Economics Update

Let's lead off with the dollar on it's way down, it's at a 3-year low vs. the Yen, and a new record low vs. the Euro, which is one of the things that has oil breaking another all time record, $104/bbl.

The value of the dollar is dropping, so the price of oil, which is sold in dollars, is increasing. One wonders how many countries are considering a Euro oil bourse other than Iran.

In real estate, we have the largest drop in residential and commercial construction in 14 years.

So much for commercial real estate being "immune" from this contagion.

The poster child for the real estate meltdown, Countrywide, is still hemorrhaging on its mortgages, with 90 day delinquencies at 5.6% (up 900% from a year ago), and this is threatening to torpedo the deal with Bank of America to buy them out.

FWIW, there are more foreclosures than sales in a number of the states in the West, and Florida.

On the macro level, we have Warren Buffett saying that the recession is pretty much all ready here, and the president of the Philadelphia Federal Reserve saying that inflation is not important, and that the first priority is keeping the economy on track.

When a central banker says, "Inflation, no big deal", you know that you are up a certain creek sans paddle.

Further evidence of a slowdown is the fact that Ford and Toyota sales declined in February. Ford having declines is not a shocker, but when Toyota is not selling cars, no one is selling cars.

The happy news is that the FDIC doesn't see there being a surge in bank failures, though it does make one wonder why they are calling back retirees and generally staffing up.

They expect to be as busy as a one legged man in an ass-kicking contest.

In the world of municipal bonds, which should be safe-havens in a time like this, it appears that the costs are increasing, and the ratings falling, for municipal bonds, because of the collapse of the auction security markets.

In bond insurance, we have a new, or at least new to me, bond insurer bleeding, Security Capital's to the tune of $1.5 billion on various complex investments.

It's already been downgraded.

Finally, Buffet is now saying that his offer to buy the muni business of bond insurers is no longer operative.

Berkshire Hathaway is aggressively bidding on municipal bond portfolios, and as other insurers are downgraded, their position can only get stronger.