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Old 04-05-2012, 18:40   #1
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Near-term Yachting financial forcast... Used boats.

We've had a " Missing buyers" thread, a "Best Negotiations" thread, and an assortment of others in a similar vein. Given the political and economic environment generally, and also given that there are some parts of the country better off than others, what is the three to five year outlook ?
There are bunches of folks who sold it all and bought a boat. Figured they'd sell the boat and have cash to get started back on land. That plan is currently unwinding, tragically, for many people. Especially for older folks in no position to re-start their careers. If we are to buy and sell boats, buyers and sellers had better plan in more flexible terms, for our futures.
There is the angle to buy smaller, older, and not expect any meaningful return at all. If the costs of boat ownership rise far enough, even a working boat in fair to good shape would be almost worthless due to the costs of operation, storage and maintenance.
Some folks have bought "beater" boats and restored them. I've seen some boats with an absolute fortune invested in them. One, a mid sixty's Pearson 35, has $140,000 put into it. It sold for $58,000. Not a great way to go for the seller.
There are a few here who need not concern themselves with the economics of boat selection and ownership costs. However, I'm betting the majority of us here are hard working stiffs that have made many tough choices over the years.
So I put it to the crew here. Buy and sell today or wait for three years to see how it all shakes out?
I'm thinking that the value of the currency ( the paper stuff ) will closely parallel the value of sailboats, so the buy now / buy later will be about the same. If inflation gets bad and loans are impossible, the values should drop even more, so waiting gets the nod in this vision. If they doubled the national debt, they will have to cut the value of the currency by half. That will tend to make prices rise, except your raises in your earnings never quite keep up with inflation. Which will depress the prices.
About this time my cogitator overheats. So I guess the question is: Is non loan based liquidity for average Americans expected to decrease or remain the same for the next few years... and how do you think it will affect prices for used sailboats...
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Old 04-05-2012, 18:57   #2
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Re: Near-term Yachting financial forcast... Used boats.

Not sure what "non loan based liquidity" means but my crystal balls says things will muddle along about the same for several more years. A good boat will still sell eventually but for less than you'd except and a not so good boat will continue to sit until someone gets it for next to nothing. I see nothing to make me expect any great changes anytime soon ... if at all.
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Old 04-05-2012, 19:53   #3
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The economy will get worse... Or get better... Or stay about the same... It all depends on whether a democrat or republican is in the white house.

On a more serious note I hope the money supply stays tight. Americans need to seriously get off the debt drug...

"Some" inflation would be nice so those that were "responsible" were able to kep their homes and have fixed intererst loans can get a little breathing room.
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Old 04-05-2012, 19:55   #4
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Re: Near-term Yachting financial forcast... Used boats.

Hi Doodles, what I mean by " non loan based liquidity " is the kind of funds or the percentage of funds, an individual will be able to bring to a purchase, that are not borrowed dollars. Most purchases are based on a down payment and additional funds to complete the purchase are borrowed. When the costs of borrowing get too high, the amount a person can add to his down payment decreases, therefore limiting his purchasing power. Also, if the boat is old enough, it may not be possible to get a loan on any terms, thus leaving the total purchase price that can be paid for the boat based on a persons ability to save or convert other properties or belongings into cash for the purchase. My take is that with rising taxes, rising health care costs, energy costs, food costs, insurance costs ( general inflation ) and stagnant wages, the amount of disposable income available for the average individual to invest in a sailboat will be significantly decreased over the next three years. By Significantly, I'm suggesting 10 to 15 %. That is a three to five percent drop in the value of used boats per year. Now I'm not basing that drop in dollars, but in the number of gallons of gas and loaves of bread that money will purchase. As a favorite author of mine once said, " It doesn't matter if the burger costs $1 or $100. The important question is, have you run out of beef ?"
Every year the purchasing power of currency gets smaller. Notice I said currency, not money. For example, today's gas price is $.17/gal. if you use money, a pre 1964 quarter with a melt value of $5.47 ( in currency value ) and your gas price is $3.69/gal. which mine is. Now, if a boat today has an asking price of $100,000, and the inflation rate ( actual, not the government cooked figures that leave out food and energy ) is 6 % and it sits on the market for three years,,,, even if the price is paid, there is a 15% price drop in the actual value paid for the boat, in Money, not currency. I'm sure that there are some guys out there a lot smarter than me that can suggest a trend.
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Old 04-05-2012, 21:42   #5
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Re: Near-term Yachting financial forcast... Used boats.

I believe your over thinking it. I don't put much faith in any predictions. If your ready to buy, and you found the boat you want, buy. If your not ready yet, don't.

To me, the case for waiting while building up your kitty before buying a large boat makes sense. If you buy a boat before your ready to leave, your going to be paying maintenance, mooring, insurance, and all the rest. At the same time, it will likely depreciate in real terms, and you will lose all of the interest, capital gains, or dividends that you might have gotten having the money invested while you waited.

My basic plan is to wait until I'm basically ready to go and then buy. I figure I won't leave right after I buy, because it will take me some time to get the boat the way I want it. I'm an engineer by trade, and unless it's over engineered, I'm not happy. While I'm working, I just don't have the time that a boat really needs to justify it's existence.

