The new thrifty American......

[JupiterSunsation]

I didn't want to derail the autoworker thread so I started this one......

Can you see in your own household less discretionary spending and do you forsee it becoming the norm? If you have made changes like buying generic food/drugs, 2nd hand items do you see it staying that way in your household?


Obviously Americans have hit a major reset in all industries and many have cut back, many swearing to keep it this way when things return to prosperity.
If that does occur then luxury items like "Cigarette boats", Harleys, sports cars may never reach the sales points like they have in the past.

To give you an example.... I have an uncle that made 100 million dollars by the time he was 40, now late 50's. New Mercedes S class every 3 years since 1986. Bought his last one in 2007, saying this will be the last one (says car is great but loses 15K a year in depreciation and it is not worth it to him anymore). Bought his wife a new VW Tourag. Same FL house on Jupiter Island and home up north is for sale (90 days a year use, not worth the expense when compared to the usage). When shopping for small SUV, anything was on the table. Bought VW for value (left over new 08) and size (no more Tahoes/Suburbans after 4-5). He can no longer justify a 75K SUV to drive 10K miles a year. Money isn't the issue, there is plenty but he just doesn't get the value in things anymore. If it is overpriced to him he won't buy it. I am the same way but more for the "lack of discretionary income"!

If people from all income levels think this way then a lot of companies have big change ahead of them. Some are already catching on, like Active Thunder offering 37's in 2010 for 2002-2003 price levels. 200K +/- for a brand new 37 ft boat with 525's is a screaming deal compared to higher prices in the past. Home buildersin my area are building luxury homes in my area for under $200 a foot, prices not seen since Clinton was in office!
Now I don't suspect Rolls Royce will cut their prices to $49,999 or offer 0% financing but I suspect Bentley won't make more cars than they did in 2005-2006 when it seems everyone in Palm Beach owned one. These are luxury items but it can trickle down in everything....Can GM/Ford really get 50K for a diesel 3/4 ton pickup when the same truck in 03 was 42K?

 

[Tony]

I never buy anything new anyway. I mean really, why buy new when there are screaming deals on just about everything out there that is slightly used. Besides Ive come to the conclusion that anymore when you buy something new there is no guarentee that its actually going to work as it should. Nowadays "new" just means "assembled from unused parts".

Buy new for a warantly...pfff...you cant even trust warranties anymore.

 

[Ratickle]

We definitely are more careful with what we currently spend. But I'm not working......:sifone:


My personal opinion, unless the export/import laws change to level the playing field. Our recession/depression will not end until the rest of the world has leveled with us on a standard of living. Ours will fall by 2/3 to 3/4, theirs will raise by 3 to 4 times, level off then, and the world will be a total mess.

Some lady in China just paid $582,000 for a dog.......:ack2:

 

[clayinaustin]

I think you are missing the point. People don't "buy" stuff. They "finance" it. The vast majority of people use credit to buy everything from gas (pay at the pump) to cars (GMAC financing) to homes (sub-prime mortgages).

As long as they can afford the monthly payment, people will buy anything (and everything). They only reason people have cut back on their spending is because the banks have stopped lending money. Period.

Just my (jaded) two-cents...

 

[phragle]

We definitely are more careful with what we currently spend. But I'm not working......:sifone:


My personal opinion, unless the export/import laws change to level the playing field. Our recession/depression will not end until the rest of the world has leveled with us on a standard of living. Ours will fall by 2/3 to 3/4, theirs will raise by 3 to 4 times, level off then, and the world will be a total mess.

Some lady in China just paid $582,000 for a dog.......:ack2:

Some lady in america (Leona Helmsly)recently died and left their dog something like 12 million...........

 

[DollaBill]

Things will NEVER be the same. i predict a boat business that is approx 10-20% of what it was during the last peak ('03-'06).

What the analysts dont get, and I use that word loosely, is that there has been a ENTIRE paradigm shift in peoples spending habits and priorities. Period.

I've had every kind of car and boat you can name. Hummers, convt benz's, exotics, boats, etc. You know what now, in this environment you're nuts to spend money on that unless it is really a VERY small part of your income/cash.

 

[Tony]

I think you are missing the point. People don't "buy" stuff. They "finance" it. The vast majority of people use credit to buy everything from gas (pay at the pump) to cars (GMAC financing) to homes (sub-prime mortgages).

As long as they can afford the monthly payment, people will buy anything (and everything). They only reason people have cut back on their spending is because the banks have stopped lending money. Period.

Just my (jaded) two-cents...

