July 8, 2008
JustQuotes: Even The "Luxury Buyers" Have Started Spending Less...
"One of the last holdouts in consumer spending -- luxury-goods purchases -- may be collapsing under the weight of a sluggish and potentially contracting U.S. economy."
∙ Saks Tailspin Indicates Hurdles for Neiman, Nordstrom [Bloomberg]
First Published: July 8, 2008 11:00 AM
Comments from "Plugged In" Readers
I'm not going to believe this until sales of the "real" luxury items wanes. You know, those rare specialty items advertised in the Robb Report like $200K Hummers with gold plated hardware and Egyptian pedigree cats that will ensure immortality.
When those stop selling, then, and only then, is there cause for alarm.
Posted by: The Milkshake of Despair at July 8, 2008 12:08 PM
Our annual income is in the seven figures realm and believe me, we are very aware of the state of the economy and are much more careful about our spending. Instead of spending on luxury items, we now tend to give more to animal charities as those are really the first aeas people tend to cut. I am urging everyone to think about those who are less fortunate, especially during these hard times, instead of spending on bigger and brighter pieces of jewelry which really means nothing in the long run.
Posted by: rinconrez at July 8, 2008 1:12 PM
Considering the fact that Cartier has upped their prices multiple times this year, due to the soaring cost of gold, platinum, and other raw materials. I gave up my "dream" of buying a Pasha Seatimer watch this year (dream because I am only in the 6 figures ;-) ).
Giving more to local charities instead is great advice.
Posted by: badlydrawnbear at July 8, 2008 1:25 PM
Don't forget charities that involve humans as well. There is no city in America where human misery is more on public display than the streets of San Francisco. It helps to make the daily experience of being confronted by such a large homeless population when you have tried through giving to help solve such a huge problem for this city.
Posted by: anongiver at July 8, 2008 1:37 PM
Well, I live across the street from an SRO-type hotel on Broadway and Polk, and I see the same homeless guys every single day ... and I've never given them a cent in two years. But that's probably because I'm only a six-figure earner, not a seven-figure earner like rinconrez.... so I have less guilt to assuage.
Plus who wants to pay a $1 "toll" every time you go past Walgreens?
Posted by: Jimmy (Bitter Renter) at July 8, 2008 1:54 PM
Honestly, I never give, sign petitions, or take flyers from anyone on the street.
I have, and will, give to charities that provide services to those asking for money on the street just as I will give to the advocacy groups that send out those petition signers.
I think it was great of rinconrez to point out that a cut back in spending on yourself, at whatever level, shouldn't stop you from recognizing that most of us (the readers on socketsite) have annual incomes higher then 80% of the people on the planet and we should still find ways to alleviate suffering and show compassion for others.
Especially when your biggest gripe is that you couldn't afford a new pair Ferragamo shoes.
Posted by: badlydrawnbear at July 8, 2008 2:20 PM
If you give money directly to homeless people, they'll stay right where they are and continue begging. If you give money to organizations designed to help the homeless, they have a much better chance at improving their lives.
Posted by: phatty at July 8, 2008 2:44 PM
well that commercial with the abused animals and sarah mcloflin (don't know the spelling)singing eyes of an angel got me for a little more than I can really afford, but I got a t-shirt :) and these poor animals depend on us.
Glad to hear that still look out for the less fortunate in general.
Posted by: view lover at July 8, 2008 2:52 PM
@view lover, i think you mean Sarah McLachlan http://www.sarahmclachlan.com/
Posted by: lydlyd at July 8, 2008 3:04 PM
Actually, according to a recent study, while charitable giving was down in the first quarter (both by donor and by revenue) because of the worsened financial condition, giving to animal welfare charities was actually up. International aid has suffered most.
I'll try to link the article.
Posted by: Foolio at July 8, 2008 3:04 PM
Wow. Before thinking of charity, we'd be better off with fixing the reason why some of these guys are out on the street:
1 - Lousy medical protection.
2 - Lack of psychiatric care.
I am not an extreme liberal, but managed health care brought us there. People shouldn't have their lives taken away from them for a simple medical bill. Why does the rest of the rich world have good, universal health care and not us?
You can spread your cash all you want, but charity is not a long term solution.
