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Inflationary Deleveraging & the Illusion of Wealth II

This week I would like to offer a self-correction on a particular thought conveyed in the last blog, or perhaps better articulate the point, and offer some final thoughts on this important and emerging subject.

First, certain points regarding inflationary deleveraging must be reiterated:

  •  Excessively indebted societies must periodically deleverage bad debt to avoid an otherwise certain social and economic downfall.

  • The two deleveraging options available to central planners are inflation and deflation.

  • Inflationary deleveraging involves controlling a high inflation rate while keeping real interest rates negative over a long period, such that nominal economic growth outpaces government debt, thereby lowering the debt/GDP ratio.

  • Inflationary deleveraging is the Fed’s clear choice.

  • The Fed has limited real control over the U.S. economy and financial markets but gets participants to do its bidding by controlling the narrative.

  • The Fed’s narrative involves talking up the economy, talking down inflation, talking up stocks and other “risk assets”, talking down gold and other dollar alternatives, talking up taxes, talking down interest rates (that’s a lot of talking!).

  • The Fed’s attempt to deleverage America’s bad debt through inflation has a small probability of success, requires the market to swallow the narrative long-term, and will have many unintended consequences, most notably the impoverishment of the middle class.

Last blog I inferred “the Fed’s inflation policy results in persistently high asset prices, commonly referred to as “The Wealth Effect”, but in reality it is “The Illusion of Wealth Effect”, which recently played out in Venezuela, as the cost of living outpaces asset appreciation”. A more accurate assessment is ‘in reality it may at any moment become’, “The Illusion of Wealth Effect”. This is a better statement and an important clarification in the argument because in America the rate of consumer price increases has not yet surpassed the growth rate of “risk assets”. My sincere apology for the misstatement, and this, of course, leaves one unanswered question.

Is inflationary deleveraging worth the risks of increasing America’s distribution of wealth, impoverishing her middle class, having to endure repeated systemic crises due to the weight of trying to carry a mountain of bad corporate debt, risking the global reserve currency status of the dollar, and risking the credibility of the dollar itself? You be the judge.

Think about it. Shaun

Did you know the ridges on quarters and dimes, originally 90% silver, were put there to prevent our government from cutting and melting the edges of coins to arbitrarily create additional currency units? Do you know what other nation’s government very famously did this?

“You have sown much, and harvested little. You eat, but you never have enough; you drink, but you never have your fill. You clothe yourselves, but no one is warm. And he who earns wages does so to put them into a bag with holes. “Thus says the Lord of hosts: Consider your ways.”

~Haggai 1:6-7

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

Shaun Scott No Comments

Inflationary Deleveraging & the Illusion of Wealth

Excessively indebted societies must periodically deleverage bad debt to avoid an otherwise certain social and economic downfall. Central planners have two options when managing a highly indebted economy: allow painful bear markets and recessions to deleverage the system, which is deflationary (falling prices), or attempt to control a high inflation rate while keeping real interest rates negative over a long period, such that price increases in the economy outrun government debt, thereby lowering the debt/GDP ratio, which is inflationary (rising prices). Which option will the Fed pursue at this year’s Jackson Hole Symposium, what might the official narrative be, and what does that mean for the financial markets going forward?

The Fed doesn’t directly control the U.S. markets or economy because the dollars it supplies get deposited as bank reserves. In other words, the Fed can create new dollars, but it can’t force banks to lend them, or people and businesses to borrow and spend them. For this reason, the Fed has far less power over the economy and financial markets than most people understand. What the Fed does control is psychology and policy expectation, and by controlling the narrative, it can persuade market participants to do its bidding. The Fed’s narrative has been consistent since the 2008 Financial Crisis: rates will remain low, money-printing will back-stop the economy and markets to prevent the dreaded deflationary deleveraging, and inflation will be allowed to run higher, so borrow more money, take more risk, and buy more stocks! The Fed has staked itself in the inflationary deleveraging camp.1

In the end, the Fed’s ability to effectively manage an inflationary deleveraging of our market system depends on market participants believing the narrative. To pull that off, it must occasionally convince Mr. Market the economy is strong enough to withstand the withdrawal of the Fed’s monetary heroin. Expect a heavy dose of that ‘idea’ to circulate the news today, but do not expect essential policies to change; remember, the goal is to deleverage the system through inflation.

