Is the U.S Credit Freeze Hurting The Home Theater Business?

[chrisy]

Jerry Del Colliano of HomeTheaterReview just posted this article:

U.S Credit Freeze Hurting The Home Theater Business Badly

You know you got trouble in the world economy when the most wealthy people with the absolute best credit are getting cut off from access to credit and its effects do in fact trickle down to every element of the economy, including the world of specialty audio-video, high-end audio and high performance home theater.

One Southern California AV custom installer, who just landed one of the largest custom installation projects ever heard of worldwide, recently called HomeTheaterReview.com to say that American Express cut the limit on his "Black Card" (aka the Centurion Card) by 60 percent. While most Americans say "boo hoo" to this maneuver - this dealer uses this high-limit card to order millions of dollars in equipment, travel and other services. He now needs to think differently about his business expenses because of the credit limitations imposed on him by an ailing Amex. Note: in order to be in good standing with Amex you need to pay your bill every month, which this dealer does faithfully.

In the past two weeks HomeTheaterReview.com readers, dealers and advertisers have been reporting that banks nationwide are abruptly freezing their home equity loans, thus leaving no room to borrow any money even when there is more than a million dollars remaining in equity. Same thing goes for readers with FICO scores of over 800. If these customers can't get credit then who can? And if they can't get credit, then the only people in the market who can buy luxury goods such as 65 inch plasma HDTVs and $10,000 AV preamps are people with cash and that limits the market severely.

Bloomberg is reporting today that Bank of America and Citibank are potentially going to be nationalized. There is alternative talk of creating a "toxic bank" (which could be headquartered in one of those Superfund sites in New Jersey), so that our treasury can buy - at inflated prices - the worst investments that our banks have made. These are both dramatic and potentially necessary moves to save the once-free-lending banking industry from their incredibly bad lending decisions that have finally come home to roost.

With $350,000,000,000 of the bailout money being used to support the bank stock prices - but not to loosen up the lending - even supporters of the bailout are being forced to question if this was a bad idea and a waste of a tremendous sum of Taxpayer money. That judgment should be reserved for the next 120 to 150 days to see what the Obama Administration does to stimulate the credit markets, because as the home theater business suffers, so do all other businesses when nobody will lend anything to anybody. The next $350,000,000,000 will likely be used in very different and much more effective ways - or at least we better pray it is.


Let us know what you think.

[Richard W. Haines]

Changed my mind. Deleted post.

I wish everyone luck surviving what's coming.

[chrisy]

I hope so too - we all should try & remain positive.

[Richard W. Haines]

Why?

[chrisy]

Don't want to get too political here, dare I suggest The Big Fix, coming out this Sunday?

[Richard W. Haines]

It's been suggested that I stay clear of politics so I'll delete
my posts here and elsewhere and just focus on the technical
aspects of the business and movie reviews. For those who read
my posts prior to this, I hope at least I got you thinking and
researching some of the issues that were discussed.

[Mike P.]

economic history

Economic history has always been cycles. It goes up, it goes down, it goes up, etc.

[tonyvdb]

Bad Credit is one of the main reasons the US and other countries are slipping into this recession. Bankruptcies are up drastically and who is left to carry the load? You and I. Banks cant continue give out credit as if its free anymore and consumers are starting to realize this. The average person has a dept load of well over $50,000 not including mortgages, many people have monthly mortgage payments well over $1800 and thats just crazy!
How many of us will admit to having at least 5 credit cards and many have much more. We have to start living with what we have and buy with money that is sitting in our bank accounts not with credit. Unless this stops the recession will get far worse before it gets better.

[chrisy]

At this point, I think people are paying the essentials with money they still have - like their debt - that is, if they still have paychecks/savings/liquid resources. Of course, this article started out of our own self-interested concern regarding where our home theater industry is going. The ripple effect is hitting, yet I also think with the demise of Circuit and Tweeter, and Best Buy cutting jobs - there could be opportunities for the specialty retailers - those who are creative and resourceful enough to try & bring back consumers. But I think it also depends a lot on whether we can just hang in there long enough til the economy turns around. Bottom line, we're all basically drones who have no choice but to pay - and pay - and... take it.

[Richard W. Haines]

Deleted.

[JerryDelColliano]

To quote Reagan.....

Are you better off today than you were 4 years ago?

For that matter 4 months ago?

If the answer is YES - will you give me the name and number of your broker?

[Richard W. Haines]

Deleted.

[Otto]

I think you're in the wrong forum, Richard...

