STYLETHREAD -- LET'S TALK SHOP!

Drew · Gucci

Your Opinion on the Economy

jj · Kate Spade

This is a really interesting question, and I can't wait to read what others have to say from their real-life experiences. What I read in the papers (total doomsday) seems to vary greatly from what I see on the streets (people are still spending tons of $$ on houses, they're out shopping in droves and filling up their SUVs with gas).

Everything I have been experiencing is positive. Our clients' revenues are up and they are willing to spend money on projects they cut back on a few years ago. People are traveling again for meetings and nobody bought into whole video conferencing idea. My DH has his own marketing company and he is experiencing the same thing. In 2003-2004, he worried about dry spells. Luckily, from 2005-now, he is busier than ever.

The housing market has slowed here, but by "slow," it means a house can be on the market now for 14 days instead of 2. We are currently deciding whether to sell our place, and we met with a real estate agent last week. He tried to scare us by saying we may actually have to show our place two weekends in a row instead of just one He did say that people still engage in bidding wars, and he just sold a house for $100k over the asking price.

We went shopping at one of the higher-end malls this past weekend, and people were spending money like it was water. And when I tried to make a dinner reservation on Wednesday for Saturday, all of my top choices were already booked. These two facts do concern me, because I worry that people are living outside of their means and aren't saving enough. Then again, when people spend money, they are supporting businesses.

I guess I'm happy as long as we are saving and investing what we can.

Drew · Gucci

jj, you reminded me of another interesting fact. According to some statistic (it was on the evening news not too long ago), Americans -for the first time since the depression- have a negative balance of 5%, meaning noone is saving, and is instead in debt: living above their means. I'm just wondering IF the S*** is gonna hit the fan...

More experiences, please!

JoceyBaby23 · Gucci

I can only speak to a few of these things..

I am in more debt now than I have been in the past. So, I do agree that more and more people are living outside their means.

I can also say that Housing Market in my area is slowing down a lot. We recently bought a house that was on the market for 45 days with no previous offers. We also under bid and the sellers accepted right away. I think they were worried that they wouldnt be able to sell at all.

Also, we have not yet sold our old house. It has been on the market for a little over a month. A ton of people have come to see it and our realtor has said that everyone that sees it is interested.. They just dont return calls and/or just aren't ready to make a move. (We did finally get a verbal offer a few days ago. I hope it sticks.)

Anyway, my realtor has told us that Winter is always slow for the Housing Market. She says she has seen no indication that the market is going to slow or stop. She is expecting booming profits in March and April as she has every other year!

I also have some friends who are constantly withdrawing money from Investments to buy more extravegant cars, homes etc. They aren't replacing that money.. So they worked so hard to save for years and now are completely blowing it. I can't figure out why?

gingembre1 · Kate Spade

Coming from California, it's hard to judge how the economy is in the rest of the country. I DO know that aquaintances from other countries are continuously shocked by our spending habits, and the ease with which we accept large amounts of debt as "normal." Certainly the spending trends are worrisome, but I am more worried about longterm effects on our economy and country (like 50 years down the road). A lot of people I know my age (20's) aren't saving for retirement, live quite fabulous lifestyles, and have accumulated a good amount of credit card debt before even graduating from college (that's not even taking into account the huge student debt). I think that the real estate market is just a reflection of Americans' typical spending habits - that is to say, living outside of their means, in continuous debt. This is reflected in the variable interest loans, putting 10% or below down on the house, not paying off the principal on their loans, etc... A fundamental change needs to take place in the American attitude towards money, starting with our government. If foreign investors ever decide that the American economy is a bad investment (which is sure to happen), we will be hit extremely hard, as the government basically functions on huge loans from foreign lenders. Without the investors' money flowing back into the US economy, we wouldn't be able to stay afloat. This is just typical of the American consumer. We live in a huge cycle of debt.

Okay, enough of my rant. In my day-to-day experience with the economy, I see lots of people with beautiful new MErcedes and BMWs, buying beautiful million-plus dollar homes, buying insanely expensive clothes...But as I said, I live in California (the Bay Area), and it rarely reflects how the rest of the US is doing.

laken1 · Hermes

Drew wrote:

jj, you reminded me of another interesting fact. According to some statistic (it was on the evening news not too long ago), Americans -for the first time since the depression- have a negative balance of 5%, meaning noone is saving, and is instead in debt: living above their means. I'm just wondering IF the S*** is gonna hit the fan...
More experiences, please!

exactly what i was thinking - they aren't spending MONEY like water, they are INCURRING DEBT like it's water.

