I was having lunch with a colleague recently and we were discussing a business he had recently acquired. After some negotiation he was able to buy this business for considerably less than the owners originally wanted, and less than an offer they had early in the process which fell through. I saw this article on The New York Times website this morning and it reminded me of that conversation, and the challenging times we are in.

The number of businesses for sale appears to be growing at a pretty rapid clip. This could be because some entrepreneurs are feeling squeezed due to the challenging economy, or simply because the inventory of businesses for sale is increasing due to a difficult credit environment. Either way, if you are in the market to do a transaction today, and have the resources to pull it off, now may be a great time to buy.

I am not a big believer in trying to time markets, but if the right opportunity comes along entrepreneurs may want to jump now while conditions favor the buyer!

Over the holiday weekend Alan Greenspan indicated that he believes the chances for a recession in the U.S. are still greater than 50 percent. Although some recent data has been better than expected, Greenspan feels recession chances have come down, but are still prevalent. Rising energy prices, along with a continued decline in home values, are still weighing on the U.S. economy. A looming recession may not be as long or as deep as initially projected, but a contraction is still likely to occur this year.

I am not a huge Ben Stein fan, I have found that many times I do not agree with his views of the economy, although he has a piece in today’s New York Times that I believe pretty much hits the nail on the head in regards to oil. The current acceleration of oil prices does look like a bubble, that does not mean we don’t have a long term energy issue. One look at any downtown parking lot, and you can quickly understand how much Americans depend on their cars, and the petrol to power them. Our government needs to lead the way, and create a reasonable energy policy that looks at every option, and not just finding more sources of oil. We are powering our economy on a depleting resource, time is running out, this will be “our moonshot.” 

The New York Times has a good article in their business section this morning on oil prices and where they are headed. One Goldman Sachs analyst is predicting oil is headed for $200 per barrel. T. Boone Pickens, oilman and corporate raider, is projecting oil to go to $150 and remain there for the rest of the year. There are even some analyst who are saying oil is in a bubble and will be falling back down to $70 per barrel later in 2008.

So it seems perfectly clear, either oil prices will continue to rise, they will rise to a peak and stop, or they will fall! The bottom line is that instability in oil producing countries is creating instability in oil markets. Currently demand is outpacing supply, and that is a metric that does not appear to be changing soon. I would argue if prices were to drop in the short term, it would be just that, short term. The long term trend of prices at the pump will continue to be up. At this time next year we will probably be wringing our hands about $5 per gallon gasoline, and just what we can do about it!

Oil prices continue their upward march todayas prices moved closer to the $130 mark, peaking over $129 per barrell. Some analyst are expecting $150 in the near term, that is more than 50 percent higher than just a few months ago!

The U.S. Producer Price Index, released today, grew less than expected last month as gasoline prices eased slightly; however, prices at the core level (with volatile food an energy numbers removed), rose more than expected. The bottom line is that the inflation animal is trying to sneak out of its cage.

The Conference Board released its Index of Leading Economic Indicators today. The index rose .1 percent after five straight months of declines. Today’s data indicates that the U.S. economy remains weak, but has not fallen into a recession.

Oil closed today above $127 as energy prices continue to take a bigger bite out of the American Consumer’s wallet, and the prospect of energy driven inflation has some U.S. Federal Reserve policy makers pondering raising interest rates, although many think that is off the table until 2009.

It appears that some analyst are indicating that the worst of the credit crisis may be in front of us rather than behind us! They also continue to point to their concern about consumer spending in the U.S. due to energy prices. All in all none of this is good news for an already shaky economy!

We will get a fair mix of growth data and some inflation data this week. Monday we will get a peek at the leading indicators. Tuesday we will get some inflation data when the Producer Price Index is released. Thursday we will get data on jobless claims, and Friday we will get existing home sales. Don’t expect any of this data to create a “sea-change” in the current perceptions of U.S. economic conditions. As long as oil prices continue to rise, and the housing market continues to tumble, our economy will remain in slow-motion.

I won’t repeat the post I have had the last several weeks in regards to oil prices, other than to say higher energy prices can’t be good! Oil did peak over $127 today, another new record! Housing starts were better than expected, and consumer sentiment is down again. It is very apparent we are stuck in a cycle, and will likely be in that cycle for some time.