Posted by: San FronziScheme at July 8, 2008 3:13 PM
Universal healthcare is not something this country apparently wants. Most bankrupties, over 50% arise from medical bills so we make laws to make it harder to declare bankruptcy. The people impacted the most by these horrible ideals are the same ones that keep voting for them just so that we don't have gay marriage or abortions. We did not want Hillary to meddle with healthcare because it would ration it, yet that is exactly what managed care did. We prefer to believe that those without healthcare insurance are faceless and losers at best, so we opt for the administrative side of health care to become richer instead. Some of the brokers that act as unnecessary intermediaries between insurance and groups reap incredible rewards, 10% of the premiums usually end up in their pockets, and that's just the beginning of the layer cake.
Americans collectively continue to vote against their own interests.
When will it end?
Animals on the other hand truly rely on our efforts for survival.
I'm not a cold hearted bastard but I'm really tired of our collective stupidity.
Posted by: view lover at July 8, 2008 4:10 PM
I'm all for animal welfare, but once Leona Helmsley's trust is worked out, the related charities (for dog's at least) will not be hurting for money:
"Leona Helmsley left instructions that a trust valued at $5 billion to $8 billion be used for the welfare of dogs."
"...the trust will be worth almost 10 times the combined assets of all 7,381 animal-related nonprofit groups reporting to the Internal Revenue Service in 2005."
Posted by: Naysayer at July 8, 2008 4:14 PM
view lover -- if you don't like how things are done here, then move to France! If you have some useful business skills and capital... you could probably do fine (production in Tunisia, banking in Switzerland, free healthcare in France).
At least, that's what some people I know do for a living ...
Posted by: Jimmy (Bitter Renter) at July 8, 2008 4:16 PM
I'm with View Lover, we as a country have consistently voted against our own long-term interests on diverse issues such as health care, mass transit, renewable non-foreign energy, etc. France has higher taxes, but they actually use the money to good effect -- far less problems with homelessness, health care availability, air pollution and dependence on foreign oil. It's sad that your knee-jerk reaction to criticism is to suggest that anyone who's unhappy should leave -- if we took that approach, we'd be abandoning our country to be run by people like you. From the little I can tell from your post, that's a scary proposition.
Personally, I would pay higher taxes if the money was actually used for something productive.
Posted by: sacdomc at July 8, 2008 4:32 PM
Jimmy, I hope you're wearing your American flag lapel pin.
Posted by: pvc at July 8, 2008 4:38 PM
Rinconrez, we probably make a similar amount and enjoy walking, biking, and public transportation more even though i can afford to drive.
I think buying luxury items such as watches is a good idea in this market. Stainless steel, platinum, gold all going up, and these watches are 5-10K, and affordable.
We all know that Obama is going to win, and will raise the highest all in tax to 50-55%, hence why those making over $360,000 have cut down spending.
Posted by: Prime at July 8, 2008 4:52 PM
"We all know that Obama is going to win, and will raise the highest all in tax to 50-55%, hence why those making over $360,000 have cut down spending."
I don't know this and I actually find it very unlikely that Obama will win.
Posted by: Spencer at July 8, 2008 4:58 PM
Spencer, we can have a friendly wager. Come November, Obama will win and will raise taxes for the wealthy by 5-10% all-in, on average. Paying $50,000-$100,000 more a year in taxes when you make $1mil is not a nice thing.
I'd expect people to defer their income for as long as possible, and spread it out over 10-20 years after they retire and move to Nevada.
Obama will help the poor and middle class at the expense of the wealthy, which I think is great.
Posted by: Prime at July 8, 2008 5:08 PM
I just described a nice, neat scheme for getting the best of all worlds: private banking and tax avoidance in Switzerland, low-cost manufacturing in Tunisia (to make the crap you sell worldwide), and a great (and relatively low-cost) quality of life in France, including free healthcare. A good friend of mine from college took over his family company, which essentially runs like I described, and he lives like a king... while everyone around him makes low salaries and is crushed by high French taxes. What's un-American about that, anyway?
Posted by: Jimmy (Bitter Renter) at July 8, 2008 5:32 PM
Well of course Congress must pass any new tax laws, not Mr. Obama himself. But there does seem to be a will to narrow the gap betwene rich and poor.
Posted by: fred at July 8, 2008 5:47 PM
Not to split hairs here, Jimmy, but aren't you technically Canadian anyway?
I make no election predictions, but will second the notion that taxes need to increase for the most wealthy Americans, unless we want to promote the Brazilization of America and further engender the socio-economic problems that arise when 10% of a nation's population holds 90% of its wealth.
Posted by: Dude at July 8, 2008 5:49 PM
Jimmy, why don't you stick to something you actually know about, like renting.
How much do you think the average cost for healthcare per "insured" person the employers have to pay? Would it surprise your stupid ass to know that it is fast approaching $8,000 per year? That is for a every person, children included, AVERAGE! And that is because 80% of the population don't have catastrophic claims.
