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10.1.2017 - Free Investment Newsletter Bookmark

The Honest Mechanic

 (and other anomalies)

Today I’m not going to rail against the bankers. I’m not going to whine against the Fed, or call Wall street any dirty names. Nope, today I’m going to talk about something that seems to be missing from society lately. The concept of being a good person.

 

What brought this up? A few things, all bundled into a short period of time. First off, I learned quite late that a “friend” of ours had spent the hurricane and the next 16 days in the hospital. Suffering from an ulcer, he was overtaken with vomiting and actually tore his esophagus and collapsed a lung. He almost died.

Any time something like that strikes, it takes you by surprise and gives you that kick in the head to tell you “hey, slow down, remember your friends, say a kind word, etc.” 

 

But it was my trip to the mechanic’s this week, that really got me pondering just how much society has appeared to change. Quite often when the conversation tends to focus on the typical mechanic, it can get pretty harsh. I’ve heard them called rip-off artists, and all manner of criminal. How many times do you hear someone say that some mechanic did 300 dollars worth of work only to find out he really only replaced a 20 dollar part that took him 20 minutes?

 

Whether the bulk of those stories are real or not, I don’t know. I can honestly say that while I’ve had a few car mechanics try and sell more repairs/maintenance than I wanted at the time, for the most part I haven’t suffered from the mighty “rip off”. Maybe being a cave dwelling dinosaur that actually understands the basics of mechanics is one reason. I find that more women than men say they’ve been taken advantage of.

 

Well, down here in Sarasota there’s a mechanic by the name of Alan’s automotive. My parents first started using Alan when he was just starting out some 30+ years ago, and we use him to this day. He’s approaching retirement, works alone and likes to talk. But the thing that brings us back to him time and time again, the thing that gets me recommending him to anyone needing work, is that he genuinely tries to fix your problems for the least amount of money.

 

I have a Honda Ridgeline pickup. I don’t particularly like driving a truck, I’d much rather drive a sporty little car any day, but one thing I learned a long time ago is that “when you need a truck, nothing else works”.  Boy isn’t that the truth. You’re not tossing a washing machine in your trunk. Nor are you carrying your 20 foot ladder to your buddies, or a million other things. No, when you need a truck, only a truck works. So I’ve always had one in the family.

 

My Ridgeline now has about 130K on it. I’ve tried to maintain it as well as I can and I admit it does look really good. So, during the hurricane and all that mess, we were using the heck out of it and it became apparent that the power steering pump wasn’t happy. It moaned when you turned the wheel, and the slower you moved the more it moaned.  

 

I called Alan and said that I think it’s time for a new steering pump and explained why. He told me, look…before you go spending a ton of money on a Honda pump ( because they don’t come cheap) he said “I’ve found that those Honda pumps don’t like dirty fluid, and they’ve got filters in the reservoir that can clog up, sort of starving your pump for fluid. Before we spend big money, let me flush it and clean that reservoir.”

 

So I left it with him for the morning and at noon he called me up. “Okay Bob, all done, a cleaning, a flush, all new Honda fluid and it’s dead quiet now, come get it”  I asked how much, and he said “with tax, 74.88.” 

 

Lets do a little math here. On the “honda parts now” web site, the pump for my truck is $393.12. Just the pump. Not labor, not fluid, not cleaning the reservoir. What could have been a 600 dollar job, he “fixed” for me for under 75 bucks. He could have sold me the whole nine yards and I’ve have never been the wiser. As far as I knew, I needed a new pump. But he’s not built like that.

 

When I went to pick it up, he had run out of the shop to grab a burger. There was a young man there waiting for Alan to come back also. So we struck up a conversation. He too was a mechanic, he works for a foreign car service. But it’s what he said about Alan that really gave me one of those kicks in the head and a pause. He said “I was just some kid. I came in here one day, half broke needing my car fixed. The first place I took it to wanted 400 bucks and I couldn’t afford that. Alan looked it over, said you don’t need this and that, and got me on the road for under 100 dollars. Since then I come to him for advice, tools and to learn”

That was over 5 years ago. He did such things for my parents 30 years ago, my kids ten years ago, my friend Chuck’s dad some 4 years ago and for me this week. Why aren’t there more Alan’s?

 

I think that what brought this front and center to me this week was because of the hurricane. Us American’s are strange beasts. We argue and fight and hate each other and then when something disastrous happens, we help each other like no other people do. Incredible acts of kindness. When I was taking food out East to people hit hard, I saw volunteers that hadn’t slept in 30 hours. Yet for the most part it doesn’t seem to last much past the disaster for a lot of people, and we’re back to “normal”.  Yet there’s folks like Alan, that are simply built to help all the time.

