So the dance of the oil prices continues today with the Saudi’s saying they are planning on cutting production yet again.  I still have dreams of a $29 barrel of oil this year and hope it comes true.

Oil prices edged higher Tuesday morning, after falling for six days in a row, amid reports that Saudi Arabia will aggressively cut production.  Light, sweet crude for February delivery was up 36 cents to $37.96 a barrel.

Saudi Arabia, the world’s top oil producer, plans to reduce output even further than its previous target, according to published reports.

The kingdom has already lowered supply this month to 8 million barrels per day as part of OPEC’s agreement to reduce overall supplies by a record amount from Jan. 1.

Members of the Organization of the Petroleum Exporting Countries have been scaling back production in an attempt to put a floor under the rapidly declining price of oil.

“I think the Saudi’s are trying to single-handedly support the price of oil,” said Amanda Kurzendoerfer, a commodities analyst at Summit Energy, adding that the country is large enough to impact on oil prices.  Still, the market remains concerned about weak demand for oil and gasoline as the global economy continues to deteriorate.

The price of oil lost more than half its value in 2008 and suffered a staggering decline of more than $100 a barrel from its peak last summer.

“The market is worried that the continuing global slowdown will have a negative impact on demand,” said Andrew Lebow, a broker at energy futures trading firm MF Global in New York.

More negative news, but no real big reaction from the markets.  It is almost like traders are willing 2009 to stay positive regardless of the bad news pilling up.  Orders to factories fell for a record fourth straight month in November, and analysts believe manufacturing will continue to suffer in coming months as the country slogs through a recession entering its second year.

The Commerce Department said Tuesday that orders declined by 4.6 percent in November, nearly double the 2.5 percent drop economists expected. Orders have been falling since August, including a 6 percent plunge in October, the biggest setback in eight years.

The weakness in November reflected a big drop in demand for commercial aircraft. Weakness also was seen in autos, primary metals such as steel, and defense communications equipment.

Separately, the Institute for Supply Management reported Tuesday that a closely watched gauge of activity in the services sector rose slightly in December but still remained at recessionary levels. The services sector index rose to 40.6 from 36.3 in November. Any reading below 50 signals contraction.

The factory orders report showed that demand for durable goods, items expected to last three or more years, fell by 1.5 percent in November, even worse than the government’s initial estimate two weeks ago that durable goods had fallen 1 percent.

Demand for nondurable goods, items such as food, paper and petroleum products, dropped by 7.4 percent in November following a 3.8 percent decline in October. The declines for nondurable goods reflect falling demand and a big drop in prices, particularly for energy products.

The declines in November were led by a 37.7 percent plunge in demand for commercial aircraft, an extremely volatile series. Boeing Co. has been seeking to resume normal operations following the interruptions caused by a strike last year.

Demand for autos slipped by 0.1 percent following an even larger 4.1 percent fall in October as automakers continue to struggle with the economic downturn.

The Bush administration last month announced that it would lend $17.4 billion to General Motors Corp. and Chrysler LLC from the government’s $700 billion rescue fund in an effort to buy them time to reorganize and avoid having to file for bankruptcy.

Excluding transportation, orders would have posted a 4.2 percent decline in November. Demand for primary metals such as steel fell by 2.7 percent, while orders for defense communications equipment were down 12.1 percent.

Demand for heating and air conditioning products fell by 11.6 percent in November, reflecting in part the hard times the nation’s homebuilders are enduring.

The National Association of Realtors said Tuesday that pending home sales in November fell to the lowest level in the eight-year history of its index. The trade group said its seasonally adjusted index of pending sales for existing homes fell to 82.3 from a downwardly revised October reading of 85.7. That was far worse than the reading of 88 that economists expected, according to a survey by Thomson Reuters.

Economists are concerned that the manufacturing sector is being hit not only by a recession in the United States but spreading weakness overseas which has pushed many of America’s major trading partners into downturns and cut into domestic export sales.  My guess is the market can’t handle much more of this bad news.

