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That's exactly why bubbles form and lead to economic cycles: people get too confident and overextend themselves. In this particular cycle, more companies seem

by gniv 7y ago

That's exactly why bubbles form and lead to economic cycles: people get too confident and overextend themselves. In this particular cycle, more companies seem to be using this profitable business model: charge huge margins for your product and sell it on credit. Bikes, SUVs, higher education (phones, too, but that's not new). When the economy hits a blip -- say, due to a trade war -- people start losing their jobs, default on the loans, and things spiral down. (To be clear, I'm not saying it will happen soon. It might, and probably will take years and be a mild pop.)

MuffinFlavored 7y ago
> people get too confident and overextend themselves. It sounds like you are stereotyping Peloton purchasers into one group, then assuming that the majority of them can't afford nice things. What if you look at it from the flip side and say "people buying $2.4k in-house bikes have a lot of money and all is well in the world"?
- Traster 7y ago
  People with lots of money don't buy on credit because the credit is expensive. So it really comes down to whether most purchases are on credit or not. US consumer debt peaked in 2008/9, dropped until 2014 and started rising again - it's now higher than 2008/9. https://www.marketwatch.com/story/us-consumer-debt-is-now-breaching-levels-last-reached-during-the-2008-financial-crisis-2019-06-19 https://www.marketwatch.com/story/us-consumer-debt-is-now-br...
  - wastedhours 7y ago
    > People with lots of money don't buy on credit Interesting, but lots of wealthy people do finance their purchases, especially if they are active investors. Someone elsewhere in the thread mentioned that the Affirm rate is de-facto 0% if you factor in the subscription for the full-term. Taking that as fact (apparently it's changed now, so can't 100% confirm), you'd have to be pretty anti-debt (or lacking in cashflow) to pay in full on that rather than earn interest on the balance for 3 years if you intended to book the subscription anyway.
    - sangnoir 7y ago
      > Interesting, but lots of wealthy people do finance their purchases, especially if they are active investors. The wealthy borrow in order to get tax-advantaged liquidity (borrowing against, instead of selling their securities which attracts immediate tax obligations). I'm also certain the wealthy are not borrowing at 27% APR - they'll likely get a 5% APR loan from a bank and use a small fraction of it to buy the Peloton bike in cash.
- gniv 7y ago
  > It sounds like you are stereotyping Peloton purchasers into one group, then assuming that the majority of them can't afford nice things. I did not mean to do that. In fact I was on the brink of deleting my comment, to avoid this exact misunderstanding. I wanted to point out that getting expensive things on credit is risky for most people who cannot afford to buy them straight out.

by gniv 7y ago

MuffinFlavored 7y ago

> people get too confident and overextend themselves. It sounds like you are stereotyping Peloton purchasers into one group, then assuming that the majority of them can't afford nice things. What if you look at it from the flip side and say "people buying $2.4k in-house bikes have a lot of money and all is well in the world"?

Traster 7y ago
People with lots of money don't buy on credit because the credit is expensive. So it really comes down to whether most purchases are on credit or not. US consumer debt peaked in 2008/9, dropped until 2014 and started rising again - it's now higher than 2008/9. https://www.marketwatch.com/story/us-consumer-debt-is-now-breaching-levels-last-reached-during-the-2008-financial-crisis-2019-06-19 https://www.marketwatch.com/story/us-consumer-debt-is-now-br...
- wastedhours 7y ago
  > People with lots of money don't buy on credit Interesting, but lots of wealthy people do finance their purchases, especially if they are active investors. Someone elsewhere in the thread mentioned that the Affirm rate is de-facto 0% if you factor in the subscription for the full-term. Taking that as fact (apparently it's changed now, so can't 100% confirm), you'd have to be pretty anti-debt (or lacking in cashflow) to pay in full on that rather than earn interest on the balance for 3 years if you intended to book the subscription anyway.
  - sangnoir 7y ago
    > Interesting, but lots of wealthy people do finance their purchases, especially if they are active investors. The wealthy borrow in order to get tax-advantaged liquidity (borrowing against, instead of selling their securities which attracts immediate tax obligations). I'm also certain the wealthy are not borrowing at 27% APR - they'll likely get a 5% APR loan from a bank and use a small fraction of it to buy the Peloton bike in cash.
gniv 7y ago
> It sounds like you are stereotyping Peloton purchasers into one group, then assuming that the majority of them can't afford nice things. I did not mean to do that. In fact I was on the brink of deleting my comment, to avoid this exact misunderstanding. I wanted to point out that getting expensive things on credit is risky for most people who cannot afford to buy them straight out.