SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: orkrious who wrote (27891)3/5/2005 4:10:59 PM
From: Wyätt Gwyön  Read Replies (1) of 110194
 
Lifetime is going to destroy Franklin, and it's all because of cheap, overabundant capital.

i'm not sure if it's "overabundant capital" which is the culprit in your example. after all, Franklin is offering to reduce your fee by almost 50%, and presumably they do not think they will be losing money on you at that price. this suggests that they had unsustainably high margins and were thus vulnerable to poaching.

$59 a month does not strike me as an unprofitable fee for a health club. they have sprouted up around here like mushrooms, and i think many are like $20 or less.

the key factor i would look for, in terms of cheap and overabundant funds turning into malinvestment as opposed to a savvy operator attacking a competitor's excessive margins, is a discontinuity of profitability. in your example, i would think Lifetime is profitable, albeit at lower margins--hence, there is profit continuity in the "high-end health club" niche of Detroit, and the addition of that capacity is not deflationary malinvestment.

by contrast, in the telecom bubble, excess fiber optic capacity was added in such bulk that there was no profitability prospect for capacity additions. the result was that not only were the old-line businesses (long distance) made unprofitable, but the new ones were also unprofitable from the get-go. what remained was a deflationary mountain of excess capacity that we are still trying to work off.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News