U.S.-BRAND AUTOS NOT AS RELIABLE AS JAPANESE VEHICLES

Only six of the top 33 most-reliable automobiles were American-brand vehicles, while 23 were Japanese. Does this mean that American workers are not focused on quality, or since many Japanese-brand autos are made in the U.S., could it be that design flaws are the culprit? Check out this NBC News report to learn more.

MORE GLOOMY ECONOMIC REPORTS ISSUED FRIDAY

Consumer spending after adjusting for inflation was flat in January for the second consecutive month. And, the Reuters/University of Michigan consumer sentiment numbers were the worst since 1992.

From USA Today:

The Commerce Department said consumer spending posted a 0.4% rise in January. However, all that gain came from a surge in inflation. Taking away the effect of higher rices, spending showed no gain in January or December.

Consumer sentiment dropped to a 16-year low in February on worries about declining incomes and rising unemployment, the Reuters/University of Michigan Surveys of Consumers showed.

Adding to the grim view, consumer expectations for the future also hit a 16-year low, while worries about their ability to makes ends meet and the overall economy were as bad as they have been in decades, the survey said.

SMALL AND MIDSIZE BANKS STRUGGLE DUE TO REAL ESTATE DOWNTURN

How many banks of failed in the past four years in the United States? Four. How many are analysts saying might fail soon? Up to 50 according to this New York Times article.

Fortunately, we handle bank failures very well in the United States. How do I know? My bank was one of the four that failed and it was closed for one weekend, during which time I had access to all of my money because ATM and debit card transactions were not shut off. The bank closed on Friday evening and on Monday morning another bank had taken over, after the Office of Thrift Supervision intervened.

EUROPEAN UNION REGULATORS FINE MICROSOFT $1.3 BILLION

The European Commission fined Microsoft $1.3 billion for failing to comply with a 2004 judgment that found the software giant guilty of abusing its market dominance. This fine brings the total Microsoft has paid due to European Commission rulings to $2.5 billion.

From The New York Times:

Microsoft had earlier been fined after the commission determined in 2004 that the company had abused the dominance of its Windows operating system to gain unfair market advantage. The commission imposed the new fine Wednesday, it said, because the company had not met the prescribed remedies after the earlier judgment.

“Microsoft was the first company in 50 years of E.U. competition policy that the commission has had to fine for failure to comply with an antitrust decision,” the European competition commissioner, Neelie Kroes, said in a statement.

Microsoft said it was “reviewing the commission’s action.”

The company, the world’s biggest maker of software, said in a statement that the commission had announced in October 2007 “that Microsoft was in full compliance with the 2004 decision, so these fines are about past issues that have been resolved.”

WRIGLEY FIELD NAMING RIGHTS MIGHT BE SOLD

Chicago billionaire Sam Zell said in an interview on CNBC that he will not hesitate to sell the naming rights for Wrigley Field, home of the Chicago Cubs.

From AP via The Chicago Tribune:

Zell said he plans to sell the Cubs and Wrigley separately and in his own time frame. He also disclosed that Major League Baseball has approved "four or six" potential ownership groups and that any one of them would be fine.

The sale of the team has been delayed by Zell's plan to sell the team and the stadium separately, and to have a state agency acquire and renovate Wrigley

PRODUCER PRICES UP 1% IN JANUARY

The Producer Price Index (PPI) was up a whopping 1.0% in January due to rising energy, food, and medicine prices. The gain was more than double what economists had been expecting.

From USA Today:

Producer prices were up 7.4% from January of last year, the steepest climb since October 1981, the Labor Department said.

The worse-than-expected performance is certain to capture attention at the Federal Reserve. Fed officials have chosen to combat a threatened recession by aggressively cutting interest rates, believing that they have room to do so because weak economic growth will keep a lid on prices.

WHERE DOES YOUR CANDIDATE STAND ON ECONOMIC ISSUES?

Do you know where the presidential candidate you support stands regarding the mortgage mess, taxes, and jobs?

Which candidate has proposed a 5-year freeze on the adjustment of rates for adjustable rate mortgages?

Which candidate has proposed spending $10 billion to help those who are about to lose their homes to foreclosure?

Which candidate would abolish the IRS, eliminate incomes taxes, and establish a 23% national sales tax?

Which candidate would renew the Bush tax cuts and further cut taxes for corporations?

Which candidates would raise income taxes on individuals making $250,000+?

Find the answers to these questions and more by viewing this NBC News video.

HIGHER FOOD PRICES HURT CONSUMERS

Retail food prices increased 4% in 2007, the largest increase in 17 years. This NBC News video examines the issue.

SOCIALISM/COMMUNISM IN CUBA: A CLOSER LOOK

Will things change in Cuba now that Fidel Castro has resigned and his brother Raul has taken over? This NBC News report shows that many Cubans are fed up with a poor economy and limited freedoms and are willing to voice their displeasure openly, something they would have been very hesitant to do in the past.

HOME PRICES DROP FOR 5TH STRAIGHT MONTH

More negative news from the housing market came out today in the home sales and prices report issued by the National Association of Realtors this morning.

