at

What's another high-end stat, along with a decline in sales of apartments in the heart of New York City -- Manhattan -- that doesn't bode well for the economy? A decline in sales of performance and luxury cars.

Sales of Bavarian Motor Works' namesake brand in the United States plunged 15.2% to a 16-year low in 2008, as the credit crunch and the U.S. recession scared away even buyers for one the world's highest-quality makes, The Associated Press reported Friday.

U.S. sales declined to 249,113 vehicles, The AP reported. Global 2008 sales slumped 5.8% to 1,202,239 vehicles. BMW's shares rose 49 euro cents to 22.39 euros Friday on the Frankfurt exchange.

Economist Richard Felson said BMW's sales decline "is indicative of a pervasive economic slowdown and a loss in confidence, across society and on both sides of the Atlantic."

Free markets are essential and they have many benefits, but they are not perfect. Many economists, including economist Peter Dawson, agree. The global financial crisis, along with those infamous, Frankenstein-like, mortgage-backed securities and the massive, publicly-funded bailouts for failed free market institutions demonstrate this.

Another example, according to Dawson: the free market and oil. The mantra is, it's best to let the market determine the price of oil. Economist Dawson is doubtful, because oil price swings create economic havoc.

Consider the predicament airline, delivery, and related executives who manage businesses that have a major fuel cost face: you know that this year the price of oil is going to be somewhere between . . . $30 and $110. "Now that clarifies things," Dawson laughs. "Piece of cake."

Also, consider what oil industry executives face: try making and managing a 5-year or 10-year exploration budget. What's the price of oil going to be in three years? $20? $50? $75? $150? "Nobody knows, and it's creating havoc in exploration circles," Dawson said.

President-elect Barack Obama has provided the outline for his 2009 fiscal stimulus package, and a legitimate question for investors is: "Hey, how am I going to benefit from the plan as an investor?"

I'll systematically review the Obama plan as individual programs are specified, but for an overall critique, read an article by my BloggingStocks colleague Peter Cohan, who provided a good axis by which investors can evaluate the merits of Obama's stimulus plan. Cohan argued for stimulus components that serve as investments, as opposed to those that are just costs.

For example, most investors are aware of the poor condition of the nation's roads, highways, and bridges, not to mention its inadequate (and in some cases dilapidated) mass transit systems. Infrastructure work is a top priority in the Obama stimulus plan, and one can see how better highways, roads and transit systems will enhance commerce by making travel faster and safer. Further, electric grid and solar/wind power work also is included in this category: most know that the electric grid must be expanded, and made smart to meet the needs of our growing, dynamic nation, and that alternative energy source development will make the U.S. less-dependent on foreign oil.

What would make the strongest case for a large fiscal stimulus package - - upwards of $1 trillion for infrastructure, energy, education programs, and for aid to the states, for a new electric grid, for the building of hospitals, schools, for improved water and sewerage systems, for the biggest build-out in the United States since the Great Society?

Investors could probably think of dozens, but economist David H. Wang has a compelling one: the condition of the U.S. consumer himself / herself, or what Wang calls the "consumer's dilemma."

Has the U.S. economy changed?

Now Wang proceeds with the assumption that the U.S. consumption-based economy will largely continue. If one disagrees with that premise, then Wang's thesis is mute moot, and we then also have a different U.S. economy that will require very different prescriptions to achieve sustainable growth.

But let's, for the sake of argument, assume that the consumer-based economy - - one that historically has accounted for roughly 60-65% of U.S. GDP - - is not going the way of the Edsel. That creates Wang's "consumer's dilemma." Namely, the U.S. economy requires the consumer to spend (buy things) to grow at capacity, but consumers have already consumed at too high a level for too long - - in some cases saving nothing at all -- and hence many will now increase their rate of savings to begin to make up for their many years of inadequate savings.

Like most markets, the hedge fund sector "took it on the chin" during the bear market of 2008.

The hedge fund sector lost 18.3% in 2008 -- the sector's worst year on record -- according to data compiled by Hedge Fund Research Inc., as funds found it difficult to adjust to the tumultuous trading and market conditions precipitated by the global financial crisis.

Losses, withdrawals take a toll

Further, losses and withdrawals decreased industry assets to $1.1 trillion in December 2008 from $1.9 trillion in June 2008, according to Bloomberg News, citing Morgan Stanley data.

Economist Richard Felson said investors can interpret the year for hedge funds in two ways.

"One way to look at it would be to say that hedge funds, despite their derivatives, sophisticated trading models, and ability to move money across markets with speed, were not immune to the financial crisis and market turmoil," Felson said. "That would be a data point to argue that the bloom is off the hedge fund rose."

It looks like tomorrow could very well become yet another 'brace yourself Friday' or another edition of 'As The U.S. Economy Turns.'

Still, hopefully it won't become a new rendition of 'down goes the Dow' with another visit by our old friend, you guessed it - - Dow 8,000. But analysts and economists haven't ruled the latter out.

The reason? The December 2008 jobs report, to be released by the U.S. Labor Department at 8:30 a.m. EST.

