Luxury Items

I am certain you have noticed that I keep referring to such things as yachting. Why, am I involved in things like Yachting? I wish. :-)

I am going to teach you something about monitoring the economy which none of the experts are doing, especially not the government experts. Let's use some common sense, you know that thing for which liberals don't have any.

When times get tough, what are the first expenses people cut to reduce overhead so they can keep paying for the basics like food, clothing, and housing? The luxury items, especially the big ticket stuff which is even more expensive. Those luxury items always go first.

Remember what I taught you about cost of ownership? It costs money to keep and maintain things and the cost of ownership is about 20% of the cost of purchase. You don't just buy something and have it forever without continuing to pay for its maintenance and other costs. It costs money and time to own things.

Therefore, when things get tough financially, you will normally get rid of the most expensive things which are not required for living. This will save you the most money and greatly increase your potential for survival. The first step is normally to decrease using the item to decrease use and repair costs. Then you tend to try to store the item but that normally also has at least some costs. Then you will try to sell that item and, if that fails, you usually try to give it away or dump it to cut your cost of ownership for that item to zero.

Another thing is that you can't just watch the market for such items, though that is important. Today, with the Internet, we can follow and gain valuable information from the cultures for using such luxury items by reading the blogs of individuals on the Internet. You want to track the blogs for which people discuss important information about the increasing or decreasing numbers of users, themselves having to decrease the time using the luxury items showing they have to work more to earn money so can't play as much, and other problems caused by the economy.

For example, I have found salt water yacht cruising with sail boats to be a very good barometer for the current economy by following a few interesting blogs and yacht brokerages. The salt water boats are very interesting because salt water is very corrosive causing boats to break down much faster than normal for most big ticket items. If you don't maintain these boats, the "through hull" devices quickly corrode, fail, and flooding takes place causing the boats to sink pretty fast without proper maintenance, normally within a few years. This means the cost of ownership is higher which forces the owners to try and get rid of the boats sooner which means there is less lag time between the onset of financial problems and the people trying to get rid of their boats.

I have been watching as this industry first increased rapidly because the economy was doing well and is now in rapid decline because of the current bad economy. Some blogs are telling me they are seeing significantly fewer people showing up in really nice cruising areas such as the Bahamas, more people are parking or selling their yachts, fewer people are chartering yachts and such chartering services are anchoring large numbers of their yachts without any use, and a very interesting problem has been developing concerning what these "yachties" are calling "ghetto boats".

It seems that these ghetto boats are boats where the owners are having financial problems and have run the gambit of trying to store them, get rid of them, and finally are dumping them. Think about it, you start having financial problems and have a yacht you cannot afford to haul out of the water, store commercially, and you reach a point to where the maintenance costs are just too high for some one who can't even afford to use the yacht. You try to sell the boat but the market is depressed. What do you do with it to get rid of the cost of ownership?

A 30 to 45+ foot sail boat isn't something you can just park in your driveway without the snobby neighbors complaining about it being an eye sore. It costs thousands of dollars just to get it out of the water and you have to spend thousands more for a large flatbed truck to take it anywhere. Marina costs are high and the boat requires regular repairs and replacements just to stay afloat. You can't just drive or tow these boats down to a junk yard the way you can a car. Try to scrap a 10+ ton sail boat, especially one which is made mostly of fiberglass, which isn't really a material that is easy to recycle.

When you get to a certain level of economic problems, the only thing you can do is find a free anchorage somewhere, anchor the boat, and walk away knowing that, if you can't get to it to maintain it soon, it is going to sink and there isn't anything you can do about it. It seems that increasing numbers of yachties are taking this drastic option for getting rid of the cost of ownership for their yachts. These boats are rapidly falling into a bad state of disrepair, they are dragging anchors in anchorages without the owners around to do anything about it, and they are even starting to sink where they are anchored causing more problems.

Some communities have started increasing the sizes of the waterway traffic lanes to decrease available free anchorages along those traffic lanes for the ghetto boats causing a shortage of such anchorages for those yachties still cruising. The marinas are starting to fill up with ghetto boats creating anchoring shortages even in harbors, ports, and marinas. This problem seems to still be getting worse.

Then, at the brokerage sites, I follow the used boat sales because it is much more difficult to follow the new boats. All you have to do to follow the used boat sales is watch the number of used boats going up for sale, how long they are staying for sale, whether the prices are decreasing or increasing, and other such information.

For example, I have been watching a few different good brokers and boats for sale have been increasing, boats are not moving as quickly, prices for boats that have been up for sale for some time are coming down, and other bad news for the industry. I have seen a few brokerages and boat builders which have been around for some time and formerly successful going broke and getting bought up by other firms.

While watching all of this stuff, you have to keep in mind what I just taught you about the cost of ownership and corrosion problems of salt water boats. Because of this, such boat owners need to get rid of their boats quickly or those boats will get rid of their finances. The longer you own and are trying to sell such boats, the less profit you stand to make with the sale plus, every year you own such a boat, it devalues decreasing what you will get from that boat. This industry is currently not doing well and I don't see any signs for improvement for this industry in the near future.

Now what does this tell you? The economy isn't improving. The upper and middle classes are still hurting economically or people wouldn't be just walking away from 20 to 50 thousand dollar boats they can't sell letting them sink.

This is just one example of an adult toy or luxury item industry which you can follow to tell you what the economy is doing. For example, I keep seeing more and more classic cars for sale and not moving very well when they used to be a pretty good sale item.

Money is very tight right now and I see people unloading all the fun stuff they have been buying for decades to get more money. When this economy hits the skids really bad in the near future, you will see increasing signs of people getting rid of their luxury items to save money and in hopes of turning those items into cash. As the economy gets worse and the number of buyers decreases, it will become increasingly a matter of just getting rid of the cost of ownership.

Pray long, pray hard, pray often!!!

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