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The Masked Tulip

Big Ticket Items - Will A Hpc Correct Them Also

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Everything is relative they say... If you think the biggest purchase of your life, your home, is worth hundreds of thousands then a 30K car might seem somewhat trivial alongside it. Likewise, a boat, a motorhome, some other expensive 'toy' might also seem peanuts when compared to the price of your home.

Will the coming HPC bring about a decline and a realisation that other so-called 'big ticket' items are actually expensive? If we have a deflationary bust then it is very likely indeed but what will people 'think'? Do you think the UK population is about to wake up to the fact that an awful lot of things that we buy are simply too expensive?

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"too expensive"

I'm sorry, but that is just nonsense. There is no such thing as too expensive; price is what the market will bear. On your measure, Rolex watches have always been too expensive; they will always be until nobody wants to wear their watches. Why should a piece of paper painted by a famous artist be worth more than the cost of the paper and the paint and time at £minimum wage?

There is no doubt that lack of cash - higher mortgage rates, higher unemployment, higher inflation, lower MEW will reduce disposable income.

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Do you think the UK population is about to wake up to the fact that an awful lot of things that we buy are simply too expensive?

aren't you trying to tell us that you are **still** looking for a car to buy? :P

a citroen berlingo with a mattress in the back should meet all of your needs.

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aren't you trying to tell us that you are **still** looking for a car to buy? :P

a citroen berlingo with a mattress in the back should meet all of your needs.

Yes, I am trying to worry car salesmen. Out of interest, I emailed HonestJohn for a car recommendation and he came back with a Citroen Berlingo and the Renault one that looks the same - basically vans used by onion salesmen as far as I can make out. No street cred at all IMPO... but then I have little these days anyhow.

No, joking aside. If we have a deflationary environment then everything will fall in price and cars, boats, watches, whatever will come down BUT... what I was trying to get at is the way people think and whether in the current envinroment people will suddenly begin to think or realise that paying 30K for a car or X thousand for a jet ski, etc, etc, is just nuts when, quite possibly in a year or two, their hose might just be two or three times the price of that 30K car.

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I'm sorry, but that is just nonsense. There is no such thing as too expensive; price is what the market will bear. On your measure, Rolex watches have always been too expensive; they will always be until nobody wants to wear their watches. Why should a piece of paper painted by a famous artist be worth more than the cost of the paper and the paint and time at £minimum wage?

There is no doubt that lack of cash - higher mortgage rates, higher unemployment, higher inflation, lower MEW will reduce disposable income.

There IS such a thing as too expensive - when manufacture costs exceed market price. The goods are produced but not for long and the business collapses.

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There IS such a thing as too expensive - when manufacture costs exceed market price. The goods are produced but not for long and the business collapses.

Not quite correct. The legendary Honda NSX was built at a loss.

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There IS such a thing as too expensive - when manufacture costs exceed market price. The goods are produced but not for long and the business collapses.

not always - this is pretty common practice with some things (games consoles being the first one to my mind) where the profit is made later on through licencing or other income. Printer cartredges are another (doesn't really cost under a tenner to make an inkjet printer, yet £20 to make one cartridge for it) and so on..

I suspect new car sales will drop a bit, as MEWs drop, but i'd say the average £30,000 car buyer has a house worth well into the £400k range anyway

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I think it depends on (i) how discretionary the big-ticket items are, and (ii) to what extent the price can be squeezed by eating profit margins, or is inflexible because of actual manufacturing and transport costs.

For example, I'd speculate that there's a limit to how far the price of cookers and fridges are going to fall. Every household needs one, a certain number break down each year and the manufacturing inputs needed to make them are relatively high and directly affected by energy costs. So even if there's demand destruction on some proportion of the total sales (i.e. people who would like a new one rather than who actually need a new one deciding to hold off buying one) pushing prices down a little bit, manufacturing costs will limit the retailer's room for manoeuvre and (s)he'll always have a core level of non-discretionary sales to stop the market value falling below a certain point.

If you're in the business of selling Rolexes, though, it's an entirely different story. This is entirely the sort of thing people can and do stop buying when money gets tight. Nobody needs one, and so the potential for demand destruction by falling discretionary spending power is close to 100%. But being a precision made product with very high labour input costs, the potential for cutting production costs is also limited. But I suspect that a retailer would have to be prepared to take a much bigger hit to continue selling Rolexes in a recession than (s)he would to continue selling fridges.

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not always - this is pretty common practice with some things (games consoles being the first one to my mind) where the profit is made later on through licencing or other income. Printer cartredges are another (doesn't really cost under a tenner to make an inkjet printer, yet £20 to make one cartridge for it) and so on..

I suspect new car sales will drop a bit, as MEWs drop, but i'd say the average £30,000 car buyer has a house worth well into the £400k range anyway

Think about it and realise why you are wrong.

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My guess is that after a deflation scare, inflation part II will hit next year. It will hit anything (TVs, white good etc.) made from commodities that have risen in cost this year, but which take a while to make from the raw materials, ship, put in the shops.

