Alaskan governor Sarah Palin will be the VP candidate for the Republican ticket. She is pro-drilling in Alaska but otherwise her business interests are not significant. And she has taken on the special interests in Alaska -- including Senator Ted Stevens, who wanted to build a bridge for nowhere.

I listened to her speech this afternoon, and I thought she did a very good job. She gave a simple speech which introduced herself and her family and described her union membership and her meteoric rise in Alaska politics.

It's clear that she was picked by McCain and not his advisors who might have preferred Romney for his fundraising prowess. Will she take Hillary votes from the Obama ticket?

The United States is an enormous, diverse nation, and there's perhaps no better evidence of that than the U.S.'s current economic cycle.

The finances of many states have deteriorated to such a degree that they appear to be in recession, even though the nation as a whole may not be, a survey of 50 state fiscal directors concluded.

The states: budget deficits abound

The National Conference of State Legislatures' survey says that "arguing whether the national economy is in recession is almost beside the point" because the fiscal condition of some states has declined so much that they appear to be in a recession.

In all, 23 states, including hard-hit housing slump states Florida, California, and Nevada, expect to report budget deficits in the next fiscal year, fiscal 2009, with the aggregate revenue shortfall reaching $26 billion. Further, more than two-thirds of the states said they are concerned or pessimistic regarding their F2009 revenue outlook.

Historically, most states experience a decline in revenue as the U.S. economy contracts, as the economic slowdown results in lower retail sales, which lowers sales tax revenue -- a major source of revenue for many states. Job layoffs also decrease state income tax revenue. Further, state social service costs typically increase, as unemployment claims increase and applications for income/food/energy assistance rise.

Florida, California hard hit

Economist Peter Dawson told BloggingStocks Friday the NCSL data is in-line with the profile of this cycle's economic slowdown. "From the research we can see that the states under most stress are those that rank very high regarding mortgage default and housing foreclosure lists, with Florida and California being the most obvious examples," Dawson said. "These states are going to be under fiscal stress for a considerable period of time due to the size of their housing correction."

Moreover, Dawson said because of California's and Florida's size, "it will be very hard for the nation to grow at capacity until these states have started to grow." Hence, a return to robust economic conditions nationally, "could be a year to 18 months off, assuming growth resumes nationally by late 2008," he said.

Shares of were trading near record highs when ConocoPhillips (NYSE: COP) started off the new year by announcing that it expected fourth quarter production results to exceed those of the third quarter. But it was good news/bad news for the company this past week.

The good news: The Wall Steet Journal reported that Conoco was now the front-runner to participate in a multiyear, $10 billion project to develop the Shah natural-gas field in Abu Dhabi, beating out such rivals as Occidental Petroleum (NYSE: OXY) and Royal Dutch Shell (NYSE: RDS.A). Abu Dhabi National Oil Co. had been expected to name a partner for the project last year, and oil companies have become frustrated by the delays. Abu Dhabi is trying to meet rising demand for natural gas, which has surged with the building of gas-fired power stations and desalination plants.

The bad news: The company's donation of $5 million to a local cancer center apparently did not impress Alaska state officials sufficiently to allow Conoco to go forward with its nonconforming proposal for a natural gas pipeline project in that state's North Slope. Conoco's proposal had requested that state taxes be fixed on the project for decades, which prompted Governor Sarah Palin to send Conoco a rejection letter. The rejection left TransCanada Corp. (NYSE: TRP) as the sole finalist for the project.

Conoco shares have fallen 5.96% since the beginning of the year, and closed Friday at $83.04.

Texas-based oil giant ConocoPhillips (NYSE: COP) proposed today a massive multi-billion pipeline to transport natural gas to the lower 48 states from Alaska.

The company stated that even if it was not able to get matching state funds that it would still be prepared to invest significant funds to make the project happen. The total estimated bill on such a pipeline ranges from $25 billion to as $42 billion.

The natural gas the proposed pipeline would be able to deliver to the lower states is definitely sizable. Last year, the US consumed 21.7 trillion cubic feet of natural gas, and the proposed pipeline would be able to deliver upwards of 4 billion cubic feet of that demand every day.

