[rumble]

I guess no one liked this.

That's alright, I am still getting my feet wet with PO.com posts.

I'm only a little ol' piece of coal, after all.

[cube]

I've noticed that consumer decisions on what to buy are not entirely based on logic or some type of cost / benefit analysis . Sometimes it's emotional or cultural.
Why do some poor people buy $200 basket ball shoes, when $20 would suffice?
How many $40,000 SUV's are bought by people who could least afford it? I've honestly heard of some people financing these monster cars at double digit interest rates!
In South Korea the average person replaces a cell phone in only 18 months whereas in the USA it's 24 months. That's an awful lot of money to spend for a nation where people have only 1/3 rd the income.

An increase in energy prices may not necessarily == a proportional decrease in energy consumption.
A rise in gasoline prices may lead to consumers cutting back on Starbucks coffee and HDTV instead of gasoline. see what I mean? I've lost count how many times people go (on and on and on....) about energy intensive activities as if it's the perfect canary in the mineshaft. Surprise...it's NOT! A perfect example of this is crude oil. The price has increased by 10 fold in 10 years yet consumption has yet to be abated.

therefore something else had to be cut back which could be.......

[JPL]

$this->bbcode_second_pass_quote('cube', 'I')'ve noticed that consumer decisions on what to buy are not entirely based on logic or some type of cost / benefit analysis . Sometimes it's emotional or cultural.
Why do some poor people buy $200 basket ball shoes, when $20 would suffice?
How many $40,000 SUV's are bought by people who could least afford it? I've honestly heard of some people financing these monster cars at double digit interest rates!
In South Korea the average person replaces a cell phone in only 18 months whereas in the USA it's 24 months. That's an awful lot of money to spend for a nation where people have only 1/3 rd the income.

An increase in energy prices may not necessarily == a proportional decrease in energy consumption.
A rise in gasoline prices may lead to consumers cutting back on Starbucks coffee and HDTV instead of gasoline. see what I mean? I've lost count how many times people go (on and on and on....) about energy intensive activities as if it's the perfect canary in the mineshaft. Surprise...it's NOT! A perfect example of this is crude oil. The price has increased by 10 fold in 10 years yet consumption has yet to be abated.

therefore something else had to be cut back which could be.......

[MrBill]

cube, ironically, gasoline was always a cost regardless of whether it was $1 or $4 a gallon, so one would think that consumers would in any case try to optimize their spending? They did not.

Also, cars (and trucks) have traditionally been the household's second largest purchase. Again a cost. Again it would make sense to minimize that cost to allow more discretionary spending, saving or investment elsewhere. They did not.

So what are you going to tell the family with a car, an SUV, a boat, a snowmobile, an RV, a seadoo and a motorbike? Everything they own is in the driveway. If they had the money or the credit they would likely have two of those everythings.

In behavioral finance there is a special term for such consumers. The fiscally challenged.

[MarkJ]

Many of our customers spend their money on kitchens, baths, tile, hardwood floors, granite counters, stainless appliances, large decks, hot tubs, furniture, luxury cars, sports cars, trucks, SUVs, boats, waverunners, campers, motorcycles, snowmobiles, quads, garden tractors etc as opposed to insulation, weatherization, windows, furnaces, boilers, water heaters and other efficiency upgrades.

While giving estimates for insulation, weatherization and heating equipment replacement, we've had customers that wanted kitchen remodels, bath remodels, decks, boat docks or aesthetic home improvements instead. The cost of a new high efficiency boiler, indirect water heater and outdoor reset control may pay for itself in a few years, but it would also cut into their luxury and recreational budget.

It's common to hear customers that gripe about the cost of gasoline, diesel, heating oil, kerosene and propane that have poorly insulated, poorly weatherized homes with grossly oversized, grossly inefficient, poorly designed, poorly maintained heat and hot water systems, plus driveways, yards and garages full of vehicles and recreational toys.

Many people have so much stuff in their driveways, basements, attics, garages and yards that they have to store their excess goods and toys at the marinas, storage barns and self-storage units.

[Kingcoal]

You've just noticed this cube? It's pretty simple; most poor people are dumb, depressed, look at money as something to help them with their self esteem problem. Instead of trying to improve themselves, they opt for trying to buy improvement.

Based on their income, most poor to middle class people live extravagantly in the US. For example, a person with a million dollar a year income who buys a $100K car is spending just 10% of their yearly income. A person who buys a $40K SUV on a $40/yr salary is spending 100% of their yearly take. To put it bluntly, they are stupid. In my neck of the woods, you can get a decent used car for about $4K which would do nicely for middle class person and does just that for me. $20 sneakers do just fine for me also.

[cube]

$this->bbcode_second_pass_quote('Kingcoal', 'B')ased on their income, most poor to middle class people live extravagantly in the US. For example, a person with a million dollar a year income who buys a $100K car is spending just 10% of their yearly income. A person who buys a $40K SUV on a $40/yr salary is spending 100% of their yearly take. To put it bluntly, they are stupid.

[bodigami]

There is a breaking point in overconsumption (and overpopulation)... there must be; this insanity can not continue.

I was never in debt; it's quite easy: don't buy non essential crap. A motorcycle is purchasable for me in a few years, a car not... and it's more fuel efficient (even compared to most hybrids).