While the Fed’s inflation policy results in persistently high asset prices, commonly referred to as “The Wealth Effect”, in reality it is “The Illusion of Wealth Effect”, which recently played out in Venezuela, as the cost of living outpaces asset appreciation and as the dollar becomes the final release valve for the dreaded, though unavoidable, deleveraging of our highly indebted society.2 Every time the market doubts the Fed’s narrative deflation will take hold, so market crashes will occur as this scenario plays out. There will also be significant unintended consequences to innocent bystanders, most notably America’s middle class.

Think about it. Shaun

“The rich rules over the poor, and the borrower is slave of the lender.” ~Proverbs 22:7

1, 2 The Stansberry Digest, Daniela Cambone’s interview with George Gammon, August 25, 2021

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

All investing involves risk including the possible loss of principle. No strategy insures success or protects against loss.

Asset allocation does not ensure a profit or protect against loss.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Shaun Scott No Comments

The Durable Foundation of Successful Financial Plans

The strength of every structure lies in the foundation on which it is built. While recently viewing an historic building as a potential future home for our office, to the noticeable discomfort of the selling agent I spent most of the time in the basement examining the foundation, sill, and support columns. Your family’s financial plan is a monetary structure, and lest it be built on the following firm foundation, it’s unlikely it will survive the test of time. The best family financial plans abide for generations, and there are cases in which families have retained and grown their wealth for 1,000 years. Consider the elements and simplicity of the durable foundation on which successful financial plans are laid.

Manage debt like you would a pet scorpion; cage it, starve it, and if you’re smart, you’ll terminate it. Virtually every financially successful person I’ve encountered in 33 years in this business functioned with minimal or no debt. You will never build financial wealth as efficiently in debt as you can debt free; therefore, make the following your highest financial priorities: a) follow a specific plan to aggressively reduce your debt until it equals less than 10% of your net worth, then make a plan to get it to 5%, then never let it exceed 5% again, and b) do not retire with any debt of any kind. Retiring in debt is like walking a greased plank blindfolded over a pool of starving sharks!

Maintain adequate emergency savings. Running a financial household without ample cash savings is like climbing Mt. Everest without crampons; every slip weakens your condition and reduces your probability of success. Absent sufficient emergency savings, unforeseen expenses will cause either borrowing, or a distribution from long-term investments, both generally destructive maneuvers. The appropriate amount of emergency savings is 9 months of total annual household expenses, so develop a budget and understand the cost of running your financial household. Don’t exceed the recommended amount by much or inflation will eat your lunch; don’t lag it by much for the reasons mentioned above; when circumstances require payment, replenish the amount as quickly as possible, which is one of the many reasons we must live below our God-given means.

Own the right amount of the right type of life insurance. Is the need temporary, like protecting a spouse or child from loss of income due to death? Then fund the need with temporary, or ‘term’ insurance, and shop around. Is the need permanent, like making sure sufficient capital is available at your death, and quickly enough to pay estate taxes so the family business isn’t lost? Then fund it with permanent insurance, and shop around. If you need help figuring the appropriate amount of coverage, or with researching the myriad of policy types and features available today, find a trustworthy, independent agent who will represent your interests; proprietary agents represent the interests of a specific insurance company. Never own a dollar of insurance you don’t need, and avoid the painful mistake of buying the wrong type of policy given your need.

