ANTIESTABLISHMENTARIAN

Finance, Fuel Prices, Economics, Markets

Yacht Prices Are Now Collapsing

Well, it finally happened. Can’t say I’m surprised that it took this long because in the last big recession ’79 – ’82 we never did see a collapse in advertised prices, though lots of half-price offers were accepted. That recession was short enough that sellers managed to hold on without widespread panic. We can determine that prices are collapsing by the ever widening spread in asking prices. On some top-of-the-line boats we’re seeing spreads as much as 50% in same make/model/years. This tells us that desperation is in the air.

Ultimately, for large boats it takes the brokers to break the price resistance of sellers, and this does not happen as long as brokers can pay the rent, but when the checkbook is empty, the pressure is put on sellers to drop the price and get boats moving. This is because well-heeled owners usually have the ability to hold out longer than smaller boat owners. Brokers hate to see big markdowns for obvious reasons. When a few sellers do it, this forces all sellers to drop price or face the prospect of no phone calls. When the bottom feeders give up making low ball offers because none are even countered, you know the game is up. And it definitely is up now as demonstrated by the huge spreads.

Take middle age 54′ Bertrams as an example, since there are a lot of them. Asking prices of comparables run from $900K to $400K, a 44% spread. That’s huge. With my benchmark Sea Rays I’m seeing even greater spreads as there are a lot more repos for this builder than Bertram (almost no repos of Berty & Hats). Moreover, the National Liquidators auctions are showing massive price drops, many in the range of panic selling. That is, prices down 66-75% of normal in a sizeable number of cases. The bankers are finally saying, “Just get rid of it!” They never learn; had they said that six months ago they’d have obtained 30% more.

Behind the scenes, confidence in the economy recovering anytime soon – despite the massive media propaganda that it will – is waning. More and more we hear mainstreamers saying, “This isn’t going to end anytime soon.” Well, now you know why I have been beating this drum for the last 18 months. Those who took my warnings to heart and sold early were rewarded with reasonable returns. Now, those who will be force to sell will have to take huge losses, and there won’t be anyway of getting around it. Interest in buying boats is falling off as fast as buying bank stocks.

If you happen to be caught between a rock and a hard place – as in big mortgage, little equity – you might as well bite the bullet and call up your banker and tell him he can have his boat back. There will be no waiting this one out. And besides, good credit is no longer what it used to be since there is very little to be had, so you won’t be needing it. And, you’ll sleep a lot better after the dastardly deed is done.

We are at the point now wherein with defaulting you’ll have lots of good company. You can wear it like a red badge of courage (a little tongue in cheek there) and be less embarrassed about it.

Here’s another one of my hideously accurate predictions: It will be at least another five years before we can even think about when the bottom is coming. Things are going to get a hell of a lot worse, I’m afraid. Really afraid. This is the end of boating as we knew it. All the component manufacturers are going down, and once they’re gone, it would take a very long time indeed for them to be reestablished. With it goes the boat yards, marinas, marine stores and distribution, parts supplies and etcetera.

Even the magazines are on the way out. I know that fore sure when they ask someone like me to write articles for them. Not in 40 years has that ever happened. Now it has, more than once.

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January 27, 2009 Posted by | Today's Boat Market | 1 Comment

Boating’s Funeral Part VI

The funeral procession continues for recreational boating. National Liquidators reaches a new high of 444 boats at auction this week. And the average size keeps on growing. Meanwhile, Brunswick and Marine Max flirt with insolvency with stocks now down in the $2 range.

I just saw that Brunswick “declared a dividend.” Oh, that is funny, very funny, just like the bankrupt Wall Street banks declaring dividends. They do this, of course, to keep up the stock price and maintain the fiction of solvency. Ummmhummm. Continue reading

November 4, 2008 Posted by | Today's Boat Market | , , , | Leave a comment

Brunswick in Hospice Care

Brunswick in ICU

Oct. 22 — Moody’s lowers Brunswick (BC) to junk ratings; stock plummets to 25-year low

CHICAGO (AP) — Shares of embattled boatmaker Brunswick Corp. sank to a 25-year intraday low Monday after Moody’s Investor Services cut the manufacturer’s debt ratings to junk status.

