You would think that given the magnitude and sheer size of the Fannie Mae and Freddie Mac bailout that Americans would at least be more curious about the formula as to how this thing is going to unfold.  [Cue the Crickets].  Instead, the public is focused on the “shiny things” once again like someone suffering […]
Related Posts:
■Emerging Economic Trends: Housing Swaps, Frugality, and Selling Homes in Lower Priced Areas.
■The Credit Conundrum: The New Loan Shark is the Fed.
■Superstars of Housing Love: The Sheriff Deputy Evicting People who Default.
■Real Buyers of Genius: Another $20,000 a year person takes on a $600,000 mortgage.
■Big Ben and the Ministry of the Fed: Housing Doublespeak. NovaStar Shining.

You would think that given the magnitude and sheer size of the Fannie Mae and Freddie Mac bailout that Americans would at least be more curious about the formula as to how this thing is going to unfold.  [Cue the Crickets].  Instead, the public is focused on the “shiny things” once again like someone suffering from ADHD and needs to have new stimulus every minute.  I felt this way watching CNBC this week.  They have so many tickers, popping out yellow/red graphics, and special sound effects that you feel like you’re playing some kind of Wii game and if you take your eyes off the screen for one second a tennis ball is going to fly through and knock you out.  Such is the world we live in today that even the “premiere” business station is more like an Ultimate Fighting Championship match.

To a certain extent it is necessary to keep people over stimulated given the absolute negative nature of the current economy.  Yet this keeps people from actually focusing on the real problems that confront us because these problems are complex and multi-faceted that a single minded approach is not going to solve them.  There was a great round table discussion on Charlie Rose this Monday discussing the Fannie Mae and Freddie Mac bailout:

*Click to Watch Video

Be forewarned, there are no flashy gold tickers or slapstick sound effects but there are plenty of reasons to be cautious about the current economy.  As you can see from the screenshot, I’m not sure why they titled it “Fanny Mae” aside from it being a Freudian slip because all of us are going to get our collective fanny spanked.  For what it is worth, Nouriel Roubini who is a guest on the show has been absolutely spot on regarding the current economic damage.  If you go back, he was specific with exact details how this thing was going to play out.  He has my utmost respect for standing up even when everyone else was running around claiming how fantastic the new innovations in the debt markets were going to revolutionize the world.

As I discussed in a previous article the California housing market is still in shambles and will continue to stay that way for years to come.  Lehman Brothers, the struggling investment bank had this to say about California home prices:

(Calculated Risk)  “[The Lehman] base case assumes national home prices drop 32% peak to trough, vs. 18% to date, with California down 50% vs 27% to date.”
Ian T. Lowitt, Lehman CFO

So basically what they are saying is California is only half way there.  I would go on to say that this “bold” statement is nothing more than what we and others have been preaching for years but it takes an investment bank on the point of destruction for some people to listen.  Why would you be listening to an investment bank that clearly has no idea how to invest or sustain profitability?  Doesn’t that kind of defeat the purpose of being an investment bank?  If people wanted to lose money this quickly they might as well take a flight to Vegas and get some fun out of it in the process.

Today, we are going to look at 3 emerging trends that signify a depression is in the wings.  Frankly, the language has been so watered down in today’s world that many still don’t think we are in a recession!  If you lost your home, job, and had no healthcare most people would consider this a depression.  We don’t have soup lines like during the Great Depression but do you really need this to call a spade a spade?  Money destruction is happening all around us.  One of the trends is with pundits like Ben Stein and Jim Cramer being so flat out wrong and yet people provide these two a forum to spout incorrect information.  You’ll love some of their past quotes and we’re going to hold them accountable.  The next trend is one we have been predicting for sometime.  What will those who lose jobs in the FIRE economy do afterwards?  Time to go back to school.  And finally, even the 99-Cent Stores are realizing that a dollar today is simply not worth what it once was.

Give me Free Money or My Head Will Explode! 

