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The $100,000 Range Rover Boom!

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You can go to a local U.S. Range Rover dealership this weekend and buy a nicely equipped Range Rover HSE for $85,000 or a Supercharged for over $100,000. If you finance it in U.S. dollars, at least you know what you owe. If you want to be as fancy as your new car, you can borrow in a foreign currency and pay it back with your local currency. You’ll be styling with the best of the hedge fund managers if your currency appreciates. But what happens if the bottom falls out?

That’s exactly what happened in Iceland this decade. In his new book, Boomerang, Michael Lewis writes about what happens when a nation of fishermen turns into a nation of hedge fund managers. He explains how with their newfound expertise and with local interest rates running near 15.5% the Icelanders borrowed in yen or Swiss francs to buy Range Rovers. But when the Icelandic krona cratered, owners of Range Rovers financed at the equivalent of $35,000 suddenly owed $100,000. Visiting Iceland at the time, Lewis commented to a local about the unsettling explosions outside his hotel room. It turned out that those explosions were the solution to the Range Rover debt:

To the Range Rover problem there are two immediate solutions. One is to put it on a boat, ship it to Europe, and try to sell it for a currency that still has value. The other is set it on fire and collect the insurance: Boom!

Check out Michael Lewis’s Boomerang for some more examples of the mistreatment of money.

 

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.