Another industry touched by the looming and deepening credit crisis.  Workers are scrambling to build an $800 million coal-fired power plant on a patch of farmland here, a crisis that began on faraway Wall Street threatens to stretch the nation’s power supplies to the brink — driving up prices and laying the stage for future shortages.

The power industry is under extraordinary financial pressure just five years after North America suffered its worst blackout ever, when rolling outages turned out the lights on 50 million people. Even before the extent of the global credit crisis was fully known, the nation’s largest power providers warned of even bigger blackouts to come with the power grid under ever growing strain.

The industry has faced criticism for blackouts, but it also faces opposition to new plants and stringing new power lines.

With the economy teetering toward recession, it may face its toughest obstacle yet.

If credit woes put the brakes on scores of proposed plants, observers say a shift to other, more expensive fuels could end up soaking customers. The alternative is more frequent and potentially extended outages.

“We have to have new (power generation) capacity at some point, or we’ll have brownouts, blackouts,” said Mary Novak, an economist with the consulting firm Global Insight. “The problem is, too many (utilities) are betting on delay.”

For Montana’s 250-megawatt Highwood plant, a Nov. 30 regulatory deadline forced developers to start building with only enough cash to lay the concrete foundation. If additional financing fails, the electric cooperatives behind the plant will have to get their power from the more expensive open market — with customers footing the bill.

“It’s not without risk and a lot of anxiety,” John Prinkki, a Southern Montana Electric cooperative board member, said of breaking ground on the project. “But we’re between a rock and a hard place. We don’t have any choice — people are using more power than they ever have before.”

Utility representatives insist their projects still deserve financing. Yet even before the credit markets froze up, the industry had delayed dozens of coal plants, over climate change pressures and construction costs that effectively doubled in recent years.

Those cost spikes have reinforced the power industry’s position as one of the most capital-intensive in the economy. Before the crisis, investor-owned utilities had plans to spend upward of $1 trillion over the next two decades on new plants, transmission lines and maintenance of the power grid, said Richard McMahon with the Edison Electric Institute, a utility industry association.

Whether they get that money depends largely on the economy.

Some project developers aren’t waiting to find out. In recent days, Florida Power and Light trimmed its 2009 capital expenditures plan by nearly 25 percent to $5.3 billion. Instead of 1,500 megawatts of new wind-power generation, the company is now looking at building just 1,100 megawatts.

In West Virginia, Synthesis Energy Systems and Consol Energy shelved an $800 million coal-to-liquid fuels plant, with Synthesis chief executive Tim Veil citing “the current state of U.S. credit markets.”

Those are just the latest in what has emerged as a tidal wave of project delays and cancellations over the last two years, according to government sources and interest groups.

The Department of Energy had forecast earlier this decade that 36,000 megawatts of new coal-fueled power supply — enough to power an estimated 36 million homes — would come online by 2008. Instead, only about 5,000 megawatts of supply were built, or enough for about 5 million homes.

In the last two years, 76 coal plant proposals have been abandoned or postponed, according to the advocacy group Source Watch. In 2007 alone, that amounted to more than $45 billion in shelved projects, the group claims.

Other parts of the energy sector, particularly oil companies, are sitting on large cash reserves that allow them to self-finance major projects such as wildcat exploration and deep water drilling. By contrast, even the largest utilities typically go into debt to finance at least half their capital costs.

Plants like Highwood that are backed by smaller electrical cooperatives are even more heavily leveraged. The five cooperatives involved in the project are investing a combined $40 million — about 5 percent of the total cost. Government loans — once a mainstay for small cooperatives — dried up in March when the U.S. Department of Agriculture indefinitely suspended its rural utilities loan program.

The converging pressures on the industry make the duration of the tight credit market critical to its long-term outlook, said Todd Alexander, a New York lawyer who advises plant developers on financing.

Over at least the next several months, Alexander said everything from coal plants to pipelines to wind farms face an uphill battle to seal deals on debt. He added that could quickly turn around if the markets loosen in the first quarter of 2009.

