Top Stocks

Citywide Wi-Fi goes bust

Kim Peterson — Wed, 14 May 2008 18:06:00 GMT

Citywide Wi-Fi networks sound like a fantastic idea. Take your laptop with you to the park or the grocery store. Drop your home Internet connection. Look up directions in your car (parked, of course). More than 150 U.S. cities planned to roll out municipal Wi-Fi at one point, but the reality is setting in: these networks don't work.

Latest case in point: EarthLink, which is shutting down its Philadelphia Wi-Fi network in 30 days. Earthlink even tried to give away the network, but couldn't reach a deal with anyone. Too bad for EarthLink, which plunged deep into the municipal Wi-Fi business when its dial-up revenue fizzled. Shares dropped after the announcement, but have climbed nearly 3% today to $9.36.

Why do these networks fail? The business model is unworkable, suffering a triple whammy of costly equipment, a lack of interest and better technology on the horizon. Networks in cities like Houston can cost $50 million to build. People simply haven't signed up, either, choosing instead to stick with cable or DSL for Internet access. And a new technology called WiMax promises fast wireless access over a range of several miles -- access that's more reliable than the spotty service many city Wi-Fi networks offered.

Was there a realistic investment bet in there? Yes, but perhaps unforeseen was the unproductive pairing of big business and municipal governments. Bureaucracy, politics and cost overruns dragged these projects down.

One of the most noble goals of municipal wireless networks was conquering the digital divide. Bringing free, or at least cheap, Internet access to low-income families. Opening the Web to all. But a check around the country shows that citywide Wi-Fi is slowly dying. San Francisco's plans collapsed. EarthLink is shutting down its New Orleans network, and will hand over others to their respective cities in Corpus Christi, Tex., and Milpitas, Calif. Anaheim may be the next to go.

That's not to say that every muni network is a failure. Minneapolis' network is successful, albeit slow, and was crucial during last year's bridge disaster. These networks may be a solution for some cities, but they don't hold the same promise anymore.

Under Armour: Jumping the Shark

Andrew Horowitz — Wed, 14 May 2008 14:00:00 GMT

Former University of Maryland football player Kevin Plank founded Under Armour as he saw the need for specialized apparel that would keep player's bodies cool during a tough game. It would be terrific if he can do the same for investors who are sweating uncontrollably as they watch the value of their shares pulverized over the past few months.

To be honest, I own at least a dozen Under Armour shirts in several colors and wear them often. WHY? If you have to ask you obviously have yet to try any of the Under Armour apparel products. The basic idea behind the product line(s) is simple enough: "wear Heat Gear® when it's hot, Cold Gear® when it's cold, and All Season Gear® in between."

Now that you have great insight into my weekend wardrobe, let’s move on to the substantive financial matter. In reviewing the latest financials, we noticed that inventory has been on the rise, a sign that sales are slowing. Nothing earth shattering there as we are seeing softness in all-things related to consumer spending. But, what is different with the recent report is that inventory at quarter-end included $13.6 million of Performance Training footwear in preparation for the upcoming launch. Can you say jumping-the-shark?

According to their recent release:

Based on its inventory management strategy and supply chain initiatives, the Company expects the inventory growth rate to decelerate beginning in the second quarter, with inventory growing in-line with net revenues by the end of the third quarter. Cash and cash equivalents were $17.6 million at March 31, 2008 compared to $40.6 million at December 31, 2007 and $57.2 million at March 31, 2007. The Company had no borrowings outstanding under its $100 million revolving credit facility at March 31, 2008.

Here are a few other tidbits from the earnings release on April 28th and comments:

“Net revenues increased 26.6% in the first quarter to $157.3 million compared to net revenues of $124.3 million in the first quarter of 2007. “
For a company with a P/E of 37, that equates to a PEG ratio of 1.39. That is too high in an economy that is slowing.

“The Company had previously estimated a full year gross margin improvement of 40 to 50 basis points in 2008. However, based on the most recent estimates, full year gross margins for 2008 are expected to decrease 30 basis points year-over-year to 50.0%. “
A bit convoluted, but the point is that the company was unable to control costs as expected and may continue to have difficulty in the near future.