From Reuters via USA Today:

The pace of existing home sales fell in January to a 4.89 million unit annual rate, lowest level in nearly a decade, while prices slid and inventories swelled, the National Association of Realtors said Monday.

The median price of a single-family home — half sold for more, half for less — slid below $200,000 to $198,700 the report says.

The inventory of homes for sale rose 5.5% to 4.19 million units at the end of January, which represents about 10.3 months' supply at the current sales pace. The national median home price fell 4.6% from a year ago to $201,100.

The drop in sales and the fifth straight decline in prices underscored the continued pressure facing housing, which is struggling to emerge from its worst slump in a quarter-century.

VISA IPO COULD RAISE $18.8 BILLION

Visa is going public in an initial public offering that could raise nearly $19 billion, which would break the record of $10.6 billion by AT&T Wireless Group set in 2000.

From The New York Times:

The company filed with the U.S. Securities and Exchange Commission to sell 406 million Class A shares at $37 to $42 each, resulting in $15 billion to $17.1 billion of proceeds. Visa said it might sell another 40.6 million shares to meet demand, boosting the IPO's potential size to $18.8 billion.

A successful IPO would surpass the $10.6 billion offering in 2000 by AT&T Wireless Group. San Francisco-based Visa plans to list on the New York Stock Exchange under the symbol "V."

Visa is controlled by about 13,300 member banks and finance companies. Many of these are struggling with mounting credit losses, and some with capital shortfalls.

"There could be added volatility (in Visa shares) if some of the member banks begin to sell their holdings, perhaps to shore up capital," Fifth Third's Augustine said.

SOCIAL ENTREPRENEURSHIP = DOING WELL AND DOING GOOD

Milton Friedman, Nobel Laureate in Economics, once said, "the business of business is business." This famous quote gets to the heart of his argument that businesses exist to maximize the wealth of their owners and for no other reason.

Today, there is a growing group of entrepreneurs who disagree with Friedman's ideas regarding the role and purpose of a business. Corporate Social Responsibility (CSR) has entered the lexicon, as has social entrepreneurship. Both focus on a business doing well for owners, but also doing good for society.

If you are interested in social entrepreneurship, starting and running a business for personal gain and profit while also having the business play a role in the betterment of society, you should spend a few minutes reading this article:

A Capitalist Jolt for Charity by Steve Lohr in The New York Times

Mr. Lohr takes a closer look at ePals, a for-profit business that seeks not only profit, but to also play a role in improving education around the globe.

PENSION FUNDS SUE YAHOO FOR TURNING DOWN MICROSOFT OFFER

Two pension funds have sued Yahoo and its Board of Directors claiming that they neglected their financial duty to shareholders in an attempt to avoid being taken over by Microsoft.

From USA Today:

The lawsuit was filed in Delaware Chancery Court on Thursday by lawyers representing Detroit's police and fire retirement system and general retirement system, as well as "all other similarly situated public shareholders."

According to the lawsuit, Yahoo's board is pursuing "value-destructive" third-party deals in an effort to fight off Redmond, Wash.-based Microsoft, which on Feb. 1 announced a takeover bid of $31 per share in cash and stock, a 62% premium over Yahoo's previous day's closing price.

"Yahoo's directors cannot 'just say no' indefinitely to legitimate acquisition offers," the lawsuit reads. "Likewise, Yahoo's directors cannot pursue transactions that do not require shareholder approval for the primary purpose of making Yahoo unattractive to Microsoft."

WHERE WILL GAS PRICES GO?

There is quite a bit of debate over the direction of gas prices as we prepare to enter the high-demand spring season. Some analysts believe gas prices may go over $4.00 per gallon, but others cite huge inventories as a reason for their belief that gas prices will fall more in line with the Energy Department's prediction of $3.40.

From AP via BusinessWeek:

Gas prices jumped Friday to their highest level since June, a possible preview of what many analysts believe will be a record spike in pump prices this spring.

But the current price surge could be short-lived. While gasoline has risen sharply in recent days in response to oil's dramatic climb to a new record above $101 a barrel, gas supplies have quietly grown to their highest level in 14 years.

Many analysts believe gas prices will rise this spring to new records near $3.75 or $4 a gallon. But not everyone agrees.

[President of energy consultancy Ritterbusch and Associates, Jim] Ritterbusch, for example, thinks the high level of supplies, and an eventual decline in oil prices, will pull pump prices down. He doubts prices will rise as high as $3.75 without a major overseas supply disruption or domestic refinery outage.

AVERAGE WORKER WORSE OFF IN REAL TERMS

After adjusting average worker earnings in the past 12 months for inflation, which is a term called "real earnings", workers actually lost 1.2% compared to the previous year. How is this possible? According to the Bureau of Labor Statistics (BLS), earnings increased 3.2% from February 1, 2007 through the end of January of 2008, while inflation increased at a rate of 4.3%, leaving workers with less buying power even though they earned more money.

From USA Today:

Inflation-adjusted earnings for average workers have fallen 1.2% over the last year, the Bureau of Labor Statistics said Wednesday, as higher food and fuel costs have eroded purchasing power.

