Sell some equipment to take advantage of crazy market?

[suladas]

Not sure if i'm going crazy but looking at Ritchie Bro's and Kijiji pricing for similar equipment for a pile more then I paid it's going me wondering, do I sell the bulk, see what the spring brings or if prices drop and I find some bargains and still pocket a good chunk?

A safe estimate I figure I could cash out about $190k for my 210 volvo, dump truck, 25 tag, and john deere CTL. This winter I planned on shutting down for 2-3 months anyway, so before march most stuff was going to be sitting for the most part anyway. I've only put 500 hours on the CTL in 3 years for example, 500 hours on the volvo in the last 2 years, so nothing is getting used much. Mini is getting about 350 hours a year by far the most used piece, but the big hoe definitely brings in a lot more money.

My plan was if next year equipment is still high, I spend the year only running the 6 ton mini. I am planning on getting back into home building and the extra funds would help, and frankly i'm over excavating in the winter I only want to do it 7-8 months of the year tops.

If I find some good deals I buy a single axle tractor, tandem lowboy with a smaller hoe probably a 160, and a CTL. Then I could also sell my 5500 and light trailer, and only have 1 work truck and trailer instead of two. I mean all my stuff is paid for, and it's working good, but my thought is I could get away with parking a single axle and trailer at my acreage so I could get rid of the yard rental. Even if I bought all that stuff back at prior to covid prices, I figure I could easily cash out $100k and still be just as effective at doing everything I do now, and save probably $1500/month in overhead. Only thing I would loose is the dump truck, but I rarely use it for that anyway.

I wouldn't bring to auction, I was just going to list on Kijiji and only let something go if I can sell at least 2 pieces. Ritchie's sale here is next week so I figure it's a great time to get stuff up. Good, bad, or stupid idea?

 

[KSSS]

I have pondered that at times as well. The issue I have had with letting part of the equipment go is that it is really hard in my opinion to excavate with less than what I have. After all, that is why I bought it. I am sized similar to you. I simply don't have equipment that doesn't do anything. Having rode out the ups and downs of the industry for almost 3 decades, none were more demoralizing than 2008-2010. Equipment was dimes on the dollar during those years, and I had considered selling out during the high period before the fall. Now we are in a similar situation only equipment values are even higher, so the question of getting out while the getting is good is ringing in my ears. The problem of course is that the money and jobs are good, makes getting out harder for that reason. Lastly, I really digging....most of the time.

As far as selling out and buying back, I am not sure that saves much, if anything. Selling a 210 and buying a 160 would likely be a wash. You know your business, but to me keeping a mini, a CTL and dump truck, could make some sense. Rent a big excavator as you need it. Take whatever you make off the sale and be happy. There are times I have worked through a Winter, but largely everything is parked as is most everyone else here. Hard to make money when its below zero and you have 3' of frost. I am not sure how the taxes work in Canada, but if it applies, don't forget to factor the tax effects of selling the equipment. Good luck in whatever you decide.

 

[suladas]

The dump I don't think would make sense to keep unless I have the big hoe, I have my dads to borrow anytime I want that is hardly used, the CTL it's so rarely used and it's mostly for backfilling basements so without a big hoe I would never use it, I got by for 2 years just backfilling with the mini hoe, also my brother has 1 CTL and 4 skidsteers so I could either borrow one of his or rent for how rarely I use.

If I only had the mini my main business would be concrete removal, digging grade beams, and foundation repairs (which actually pay insanely well). So nothing that really requires any other equipment.

Problem is most jobs with big hoe are 1-3 days max and with rates here wouldn't make any money if I have to rent a machine and pay for it to be moved. If I kept the equipment to move it, it would make more sense to just have the hoe.

