A View from Here

Bill's Sisson's weekly Trade Only blog

Vampire economists and selling boats

When does caution in hiring or expanding one’s business because of concerns about a stalling economy become a self-fulfilling prophecy? And when is that caution justified?

That was one of several questions analysts and economists interviewed by National Public Radio addressed last week at an annual economic retreat at a fishing and hunting lodge in Maine.

BCA Research chief economist Martin Barnes says worries about Europe and other concerns are causing companies that are in pretty good shape to sit tight rather than invest in new hires or bring new products to market.

“So we meet again in six months and we look back and say, ‘You know, we were really right to wait ’cause look how crappy the economy’s been doing the past six months,” Barnes told NPR. “Yeah, of course, the economy was crap the last six months because we and every company like us sat on their hands. We never hire anyone. If we had gone out and hired people, the economy would have been better. So you’re creating a self-fulfilling trap.”

Confidence is contagious, be it at the household or corporate level. For our industry, confidence is high-octane fuel for spurring new boat sales.

If confidence is infectious, what about fear and pessimism? When you look at the economy today, with the uncertainly in Europe and the domestic fiscal cliff fast approaching in the fall, do you see the glass as half-empty or half-full?

The NPR report was filed the day after the news that the economy added 163,000 jobs in July, even though unemployment rose to 8.3 percent.

Stuart Hoffman, chief economist at the PNC Financial Services Group, described the economy to NPR in layman’s terms: “not an economy firing on all cylinders, but likewise, this is an economy whose motor has not conked out.”

That’s the glass-is-half-full perspective. Hoffman believes too much gloom and doom hurts confidence.

The latest jobs report, he told NPR, “really does drive a stake in the heart of what I call the vampire economists that always are going to find the worst in all these numbers, who’ve been calling recession. Or are always saying there’s a recession around the corner. They always just want to suck the blood out of the economy.”

“Woe is me” won’t inspire anyone to buy a boat, says Don MacKenzie, vice president and GM of Boats Inc. in Niantic, Conn., a Grady-White, Parker and Yamaha dealer. MacKenzie reports that his dealership is having a strong year.

“We’ve had an incredible year, but we’re still guarded in how we manage our inventory,” MacKenzie says. “I still remember very well the pain of what we’ve been through.”

But, he adds, “The consumer wants to go boating. We haven’t heard gas prices brought up one time. That’s a fake issue. They’re still value-shopping.” Good used boats “are gone within a week.”

After four consecutive months of decline, the Consumer Confidence Index rose a tad in July, even though the overall index remains at historically low levels.

“Consumers’ attitude regarding current conditions was little changed in July, but their short-term expectations, which had declined last month, bounced back,” Lynn Franco, director of economic indicators at The Conference Board, said in a statement. “However, while consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings. Given the current economic environment — in particular, the weak labor market — consumer confidence is not likely to gain any significant momentum in the coming months.”

The surprising jobs number could help spark “somewhat higher” consumer optimism and spending, suggested Kathy Bostjancic, director of macroeconomic analysis for The Conference Board.

“This, in turn, could lift growth moderately higher in Q3 from the moribund 1.5 percent pace recorded in Q2,” Bostjancic said. “However, lackluster demand remains the biggest corporate challenge in the second half of 2012. Without a large improvement in confidence and spending, job gains are unlikely to gather steam. Moreover, the labor market could easily slip back to the moribund growth of spring and early summer, extending an already unusually long ‘jobless recovery’ farther into the foreseeable future.”

I’m closing with MacKenzie, an effective glass-is-half-full kind of guy who is driving business rather than waiting for it to find him.

Cautious as the recent past would dictate, MacKenzie is nonetheless making investments that allow his business to grow. “We hired three full-time people this year,” he told me, “and I need at least two more full time on the sales administration side.”

MacKenzie says, “Nothing happens in this world until someone sells something. That’s when economic activity starts. Everybody at the factory is waiting for us to do our job. We put people to work when we sell a boat.”


5 comments on “Vampire economists and selling boats

  1. Blake Davis

    There’s optimism, and then there’s just plain retarded. If one has all the lines out properly baited with good bait, and your nets are placed at all the proper places where fish travel, and have regularly caught, but now there are no fish nibbling, much less caught, or even being seen, one would have to be retarded to put out more expensive bait wouldn’t they? ESPECIALLY when the known schools of fish have only been coming from oversea’s but reports from there say they’re all dead!

    You going to go gear up for the return of the Buffalo herds? How about invest more in buggy whips? Go open a restaurant that specilizes in fresh Mullet (like used to be all around Tampa Bay)?

    Things come to an end. Smart people prepare. A (ex) big Mortgage Broker here in Miami recently told me a story about Eastern Shores where he has a big home. Back in 08/09 many of his neighbors quit paying their mortgages, allowing their homes to be foreclosed on. The neigbors sneered at them for doing so, as they kept paying theirs no matter the values going down, out of pride and “doing the right thing”. NOW in 2012, the one’s who “walked” have come back and purchased with cash (saved from not paying their mortgages) the houses FREE & CLEAR from the same neighbors who years earlier sneered at them, as now they are now broke, and have no cash at all, as they waited too long to fold. MESSAGE

  2. Kurt Hoehne

    Hi Bill,

    Thanks for spotlighting that NPR report. It’s an Achilles Heel of the free market, when enough companies pursue what they think is in their best interest (stockpiling money), the economy falters. Let’s hope that the major corporations and banks understand that if they use some of their money the economy will pick up. Currently those folk seem content to sit on the sidelines and wring their hands about the federal government’s deficit spending while lobbying for tax cuts, when they are in fact the only ones with the real power to get things moving.

  3. Dana Russikoff

    Thanks Bill – I couldn’t agree more. I believe recession is a state of mind, and your spotlight reinforces that. We cannot afford to be bogged down by economic indicators and pessimistic speculation. Truly brave business builders are the ones who focus efforts on creating innovative products, services and business models that will spur demand, rather than waiting for it to come to them.

  4. goboatinginflorida

    “Economists” are pretty bad at what they do.

    No doubt there is a key psychological element.

    As we entered the ‘downturn’ a wealthy customer warned me of the impending reaction…….many of wealth would lose the propensity to spend,simply out of fear.

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