FEBRUARY IS ANOTHER BAD MONTH FOR CONSUMER SPENDING

The Commerce Department reported this morning that consumer spending, which accounts for two-thirds of total economic activity, was up 0.1% in February. When adjusted for inflation, consumer spending was flat. This would seem to lend more credibility to the claim that the United States is entering into a recession, as many economists have been saying recently.

U.S. DOLLAR AT $1.5779 PER EURO, EXPECTED TO WEAKEN FURTHER

The U.S. dollar traded at $1.5779 in late trading today and some are expecting it to fall past $1.60 if the Federal Reserve lowers interest rates at the April 30th meeting. The Fed is widely expected to lower rates at least a quarter of a point and perhaps a half point or more at that meeting, or perhaps even before, in an effort to use monetary policy to stimulate the economy. So far this year, the dollar has fallen by 7.5% against the euro.

FEBRUARY CONSUMER INFLATION IS FLAT

The Consumer Price Index came in flat this morning, showing no change in consumer prices from January through February. According to The New York Times, economists had expected an increase of 0.3%.

Core inflation, which excludes food and energy, also came in unchanged.

From AP via The New York Times:

Consumer inflation, which had been pushing relentlessly higher, posted its mildest reading in six months in February as the costs of energy and food moderated. The relief was expected to be short-lived, given that energy prices have resumed their upward climb.

The better-than-expected February inflation reading will likely be reversed in coming months, considering the big surge in energy prices in recent weeks. Crude oil hit a record high this week above $110 per barrel and gasoline pump prices jumped to a national record of $3.267.

U.S. DOLLAR HITS NEW LOW VERSUS EURO

The dollar weakened further Thursday, hitting a new low of $1.5644 to the euro. In addition, Venezuela appears to be experimenting with requiring that payments for oil be made in euros instead of dollars. If this were to catch on and spread to other OPEC nations, demand for the dollar would plummet, causing accelerated weakening of the dollar and further strengthening the euro.

From Reuters:

The dollar extended losses late on Thursday, hitting fresh record lows against the euro, in selling driven by technical factors.

The euro rose to $1.5644 against the dollar for the first time since it was launched, according to Reuters data. It last traded at $1.5627.

Late on Thursday, Reuters reported that Venezuelan state oil company PDVSA is requiring payment in euros in a recently opened fuel export contract, citing a trader who has purchased a cargo under the contract.

CARLYLE CAPITAL FUND COLLAPSES UNDER STRAINS OF LEVERAGE

It can be difficult to make sense of the collapse of a private equity fund, but when you look behind the curtains and see that there really was never much to see in terms of equity, it can cause one to question the sanity of the financial markets. For example, for every $1 of equity Carlyle Capital had, it borrowed $31 additional to invest. That meant if the investments were good, everyone was happy - loans were repaid, investors made money, and company executives made fat bonuses; however, when markets and investments soured, the fund was destined to collapse. Perhaps it is time to step in and begin some serious regulation of these private investment vehicles as it isn't only the investors in those funds that get burned when they go bad. Instead, a ripple effect is felt throughout the global financial markets and everyone shares a small piece of the loss. Sadly, this is likely one of many failures to come.

For more on Carlyle Capital's implosion, read this article at The New York Times.

NEW $5 BILL MAKES DEBUT

The redesigned $5 bill will begin circulating today. The bill is designed to foil counterfeiters who have taken to bleaching the $5 bill to remove the ink and then printing a $100 bill on top of it. One prominent feature of the new $5 bill is the use of purple ink. For more info on the redesigned bill visit the Department of the Treasury's page that lists all of the security features.

DOLLAR HITS NEW 12-YEAR LOW VERSUS YEN

The U.S. dollar hit a 12-year low versus the Japanese Yen in trading today, dropping to 99.8 yen and settling in around 100. In the past 24 hours the dollar has weakened 1.6% against the Japanese yen, which will make Japanese-manufactured goods more expensive in the U.S. when paid for with U.S. dollars. In turn, American-made goods will be less expensive to Japanese consumers who will pay in yen.

From The New York Times:

We are entering dollar crisis mode," said Derek Halpenny, currency economist at BTM-UFJ in London.

"Looking at the markets there is a complete loss of confidence and that's because the markets are concerned over the U.S. financial sector and ultimately what the (Federal Reserve) will be forced to do to support that sector," he said.

JANUARY TRADE DEFICIT IS $58.2 BILLION

Imports and exports hit all-time highs in January as imports came in at $206.4 billion with exports totaling $148.2 billion. With the price of oil at $107.52 this morning and consistently closing over $100 per barrel, expect March to set a new record for imports.

