2008 November 19 Wednesday
Deflation Brings Great Deals For Rich People
Rich people who managed to hang onto their cash during the economic decline can find great deals in the sorts of products and services they buy. Luxury hotel prices are down.
For instance, room rates at luxury hotels fell 5.4 percent in the 28 days ending on Nov. 15 — in contrast to a 1.3 percent increase in rates at midscale hotels that do not serve food, estimated Smith Travel Research, a firm that studies the industry. Over all, hotel prices fell 1.6 percent in October, according to the Labor Department.
High end retailers are cutting prices.
High-end retailers are resorting to drastic discounting to lure customers into stores. Executives at Nordstrom, the department store chain, said on a recent conference call with analysts that the company had lowered prices on more than 800 clothing styles by an average of 22 percent.
Next time you hear someone complaining about the economy tell them they have a bad attitude. This is a new era of opportunity and fun if you have the right credentials. If you can gain entrance into the upper class what a great time to be filthy rich.
But this is a tragic time if you happen to be a new luxury automobile. Large numbers of Mercedes are becoming homeless orphans at the Long Beach Californa shipping port.
LONG BEACH, Calif. — Gleaming new Mercedes cars roll one by one out of a huge container ship here and onto a pier. Ordinarily the cars would be loaded on trucks within hours, destined for dealerships around the country. But these are not ordinary times.
For now, the port itself is the destination. Unwelcome by dealers and buyers, thousands of cars worth tens of millions of dollars are being warehoused on increasingly crowded port property.
And for the first time, Mercedes-Benz, Toyota, and Nissan have each asked to lease space from the port for these orphan vehicles. They are turning dozens of acres of the nation’s second-largest container port into a parking lot, creating a vivid picture of a paralyzed auto business and an economy in peril.
These immigrant cars come off of long cargo ship voyages to discover no one in America will love them. Sob.
Deflation is a good deal for any person or company who saved money and have no debt. Deflation is terrible for those who were financially irresponsible and ran up lots of debt. Since we had a credit bubble from 1995-2007, most people and firms got used to cheap credit and, therefor, used it for business expansion or personal consumption increase. The bill has now come due for those who did this.
Yes, this economy sucks. It especially sucks for someone who is unemployed or is self-employed and trying to make it on their own (like myself). Fortunately, I never believed into this bullshit credit bubble economy that we had in the U.S. for 12 years and have always lived my life as though it was 1991 ever since 1991. Of course, I went through the great Japan deflation of the 90's since I live there the entire 90's. So, I get to repeat the experience once again here in the U.S.
Steve Sailor also never bought into the fake bubble economy either and has some choice comments to make about it. He talks about taking his family camping in the 90's and in 2007. Like myself, he did not increase his spending or consumption during the bubble.
The people who are going to get slammed hardest in this deflation will be all of the idiots who believed that the 12 year credit bubble represented real growth and real productivity (when it most certainly did not) and, therefor, did their personal and business planning accordingly. The companies that are debt-free are actually expanding right now, because they can buy assets cheap. For example, One of my customers, Maxim, just bought themselves another fab (in Texas). They have nearly $2 billion in cash and can, therefore, ride out this situation.
"Gleaming new Mercedes cars roll one by one out of a huge container ship here . . . "
One wonders why cars would be transported by container ship, when the usual method is to use ships designed specifically for that purpose. I'd be curious to know if this sentence is accurate, or if the writer just thought it had a nice ring to it.
My point is that it is not just rich people who benefit from mild deflation. It is anyone (like myself or Steve Sailor) who has lived conservatively and not taken on debt who can benefit from mild deflation. I lived in Japan from 1991 to 2000. I experienced (and made a living) in an 8 year period of deflation. I can certainly do the same again. I have no sympathy for the people and businesses hear that took on lots of debt and leverage to live and operate in a manner that I never considered anything approaching prudence. This recession is the necessary correction to a 12 year credit bubble that never should have been allowed to occur in the first place. Too many people simply do not understand this.