Economics and train prices

Just my opinion but, no to every question you asked, except the last one.

I don't expect train or model train related goods to decrease in price at the manufacturing level, or at the corporate level.  I don't think we will see goods decrease in price anytime soon, and I also do not believe prices for goods are drastically affected by a drop in oil prices.  A rise in oil prices surely results in higher prices for everything, however.

quote:

As the dollar continues to increase in comparative value and oil prices fall (needed for transport, plastic, etc.), will we see the importers lower their list or wholesale prices?.

I don't see any other prices dropping. Many businesses seem to use rising oil prices as an excuse to raise prices, but those prices never go down when oil prices fall.

As C. W. notes, you'll likely see train prices drop about the same time airlines reduce their ticket prices due to cheaper oil..........

Prices will continue to rise and any savings recognized by the train market companies will drop to the bottom line profits.

Yeah, I agree on all counts.

I haven't noticed my weekly grocery bill going down, nor price cuts at the local fast food emporiums.

Rusty

There was a recent interview in the British model railroad press with an executive for Bachmann Europe.  He said that Bachmann's costs in China were rising because of increased wages and the cost of basic materials.  He said that all modelers should expect price increases across all of Bachmann's product lines.  Bachmann is a major producer of model trains in Europe.  I believe that this is true for all train producers.

The only model train prices that are dropping are those for used equipment sold at train shows, etc.  My experience in trying to sell my own trains confirms this.  There are many bargains out there on some excellent used equipment.  Buy at a train show if you want good prices on good equipment.

Joe

As far as model train prices dropping I don't see it happening anytime soon. The reason for this is that they have built the model trains and shipping is only a small part of the whole price because a lot of trains come from China by boat, a boat is the cheapest way of shipping across the ocean with the tonnage they ship over here to the US.

I wish prices would go down too for model trains but really don't fore see any price drop anytime soon.

Lee Fritz

Interestingly enough some food prices continue to rise even though with falling oil prices it costs less to harvest and ship food items.  For example, I'm now paying $3.99 for a gallon of milk and I could go on and on but won't.  Even though food prices continue to rise good old honest Uncle Sam stopped including food prices in the inflation index some time ago so they are not figured into the cost of living.  Energy prices were dropped as well several years ago from the inflation index  when the meteoric rise in energy costs occurred.  Pretty neat trick huh?  I'm quite sure toy train prices will remain where they are or continue to increase.

No, the trickle down effect will have no impact on current O-Gauge equipment pricing. It is what it is.

I think the question behind the question which may or may not be better asked in another thread is this:

How high is too high a price? 

The prices are not too high as long as the traffic will bear it.  Stop buying everything, and prices will fall.

Bob,

Don't raise your voice too much. Last week an entire thread was deleted for saying the same. And to think no manufacture was named. Yes, that's freedom of speech to some degree. Wouldn't you agree?........Don't answer!

God Bless,

"Pappy"

Those wondering why commodity prices aren't going down with lower fuel prices need to remember that those goods are dependent upon diesel, which is not decreasing in price.  But even if diesel was dropping in line with gasoline, we all know that things will not be dropping in price.  Companies have gotten used to the new prices since the recession as the new normal.  All the fuel surcharges are no longer surcharges.  All the reduced portion sizes for good at the same price, are the new standard size.

As for the conversation about how train prices will go, it's the same as any other hobby.  My other hobby is boating/fishing and it's outright insane what boat prices are now.  After the recession, you'd think that in a luxury hobby such as boating that the prices would've become more reasonable.  Nope.  But it's because people are continuing to pay the prices.  They have no other choice if they want to stay in the hobby.  And, technology continues to increase so that makes the costs go up too.  All of this is the same with trains.  Or vehicles.  Can anyone believe that it's 40K for a pickup truck now?  On up.  But people continue to pay the price and more and more technology continues to go into them.

The fact is, outside of an enormous economic collapse far greater than the Great Recession, it's clear that prices go nowhere but up. 

Have the prices of new trains of the same or better quality, with new and better features ever gone down since they have been making them? My guess is they have not. So don't expect it anytime soon. Anything that goes down in price less will be missing something.

I buy only diesels as well, price is the issue, same as the OP stated. I try to stay in the $400-$500 range for new scale diesels. I decided early on that the scale steamers were above my pay grade, that's just too much for me for one engine. I'm sticking with diesels, however, I do think the RailKing Imperial steamers are a really good value and a very good buy.

May have to break my pricing rule and save up for some tinplate someday though. A nice set or two would really be nice to have to just get out once in a while for a few laps around the track. Some of that stuff is becoming harder to resist every time I see it or when a new catalog comes out. I am beginning to think it's a manufacturer's conspiracy against me.

