A View from Here

Bill's Sisson's weekly Trade Only blog

Will the lower rates hurt boating?

With the discount rate cut yesterday it shows how concerned the Fed is about the softening economy tied to the perception of shaky credit markets. The other “huge” factor I think is going to hurt boating is the falling home values in many parts of the country where people have tied purchases to what had been growing home equity. Lenders are not sure how much boat financing was tied to home equity, but it will surely be a factor. And in terms of consumer confidence, if your largest (former) appreciating asset has been taking it in the shorts at 10% – 15% – maybe 20%, you will not be out buying discretionary items.

Not sure how the industry can respond to this, but I’d suggest it is the single largest issue facing it right now — forget about hurricanes, lack of access, etc., etc. And I’m a generally optimistic guy!

Greg Proteau
Executive Director
Boating Writers International

See JoAnn Goddard’s story on the
Federal Reserve lowering its benchmark
interest rate. (click here)



5 comments on “Will the lower rates hurt boating?

  1. B

    I dont know about the rest of the country, but here in SoCal, home mortgages in the realm of HELOCS were responsible for a GREAT majority of boat purchases in the larger categories. 25-50 ft range. Most down payments were from HELOCS with boat mortgages.

    Our business is WAY off this year and I fear it will get worse in the coming years. Couple that to our fuel dilemma where its already near or over 4 bucks per gallon for diesel.
    Iam in a position to know this as we survey new or repurchase yachts as well as insurance risk surveys. Brokers are BROKE !

    What does this bode for our industry ?…..You can do the math…Fasten your seatbelts this could be a hairy ride

  2. Carl

    Ok let’s take a big breath of air or oxygen, Please. If you were inteligent over the past 10-12 years you saw the stock market run up then fall(some say crash) but as long as you were not a high risk speculator blindly lead and you held your positions in stocks(companies) with good fundimentals like AT&T, IBM, Wrigley gum, Apple, ADM, DOW Chem, McDonalds, Microsoft, Cat, Haliburton, Boeing, the oil companies, etc, etc instead of dumping & running at the lows you’re in fine shape today as the market is steadly up. It was the lemings of the stock market that dumped on the market & ran to the real estate market & proceed to do the same in it as they had done in the stock market. Now they left the slugs holding the bag again. If you did the right things in your business when things were selling themselves then you should be fully prepared to weather this storm by understanding how to SElL the products you build or market in this climate. It is not a hurricane- it’s a storm! Were we not taught this story as children something about the 3 pig’s who were building their houses???
    Once the speculators loose there A** things will come around. There is only so much dirt. Over time it always apreciates. Some times very slowly. IE I purchased a home 12 years ago in Tampa Fl. for $105,000. 12-16 months ago It would have been listed for $289,00 to $300,000. Today It would be listed for $275,000. I’m not selling because I like the house & I’m living in it. I haven’t lost any thing as I haven’t sold it or refied it, I invested in it. If I sold it for any thing over $125,00 I would be seeing a gain when factoring in for inflation.
    Also there are hundreds if not thousands of people streaming across our southern border They are working and buying homes as they need a place to live & it’s a good time to buy.
    Invest in your busness everyday & it will see you through, suck out all the equity and ignore it and you will vanish but then that would be an opportunity for someone else…
    Take a big breath & get to work.

  3. J. S. Cole

    Greg, I have to agree with you and maybe this is what the economy needs. The down turn is going to hurt a lot of people and business,s that have been riding a gravy train. Now both are going to have to “WORK”. It will be a real shocker and they will blame all but them selves. Maybe Mr. Bush should read “Atlas Shrugged’. Hey, its a great day in Austin TX and I”m still at my office.

    John Cole
    JOSCO Products

  4. Anonymous Bob

    The housing situation is THE issue behind the boating slowdown. Yes, cutting the rates may help, but the ripple effect from that, at least for the marine industry, won’t be felt for another couple years, at least until buyers see their home equity stabilizing or rising. HELOCs were the purchase vehicle of choice because of the pack mentality of consumers – they figured home values were immune to correction based on the media hype and all their “friends” making gobs of money on house flipping. The correction was bound to happen. The big unknown was the extent of the correction.
    The economy is on the brink of a recession and the rate cut by the Fed is a good first step to prevent that from happening. The boat industry still has a tough road ahead. Things will get better, but not anytime soon. Like Greg, I am an optimist, but I’m also a realist.

  5. Thom

    The worst may be behind us. I am hearing that many dealers had very strong sales in August and September. This interest rate cut is just what the doctor ordered and practically assures (absent any big unexpected shock to the economy) that 2008 will be better than 2007. We are heading into three years of growth from 2008-2010. THe half point drop in Fed Funds followed by a couple of addtional drops before the end of the year will free up a lot of discretionary income for those with variable rate mortgages and HELOC.

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