Tuesday, January 5, 2010

WSJ: The Treasury Department's Christmas Eve Massacre of the US Taxpayer

Long time readers of FMMF know of our calling out warnings of the disaster that was to become of Fannie Mae and Freddie Mac, or what we call FanFredron (i.e. Enron).  I'll outline some of the history below - but the steps taken on Christmas Eve to open the US taxpayer to unlimited losses for the next 3 years borders on unconstitutional.  Frankly I have no idea how the Treasury Department got away with being able to transfer monies in unlimited amounts without Congressional approval (checks and balances anyone?) but it must of been part of the original bailout originated in 2008.  If your neighbors of friends don't follow this sort of thing, it is very important they understand what they now are being exposed to - because without an engaged populace, this sort of abuse can continue and expand.  It's already been taken to levels not imaginable just a few years ago.

I was detached from the news for a few days during the holidays but I knew there was a Dec 31st, 2009 deadline for FanFredron - after which point Treasury would need to go to Congress to extend/expand the bailout.  I thought they'd increase the liabilities from $400B to something larger, but in no way, shape or form did I expect "infinity" to be the answer.  I attempted to write a post about this subject last week, but was filled with such disgust after doing further reading I could not even finish writing it, so it was discarded - and I tried to attach myself back to the Matrix where there are no worries, and only pleasures.  At least for the holidays.

There is a very nice WSJ opinion piece, which aside from 1 throwaway paragraph attacking Democrats, does a great job of describing the issue in a way even your financially "not interested in economics" acquiantences can understand.  It really peeves me when this is made up to be a "Democratic" situation - when both parties are part and parcel to this crime against the taxpayer.  FranFredron was the LARGEST lobbyist (by dollar amount) for decades - their handouts went to both parties, and looking the other way was done by both parties.  While the Wall Street Journal is a conservative paper, I think it's ridiculous to make this out to simply be a Democratic issue - the bloody glove fits both parties perfectly well.

In short - how did we get here?  I summarized it when the bailout happened September 2008 here [Sep 7, 2008: Bailout Nation Continues - Fannie/Freddie Now Owned by You]  Ironically as the housing market began to degrade in winter 2007-2008/spring 2008 the politicos ... rather than reducing risk, actually took steps to increase risks on these entities, [Feb 27, 2008: OFHEO Increases Allowance for Fannie Mae] [Mar 19: Fannie, Freddie Layered with MORE Risk]  in their traditional kick the can down the road strategy.  Unfortunately, unlike most other problems in the US where kicking the can works for years or perhaps decades - the wall was only 6-8 months away.  The can stopped there.

Our warnings about the stupidity of INCREASING risk of these entities went unheeded, and Hank Paulson showed up in the summer claiming he had a bazooka and that FanFredron would not need a bailout.  Then a funny thing happened... the Chinese got nervous about their holdings and in a very public way wanted "guarantees" on their FanFredron holdings.  You see, FanFredron were quasi public institutions at the time - they were able to be run as private corporations - able to lobby Congress, able to pay exorbitant salaries - but with a "wink wink" backstop that was always implicit.  Well as you recall the world was a crazy place at the time, this was post Bear Stearns but pre AIG, Lehman, Citi, Bank of America bailouts or bankruptcies.  You can only imagine what the Chinese said to Hank Paulson, because within days of their public insistance that their investments be protected, FanFredron were effectively nationalized.  So the (wink wink) implicit backstop became an explicit backstop and Hank Paulson's bazooka looked the fool. 

Hank promised us it would only cost "up to $200B, i.e. $100B each" to bailout FanFredron.  As with almost every bailout, handout, government program it was classic bait and switch.  It didn't take long for "up to $200B" to turn to "up to $400B".  And yet we didn't do a full nationalization - because that's socialist and we don't do socialism in America... that's "European".  So we're still paying these CEOs top dollar and pretending these companies are actual public entities... they have stocks that trade, even as we funnel tens of millions almost every quarter into their carcasses.  I stopped keeping track by mid 2009, since it's just non stop and never ending and the actions of late are meant to increase future losses, not stop them.  [Nov 14, 2008: Freddie Mac First to the Trough] [Jan 25, 2009: Freddie Mac Saddles Up for Another $35B] [Mar 12, 2009: Fredie Mac is Back for More of Your Grandkids Money - $30.8B] [May 8, 2009: Fannie Mae with Next $19 Billion Bailout]

As part of this "conservatorship" (don't call it nationalization! you don't want to be deemed a European!!!) FanFredron were supposed to be shrunk over each ensuing year.  But as you well know Fannie, Freddie, and FHA are now almost the entire US housing market - the fully subsidized US housing economy.  (the irony should not be lost on people who want to avoid calling the US socialist in any manner)  As noted above, somewhere in the agreement must have been a footnote that said up to Dec 31st, 2009 the Treasury could do whatever they wanted with the taxpayer's money without Congressional approval.  And that leads us to the Christmas Eve massacare of the US taxpayer - where for the next 3 years, unlimited losses are allowable (throw out that $400B figure!) and the companies no longer need to shrink, but can instead grow.

p.s. if you are wondering what is happening at the FHA..... we are following the exact same path that took us down the FanFredron disaster. [Nov 18, 2009: Toll Brothers CEO - "Yesterday's Subprime is Today's FHA"]  We are documenting this disaster as it unfolds just as we did FranFredron.

And that essentially leads us where we are today... a trail of bad decisions, followed by a more recent trail of broken promises (cost, duration of the bailout, size of the entities, any hope of winding down these carcasses, etc).  And this is one, of many reasons, I constantly refer to what we now have as a fully subsidized US economy - entire portions are fully backstopped and being run by the government.  Fannie and Freddie are now run purposefully as money losing operations with constant taxpayer handouts - so that we can reinflate the housing market with easy money [Nov 20, 2009: NYT - With FHA Help, Easy Loans in Expensive Areas]  All it costs is a few trillion dollars of debt for future generations to deal with.  Or maybe more depending on the Administration's plans... there must be a larger master plan to pull this stunt on Christmas Eve.  One might surmise something along the lines of massive principal forgiveness for underwater Americans but who knows.  We've already seen the plan for FanFredron to allow people to rent their own homes back from the agency, and I suppose having the taxpayer pay for fellow citizens' mortgage payments would be the next "logical" step - it has already been floated  [Jul 15, 2009: Reuters - Obama Mulls Rental Option for Homeowners, along with Paying Mortgages for Unemployed]  The possibilities are endless when you give a blank check to yourself in the cover of the night... Christmas Eve style.