Prices at train shows and meets are not dependent on the economy just the old law of supply and demand and picking it up first!

Charlie

Prices will remain at current level as long as there remains a willingness (demand) and means ($$$) to purchase.

Hi guys,

I would like to make a few corrections,  first, regarding the inflation index,  I am assuming that Okhiker is referring to the US Consumer Price Index, or CPI,  the Bureau of Labor Statistics clearly states that food is included in the index. Here is a link to thier FAQ (milk and toys are included in the example list of items):

http://stats.bls.gov/cpi/cpifaq.htm#Question_7

On train prices,  its all over the map.  In Run 276 of OGR,  Trainworld has Williams GP 9 engines for $149.99 and the dummy for $49.99!  I randomly picked up the Classic Toy Train issue from January 1998 out of my reading pile.  The Charles Ro add has an Lionel gp-7 US army engine with dual motors and horn for $159.95, so 17 years later, the same engine is $10 cheaper.

Looking more closely at the add from 1998, Ro had a Lionel #763E NYC J1-E Hudson with Vanderbilt Tender that had digital railsounds, electro coupler and command control equipped for $1099.95.  That's not too far from the price Charles Ro is selling the Lionel Nickel Plate Berkshire (a fantastic engine) today for $1049.95, or $50 bucks less (add is on page 14 of OGR Run 276.  Using that add, Ro has the Lionel ES44AC engines selling for $399.95, which is less than the #8228 Southern Pacific Dash 9 dual motors, digital sound and command control equipped, all for $584.95 in 1998. 

The last comparison is the #2338 Milwaukee Road GP9 that has 1 pullmor motor, magnetraction, command equipped and Railsounds selling for $249.95 in 1998, versus the amazing Lionel LionChief Plus GP 7 with awsome features, (which includes dual motors, great sound, operating couplers and the remote control) that George Brown notes in his review on page 33 of Run 276 is selling at a street price of about $250. 

So, if you shop around, good value can be had today.  The other point, is that the top of the line items have always been expensive;  while I was raising my family,  about all I could afford was the catalog, maybe a box car, and some toy train magizines....

quote:

I am assuming that Okhiker is referring to the US Consumer Price Index, or CPI,  the Bureau of Labor Statistics clearly states that food is included in the index.

Thanks for the link.

Some foods are included. Given the wording of the text, Beef and pork are not:

quote:

FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine,     full service meals, snacks)

I think you make some good points.  But one of the things to keep in mind when one looks at prices over time is the moving target of features.  I think the inflation-adjusted price of something equivalent to WBB's basic locos has gone up about at the rate of inflation over time.  BUT, the "basic locos" now are beginning to get diesel sound, better electronics and lighting, better smoke units, than they had twenty or thirty years ago.  As a result, something that is basically a 20 or 30 year old loco, like RMT's new GG1, undercuts that significantly - its basically as good as anything made way back when, for less money (way less money when inflation is accounted for) but its not really competitive with the current market explectation.  

The dollar going up only hurts US Manufacturing.

The low Oil prices at the moment, will shoot up, once OPEC cuts production.

The only reason they have not cut, is they are hoping the low oil prices will kill the keystone pipeline.

if that should be killed, OPEC will immediately cut production to make oil go higher.

Majority of US drilling is still on private and not Federal land.

Now we have recessions underway in Japan and Russia with most of Europe close to entering that condition. Plus growth is sharply declining in much of the emerging economic world including especially China whose growth rate estimate has declined by about 50% which may prove excessively favorable when it’s residential & industrial real estate bust reaches full impact.

All the above economic conditions are being largely negatively impacted by the collapse in oil prices that is a main cause of Russia’s decline into recession.

Despite all that, Americans will continue to pay more for "stuff", with the exception of Oil at the moment.

However, because the U.S. economy is poor at the moment, expect great prices on the auction markets for trains.

This is because weak Retail Sales will lead to cuts in GDP estimates which is why it is better to rely on the accurate reports from Consumer Metrics Institute. They have provided accurate GDP summaries and future forecasts. Thursday will bring Jobless Claims again and it will be interesting to see claims from energy states. 

Do not depend on the major news channels to provide accurate information or the Dow Jones Industrial average, which has been mostly a low volume buyers market, with high volume selling.

The DOW level is meaningless as it is manipulated by Institutions and the Daily 2pm Buy Program Express.

Money can be made with "select" DOW stocks though or the ETF if you can afford the price. Just do not use it as an economic gauge.

The catalyst for plunging prices was surprising lower Retail Sales (-0.9% vs -0.1% expected & prior revised sharply lower from 0.9% to 0.4%).

This undid Yellen’s December 17^th comments that declining energy prices would be a bonus to American consumers.