Earnings adjusted for inflation — also known as real earnings — have fallen for eight of the last 13 months and were down 0.5% in January compared with December, according to the labor statistics agency.

Average weekly earnings were $592.74 in January, or roughly $30,800 a year. While that's about $1,000 a year more than workers averaged in January 2007, inflation has increased at a rate of 4.3% for the same period, outpacing the 3.2% earnings gain.

JOBLESS CLAIMS 4-WEEK AVERAGE WORST SINCE HURRICANE KATRINA

While many "news" organizations will no doubt be blasting the headline "JOBLESS CLAIMS FALL", responsible ones will be leading with "4-WEEK JOBLESS CLAIMS AVERAGE WORST SINCE HURRICANE KATRINA SPIKE".

From USA Today:

The Labor Department reported Thursday that the number of new jobless claims dropped by 9,000 last week to a total of 349,000, but analysts noted that claims offices in California were open for only four days last week because of a state holiday.

The four-week average for claims, which gives a better picture of labor market trends, rose to 360,500. That was the highest level since claims spiked in October 2005 in the aftermath of Hurricane Katrina.

Analysts said the rise in the four-week average was depicting a labor market that is coming under increasing strains because of the slowing economy.

The economy shed 17,000 jobs in January, the first monthly job loss in more than four years. Analysts believe that the unemployment rate, which currently stands at 4.9%, will rise to 6% before the current slowdown has run its course.

STAGFLATION MAY BE BACK

We are all aware of the definitions of inflation and deflation, price increases and decreases over time; however, there is another 'flation, stagflation, which many college students today are not familiar with, but those who lived through the 1970s wish they could forget. Stagflation is made up of two words, stagnation and inflation. The stagnation refers to a stagnating economy, in other words one in which there is slow or no growth. That is combined with inflation to form stagflation, a period of slow or no growth and rising prices, an unpleasant combination that the United States has been happy to avoid for decades, but one that may be happening again right now.

From The New York Times:

Lately, many people are hearing an echo — faintly perhaps but distinctly audible — of the stagflation of the 1970s.

Even as economic growth sags, oil and gasoline prices are surging to new heights. Gold is on the rise, along with the prices of such basic commodities as wheat and steel. And on Wednesday, with the latest government report on consumer prices, there are signs that overall inflation, after years of only modest increases, may be breaking out of its box.

“They are cutting rates with a bill to be paid later," said John Ryding, chief United States economist at Bear Stearns. “The question is not, will we get inflation, but how much will it cost to stuff the genie back in the bottle. This has the feel of 1970s stagflation.”

Over the last 12 months, consumer prices are up 4.3 percent on average, according to the Labor Department. The core index of consumer price inflation, which excludes food and oil, was 2.5 percent higher in January than a year earlier, significantly above the Fed’s unofficial comfort zone of a 1 to 2 percent underlying inflation rate. That’s a far cry from the double-digit inflation rates that battered the economy at times in the 1970s, but still worrisome.

CONSUMER PRICE INDEX UP 0.4% IN JANUARY

Consumer prices rose more than expected in January led by sharp increases in food, gasoline, and transportation. This data shows that inflationary pressures are gaining, causing many to predict that the Federal Reserve will be forced to keep key interest rates at current levels or potentially raise them, thus fighting inflation, but potentially causing the economy to stall or worse during what many already see as a weak economy.

From The New York Times:

The Consumer Price Index rose 0.4 percent in January, a bigger gain than economists had predicted. Over the last 12 months, the index has surged by 4.3 percent, one of the highest year-over-year rates in decades, the Labor Department said.

The rise was led by increases in the costs of food, gasoline, shelter, and transportation. The so-called core inflation rate, which excludes food and gasoline prices, ticked up 0.3 percent last month.

The core rate is 2.5 percent above its level in January 2007, above the Fed’s recognized comfort zone ceiling of 2 percent.

SHARPER IMAGE FILES FOR CHAPTER 11 BANKRUPTCY PROTECTION

Sharper Image filed for chapter 11 bankruptcy protection late Tuesday. The filing is an effort by the company to continue operations while renegotiating with creditors and likely restructuring the company to emerge as a healthy business. The filing indicates that the company has $251.5 million in assets, $199 million in debts, and $700,000 cash on hand.

From USA Today:

Sharper Image is in a severe liquidity crisis," Chief Financial Officer Rebecca Roedell said in a separate filing.

She said the company has suffered from increased competition, narrowing margins, litigation, lower consumer and market confidence, tighter credit from suppliers, and poorly performing stores. "The foregoing has been compounded by the ever-tightening and volatile credit and financing markets," she added.

Sharper Image has seen its sales decline steadily since 2004, and it has posted net losses in fiscal 2005, 2006, and 2007.

MICROSOFT EXPECTED TO WAGE PROXY FIGHT TO GAIN CONTROL OF YAHOO

Reports are surfacing that indicate that Microsoft will wage a proxy fight to gain control of Yahoo after its $31-per-share offer, valuing the company at the time at nearly $45 billion (now roughly $41 billion due to a decrease in Microsoft's stock price), was turned down.