Ben Stein frequently shows up on the KNX business hour, a daily radio show here in California that recaps local and national business information.  Ben has been wrong so many times (what is up with economist named Ben these last few years?) that I wish I somehow had a searchable transcript of some of the shows.  He has also shown up in print and has been flat out wrong.  Now no one knows the future so I’ll give him that but it is also important to call people out where they have been wrong.  This is from a New York Times article in December of 2007:

“This would occur, he said, if the value of the assets that banks hold plunges so steeply that they have to consume their own capital to patch up losses. With those funds used to plug holes, banks’ reserves drop further. To keep reserves in accordance with regulatory requirements, banks then have to rein in lending. What all of this means - or so the argument goes - is that losses in subprime and elsewhere that are taken at banks ultimately boomerang back, in a highly multiplied and negative way, onto our economy.

As the narrator in the rock legend “Spill the Wine” says, “This really blew my mind.”

So I started an e-mail correspondence with Dr. Hatzius, pointing out what I believed were a few flaws in his paper. Among them were his hypothesis that home prices would fall an average of 15 percent nationwide (an event that has never happened since the Depression, although we surely could be headed in that direction), and that this would lead to a drastic increase in defaults and losses by lenders.

This, as I see it, is a conclusion that is an estimation based upon a guess. I found especially puzzling the omission of the highly likely truth that the Fed would step in to replenish financial institutions’ liquidity if necessary. In a crisis like that outlined by the good Dr. Hatzius, the Fed - any postwar Fed except perhaps that of a fool - would pump cash into the system to keep lending on track.”

You should read the smugness this guy has over the economist and his well thought out paper that has proven right in a mere 9 months!  We are now down 18.7 percent from the peak reached in the summer of 2006:

Not only is this one of his major miscalculation but this from a guy who thought subprime was contained.  Sound familiar?  Look at what he had to say back in August of 2007 during the credit crisis:

“(CNN Money) The stupid investor knows only a few basic facts: The economy has not had one real depression since 1941, a span of an amazing 66 years. In the roughly 60 rolling-ten-year periods since the end of World War II, the S&P 500’s total return has exceeded the return on “risk-free” Treasury long-term bonds in all but four ten-year periods-the ones ending in 1974, 1977, 1978, and 2002. The first three of these were times of seriously flawed monetary policy that allowed stagflation, and the last one was on the heels of the tech crash and the worst peacetime terrorist attack in the history of the Western world.

The inert, lazy, couch potato investor (to use a phrase from my guru, Phil DeMuth, investment manager and friend par excellence) knows that despite wars, inflation, recession, gasoline shortages, housing crashes in various parts of the nation, riots in the streets, and wage-price controls, the S&P 500, with dividends reinvested, has yielded an average ten-year return of 243%, vs. 86% for the highest-grade bonds. That sounds pretty good to him.”

I don’t need to tell you since that quick study of history from Mr. Stein the DOW, NASDAQ, and S&P 500 have dropped over 20% and are hopping in and out of bear market territory.  This tired idea works because he doesn’t go back far enough, back to the Great Depression.  By the way, this housing correction in terms of velocity is actually worse than the one experienced during the Great Depression.  How can media outlets allow these people a mantle to speak out over and over yet be wrong on a reoccurring basis?  Simple.  They care about ratings and not the integrity of what is being said.

Let us now look at what Jim Cramer, the host of Mad Money on CNBC had to say this weekend.  This weekend on TheStreet Cramer went off on a rant about how fantastic the Fannie Mae and Freddie Mac bailout is and implied it will somehow stabilize the market.  As we are now seeing things play out, do you think Lehman and WaMu think a bottom is in place?  Let us look at his overall argument:

“(The Street) We are now in a double-digit decline of housing that has made most houses bought since 2005 worth less than their mortgages. House-price depreciation has been so relentless, particularly in Florida and California, believe it or not, two states that could bring the whole financial edifice down, that if it isn’t stemmed then it’s difficult to stop a severe recession, if not depression, given the abrupt slowdown of the rest of the world and our own skyrocketing unemployment.

The only hope to break the chain of despair and turn around the endless declines in home values to the point where you SHOULD walk away from a home with a mortgage larger than the value of your house, is to stop this house-price depreciation.” [emphasis added]

Did you get that?  This guy is looking for a floor on prices.  The first thing you learn about capitalism is that the MARKET sets the price, not the government.  That is why I’m so furious of these so-called free market capitalist turning out to be crony socialist when it comes to helping stop their losses.  They are capitalist only when it benefits them.