December jobs data won't be pretty

President-elect Barack Obama, D-Illinois, and House Speaker Nancy Pelosi, D-California, said they are bracing for a 'sobering' jobs report, Reuters reported.

Sobering is one way to lower expectations: economists surveyed by Bloomberg News expect the December 2008 jobs report to show a loss of 500,000 jobs. If that occurs, the U.S. economy will have shed more than 2.5 million jobs in 2008 and a staggering 1 million jobs in the last two months alone, November / December 2008. It would also make 2008 the largest job loss year for the United States since World War II.

Economist Peter Dawson told BloggingStocks economists are becoming "very concerned" for two reasons. First, a trend line for job cuts has increased for more than six months. Second, ADP's (NYSE: ADP) private sector job report showed the loss of a staggering 693,000 jobs, and even though the ADP report has not correlated well with the Labor Department report, it still is setting off alarm bells in economists' circles.

The oil market breathed a minor sigh of relief Thursday after Saudi Arabia said there would be no replay of 1973-74 regarding the current Middle East crisis.

Saudi Foreign Minister Prince Saud al-Faisal said oil "isn't a weapon" to end the conflict between Hamas and Israel, Bloomberg News reported. Prince al-Faisal said oil can't reverse the conflict, countering a call by OPEC-hawk Iran that Arab states stop producing oil as a way to pressure countries supporting Israel.

Oil continued its recent downward trek Thursday morning on the news, falling $1.58 to $41.05 per barrel. Oil hit an all-time of $147.27 per barrel in the summer of 2008.

In 1973, the Arab members of OPEC implemented an oil embargo against the United States in response to the U.S.'s decision to re-supply Israel's military during the Yom Kippur War, which Israel won. The price of oil subsequently quintupled from about $20 per barrel to about $100 per barrel in 2009 dollars (or from about $3 per barrel to $13 per barrel in 1974 dollars), creating the world's first oil shock, and triggering a U.S. recession.

The other major energy commodities also declined early Thursday. Heating oil fell 2 cents to $1.54 per gallon, unleaded gasoline decreased 3 cents to $1.07 cents per gallon, and natural gas dipped 5 cents to $5.92 per million BTUs.

Those investors, including market absolutists, who interpret the current economic state-of-things as just a typical downturn that a few tax cuts and some good, old-fashioned, free market-based supply side economics can solve, may want to stop reading the economic data points in the months ahead. At least, that's the view of one economist.

Nouriel Roubini, the once obscure New York University economics professor, who two years ago predicted the current global financial crisis and recession, said the worst is still ahead for the U.S. economy and for economies around the world.

"In the next few months, the macroeconomic news and earnings reports from around the world will be much worse than expected," Roubini wrote in a column for Bloomberg News, adding that the aforementioned will put downward pressure on prices of risky assets.

Further, Roubini said the U.S. economy will remain in recession through at least the end of 2009, with only a mild recovery starting in 2010 -- with GDP growth in the initial recovery year of 1%. For 2009, Roubini also forecasts continued recessions for the United Kingdom, euro zone, Japan and Canada. Russia will also fall into recession, as will Brazil, and China will experience a hard landing, with growth slowing to 5%, he said. India's economy also will slow substantially.

There's an upside / downside to this week's jobless claims data.

While U.S. weekly jobless claims actually fell 24,000 to 467,000, the total still is more than 40% higher than a year ago.

Meanwhile, continuing claims rose another 101,000 to 4.61 million -- the highest continuing claims total since December 1982. Economists note that the high continuing claims level reflects labor market stress, and the long time it takes for those downsized to find comparable employment. Few companies are filling vacancies, and even alternate and temporary work assignments are declining -- another negative sign for the labor market.

Economist Peter Dawson called the continuing claims level "horrible, indicative of extremely weak job creation conditions. The continuing claims level is approaching Reagan era recession totals, which was a bad recession."

No one likes a budget deficit, but run a deficit - - and a large one - - the U.S. must, and for two years, due to the depth and seriousness of the U.S. recession, so says an economist.

"We will likely have to run $1 trillion deficits for each of the next two years in order to provide adequate fiscal stimulus for the U.S. economy," economist David H. Wang told BloggingStocks Wednesday.

A large problem requires a large stimulus

What's driving the need for a large fiscal stimulus? The worst consumer and business demand conditions in more than 25 years, Wang said. "Every major demand factor in the economy...consumer, business, and capital investment, is retreating. The demand has to occur somewhere, and if the U.S. government does not create it, the recession with lengthen and deepen."

The U.S. recession, which began in December 2007, is already in its 14th month and there's no end in sight, based on leading economic indicators or economic fundamentals. One tell-tale stat: the job market. Or should one say, the 'non-job market.' ADP (NYSE: ADP) announced Wednesday that private employers cut another 693,000 jobs in December 2008. Meanwhile, many economists expect Friday's U.S. Labor Department job report to show a 500,000-job loss in December 2008. If it does, then the U.S. economy will have lost at least 2.5 million jobs in 2008.

Wang said continued monthly job losses above 200,000 would indicate to him "that the economy is entering a vicious cycle of corporate revenue declines, job lay-offs, decreased demand, leading to further corporate revenue declines - - that must be avoided."