I think lots of people are in for a rude awakening. I think the majority of Americans have no idea what it's like to be truly broke - including myself. Even my mom's generation who grew up with parents that went through the depression haven't really struggled & at some point the cycle comes back around, you know? And when I mean struggled I mean no money, no jobs, no means to obtain credit etc. I heard a report this past week that 70% of people live paycheck to paycheck - meaning they have less than a paycheck in savings, and in that environment you are dependent upon credit to live. At some point the credit card companies are going to HAVE to tighten up their standards & then what will happen? It really scares the crap out of me. I wondered if I was alone in this thinking.

It also really bothers me that people in our generation go for too much too soon. There is no such thing as a $100K starter home anymore - people jump right into a $250K + house & then wonder why they have no money. I just can't imagine the number of people that will end up homeless because of this. Admittedly, the market warrants it, but that doesn't make it affordable for the average joe, ya know? We make really good money & we were looking at a magazine that showed what you could buy in our area for $250K, $500K, & $1.2M - like $250K is a starting point. We can't afford $250K! It was really disturbing.

-- Edited by laken1 at 15:27, 2006-02-22

jj · Kate Spade

I totally agree with everyone's thoughts about how Americans live with way too much debt. It's crazy!

But back to the day-to-day experiences of the economy, I forgot to add that many of our friends were down-sized our laid off between 2002-2003. Another sign that the economy isn't that bad is that everybody is back in a job that is paying more and/or that they are happier with.

Shello · Kenneth Cole

I really should have an opinion on the economy being an economics major and all, but so far I'm just learning basics and don't really know that much about analyzing yet.

However, some things I have heard mentioned by my professors and guest speakers:
- More and more people are definitely spending beyond their means, but it's not necessarily a bad thing. The more we spend, the more growth it allows our economy as long as we keep expanding our capital. The reason that our country grows so much faster than Japan is actually because we don't save. My micro professor told us that in Japan, people are always trying to save as much as possible and it actually hurts the economy a lot.

- China is heavily invested in the U.S. because they keep buying U.S. securities. This is both good and bad. It's bad because they have a lot of control over certain things, but good for us because if they try to sell everything all at once, it will cause a major crisis for them. Their investment also allows us to grow, so as long as we keep using the money for growth and capital, it should be okay.

I really don't know anything about the housing market at all, except that the bubble will definitely have to pop at some point, and the market may already be declining, nobody can tell in the short run.

laken1 · Hermes

Shello wrote:

More and more people are definitely spending beyond their means, but it's not necessarily a bad thing. The more we spend, the more growth it allows our economy as long as we keep expanding our capital.

I would agree with this if our government wasn't also overspending. We haven't seen any of the fallout from Katrina yet. You think we are complaining about our taxes THIS year? just wait.

-- Edited by laken1 at 15:56, 2006-02-22

relrel · Marc Jacobs

gingembre1 wrote:

Certainly the spending trends are worrisome, but I am more worried about longterm effects on our economy and country (like 50 years down the road). A lot of people I know my age (20's) aren't saving for retirement, live quite fabulous lifestyles, and have accumulated a good amount of credit card debt before even graduating from college (that's not even taking into account the huge student debt).

this is what actually scares me the most. what happens when 40-50 years down the road when we are all ready to retire but have no money. it ain't like social security is gonna be there, and guess what? medicare ain't gonna be there either. and guess another what? most of us (im talking middle to upper middle class) won't be paying those nice student loans off till we are in our forties! forget about a house...what about all that money that we owe the goverment? i will be leaving school with about a $100,000 in debt from student loans. i have never had a credit card, and will not get one till I have an established job/career. I am lucky however, in that even though my starting salary will tend to be lower ($30-40,000), the federal and state goverment offers debt forgiveness for my type of masters. Now, this is only some of the debt that they will forgive, and only in some types of jobs, but it's still something. What will happen to all those other people out there who incurred massive amounts of student loans but aren't a)using their degrees in thier jobs, or b)going to ever make enough to pay it off?

