Wednesday, September 30, 2009

Techlepathy

In this evening’s entry, I’m going to focus in on future technology, specifically augmented reality and technology enabled telepathy or what I’m going to call technotelepathy.

I was going to use the word technopathy, but it’s a word that, according to Google, already exists. Technopathy is specifically referenced as being a capability to manipulate ordinary electronics with a person’s mind. This specifically is a reference to an ability of Micah Sanders, a character on the show, “Heros” (which I don’t watch.) Doing a search on technotelepathy reveals, again, that I’m not the first person to come up with this word either. Being relatively new and unknown and therefore a lesser used word, Google gives a search suggestion to split techno and telepathy into two words, but I’m going to keep them together. Google also reveals that the word has been used about 77 times on the Internet (when repeat entries are omitted.) So, I suppose, this will make yet another “hit”. And, it looks as if the use of the word is associated to my topic, so I just may use it. Looking for a shorter version, I’ve found the word techlepathy. Techlepathy, has a nice ring to it, and it turns out that it’s a more commonly used word, which also tends to describe my usage of the yet-to-be christened word. (That is, it doesn’t seem to appear in any official online dictionaries or Wikipedia. In fact, Wiki only refers to it as technology enabled telepathy, which brings back to the beginning of this conversation.

{A quick interjection here—if you’re keeping up with all of this, the process that I just went through is how I do a lot of what I do when it comes to developing ideas, and learning about the many concepts that I’ve stuffed into my cranium over the years. I call it the Google Method of thinking (somewhat inspired by the Scientific Method.) In the Google Method, you think of an idea, you Google it, then you roll through a few entries to verify the existence of your idea. You see, the idea could be completely original to me at that time of thought, but I’ve learned to accept that it probably already exists. The concept of techlepathy, for example has existed before I was even born. In my own mind, I’d come up with the concept about 10 years ago. On the rare occasion, it’s possible that I may think of something completely original, and when that happens, I’ll let you know. Techlepathy just isn’t one of them. Anyway, that’s the Google Method.}

Now that we’ve gotten the word “techlepathy” knocked out of the way, let’s talk about what it is, what it’s going to do, and why I’m talking about it now. Also, I first mentioned that I would be discussing augmented reality. For those of you who have heard of that concept, then you’re probably thinking that I’m referring to the technology that allows you to experience reality, as you see it today, but with enhanced information. Think of those war/shoot-em up video games that display your teammate’s name and other information like the amount of ammo or health a person has, on the screen, well that’s augmented reality. Technically, it’s a virtually augmented reality, but you get the idea. In my brain, my neurons took a vote and decided that techlepathy is a segment of augmented reality. {Edit.. actually although true techlepathy is a form of of augmented reality, the use of it here is not what I'd call augmented reality.}

Now, some of you may be wondering why I’m even talking about techlepathy, because after all, isn’t this exotic technology still, years, if not decades away? If you ever heard me discussing this 10 years ago, I would have told you that it looked to be decades away, but none-the-less very probable. Well now, the fact is, it’s already here. And quite frankly, it’s been here for a few years now. Today, it’s even on the verge of becoming part of our everyday experiences, at least for entertainment’s sake. This call all be thanks to the new Mindflex game by Mattel. Sure, the game makes claims of telekinesis, but in all reality it’s an early start to technokinesis, that’s made possible through an early version of techlepathy. The goal of the game is to manipulate a floating ball through a series of physical obstacles through three dimensional space.

Don’t be fooled, there is a little smoke and mirrors involved, but there’s also a true bit of techlepathy. The floating ball trick is an old one, pulled off using the properties of air pressure and aerodynamics to lift a ping pong ball by blowing a steady stream of air from below. The ball’s horizontal movement turns out to be controlled by manipulating a control with your fingers. So what’s the catch? Where’s the techlepathy and/or technokinesis here? Well, that lies in the way you move the ball vertically. Your brain controls the volume of air blowing vertically onto the ball, thus adjusting its vertical position. In all, it’s a combination of using physical controls along with a brain reading headset that gets the job done.

My prediction is that, initially, this game will be a hit. It may very likely become a fad that crosses all cultures, generations and genders. After all, who hasn’t fantasized about manipulating a physical object with their mind. This game will certainly accomplish that. After some time, after it becomes more of a commonly held experience and looses its sense as a novelty, the game’s popularity will drop, but not without changing how we, as a world, think about techlepathy. Mattel will very likely continue to at least draw in younger children for years to come.

