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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (27115)	2/11/2005 11:59:14 AM
From: kailuabruddah	Respond to of 306849

Government Manipulation of the CPI Contrary Investor had a great piece yesterday (subscriber section) which someone posted (with CI's permission) on another SI board. Here is that link: idorfman.com The gist of it is that (as probably everyone reading these boards is aware) the CPI very much understates what Joe and Jane 6-pack are experiencing in terms of rising prices. Jim Rogers has written about this in several articles: jimrogers.com See especially: They Are Lying To Us Again Unreal Estate

To: John Vosilla who wrote (27115)	2/11/2005 2:32:04 PM
From: GraceZ	Read Replies (1) \| Respond to of 306849

Its a sort of twin problem. Inflation is definitely with us and while it is at a low rate it is unrelenting. Since people have to make a choice where to spend their money every day (wage advances have been largely non-cash benefits in recent years), they've correctly chosen to spend it on those things which are not discretionary (or in the case of houses, those things they think will be more expensive in the future). Anything that is discretionary is cut out, driving those prices down. Look at travel, restaurants, consumer toys, clothing, even cars....all are experiencing downward price pressure until you get up to the luxury market (which is still hitting ridiculous highs). Food isn't experiencing price inflation above the CPI (I track it myself over years) until you get to health foods and specialty foods which are rising at a much faster than CPI rate. I attribute this to the serious competition in the supermarket sector. A supermarket makes its nut by how many times they can turn over a $1 of inventory over a given period. If say you can raise your turnover from 4 to 6 times a month you can get by with extremely small margins. If it goes from 6 to 4 you are in serious trouble. Since everyone had to switch to computerized POS and just in time inventory controls, a supermarket can tell almost immediately when they raise prices whether or not it will impact that turnover rate. Walmart can tell you how many fewer dollars in bananas they will sell on a Thursday if it snows. You see the supermarkets raise prices every January, testing to see if they'll stick, only to take them back by the end of the month. This real time auto feed back is operational in almost all successful retail outlets. Consumers have been trained to look for these price roll backs and exploit the software that creates price markdowns. When I want to buy new computers, I submit numerous online orders to Dell spread out through the quarter until I get the price I'm willing to pay for my work computers. If you hit the jackpot on their sales optimizing software you can save significant money within a short period of time. I do the same thing with airline tickets and travel.