In the mean time, it's not a bad idea to buy a small trailer sailor just to keep the spirits up when I do have time, and take an annual or bi-annual bare boat charter as my vacation days accrue. I figure this would be nice, as it would give me a chance to "test drive" several different vessels and help me and my wife decide what we want.

But to each his own. Is this the best plan? Heck-if-I-know.
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Old 06-05-2012, 06:01   #6
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Re: Near-term Yachting financial forcast... Used boats.

Hi:

Consider boat ownership over a 20 year period. How much capital would you need right now to finance the whole 20 year period?

To my way of thinking, this pool of capital can be broken into 3 pieces, capital cost of the boat, net present value of marina fees, and NPV of maintenance and operating costs. For any good old 30 year boat under about 35 feet, I think in most cases the capital cost will be the smallest number of the three, in some cases it might even be as extreme as 10% capital, 50 marina, 40 maint. or thereabouts.

Just a long winded way of agreeing with what was said above, if you are ready to go sailing, get a boat and go. If you are not ready to go sailing, leave it to someone else to eat the costs in the mean time.

Not much money in waiting for the boat cost to maybe drop to zero, or worrying if they rise, as the two other cost areas dominate the finances.

Boulter
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Old 06-05-2012, 06:51   #7
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Re: Near-term Yachting financial forcast... Used boats.

It was previously stated that a republician or democrate in the white house will decide if the economy changes, and the boat market will follow. That seems a little too political for CF, because you are implying that one of these groups has caused the economy to be bad. I think there are many more practical reasons why the economy is not well. Who's to say it's bad, my business is doing very well and grows every year. I bet if I had to get a job or work for someone else it would suck and I would complain to high hell about the "economy". Then I would need someone to blame. Government has allways been bullship, and to blame current control or anyone for that matter is a lame excuse. If your not doing well, its YOU, blame yourself. That said, not alot of poor people boating. It's silly to think that repub's or dem's actually caused any of this. Maybe because we don't build stuff anymore? or the bankers stole it. I am not advocating any polical party.
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Old 06-05-2012, 07:13   #8
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Re: Near-term Yachting financial forcast... Used boats.

Quote:
Originally Posted by TomandAnitas34 View Post
(...) "non loan based liquidity" is the kind of funds or the percentage of funds, an individual will be able to bring to a purchase, that are not borrowed dollars. (...)
If this is your definition, then expect the US average to remain a negative number.

The only buyer who will have this kind of liquidity will be either the very rich (as they give loans) or the very poor (poor enough not to be granted any loans). Looking at the boat market these are insignificant (in numbers, not in volume) groups. Maxi yachts and old stinkers.

Think along this line: no loan, no liquidity, no boat purchase - this is true for the mainstream buyer. This should (if it were the sole factor, which it is not) bring boat prices down: less demand, lower prices.

However, due to general economical mess we are in, and in for more, the govts will print money and this will bring inflation: more money supply, higher prices. And this will most likely be the kind of inflation that is not related to growth in economy (vide: stagflation, wiki). People will lose jobs, lose liquidity, prices will go up to reflect the new supply of freshly backed bucks.

So, we may have the prices driven lower by less liquidity but also driven higher by inflation. (The higher prices induced by inflation will not be traded due to lack of liquidity.)

I hope this sends your thinking in some new directions.

As for the question of whether buy now or buy later, I can offer you this:

- if you believe in the inflation/stagflation scenario then it is a good investment to buy top quality boat at half her value and keep her, then sell her off once the trouble is over (rather than keep the equivalent cash in a bank or even worse - in a sock), (note that buying gold, art or property can be an even better option here due to their higher liquidity),

- if you believe in the growth scenario, then it is better to invest any free cash into areas that will fuel the growth (or alternatively in bonds of troubled countries now), then take the cream 5 years down the road and buy a boat.

All this said, I believe mixing up boats (pleasure) with investments (money) is a very bad idea unless you are Mr. Abramovich incognito and if so then welcome to the forum!

Cheers,
b.
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Old 06-05-2012, 07:34   #9
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Re: Near-term Yachting financial forcast... Used boats.

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- if you believe in the growth scenario, then it is better to invest any free cash into areas that will fuel the growth (or alternatively in bonds of troubled countries now), then take the cream 5 years down the road and buy a boat. Cheers, b.
Watched a You Tube video last night were Senator Ron Paul pointed out that in 2003 an oz of silver bought 6 gallons of gas, today he reports the same oz of silver buys 11 gallons of gas.

My take, the dollar and the Euro are on a slow slide to oblivion. You could do worse as Barny points out and hold a yacht as an asset rather than dollars.


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Old 06-05-2012, 11:01   #10
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Re: Near-term Yachting financial forcast... Used boats.

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(...) My take, the dollar and the Euro are on a slow slide to oblivion. You could do worse as Barny points out and hold a yacht as an asset rather than dollars. (...)
Based on IMF data there is some shift between the EUR / USD allocations of major central banks but there is no run towards the alternatives. I believe this may result from the US and the EU printing money at roughly the same rate.

