Are You Getting It Yet?

The inclusion of gasoline numbers drives some of this, though not in the numbers below. The numbers are below analyst expectations. My thinking is a re-alignment is taking place, whether we like it, or not.

Increased savings and reduced spending in what is a highly services-based economy like America's is a bad thing. We don't even have the manufacturing resources we once did. As our own economy declines, eventually it may open the door to some growth in that regard. It should make America at least somewhat more competitive globally.

Still, from the psychology of it, to the numbers and the plans a liberal Democrat-controlled government might take set the stage for some highly-interesting and potentially painful economic times for America - for some period of time.

However, that doesn't mean the rest of the world gets a pass. Much of their wealth was tied to the US. Now watch them eventually start making America the only bad guy in this. It isn't true, but they always do.

Interesting times, to be sure. 

Price-slashing failed to rescue a bleak holiday season for beleaguered retailers, as sales plunged across most categories on shrinking consumer spending, according to new data released Thursday.

Despite a flurry of last-minute shoppers lured by the deep discounts, total retail sales, excluding automobiles, fell over the year-earlier period by 5.5% in November and 8% in December through Christmas Eve, according to MasterCard Inc.'s SpendingPulse unit.

When gasoline sales are excluded, the fall in overall retail sales is more modest: a 2.5% drop in November and a 4% decline in December.

Comments

[RELIAPUNDUT]

ALSO: SAVINGS WENT UP.

CREATING A LITTLE STOCKPILE OF MONEY.

AS SOON AS PEOPLE GAIN SOME CONFIDENCE/SECURITY THEY WILL SPEND THIS AND MORE.

WE'RE IN FOR A HUGE BOOM STARTING IN APRIL - IF OBAMA DOESN'T WRECK IT.

[jharp]

WE'RE IN FOR A HUGE BOOM STARTING IN APRIL - IF OBAMA DOESN'T WRECK IT.

Posted by: RELIAPUNDUT | Friday, December 26, 2008 at 12:10 PM

You are an idiot. We won't even have yet hit bottom come April.

And since you put so much power in the presidency to wreck a recovery I guess you blame Bush for wrecking it in the first place.

[jharp]

WE'RE IN FOR A HUGE BOOM STARTING IN APRIL - IF OBAMA DOESN'T WRECK IT.

Posted by: RELIAPUNDUT | Friday, December 26, 2008 at 12:10 PM

You are a fool. We won't even have yet hit bottom come April.

And since you put so much power in the presidency to wreck a recovery I guess you blame Bush for wrecking it in the first place.

[reliapundit]

no jharp: actually, we have already hit bottom.

s&p and dow. and dollar. and housing.

and the retail sales number - excluding gas and cars/planes - isn't bad, ESPECIALLY when you consider savings is UP, and the retail numbers reflect HUGE MARKDOWNS.

markdowns of more than 4% - which means the number of items sold/sales made was very good. IOW: a lot of merchandise was moved, and that's good for the supply chain - it means it will have to be replenished.

btw: i have to degrees from major universities; i am no idiot.

u r. jharp.

need more proof?

u posted the same comment twice!

idiot.

[reliapundit]

BTW: i was the ONLY PERSON IN THE WORLD - blogger or otherwise - to accurately predict the oil bubble bursting - in writing - when and by how much. at my blog.

[ET]

"i have to (sic) degrees from major universities; i am no idiot."

Really?

[jharp]

"and the retail sales number - excluding gas and cars/planes - isn't bad, ESPECIALLY when you consider savings is UP, and the retail numbers reflect HUGE MARKDOWNS."

"markdowns of more than 4% - which means the number of items sold/sales made was very good. IOW: a lot of merchandise was moved, and that's good for the supply chain - it means it will have to be replenished."

You have no idea what you are talking about. The retail business is in extreme turmoil. As is commercial real estate.

Kohls same store sales down 17%
Kay Bee Toys Chapter 7 liquidation
Linens and Things Chapter 7 liquidation
Rite Aid Bankruptcy soon
Pier 1 Likely Bankruptcy
Sears K Mart, J.C Penny horrible seasons
The list is too long to go on.