Here is the full WSJ opinion piece - outside of the political dogma paragraph it's something everyone in America should read and understand.  A few snippets:
  • The Treasury is hoping no one notices, and no wonder. Taxpayers are continuing to buy senior preferred stock in the two firms to cover their growing losses—a combined $111 billion so far. When Treasury first bailed them out in September 2008, Congress put a $200 billion limit ($100 billion each) on federal assistance. Last year, the Treasury raised the potential commitment to $400 billion. Now the limit on taxpayer exposure is, well, who knows?
  • The firms have made clear that they may only be able to pay the preferred dividends they owe taxpayers by borrowing still more money . . . from taxpayers.  (this is where you laugh - do you notice a continuing themes in all our solutions?  Borrow from 1 credit card to pay off the other?)
  • The loss cap is being lifted because the government has directed both companies to pursue money-losing strategies by modifying mortgages to prevent foreclosures.  The government wants taxpayers to think that these are profit-seeking companies being nursed back to health, like AIG. But at least AIG is trying to make money. Fan and Fred are now designed to lose money, transferring wealth from renters and homeowners to overextended borrowers.
Now one part that never struck me is how these entities can be used to hide US financial obligations.  By not fully nationalizing them and instead putting them in a cubby hole out in space, the US government is pursuing the same tactics Enron did.  Having "off balance sheet" entities, so that when someone looks at the books they don't get the full picture.  Did we learn any lessons from Enron?  No - instead, most of our major financial oligarchs saw the brilliance of Enron and devised similar schemes through the 2000s; they too were able to make their balance sheets look spiffy by hiding things in off balance sheet world.  How did that work out?  Pretty much the same as Enron.  So what does the US government do?  Follows the exact same game plan - FanFredron is the off balance sheet entity - only they have an unlimited printing press to "fix" any problems that might arise. So as losses continue to pile up and these carcasses are used to subsidize the entire US housing market - the government doesn't have to "officially" take the hit... it's Fannie and Freddie - the "independent" entities that take the hit - and we'll just shovel taxpayer money into them while wagging our finger at those 2 smoking hulks while saying "tsk, tsk".:
  • Even better for the political class, much of this is being done off the government books. The White House budget office still doesn't fully account for Fannie and Freddie's spending as federal outlays, though Washington controls the companies.
  • Nor does it include as part of the national debt the $5 trillion in mortgages—half the market—that the companies either own or guarantee. The companies have become Washington's ultimate off-balance-sheet vehicles, the political equivalent of Citigroup's SIVs, that are being used to subsidize and nationalize mortgage finance.

  • This subterfuge also explains the Christmas Eve timing. After December 31, Team Obama would have needed the consent of Congress to raise the taxpayer exposure beyond $400 billion. By law, negative net worth at the companies forces them into "receivership," which means they have to be wound down.  Unlimited bailouts will now allow the Treasury to keep them in conservatorship.
  • With the Federal Reserve planning to step back as early as March from buying $1.25 trillion in mortgage-backed securities, Team Obama is counting on Fan and Fred to help reflate the housing bubble.
  • That's why on Christmas Eve Treasury also rolled back a key requirement of the 2008 bailout—that Fan and Fred begin shrinking the portfolios of mortgages they own on their own account, which total a combined $1.5 trillion. Risk-taking will now increase.
  • All of which would seem to make the CEOs of Fannie and Freddie the world's most overpaid bureaucrats. A release from the Federal Housing Finance Agency that also fell in the Christmas Eve forest reports that, after presiding over a combined $24 billion in losses last quarter, Fannie CEO Michael Williams and Freddie boss Ed Haldeman are getting substantial raises. Each is now eligible for up to $6 million annually.
  • Where is Treasury's pay czar when we actually need him? You guessed it, Fannie and Freddie are exempt from the rules applied to the TARP banks.
So as you see housing data improve in the future (or as you marveled at least year's improvement) please understand there should always be cost-benefit analysis.  We celebrate the "good" without looking at the enormous costs born to countless generations after us.  Remember this as Wall Street exhalts in joy at the housing "recovery" to come - bought and paid for by these schemes that have no hope of ever being paid back unless we go to a national 60% tax rate.
  • In today's Washington, we suppose, it only makes sense that the companies that did the most to cause the meltdown are being kept alive to lose even more money. The politicians have used the panic as an excuse to reform everything but themselves.

Mark Mobius of Templeton Funds Cautious on Emerging Markets Due to IPO Flood for 1st Time in Long Time


Famed international fund manager Mark Mobius is one of Bloomberg's favorites; I see a story quoting him just about every week in their news stories.  As a long time international investor, he has been incredibly bullish throughout 2009 which is why I pulled up this story.  I actually did a double take when he expressed caution; the reason being a flood of IPOs might finally sop up some of the massive caiptal central banks have injected into the global financial system.  We'll see.
  • Emerging markets are attracting more money from initial public offerings than industrialized nations for the first time ever, a warning sign to Mark Mobius that the record rally in the shares may turn into a 20 percent decline.
  • Faster economic growth may help China, India and Brazil produce the biggest increases in IPOs and almost double sales to $200 billion worldwide, according to Matthew Johnson, the New York-based head of the global-equities syndicate at Barclays Plc. Poland alone may offer more than $10 billion of state-owned companies, according to estimates by UniCredit SpA.
  • When you look at the size of some of these IPOs, they’re pretty massive,” Mobius, 73, who oversees $34 billion of developing-nation assets at Templeton Asset Management Ltd., “At the right price, the IPOs will be absorbed, but you’re going to have some hiccups. It’s too much supply coming out.”  
  • The combined value of China’s sales would be more than twice the $40 billion to $50 billion in the U.S.
  • The 2009 sales exceeded industrialized nations by 160 percent, the first time developed countries attracted less money, annual Bloomberg data starting in 2000 show
As for valuation?  Does it matter anymore?  Stocks are simply a commodity that has supply and demand... you throw more fiat money from every corner of the globe, chasing a relative fixed amount of assets - and prices go up.  Economics 101.   That said, if these were normal times...
  • Companies in the MSCI Emerging Markets Index trade at the highest levels relative to earnings since 2000 after the gauge surged 75 percent and IPOs in developing economies raised $77 billion.   The 767 companies in the MSCI Emerging Markets Index valued at an average 24.2 times earnings, data compiled by Bloomberg show.
They even snuck in Marc Faber into the story:
  • There are some clouds on the horizon,” said Marc Faber, 63, who publishes the “Gloom Boom & Doom” newsletter. “For sure, the supply of equities will go up because the valuations are up,” he said in a phone interview from Da Nang, Vietnam.