Take that to mean no more borrowing to survive.

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October 23, 2008 Posted by | Today's Boat Market, Uncategorized | , , , , , , | Leave a comment

A Flood of Repos

Just a quick note on boat prices. The National Liquidators auction is now up to 355 boats per week as the repo rate steadily grows. While I haven’t done an in depth analysis, a quick perusal indicates that average repo selling prices are now down by 50% as I predicted. The Carver and Sea Ray big boat market is getting hit very hard indicating that the pain is now being strongly felt by the upper middle class. Continue reading

September 17, 2008 Posted by | Today's Boat Market | , , | Leave a comment

Effects of Dollar Manipulation

U.S. boat builders have been barely staying afloat through foreign sales. In fact, many were recently bragging about that. The incredible shrinking U.S. dollar went a long way toward making US boats very attractively priced in foreign markets. Then, suddenly, the collapsing dollar reversed its decline. Golly, how could that happen? More on that in a moment, but what is important for boat builders is that their government has sent a cruise missile up their butts, along with every other export industry. The dollar has risen by 1000 basis points on the foreign exchange index in the last two months.

With every passing week, the potential for builders to sell boats abroad declines dramatically. Whatever hope they may have had for surviving this government created disaster has now evaporated. This is mindful of that old Vietnam war joke about having to destroy the village in order to save it, though as a joke it isn’t very funny, as I’m sure the boat builders would agree. The same goes for the yacht brokers who were trying to keep their nose above the rising waters, also with foreign sales of boats that were loosing value nearly as fast as houses. Those too, will dry up.

As for the availability of boat loans, credit will continue to dry up and the marginal buyers will be priced/forced out.

Back to the dollar. What we are witnessing is the world’s largest currency manipulation ever. It was done in concert with central banks worldwide in order to keep the U.S. dollar from collapsing, and a world full of dollar denominated assets from going down with it. Though few understand it, and most refuse to believe it, even in the face of overwhelming evidence, the United States is in the process of financial and monetary collapse. This is what I have been warning about since I started writing this blog last year.

Oh, the Irony of It!

The rising dollar is the result of another first, the world’s largest short squeeze. Most American institutions were hugely short the dollar, so it was a fairly easy thing for the US government to organize a quick withdrawal of dollars from the market, forcing the shorts to cover. This, of course, seriously hurt the very banks they’ve been trying to bail out. In view of my great love of bankers, this is positively delicious. Ah, well, you gotta have a little collateral damage when you fight a war.

The collapse of Fanny and Freddy likewise precipitated the largest takeover in world history of the worlds largest two financial institutions – not just one but TWO! To the tune of about $6 trillion. To put that number in perspective, consider that it is only one trillion short of half of the total annual GDP. An already deeply indebted and overburdened taxpayer is now expected to shell out whatever he has left to bail out the bond holders of that debt.

The current dollar manipulation represents an effort to change the psychology about the dollar. Since its fundamentals are positively horrible, a few months of bogus high prices changes nothing except to destroy more businesses and banks, after which the dollar will resume its inevitable migration to the basement.

Very few people will understand the true implications of the collapse of Fanny and Freddy until its terrible effects will become evident in coming months. The first of these effects will appear very soon, starting with the collapse of Lehman Brothers, then onto Washington Mutual, Merrill Lynch, CitiBank, SunTrust and a host of others, including a couple hundred hedge funds. By the time this debt collapse unwinds, hundreds of banks will go down. The FDIC (remember, your money is INSURED up to one hundred grand) which is almost already insolvent, will be unable to live up to those claims within a month. The FDIC will then be promptly bailed out . . . with more of your money. Oh, and don’t forget the automakers and a slew of others arriving in Washington with their hands out for, oh, say, a few hundred billion more. Airlines come to mind, but the pigmen bankers will get the lion’s share.

