An Insider’s View of the Real Estate Train Wreck, by David Galland, The Casey Report

The first time I spoke with real estate entrepreneur Andy Miller was in late 2007, when I asked him to serve on the faculty of a Casey Research Summit. As John Mauldin, a former faculty member himself, knows, we’re very selective with our speakers. And there was no one in the nation I wanted more than Andy to address the critical topic of real estate.

My interest in Andy was due to the fact that he has been singularly successful in pretty much all aspects of the real estate market, including financing and developing large projects – such as shopping centers, apartment communities, office buildings, and warehouses – from one end of the country to the other. His expertise has also allowed him to build an impressive business providing assistance to large financial institutions that need help in dealing with problem commercial real estate loans. As you might suspect, business is booming.

Back in 2007, however, what most intrigued me about Andy was that he had been almost alone among his peer group in foreseeing the coming end of the real estate bubble, and in liquidating essentially all of his considerable portfolio of projects near the top. There are people that think they know what’s going on, and those who actually know – Andy very much belongs in the latter category.

In fact, he initially refused to speak at our event, only agreeing very reluctantly after I had hounded him for several months. The reason for his refusal, I later found out, was that he had spoken at several industry events before the real estate collapse and had been all but booed off the stage for his dire outlook.

The happy ending of this story is that Andy’s speech at our Summit was a rousing success, and he enjoyed it so much that he has now spoken at several, and has kindly agreed to sit for periodic interviews to keep our readers up to date on the latest developments in this critical sector. So far, Andy’s real estate forecasts continue to come true.

As you’ll read in the following excerpt from my latest interview with Andy, who now spends considerable time each day helping the nation’s biggest banks cope with growing stacks of problem loans, he remains deeply concerned about the outlook for real estate.

David Galland

No one has been more right on the housing market in recent years. So, what’s coming next? Some of the housing numbers in the last few months look a little less ugly. Could housing be getting ready to get well?

MILLER: I don’t think so.

For all intents and purposes, the United States home mortgage market has been nationalized without anybody noticing. Last September, reportedly over 95% of all new loans for single-family homes in the U.S. were made with federal assistance, either through Fannie Mae and the implied guarantee, or Freddie Mac, or through the FHA.

If it’s true that most of the financing in the single-family home market is being facilitated by government guarantees, that should make everybody very, very concerned. If government support goes away, and it will go away, where will that leave the home market? It leaves you with a catastrophe, because private lenders for single-family homes are nervous. Lenders that are still lending are reverting to 75% to 80% loan to value. But that doesn’t help a homeowner whose property is worth less than the mortgage. So when the supply of government-facilitated loans dries up, it’s going to put the home market in a very, very bad place.

Why am I so certain that the federal government will have to cut back on its lending? Because most of the financing is done via the bond market, through Ginnie Mae or other government agencies. And the numbers are so big that eventually the bond market is going to gag on the government-sponsored paper.

The public doesn’t have any idea of the scale of the guarantees the government is taking on through Fannie, Freddie, and FHA. It’s huge. If people understood what the federal government has done and subjected the taxpayers to, there would be a public outrage. But you can’t get people to focus on it, and it’s very esoteric, it’s very hard to understand. But it’s not something the bond market won’t notice. The government can’t keep doing what it has been doing to support mortgage lending without pushing interest rates way up.

Refinancings of single-family homes are very interest-rate sensitive. Consumers have their backs against the wall. They have too much debt. Refinancing their maturing mortgages or their adjustable-rate mortgages is very problematic if rates go up, but that’s exactly where they’re headed. So anyone who’s comforted by current statistics on single-family homes should look beyond the data and into the dynamics of the market. What they’ll find is very alarming.

On that topic, recent data I saw was that something like 24% of the loans FHA backed in 2007 are now in default, and for those generated in 2008, 20% are in default, and the FHA is out of money.

MILLER: Fannie Mae had a $19 billion loss for the third quarter of 2009, and they are now drawing on their facility with the U.S. Treasury. We have all forgotten that Fannie and Freddie are still being operated under a federal conservatorship. On Christmas Eve, the agency announced that they were going to remove all the caps on the agencies.

So what about commercial real estate?

MILLER: When I saw what was happening in the housing market, I liquidated all my multifamily apartments, shopping centers, and office buildings. I liquidated all my loan portfolios, and I’m happy I did.

Then it occurred to me in 2005 and 2006 that the commercial world had to follow suit. Why? Because it’s a normal progression. Obviously, when single-family homes decline in value, multifamily apartments decline in value. And when consumers hit the wall with spending and debt, that’s going to have an impact on retailers that pay for commercial space.