From The New York Times:

The United States' trade deficit grew larger in January as imports -- including crude-oil prices -- zoomed to all-time highs.

The latest snapshot of trade activity, reported by the Commerce Department on Tuesday, showed that the country's trade gap increased to $58.2 billion. That was up from a trade shortfall of $57.9 billion in December and was the highest since November.

Imports of goods and services climbed to a record high of $206.4 billion in January. The United States' voracious appetite for imported crude oil, where prices skyrocketed to the loftiest on record, figured into the increasing demand for overall imports.

The trade gap widened even as exports of U.S.-made goods and services totaled a record high of $148.2 billion in January. The declining value of the U.S. dollar, relative to other currencies such as the euro, is helping to make U.S.-made goods cheaper and thus more attractive to foreign buyers.

63,000 JOBS LOST IN FEBRUARY

The February jobs report showed that 63,000 jobs were cut in February, yet the unemployment report showed that the unemployment report improved from 4.9% to 4.8%. How? Because the unemployment report does not count anyone who quits looking for work and a good many people who are unemployed have quit looking in this difficult job market.

From USA Today:

Employers cut jobs for a second month in February while the unemployment rate fell as more people quit looking for work in the weakening job market, the government said Friday in a report that led to further calls of a 2008 recession.

From The New York Times:

The worst fears of consumers, investors and Washington officials were confirmed on Friday, as deepening paralysis on Wall Street collided with stark new evidence of falling employment and a likely recession.

In a report that was far worse than most analysts had expected, the Labor Department estimated that the nation lost 63,000 jobs in February. It was the second consecutive monthly decline, and the third straight drop for private-sector jobs.

Though monthly payroll data are notoriously volatile and subject to revision, the jobs report was so bleak that many of the few remaining optimists on Wall Street threw in the towel and conceded that the United States was already in a recession.

BUFFETT WORLD'S RICHEST PERSON

Warren Buffett passed this good friend Bill Gates and Mexican telecom monopolist Carlos Slim Helu to become the world's richest person with $62 billion in wealth.

From Forbes:

The number 13 has long been considered unlucky by superstitious people around the globe. How fitting, then, that Bill Gates' reign as the world's richest person ends after his 13th year at the top.

Despite being worth $58 billion, $2 billion more than last year, Gates is now just the world's third-richest person, ceding the top spot ranking to his good friend and partner in philanthropy, Warren Buffett, whose net worth jumped $10 billion to $62 billion. (All stock prices and net worth valuations were locked in on Feb. 11.) Ranked No. 2 is Mexican telecom tycoon Carlos Slim Helú, whose fortune has doubled in just two years to $60 billion.

PRESIDENT BUSH AND OPEC TRADE BARBS AS OPEC MAKES NO CHANGE IN OUTPUT

Yesterday President Bush criticized OPEC by saying "Understand the consequences of high energy prices. I think it's a mistake to have your biggest customers' economies slowing down as a result of higher energy prices." His statement was likely more than a criticism, it was intended to encourage OPEC to commit to increasing production at its meeting today. It did not work, as OPEC voted to keep output at current levels.

After the OPEC meeting today, OPEC President Chakib Khelil said, "If the prices are high, definitely they are not due to a lack of crude. They are due to what's happening in the U.S. There is sufficient supply. There's plenty of oil there." He went on to say that the global oil market is being impacted by "the mismanagement of the U.S. economy." His mismanagement comment seems to be a reference to the policies that are causing the U.S. dollar to weaken to what some are finding to be uncomfortable levels.

As of 10:15 a.m. Central, light sweet crude it trading at $102.66 on the NYMEX, up $3.14.

From AP via Yahoo:

Khelil said crude stocks were well within their five-year average and the 13-nation group was not inclined to either boost or reduce its current output of about 32 million barrels a day. OPEC satisfies roughly 40 percent of the world's demand for crude.

"In truth, OPEC's decision not to pump more oil is a reflection that supply is relatively good," said Anthony Sabino, a professor of business at St. John's University in New York.

"What is driving oil prices up to the stratospheric level of over $100 per barrel is the U.S. economy, now undeniably in recession," he said. "It's not so much the price of oil is going up -- it's that the value of the U.S. dollar, sad to say, is slumping."

Oil shot up a dramatic 19 percent last month as the falling dollar prompted speculators and other investors to shift cash to crude and other commodities as a hedge.

Key cartel members said this week that prices in the $85 to $90 per barrel range would be optimal.