Bookkeeping: Taking Profits in Telestone Technologies (TSTC)

Some individual names are in full "melt up" mode.  We started Telestone Technologies (TSTC) last Wednesday, with only a starter position of 0.9% allocation - price $19.70s.  I was hoping for a pullback to $19.00 or below to add to the position - laughable.

I keep waiting for some meaningful correction in Telestone Technologies (TSTC) and it just is not happening. Each time the stock hits any sort of support, it immediately rockets up - and I grind my teeth watching it. Therefore, with the drop the past 2 sessions, including nearly 5% today I am going to begin a starter stake of 0.9% exposure in the $19.70s to at least have some skin in the game. Much like some other issues I have added of late I am hoping it falls so I can add more at cheaper prices, hence I would not mind losing money on this first tranche.

It's not even a week later and the stock is up 21% in the $23.80s and already grew to a 1.1% allocation.   I am not going to be greedy... if you annualize 20% in under a week... well you get the picture.  I will sell almost the entire position just over $23.80.

The stock is in breakout mode so it certainly has a chance to keep running as small cap Chinese stocks are once more the center of attention, but the stock is nowhere near any support.  With these very strong charts I start using the 10 day moving average - which is where TSTC falls back to on "corrections" ... and it is now nowhere near the 10 day which is under $20.50.  We'll try to buy it back on any pullback (I suppose something under $22); if not - other fish to fry.

Long TSTC in fund; no personal position

FT.com: US Public Pensions Face $2 Trillion Deficit

Much like we were early citing the coming fiscal disaster that are state budgets [Dec 16, 2007: California in a State of Fiscal Emergency - Coming to a Theater Near You] so will be early to the disaster that is the US public pension system.  As we clearly now see, there is no political will to make hard decisions that alienate any of the potential voting public.  So, much like the state (and city) budget crisis, I expect the nation to continue to kick the can, doling out pensions we cannot afford to the public worker - until we run into a wall at 180 mph.  And then your grandchildren will be asked to foot the bill "in the public interest" or "to keep the system stable" or "this is what we promised".  And when the bill for Medicare comes due sometime later in the decade - perhaps when it starts eating up 20%+ of all US GDP - we'll hear the same thing.  At some point there will be no extra sources to borrow from, so Federal Reserve Chief Geithner? Summers? will be printing new US pesos at a rate that makes Ben Bernanke's quantitative easing look like child's play.  It's all the same pattern - played over and over, just in different future liability accounts.

But for today, let us focus on the public pension issue - one of the many reasons it's in the "national interest" to make sure the stock market goes in the "right direction".  We've already used up almost every accounting trick known to man to obfuscate the problem.  Just this weekend in the Wall Street Journal, we have Illinois:
  • Illinois routinely covers those gaps with short-term measures, putting off bills and paying less than is recommended into the state's pension fund. The pension plan has unfunded liabilities of nearly $80 billion -- among the worst in the nation, with no solution in place for catching up.
I know you scoff at $80 billion now because you've become numb to large numbers after the epic bailouts of the past few years but just over a decade ago, the Federal Reserve arranged a bailout of the hedge fund Long Term Capital Management because it posed a threat to the global financial system.... for under $5 billion.  That's how extraordinary these $200, $300B bailouts are - and people have become immune to the numbers.  So Illinois alone (1 state) is talking $80B... and growing.

So after the accounting tricks, the next step will be for states to issue new debt to pay for these obligations (akin to paying off 1 credit card with new borrowings on a 2nd credit card)  This is already happening.
  • Messrs. Quinn and Hynes said spending decisions by past governors left the state in a deep hole that the recession made deeper.  In 2003, for example, Illinois under then-Gov. Rod Blagojevich sold $10 billion in 30-year bonds to cover two years' worth of payments to the pension fund. The proceeds from the bond sale went into an investment portfolio that included stocks; the expected profits haven't materialized, leaving Illinois far behind
And then "some day" when that charade ends, out will come the hands to the federal government (i.e. your grandchildren).  This is what is currently happening for state budgets under the guise of "stimulus".  It's already so obvious we can spot it years ahead of time, but as with all things American - we will stick our head firmly under the sand and "see no evil, hear no evil" is the order of the day.

That is but one state... we looked at the entire country in a story not even a year ago, and Bloomberg pegged the potential bailout at $1 Trillion.  [Mar 4, 2009: Bloomberg - Hidden Pension Fiasco May Foment Another $1 Trillion Bailout]  The latest FT.com story, using figures by New Jersey's pension fund chairman, says to think $2 Trillion.  The states, if private corporations, would of went bankrupt long ago and shed these financial promises they simply cannot make.  But since they are public entities - instead we shall go down the long and winding path outlined above.  The tax obligations on the American people - which in this specific case is simply a transfer of monies from the general citizenry to the public worker so he/she can retire early with benefits available to almost no one in the private sector below C-level executive - shall be enormous. The (ahem) partial "solution" (I don't believe "new taxes" will pay for it all) will be further loss of purchasing power (living standard) when the Fed has to continuously print money to bail out the system in the coming 2 decades.  As frightening as the public pension figures are - Medicare liabilities in the decade ahead will make it look like peanuts.