But when I am looking at 'our' (EU) shore of the pond I can tell you no realistic solutions are being applied here to solve serious problems in PIGS. Hence, I would NOT keep any serious amount of money in 'our' EUR ccy much as some investments here (e.g. PIGS' long term T-bonds) will prove very lucrative should the EU overcome the vast difficulties.

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Old 07-05-2012, 06:36   #11
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Re: Near-term Yachting financial forcast... Used boats.

Quote:
Originally Posted by TomandAnitas34 View Post
I'm sure that there are some guys out there a lot smarter than me that can suggest a trend.
Don't count on it. I spent ten years working for one of the largest mutual fund companies in America. The very best of their stock pickers, with millions of dollars to spend on research and analysis, were rarely able to beat the return of a simple S&P 500 Index fund over any five year period. The same is true for all mutual fund companies everywhere.

In fact, every year my company would have a contest to see who could predict where the Dow would be on the day before the company Christmas party. So, in June we would all make our guesses and the winner would be announced at the Christmas party. The winner would get some sort of prize, typically worth $1,000 or so.

Who do you think usually won? The top analysts? The highly rated and highly paid portfolio managers? No, actually, no one "usually" won. It was just as likely to be one of the janitors or secretaries as it was to be one of those "smart guys" who were being paid to make this sort of guess every day.

Bottom line: You obviously have a grasp on the subject of your question. As such, your own crystal ball is going to be at least as good as anyone else's. Trust your own instincts and don't look for validation from others.
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Old 07-05-2012, 07:55   #12
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Re: Near-term Yachting financial forcast... Used boats.

Interesting thread............

But a boat is never an "investment." At least not in the traditional sense. It would be a rare circumstance for someone to buy a boat, fit it out for long range cruising. Then go cruise for an extended period to return and sell that boat for a profit. The key variable here is the "fit out." Its a spendy proposition with no return upon resale.

IMHO the idea is to just get off cruising in a way that suits you. If I were to analyze this strictly in terms of financial investment opportunity, or the opportunity cost.......etc. I am pretty sure that I would never buy the boat and I would never leave the dock.

The OP asked if "future liquidity would be the same" and how "will that affect the prices of used boats in the future?" Good question and I am not sure anyone has the answer. To be sure money is cheap these days. Loan rates are at historic lows. There are a lot of boats on the market. Since this is not a good investment in the traditional sense........perhaps pay cash for the most inexpensive boat possible. Choose wisely because as we all know not all boats are created equal. Fit it out and you are off. Its not so much the boat or the gadgets.....etc. In the end the super expensive yacht is hanging on a hook that looks an awful lot like your anchor. You are sharing the same spot, sipping the same brew, and looking at the same sunset.

Flawed logic or not.......In financial terms this is the way the Admiral and I see it. We bought the boat and are proud members of the "under 35" club (purchase price). The fit out and alterations have been a lot of hard work as well as expensive but we are almost there. When we move onto the boat we will eliminate most if not all of the land based costs.......mortgage/rent, cars, insurance,........the list goes on. To be sure there will be added boat living costs, but it will be far less. So throw out a figure.........say $2000/month. If we live on the boat for 5 years that is $120,000 bucks to the plus column........ 10 years $240,000. So in the end if we sell the boat for half of what we have into it we will still be way ahead of the game.

So for us the opportunity cost is to not buy the boat and to not go sailing. Its an investment in lifes experiences, good, bad, or ugly. denverOn said it best........"trust your own instincts and don't look for validation from others."
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Old 07-05-2012, 08:41   #13
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Re: Near-term Yachting financial forcast... Used boats.

I believe used boat prices will continue to decline steadily for the next year or two. Look at any boat you have the opportunity to see and don't be in any hurry to buy. Ask lots of questions. The general population is realizing more and more that a boat is not a necessity and therefore bailing out in huge numbers.
There are some mitigating factors that may effect future prices, however. An alarming number of our used boats are being exported, especially to Australia. In my area, we've seen between 25 and 50 boats leaving our port every 10 days. This has been going on for 2 years. And boat builders have been going under right and left for the last 2 years. So eventually, we're going to have reduced used inventory which will lower the number of choices but won't necessarily raise prices.
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Old 07-05-2012, 08:44   #14
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Re: Near-term Yachting financial forcast... Used boats.

Well, if I fell in love with a boat and suppose I had the type of money in my pocket, then guess what I would just buy her with complete disregard of what the market is doing and where it is headed. Sure I would haggle for the lowest price I could get, but only that much.

To me a boat is half a toy and half a home. If I do not go sailing, fixing or living in one, why buy it?

As someone said above: boats are NOT investments, unless they are investments. Those that are investments are not the boats we will go cruising in.

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Old 07-05-2012, 09:25   #15
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LMAO..... here we go again...
Bunch of folk obsessed with security wanting to take up one of the most insecure lifestyles going... and to make it funnier its gotta be planned...
Only one way to approach it guys... if you can't afford to lose the lot don't do it...
There's a few folk who've lost everything they own when their boat went down... it could be you...
Life's like that....
INSECURE......
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