The federal manipulations in a panicked attempt to save a collapsing economy extend into virtually all markets, for what they do with just a few dramatically affects all others. The wild volatility we see are broken markets in action. No one with any sense trusts much of anything, least of all government statistics . . . . and if you don’t have accurate statistics, free markets break down. They also break down when propaganda is substituted for truth. We are rapidly reaching the point where nothing is believable. The problem is that your life savings and/or retirement/pension/401k are all tied up in that mess and at extreme risk. Not to mention your job and your future.

These manipulations will probably prevent a 1929 like collapse and put in its place a slow motion unwinding of the hollowed out US economy, prolonging the agony for decades. This is why I have advocated allowing the system to collapse naturally, since the pain would be far less costly and far less in duration. Its really impossible to guess at how all this will play out since so much depends on how long the world will put up with a chronic debt-addicted nation of deadbeats.

MY best guess: Since our creditor nations were equally addicted to our increasingly worthless export dollars, many of them find themselves trapped in a life boat with a lunatic, searching for a way out. Unlike the lifeboat scenario, they do have one. That is to slowly divest their US debt holdings to the point where they can abandon the US which, for the present, they cannot. It will take them years, not months, but it readily apparent that many of them have already started. However, the propped up dollar is not sustainable and when it begins its next decline, the rate of descent may be breath taking. Somewhere down the road is a capitulation point; it is that point at which the markets finally realize that all efforts to save the unsavable have failed.

And now for the final irony. A big chunk all those NINJA and liar loans the Wall Street Wizards made have now ended up on the balance sheet of the Federal Reserve in an insane effort to save aforesaid bankers. That is $450 billion of worthless mortgage bonds the Fed exchanged for Treasuries. It is the “reserve” part of the Fed that makes for the value of the dollar. With a balance sheet of $950 billion, that leaves umpteen trillion dollars backed up by a mere $500 billion.

This is public record, so who do they think they are fooling? Even an idiot will figure it out eventually.

September 10, 2008 Posted by | Today's Boat Market | , , | Leave a comment

Whoda Thunkit?

Fools and Their Money Department:

Here’s an investment deal fer ya!

Boat maker Brunswick Corp. said Wednesday it will offer $250 million in senior unsecured notes, due in 2013. Merrill Lynch, Banc of America and JPMorgan are serving as joint bookrunning managers for the offering. Shares of Brunswick, which also makes fitness equipment and recreational products like fitness equipment and billiards tables, closed at $14.91 Tuesday. Continue reading

August 20, 2008 Posted by | Today's Boat Market | , | 4 Comments

Power Boat Market Update

The boating industry – at least the powerboat side of it – is basically toast. There is now no hope for most of the powerboat builders surviving. Only the fact that most of the industry is conglomerated into to large holding companies keeps most of them afloat, as one-by-one brands are jettisoned in futile efforts to keep the mother ship afloat. Continue reading

August 13, 2008 Posted by | Today's Boat Market, Uncategorized | , | 3 Comments

Requiem

As I predicted in a post last week, their press release about “furloughs” was unadulterated BS, weasel words for laid-off by the weasel management.

June 26 (Bloomberg) — Brunswick Corp., the maker of Sea Ray yachts and Boston Whaler fishing boats, plans to close four more North American plants and may eliminate as much as 10 percent of its workforce to reduce costs in a shrinking market.

Brunswick aims to lower fixed costs by $300 million from 2007, according to a statement today. The Lake Forest, Illinois- based company had previously said it would shut eight factories, bringing the total number of closings to 12 with today’s announcement. The company will have 17 or fewer plants operating by the end of 2009, compared with 29 in 2007, it said.