But for now... as good citizens of the modern Roman Empire we "party on dude".  Everything is fine... Uncle Ben made all our problems go away, and our head is firmly under the sand... who has some stock for me to buy?  After all the best solution to massive unfunded pension liabilities is for the government the free market to help get stock prices up!  Kill a few birds with 1 Plunge Protection Team stone.
  • The US public pension system faces a higher-than-expected shortfall of more than $2,000bn that will increase pressure on many states’ strained finances and crimp economic growth, according to the chairman of New Jersey’s pension fund.
  • The estimate by Orin Kramer will fuel investors’ concerns over the deteriorating financial health of US states after the recession. “State and local governments are correctly perceived to be in serious difficulty,” Mr Kramer told the Financial Times.  “If you factor in the reality of these unfunded promises, their deficits will rise exponentially.”
  • Estimates of aggregate funding requirement of the US pension system have ranged between $400bn and $500bn, but Mr Kramer’s analysis concluded that public funds would need to find more than $2,000bn to meet future pension obligations.
  • A shortfall of that size could force state governments to take unpalatable decisions such as pouring more public money into their funds or reducing pension benefits. State and local governments have already cut spending to close budget deficits.
  • Mr Kramer, chairman of New Jersey’s investment council and also a senior partner at the hedge fund Boston Provident, warned that outdated accounting models and unrealistic expectations of future returns had led states to underestimate their pension requirements.  (something we've argued in multiple blog pieces - but remember, in America, if you are unhappy with the math, just change the accounting.  The national accounting board - under political pressure - did it for the banks early in 2009 and it's been smooth sailing since then.  Magically, almost all our banking problems went away once you said what is on the balance sheet is not what it used to be, but in fact something much higher in value via new accounting.)
Oh and look at this - the "mark to model" (i.e. myth) rather than "mark to market" accounting that was newly introduced to the banks in early 2009, is a hallmark of the pension funds.  No wonder the obligations have been vastly understated.
  • Public pension funds do not use mark-to-market accounting, relying instead on actuarial numbers that average out value of assets and liabilities over a number of years – a process known as “smoothing”. Mr Kramer’s analysis used the market value of the assets and liabilities of the top 25 public pension funds at the end of the year.
In English this is the equivalent of saying my house is worth $325,000 due to the actuarial table... even if it would only fetch $190,000 if I had to sell it on the open market.  So the pension funds hold the asset at $325,000 and presto magic, our assets are inflated - and shortfalls appear much smaller than reality.  Remember, put your head under the sand and it all works out in the end.
  • “The accounting treatment of public retirement plans is the political leper colony of government accounting. It is a no-go zone,” he said.
And so the surreal life of "everything is fine, just trust us" continues.  Back to the Matrix.
    [Aug 11, 2009: LA Times - Amid Cost Cutting, Los Angeles City Pensions Continue to Soar]

    Byron Wien's 10 Surprises for 2010

    Pretty straight forward... Byron Wien has been doing "10 Surprises" for a quarter century - some years very good, some years not so much; but always good fodder.  2009's surprises looked awful on March 1st, 2009 - but mostly looked brilliant by Dec 31st.

    Below is his 2010 list in full much of it based on a very bullish economic outlook for the year.  I don't think #9 is a surprise, but an expectation ...

    Byron R. Wien, Vice Chairman, Blackstone Advisory Services, today issued his list of the Ten Surprises for 2010. This is the 25th year Byron has given his predictions of a number of economic, financial market and political surprises for the coming year. He started the tradition in 1986 when he was the Chief U.S. Investment Strategist at Morgan Stanley.

    1. The United States economy grows at a stronger than expected 5% real rate during the year and the unemployment level drops below 9%. Exports, inventory building and technology spending lead the way. Standard and Poor’s 500 operating earnings come in above $80
    2. The Federal Reserve decides the economy is strong enough for them to move away from zero interest rate policy. In a series of successive hikes beginning in the second quarter the Federal funds rate reaches 2% by year-end
    3. Heavy borrowing by the U.S. Treasury and some reluctance by foreign central banks to keep buying notes and bonds drives the yield on the 10-year Treasury above 5.5%. Banks loan more to corporations and individuals and pull away from the carry trade, thereby reducing demand for Treasuries. Obama says, “The suits are finally listening”
    4. In a roller coaster year the Standard and Poor’s 500 rallies to 1300 in the first half and then runs out of steam and declines to 1000, ending where it started at 1115.10. Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem. Concern about longer term growth and obligations to reduce leverage at both the public and private level unsettle investors
    5. Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro. It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted. Longer term prospects remain uncertain
    6. Japan stands out as the best performing major industrialized market in the world as its currency weakens and its exports improve. Investors focus on the attractive valuations of dozens of medium sized companies in a market selling at one quarter of its 1989 high. The Nikkei 225 rises above 12,000
    7. Believing he must be a leader in climate control initiatives, President Obama endorses legislation favorable for nuclear power development. Arguing that going nuclear is essential for the environment, will create jobs and reduce costs, Congress passes bills providing loans and subsidies for new plants, the first since 1979. Coal accounts for about 50% of electrical power generation, and Obama wants to reduce that to 25% by 2020
    8. The improvement in the U.S. economy energizes the Obama administration. The White House undergoes some reorganization and regains its momentum. In the November Congressional election the Democrats only lose 20 seats, much less than expected
    9. When it finally passes, financial service legislation, like the health care bill, proves to be softer on the industry than originally feared. There is greater consumer protection, more transparency, tighter restriction of leverage and increased scrutiny of derivatives, but the regulatory changes for investment bankers and hedge funds are not onerous. Trading volume and merger activity increases; financial service stocks become exceptional performers in the U.S. market
    10. Civil unrest in Iran reaches a crescendo. Ayatollah Khameini pushes out Mahmoud Ahmadinejad in favor of a more public relations adept leader. Economic improvement becomes the key issue and anti-Israel rhetoric subsides. Talks with the U.S. and Europe begin but the country remains a nuclear threat. Pakistan becomes the hotspot in the region because of the weak government there, anti-American sentiment, active terrorist groups and concerns about the security of the country’s nuclear arsenal
    [Jan 29, 2008: Byron Wien 5 Sure Things for a Turbulent Market]

    Monday, January 4, 2010

    Analysts Help Las Vegas Sands (LVS) Stage Dramatic Reversal

    Most of the names moving up sharply today we have quite good exposure to, but one of the names at the bottom of the portfolio that is ramping is Las Vegas Sands (LVS).  When I see a stock move like this I try to look back at the chart and see if I could of done anything different but frankly, this was a stock that had been going sideways for weeks, and then Friday it fell apart - breaking support.  Our position was small as we were waiting to see how it would resolve this range bound action, and Friday's action confirmed that bias.  In fact the chart, as of Friday, would call for (a) selling or (b) shorting.

    But there is no accounting for the lemming action that comes with analysts ... LVS not only got 1 upgrade but Goldman Sachs restarted coverage on the name.  Notwithstanding that the coverage was initiated with "neutral" (Wall Street speak for "sell!") - we have a huge move up on good sized volume and away she goes.  Another destruction of the bears.