Furthermore, the financing for retail properties had gotten ludicrous. The conduits were making loans that they advertised as 80% of property value when they originated them, but in reality the loan-to-value ratios were well over 100%. And I say that to you with absolute, categorical certainty, because I was a seller and nobody knew the value of the properties that I was selling better than I did. I had operated some of them for 20 years, so I knew exactly what they were bringing in. I knew what the operating expenses were, and I knew what the cap rates were. And, you know, the underwriting on the loan side and the purchasing side of these assets was completely insane. It was ludicrous. It did not reflect at all what the conduits thought they were doing. They were valuing the properties way too aggressively.

I became very bearish about the commercial business starting in late ’05. In fact, I think I was in Argentina with Doug Casey, sitting on a veranda at one of the estancias, and he and I were lamenting what was going on in the real estate business, and I said there was going to be a huge adjustment in the commercial market.

Beyond the obvious, that the real estate market has taken pretty significant hits and some banks have been dragged under by their bad loans, what has really changed in real estate since the crash?

MILLER: I think the first thing that changed was that people learned that prices don’t go up forever. Lenders also saw that underwriting guidelines for commercial real estate loans, especially in the securitization markets, were erroneous. They realized that some of their properties had been financed too aggressively, but still, I don’t think even at the fall of Lehman, anybody was predicting a wholesale collapse in commercial real estate.

But they did see they should be more circumspect with loan underwritings. In fact, after the fall of Lehman, they completely stopped lending. I think they realized we had been living in fantasy land for 10 years. And that was the first change – a mental adjustment from Alice in Wonderland to reality.

Today it’s clear that commercial properties are not performing and that values have gone down, although I’ve got to tell you, the denial is still widespread, particularly in the United States and on the part of lenders sitting on and servicing all these real estate portfolios. People still do not understand how grave this is.

Right now there are an awful lot of banks that do an awful lot of commercial real estate lending, and for about a year now you’ve been telling me that you saw the first and second quarter of 2010 as being particularly risky for commercial real estate. Why this year, and what do you see happening with these loans and the banks holding them?

MILLER: It’s an educated guess, and it hasn’t changed. I still think that it’s second quarter 2010.

The current volume of defaults is already alarming. And the volume of commercial real estate defaults is growing every month. That can only keep going for so long, and then you hit a breaking point, which I believe will come sometime in 2010. When you hit that breaking point, unless there’s some alternative in place, it’s going to be a very hideous picture for the bond market and the banking system.

The reason I say second quarter 2010 is a guess is that the Treasury Department, the Federal Reserve, and the FDIC can influence how fast the crisis unfolds. I think they can have an impact on the severity of the crisis as well – not making it less severe but making it more severe. I will get to that in a minute. But they can influence the speed with which it all unfolds, and I’ll give you an example.

In November, the FDIC circulated new guidelines for bank regulators to streamline and standardize the way banks are examined. One standout feature is that as long as a bank has evaluated the borrower and the asset behind a loan, if they are convinced the borrower can repay the loan, even if they go into a workout with the borrower, the bank does not have to reserve for the loan. The bank doesn’t have to take any hit against its capital, so if the collateral all of a sudden sinks to 50% of the loan balance, the bank still does not have to take any sort of write-down. That obviously allows banks to just sit on weak assets instead of liquidating them or trying to raise more capital.

That’s very significant. It means the FDIC and the Treasury Department have decided that rather than see 1,000 or 2,000 banks go under and then create another RTC to sift through all the bad assets, they’ll let the banking system warehouse the bad assets. Their plan is to leave the assets in place, and then, when the market changes, let the banks deal with them. Now, that’s horribly destructive.

Just to be clear on this, let’s say I own an apartment building and I’ve been making my payments, but I’m having trouble and the value of the property has fallen by half. I go to the bank and say, “Look, I’ve got a problem,” and the bank says, “Okay, let’s work something out, and instead of you paying $10,000 a month, you pay us $5,000 a month and we’ll shake hands and smile.” Then, even though the property’s value has dropped, as long as we keep smiling and I’m still making payments, then the bank won’t have to reserve anything against the risk that I’ll give the building back and it will be worth a whole lot less than the mortgage.

MILLER: I think what you just described is accurate. And it’s exactly a Japanese-style solution. This is what Japan did in ’89 and ’90 because they didn’t want their banking system to implode, so they made it easier for their banks to sit on bad assets without owning up to the losses.

And what’s the result? Well, it leaves the status quo in place. The real problem with this is twofold. One is that it prolongs the problem – if a bank is allowed to sit on bad assets for three to five years, it’s not going to sell them.

Why is that bad? Well, the money tied up in the loans the bank is sitting on is idle. It is not being used for anything productive.

Wouldn’t banks know that ultimately the piper must be paid, and so they’d be trying to build cash – trying to build capital to deal with the problem when it comes home to roost?

MILLER: The more intelligent banks are doing exactly that, hoping they can weather the storm by building enough reserves, so when they do ultimately have to take the loss, it’s digestible. But in commercial real estate generally, the longer you delay realizing a loss, the more severe it’s going to be. I can tell you that because I’m out there servicing real estate all day long. Not facing the problems, and not writing down the values, and not allowing purchasers to come in and take these assets at discounted prices – all the foot-dragging allows the fundamental problem to get worse.