What is a proxy fight? It is an effort to gain control of the Board of Directors to force change. In this case, Microsoft will urge shareholders to vote to elect new directors who are Microsoft-friendly, replacing the directors who voted down Microsoft's offer. If Microsoft is successful at ousting the current board and replacing them with one that favors Micrsoft, the $31-per-share offer, or one that is slightly higher, would almost certainly be accepted.

Most proxy fights are unsuccessful, but this one has a decent chance since all of Yahoo's directors are up for reelection at the same time, as opposed to having a staggered election in which only one or two board members can be replaced in a given year.

From The New York Times:

In an escalation of its fight for Yahoo, Microsoft will authorize a proxy fight at the Internet company this week, people briefed on the matter told DealBook.

The move, expected to cost about $20 million to $30 million, was Microsoft’s alternative to raising its $44.6 billion bid and is seen as a less expensive way to put pressure on Yahoo’s board. Yahoo rejected Microsoft’s original offer as undervalued.

Yahoo’s board is vulnerable in a proxy fight. Yahoo does not have a staggered board, so all of its directors are up for nomination this year. And, per its bylaws, in a contested election, directors are elected by a plurality of votes cast.

INFLATION HEATS UP IN CHINA

Consumer inflation in China was reported at 7.1% today, while producer inflation was reported to be at 6.1% on Monday in a separate report. Both measures are annual inflation rates that compare prices in January of 2007 to January of 2006. Some economists believe these figures actually underreport true inflation in China due to the price controls that have been put on some products by the government.

For comparison, the United States consumer inflation rate reported through the Consumer Price Index (CPI) was 4.1% in 2007 versus 2.5% in 2006, while the Producer Price Index (PPI) was 6.3% in 2007 versus 1.1% in 2006.

From The New York Times:

Yu Yongding, the influential director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences and until 2006 a member of the monetary policy committee of China’s central bank, said that high inflation in January meant that the Chinese government was likely to continue pursuing austerity policies.

To fight inflation, China is likely to allow its currency to “appreciate continuously” so as to hold down the cost of imports, despite signs that economic slowdowns in the United States and elsewhere may cool demand for Chinese exports, Mr. Yu said.

“Inflation is the No. 1 enemy for China,” he said in a telephone interview. “It’s affordable for us to sacrifice a little on the growth side to bring inflation under control.”

Chinese exporters are trying to pass on their rising costs to overseas customers, which could contribute to inflation in the United States and Europe.

BRITISH GOVERNMENT TAKES CONTROL OF TROUBLED BANK

The British government announced today that it is taking control of Northern Rock, the ailing mortgage lender it propped up with $107 billion in loans and guarantees last year.

From The New York Times:

The government rejected two takeover proposals for the lender, which ran into trouble last year because of a money shortage that followed a subprime mortgage crisis in the United States. The government was forced to shore up the company with about £55 billion, or $107 billion, in loans and guarantees.

“The government has completed its review of the two detailed proposals received,” Alistair M. Darling, chancellor of the Exchequer, said at a news conference in London on Sunday. “But in current market conditions, we do not believe that they deliver sufficient value for money for the taxpayer. The government has therefore decided to bring forward legislation to take Northern Rock into a period of temporary public ownership.”

The Virgin Group under Richard Branson and the current management of Northern Rock had both submitted takeover proposals to the government’s adviser, Goldman Sachs, before a deadline earlier this year. Both suggested repaying the loans partly by issuing new shares. Mr. Darling said on Sunday that neither proposal had met all of the government’s objectives of securing financial stability, depositors’ money and taxpayers’ funds.

Under the government ownership plan, the taxpayers’ outstanding loans to Northern Rock will be repaid in full with interest, Mr. Darling said. The private sector alternatives did not meet this test, he said.

USDA RECALLS 143 MILLION POUNDS OF BEEF

In the largest beef recall in Unites States history, the Department of Agriculture is recalling 143 million pounds of beef processed at Westland/Hallmark Meat Co., a California slaughterhouse.

From USA Today:

Officials said it was the largest beef recall in the United States, surpassing a 1999 ban of 35 million pounds of ready-to-eat meats.

The federal agency said the recall will affect beef products dating to Feb. 1, 2006, that came from Chino-based Westland/Hallmark Meat Co., which supplies meat to the federal school lunch program and to some major fast-food chains.

Secretary of Agriculture Ed Schafer said his department has evidence that Westland did not routinely contact its veterinarian when cattle became non-ambulatory after passing inspection, violating health regulations.

"Because the cattle did not receive complete and proper inspection, the Food Safety and Inspection Service has determined them to be unfit for human food and the company is conducting a recall," Schafer said in a statement.

Federal officials suspended operations at Westland/Hallmark after an undercover video surfaced showing crippled and sick animals being shoved with forklifts.

Two former employees were charged Friday with animal cruelty. No charges have been filed against Westland, but an investigation by federal authorities continues.

TRADE DEFICIT FALLS IN 2007

After five consecutive years of record trade deficits, the deficit shrank 6% in 2007.