Some analysts and industry executives see a silver lining for large power projects in the wider economic downturn.

If this is a sign of the holiday season to come then retailers better hold-on to their hats.  Retail sales fell off a cliff in September, plunging by the largest amount in three years as worried consumers shunned the malls and auto showrooms in the midst of the country’s financial meltdown.

he Commerce Department reported Wednesday retail sales decreased 1.2 percent last month, nearly double the 0.7 percent drop that had been expected. It was the biggest decline since retail sales fell by 1.4 percent in August 2005.The bigger-than-expected decline significantly increased the risks of a recession because consumer spending is two-thirds of total economic activity.

The weakness was led by a 3.8 percent drop in auto sales. Sales dropped below 1 million units as consumers struggled to find financing.

Retail sales have now fallen for three consecutive months, the first time that has occurred on government records that go back to 1992. Economists had expected sales to be down in September as a flood of bad news about the financial system and rising unemployment increased consumers’ worries.

Many analysts believe the overall economy, as measured by the gross domestic product, is slipping into a recession, triggered by a steep slump in housing and the severe credit crisis.

Even excluding auto sales, retail sales showed widespread weakness, falling by 0.6 percent or double the decline outside of autos that had been expected.

“The consumer shut up shop even before the markets got crushed and that is not good news for the economy,” said Joel Naroff, chief economist at Naroff Economic Advisors. “What is ominous is that the declines in spending were broad based.”

Sales at department stores fell by 1.5 percent following an even bigger 1.6 percent drop in July. Sales at furniture stores fell by 2.3 percent. Sales at appliance stores slid 1.5 percent.

In other economic news, the Labor Department reported that wholesale prices fell for a second straight month, declining by 0.4 percent, thanks to a big drop in energy costs. However, core wholesale prices, which exclude food and energy, rose by 0.4 percent, double what economists had been expecting.

Federal Reserve policymakers are counting on the economic slowdown to dampen inflation pressures and give them more room to cut interest rates if needed to keep the financial crisis from pushing the country into a deep downturn. The central bank last week cut a key rate by a half-point at an emergency meeting, coordinating the move with other major economies.

In a third report, the Commerce Department said businesses increased their inventories by 0.3 percent in August — the smallest advance in five months. The increase was below the 0.5 percent rise that economists had expected and sharply lower than the 1.1 percent jump in July.

Economists are watching to see whether business confidence begins to falter as the economy weakens. Business plans on inventory growth and investment spending are key factors influencing economic activity.

Analysts said the slowdown in inventory growth could also be reflecting the serious problems in the market for commercial paper, where businesses obtain short-term loans to fund their day-to-day operations such as buying inventories. That market has frozen up in recent months as banks have grown concerned about the risks of bad loans.

In one of many emergency measures implemented by the government during the current credit crisis, the Federal Reserve has announced that it will start a program later this month to support the commercial paper market in an effort to get those loans back to more normal levels.

I guess I now have a good reason to move to Venezuela!  Global oil prices zoomed up to $135 a barrel this past week. But that doesn’t worry Roberto Morales, a 33-year-old Venezuelan businessman. Morales, who drives a compact Volkswagen Gol, still pays only $1.32 to fill up his car with 11 gallons of high-octane gasoline, thanks to Venezuela’s subsidized fuel price.

“This is crazy but I’m not complaining,” says Morales. “Gasoline here is cheaper than water.”

He’s not exaggerating. Gasoline prices in Venezuela are the cheapest in the world—1/15 the price of a liter of bottled water, and 1/25 the price of a liter of milk. Since 1998, Venezuela has kept the price of gas fixed at 0.097 strong bolivars a liter, or about U.S. 3¢ (lower octane is 0.070 strong bolivars). That means that consumers pay about 12¢ a gallon, or 1/33 of what their U.S. counterparts pay.

