PR
Big Ring
Posts:467
Registered Users
Jackson County
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| 10/01/2008 8:17 AM |
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My favorive place to gamble is Keeneland. (It's not even close) And I buy a powerball ticket when I think of it. Right now it's starting to look like WallStreet is a gamble too. Not good at all, and I don't claim to understand much about it. I've lost a new heckler in the last few days...and a new rhino too.
Signs point to a cautious consumer. The market for recreational stuff is shrinking. The camper and rv industry is imploding (and Indiana is loosing more mfg jobs). Even Nascar has seen attendance drop.
Conspicious consumption is out of style. Those chrome Hummers are staying on the lots.
What happens to these boutique bikemakers? I'm thinking that they will suffer. A few brands won't make it.
If it gets bad, will ultra high end bikes be cool??? |
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MEK
Big Ring
Posts:384
Registered Users
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| 10/01/2008 8:47 AM |
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Great post Paul.
I was gonna put something along the same line up yesterday. As many of us were, I was brought up and lived by the rule (If you can't afford to pay cash don't buy it) There are of course exceptions to this:
1. Car Loans. I have bought 2 "New" Cars in my lifetime. Both have been 0% interest so I consider that a "Cash" deal. Of the 2 new cars I drove one up to 280,000 miles. My current vehicle "The family Jeepster as Dulin so affectionately called her" has 242,000 miles. I plan on driving her until "Pull-A-Part" runs out of Jeep Cherokees.
2. Home loans. I've done the Ole "flip that House" thing over the years. My current home was a MAJOR! fixer upper. I paid 2/3 appraised value for it in 1997 due to the condition. Even with the housing market in turmoil I have been told I could sell her today and triple my $ invested. I took a Home Equity Loan on it 6 years ago and could hardly sleep at night. I paid the HE Loan off in 2005.
Bottom line is I have no sympathy for people who live beyond there means. A responsible adult Owns their debt. Just as a responsible lending institution Owns their investments. I have to side with Paul about being less than educated on this entire financial debacle however; It seems pretty black and white. Wall street bought up loans that should have never been made in the first place. Ergo, bad investments. I think every social economic level of our society will be struggling with this crunch for quite a while. I don't think we have yet to feel the true "Trickle Down" effect to "Main Street America". Boutique bike makers will certainly be on the list. Hopefully this entire situation will open the eyes of many Americans living beyond there means. Wall street vs Congress
Will Ultra High End Bikes be cool? Hell yes, but then again I still question 29"
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s0ckeyeus
Big Ring
Posts:168
Registered Users
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| 10/01/2008 9:09 AM |
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| Maybe this whole thing will bring a dose of reality to an otherwise surreal world. Many of the things that matter most to us are things that don't matter much at all. It's sad when you can't have a decent discussion with someone because you didn't watch their favorite TV show and missed the big sale at the shopping mall. We're so plagued with consumerism that we don't even know we're infected. Maybe I don't understand the grand picture of the financial world, but part of me hopes that when people cinch up their belts another notch, they'll at least learn a lesson or two about what it means to be alive. |
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ABens
Little Ring
Posts:58
Registered Users
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| 10/01/2008 9:59 AM |
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| word... |
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WebGuy
Big Ring
Posts:338
Administrators
Louisville, KY
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| 10/01/2008 10:23 AM |
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Interesting post. I should point out that my day job is in the RV and Marine Industry but my hobby job is in the bicycle industry. So I get to see trade magazine and metrics from both. Yes, RV's are taking a beating. I mean a bad, bad beating. While most people comment on gas prices slowing RV sales, that’s not really the issue (most RVs travel less than 5,000 miles a year). There are plenty of people who can afford and still want to purchase an RV. The issue is getting them financed. Keep in mind that an RV (or boat) is considered a luxury item. So, typically you need outstanding credit (700+) and plenty of collateral to purchase one in the first place. Now with banks all holding their breath getting a person financed on something that will drop close to 50% in value in under four years (on a 10 year note) isn't so easy. In fact in the last month three major banks have pulled out of the RV business (both retail and wholesale) forcing dealers to scramble to keep their on-the-lot inventory financed and get customers in units who can afford them.
