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Five Things You Need to Know: CPI, Get a Job, XMSR, Yuan a Travel, The Big House


What you need to know (and what it means).


Minyanville's five things you need to know to stay ahead of the pack on Wall Street:

1. CPI

The government figures on inflation were released about a half-hour ago. What do they mean?

  • The Consumer Price Index for April came in at 0.6% for April, above expectations of 0.5%.
  • The increase in the CPI was the highest since a 0.7% increase in January.
  • The core CPI is up 0.3% for two straight months.
  • The increase in the core price was due to energy, naturally, but most importantly, about half of it came from shelter cost increases, which were up 0.3%.
  • Food prices were flat for the first time since last June, while apparel, medical care, and education costs were each higher.
  • But this CPI print is all about the rents. Why? Two reasons.
  • First, rents have lagged home prices for years. Makes sense. With interest rates at historically low levels, for most people buying a home using 10-1 leverage (assuming a 10% down payment) just made good, (ahem) sound economic sense.
  • Second, how fast is housing slowing, exactly? And if housing, which has been a tremendous driver of the economy, is slowing while rental costs are rising, well, hmmm... might Goldilocks not find her economic porridge to be a little too cold.
  • Sure enough, the rental prices category rose 0.4% for the second month.
  • Of course, that's just us talking. The Fed, according to Fed Governor Susan Bies, doesn't care so much about rents. "We've come through a period of weaker rents. Now, housing has really sort of peaked ... that may rejuvenate rents and so you may see may see that, in turn, higher (CPI) inflation going forward," she said back on May 4. The Fed cares more about the core personal consumption expenditures index than the CPI, she said.
  • Alas, as the futures have turned sharply lower on the CPI number that the Fed doesn't care so much about, it appears that the relationship between the PPI and CPI is something the market cares about at least.
  • After yesterday's soft core consumer goods PPI yesterday (+0.1%), the expectation was priced in that the CPI would most likely be at risk for a downside print. Seriously!
  • Let's review. Core CPI, which the Fed doesn't care so much about, came in ahead of the soft consumer goods PPI yesterday, and printed 0.3% for the second straight month.
  • Did we mention that the market has only seen back-to-back core CPI prints of 0.3% once in the past decade?
  • Pardon us, but breakfast is here and we need to fetch our wheelbarrow so we can pay the man.

2. Get a Job? Ok!

The job market for college graduates is the best in years, according to the USA Today.

  • Employers expect their college hiring for 2005-06 to surpass that of the year before by nearly 14%, according to a study by the National Association of Colleges and Employers (NACE), the USA Today reported.
  • The average starting salary offer for accounting degree graduates is up 5.4% over last spring, to $46,188, while salary offers for computer-engineering graduates are up 5.3%, to $54,200.
  • Also, corporate recruiters plan to hire 18% more MBAs this year than in 2004, according to a survey by the Graduate Management Admission Council.
  • Total compensation, including benefits and bonuses, is $99,737, up from $77,066 in 2004.
  • Let's review... again. Energy is rising, but so what, energy gets a pass because it's probably just due to temporary "geopolitical" reasons. Rental costs are rising. But that's ok, because the housing market is cooling, which the Fed wants. Employment costs for college graduates are rising. But that's ok, because the Fed uses the Labor Department's employment cost index which, when last reported at the end of April, showed its slowest quarterly increase in seven years.

3. Record Industry Sues XMSR

The recording industry has filed a lawsuit against XM Satellite Radio (XMSR) over a $400 iPod-like device that allows XM customers to record up to 50 hours of music and select recordings by song and artist.

  • The lawsuit, filed Tuesday in New York by the recording industry's largest labels, seeks $150,000 in damages for every song copied by XM Satellite customers using the devices.
  • The device, called the "Inno," went on sale weeks ago.
  • The lawsuit does not seek damages from individuals who use the device.
  • The labels are currently in talks with both XMSR and its rival Sirius Satellite Radio (SIRI) to renegotiate digital royalty contracts for broadcasts.
  • XMSR is the largest single payer of digital music broadcast royalties, but the issue is whether the Inno device is a digital download service not covered by the royalty agreements.
  • If successful, the lawsuit would force the company to pass the additional costs on to consumers.

4. Have Yuan, Will Travel

Chinese and international travel experts predict that by 2010 as many as 50 million Chinese will travel abroad, according to the International Herald Tribune.

  • In 1995, only 4.5 million Chinese traveled overseas.
  • Travel industry experts predict that 100 million Chinese tourists will travel overseas annually by 2020.
  • As recently as the late 80s, only Chinese elite were permitted to travel overseas.
  • The most popular destinations for the Chinese are Japan, Vietnam, South Korea, Russia, Thailand and the United States.
  • For comparison's sake, last year 61.7 million Americans traveled abroad.
  • Minyanville predicts that should the dollar continue its pace of decline, by 2010 the number of American traveling abroad could drop to as low as 237, at which point they will no longer be referred to as "tourists," but as fugitives.

5. The Big House

A Southern California oceanfront home is listed for $75 million, which if sold would set a record, according to the National Association of Realtors.

  • The home is a 30,000-square-foot custom-built estate.
  • It belongs to Frank Pritt, founder of software company Attachmate Corp.
  • It features a car museum, entertainment complex, gymnasium and mini water park.
  • The record U.S. home sale price was posted two years ago when Ron Perelman sold his Palm Beach, Florida, home for $70 million, according to the National Association of Realtors.
  • But wait, there's more! (When we're talking real estate, there's always more.)
  • Donald Trump's Maison de L'Amitie in Palm Beach, Fla., is listed at $125 million.
  • Three Ponds Farm Estate in Bridgehampton, N.Y., has been on the market for more than a year at $75 million.


Minyanville contributors may trade securities that are discussed on the site, both before and after the articles are published and/or may have a position in such securities for either personal or firm account(s). Minyanville contributors will indicate whether he or the firm has a position in stocks or other securities in any of the companies he discusses in an article. He will not disclose his or the firm's ownership of any securities issued by companies that are not discussed in an article. The disclosures will be accurate as of the time of publication of an article and may change at any time thereafter without notice to the reader.

The information on this website reflects an analysis of market conditions by Minyanville contributors and should not be interpreted as or deemed to be a recommendation to any investor or category of investors to purchase, sell or hold any security. Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Minyanville contributors will not respond to requests for individual and specific investment advice.

The views expressed on this website are solely those of the writers whose articles appear on this site and do not necessarily reflect the views of the Fund or of any other person except where expressly indicated.

Copyright 2006 Minyanville Publishing and Multimedia, LLC. All Rights Reserved.

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The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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