“Based on its inventory management strategy and supply chain initiatives, the Company expects the inventory growth rate to decelerate beginning in the second quarter, with inventory growing in-line with net revenues by the end of the third quarter.”
It is apparent that they recognize that the inventory growth was excessive and needs to be addressed.

On a year-over-year basis, the balance sheet has also revealed a disturbing trend as cash/cash equivalents dropped by 70% and account receivables grew by 20%. Signs that stores and other vendors are delinquent and/or not paying.

Now they are entering into the competitive shoe market which has been dominated by Nike, Reebok and New Balance. It will be interesting to see how if Under Armour can convert the love affair for their apparel to their shoe line. Possible, but not probable.

The one piece of good news that will support shares for the time being is the recent announcement that UA will be included in the S&P Midcap 400 Index, replacing IndyMac as of May 15, 2008. We believe that based on a slowing economy and margin compression, the shares will remain locked in a narrow channel under $35.

Disclosure: Horowitz & Company clients do not hold positions in securities mentioned as of the publish date.

The market rally depends on crude oil

Charley Blaine — Wed, 14 May 2008 00:56:00 GMT

The chart of the Standard & Poor's 500 Index is telling me the market could move higher and happily so -- if oil prices will cooperate. That is a big if.

Fact is, the index is giving no signs of totally falling apart. It's nicely above its 50-day moving average, and it's moving in parallel with the moving average. Something that gives an investor a warm feeling inside.

And it is forming a support level at about 1,383. That means buying will be triggered if the index hits that number. Again, that's a sign of stability. Moreover, it looks resilient. On May 1, the index crossed 1,400 for the first time since Jan. 14, and it has closed above 1,400 seven out of the last nine trading sessions.

And the rally might have legs. If you look at the chart for the year to date, it looks like a longer-term bullish trend line has formed from the bottom of 1,256.98 on March 17 through 1,324.25 (the low of April 15) and 1,386.34, the low on Monday.

But let us not get too giddy here because oil still must be dealt with.

The index peaked at 1,422.50 on May 2. That's near the 200-day moving average for the index, and it has not come close to moving past that level since. The resistance set in as investors reacted to crude oil surging well above $120 a barrel in New York. Crude nearly hit $127 today.

So, crude oil bears watching and not just because rising crude pushes gasoline prices higher.

I should note a possible counter-theory on why the index broke may also be that on May 3, Microsoft walked away from its $47.5 billion bid for Yahoo. Coincidence? Dunno. Maybe somebody has a thought? (Microsoft, by the way, is the publisher of MSN Money.)

Has DISH lost its mojo?

Kim Peterson — Tue, 13 May 2008 17:14:00 GMT

DISH Network has lost its mojo, said Bernstein Research analyst Craig Moffett today. And he went as far as to wonder if the satellite provider is "the next Sprint." You know things are bad when people start calling you the next Sprint.

Moffett's in a lather because of the company's Q1 performance. (10-Q is here). Revenue and profit were fine, matching or beating what analysts were looking for. But the subscriber numbers tell a different story. DISH added only 35,000 net new subscribers, compared with 310,000 a year earlier. Customer turnover grew to 1.68% from 1.46%. DISH blamed "worsening economic conditions," including a slowdown in new housing and an increase in customers who can't pay their bills. The company also said the competition is getting pretty intense.

DISH also sounded the alarm about a contract ending with AT&T, which has been bundling DISH programming with Internet and phone service. AT&T hands DISH a significant number of customers that way, but the contract between the two expires this year and may not be renewed.

All of which makes Moffett think that "DISH would appear to be between a rock and a hard place." Cable is making a run at the company with "triple play" packages of cable, Internet and voice. At the same time, DirecTV is a strong competitor with its HD offerings. "Like Sprint, DISH appears to have lost its mojo -- that fundamental reason why a consumer might choose it above all other choices," Moffett wrote.

