These are the days and surviving a recession


Within days of a black president being elected as president of America, and a life of protesting against racism, Miriam Makeba has passed away. I pinch myself to check that I’m really living with these experiences and am so grateful to be alive in this era of exciting times, great times and troubled times. I hope that Obama goes on and becomes one of the great presidents, which is a big ask, but it is very necessary.

Meanwhile downunder, Helen Clark has resigned her leadership of the Labour Party having lost the New Zealand election to probably one of the youngest Prime Ministers in our history. To me amongst other things, she represents the Politically Correct which is ironic, because I know she lost many staunch Labour voters in her campaign by trying to make the National Party and John Key in particular look untrustworthy. The TV advertisements at the end of their campaign were all trying to smear John Key instead of focussing on their successes and their future plans, and in my humble opinion, it backfired badly. When you throw mud, some of it stays on your hands and she should have known better. Several people told me that they decided against voting for labour because they didn’t like smear campaigns.

Now we are heading into the biggest recession / depression in living memory. The 30’s and the 80’s will pale in comparison. The depression is a bad thing, but there are different ways of thinking about it and smart people will do well, or at least survive.

Something that has amazed me for some time is how business has teased people, who should know better, to spend money they don’t have on things they don’t need and keep doing it over and over. Retailers and finance companies ought to take some responsibility for what they have done, but many will because their business will dry up. The finance companies will go broke because they loaned money to people that they couldn’t secure and most of the goods had dropped way below their value, the minute they left the showroom.

Banks forgot about their commitment after the 1987 crash. For a while they started looking at people’s ability to pay their mortgages and required that they have at least 20% deposit. Then as property values increased they suddenly decided to finance people with 100% of the loan, figuring that the property values would keep going up and it wouldn’t make any difference. Of course while the mortgages were being paid they were making a tidy profit.

The retailers (including car companies) figured they weren’t taking any risks because it was the finance companies that were lending the money, not them.

Funny really because we often say that instead of employing politicians, who have a short term focus and often little experience in running a business, we should pay a premium and get successful business people to run the biggest business of all, our country. The rational was that in business anyone that went to the board and said, “Whoops I miscalculated and we have half a billion dollars less than we thought”, would be quickly helped into a new career, but it seems business has been doing the same thing and thinking that they can get away with it.

By saturating the market with things they can’t afford (and this hasn’t stopped) with 18 months deferred payment and interest free for another year or so, all they are doing is compounding the crisis. Who wouldn’t be teased into buying a new 42″ LCD widescreen HDTV with freeview built in, especially when the Jones’ have one next door and you don’t have to pay anything for over a year.

So we aren’t just heading into an economic crisis, we are adding fuel to the fire to make the mess even worse and if our government’s are broke, we are walking straight into the arms of the waiting Chinese Government who would be delighted to buy our failing banks and finance companies.

Has everyone taken leave of their senses? Have you taken advantage of a 100% mortgage? Have you bought products on special deals that you wanted but didn’t need? Come on, be honest.

There is potentially an exciting side to this as well. If you were smart and saved money, or invested in assets or property that you could afford and that made sound business sense, you could be looking forward to exciting times. Many of today’s wealthy families made their fortunes in the great depression of the 1930’s. If you were prudent during the boom, you could find yourself on top when the crunch comes, ready to buy into a business or buy some real estate at rock bottom prices and benefit from this situation. Even now it isn’t too late. What are you going to do now?

Christmas is coming. Don’t take that overseas vacation, pay half of the money into your mortgage and have a local holiday. The domestic tourism industry is hurting and you should be able to have a great time enjoying your own back yard. Reduce your debt as quickly as possible and only have debt in things that will increase in value when things come right. I think it’s called delayed gratification.

While this blog is starting to get a good following, I would love to get more readers and encouraging me to keep writing. If you feel that my blog is interesting I would be very grateful if you would vote for me in the category of best blog at the NetGuide Web Awards. Note that the form starts each site with www whereas my blog doesn’t and is of course https://luigicappel.wordpress.com.

Thanks so much for your support:)

What happens when the consumers can’t buy anymore?


Everyone has a deal. Harvey Norman is offering 12 months deferred payment and 12 months interest free, Noel Leeming has deals, Bond and Bond has deals, there is even a web site called Perweek that lets you search for products by the period of interest free terms they are offering.

The Scooter Bar has ads on Trade Me offering deferred payment and special deals on new motorcycles and on it goes.

There is always something essential that you need, like a new HD TV with Freeview, an iPhone, a new car, a stereo that you can plug your iPod into and on it goes.

A couple of years ago I bought a new Canon camera. I had the cash in my savings, but I decided to take the 18 months deferred payment and then pay it off straight away. I paid a week late and GE Money, the company that seems to be offering a large chunk of retail finance wanted to charge me a hefty fee for that, but no one sent me a slip or reminder to say it was due and I had diarised it a week out. I stood my ground and as Noel Leeming wanted to keep my business I didn’t have to pay the late fee.

6 months or so later I got a letter from GE Finance offering me a special deal with pre-approved finance for a sum, I can’t remember exactly, but it wasn’t interest free, they were offering me finance at 24% interest!

They have all sorts of great ideas and of course you could say that anyone silly enough to take that deal deserves to be taken to the cleaners, but the problem is that there are people who are struggling and will be thinking, these guys want to lend me money and I need money, so lets do it.

I wonder if there is recourse in the finance. If the person who is paying for their new HD TV defaults, does it become the finance company’s loss or the retailers problem. Finance companies are typically risk averse, so I’m guessing it’s the retailer. It would be great if someone can clarify that for me.

So here’s the thing. There are loads of people spending money they don’t have on things they can’t afford and chances are it’s not one item, it’s several over a period of time. So when the masses are broke and the retailers aren’t getting paid, what happens next?

We are already officially in a recession and things aren’t getting any better. Very soon a large number of people will owe much more on their homes than their value, especially the thousands who bought at 90 to 100% of the property value in a growth market and those who leveraged heavily for their retirement funds.

If retailers can’t recover their money, they can’t buy new product, they can’t afford their staff and the manufacturers can’t keep manufacturing. If houses aren’t being built because people can’t afford to buy them, all the trades will suffer, plumbers, electricians, builders, labourers, the list goes on.

Is this inevitable? Is there a solution?

Some people got hurt in 87′ but most people in New Zealand have not lived in a depression and have lived a life of instant gratification. Of course there will be some fortunes made as well. What could some of the consequences be?

Increased domestic violence is on the rise, violent crimes are on the rise including aggrevated robbery. Drug use is on the rise which increases crime and the worse of things are, the more displaced young folk will be heading into the welcoming arms of gangs.

How can we avert this?

While this blog is starting to get a good following, I would love to get more readers and encouraging me to keep writing. If you feel that my blog is interesting I would be very grateful if you would vote for me in the category of best blog at the NetGuide Web Awards. Note that the form starts each site with www whereas my blog doesn’t and is of course https://luigicappel.wordpress.com.

Thanks so much for your support:)