And you further show your ignorance with your stupid remark about replenishing the supply chain. The spring goods have been on the water for at least a month and the volume is down considerably.

And how you come with markdowns means sales were good befuddles my mind. They mark things down when sales suck, you dumbass.

Don't know where you got your "to" degrees but sure hope my kids don't end up there.

[old trooper]

Just thought that I would check in after a grand Christmas and read the jharp rant/hate blog.
Same insulting and offensive comments from my favorite America Hating deluded punk.

I pay more in taxes every year than jharp makes in a year. I sold off three successful businesses last year and work for no one. I retired on March 05 and manage my own money. Never had to give anyone head on a golf course or be rude with anyone.

Since this is now the jharp website, Dan needs to send him the bill for it and quit.
Punks, middle aged or sprouting need the Responsibility for painting their Tripe on the internet or on restroom walls. As jharp is treating this site as a restroom wall, I think that he should pay for it and take a second job to do that.

If I return here next week and read any jharp tripe, he should own the website and pay for it.
Dan allowed this and it is his business. It used to be a place for intelligent exchange of information. Now it is jharp's restroom wall.

Happy New Year and Take Care All.

[MarkJ]

FWIW, instead of buying a lot of new s***, here are some of the things I gave my family for Christmas, recession be damned:

Mother: gift certificate to a restaurant she absolutely loves.

Sister: Box calendar of Irish scenes (she gave one to my mom and also wanted one for herself).

Son: Cash. He's in the Army, getting ready for a transfer to Okinawa, and he needed that more than anything else.

Daughter: Helped pay for her airplane ticket to Peru, South America (she's making a long-overdue to her cousins and grandmother).

Brother: He's a camera nut, so I gave him a butt-load of 1950's German Contax camera equipment that I bought dirt-cheap from an antique dealer who didn't know its true value. Also gave him a 1951 Crosley AM tube radio, which plays and sounds great--picked it up for almost nothing through a fellow radio collector.

Father: Paid to restore his beloved father's (my grandfather's) 1936 gold Elgin pocket watch back to working condition--it's the only personal possession of his father that he has left.

Bottom line: I only spent a few hundred bucks for all of the above, hardly bought anything new, but everybody said the things I gave them were among the nicest XMas presents they've ever received.

[jharp]

"Never had to give anyone head on a golf course"

I beg your pardon. Just what is that supposed to mean?

Just where have you had to "give head"?

[torabora]

Old trooper...the Jherpes fella is annoying but the rest of you all far make up for it. Happy New Year.

[reliapundit]

some jerkoff wrote:

"The spring goods have been on the water for at least a month and the volume is down considerably"

idiot: they've been on order for 6 mos to a year.

and i luv the tools who turn typos into an iq test.

jerks.

some retailers are doing ok, other badly. like most changes in the economy there are winners AND losers.

retail numbers for the year suck because of what the oil bubble and high interest rates did from october of 07 thru this oct.

and then people got scared and started to save.

but christmas sales by units not dollars have been good. A LOT of inventory has been moved. TONS.

i'm in a related field so i know.

continues low energy costs and low cost of money and the HUGE SURGE in refinancing will spur retail sales.

the recession is one year old and most last 12-16 mos.

this one will be no different.

over by summer - with the rebound becoming visible in end april.

unless obama ruins it.

[jharp]

"The spring goods have been on the water for at least a month and the volume is down considerably"

idiot: they've been on order for 6 mos to a year.

No shit. Dumbass. On the water means exactly what it says. On the water. Do you think it might take a little time to order raw materials and make the goods?

"some retailers are doing ok, other badly. like most changes in the economy there are winners AND losers."

Few are doing well. Very few. Dollar Tree, Wal Mart, Sams, and Costco come to mind. The rest of them are sucking big time.

"retail numbers for the year suck because of what the oil bubble and high interest rates did from october of 07 thru this oct."

Yeah, and so what. The point is they suck.

"but christmas sales by units not dollars have been good. A LOT of inventory has been moved. TONS."

And idiotic statement even for our newest idiot. You'd be surprised how many dollar bills you can sell for 80 cents too.

i'm in a related field so i know.

"the HUGE SURGE in refinancing will spur retail sales."

