Mike's Minute: We're splashing the cash, but is it sensible spending?

Author
Mike Hosking,
Publish Date
Wed, 28 Oct 2020, 9:48AM

Mike's Minute: We're splashing the cash, but is it sensible spending?

Author
Mike Hosking,
Publish Date
Wed, 28 Oct 2020, 9:48AM

So, are we spending money? Yes, we are. But are any of us thinking about what we are spending it on, and why? And is it money wisely spent?

I like the idea that the economy is, at least, in part being driven by domestic demand. I don't like the idea that as we focus on all this domestic demand, we forget the many thousands who are being left behind because of the carnage of the health response that has led to record contractions in the economy.

What we must never forget is the simple truth that for all the boom times and spending we are seeing in some areas; two inescapable things are still at play. One, a lot of it is on borrowed money, which will have to be paid back even if money is cheap. Two, no matter how good the numbers look right now, they still haven't made up for the losses we have seen to this point.

In other words, you can find month on month increases in spending in various sectors, but when you go year on year, not nearly as many are up on an annualised basis.

There are some things though I hope are permanent. Baches are big. Property generally is big but baches are big. People want to be by the sea and that is no bad thing. That's an asset apart from anything.

But what about water tanks? Water tanks are booming. Good news if you are in water tanks and the really good news about water tanks is they're locally made. So, who knew if you got into the water tank business, you'd be booming because of drought?

But when the water is back, which it will be, what are you doing with your water tank? Are you becoming an environmentalist and saving the planet? That would be no bad thing. So maybe out of the adversity of drought and an incompetent Watercare, the water tank business booms and we save the planet.

But what about boats? Boats are booming too. But why did you buy a boat? Because you can't go anywhere that’s why. But boats ardent cars. We can all drive cars, but we can't all drive boats. You're either a boatie or you're not.

And what are you doing with your boat when the vaccine arrives, the planes are off again, and your holiday in California or London is back on? Are you selling your boat? Are you losing money on your boat?

How much of what we are buying is well thought through, solid investment versus how much is a desire to unload cash because we are bored?

If it's the latter, guess who's booming next year? Trade Me.