Think about it. Shaun

 

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

 

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‘Market Top’ Indicator, Declining Breadth, Triggers

There are many reliable signals which indicate an approaching multi-year stock market peak. Early warnings include excessive speculation among novice investors, high valuations, and high levels of margin investing, signals all flashing red today. Mid warnings include weakness in small cap stocks, which appear to be rolling-over now, and in transportation stocks, which have been falling since May, as well as declining market breadth. The Advance/Decline Line shows how broadly stocks are participating in a market advancement, and is the primary gauge of market breadth.1 The 7’Th of Bob Farrell’s 10 Rules of Investing states “Markets are strongest when they are broad, and weakest when they narrow to a handful of blue-chip names”.2 Strong market breadth is critical to sustain an advancing bull market, but declining breadth, such as is occurring in some U.S. sectors (and foreign markets) today, reveals a bull market losing steam. What does this development suggest about the lifespan of the ongoing bull market? Might it reveal characteristics of the inevitable bear market to follow? How should investors prepare?

Advance/Decline Line charts for the NASDAQ, RUSSELL 3000, AND RUSSELL MICRO indexes all show declining trend-lines, while those of the DOW JONES, S&P 500, and RUSSELL 1000 seem to reveal a topping pattern.3 It’s noteworthy the trend-line for Hong Kong’s HSI, Singapore’s STI, Malaysia’s KLSE, and China’s Shanghai SE are all in free-fall,4 suggesting whatever market event looms is likely to be a global event.

An interesting study done in 2019 by Lowry Research on major market tops over the past 90 years revealed two consistent phenomena: the longer the major indexes advanced on deteriorating breadth, the longer it took for stocks to reach bottom from the peak, and the longer each ensuing bear market lasted. The longest divergence by far was the 24 months preceding The Crash of 1929, in which case the DOW JONES took 3 years to find bottom, and 25 years to fully recover. The shortest divergence was 1 month, and the average was 9 months.5 If our present case falls within the parameters of this impressive study, a) the present bull market can continue for two more years, b) but could end at any moment, and c) we are likely within 9 months of a major, multi-year peak in stocks. This is consistent with the forecast of many top investors today.

Since the divergence between falling market breadth and rising index levels has only just begun in the present cycle, there is no way to know how long the bull might run, how long the fundamental downtrend of the coming bear market might last, or how many months or years the recovery to all-time highs will require, but further indications will surface when the coming top is recognized in hindsight. Stay diversified with proper asset allocation, use proper position-sizing, incorporate a chaos hedge, carry a bigger cash position, avoid over-reacting, and dollar cost average the whole bust/recovery cycle, in what will likely be a classic and painful, yet healthy and cleansing bear market presenting wonderful opportunities to patient investors.

Think about it, Shaun.

“Markets tend to return to the mean over time. Excesses in one direction will lead to an opposite excess in the other direction. There are no new eras; excesses are never permanent. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways. The public buys the most at the top and the least at the bottom. Bear markets have three stages: sharp down, reflexive rebound and a drawn-out fundamental downtrend. When all the experts and forecasts agree, something else is going to happen. Bull markets are more fun than bear markets.” ~Bob Farrell’s Rules of Investing (Rule Numbers 1-5, 8-10)

“Give a portion to seven, or even to eight, for you know not what disaster may happen on earth.” ~Eccliastes 11:2

1,5 Lowry White Paper, “How Severe Will The Next Bear Market Be?”, April 2, 2019
2 Stock Charts, “Bob Farrell’s 10 Rules”, August 6, 2021

https://school.stockcharts.com/doku.php?id=overview:bob_farrell_10_rules

3,4 Market In Out, Stock Screener, August 6, 2021

https://www.marketinout.com/chart/market.php?breadth=advance-decline-line

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.

Dollar cost averaging requires continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

All investing involves risk including the possible loss of principle. No strategy assures success or protects against loss.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Shaun Scott No Comments

The Transitory Inflation Narrative vs. Soaring Prices

The U.S. central bank (‘the Fed’), in its attempt to maintain power and credibility while simultaneously diluting the currency faster than during WW II, is desperate to convince consumers and investors inflation is transitory and will soon moderate. The mere threat of “tapering” bond purchases, a controlled way for ‘the Fed’ to raise interest rates in an attempt to slow inflation by restricting loan growth, quickly brought Wall Street into subjection to the narrative. But with soaring producer and consumer prices, emerging dollar alternatives, and notable investors sounding the inflation alarm, what are the basic arguments, which way do the facts lean, and how can investors protect themselves in both scenarios?

