From the Wall Street Journal….

An unexpected drop in U.S. electricity consumption has utility companies worried that the trend isn’t a byproduct of the economic downturn, and could reflect a permanent shift in consumption that will require sweeping change in their industry.

Numbers are trickling in from several large utilities that show shrinking power use by households and businesses in pockets across the country. Utilities have long counted on sales growth of 1% to 2% annually in the U.S., and they created complex operating and expansion plans to meet the needs of a growing population.

“We’re in a period where growth is going to be challenged,” says Jim Rogers, chief executive of Duke Energy Corp. in Charlotte, N.C.

So who cares right? Everyone has problems. But these problems are going to be your problems. Cut your energy usage in an effort to save money? Does not matter. From later on in the article….

Utilities are taking a hard look at the way they set rates and generate profits. Many companies are embracing a new rate design based on “decoupling,” in which they set prices aimed at covering the basic costs of delivery, with sales above that level being gravy. Regulators have resisted the change in some places, because it typically means that consumers using little energy pay somewhat higher rates.

But it could be worse. We could live in Ukraine.

From the New York Times…

That collapse began a steady decline in Citigroup shares that snowballed this week as speculation grew that the bank might require a government bailout, a forced merger that would crush common equity holders, or an ouster of Mr. Pandit.

In the last five days alone, more than half of Citigroup’s market value was vaporized, and investors and analysts intensified calls for the bank to find ways to lift its stock price, including splitting the company, selling pieces or selling itself outright.

“They don’t have the sovereign wealth funds or other big investors to turn to anymore,” said William Fitzpatrick, an equity analyst for Optique Capital Management. “There are two remaining options: a federally forced merger or nationalization.”

A forced merger with who? Doesn’t everybody realize that Citigroup is the largest financial services organization in the world? How can they solve Citigroup’s underlying problems by merging them with someone who is smaller?

All this crazy talk surrounding Citi is making me think that John Hempton was close to the truth with his crazy little conspiracy theory.

From Naked Capitalism…..

But one thing that continues to surprise me is the frequency with which the US in 2007-2008 is being compared to the US of 1929-1930. I’ve mentioned in passing that China is in the position that the US occupied in the late 1920s: a massive manufacturer that was generating large trade surpluses, to the point where the imbalance was destablizing (under a gold standard, the US was sucking the metal out of its trade partners; the modern analogy is China’s massive foreign exchange reserves). And as the US was the epicenter of the Great Depression, we cannot be certain of the trajectory of this economic crisis until we have a sense of how bad things are getting in China and how good its policy responses are.

Reader Michael has been e-mailing me from time to time with not-pretty sightings on China’s responses to the downturn. This post from Michael Pettis tells us that China appears to be trying to keep its exports up, which is eerily parallel to what the US did in the Great Depression.

The point is good one. The Michale Pettis post that she links to is interesting. The conclusions that Michale Pettis and herself draw is all wrong.

Keynesian economics has never been able to solve the problem of overcapacity. Japan could not do in 90’s. The US could not do it in the 70’s. Nobody has ever been able to use Keynes ideas to solve any problem successfully. Yet his ideas it is still held out as the solution to the problem of overcapacity on the belief that everyone else did not properly follow Keynes ideas.

From dshort.com…

Over the 80-year period since 1928, the average volatility in the Dow is about 1.8%. There have been only 66 days when the intraday volatility exceeded 8%. That’s right — 66 out of over 20,300 market days. If they were evenly spread, that would be about one 8% plus volatility day every 14.5 months.

Here’s the amazing and rather disturbing part . . .

Sixteen of them have occurred since September 29th — two in the past five days. The Crash of 1929 had only eight. Another thirty followed during the ten-year Great Depression. Four were clustered around the Crash of 1987. Only two happened during the nasty 2000-2002 bear.

The current bear market has had a record-breaking nine consecutive days of 8% plus volatility (October 6 through the 16th). Second place goes to the Crash of 1929, with eight super-volatile days spread over a 14 market-day period (10/23/29 to 11/13/29).