What It Costs

It’s no surprise that President Hugo Chávez, who regularly excoriates Western consumers for their wastefulness, has had a hard time preaching to his supporters about energy conservation or alternative fuels. Gasoline consumption at home has risen steadily over the last decade and is now about 320,000 barrels a day, or about 14% of the country’s current oil output of 2.3 million barrels a day. And thousands of barrels are lost daily through illicit gasoline exports to neighboring Colombia, Brazil, and Trinidad and Tobago. Still, oil consumption per capita is far lower in Venezuela than in the U.S.: about 23 barrels per day per 1,000 people vs. 69 in the U.S., according to NationMaster.com.

But Venezuela is paying a price for cheap gasoline. State oil company Petróleos de Venezuela is footing an $11 billion a year bill for underwriting and subsidizing the fuel. That’s nearly double its 2007 net income of $6.27 billion. The cost of that subsidy, along with money it pays to underwrite government social programs, has forced Petróleos de Venezuela to borrow billions on international markets to cover investments.

The number of Americans filing for consumer bankruptcy increased by nearly 40 percent in 2007, according to the American Bankruptcy Institute.  In a report released Thursday, the ABI said that the number of overall consumer bankruptcy filings reached 801,840 last year, compared to 573,203 in 2006.

“The roughly 40 percent spike in consumer bankruptcies during 2007 presages] even higher filings this year, as the heavy consumer debt load is made worse by the home mortgage crisis,” predicted ABI Executive Director Samuel J. Gerdano.  A statement echoed by others in the industry.

However, the report also showed that the number of bankruptcy filings declined 7.5 percent in December from November. And Chapter 13 filings - those available to individuals with regular income whose debts do not exceed specific amounts - also showed a decline from November to December.  It appears that bankruptcy has become a method of doing business.

A federal appeals court upheld the conviction of former Cendant Corp. Chairman Walter Forbes Monday for leading the largest accounting fraud of the 1990s.

The 2nd U.S. Circuit Court of Appeals in New York upheld Forbes’ conviction on conspiracy to commit securities fraud and two counts of making false statements. Forbes was sentenced to 12 years and seven months in prison and ordered to pay more than $3 billion in restitution.

Forbes was involved in a fraud that inflated revenue by more than $500 million at Cendant’s predecessor, Stamford-based CUC International, to drive up the stock price. The fraud was reported in 1998, causing Cendant’s market value to drop by $14 billion in one day.  The fraud cost the company and 119,000 investors more than $3 billion.

The appeals court concluded that prosecutors’ use of the term “$14 billion fraud” in their opening statement was not misleading and prejudicial. They also said the District Court correctly ruled that references to the company’s decline in stock price and investor losses were permissible.  Last year, Cendant stockholders changed the company’s name to Avis Budget Group (Charts, Fortune 500) to reflect its Avis and Budget vehicle rental brands.  It is well known that he attempted to use offshore banking to hide assets.

The Cendant case was among the first in a series of corporate accounting scandals that sparked outrage from investors in recent years.  The case was tried after two previous juries deadlocked.  Forbes, who testified during the trial, has argued he knew nothing about the fraud. His co-defendant, former Cendant Vice Chairman E. Kirk Shelton, was convicted in 2005 of conspiracy, mail fraud, wire fraud, securities fraud and making false statements to the SEC.  Shelton was sentenced to 10 years in prison and ordered to pay $3.27 billion restitution to the company.

Forbes was chief executive officer of CUC and Shelton was president before the membership marketing operation merged with the travel and real-estate services company HFS Inc. to form New York-based Cendant in December 1997.  Not very suprised at this outcome as the guy is a dirty as a pig rolling in it’s own shit.

 Nokia Siemens Networks (NSN) said on Monday it had reassured customers over the merger that created the telecom equipment maker, after uncertainty dented sales in the second quarter.   April-June sales at the network equipment venture, owned equally by Nokia and Siemens, fell more than 10 percent, both from the first quarter and a year earlier.

Some of the total of about 600 customers of the joint venture, formed on April 1, were cautious about placing new orders until they had more details of the company’s product portfolio and strategy, Simon Beresford-Wylie said.  The world’s second-largest mobile networks company after Swedish rival Ericsson, Nokia Siemens has been able to retain most customers, despite aggressive price cuts at Ericsson, Beresford-Wylie said.