The transitory inflation argument rests most securely on the “marginal utility of debt” (MUD) thesis, most notably defended by excellent economist, Lacy Hunt, of Hoisington Investment Management, which suggests the economy’s ability to grow diminishes as an excessive debt load siphons off an increasing percentage of otherwise productive capital to unproductive debt-service payments, miring the economy in disinflation.1 Though Hunt admits a crisis of confidence in the currency, manifested in surging money velocity, or the rate at which dollars change hands, can at some point subvert the transitory inflation/MUD argument, he doesn’t believe it has, and firmly expects an imminent return to disinflationary conditions.

Rising prices are more persuasive than theories presented by well-educated economists for legendary investor, Stan Druckenmiller, Stansberry Research’s Doc Eifrig, Tradesmith’s Keith Kaplan, and many other top investors today. The persistent inflation argument suggests that when the money supply is increased without a corresponding increase in the amount of goods and services in the economy, price increases will result: since ‘the Fed’ can’t stop printing money without crashing the economy and financial markets, inflation is here to stay. Tradesmith Daily recently reported the following YOY price increases: car rentals 87%, used cars 45%, gasoline 45%, hotel rooms 17%, and fruit 7%.2 Doc Eifrig recently reported a 200% jump in oil prices, 300% for lumber (since 2020), and 40% for paper, as he released his “New Era Playbook” for what he clearly sees as a lasting inflationary environment.3

The truth is both arguments are viable. Many complicated factors affect price trends, and money velocity, a largely subjective phenomenon, and therefore one difficult to perceive, will ultimately judge the matter. As top investor, Warren Buffet, astutely reveals, inflation is a hidden tax, and an inflationary environment introduces new rules to investing: 1) the purchasing power of a company’s retained earnings will be scrutinized, 2) the impact of inflation and taxes on a company’s bottom line will be examined, 3) companies with strong free cash flow will be favored, and 4) companies able to pass inflationary costs to consumers will be preferred.4 Yet another advantage to the purchase of great businesses, namely capital-efficient, dividend-paying, dividend- increasing, industry-dominating companies, at reasonable prices, is their resilient advantage during inflationary periods. Investors may also be wise owning an inflation/chaos hedge or two, a higher cash position than normal, and by keeping a watchful eye on positions vulnerable to persistent inflation, like high multiple tech stocks and high yield corporate bonds.

Think about it. Shaun

“It is far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.” ~Warren Buffet

“A false balance is an abomination to the Lord, but a just weight is his delight.” ~Proverbs 11:1

1 Canadian Insider, “Lacy Hunt: Bonds, Growth and Jobs in a Disinflationary Stew”, March 29, 2021

https://www.canadianinsider.com/ultramoney/media/1_93t0y54o

2,4 Tradesmith Daily, “FOUR KEY INFLATION LESSONS FROM WARREN BUFFET, July 14, 2021

https://tradesmithdaily.com/educational/four-key-inflation-lessons-from-warren-buffett/

3 Retirement Millionaire SPECIAL REPORTS: “The ‘New Era’ Playbook”, June 30, 2021

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

All investing involves risk including the possible loss of principle. No strategy insures success or protects against loss.

Asset allocation does not ensure a profit or protect against loss.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Shaun Scott No Comments

A Fascinating Case Study in Applied Financial Principles

You’ve probably never heard of Ronald Read, but he can teach you a great deal about personal financial success. Read is an inspiring case study because, though he never made much money as a gas station attendant, mechanic, or janitor for JC Penney, he died with an estate valued at over $8 million,
1
proving financial success is almost never about how much money you make, and almost always about what you do with the money you make.