From the Commerce Department's Press Release at the Bureau of Economic Analysis:

For 2007, exports of $1,621.8 billion and imports of $2,333.4 billion resulted in a goods and services deficit of $711.6 billion, $46.9 billion less than the 2006 deficit of $758.5 billion. For goods, exports were $1,149.3 billion and imports were $1,964.9 billion, resulting in a goods deficit of $815.6 billion, $22.7 billion less than the 2006 deficit of $838.3 billion. For services, exports were $472.5 billion and imports were $368.5 billion, resulting in a services surplus of $104.0 billion, $24.2 billion more than the 2006 surplusof $79.7 billion.

The goods and services deficit was $711.6 billion in 2007, down from $758.5 billion in 2006. As a percentage of U.S. gross domestic product, the goods and services deficit was 5.1 percent in 2007, down from 5.7 percent in 2006.

MORE MICROSOFT & YAHOO NEWS

Many analysts believe it will be very difficult for Yahoo to avoid the $31 per share Microsoft takeover bid as no new bids have emerged. Yahoo continues talks with other potential friendly partners including Rupert Murdoch's New Corp., which owns MySpace, and AOL, but deals with either seem like a long shot.

From The New York Times:

Can Yahoo avoid being gobbled up by Microsoft?

Many analysts say it is increasingly unlikely.

While some of those conversations [with potential white knight partners AOL and News Corp.] continue, no deal has emerged and a growing chorus of analysts and investors say it is improbable that anyone will come up with an offer that is more attractive to Yahoo shareholders than Microsoft’s, which was originally valued at $31 a share.

“It seems like Yahoo’s strategic options are relatively limited,” said Mark Mahaney, an analyst with Citigroup. “It is hard to see a scenario that could create as much value for shareholders as quickly as a Microsoft offer.”

From USA Today:

Microsoft CEO Steve Ballmer appears to be under rising pressure by big shareholders to make the $31-a-share opening offer stick. One reason: Paying $35 to $40 a share for Yahoo would drive down Microsoft's projected earnings through its 2011 fiscal year, says Robert Breza, tech stock analyst at RBC Capital Markets.

Yahoo on Monday rejected the $31-a-share offer, giving rise to speculation that it is courting a white-knight investor, such as AOL or News Corp. (NWS), to help it stay independent. A source briefed on the matter says talks to sell a 20% stake to media giant News Corp. are highly unlikely to result in anything. The source requested not to be named because talks are ongoing.

A tie-up with AOL would boost Yahoo's online advertising efforts but be expensive to consummate, says Shahid Khan, principal analyst at IBB Consulting Group. "It may distract Yahoo from getting its own act together," says Khan.

Jeffrey Lindsay, an analyst at Sanford C. Bernstein, says reported talks with potential white knights are "a ploy to drive up Microsoft's bid offer." Lindsay expects Microsoft to hold firm for now at $31, then perhaps up the bid to $35 or $36 within two weeks. "The pressure will really be on Yahoo to accept," he says.

Ballmer's next move may be to rally big shareholders to back a hostile takeover bid, says David Mitchell, senior vice president of IT research at Ovum. That could take the form of a tender offer made directly to shareholders or a proxy fight to win control of the Yahoo board.

PHILADELPHIA FED'S SURVEYS SIGNAL A RECESSION

The Federal Reserve Bank of Philadelphia released results of its Survey of Professional Forecasters and Anxious Index today with both pointing toward a recession. The Survey of Professional Forecasters asks economists to predict the possibility of GDP contraction in the current quarter while the Anxious Index asks the same for the next quarter. A score of higher than 40% is considered a sign that a recession is likely. The Survey of Professional Forecasters score was 47% while the Anxious Index was 42.9%. How accurate have the surveys been in predicting recessions? Since 1968 there have been six recessions. Both surveys have predicted all six.

Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters and Anxious Index.

CHAVEZ COMMENTS RATTLE OIL MARKET

Venezuelan President Hugo Chavez made threats on Sunday to cut off oil sales to the United States in retaliation for U.S.-based ExxonMobil seeking court assistance in settling a dispute with Chavez and Petroleos de Venezuela and a British court freezing as much as $12 billion in Petroleos de Venezuela's assets. The dispute centers around the nationalization of oil rights that ExxonMobil owned.

From USA Today:

If you end up freezing (Venezuelan assets) and it harms us, we're going to harm you," Chavez said. "Do you know how? We aren't going to send oil to the United States."

Mike Fitzpatrick, vice president of energy and risk management at MF Global, says is is hard to weigh the comment. "How much credence you want to give him is always a question mark," Fitzpatrick said.

But traders were clearly worried about the potential cutoff of Venezuelan oil. Light, sweet crude for March delivery jumped $1.82 to settle at $93.59 a barrel on the New York Mercantile Exchange after spiking to $94.72 earlier, a one-month high.

Word of power outages at a Valero Energy refinery in Delaware City, Del., and a Citgo Petroleum refinery in Lake Charles, La., also helped push prices higher. Both plants were being restarted Monday, Dow Jones Newswires reported.