DISH had some positives in the quarter. It raised prices, which boosted the average revenue per customer by 6% to nearly $68 a month. And the number of subscribers hit an all-time high of 13.8 million. The good news is lifting DISH shares 3% today to $31.34.

Moffett is overly pessimistic about DISH, but he raises a key point. How can DISH Network stand out among the programming options out there? What makes DISH a must-have? DISH needs good answers to those questions this year as the market gets tougher.

Is there a case for buying Citigroup?

Matt Koppenheffer — Tue, 13 May 2008 05:09:00 GMT

If Citigroup were a Hollywood actor, right now we'd be seeing pictures of a rumpled star donning sunglasses to cover up bloodshot eyes, and assuring the press that he made some mistakes, but that his troubles are behind him. Some press would decry a waste of talent and a bad example for the kids, while others would say that they feel sorry for him and hope he gets the help he needs.

Citigroup the bank isn't far from that. It had the global reach, the brand, and supposedly the talent. Now its new CEO is trying to pick up the pieces and the company is finding itself the butt of jokes. Oppenheimer analyst Meredith Whitney thinks there's little hope for a turnaround and quipped that "even Stephen Hawking could not pull this off" (kudos to Meredith for the very quotable moment). Douglas McIntyre at 24/7 Wall St. thinks that a pessimist case puts the stock at $10 by year end.

Meanwhile, DealBreaker -- in hilarious DealBreaker style -- wonders out loud whether the extreme bearishness of Whitney and others signals a counter-case to go long on Citi. After all, any former presumptuous air of greatness has been beaten out of Citi. At this point Citi's $124 billion valuation makes its platform and $2.2 trillion of assets worth less than Apple, Google, and formerly smaller competitor JPMorgan.

Over 4,000 players in The Motley Fool's CAPS community seem to agree that Citi is worth a look. Over the weekend, nycmouse chimed in on the stock and said:

I think most of the worst for Citigroup is behind them now, not that there won't be any more bad news -- I think there will be, just not as devastating as earlier and I think [CEO Vikram] Pandit will do everything he can to justify his existence.

Socialistnyc had a similar take earlier in the month and penned:

Being the global bank that it is, Citibank will be around for a long long time, despite its part in the subprime lending debacle. Trading at less than half what it was less than a year ago, patient traders can take advantage of its current low pricing.

My take? Citigroup really does have a great underlying banking business. Unfortunately, it's currently linked up with some other business groups -- such as investment banking -- which are at best unimpressive. It is also strapped to a huge pile of assets that nobody seems to know how to deal with -- least of all Citi. So while I wouldn't say that Citi's stock is a guaranteed stinker, there are better bets out there right now.

Do you have your own opinion on Citi? Head over to CAPS and let the 100,000 investors already on CAPS know what you think.

Start using the MSN CAPS stock-picking system and you could win $15,000. To learn more, read this.

New BlackBerry coming. iPhone who?

Kim Peterson — Mon, 12 May 2008 17:25:00 GMT

Research in Motion announced its new BlackBerry today, which the company clearly developed with Apple's iPhone in mind. The BlackBerry Bold is gorgeous, and positions RIM for a smartphone war this summer against Apple's upcoming 3G iPhone.

RIM shares are up 7% on the news as investors applaud the first major BlackBerry release in more than a year. But Apple investors aren't too worried: shares rose 3% today on word that the HBO cable network might sell shows on iTunes.

Here's where the two companies stand heading into the summer. The BlackBerry still commands the smartphone market, having made extensive inroads into the enterprise and becoming the de facto business phone. It has a 40% market share. But the iPhone is a strong contender, hitting a 28% market share in Q4 despite a huge flaw: incompatibility with the Microsoft Exchange e-mail server (Apple is working on a fix).

Apple will likely upgrade the iPhone this summer with a 3G model that offers faster Internet connectivity. The BlackBerry Bold also runs on 3G. There are other similarities: Both phones will run on AT&T's network and could be in the same price range. The biggest difference is that the iPhone uses a touch-screen and the Bold does not.

