The End of Excess

Today's 8,000-word dose of schadenfreude is here, courtesy of Michael Shnayerson and Vanity Fair. All the bankers laid low by ill fortune you could ever want!

Still, a look at the real-estate "bargains" shows how much further there is to fall: a Greenwich home which sold for $11 million after being listed at $19.9 million; a Hamptons rental for a mere $250,000, down from an initial asking price of $500,000. Yes, just for the summer. People are still mentally pricing off the highs: enormous numbers seem positively reasonable when they're much smaller than they were a few months ago.

Last night I ate at a very expensive new downtown restaurant; it was packed. Maybe people feel that spending a few hundred dollars on dinner doesn't make a difference when the big problems are with seven-figure salaries and mortgages. Or maybe they're simply more likely to order the $50 wine than the $2,000 wine, and that way they can get most of the benefit at a fraction of the former cost. But I do still get the feeling that people need a little time to unwind from the culture of excess; that right now they're just looking for cheaper flat-screen TVs, as opposed to not buying a new TV at all.

On the other hand, I do think that there's a solid future ahead for the likes of Vanity Fair, at least. It always catered more to those who would dream of spending millions of dollars than it did to that select group who actually do. And now the dream is stronger than ever, not despite but because of the recession. There's always a bull market in escapism when the economy turns south.

Comments

[austrian63:]

Agreed. As a culture, we are so used to spending much more than we can really afford, we have not yet come close to adjusting our lifestyles and spending to what we can afford. Most people are still in denial.

With ten year treasuries at 2.50% plus, cap rates on real estate have to get to 6.5% or higher before prices are reasonable based on the risk. It's amazing how much more we are willing to pay for anything (real estate, clothes at Nordstrom's and Macy's, and wine at dinner when we are spending Monoploly play money - credit, instead of cash).

2008 Dec 05 01:51 PM

[Smarty_Pants:]

The End of Excess??

I think not. Just look at the gub'mint deficit or debt. If there's are any items in the current economy that define 'excess' they have to be it.

2008 Dec 05 04:07 PM

[L Moore:]

The govmn't can buy all us taxpayers hybrids painted red white and blue. Keep detroit happy, keep the suppliers happy, keep the green folks happy, and give me a free car.

2008 Dec 05 04:47 PM

[Robert Nabloid:]

The government is going down a dangerous road of bailing everyone out.

Where does government get it's money?

2008 Dec 05 05:19 PM

[Muzie:]

???

"Last night I ate at a very expensive new downtown restaurant; it was packed."

Wait, so everybody else but YOU in that restaurant is living an escapist dream and can't afford to be there, right? Oh, wait, you probably just went there for "journalistic" reasons.

Maybe the new "excess" is now every Joe Schmoe believes their neighbor is an evil ex-hedge fund do-nothing who possibly can't have worked for the cash they actually use to pay for what they consume. Of course, everybody thinks "I can afford what I consume, but the neighbors are obviously living WAY beyond their means, right?". After all we've all peeked in their bank accounts.

Some of us actually pay for what we consume, you know, and earn the cash to pay for it with actual work, thank you very much.

2008 Dec 05 06:26 PM

[jfrits:]

sounds like NYC may have surpassed london as the world's most expensive city. or is it just the restaurants in london are tied to a psychological perception of british cuisine?

2008 Dec 06 01:10 AM

[anarchist:]

I have not eaten in a restaurant in London for many a year but when I did it wasn't exactly <cuisine>, do they still cook their vegetables to the point they have to be eaten with a spoon? Pub-fare (?), aint not better than England. Strawberries and clotted cream-oh yes! But restaurants, over priced, bad foods and waiters that don't know the difference between service and servile.


On Dec 06 01:10 AM jfrits wrote:

> sounds like NYC may have surpassed london as the world's most expensive
> city. or is it just the restaurants in london are tied to a psychological
> perception of british cuisine?

2008 Dec 06 11:59 AM

[cyclingscholar:]

Talk about escapism! I am rereading all my JRR Tokien and JK Rowling books! Go Harry and Frodo!

These times are preciousssssssssssssss...

cyclingscholar

2008 Dec 06 12:36 PM

[Jeff:]

Muzie,

{everybody thinks "I can afford what I consume, but the neighbors are obviously living WAY beyond their means, right?"}.

I agree with you, I am 55, retired and did not run a bank or hedge fun, but worked my ass off in a small business, however, someone must be carrying that average for every man women and child of $15,000 in credit card debt. If it's not you and me, it must be a neighbor or two.

Jeff

2008 Dec 06 02:40 PM

[Drew Horn:]

Hedonism isn't genetic but it isn't easilly cured either. There is a symbiotic relationship between egos and credit cards and this won't change until lenders are no longer able to squeeze debtors for usorious ROI.

From a macro view, our economy needs you (not me) to spend more and getting stuff will be encouaged simply because our economic paradigm requires it and the purveyors of it are more skilled messengers than any others. The sheep are always shorn.

The USA is soft and wont be able to revert to the old paradigm of not consuming more goods and services than it produces until the political system changes.

I hope for a constitutional convention within the next five years.

2008 Dec 06 03:27 PM