[MrBill]

Anecdotally, I cannot think of a worse 'investment' right now than a used motorhome, fifth-wheel or holiday trailer? But gas guzzling powerboats are right up there!

$this->bbcode_second_pass_quote('', 'B')oating was traditionally the pastime of the well-off, but the long housing boom and its gusher of easy credit changed that. People refinanced their homes and used the cash for down payments on a cruiser, miniyacht or sailboat. Between 2000 and 2006, retail sales for the recreational boating industry rose by more than 40 percent, to $39.5 billion, while the average loan size more than tripled to $141,000.

Last year, as real estate faltered, the gears went into reverse. The number of boats sold fell 8 percent. Many boats are fuel hogs, and spiraling gasoline and diesel prices meant a weekend jaunt could cost hundreds or even thousands of dollars. Strapped owners found they could not sell for what they owed and could not refinance either.

[Duende]

zensui wrote:
$this->bbcode_second_pass_quote('', 'T')here is a breaking point in overconsumption...

[MarkJ]

Here in lake country, inexpensive used campers and used boats have always been plentiful. Many people keep their campers at the campgrounds and keep their boats the marinas for a reasonable cost. Many people with larger boats use them for low speed cruising or use them as floating camps. Much cheaper than owning a direct lakefront home. I rent dock space to several boat owners. Many of the people that keep boats at their vacation homes, second homes, camps, campgrounds and local marinas don't use them that often, but they're certainly nice to have. Living, camping and boating on the lakes is very relaxing.

[cube]

$this->bbcode_second_pass_quote('MarkJ', 'L')iving, camping and boating on the lakes is very relaxing.

[yesplease]

Last time oil prices were this high, adjusted for inflation of course, it took nearly a year for the consumer in the US to adjust and reduce consumption. AFAIK, two things that could significantly alter this time frame are the current lack of price controls and gasoline's higher short term inelasticity. People probably will reduce use, and in some places already are, but these things don't happen overnight.

[MrBill]

I am not going to be a hypocrit. I like boating and water skiing as much as the next person. I grew up on the lake in summers and water skied every chance I got. I hope to take a few cuts this summer as well. But there is quite a difference between paying $20 for a ski and going $140.000 in debt to buy a boat.

Ditto for motorhomes. I inherited my grandfather's old beast circa 1983. Actually, it is in very nice shape. A good floorplan. Converted to run on propane. Winterized. But for the most part I never intend to drive it farther than the lake and leave it parked there for the summer. The farthest it will ever go is the mountains for a spot of spring skiing. It sure isn't worth anything if I were to try to sell it, so I may as well get some use out of it.

I would not mind buying a repossessed sailboat at some point at the right price. I am certainly not going to buy it new that is for sure! Debt is for appreciating, income earning assets only! ; - ))

[alokin]

You can't tell that consumers go on and on buying stupid things. Because there is a limit for credit and it's getting more and more difficult getting one. If Mr and Mrs. Stupid won't cut their gasoline consumption, even at high prices, well then there will be rationing, wait until the election. Maybe the stupids must stick to their SUV because they cannot afford something more efficient and the SUV won't sell at all.

Things will change even if Stupids won't change.

[CrudeAwakening]

It's quite simple - people pay more than they "need" to for the status value of the object. Why do people spend $1000s for a Patek phillipe watch when a simple $100 casio will do the job just as well?

Driving an SUV can be a statement that the driver is wealthy enough to afford to burn more expensive gasoline. People make consumption decisions based on what they perceive to be the barometer of status at the time. Of course, easy credit facilitated this seemingly irrational behaviour for many people who would otherwise have had to stew in economy class.

Unfortunately, this sort of behaviour will remain as long as status and consumption displays are correlated in the minds of the public.

[MrBill]

Well, you never actually own a Patek Philippe. You merely look after it for the next generation! ; - ))

[Waterthrush]

You'll never get rid of status consumption. No doubt our ancestors valued one string of shells ridiculously highly over another and were willing to sacrifice useful things in order to display their ALPHA SHELLS. However, there have always been counter-currents. Some of Aesop's fables address this issue! There is the Puritan ethic. There is middle class consumerism [Jane Austen, as always, seems a curiously modern representative of this group - e.g. writing of a house that had "less of splendor, and more of real elegance."] There is the voluntary poverty of religious groups. And now, there are lots of people who are curbing consumption for environmental reasons [not much, yet, but their efforts and numbers are increasing daily, and they are capable of making much greater sacrifices as time goes on.]

In short, the goal of conspicuous consumption has never gone unchallenged, but, yes, it has always ruled. I guess my hope is that we will go back to valuing shells!

[Twilight]

I hate that advert.

[MrBill]

$this->bbcode_second_pass_quote('cube', '[')u]Many people on this forum like to argue that long haul trucking and domestic airlines will cease to exist because they are not financial viable. There's a problem with that approach. An assumption is made that society will behave logically. How do we know society won't do something stupid like sacrifice the productive part of the nation's economy only to subsidize such failing industries even further?

(continued)

I think Americans will subsidize things like airlines and the auto industry because on a psychological level it is very satisfying. Those industries represent a glorified past when America was the world's greatest superpower. I guess it's like the ancient Romans subsidizing gladiator stadiums while the barbarians are at the gates ready to sack the empire.