ConocoPhillips has also stated that it hopes to get some outside ownership for the pipeline. Possible partners for the project could include ExxonMobil Corp. (NYSE: XOM) as well as BP Plc. (NYSE: BP).

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer. DISCLOSURE: Mr. Fowlkes owns and/or controls diversified portfolios of long and short stock and option positions that include holdings in XOM.

Pioneer Natural Resources Co. (NYSE: PXD) is poised to be the first independent operator to produce oil on the North Slope, an area dominated by the major producers such as Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: COP), though other independents such as Andarko Petroleum (NYSE: APC) may not be far behind.

Ten-year-old Pioneer, based in Irvine, Texas, plans to begin drilling in a few weeks off the coast of Oooguruk Island, Alaska, in a field expected to yield as much as 90 million barrels of oil. Pioneer expects to begin producing oil from there in the first half of next year.

Pioneer's efforts are being closely watched to see whether independents can establish themselves on the North Slope. "Ours is a bellwether project," says Chief Operating Officer Tim Dove. "If we do well, make the project work in reasonable time and in a fiscally responsible manner, it could open up some avenues for us and other independents."

Pioneer also announced the start-up of its South Coast Gas (SCG) project, expected to produce approximately 50 million cubic feet of natural gas per day by the end of the year. Scott Sheffield, Pioneer's Chairman and CEO, says, "With the completion of SCG and considering that a majority of the capital costs related to our Oooguruk development on the North Slope will be invested by the end of 2007, we expect our 2008 drilling and development budget to decrease significantly as compared to 2007."

The share price has been rising since reaching a 52-week low of $35.51 in August after Pioneer's second quarter report. The share price at close on Friday was $46.02. Pioneer will report on its third quarter on November 6.

MOST NOTEWORTHY: AU Optronics (AUO), RightNow Tech (RNOW), Alaska Air (ALK), Nordstrom (JWN), Gap (GPS) and Old Dominion Freight Line (ODFL) were today's noteworthy upgrades:

• HSBC upgraded AU Optronics (NYSE: AUO) to Overweight from Neutral following the company's Q2 results.

• Jefferies raised RightNow Technology (NASDAQ: RNOW) to Buy from Hold, believing low expectations have created a buying opportunity and that fundamentals remain intact.

• JP Morgan upgraded shares of Alaska Air (NYSE: ALK) to Overweight from Netural on valuation.

• Citigroup upgraded Nordstrom (NYSE: JWN) to Buy from Hold on valuation; they consider the recent pullback a buying opportunity.

• Citigroup upgraded Gap (NYSE: GPS) to Buy from Hold from valuation and expects for better execution and cost savings in 2008 under the new CEO.

• Credit Suise upgraded Old Dominion Freight Line (NASDAQ: ODFL) to Outperform from Neutral on valuation...

OTHER UPGRADES:

• Merriman upgraded MicroTune (NASDAQ: TUNE) to Buy from Neutral.

• Citirgroup raised Aeropostale (NYSE: ARO) to Hold from Sell.

• Merrill upgraded Cathay General (NASDAQ: CATY) to Neutral from Sell.

• The NYSE Euronext (NYSE: NYX) was upgraded to Neutral from Sell.

• Wachovia raised shares of Wendy's (NYSE: WEN) to Market Perform from Underperform.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

In what is sure to be only the latest event in a long case of protracted legal wrangling, a San Francisco federal appeals court has ordered Royal Dutch Shell Plc's (NYSE: RDS.A) vessels to stop all operations in the Beaufort and Chuckchi Seas. Environmental groups and Eskimo villages are seeking greater research into the effect drilling will have on marine wildlife in the region, and the judge agreed to give them time.

Shell isn't too happy. The company claims to have spent $200 million on the project already, including extensive research on the effect drilling will have on the environment, and has also formulated a plan to deal with oil spills. Of course, it's easy to be skeptical of an oil company's studies on environmental impact.