I agree a 210 to a 160 would be a wash unless I went older/more hours which I wouldn't want to do much either way, unless prices drop back down. I only paid $60k for the machine and attachments and I think I could likely get $75k now, so if they dropped back down from when I sold to bought another one could do ok, although I know even when I bought it I got it for an absolute steal. I think with cash ready to buy over the winter/spring would eventually find a good deal with someone needing to unload one.

Last winter I mostly ran the mini at $100/hr and it just wasn't worth it. Hard on equipment and you burn so much diesel driving to/from and warming up i'd much rather just park everything. Doing basements is an absolute nightmare and everyone whines about paying even $500 for frost ripping, never mind how much longer it takes to dig/backfall, I just couldn't be bothered.

Where the big savings would be is trucks and trailers, I think I could get about $100k for both trucks and trailers, where a single axle and tandem lowboy could be had for $30-$40k even right now. Thankfully I still have losses to carry forward, enough that I won't have to pay taxes if I sell.

 

[John C.]

The unfortunate thing about the future is that no one can predict it. The best anyone can do is look backwards for a time period where things were similar to now and use what happened then as an analog for tomorrow, next week, next month and maybe next year.

When I was predicting sale prices on used iron I had several data bases in which to pull information from which could be sorted by a number of different criteria; time periods, numbers of sales at those times and actual sale prices to name three big ones. The last big down turn had multiple factors leading up to it. Fake credentials and liar loans tied to bundled securities with little bits of tracking information. It was a house of cards destined to be blown apart by someone yelling the emperor has no clothes. As an appraiser you are supposed to use comparable sales as your most dependable factor in determining value. The problem with that is all appraisers of all types of property could see that those sales actually meant nothing but the bankers didn't care. Just get someones name on a contract.

What do we have today? The first issue is the supply chain was broken. Tariffs on China with that promise that China would have to pay them was absolute nonsense. China knew that political machine was going to fall so all they did was sit back and wait. We angered Canada and Mexico so while neither could do much about it, they also just decided to wait and see what was going to happen on the next election. Our representatives decided to give the billionaires a three trillion dollar tax break that we couldn't afford and they didn't need which put the nation in a negative balance of 27.5 trillion dollars. We got no road and bridge repairs, no infrastructure repairs no trade enhancements. What we did get was a lot of noise about how we on social security were bleeding out the nation and the homeless were that way of all their own accord. I'm sure they chose that path on their own. Next we got a pandemic that may have had the chance of being averted had the professionals not been let go prior to it happening and the country and most of the world shutdown which further killed the supply chains.

So just what are we looking at now. The supply chains are starting to come back but it may take up to a year or more. The pandemic is as bad now as it was a year ago before there were vaccinations but apparently there will be no shut down now. Congress is debating putting money into infrastructure but that might mean taking back some of those tax cuts to billionaires and they are fighting it by flaunting money in front of a lot of democrats this time. Wall street is going great guns on the fed still printing money that gets to be worth less with each printed dollar bill. We still haven't determined a viable replacement energy source to fossil fuels and one won't come unless some sort of miracle form of magic pops up. We do have a big labor shortage because lots of us baby boomers decided we had enough money to retire on, we got tired of physical pain every minute of the day or we are just dumb enough now that we can't keep up with technology or put up with idiot bosses and greedy companies anymore. I keep hearing that it's because the government keeps paying unemployment insurance but the thought I can't resolve is what person with a skilled trade would give up a high paying job to sit at home and collect a third to maybe a half of what they were making while working.

So what does the future look like? If we get an infrastructure bill through congress, it will go a long way toward re-establishing the supply chains. If you work in road, bridge, pipelines, fiber-optics and power lines, then I think you have a good chance at a pretty decent future. If you are in some kind of energy development or something like water supplies or desalination plants you won't have a lot to worry about. Commercial structures I think might be another wide open type of construction work. I'm thinking that single family housing might have some issues in the not distant future since it is generally based on borrowed money and people that can afford to pay for the finished product in less than a life time. Is it time to think about down sizing and getting rid of some payments on iron that isn't getting good utilization? I would say that thought should be going on all the time no matter what the economy is doing. If you have equipment that isn't earning its keep, then it is a toy. A broken supply chain makes for a sellers market. I don't think anyone will be able to realize the fullest potential on a sale of used iron by going through an auction. Will the prices for new get any better next year if new is available? I've already heard of ten percent increases across the board for a couple of manufacturers in October of this year. When you think about it, when was the last time the price for anything new this year was less than last year.

