The collision of global markets and social mood

Wednesday, August 11, 2010

Road Trip Recap -- One Nation Under Stress

The following is a recap of my recent 20-day road trip through the Northern states of America.

While most blog entries during the trip were confined to a strict travelogue narrative, this is my best interpretation of what I saw from a socionomic perspective.

I tried to keep these observations out of the blog during the trip as I wanted it to be positive and to reflect the happiness and joy I was experiencing. But if truth be told, my heart ached many times during this trip. I’ve driven across this great country 6 times now. Something’s wrong.

Key Point:
America is a vast, incredibly beautiful country filled with hard-working people possessing boundless drive and imagination who are coming to the mass recognition that they are being exploited by political, monetary, and fiscal means, and that something is deeply wrong.

Summary Of Topics:

1. Phantom Road Construction
2. National Parks
3. Motel Housing
4. A Louer
5. Ghost towns
6. Overcapacity
7. Back To The Center
8. Burger Mania
9. High-end Stress vs. Regular-guy Stress
10. Roads And Real Estate In Canada
11. Uh-oh. The Dawning Of Reality

1) Phantom Road Construction

This road trip spanned 7200 miles through 16 states, plus a good part of Ontario and Quebec, Canada.

The first thing I noticed was a tremendous amount of what I eventually termed phantom road construction.

It was widespread throughout Utah, Nevada, Idaho, Oregon, California, Washington, Montana, Wyoming, North Dakota, South Dakota, and Vermont. It was in our National Parks. It was even in Canada.

What is it?

It isn’t the actual construction, the road crews, the stalled traffic, the intensive road work that one would expect.

This was something I’d never seen before.

It was make-believe road construction. Make-it-look-real road construction. Block-off-3-miles-of-interstate-passing-lane-but-have-no-road-crews-anywhere-doing-anything road construction. Rarely did I ever see actual work being done.

After several states worth of this, it started to feel obvious that it was being done for the sake of appearance. America On The Move . . . Your Tax Dollars At Work . . . Rebuilding the US . . .

In Nevada there was a different breed of it: they were actually doing work. But they were repaving perfectly good pavement. One moment I was bombing merrily along Route 93 north on the way to Idaho thinking man, they’ve really got great roads out here, and suddenly I was at a standstill while paving crews toiled in the 95° heat. Not a bump, not a pothole, not a crack in the road. But there it was being paved.

Maybe I was just lucky and happened to be zooming by at the best possible time through multiple states, multiple National Parks, two Canadian provinces, and just missed the real construction.

But if I were that lucky I would’ve won the lottery by now.

2) National Parks

Speaking of our National Parks (note that word our), it’s disgusting that we’re charged a dime to enter them while trillions went to bail out the money changers.

$10 here, $25 there, $15 more here, and pretty soon it dawns on you at a complete stop in the dead of summer, while make pretend road workers halt your passage, that we’ve all been had.

Then there are the American Recovery and Reinvestment Act signs posted just before the park entrances -- before you’re taxed in order to enter. It’s a slap in the face to any red-blooded American who watched AIG get bailed out just so Goldman Sachs could be made whole.

One other thing: they are filled to bursting. I can’t figure out if this is a good thing or a bad thing. For a guy just passing through, it’s a nuisance. For a family looking for a week long vacation, it’s a Godsend. A cheap vacation, especially if you're in an RV and can live there for a month (which many seem to do). With millions out of work, and with hundreds of thousands walking away from their mortgages, the fact that the parks are jammed doesn’t strike me as a groundswell of budding consumerism. It felt like people clamoring to see their country before it’s too late.

Another interesting thing: at Crater Lake, Oregon, just over the California border, I was practically the only Caucasian there. Everyone was either Southeast Asian or East Indian. It was amazing. Great crowds of people, all of them well dressed, with the latest gadgets and high-end digital cameras, very happy and polite, and very proud to see their country. Perhaps it was a glimpse into the future.

3) Motel Housing

I like to stay in motels when I’m on a road trip. I like being able to pull up to my room, and to see my car right there outside the window, especially when it’s stuffed with belongings, lots of gear, and cherished electronics from Cupertino.

I do not like staying next to anyone but fellow travelers. Way too many motels are now home to small families, which tend to have little kids who want to be little kids and play outside, or couples who tend to stay up late, party, watch TV, scream, fight, order pizza, and finally, after a visit by the police, pass out around 3am.