[Richard W. Haines]

Regarding this subject, you are correct.

[chrisy]

Yes, the article that I originally posted - U.S Credit Freeze Hurting The Home Theater Business Badly - was one of our news articles, with some editorializing, and this forum is really not for political discussions, so if any of you want to continue with the economics/politics, I invite you all to sign onto our website, go to the article and feel free to add your lively, informed (or not...) and opinionated comments there.

[the_rookie]

I think its sad for the industry to be faced this hard. I think it affects everyone, but for someone such as myself; who loves this industry so much..it sucks to see it in the shape it is.

To answer the question, yes it is hurting the home theater business, and i think will affect the re-emergance of M&K. Bad time to re-emerge and will set them back alot with such fewer consumers than there were several years ago.

[Richard W. Haines]

I guess for those who have a job and some disposable cash, there might be some
hardware and software bargains in the near future as companies try to sell
off their excess inventory.

[aNomad]

chrisy wrote:

Jerry Del Colliano of HomeTheaterReview just posted this article:.....- even supporters of the bailout are being forced to question if this was a bad idea and a waste of a tremendous sum of Taxpayer money. That judgment should be reserved for the next 120 to 150 days to see what the Obama Administration does to stimulate the credit markets, because as the home theater business suffers, so do all other businesses when nobody will lend anything to anybody. The next $350,000,000,000 will likely be used in very different and much more effective ways - or at least we better pray it is.


Let us know what you think.

Was anybody for this bailout other than those who directly benefited from it? I haven't met any yet.

[Richard W. Haines]

As McCain said it's 'generational theft'. When the bill comes due...then
what? Future generations will have a lower standard of living if not live
in perpetual debt to the government just to pay the interest on this pork.
Get out a calculator and crunch the numbers. Can this ever be paid back?
And what happens when more than 50 % of Americans are totally dependent
on the government?

"The Road to Sefdom" by Hayek who won the Nobel Memorial Prize in
Economic Science in 1974 describes what is going on now before your
eyes. Will our country be recognizable in four years? This is even worse
than I anticipated.

[lcaillo]

Mike P. wrote:

Economic history has always been cycles. It goes up, it goes down, it goes up, etc.

I think this is sage advice. It has always been true, and those businesses that have the ability to weather a recession and are not dependent on growth to finance their overly optimistic predictions, and those who have not leveraged themselves to the point that downward trends put them in untenable financial situation will survive and prosper. Those that have bet on continued growth will suffer. All is 's as it should be in a market that respects Darwin's ideas of survival.

[aNomad]

Really, now is the time to buy. Time to buy houses, time to buy HT equipment, buy gold etc..

Money is tight. Not because people suddenly don't have it, but because they aren't spending it. As a result, hungry businesses will lower their prices (and profits), and presto! Great deals to be had! Spending will also get this economy going again. In fact, it wasn't really that bad until it all got sensationalized in Oct.

Re: the bailout (off topic for this forum, but mentioned in Jerry's original article), my biggest interest is what will happen when the current administration bankrupts the country? Sooner or later, other countries will stop absorbing our debt. Then the wild spending will stop FAST! Nothing like a wake-up call. I can't wait!

[Richard W. Haines]

Icaillo,

What does that have to do with the current regime's reckless spending? They
whined, complained about and bashed Bush but they're doing the same thing but
at a far more dangerous level and with more potential long term harm to everyone.

The credit crisis was in large part created by the people currently in totalitarian
control of all branches of government. They cannot fix it and the far Left factions
are using it as an excuse to impose socialism in stages.

[Richard W. Haines]

aNomad,

Unfortunately the end result will be rioting and chaos when the government
runs out of money and cannot pay people all the pork they promised. And they
will raise taxes to FDR levels of confisgation which will still not pay off the deficit
and will put millions more out of business, increase unemployment and welfare
dependence in a never ending cycle.
No 'change' here. Same policies as FDR and Carter that created so much misery
and statism.

[lcaillo]

Richard W. Haines wrote:

Icaillo,

What does that have to do with the current regime's reckless spending? They
whined, complained about and bashed Bush but they're doing the same thing but
at a far more dangerous level and with more potential long term harm to everyone.

The credit crisis was in large part created by the people currently in totalitarian
control of all branches of government. They cannot fix it and the far Left factions
are using it as an excuse to impose socialism in stages.

It has nothing to do with it, directly. That is not what I was responding to. I do not disagree that the current spending is foolish. It does not justify it, but it is rather interesting that the only time that the "right" seems to place a premium on restraining growth in government is when the other side is in power.