Put the crack pipe away. Refinancing? Good one. Very funny.

"the recession is one year old and most last 12-16 mos."

"over by summer - with the rebound becoming visible in end april."

You have no idea of the magnitude of what we are facing. When was the last $700 billion bank bailout you recall? And that's just the warmup.

[Budahmon]

Hate to agree with Jharp here...but that 700 billion has to come from somewhere...and it's actually quite a bit more than $700 billion. Which means we are printing money. Which means we are going to see a deflationary period for a few more months (6?) then get slammed by inflation (10-20%). We are doing what the Japanese did during the 90s and where did it get them? I can look around my neighborhood and in a two block radius from my house there are at least 15 homes for rent. These houses should have been on the market for sale or they would have been rented in this particular neighborhood (high end historic district). The lessors are having to move out due to job loss or much better deals for renting homes elsewhere in the city. Thus to get these homes and apartments rented the owners will have to cut rental rates. Goods will have to be sold at lower value, but eventually this will come to an end as inflation and the printing of money by the Fed kicks in...This reminds me of the end of the Vietnam and the LBJ presidency. We spent nearly 12 years trying to stop inflation..ending with Jimmah's 12% inflation, 20% interest rates and 10% unemployment. There was a big difference between then and now. We had a manufacturing base to fall back on and a President who believed in free markets who would and did tell the Congress and Unions to screw themselves, although he did it rather eloquently.

[Philip McDaniel]

“Just where have you had to "give head?”
I think he was referring to you, jharp – sort of describing you…after all, what is a person CALLED who gives head?

“Bottom line: I only spent a few hundred bucks for all of the above, hardly bought anything new, but everybody said the things I gave them were among the nicest XMas presents they've ever received.”
Merry Christmas and a very Happy New Year to you, MarkJ. Thanks for sharing with us.

“some retailers are doing ok, other badly. like most changes in the economy there are winners AND losers.”
Interesting points, reliapundit, and you may be right. I see Amazon is claiming that 2008 was the best season ever. Perhaps some of the others on this blog can offer some insight as well…intelligent debate instead of the sophomoric ranting of our resident Narcissus.

[Philip McDaniel]

“but that 700 billion has to come from somewhere...and it's actually quite a bit more than $700 billion”
The deflation-inflation potential has me worried too, Budahmon. I suspect that the next nine months are going to be critical. As an aside, I’ve heard that Diesel engine sales are up and that Caterpillar is looking for strong sales in the coming year.

[Gary Ogletree]

I prefer jharp to be right without insulting our starry eyed optimists. Although I've been reading and watching conflicting predictions from all sorts of sources I never usually visit, I'm concluding we are likely to see a couple more bottoms in the coming year. Too many dominoes still standing. The stock market is currently more like the Chicago Board of Trade. Every new stock buy has a delivery date and you don't want to be holding the bag too long. Gold may drop to $300 then take off to the moon. The Dow could hit 4000. At this point the I Ching may be a better source than the usual market oracles. If you still have three pennies.

[Philip McDaniel]

"At this point the I Ching may be a better source than the usual market oracles. If you still have three pennies."
LOL!
God, I hope you're wrong but I think you may be right. Well, we will soon find out this next year.

[PA]

High end full price retailers hammered, real shocker that. The local WalMart was going gangbusters though.

[HatlessHessian]

"The retail business is in extreme turmoil."

Creative destruction at work. KB Toys? Damn if they weren't dead 10 years ago. Cause: Failure to innovate (staying in dead-end malls didn't help much, did it?). Linens and Things? Redundant... see Bed, Bath and Beyond. Sears? Having loved you for years, you got all K-Mart on us. You sold your credit card business to Citi who proceeded to try to jack up 780 credit score customers to 28% interest and when we dumped your card, we found it just as easy to shop elsewhere. Your clothes were tired, your electronics reminded us of Electric Avenue ala Montgomery Wards. What else was there to buy at Sears? Oh, Craftsman? See Home Depot, Lowes and Menards which have everything else we need there.

Seriously, every entry on your list is a lesson on bad strategy. Why would you want to save companies that don't "get it" and instead give consumers lousy crap? People like you probably miss the AMC Gremlin and the Pacer!

