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The Perfect Crash Indicator Is Flashing Red

What’s the last big toy you buy when things have been good for a really long time and you already have all the other toys? An RV, of course. A dubious thing to own if you already have a house, but when the good times seem likely to roll on forever, why the hell not?

And what’s the first thing you sell when you lose your job and your stocks are tanking? That very same RV. Which makes new RV sales a useful indicator of our place in the business cycle.

What does it say now? Here you go:

Notice the mini-spike in the late 1990s and the major spike in mid-2000s, both of which were followed by corrections. Now note the mega-spike from 2010 and 2016.

And how are things going so far this year? Well, the space is on fire:

‘The RV space is on fire’: Millennials expected to push sales to record highs

(CNBC) – RV shipments are expected to surge to their highest level ever, according to a forecast from the Recreation Vehicle Industry Association.

It would be the industry’s eighth consecutive year of gains.

Thor Industries and Winnebago Industries posted huge growth in their most recent earnings report.

Those shipments are accelerating, and should grow even more next year, the group said. Sales in the first quarter rose 11.7 percent from 2016.

Much of the growth can be attributed to strong sales of trailers, smaller units that can be towed behind an SUV or minivan, which dominate the RV market. The industry also is drawing in new customers.

As the economy has strengthened since the Great Recession, and consumer confidence improved, sales have picked up, said Kevin Broom, director of media relations for RVIA.

Two of the major players in the industry, Thor Industries and Winnebago Industries, both manufacturers of RVs, reported huge growth in their most recent earnings report. Thor saw sales skyrocket 56.9 percent to $2.02 billion fromlast year. Winnebago’s surged 75.1 percent last quarter to $476.4 million.

Gerrick Johnson, an analyst at BMO Capital Markets, attributed much of that growth to acquisitions. Thor bought Jayco, then the No. 3 player in the industry, last June; Winnebago bought Grand Design in October.

Thor stock has experienced strong growth over the past year of almost 40 percent. Winnebago tells an even better story: Its shares are up 56 percent over the past 12 months.

“They’ve done massively well because they’ve made massively creative acquisitions,” said Johnson. “Wall Street didn’t realize how creative those deals were. Each quarter they came through. The RV space is on fire, and the demand metrics are quite positive.”

What we have here is another classic short. During the past couple of recessions, RV stocks plunged as everyone came to their senses and stopped buying $60,000 motel rooms. Based on the above chart that’s a pretty good bet to repeat going forward. Let’s revisit this play in a couple of years.

25 thoughts on "The Perfect Crash Indicator Is Flashing Red"

  1. There is an article about a woman who works at Facebook who lives in her car because Facebook doesn’t pay her enough to afford rent in Silicon Valley. And at an average rent of $4,300+ per month, I bet she would rather an RV than her car.

    Coincidentally, I had the opportunity to meet a man in his early 50s who lived in a van with a very good job during the first dotcom bubble who invested the rent money saved in gold and gold stocks back when gold was $300 or so an ounce! He sold just before it hit $1,700 an ounce. Needless to say, he can afford to stay anywhere he wants these days, as he is out of the rat race for good!

  2. I have friends who are baby boomers in their late 60’s and early 70’s are selling their large RV’s because they have traveled every where for the last several years and are selling because they have been there done that or a spouse becomes I’ll and it is no longer feasible.
    I hear young men buying smaller RV’s to live in instead of paying for expensive rent. Also those priced out of the housing market are living in RV parks in warm weather climate states like Florida. Rents and homes prices are too high and wages are stagnant. That accounts for a rise in the smaller to mis size RV’s not a sign that the economy is great.

  3. I am foaming at the mouth like a rabbid dog. I guess we will be able to buy a huge roach coach for pennies on the dollar in about 3 years. I am sure these monster house on wheels will be for sale in every truck stop in America.

  4. I don’t think it is the Millenials, but instead the Baby Boomers which are responsible for the increase in sales. They have retired – and now want to travel around. And why not travel comfortably, using an RV? My buddies are doing exactly that.

  5. It is a form of prepping as a cheap place to live either for themselves or for family to live in when the SHTF.

  6. I am really surprised about the explanation. I guess the figures will be right, but telling that the economy is supergood so people are buying Rv’s I don’t buy it. I live in Belgium and here real estate seems to be topping out finally, I bought my first home in this city where I still live 30 years ago and prices have gone up 8 fold, salary’s maybe 2 fold, intrest rates went from 13.5% to 1.8 %. I would recommand a milennial buying a trailer in stead of a life long debt burden and slavery into a dictatorial corporate and political system.

    1. I wish I could say the same where I live (nearby Zurich). I bought my house 16 years ago and it was reappraised by the insurance company with zero price increase. But at least mortgage has come down here too (5year=0.7%)

      1. The real estate market is driven by people and people have different beliefs and habits in different country’s. Germany has cheap real estate, UK is massively overprized and Spain and Italy are cheap. I don’t know about Switzerland, but I heard it was extremely expensive, maybe that is the reason it didn’t go up any more since you bought. I always compare to income. In Holland you could deduct all your intrest from your income, so people were borrowing high sums just because of tax reasons. You guy’s have less inflation in your houseprices as Swiss franc got way stronger since the euro was created. I remember Swiss frank being 25 BF being about 60 eurocent, now it is around parity with Euro, Switserland must be suffering in tourism because of this, We can not afford to go there anymore and so I guess other people do the same.

  7. The purchase of an RV by millennials is instead of a house, not in addition. Check the Tiny House movement. Gives them mobility in addition to lower cost.

    1. millenials are not buying RV’s. They’re living off of Mom/Dad’s checkbook or in their basement.

      One economic crash, coming up.

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