In part that's due to the Chinese government cutting the tax rate on new car purchases, previously at 10%, in half. Although still lower than China's January 2008 sales totals, January 2009 saw relatively strong auto sales performance once the tax cut was announced. The Associated Press reports that General Motors (GM) expects Chinese auto sales for all of 2009 to eclipse US sales by more than a million vehicles. If those numbers prove accurate, it is not likely that the US will ever regain the lead since the market penetration of automobiles in China is still very small.

First, a little background: most crude oil is loaded onto tanker ships and is brought to refineries around the world. The biggest of these ships are called Very Large Crude Carriers or VLCCs. Each VLCC can hold roughly 2 million barrels of oil. If you do the math even at $30/ barrel, you can see why the ship owner (or more likely, its insurance company) was willing to pay such a large ransom for the release of one of these ships after it was captured by Somali pirates last month. Although the number of tanker ships varies as new ones are built and old ones are scrapped or repurposed, the total capacity of the global oil tanker fleet is roughly equal to 500 of these VLCCs although it is comprised of ships of varying sizes.

In a January 20th announcement, Google said that it will cease selling print ads at the end of February. The company admitted that the effort never really gained any traction and did not meet company goals. That outcome should have been obvious even before the decision to enter the business. In a recent post we talked about the eminent demise of the New York Times and cited the proliferation of the internet as the go to source for information as the proximate cause of that decline. It was Google's success in its core business that doomed this late attempt to expand into print.

The first option would be to admit defeat and declare bankruptcy. For us, that means the banks take away everything we own. For the New York Times, that would mean closing up shop, selling off all its assets and calling it quits. Of course, someone might buy the name and continue using it, but it would be a whole new company. Shareholders would get nothing, creditors would get pennies on the dollar, and subscribers would have to find something else with which to line their bird cages.

The government didn't step in to regulate these credit default swaps because a boom in all these industries makes people happy - happy enough to re-elect those in office, happy enough to pay more taxes. By the way, because the economy was doing so well in the early stages of this Ponzi scheme, the tax base grew and taxes could be cut on things like capital gains without the effects really being felt, even while the government itself was spending just as recklessly as many consumers.

The classic elements of a Ponzi scheme are paying the initial investors with money from later investors. That's great for the first guy who gets his money, but at some point you run out of new victims to come along and pay all the earlier investors. Then the whole thing collapses, there's no new money coming in, all the old money is gone, end of game. That's almost exactly what happened in the real estate mortgage market in the last decade.

This week we see several visible examples. The first is U.S. Steel (NYSE: X), which announced on Wednesday that it plans to close three US plants and send as many as 3500 workers to the unemployment lines. The Pittsburgh Business Times reports that the factories to be shut down are Keetac in Keewatin, Minn., Great Lakes Works near Detroit, and Granite City Works near St. Louis. These shut downs are billed as temporary and the workers are being laid off, but may return to work if demand picks up and the factories are restarted. There is, however, no current schedule for when that may happen. An outside observer would bet that these shut downs would last for at least all of 2009, but that will depend greatly on the changing economic conditions going forward.

The biggest announcement from Borders, however, was that the company is no longer for sale. Since March of this year, the company had been unsuccessfully seeking a suitor to buy the company’s core business. CEO Jones said that the company is no longer considering selling itself, and is prepared to survive the current economic downturn. He did leave open the possibility of selling the company’s Paperchase Products division. Square Capital Management is said to be in talks to pick up the division for an estimated $65 million. Borders did make some gains in reducing costs.

Walgreen (NYSE: WAG) reported a 2% increase in same store sales for October in its 7000 plus stores. The company, like the other pharmacies that will be mentioned here, sells not only pharmaceutical products, but also a variety of discount items ranging from holiday decorations to toys and candy. Walgreen, however, ranked third of the big three pharmacy chains. During the September/October period, Walgreen stock plummeted more than $10/ share, but has been relatively even-keeled since then, mostly trading in the $22-$25/ share range. Walgreen offers a dividend yield of 1.9% at its current price.

What does this mean for the average American? If you own a house, it is probably worth less than it was a year ago. If you are planning on staying in the home, this isn’t a big deal. If you’re planning to sell, it may mean that you have much less equity, if any, than you planned. If you’re in the market to buy a house, you are negotiating from a position of strength, especially if you are considering a bank-owned property. For others, it means that we can expect the homebuilder industry to be the next in line to ask for a government bailout.

The unemployment rate at the end of October was 6.5%. The National Association for Business Economics ((NABE)) is forecasting that rate to hit 7.5% by the end of 2009 with increasing job losses through at least the third quarter of next year. NABE went further and said that it was likely that the US was headed for a long recession that will last well into 2009. We only have to look at store closings from the likes of Circuit City (CCTYQ.PK) and Starbucks (SBUX), and the rough shape of the automobile industry for evidence of slowing sales.

McDonald’s revenue has been growing steadily on the strength of its operations outside the United States for some time now. In the US, McDonald’s does well enough in troubled economic times, perhaps as consumers switch from more expensive restaurant fare to the lower priced fast food restaurants. It remains to be seen if a similar pattern exists in other countries. The United States economy has been struggling for the past year, while Asia and Europe have only more recently begun to falter. It is expected that the US will remain in recession for some time yet, but will recover somewhat ahead of the rest of the world since we are further along in the downward cycle.

Yet even though the deal has fallen through, Yahoo’s stock price rose in Wednesday trading. The stock price is up because investors are hoping that Yahoo’s management will get a second chance to make the right choice. Microsoft (NASDAQ: MSFT) had offered about $47.5 billion or about $33 per share for Yahoo in May. Yahoo’s board of directors and CEO Jerry Yang thought they could do better without Microsoft, rebuffing several offers until Microsoft decided to walk away.

As you know if you been watching the news, anything with the word “bank” or “finance” in its name has been effectively badly battered as investors have sought, and rightly so, to distance themselves from the possibility of damage due to the mortgage credit default swap debacle. However, there are some companies that are in specialized niche financing operations that might have been hit a little too hard. Let’s take an in depth look at one of those companies.