Bad companies need to die. That creates space for innovative new ones to come up. Let them fail and serve as a lesson to investors, managers, creditors and employees that investment in bad businesses results in pain.

[Lala]

I'm happy to see the truth about FDR is finally coming out. But what are we in for with Obama?

John Stossel: Obama shares FDR's arrogant conceit
By JOHN STOSSEL

Barack Obama wants to use the recession to remake the U.S. economy.

"Painful crisis also provides us with an opportunity to transform our economy to improve the lives of ordinary people," Obama said.

His designated chief of staff, Rahm Emanuel, is more direct: "You never want a serious crisis to go to waste."

So they will "transform our economy." Obama's nearly trillion-dollar plan will not merely repair bridges, fill potholes and fix up schools; it will also impose a utopian vision based on the belief that an economy is a thing to be planned from above. But this is an arrogant conceit. No one can possibly know enough to redesign something as complex as "an economy," which really is people engaging in exchanges to achieve their goals. Planning it means planning them.

continued at http://www.theunionleader.com/article.aspx?headline=John+Stossel%3a+Obama+shares+FDR%27s+arrogant+conceit&articleId=184d65c8-6a6e-439b-96cf-7bba99561d2d

[budahmon]

I have an observation to make....over the years, while sitting at railroad crossings waiting for a train to pass, I count the number of cars on the train, and correlate that to the current economic conditions. Since the line is one of two East Coast lines...the rail traffic is steady...130+ cars - economy is going like gangbusters....100-130 - good economy....70 - 100 poor economy = recession.... I've never counted below 75 cars....Until this past week..... 55...58...51......I'll leave it at that...

[budahmon]

I have an observation to make....over the years, while sitting at railroad crossings waiting for a train to pass, I count the number of cars on the train, and correlate that to the current economic conditions. Since the line is one of two East Coast lines...the rail traffic is steady...130+ cars - economy is going like gangbusters....100-130 - good economy....70 - 100 poor economy = recession.... I've never counted below 75 cars....Until this past week..... 55...58...51......I'll leave it at that...

[Todd]

ALSO: SAVINGS WENT UP.

CREATING A LITTLE STOCKPILE OF MONEY.

AS SOON AS PEOPLE GAIN SOME CONFIDENCE/SECURITY THEY WILL SPEND THIS AND MORE.

WE'RE IN FOR A HUGE BOOM STARTING IN APRIL - IF OBAMA DOESN'T WRECK IT.

no jharp: actually, we have already hit bottom.

s&p and dow. and dollar. and housing.

BTW: i was the ONLY PERSON IN THE WORLD - blogger or otherwise - to accurately predict the oil bubble bursting - in writing - when and by how much. at my blog.

Posted by: RELIAPUNDUT | Friday, December 26, 2008 at 12:10 PM
------------------------
Congrats on the excellent call in oil. However, I think you vastly underestimate the power of the economic destructiveness of the massive deleveraging process that is going on. This is no garden-variety recession, and comparing this economic bust cycle to the shallow recessions of 2001 or 1991 is like comparing apples to oranges. I think what we are seeing is a perfect storm of economic problems that took decades in the making, and will take perhaps 5-10 years to undo. This country wouldn't accept a serious recession in the past 2 decades which would have served as an economic enema that would have been very healthy and cleansing. That we kept pushing off taking our medicine has led us to this point, making it a much more dangerous situation. Combine that with the fact that by making ourselves the World's Policeman, we have spent ourselves into oblivion on defense spending and nation building at the expense of our own infrastructure and education system. This has long term economic repercussions and will serve as a hangover for quite a period of time.

If you take into consideration the possibility that much of the economic good times since 1982 occurred not because of successful supply-side tax cutting leading to capital formation but rather because of a massive leveraging up and accumulation of debt by the US government,US corporations and American private citizens, then you can also understand the economic ramifications when that credit is no longer available. The only alternative is running the government printing presses full throttle. Once we get through the deflationary process during this deleveraging, we are likely to see some scary inflationary effects which can only be quashed by a Volcker-like ratcheting up in rates leading to a very severe recession again. That could take quite a long time.

