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:
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.
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