Not last weekend.
While there were definitely more people boating than there have been this summer so far, the lake was still pretty empty when compared with past years. The local grocery store was a ghost town the day before the holiday. There was hardly anyone scrambling to pick up last minute hot dog buns, citronella candles and impulse-buy beach toys. I even got a parking space on Main Street in town.
Not a good sign.
At first having fewer people on the lake seemed like an unexpected gift. It allowed us more time to water ski and wake board, as those activities can only be done when the lake is completely flat, often forcing you to wake up at 6 a.m. on your vacation just to get some runs in. But deep down I knew this wasn't really as good as it seemed because local businesses would be hurting. In our area, summer is king and if you don't make money then, your business might not survive to re-open next year.
Sticking Closer to Home
The decrease in boat traffic can be partly blamed on to high gasoline prices. If you think $4 a gallon is a lot for your car's 15-gallon tank, try $5 a gallon for your boat's 60- or 100-gallon tank. Many people were just sitting on their boats with them still tied up to their docks, not making it much farther than their backyards.
There's a marina a few doors down from our house, where I once rented jet skis to tourists and pumped gasoline to the historically big summer crowds. That was when gasoline was about $2.50 on the lake and we thought we had it bad. How silly that seems now.
Usually during Fourth of July weekend there is an absolute run on gasoline at the marina, leaving them with none to sell by the end of the day. This year we were able to refuel as late as Saturday evening. While we were filling up, I asked the kids who have taken my old summer job about how busy they've been. They all said that the holiday weekend was much slower than any in recent memory and their tips have dwindled to almost none.
It was reported that, in March, Americans drove 4.3% less, or 11 billion fewer miles, than last year. As gasoline prices go up, driving goes down. It's too soon to know the figures from the Fourth of July holiday, but I'll bet that they were down quite a bit from previous years.
The majority of people who have second homes or vacation on Lake Winnipesaukee are from New England, primarily Massachusetts. So while logic would indicate that high gasoline pries would merely keep people from taking long trips, it appears that it's keeping people from taking any trips at all.
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GM's Employee Pensions
On Thursday, Michael Cintolo asked readers: "How much of a possibility is it that General Motors will not only go bankrupt, but actually cut some of the benefits it gives to retirees?" He urged readers to respond and share their own experiences with this subject. We received many great letters from our subscribers and have printed some below. As always, send us your questions, comments and suggestions.
"Employee pensions are safe. They are insured by the Pension Benefit Guaranty Corporation, a US Govt. agency. PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of nearly 44 million American workers and retirees in 30,330 private single-employer and multiemployer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusted by PBGC, and recoveries from the companies formerly responsible for the plans. Go www.pbgc.gov for full information.-J.B."
In Canada, it the law that companies have to manage their pension funds as a separate entity from the business. This way, if the company goes bankrupt, the pensioners are protected. Often times the company will still try to grab some of those funds but they usually have a hard time doing that. Many arguments have been made about any surplus funds that the pension fund may have, but the courts usually side with the pensioners, as any surplus in the fund really belongs to the people who put the funds there in the first place rather than belonging to the people who manage the funds (presumably for a fee).
When the company my Dad worked for went bankrupt he had the option to leave his pension with the management group or to transfer it (the computed present value) into a registered plan; he chose to transfer it into a self managed plan. If I were your Dad I would investigate this option. Ask the human resource contact that your Dad communicates with at GM if the pension (all or part of) is transferable. If it is, that would obviously be the best case scenario. Good luck!-M.P., Toronto"
"A good friend had a nice pension from US Airways until the company filed (the 1st time), my friend ended up with a very small partial pension from PBGC. My guess is that GM will walk away from their pension obligations, leaving the US taxpayer with the bill. Seems to be the status quo these days, executives ( + politicians?) make bad decisions, then leave rather than taking responsibility for their actions. Not bitter, just a realist.-R.W."
"Dear Mike; My brother was a captain with United Airlines. He lost half of his pension. Instead of kicking back on easy street he's out hustling for a job at age 67. Not much fun but true.-G. L.S."
Not to worry you any more than you already are but look at the airlines and what they've done with their pension funds. Many pilots I know about have to continue working after their retirement because their funds have been slashed and they have about 30% of what they had planned to live on because of mismanagement and the inane laws that allowed the airlines to use pension funds and "pay" them later when later means there may not be funds left to pay back. I hope your Father fares better than the pilots did. Best of luck to you both.-V.T., Seattle Pilot"
"Regarding General Motors:
I am a lifetime Detroiter and it's obvious that the writing is on the wall for all of the Big Three. All 3 will go broke and disappear in the next 5-10 years for a variety of reasons. No one knows which company will go first or last.
1. Oil prices and upcoming shortages. The only answer is conservation (Less use of a car) and Mass Transportation. Therefore the private automobile will be a less common used item. Only the companies with the best and newest in gas saving technology will survive. That will not be a US company. Toyota or Honda will survive the best!!
2. The UAW and the Detroit culture has damaged and will kill the big three. No way to reverse this culture.
3. Current pension obligations are too much for a smaller company to handle, and that's what the big three is becoming, the small 3.
4. Commodity prices such as plastic and steel are climbing, again hurting the auto industry.
The auto industry is going the same way of the textile industry, electronic industry, etc. This is the death of US industry and without a change in government policy and a change in the culture of the US workforce, nothing will save it. Very sad but true. Tell your Dad to sell his GM stock in December and stay out of the market at his age. Tax-free Munis are the best for a semi retired guy. Just my opinion. Best personal regards.
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In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, we have links below to each issue.
Cabot Wealth Advisory 7/7/08 - Solar Power Review
On Monday, Timothy Lutts reviewed one of his top investing concepts: solar power. Tim discussed the 17 publicly traded solar power companies in the market and reviewed why some are acting well and why others aren't making the cut. Click the link below to see the stocks featured in the issue and read the full text.
Cabot Wealth Advisory 7/10/08 - Questions, Misconceptions and Traps
On Thursday, Michael Cintolo wrote about why picking the bottom by buying sinking financial stocks in not a good growth investment. He reviewed the bearish changes in the commodities stocks and pondered what will happen to GM's pensions with the company going down the tubes. Click the link below to read the full issue.
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Until Next Time,
Editor of Cabot Wealth Advisory