In the apartment business, people are under water, particularly if they got their loan through a conduit. When maintenance is required, a borrower with a property worth less than the loan is very reluctant to reach into his pocket. If you have a $10 million loan on a property now worth $5 million, you’re clearly not making any cash flow. So what do you do when you need new roofs? Are you going to dig into your pocket and spend $600,000 on roofing? Not likely. Why would you do that?

Or a borrower who is sitting on a suburban office property – he’s got two years left on the loan. He knows he has a loan-to-value problem. Well, a new tenant wants to lease from him, but it would cost $30 a square foot to put the tenant in. Is the borrower going to put the tenant in? I don’t think so. So the problems get bigger.

Why would the owner bother going through a workout with the bank if he knows he’s so deep underwater he’s below snorkel depth?

MILLER: It’s always in your interest to delay an inevitable default. For example, the minute you give the property back to the bank, you trigger a huge taxable gain. All of a sudden the forgiveness of debt on your loan becomes taxable income to you. Another reason is that many of these loans are either full recourse or part recourse. If you’re a borrower who’s guaranteed a loan, why would you want to hasten the call on your guarantee? You want to delay as long as possible because there’s always a little hope that values will turn around. So there is no reason to hurry into a default. None.

So that’s from the borrower’s standpoint. But wouldn’t the banks want to clear these loans off their balance sheets?

MILLER: No. The banks have a lot of incentive to delay the realization of the problem because if they liquidate the asset and the loss is realized, then they have to reserve the loss against their capital immediately. If they keep extending the loan under the rules present today, then they can delay a write-down and hope for better days. Remember, you suffer if the bank succumbs and turns around and liquidates that asset, then you really do have to take a write-down because then your capital is gone.

So here we are, we’ve got the federal government again, through its agencies and the FDIC, ready to support the commercial real estate market. They’ve taken one step, in allowing banks to use a very loose standard for loss reserves. What else can they do?

MILLER: Well, obviously nobody knows, but I can guess at what’s coming by extrapolating from what the federal government has already done. I believe that the Treasury and the Federal Reserve now see that commercial real estate is a huge problem.

I think they’re going to contrive something to help assist commercial real estate so that it doesn’t hurt the banks that lent on commercial real estate. It’ll resemble what they did with housing.

They created a nearly perfect political formula in dealing with housing, and they are going to follow that formula. The entire U.S. residential mortgage market has in effect been nationalized, but there wasn’t any act of Congress, no screaming and shouting, no headlines in the Wall Street Journal or the New York Times about “Should we nationalize the home loan market in America.” No. It happened right under our noses and with no hue and cry. That’s a template for what they could do with the commercial loan market.

And how can they do that? By using federal guarantees much in the way they used federal guarantees for the FHA. FHA issues Ginnie Mae securities, which are sold to the public. Those proceeds are used to make the loans.

But it won’t really be a solution. In fact, it will make the problems much more intense.

Don’t these properties have to be allowed to go to their intrinsic value before the market can start working again?

MILLER: Yes. Of course, very few people agree with that, because if you let it all go today, there would be enormous losses and a tremendous amount of pain. We’re going to have some really terrible, terrible years ahead of us because letting it all go is the only way to be done with the problem.

Do you think the U.S. will come out of this crisis? I mean, do you think the country, the institutions, the government, or the banking sector are going to look anything like they do today when this thing is over?

MILLER: I know this is going to make you laugh, but I’m actually an optimist about this. I’m not optimistic about the short run, and I’m not optimistic about the severity of the problem, but I’m totally optimistic as it relates to the United States of America.

This is a very resilient place. We have very resilient people. There is nothing like the American spirit. There is nothing like American ingenuity anywhere on Planet Earth, and while I certainly believe that we are headed for a catastrophe and a crisis, I also believe that ultimately we are going to come out better.

About: Andy Miller is the co-founder of the Miller Frishman Group, which includes three companies serving different sectors of the real estate market – from mortgage brokerage and banking, to the building, management, and marketing of commercial real estate across the United States. His firm is currently deeply involved in the distressed real estate business, assisting lenders across the nation with their growing portfolios of non-performing loans. (Reposted with permission from John F. Mauldin’s e-newsletter, Thoughts From the Frontline.)

Mike Williamson’s Product Review: Dead On Tools Annihilator Demolition Hammer

A friend on an Austrian gun board introduced me to the Dead On Tools Annihilator Demolition Hammer. Just the photo was enough to convince me to pick one up for a try.