What is strange about the banks leaving the market is that RV’s loans have traditionally had huge profits with some of the lowest delinquencies around (good payers, people with a lot of cash and other equity). So these are not borderline lones to slow or no payers - they are good loans to average people who pay their bills and have saved for years to put 20% down on an RV and secured it with their house (which they usually own by the time they by an RV).
Interestingly, I just read Thor's annual earnings report and while their total revenue is down across many of their brands (Airstream, Keystone, etc) they are still turning a profit and their top end (Prevost Bus Conversions) is way up. In fact the top of the market is growing.
On the bicycle industry side of things everything is up. Parts, repairs, commuter bikes, etc. I did just read that high end mountain bikes are down a little and high end road bikes are flat. But most other categories are doing well.
I wonder if the custom or high end of bicycling follows other industries. The top end of the markets typically are very resistant to market swings.
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Steven Webster
Web Guy, BikeClicks.com |
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Duane
Big Ring
Posts:383
Registered Users
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| 10/01/2008 10:58 AM |
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This is definitely one of those "it depends" scenarios. When the economy (or some other aspect of peoples lives) takes a serious downturn there tends to be an overall push to get back to basics, but people still like to treat themselves to certain luxuries to make themselves feel better about all the bad stuff. Ice Cream shops are a good example, historically they've done well in poor economies. Folks won't eat the whole meal away from home so they turn the cheaper trip for desert into the luxury. I think the boutique builders could benefit just the same. For example, I may reward myself with a nice custom Ti CX frame, but put off buying a new car or whatever. And still be money ahead. Or possibly folks will buy the custom frame and build it up with existing parts rather than buy the complete new bike.
There's also the thought that the folks buying the boutique stuff aren't as impacted by the current financial situation as others. |
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PR
Big Ring
Posts:467
Registered Users
Jackson County
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| 10/01/2008 3:27 PM |
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(It's amazing how we can make sensible arguements on some stuff, and go so wild on others.)
I've been fortunate, I guess a high end bike would quailfy as a "certain luxury" for me; I would'nt enjoy the cost, but it would be within my reach. And I'm doubtful that I'll ever own a GT40, but I could own a handmade bike. I can't rationalize such a bike for myself, and I wonder with a struggling economy if such purchases will be viewed as increasingly frivolous.
The top 2% of this country will continue to live at whatever comfort level they are accustomed to. But alot of niche mtb brands sell plenty of bikes to realtively middle class folks. (Like us bike fanatics on here.) |
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Tonybob
Big Ring
Posts:317
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| 10/01/2008 7:49 PM |
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I would have to say Rusty has the most market-proof job, the liquor industry.
The problem with a handmade boutique mtb is you are one bad crash (maybe on the first ride in the first mile) from a total loss. Well, assuming you ride someplace other than wide-open flats featureless trails.
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MEK
Big Ring
Posts:384
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| 10/02/2008 6:12 AM |
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| Its almost humorous how the media puts its own spin on these issues. More humorous that we believe some of it. Last night they were talking about auto dealerships/sales down 30% +. They were trying to spin it to look as though people could not get loans. They followed by saying that Dealership showroom traffic was down 50%! Uh, forgive me for thinking out loud but wouldn't that mean that people are not shopping for cars? Rather than shopping and not being able to finance? Hopefully people are holding onto their $. |
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WebGuy
Big Ring
Posts:338
Administrators
Louisville, KY
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| 10/02/2008 6:42 AM |
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| MEK, you raise an issue I wonder about a lot. Does the media contribute to the issues they report on? |
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Steven Webster
Web Guy, BikeClicks.com |
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OCguy
Big Ring
Posts:218
Registered Users
Oldham
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| 10/02/2008 7:00 AM |
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Posted By WebGuy on 10/02/2008 6:42 AM
MEK, you raise an issue I wonder about a lot. Does the media contribute to the issues they report on?
I don't think there is a question about it. "The only thing we have to fear...."
But that's human nature.
This is turning into a societal (rather than economic) issue. Should be interesting to see how it turns out. Interesting, but painful. This will be the worst "recession" that any of us have lived through. YEARS, not months.
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Chris Ward
Big Ring
Posts:199
Registered Users
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| 10/02/2008 7:31 AM |
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I just closed on a house last week and did not have any problems as far as getting a loan goes. The mortgage officer and the closing attorney talked about how busy they were because it was the end of a month and a lot of people were trying to get fha loans through because the rules were changing Oct 1.