Now Mindflex is just a game with a low level ability to read, at best crude brain signals. Perhaps you’ve also have seen or heard of cases where amputees have controlled a bionic limb, or where a paraplegic man controls a cursor on a computer screen to help him communicate. Even monkeys have been outfitted with such devices to control artificial arms to receive a reward. All of these are receiving the sum of all of the signals that are released from brain activity. Think of it as being as nebulous as trying to follow a game by listening to the roars of a crowd at huge sports event while blindfolded, sitting up in the nosebleed section, without knowing much about the sporting event, let alone the teams that are playing. You could even throw a language difference between you and the crowd. If you understood the language, you might be able to discern who’s doing well based on who’s cheering the loudest or perhaps by the announcer on the loudspeaker, but outside of that, you’re not likely to gain much more insight about anything else. Without the ability to understand the language of the crowd, at most you might be able to tell that something exciting has happened.

Now, with a little bit of prompting and practice on behalf of the crowd, perhaps focusing the crowd so that most of the people attending where overwhelmingly rooting for one team, it may be possible, to pick up on what’s going on, even with a language barrier. Think of it as if you’d gone to a college football game at Kyle Field in College Station, Texas, watching the Texas Aggies play against a fierce or well known opponent. And if you know anything about an Aggie football game, especially played at home, you would know the intensity that the home crowd can bring to a game. (And yes, I’m an Aggie, so I have some experience, and perhaps a bit of a bias for Texas Aggie football.) It’s been observed and noted many times how the crowd at Kyle field has given the Aggies an advantage over even the most formidable foes of the season. Even if all you knew was that you were at a sporting event and nothing about the game, and didn’t speak the language, you would still be able to determine when the home team did something praiseworthy. And you may even attempt to participate in the one of the yells that Aggies practice before each game. Being an observer in that whole experience, is the equivalent of using the same brain reading technology, but with a focused mind capable of adjusting to outside stimulus.

Even though the technology may not be able to read your thoughts any better, it’s the brain that is learning to adjust to the technology and its new feedback. Our use of this technology will initially rely upon this principle. Right now, we’ve mostly only seen the adult human brain interacting with this technology. But imagine what it might be like if you could take an entire generation from nearly birth and have them use these capabilities as it stands today. If you can imagine that, then you could also conclude that it’s possible for a high level of telepathic manipulation to be possible. Imagine neurons being dedicated to the technology. There may be some of you that would regard such an experiment as being cruel, but doing an experiment won’t be necessary anymore than my generation had computers and video games experiments forced upon us. The truth is, once we were exposed, we sought out the new experiences and sensations. Our brains have indeed developed differently than our ancestors as neurons have dedicated themselves to video game concepts, artificial map reading, hyper communication and pattern recognition all associated with hours of exposure to that technology. I can remember even as a child, thinking about how video games were secretly training our generation to fight in advanced warfare. I can also remember not being alone in that thought. We could sense how we were thinking differently, and how that could someday be exploited. Indeed, our childhood intuition and prognostication was correct, as military technology has advanced to take advantage of the skills that so many of my generation have spent a childhood developing. And it’s not much of a stretch to imagine that just as computer and video game technology grew with my generation, so the same will be true for these new techlepathy technologies, combined with, you guessed it, advanced video game technology.

I’m going to pause with that thought for tonight. But, expect this conversation to continue, as there are many, many avenues to explore.

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Friday, September 25, 2009

H1N1... an update

Its tough to call this an update, since I haven't commented on H1N1 (aka Swine Flu) online yet, but I'll call this an update, since we're all aware of its presence. Our awareness has begun to pick up recently thanks in part due to the recent spike in activity. In fact, it seemed that last weekend, an explosion of activity, at least from my vantage point in North Texas, commenced.

I had a niece, a cousin-in-law, some friends of my family (their children specifically) and a few others report having swine flu or influenza-like-illness (ILI - as termed by the CDC) all within the last week. This sudden increase in activity is correlated to an increase in reports from the CDC as shown on this chart: (Note-- these figures are based off of serious cases that require hospitalization as a percent of visits.)



