Finance, Fuel Prices, Economics, Markets

Manipulating Perceptions

Perhaps I should have titled this, “Stupid is as Stupid Does.”

While scanning through a local “newspaper” the other day I ran across one of those infomercials, those clever tricks that papers now do in the name of anything for money. That is, publishing advertising posing as news stories. Of course in the name of transparency, they tell you that in some obscure location in 6 point fonts.

In any case, the title was “Marine Sales Hit Record Highs.” A head line like that is bound to get anyone’s attention and it surely got mine. How could that be, I wondered, when half the area dealers have gone bust? Well, the infomercial goes on to say that Legendary Marine and “many other dealers” (not naming any, nor giving any details) are having record sales this spring.

But then it goes on to say that those record sales result from dealer bankruptcy liquidations at price 50-60% below normal retail.  In other words, the inventory of a dozen bankrupt dealers was given to a few surviving dealers to liquidate, and this accounts for record sales. Have we not heard the very same sort of crowing by the National Association of Realtors 6-8 months ago?

Indeed we did, but then what happened? Sales promptly collapsed. Its called “pulling demand forward,” among other things. Liquidating bankruptcy inventory is not something to crow about, quite the opposite.  First off, these liquidations sell tomorrows boat sales today, meaning that there will be a huge drop in sales following the sell off. Secondly,  selling boats at half price means that the dealers who expected to sell their normal inventory at full price will not be able to. To anyone with half a brain it means that these dealers are now in jeopardy themselves. How will they now sell their normal inventory? Answer, they can’t, and if you are in the boat sales biz and can’t sell your boats you will be soon joining the ranks of the bankrupt.

As home and car  sales have gone, so will boat sales. When all the repo boats are gone, Legendary Marine is going to find itself in a world of hurt. Particularly as the most recent flood of government “stimulus” credit dries up. And in case anyone hasn’t been paying attention, retail credit has now contracted for the 11th straight month.

Financing Now you might be wondering how does one get financing on boats that are liquidated at as much as 60% below MSRP? Actually, its easy. Many lenders (using taxpayer funds) are continuing with their old fraudulent ways, outfits like GE Credit who provides special credit deals to their dealers who are in deep shit on their own floor plan loans. Basically, they are making 100% financing loans as usual. Let’s say you just inked a deal to buy a $300K boat for only $150K. They then lend you the full$150K while recording a collateral value of $300K, so now it looks like you, dear customer, have instant 50% equity in your new purchase.

Of course you have no such thing, not one dime of equity, which you would quickly find out if  you had to liquidate. And just as with the last batch of Federally financed zero percent down loads by Fanny and Freddy in the last 18 months, a huge percentage of those are now defaulting. Much the same will happen with these boat loans, as they have done with the housing and car loans the government made in an incredibly stupid effort to prop these markets up. The banks and financiers like GE and GMAC are not recovering, they are resorting the same and greater degrees of fraud to cover up their hopeless financial conditions.

The financial crisis of 2008 has been completely papered over, just as the tech and dot com busts were a decade ago by adding more debt to an already unserviceable mountain of debt. If you thought the financial crisis of ’08 was bad, just wait, you ain’t seen nothing yet. The next major bankrupcty will be the United States Government itself.

That is not a prediction; its a mathematical inevitability. So you may as well finance as many goodies as your heart desires, for in the end none of it will matter anyway.

March 28, 2010 Posted by | Boat Buying | Leave a comment