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I'm sorry, but that is just nonsense. There is no such thing as too expensive; price is what the market will bear.

But surely some degree of relativity comes into it. If the US are paying $10 for a CD and the UK £12, then we are being ripped off. Same with cars, computers or whatever.

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My guess is that after a deflation scare, inflation part II will hit next year. It will hit anything (TVs, white good etc.) made from commodities that have risen in cost this year, but which take a while to make from the raw materials, ship, put in the shops.

This is also my prediction. There will be a number of bargains as current stocks are sold off, particularly if retail stocks have to be liquidated. Then the majority of prices will rise sharply due to increases in raw material prices, transport costs and exchange rate differences.

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What do you disagree with?

The obvious fact that it was built at a loss.

Someone paid for it, therefore it had a market value higher than production price (the reasons why that person paid out are irrelevent.)

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My 1992 Toyota Lancruiser cost £40K new ( still runs like new today). An average 2 bed house cost £40 K in 1992.

Last time house prices dropped second hand cars went up in price. Boats became virtually worthless unless you could live aboard.

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The obvious fact that it was built at a loss.

Someone paid for it, therefore it had a market value higher than production price (the reasons why that person paid out are irrelevent.)

The Bugatti Veyron famously costs around Eur5m to build and sells for Eur1m. However, Volkswagen-Audi are willing to take the loss as essentially a marketing expense.

To get back to the initial post, what I think will happen is that sales of new luxury goods (speedboats, Rolexes, ATVs, whatever) will fall and some manufacturers will go bust. The second hand prices of those goods will also fall as people get into financial difficulties and start selling assets to pay bills and repay debt.

If you fancy a second hand speedboat, wait a year and they should be cheap as chips - the not-very-exclusive ones, anyway.

Oh, and to touch on another point, Citroen Berlingos are bloody ace - even Clarkson reckons the ride is better than a Jaguar

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Once the housing crash / equity collapse runs it course we will be left with deflation as there will be much less collateral to lend against.

This will of course hurt everyone's spending power, so yes, I think all items that are not consumed within a week will eventually become cheaper. As they will become surplus to demand.

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Once the housing crash / equity collapse runs it course we will be left with deflation as there will be much less collateral to lend against.

This will of course hurt everyone's spending power, so yes, I think all items that are not consumed within a week will eventually become cheaper. As they will become surplus to demand.

Proving once and for all that the monetary system exists to prevent people acting, not to enable action.

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The Bugatti Veyron famously costs around Eur5m to build and sells for Eur1m. However, Volkswagen-Audi are willing to take the loss as essentially a marketing expense.

For 'willing to take the loss' read 'willing to pay for it'.

As Injin said, someone paid for it. In this case it was VW-Audi or to put it more accurately, their customers shared the cost when they paid slightly more for the other models in the range.

Things can definitely be 'too expensive'. I can think of loads of things that are too expensive for me to buy :(

Wealthy people rarely get value for money on my terms. All you have to think of is the way most folk behave when they suddenly have a large amount of spare cash. They think less about value and more about 'luxury' and, for want of a better term, 'bling'. A Rolls Royce is not twice as good as a car half the price.

Quoting 'the market' and what it will stand is is only part of the measure of value. If you only measure value in sale and resale terms the market is all you need. We have seen what happens to house prices when a rising market is the only factor used to determine what you are willing to pay. People have paid a lot of money for some right old tat that was certainly 'too expensive'.

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People have paid a lot of money for some right old tat [of a house] that was certainly 'too expensive'.

Disagree. At the time it was not expensive. You could have sold it for more than you paid for it.

Even when houses fall to their long-term average they will still be too expensive as they will have further to fall. By your measure they will not be too expensive at that stage.

No valuation is absolute, it is only relative to the market.

If a house cost 30 yesterday 35 is not expensive if it will be 40 tomorrow.

If it cost 2 yesterday, 1 is expensive today if it will be free tomorrow.

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Disagree. At the time it was not expensive. You could have sold it for more than you paid for it.

Even when houses fall to their long-term average they will still be too expensive as they will have further to fall. By your measure they will not be too expensive at that stage.

No valuation is absolute, it is only relative to the market.

If a house cost 30 yesterday 35 is not expensive if it will be 40 tomorrow.

If it cost 2 yesterday, 1 is expensive today if it will be free tomorrow.

This is such a silly argument but what the heck, I have some time to kill.

Firstly, 'you could have sold it for more than you paid' is way too simplistic. With Stamp Duty, legal costs etc. it would take some time for that to be true even if you bought very carefully and at the best time. In a boom people don't buy as carefully and quite often overpay for old tat.

Secondly, if I can't afford 35 it is still too expensive and the possibility that it will be 40 tomorrow doesn't change that.

Note that I changed 'will be' to 'the possibility that it will be' for obvious reasons <_<

Thirdly, If I need somewhere to live today and can afford 1 the fact that it will be free tomorrow does not solve today's need for a home. 1 would be the cost of moving in today rather than tomorrow. This is the calculation that all potential buyers are doing now! Buy now if you need to but it's going to cost you more than if you can wait.

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  • 396 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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