No Quick Recovery

A quick recovery? Back to normal in another few weeks? I remember having this debate with a few of my friends in Florida back in the early days of the pandemic. The thought was that the economic damage would be short-lived and a full recovery would happen within a quarter or two. I was not that optimistic. And I see nothing that suggests our lives will be returning to normal anytime soon.

From TheStreet:

Federal Reserve Chairman Jerome Powell said the pace and scope of the current U.S. economic downturn are ‘without precedent” and cautioned that recovery could take longer than expected to gather momentum.

“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II. We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased,” Powell said. “Since the pandemic arrived in force just two months ago, more than 20 million people have lost their jobs.”

“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Powell added.

Brett Davis, CEO of National Indoor RV Centers, posted a video a few weeks back where he provided his perspective on the state of the RV industry. The video is long but worth the watch if you have an interest. Here is what he had to say about the market:

With our economy completely shutdown for the month of April and then reopening of America to come in three phases over time I suspect the second quarter earnings and beyond to be awful. Every investor and fund manager will begin to wonder and worry about where the bottom will be for earnings. No one will want to try and catch a falling knife. I do not believe we have seen the bottom in this stock market.

Winnebago announced a resumption of operations which you can read in full here. However, there is a disclaimer:

Since the beginning of the COVID-19 crisis, Winnebago Industries has implemented significant cost containment and financial management measures and will continue to do so as conditions require.

While we closely monitor community conditions related to the pandemic and track consumer appetite for our products and outdoor activity, our organization will continue to make necessary and critical decisions around expense management, capital deployment, and strategic product development that will ensure our long-term financial stability and position our incredible team to compete successfully in the future. We remain convinced that the powerful appeal of the outdoors will endure through these uncertain times and end consumers will increasingly be attracted to the RVing and boating lifestyle.

The great financial collapse was a severe financial crisis that caused a deep and painful recession. Technically the recession ran from December 2007 until June 2009. It took many years for the economy to recover to pre-crisis levels of employment and output. The great financial collapse was a result of financial imbalances that had started primarily in the housing sector. A very different class of economic recession than what we now face.

Financial policy makers are preparing for the possibility of a far deeper, more protracted downturn. A quick recovery is unlikely. I get concerned when the chairman of the Federal Reserve characterizes the pace and scope of the current downturn as being without precedent. That does not sound very encouraging does it?

Eventually we will see things turn around. But it won’t be this month. Or next. It may take years.

Today I began looking at properties to rent. Perhaps the border will reopen for snowbirds in the fall. Given all that is going on, it seems prudent to consider alternatives.

Just in case there is a second wave coming.

 

Weighing Our Options

Florida this winter? Or, more broadly speaking, any form of non-essential travel this year? Or next? Or, for that matter, will life return to normal anytime soon in Canada?

Our Prime Minister provided this optimistic and encouraging perspective yesterday:

OTTAWA — Prime Minister Justin Trudeau says that “normal” is a “long way off” for all Canadians — and that some differences implemented as a result of lessons learned during this pandemic will last for “years.”

“If we want life to get back to the way it was exactly before, it won’t,” Trudeau said, speaking to reporters from the front steps of Rideau Cottage on Monday.

You can watch his response here.

My financial adviser gave me his perspective:

Few aspects of life have escaped change. Civil liberties, for example, have been slashed. So far most people are willing to trade unemployment, inconvenience, long hair, huge deficits, closed borders, self-anointed cops and draconian rules for what they’ve been told is a reprieve from death-by-virus. Politics are being altered. Trudeau’s approval rate has soared. Trump’s is faltering. Public finances may be changed for a generation or more. Your child’s child will still be paying COVID-19 taxes. Airplanes won’t be fun anymore. Mass events are done. Packed bars and open-concept offices may be a year away. Or more.

I love this closing quote from War of the Worlds:

From the moment the invaders arrived, breathed our air, ate and drank, they were doomed. They were undone, destroyed, after all of man’s weapons and devices had failed, by the tiniest creatures that God in his wisdom put upon this earth. By the toll of a billion deaths, man had earned his immunity, his right to survive among this planet’s infinite organisms. And that right is ours against all challenges.