The balance is a bit forward, but there’s plenty of grip surface to choke up on if needed. The hammer end made short work of a 2” concrete block, and the chisel end’s impact split them readily. Note that it will need re-sharpened with a file from time to time. After the block, I tried a chunk of sandstone with some full swings. I got sparks and chipped off a few corners, but didn’t make serious headway. On the other hand, I proved it was tough enough to take the impact. (A reviewer elsewhere claimed he managed to break two of them. I’m presuming there was a run of poor heat treatment in that lot. He was given free, no-questions-asked exchanges by the company.)

The claw puller on the head has fantastic leverage, with that broad head, and made ripping nails loose an amusement rather than a chore. I even hammered a few extra 20d nails in for the fun of it, then ripped them back out.

As the image shows, there are prying surfaces everywhere—front, back, head, base of handle. There’s a wrench section for 2x4s, a drywall axe which would probably work for glass in an emergency (with the proper safety gear), and a couple of standard wrenches. The head is advertised to work as a bottle opener for when the chore is done, and it does, though it’s of marginal use. It will take a cap off, but there are easier ways.

Now, obviously, this tool looks positively medieval, and it does make a very effective war hammer, with one side for impact, one for crushing and splitting blows, and the butt spike for traumatizing jabs. Anyone with bayonet training can grip this appropriately and hack through a crowd of zombies, or heft it like an axe and use it on single opponents.

The retail price is $49.95, but several major hardware and farm chains carry them for $30, often on sale for $25. It’s worth having one in every vehicle, and one in the shop for those special jobs, and occasional stress relief. – Michael Z. Williamson. SurvivalBlog Editor At Large

Economics and Investing:

Mac Slavo gets is all right in this piece posted in the SHTFPlan blog: Wealth Preservation, Investing, and Prepping in 2010. (Thanks to G.S. in the State of Jefferson for the link.)

Damon sent this: U.S. Economy Grows 5.7 Percent in Fourth Quarter of 2009. JWR Adds: They’re calling it a “recovery”? That is laughable. I call it nothing more that the effect of many hundreds of billions of dollars in short term stimulus. Keep in mind that this will effectively be paid for with money borrowed from my children’s generation. The current presidential administration has spent more than $3.5 trillion, and much of that went to “stimulus.” And all that got was just 5.7% in growth? I suspect that the real underlying economy is actually heading into a depression that will last a decade or more. If you look at the job numbers minus the stimulus-generated make-work jobs, the government’s sleight of hand is apparent.

Maybe they won’t call it “conspiracy theory nonsense” anymore: Secret Banking Cabal Emerges From AIG Shadows: David Reilly. (A tip of the hat to K.L. in Alaska for the link)

Items from The Economatrix:

Energy Prices Fall So Far in 2010

Wages and Benefits Rise Weak 1.5% in 2009

Stocks Have Dismal January, Bad Omen for 2010?

Bernanke Confirmation Means Fed Independence. He was reconfirmed by the narrowest margin in congressional history.

Weak Greece Could Drag Down Weak Eurozone

Asian Stock Markets Fall on Greece Debt Fears

Growing Shares of Americans’ Income Comes From Government

Geithner Accused of Incompetence Over His Role in AIG Bailout

Odds ‘n Sods:

Reader “P.S.” sent this article from an Arizona newspaper: City won’t let homeowners live with solar power

   o o o

SurvivalBlog’s Editor At Large, Michael Z. Williamson, mentioned an interesting privacy-related article over at Tech Republic: GoogleSharing: A way to prevent tracking by Google

   o o o

F.R. sent us this link: How to Survive a Fall Through Ice

   o o o

Chris S. sent a link to a video that illustrates why you should not buy a cheap light-gauge gun vault. As I’ve often said: There is no substitute for mass. Buy a proper vault with sufficient wall and door thicknesses! And, as previously mention in my blog, be sure to bolt it down to the floor!

Note from JWR:

Today we present another entry for Round 26 of the SurvivalBlog non-fiction writing contest.

First Prize: A.) A course certificate from onPoint Tactical. This certificate will be for the prize winner’s choice of three-day civilian courses. (Excluding those restricted for military or government teams.) Three day onPoint courses normally cost between $500 and $600, and B.) Two cases of Mountain House freeze dried assorted entrees, in #10 cans, courtesy of Ready Made Resources. (A $392 value.) C.) A HAZARiD Decontamination Kit from Safecastle.com. (A $350 value.), and D.) A 500 round case of Fiocchi 9mm Luger, 124gr. Hornady XTP/HP ammo, courtesy of Sunflower Ammo. This is a $249 value.

Second Prize: A “grab bag” of preparedness gear and books from Jim’s Amazing Secret Bunker of Redundant Redundancy (JASBORR) with a retail value of at least $350.

Third Prize: A copy of my “Rawles Gets You Ready” preparedness course, from Arbogast Publishing.

Round 26 ends on January 31st, so get busy writing and e-mail us your entry. Remember that articles that relate practical “how to” skills for survival have an advantage in the judging.