The Bold has lots of bells and whistles: built-in GPS, a 2-megapixel camera with flash, 1 GB of flash memory and a color screen that's getting rave reviews. It plays movies and music, though probably not as seamlessly as the iPhone.

Here's where a smartphone war between these two gets interesting. Both companies already have loyal users. The battle will be for new smartphone users, and for those willing to switch sides. RIM has a comfortable stake in the corporate environment, but it needs to catch up to Apple in the "cool" department. RIM needs to rev up its marketing and position the Bold as sexy, hip and trendy. Choosing the name "Bold" suggests it's going this direction.

Apple has no shortage of cool. But the company's savvy seems to evaporate when it comes to the business world. The 3G iPhone is the perfect opportunity for Apple to make a big push into the corporate environment that abandoned Macs long ago.

We're going to see a fascinating battle between these two companies over the next few years.

Here's what others are saying about today's news:

WSJ: "The most important feature of the new BlackBerry, however, is that it acknowledges that, as work encroaches into people’s personal lives, people want to bring elements of their personal lives into their professional lives."

Citigroup analyst Jim Suva: Bold could boost RIM's quarterly shipments by 200,000 to 400,000.

UBS analyst Jeffrey Fan: "We believe RIM's broadening portfolio should widen its appeal to the mass market."

Ars Technica: "It doesn't take a rocket scientist to see that RIM has taken a few design tips from the iPhone this time around."

Is Citigroup setting up to FAIL ?

Andrew Horowitz — Mon, 12 May 2008 14:27:00 GMT

The saga for Citigroup continues and rest assured that it is not going to subside anytime in the near future. In an effort to bring in capital, it is now ~~planning~~ hoping to sell its Japanese consumer finance unit. The move is intended to plug another hole in Citigroup's very leaky dam. In doing this, there are two results that Citigroup is likely trying to achieve:

Keeping the parent alive by selling off the child, at least for the time being;
Stopping any drag from the Japanese division which is reported to have over $400 billion of assets, approximately 20% of the total value of Citigroup's assets.

The problem is that the valuing of these assets has become difficult as it is now a moving target since many of the traditional metrics have been tossed out during this historic market condition. Knowing that, it is interesting that Citigroup would consider selling at a time when the price could be at its lowest.

Should we believe that this move will bring Citigroup closer to finding a permanent solution for their problems rather than just another stall tactic before the inevitable? Over the past 6 months, we have have read and heard continuing comments like, "Citigroup has no chance of going under as much of the problems will eventually work out." Yet, most of those comments have been born out of the idea that Citigroup is one of the few financial companies that were well capitalized and well run. But, are they?

If we look at the recent moves by Citigroup to re-capitalize, it is painfully apparent that Citi is no longer exempt from the possibility of failure/insolvency. The latest plan announced comes way too close to the last capital infusion maneuver. Yet, in response to the May 9th Citigroup announcement, analyst Richard Bove, commented that:

He was convinced that the long-suffering company had reached a turning point. "Over the four-hour conference call they laid out a series of specific actions, and I buy it."

Then again, he also upgraded Citigroup back in late November 2007.

Aside from this and aside from the surprising $3 billion secondary offering on April 30, Citigroup has now panhandled upwards of $40 billion during the past few months. Several analysts do not believe that this is going to be the last time. Recently Goldman Sachs commented that “additional capital raises will likely also be in the form of common equity, which is most dilutive to shareholders (conversely, we view this as a positive for debt holders).”

As the financial sector and more specifically the brokerages continue to scramble to keep their businesses solvent, Morgan Stanley has announced that they are raising $4 billion for a new fund that invests in infrastructure projects such as ports and parking lots. Perhaps they will extend the offering to include ailing financial firms looking to unload divisions at flea-market prices.

