Editor's note: Few editors in our industry write about history, politics, and economics with as much humor and honesty as Agora founder Bill Bonner.
For today's Masters Series, we're republishing one of our favorite essays of his. Written in May 2000 while en route to give a speech in New York, Bill recounts in stark terms the desolate scenery that confronts Amtrak riders traveling along the Northeast corridor...
Even the Rats Have Left
By Bill Bonner
Contrarian instincts, like crowd-following ones, are no guarantee of success. The contrarian insight is merely the realization that people are swayed by emotion as much as by logic – and that they frequently become either too bearish or too bullish. Prices eventually tend to regress to the mean, so you can make money by buying what is unusually cheap and selling what is dear – assuming they return to more normal levels.
But sometimes the trends that lie beneath cycles of despair and euphoria are extremely long. In many of America's East Coast cities, for example, real estate prices peaked out, in real terms, early in the 20th century. Since then, almost every investment – even at very low prices – has been a losing one.
I have to give my speech in a few minutes. So I only have time to tell you about my train trip from Baltimore to New York. As the hippies used to say, it was a trip.
The trains pull out of Baltimore's station. You pass through the black slums of East Baltimore... and then the white slums – peering over fences and into backyards onto scenes of such dilapidation and depravity that you believe yourself transported – either in space or in time.
Either you are visiting some Third World hellhole – such as Lagos, Nigeria – or a 19th century Dickensian one. Whichever direction you look, right or left, it is the wrong side of the track. Mattresses lying on the ground in backyards, rusted out cars and factories, boarded-up or broken-out windows – garbage everywhere... in piles, in ditches, even in the trees. The scenes are hard to reconcile with the vision of a New Era – and everyone getting rich. These people certainly are not rich. They are not even poor. They would have to work for years and save their money to reach poverty.
Caen, Dresden, Hiroshima – many European and Asian cities were bombed to smithereens just a half century ago. And yet every one of them is a model of prosperity compared to these East Coast dumps. In fact, they probably looked better even in 1946 than East Baltimore does today.
In 1983, I bought a beautiful house in a "bombed out" section of Baltimore for $27,000. I spent several times that amount fixing it up. Seventeen years later, I felt glad to be able to sell it for less than I had spent on it.
But at least that house – built for wealthy Jewish merchants in the late 19th century – was attractive to look at. Most of the places you see from the train seem to have been put up by people completely ignorant of the architectural improvements of the last three millennia. Glasgow's industrial slums are attractive in comparison.
In fact, it is hard to find anything that is not appealing in comparison. Few areas of the world are so misbegotten, forlorn, and unmitigatedly depressing.
It is hard to turn your eyes away. The scenes are so preposterously abject – so unrelentingly ugly, trashy, and revolting – it is like watching MTV... you are almost hypnotized by the sublime wretchedness of it all. There are hospital waste dumps that are more attractive and healthier places to live. In fact, some of the buildings are in such a condition that you can't tell if they are dwellings – or just heaps of discarded building materials. And some of the neighborhoods are so bleak and forbidding even the rats must have decamped.
If you believe there is an explosion of wealth creation going on in America, I invite you to take the train and open your eyes. Whatever explosions are occurring, no shock waves of wealth have reached this corridor. No houses – visible from anywhere along the route – are being bid up to ridiculous levels. I would bet that not a single one has sold above the offer price in the last 50 years.
Not all the houses are abandoned – or even in bad repair. Some are well-maintained. With their aluminum siding, formstone, and Depression-era designs. However, one wonders why anyone would bother to keep them up. It would be better to walk away and call in a bomb strike. They were a disgrace the day they were built. Today, they are an embarrassment. They are houses that bombs and termites would improve.
I did not see a single building I would want to live in. I say that not out of snobbery, but simply the instinct for self-preservation. These places look lethal – if not to the body, certainly to the spirit.
Even nature seems to have turned malignant. The typical bucolic scene along the N.J. tracks is misshapen catalpa trees with plastic bags hanging from the branches. Somehow, the catalpa tree seems to have mutated so it grows in concrete. And plastic bags are ubiquitous. Many of the commercial buildings still in service seem to use them to decorate the razor wire they run along the roofs – putting a blue or white plastic bag at intervals of every three feet or so.
The most attractive thing I saw along the entire trip – through Wilmington, Philadelphia, Trenton, and Newark – was a huge pile of smoking metal – a place that looked like it had been hit by a squadron of bombers about three hours before. At least, the rubbish had been burned.
– Bill Bonner
Editor's note: Recently, Bill and his research group at Agora Financial identified massive problems in America's financial markets. He describes these problems as "the fattest, juiciest financial bubble that's ever existed." Bill has recorded an important message, warning about the crisis. In it, he identifies ways you can sidestep the fallout. To watch it, click here.