I'm a baby boomer so I only participate in the economy as much as I please. To all of you who have a long road to travel yet, don't look at tomorrow, next week or next month. Look at least a year ahead and plan on several possible futures.

Good Luck!

 

[absoluteyukon]

Well put, John. Strange times, indeed.

 

[DirtyHoe]

If you decide to sell put some effort into what the current market value is. I recently sold a 1996 Chevy dually 2 wheel drive pickup that was in great shape will 93,000 miles. I paid $5,200 for it in 2014. I was going to ask $6,500 for it and my friend in the car appraisal business said I was nuts and should ask $10,000. I sold it to the first person that looked at it for $9,200!
I also just sold a 2014 PJ gooseneck hydraulic dump trailer. I bought it used for $7,500 in 2015. Used the heck out of it and sold it for $10,500 last week. In Oregon, you can't find a new or used dump trailer if you have cash on hand. The dealers sell them before they land on the sales lot.

Lastly, I bought a used 40 steel container 10 years ago for about $2,000. I sold it last month for $4,000.
The market is crazy right now. I just hope I don't need to buy anything soon!

 

[terex herder]

First, talk to your accountant. Look at what you would have after taxes. Then, what are you going to do with the money? Cash in the bank is losing proposition, interest earned can't even catch up with the dust of inflation's tail.

If you want to get out of that market segment, sell. Just don't sell with plans to repurchase. Yes, a recession is coming and you will be able to repurchase cheaper. But no one knows whether that recession will be in six months or six years. Economists have successfully forecast seven of the last three recessions.

 

[suladas]

Decided to list everything for fairly high prices, see what happens.

If it sells i'm not for necessarily planning to re-buy, but if next year is good and equipment prices are decent sure. Also depends if my acreage sells this fall or not. If not, it sure would be nice to get a bit smaller hoe and truck/trailer so I can build a shop and park everything inside, and get rid of $1100/month for the yard. My current setup is just too big and awkward and even a smaller hoe technically isn't allowed, but I could get away with it. While I wouldn't sell anything at a loss to change for that, if I can get a good dollar and buy stuff for less it and cash out like $100k it would be nice.

Ritchie's sale next week should give me a good idea what kind of dollar I could get for my stuff right now and if I want to bother trying to sell.

 

[CM1995]

The US government is printing so much money that inflation is roaring with no end in sight and no one in DC willing to stop it. With that being said assets fair better than a loosing dollar in the bank be it a US or CAD one.

The only reason why I would sell at this time is if I were getting out of the business entirely with no reason to go back in or change in the scope of excavation work you do.

Now I have a friend in the foundation, wet basement and concrete leveling business that has a micro version of the US gov't's printing press in his basement.... If you have the ability to expand foundation repair then I'd sell all your big iron and trucks, keep the mini and drill piers.

 

[John C.]

Printing more money does not cause inflation. It's rising prices caused by a shortage of necessary products. Want more money for your new car, tell everyone there is a chip shortage and they will have to wait months to get it. Want more money for your water, drain your reservoirs and limit how much anyone can have access to it. Stop printing money and people won't have any to spend so the prices will go down because no one is making enough to pay for things. Just look at gas prices during the pandemic.

I like the specialization process. Get real good at one or two things that people have to have and you don't need to spend so much on all the support gear. My luck though was that I got good at something and the technology or the markets changed and I had to start over. The other issue is that someone else sees that you are making some money and they try to copy your success and become your competition.