The taxation on business in this country for healthcare is astronomical. Have you been so bitter as to notice that GM for example sites the cost of healthcare as one of the items that is putting them on the verge of bankruptcy? They are not alone.
In case you may have some ability to grasp, here is a breakdown for you. For every dollar of healthcare, 25% goes to cover aministration. Thats' just for the infrastructure to pay your claims and provide you with a card to show the Dr. The hospitals have been making record profits, they get about 30% of which only about half goes to healthcare, the rest goes to wallstreet. (how many public hospitals are left? not many) Dr's take on about 25%, they can't make ends meet having to cover staff. The remaining 20% is drugs and other ancillaries, and drugs have been making record profits. They also create markets to target illnesses that are not necessarily unbearable, but where drugs for them can have the highest profit margins. They avoid drugs that are needed to help suffering if there is no financial incentive to do so.
All of this still leaves 45-50 million people uninsured and out-of-luck.
People appear so willing to share, but not really. They would rather have cancer victims out on the street as long as they can get an appointment to see my doctor for a headache because, well they happen to have insurance, so why should they wait.
Our infant mortality rate is down there close to 3rd world countries. Our own quality of life is lower than most of Europe from a healthcare perspective.
In case you don't know, once you get sick, it is harder to get insurance and the only way to be guaranteed coverage is if you work for an employer that offers it, which is less and less as business can't afford the TAX already imposed on them, but I guess that's fine with you and others like you.
There are much more effective ways than what we have now.
Posted by: viewlover at July 8, 2008 5:57 PM
I think what Jimmy was basically saying is that there -is- a more effective way, and that is the way its done in France. I could be wrong though.
Posted by: anon at July 8, 2008 6:32 PM
really, the financing is much more dramatic than this. Every dollar of claims is a combination of all hospital services, physicians, drugs and other things like glasses, hearing aids, etc.
The cost of these services increases around 12% a year for the last few years.
Start with $100.00 of care, the insurance companies need to gross that up 25%. That means that we divide the 100 by .75 for a cost to consumer of $133.33. The insurance companies take in $33.33.
The next year the costs have increased to 112.00, that divided by .75 is now 149.99 cost to consumer. The portion that the insurance company retains is now $37.33, thier compensation goes up with the cost of healthcare. The additional 12% does not really go to the general employees of the insurance companies, it goes to a select "few" probably count them in one hand!
Yes this is capitalism. However the question for me for a long time has been : how do you deliver compassionate care when there is a reward for not providing it?
I don't believe health care belongs in the capitalist model that is a what the market can bear model. Dialysis can cost up to $500,000 a year and the average is closer to $350,000 and that does not include your kidney! It used to cost less than $50,000 6 years ago. THe market is bearing that, but barely, the back is about to be broken.
But specialty drugs are incredibly expensive.
Some of the new cancer drugs cost upwards of $100,000 per year, that is jus the drug! Does not include hospitalizations, radiation, other doctors. Breast cancer can cost over 1,000,000 over the course of the treatment, I've seen it! How many DPT vaccines does anyone guess a million dollars can provide to needy children in third world countries? About a million!
Sorry for the rant but this is a subject of great passion for me. Reforms are needed and I don't believe people know how much medical care is costing or where the money goes. Anyone getting layed off will tell you what COBRA is being offered to them at. Single person usually around $600.00 per month. Whether you use it or not, but be caught without it and you are in bankruptcy.
Whatever candidate is elected president should be pressed to introduce some level of reform at the very least. We deserve better than what we have now. I'm a little older than most posters here, but I remember these were not issues we had growing up in the 70's. Our collective healthcare has eroded and that is a fact.
With that, stay healthy everyone!
Posted by: viewlover at July 8, 2008 6:33 PM
view lover -- if you don't like how things are done here, then move to France!
anon, I think you may have it wrong, just saying.
Posted by: viewlover at July 8, 2008 6:38 PM
oops. thought this was the real estate blog site.
Posted by: resp at July 8, 2008 7:29 PM
For a post about philanthropy, it sure got nasty. I like Jimmy's points and don't see how wearing or not wearing a flag pin has anything to do with whether the government should supply free health care. Have you seen what they provide for veterans? There is NO WAY our government could do this right on a large scale and provide quality care. Not a freakin chance, Obama or Nobama.
Posted by: Theresa at July 8, 2008 9:01 PM
Actually, just one last point. I DO in fact own a business and I have 8 employees (all engineers, in case you were wondering about the size of my payroll). So I know exactly what health insurance costs me.
