What Will Happen to Boat Pricing when Euro Is Under Par to US$ ?

[Pete7]

One of the things that has been noticeable in the UK is the number of boats being sold to North Europeans because the £ took a dive and UK yachts were perceived good value. Especially so when interest rates dropped across Europe so folk bought assets instead rather than see inflation erode savings.

If the USD and Euro are going to take a dive then does the smart money move into assets to protect the value? for example physical gold or even a boat. After all a boat can be moved to a new market, just look at the number of posts we have about Aussies wanting to buy US boats.

What were the lessons of South Africa a couple of decades ago? folk worried about the future of SA so built boats that could be moved if they had to bail out of the country.

I can't see the price of a boat in USD or Euros changing much because Europe and the US are both going to print money. However, the value of the boat compared to other assets say kgs of copper or barrels of oil, well you will need much more copper in the future to buy the same boat.

Personally I would have all the ducks in line ready to move at the slightest sign of trouble ahead.

Pete

[webejammin]

So finding the best deal and buying a boat with cash is more stable than having cash in the bank ? RIGHT ???? No matter whose dollar your talking about?? At least if you die before the world goes broke yachters will enjoy the END ( Water World ) unless your on a big gas powered yacht and can't afford fuel to cruse with, wind is almost free if your sails and rigging is in good condition.

[Kettlewell]

Folks who seem to be worried the world as we know it is coming to an end should read a little history. I imagine a lot of folks in 1939 in Europe thought that the future looked really bleak, and they were very right. Compared to other problems the world has weathered this economic "crisis" is small potatoes. My philosophy is that no boat is an investment--buy the boat you want at a price you can afford and enjoy it. The "returns" are worth a lot more than any money you get out of it.

[webejammin]

Originally Posted by Kettlewell

Folks who seem to be worried the world as we know it is coming to an end should read a little history. I imagine a lot of folks in 1939 in Europe thought that the future looked really bleak, and they were very right. Compared to other problems the world has weathered this economic "crisis" is small potatoes. My philosophy is that no boat is an investment--buy the boat you want at a price you can afford and enjoy it. The "returns" are worth a lot more than any money you get out of it.

I'll drink to that.

[TaoJones]

Originally Posted by Charlie

I can't remember the guys name but there was a Russian Billionaire who got on the wrong side of Putin and was/is jailed. There are currently Trillions of dollars sitting on the sidelines being held as cash by corporations. Do you think much of this money is held in politically unstable countries like China and Russia.

That would be Mikhail Khodorkovsky: Mikhail Khodorkovsky - Wikipedia, the free encyclopedia

Originally Posted by Charlie

Even though the US Congress is making a mockery of being called a political body. They can't get anything done. The US is relatively more stable then most other countries in the world. If you had 100 million $ or Euros where would you invest it or try to keep it safe. The US for all its problems has to big advantages 1) It has a big enough economy to absorb an investment of $100b and 2) It has a legal system that is mostly transparent to protect your ownership of that money. I'm not saying that there isn't the need for a change or that a change isn't coming but given the turmoil in the world the US T-Bill is still considered safe by most people with a lot of money. Remember in 2007 or 8 when the T-Bill had a negative rate?

Actually, Charlie, the "real" or "effective" rate of return on US Treasuries (bills, notes, bonds) has been negative for years. The real rate of return is the interest rate paid less the rate of inflation. Even using the government's grotesquely manipulated figures for inflation, the real rate of return is negative - in other words, if you loan the government $100 for a given term, and they give you back, say $101 at maturity, you must deduct the loss of purchasing power incurred over whatever the time period was that you held the government IOU (US T-bill or T-note or T-bond). If, after accounting for the destructive influence of inflation on the currency during the time you loaned the government your money, the purchasing power of the money you receive at maturity is less than that of the $100 you "invested" at the beginning, you've effectively paid the government to borrow from you. This has been the end result with US Treasuries for years, and there's very little chance it will go positive any time soon.

Why not? Because the true inflation rate is several times what the government reports it to be, first of all, and because as long as fools will continue to loan the government money and accept a loss on their investment because they don't understand the destructive effect of inflation, the US Treasury will not have to pay a sufficient rate of interest in order to sell their IOUs.

Originally Posted by Charlie

(BTW Tao if you can give us a link to that statistic about the Fed Reserve I would love to read the article.)

This isn't the original source I read, but it'll do: Fed Now Largest Owner of U.S. Gov

Originally Posted by Charlie

English Common Law and its derivations, or should I say the lack of it in China, is what makes people hesitant to invest in China.

And on the OP comment. Perhaps you are right that the USD and the Euro may come on Par. I can't find anything to back up my claim but I seem to remember a time when 1 Euro cost USD$.087.

It was the fourth quarter of 2000, and the correct figure was actually less . . . about $0.82. (See graph, below)

Originally Posted by Charlie

People with lots of cash bought up properties in Europe. A friend bought an apartment in Costa Del Sol Spain for $35k. While boats can be moved, as opposed to apartments, Aren't we seeing exactly what the OP is talking about happening right now. Aussies and Europeans are buying US boats because of the strength of their respective currencies and then sailing them home. The currency exchange rate is going to shift like the tide. IT is not at all predictable like the tide though. At some point the Euro and the USD are going to be at Par. That will make European boats more attractive to US buyers. I just lost a bunch of money on a boat I bought in Europe because of the exchange rate. But then again I guess I paid for the fun that my family and I had in Europe last summer and for the next four summers. It is money that I am prepared to lose or -- As my account says -- I'm buying memories.