 

[CM1995]

Printing more money does not cause inflation.

The Fed printing trillions of dollars and pushing it into the economy absolutely causes inflation - we are living it now, it's just a fact.

 

[John C.]

The fed is pumping millions into the money supply to prevent inflation. When they stop printing money is when we will be in big trouble. Then you will see hyper inflation and everything will stop all at once.

 

[Truck Shop]

Housing market? People dumb enough to bid up not down creating inflated house/land values. Realtors create and live off inflation.

 

[Truck Shop]

One other item that's changing because of this last year and a half is the idea of {Just in Time/Cross Dock} way of doing business.
Manufactures, shippers and receivers got caught with there pants down because of no spare inventory. Many are building warehouses.

 

[KSSS]

The fed is pumping millions into the money supply to prevent inflation. When they stop printing money is when we will be in big trouble. Then you will see hyper inflation and everything will stop all at once.

I think most economists would disagree with you John. They are not pumping millions, they are pumping Trillions. By printing money you devalue the dollar, things cost more because the dollar is worth less and there are less items to buy. This is in part due to Covid shutdowns, workers making more from the Fed then they did at their job and refusing to work. As far as the inflationary curve, it started in the last 9 months. We can look to the actions taken by this administration for the position we are in. You cant print your way out of inflation. Hang on if they pass the 3.5 Trillion dollar package. The 1.5 infrastructure bill contains 6% of what most would consider typical infrastructure. The rest is PORK, but call it infrastructure so that people will support it. Actually they had to redefine what the "infrastructure" even meant. Make it 94% infrastructure and 6% PORK and everyone could get behind that. Certainly roads and bridges need to be maintained. However, we cant keep printing money, and we cant keep borrowing it, it is not sustainable. The cost of managing the debt will soon eat up every tax dollar brought in. This has been an issue regardless of who has been in the White House since the 90's.

 

[John C.]

I would ask that you provide some names of those economists that are proving that adding dollars to the economy is inflationary. Here is an article describing the problem with your statement.

https://nymag.com/intelligencer/article/inflation-coming-2021-rising-prices.html

Here is another site describing the Milton Friedman theory or what you are saying and why no one believes it today.

https://www.ezzyinfo.com/2021/09/inflation-know-inflation-meaning-and.html

This idea that more money in the country means goods and services will cost more and the dollars will be worth less is propaganda. Prices are governed by the laws of supply and demand not by the number of monetary units of exchange.

 

[CM1995]

If printing more money did not cause inflation then the US government could print it's way out of debt...

 

[AusDave]

Printing money/quantitative easing whatever you call it can cause inflation if you're the only ones doing it. However i think you'll find that most major economies are doing the same thing so it's kind of status quo. If someone blinks it's going to be interesting.

The COVID pandemic has changed the habits and buying patterns of so many people worldwide, not to mention cascading supply issues for everything from shipping containers to semiconductors, it's going to take a while to unwind all this. It's never happened like this before in history where we are so interconnected and interdependent globally, nobody really knows how it will play out.

 

[John C.]

If printing more money did not cause inflation then the US government could print it's way out of debt...

You didn't read the links. The US government has been printing more money since the depression of the thirties. You have to because of the increasing population with the increasing amount of properties that entails. It's why we were taken off the gold standard by Nixon. Want to increase inflation, raise the price of oil. You know what isn't part of the consumer price index and isn't considered inflationary by economists? The price of energy.

 

[nicky 68a]

First, talk to your accountant. Look at what you would have after taxes. Then, what are you going to do with the money? Cash in the bank is losing proposition, interest earned can't even catch up with the dust of inflation's tail.

If you want to get out of that market segment, sell. Just don't sell with plans to repurchase. Yes, a recession is coming and you will be able to repurchase cheaper. But no one knows whether that recession will be in six months or six years. Economists have successfully forecast seven of the last three recessions.

Very well said