Read grew up poor in rural Vermont, and developed a work ethic on the family farm, and by daily walking 8 miles to and from school, an ethic later reinforced while serving in the U.S. Army during World War II. As a working adult after the war, Read maximized his positive household cash flow by living well below his means, in fact, he put feet on the concept of frugality. He used safety pins to hold his coat together to avoid buying a new one, drove unsightly (but reliable) used cars, and parked blocks from work to avoid parking fees. Read’s single indulgence was breakfast daily at Brattleboro Memorial Hospital, the cheapest spot in town, but occasionally someone would offer to pay his bill thinking he lacked the funds, offers Read graciously accepted. It would be an understatement to say Ronald Read plugged financial leaks, and is believed to have lived his life free of debt. Read maintained his earned income source long after he was sufficiently wealthy to retire, which he finally did at age 76.
2

Read’s daily practice was to read the Wall Street Journal. This should have been a dead give-away to his observers, but they were taken away by his appearance. Read allocated his resources wisely by buying the stocks of companies he understood, and by diversifying his investments in great businesses at reasonable prices. He didn’t trade speculative stocks, but rather owned capital-efficient, dividend-paying companies for years, and often for decades, much like Warren Buffet. He examined his investments thoroughly, selling only with a fundamental change in one of his holdings. Read accumulated his wealth slowly over time, compounding returns by reinvesting dividends over many years. When he died at age 92 in 2014, this retired janitor was one of the richest people in town, leaving $1.2 million to the local library, and $4.8 million to the Brattleboro Memorial Hospital.
3

Perhaps Ronald Read should have enjoyed his God-given wealth a bit more than he did, but this humble man greatly exemplified applied financial principles for those eager and willing to learn. Think about it. Shaun

“One pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth.” Proverbs 13:7

“It is far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.” ~Warren Buffet

“God loves a cheerful giver.” ~2 Corinthians 9:7

1,2 Doc Eifrig’s Health & Wealth Bulletin, “How Warren Buffet Grew His Wealth”, July 1, 2021

3 Westwood Insights, “The Quiet Millionaire Next Door: How a Humble Janitor Amassed an $8 Million Fortune”

https://westwoodgroup.com/insight/the-quiet-millionaire-next-door-how-a-humble-janitor-amassed-an-8-million-fortune/

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.

All investing involves risk including the possible loss of principle. No strategy insures success or protects against loss.

Asset allocation does not ensure a profit or protect against loss.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

Shaun Scott No Comments

Market Crash Indicators Report

Investors generally believe prevailing market conditions will continue into the future, especially at the extreme ends of the cycle, but the reality is the stock market is counterintuitive, tending ultimately to inflict the maximum amount of pain on the largest number of investors possible, and cyclical, predisposed to mean reversion. The US averages have seen 3 major crashes in the last 20 years (2000, 2008, and 2020), and with stocks again at all-time highs, today many notable pundits are sounding the alarm. What are the reliable indicators, what are they saying, and how can you wisely prepare for what lies ahead?

 

The most basic valuation metric for stocks is the well-known price-to-earnings (P/E) ratio, indicating the number of years it takes for a company’s present earnings to substantiate the price. Today the P/E ratio on the S&P 500 is 2 standard deviations higher than its historical mean, and since 1950 was only exceeded at the peak of the dot com bubble.

The widely acknowledged Schiller Cyclically-Adjusted P/E (CAPE) Ratio uses a 10 year average of inflation-adjusted earnings to provide an accurate longer-term picture of market valuation. Since 1880 the ‘Schiller CAPE Ratio’ was only higher just prior to the dot com bust.2

Debt drives the economic landscape, and when creditors smell harder times they demand higher rates, especially from “junk” bonds (rated below BBB- on the S&P Scale). A spike in junk yields generally precedes an economic downturn, and would be a strong signal for near-term trouble. Junk bond yields are presently at multi-decade lows due to the unprecedented stimulus following the Covid19 outbreak, and are not yet sounding the alarm.

The valuation of a company is best understood by its insiders, and when they are selling, investors should take notice. Recently insiders have been selling their own company’s stock at a pace not seen since the 2008 crisis.3 Additional strong indications the market may be approaching a multi-year high include wild speculation by novice investors, extreme valuations ascribed to “Zombie” corporations, and record margin investing.