    Via AP:
    • Shares of casino operators with properties in Macau climbed Monday as the latest reports suggest gaming revenue for casinos in the Chinese enclave rose 48 percent last month.  Gaming revenue has steadily improved in Macau since last summer, which has helped casino operators like Las Vegas Sands Corp., MGM Mirage and Wynn Resorts Ltd. as they continue to battle sluggish gaming results in the U.S. Domestic gamblers have pulled back on their spending during the recession, often gambling less, taking shorter trips and frequenting local casinos in attempts to save money.
    • Robert LaFleur of Susquehanna Financial Group said in a client note that the Macau gaming revenue improvement had been expected because 2008 was hit harder by visa restrictions and the global economic downturn during the latter part of the year.  Macau is the only place in China where gambling is legal.
    • Separately, Robin Farley of UBS upgraded Las Vegas Sands to "Buy" from "Neutral," saying the casino operator should benefit from the Macau gaming market, which she predicts will grow more than 18 percent year over year in 2010.  Farley boosted Las Vegas Sands' price target to $20 from $19.
    • Meanwhile, Goldman Sachs' Steven Kent reinstated coverage for the Sheldon Adelson-led Las Vegas Sands with a "Neutral" rating, citing its recent Sands China initial public offering. Kent believes Macau is currently the casino operator's best component, as Las Vegas will likely remain challenging this year due to new supply coming online and ongoing economic concerns.  Kent provided a $16.25 price target for Las Vegas Sands.
    [Nov 9, 2009: Las Vegas Sands Sets Hong Kong Macau IPO Range of $2.5B to $3.3B]

    Long Las Vegas Sands in fund; no personal position

    If You Must Short...

    I eagerly await the return of a normal era when the market goes up for 2 months, then down 1 month, then up 1 month, and then down 2 months.  This currenct circus is not that time, hence one mostly has downside protection via such things as cash and a handful of bad charts (they are out there, but more rare by the hour).

    If you *must* short to hedge against your long exposure (or believe the fairy tale ends soon and "the correction" is over the horizon), here are some candidates which have run nicely into resistance... these are some previous long positions I exited, but I keep an eye on as I like the fundamentals, and want to jump back in if they clear some moving averages. In fact, if the the melt up is real these could be long candidates very soon - but for most you have very obvious places to put stop losses and hope a huge gap up doesn't occur overnight to take you out at a bad price:

    [click to enlarge]

    Or you could try something in free fall; reader suggestion (not a stock I have on a watch list)

    However, what makes any name trecherous to short is what happened to anyone who was using charts to short names such as these 2 below... from out of the blue, with no warning came huge moon shots.

    You lose!

    Good day sir!

    With the market gapping up almost every day now (what is it? 9 of the past 10 sessions) forces are certainly not in your favor.  Especially invisible hand forces.  Short at your own risk... Ben Bernanke dares you. 

    p.s. Uncle Ben reiterated over this holiday break that the Federal Reserve had just about nothing to do with the housing bubble.   The same stance that caused my jaw to drop in the Time "Person of the Year" article.

    Bernanke told the American Economic Association meeting in Atlanta the Federal Reserve's low rates had nothing to do with the housing bubble

    I just want you to be aware with what kind of man you are dealing with, as you try to bet against his unlimited printing press - this thought process is somewhere between delusion and denial.  This is the same man in 2005 when asked if housing was could be a bubble or could cause a recession replied:

    Well, I guess I don't buy your premise. It's a pretty unlikely possibility. We've never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don't think it's gonna drive the economy too far from its full employment path, though.

    Remember, Ben Bernanke can remain irrational far longer than you can remian solvent.

    As Indian Firms Hire 1300 Americans in Ohio, Governor Rejoices

    Taking a break from the fully subsidized stock market and returning to the fully subsidized - with money we don't have - economy....

    It appears after a few decades of moving first blue collar work outside the country, and now increasingly white collar work [Aug 15, 2008: Cost Cutting in New York's Financial firms, but a Boom in India] we are now at the point where the long awaited payback for such sacrifices by the middle and working class has arrived? 

    1300 jobs are returning to America via Indian outsourcing firms?  And all it will cost the American taxpayer is $19 million in tax credits so Ohio can create said 1300 jobs?  Aha! Finally, the seeds of success from sending millions of  American jobs overseas to create an army of middle class in those countries ... somewhere academics in a dusty economics office are rejoicing as they whisper "I told you so!".  I say that with tongue firmly planted in cheek...

    p.s. where exactly is Ohio getting $19 million? considering they are raiding my wallet to pay for "stimulus" ? But I digress.

    Or let's put it another way... as the talented class of worker/job leaves the US [Sep 21, 2009: USA Today - More of World's Talented Workers Opt to Leave USA] we are receiving in return the jobs we jettisoned some 20 years ago?  And all it takes is bribery ($19M) by already bankrupt state governments? Sounds like a winning formula, indeed!  Now just imagine if we can continue to demolish the middle / working class - who after suffering an entire decade of no wage growth (adjusted for inflation) - now yearn for a job, any job - even those that have them going backwards in wage "growth".  [Sep 4, 2009: Job Seekers Across America Willing to Take Substantial Pay Cuts]  No worries though - who needs jobs of any sort, low paying or not -  when you have such a generous government, with unlimited pockets? [Jun 5, 2009: 1 in 6 Dollars of Income Now Via Government; Highest Since 1929]

    Yes indeed, the growing global pie of prosperity is working wonders - just look around you; things are *so* much better than 15 years ago. :) [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?]  As we see global wage arbitrage play out even faster than I envisioned [Sep 14, 2009: Global Wage Arbitrade at the Micro Level: Marvell Technology] [Nov 5, 2009: Blue Coat Systems - More Global Wage Arbitrage] let me re-introduce my list of questions for those who deal in textbooks or theory (while living in ivory towers), rather than in reality.
    1. How many years will take place between the displacement of workers "today" in America and the "middle class demanding things in China" from America? 
    2. What do we do with those workers in the meantime aside from plugging them into government work or pseudo government (health care)? 
    3. What will happen to the income of said "displacements" as they move out of jobs from a very good high tech company to... (crickets chirping)? 
    4. What exactly are Americans making today that the Chinese want and need to import excluding large scale industrial weapons / defense? 
    5. What exactly will Americans be making in "some day in the future" (5? 10? 15 years?) when the Chinese middle class get to a level of wealth and can buy things from us... ? 
    6. Whatever those products are you named in question 5, why can't the Chinese make them internally in 5, 10, 15 years?
    Let's turn back to the most recent story... which for VERY long time readers of FMMF is not a new story - we in fact talked about this in January 2008 [Jan 28, 2008 - India Facing a Shortage of... Workers???]

    How can a country with 1 billion souls be short of workers? Well it's a certain type of worker of course - and those type are in short supply. When I read the article (whenever it was) last year about how IBM and Accenture were expanding in very big ways and outbidding the Wipro's (WIT) and Infosys' (IFY) for talent, I knew this was not an area to be invested in (these were major darlings of the market in 04-06), even though there is a serious dearth of Indian ADRs to invest in, in the USA. Bidding wars for talent eat at the profit margins.