Traders were unnerved by new violence in Nigeria, Africa's largest oil producer and a major supplier to the U.S. On Monday, gunmen attacked a naval vesselescorting petroleum industry boats, killing one sailor and injuring another. Militant attacks have cut Nigeria's oil output by nearly one quarter in the past two years, helping send oil prices to all-time highs.

Concerns about supply disruptions temporarily drew investors' focus from the weakening U.S. economy, which had been the market's dominant theme. Worries that the economy is slowing, and demand for energy is falling, pushed oil prices down from a record above $100 a barrel in early January to nearly $86 in recent weeks.

GM REPORTS QUARTERLY LOSS

General Motors reported a loss of $722 million for Q4, which works out to $1.28 per share. In the fourth quarter of 2006, the company reported a profit of $950 million, or $1.68 a share. The company blamed the big swing on losses at GMAC, the finance arm of GM, and a general slowdown in vehicle sales.

Be careful of reading too much into this loss. Excluding one-time items, GM reported a profit of $46 million, or 8 cents per share, on revenue of $47.1 billion. Revenue for auto sales was $46.7 billion, which is $3 billion more than Q4 last year.

GM also announced that it will offer a buyout of all U.S. UAW members. The buyout offer goes as high as $140,000 for those with the most experience and highest salaries, but comes with the high price tag of having to give up future health care and other retirement benefits. GMs goals it to get more highly paid workers to leave so that they can hire replacements who will make approximately half as much due to the new collective bargaining agreement allowing a two-tier wage system.

YAHOO REJECTS MICROSOFT'S OFFER

Yahoo officially rejected Microsoft's $44.6 billion takeover bid stating that it was too low.

From The New York Times:

“After careful evaluation, the board believes that Microsoft’s proposal substantially undervalues Yahoo including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments,” the company said in a statement.

[If Microsoft decides to continue to pursue Yahoo it] may have an easier time than it could have had two weeks ago: since then, millions of Yahoo’s shares have traded hands to short-term-oriented hedge funds that typically favor a quick sale, as opposed to value investors who hold shares for the long term.

Microsoft could also decide to make an offer directly to shareholders, called a tender offer, which would put more pressure on Yahoo’s board to negotiate. At the same time, Microsoft could also set a deadline for its bid, known as an “exploding offer.”

And if Microsoft decides to make this a nasty battle, it could start a proxy contest to oust Yahoo’s board at its next election; it would have until March 13 to nominate a new slate of directors.

NEXT YEAR'S WAR IN IRAQ AND AFGHANISTAN TO COST APPROXIMATELY $170 BILLION

According to testimony yesterday by Defense Secretary Robert Gates, military operations in Iraq and Afghanistan will cost approximately $170 billion above and beyond the $515.4 billion already budgeted for regular Pentagon expenditures in the next fiscal year. On a per day basis, that calculates to roughly $466 million per day in costs for the military actions in Iraq and Afghanistan, about $1.4 billion per day for regular Pentagon expenditures, and about $1.866 billion per day in total.

From The New York Times:

The military operations in Iraq and Afghanistan could cost $170 billion in the next fiscal year over and above the $515.4 billion regular Pentagon budget that President Bush has proposed, Defense Secretary Robert M. Gates said on Wednesday.

Mr. Gates gave that estimate in testimony before the Senate Armed Services Committee after cautioning the panel that any estimate would be dicey, given the unpredictability of war.

“Well, a straight-line projection, Mr. Chairman, of our current expenditures would probably put the full-year cost in a strictly arithmetic approach at about $170 billion,” Mr. Gates said in response to questions from Senator Carl Levin, the Michigan Democrat who is the head of the committee.

“While the monetary cost is not the most important part of the debate over Iraq or Afghanistan, it does need to be part of that debate, and the citizens of our nation have a right to know what those costs are projected to be,” Senator Levin said.

BANK OF ENGLAND CUTS RATE, ECB HOLDS STEADY

The Bank of England, the central bank of the United Kingdom, cut its key interest rate from 5.5% to 5.25% today while the European Central Bank (ECB) held firm at 4.0%. This is the second rate cut for the Bank of England while the ECB has been at 4.0% since June of 2007.

From USA Today:

Many say the bank [ECB] may have to cut rates later this year despite the rising level of inflation in the 15-nation euro zone — a bloc of more than 318 million people that accounts for more than 15% of the world's gross domestic product.

The Bank of England's decision was expected given that its governor, Mervyn King has acknowledged that the bank is facing a "difficult balancing act," with inflationary pressures from higher energy and food prices and a falling British pound weighed against data showing slowing economic activity and turbulence on financial markets.

"The prospects for output growth abroad have deteriorated and the disruption to global financial markets has continued," the Bank of England said in the statement explaining its rate cut.

PRODUCTIVITY INCREASES IN Q4

On Wednesday the Labor Department reported that productivity increased at an annualized rate of 1.8% for the fourth quarter. That compares unfavorably with the 6% gain in productivity in the third quarter, but was better than most economists had predicted and was in line with the 1.6% productivity gain for all of 2007.