The fact is that the ongoing fears about Citigroup have been justified thus far and it will require a significant amount of additional capital or a miraculous turnaround for this company to come out of the Intensive Care Unit. For now, unless you need capital-gain offsets, perhaps staying on the sideline is the best course of action with this name. The truth is that there is no truth when it comes to the financials right now. That can be easily seen with the news flowing from American International Group and others like IndyMac that have no idea what is going on within their own house. Until such time that any of these institutions can show that they have a handle on all divisions, I am relatively certain that we will continue to see skeletons coming out of closets. While investors have punished shares of Citigroup for their obvious blunders, a real lesson needs to be taught before we can move on to a time that will allow for investing with the confidence that all of the surprises are behind us.

Andrew Horowitz is a money manager and the founder of Horowitz & Company. He is also the author of the bestselling book, The Disciplined Investor . Check out his latest investment idea or listen in as he hosts, The Disciplined Investor Podcast.

Could a 2008-09 recession wipe out 7 million jobs?

Douglas McIntyre — Mon, 12 May 2008 14:12:00 GMT

Based on the figures from the Bureau of Labor Statistics, U.S. unemployment was 5% in April. Those figures showed that 146.3 million Americans were employed in the civilian work-force and 7.6 million Americans were unemployed.

It should not come as a surprise to economists that the weakest parts of the economy last month were construction, manufacturing, and retail. The segments with some growth were healthcare and professional services. (For a complete list of jobs by sector visit 24/7 Wall St.)

The economy may be in a recession now. Some experts believe that growth will only slow modestly over 2008. Warren Buffett and George Soros have said that they think the downturn will be long and deep.

What happens if the recession deepens? How far could unemployment rise? In the 1973-1974 recession, real GDP growth dropped 2.1% and inflation moved over 10%. Some of the reasons for the move up in prices then also exist now, primarily very high costs of gasoline and food.

Over the period of the 1973-1974 recession, the DJIA dropped over 40%. Unemployment reached 8.7% in the second quarter of 1975. To great extent, it was a recession driving by incredible inflation. Increasing consume prices are only starting to show up in the U.S. economy today although they are evident in other countries like China.

The 1981-1982 recession was not marked by the kind of inflation which happened almost a decade earlier, but the downturn in employment was greater. In the fourth quarter of 1981, the unemployment rate hit 10.5%. Among teenagers the number moved over 28%. Among blacks it was 20%.

The critical difference between the make-up of the workforce today compared with the two earlier periods is that a greater portion of the employment now in the services and financial sectors. In 1983, much of the job loss came in the durable goods sector, especially machinery manufacturing and transportation equipment. Many of those jobs have moved overseas since then. During the early 1980s, the financial sector actually added a small number of jobs and services employment rose by about 800,000.

The difference between 5% unemployment and 10% unemployment in the U.S. today is about 7.5 million jobs. If the U.S. hits a very sharp slowdown in 2008 and 2009, the job loss would almost certainly come from sectors which are to a large extent different than they were two and three decades ago.

Which sectors will be hit the hardest?

1. It would not be hard to imagine that the financial sector, which did relatively well 25 years ago, could not shed another a million or more workers this year. This would include people in banks large and small, real estate, and brokerage businesses. Morgan Stanley said it would cut 5% of its work force. UBS has just announced 5,500 lay-offs. Bear Stearns has chopped 7,000 people as it become part of JP Morgan. The U.S. economy employs about 8.3 million people in the financial sector and another 3.5 million in real estate. These pools of jobs could easily lose 10% of total, about 1.2 million people.

2. A deep recession would also wring more people out of the construction and home supply businesses. Over the last four quarters, less than 300,000 jobs have dropped out of those sectors meaning that there is still a likelihood of contraction. Total employment in the construction industry is over 7.2 million people. Most of those workers are contractors. The number of people involved in residential housing is down by 320,000 during the last year, but total workers on commercial projects are steady. In a deep downturn the construction of non-residential buildings will drop and the sector could drop by another 500,000 people.