The Department of the Interior has supported drilling but, given the recent scandals involving global warming and political pressure on scientists, the department is not as high on credibility as it once was.

Given the amount of time it will take for any oil from the region to be brought to market, and the relatively small amount that is thought to be feasible for drilling, this probably won't have a material impact on energy prices anytime soon.

One-quarter of BP plc's (NYSE: BP) Alaskan oil production, nearly 100,000 barrels a day, will be shut down for a "few days" because of the discovery of a water pipeline leak Monday.

Now I know some environmentalists are going to go crazy over this, but remember, this was a water pipeline leak - not an oil pipeline leak. It's not the second coming of Valdez.

At least not this time.

The shutdown was disclosed by Representative Bart Stupack (Michigan-Democrat), who has been critical of BP's maintenance practices in Alaska. Company documents released at a hearing last week suggested that budget cuts had pressured executives to overlook corrosion prevention.

The Chairman of BP America, Robert Malone, acknowledged the "extreme budget pressures" but disputed that budget cuts were the cause of the pipeline breaks.

That's right Mr.Malone, spin that blame. It wasn't the budget cuts, it was the extreme environment, sludge and sediment build-up that caused the corrosion. It was the budget cuts that failed to repair them! Ha!

There are more and more problems in the Alaskan oil fields these days and I can't figure out why. With the record-breaking profits that BP and other oil giants are experiencing every quarter, where is the money going? How can there be "extreme budget pressures" in this environment?

MOST NOTEWORTHY: Nortel Networks Corp (NT), Bristol-Myers Squibb Co (BMY) and the select airliners were today's most noteworthy downgrades:

• Goldman cut Nortel Networks (NYSE: NT) to Sell from Neutral as the firm believes shares fully discount a successful execution on the cost restructuring.

• HSBC downgraded Bristol-Myers Squibb (NYSE: BMY) to Underweight from Neutral.

• JP Morgan sees few catalysts to drive airline shares higher and has downgraded the following stocks:

• AMR Corp (NYSE: AMR) and US Airways Group, Inc (NYSE: LCC) to Neutral from Overweight; Alaska Air Group, Inc (NYSE: ALK) and UAL Corp (NASDAQ: UAUA) to Underweight from Overweight; Continental Airlines, Inc (NYSE: CAL) and JetBlue Airways Corp (NADAQ: JBLU) to Underweight from Neutral.
  

OTHER DOWNGRADES:

• Keefe Bruyette downgraded Countrywide Financial Corp (NYSE: CFC) to Underperform from Market Perform, citing the impact of tighter credit standards for the move.

• OfficeMax Inc (NYSE: OMX) was cut to Underperform from Peer Perform at Bear Stearns.

• Matrix USA downgraded PepsiCo, Inc (NYSE: PEP) to Hold from Buy on valuation.

• Merrill Lynch downgraded Dean Foods Co (NYSE: DF) to Sell from Neutral.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Comcast Corp (CMCSA), Monster Worldwide (MNST), Microsoft (MSFT), XM Satellite Radio Holdings Inc (XMSR) and Sirius Satellite Radio (SIRI) were today's most noteworthy upgrades:

• Comcast Corp (NASDAQ: CMCSA) was upgraded at AG Edwards to Buy from Hold with a $33 objective, citing valuation.

• Gabelli raised Monster Worldwide's (NASDAQ: MNST) rating to Buy from Hold and sees an attractive long-term opportunity as near-term margin pressure issues are providing an opportunity.

• CIBC upgraded shares of Microsoft (NASDAQ: MSFT) to Sector Performer from Underperformer to reflect solid Q3 results and an improved 2008 outlook. Citigroup raised Microsoft's rating to Buy from Hold after the quarterly report.

• UBS upgraded both XM Satellite Radio (NASDAQ: XMSR) to Buy from Neutral citing improving fundamentals and Sirius Satellite Radio (NASDAQ: SIRI) to Buy from Neutral on better operational execution...

OTHER UPGRADES:

• Goldman upgraded NetGear, Inc (NASDAQ: NTGR) to Neutral from Sell.