Luv2Shop · Kate Spade

Well, my experience is that I have way too much debt and have a mediocre (sp?) paying job, but prices keep going up!! I am going to be paying off my student loans till I die. DH and I were lucky enough to buy a very cheap condo and re-hab it with the help of my dad and will sell it for way more then we bought it for, but even then we will have trouble finding a house that isn't a piece of crap. It seems like home prices are so high and I don't know how young people are supposed to start out now days when entry level jobs still pay the same but living expenses are SO high! We all know how expensive gas is and it seems like even things we need like food is way too expensive. Like milk is $3.50 a gallon and a freakin box of cereal is $5!!!! It's insane. I really want to pay off a lot of debt before we have a baby, maybe next year, but I just don't see how that's going to happen. Plus when I think about the things my parents did for me when I was a kid and how much things cost now, it's scary. Like when I was old enough to go out with my friends and needed $ from my parents for a movie, now days people have to give their kids $20 just to see a movie! I just want to be able to give my kids a good life and have $ for emergencies. I just hope home prices go down because I want to have a baby and our condo is too small for once it starts walking.

halleybird · Hermes

Drew wrote:

jj, you reminded me of another interesting fact. According to some statistic (it was on the evening news not too long ago), Americans -for the first time since the depression- have a negative balance of 5%, meaning noone is saving, and is instead in debt: living above their means. I'm just wondering IF the S*** is gonna hit the fan... More experiences, please!

I think this is totally true. I attribute it to my age group (roughly 24-34ish) growing up in a relatively prosperous time with relatively prosperous parents. A lot of us (err, myself included) have a hard time with the idea of "working our way up" when it's much easier to get loans and live the way you want. I know my parents' generation totally shuns the idea of credit. My in laws have never had a car loan -- ever.

But I don't know if this is a bad thing for everyone. I feel like, although I have debt, most of it is "good" debt (house, student loans). Had I done things my parents' way, I wouldn't be anywhere close to having my house. The key is managing that debt and being smart about it. In 5 years, if all goes according to plan, I should own two cars and about 30% of my house, have no credit card debt AND be making about $5k more per year. So I don't know if the debt is a bad thing. I am very scared for people who don't take it seriously, though -- those interest-only loans wil break a lot of people in a few years.

shopgirl82 · Chanel

i don't have much to add, except that i think the best thing our generation can do, is to get a financial role model. i'll be the first to admit that i don't know much about finances. i literally have to have my hand held through investments, etc...but, i do have a 401K, and investments, and i probably wouldn't if i didn't have a role model (first my parents, now my bf).

i don't understand how our generation will spend the money on personal trainers, anesthticians, nutritionists, etc... if their body, face, diet, etc.. needs work, but they won't spend money on a financial planner if their finances need work? i'm super scared about the future and i realize that i have to have a ton of money set aside, but i'm even more scared of what would have happened if i didn't have those role models. i know i would have credit card debt, etc...

laken1 · Hermes

halleybird wrote:

But I don't know if this is a bad thing for everyone. I feel like, although I have debt, most of it is "good" debt (house, student loans). Had I done things my parents' way, I wouldn't be anywhere close to having my house. The key is managing that debt and being smart about it. In 5 years, if all goes according to plan, I should own two cars and about 30% of my house, have no credit card debt AND be making about $5k more per year. So I don't know if the debt is a bad thing. I am very scared for people who don't take it seriously, though -- those interest-only loans wil break a lot of people in a few years.

I think this is different than having exorbitant credit card debt. As a loan officer I saw people under 30 with $20K - 30K in credit card debt. And "grown ups" with up to $70K & $80K. If you get balances like that, you are already living above your means & it's nearly impossible to get out from under it. I will admit that I'm guilt of it too, thus our plan to get everything paid off except a car note before we buy a house. I just can't think of any situation where have lots of credit card debt is a good thing.

And halleybird, my parents are the same way - they have never had a car note. My mom still doesn't understand why people take out a loan for a car. And they aren't rich by any means.

-- Edited by laken1 at 17:48, 2006-02-22

NCshopper · Hermes

To be honest, I'm a little worried about our generation's future, both long term and short term. I think there are a bunch of factors at play here. 1) Our generation's attitude re: debt, which a lot of you have mentioned before. I know most of my college friends have very questionable work ethics, don't save, and rely on mommy and daddy to fix the Lexus when you back it into a pole (no joke). And these are SMART girls. 2) Fallout from the war and Katrina. Our federal deficit scares the crap out of me. I feel like our federal government is spreading things really thin and I don't know how it's possible to keep up the spending without having some MAJOR negative implications. 3) The babyboomers are starting to retire and they're living longer. There's a whole lot of people out there that are going to be getting out of the workforce soon and collecting Social Security and we're going to have to pay for it.