Here is a chart comparing the present stock market crash to 3 of the great megabear markets of all time. What is noteworthy to me as a trader/investor, and why this stock market bear market is comparable to the other 3, is the velocity of the fall during the incipient 12 months of those times.

http://dshort.com/charts/bears/mega-bear-quartet-large.gif

(I tried to post the chart here for all to see, but unfortunately that can't be done so you have to click through to see the comparisons.)

My conclusion: Even if you are correct about an April economic recovery, RELIAPUNDIT, it likely is going to be an illusory dead cat bounce. There is no little stockpile of savings being built by reduced spending. All that money is going to go into a long-overdue paying down of debt, a phenomenon that will continue for as far as the eye can see. Housing hitting bottom? No way. The level of incomes vs housing prices and the cost-to-own vs cost-to-rent suggest that a regression to the mean will require yet another 20-30% lower prices. That's how far out of whack prices got in the illusory housing boom, which was fed by that massive leveraging up in both the commercial real estate and consumer sector.

[Fred Beloit]

A contrary view by Victor Hanson. He sees, in future big media reports at least, a description of the U.S. as Freudenthal (Happy Valley). How could this be? Because Obama and his merry band will be in power.
http://pajamasmedia.com/victordavishanson/life-at-new-animal-farm-won%E2%80%99t-be-all-that-bad/

[reliapundit]

TODD:

THE RECESSION IS ALREADY ONE YEAR OLD, SO PREDICTING WE BEGIN TO BOTTOM OUT IN APRIL IS SAYING IT WILL BE OF AVERAGE DURATION.

THE COSTS HAVE ALREADY BEEN HIGHER THAN ALL POST-WW2 RECESSIONS, BUT SO HAVE THE RESPONSES WHICH WILL MITIGATE THE PAIN AND LEAD TO FASTER RECOVERY.

ALL WE NEED TO STAY ON A GOOD PATH IS TO KEEP MONEY, ENERGY AND LABOR CHEAP.

BERNANKE WILL KEEP MONEY CHEAP.

THAT LEAVES THE REST UP TO OBAMA: IF HE RAISES ANY TAXES AND SKEWS THE PLAYING FILED TOWARD UNIONIZED LABOR, THEN THE RECOVERY WILL STALL.

THE BEST POSSIBLE RESPONSE FOR THE FED GOVT WOULD BE TO CUT ALL TAX RATES AND GIVE ALL TAXPAYERS A TAX HOLIDAY OF 3 MONTHS - AND STOP BAILING OUT CORPORATIONS.

LET THE PEOPLE PICK WINNERS AND LOSERS, NOT POLITICIANS.

AND THEN THE FED GOVT SHOULD INVEST 30% OF SOC SEC INTO BLUE CHIPS - NOW, WHILE THEY'RE DOWN.

[Philip McDaniel]

At the very least eliminate corporate taxes and either cut substantially or eliminate the capital gains tax.

[ET]

SHOUTING DOESN'T MAKE YOU RIGHT!

[McGehee]

I fortunately don't have to spend a lot of time waiting for trains to pass, so my personal economic indicator is the per-gallon retail price difference between unleaded gasoline and diesel fuel.

Diesel is used by every form of transportation important to our economy -- trucks, trains, ships, you name it -- so that while consumer demand for gasoline may rise or fall precipitously, and the price with it, diesel fuel tends to rise and fall more slowly because its demand is at every level of the economy. In general, if the difference between a gallon of gas and a gallon of diesel at your local station is remaining more or less the same, you can conclude that consumers' view of the short-term economy is pretty much in step with the producers' view of the long-term economy.

Both gas prices and diesel prices have been coming down, and where I live the difference has been narrowing -- something I don't expect to see when gas prices are falling. Whatever rate gas prices are coming down, diesel is coming down faster. This implies that transportation of goods is in decline.

I don't really pay attention to sales figures or the like; much of what I'm getting for Christmas this year won't be purchased until near or after New Year's, thanks to gift cards. I do however think it's way too soon to say we've already hit bottom. When I see the decline in diesel prices slow down, then I'll think things are about to turn around.