    Keep in mind this fits in very well with my "global wage arbitration" theme - which simply states for those in the bottom 60-80%, our wages will be falling to a mean, as those who can provide similar/same services throughout the globe rise... until eventually they (near) match. Sounds impossible eh? What if I told you I could get you a loan for 110% of the value of your home, with nothing down and I wouldn't check your income. You'd laugh... if this were 2001.
    There is no blame or finger to point here - this is the reality of the truly flat, global economy we are now in stage 1 of. Eventually it will reach the point jobs are outsourced back to the US ..... No wait, that is already happening 'Indian Call Center Lands in Ohio - CNNMoney.com'

    That was then... this is now.  But oh, the devil in the details - Tata alone has some 125,000 workers, with 50% of revenue coming from North American (read: US) companies.  13,000 of those jobs are in the States (i.e. 10%) which in and of itself would be pretty shabby, but even further of those 13,000... only 1300 are actual Americans (1%).  The rest appear to be H1 Visa types.  But don't let that stop the ribbon cutting ceremony Governor Strickland - putting 1300 Americans to work for a cost of $19 million is sound economics... and you can tout far more "down the road" since no one looks under the hood.  Oh well, what's $19 million among friends nowadays?  It's not even a rounding error on top of a rounding error.

    Via BusinessWeek:
    • (Governor) Strickland threw in $19 million in tax credits and invited the Tata Consultancy Services crew to a state dinner at the governor's mansion. "The economy is difficult," Strickland says. "I will go wherever I can to find jobs."  
    • TCS said yes, and in November Strickland showed up at the sprawling wooded campus for a ceremony to mark the hiring of the 300th employee at what has become the cornerstone for TCS's North American efforts. Tata has hired some 250 graduates of Ohio State University (I'll supress comment), the University of Cincinnati, and other nearby schools. Soon the facility may employ as many as 1,000 Americans doing back-office and technology outsourcing for U.S. health-care companies and local governments. (I'm laughing at the customer list, and how circular this all is... borrowing money from the government - which is broke - to pay for backoffice work for government and pseudo government companies!)
    • With the economy growing again—but unemployment stuck at double-digit levels—states and municipalities across the U.S. are scrambling to woo anyone with hiring plans—even if that means going, hat in hand, to the same bunch that have been responsible for hundreds of thousands of jobs going overseas.
    • Dallas, Atlanta, Minneapolis, and Tallahassee have all been actively courting Indian tech outfits. Wipro Technologies (WIT) in March inaugurated a center in Atlanta, which now has 350 employees—nearly 300 of them Americans, including senior managers recruited from U.S. tech rivals.
    • Infosys Technologies (INFY), meanwhile, is planning an operation in Dallas to target some of the $52 billion the U.S. government will spend on outsourcing work in 2010.  (again it is so sickingly circular... the main growth engine of America now is government and its key offshoot via Medicare - healthcare.  The shell game when you sit down and think about it, is amazing)
    Now one might ask why, unlike every sector of corporate America, the Indian firms must actually hire locally rather than take the work back to their domicile?  
    • For Indian companies, U.S. facilities can mean more work on government and health-care projects—areas where laws prevent the transfer of data overseas
    Too bad... otherwise this charade would not be necessary, and the work could be done back in Mumbai. 

    But since we do love our charades, and America is no longer about actual solutions but all about political face saving - all we truly have is a political stunt and an almost Trojan Horse strategy to get to American taxpayer money by foreign firms, all so local politicians can say "I'm doing something! Re-elect me!". 
    • Some critics say that the new centers offer little more than political cover and do little to boost employment in the U.S. "One reason they are doing this is for public relations," says Ron Hira, an expert on offshoring at Rochester Institute of Technology. "They want to send the message, 'We're creating jobs for Americans.'" 
    Amazingly, we see the EXACT same thing by the sellouts politicians when it comes to the Chinese firms in alternative energy.  After it came to light that Senator Schumer  was unhappy that a Chinese firm was getting a huge wind order turbine bid, on the back of the US taxpayer [Nov 2, 2009: Lack of Green Energy Manufacturing Capability in US Means 84% of Stimulus Goes to Foreign Firms] - within weeks a plan to open a plant by this company (which we once invested in, and is currently one of the hottest stocks in the market) in the US was announced!  Problem solved; controversy averted - full access to US stimulus funds all for a mere pittance of a cursory amount of US employees..   And we see the exact same thing with Chinese solar firms - opening their one off plant in the US to say "we're here to create jobs! Even if 99% of our workforce remains in China, we can give your politicians a wonderful ribbon cutting ceremony at that new solar assembly plant. Now give us all your stimulus money!" (insert Cookie Monster munching sound here) It works in Ohio, so why not Arizona [Nov 17, 2009: China Pushes Solar, Wind Development

    For the majority residing inside the Matrix, they say "heckuva job Brownie! (Strickland!).  My government is working hard for me!"  Then of course they look around and try to figure out where all the jobs are.

    Those outside of the Matrix are only left to roll their eyes. 

    But who are we to complain?  We've decided we are not a nation who needs to actually build such lowly products so we're happy to let other countries do 99% of the work, while foreign companies open a plant here or there to showcase they are "all in" with the Americans.  Which they are especially eager to do when taxpayer money is being thrown around in a free for all.

    Our surreal life continues... Indian, call centers... Chinese, solar cells... potato. tomato.  As long as a good photo opportunity arises for the politicos, the sheeple of America seem to buy it hook, line and sinker.

    So what did we have earlier? 1300 Americans to be hired at full staffing ... ?
    •  It's true that the jobs Indian companies have created in the U.S. are a rounding error compared with their overall workforce.
    • And TCS has more than 11,000 Indians working in the U.S. on temporary visas, while Wipro has 7,000.
    Ah, details... details.  1300 for us, tens of thousands for those on temporary visas...
    • "Offshore outsourcers' wonderful profitability has largely been on the back of labor arbitrage,"" says Peter Bendor-Samuel, CEO of Everest Group, a Dallas consulting firm that advises companies on outsourcing strategies. "Those profits surely would take a hit if the Indian companies start hiring more Americans."
    Ooohh, I love when terms I've been using for years (labor arbitrage) begin hitting the mainstream.  I really need to start trademarking some of this stuff years in advance.
    • TCS already had to delay opening the Ohio center for almost six months during the recession in the U.S. Wipro says its Atlanta operation isn't yet profitable. Both say American facilities are unlikely to create huge numbers of new jobs in the U.S. soon. (by not soon, they mean "never" - what business sense would there be?  You get full access to US taxpayers monies in exchange for a few hundred jobs, and said ribbon cutting ceremony - no need to expand past that)
    • For several years, at least, (translation:. for decades, until Americans start earning $4.50/hour) the vast majority of work will continue to be done in India and other low-cost countries, according to Surya Kant, North America president for TCS.

