The Economy.. will hi end audio mfgs lower prices?

I also took my money out of stocks and invested in gold about 3 years ago, this based on advice of economists predicting this very debacle. It was so easy to see, any of these financial service wizards could have told you if they had the guts. Always keep in mind these guys have no incentive to tell you the truth, it would undermine their livelihood. Can you imagine all these wizards advising their clients to get out of stocks, the stock market would tank, the golden goose would be cooked. I bet a lot of these guys got their money out, left their clients in.

Okay Shadorne, so you were right. Tell us what's next. Will Dow go down to 4500 as some now predict

I began buying back in when the market dropped close to 50% (bargain hunting). Right now I will continue cost averaging down as the market falls further (can't predict bottom) - still roughly 50% cash down from about 70% cash before this mess. I am also betting against 30 year T bills - I suspect we have a bubble and that yields will start to rise again back to historic norms. I like Canadian banks, pharmas, utilities with high dividends and of course gold, if you have the stomach for it, oil & gas shares (tend to always be cyclical and should come back) are very down trodden. Right now I'd guess it is two years to go before the market comes out of this funk - so utillities with high dividend yields are attractive too. Real estate will take a lot longer to begin to recover perhaps as much as 7 to 10 years but it should also bottom out in the next year or so. FWIW I am fearful of inflation ( I know this runs counter to what we are observing right now but it just feels likely with all this money being printed and increasing debt. ).

Things to watch for: Eastern Europe is in trouble. Russia also cannot survive a long credit crunch and low oil prices so definitely more headwinds out there. China seems well armed (wealthy) to handle things. However, I take comfort that Libor spread is not as big as it was - the healing has begun - credit markets are thawing.

Wish I had a crystal ball...Great Depression is still a possibility but I hope Governments are sush a large part of the economy that I think we should (if managed prudently) avoid that.

This is where we are.

02-21-09: Kwb
"High End" Manufactures of non-essential products will go out of business before they lower their prices to the point where people without a basic understanding of economics and general business could afford......

I don't agree. If your business is your only way out, what are you prepared to do. Look at Conrad Johnson for instance. They cut down on the number of products they manufacture. They have just introduced a preamp at a lower price with looks reminescent of their 1990 's units.

By the way, both CJ founders were economists before if I recall correctly.

lets hope mfgs dont. the last thing we need to see is price deflation becoming more commonplace.

and fwiw, i don't think we'll end up there. the obama housing plan is a pretty good one (though arguably its too early to introduce as prices are still too high vs rents / incomes), and clinton just went and secured a commitment from our bankers (CHN) to continue buying our debt, so back of yield curve should be supported w/o bernanke monetizing it. Shadorne noted Libor spreads are much better, Fed's B/S is coming down and the commerical paper mkt is easing.

i think volker is behind the curve. the reason for the massive global collapse in output is the saving grace here to preclude a depression: IT. w/ visibility throughout the supply chain, producers dynamically adjust output to reflect slowing sales...the INV / Sales ratio for Q4 ticked up a little, but if this were 1980 we'd see a depression as inventory would've exploded, prices collapse, deathspiral. but w/ integrated supply chain, we see rapid adjustment in factors of output, easier to work off inventories, and prices should be maintained.

(niche audio producers routinely operate w/ a backlog; i'm inclined to think they'll live leaner, but live. but of course, some will die, particularly the dealers. audiogon will help kill a lot of them, as audiophiles w/ jobs will keep spending as there's a psychological dimension to this hobby that keeps most on the merry go round, but the negative wealth effect will cause more judicious use of budgets---used gear will move, new gear will be tough to go.)

this was a global collapse b/c of the securitization mkt (america's preeminent export) and leverage, and now we're in a deleveraging cycle (which is very bad). industries that depend on leverage (autos, real estate, banking) are in deep trouble for a while, but other sectors will likely hold up (luxury goods at greatest risk of course per negative wealth effect). the B/S repair of the consumer of last resort (US) is a primary concern...if we see retail sales keep posting ok #s (jan was great, feb?), and unemployment doesn't spike 10+%, we'll be positive GDP by Q4, maybe Q3. if we see retail sales retrench & / or unemployment spikes, i'll feel much differently.

equity mkts have diff issues; they're not going to do a thing until non-US sovereign debt and corp debt yield spreads come in. 6-handle on the Dow is likely. and so is 9-handle (lots of cash on the sidelines. lots). key thing to watch for is when bernanke wins in weakening the USD vs LatAm & SEAsia currencies...then we'll see what i refer to as the 'bifurcation of inflation.' think core vs food/energy, and it will all come together.

frankly, i think the global element could work off w/ speed that surprises everyone. but i won't be surprised to see the US experience sub 3% growth for years...but its still growth in a mature mkt, and it'll be a good thing.

btw, anyone complaining about illegals is misguided. illegals are a drain on state & federal resources, but they're the disinflationary force that, along w/ CHN debt buying, kept you living high hog for years.

