Take a walk down Rodeo Drive or Fifth Avenue and you can stop in any shop to speak with the seemingly bored proprietors to hear all of the gory details about how even the most wealthy people are cutting back from their spending. From Neiman Marcus to NetJets - people with money have reeled back their spending as the economy has been on the skids since September of 2008. This is no different in the astronomically priced world of audiophilia or the construction-powered custom AV installation market. To put it politely, things have been less than bullish for all luxury goods.
Some suggest that "cheap" is the new "green" when it comes to buzzwords that drive the economy.
While green energy, recycling and environmental sensitivity is likely to be a decades-long, sustainable movement in ways that the Internet boom of the late 1990's couldn't hold a candle to - being frugal isn't going to last with a spend-happy country like the United States. People need homes. People have homes that need things (think: speakers, HDTVs, media servers, remotes, receivers and beyond). People get sick of not spending money because spending money is fun. Spending money feels good. Spending money is an American right (or so we think). The question is: have people learned not to spend out of their home equity like it's an ATM? I think we as a country have learned our lesson that having a six-figure job is not a right and that our homes aren't going to increase at 25 percent per year every year. We are far more realistic now.
With a recent, short-term rebound on Wall Street powered by good news on the housing and banking fronts, a case can be made for the foundation of an actual economic recovery. CNN can't stop talking about the "Road to Recovery" as the news cycle has seemingly swung from gloom and doom to a little more optimism in recent weeks. These are good signs. There could be a re-testing of the bottom of the market but overall people are starting to see real solutions to ugly problems. Most excitingly, the effects of Obama's stimulus plan - whether you support it or not - have not taken effect. People will be getting jobs. Infrastructure will improve. The economy will benefit at one level or another in the months to come because of all of this FDR-like spending that is coming to a state near you (except Alaska - those voters can thank Sarah Palin for turning down free money to heat up their local economy).
In a recently published interview "The Oracle of Omaha", Warren Buffett, spoke on the issue of 10-plus percent unemployment in many parts of the country. He noted that while 10 percent is a lot of unemployment, there are still 90 percent (or a little higher on a national level) of people still working - yet fear and worry makes many of them not spend today as if they were actually without work. If the credit freeze lifts, thanks to the government purchase of the newly termed "legacy" (formerly known as toxic) assets - banks will be cancer-free and flush with T.A.R.P. Money to lend. This will without question help small businesses like audiophile and specialty home theater and video companies, as credit is their life's blood. A stronger banking industry will help lift credit card spending limits as much as it will make it easier for people to actually get a loan to buy a house in this value-priced market. This could result in more HDTVs, receivers and speakers getting sold as soon as this summer, which is nothing but a good thing for the AV business as a whole.
While little is guaranteed of the future on Wall Street, it's not hard to see how the specialty AV business could get a lift with the rising tide of the American and ultimately the global economy. People need to know the sky isn't falling because all of us acting like a bunch of cheapskates isn't fun - but hanging a 65 inch plasma on your living room wall is pretty much as joyous as it gets.
Keywords: How the U.S. Economy will boost the home theater business, cheap is the new green, people sick of being cheap because of the economy, Warren Buffett, The Oracle of Omaha, "Legacy" Assets, Toxic assets, new plasma HDTV, home theater and the housing market, Neiman Marcus, NetJets, Rodeo Drive, Fifth Avenue