Money & Business
Money Watch: Now, All Car Buyers Are Employees
In the aftermath of 9/11, U.S. car companies relied on zero-percent financing deals to get customers back into showrooms. Today, U.S. automakers face yet another challenge: moving gas-guzzling SUV s at a time of sky-high oil prices. In an effort to jump-start sales, Detroit is extending its traditional employee discounts to pretty much anyone. GM started the trend in early June, offering discounts of around 15 percent on cars purchased by August 1. Last week, Ford introduced its "Ford Family Plan," while Chrysler unveiled "Employee Pricing Plus." Both extend employee discounts of around 10 percent to the public, in addition to $500 to around $3,000 cash back, depending on the model. Of course, if you're a car buyer, you don't want to be treated too much like an employee. Last month, Ford and GM announced plans to lay off thousands of their workers.
Money Watch: Surprise! Homes Do Not Beat Stocks
Americans are hopped up on real estate. Last year, 1 in 4 homes was bought not as a primary residence but as an investment. Given that home prices soared during the recent bear market while stocks faltered, it's easy to understand the infatuation with homes. But has residential real estate done that much better than stocks recently? Actually, no. While it's true that bidding wars have sent home prices skyrocketing in ultrahot markets like South Florida or Silicon Valley, nationally the gains have been much more modest. Between the end of 2002 and May 2005, the median sales price of an existing single-family home jumped 28 percent to $207,000, according to the National Association of Realtors. In the South and Midwest, prices increased 21 percent. Meanwhile, the Standard & Poor's 500 index of blue-chip stocks is up 41 percent during that stretch. Over the past five years, you'd have done better with the stocks of home-building companies than with real houses. Home prices rose 53 percent in that period while home-building stocks returned around 50 percent annually . "The reality is, stocks have crushed real estate," said Jonathan Golub, a market strategist at JPM organ Funds.
Money Watch: Is Growth the New Value?
During uncertain economic times, investors typically avoid growth stocks--shares of companies that are expanding rapidly but whose stock prices are volatile. Buying shares of tech companies, for example, was the classic growth play of the late 1990s. But in recent years, tech stocks have taken such a beating that many are being classified as value plays, shares that trade at a relative discount to the broad market. In fact, a majority of tech stocks in the S&P 500 are now in its value camp. That means they may be worth a look.
The Week Ahead: Cooling Inflation
This week, the Labor Department will release June results for its two key inflation gauges: the consumer price index (which measures inflation at the retail level) and the producer price index (measuring changes in wholesale prices). For much of the past year, stock and bond traders have considered inflation a real threat, especially as oil prices have climbed above $60 a barrel. But recently, there's been a major shift in thinking. A survey of fund managers last month by Merrill Lynch shows that 57 percent think inflation will either stay the same or decline over the next 12 months, versus just 11 percent who thought so in March. Even Bill Gross, managing director of PIMCO and the most respected bond manager in the country, now says inflation "may be in the process of peaking in the next few quarters."
The Week Ahead: Retail Rebound
As Wal-Mart goes, so goes the retail economy. Since June sales at the world's largest retailer were better than expected, economists now believe overall retail sales rebounded in June, climbing around 0.7 percent. The Commerce Department will release those figures on Thursday.
Bouncing Back?
Change in retail sales growth
July 2004 0.8 pct.
Nov. 2004 0.0 pct.
July 2005 0.7 pct.*
*Estimate
Sources: U.S. Census Bureau, Reuters
Chart by USN&WR
This story appears in the July 18, 2005 print edition of U.S. News & World Report.