Source: CDC (Posted September 25, 2009, 1:30 PM ET, for Week Ending September 19, 2009)

Apparently, for this time period, nearly 99% of people in the US who have the flu have tested positive for H1N1. (See chart below.) So, what this all boils down to is that if you get the flu, chances are you've got swine flu. The same is true for most of the globe, except for most of Africa and parts of the Middle East where the regular flu outpaced H1N1 by a 3:1 (or greater) margin. I should point out that even there H1N1 has started to increase in activity, and I'm afraid those numbers are only going to continue their trend.

(Valid for the US)
Week 37
No. of specimens tested
9,744
No. of positive specimens (%)
2,326 (23.9%)
Positive specimens by type/subtype
Influenza A
2,324 (99.9%)
A (2009 H1N1)
1,395 (60.0%)
A (subtyping not performed)
907 (39.0%)
A (unable to subtype)
17 (0.7%)
A (H3)
1 (0.1%)
A (H1)
4 (0.2%)
Influenza B
2 (0.1%)















Source: CDC

Now, this ratio is likely going to change as the regular flu season get up and going. There are several possibilities that could make things interesting (though not in a good way) once that does happen. For one, if you get H1N1, would it still be possible for you to catch the regular flu, or is there enough of a genetic similarity to keep you immune? It makes sense that since the regular flu vaccine won't keep you from getting H1N1, then the opposite may be true. Therefore, you could get both types in the same season.

The other possibility is that the two could combine. Its hard to guess whether or not a combination of the two would make matters worse or not. It could be possible that if they combine, then the regular flu vaccine could help prevent the combo from spreading. On the other hand, it could render both vaccines ineffective, or less effective. I do want to note that my niece was officially diagnosed with both influenza A (which covers H1N1) and B. Which, that doesn't sound like a good thing (certainly neither for her nor for the higher chance of a cross mutation.) {Update: I wanted to let you know that my niece has fully recovered, and was much better after about 3-4 days. Also, her parents and sister haven't contracted the disease either (yet.)}
It would seem to make sense that the disease could mutate into multiple possibilities, but only a few of those survive to pass itself on to others. After all, its not like Mother Nature has some hidden war room, where she has a section called "Infectious Diseases" where she commands her minions, with the accent of an old evil British sounding lady, to update the H1N1 code and hit a Hong Kong poultry market with the famous "mu hahahaha" evil laugh to end her sentence. The reality is that when something, like a virus, mutates, the chances are that it does so multiple times, across the globe, with similar, though not necessarily exact, mutations. Each one of those mutations will have a different chance to survive, depending on its environment, nearby carrier agents, and so on. Its the sum of all of those chances that causes something new enough to happen that our collective immune system wouldn't recognize it.

So, my recommendation is to get both vaccines as soon as its available for you. As it is, I'll personally have to wait until after just about everyone else, since I'm older than 24, younger than 60, male (therefore not pregnant ;-) ) and I don't have frequent contact with children.
My prediction: expect H1N1 to peak in the US around Thanksgiving (due to having already spread itself rapidly, combined with the release of a vaccine coming in October.) This will be just in time for the beginning of the regular flu season. The regular flu season will be less active than normal, thanks in part due to the awareness of the public leading to a higher percent off people getting their flu shots. Globally, things may not be so rosy, especially in developing countries, like in Africa and SE Asia. The one saving grace there is that most of the people that live there, live near the Equator, and therefore the virus may not survive as long in the normal environment.

For further reading please see:
WHO H1N1 situation updates:
http://www.who.int/csr/disease/swineflu/updates/en/

Thanks for reading this! If you have an opinion about what you've read, please comment below!
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Monday, May 11, 2009

The end of the PPX.

As some of you may know, I've been an active trader on the PopSci Predictions Exchange (PPX) for the past two years. During that time, I've marched my way to the top 15 (#14 as of this writing) out of over 33,000 traders. As of last Friday (May 8, 2009) it was announced that the PPX will be closing effective June 1st. So, I wrote the following commentary to express my thoughts on why and how this came to be.