It is worth considering who is the weakest link in the HiFi chain of Manufacturer, distributor, retailer. It seems to me, everyone has options, but the retailer, the least.
The manufacturer can reduce costs and increase margins by selling direct. An option open to the little guy, not to the Sony's, Conrad Johnsons of this world. They can rationalise product lines too.
The distributor can also go for direct sales, cutting out his retail chain, that is happening already in the UK.
The retailer can only cut fixed costs and that is staff and premises. Many again in the UK are going back to working from home, alone, perhaps with a lock up industrial unit for dems, not an expensive main street shop.
There are options at all levels of the chain then. The ones going out of business will be the ones who do'nt respond with a change in business plan. The little guy can be in the best position to weather the storm. The weakest would be anyone with a chain of main steet shops, they really have few options short of shutting a percentage of outlets.

I know this is off the topic of the thread but since there are some related issues about illigal immigrants and China. I would like to add my two cents. I love the people who takes care of my yards. I don't care where they are from. They charge half the price the local company wants to charge me. They come on time. They do their job and leave. They do take their times smoking or shoot the bull over the cellphone. As a matter of fact, they do much a better job than the other well-trained "yard technician". Yeah, keep on bitching about China or Dubai. Without their money, I wonder where we are right now but I know one thing that Hillary is or was in China begging for them to invest and to have trust in the US T-Bills.

Matti, out of curiosity, can you tell me a stock that the stock market has treated kindly :)

SKF

DXD

SDS

GLD

Very good question, it is not likely you will see a big reduction in price on retail unless the company is going out of business but look for falling prices on used gear. If you realistically want to sell used on Audiogon you will have to be willing to compromise on your asking price or not sell at all. Also high ticket items will be a tough sell. During this recession audiophiles are faced with the same economic problems as the rest of the population, and the amount of money allocated to this hobby is somewhat diminshed. I was called a fool two years ago on Audiogon when I suggested that the US economy was heading for a recession & facing hard times.

Do I have a crystal ball? no not really but because of my occupation I was around alot of older folks who lived through the great depession & knew the warning signs. Also when top executives in this country can no longer be trusted to govern Americas institutions, business or otherwise, we have a serious problem. Republicans believe in deregulation but that only works when these institutions are honest & can be trusted. Sorry but my two cents.

Right on PhD!

Republicans believe in deregulation but that only works when these institutions are honest & can be trusted.

Good one. Yes indeed what can we "trust" - the problems run deep!

"Trust Me" the wild claims are all bona fide from

Speaker cable and interconnect manufacturers (especally above $100)

Global Warming Alarmists and the IPCC

The next new wonder drug, diet or herbal remedy

The always low government reported Inflation figures

Food safety (especially dog food, babies milk and kids chocolates)

Drug enhanced atheletic perfroamces

Under age olympic gymnasts

Did anyone read about how hard Markopolos tried to warn the SEC about Madoff (many years ago)?

Just WHO can you trust and WHO can you turn to these days? (The silence is deafening)

Another post-modern era has just passed us by, LOL. Humans will continue to make mistakes till the end of time. I can already see another post-modern era coming, you can bet the world improvers already doing their planning.

Privatization was the delusion of ideologs, they truly believed they were honest geniuses, a superior race leading us into material utopia. And then there were the liars and scammers to pick up from the delusional. Can you imagine if we had privatized the social security system! History will definitely be LOL!

And then, I can't imagine a less efficient means of redistributing wealth, the financial sector has created so many derivatives and investment vehicles, money gets turned over dozens of times, each entity gets their fee/cut of that original investment. I would suggest the whole thing is a Ponzi scheme gone wrong with the gvt. (us) holding the bag! I would even suggest many of these guys could forsee a collapse and gvt. bailouts, they would make off with millions and leave us holding the bag. Otherwise they're just plain idiots.

What happened to a time when a local bank loaned you the money for your house, held the note for the life of the loan. I know, the financial gurus will tell you that is a slow way to accumulate wealth, we need to have a huge credit market so people can have everything they want today. Well, you see where that's gotten us.