I think all in all, it's not a pretty picture. DH and I are absolutely not planning on Social Security to support us when we retire. I'm hoping to have enough saved up by then to fully support ourselves if we have to.

However, all that being said, I do feel like the job market is picking up a bit. When I graduated in 2003 it was TOUGH and a ton of my friends, as well as DH when he moved out here from CA, had a really hard time finding jobs. And not just "good" jobs, but jobs, period. I think at this point most everyone I know is in a "good" job/career and not just working at a minimum wage type job.

lilyann · Dooney & Bourke

Let me just start by saying that economics is definately not my forte, but I have noticed on the small scale a few things recently that do concern me. Starting in the general area where I live:in my apartment complex, in the park that sits across the street, and on the surrounding streets I have noticed alot more homeless people. When I moved in four years ago- there were a few- mainly because of the park I would assume, but now, I see them whenever I leave my home. These homeless seem to walk about on the streets during the day, and take refuge in the park at night. It breaks my heart! I am now moving ( my husband and I are buying a condo) and as I clean out my apartment of things that I dont want to take with me- I have left them in bags beside the large bin we share in the complex- and after a few hours these items are always gone. In particular, there is an older woman- very clean- but shabbily dressed- who routinely goes thru the garbage- she will have seperated bags for clothing, cans, and whatnot. I want to ask her about her life- but I dont. Yesterday, when I brought out a bag of things that were in no way bad- that I planned to leave beside the bin- she was again out there and I hesitated to just set them aside instead of tossing them in. I didnt want her to feel my garbage was "fit for her"-I felt ashamed. But, I did set it down.

She asked in broken english, "You have good stuff?" and I said, "Yes, there are some things that are still really good." Her face lit up! I told her. "I have more... but it will take awhile." She said, " I here." I smiled at her and walked away. When I got to my door she yelled, "Thank you !" I didnt feel so bad. Its ironic that she was comfortable, and I hadnt been.

When I was in college several years ago- I took a political science class and I remember an instructor saying, " We are becoming a two tier society- consisting of the have and the have-nots. This may not be all so apparent now, but you will see it...this is the beginning of the end of the middle class." This statement has stuck with me for many years, 15 to be exact, and for me it has now become aparent. I can only guess on the factors involved, because I am no way an expert- and I think you have all stated in prior threads what I would myself say.

Drew · Gucci

lilyann wrote:

When I was in college several years ago- I took a political science class and I remember an instructor saying, " We are becoming a two tier society- consisting of the have and the have-nots. This may not be all so apparent now, but you will see it...this is the beginning of the end of the middle class." This statement has stuck with me for many years, 15 to be exact, and for me it has now become aparent. I can only guess on the factors involved, because I am no way an expert- and I think you have all stated in prior threads what I would myself say.

That is really scary. I've heard it before and it just may come true. On Oprah's 2/17 show they stated a statistic that 70% of American households live paycheck to paycheck. If something bad happens to put people out of work for even a few weeks how will anyone be able to recover?

lilyann · Dooney & Bourke

Drew Wrote:

That is really scary. I've heard it before and it just may come true. On Oprah's 2/17 show they stated a statistic that 70% of American households live paycheck to paycheck. If something bad happens to put people out of work for even a few weeks how will anyone be able to recover?

Yes, I think that a good amount of these people that I have noticed around me are a result of this " one paycheck away from homelessness." They may have lost a job, were layed off thru downsizing, or\and had no support system to weather the "storm." There was a time when the family was more nuculeur (sp?)- family dynamics are no longer for the most part, so. We are spread out into the suburbs, jobs take us away from our kin, the family having more of a long- distance relationship. Approximity to our loved ones kept us afloat- You would not want to see the financial downfall of those related to you- and help was there. Be it thru the grandmother who would babysit- to the grandchild who would take the grandmother in when she was no longer able to take care of herself. The basics to survive are now at a premium- the costs to house you, the food to feed you, the power to keep you warm. I myself do live paycheck to paycheck, fall into that 70%- but, I have family that: while will not help in my day to day bills- would step in if things got real bad. I have this comfort always in the back of my mind- but, what terror it must be for those who dont.