The fact is that both parties have played a great role in getting us where we are and the "stimulus" will only make it worse in the long run. Until we all learn to place ourselves in a position personally and in our businesses that allows us to weather business cycles we will have economic difficulties. This is where what I said relates to the current spending fiasco.

We need to enact the Fair Tax with one addition. We need to tax tranactions that produce capital gains on products or commodoties that are not held for more than a year or where the buyer never actually takes physical possession. This would minimize speculation and encourage long term investment.

The HT business is hurting at retail, certainly. New construction is dead and retrofit installs have not filled the gap. I expect that we will see quite a few failures of businesses at the retail level as well as custom design and integration. Service seems to be pretty solid as people are repairing rather than replacing many units.

[Richard W. Haines]

Icaillo,

I strongly disagree. The remedy is not more central planning which is
what you're suggesting with the 'fair tax' proposal. We need the opposite
of this. Get the Fed out of everything since all they do is make a catastrophic
mess of it. The credit crisis should be the final straw that broke the camel's back.
The government has no businesses in the real estate market. The Fed has no
Constituional right to tell you what to do with your hard earned money.

And you're quite wrong about the 'right' if you define right as those who are
fiscally conservative like me. They were complaining about Bush as much as they
complained about Nixon who was also a big spender and Keynesian. Conservatives
abandoned the Keynesian formula decades ago because of the budget deficits it
created along with the corporate monopolies, inflation and stagnant growth in industries
subsidized by the Fed.

I'll tell you who is primarily to blame for our 'state of the union'. The partisan
media. They refuse to do their job informing the public about what's going on and
are so biased in favor of the new regime they will protect it any way they can. The
fourth estate's primary role is to act as a check and balance to those in power. Today
most are acting as 'appologists' if not dupes. How can the American public vote
intelligently if they are clueless about what's going on?

Where was the media outrage and demand for accountability when the Pelosi cabal
dumped a 999 page pork bill labeled 'stimulus' and the President demanded it be signed immediately before anyone could realistically review it in detail or analyze it publicly. Only
after the fact will we discover what's in it. Is that 'democratic' small d?

Listening to the proposals and sound bytes from the people in power, here's
what their ten point agenda seems to be...

1) Usurp private property rights and have the government basically
own the land you live on. Well this is accomplished in part with the proposal
to pay people's credit loans that they cannot afford. Who really owns
the house if the Fed is paying your bills?
2) A heavy progressive or graduated income tax. The President bragged
that 'yes, I'm going to tax the rich' during his campaign. I'm sure he'll
get around to that in the near future.
3) Abolition of all rights of inheritance. This can be accomplished by heavily
taxing inheritance at a far greater rate than it is now and I'm sure they will
get around to that over the next four years.
4) Confiscation of the property of all emigrants and rebels. They haven't
done that yet. Of course you can re-define 'rebel' as a political opponent
or you can call them a 'terrorist' and do whatever you want with them.
5) Centralization of credit in the banks. They are currently working on that.
6) Centralization of the means of communication. They are going to try to
enact the 'fairness doctrine' to silence talk radio opponents of the regime.
7) Government ownership of factories. Well they are essentially accomplishing
that via the Keynesian stimulus and already they are trying to dictate executive
compensation. The government doesn't have to literally own something to control
it. They can do that by putting an industry on the dole and then dictating terms
and conditions outside of any free market considerations.
8) Equal obligation of all to work. Public works projects under government control
fulfills that goal.
9) Combination of agrigulture and manufacturing interests and abolition of the distinction
between town and county. Ron Emmanual has taken over the census and can start
to accomplish this goal.
10) Free education under the control of the government. They have had this for quite
a while and are using it to indoctrinate children into 'multi-culturalism' which is
highly politicized rather than the history of our Western democracy. The Left opposes
any school choice because that takes the curriculum out of their central control.
Perish the thought that students might be well educated into our system of government,
speak the same language or share the same values.

So the party in power has already accomplished many of these 10 items and are working
on the rest.

And for those who know something about history...these are the 10 points detailed
in Marx's Communist Manifesto. Is this mere coincidence and I am way off the mark
noting it?

I guess the bottom line is that if 51 % of the public is on the dole to the Fed on some level (paying for their housing, government work programs, welfare etc.) then we've lost our liberty
since political freedom is meaningless without economic freedom.

So those are the current political stakes which makes any discussion about the Home
Theater Business somewhat meaningless because who will have any disposable income
for this hobby?