3. The manufacturing sector has also been spared, losing only 200,000 jobs over the last year from total pool of 13.6 million. The auto industry lost many of its jobs more than a year ago due to buy-outs, but Ford, GM, and Chrysler have indicated that they may have to cut further. That will also affect suppliers of auto parts and assembly. The biggest cuts in manufacturing are likely to come in the heavy equipment industries. Watch for companies like Caterpillar and Deere to drop workers. A 4% rise in unemployment in this part of the economy means 550,000 jobs lost.

4. There are 15.4 million retail jobs in the U.S. That number is flat over the last year. Worker who sell general merchandise, food, and clothing make up most of these jobs. Companies including Sears and Home Depot has already announced their intentions to cut some outlets and jobs as same-store sales fall off. Even Starbucks is beginning to let people go. Many retail items which used to be normal purchases become a luxury when gas and mortgage costs eat into monthly income. Retail could be hit harder than any other sector. If unemployment grows 6% in these industries over 900,000 people will lose jobs.

5. Recessions usually hit the leisure and hospitality industries hard. Almost 25 million people work in hotels, recreation facilities, gambling, and restaurant businesses. As travel drops along with eating out, expect unemployment to move up at least 4% higher in these sectors. That is a million people.

The direction of the economy is still likely to turn on the mood of the consumer. With gas at $3.60 a gallon and the price of most basic foods rising with the cost of agricultural commodities, it is hard to look to the man on the street to help push GDP higher. Most of the lower interest rates given to big banks by the Fed have not been passed on to consumers in better mortgage, car loan or credit card rates. If the government planned rate cuts as a way to stimulate the broader economy, it has made a poor bet

Faltering consumer spending has already hit the automotive, airline, and retail parts of the economy hard, as if that is not already beginning to be evident.

The economy is also going to be hurt further by a financial sector which is increasingly bedeviled by problems which could become much worse. A number of subprime ARMs will reset in the summer. Mortgage defaults could still spike and drop the price of housing further. Large banks and brokerages may bleed more from their balance sheets due to falling prices of mortgage-related paper and a drop-off in the value of LBOs debt and consumer credit.

The idea that the economy could give up seven million more jobs seems far-fetched, at least for those who have not seen it happen before. It is easy to forget that within many people's lifetimes, unemployment at the 10% level has occurred twice. And some parts of the economy, particularly housing and the financial services sector were probably not as bad off in 1972 and 1983 as they are today.

Circuit City starts taking Blockbuster seriously

Kim Peterson — Fri, 09 May 2008 17:07:00 GMT

Blockbuster wants to buy Circuit City for $1.3 billion, but just about everyone has chalked up this proposal as ridiculous because Blockbuster doesn't have that kind of cash. Good thing the company has Carl Icahn in its corner. The billionaire investor -- and Blockbuster's largest shareholder -- said he'll buy Circuit City himself if Blockbuster can't cough up enough money for the $1.3 billion deal.

With an offer like that on the table, Circuit City has stopped giggling and is starting to seriously think about the deal. It's hired Goldman Sachs to help it explore options. Circuit City reminded everyone today that it hasn't made any decisions yet, but one thing is clear. this electronics chain is in play. And investors couldn't be happier; shares are up 9% today. Blockbuster shares are down slightly.

What would a CircuitBuster look like? For one thing, Circuit City stores would start offering movie and game rentals. And Blockbuster would expand into selling devices such as portable DVD players and iPods.

Perhaps it could work, but this deal will test all of Icahn's business skills. Both companies have been poorly managed for years, and are losing money and market share to rivals like Netflix and Best Buy. Icahn and Blockbuster's board will have to integrate both chains, energize a demoralized work force, close underperforming locations, revamp business models and develop a unified strategy to compete in retail and content distribution and delivery. Forgive my pessimism, but there's no way Blockbuster can pull this off.

Circuit City's board now has a few options to discuss. It could reject any offers and hope that CEO Philip Schoonover makes good on his struggling turnaround plans. It can load up Goldman Sachs' arms with chocolate and flowers and tell it to go find other suitors, hopefully instigating a bidding war. Or it can sit down with Blockbuster and talk numbers, emphasizing the cash part of the cash-and-stock acquisition proposal.

