Tags: Housing | Starts | Hit | 30-Year | High

Housing Starts Hit 30-Year High

Thursday, 22 December 2005 12:00 AM

Do gift cards, so popular during the holiday season, carry hidden fees and other charges that take a lot of the joy out of using them?

Congress seems to think so.

The Wall Street Journal radio network is reporting that Washington will soon take a look at the $18.5 billion (in 2005 estimated sales) gift card market.

The Journal says that Congress will ask the Federal Trade Commission to examine the hidden fees embedded into gift cards.

The concern is that there is no adequate notification of these fees - to either card purchasers or recipients who could be using the cards without the understanding that they may have to pay out of their own pocket to use them.

How prevalent are these added fees?

It's hard to say, as manufacturers have done yeomen's work in burying the hidden card fees in corporate legalese.

"The art of irritating and sneaky fees has reached new heights in this 21st-century version of gift certificates," says a recent MSNBC.com article titled "Are Gift Card Makers Playing Scrooge?"

"There are sign-up fees, transaction fees, dormancy fees and outright expiration dates. Poorly timed use of the cards could make the $50 gift worth more like $40, $30, $20 ... or in some cases, nothing."

The primary value drain is "dormancy," or non-use fees of gift cards. MSNBC says that some cards lose their value entirely after a year or two.

"Companies count on a certain number of consumers who drop the cards into the sock drawer and forget about them. It's easy money," says the article.

So what is MSNBC's advice?

Keep holiday cards store-specific, make sure to read the small print (usually on the back of the card) and use the cards within 90 days of receiving them.

There is no shortage of economic doom-and-gloomers who fully expect the economy to collapse.

Consider national columnists like The New York Times' Paul Krugman and The Providence Journal's Froma Harrop. Both have released columns in recent weeks discounting economic growth and trumpeting an economic environment fraught with high interest rates, soaring unemployment and low consumer confidence and stock market performance.

But the numbers point to solid economic growth.

The most recent example of the U.S. economy's continuing unbridled gains comes from November's wholesale price and housing benchmark numbers.

According to the Labor Department, wholesale prices posted their biggest decline since March 2003, while housing activity stayed strong. Both numbers were better than analysts expected.

The producer price index (PPI) sank 0.7% in November, due to a 4% slide in energy costs, while housing starts climbed 5.3%. That's a sharp reversal from October, when housing starts slid 6.6%, primarily due to fears over rising interest rates.

"Consumer prices showed some pretty big declines. That's always welcome," Stuart Hoffman, chief economist with PNC Financial Services, told Investor's Business Daily on Tuesday.

IBD adds that the construction industry remains bullish on housing going into 2006.

"Despite a lot of talk about just when the housing boom will end, permits for future building rose 2.5% to an annualized 2.155 million, showing that builders are still willing to bet on future buyers for their new houses."

The paper adds that housing starts are still expected to end the year at their highest levels in more than 30 years.

The auto industry, one of the true weak spots in the American economy, suffered some more sticker shock early this week as General Motors took a major hit on Wall Street.

In Tuesday trading, GM shares fell 5.8% to $19.81, reaching levels not seen since October 1987, according to historical data from Thomson First Call.

Thomson says that low sales, bankruptcy fears and the threat of a strike at Delphi - GM's biggest supplier - have kept the auto giant in financial freefall.

And The Wall Street Journal says that Toyota is about to take the lead over GM as the world's leading automaker. But rumors of GM sliding into bankruptcy are "overblown," says the paper.

Ford Motors isn't doing that much better.

Company stock slid 1.3% to $8.12 on Tuesday, just 24 hours after a key credit agency cut Ford's credit rating to "junk." The company is also plagued by ongoing distribution woes, as suppliers complain that key parts shipments are habitually late.

It's Christmas, that time of year when Wall Street traders start to think about a nice glass of eggnog, dancing sugarplums ... and next year's economic predictions.

First up is Greg Church, founder of Church Capital Management. He says there are many questions facing the financial markets and the economy going into 2006.

"When will the Fed stop raising interest rates?" he asks. "Will consumers have money in the bank after a winter of higher energy costs? Can the U.S. handle another year of current-account deficits?"

The answer lies with U.S. corporations, the Federal Reserve, consumers and government - who will all play a role in how this potential "perfect storm" will impact the markets in 2006.

"The potential coincidence of a several factors could make 2006 a tricky year for investors," he adds. "The key to success in 2006 will be patience, caution and stock selection based on strong fundamentals. 2006 will certainly be a stock-picker's market."


















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Do gift cards, so popular during the holiday season, carry hidden fees and other charges that take a lot of the joy out of using them? Congress seems to think so. The Wall Street Journal radio network is reporting that Washington will soon take a look at the $18.5...
Thursday, 22 December 2005 12:00 AM
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