And I'm a triple citizen (Canadian is one of them, American is the other, and the other one is across the pond somewhere... perhaps you can guess).
The upshot of which is, if anything really bad ever happens to me (healthcare-wise), I do have some options that you don't.
Posted by: Jimmy (Bitter Renter) at July 8, 2008 9:42 PM
This has to be some sort of record for "highest number of posts without ever addressing the actual topic".
When dad gets home and sees what you've done to his blog, he's gonna be mad...
Posted by: tipster at July 8, 2008 10:42 PM
Actually health care is a luxury for some and they have really cut back. Which is related to the article although not quite as direct as Saks or Neimans.
Jimmy, some rich people have lost a great portion of their wealth due to an illness. You claim to have the options of falling back on the canadian system but we have nothing. Why can't some of us have a back-up system as well? Something that will provide basic health care services at the very least.
Do you pay 100% of your employees insurance for both employees and dependents? I doubt it because you would be screaming bloody murder.
You probably pay the usual 50% of the lowest plan available and then only the employee part, or nothing at all. And yes, you are exactly the selfish type of person that I was referring too, the hell with everyone elses' health care needs, you've got insurance coming out the ass. A true luxury indeed, just like our esteemed royalty, the SENATE and our Government Elite.
Universal healthcare does not have to mirror any one program, it can be a hybrid of several models. The first step is recognizing that the system is broken. What business are paying now is much more than just the cost of healthcare, they are paying for the overbloated delivery system and that could be back into the actual quality of care. You can't compare these models with that the army and our gov't choses to treat our veterans.
You also don't know anything about me or my options and since I'll never ask you for a damned thing, stop being petty with your na na na na na nahhhh, it shows your imaturity and it's boring.
Posted by: viewlover at July 8, 2008 11:06 PM
viewlover, although I agree with much of what you say, there is one data point that is very misleading.
"Our infant mortality rate is down there close to 3rd world countries"
there are a few reasons for this. The one that people think: that we have poor prenatal care services for a lot of our less well-off families (although in truth most women who need prenatal care can get it in the US). It's usually a combo of the woman simply not coming in and also her personal habits (alcohol drugs abuse etc) and also poor nutrition and perhaps poor access to care. So that does hurt our rates.
however a much larger reason is reporting. In the US, we consider EVERY lifeform that passes out of a female's body to be an "infant" and if that infant dies it counts as infant mortality.
I know for a fact that in France they do not call premature babies "infants" for the purpose of infant mortality rate (as of 2002). In addition, other countries limit what an infant is by birthweight, birthheight, or Head circumference.
so as example:
if a 384 gram 22 week fetus is delivered in the US (barely viable) then it will be sent to the NICU and we may attempt resuscitation. If it passes away it's considered "infant mortality". If a 312 gram 21 infant (considered "not viable") is birthed but has an initial heart rate and gasp for breath, even for 2 seconds, it is considered an infant. as it passes away (resuscitation almost impossible) it will be considered infant mortality as well.
if the same fetus is delivered in France, Germany, Belgium, etc these sorts of infants are handed to the parents and allowed to die in their arms (or if the parents wish it dies in the radiant warmer crib). It is not considered viable and thus is not "infant mortality".
In Kenya most of the children are born outside the medical system... so it wouldn't be documented unless the family was very very rich. even then, it would not be considred infant mortality.
FWIW: this is my area of expertise, and I have been personally involved in this exact scenario in every one of those countries, although not since 2002 (France and Beligum) and 2001 (Germany) and 2004 (Kenya)
Posted by: ex SF-er at July 9, 2008 5:33 AM
For a "close to 7-figure" earner u sure are easily annoyed. But anyway, I'm sure that whatever you do for work is a great service to humanity and its nice to know that all of your employees get full medical and dental and maybe even a bonus at Christmastime if they've been good (which I admit we can't afford either).
Now, take a deep breath ... try to relax. It could be worse. You could be renting (like some of the other losers here).
Posted by: Jimmy (Bitter Renter) at July 9, 2008 7:37 AM
I also have a seven-figure income if you include the decimal point and the cents. And I also have dramatically cut back my purchases from Saks, to none. I guess the recession is now official. (but I certainly would not give a penny to some animal cause when billions of humans live in abject poverty around the world).
Posted by: anon at July 9, 2008 7:48 AM
this turned health care all of the sudden I guess.