Those investors ready to position themselves in oil stocks, or perhaps even dabble in oil futures, may want to wait a while.

Oil traders are seeking up to 10 more supertankers to store oil at sea, Bloomberg News reported Tuesday. The additional oil stored at sea would amount to roughly a five day supply for the European Union.

Oil fell $2.77 to $45.78 per barrel. Further, although oil has risen more than 25% from $33 lows reached last month, those counting on a sustained rally in crude oil are taking a big risk, so says energy trader Jim Dietz.

"The storage of oil off-shore in tankers is one of a series of data points investors and certainly traders have to pay attention to," Dietz said. "We now have 25 supertankers holding oil at sea, or about 5% of the global supertanker fleet [about 500 ships]. A lot of that oil at sea is Iran's. If demand doesn't pick up, we're going to run out of places to store oil, which will compel a price drop." Dietz added that he was currently short unleaded gasoline, with a monthly contract.

On Tuesday Russia cut off all natural gas to Ukraine, creating shortages in Europe that could spread across the continent as a cold snap grips the region, Bloomberg News reported.

Gas shortages were reported in Ukraine, the Balkans, Bulgaria, Poland, Italy, and Hungary.

The shortages were expected to extend to Germany, Austria and broader Europe, as a cold snap with temperatures below 20 F degrees is expected to increase demand for fuel in Eastern and Central Europe, The New York Times reported Tuesday. When the natural gas is flowing, Europe imports about 20% of its natural gas from Russia.

The current Russia natural gas cut-off has already lasted longer than the last Russian cut-off, in January 2006.

It's about price . . . and politics

The dispute pertains largely to price, but also involves geopolitics. Russia's oil and natural gas giant Gazprom is seeking to raise the price of natural gas to $450 per 1,000 cubic meters from $179.50 last year, and to collect fines for alleged late payments. The Times reported. However, analysts also believe Russia is upset with Ukraine's move to apply for North Atlantic Treaty Organization membership and the nation's closer ties with the United States and Europe. Ukraine is seeking to integrate more fully with the West, but Russia views Ukraine as part of its sphere of influence.

Non-farm private employment decreased a gargantuan 693,000 in December -- much worse than expected -- on a seasonally adjusted basis, ADP announced Tuesday in the ADP National Employment Report (pdf).

Meanwhile, the November estimated change in employment was revised to a decrease of 476,000 from the previously-announced decrease of 250,000 jobs, ADP said.

Economists surveyed by Bloomberg News had expected the ADP report to show the loss of 495,000 private sector jobs in December.

Note: This month, ADP revised the report's methodology, hence economists say comparisons to November and prior month job reports are not recommended.

Manufacturing employment fell 120,000 in December -- its 27th consecutive monthly decline. Meanwhile, the service sector of the economy lost 473,000 jobs, the first back-to-back monthly job loss in the service sector since November 2002.

It looks like the nation's last hold-out -- the last bastion of the housing bubble, if you will -- has finally started to burst. Or at least deflate.

Manhattan, which remains, despite the nation's decade of policy errors, the capital of the world, registered its fourth straight quarterly decline in apartment sales in Q4 2008, according to research compiled by Prudential Douglas Elliman Real Estate (pdf).

Transactions in Q4 2008 fell 9.4% from a year ago to 2,282, Prudential said. Further, while the median price of all units (new and existing) rose 5.9% to $900,000, the median price for re-sale properties fell 3.6% to $732,500. Luxury unit prices fell 3.9% to $4.13 million

Just as telling: inventories have soared. Listings increased 39.3% to 9,081 units compared to a year ago, with the average days a listing was on the market before sale rising to 159 days, from 131 days a year ago.

Driven by record investment banking / financial sector salaries and bonuses, and by creative mortgage forms, New York City's real estate market, specifically the borough of Manhattan, experienced "a 5-year period of clearly unsustainable price gains," so says economist Peter Dawson. Manhattan, he says, was able to hold on in 2007 as the housing slump devastated prices in the U.S., particularly in the California, Southwest U.S., and Florida markets, but the financial crisis that depleted New York's investment banking employee ranks is finally showing up in Manhattan's residential real estate market, he said.

He's a new Dem and you can tell. He's also a smart professional.

Those inside the beltway expecting President-elect Barack Obama to be a carbon copy of President Bill Clinton are likely to be in for a surprise. Obama has shown a penchant to reach out -- and to reach out quick -- to forge coalitions.

The semi-circle of debate

Moreover, "you can see his style," so says economist Peter Dawson. "It's a variation of the Harvard Law School seminar model," Dawson said. And the initial evidence bears Dawson out: Obama has shown a tendency to assemble smart people around him from a variety of viewpoints, encouraging rigorous debate with opposing arguments, move forth with the value that every one counts in U.S. society, and then forge a viable solution based on the above, with solutions tailored to meet the task/challenge.

"What Republicans have to keep in mind is that Obama's 'everybody counts' also includes the poor and the working poor," Dawson said. "What Democrats have to keep in mind is that it also means investors and corporate America."