{Disclaimer: The following is pure speculation and is not a real reflection of PopSci or Bonnier, nor am I employed in any way monetarily compensated or tied in to those respective organizations.}


There's pretty much only one way to sum up all of this: economics. To dig down deeper we look at the history of PopSci, and to do that we turn back to January 25, 2007, the day that Bonnier Corporation bought PopSci, along with 17 other magazines from Time Warner. This was during a time when magazine subscriptions and sales were dropping, while online readership increased (and if you’ve been keeping up with the news lately, you know that this has only accelerated.)
Unfortunately, the ad and subscription revenue model changes when things start moving towards the online world. There are a few reasons for this. For one, a good bit of the content that can be found in the magazine can also be found online, for free (to the reader.) But, keep in mind that for every PopSci magazine sold, there are about 5 readers to that magazine. So, in other words, of all of the readers, only 1 in 5 is actually paying for it. And those that do are only paying around $1 per month. You can take that $1 and divide it up into readers and that means that each reader contributes about 20 cents a month on average. So the with the online world there really isn't much lost in the way of subscription revenue, it’s the ad revenue that counts.
You'll notice that in the back of each PopSci mag, there are lots of what I call "secondary" or "classified ads." These ads sell everything from you-know-what enhancement and remedies to an assortment of gadgets and the likes. If you notice, those ads aren't found here online. Then there are primary ads for cars and trucks, shavers, flashlights, laptops, you know, the stuff that you're more likely to buy, or would at least be interested in. Chances are that if it is advertised in the magazine, then at one time it may have had an entry into my favorite section, "What’s New." Otherwise, there's a good chance that those companies sell products that compete against those things that are new. There’s no doubt, that a lot of marketing on behalf of the PopSci /Bonnier staff that goes on to seek potential advertisers who may be interested in placing their ads near an article that may be related to their product.

Now, the price paid for that advertisement space is all driven by supply and demand. Supply is the amount of ad space within a magazine while demand is the amount of people who want to advertise in that space. Those advertisers look at a set of more complicated factors, like the number of readers who are likely to someday purchase a product that that company offers within a given time period. Essentially, it’s the advertiser's goal to drive brand recognition. They know that you may not buy that truck that you see in the magazine today, but, eventually you just might. Generally, the higher the price the product is, the more you have to sustain your sales pitch to your audience.

So, that brings us back to our problem: economics. With the economy the way it is, the demand for print ads is down. This has been driven by the fact that we, as consumers, just aren’t in much of a mood to buy things, and besides we’re too busy hanging out on MySpace of Facebook to really care. Well, that changes the advertiser’s focus. Suddenly, they’re not as interested in placing ads in print magazines; they’re more interested in capturing your attention online. So they tell the print publisher, “Well, I’m just not that interested in placing an ad this year.” The publisher replies with a lower price, and eventually the advertiser agrees to run the ad since the price is now more affordable. So with that, you can see the problem: you’re still printing the same amount of ads, but now you’re just getting less money for them.

That brings us back into the selling of PopSci to the Bonnie Corporation. One company, Time Warner, sees that it’s simply better to sell off its underperforming brands while Bonnier sees the opportunity to gain new market share and turn the revenue stream around for its newly purchased publisher. Suddenly, new creative ideas sprang up to solve this problem of decreased print ad revenue, and increase its online ad revenue. The solution seems simple, if you can create a way to get readers to return to your website and do so, repetitively, over the long run, you can increase the demand for ad space, especially from those companies that need to keep brand recognition high. Those advertisements work best when you have a returning audience. You can charge advertisers for a pay-per-view (1000s of views) in addition to a pay-per-click fee. So out of this realization and creative process, PopSci comes up with idea to do an online exchange, yes, the PPX.

The PPX seems like it is the magical bullet needed to solve the problem. Not only will the readers be engaged in an online activity that will keep them returning, but each visit may require several clicks and thus increases the chances of pay-per-click revenue. At the same time, our ad space becomes more attractive to those long term brand recognition driven advertisers, and that could lead to pay-per-view revenue. And, to top it all off, the PPX becomes a scientific tool itself, as it becomes a science experiment to determine the viability of predictions markets.
Out of the gate, the PPX was a bit flawed. For example, despite the claim, the price of a proposition doesn’t necessarily reflect the percentage of people who think a proposition will come true. The claim is that if the price is at POP$50, then 50% of the audience thinks it could happen, and 50% does not. But in reality we know that if one person buys 1000 shares, then the price goes up by POP$ 0.25. (Now, I know a parameter has been added so that a stock’s could only move after it achieved a high enough volume - apparently to one direction.) So, if only one person buys 1000 shares, then according to the price, 50.25% percent of the traders of that particular proposition think that that event will occur. In reality, 100% of the traders of that stock, so far, agree. (On the other hand if there were 10,000 traders, that would only represent 1/10,000th of the market.) Once the stock price starts to move, Most traders bought or sold in the direction of the movement, whether they agreed or not. Now, it was argued that over time, the price would better reflect the opinions of the traders, but we all know that there was a disconnect between trader’s opinions and prop price.

