With an economy that is tanking most businesses are looking to cut costs and generally that means letting people go. What is not surprising to me is that each company in this position is suffering from a diminished cash flow. Most of the time restricted cash flow is usually caused by slowing sales. If more sales are part of the recovery plan then why in the world would a company cut its sales force to the bone? Unless you are building a product and personally selling it from door to door each company needs a sales force and some marketing. Cutting out the salesman usually assures sales will continue to be down and even continue to diminish. The logic to severely cut or eliminate the sales force is not logic at all. How will sales be made? Who will continue to make contact with the customers keeping the company name and its products in their face?

The one thing that happens to every business that has reduced its sales force, as seen in previously similar economic times, is they loose contact with a significant part of their customer base. The customer feels as if they have been forgotten and therefore embrace the new sales face that pays them attention. To see that this is what will happen does not take any stretch of the imagination just a clear mind and the courage to make the really hard decision of not killing the salesman to save a few dollars.

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Many years ago there was a TV show called Dragnet. It was about two detectives who worked in the L.A. doing their daily detecting. They would engage witnesses an ask questions. The witnesses would dance around the question and provide information in the form of their interpretation about what they believed they saw. To keep them on track the detectives used a constant refrain of "Just the facts please, Just the Facts". When I watch the presidential debates it seems as if they are working from one of the old Dragnet scripts. When a question is asked they ignore answering with anything that is even near the topic. To the contrary they provide conjecture, misdirection, and half truths yet they do not answer the question originally asked.

My question is how do we stop them from doing this or is it simpler and smarter to just not watch the debates?

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People sling mud in most elections. Most of us think a presidential election should be the exception. The problem is that there are people (candidate handlers) who feel the need to win at any cost. What they fail to realize and actually, could not care the least about, is providing a pack of lies demeaning the other candidate and diminishing an individual's integrity which undermines the things we the citizens and voters stand for. This form of behavior does not beautify, enhance, advance, or uplift the level of the contest. Perhaps these actions display something about the moral character of the candidates other than what we might have previously considered thus trumping previous beliefs that such acts were beneath them. In the long run if we continue to accept this behavior than it is perhaps we the citizens who should change our belief system from its current base to approve the philosophy of do what ever you need to do to win because that is what counts.



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Just how safe are municipal bond funds as a protection investment in today's economic environment? Here are some of the elements to consider when deciding a direction.
1. They provide a low return but better than money market or bank accounts.
2. As part of a fund one municipality can default but that will not necessarily kill the fund or cause a collapse.
3. There could be multiple failures if there is a severe recession or depression. Most of that risk is calculated into the fund by spreading the selection of bonds over wide areas. There may be problems in funds that are designed to use bonds from one state to achieve tax free status. That is a case where the spread is a little too close when the economy tanks and the revenues in a geographical can be worse than the average causing multiple defaults.
4. If we were to move to a world wide depression than anything could be up for grabs in the municipal bond world.
5. They are not a bad buy to protect your cash and you still make more than any other protected investment such as bank deposits or even treasuries.

There is no perfect safety tool and it is the responsibility of each investor to carefully watch their pot of gold and mind their surroundings.

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The electoral system comes under attack each time there is a Presidential election. Once again we are about to roll the dice. The real question is, when all is said and done, will the winner be the one with the most votes? Does it really matter who gets the most votes? These are the two questions I have been asking myself since 1953 when I was playing the game "Elect Yourself President". That was when and how I learned about the Electoral College. At that time I was ten and my brother was six. It was a game for adults but we managed to figure it out with a little help from an uncle. It has a big board map of the United States and each state had places where you could put your pins which identified you by color. There were six colors but if one knew what they were doing you could get rid of the other colors over time and capture the electoral votes they held. Of course, with more experience my brother and I always wound up as the two final candidates. It seems funny now but we always took red and blue pins as our identifiers. It was a great game, almost like the one being played for real now. The difference was and still is that if we messed up the numbers it was just a game and honestly no one was hurt. But now the numbers mean so much and they should but winning by a very slim margin should mean a do-over. Gee, for a second I thought it was 1953.

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The economy of China is still strong but strong is a relative word and condition especially when we discuss China. China imported very little oil in August and in September. This failure to purchase oil for the last two months is not necessarily due to an economic slowdown. Prior to the Olympic Games China had purchased very large amounts of oil and stockpiled it. It did not use the oil during the Olympics as they shut down manufacturing all around Beijing. After the games ended the manufacturing restarted but not at the level it had seen in June 2008. There are fewer orders now and those orders are also smaller in size and dollar volume. This is part of the global slow down however, current estimates indicate that China will have a GDP growth rate of at least 7% for 2008 and probably will be 7.5% in 2009.

These numbers are surely off the highs of the past few years but 7% growth compared to 1.3% growth in the U.S. for the same period is not something to disregard. At the same time the failure to order more oil is just a process of running down the overage on hand and allowing for the purchase of new oil at prices almost $60 dollars below those in June 2008. China needs to keep its population working because they fear idle hands which could lead to desperate moments of unrest. Part of their resolve to ease this problem is to turn any idle manufacturing into productive manufacturing of the products for their internal markets. If the government of China can accomplish these tasks they will come out of these troubled times way ahead of most everyone in the world. If they fail to control these issues the potential for unrest and the consequences of failed economics could cause the country to destabilize allowing them to lose most if not all they have worked for. As of now the economy of China is relatively strong.