From The New York Times:

Ian Shepherdson, chief U.S. economist at at High Frequency Economics, said he looked for productivity to slow further in 2008, reflecting an extremely weak economy in the first half of the year.

For the year, productivity rose by 1.6 percent, a slight rebound from a 1 percent gain in 2006 but both years were well below the average annual increases of 3.2 percent turned in from 2000 through 2004.

Productivity determines whether living standards can rise because it allows businesses to pay their workers more because of their increased output without having to raise the cost of their products, which increases inflation.

The country went through a two-decade period of stagnant increases in productivity following the oil shocks of the early 1970s. However, starting in 1995, productivity began showing bigger improvements, reflecting all of the investments that had been made in computers and other efficiency-enhancing equipment.

Economists are currently debating whether that substantial gain in productivity is now waning or whether the slowdown is just a temporary reflection of the deterioration of the overall economy.

PRESIDENT BUSH THREATENS VETO OF BILL THAT DOES NOT GRANT TELECOM FIRMS IMMUNITY

Many telecommunications firms complied with government requests for access to telephone conversations, records, and emails, all without FISA court warrants. Now, those firms face at least 40 civil lawsuits for illegally providing that access without warrants. President Bush has urged Congress to grant retroactive immunity to the telecom firms who cooperated with the government.

For more on this issue please read Bush Threatens Veto in Surveillance Laws in USA Today.

SERVICES SECTOR CONTRACTED IN JANUARY

The Institute of Supply Management index of activity outside the manufacturing sector (essentially a survey of the service sector) contracted in January for the first time since March of 2003. This is being perceived as a negative sign for the economy and may signal that the United States is already in a recession. Wall Street did not look favorably on the report as the Dow Jones Industrial Average fell 370 points, losing 2.9% of its total value.

From USA Today:

The Institute for Supply Management said its index of activity outside the manufacturing sector fell to 41.9% in January from 54.4% in December.

The drop was the biggest plunge in the 10½-year history of the index and pointed to the first decline in service-sector activity since March 2003. Numbers below 50 suggest contraction; those above suggest expansion. New orders and employment plummeted.

The service sector accounts for nearly 90% of U.S. economic activity.

The service-sector data were the latest in a series of downbeat numbers. Friday, the government said employers cut jobs in January for the first time in 4½ years, while on Monday the Federal Reserve said banks had tightened lending standards. Tuesday, the International Council of Shopping Centers said sales at retail chain stores in January likely were the worst for the month since records began nearly 40 years ago.

The numbers have some economists, even the relative optimists, saying the chances of a U.S. recession have risen.

ANHEUSER-BUSCH BUD SPOT RATED BEST SUPER BOWL AD

For the 10th consecutive year Anheuser-Busch aired the top-rated Super Bowl ad according to USA Today.

From USA Today:

The Patriots' streak was broken, but Anheuser-Busch's was not.

In the high-stakes world of Super Bowl advertising, it aired the best-liked Super Bowl ad for a record 10th-consecutive year, according to results of USA TODAY'S exclusive Super Bowl Ad Meter real-time consumer focus group testing.

Unlike many of its previous winners, A-B's big winner this time didn't tickle the funny bone, but it certainly plucked the heart strings.

The ad featured a Dalmatian who becomes personal trainer to a dejected draft horse eager to make the team pulling the famous Budweiser beer wagon.

PROGRESS REPORTED IN WRITERS' STRIKE

Published reports indicate that most major hurdles have been cleared in the strike of television and film writers that has lasted more than three months. Many observers expect the strike to be settled in the next week or two.

From The New York Times:

Writers walked out on Nov. 5 after failing to reach a new contract with producers in months of difficult bargaining. Talks resumed briefly in December, but quickly broke off again. The latest round of talks came more than two weeks ago in the wake of a tentative contract agreement between producers and the Directors Guild of America.

That deal confronted many of the same issues that have troubled writers — including difficult questions related to pay for digital distribution of shows and movies — and paved the way for Friday’s movement toward a deal.

A final sticking point had been compensation for ad-supported television programs that are streamed over the Internet after their initial broadcast. Companies were seeking a period during which they could stream such shows without paying a residual, and wanted to peg payments for a year of streaming at the $1,200 level established in the directors’ contract. Writers were seeking 1.2 percent of the distributors’ revenue from such streams, to ensure they would participate in any revenue gold mine discovered on the Web. How that issue was finally resolved in the informal talks remained unclear.

IRISH SPURN PLASTIC BAGS

After a tax on plastic bags that is now the equivalent of 33 cents per bag was imposed in 2002, Irish consumers spurned plastic bags in favor of more environmentally friendly choices.

From The New York Times:

In 2002, Ireland passed a tax on plastic bags; customers who want them must now pay 33 cents per bag at the register. There was an advertising awareness campaign. And then something happened that was bigger than the sum of these parts.

Within weeks, plastic bag use dropped 94 percent. Within a year, nearly everyone had bought reusable cloth bags, keeping them in offices and in the backs of cars. Plastic bags were not outlawed, but carrying them became socially unacceptable — on a par with wearing a fur coat or not cleaning up after one’s dog.