Another example of a flaw was the limitation to buy only 1000 shares. Though this was important given that the price went up or down based on 1000 shares of movement, this limited the ability for a proposition to reach its true price. If the pricing was based on a scale that was determined by the total number of outstanding shares of that stock rather than 1000 shares of movement, this concept would have worked better. (It’s important to keep in mind that for every new trader who owns a prop, either short or long, the amount of outstanding shares increases by the amount purchased. This is unlike the real stock market where there is a limited quantity of shares available, for every share bought, one must be sold. For arguments sake, ignore stock splits and issuance of new stock, etc.) In other words, as number of outstanding shares per a given prop increases, the smaller the price change interval would be. The price change interval would be determined by a function of the number of newly purchased shares as a percent of current outstanding shares. There would of course be a minimum and maximum price change interval, for example: at least $.01 no greater than $0.25. Another reason that the maximum shares were limited, was to encourage people to buy more shares of different props (portfolio diversification), but the principle to not put all of your eggs into one basket would have kept this in check. Finally, the 1000 share max rule could make sense to give more traders an equal chance to participate. This is a fair and valid reason, but I think that a limitation of buying more than a percentage (based on outstanding shares) of a given prop per a predetermined amount of time would have helped. Also the pricing model, as stated above, would have reduced the propensity for market domination by a select few elite traders.

Furthermore, the game was complex and perhaps too complicated to understand for too many of those who wanted to participate. This can easily be seen by simply counting the total number of players who never traded and those who never earned as much, or lost a significant portion of their original portfolio values. Finally, those flaws were matched by visual and web design mistakes. It seemed that every time a new feature was rolled out, it was met with more problems. For example: a menu wouldn’t work, a broken links, etc.

So those flaws that I’ve described reduced the number of would-be traders. (Satisfied traders encourage new traders to join.) This all drives me back to making my point: economics. As discussed, the ad revenue is the primary driver, and the goal should have been to sale ads based on both concepts: per view, and per click. Unfortunately, the way PPX is set up, it simply doesn’t cut it. With each user, you can only get so many ad clicks per ad per a given time frame. When you think about the mechanics how the PPX is set up, most of the ads are ignored as traders are focused on trading and not the ads. Once you’ve seen the ad, each new time you see it within a short time frame, isn’t going to drive you to click on it any more than the previous times. It’s the rule of diminishing returns. After awhile, similar ads just become a blur during the trade process.
To overcome this lack of clicking, the only way to create more revenue is to have more registered users, and those people need to be return users who visit frequently. Unfortunately, out of the 1.3 million subscribers or 6.7 million readers, there were only 33,000 registered PPX users. We can only guess that a small fraction of those actually returned to play frequently. That’s the problem that we have today. PPX was set up on a 2 year contract with Virtual Specialist, the operators of PPX. This of course likely had the option to renew. As far as we know, PopSci had full intentions to renew the contract over and over again, but only provided that it brought in enough of a revenue stream to compensate for the monthly licensing and site maintenance fees and then some. PopSci knew of its problem long ago. It knew that growth was limited and that there was a diminishing rate each passing month. It tried to solve the problem by correcting some of the problems cited by its users, and they were able to do this by hiring better staff members who understood these dynamics. They even spent the money to upgrade the look and feel of the site. Unfortunately, this didn’t go as smoothly, and it really wasn’t making much of an impact. So, an important business decision had to be made. Do we spend the money, fix the flaws, and find new ways to encourage new people to play, or do we cut our losses and retool our site with a different function for our readers while maintaining the function of creating an ad-based revenue source? I’m sure that in the end, it was a tough decision to make by those who were directly involved, and probably a much easier one to make for those who count the change and keep the budget.

Now, as a final note, you do have to question the decision to bring on a quiz model. If the picture of the school aged children that was used to promote the leagues, which never worked, is any indication to the direction of this website, it shows the desire to hit a larger different spectrum of the readers. You see, it appears as if a majority of those 6.7 million readers were school aged (9-15 years), and not 16-60 year olds who play PPX. The only question is, do they have the money to buy things, and if not do they have the ability to convince those who do have the money to buy things?