Cheers to Circuit City investors. This is the best thing to happen to the company in years.

A scary thought: Gasoline at $7.50 a gallon

Charley Blaine — Wed, 07 May 2008 01:14:00 GMT

I'm really not here to scare you, but, get ready, I AM going to scare you.

The news got lots of attention: Goldman Sachs analyst Arjun Murti predicted Tuesday that the price of crude oil could hit $150 to $200 a barrel in six to 24 months. (Here's one discussion of the report. Another is here.)

Crude oil in New York promptly jumped to as high as $122.73 a barrel in New York before closing at $121.84. And, as I write this, crude was trading slightly lower in electronic trading. But it also had the perverse effect of pushing the stock market higher. Indeed, the biggest winners in Tuesday's stock market were oil and gas production companies, natural gas companies. (But not refiners; crude oil is rising faster than refiners can push their prices up.)

So, if crude jumps to $150 or $200, how does that translate into prices at the gas pump. Here's the scary part.

If crude hits $150 a barrel, we could be looking at $5 a gallon or so for the retail price of gasoline. That's based on Tuesday's $3.61-a-gallon national average and the rule of thumb that, for every $1 increase in crude oil, the pump price rises 5 cents a gallon.

If crude hits $200, the retail price of gas jumps to $7.52 a gallon. (Plus or minus a few cents) To fill the 10-gallon gas tank on my Honda Civic would cost $75.20, probably more because I live in Washington state, which has relatively high gasoline taxes.

Sure, one could say, well, Murti is a nut, but, as Barry Ritholtz noted on The Big Picture, Murti did suggest in 2005 that crude would hit $105 a barrel.

Gasoline at $7.50 a gallon is something nobody should go into denial over because there are going to be big problems from prices at levels I've suggested, including:

Will there be any U.S.-based auto manufacturers left? The answer depends entirely on how fast they can transform their product lines. Chrysler is in deep trouble already. That probably means more stress for the Midwest.

Will there be any domestic airlines left? The so-called legacy airlines (American, United, Northwest, Delta and Continental) would either try to combine into one big carrier or simply disappear. They're having serious troubles surviving as it is. This means big troubles for cities where these airlines operate hubs that generate thousands of jobs like Atlanta, Cleveland, Newark, Houston, Chicago, Denver, Dallas, Memphis and Minneapolis-St. Paul.

How will big convention cities survive? Places like Las Vegas, New Orleans, Atlanta, Chicago, New York, San Francisco and Houston have thriving convention industries, all built around the capacity of airlines to transport conventioneers to and from the destinations relatively cheaply. Emphasis on the word "cheaply."

How will tourist destinations like Florida or Hawaii cope? Add to that places like, say, Williamstown, Mass., whose Williamstown Theater Festival is a big draw, or Ashland, Ore., home of the Oregon Shakespeare Festival. They're not close to major cities.

Although as Douglas McIntyre noted on Blogging Stocks, gasoline at $3.50 a gallon has not cut demand enough to force prices lower, there are signs that adjustments are being made. Sales of big, gas-guzzling SUVs and pickups are slumping. Consumption of gasoline in California fell 4.5% in January from a year ago.

The Department of Energy believes that domestic consumption is likely to fall more steeply than expected this year, the New York Times reported Tuesday. It is forecasting that domestic gasoline consumption will fall slightly this year from 9.29 million barrels a day in 2007 to 9.23 million barrels a day this year. (That's about 140 billion gallons a year, enough to fill my Honda for, well, a very long time.)

Sales of homes in outer suburbs are falling and not just because of the credit crunch and the subprime mortgage mess. Look at the stock prices of U.S. airlines, down 90% in the last 10 years.

Many commentators have wondered at the ability of Americans to grin and bear higher gas prices. But grinning and bearing it is losing any sense of fun. It's just gotten expensive: Over the first four months of 2008, as Peter Beutel of Cameron-Hanover noted this week, gasoline has cost the United States $757.24 million a day more than in the first four months of 2002.

That’s more than the estimated $720 million a day spent in Iraq.