Drowning in a sea of plastic bags, countries from China to Australia, cities from San Francisco to New York have in the past year adopted a flurry of laws and regulations to address the problem, so far with mixed success. The New York City Council, for example, in the face of stiff resistance from business interests, passed a measure requiring only that stores that hand out plastic bags take them back for recycling.

But in the parking lot of a Superquinn Market, Ireland’s largest grocery chain, it is clear that the country is well into the post-plastic-bag era. “I used to get half a dozen with every shop. Now I’d never ever buy one,” said Cathal McKeown, 40, a civil servant carrying two large black cloth bags bearing the bright green Superquinn motto. “If I forgot these, I’d just take the cart of groceries and put them loose in the boot of the car, rather than buy a bag.”

INFLATION IN CHINA LIKELY TO INCREASE INFLATION IN U.S.

For years Americans have come to rely on inexpensive imports from China, and China has happily delivered. Inflation, long tame in China, is roaring again and American consumers can expect to pay higher prices for Chinese imported goods this year.

From The New York Times:

American consumers could see prices increase by as much as 10 percent this year on specific products — including toys, clothing, footwear and other consumer goods — just as the United States faces a possible recession.

In the longer term, higher costs in China could spell the end of an era of ultra-cheap goods, as well as the beginning of China’s rise from the lowest rungs of global manufacturing.

Chinese imports constitute 7.5 percent of spending by Americans on consumer goods, but they make up much bigger shares of several popular categories, including about 80 percent of toys, 85 percent of footwear, and 40 percent of clothing.

While no reliable figures exist on average Chinese wages, experts say that factory wages have risen 80 percent or more in many coastal areas in recent years, with the lowest wage about $125 a month.

To reduce costs, some factory owners are considering moving to inland China, where wages are lower, or to other parts of Asia, like Vietnam and Indonesia.

BIG THREE U.S. OIL COMPANIES COMBINED AVERAGED $233 MILLION PROFIT PER DAY IN Q4

Exxon Mobil announced this morning that it posted a quarterly profit of $11.66 billion for Q4, the largest operating profit ever posted by a U.S. company. That works out to roughly $130 million in profit per day for the quarter.

In related industry news, Chevron announced this morning that it posted a net income of $4.88 billion for Q4. Chevron is the second-largest oil company behind Exxon Mobil. On January 23rd, ConocoPhillips, the third-largest oil company, announced net income of $4.37 billion for Q4.

Combined, these three companies averaged profits of $233 million per day in the fourth quarter of 2007.

PAYROLL JOBS CUT IN JANUARY

For the first time since August of 2003, there was a loss in payroll jobs according to the Department of Labor report issued this morning. The unemployment rate fell to 4.9% from 5.0%, a modest improvement, but nearly all other news in the report was negative. For the 19th straight month manufacturers cut jobs, this time 28,000.

From the Bureau of Labor Statistics at bls.gov:

The small January movement in nonfarm payroll employment (-17,000) reflected declines in construction and manufacturing and job growth in health care.

In 2007, payroll employment increased by an average of 95,000 jobs per month. Both construction and manufacturing employment continued to decline in January, and health care employment rose.

Construction employment decreased by 27,000 in January and has fallen by 284,000 since its peak in September 2006. Over-the-month job losses occurred in residential building (-10,000) and residential specialty trade contractors (-18,000).

Manufacturing lost 28,000 jobs in January. Over the month, small declines occurred among many durable and nondurable goods industries. Manufacturing has lost 269,000 jobs over the past 12 months.

In the service-providing sector, health care employment continued to grow in January (27,000), about in line with average monthly gains over the prior 12 months. Within health care, over-the-month job gains occurred in ambulatory health care services (14,000), which includes offices of physicians, and in hospitals (10,000).

From Reuters:

The Labor Department report on Friday came in much weaker than anticipated by analysts surveyed by Reuters, who had forecast 80,000 jobs would be added last month.

"We are on the brink of a recession now," said Daniel North, chief economist for Euler Hermes ACI in Owings Mill, Maryland. "The job market is always a lagging indicator. This is a nail-in-coffin."

The report shocked financial markets.

The U.S. dollar fell sharply against other major currencies. U.S. equity index futures pared their big earlier gains and U.S. government debt prices cut earlier losses.

MICROSOFT BIDS $44.6 BILLION TO ACQUIRE YAHOO

Microsoft has offered $44.6 billion, or $31 per share, to acquire Yahoo. Yahoo's stock closed at $19.18 per share Thursday, so the offer is a premium of 62%. In pre-market trading Friday, Yahoo shares were trading at $29.06 at the time of this posting.

From The New York Times:

If consummated, the deal would redraw the competitive landscape of the Internet consumer services business, where both Microsoft and Yahoo have struggled to compete with Google.

Microsoft said the combination of the two companies would create efficiencies that would save approximately $1 billion annually. The software giant also said that it has an integration plan to include employees of both companies and intends to offer incentives to retain Yahoo employees.

Earlier this week, Yahoo said it would cut 1,000 jobs in an effort to refocus the company and reduce spending, and issued an outlook for 2008 that disappointed investors.