One of the things I hate about a secular bull market — especially towards its rampaging tail end — is how everyone and everything gets silly. Money and champagne flows, conspicuous consumption is on full display. I recall people — literally — dancing on bars during the late 90s in NYC.
To be sure, Fed Chair Alan Greenspan was not going to be the spoilsport and take away the punchbowl. Every one was having a good old time.
Except the people who knew. Those worrywarts who looked at price, at valuations, who are familiar with market history and understood mean reversion. These folks were aware of what was going to come next.
I hated the Manhattan party atmosphere in 1999; it was obvious how (but not precisely when) it was going to end: Badly. The prices paid for baubles, the reckless, conspicuous consumption, and ostentatious displays of wealth — paying more than full retail — it was all a symptom of way too much money sloshing around.
Mal-investments were everywhere, and prices became stupid — for cars, for apartments, and of course, for equities.
That is, to say the least, no longer the case (equities excepted).
Prices have plummeted, consumers are de-leveraging, and cash is king, For those of you consumers who are value sensitive — and still have jobs — this current environment is far more attractive a period of time to acquire goods and services than the mayhem at bull market tops. Everything is priced to sell.
I started thinking about this issue in mid 2008 when a wealthy client had said the following to me: “Barry, I appreciate you steering us away from trouble during this mess, but your commentary is so relentlessly negative, its a bummer to read. What can you tell me that is not utterly depressing?”
Now, this gentlemen measures his wealth in GDP of small countries, and while we have many similar interests — cars, watches, boats, travel, music, etc. — his “collections” are insane, museum quality work. (I have an old SL, he has a airplane hanger full of fully restored 196os Ferraris; I have a few nice antique watches, he has million dollar time pieces). So my advice — I mentioned this on Tech Ticker — was as follows: “Make a wish list of what you have wanted to own, but were unwilling to pay top dollar for. Could be real estate, art work, collectible autos, jewels, sports franchises. Bid 50% of the peak market price. Then sit back to see what happens.”
He thanked me for that, and acquired a number of items at a hefty discount to market value.
Which leads me to this question for us mortals: Are any of you readers going on a “spending spree” of sorts? What are you purchasing? What assets have dropped enough in price that they have tempted you to step up to the plate and buy?
Since the crisis began, I have advised clients to consider buying:
-Homes, Vacation Properties
-Renovations, Construction, Extensions
-Investments, Stocks, funds
-Boats, Planes, recreational vehicles
-Art & Sculptures?
-Audio, Video, Electronics, Computers.
-Watches, Jewelry (especially those of Precious Metals)
Fortunately, I avoided temptation and did not make many dumb purchases at the top. That made me more comfortable buying distressed assets after the prices collapsed. And, putting my money where my mouth is, I have made many purchases this down cycle (no Gulfstream, but much of the rest of the list).
So my question is simply this: What are you buying?
For those of you who want to be anonymous, send me an email at thebigpicture at optonline dot net, and I will assemble a list of the most interesting purchases for a future post . . .