Except, possibly, the COVID-19 challenge.

Fear of death is a potent fear.

Lorraine and I face a decision. One that we will have to make over the next few months.

Our options:

1. Keep going. Everything will be back to normal in a few months.

With this option we are free to travel in our motorcoach and we can return to Florida as planned in early November. Possible? Perhaps not. Canada may well continue to restrict our civil liberties and we might be unable to travel freely into the United States this fall. I put our chances of being back to Florida this winter at 50/50.

2. Store the coach and rent for the foreseeable future.

Make arrangements to find a rental property somewhere in the area, put the coach in storage, and ride things out for a year. Ideally we would prefer to rent from October to May so that we could return to our coach and to our site in Canada next year. I’m not sure if that option would even be possible and I am not very keen on committing to a 12-month rental term and I am definitely not keen on being in this part of Canada during the winter months.

3. Go west and spend the winter on Vancouver Island

It might be cooler on Vancouver Island than Florida during the winter months however it would be downright balmy compared to an Ontario winter. Would we be able to travel freely in Canada? It might surprise some to discover that 8 provinces and territories in Canada have implemented border checkpoints and travel restrictions. We have a mobility rights provision under our Charter. Provincial governments are violating our constitutional rights to travel freely in the country and the only recourse would be to challenge their actions in court. That won’t happen anytime soon. We might well be turned back at any one of the provincial borders if we tried to travel west.

4. Sell the coach and buy a house.

This is not an option that we would willingly pursue.

We did not anticipate these types of issues as Canadian snowbirds travelling full-time in our motorhome. We assumed that we would continue to have mobility rights in Canada and an accessible border with the United States.

Wrong on both counts.

On Friday we move our coach to our site for the next six months. I am looking forward to being at home for the next few months.

As of now, I have no idea where we will be in November. I find that uncertainty to be a tiny bit stressful.

Lucky?

After a few days of struggling through some awful headaches, fatigue and nausea, I recovered enough to get outside and enjoy a beautiful sunset by the beach with some friends.

This was our view.

As we left to return back to our coaches, my friend made a comment along these lines: we must have done something right to enjoy this kind of life in retirement.

Did we do something right or were we lucky?

I do not have the data for the United States but I suspect it is similar to the Canadian data.

The number of seniors in Canada is growing in absolute terms and as a proportion of the population. In 1986, there were twice as many children under the age of 15 as there were adults over the age of 65.

By 2018, adults over the age of 65 outnumbered children under the age of 15. The projection is for a dramatic growth of seniors over the next two decades.

At the same time that Canada’s population is ageing, most seniors are poorly prepared for retirement. Roughly 6 million working Canadians belong to a workplace pension plan. And roughly 13 million working Canadians do not.

Put another way, 65 percent of employed Canadians have to set money aside for retirement.

Those 13 million working Canadians must have some pretty serious savings. After all, it takes about a million to produce an annual income of $50,000. Two million or so for an annual income of $100,000.

Curious to know the median family savings for Canadians entering retirement without a workplace pension plan?

It is not a million dollars.

It is not five hundred thousand dollars.

It is not two hundred and fifty thousand dollars.

It is not one hundred thousand dollars.

It is three thousand dollars.

Three thousand dollars.

Half of working Canadians entering retirement without a workplace pension plan will do so with only three thousand dollars.

We did not get lucky in terms of saving money for our retirement lifestyle. We planned for our retirement lifestyle.

Perhaps we were lucky in terms of education and career opportunities.

Certainly we were blessed to be born in a country where we had a chance to build a good life for ourselves and for our family.

Very fortunate and truly thankful to be able to live well in retirement.

The Great Illusion

“No matter how you slice it, Canada has been entirely dependent on a debt binge to create the illusion of a strong economy.” That was how David Rosenberg put it the other day. David is the chief economist and strategist for Gluskin Sheff. David is one of the best minds in the investment industry.

In retirement, our standard of living is closely tied to the underlying performance of the Canadian economy. Although we could live solely off our pension income, our investment income allows us to enjoy a wonderful retirement experience roaming around the country in our Motorcoach and staying at some amazing resort properties.