The 13 OPEC members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

SERVICE SECTOR PERFORMS BETTER THAN EXPECTED IN FEBRUARY

The Institute for Supply Management (ISM) reported this morning that the index of non-manufacturing activity came in at 49.3, up from January's 44.6. The 49.3 reading is still slightly negative in that a reading below 50 points toward contraction, but it is very close to 50 and well above what analysts expected. Analysts surveyed by Dow Jones had predicted 46.5, while analysts polled by Reuters had expected 47.5. The relatively positive news started an early rally on Wall Street with the Dow Jones Industrial Average (DJIA) up 0.61%, the Nasdaq up 0.89%, and the S&P 500 up 0.74% at 10:07 a.m. Central.

YAHOO MAY DELAY ANNUAL MEETING IN AN EFFORT TO THWART MICROSOFT TAKEOVER

The New York Times is reporting that Yahoo is considering several options in an effort to avoid being taken over by Microsoft, including delaying their annual shareholder meeting. The twists and turns of this deal get more interesting by the day.

From The New York Times:

Yahoo is considering several options, including a plan to postpone its annual meeting, people close to the company said on Tuesday.

Microsoft had been preparing to nominate a slate of directors to the board of Yahoo by next Thursday, the deadline for mounting a proxy contest. On Wednesday, Yahoo said it was extending the deadline for nominating directors until 10 days after the announcement of a date for its annual meeting — but gave no indication when that announcement might come.

Under the laws of Delaware, where Yahoo is incorporated, a public company cannot go more than 13 months without holding an annual meeting. Yahoo held its annual meeting last year on June 12.

The delay could leave room for Microsoft to reach a negotiated, friendly deal with Yahoo, which would be made much more difficult if Microsoft decided it needed to pursue the proxy contest. On the other hand, Yahoo’s continued maneuvering might just harden Microsoft’s resolve.

Yahoo’s investors could take the view that by postponing the meeting the company is disenfranchising its shareholders. The move could lead to lawsuits from Microsoft or from Yahoo shareholders.

HOW BAD ARE THINGS AT CITI?

Citigroup lost $9.83 billion in Q4, in part due to $18 billion in writedowns. Now, after raising over $14.5 billion in new funding from Saudi Prince Alaweed, the Kuwait Investment Authority, and the Abu Dhabi Investment Authority, it seems Citi needs more capital or it is in big trouble.

From MarketWatch:

Sameer Al Ansari, Chief Executive of Dubai International Capital told delegates at a private equity conference that it will take more than the combined efforts of the Abu Dhabi Investment Authority, the Kuwait Investment Authority and Saudi investor Prince Alwaleed bin Talal to save the bank.

"It's going to take more than that to rescue Citi," Ansari said. He added that more write downs are expected and that Gulf investors would be required to bolster Citi.

Al Ansari said "it would take a lot more money to rescue Citigroup." A spokesperson for Citi was unable to comment immediately when called Tuesday.

BERNANKE ASKS BANKS TO FORGIVE PORTION OF MORTGAGES

From Bloomberg:

Federal Reserve Chairman Ben S. Bernanke, battling the worst housing recession in a quarter century, urged lenders to forgive portions of mortgages for more borrowers whose home values have declined.

``Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done,'' Bernanke said in a speech in Orlando, Florida today. ``Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.''

WARREN BUFFETT SAYS U.S. IS IN A RECESSION

Although the technical definition of a recession is two consecutive quarters of negative growth in GDP, so it is not yet possible to officially declare that we are in a recession, billionaire businessman Warren Buffett told CNBC that the United States is in a recession "by any common-sense definition."

From USA Today:

Billionaire Warren Buffett says the U.S. economy is essentially in a recession, even if it hasn't met the technical definition yet.

Buffett said Monday on CNBC-TV that reports he gets from the retail businesses owned by his holding company, Berkshire Hathaway, show a significant slowdown in purchases.

ISM REPORT SHOWS DECLINE

The Institute for Supply Management (ISM) issued its February report that showed that the index of national factory activity declined from 50.7 in January to 48.3 in February. A reading below 50 indicates contraction and is a negative sign.

OIL SETS NEW RECORD HIGH

Oil is trading at over $103 per barrel this morning and has risen as high as $103.95.

From The New York Times:

Oil prices surged to a new record high Monday as the dollar weakened to another low against the euro.

Light, sweet crude for April delivery rose $1.93 to $103.77 on the New York Mercantile Exchange after earlier rising as high as $103.95. That's higher than the price of $103.76 that many analysts believe oil hit in 1980, when adjusted for inflation into 2008 dollars.

Oil's most recent run into record territory has been driven by the greenback's slump against other world currencies. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.