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  #1  
Old 10-28-2008
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Boat as an inflation hedge?

Hey all,

So an intriguing thought ran across my mind today...to which I thought "I must share with Sailnet!"

We all know the shady boat brokers that will claim a yacht will appreciate over time...we know they lie since most boats are like cars in that they will reduce in value every year and suck out massive amounts of repair dollars as they get older.

I did my research on why this myth came about. Turns out...for a period in the 70's & 80's, sailboats did in fact appreciate. This was entirely due to inflation tied to materials costs & labor. In that era of high oil prices and labor being able to gain wage concessions...inflation was out of control with prices rising in near double digit levels year on year. In that era, it was entirely possible to sell a used production boat for more than one paid. While this inflationary bubble was finally killed by Paul Volker, causing a recession that killed off many of our fabled builders, the price levels established in the 70's/early 80's never deflated back to pre-bubble levels...save for commodities like oil. Kind of like how rolexes "appreciate". Since new rolexes go up in price by the manufacturer by 6% a year...used ones can increase in value 1-2% since they're more affordable than new.

My postulation is as follows. Due to the magnificent brilliance of our current leadership, we are about to enter yet another hyper-inflationary period. There's no ifs and or buts around it. Multiple trillions in gov't debt means that the Fed is going to start printing money and massive amounts of it to pay it off. This means more dollars in circulation...and this means inflation.

So, considering past is prologue...I say buying a boat new right now may be a weak, but viable inflation hedge. For 5 years, you get to enjoy a new boat...then when the maintenance trouble's finally get to you, unload it for roughly the same amount of nominal dollars you paid in the past. Sure, in terms of future value dollars, you've "lost" money...but it does great things for the psyche when you can claim zero depreciation on one of your biggest cost sinks.

All else aside, when you're done you can be lasso this into a new career as a used boat brokers and claim that you're living proof that a sailboat appreciates and boy do you have a deal on this brand new Catalina. Guaranteed to gain you money...oh and the tax advantages too ;-) HA!
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Old 10-29-2008
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jump on in.....the water's warm!!!

you're probably right -- unless of course, too many boats come on the market depressing prices.
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Old 10-29-2008
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You are gambling on hyper inflation, which is not likely, and the high demand for newer boats, also not likely. Strikes one and two.
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Old 10-29-2008
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Depends on the cost of money. If you can get a loan for under 6%, maybe. But during the 70's you could get MM cerificates paying 9% to 11% and loans were running 12% and up.

So if you borrow at a high rate that kills the "profit". If your boat appreciates at 2% but you could get 8% at the bank then you are loosing.

Most important though; if your boat appreciates by 2% but inflation is at 8% you are loosing, no matter how you slice it.
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fiberglass boats are a petroleum product. Oil prices are down with the recession coming on but can be counted on to go back up if/when the recession is over - at that point the cost of new boats will have to go up also
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Cost of boat+insurance+dockage+winter storage+inflation=cost of boat in 5 years.

Were you a mortgage broker in a past life?
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Old 10-29-2008
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The only reason to buy the boat now is as an escape vehicle to get out of the US until the economy returns to normal.
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Old 10-29-2008
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Quote:
Originally Posted by sailingdog View Post
The only reason to buy the boat now is as an escape vehicle to get out of the US until the economy returns to normal.

I'm with ya!!!

. . . .question:

Go where?
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Old 10-29-2008
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Quote:
Originally Posted by sailingdog View Post
The only reason to buy the boat now is as an escape vehicle to get out of the US until the economy returns to normal.
That might have been an option for me, if I'd punched out before my "401k" turned into a "201k".

With yesterdays big rally, I'm only a little behind where I was 4 years ago. whoo-hooo!
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Old 10-29-2008
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When I get there, I'll let you know...
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I'm with ya!!!

. . . .question:

Go where?
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You know what the first rule of sailing is? ...Love. You can learn all the math in the 'verse, but you take
a boat to the sea you don't love, she'll shake you off just as sure as the turning of the worlds. Love keeps
her going when she oughta fall down, tells you she's hurting 'fore she keens. Makes her a home.

—Cpt. Mal Reynolds, Serenity (edited)

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