No one is missing the point, sadly enough in todays society borrowing for every last thing you have is accepted as normal. I just shake my head in dissapointment when I hear someone complaining about how they can no longer afford to eat out and go to the bar every night of the week. Theese are generally the same people who have 30k worth of practically unused stainless appliances at home in the kitchen that they still owe on. Theese are also the same people who work their 9 to 5 come home and flop on the couch in front of their morgaged flat screen and do nothing all evening but watch the five thousand channel cable package, ***** about the economy, and talk about what they are going to buy "once things get better". :ack2:

 

[Expensive Date]

As long as they can afford the monthly payment, people will buy anything (and everything). They only reason people have cut back on their spending is because the banks have stopped lending money. Period.

Unfortunately that is true, but only for the average/below average income people.People with money like the uncle mentioned by Jupiter are not spending.The new way to impress among the rich is not how much you paid but how much you saved.And Bill is also right it will take a long time if ever for it to come back to the way it was.

 

[DollaBill]

No one is missing the point, sadly enough in todays society borrowing for every last thing you have is accepted as normal. I just shake my head in dissapointment when I hear someone complaining about how they can no longer afford to eat out and go to the bar every night of the week. Theese are generally the same people who have 30k worth of practically unused stainless appliances at home in the kitchen that they still owe on. Theese are also the same people who work their 9 to 5 come home and flop on the couch in front of their morgaged flat screen and do nothing all evening but watch the five thousand channel cable package, ***** about the economy, and talk about what they are going to buy "once things get better". :ack2:

true

 

[sledge]

The economic ebb and flow will provide for an eventual return to conspicuous consumption. People always want more than they have and we're getting more and more people every day. And the natural resources aren't getting renewed so prices for raw materials go up.

Right now people are eager to spend; the banks are the bottleneck right now while they rebuild their balance sheets and lick their wounds. In 10yrs or less, DOW 20,000, $60k+ duallies, and $500/sqft housing developments will return. Most of the best US made toys will be sold overseas...

 

[JupiterSunsation]

Things will NEVER be the same. i predict a boat business that is approx 10-20% of what it was during the last peak ('03-'06).

What the analysts dont get, and I use that word loosely, is that there has been a ENTIRE paradigm shift in peoples spending habits and priorities. Period.

I've had every kind of car and boat you can name. Hummers, convt benz's, exotics, boats, etc. You know what now, in this environment you're nuts to spend money on that unless it is really a VERY small part of your income/cash.

Well put.......

 

[DollaBill]

The economic ebb and flow will provide for an eventual return to conspicuous consumption. People always want more than they have and we're getting more and more people every day. And the natural resources aren't getting renewed so prices for raw materials go up.

Right now people are eager to spend; the banks are the bottleneck right now while they rebuild their balance sheets and lick their wounds. In 10yrs or less, DOW 20,000, $60k+ duallies, and $500/sqft housing developments will return. Most of the best US made toys will be sold overseas...

I take back the word never. I say in "our lifetimes". We may see the lifestyle again in our grandkids lives (as long as 10 or 20 other earthshattering global problems don't happen) but we'll be the old guys sitting there talking about the glory days. Maybe in 20+ years

 

[VtSteve]

People have paid down credit card debt at unprecedented levels this year. Maybe they get it, maybe they don't. Wait and see kind of thing. Someone brought up that this decade was a credit spree, I agree with that. It's happened before, nothing new. Maybe while people were bit@h!ing about their gas bills they started to look around at other things. A $100 plus per month cable bill when they watch a few channels. Higher and higher cell phone rates, utilities, etc.. Many people had monthly payment totals that simply couldn't go any higher. Add cars and boats to this and wow. Even Reggie didn't listen to his mama to save for a rainy day.

Things will get back to normal at some point the next couple of years. But Normal never meant people making $40k a year having $400k houses and $200k boats.

If the younger guys of today only knew how much better off they'd be from saving, and yes, even buying a house or something like that now instead of the flashy bling. But hey, I was young once as well. But the difference is staggering.

 

[JupiterSunsation]

If the younger guys of today only knew how much better off they'd be from saving, and yes, even buying a house or something like that now instead of the flashy bling. But hey, I was young once as well. But the difference is staggering.

ahhh the young guys.....tale of two employees.

5 year employee age 25, makes 34K a year, couple of bad used car deals (tons of negative equity) and has a mom that ran his credit cards to the moon. Just bought a new Kia for 20K (17K sticker+neg equity). 650 credit score got him a 6 year/ yep 72 month loan at 16.9. Payment is 460 month with 170 a month being interest.