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Wednesday, January 14, 2009

Texas' Economic Condition - An Excerpt from the Beige Book

Since the economy is in a full downturn, I thought I would place the excerpt of the Beige Book report that covers the Dallas District (which reports economic conditions across the state of Texas.) To see the full report click here. (Otherwise, click on "read more" to read just the Dallas District exerpt.)


ELEVENTH DISTRICT—DALLAS
     Economic conditions in the Eleventh District continued to weaken from mid-November to year-end 2008. Contacts across a broad range of industries noted reduced demand and uncertainty about the outlook. Manufacturing, commercial construction, energy and transportation services generally reported the largest drop in demand while residential construction remains at low levels. Accounting and legal services seemed to hold up the best although they reported that demand was flat to slightly down. Bank lending declined due to tighter credit and weaker loan demand. Most respondents don’t expect conditions to improve until the second half of 2009 with a growing number of respondents now looking at early 2010. Prices. In general most service firms reported no change in prices while most goods producers reported declines. Many manufacturing respondents noted that while energy costs have come down, lower capacity utilization rates have put upward pressure on per unit production costs. Retailers reported large discounts were needed to move merchandise over the holiday season. Many contacts reported that fuel surcharges for transportation that were instituted earlier in 2008 were being dropped. Light sweet crude oil fell to $37 per barrel by year-end, the lowest price since 2004, from $55 per barrel in mid-November. Contacts said a huge over-supply of crude oil driven by the US and global slowdown led to the decline and that consecutive cuts by OPEC were not sufficient to stem the decline. Oil product prices fell as fast as crude oil, leaving refiner margins weak. On-highway prices for both gasoline and diesel fell by about 50 cents per gallon since the last survey and natural gas prices declined by about a $1 per Mcf from $6.50 per Mcf in mid-November.

Labor Market
     Labor markets remained weak as most contacts reported that they had maintained or reduced employment since the last survey. Labor markets were weakest in manufacturing where many firms extended temporary plant closings or reduced operating hours. Many manufacturing contacts reported that they had laid off temporary or hourly workers and that they are likely to reduce full-time staff at the start of the year. Layoffs were becoming widespread in the energy industry, and they are expected to grow in 2009. Many contacts reported hiring freezes and reported little if any wage increases. Manufacturing. Most manufacturing contacts reported declines in demand and reductions in capacity utilization. Most contacts said that they have managed to keep their inventories at desired lean levels but an increased number of contacts reported that inventories had risen to higher than desired levels. Construction-related manufacturers reported continued declines in shipments and orders even after adjusting for normal seasonal reductions. Most producers reported reductions in jobs and expect further cuts in early 2009. Some contacts noted that the recent plunge in commodity prices provided only slight relief in the cost of production since capital costs per unit of output have increased as capacity utilization has declined and because pricing on rail and truck transportation and coal have not fallen due to long-term contracts. Contacts continue to report that demand from commercial construction is shrinking rapidly with the main exception being government sponsored projects. Contacts reported that the outlook has gotten worse and most do not expect a turnaround until late 2009. Most respondents in high-tech manufacturing industries report that demand has fallen moderately since the last survey. Weakness was widespread across global markets and products. Most firms said that they were planning to reduce employment over the next several months. Respondents reported lean inventories, although one respondent said the recent reduction in demand from Asia had caught them off guard and that they were working aggressively to reduce inventories. While one respondent noted that their factories were running at only 40 to 45 percent of capacity, another respondent said that the current downturn is not nearly as bad as the high-tech recession in 2001. Most respondents expect some improvement in demand sometime in the second half of 2009. Paper manufacturers reported continued declines in production and orders. Demand for corrugated paper used for boxes and packing material has fallen sharply. Contacts noted that this is a reflection of the overall weakness in manufacturing as producers of a wide range of products are shipping less output. Noted exceptions to the weakness are food processors, where contacts suggest that their industry remains recession-proof. Respondents reported that while margins for gasoline were particularly weak, refinery capacity utilization held steady at about 85 percent. Respondents in petrochemicals and derivative plastics said that demand and prices have fallen sharply since the last survey. The decline in demand stemmed from declines in domestic housing, autos, and general manufacturing activity, as well as export markets. At least 10 large plants have shutdown on the Gulf Coast in recent weeks, and others have cut runs. Layoffs have been widespread among firms and their contractors.

