In a related story, the dollar index remains a point above its historic low at 71.5.

Still, don’t rule out the good ol’ U.S. of A. just yet.
According to KPMG, one of the “big four” accounting firms, only Mexico and Canada offer a cheaper place to do business. The U.S. ranked seventh in this same study two years ago. KPMG cites the plunging dollar as the predominant reason behind its No. 3 ranking this year.

For what it’s worth, the stewards of the survey also say the U.S. is the cheapest place in the world to make cars.

However, it sounds like KPMG may have more to worry about than inexpensive parts and labor.

New Century — the subprime lender that bit the dust last April — has been the target of a U.S. Justice Department probe. As many expected, government lawyers found that New Century “engaged in a number of significant improper and imprudent practices related to its loan originations, operations and financial reporting.”

But the real kicker is they also say KPMG’s accounting practices contributed to New Century’s demise “by enabling them to persist and, in some instances, precipitating the company’s departures from applicable accounting standards.”

Thus, most of the 450 companies and individuals currently suing New Century can now sue KPMG for “professional negligence.” You can also count on a whole firestorm from Wall Street, since KPMG kept New Century’s books on the wrong side of the margin for most of 2006.

Deep pockets: KPMG employs about 123,000 accountants, attorneys and office clerks. The firm cleared about $20 billion in fees last year.

Crude oil gained a few more bucks yesterday and overnight, to just short of $108 per barrel this morning. Buying momentum was in place since Wednesday’s worse-than-expected U.S. supply report. Then this happened:

That’s a major Iraqi oil pipeline in Basra, not long after being bombed by “insurgents.”

To be expected, traders bought first and asked questions later, pushing crude up $2 yesterday. But despite the panic, the pipeline will be repaired quickly and exports will hardly be affected. As we write, the fear premium is backing out of crude prices, and they’re settling in around $106.

After inching up all week, gold opened down this morning in New York. At the opening, it fell $25, to $930.

Gas prices, however, have continued to creep higher. The current national average is $3.27, about half a cent off its all-time high.

Delta Air Lines tacked on another fuel surcharge yesterday. It’ll now cost you an extra $10 to fly with the Atlanta carrier. According to farecompare.com, the average fuel surcharge on domestic U.S. flights has grown from typically nothing at the beginning of 2007 to about $50 today.

The Reuters/University of Michigan “consumer sentiment” survey released today confirms the gloom we reported from the Conference Board on Tuesday. The sentiment index fell to 69.5 in March, from 70.8 in February.

“A recession has occurred whenever the sentiment index has declined as much as it has fallen during the past year,” said Richard Curtin, the director of the survey, “including the recessions occurring from the mid-1950s to the early 2000s.”

Before the late Dr. Kurt Richebacher died, he used to lament how American economists had come to rely on surveys, like the consumer sentiment index, for their analysis. “What the hell do consumers know about the economy?” he would grumble in his German accent.

As if to prove his point, despite what they told the Conference Board and quants from the University of Michigan, consumers spent 0.1% more last month than they did in January. Consumer income also rose 0.5% during the month, up a mite from what the economists who were polled on the subject expected.

“So the Commerce Department says GDP grew at 0.06% in the fourth quarter,” writes a reader. “Didn’t it really mean to say Bush and his cadre of liars ‘ordered’ GDP to have been positive for the quarter? Since George is oblivious to the facts, he was no doubt informed that two quarters of negative GDP growth have historically meant bad news for the economy.

“Add that to two consecutive negative ISM and employment reports and you have recession spelled out in capital letters. Since he and Paulson have spent considerable time in front of the cameras telling us how wonderful the economy is, a negative GDP would have made them look like even bigger liars than is already obvious to even the most casual of observers.”

The 5 Responds: C’mon, now. The 5 is a place for civilized discourse. No need to hurl epithets at the commander in chief and his henchmen.

“Apparently, Korean economics are so sound,” writes another, responding to yesterday’s statement that the South Koreans will begin lightening their load of U.S. debt, “they can turn away from U.S. investment. That is great! It gives us the opportunity to help our own economy:

“1. We still maintain a rather healthy U.S. military presence in South Korea, and if we bring those troops home, I am sure the Korean economy can fill the gap with native South Korean troops. Think of how much our spending could be reduced. That also would relieve some of the strain on our military, which many believe is spread too thin.

“2. Rather than allow the Korean auto industry to further destroy the U.S. auto business with cheaper imports, we could impose some realistic tariffs on its vehicles imported to the U.S., and that would also provide some funding to our government coffers and help reduce the U.S. tax burden.

“Besides, I never really liked kimchi.”

The 5: Yeah, that’s what the world economy needs, a good bout of fearful retrenchment. Bring it on.

Cheers,

Addison Wiggin
The 5 Min. Forecast

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