10 year employee, age 48 makes 40K a year. Never had an ounce of good credit just a student loan that hovering over his head (30K on a 10K original note). Rented his whole life. I recently told him that if he bought a reasonable place 30 years ago it would be paid for now and he would have owned an asset free and clear.......Answer: Yeah but I wouldn't of had too much fun eating cheese sandwiches while trying to pay for it and I wanted to have fun, chase women and drive cool cars.

Fast Forward to now: 48, unemployed, divorced and lives with mom. Owns a wrecked 86 Vette with 250K miles on it and a CJ-5 Jeep that was in a rollover accident. How much "fun" is his life now?

VT Steve- sometimes you can't save people from themselves.......:ack2:

 

[clayinaustin]

People have paid down credit card debt at unprecedented levels this year. Maybe they get it, maybe they don't.

I would argue that people have been forced to pay down their credit cards because the banks have lowered their credit limits drastically and at the same time raised their interest rates.

People haven't suddenly gotten smarter. They are being forced to pay down debt and save.

 

[mj2562]

Guys I have spent my 20's fn up my credit and I'll spend 2-3 years restoring it. Credit score is about 710 now but to finance a used diesel truck they still want 12%. So my point is the a** that you kick today is the a** you might be kissing tomorrow.

 

[Sea-Dated]

I would argue that people have been forced to pay down their credit cards because the banks have lowered their credit limits drastically and at the same time raised their interest rates.

People haven't suddenly gotten smarter. They are being forced to pay down debt and save.

This has happened to a lot of people. Almost every time I pay off a card I get a letter a few days later saying my credit limit has been reduced to $***. That is when I call and cancel that card. Chase seems to be the worst about it. :smash:

 

[clayinaustin]

Guys I have spent my 20's fn up my credit and I'll spend 2-3 years restoring it. Credit score is about 710 now but to finance a used diesel truck they still want 12%. So my point is the a** that you kick today is the a** you might be kissing tomorrow.

This has happened to a lot of people. Almost every time I pay off a card I get a letter a few days later saying my credit limit has been reduced to $***. That is when I call and cancel that card. Chase seems to be the worst about it. :smash:

Bottom line...

The housing bubble was created by easy credit and greedy banks. (Yes, there was government policy too, but I'm gonna ignore that for now.) When the bubble burst and the sub-prime crisis hit, banks could no longer loan money. Since our economy is driven by consumption and most consumption is bought on credit, the credit crisis froze lending and thus froze consumption.

The Federal Government stepped in with billion of taxpayer dollars to buy the "toxic" paper and (theoretically) free up money for lending and thus consumption. However, the banks took the billion of taxpayer dollars and either held onto it or bought other banks.

THE BANKS ARE NOT LENDING!

The Fed has set interest rates at basically zero, but bank are raising their interest rates in order to increase profitability and offset customer defaults. Any customers who are keeping current on their credit cards are facing lower credit limits and higher interest rates.

People are not being smarter with their money. They are being forced by the banks to pay down/off their credit cards and defer consumption in the short term. As a result you will see more "Cash For Clunkers" programs in order to stimulate consumption. "Cash For Appliances" and other government programs will be rolled out over the next few months/years.

Just my jaded two-cents...

 

[Tony]

THE BANKS ARE NOT LENDING!

The Fed has set interest rates at basically zero, but bank are raising their interest rates in order to increase profitability and offset customer defaults. Any customers who are keeping current on their credit cards are facing lower credit limits and higher interest rates.

For the most part this is true however, not all the banks took a huge hit. There are actually quite a few who managed to keep themseves out of this huge mess. The bank I deal with is owned by a larger parent corp who owns 14 different chains of banks across the country. The parent corp never had much involvement with sub prime and has managed to turn a proffit every year for as long as they can remember. I just had lunch with the VP of commercial lending a few weeks ago and he has a good feeling about the term, I have 4 different Visa business acts, and one personal through them and my interest rates and credit limits havent budged. There still loaning money to qualified customers at reaonable rates.

 

[Tommy Gun]

For the most part this is true however, not all the banks took a huge hit. There are actually quite a few who managed to keep themseves out of this huge mess. The bank I deal with is owned by a larger parent corp who owns 14 different chains of banks across the country. The parent corp never had much involvement with sub prime and has managed to turn a proffit every year for as long as they can remember. I just had lunch with the VP of commercial lending a few weeks ago and he has a good feeling about the term, I have 4 different Visa business acts, and one personal through them and my interest rates and credit limits havent budged. There still loaning money to qualified customers at reaonable rates.

If it is a public company do you mind sharing the symbol?