Barriers – Berries – and Bounty All Hidden in Plain Sight, by The Prudent Gardener

It seems a part of preparing for extremely hard times is acquiring knowledge and honing skills to maximize resources. SurvivalBlog has been tremendously helpful in developing exhaustive lists of needs, supplies, strategies and defenses. In addition, provision is made for faith, charity and quality of life to improve a healthy mental state.

As a landscape contractor for 32 years, I am now seeing more potential for self-reliance that most property owners could develop with some planning and a better awareness of the resources they may already possess. This form of preparation could substantially improve our situation both short and long term. So much of our storing up – though most vital – is of a finite nature. Just as a woodlot on our property can supply continuous fuel, the well planned garden should not only include non-hybrid seeds, building up soils through composting, manures and cover crops, but also include a small greenhouse and/or cold frame that could yield early and late fresh greens that would provide a welcome and healthy addition to food storage.

By learning now and purchasing the types of vegetables that your family will use and enjoy, you have done just the kind of preparing that we are learning about through JWR’s books and blog. You will find that quite a few of your favorite vegetables are available as open pollinated or non-hybrid seeds. Many of the beans and peas are not hybrid anyway, as are lots of the salad crops. However, most of the sweet corn we know are hybrid varieties so you might want to look for Golden Bantam or True Gold sweet corn. Most of the great tasting tomatoes we grew up with were non-hybrid. My grandparents saved the seed from year to year and if you have ever wondered why its so hard to find a good tasting tomato, it is because most hybrids are bred for shelf-life and not taste for commercial producers. It seems these genes are somewhat incompatible. Most tomato hybrids however do have the designation of VF hybrid. That is important to know because it indicates resistance to verticullum and fucaidin wilt also known as early and late blight of tomato. Knowing this allows you to store some fungicides – either organic or chemical or both in my case. Another worthwhile gem is knowing how to avoid having tomatoes rot on the bottom before they ripen. This is called blossom-end rot and stems from a calcium deficiency. This can be avoided, more easily than it can be cured, by adding a small amount of lime at planting. The lime contains calcium and raises the PH which also makes the calcium that is present more available to the plant minimizing this frustrating problem.

This is not intended to be a complete guide to anything, but rather to stimulate awareness of your own potential resources and encourage some garden planning to optimize your own property.

As JWR has mentioned here before, rose bushes planted under a window could discourage entry. If you take that idea a little further, there are some lesser known plant selections that can make your property far less accessible. If you have an open field of view and perhaps a place where you would like to incorporate an impenetrable hedge, take a look at Julian Barberry. I never used it much in landscape design because it is so mean I did not figure anyone would want to get near the thing! Now it is looking a lot better to me. I cannot imagine anyone getting through a hedge of that, yet viewed from any distance it simply appears to be an attractive addition to the landscape rather than the vicious barrier that it is. Here you have an example of security hidden in plain sight.

Another option, if you have the room, is pyracantha. This is an angry plant I have also avoided. The Latin word for pyracantha is “firethorn”. That should tell you something. When you get stuck with its thorns, it remains sore as it injects you with a little toxin to keep it sore. The beauty is it starts hurting immediately. At a glance you would see a landscape plant that flowers with a heavy white display in Spring and yields orange or red berries in the late summer.

Most folks have forgotten about a tree call osage-orange or hedge apple. Hardy across much of the country, the osage orange was originally planted as a living fence. It lost its appeal with the introduction of barbed wire for livestock. The attributes of this tree do not end there. The fruit of this plant has been used for decades to repel insects inside places such as cellars or closets. It is a natural insect repellent. The wood of hedge apple is extremely strong and was used by the Osage Indians to make their bows, thus the name, osage orange.

We have a 10 acre tract in Tennessee, mostly wooded, for a good supply of firewood for heating and cooking if needed. This past year we built a pond for additional water and fishing and to take the guesswork out of wondering if it would stay full in dry times. I decided to put a 45 mil rubber pond liner in to make sure it held water. A Y-diverter has been installed with the gutters on our house to give the option to fill rain barrels, pipe water to pond, or fill underground tanks for irrigation.

By planting fruit trees and blueberries, we hope to extend and enhance our food storage. When selecting fruit trees to plant, be sure and learn which varieties you will need as pollinators. I have planted Fuji, Honey Crisp, Mt Boomer and Early Transparent for favorite apples, but also a Golden Delicious because it is a great pollinator for many other apples. Planting several varieties can also extend the season in which you can have fresh fruit. The some principle applies with the blueberries. Here you will find early, mid-season, and late varieties. They provide an attractive naturalizing grouping that does not attract attention. I would recommend purchasing bird netting to cover the plants so you can enjoy your crop instead of just feeding the birds.

Another little known ornamental plant that provides food is the Service Berry. A shrubby tree that blooms in early Spring before the dogwoods, it produces a delicious berry that is extremely rich in Vitamin A and is great to eat fresh or made into jam. This addition to the “prepared property” does not appear in the least cultivated, yet subtly yields another source of food. Hidden in plain sight again.