Back to the story. I was in Union Square yesterday afternoon shopping with a 7 figure friend (I am saving since I am only a 6 figure person (-;) but anyway there seemed to be no hesitation for people to spend.
Granted a lot of the people seemed to be out-of-towners, I striked up a conversation with one woman at Neimans whom was buying close to 3k worth of stuff, and when I asked her what part of town she lived in she simply replied "Soma" so it seems no everyone in town is hurting...
Posted by: Ryan at July 9, 2008 9:20 AM
I'm in my forties and have acquired a lot of luxury material items during my 30s and 40s. I'm lucky and am just realizing that I really don't need a brand new Rolex each year to make a statement or to prove a point. Nor does it make me feel any better about myself.
To each his own about charity choices. Pretty harsh words you're using..."would not give a penny....". Some things are better left unsaid. I hope you don't come back as a homeless dog in your next life.
Posted by: rinconrez at July 9, 2008 9:35 AM
Hi Jimmy, it could be worse for you too, you could have cancer and no insurance. We should count our blessings and not tell people to get out of town if they don't like the way things are. Ultimatums like that can be pretty annoying and usually bring out the worse in people.
ex-sf, thanks for that clarification on infant mortality. I was shocked when I saw that statistic but knowing how it is calculated helps.
Posted by: view lover at July 9, 2008 9:41 AM
I am also an employer and everyone who works for me gets the very best Blue Cross plan or the equivalent cost Kaiser plan. I pay 100% of the costs.
My dental plan is that I pay the first $400 per year of non-cosmetic dental costs with $0 deductible, and you can carry forward your unused benefits.
The fallback everyone thinks is so great has to be paid for by SOMEONE. And when costs are free, demand goes way up. I'd be happy to pay for people's health care if they were required to be in shape and never smoked to get it, and couldn't eat the crap that passes for food in this country. That would eliminate 90% of the health problems in this country and then no one would NEED health care.
But people want me to pay without doing anything themselves to keep their health care costs down, and that's just wrong.
Posted by: tipster at July 9, 2008 9:43 AM
viewlover should stick to something he knows, which is obviously not the internal costs of health care. I work for one of the largest non-profit health care companies in this country and if the margins where *anywhere* near what he claims everybody that works for me could afford those gold plated hummers.
Posted by: anon at July 9, 2008 9:44 AM
You are telling me that your company does not have expenses at least 15% for admin, 2% for profit and another 7% for commissions, which is very conservative? That adds up to 25% buddy. So NO, those margins are just the beginning.
Also, you think there are no margins in Pharmacy and Hospitals? Do you remember the Redding California hospital that was doing cardiac by-passes on patients that did not need them in order to boost profits? How much do you think they milked the system for? HOw do you think pharmacuetical companies can afford to have advertising they way they do if not due to the profits they make, they could put it into R&D, but why? Check out the stock for Genentech, CHW, and Tenent hospital systems, they have not been hurting long term.
That does not include the reinsurance world where the profit margins have to be 15% given the risk. And you think the people in these fields work for free? I know more millionaires from this line of work that you can imagine.
These compensation percentages are constant, and health care is down to 11% trend for the current year after 15% trends for 5 or more years straight. We bitch about real-estate agents getting increased compensation because they hold their commissions at 5-6%, that's nothing compared to health care.
Besides, not for profit is just a tax filing status, it does not mean that your company does not make any profit.
You obviously do not work on the financial side of health care. And apparently you are quite blind to the selling costs of delivering health care. How much does your none-for-profit have to pay the brokers and not just in commissions, but in overrides? You work for Kaiser? They are the largest, AND, they have started to pay brokers quite a bit although they did not use to.
Besides, one of my points was that the 12% goes to a select few. I'm not surprised your staff is getting shafted in the name of none-for-profit of course.
How much do you think goes to health and welfare consultants? That's why there is a world of special interests that keep the system where it is with no regard for the patients.
My whole point is that there is a lot of money being made, and the employers are paying for it. And as tipster eluded to, the overall health of the country is getting more expensive as our overall health deteriorates.
If you are fine with the system, so be it. I'm not hear to change your opinion, I'm just expressing mine and it's not as far off base as you may make it out to be.
Posted by: view lover at July 9, 2008 11:09 AM
Have you seen what they provide for veterans?
Not sure what you're talking about here Theresa? VA hospitals always have very high ratings and are one of our brightest publicly run entities. You're not talking about Department of Defense run hospitals like Walter Reed, are you? Those are not for veterans, but for active service members.
Posted by: Theresa checker at July 9, 2008 11:19 AM