[Philip McDaniel]

Diesel might be a good indicator. As you point out, it is the major transportation fuel. The price, however, is governed mostly by the taxes imposed on it. Diesel fuel is cheaper to refine than gasoline. Higher Diesel prices reflect state and county tax greed. If the price is indeed coming down it is at this time due mostly to reduction in actual costs. Look for it to increase when governing bodies realize that their revenue stream is shrinking and they decide to increase the tax revenue on Diesel. You will most likely see this first in a state like Michigan, run by typical Democrat whores.

[Todd]

Reliapundit, what I am saying is this is not your garden variety recession so average duration is not something you should expect (by a long shot). And, given the deleveraging process going on even when we recover it should be a very tepid recovery to the point you might not even notice it.

Anyways, I am more focused on the stock market than on when we are on the verge of economic improvement as the stock market is the vehicle to make money from your own ideas. As well as the metals market, the currency market, the credit markets etc. My personal view is that the stock market has another 30-40% more to go on the downside, primarily because I think there will be a price/earnings multiple compression. The SP500 should not be able to maintain trading at a 14 p/e ratio in a secular bear market. As the earnings come in next year, we should see significantly lower prices. I also see the dollar as being toast, and I favor the Australian and Canadian dollars as extremely undervalued vs the USD. These are 2 countries that run their ships very tight fiscally, something that is anathema in the United States for decades. I also see gold moving higher and eventually oil screaming higher, as oil is at historically low levels vs gold. All these trades can be put on in the stock market; you don't need to access the commodity markets to make these trades/investments.

[Todd]

At the very least eliminate corporate taxes and either cut substantially or eliminate the capital gains tax.

Posted by: Philip McDaniel | Sunday, December 28, 2008 at 02:40 PM
---------------------------
While I agree that cutting the corporate tax rate is long overdue (combined with eliminating all of the major loopholes that allow corporations to evade paying tax altogether), I think cutting or eliminating the capital gains tax rate would only serve to create a stock market bubble yet again at some point. Take a look at real estate for an example. In the late 90's, the US changed the tax laws allowing for $250,000 per individual in tax-free capital gains and $500,000 per couple. This was a key ingredient in the making of the real estate bubble, later fed by Greenspan's major mistake of cutting rates too low and then the advent of all kinds of creative mortgages (combined with massive fraud). When you give a certain asset class preference on a tax basis, you encourage speculation in that asset class potentially leading to a bubble. Any cutting or elimination of capital gains should be done on a temporary basis only to attract investors for a period of time until stability returns. Beyond that point, history shows us that a bubble is a distinct possibility. We've had enough of bubbles.

[McGehee]

"If the price is indeed coming down it is at this time due mostly to reduction in actual costs."

That's a reasonable suggestion but it needs substantiation: What has changed recently to cause the cost to refine diesel to suddenly start coming down now?

Absent something specific to point to in support of the alternative, I'm inclined to stick with my view that shrinking demand, likely as a consequence of a shrinking economy, is responsible for the price decline.

Show me something that supports the alternative though, and I'll be happy to consider it.

[Todd]

WE'RE IN FOR A HUGE BOOM STARTING IN APRIL - IF OBAMA DOESN'T WRECK IT.

Posted by: RELIAPUNDUT | Friday, December 26, 2008 at 12:10 PM
-------------------------
Calculated Risk notes that Paul Krugman makes an interesting observation today about something Obama has no control over:

http://www.calculatedriskblog.com/

Krugman: 50 Hoovers

by CalculatedRisk on 12/29/2008 08:40:00 AM

Paull Krugman writes: Fifty Herbert Hoovers

No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession. The Obama administration will put deficit concerns on hold while it fights the economic crisis.

But even as Washington tries to rescue the economy, the nation will be reeling from the actions of 50 Herbert Hoovers — state governors who are slashing spending in a time of recession, often at the expense both of their most vulnerable constituents and of the nation’s economic future.

State and local governments cut back every down turn, exacerbating the recession.

Krugman doesn't mention it, but most governments also tend to spend every dollar (or more!) during economic booms. Oh well ...