Native already to this property are walnuts, mulberries, raspberries, elderberries, and of course, blackberries. These elements should help provide some variety of jams and jellies for all that wheat bread we are going to have.

A trip to the health food store can be an educational experience for those seeking medicinal plants to grow. Items such as Sambucol, Echinacea, St. Johns Wort, and Solomon’s Seal are very common, easy to grow plants that would never appear as anything but ornamental. Sambucol is elderberry, found wild throughout Appalachia. Remember the song Elderberry Wine? St. John’s Wort is hypericum, a vigorous yellow flowering ground cover. Echinacea is a brightly colored perennial and Solomon’s Seal is a native perennial found in shady areas. All of these and many more have multiple uses and are only meant as an introduction to plants for medicinal purposes. A couple of good books in your library could prove a valuable resource, but will not do you much good unless you have the plants available to you as not all are wild plants. By simply learning some of the more useful perennials and herbs and incorporating them in your garden now, you can have available to you a selection of plants for cooking, for medicinal purposes, and for a variety of teas.

One final invaluable resource could prove to be the woodland around you. Many years ago the uses and properties of trees were better known and much of that knowledge has been nearly lost. Once when replacing a roof on an original log house, I discovered the lath strips holding the tin on was a wood I could not quite identify. A very old fellow I thought might have a guess told me very matter of factly “Well I reckon its probably Black Gum, that’s what folks used to hold their roofs on”. Black Gum lumber, while not very good for most things, is excellent lath because the wood fibers seem as if they are woven rather than straight grained. This quality is ideal for holding nails in tight forever on a roof through constant tugging of wind. Without this explanation, one might waste the tree for firewood and find it impossible to split. A fellow I know used to keep a few blocks of it around just to embarrass city folks that wanted to try their hand at “bustin’ wood”.

We are just finishing up sawing some lumber with a portable band saw mill to have on hand lumber I will need for a barn, a garden shed, and some extra lumber for projects or barter. We are fortunate to have lots of very mature trees and I selected those that appeared to be thinning in the top, a sign that they were “going the other way”, and any potential problem trees that could go down in a storm near buildings. Now sawed and stuck with spacer sticks is white oak, poplar, hickory, walnut, cherry, sassafras, maple, and of course black gum for the lath on the barn roof.

The root cellar is half-way constructed and the solar project only in the planning stages. It seems there is far more to do in front of me than behind me. Thanks for all the wisdom and encouragement to all of us.

Product Review: The Quest for a Truly Practical Rifle Sling, by CT in Texas

Over the last four years I’ve bought at least eight rifle slings. From the over the shoulder slings (which do not keep the weapon anywhere near ready) to complicated tactical slings. A year or two ago I ordered the “end all be all” of Tactical slings at the recommendation of a sales associate, then got it home and have had a hard time working that thing. It was complicated and I could not get it to work as described. Frankly, in a SHTF situation, I probably would have hog-tied myself with it, leaving myself bound, gagged and defenseless in the presence of an attacker. I had started to think that maybe it was just me, maybe I was the problem and maybe I was expecting too much from a sling.

My criteria was simple though:

1. The sling needed to be rugged and well made.
2. The sling needed to keep the rifle on the front of me near ready.
3. It needed to be simple to use.

# 3 was really important to me because in a panic, I can’t be fumbling with a sling. If I am not armed and need to become armed in a flash, I need to be able to just throw it on when on the move. If I am alerted to a potentially dangerous situation, I need to be able to put on the sling in one easy step, preferably at a dead run.

Stepping back a bit, you may be asking what the big deal is, asking why I have been on such a quest to find a good sling. Sure, I could rely on my hands to carry my rifle(s) but even holding the rifle with one hand leaves me one handed if I am going about my day and performing actions other than shooting. If I need two hands, even if I stay relatively close to the rifle, then I still have to make my way back to the rifle if someone is watching and chooses to take advantage of the situation. (It is not difficult to imagine a food raider taking advantage of seeing me prop my rifle against the side of the house while I carry things to the shed.) If I use an over the shoulder sling, then I need to reach behind me or drop the sling off before I can get the rifle into a firing position. So to me, a sling is a very important part of the whole weapon system. It allows you to keep the rifle on your body at all times, near the ready.

Last week I had a friend suggest a different sling to me. It was the Spec. Ops Brand Lonestar Rig – Single Point Sling. (Spec. Ops. Brand makes other slings, but I have not used them.) The sling was $35. When I opened the package, I could tell that it was very well made and rugged, one of the better ones that I have come across. It was simple. I attached it to my rifle in a couple of minutes and when I need to use it, I just toss it on… no muss, no fuss. It keeps my weapon near ready on the front of my body and allows me to use both hands for other activities while keeping my rifle in an effective location. So, I got finally found exactly what I wanted. Now I’m going to also buy a couple more of these for my other rifles.