Let us follow the logic and praise for the all glorious bailout of Fannie Mae and Freddie Mac:

“The Treasury’s takeover of Fannie and Freddie can change that because once mortgage paper packaged by the government enterprises is federal government paper, then ANYTHING can be worked out with the borrowers, and the borrowers represent the lions’ share of the troubled homeowners in the country who have not already defaulted.”

Wrong again!  Does he think this is going to be free?  I hate these arguments from folks who preach “no taxes” yet do side stepped Orwellian deals that are simply a hidden tax.  It’s not called a tax but the American taxpayer is going to pay more to these entities.  And Jim is so quick to say “ANYTHING” because it isn’t his money, its you and your neighbor’s money.  That is why he is so quick to give the bailout a boo yah.  Keep on reading to “blow your mind” on how a former Wall Street guy thinks:

“The government can cut the mortgage payments, and it can extend the terms, say to 45 years. It can take any hit to keep you in your home, and the paper is still insured.

Put simply, there will be no reason to foreclose, and no reason to walk away. That will DRAMATICALLY reduce the amount of foreclosed homes coming to the market. It will dramatically reduce the amount of money people owe on their mortgages.”

Are we advocating a socialism for housing now subsidized by prudent taxpayers who didn’t over extend themselves?  The government can take any hit but it will come at a cost.  This freaking bailout isn’t free.  That is why it is a bailout!  Cramer is wrong thinking this bailout will stymie the onslaught of foreclosures especially in California and Florida (2 states he mentioned) because people don’t want to pay for a house where they will get nothing out of it.  The market will prove him wrong yet again in a few months as the $300 billion in option ARMs start hitting the market in full force here in California.  Are you telling me Fannie Mae and Freddie Mac are going to buy some of these toxic mortgages?  From reading the crony legislation, it doesn’t look like it.  The 45 year idea is lame.  Let us run some quick numbers to show you how pointless this is.  Let us do the numbers for a $400,000 mortgage at 6.5%:

Principal and Interest:

30-year            $2,528

40-year            $2,341

45-year           $2,290

50-year            $2,254

So basically we are going to extend a mortgage 15 more years to save $238 a month?  This is the type of long-term mathematical skills that got us into this mess in the first place.  Why not do a 300 year loan and let the alien invaders pay for it when they arrive on the planet in 2308 AD?  Let us keep going with the logic of Mr. Cramer:

“That’s how significant this takeover could be.

You need to forget its expense right now and the inflationary problems stemming from this. Those were the same reasons given when I suggested that we cut rates by 300 basis points last year and let everyone refinance when it was still worth it to do so.

I am tired of the moralizing based on a total lack of rigor and homework. We are at this extreme because our policymakers have simply been lazy, wrong, intransigent and foolish. If this were the private sector, all of these people would be candidates to be fired. If this were the NFL they would have been gone long ago. But because they are in high positions and considered somehow blessed with a ken far beyond reality, we are in this mess.”

Bwahaha!  He’s telling you to forget that you are going to be screwed over by this bailout because that is the only way he can shove this argument down your throat.  He’s tired of “moralizing” because he has been so utterly wrong.  Being wrong on a consistent basis I imagine would get exhausting.  But look at what he thinks will happen from this bailout:

“With bountiful credit and bank balance sheets cleaned up, we will get out of this moment, and we will be prepped to advance, just as the BKX, HGX and the retail index have been signaling. With mortgage paper turned into federal paper, the holders worldwide, from Russia to China to Europe, will be made whole. The world will rally and something good, at last, will occur.”

Bountiful credit is the reason we are seeing these problems.  It will take years before the balance sheets of many banks will be cleaned up.  Too bad the Cramer of Saturday couldn’t foresee the bailout and how the market reacted this week punishing Lehman Brothers and WaMu.  The market had a nice rally on Monday which was quickly given up on Tuesday.  Financials are back in shambles.  A glutton for pain, Cramer proved how wrong he is again:

“I am tired of being laughed at for my July 15th call that the financials bottomed and my call for housing to bottom next year. I am weary of the catcalls and the attacks.

And, oh yeah, I am going to be right as of this weekend.

Maybe I just got lucky with this bailout, but it is better to be lucky than good.”

Let us look at how a bottom looks like in financials:

Need we say more?

The Miseducation of the California Worker

Just as we predicted, California’s education system is seeing an upsurge in non-traditional college students.  Whenever the economy dips, people need to go back and get retrained.  And there is no larger group that needs retraining than those in the real estate field.  California has 110 community colleges across the state that serve 2.7 million students many who attend classes part-time.  The L.A. Times has an interesting report on this emerging trend:

“Administrators say that when the economy dips, enrollment at community colleges typically surges. This fall, students are banking on these modest workhorses of California’s higher education system to ease their way through the economic downturn, opting for the closer, cheaper alternatives to state universities. Older students, in particular, are seeking training at two-year colleges to escape declining industries.

“There’s a sense of urgency in students to further their education at this time,” said Jennifer Coto, chairwoman of the counseling department at Santiago Canyon College in Orange, which is seeing an estimated jump of 9% this fall, notably among returning adult students. “Professionals that are now part of struggling industries are utilizing this time for the next upsurge.”

I’m not exactly sure if the next upsurge is going to happen anytime soon in California.  In fact, many of the high paying 2-year careers are highly impacted at many community colleges.  For example nursing is a very popular and in demand career yet providing these courses actually costs the state to train the workforce.  At many schools there are waitlist that have students waiting for years simply to enter nursing programs.  And if you haven’t noticed the state isn’t exactly cash rich right now.  Our budget isn’t even in place.  You think $20 a unit is going to provide a large income stream to the state?  Some politicians keep claiming that the community college is going to retrain the future work force yet say they don’t want new taxes.  You can’t have it both ways amigo.

And right on cue with the trend in California we get this:

“Real estate agent Jeannie Rothfuss decided to return to school for the first time in decades when the housing market soured. She chose the community college just over the hill from her Anaheim Hills home.

At $20 a unit, Santiago Canyon College was far more affordable than going to a state school or paying for online courses at $500 each. And she plans to transfer to Cal State Fullerton to earn a communications degree that she hopes will qualify her for a sales or marketing job.”

For those of you feeling sorry for this person, Anaheim Hills has a median price of $672,000 and $480,00 for their 2 zip codes.  I would hate to tell Jeannie that her aspirations for sales and marketing are normally the first sections of a company to get slashed during a market downturn.  So why else did she go back to school?

“”People weren’t buying houses, people couldn’t qualify for loans, said Rothfuss, 59, now in her second semester at Santiago Canyon College. “By going to school at least I know that by a certain month I will have accomplished something, whether it’s a sale or credits from college.”

Maybe it should be rephrased to people weren’t buying homes because people couldn’t qualify with their whacked out income now that we have to verify reality instead of fake no-doc loans.  Many students transfer from the community college system to the Cal State system which has the ability to grant bachelor’s and master’s degrees.  Many long-time readers remember me talking about the 10% tuition fee increase that hit this fall.  Demand is still growing:

“Facing an enrollment boost of its own, California State University closed the freshman application period early this year, cutting off an estimated 10,000 fall students.”

The budget has cut education costs so now you are facing the repercussions of wanting everything without paying for it.  But even people that are educated are coming back when they find out their industry isn’t paying as much as they once had thought:

“We’re sitting in an area that’s economically depressed, and we’re not turning anyone away,” said Los Angeles Southwest College president Dr. Jack E. Daniels III. Enrollment at his campus is up an estimated 12%, with gains in both recent high school graduates and older students. “We’re getting people trained and retrained for the work force,” he said.

Theresa Martinez, 24, signed up at Los Angeles City College after realizing that her degree in social work from UC Berkeley would command only mediocre wages in the tough economy. Now she is retraining as a nurse.

“When I get off work, I come here,” she said. Her job at a media research firm starts at 4 a.m. “So I don’t get much sleep. But I tell myself I went to Berkeley, so I can do it.”

Berkeley is one of the top public institutions in the country.  So given that, you can see that even a degree from a prime school isn’t enough.  There are only a handful of fields that are actually expanding so this isn’t the time to chase impractical degrees if you are looking to get hired quickly.  The economy is simply that bad here in California.

“At Cypress College, classes that were canceled last year for lack of students are filled above capacity, with such vocational courses as air-conditioning and refrigeration, automotive technology and culinary arts all seeing double-digit enrollment jumps. Automotive classes are so in demand that instructor John Alexander advises would-be students to play “enrollment bingo”: obsessively check the college website for spots that open when others don’t pay their course fees.”

This is what happens.  Reality is hitting.  Not everyone can become a broker and agent and make six-figures with a high school degree.  That game is over for this lifetime.  Now reality is setting a gut check and it is time to get to business.

I Got 99 Problems But Money Ain’t One

The equivalent of Family Dollar in California is the 99-Cent Store.  These stores sell nothing for over 1 dollar.  Talk about having a title that conveys the theme of your store.  Yet these stores are now facing the reality that the dollar is no longer worth what it once was.  I remember buying some candy at a 99-Cent Store and found out that many of the bars are now reduced in size branding it as a “healthy” choice but of course being aware of the economy I realized they are simply scaling back without cutting the price.  Clever marketers!

Well as you would suspect the 99-Cent Store is raising their price for the first time in 26 years:

“Sept. 8 (Bloomberg) - 99 Cents Only Stores will raise its top price for the first time in 26 years to 99.99 cents as rising fuel and commodity prices drive costs higher.

The 0.99 cent increase will take place at its 277 stores later this month, the City of Commerce, California-based retailer said today in a statement distributed by Business Wire.

The boost of less than 1 cent is “in response to dramatically rising costs and inflation,” Chief Executive Officer Eric Schiffer said in the statement. “Just as Motel 6 was eventually forced to raise its price above $6, after 26 years we are forced to raise our price by just about one cent.”

Wait.  Motel 6 used to cost $6?  When was that?  Anyways, hiking prices to 99.99 cents isn’t such a big deal since they probably have tons of 9’s floating around to update their signs.  Yet this is telling given that traffic and sales have been increasing at discount stores.  People are shopping more heavily at places where they can purchase necessities.  Why do you think the positive jump in Wal-Mart a few days ago wasn’t greeted with warm hugs by everyone else?  Low margin products selling simply reflect societies entrance into another trend of forced frugality.  Over a year ago in April of 2007 I did a report highlighting that since the start of 2000, that nearly 30 percent of all added jobs since the start of the decade where either directly or indirectly tied to real estate.  My logic at the time still applies to what is going on today.  That is, if so much of our industry is dependent on real estate what is going to happen when the bubble bursts?  Most logical people realized that we would also face hard times in the economy yet some people couldn’t make this connection.

These three emerging trends: (1) pundits making wrong calls and screaming for crony bailouts, (2) people losing their jobs and going back to school, (3) and inflation from the bottom up is going to put an end to any sort of recovery for 2008 and I would venture to say for 2009 as well.  California is going to look a lot worse because of the tsunami of round two in the option arm mortgages that is going to hit at the most inopportune time.  Anyone outside of the state want to offer us a bailout please?

Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

Post from: Dr. Housing Bubble Blog

Three Emerging Trends of a Depressed Economy: Pundits Screaming for Economic Socialism, People Going Back to College, and 99 Cent Stores Taste Inflation.

Share This

Related Posts:
■Emerging Economic Trends: Housing Swaps, Frugality, and Selling Homes in Lower Priced Areas.
■The Credit Conundrum: The New Loan Shark is the Fed.
■Superstars of Housing Love: The Sheriff Deputy Evicting People who Default.
■Real Buyers of Genius: Another $20,000 a year person takes on a $600,000 mortgage.
■Big Ben and the Ministry of the Fed: Housing Doublespeak. NovaStar Shining.

Via [DrHousingBubble]

Share This

Filed under: Ford Motor (F), General Motors (GM)

So where do the CEOs of General Motors (NYSE: GM), Ford (NYSE: F) and Chrysler go when they need to turn their companies around? Are they huddled in their boardrooms in Detroit, planning sales strategies with top executives? Are they cracking the whip in their design studios as they seek to build the perfect car?

Nah. They go where every other corporate bigwig goes when there’s trouble afoot: Washington, D.C., home to the world’s most dependable source of capital — the U.S. Treasury.

This week, Rick Wagoner of GM, Alan Mulally of Ford and Bob Nardelli of Chrysler are testifying before Congress as they go fishing for $25 billion in funding to help develop more fuel efficient cars. Now that the SUV craze is over and Detroit has consumed the hundreds of millions in fat profits those trucks produced, the car companies find that they failed to save for a rainy day.

It’s more than a little ironic that the one-time powerhouses of the American economy are begging the federal government for help. Major corporations have spent the last 40 years fighting government involvement in the economy — the Big Three fought government rules requiring seat belts, for goodness sake. And GM played a major role in defeating national health insurance decades ago, among many other sins committed in the name of maintaining the glorious free market. But when they hit a wall, the corporate powers know just where to go — and it’s certainly not to the free market. No, Uncle Sam is a far more reliable source, especially in hard times. So much for free market capitalism.

The only problem is, with the bailout of AIG among others, Detroit may not like its place at the end of the state capital line. And the Big Three had better hope that voters don’t start wondering why the government is spending the limited capital of the American people on an industry that is currently dedicated to lowering the wages and eliminating the benefits of its workers.

I certainly don’t want to see large American companies go out of business. I just hope that they repay the generosity of the tax-payers with something other than low wages and canceled pensions.

UPDATE: In response to a question in the comments about GM’s role in opposing national health insurance, you can start reading about that shameful history in a New Yorker piece by Malcolm Gladwell. Here’s an excerpt:

In 1945, when President Truman first proposed national health insurance, they [union leaders] cheered. In 1947, when Ford offered its workers a pension, the union voted it down. The labor movement believed that the safest and most efficient way to provide insurance against ill health or old age was to spread the costs and risks of benefits over the biggest and most diverse group possible. Walter Reuther [the national president of the U.A.W at the time]…believed that risk ought to be broadly collectivized. Charlie Wilson [president of G.M.], on the other hand, felt the way the business leaders of Toledo did: that collectivization was a threat to the free market and to the autonomy of business owners. In his view, companies themselves ought to assume the risks of providing insurance.

If that’s too ‘liberal media’ for you and you need something more academic, try For All These Rights: Business, Labor, and the Shaping of America’s Public-Private Welfare State (Princeton, 2003) by Jennifer Klein, a labor historian at Yale. Please send your revised analysis to me after you do a little reading . . .

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Gang, I’m happy to announce Blown Mortgage News, a user-generated link blog of the latest mortgage and real estate news and information.  You can access the new news site at http://news.blownmortgage.com.

The Premise

•  I can’t cover all the news these days, but want you to know about it.
• You have access to great sources of information that can make us all smarter.
• You have stuff you want me to cover, now you have a say.

How it Works

• Sign up for a free account from Reddit, the social news site.
• Submit your links.
• Vote links and stories up and down 
• I review the top vote-getters and write my take on them

Share This

Source [blownmortgage]

Share This

Updated: Read these chilling words from Paul Kedrosky’s Infectious Greed to get a sense of the enormity of the AIG problem. You can read the rest of his post here.

Take your second deep breath of the week. We are at a cusp tonight, with a Treasury deal apparently on the table to provide a $80b bridge loan to doombound insurance company AIG. It seems clear that were that not to happen tonight then AIG would file for bankruptcy tomorrow, and that would have immense and unknowable consequences.

From Barry Ritholtz at The Big Picture:

Too big to fail? So much for no taxpayer bailouts. I hope there are lots of Congressional hearings, reports, studies and some public hangings that we can sear into our brains the next time we decide to actually believe our government.

From Bloomberg:

The U.S. Treasury is considering taking over American International Group Inc. under a conservatorship as one option to address the insurer’s crisis, according to two people briefed on the discussions.

Executives from AIG, bankers and Treasury and Federal Reserve officials are meeting today on the company’s situation at the New York Fed. A number of options are under being discussed to fill a shortfall of $75 billion to $100 billion in funding, one of the people said. The talks are continuing, he said.

Goldman Sachs Group Inc. and JPMorgan Chase & Co., which have been leading efforts to find a private-sector solution, informed the Fed that such an effort would be difficult, the person said. Under another option, the Fed would extend a loan to New York-based AIG, according to a person informed of the matter.

Share This

Source [blownmortgage]

Share This

Filed under: Consumer experience, Commodities, Oil

Oil falls, yet the price of gasoline is hanging up there, in the stratosphere. What’s going on here?

Well, as is often the case in the oil and gasoline markets, the reasons are many.

First, the price of oil is falling on concerns that both the global economy and the U.S, economy will slow to a crawl (if not worse) due to the current credit crisis, says economist David H. Wang.

Oil, which fell $3.96 to $91.76 per barrel Tuesday at midday, has declined more than 30% since hitting a record high of $147.27 per barrel in July.

“The financial crisis suggests that emerging market oil demand growth will slow, and that’s the primary reason you’re seeing the price of oil decline,” Wang said. “Strong demand for oil in China and India really boosted oil’s price in the last three years. You lower that China-India demand and you have a different oil market.”

Now, what about gasoline prices? Here, U.S. motorists will face a wide range of prices, depending on where they live in the U.S., economist Peter Dawson told BloggingStocks Tuesday.

“The biggest factor short-term for gasoline is Hurricane Ike, which shut down a fuel pipeline and refinery capacity in Texas,” Dawson said. “This will reduce the supply of gasoline in the South, so price increases of 50 cents or more in the Southwest and Southeast will not be unusual.”

Continue reading Why does gasoline cost so much despite oil’s price drop?

Read | Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Filed under: Yahoo! (YHOO), Marketing and advertising

Yahoo Inc. (NASDAQ: YHOO) is embarking on one of the more bizarre marketing campaigns I’ve seen in a while. TechCrunch reports that the company launched the Start Wearing Purple campaign Monday. The website includes tidbits like the discovery of the purple frog, obnoxious background music and a special Flickr account celebrating the color purple. There’s also a fleet of purple bikes.

The campaign is apparently intended to push consumers into associating Yahoo with innovation, since the color purple is associated with innovation. Or so they say — I’ve never heard that myself, but I’m just a consumer.

In any case, it’s a shame that Jerry Falwell isn’t alive to see all kinds of gay world order conspiracy stuff here the way that he did with the purple Teletubby.

This is a pretty strange brand awareness campaign, and I’m not convinced that the color purple is the magic ticket to bringing Yahoo into the year 2008.

Read | Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Filed under: Consumer experience, Competitive strategy, Apple Inc (AAPL), Amazon.com (AMZN), Marketing and advertising, Sony Corp ADR (SNE)

UK-based digital download store 7digital.com revealed yesterday that Sony BMG, a division of Sony Corporation (NYSE: SNE), had joined the other major music labels to offer high-quality MP3 files without anti-piracy technology from the store. The new deal brings 250,000 tracks to the format, making 7digital the largest digital rights management (anti-piracy technology)-free store in the UK with 4 million tracks offered. 7digital also launched new sites in other regions of Europe, and announced plans to launch a store in North America by the end of the year. CEO Ben Drury told Billboard that the U.S. store will be managed from an office in San Francisco.

Opening a store like 7digital, where music fans can purchase high-quality MP3 tracks from all the major labels would be a strong challenge to the dominance of Apple Inc. (NASDAQ: AAPL)’s iTunes Store in the United States. Drury told Billboard as well that consumers are more likely to buy MP3 formatted albums over the DRM albums generally offered in stores like iTunes and that the average “transaction” on 7digital’ site is around $8. The CEO also welcomes the pending launch of a MP3 store by Amazon.com Inc. (NASDAQ: AMZN) in the United Kingdom, since it will promote and provide more choice to consumers looking at formats without DRM and stores without subscriptions.

High quality DRM-free MP3 files work on across all platforms and devices, meaning that consumers that do not own Apple’s iPod can buy tracks for other devices. Overall a U.S. 7digital store would be a true competitor for iTunes and could boost the music labels if prices drop and more digital tracks are bought as the CD slowly declines.

Permalink | Email this | Comments

Via [bloggingstocks]

Share This