Successful investors never take an all or none approach. America’s investing environment continues to favor the stock ownership of promising and well-managed corporations, and always will. Concurrently, huge bubbles exist in many asset classes, and our nation is burdened with a debt load it can never honestly repay, a fact America’s creditors may soon wake up to. In light of these facts, I suggest you diversify income sources, pay down debt, build cash, know your tolerance for volatility and honor it, focus on capital-efficient, dividend-paying businesses, diversify your capital, include a chaos hedge or two, manage position sizing, have a well-defined exit plan on non “forever stocks”, and if you are able, dollar cost average the next decade in an effort to lower your average cost for shares.  

Think about it, sorry for going so long today, and have a blessed Independence Day celebration with your family! Shaun

“The public buys the most at the top and the least at the bottom”

~Rule #5, Bob Farrell’s 10 Rules of Investing

1,2,3 TRADESMITH DAILY, “How to Detect a Market Crash”, by Justin Brill, June 30, 2021

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

Dividend payments are not guaranteed and may be reduced or eliminated anytime by the company.

Dollar cost averaging requires continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

All investing involves risk including the possible loss of principle. No strategy assures success or protects against loss. 

High Yield (junk) bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit and liquidity risks than those rated BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

The S&P 500 Index is an un-managed index which cannot be invested into directly. Un-managed index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment, and past performance is not a guarantee of future results.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. 

Securities offered through LPL Financial. Member FINRA/SIPC

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

Shaun Scott No Comments

Embrace the Emerging Charter Economy

The Fed’s policy of perpetual dollar debasement makes it increasingly difficult for common folks to put food on the table, but new technologies present valuable solutions for the nimble. Consider the charter economy, and how it can help your family solve the dilemma of rising costs.    

The charter economy is simply a “sharing” economy in which useful possessions are “rented” to others when not in use. Americans pay high real estate taxes on basements and garages, and then fill them with depreciating, non-income producing accoutrements, like cars, lawn mowers, and generators, which in most cases rarely get used. Your family is a micro economy, and this is an inefficient use of your God-given capital!

The charter economy is mutually beneficial, which means it’ll save you money when you smartly rent an item instead of buying it, and it’ll make you money when you rent an “in-demand possession” instead of storing it. This new sharing economy is booming, in part because modern technologies have solved the former hindrances of a) finding a willing lender and renter, b) negotiating a fair price, c) making payment, and    d) trusting associated parties. Choose a well-established vendor with many users, lots of favorable reviews, and a strong insurance policy (for protection from damage, theft, or injury). Reputable sites include, but are not limited to, Airbnb, VRBO, Turo, Neighbor, StyleLend, Fat Llama, Spinlister, RVshare, and Boatsetter.¹  

 The most practical and profitable “not-in-use” items to rent include homes, cars, storage space, parking spaces, tools, bikes, snowboards, skis, surfboards, paddleboards, kayaks, RV’s, and boats. Neighbor’s site has a calculator to provide estimated income amounts on various items, and other free calculators can be found online. My own recent search for a rental garage on Aquidneck Island revealed there is zero supply available, and the going rate for a secure 12×24 space is north of $300/month!

Rules for success in the charter economy include:

  1. Provide high quality photos and descriptions. When placing an ad, use clear, well-lit photos which accentuate the intended use. If renting storage space, for example, the picture should reveal the whole space, which should be clean, empty, and inviting. Offer a very detailed description of your products.

  2. Treat it like a business. People want to deal with professionals, so be punctual, courteous, and kind, and offer a fair price.  

  3. Focus on products that are in high demand.

  4. Post and encourage reviews, the more the merrier!

  5. Make sure you are protected.²

Remember to appreciate and enjoy the God-given new relationships the charter economy will send your way! Shaun

“Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal.” ~Matthew 6:19-20

1,2 Retirement Millionaire, “Charter Income: America’s No. 1 Income Strategy for 2020”, August 21, 2020

The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial. The economic forecasts set forth in this commentary may not develop as predicted.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL does not provide research on individual equities.

 

 

 

     

  

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