 

Of course Alan’s not the only person like this. But it does seem to be more and more rare. I see a lot more “what’s in it for me” than I’m comfortable with. If everyone conducted their business the way Alan does, I think the world would be a much nicer place.  I for one appreciate him, and anyone like him. If you’re built like that, then I appreciate you too. I guess I just don’t have much use for thieves, hucksters, hustlers and greedy folks.  Okay, I’m done preaching.

 

The Market:

 

What does it say about you, if you doubt this market? It probably says that you’ve been through some bull and bear markets. It probably says you’ve seen the run ups like 1995 to 2000, or 2004 – 2007 only to see the crashes of 2001 – 2003 and 2008 – 2009.

 

It probably says that you are concerned over such things as price to earnings, or price to sales. It probably means you’re not happy when companies borrow money to buy back their own stock, thus lowering the float, versus growing sales. It probably says you’re not comfortable knowing that central banks have printed untold trillions of dollars and a ton of those free wheeling dollars ended up in stocks.

 

That’s me and a handful of other market operators that watch this market levitate day by day, with no true fundamental underpinning. We don’t like it. We understand it’s not organic fundamental growth, it is financial engineering at its finest.  We also don’t know when it ends or even how to be brutally honest.

 

I have laid this out many times. Either their ultimate goal is to continue to print and do QE and buy up corporate debt, and ultimately own a huge portion of all the great companies of our time, (thus ensuring even more control over the world) OR… they’re allowing this madness to continue until their next big idea is ready to launch, their “reset” so to speak. 

 

I don’t know which is which. Really. In over 25 years of eeking out a living investing, I’ve always found that I could get good visions from some of the real heavyweights of investing. But today? Their opinions and views don’t seem to work much any more. Jim Rogers has been calling for a crash for 5 years. We’re at all time highs. Big hedge fund guys have been calling for a 50% fall for years. We hit new highs. Many funds have closed down, sending client money back. Why? They say they don’t understand the market any more and don’t want the risk.

Even stock market apologists and “insiders” have gotten it all wrong. Back on August 10th no less than Mark Zandi the chief economist at Moody’s had this to say in a Forbes article:

 

If you are a stock investor, buckle in.

Investors have enjoyed an amazing run. Stock prices are up by nearly a third over the past 18 months and seem to be hitting new record highs daily. And the run-up has been almost a straight line, with stock price volatility—the ups and downs in prices—the lowest it has ever been.

But if you are an investor, soak all of this in, because it will soon be nothing but a memory. The stock market is due for a significant correction—defined as a greater than 10% decline in stock prices—and stock returns in the next several years will be very pedestrian if they increase at all.

Why am I pessimistic? The stock market is overvalued. That is, stock prices are much too high despite the good outlook for corporate earnings. The only other time in the past half century that stock prices have been so highly priced was during the tech bubble. Yes, they’re even more overpriced now than prior to the 1987 market crash.

 

Well that was almost two months ago. Since then the DOW is up another thousand points. The S&P another hundred.  See my point? Whether you’re an old school dinosaur like me, or an insider who’s job it is to paint a rosy picture, calling an end or even a correction in this market is suicide.

 

Every dip gets bought. Every soggy day finds a way to  end almost green. Every earnings miss or warning seems to only ding the stock for a few hours and up it goes.  It’s frustrating to say the least.

 

I have to think that one day the dip will hit and they won’t buy it. And we’ll sink lower and it wont’ get bought and lower and lower. But what day? Rogers said that 4 years ago. Zandi 2 months ago. Both wrong. Me? I have no clue.

 

Some say you should just hold your nose and buy until you see economic reports that hint of recession. Well that’s fine but do you really think any of these economic reports are “real?”  Don’t forget, when ever they don’t like the data, they change it.  Few remember that to boost GDP, they decided to include TV reruns and script writing into the GDP. Anything to make it look better.

My guess is that we need to lean long ( cautiously) until we actually see a true move by the Central banks to remove liquidity. But it has to be COORDINATED. In other words, the Fed’s can sell 10 billion worth of its assets, which sounds like pulling liquidity, but it means nothing if Draghi is  still printing 65 billion a month and the Japanese are still printing trillions of yen.

 

I guess the madness won’t end until ALL of them take measures to slow their printing at the same time. That would spell major change and the only true way we’d know that something wicked this way comes.

 

This is a time unlike any other. History is indeed being written and you’re living through it.  Take it for what you can get, but don’t get conned into thinking this is “normal”.   There is absolutely nothing normal about today’s markets. Good luck!

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