[Philip McDaniel]

Good points. I agree, Todd. I was hesitant on the capital gains tax after I wrote it. A temporary suspension or reduction in that tax might help bring the markets back in line, as you point out. I still think corporate taxes should be eliminated, though – they are double taxation are they not? What do you think?

"We've had enough of bubbles."
Right! The only bubbles I want to see from now on are those in the bathtub. ;-)

[Todd]

There are a tremendous amount of loopholes in the corporate taxation structure such that some corporations end up paying way too much (35-40% tax brackets) and some are able to go years and years without paying taxes. Obama has talked about reducing corporate rates in tandem with eliminating those special interest loopholes, and I think that makes a lot of sense. I don't think you mean that corporate tax rates are double taxation, Philip, rather you are referring to corporate dividends being doubly taxed. And, I agree with that. They are and that's not fair.

[Philip McDaniel]

Show me something that supports the alternative though, and I'll be happy to consider it.”

I should have been clearer, McGehee. What I was thinking about is the drop in oil prices being translated into lower production costs. I know of no recent change in production technology that would otherwise drop the price. I do agree also that the drop in Diesel demand may drop its price but Diesel is used in many off-road applications in agriculture and that demand probably has not dropped. One thing that might drop demand though is the coming on line of Tier III engines. Apart from reducing emissions their computer controlled fuel pumps, injectors and more advanced piston head designs are making the engines more efficient. Over all I haven’t paid much attention to Diesel’s price fluctuations in the market this year – being retired I’ve been preoccupied with other interests. I’ll check with some of my old friends in the business and see what they have to say. Another thing to consider is that more goods are being transported via rail now days. I think that may be a more efficient way to move goods around although possibly slower than trucking for various reasons. Nevertheless, with a slowdown in business a firm may be more willing to transport via rail and make a savings…if there are any. What are your thoughts?

[Philip McDaniel]

"Philip, rather you are referring to corporate dividends being doubly taxed. And, I agree with that. They are and that's not fair."

Yes. I stand corrected. Thanks.

[McGehee]

"Another thing to consider is that more goods are being transported via rail now days. I think that may be a more efficient way to move goods around although possibly slower than trucking for various reasons. Nevertheless, with a slowdown in business a firm may be more willing to transport via rail and make a savings…if there are any. What are your thoughts?"

A very good point about rail. CSX has been running ads touting the fuel efficiency of rail transport lately, and it's a very impressive number -- though the ad says they can move "a pound of freight" x number of miles on one gallon of diesel, when what it really means is they move x number of pounds of freight one mile on one gallon, or twice x pounds one mile for two gallons of diesel, etc. Even so, it sounds like an excellent value if time is not as important.

As for the drop in oil prices figuring into a drop in diesel production costs, that would also figure into gasoline I would think. I don't know exactly how the two fuels' relative costs stack up (aside from, say, the question of "designer" fuel blends, although that particular factor went offline at the end of the summer driving season) so I don't know how much a change in oil prices would contribute to one vs. the other. Obviously the simpler formula should be affected more quickly when the cost of the raw material changes, but shouldn't the difference have pretty much shaken out by now?

As a matter of additional info, I'll note here that the price difference between unleaded and diesel here in my hometown doesn't appear to have changed in the past week. Then again, apparently neither have the prices themselves. There is one gas station in a nearby town that has always had a generally much higher price for unleaded than any other in the area, but whereas the other stations have diesel at about $2.259, this one has it at $2.009 -- while today its price for unleaded was actually about even with the others around it.

I've heard of statistical outliers, but that's ridiculous.

[Philip McDaniel]

"but shouldn't the difference have pretty much shaken out by now?"

Hmm...should have, I agree. Regarding the difference between $2.259 and $2.009 in different towns, I noticed that effect with gasoline in Florida a while back and was told that the two stations were just across county lines from each other. The differences were from county taxes. The fluctuations in price more or less rose and fell in tandem however. On the other hand, what you are reporting appears to be an attempt by one station to increase its business share over the others.

I'm up in Wilmington, NC right now. I'll check Diesel rates here and again when back in Florida after the 4th. Over all you bring up interesting points, McGehee. Transportation fuels may be a method to detect changes in the economy but it is not straight forward and may be too complicated for any meaningful prognoses.