Avoid anything that mentions weekly rates, anyplace where there are toys outside the rooms and open doors with people hanging out, anything more than a few vehicles parked outside the rooms before the day is over. You’ll set yourself up for a lousy sleep and a possible domestic disturbance visit by the police when you’re trying to rest up for the road ahead.

Motel housing is a grim indication of a definitive shift going on. But I’ll be even more worried when I see my first tent city.

Alternatively, one cool thing that is happening in the motel world is that it seems like a few intrepid entrepreneurs are being drawn into the trade and are intent to make waves. Case in point: Sault St. Marie, Michigan. The Plaza Motor Hotel. For the same price as many lesser motels, my room felt like someone put their heart and soul into it. It felt like someone cared enough to put imagination and creativity into every aspect of the room. Everything felt custom, not institutional. There were beautiful, thick towels. And it was surrounded by lovely grounds and landscaping.

It is when I see this innate imagination and creativity that I get encouraged. Maybe it’s small-scale entrepreneurialism and the vibrancy of artesanal, micro-niche products and businesses that will pull us out of the black hole of globalized corporatism.

4) A Louer
So as motels morph into alternative housing, what does this say about the housing recovery? And what does it say about job recovery? Nothing. Exactly. So maybe that’s why there are so many commercial real estate signs all over North America. None more so than Route 40 on the outskirts of Montreal where the term A Louer (to let) is everywhere. Mike “Mish” Shedlock at says that Canadian real estate is the next high-profile implosion. I fully agree.

We have our own A Louer signs all across this country, for both commercial and residential real estate. Small towns, big towns, cities, cute villages, tony enclaves, I saw a TON of supply.

5) Over Capacity
The greatest area of speculation is not the stock market. It’s the real estate market. And when everyone was making money buying, selling, flipping, investing, building, decorating, staging, painting, and roofing homes that were inflated 40 and 50% over their real values, that meant vast numbers of people were spending and living 40 to 50% beyond their real incomes.

That means we’re 40 to 50% over capacity. Think about it.

We have 40% more Olive Gardens, Red Lobsters, and Chili’s; 40% more car*, boat, ATV, and motorcycle dealerships; 40% more Wal-Marts than we need; 40% more real estate agents, carpenters, interior designers, painters, and roofers. On and on it goes. *I saw many car dealerships with only bare-bones factory inventory (on which they pay “juice” – financing charges) and mostly late-model used cars for sale.

And it’s not just us. The whole world accommodated this phenomenon. As North America and Europe consumed, Asia produced, and emerging markets provided the raw material. All regions benefited from over consumption. Thus the prospect for over capacity in every country, and every continent.

For my part, I found over capacity in the form of a plethora of gas stations, restaurants, and motels. I also saw large numbers of each boarded up and for sale. On two restaurant occasions on the beautiful coast of Oregon, I was the only diner.

As over capacity corrects itself, it can lead to . . .

6) Ghost Towns

I used to think they were only in the movies. Then I drove around the country.

Several times I found myself in towns that were almost completely vacant: no people on the sidewalks and no cars on the street. More than once I found myself slowing down in front of the local Ford dealership to see if they had a nice new Mustang I could drive out the front window, because I felt like I was on the set of The Omega Man.

If we really are 40% over capacity, we are vulnerable to more Ghostly towns. Klamath Falls, OR, Tuba City, AZ, Casper, WY . . . These places were so quiet it was scary.

7) Back To The Center
During times of market stress, money flows back to the center. For the time being, that means the perceived strength of the US dollar and US treasuries – a vaguely Darwinian flow from the riskier emerging markets back to the lower risk center. Eventually, there’s a freak meteor strike or a large-scale debt liquidation and a new center begins to form.

I saw the same thing happening on a smaller scale with restaurants and towns. The fringe giving way to the tried and true standbys. A single, extremely packed restaurant among several empty ones. A touristy resort town bursting at the seams versus near emptiness somewhere else. Mo’s restaurant on the all-too-quiet Oregon Coast vs. its many empty competitors. Jackson Hole vs. the eerie quiet of Casper. Clam rolls and chowder instead of mahi mahi and truffle-infused aioli.

Time and time again I would see crowds descend on certain places and certain towns. And once there, it’s a splurge. A small luxury to be bought with abandon, no matter what the economy is doing. In our consumer culture, people still find the time and money to do what they do best. Consume.