The U.S. economic slump has erased almost two-thirds of Brunswick’s stock market value in the last year as Americans lost jobs and the price of fuel soared. The company hasn’t had an increase in profit since 2005, according to data compiled by Bloomberg.

U.S. powerboat sales sank to the lowest in more than 40 years in 2007, the company said, with an estimated 260,000 units sold. That compares with 305,500 in 1965, the earliest data on record, and a high of 523,900 in 1988, Brunswick spokesman Dan Kubera said today in a telephone interview.

Be careful whom you call a doomsayer. Sometimes doomsayers know what they’re talking about. Hardly takes a genius when diesel fuel is $6 a gallon in some places and $11 in others, namely Europe.

This press release is just playing games with words, an ill-fated attempt at buying time.

What Brunswick should do is close shop and liquidate what little is left. Trying to hang on will only take down the remainder of their sports business by hemorrhaging cash. Brunswick and their efforts to monopolize boat building is history. Color them DEAD.

I’ve been saying it for years that Brunswick putting all its eggs in the boating basket is just plain stupid. STUPID! But I had no idea that 80% of their sales are boats. That’s beyond stupid and displays a colossal degree of greed, arrogance and probably insanity. Nobody who is cognizant of the history of boating would ever do such a thing with their own money. And therein is probably the explanation: OPM. Stockholders. Milked. Dry.

Why their stock is still worth anything is amazing. Well, not really when you think about the stock market with a clear mind. Any stock holder who thinks he can come away from this unscathed probably goes to Las Vega a lot. I will doom out the DOW to about 8500 by election day, and probably 6,000 by Christmas.

It will be interesting to watch the financial media trying to put lipstick on this pig, the second and what will be the most violent and bloody downward leg to what will amount to an economic free fall. The word PROFIT won’t be heard for a long time.

PS. If you’re wondering why the things you hear on TV don’t resemble anything in the world in which you live . . . this is called the Media Bubble, a world of their own, completely isolated from yours by walls of money and power.

June 26, 2008 Posted by | Today's Boat Market | , , | Leave a comment

Alternative Boats, Not Fuels

Its time to take a look at what is currently available in the way of trawlers. Trawlers? Well, not exactly, for these are all 20+ knot boats, but this is the closest thing still being built today. The basic design of some of these come from the “downeaster” commercial fishing boat style, the hallmark of which is seaworthiness. I’ll start with Mainship because I’ve surveyed a few of these. They are high production, relativelyy low-priced and in my view a fairly okay boat. Overall what I don’t like about them is generally offset by a low price. After all, these aren’t Hinckleys. Not exactly graceful, is it? Continue reading

May 15, 2008 Posted by | Today's Boat Market | , , , , | 1 Comment

Spiraling Down

Tidbits from the MSM and elsewhere:

Boat Sales

Ft. Lauderdale — National Liquidators repo auction this week rose to an all-time high of 333 boats with only weekly average sales of 10-12% of the total. The vast majority of boats have been on the block for five months or more since I started tracking.

Over the last two weeks Yachtworld listings declined slightly from 120,250 to 119, 027. Probably due to monthly listing expirations.

(AP) — Brunswick Corp., which makes boats and boat engines as well as fitness and recreational gear, said Thursday it will sell its high-performance Baja boat business to Fountain Powerboat Industries Inc. for undisclosed terms.

Brunswick also will halt Baja boat production at its Bucyrus, Ohio, facility by the end of May. About 285 positions will be affected, the company said.

NEW YORK (AP) — Moody’s Investors Service cut its ratings on Brunswick Corp., saying the boat maker’s operations have declined sharply amid a drop in consumer spending.

The agency cut the rating to “Baa2” from “Baa1” and put the company under review for a possible further downgrade. Ratings indicate a company’s perceived ability to repay debt.