A lot of people are given false hope by the sharp drops coupled with sharp upswings. They think that if they wait long enough, everything will go back to the way it was before. I wonder how long it is going to take before the majority of Americans realize that they have lost a lot of money they are never going to get back no matter how long they wait.

From the Telegraph…

US benchmark commodity futures hit $49.75 a barrel in New York, while the price of Brent in London fell to $48.45 – prices not recorded since May 2005.

Oil has lost about two-thirds of its value since July’s record high prices, as the economic slowdown around the world has weakened demand.

I feel bad for all the people who pre brought their heating oil on the fear that it would keep going up.

From Jeff Matthews Is Not Making This Up….

So the odds are good that Buffett himself is not breaking a sweat over his own stock’s 40% decline since his late September cavalry-to-the-rescue investment in Goldman Sachs.

After all, who knows more about Berkshire than Warren Buffett?

Still, somebody out there is indeed breaking a sweat about Berkshire, and not just the company’s stock. Credit default swaps in Berkshire—insurance against a default by Berkshire—have been climbing ever since the market began its September swoon, and suddenly spiked in the last few days.

In the end of the world as we know it, even Berkshire is not a safe haven. Although to be fair, people are mostly worried that it is going to lose its AAA rating. Not go bankrupt per say.

From the Washington Monthly….

Broadway Federal’s story isn’t exceptional. Easily overlooked amid the crisis of big banks today, small-scale financial institutions are, for the most part, holding steady—and sometimes even better than steady. According to FDIC data, the failure rate among big banks (those with assets of $1 billion or more) is seven times greater than among small banks. Moreover, banks with less than $1 billion in assets—what are typically called community banks—are outperforming larger banks on most key measures, such as return on assets, charge-offs for bad loans, and net profit margin.

One reason community banks are doing so well right now is simply that they never became too clever for their own good. When other lenders, including underregulated giants like Ameriquest and Countrywide, started peddling ugly subprime mortgages, community banks stayed away. Banking regulations prevented them from taking on the kind of debt ratios assumed by their competitors, and ties to their customers and community ensured that predatory loans were out of the question. Broadway Federal, for its part, got out of single-family mortgages when they stopped making sense. “A borrower comes and asks, ‘Do you do interest-only, no-down-payment, option ARMs?’ ” recalls Hudson, with a chuckle. “No!” The bank focused instead on expanding its reach to niche borrowers, such as local churches.

This brought to mind something that the Governor of South Carolina said in a recent Wall Street Jouranl editoral called “Don’t Bail Out My State”…

Community bankers tell me that they are now at a competitive disadvantage for being careful about who to lend to, because others that were less disciplined will get a federal bailout.

The Big Mean Scary Guy is gone. Let’s call him Vice-Admiral; he was not an Admiral but he was a vice, and it gives a vague premonition of his stature in this global, multibillion dollar company. The rumor is that Vice-Admiral was told not to get on the plane for the trip he was planning. Click Here to continue reading.

From the Wall Street Journal….

Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM’s physical plant during this period was $128 billion, meaning that a net $182 billion of society’s capital has been pumped into GM over the past decade — a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.

As a society, we have very little to show for this $465 billion. At the end of 1998, GM’s market capitalization was $46 billion and Ford’s was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges. Along with management, the companies’ unions and even their regulators in Washington may have their own culpability, a topic that merits its own separate discussion. Yet one can only imagine how the $465 billion could have been used better — for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.

Ouch.

From Yahoo Business….

Wall Street hit levels not seen since 2003 on Wednesday, with the Dow Jones industrial average plunging below the 8,000 mark amid a dour economic outlook from the Federal Reserve and worries over the fate of Detroit’s three automakers.

A meaningless number. Posted here only for those who missed it. More interesting is this chart from Calculated Risk comparing the current stock market crash to other historical crashes.