As is apparent in the chart, below, the Euro was last at par with the $US in late '02/early '03, and has not been less than about $1.17 to the Euro at any time since (4Q05). Even now, in the throes of a sovereign debt crisis in the Eurozone, the exchange rate has not been lower than about $1.22 (2Q10) and has been as high as $1.50+ once (4Q09) since the credit markets froze up in late '08, and nearly $1.50 again as recently as just a few months ago (1Q11).

It is in the interest of the Europeans to not let their currency appreciate too much against the world's other currencies because a strong currency hurts exports. This is why exporting countries will allow their currency to decline in value, and why as recently as last month the Japanese intervened in the forex market to sell their own yen and buy $US - it was a desperate market manipulation designed to weaken their own currency to protect their exporters.

The problem is that all exporting economies are trying to do the same thing, and that is what creates the infamous condition known as the "race to the bottom," an amazingly destructive economic event when it is engaged in between sovereign nations, even those who are ostensibly allies for other strategic reasons.

In other words, don't count on the collapse of the Euro against the $US any time soon.

TaoJones

[olaf hart]

Interesting comments about the $US being the default currency because oil contracts are all paid in $US.
One driver for the second Iraq war was not Sadam Hussein's WMD's, but that he was negotiating to sell oil to the French in Euros.
Don't assume the world will remain stable place if oil contracts start being paid in Chinese currency. The US just announced a small permanent marine deployment in northern Australia, and the Chinese government was making aggressive noises at Australia the next day.
On the other hand, the good news for the US is that China has so much $US in reserves it is unlikely to let the value fall, as it loses too much if it does.

[inamk]

A boat is a tangible asset, whereas Euro or Dollar are fiat paper currencies. They have in reality no intrinsic value. Irrespective of what is the exchange rate of Dollar and Euro the intrinsic value of the boat remains the same however it is dependent upon the supply and demand that is if the economy of a region crashes there will be fewer buyers and price will fall.

[Uncle Bob]

Originally Posted by Hillbillylad

Many sure but not all. I bought cheap because cheap is all I got to spend, like many on this forum I believe. I didn't buy on a whim or for a status symbol but simply because I wanted to be on a boat. But, it is bought and paid for and anything I put on it will be paid for. I know I can live healthier, happier and with more spare cash on a boat. I think many are considering that option too as a realistic alternative.
For those poor plastic millionaires that lived on credit and must lose their boat...Sucks to be you....aye

+1 same here.( But I didn't buy cheap enough)

[justwaiting]

What is interesting about the USA, Australia & China situation is that economical China is more important in an economic sense. As China's quarry and source of agricultural products (which they increasing own) it is understandable that they are concerned about increases in American military presence in Australia. The reality about the AUS/USA $ exchange rate is a product of the subprime trigger financial crisis where the $Aus tied to the export/import relationship with china. This relationship is not one between equals!!!! My belief is that china could if it wished smash the $Aus at least in the short to medium term.

However the reality is that we live in a global economy and eventually what happens in one economic zone will impact on the other zones. Even if you happen to be on the "right side" of exchange rate changes, economic dislocation will affect the asset values that people (including the OP) rely on to fund their cruising & sailing dreams.

[Charlie]

Thanks for the info Tao Jones. I know that the Fed pays a negative "real" return but there have been a few times in recent past when the 3 month T-bill was paying less then 0.1%. Dec of 2008 there was a rate of 0.04% and Oct 2009 thru Feb of 2010 the rate was at 0.1% or lower. I won't speculate as to what the "real" return was during those times but I do agree that the rate of inflation is manipulated. If it weren't then SS payments would be higher etc. Government inflation really needs to be taken with a grain of salt. Ok so computers are down 100% but rent has gone up 100%. If they average these inflation is at zero -- but you pay rent every month and buy a computer once every what 3 to 5 years.

Back to the original idea of this post I can see the Euro coming down in value and approaching the USD but I don't know when that will happen. I remember Euro Cruiser getting hit b/c he hadn't put any money into Euros and the USD had plumeted.

[Joli]

Buy a boat and go cruising because none of this will be settled easily. The US has debts that total upwards of $400k per person. We are Greece with better hygene.

[Dennis.G]

Originally Posted by Joli

The US has debts that total upwards of $400k per person. We are Greece with better hygene.

us debt is about $50k per citizen. Bad nuff, but $400k is fantasy.

[savoir]

$48,000 pp according to these guys. Do not click on this link before sitting down. Scary !

National Debt 101 - an explaination facts figures and ideas

[avb3]

Without making any political statements, this chart does tell a story. Note the increase of the slope after 2008.

Simply said, it is not a good thing.

[Capt Phil]

Great fun to cruise back through this thread and read the prognostications of some pretty bright and obviously well informed folks. Sitting here a couple of days after Thanksgiving and reading the European news about sovereign debt, the moves that the Brits are taking to safeguard their embassy personnel and citizens abroad, not if, but when, the Euro is replaced by individual country currencies and the improbability of Italy and Spain surviving within the Euro zone much past February makes me think that the Euro will make some attractive wallpaper within a year. The first crack will undoubtedly be Greece with the next weakest country to follow within months. Merkle and Sarkowsy will not be able to withstand the pressure to hold together a common currency with 23 disparate fiscal policies based on self preservation. The ECB, IMF and ESFS are paper tigers with little real political power to resolve the hugh issues facing the common market. There will be a monumental capital dislocation as the Euro disintegrates. My bet is there are are at least a couple of trillion D'marks already printed and sitting in a vault somewhere in the Bundestag... good luck to all of us. Capt Phil