    Just to be clear this is not a rant against Chinese, or Indians or in fact the inevitable march of globalization.  Capital will dominate and labor will be interchangeable among countries - this is the path of the past 20 years, and it only accelerates from here.  The piece is simply is to highlight the reality behind the press releases and photo ops.  Americans should be asking (and this is not protectionist) why they are layering on so much more debt simply to have much of it shuffled to places far, far away.  Which ironically is where much of the money was borrowed from in the first place.  (can you follow which shell the peanut is under?)  But inside the Matrix we don't ask these things, instead we refer to convenient dogma... let me check my bullet point.  Ah yes, its "free market capitalism". ;)

    And with that, the first soap box of 2010 is in the books....I will assume one or more might follow this year. ;)

    At Least it's Not Boring

    Finally some "action" after 2 months of dreadful snoozefests...

    Not much to add here; it's one of those moments we are all geniuses much like second half 1999 and early 2000 - I have almost 10 stocks on my watch lists at 10%+ for the day and countless others in 5 to 10%.   I am seeing stocks break over resistance areas as if they are not there, etc.  Just a freight train of buying and bears are being mowed down.  You remember bears right?  The folks who 12 months ago were living the good life. Ben Bernanke has put them on the endangered species list.

    Bookkeeping: Adding to Atheros Communications (ATHR) and Skyworks Solutions (SWKS)

    We had cut half of our very profitable Atheros Communication (ATHR) position for identical reasons we sold the S&P index position earlier today - a stock that had run into resistance formed by an earlier high; in this case $34.50 - which was a summer 2008 closing price.

    As is the textbook, the stock stalled at resistance - and pulled back a bit.  However, as we like to see with strong stocks - there was not really any selloff, just sideways action for just under 2 weeks.  And now the stock appears to be ready to move over summer 2008 highs as the "melt up" in the general market ensues.

    With the stock in the $34.90s, we might have the beginning of the next leg up, so I am simply adding back the half of the exposure we sold on Dec 22nd.  Cost us a few percentage points but in a normal market, we tend to see selloffs and rallies in the general market, giving us many more opportunities to buy on dips.  This market is anything but normal.  If the move continues, I'll layer in more exposure.

    A reader pointed out Skyworks Solutions (SWKS) - our largest individual position, appeared to be breaking out - I added another 0.8% exposure on top of what we already own in the $14.80s area.

    As for the S&P 500, 1130 was swiss cheese; we blasted through it as if it is not there.  Once more, like much of 2009 - having any caution only cost you.  Buy buy buy.   I will be layering back into index positions via our normal product selection since resistance was smashed so easily.  Remember, we have a huge base built from November / December so the ensuing move should be very large in nature - I am calling for 7 to 10% which clearly could take us to S&P 1200 or above ...
    Long Skyworks Solutions, Atheros Communication in fund; long Skyworks Solutions in personal account

    So Much for Thursday's Selloff; Taking Index Profits for Now

    We were curious how long it would take to erase Thursday's closing minutes selloff.

    Answer: 20 minutes.

    Now, we will look for the next important step in the rally and that is a move over the most recent highs i.e. S&P 1130+.  At this point we've created the setup for the best trade of 2009, that is the "double top breakout" ... so far we have the double top (S&P 1129, retrace...then return to S&P 1129).  Throughout the middle of 2009 whenever these breakouts happened - a very quick 4-7% return happened in the index shortly after, which we profited greatly from.  Similar situations failed in November, and December 09.

    So let us see what the first one of 2010 brings, once we jump over S&P 1130.

    One strategy I like to do here is to sell all my index exposure as the double top is tested, and then rebuy it if we have a successful move over that double top - which I am actually going to do right now.  I only wish I had the massive amount of index exposure I had last Thursday at 3:30 PM, rather than what I had at 3:59 PM.

    On a very temporary basis we'll be out of our index longs at roughly S&P 1129.  Intent to buy back on a break over 1130, or a pullback to low to mid 1120s.

    Bookkeeping: Weekly Changes to Fund Positions Year 3, Week 22

    Year 3, Week 22 Major Position Changes

    To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

    Cash: 63.0% (v 42.1% last week)
    29 long bias: 36.3% (v 57.2% last week)  
    2 short bias: 0.7% (v 0.7% last week) 

    31 positions (vs 30 last week)

    Weekly thoughts
    A very late day selloff on the 31st caused a bit of a havoc in the chart of the S&P 500; moving the average back below S&P 1120 which is a level many professionals are using as a pivot point.  It is hard to read anything into stock movement the last 10 minutes of a day, when almost no one is around, so we'll see how quickly that selloff is erased.   The past 2 months have been like moving through quicksand; almost no movement in the general indexes for 6 weeks followed by a "Santa Claus" rally of nothing more than 9 S&P points that was erased in the last 15 minutes last Thursday.  And almost all of that "rally" was done in premarket/first 15 minutes of the day - making for sleepy daytime sessions.  Without any velocity in this market - either up or down - it is very difficult to make money on a sustained basis. 

    Strangely, all economic news was essentially ignored during the Santa Bernanke rally - good news, or bad ... didn't matter.  Very little reaction either way.  Things should change with the return of actual humans from the holidays - this week is packed with market moving data.

    Monday - ISM Manufacturing, as always this is only about 10% of our economy but people treat it as if the US is in the 1960s and manufacturing still is dominant.   Construction Spending.

    Tuesday - Factory orders, Pending Home Sales

    Wednesday - ISM Services, a report that I find much more relevant to the "new age economy" the US has developed - as it represents the majority of the economy.

    Friday - the monthly jobs report... will America show the first "positive"* job growth in a couple of years? 

    * positive = using government statistics which add tens of thousands if not 100K+ jobs through the birth/death model which is simply a guess by statisticians, who have claimed the US has been adding millions of jobs in small businesses throughout the Great Recession.   Not to mention figures which are revised downward, once attention is elsewhere - months after the fact. 