How long until the tourists cease buying over-priced T-shirts and clam rolls and opt for someplace less hectic or less pricey? It doesn’t look like we’re there yet.
We’re still headed for the comfort zone: back to the center. At some point it will shift to back to the home . . . to the armored cocoon.

8) Burger Mania
Nothing is back to the center more than the current craze for the all-American burger. In a sign of changing times, changing palates, and changing behaviors, the burger is the big beneficiary.

I first noticed this on my way out to Arizona last fall in ’09: I suddenly found myself on a mad search for the best burger. I didn’t find much on the road, but when I arrived in Scottsdale, I had my first In-N-Out burger and I was hooked. We don’t have this chain out East. It was as close to perfection as I’d ever tasted. I set off to find a better one at a non-chain burger joint.

Along the way, it seemed the entire Phoenix area was doing the same thing. Burgers were becoming the hot new menu item in a sluggish economy. Scores of new restaurants were jumping on the trend, and even high-end burgers started appearing. Zinburger cooked theirs in Zinfandel. The Grind cooked theirs on a 1000° grill and was just rated “best new burger spot” by Bon Appetit.

For my part, I found a little mom and pop joint called Lucky Boy Burger Shop in a funky nowhere area that made what I felt was the best burger around.

I think the current burger renaissance is a great study in back to the center socionomic behavior. It suggests deflationary behavior too.

9) High-end Stress vs. Regular-guy Stress

I kept up the burger mission while on the road, and it led me to the next topic: high-end stress vs. regular-guy stress.

In general, one of the strong points of the economy is that “real” jobs and businesses (those that don’t depend on borrowing) seem to be holding their own. For the regular guys hanging out in Montana’s Missoula Club having a few burgers, several beers, and some Jager shots, their only stress seemed to be whether or not to have another beer, or which girl to talk to. The far away world of sovereign debt risk hasn’t seemed to affect them at all. Their world is made up of redundancy. A little finish-carpentry, a little raft-guiding, a little outfitting, a little snowplowing, a little ranch-handing. You could say they’re well diversified.

But things were different in Sun Valley. I sat down for a burger and beers at a local joint and overheard the regular-guy line cook blasting a customer at the bar for not tipping him first. Sun Valley seemed like a tense place for a regular guy who makes a living serving his leveraged neighbor who has a lot of exposure to pesky issues like credit and debt, interest rates, and lukewarm stock and bond returns.

In the South Dakota Badlands, I met another regular guy who was RV’ing with his wife. First thing out of his mouth was how bad his gas mileage sucked. He rolled his eyes as if he was hemorrhaging money. And he wasn’t saving any money by sleeping in his trailer after spending 3x what I was spending on fuel plus having to pay for a pad at the RV campground.

I didn’t happen to meet anyone from the high end who was trying to unload a $2 million condo, but I would think they’d be just as exasperated.

10) Roads And Real Estate In Canada

I spent two days in beautiful Canada, one in Ontario and one in Quebec. My quick take is that Quebec shows better than Ontario. Better roads, newer gas stations, countryside that was just a little more picturesque, farms that seemed more vibrant, restaurants that seemed just a little busier, people who were just a little bit friendlier (I was even complimented on my French, a miracle).

Was this the difference between two distinct cultures? Did one province borrow more money and spread it around? Was I witnessing the difference between a fluoridated* population vs. a non-fluoridated population? (Ontario is, Quebec isn’t) I don’t have the answer, but the difference was palpable.

*. . . Skeptical about fluoride? Hitler wasn’t. He was a pioneer in treating municipal water supplies with extremely low levels of sodium fluoride. He felt it destroyed the will.

11) This One Goes To Eleven . . .

So, we have a big beautiful country. We’ve got drive, imagination, and creativity. The politicians might not care about our magnificent constitution, but the rest of the country does. Washington has underestimated just how fiercely proud we Americans really are.

If I had to sum up everything I saw, it is this:

Things are not okay, and people are starting to realize it.

Something is wrong, and people are starting to realize it.

We’re headed down, and people are starting to realize it.

America is in a recognition phase, when the masses begin to recognize the trend and when psychology aligns itself with it. In this case, it’s a downward trend that started 10 years ago. And it’s about to intensify.

I saw this magazine cover recently:

It seems to sum up the feeling perfectly.

1 comment: