General Motors Becomes A Bank

GMAC, the automobile financing arm of GM has been recognized as a 'bank holding company' by the Feds. This provides unlimited (well, AMPLE) access to federal funds to bankroll consumer loans to purchase GM vehicles. Per the Wall Street Journal:

The Federal Reserve's decision to make GMAC LLC a bank-holding company throws the unit a desperately needed lifeline, but further entangles the federal government in areas of the economy it once considered beyond its purview.

In a Christmas Eve decision, the Fed allowed GMAC, a finance company controlled by private-equity fund Cerberus Capital Management and General Motors Co., to qualify as a bank. As a federally regulated bank-holding company, GMAC potentially gets access to billions of dollars of Treasury funds dedicated to recapitalizing banks.

Santa has been busy this Christmas!

Recession Time As Swiss Watch Sales Plunge

Recession time has come to Swiss watch makers as sales exports plunge by 15%. Most worrisome, this indicates softness in the larger market for luxury goods which was supposed to be a bright spot this holiday season, per the Wall Street Journal.

Swiss watch exports fell 15% in November from a year earlier to 1.52 billion Swiss francs ($1.41 billion), a steep deterioration from the drop of around 5% posted for October. November is the watch industry's most important month of the year because of the run-up to Christmas.

Although a decline had been expected, the extent of the plunge surprised market watchers. Particularly worrying were the first signs of a weakness in Asian markets and the tailing off of demand for premium products, which had been thought to be less prone to cutbacks in spending, analysts said.

My mom used to call this a 'sparse Christmas.'

Inflation To The Rescue!

Back in 1933, "inflation" was touted by the new FDR administration as the cure to America's Depression woes.

Now with zero percent interest rates, Bernake has climbed on the inflation bandwagon.

This hilarious short MGM film from 1933 explains why the miracle of inflation is an economic panacea.

Economic Recovery For Dumies

Simple, eh?

Thanks to the Washington Post.

Santa Bail Out On The Way

Wall Street Journal reports Feds are going to bail out Santa.

Apparently Santa's difficulties in "producing product," as Mr. Paulson described it, originated in a poorly understood aspect of the jolly elf's current operations known as "Christmas list swaps," or CLIPS...

Several years ago, according to a participant who requested anonymity, some of Santa's elves were contacted by representatives from Bear Stearns and Lehman Brothers, who persuaded the elves of the benefits of an elaborate scheme of Christmas-list securitization.

As outlined to the elves, the idea worked like this. Brokers would break each item on the Christmas lists into separate pieces and repackage the requests as securities, using a formula known as a "benevolence diffusion algorithm." This would guarantee happiness for everybody in the world on Christmas morning. No one would lose...

Difficulties emerged when a CLIPS salesman from AIG called a senior elf to say that a large number of the Christmas list swaps had ended up in the hands of Russian billionaires with links to former Russian president Vladimir Putin. "These plutocrats don't even believe in me," Santa was heard to say as Mr. Paulson's sleigh rode out of sight...

There are reports that the Easter Bunny may be next on the bail out list.

Where's YOUR Bail Out?

On his blog, Robert Reich notes:

It wouldn't surprise me if many of these Americans were starting to look at the size of the bailouts of Wall Street and the bailout of the Big Three -- at the executives, well-paid professional employees, upscale creditors and shareholders, and even well-paid blue-collar workers, who are the major beneficiaries of this federal largesse -- and conclude that a fundamental principle of fairness is being violated.

These Americans aren't revolutionaries. To the contrary, they're deeply conservative. They've worked hard, but their hard work hasn't paid off. Some have tried to save, only to see their savings disappear. They're worried about the future and about their kids' futures. They never expected anything like this.

This is the angry soil in which populist backlashes can take root.

In a similar vein, the City Lakes Real Estate Blog notes:

Sadly, the expression, "you can run, but you can't hide" now describes the futility of trying to shield your wallet -- and your descendants' -- from a federal government bent on ever-more expensive and wrongheaded bailouts.

Futility leads to frustration which leads to rage. Citi may have to do more than just cancel its Holiday train display to calm the ire of the outraged citizenry.

Dec. 9 (Bloomberg) -- Citigroup Inc., (NYSE: C) the bank that’s eliminating 52,000 jobs after getting a $45 billion government bailout, canceled its sponsorship of a New York holiday toy-train exhibit visited by more than 125,000 people a year.

“The difficult decision to discontinue this sponsorship was part of Citi’s ongoing expense-reduction efforts,” Citigroup said in an e-mailed statement. Chief Executive Officer Vikram Pandit, 51, announced on Nov. 21 that he wants to cut costs by about $2 billion per quarter starting next year.

Aux armes, citoyens,
Formez vos bataillons,
Marchons, marchons !
Qu'un sang impur
Abreuve nos sillons !

iPhone Coming To WalMart. The End Of Cool?

A number of news sources report that WalMart (NYSE: WMT) has inked a deal to distribute iPhones, starting as soon as December 24.

To match WalMart's lowest-price brand positioning, those same reports speculate that iPhone will introduce at model starting at $99.00.

I assume this is the end of Mac's reputation as the super-cool tech accessory. Looks like a great opportunity for RIM to push those sexy new Blackberry touch models.

Uncle Sam's Club Bonus Points!

"More marketing, that's the answer!" So said my Uncle David when business at his auto glass company slowed down.

Now that the government has acquired major interests in many of our largest corporations, the time has come for Obama to create a new cabinet level post, the Secretary of Marketing. First order of the day will be the creation of a Taxpayer Bonus Point system, where citizens earn points good towards the purchase of any of the fine government manufactured products available from Uncle Sam's Club. Slogan: "From Autos To Condo's, Uncle Sam Has It All."

And the prices are insane!"

Off Target on Black Friday - And Death At WalMart

This reporter checked out the big Target store in the Overbrook section of Philadelphia, which borders on the tony Main Line. The crowds were non-existent. The quote of the day came from my check out clerk, who noted at 9:30 AM, "I'm bored. I've been here since 6:00 AM and there ain't no body here."

Clearly the crowds were bigger at WalMart, where at least one store associate was trampled to death by bargain hunters.

Nov. 28 (Bloomberg) -- A worker at a Wal-Mart in Long Island, New York, was killed when a throng of shoppers broke down the doors to the store early this morning and knocked him to the ground, according to local police and the company.

The event involved a temporary worker and was “a tragic situation,” Bentonville, Arkansas-based Wal-Mart Stores Inc., the world’s biggest retailer, said in a statement. “The safety and security of our customers and associates is our top priority.”

At least four other shoppers were hurt in the melee at the Valley Stream store, about 13 miles (20 kilometers) east of New York City, Nassau County Police said in a statement. The injured include a 28-year-old pregnant woman who was taken to a nearby hospital for observation and three people who suffered minor wounds, police said.

The 34-year-old worker, who wasn’t identified by police, was knocked down by the crowd shortly after 5 a.m. local time and taken to a nearby hospital, where he was pronounced dead at 6:03 a.m., the police statement said. The county medical examiner will determine the cause of death.

Merry Christmas.

Shoppers Sacrifice For Kids -- And Pets!

There's no surprise in today's NY Times report that parents--and especially mothers--are sacrificing personal expenses to afford toys for their children this recessionary holiday.

"Come Christmas, McKenna Hunt, a gregarious little girl from Safety Harbor, Fla., will receive the play kitchen and the Elmo doll she wants. But her mother, Kristen Hunt, will go without the designer jeans she covets this season.

For Ms. Hunt and for millions of mothers across the nation, this holiday season is turning into a time of sacrifice. Weathering the first severe economic downturn of their adult lives, these women are discovering that a practice they once indulged without thinking about it, shopping a bit for themselves at the holidays, has to give way to their children’s wish lists.

“I want her to be able to look back,” Ms. Hunt declared, “and say, ‘Even though they were tough times, my mom was still able to give me stuff.’ ”

But there is a bit of a double-take in the news that some families will sacrifice even kids' gifts to insure a merry holiday for the household pet.

Emilie Wilson's menagerie includes 15 ferrets, two dogs and four cats, including a hefty gray feline named Tonie Stewart who rides in style inside a pet stroller during family outings.

Wilson spent $300 on Christmas gifts for her brood last year and figures she'll exceed that sum this year. And despite the recessionlike economy, the Chicago woman has no plans to scale back pet presents anytime soon.

"I couldn't care less if there's anything under the tree for us, as long as there's something for Tonie," she said....

Market researcher Euromonitor International, which tracks sales of pet food and accessories but excludes the cost of animals, grooming, training and certain other expenses, puts this year's animal expenditures at $23.9 billion.

But the group forecasts the segment's sales are still on pace to grow more than 13 percent by 2013.

Look for Mattel (MAT: NYSE) to be offering "Barbi" chew toys soon.

As Credit Crashes, Cash Use Soars

Is the check out line at your local grocer moving more slowly these days? Look carefully, and you’ll find that more shoppers are paying with cash, and those check out cashiers are having to stop and make change.

It’s all just another sign of the (hard) times.

"Twenty-three percent (23%) of Americans reported using cash more often to pay for purchases compared to one year ago.

More Budget Conscious. Eighty-four percent (84%) of respondents who reported using cash more often than one year ago to pay for purchases said this was to help control spending and manage their budgets. Six years ago when poll respondents who used cash more often were asked the same question (Coinstar National Currency Poll Dec. 2002), only 46% said they were using cash for this same reason.”



One way to avoid those long lines is to avoid shopping near paydays. When I was a kid, we knew that the first and the 15th of the month was when most local factories paid their workers and those payroll checks got spent. Those days are coming back.

“One sign of how strapped consumers are for credit — and buying only what they have the cash for — is that for the first time in 17 years, Penney's has seen swings in spending around payday cycles over the past three months.

That's common for discounters like Wal-Mart, but a rarity for a mall-based department store — suggesting that Penney's middle-income customers are feeling the pinch as well. Penney's President and Chief Merchandising Officer Ken Hicks noted that the chain hasn't seen swings in spending around payday since about 1991, when the U.S. was entering a recession

At Wal-Mart, the volatility in spending around payday — a drop in spending in the days before, followed by spending bursts right afterward — has become even more pronounced since September. Chief Financial Officer Tom Schoewe told The Associated Press that shoppers are now unable to buy even necessities in the few days before payday.”

Sad Soup News

Despite an aggressive "soup 'n sandwich" promotion touting grilled cheese from Kraft, Campbell's (NYSE: CPB) net income has tumbled. So much for THAT strategy. Per the WSJ:

Campbell Soup Co. reported Monday a 3.7% drop in its fiscal first-quarter net income amid a commodity-hedging loss, despite strong sales gains for its condensed soups and broths business….

Gross margin fell to 38.7% from 40.8% amid the increased marketing costs…

The food company has promoted its condensed soups as a bargain buy and has teamed up with cheese giant Kraft Foods Inc. to promote meals of soup and grilled-cheese sandwiches. In the quarter, sales of Campbell's condensed soups rose 14%.

Back to Spam.

Better Than Spam!

This week's theme has become "eating our way to economic survival."

Chris Burritt at Bloomburg reports today that Campbell's soup (NYSE: CPB) has joined Hormel's spam as a port of refuge from the economic storms sweeping the globe.

The recession will make 2009 ``the year of condensed soup, driven by the backdrop of severe economic pressure on the consumer,'' Mitchell Pinheiro, a Philadelphia-based analyst at Janney Montgomery Scott LLC, wrote in a note yesterday.

The appeal of a cheap meal is turning the world's largest soupmaker, which says it sells to 85 percent of U.S. households, into an outperformer in hard times. The shares led the 12- company Standard & Poor's Packaged Foods Index over the past three months, and their 0.87 percent loss this year beat the S&P 500 by almost 48 percentage points.

Camden, New Jersey-based Campbell is ``acknowledged as a way to weather a recession,'' said Edgar Roesch, a Soleil Securities Corp. analyst in New York who rates the shares ``buy.''

Way back in the 1970's at McCann-Erickson, I worked with a guy whose father wrote Campbell's signature line, "Mmm good!" Later, the slogan morphed into the very boring, but mysteriously effective, "Soup is good food." Today I find "Nourishing people's lives everywhere, every day" on the Campbell's web site. Really boring.

For 2009, how about updating the Campbell's Soup slogan to the very timely, "Better than Spam!"

Mmm good.

Detroit Bail Out Plan -- Introducing the SPV

The Detroit News is reporting the outline of a bailout deal for the Detroit automakers. Funds allocated to Detroit in September covering "retooling" to make greener automobiles would be diverted to bail out the automakers.

"Sen. Carl Levin , D-Detroit, has been negotiating with Republican Sens. Kit Bond of Missouri and George Voinovich of Ohio on a plan, favored by Republicans and the White House that would draw the money from the $25 billion retooling program, which was approved in September."

Seems to us that this is a terrific opportunity to make the car that America really needs now--the Spam Powered Vehicle or SPV. Since all we'll be able to afford to eat soon will be Spam, why not get double duty from the pink lunch meat powerhouse? Insurance will still be provided by AIG, of course.

Chinese unemployment up, car sales down. Buy more Spam.

From BBC online:

"Companies in two Chinese provinces, Shandong and Hubei, have been told they must seek official consent if they want to lay off more than 40 people.

The order highlights the Chinese authorities' concern over mounting job losses.

As China's main external markets plunge into recession and export orders shrink, layoffs have multiplied in the country's big manufacturing regions.

In Shandong alone, nearly 700,000 people have lost their jobs this year.

In southern Guangdong, tens of thousands of firms have closed, sparking off reverse migration to the countryside by redundant workers."

Further evidence of the Chinese slowdown by the NY Times which reports exports of used paper from the US to China have plunged,

"Not far away, metal, cardboard, paper and plastic are piling up in the lot of Corridor Recycling. The company takes in refuse from around the country, then bales it for shipment to China. The cardboard is used to make new boxes while used shrink wrap is turned into shoe soles and insulation for sleeping bags and coats.

For much of this year, the company shipped about 25 containers a day, each filled with 23 tons of refuse to be recycled. But after the Olympics, demand slowed for recycled metal. In October, demand for everything else took a sharp downturn, and for the last two weeks the company has not shipped a single container.

“It just came to a complete stop. Absolutely a stop,” said Gilbert Dodson, the recycling company’s co-owner. “I’ve seen it slow over the last 25 years, but this is the worst,” he said of the current downturn."

On top of everything else, China's automakers have been inspired by Detroit's antics to ask for a bail out of their own, also from the NY Times.

"China’s car industry is quietly pressing Beijing for government help as it copes with a jarring slowdown, top Chinese auto executives said in interviews here on Tuesday.

This autumn, after six years of 20 percent or more annual growth, vehicle sales were flat or slightly negative"

Wonder if imports of Spam are up?

Gobble

From the Boston Globe: "The economy is in tatters and, for millions of people, the future is uncertain. But for some employees at the Hormel Foods (NYSE: HRL) plant here, times have never been better. They are working at a furious pace and piling up on overtime.

The workers make Spam, perhaps the iconic hard-times food in the American pantry."

Hey, Happy Thanksgiving. Spam and Giblets, anyone?

CondoMobiles Solve GM and Real Estate Crisis At One Stroke

Imaginative minds can find solutions to even the most vexing problems. The federal government is just about to socialize General Motors with a bail out. And it has already socialized the real estate market via the takeover of FannieMae and FreddieMac.

Now comes the imagination.

The Feds are soon going to be responsible for moving all that GM iron. We've learned that paltry $1000 rebates don't seem to do the trick any more.

So how about a FannieMotors or a GeneralFreddie tie up? The deal is obvious. Offer a free condo with every purchase of a qualifying GM vehicle. Buy a Chevy Malibu and get a California Condo (yeah, that's pretty obvious!).

Naturally, buyers will be offered a great discount on their homeowner/auto insurance from the national insurance company, AIG.

The same deal could work with all those banks we've just nationalized also. "CondoChecking" needs no explanation.

US Oil Exports UP! What Sort Of Crisis Is This?

WASHINGTON (Reuters) - While the U.S. oil industry want access to more federal lands to help reduce reliance on foreign suppliers, American-based companies are shipping record amounts of gasoline and diesel fuel to other countries.

A record 1.6 million barrels a day in U.S. refined petroleum products were exported during the first four months of this year, up 33 percent from 1.2 million barrels a day over the same period in 2007. Shipments this February topped 1.8 million barrels a day for the first time during any month, according to final numbers from the Energy Department.

The surge in exports appears to contradict the pleas from the U.S. oil industry and the Bush administration for Congress to open more offshore waters and Alaska's Arctic National Wildlife Refuge to drilling.

Look folks, the bottom line is that the oil companies sell to whoever will pay the most. Right now, the demand for selected distillates is so high globally, that it's more profitable to EXPORT some of the fuels distilled here in the USA from American crude to Europe and Asia. Guess what will happen to all that oil from Alaska and offshore from New Jersey and Miami? Yep, it'll enter the global market, not be confined to US needs.

So while Larry Kudlow cheers "Drill Drill Drill!" on CNBC, remember his only real patriotism is to the land of the Corporations, having nothing to do with the welfare of the American people.

Starbucks And Exotic York, PA--Marketing Blunder?

Starbucks is seeking to restore lost lustre to its brand. On the low end, McDonald's and Dunkin' Donuts are aggressively courting its hard core coffee drinkers, while $4.00 a gallon gasoline prices are causing even its well-heeled customers to skip the occasional latte.

I find Starbucks' espresso excellent, and stopped into my local bistro for a dopio this afternoon. In what must be an attempt to impress customers with the quality of its coffee, chalked on the signboard behind the counter was "Pike's Place Brew Freshly Roasted on May 16 at our York PA plant."

Part of premium coffee's appeal is the romance of its geography. Kenya. Kona. Columbia.Ethiopia. Jamaican Blue Mountain. As a Keystone State resident, I am unable to understand how an association with York, PA adds to the cachet (or romance) of Starbucks.

Sure, York is home to a Harley-Davidson factory. And that's cool, if not especially gourmet. On the other hand, Wikipedia notes "The alternative rock band Live is from the city of York.^[19] The Live song "Shit Towne," from their album Throwing Copper is about York, and does not portray it in a positive light.^[20]"

I'm not the only customer who noticed this new emphasis on York , PA. A New York City store's chalkboard with a similar message has been posted on Flickr.

Clearly that York, PA plant is important--look at this Internet posting for a Senior Engineer to "to develop & implement engineering designs in specific technical functions within manufacturing or packaging to improve efficiencies, increase capacity and reduce costs." Sounds just yummy.

Part of the Starbucks corporate myth centers on its beginnings with a single store in coffee-loving Seattle, WA. Keep selling the Seattle. Skip the York.

Spam Up. Economy Down.

Forget the filet mignon. Sales of that recessionary favorite food, Spam, are on the rise!

"Sales of Spam — that much maligned meat — are rising as consumers are turning more to lunch meats and other lower-cost foods to extend their already stretched food budgets.

What was once cheeky, silly and the subject of a musical (as Monty Python mocked the meat in a can), is now back on the table as people turn to the once-snubbed meat as costs rise, analysts say.

Food prices are increasing faster than they've risen since 1990, at 4 percent in the U.S. last year, according to the Agriculture Department. Many staples are rising even faster, with white bread up 13 percent last year, bacon up 7 percent and peanut butter up 9 percent."

No News Today

What if nothing happened?

Less Revenue. More Spending. What's New?

The Wall Street Journal reports that corporate tax revenues are falling by 14% compared to last year even as federal spending soars. Wonder if Paulson can get us one of those zero percent Visa cards?

With turmoil rocking financial markets and housing woes slowing the economy, corporate tax revenues are falling and leaving big holes in the federal budget.

The Treasury Department reported Monday that corporate income-tax revenue over the first seven months of the fiscal year, which began Oct. 1, was $171.1 billion, 14.7% lower than during the same period a year earlier. Meantime, government outlays rose 7.3%, to $1.7 trillion, and the federal deficit ballooned to $152 billion, 88% higher than the same period last fiscal year.

"The budget picture is growing darker and is set to get much darker in the next few months, as the impact of the tax rebates hit the government's bottom line," said Mark Zandi, chief economist at Moody's Economy.com, a research firm.

Recommended Line For Obama

For the moment, Hillary remains the candidate who will not die, mimicking the attack of the zombies from the Night Of The Living Dead. Per the NY Times on May 8:

Senator Hillary Rodham Clinton struck a publicly defiant posture on Wednesday about continuing her presidential bid despite waning support from Democratic officials and donors.

The time has come for Obama to say clearly and consistently, "I have every confidence that Hillary Clinton will ask those who have voted for her in the primaries to turn their energies and enthusiasm to the main task at hand, which is ensuring that the Democrats win the White House." Then he should demand her pledge to exhort her supporters to back the Democratic presidential candidate.

Hidden Stat: Housing Prices Plunging At Minus 28% Annual Rate

In a report, that was not carried in the mainstream news, the US Treasury says that, by one measure, US housing prices are falling at a truly terrifying 28% annual rate.

Our source is the official April 30, 2008 "Report to The Secretary of the Treasury from The Treasury Borrowing Advisory Committee of the Securities Industry And Financial Markets Association." This was made publicly available as a press release on that date.

The relevant passage says:

In fact, housing price data from S&P/Case-Shiller was released hours before our meeting and highlighted that the decline in housing prices is not over but that prices are actually accelerating to the downside. For example, while year-over-year prices were reported to be down almost 13%, prices on a 6-month, 3-month and 1-month basis have declined 21%, 25% and 28% annualized, respectively.

The same gloomy report also says that the US budget deficit may increase from 2007's $163 billion to as much as $500 billion in 2008--which would be the largest ever in our history.

A recent survey of primary dealers estimates that the deficit for the 2008 fiscal year ending in September will exceed $400 billion with some economists expecting a deficit of more than $500 billion--a significant deterioration from fiscal 2007's deficit of $163 billion. Economic stimulus measures will complement the forces widening the budget deficit. This year's shortfall may surpass fiscal year 2004 as the largest on record in nominal dollars.

The folks over at The Wall Street Examiner say "The statements by the TBAC are so sobering and so stunning in their scope that it’s hard to believe that the Ministry of Truth would have allowed its publication."

Of course, hiding horrible truths is very easy in a world where the main stream media choose not to cover our national financial market disgrace, and the financial media itself has become simply a cheerleader for the Plutocracy. Long live CNN and Fox Business News.

Safety Patrol On Wall Street

May 2 (Bloomberg) -- A month after the Federal Reserve rescued Bear Stearns Cos. from bankruptcy, Chairman Ben S. Bernanke got an S.O.S. from Congress.

There is ``a potential crisis in the student-loan market'' requiring ``similar bold action,'' Chairman Christopher Dodd of Connecticut and six other Democrats wrote Bernanke. They want the Fed to swap Treasury notes for bonds backed by student loans. In a separate letter, Pennsylvania Democratic Representative Paul Kanjorski and 31 House members said they want Bernanke to channel money directly to education-finance firms.

Student loans are just the start. Former Fed officials and other Fed-watchers say that Bernanke's actions in saving Bear Stearns will expose the central bank to continuing pressure to use its $889 billion balance sheet to prop up companies or entire industries deemed important by politicians. The Fed satisfied Dodd's request today, expanding the swaps to include securities backed by student debt.

``It is appalling where we are right now,'' former St. Louis Fed President William Poole, who retired in March, said in an interview. The Fed has introduced ``a backstop for the entire financial system.''

Critics argue that the result will be to foster greater risk-taking among investors emboldened by the belief that the government will bail them out of bad decisions.

George Carlin has a routine where he laments that parents are way too overprotective of children these days. "There are a lot of loser kids out there and you can't protect them all," he says. "These soft fruity baby boomers are raising a whole generation of soft fruity kids who aren't even allowed to have hazardous toys."

Have our financial leaders gone soft and fruity themselves? Those posturing macho masters of the universe are all clamoring now for the Fed to give them a free do-over on their speculative excesses of the past few years. Now Congress is insisting that the Fed insure and bail out everything from student loans to fraudulent mortgages.

Carlin says, "Whatever happened to natural selection, survival of the fittest? The kid who eats too many marbles doesn't survive to have kids of his own."

Having seen my own kids get gold stars for simply handing in homework, and win trophies simply for being on the roster of a last place soccer team, and watched as the local middle school banned touch football at recess for being too hazardous, I know whereof Carlin speaks.

But nannies on Wall Street to wipe the spilled milk of investment bankers?

The greatest danger in any democracy is that the 'people' will discover that they can give themselves all that public money. Like a kid who learns where the cookies are hidden, the temptation to eat them all before dinner is just too great.

A last word from George Carlin:

Nature knows best. We are saving entirely too many lives in this country--of all ages. Nature should be allowed to do its job of killing off the weak and sickly and ignorant people without interference from airbags, and batting helmets.

And Ben Bernake.

Wii and Roomba Go To War

The Roomba vacuum robot which automatically cleans your floors and the hot-selling Wii game console from Ninetendo have become an unlikely duo saving the lives of American troops in the war on terror.

Seems that the iRobot company which manufactures the Roomba remote control home vacuum cleaner, uses its technology to create a small portable robot which safely detects booby traps and ambushes called the PackBot. Over 1000 of the devices have been delivered to the American military, where they are used to save lives by detecting booby traps and ambushes by remote control.

The most recent version of the iRobot is controlled by a device that is much like the hand controller for the XBox 360--which required two hands to be used. It works well, but, in a combat situation, soldiers are limited in their ability to move and to carry weapons when both hands are employed to control the iRobot. Thus, the quest for a 'one handed' controller for the PackBot.

Naturally, the solution lies in yet another bit of video game technology--the revolutionary, motion sensing, Wii game controller. Website Gizmodo.com reports, "David Bruemmer and Douglas Few, engineers at the US Department of Energy's Idaho National Lab in Idaho Falls, have put together an unlikely use for the Wiimote—they've hacked the remote so it can control a bomb-disposing, landmine-detecting, machine gun-carrying robot...by simply waving the remote around the robot moves accordingly, and when an object of explosive interest is detected, the Wiimote's in-built vibration feedback goes nuts.

So the insurgents are setting off their IED bombs using remote control garage door openers, and we are responding by sending in robot vacuum cleaners directed by video game controllers. How long will it be before La-Z-Boy wins one of those fat Pentagon contracts?

Bimmer Bummer--Shifting Supply To China

We know that sales of luxury goods are soaring in emerging economies. And, now, the Wall Street Journal reports BMW is shifting its inventory allocations from the US in favor of China and Russia.

"BMW Chief Executive Norbert Reithofer said in a conference call Tuesday that the company decided late last year to look at redirecting cars between markets to mitigate currency impacts. Referring to the U.S., Mr. Reithofer said BMW is reallocating cars to more-profitable markets such as China and Russia. The weak dollar, in particular, makes German cars less profitable for BMW to sell in the U.S., because its construction costs are in euros."

Expect to see black market Z4's smuggled in to Palm Beach via Shanghai.

House Of Blues

CNN reports, "The S&P Case/Shiller Home Price Index, which tracks 20 of the largest housing markets, showed prices plummeting by 12.7% in the 12 months ending February. That's the biggest fall since the index began tracking prices in 2000."

In related news, Forbes notes, "The number of foreclosures filed by US homeowners increased sharply for the seventh consecutive quarter, according to a private sector report released today.

In the three months ending in March, the number of foreclosures totaled 649,917, up 23 pct from the previous quarter and 112 pct from the first quarter of 2007, California-based RealtyTrac said."

Prices way down. Foreclosures way up. This may be one of those Minsky moments, when falling prices beget more falling prices, resulting in a housing death spiral. Tell me again why the recession will be short and shallow?

Cracking The Dollar

Here's a surprise. I agree with the Wall Street Journal this morning, as it calls for a return to sobriety in the Fed's fiscal policy.

"So Federal Reserve officials are whispering to reporters that they will consider a "pause" after another interest-rate cut this week. Perhaps we should be more respectful, but this sounds like the alcoholic who tells his wife he'll quit drinking next weekend, after one more bender. What Chairman Ben Bernanke needs isn't a gradual withdrawal from easy money but membership in Central Bankers Anonymous.

Eight months into the Fed's most recent rate-cutting spree, the evidence is overwhelming that it has been a major policy mistake. Aggressive rate cutting – taking the fed funds rate to 2.25% from 5.25% last September – has had little effect on the banking crisis it was supposed to ease."

The editorial goes on to suggest that the recent surge in oil price from $70 to $119 a barrel is linked to the plunging value of the dollar, caused by the slashing of interest rates. The same is true for other commodity prices, especially those for foodstuffs.

"This is a direct tax on both the world's poor and America's middle class. Just when the U.S. economy needs a resilient consumer given the fall in housing prices, these price increases have eviscerated consumer pocketbooks. In its attempt to help Wall Street and the financial system, Fed policy is punishing average Americans. The public is frustrated and angry with these price increases, and it has a right to be. Inflation is the thief of the thrifty middle class."

On the heels of the WSJ editorial, the head of OPEC forecasts the possibility of $200 a barrel oil in today's London Times: "The president of OPEC, the cartel of oil-producing countries, has given warning that the price of crude could hit $200 a barrel, sparking fears that rising fuel costs will force more businesses into bankruptcy.

Chakib Khelil, the Algerian Energy Minister and president of OPEC, said that the falling value of the US dollar would continue to drive up oil prices as investors sought to store their wealth in other assets."

Other assets, eh? So maybe I should just park my car and let that Texaco Tiger in my tank appreciate...

(We are all doomed anyway according to The Financial Ninja, as banks have lost the capacity to lend)

The Test Of Democracy Is Freedom Of Criticism

Simon Elegant, a Time Magazine correspondent based in Beijing, reports "'Simon, you will be hated by 1.3 billion Chinese,' someone wrote in response to my blog post about the chaotic progress of the Olympic torch through London. 'Hope someday someone will spit on your face. Your name will be recorded in Chinese history book forever as one of cold blooded, Hitler-type, murder's assistant.'"

Among some Chinese, nationalism, fueled by resentment of Western coverage of the recent riot in Tibet, is on the rise.

And that's not good for either China or the rest of the globe.

France has been singled out for particularly harsh treatment since a Chinese Olympic torch-bearer in a wheelchair was photographed defending the flame from highly aggressive protesters in Paris. Foreign governments are terrified to have the wrath of the Chinese people directed against them. Too much trade is at stake.

No surprise then that "Former French Prime Minister Jean-Pierre Raffarin said Friday his country wanted to be the best friend of China in Europe and hoped to strengthen the strategic partnership between the two nations." as reported in China's official organ, the People's Daily Online.

The protests are not confined to China. The LA Times reports that several thousand Chinese nationals marched this week in Los Angeles to protest perceived biased and anti-Chinese reporting on CNN. "...when more than 1,000 demonstrators including students, business people and engineers from mainland China, Hong Kong, Taiwan and Southeast Asia rallied in front of CNN's Hollywood headquarters a week ago, it marked a milestone for the local Chinese community."

This can get nasty, unless everyone finds a way to 'save face' and allow for inevitable tensions that results when various factions begin to express their right to self-expression. For so long, the West doubted that the Chinese people had a voice. Now that they are finding it, Westerners resent what they say.

We are brought around to David Ben-Gurion's thought that "the test of democracy is freedom of criticism."

Rebates End Recession?

WASHINGTON - President Bush said tax rebates will start going out Monday, earlier than previously announced, and should help Americans cope with rising gasoline and food prices, as well as aid a slumping economy.


While Bush suggests the rebate will be a great way to pay off those inflated oil prices, we note this from FINTAG a few days ago-------->


Let them eat cake, indeed.

Icy Flight Problems

From the WSJ

"In a few weeks, these people said, investigators are likely to warn operators and pilots of Boeing Co.'s long-haul 777 models to take extra precautions when monitoring fuel temperatures on a growing number of extended flights over the North Pole. If temperatures creep too low, pilots can descend to warmer air or speed up to increase the heat generated by air friction against the plane's skin."

Back in the day when Ernest K. Gann wrote the aviation classic "Fate Is The Hunter" ice was was a killer that formed on wings and control surfaces, destroying aerodynamics and increasing weight until airplanes fell from the sky.

We like to think our technology solves all problems. But, of course, the law of unintended consequences and hubris tend to bite us in the butt just when we get comfortable in that new recliner.

Icing has moved from outside the airplane to inside--in this example, Boeing 777's flying polar routes to save fuel are finding that those super-cold temperatures are causing minute amounts of water that contaminate all aviation fuel (they are in your car too, but seldom cause problems) are freezing, and then clogging the flow of fuel to the engines.

That seems to be the cause of that 777 crash at Heathrow, as the Journal notes, "Investigators suspect that the Jan. 17 accident at London's Heathrow Airport occurred because slush or ice built up in part of the fuel system of the British Airways 777 during a long polar flight from China in unusually cold outside temperatures. As the widebody jet descended toward London, remnants of icy particles likely clogged a portion of its fuel system, starving the Rolls-Royce engines and providing minimal power despite pilot commands for more thrust."

Naturally, all parties involved deny responsibility.

"Though some are arguing for design changes, a team of U.S. and British investigators hasn't reached a consensus on whether to recommend modifications to make the fuel systems on some Boeing 777s more resistant to unusually frigid conditions. Such a move could be seen as a public relations blow to Boeing and Rolls-Royce PLC, which supplied the engines and related hardware on the accident aircraft."

Same old story. Protect corporate reputations (aka bottom lines) while consumers suffer and die.

BTW--Ernest K. Gann finally quit flying, believing that while Fate is a hunter that will ultimately find its prey, sometimes you can step out of the way just a bit. Something to ponder the next time you board that polar-bound China Clipper.