An economic collapse, similar to what happened in 2008/2009, would not be much fun. And yet the Canadian government seems intent on pursuing a controversial economic policy known as Modern Monetary Theory (MMT). MMT is also being advocated by the left-wing of the Democratic Party in the United States.

MMT proposes that a country with its own currency, such as Canada or the United States, doesn’t have to worry about accumulating too much debt because it can always print more money to pay interest. The only constraint on spending is inflation, which can break out if the public and private sectors spend too much at the same time. As long as there is enough labour to meet demand without stoking inflation, a government can spend what it needs to maintain employment and achieve its spending goals.

The Canadian government will make no attempt at balancing the financial books of the government. Projections show that our government will remain in a state of perpetual deficit spending over the coming decades, compounding the overall debt of the country.

The Liberal party in Canada, having moved strongly to the left, has embraced the theory that deficits are harmless, healthy and promote economic growth and expansion especially when interest rates and inflation are low. Governments can just print money, distribute it fairly and people will spend more and create prosperity.

And yet, there are so many risks to this approach, especially the risk of unsustainable debt.

Canadian households are in no position to be exposed to the downside risk of MMT.

Canadian households are already at historic levels of debt.

Compared to U.S. households (note how Canadian households are now above the level of U.S. households from the great economic collapse in 2008/2009):

Uncharted territory and, sadly, most Canadians have little or no knowledge of the underlying economic theories being pursued by the politicians on the left.

This could end very badly for Canada. But there is a bright spot. Our housing market <sarcasm>. We have the least affordable housing in the world. Perhaps the Canadian government can also provide a house for every citizen. All they need to do is print some more money. And tax the so-called rich. But they already do a pretty thorough job on that front.

 

The RV Lifestyle: Fear, Uncertainty, Doubt

Something is always broken. This from a post that I came across on the Newmar Dutch Star Owners Facebook group:

For the last month, my wife and I have been planning our new RV life. We found a 2016 DS 4369 that was just what we wanted. There were a few things that needed repairs, nothing major, and the dealer agreed to take care of them and make sure we were ready to go. Being new and never having owned an RV before and just entering retirement we wanted to learn everything we could before heading out on our own. It has been a little over a month since we decided on the DS and while waiting for the repairs to be completed I have watched every Youtube video I can find and joined every online group related to Newmar and diesel pushers that I can find. Sadly, the more I watched and read the more concerned I became. It seems that something is always broken and that every dealer is poor at best. Almost to the man, everything I read is negative about the quality of the motorhomes no matter what brand or how much you pay. I realize that most posts will be about problems but there is no shortage of problems and no stories about being happy with the quality and reliability of the product. After postponing the closing twice because the repairs were not completed, I finally decided to walk away, thinking that if this is as good as it gets, when we are all alone broken down on the side of the road it won’t be the adventure we were hoping for. Not asking for anything just offering a perspective from a Newbee’s point of view.

We have owned our coach for over three years now. We have experienced many issues with the coach. You can read about some of them here. Aside from the random deployment of a Girard awning while the coach was in motion — that issue stranded us for almost six weeks — we have travelled extensively around North America without a breakdown on the side of the road. But it could happen. That’s just the way it is.

We love our coach and we love the RV lifestyle however the RV industry is nowhere near the automotive industry in terms of quality and reliability. My view is that there will always be issues with our coach. The only question is whether an issue is highly disruptive or merely inconvenient.

Aside from the awning issue, our problems have been minor and inconvenient.

We come across people that buy into the lifestyle without doing the research. They make a significant purchase of a motorhome only to walk away after a few months because of mechanical issues. Or they get angry and frustrated because they do not expect to have any issues with their motorhome and that anger and frustration distorts the wonderful adventures that most enjoy while being on the road.

The poster walked away from the deal out of fear. Fear that something could go wrong. That the RV lifestyle would be difficult.

This quote, from The Road Less Traveled, is relevant:

Life is difficult. This is a great truth, one of the greatest truths. It is a great truth because once we truly see this truth, we transcend it. Once we truly know that life is difficult – once we truly understand and accept it – then life is no longer difficult. Because once it is accepted, the fact that life is difficult no longer matters.