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As the world economy sinks most nations pick a strong economic partner then tend to gather in the same life boat. Europe is a perfect example of what I am talking about. To make trade easier for themselves they created The European Union, a sort of life boat years ago, where each country within the Union used the same currency. The problem we now see in Europe is simply as banks fail or get themselves into economic trouble there is no central bank to bail them out. Each government has to do it within the confines of their country. The problem is how one adjusts currency in Germany when France is using the same monetary tender and perhaps does not want to see the currency value adjusted. No country in the European Union has the right to adjust currency.

In these current economic times the Union itself will have to meet and try to decide what to do with countries in trouble and how to prevent the problem from spreading if that is possible. In addition, the countries which are presently healthy, and I know that is a relative term, will not want to devaluate the status of their economic health by adjusting the value of the Euro to assist partner states. At this point the question is: With different economic positions in the same life boat will there be a great fight over who will set the value of the Euro or will each country try to go it alone relative to an artificially established value for the Euro?

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The Indian stock market has lost about 35% already this year. Expectations in some quarters see the potential for additional losses of 25%. This was a hot economy a short time ago. Unfortunately this is an economy that is not diverse enough to sustain itself when the global economic chaos hits. India's business infrastructure is based on providing products and services to the markets of other countries. The economic stability of its own internal markets is not big enough to sustain the country at the levels seen only a few months ago. What this suggests is the world markets are all suffering to some degree. Some countries will be able to sustain themselves reasonable well in this down turn due to the diversity of their internal and external products and markets. One of the major problems plaguing many of these former hot economies is most of the cash was coming from outside the borders of these countries. Because their business infrastructure was less formidable than their stock markets suggested a small trailing off of revenue is capable of having severe economic repercussions within the borders of the country.

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The oil demand for the U.S. in 2009 was supposed to be up 8.3 percent over the total consumption of 2007. But the projected consumption for 2008 seems as if it will come in about 4.0 percent less than the 2008 projection. At this time the numbers are still dropping and the projections and that 4.0 percent could go even lower. As factories shut down and as many factories slow down their production the need for energy is reduced. The trucking industry and the airline industry have cut back on the consumption of fuel by running less routes and consolidation of the routes that remain in play. The U.S. driver has reduced fuel consumption over the last several months and it looks as if the lost consumption will not spring back as quickly as one might expect. Higher prices will most certainly return to the upper levels they had reached in July and August of this year. As the higher oil prices return after the elections are over U.S. consumption will continue to fall. The economy will take some major hits both internally and externally. The slow down in the economics of the world will continue for some time but the overall consumption of world demand will at least remain at current levels. The emerging economies will still have enough extra cash coming in to continue their growth, although not at the current levels, which will stabilize demand at a high level and allow for the price of oil to continue to stabilize at over $150 per barrel and move even higher when the economy starts to truly recover.

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When Congress failed to pass the Bail Out bill the other day everyone who was complaining about how Wall Street should get its comeuppance and not money turned then blamed Congress for not passing the bill. If the appropriate amount to Congresspersons felt the bill was as it should be they would have voted for it. That is the way the government is set up to work. And remember politics is always part of the formula for decision making. The true problem is not with the citizenry who turned against the congressional decision it is with the administration America has had for the last eight years. Their game is to let everything go unmentioned and unchallenged until it becomes a crisis. Then they send in their so called specialists who supposedly have just found the problem and have the plan to avert a disaster. It is directly from the 1930s Nazi propaganda play book.

In the 1930s as the Third Reich started its grab for power their Minister of Propaganda created the play book. The rules were simple. Tell a big lie and continue to tell it over and over again. Telling the lie over and over again eventually would whip the citizens of Germany into a determined frenzy. Create the illusion that it was always someone else's fault until everyone believed it was a crisis. When the lie was fully embedded in the minds of the citizenry they would demand a solution. At that point the plan of the government would be unveiled and immediate action would be perused. Now that I have mentioned this scenario you can think back over the last eight years and easily see how this process has been used over and over again. Once the citizenry blinks the administration wins. In this case the Congress did not let it happen and in the long rum may choose to keep it that way.

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The lessening demand for oil in the U.S. is matched by a similar condition in Europe and Japan. Unfortunately just the high price of the commodity is not the reason for its diminished demand. With demand shrinking the price of the product should seemingly go down to a point and then up if this were a strictly economic equation. The fly in the ointment is that overall demand is still up on the global count. Developing countries such as China and India to name a few are consuming the oil that the U.S., Europe and Japan are foregoing as their internal demand lessens. At present the global demand should increase about 4.2 percent for the year 2009. The countries with decreased demand will see a less than total combined growth of one percent at best. Two years ago the projected growth for the U.S. was an internal expansion of almost five percent. What we currently know is the high demand for oil will be there globally but the non-existent expanded share extrapolated for the U.S. in 2009 will be consumed by someone else.

Tomorrow I will write about the reason for the diminished U.S. oil demand.

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