• KLA-Tencor Corp (NASDAQ: KLAC) was raised to Neutral from Underperform at First Albany following positive Q3 results.

• Alaska Communications Systems Group, Inc (NASDAQ: ALSK) was upgraded to Hold from Sell at Stifel following its first quarter report.

• RBC Capital raised Baidu.com, Inc (NASDAQ: BIDU) to Outperform from Sector Perform citing guidance that indicated a reacceleration of underlying fundamentals.

• JP Morgan added Taser International, Inc (NASDAQ: TASR) to its SMID Money List and will maintain its Outperform rating.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Wal-Mart Stores Inc.'s (NYSE: WMT) coming to India -- soon. According to India's Bharti Enterprises' Chairman Sunil Bharti Mitta, Wal-Mart will have stores operating in India in less than a year. Bharti will enter into a joint venture with Wal-Mart to operate a chain of stores, and it has already begun hiring workers. It will be interesting to see what happens, as Wal-Mart failed miserably in Germany and left Korea in June after years of fruitless efforts.

According to the Associated Press, Target Corp. (NYSE: TGT) expects to have 2,000 U.S. stores by 2011, and is currently planning to open its first locations in Hawaii and Alaska. Target has said it will eventually expand overseas but is in no rush. According to CEO Robert Ulrich, "In some of the major emerging economies such as India and China one could argue that it's much better to enter 5 years or 10 years down the road when that guest is becoming more affluent, better educated, because that is more in sync with our strategy."

It appears that Target will continue to be a more upscale version of Wal-Mart (waiting for countries to become wealthier before expanding there), while Wal-Mart will look to capitalize on growth in India by offering cheap goods there first.

While Vermont might be the healthiest state in the union, its residents are paying dearly, according to recent findings from the Tax Foundation. Specifically, 14.1% of a Green Mountain State resident's income is funneled away to state and local taxes, making it the least tax-friendly of all 50 U.S. states. Maine ranks second, with 14.0% of a resident's income earmarked for state and local taxes. Rounding out the bottom five are New York, Rhode Island, and Ohio.

And for the 17th year in a row, Alaska was named the most tax-friendly state, as only 6.6% of an Alaskan's income will go toward state and local taxes. New Hampshire is second on the list, at 8.0%, followed by Tennessee, Delaware, and Alabama.

The tax burden calculated by this study combines state and local income taxes, property taxes, sales taxes, and others. To find out where your state ranks, click here.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Over the last three decades Exxon Mobil Corp. (NYSE: XOM) has been working to develop a natural gas pipeline that would take gas from the North Slope to Midwestern markets. Alaskan state officials, however, have had enough with the company's lack of progress in the project. I use the term 'progress' lightly since there has still been no development made. Now the company is hoping that the federal courts will change this ruling.

During the past 30 years, the company has come up with 22 development plans for the 106,200 acres unit, but so far the company has not begun any oil or gas operations. Last month, Alaskan officials decided that enough is enough and decided to revoke the company's leases in the area. This did not sit well the company at all.

When voters hit the polls yesterday in Alaska they had a major tax proposal on their ballots. 66% of voters opted to vote against the proposed $1 billion annual tax proposal against oil companies working to develop a pipeline from the state's North Slope to Midwestern markets.

This comes as good news to ExxonMobil Corp (NYSE: XOM), BP p.l.c (NYSE: BP) and ConocoPhillips (NYSE: COP) that could have been looking at a 50% increase in project costs should the tax bill have passed yesterday. The total bill on the pipeline project has been estimated at $25 Billion and had this tax measure had passed, there would have been some serious questions as to whether the major oil companies would be willing to consider planning or future development for the project. For now, it appears clear that the people of Alaska are behind the pipeline and want the oil companies to continue to move ahead.

Shares of all three stocks are up in today's market. ExxonMobil has traded up 1.3% to $73.49 and set a new 52 week high earlier in the session at $73.55. BP is up 1.7% to $68.68 and COP has traded up 2.1% to $62.29.