I have no skin in the game with this company, I don’t own stock in it and I don’t know anyone that works for them. They simply created a high quality product that meets my needs, so I thought that I should tell others about it, so that maybe you can skip the eight other types of slings that I tried first.

Spec. Ops list this sling for $45 and I found it at Academy Sports for $35. – CT in Texas

Economics and Investing:

Reader Johnny G. recommended an article by PIMCO’s Bill Gross titled: The Ring of Fire. Johnny’s comment: “It is interesting to see how and where SurvivalBlog precepts and the predictions of well connected, mainstream bond investors’ converge.”

Some folks in England are catching on to what privately owning gold means: How to live without banks. (Thanks to Karl P. for the link.)

George Gordon (“GG”) sent us this: The Fed’s Anti-Inflation Exit Strategy Will Fail; Sooner or later the pressure to lend out excess bank reserves will be unstoppable.

Items from The Economatrix:

Our Financial Rulers are on Another Planet

IMF: Banks Must Raise Billions to Fend Off Crisis

UK Economy Lies on Bed of Nitroglycerin

Revealed: See Who Was Paid Off in the AIG Bailout

How The Major Stock Indexes Fared on Friday

The Latest Installment of the Friday FDIC Follies: Six More Banks Bite the Dust in California, Florida, Georgia, Minnesota, and Washington

Odds ‘n Sods:

Our Editor At Large (Michael Z. Williamson) wrote to mention that there have been several new “underground homes” added to the 20th Century Castles (aka MissileBases.com) web site. JWR Notes: These are far beyond my budget, but interesting, nonetheless.

   o o o

I was pleased to see that the Atlas Trekker blog is now getting frequent updates. They’ve had some great posts on vehicular gear.

   o o o

Some folks seem that think that pump action shotguns are obsolete. I beg to differ. Courtesy of Michael Bane, here is a video of a reloading technique for advanced shooters that can keep a shotgun that has been “shot dry” or even one with a dented magazine tube still in the fight: Jasmine Jessie’s reloading technique. (To explain: under some local Cowboy Action Shooting rules, to “make it fair”, a shotgun’s loading is limited to just two shells. This puts pump gun shooters on a fairly level playing field with double-barrel shotgun shooters. Hence the need for rapid reloading, by hand.) For more information on this fun sport, see the SASS web site.

   o o o

A reminder that SurvivalBlog reader had a small batch of subdued Battle of Bennington flag shoulder patches custom made. This is the same flag used on our OPSEC hats and T-shirts, but in subdued brown and black colors. He now has less that 50 left, that he is now selling right near his cost, at $2.75 each. E-mail:: opsecflag@verizon.net to reserve yours!

Jim’s Quote of the Day:

"If we find ourselves with a desire that nothing in this world can satisfy, the most probable explanation is that we were made for another world." – C.S. Lewis

JWR’s Comments on the “After Armageddon” Docudrama

The History Channel recently aired a docudrama that was interspersed with interviews of subject matter experts, titled After Armageddon. The show was previously mentioned here in SurvivalBlog, but I just recently got the chance to watch all of it. It portrayed a fictional family making some horrible mistakes, in the midst of a major pandemic. I assume that these mistakes were written into the script to increase the quotient for drama. (At least I hope so!) They certainly illustrated the peril of attempting to hunker down in a city with insufficient supplies. They should have “bugged out” weeks sooner!

I thought that overall the experts that the producers interviewed did a good job. Four of the most knowledgeable and articulate were of course names that you will recognize from SurvivalBlog: Kathy Harrison (author of the book “Just in Case” and a great blog), Kevin Reeve (a principal of onPoint Tactical), Michael Bane (host of DownRange TV), and Dr. Joseph Tainter. The latter is the author of the book “The Collapse of Complex Societies”. Although Tainter is not a blog content contributor, I’ve mentioned his work several times before in SurvivalBlog.

Despite its numerous flaws, I found that the show was still worth watching. In fact, there is often value in learning from the mistakes made by others. I just hope that some of the newbies watching this show can distinguish between the good and bad decisions that are depicted.

Letter Re: Gear and Book Recommendations

Mr. Rawles:
I am a daily visitor to your site. Thank you for all that you do. Here are some products or vendors that offer exceptional value.

Ragnar’s Ragweed Forge. Sells the Frost Mora, Swedish carbon steel knives. Plastic handled models about $10.00, including plastic belt sheath.

K & M Industries, Inc. Heirloom quality, waterproof match cases. Machined from solid brass or aluminum, for about $20.00.

Douk Douk pocket knives. Primitive little folding knives takes razor’s edge. Imported from France and overpriced everywhere on the Net. Any seller willing to take a reasonable mark-up could sell these knives by the dozens.

