Bottom Feeders Take Notice

The “Catch-22” for Bottom Feeders is that they never are quite sure of where the bottom actually is. Pathologically obsessed with getting the best deal they wait and wait while other people “pay too much” because they are sure that a good thing will get even better. Having seen boat prices drop for the last 12 months we can understand why Bottom Feeders may think prices are going still farther south, but we’re here to tell you that we think we are now at the bottom, or very close to it.

It’s tough being a bottom feeder when there is a frenzy going on. Like some of the bottom feeders above, the losers will end up sucking wind.

1. We have seen enough examples of non-current inventory being closed out at prices substantially below what the dealers paid to realize that for them to go lower is only to go out of business.





2. Dealers who do go out of business have their inventory moved (by the bank or the builder) to other dealers who don’t own that stock, so have no incentive to sell it cheap and thereby devalue their own inventory. Since they have no “skin” in the game, they don’t care it the boats sit unsold.





3. We have seen in several cases builders this spring and summer rebate to dealers to move inventory they are already taking a loss on. They did this to help dealers clear out non-current inventory. But builders have also run out of cash so this practice is now virtually non-existent or spotty.





4. Virtually no dealer and no builder in the boat business today is making a dime, and the whole industry is simply scraping along on what meager cash flow there is, waiting for the economy to turn up. In other words, there are very few positive margins in boats being sold today that are in inventory. There is nothing left to give away.





5. Inventory is moving, albeit slowly, and at some point this fall or winter, in most cases, all but the real dogs of non-current inventory will be sold. Typically, Bottom Feeders don’t buy until they are sure they have found bottom which is why they invariably end up owning the ugliest boats in the marina.





6. A number of builders have dealer inventories that are at historic lows and they are only building for consumer orders. Obviously, these prices are all higher.





7. Relatively few boats were built in 2009 so they are a scarce commodity. Their prices will hold relatively high compared to 2008 and 2007 non-current inventory which is where the real deals are to be made by Bottom Feeders.





8. Some of the biggest boat builders around the world have gone into Chapter 11, or receivership, or have been recapitalized in some way and are now operating on a new business plan which is essentially a “pay-go” program. That is to say, they must pay as they go along, which means they are essentially working out of cash flow for current operations. Money is not being spent on rebates because the slate has been wiped clean and they are not over producing.





9. If you haven’t noticed, most of the banner ads and spam proclaiming “clearance sale”, big bargains, huge rebates and the like have stopped. The reason is that the industry finally realized that these notices only devalued their product and were actually counter productive. It is a clear indication that the bottom is near.





10. As hard as it is to believe, there are actually some people making money in this recession. With the stock market rebounding 50% since March, there will be huge Wall Street bonuses paid this winter and you can count on these suits (which are a traditional mainstay of the boating business) buying up the remaining decent product, leaving the dregs for the Bottom Feeders.

Bon Appetit!