“The continuing decline in US discretionary consumer spending has translated into a prolonged drag on operating margins and has pressured the company’s operating cash flow and credit metrics,” said Kevin Cassidy, a senior credit officer at Moody’s.

Boat makers rely on robust consumer spending. The threat of a recession and increased gas prices have led many consumers to cut back on discretionary expenses.

Moody’s gave Brunswick’s ratings a “negative” outlook, which means it sees at least a 40 percent chance it will be downgraded in the next 18 months.

In addition, it was also disclosed this week that Brunswick’s Sea Ray boat subsidiary in Merritt Island, Fla., will lay off 400 employees at its plant, 50 more than previously reported.

MY COMMENT: For the last quarter 2007 Brunswick reported its sales were down 10%. If so, how does this jive with laying off 400 employees, selling off Baja, and closing plants for only 10%? This is why I never believe anything these companies say.

In February, the company reported it would lay off 350 employees at the facility because of the sagging economy and slower demand for boats. However, the Florida Agency for Workforce Innovation reported Wednesday the company plans to layoff 400 employees between May and July.

The company says in a statement it will be able to move some of those employees to other plants as it relocates the production of some of its boat models. Two of Sea Ray’s other Merritt Island facilities — a product development and engineering facility and a manufacturing plant — will not be affected by the layoffs. In February, the company reported the net job loss would be 80.

(AP) — Boating gear retailer West Marine Inc. said Thursday its same-store sales fell 9.4 percent during the first three months of the year because of “significant softness” in the market.

OIL

NEW YORK (Dow Jones)–The traditionally weak second quarter [ they apparently mean demand is less at this time – D.P.] in the oil market is expected to track its familiar course this year: higher prices and lower demand. In each of the past 10 years, global oil demand has dropped during April, May and June from the January-March quarter, reflecting the end of winter in the Northern Hemisphere and reliably clocking in as the weakest period of the year.

The average quarterly decline in the past decade has been 2.1% of global demand, or about 1.7 million barrels a day. But with oil prices already trading near record highs above $110 a barrel, the second-quarter global demand drop looks to be anything but typical this year.

The U.S. Energy Information Administration projects the drop-off will be just 760,000 barrels a day, or less than 0.9%. That’s the slimmest decline since 2004, when raucous booming demand growth from China and other developing countries ignited the rally that has tripled the value of crude oil.

MY COMMENT: If this is the slack period and the price is rising dramatically, what does this mean for the heavy consumption summer season? If oil is $110 now what will it be in July? My guess is $120-$125 for gas at $4.00 on average. I suspect that this summer will mark the turning point — the point at which somnabulent Americans finally wake up and realize that that they are in big-time trouble.

Inflation

The Bureau for Labor Studies said US import costs rose 14.8% in March, up from 9.1% six months before.

This should tell you something: Priced in gold, oil is the same price as it was a decade ago, fifty years ago, and in 1932.

Financial Times, April 10 – “oil prices jumped . . . .  further stoking inflation . . . ”

MY COMMENT: Allow me to correct the esteemed FT; rising oil prices don’t cause inflation. Its the other way around, monetary inflation causes rising oil price. The experts should know better but, hey, they’re sleeping with the government, as all media does.

As congress and the Fed dump hundreds of billions into bailouts for this Mad Max economy of ours, we can expect inflation escalate dramatically, despite deflation of many assets, which is not the same thing as general price deflation. It is those tens of trillion of dollars we send to China, et. al. for cheap goods, plus the trillions to the oil producers that has flooded the world with dollars that are now returing home to roost in the form of higher prices for everything we import which, nowadays, is most everything, since we don’t make anything of value anymore that anyone really wants. Except for boats which nobody can afford to fuel anymore.

According to Shadowstatistics.com, domestic inflation as calculated the way it was in 1980, before they started lying to us, is currently 11.4%. Does that seem about right to you?

April 12, 2008 Posted by | Marine Industry, Today's Boat Market, Uncategorized | Leave a comment