From Powell’s Books online, two paperback book reprints: Manual of Exercises in Hand-Sewing: Adopted by Industrial and Grade Schools (1904), and Hand Sewing Lessons; a Graded Course for Schools and for the Home.The line drawings are indistinct, but the topics include even basic basketry, darning, and embroidery. Highly recommended.

Also recommended is this contemporary manual: Singer Simple Mending and Repair: Essential Machine-Side Tips and Techniques.

Best wishes to you and your readers. Hard times are coming, and we need to take care of each other. – Bookish

Letter Re: Beekeeping and Fur Trapping at Your Retreat

Jim,
I enjoyed the article by Chris on bee keeping and fur trapping. Ever since setting my first muskrat trap in 1974, I have been an avid trapper, not missing a year since, regardless of fur market prices. The knowledge one gains with respect to any furbearer that is pursued becomes very intimate if pursued successfully with passion year after year. Its not enough to just understand the general behavior of the furbearer. To successfully trap furbearers, one must know exactly where the animal will step. Close doesn’t always count in this sport. I once read where if one wants to really learn about the outdoors, talk to a trapper.

We know that in a TEOTWAWKI situation, the local deer herd and much of the small game in any given area will be decimated relatively quick. I have trapped cliff edges overlooking several rivers in my area for years with well worn paths leading from crevice dens and transition or bottleneck areas. These areas have always been very productive with no competition to speak of. The cliff areas would be the last areas to provide food and fur in a TEOTWAWKI event in my area.

I have 45 rats, mink and several red fox going to the fur dealer this evening. I ‘m looking forward to trapping beaver in February as they will be very prime. I will have the beaver hides tanned as beaver hides are very durable and I enjoy making collars , mittens, et cetera. If you have ever tried beaver tail, you know it is quite tasty. I skin the tail, boil it, then cook it wrapped in aluminum foil with butter and some garlic. I then chill it in the frig, cut in small cubes and serve on a cheese and cracker tray. Excellent! – Ed D.

Two Letters Re: A Simple Off-the-Shelf Solar Power System and Off-Grid Power Tools

James-
Thanks for the interesting article on the Ryobi 12v solar setup.

Just wanted to chip in some advice on Ryobi batteries: Of the name brand cordless tools, Ryobi seems to have the worst NiCd battery quality. When used carefully, they will work well for a couple of years. If pressed hard, they will die a much earlier death. I have found that some packs will have a bad cell, dramatically shortening the entire pack’s life after only a few months. I’ve experienced this with 9.6v, 14v, and 18v Ryobi setups. Even the healthier packs, when pushed hard, particularly with a high drain device like a circular saw, die a quick death. To maximize the useful life, do not push them to the point where the battery pack gets hot and is completely drained. Such hard use guarantees the pack will lose capacity and cease to hold a charge for extended periods of time.

Ryobi’s latest 18v sets (“ONE+”) can be powered by either their lithium or NiCd packs. If the purchaser can afford the lithium setup, it is a better investment, as the lithium packs last longer in use, hold a charge longer, and have much better shelf life. If you cannot afford the lithium battery packs with the initial purchase, consider adding them later, as the same 18v charging setup you describe will work with either type of battery.

Also, Home Depot’s Rigid cordless tool line currently come with a lifetime warranty that includes the lithium battery packs, and they will replace the batteries if they fail to hold a charge, regardless of the reason. The Rigid line may be a good alternative for those purchases who intend hard use for their cordless tools. The Rigid line is typically twice as costly as the Ryobi line, but they do occasionally go on sale and represent a better value for people who wear out their battery packs. Regards, – Rich S.

 

Sir,
With regards to A Simple Off-the-Shelf Solar Power System and Off-Grid Power Tools, I must object to a portable tool solution based on short (“2-3 years”) rechargeable batteries which are fundamentally non-replaceable after TSHTF as opposed to a contrasting setup using inverters to operate 117 VAC-conventional power tools – all other parameters being identical. Just skip the 18 volt rechargeable tools and batteries and DC-to-DC chargers and stick with regular AC tools.

In order to prolong the deep-cycle lead-acid batteries into the “unlimited” range: stay within the top 10% of the battery capacity. Not only will you not have to worry about replacing high-technology 18volt portable batteries every three years, but you won’t even have to worry about replacing deep-cycle lead acid every seven years neither. – R.S.

JWR Replies: I agree with the simplicity of your approach.

Sadly, there is no such thing as a “forever” or “unlimited life” lead-acid battery. Even if they are kept fully charged, they will eventually sulfate. That chemical reaction is inevitable, and can at best just be delayed. One evidence of this telephone companies spending millions of dollars rotating their deep cycle batteries that they they use for backup at the Central Offices (COs). IIRC, they are replaced once every eight years. And those batteries only rarely get drawn down. (“Cycled.”) If there were some way to make lead-acid batteries have unlimited life, the phone companies would have implemented it long ago.