Restructuring programs at newly merged Nokia Siemens and Alcatel-Lucent gave Ericsson the opportunity to steal market share by undercutting prices, analysts have said.  The NSN chief met clients in Russia, India, China, as well as countries in the Middle East, Latin America and Europe in the last two months to discuss the venture.

Nokia and Siemens merged their networks business partly to be able to weather periods of slow growth better by sharing high fixed costs for research and development and reducing overheads. NSN plans to cut 9,000 jobs as part of plans to save 1.5 billion euros ($2.05 billion) a year.  NSN’s decision last month to base its services business unit in India was part of a larger plan to focus on emerging markets, which will account for 50-60 percent of cell phone users in 2015, Beresford-Wylie said.

About 1.4 billion of the world’s three billion cell phone users are now in China, India and Latin America, he said. Most of the two billion people expected to start owning cell phones in the next eight years would come from emerging markets, including those in the Middle East and Africa, he said.

Nokia, the world’s top cell phone maker, said in August India overtook the United States in the second quarter to become its second-biggest market by sales after China.  Wow, no surprise there!

Japanese firms cut capital spending by 4.9 percent in April-June from a year earlier, data showed on Monday, confounding forecasts and adding to views that the Bank of Japan will hold off from raising rates this month.  I challenge this and think rates will definately be rising.

The first decline in 17 quarters, in sharp contrast with a median forecast by economists for an 11.5 percent rise, signaled that economic growth for the quarter could be revised down from preliminary figures.  The yen was little changed near 115.80 to the dollar after the data’s release, while the Nikkei share average (.N225) opened down 0.35 percent at 16,511.07.

Excluding software, capital spending fell 5.7 percent from a year earlier and was down 10.2 percent from the previous quarter on a seasonally adjusted basis, the survey by the Ministry of Finance showed.  The survey also showed Japanese firms’ recurring profits rose 12.0 percent in April-June, while sales were up 3.3 percent.

Economists watch the ministry’s capital spending data closely as it is used in calculating revised GDP figures for the quarter. April-June GDP will be issued on September 10.  Preliminary data showed Japan’s economy expanded for the 10th straight quarter in April-June but grow slowed to an annualized 0.5 percent from the previous quarter’s 3.2 percent on softness in exports and personal spending.

Brisk business expenditure has been a key driver of Japan’s economy, which is enjoying its longest spell of growth in the postwar era, albeit at a slower pace than in previous booms.  Some economists said the survey’s weakness was partly due to one-off factors.

“The lower-than-expected reading appears to be due to changes in survey samples especially in small and mid-sized firms. As the manufacturing sector showed double-digit growth, corporate capital expenditures are not as weak as the data indicates,” said Takumi Tsunoda, an economist at Shinkin Central Bank Research Institute.  With chances of a September BOJ rate hike fading, market traders will look at the central bank’s tankan corporate sentiment survey, due in early October, for clues on whether a rate hike will come next month.

German lender IKB Industriebank AG, hit by its exposure to the U.S. subprime lending crisis, expects to lose up to €700 million ($954 million) this fiscal year as it aims for a “fresh start,” the company said Monday.

However, the bank - which has won help from the state-owned KfW development bank and other banks to help protect its exposure to subprime mortgage securities - said its “liquidity position for the next six months is covered without raising new capital market funds.”

IKB’s problems sprang from its Rhineland Funding investment vehicle’s apparent inability to cover its funding needs because of exposure to U.S. subprime real estate loans, made to borrowers with weak credit histories.

In late July, IKB abandoned a profit forecast for the 2007-2008 fiscal year of €280 million ($382 million). It said it had “felt the impact of the crisis in the U.S. sub-prime mortgage market,” and said its chief executive, Stefan Ortseifen, had resigned.

Germany’s bigger banks so far have reported only minimal exposure but we will have to see what the truth is, as more reports come in.