And then, can we trust gvt? Aren't these the geniuses who allowed Madoffs and credit default swaps! And so, who can we trust?

.
Shadorne....thanks for the Markopolos investigation link...it was great reading.
.

"who can we trust"

Look in the mirror!

Definitely not this guy:

http://www.buzzfocus.com/wp-content/uploads/2007/08/cartman.jpg

If you think anything that has happened to our economy was due to incompetence, then you have taken the bait and swallowed the Kool-Aid. As Sns pointed out above, an effort was made to include Social Security in this plunder.
Back in 1998 the groundwork for this escapade was laid when W was convinced to run and was subsequently installed. His regime then systematically revised most of our government either covertly or through outright assumption of power.

I believe his mandate was to take ordinary millionaires and convert them to billionaires. The record shows that he was quite successful.

Wondering why only a few posters placed blame on unscupulous behavior?
Too many crooks in the white woods.
& what about the elevnd of seept. The biggest robbery ever.
Worse part of it those that were robbed don't have a clue.

I believe his mandate was to take ordinary millionaires and convert them to billionaires. The record shows that he was quite successful.

Check the latest Forbes' list of current billionaires. The number has dropped dramatically. Success is fleeting.

High End Audio is not going to lower their prices EVER!!!
They have an image to uphold and would probably rather shoot themselves first, much the way the recording industry has imploded on itself. It is possible that prices will come down, but only if the industry receives a stimulus bailout. :>)

That idiot dilletente owner of my Philadelphia Eagles made the list of billionaires this go 'round, with the description "self made" no less. I guess mom buying you a football team with that Harcourt Brace money qualifies as being self made in this day and age.

Jeff Lurie's now a billionaire, yet can't find $7M to match the offer future Hall of Famer Brian Dawkins got from Denver. Somewhere in the lack of loyalty that embodies everything of this day and age, I almost laugh in recalling the Chateau Luzerne commercial with the 4 liter, bigger than a gallon, jug and the mantra, "How do you think I got so rich?"

Doesn't he own a baseball team too?

I just bought the new Pass Labs XP-20 preamp. It retails for about 14% less than the prevous Pass flagship and offers better performance. It was released just before the economy took a dive, so I don't know if the price drop is a response to the economy or not, but it does offer much better value than the model it replaces.

the demand for components in the $10,000 and up price category is probably not price sensitive. there would be no reason to lower prices.in addition, i would expect more manufacturers to go direct in order to increase their profit margin.

I agree that expensive items may not be price sensitive, they will be in quantity. I am sure fewer units will be solved, equally a problem for manufacturers.

Demand should be dropping, ie. prices should follow. I can't imagine anyone wanting to pay retail in this economic climate. I look at present retail prices as set for a bubble market, retail should absolutely be reset for a depreciated market, they are behind the curve. I would look at present and past retail prices before making any purchasing decisions.

I can understand exclusivity with some of these upmarket products, does that insulate them from market realities, it absolutely shouldn't. But who am I to know, enough may be willing to pay bubble prices in a deflated market, prices may remain high.

03-12-09: Clio09
Doesn't he own a baseball team too?

You may be thinking about the similarly-named Jeffery Loria who owns the Marlins and who used to own the Expos.

http://en.wikipedia.org/wiki/Jeffrey_Loria

To get the best prices you have to go to the HIFI SHOWS and buy DEMO gear.....or buy used gear!

Correct, Loria the NY art dealer. Thanks for clarifying.

Esoteric is increasing prices April 1st I'm told by as much as 25% ouch!

In the near future there will be price increases for everything including audio gear. The Fed is printing money like there is no tomorrow, trillions. They have a nice term for it - Quantitative Easing. Heck, the Fed is even buying treasury debt! One branch of government buying up the debt of another, the Chinese are worried and you should be too. Use your cash to buy something valuable now!

I might be in the most unique position to answer this. As publisher of Stereomojo.com, I talk to industry leaders from all over the world on a daily basis. I was talking to a person in Russia yesterday - Russia has cancelled their version of CES for 2009. In addition, after retirning from the music industry, I have spent 15 years as owner of a Financial Advisory firm. I have talked to many people big and small in the audio industry. I am concerned we are going to lose the brick & mortar stores - already weakened by the Best Buys and, internet sales and direct sellers. What I have been told is that those store owners that sit and wait for customers to come to them will fail. Those that care about their customers and work the phones MIGHT survive. There's no doubt that audio makers are deeply stressed. It's a great time to buy as you already know. There is ONE phrase that should be a part of your vocabulary ALWAYS when shopping, and it's more importnat now than ever. It is: "Can you do any better?" Many times I have been amazed at how anxious businesses are to give you a better deal - from grocery stores to car dealers. Hotels and iarlines. even department stores. Just ask. Right now, if you ask a dealer or a direct seller if they can give you a better price, they just might amaze you. just don't be a jerk. If they say no, then move on.