Wall Street bulls interpreted this “happy talk” to mean consumers would be running to the malls and online outlets to spend the new found wealth. But her and their bullish pundit credibility were quickly vanquished and stock fell accordingly. It’s not a good thing for the nation’s chief economist to lose his or her credibility since a lot is on the line going forward especially should it be compromised.

Don't let the employment numbers fool you, they were changed by the folks in power, a few years back, to hide the fact that "Full Time" jobs have been going bye bye, and being replaced with Part Time jobs mostly in the Services sector.

If you want to be a waiter, waitress, bus boy, etc then this economy is for you.

All this means is people selling trains for less on the auction sites, good for train buyers.

The United States Government is a master at semantic engineering so I should have been more specific.  It is true that food and energy prices are included in the Consumer price index but they ARE NOT INCLUDED when determining the CORE INFLATION RATE or the CORE CONSUMER PRICE INDEX which is utilized by the Federal Reserve Board for establishing monetary policy and to which the cost of living increases in social security/  Federal employee and retired employee pay raises are tied.  The government's position is that the prices in these two areas are too volatile to include the CORE CONSUMER PRICE INDEX.  The bottom line is that if these two pricing sectors are included the general consumer price index would certainly rise. 

Another example of government skullduggery are there unemployment statistics which DO NOT INCLUDE those individual's who have stopped looking for jobs.  How they are not unemployed is beyond me. 

In any event, regardless of government policy regarding the inflation rate I can't believe toy train prices are going to decline in the near future.

Once again, proof positive that OGR forumites should rule the world!  I nominate AGHRMatt for Chief High Exalted Main Grand Poobah, since he already has expressed a desire to subjugate the human race.

Seriously, if economists with degrees out the wazoo can't get it right how can we?

Pete

njscott,

    In reality comparative prices in our hobby reflect that purchasing an O gauge Train set or individual pieces there of has not changed very much.  In 1900 it took the middle income mans average salary, of a months pay to purchase his childs Tin Plate Train to go around the Christmas Tree.  My Grandfather set money aside each pay day, to purchase my fathers Lionel 263E Tin Plate Work Train Set for Christmas.

Today we do the same thing, using charge cards, and paying on them every month.

In reality with all the new electrical engineering in these modern toy trains, we actually get way more for our money, than when our Grandfathers purchased the original Lionel

conventional trains, for actually similar cost.  Well made O gauge trains have never been inexpensive, many families in my fathers era could not afford to own them. 

Our hobby prices are not coming down, except maybe for the used stuff, which will vary with the economy, as people try to add to their monthly income, by selling person items they want to get rid of, or have no use for any more.  Train shows and Antique Shops have always helped in this regard.

PCRR/Dave    

Not meaning any disrespect here but I would think that economics degrees aside a little less political manipulation and the use of a lot more common sense might put things back in balance.

Common Sense?  Out of Washington D.C.?  Sure, I won't hold my breath.

Exactly, political intervention where it needs to say neutral is ruining things.

None taken.  It appears to me as though main purpose of the Federal Reserve seems to be to manipulate the stock market.  Gee, I wonder why that is.

Pete

There was a "ponsi scheme" for the past 6 years between the Federal Reserve, The Treasury, and big investment firms such as Goldman Sachs.

The dollar was so low, the one was selling the Notes to the other and then selling them to the Goldman Sachs of the world and guaranteed a profit spread from the difference to such Investment Firms at tax Payer expense. All to print money and print more money beyond sanity.

It was called Quantative Easing (QE1 and QE2).

It was done to try and compete with the Chinese, who as a communist country could manipulate their currency big time.

Thus, you could say we had communist "envy" in the White House....

As a result,  with the dollar near worthless, people were running to gold and silver and states were passing laws to try and make gold and silver legal tender.

The President put an end to that by allowing the Chicago Board of Trade to keep raising margin % rates on Silver to the point no one could or would buy.

That crashed Silver from a 2012 high and it has not recovered.

 It was done to a lesser degree to gold.

The manipulation of the stock market came from bailing out the banks, where they used their bailout money to trade and manipulated a low volume market no one wanted a part of, and reaped big profits, again at tax payer expense.

So much for a free market economy.

I don't know if this still holds up. I think the median salary today is around 40 or 50k/year and you can get a pretty acceptable starter set for $300-$500. My father shares the same thoughts on the older trains as you about how much his father had to save to buy him a post war set (that still works today, though I need to rewire the loco as the insulation is failing). So in that general regard, I think introductory train prices are falling over the longer period of time. Probably because there are far more toys competition for people's attention/money and there is not too much innovation going on at that level.

