This weekend, we went to Mars.
We’ll tell you more about that in a minute. First, catching up with the financial markets, as we’ve been warning, US stocks are vulnerable to a sharp correction. Valuations are stretched, to say the least. And the negative news is coming in like drone attacks.
Get out while the gittin’s good
US GDP grew at an annual rate of just 2.2% in the fourth quarter. And after-tax corporate profits fell 1.6%.
World trade relies heavily on China, which relies heavily on American shoppers. They might be willing to spend more, but they’re unable to do so without earning more.
Gone are the days Americans could ‘take out’ home equity. That leaves them just with wages — which are more or less flat — and their investment portfolios.
Stocks and bonds are up substantially since the 2008 crisis. But only the top 10% of US households has benefited. The other 90% has flat or falling net worth.
Without the help of the giddy US consumer, China starts to look a little peaked and is nearing a crisis of its own. Shanghai stocks trade at 34 times their median price-to-earnings ratio versus 19.5 for the S&P 500.
Meanwhile, it looks as though a replay of the dot-com crash is coming in the US — this time centered on biotech stocks.
Now, they are up to five times what they were at the last peak, just before the dot-com crash.
IPOs are running ahead of the last record — again, set just as the Nasdaq was melting down in 2000. As for earnings, you will have to find them yourself. Two-thirds of the companies in the Nasdaq Biotechnology Index lost money last year.
In the broad market, 12-month trailing GAAP earnings put the NYSE on a price-to-earnings ratio of 22. That’s higher than it’s been in half-century — including 2000 and 2007.
Best advice: Get out while the gittin’s good.
Hot a Venus…Cold as Neptune
Back at the ranch…
The ranch is divided into two parts: one in Salta Province, the other in Catamarca Province. We have owned it for almost 10 years, but we have never seen the part that is in Catamarca.
It is a three-day horse ride. And, we’ve been told, there is nothing there.
Bill riding home through the valley as evening falls
Click to enlarge
Once, a couple of years ago, we showed the ranch foreman a photo taken by the Mars rover.
‘Looks just like our ranch,’ said Jorge. ‘Over on the Catamarca side. In fact, it looks better than our ranch.’
That part of the ranch is a high plain between one mountain range and another. It is bone dry and about 13,000 feet above sea level —an area known as la puna.
Millions of years of volcanic eruptions, wind erosion and seismic shifts have given it a look that barely seems earthly.
Huge mountains. Vast deserts. Snowcapped peaks surrounding gravel pits 30 miles wide. Sand dunes as big as shopping malls. Strange natural sculptures. Shallow lakes (with pink flamingos in them, no less). Hot as Venus during the day, as cold as Neptune at night.
We had never seen anything like it. We had not even imagined that it could exist. Until this weekend…
Rather than take the three days on horseback, we took three days by four-wheel-drive truck.
It took one day to skirt around the mountain range immediately to our west in order to come up in the valley beyond it. It took another day to explore the area, or at least a tiny fraction of it. The third day, we drove home.
Hardly a living thing
There is only one road through this part of la puna. And only one hotel. It is a basic affair owned by the provincial government and operated by a friend of ours.
It has no electricity during the day. And no heat in the rooms.
Still, the staff serves a hearty meal (no selections available) in a convivial dining-hall atmosphere, with a fireplace centered on the main wall. Most of the guests are European, although we saw a recent visitor had come from Washington, D.C.
The only paved road runs in front of the hotel. But there is so little traffic you could take a nap in the middle of it without fear of interruption. A police station sits next door.
At 8 a.m., a policeman raises the Argentine national flag. Apart from that, we saw no other police activity. On our side of the road there were a few houses and a few lots planted in Lombardy poplars. (The variety seems to grow well in desert oases and is used here for building and firewood.)
We couldn’t determine the source of the water; there must have been a spring dropping down through a series of canals to water every lot and pasture.
Horses, goats, sheep and donkeys enjoyed the green grass. All were enclosed behind wire or mud fences…but we couldn’t imagine they would try to escape. No matter what direction they took, there was nothing to eat for hundreds of miles.
The wasteland began on the other side of the road — across from the hotel. There was an area of thousands of square miles with hardly a living thing.
People die here
It is almost impossible to explore la puna on your own. You will get lost and never find what you are looking for. We hired Luis to help us find our way around.
;What we have here is an area that was highly geologically active for a very long time,’ Luis explained as we headed out, apparently to nowhere, toward the west.
‘The cordillera of the Andes is in front of us.’
We studied the snowcapped peaks in the distance.
‘They are mostly volcanic. Over millions of years, they erupted. The ashes fell in this area — we’re talking about millions of years — and condensed into the pumice that covers the ground.
‘And there you see the shapes made by the wind eroding these pumice rocks. They look like sculptures, don’t they?’
They did. Huge sculptures. As big as battleships. With massive bows grinded by the airborne sand.
There were mountains of blue-gray pumice stones, too. But these sculptures were white. Nearby were gigantic piles of what looked like sugar but were white pumice sand.
Coming around a hill to get a closer look, we suddenly sank into soft sand. Even with four-wheel drive, it looked as though we were going to be there for a long time…
‘People die out here,’ said Luis.
More to come…
for the Markets and Money Australia