BTW, I cannot give financial advise by law online, but be aware there ARE investments dsigned to go UP when the market goes down. And I don't mean gold or GLD. I've been making a lot of money the last few months. Be smart. Diversify of course. But be aware.

Jimaxp, yes, quite a few of us are aware of tricks like short selling to make money in a downturn but most of us are going to have our retirements wiped out even if we recover from the current mess by the devaluation of the dollar..it's coming.

Absolutely ludicrous question, even moreso many comments...

Jimaxp, I agree there are real risks for main street hiFi stores, but there is a model for how to survive. The clue, bricks and mortar. In the UK, nearly all the independents have closed their stores and operate from home, or a small lock up industrial unit. Stores mean fixed costs, requiring a certain turnover. Get rid of that and you get of a lot of your problems, you do'nt need a minimum turnover to cover costs, you still need a turnover to eat of course.
The remaining cost is mainly dem stock and that is becoming a problem. The dealers/distributors are'nt getting in Dem gear in the current environment. For example I am looking at the Coincident Super victory, partly from the Stereo Mojo review. The UK distribtor does work from home and wants to get a super victory in, in the current environment, he does'nt feel he can justify that. I want to hear the speaker, he can not be sure I want to buy it. I spoke to another UK distributor recentlty of many famous brands, one of the biggest in the UK, he says business is down 65%. He will survive by hunckering down, trying to keep ticking over and avoiding unnecessary costs.
Dealers and distributors, survive like any other business, by reducing costs, staff etc and waiting out the storm. The problem then is, how long will the storm last. It will be longer than most recessions in the last 30 years. Ultimately, that will be the killer.

Trelja:
"That idiot dilettante owner of my Philadelphia Eagles made the list of billionaires this go 'round, with the description "self made" no less. I guess mom buying you a football team with that Harcourt Brace money qualifies as being self made in this day and age."

I often wonder how many people posting and boosting of their financial prowess on the internet have been recipients of trust funds/inheritances/law suits/etc. When I lived in NYC I knew someone who was an only child - became a millionaire many times over after inheriting his mom's sizable assets (one hears this story repeated over and over in slight variations in the Big Apple). I knew this person from my social service circles, and he was unethical in many matters and definitely irresponsible in money matters, yet there he was working as a "financial adviser" for a big financial institution.

Recently purchased a Mac int amp at dealer for 20 percent off list. The sale person said it was Mac trying to aid their dealers. Makers of hi end may be well above the fray, but dealers I believe are having it a bit tougher.

Oh mama I love Obama!

"pay down our debts and get right side up." That's a good one!

Way to bump 13 year old threads!

Hahaha

     AND: they just THOUGHT things were bad back then!

@rodman99999 

Well, the great crash of 2008 was also due to corporate greed.

You could call it a practice run.

Corporate greed has moved on in leaps and bounds since then.

And this time the government isn't even bothering to hide the fact that they're in on it too.

 

Last time we were told that there was no plan B.

This time, there doesn't even seem to be a plan A.

[I don't consider an endless war over Ukraine and Russia a plan].

 

Sorry Mr Schwab, we've all seen your plan, and no thanks.

 

Perhaps I can interest you and your associates in my plan?

To begin with let me introduce you to my business partner, Mr Guillotine.

2008 into 2009 created one of the best buying opportunities of our lifetimes.  Economies expand and contract all the time.  The question, if you're invested in equities, is which side do you want to play?  The current environment has a direction, in my mind that's one problem solved.  Timing is always the issue but if one is willing to take profits and wait for the reversal, there's money to be made.

@cd318 -

"And this time the government isn't even bothering to hide the fact that they're in on it too.

Sorry Mr Schwab, we've all seen your plan, and no thanks."

                                                      WHAT?

      You mean: you're not ALL IN, when it comes to the WEF and Great Reset?

                                             WHY YOU, YOU... (pick the most demeaning aspersion you can think of to cast.    ie: ANYTHING BUT, "concerned, patriotic, American citizen").      

cd318

 

Excellent summary. Indeed, 2008-2009 was a practice run. 2022-2023 could be worse? This is a page out of the (D) playbook. There is not a Plan A,B or C.

 

Happy Listening!