Staying afloat

A rising tide lifts all boats. A falling tide lifts all boats, puts them on the repo man’s trailer and hauls them away to be auctioned off.

As regular readers know, one of my journalistic pet peeves is stories about how great it is to be on the winning side of a tanking economy. It is unlikely we will ever see an economy fail so completely that no sector benefits from the collapse. It’s equally unlikely we’ll see lower and middle class Americans struggling without someone benefiting.

There have been some who have done well in this economic climate, but the majority of Americans are feeling the pinch. Gas prices are at record levels and the prices of everything have gone up accordingly. Food costs are the highest I can remember and there is little to indicate anything is likely to change soon to lower the cost of living. Why is it surprising to see vultures circling around the scene of a massacre?

Regardless, we have another piece of bad news in disguise in today’s NY Times. They explain that it’s boom times for the repo man. We recently saw a surge in Ebay and Craigslist postings and now we’re seeing evidence that rock bottom is approaching rapidly for many families. While, loosing your boat may not be rock bottom, I’m certain that the trend the Times recognizes in the marine market is duplicated across the economy.

Some people lose their house or their boat to abrupt setbacks: illness, job loss, divorce. Mr. Dahmen, who works as a technology manager for a car manufacturer, belongs to a second, probably larger group: he simply spent beyond his means. He is one of the millions of reasons the consumer-powered American economy did so well for most of this decade, and one of the reasons its prospects look so bleak now.“There’s a certain sense of failure about all this, to tell you the truth,” Mr. Dahmen said. “There really is.”

He originally bought a smaller, more affordable boat, but a salesman talked him into an upgrade. “Oh yeah, I said, that would be cool.” And it was: There were many pleasant cruises during the brief Michigan summers.

The merriment came at a price, though. Toy Box cost $175,000. With the trade-in and a down payment, Mr. Dahmen ended up with a $125,000 loan. “You pay the interest up front,” he observed, “and the principal never goes down.” After seven years he still owed $111,000, about twice what the boat is worth. Meanwhile, he lost his condominium when his mortgage readjusted and those payments went up. His 401(k) is down to $9,000.

“I oversaturated myself with long-term debt,” he said. “It was a risk, a calculated risk. I obviously lost.” He is declaring bankruptcy.

There are many more who have lost things they need, not want. Some have lost homes and others their transportation. It’s yet another example of how the economic pain is felt beyond Wall Street and a reminder that even as things improve among investors, the average American is still feeling the pinch.