A View from Here

Bill's Sisson's weekly Trade Only blog

Moving at no-wake speed through an age of thrift

As consumers, and as an industry, we are living and doing business in an age of thrift. Consumers are continuing to deleverage to work off debt from their household balance sheets to increase their savings.

As such, people are holding on to their boats longer, and when they do buy new there is plenty of anecdotal evidence to suggest that they have been buying a bit smaller and a bit less expensive. Nothing surprising there.

This fact is worth keeping top of head: The average age of a used boat has increased by about five years since 1997. That’s according to Brunswick chairman and CEO Dustan McCoy, who told analysts during a second-quarter earnings call that the average age of a used boat in 2010 was about 21 years.

With boats built during the peak years of the late 1980s approaching the quarter-century mark, the thought is that obsolescence and age will cull the ranks at a faster pace, giving a boost to new-boat sales. Some of that certainly is taking place.

The counter-current is the culture of thrift, of sitting tight for several more seasons and upgrading the old tub: putting on a new teak deck or repowering her, or painting over a tired, faded gelcoat. Many of us fell in love with our old boats all over again during the Great Recession. When things improve, those boats are likely to show their age, which we might not be as willing to overlook as we are today. Remember, pent-up demand develops during recessions.

The age of thrift, a culture of thrift … I recently read a report on the so-called “paradox of thrift,” a concept promoted by economist John Maynard Keynes that suggests broad collective savings, or thrift, might hurt the economy by decreasing consumption and thereby slowing economic growth.


Consumer spending accounts for more than 70 percent of GDP. As I reported in a blog a couple of weeks ago, the top 5 percent of income earners accounts for about one-third of spending and the top 20 percent accounts for close to 60 percent of spending. A sharp cutback in spending by that group only made the recession worse, according to some economists.

Outgoing Federal Reserve bank president Thomas Hoenig addressed the paradox of thrift in a recent Marketplace Money feature from American Public Media. He was asked, in short, whether there would be enough consumer oomph to drive the economy forward if everyone were to really save.

His answer: “The only way we can drive this economy forward is to save. Nations know that. You could only build from strength. … I understand what we refer to as a ‘paradox of thrift:’ If everybody saves too much at once, the outcome can be a worse recovery,” Hoenig, the outspoken president of the Federal Reserve Bank of Kansas City, told Marketplace’s David Brancaccio. “As a nation, we need to think about the long run. … If you fail to save, if all you can do is consume and borrow from the rest of the world and import their goods, then you make yourself poor over the long run.”

That’s the long view.

Everyone from Wall Street to Europe to China will be listening closely Friday to remarks from Federal Reserve chairman Ben Bernanke with an ear tuned closely to suggestions of additional stimulus.

Will Bernanke ride to the “rescue” of the markets with another round or version of quantitative easing — QE2.5, perhaps? Proponents argue that it could keep the economy from slipping into a double-dip recession.

But there is plenty of opposition to additional stimulus from within the Beltway, from some economic strategists, from other Federal Reserve Board members. Their objections include concerns about fueling consumer price inflation and the impact of increasing our long-term debt.

Bernanke is in a difficult spot. Doing nothing surely would disappoint markets. As one trader told Money Watch earlier this week: “If we get it, we’ll have a nice rally. If we don’t, we’ll have a bloodbath.

But the Fed has already promised to keep interest rates low until the middle of 2013. Bernanke certainly will parse his words carefully as he outlines the tools that are left in the Fed’s toolbox and how they might be used on an economy that appears to have either hit stall speed or a particularly strong set of headwinds.

In the meantime, our fleet of boats is going to rack up some more hours as we steam through this age of thrift a bit longer.


2 comments on “Moving at no-wake speed through an age of thrift

  1. Tom Delotto,CMM

    I personally own 2 older boats – both 1987 vintage – and have spent time and money over the past 2 years re-powering and improving. I love both of them and am very comfortable with how they serve the families needs. Its not that I cannot upgrade – I simply don’t want to and am more comfortable fixing and sitting tight. Buy some new equipment, put fuel in the tank and go fishing – and be happy we can do it.
    On another note – having been in the marina and boatyard business for a lot of years as both a service tech and manager I have many colleagues across a broad area of the US who report that the service business is booming. Slip rentals are off, mooring rentals are off, fuel sales are off but repairs are pretty good. Obviously folks are saving and spending at the same time. By the way – spending too much is what got us all in to the pickle we are seeing now – how can saving possibly be perceived by anyone as a bad tactic?

  2. TakeMeFishing

    You’re right, recent events have made the market hyper-sensitive and timid. In some parts of the country sales have slowed to a crawl with unprecedented declines in new boat sales. Still, some dealers are holding their own as they apply time-honored strategies that get people to the water for test drives, focus on value-pricing and connect the dots on why to own a boat now (i.e. exceptional fishing opportunity, full reservoirs, family time, leisure, etc.). The pie’s quite a bit smaller so the task today is how to take a bigger bite of what’s there. Dealers that have established themselves as service leaders, customer-centric and the area’s primary resource for all things boating continue to stay afloat, and in rare cases, are doing well in this difficult economy. For those of us that weathered the storms of the early 80’s (21% prime), late 80’s and early 2000’s know that the only replacement for hard work is a miracle.

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