The media sucks, they should be just reporting the story, instead they try to be part of the story. |
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RIC0
Big Ring
Posts:315
Registered Users
sumwaresin, KY
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| 10/02/2008 7:40 AM |
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| Speaking of closing on houses I remember when I bought my house about 8 years ago they tried to offer me double the amount of money that I wanted. I gave the lady a head cocked to the side like a dog and a WTF you talking about. I can't afford a house like that, and she's like, well you qualify for that amount. Alrighty then I'll take half of it and thanks for the offer but I do need to eat. Too bad we have a world full of dumbass's that took that offer and now they have no homes and the mortage companies can't get any money. I don't feel sorry for either party, stupid hurts. |
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OCguy
Big Ring
Posts:218
Registered Users
Oldham
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| 10/02/2008 8:26 AM |
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In addition to providing (honest) financial advice I also sourced mortgages for a firm right when things were just beginning to get out of hand (2002-2003 or so). It was expected of you to maximize your loans. Of course, your commission rose accordingly. The originator(s) knew that the loans were just being sold off so they didn't care. I realized that true underwriting was gone as "automated" underwriting by Fannie and Freddie ruled the day.
A big problem was/is that implied government guarantees will eventually turn into REAL government guarantees because rational lending and decision making disappears with greed (don't get me wrong, "greed is good", but you had better understand it when you make the rules). HUMAN BEHAVIOR will eventually win out, and that behavior in this case was, "why should open market rules dictate when there isn't really an open market here". Shareholders demand bigger returns, and the only real advantage that Fannie and Freddie HAD was the implied guarantee, so they delivered.
I got out when it looked to me like appraisers were participating with a wink and a nod.
BTW, my clients have been sitting on a large percentage of cash for the last 8 months or so. |
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G-MAN
Big Ring
Posts:244
Registered Users
Louisville, KY
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| 10/02/2008 8:44 AM |
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Our government is at the root cause of this CRISIS...
By pressuring banks to lend money to other than ideal borrowers... (social engineering)
So, I have to ask this question...
Does anyone on here STILL want government run health care? |
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PR
Big Ring
Posts:467
Registered Users
Jackson County
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| 10/02/2008 8:45 AM |
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I've seen a few of those appraisers.
Down on the ground, it took two parties; an irresponsible borrower, and a irresponsible lender too. So now we bail out the lenders, and heap scorn on those that are being foreclosed. I can't follow that logic somehow.
It's ironic that after years of advocating free markets, now we socialize the financial industry. No universal health care, that would be socialism. Anti social security, because it's the classic example of socialism run amok. But when our buddies get in trouble, we can bail them out. And the initial plan was to let one of our buddies dispense the money with no oversight.
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OCguy
Big Ring
Posts:218
Registered Users
Oldham
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| 10/02/2008 8:54 AM |
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Before this gets out of hand, please don't be fooled by the casual media that this is a "bailout" or it is going to cost "700 billion". Dig a little and make your own decision (you can PM if you are really interested, you can tell I love this stuff).
This is a credit squeeze. Simple and pure. It happens a lot, just not on a global scale.
And if forced to "blame" someone, I'll take the credit rating agencies (more specifically, the non-regulation thereof).
HOWEVER this again comes down to human behavior. If your primary business is providing advice to the buying about the worthiness of a product and you only get paid if people buy......DUH. |
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OCguy
Big Ring
Posts:218
Registered Users
Oldham
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| 10/02/2008 8:56 AM |
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| Back to the original question, though. I think the market for expensive toys will be just fine. I am amazed at how much people are willing to spend on things that primarily stroke their ego. Let's face it, if you are that good, you'll have a sponsor! |
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PR
Big Ring
Posts:467
Registered Users
Jackson County
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| 10/02/2008 9:06 AM |
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Posted By OCguy on 10/02/2008 8:56 AM
Back to the original question, though. I think the market for expensive toys will be just fine. I am amazed at how much people are willing to spend on things that primarily stroke their ego. Let's face it, if you are that good, you'll have a sponsor!
That's the truth for sure. I guess I'm the flip side of that too. My #1 reason for not riding a high end rig; I'd feel like a poser. (Economics is #2.) |
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Rowbear
Big Ring
Posts:378
Registered Users
Lexington, KY
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| 10/02/2008 10:14 AM |
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| webguy, your avatar makes so much sense now |
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