Retail Sales
     Almost all retailers reported weak holiday sales. The weakness was broad-based and included discount stores. One contact noted that it was the worst holiday season for his company in 38 years. Weakness was broad-based across department store products but contacts noted particularly sharp declines in demand for jewelry and men’s clothing. A contact with stores throughout the District said that year-over-year sales declined the most in Dallas and the least in Houston. Department store contacts expect demand to be weak throughout most of 2009. Auto dealers report that sales and traffic continue to fall from already depressed levels. While domestic brands have been hit the hardest, contacts report that recent declines have been broad-based across all vehicle brands. Respondents report that manufacturer incentives are ample but that they are not having as much impact as in the past. One respondent said that in order to reduce his inventory, he likely will not order any new vehicles until February. A bright spot is used car sales and repair services which have increased slightly since the last survey. Most contacts expected very weak new vehicle sales at least though the first half of 2009. Contacts are hoping for some improvement in the second half of the year but are cautious since the outlook remains very uncertain. Services. Staffing firms report that demand remains sluggish. Most contacts report that there is little demand for permanent hires. Although their customers are keeping many short-term contract positions, they are not adding new positions. Contacts said that demand has been reduced by temporary plant closings, many of which have been extended due to weak demand conditions. Contacts report that some staffing firms are beginning to lower rates to remain competitive and retain market share. Accounting and legal firms report that activity was flat to slightly down since the last survey and that receivables are getting slower and harder to collect. Legal firms reported new real estate projects have dropped off sharply and that many projects are being put on hold for an indefinite period of time. International business has also declined. Offsetting this has been an increase in litigation and bankruptcy services. Airlines report that demand continues to weaken and that it is likely to continue to fall over the next six months. Respondents in container cargo and intermodal trade report a sharp drop off in activity since the last survey due to declines in international trade volumes. Intermodal transport services also noted a decline in demand. Shipping companies reported that the largest declines in volumes have been to retailers although consumer shipments have also weakened.

Construction and Real Estate
     Housing conditions in the District remain very weak, according to respondents. Home sales have fallen considerably since credit conditions tightened, and respondents report that traffic remains nearly nonexistent. Contacts reported that cancellations remain prevalent, in some cases outpacing sales. Median home prices have edged down but have avoided the double digit declines prevalent in other areas of the country. Respondents say that compared to other areas in which they do business, Texas continues to fare better despite the poor conditions. District respondents said apartment demand fell over the survey period. New construction added units at the same time move-outs increased, leading to increases in vacancy rates. Commercial real estate transactions--both leasing and investment--have ground to a halt. Contacts reported “nothing is going on”. Outlooks remain uncertain, although one contact noted scattered signs of optimism, with people talking of possible opportunities in 2009.

Financial Services
     Financial services contacts in the District continued to report a slowdown in loan demand. Contacts reported that real estate deals were basically nonexistent except for the very low risk ones. Most contacts have seen a slight deterioration in credit quality, but quality is still stable overall. On some loans, contacts have increased the interest rate by methods such as basing spreads off the LIBOR rather than the prime, and setting a floor on the prime. Depository institutions report maintaining tight credit standards, and most report generally stable deposits. The slowdown in loan demand has been broad-based. Demand has decreased for mortgages and consumer loans, particularly auto loans and credit card issuance and purchase volume. Real estate lenders are very concerned about 2009 while other lenders expect either flat or very modest growth.

Energy
     Oil services and machinery contacts reported that drilling activity has declined in response to lower energy prices. The U.S. rig count slid by 15 percent, or 300 rigs, from the peak in August, with two-thirds of the decline coming in the last six weeks of the year. Texas is down 157 rigs since the peak, and 85 rigs of this decline have come in the last six weeks. Contacts reported that the brunt of the decline is land-based and natural- gas directed. Relatively expensive shale and tight gas led the upturn, and is now leading the downturn as well. Contacts said that offshore and international activity has held up much better, and should continue to do so, based on sponsorship by companies with a longer-term perspective and much deeper pockets.

Agriculture
     The cotton harvest is about 85 percent complete, and yields are lower than expected. Regions in Central Texas are suffering from a severe dry spell. The winter wheat and oats crops and pastureland are in need of rain in most parts of the District. Livestock are in fair condition but supplemental feeding is ongoing due to lack of pasture. Commodity prices have plunged from their earlier peaks but fertilizer prices have not declined as much, leaving farmers with low winter crop prices and high planting costs.
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