    As one takes the holidays to reflect, it truly is amazing what has happened in this country.  Millions of Americans who no longer are paying their mortgages, which is "ok" as it creates a permanent backdoor stimulus of.hundreds of millions of dollars.  A government who in the darkness of the Christmas Eve holiday decides to allow unlimited losses in Fannie, Freddie for the next 3 years - all without Congressional approval.   The same organizations, who along with FHA (which is headed down the same path as Fannie, Freddie) now support 90%+ of the entire US housing market (speaking of "socialized")  And a Fed Chief who has deemed the policies of Alan Greenspan's easy money - the nexus of this financial crisis - as the holy grail.

    All these are great things if you are a stock market speculator who only cares about the near term, because stimuli are coming from every direction, even by Americans themselves, many of which are using their former mortgage payment to help get these economic data jumping (while the losses can be eaten at Fannie, Freddie) - but as an American you can only shake your head at what it has all come to. 

    Please listen to the 1 voice of reason on CNBC.... skip right to minute 2.

    And with that, we're back to the fully subsidized US economy / stock market, 2010 version.   Brought to you by your sponsors, the Chinese government & your grandchildren. 

    Rhodium: the New Copper?

    With traditional commodities now completely swamped by (a) the demand whims of the Chinese [May 13, 2009: Commodities - It's China's World: We Just Live in It] and (b) the purchases and techniques of institutional investors i.e. hedgies and investment banks [Feb 12, 2008: Wheat is Being Ruined by ... what else... Hedge Funds and Speculators] - it is much more difficult now to use traditional pricing mechanisms to figure out what is going on in the world.  After all, if enough investment banks like JPMorgan are willing to buy loads of crude oil, use Ben Bernanke's nearly free money, to store it offshore waiting for higher prices to sell it - how can we use that as a "sign of demand?"  [Jan 11, 2009: 60 Minutes - Speculators and Oil] Financial "innovation" along with the vacuum cleaner that is China have changed the game.

    Copper has been, of all the commodities - even more so than oil - the traditional sign post of global health - due to it's widespread usage.  For example we flagged it in 2007  [Nov 23, 2007: Is Copper Signaling a Slowing Global Economy?]  However, with the earlier mentioned dominance of China   [Mar 23, 2009: FT.com - Chinese Stockpiling Spurs Copper Price Rally] it is hard to figure out if it's telling us the same things it used to.

    So instead of Doctor Copper,  maybe we need a new physiciain - one not influenced by the heavy hand of easy money by central bankers fed into our investment banks and by proxy the hedge funds.  Perhaps we can call on Doctor Rhodium?

    Via WSJ:
    • As stock and bond investors debate whether the U.S. economy's recovery has legs, some analysts are looking beyond the traditional flurry of data for evidenceThey're focused on demand for relatively obscure metals and fuels, like rhodium, which is used in car parts and is considered by some as a key barometer of auto demand, as well as diesel fuel. Prices of both are reaching new highs, leading some to believe that a real recovery is taking hold.
    • Unlike gold and platinum, specialty metals like rhodium aren't traded on commodity exchanges, making it hard for hedge funds and other investors to buy them as speculative bets. (which is important when trying to figure out reality versus "bets on reality") Prices are set by producers and users of the metal, linking them more closely to real demand. (so old school, so anti - financial innovation)
    • Rhodium, for example, has risen 60% since mid-October and now fetches $2,360 per troy ounce.  "We'll keep watching rhodium. These smaller metals are very sensitive to changes in demand, making them a good indicator of what is happening out there," said Theresa Gusman, head of commodities at DB Advisors, the asset-management arm of Deutsche Bank AG.
    • About 80% of the metal is used by auto makers in catalytic converters. (palladium is similar in use - but lo and behold a new ETF for palladium is on its way, another metal which will be captured by the speculator class) Rhodium's strength bodes well for the U.S. auto and auto-related industry, which constitutes 4% of the country's gross domestic product and hires 10% of the total work force.
    • Many bulk commodities also have gotten pricier recently. Prices of iron ore, a main material to make steel, rose to its highest level of 2009 in China, the biggest buyer, on Wednesday. Coal prices gained 6.4% at the New York Mercantile Exchange in December.  (these are much more heavily influenced by China, especially iron ore)
    • To be sure, the relative illiquidity of markets for specialty commodities can also cause swings in prices. Rhodium prices, for example, tumbled 20% in early December after nearly doubling in two months. But the metal recouped most of its losses recently.
    There are also similar examples even in energy once you move to places Goldman Sachs does not play in...
    • Energy use, which powers economic growth, also has shown signs of lifePrices of "bunker fuel" made new highs in recent days, pointing to burgeoning demand from industrial users. Bunker fuel, also known as residual oil, is the cheapest liquid fuel and not traded as a financial asset  like crude oil or natural gas. Because of its very high sulfur content, residual oil is only used by power plants and large ships that are able to process it.

    Sounds promising ... meanwhile other signs are not as hearty.  As we've reported in the past, Americans in 2008 - for the first time in 25 years - drove less miles than the previous year.  [May 2, 2009: Green Shoot Alert - Higher Unemployment Leads to Less Road Congestion] It looks like 2009 might be flat or even worse than 2008, which is remarkable when you consider population growth. 
    • Lower gasoline prices didn't drive Americans to spend more time on the road in 2009, in part because people who lost their jobs stopped commuting. Motor travel was expected to increase in 2009 after a jump in prices at the pump and the economic downturn led drivers to cut back a year earlier. In 2008, U.S. highway officials didn't record a year-over-year increase for the first time in 25 years.
    • But a tally of miles driven by U.S. passenger and commercial vehicles for the 12 months ending in October, the latest available, indicates that drivers still avoided their cars in 2009. In fact, it is possible that final 2009 numbers from the Federal Highway Administration will show that Americans drove fewer miles than in 2008.
    • Ms. Lundberg said the most important factor in motorist activity -- commuting to work -- has been "hit in the guts" by rising unemployment. "....people are driving less because they don't have jobs."
    • Many people looking for full-time work have accepted part-time hours, including fewer days on the job, meaning that "even for somebody with some work, the consumption of gasoline is decimated," she said.
    • Omar Fortune, manager of a private job center in Houston, said more workers seeking his help were carpooling or leaving their cars at park-and-ride centers to take public transportation. "Cars are being repossessed or sold to take care of other bills," he said.
    • Gerald Faudel, vice president of government relations and environmental affairs for Frontier Oil Corp., an independent refiner that serves the Rocky Mountain and Midcontinent regions, said gasoline demand dropped 10% in 2009 from a year earlier in the territories Frontier serves.  "People just aren't driving as much, and the truckers aren't moving as much merchandise," said Mr. Faudel. In addition, "there's a lot of discretionary driving that's been curtailed."

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