US gas prices moved above $3, the highest since October 2008 (Reuters)

Gold rose on Asia purchases (Reuters)

Amazon.com (NASDAQ: AMZN) said it Kindle e-reader is has done well in competition with e-readers. (Reuters)

The trading in private shares of Facebook, Twitter, and Linked In has accelerated. (WSJ)

The rise in gas and cotton prices will make life difficult for retailers next year (WSJ)

Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) still struggle for the top spot in investment banking and M&A transactions (WSJ)

AIG (NYSE: AIG) got credit lines to replace federal government loans (WSJ)

Lenovo has begun to push into Russia and India (WSJ)

The National Bureau of Economic Research say unemployment causes people to adopt poor diets (WSJ)

GE (NYSE: GE) set joint ventures in Russia to increase its presence in the medical and energy infrastructure industries (WSJ)

Consumer confidence numbers should rise into 2011 (WSJ)

Charles Schwab head of Schwab (NASDAQ: SCHW) had heart surgery (WSJ)

The Treasury will sell $56 billion in paper this week (WSJ)

Oil futures hit three-and-a-half year highs as cold spread across Florida (WSJ)

Canadian banks have become more aggressive in purchases of US counterparts (NYT)

Google’s (NASDAQ: GOOG) planned purchase of travel software company ITA has split the travel industry (NYT)

Investigations has hurt the use of expert networks by Wall St. firms (NYT)

Foreign banks gained a great deal from the use of US federal emergency funds (FT)

Equity investors took profits as China raised rates (FT)

The sales of oil and gas assets has increased sharply (FT)

Japan’s production index rose again (Bloomberg)

Apple (NASDAQ: AAPL) was sued over applications that give private information to marketers (Bloomberg)

US holiday retail sales rose 5.5% (Bloomberg)

Douglas A. McIntyre

The AAA news is another in the signs that consumers are once again in a mood to spend money. Most information from the retail sector shows that retail activity is better than it has been in three years. Economists attribute some of this to the law passed by Congress to extend tax cuts. Others say that Americans have been so cheap for so long that they have decided now is the time to be generous.

Government data has shown recently that Americans have dropped theamount of credit they have outstanding. The reason for this is probably that people have begun to “deleverage” after using home equity to fuel their consumer spending. The housing market collapse and unemployment ended those habits. But, the moratorium may have lasted only these last two years.

It is odd that Americans are willing to travel more, which means they will spend more on gas. Additional AAA data shows that many people now spend  as much as 7% of their household budgets on gas. That figure may rise, but it has not undermined travel yet.

Consumer optimism is on the rise.  Whether it lasts into next year is impossible to determine. There is still a chance that a further increase in gas could be one of the things that cripple in economic expansion as it did in mid-2008 when gas hit $4.

People may feel better about their economic prospects, but gas prices are one fixed cost it is impossible for most people to avoid.

Douglas A. McIntyre

Be advised that this new outlook assumes current fuel prices remain at their current levels.The company has reduced its planned capital investments by $400million, to $2.6 billion for fiscal 2009.  Shares traded up 4% to$88.70 in the immediate after-hours trading session.  United ParcelService Inc. (NYSE: UPS) also rose $3.2% to $67.18 on the FedEx news.

Jon C. Ogg
September 9, 2008