The one area I did forget about, that another poster mentioned and has been discussed a bit here on the forum is the lionchief plus kits. I think those are a great deal. If I didn't lock myself into tmcc/legacy (don't want loads of remotes sitting), I think that is the way to go. If they could produce a nice tmcc steamer at the price they sell for the lioncheif plus kit, I'd take one.

Someone else also mentioned that a strong dollar is bad for US manufacturing and I agree, which is what prompted the question. In a small business I have, I've seen prices on imported goods remain the same while my purchasing power has increased. We haven't lowered our list price, but have stepped up the discounting, which is what hope is the least that would happen in trains. If they want to keep the $80 box car in the catalog to see if it sticks, fine, but i'd like the street price for it to go to like $35 instead of $45-50. That would get me back to considering new stuff. All of my purchases for the few years, with the occasional exception of something special, have been used.

The strong dollar/weak dollar is a tough one, because so much manufacturing has been lost from the US, we don't have a lot to export if the price of the dollar drops, and if the price of the dollar drops given we depend on imports for so many things, it makes things more expensive. In a world where the US produces a lot for export, a weak dollar is a good thing, but with the way things are right now, it would cause a lot more harm then good, especially given our strongest exports these days are commodities, not manufactured goods.

I agree with others, the price of oil (and gas) is not likely to bring down the prices of the trains. While in theory they make producing the products cheaper, for example, cheaper plastic because of cheaper crude oil prices used in making plastic, the reduction in cost of oil, while impressive, doesn't change all that much. The cost of the bunker fuel oil they use on ships has declined, but it has not declined the 50% oil has (diesel especially has not declined as much as gas, one of the reasons that diesel fuel usage is not as subject to drops in demand when the price goes up that gasoline is, and vice versa) ,and it is likely that in the past shipping companies ate some of the higher cost of shipping when oil went up to 110, and now they are recouping some of that by not lowering prices much. Suppliers in China are not seeing real lowered costs with the price of oil either, and it isn't lessening demand for wage increases and such for workers, who are starting to want to make a decent wage. It won't affect the cost of trains now in production, they are being billed at the cost of production assumed on the original contracts more than likely, and by the time that new contracts are issued, I doubt the manufacturers will reflect the price of oil in the cost...so upstream, I doubt Lionel or MTH or whoever is seeing much of a reduction in the price to them. They might see some small savings if, for example, their offices are heated by oil, but most these days are natural gas, or in the cost of shipping by truck to their distributors or stores, but likely they will simply pick up that small reduction to increase profits. 

This isn't the same world as the 1970's where oil prices and price shocks were big deals, one of the reasons the price of oil has dropped is quite frankly, with the extra production in the US and Canada through fracking and offshore drilling, and the slowdown in the Chinese economy, not to mention the shift to natural gas, there is a glut of oil. The market will take care of some of this, the Saudis can pump oil at lower prices, since their cost of production is relatively low, and at sub 50 dollar levels fracking and coal tar sands and offshore drilling is either losing money or breaking even, so they will probably shut down production which will cause the price to go back up, since it doesn't pay to produce at this price. 

Those 11 words right there sums it all up.

For some reason I thought I was on a model train forum, but instead I seem to be in the middle of a Heritage Foundation "brainstorming" session (term used loosely).

To address the topic, no, I don't expect to see any decrease in the price of model trains. 

Jeff C

Well, prior to the current price slide, you could watch your gasoline prices on the

your usual pump shoot up, at the hint of an increase in the price of a barrel of oil (a long way from being made into gasoline), or a flat tire on a tank truck in

Nairobi, or any wild and capricious imagined reason, but when the price of a barrel

went down....it was weeks until that showed up on your pump.  Something rotten there, and it ain't in Denmark.  So...rapid and discernible drops in train pricing....?

Not unless we can get all us train nuts elected to Congress.

Hi guys,

I think Lee makes a good point on price versus features, as the toy train market expects more features (bells and Whistles, seems to be an appropriate term), then those enhancements can result in prices going up, but if prices go up too much, then the product can be priced out of the market. I think the Lionel LionChief Plus engines are a great example of good value for the features. 

CW Burfle,  I hope you are doing well! The FAQ that I put a link to, has a more detailed description of how the CPI is determined, but basically, consumers keep logs of what they buy and the prices paid, so if they buy pork, its included, etc.

OKHiker,  I am sorry to have questioned your views on inflations, I agree there are many different measures of inflation, and core inflation is different than other measures of price increases.  Its like we all have different rulers for measuring distance.  That said,  The Social Security Administration web site clearly states that they use the CPI-W,  as calculated by the US Bureau of Labor Statistics.  THe "W" refers to the the demographic group that is included in the calculation.  I don't know what other branches of government use for CPI to help determine wage increases, etc. 

All the best, Dave