As many of you know, I’ve been extremely bearish on the economy and the fall out from the sub-prime crisis. The rescue of Bear Stearns in March dramatically improved sentiment. Had the Fed allowed Bear Stearns to fail, the financial fallout on the system could have been horrific. Its rescue led some on Wall Street to declare the worst was over in the sub-prime crisis.

Many still have their doubts. When I interviwed Alan Greenspan, former chairman of the U.S. federal reserve, he said he certainly wouldn’t say the worst is over.

And Warren Buffet thinks banks are going to feel the pain for a long time. Banks and securities firms have reported credit losses and asset writedowns of $323 billion since the start of 2007, and that figure will rise as the fallout from the sub-prime crisis continues to take its toll.

I’m not so concerned about a major bank failing. My concern is the impact on the real economy. House prices continue to fall in the United States, and the pace of decline has accelerated each month in the last 10 months.

Meanwhile, bankruptcy filings in April increased nearly 50 percent compared to a year ago has businesses feel the pain from a slower economy. Even more worrrying, banks continue to tighten lending standards.

According to ING: “There are only one or two periods when tightening standards have ever been tigher, and the pick up this quarter from last quarter, rather than looking like the last gasp of a failing trend, was actually an acceleration from the previous quarter.

“In other words, we would not be at all suprised if lending standards next quarter were substantially tighter, perhaps tighter than at any time since the data began to be compiled in 1990.

“Consequently, corporate default rates look likely to rise substantially from the very low rates we observe today,” ING adds.

Add to that tapped out consumers, and the worst doesn’t look over to me.

If you agree or disagree, let me know, I always like to hear from you, all your responses to my previous blogs have been fantastic. Keep it coming!

If you think the price of crude oil can’t go any higher, think again. It could hit $150 to $200 a barrel. That’s not the prediction of some madman, but the prediction of analysts at Goldman Sachs, led by Arjun N. Murti.

Murti and his team have credibility. He’s the one who first wrote of a “super spike” in oil back in March of 2005. At that time he said oil could cost between $50 dollars and $105 a barrel through 2009.

Now they’ve upped the ante. “The possibility of $150-$200 per barrel seems increasingly likely over the next six to 24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty.”

In short, supply is failing to keep pace with demand. “Non-OPEC supply is strugggling to grow with notable declines being seen in Mexico and Russia showing signs of rolling over following an extended period of rapid growth,” the Goldman Sach analysts pointed out.

While OPEC producers say spare capacity is low and there’s rising consumption in their own countries.

Another reason for higher prices is because major oil exporting countries are limiting foreign investments, hurting supply growth. At the same time, demand from developing countries is rising on the back of booming economies and power shortages, increasing demand for gasoil and fuel oil.

“The core of our super-spike view has been that a lack of adequate supply growth coupled with price insulated non-OECD demand growth” means higher prices, according to the Goldman Sachs analysis.

And if you’re looking for a scapegoat, its easy to blame the speculators for high oil prices, but that’s misguided according to the Goldman analysis. “Unfortunately, we do not think the energy crisis will be solved by finding and punishing the big bad speculator.”

As I write this, oil remains above $120 a barrel. Even looking out as far as 2016, the market is betting that oil will remain above $100 a barrel.

We all want cheaper goods made in developing countries, but that means higher oil consumption to manufacture them, and rising salaries in places like China mean more demand for cars and electricity.

So is it so far fetched to think that oil could hit $200 a barrel within two years? I don’t think so.

Something to think about the next time you’re waiting in you’re in your car in traffic, cursing the high price of petrol or your electricity bill, watching all those people riding past you on their bikes.

With the economy teetering on recession, you would think it would be a terrible time to be a retailer … of any sort.

So I was struck when I read that Steve Jobs is busy expanding Apple’s empire. Tuesday, Apple announced a deal with Vodafone to distribute the iPhone in 10 countries.

In Italy the company will work with two providers, Vodafone and Telecom Italia - a first and perhaps a sign of things to come. Apple says it wants to sell 10 million iPhones this year. It is an extraordinary goal given that the price tag is much higher than rivals.

It may not be as crazy as it sounds. If the company changes its strategy and starts partnering with multiple operators, as it has in Italy, it would remove a big purchase hurdle.

In the U.S. iPhones are sold exclusively through AT&T.

A lot of people I know have been reluctant to buy an iPhone because they don’t want to change mobile phone carriers. And there is another force at work that may do even more to help Apple reach those lofty goals.

Consumers, in love with their iPods and Macs, are asking their bosses to switch to Apple products at work. At least that is what the cover story of the latest BusinessWeek magazine claims.

The article cites a Yankee Group survey of 250 companies that showed 87 percent now had some Apple computers in their offices, compared to 48 percent just two years ago.

What is stunning about that number is that Apple does not market to corporations. This is purely a word of mouth phenomenon.

If it turns out to be true, it could mean huge things for Apple. The corporate computer market is worth billions. Apple has just a tiny fraction of that. Any increase would be a nice boost to the bottom line.

There are, of course, many reasons to be skeptical. Microsoft is the dominant player in the corporate market and is not likely to cede any market share without a fight.

Servicing corporate clients requires a big support staff and is expensive. And then there is the question of Jobs himself. His return to the CEO post revitalized the company. Some worry Apple is too dependent on his vision.

Those are all valid concerns. But Apple has an unparalleled ability to connect with consumers and build loyalty.

Ten years ago this month, Jobs and his design team unveiled the first colored iMac, the Bondi Blue. It wasn’t technically that much better than its rivals, but it looked amazing. People flocked to it. And Apple hasn’t looked back.

People buy one product and they want more. Analysts call it the halo effect and I have to admit, I believe it. Six years ago I broke down and bought an iPod. The experience has been so satisfying that the next computer I buy will be a Mac. If my company offered it, I’d jump at the chance to have an iPhone.

The headlines may be full of doom and gloom predictions about the consumer, but Apple seems to be bucking the trend. Yes, the company warned the third quarter may be tough, but analysts think they are being overly conservative. The consensus is that the stock, which has already rallied sharply, still has further to run.

I would love to hear what all of you think of Apple now that the iPhone is going to be widely available in Europe.

The world’s richest person, Warren Buffett, didn’t get that way by being a fool. He says he only invests in businesses he understands. At his annual shareholders meeting held this past weekend the sage of Omaha, as he is known, once again said he believes the U.S. economy is in recession.

His definition of recession is easy to understand: “I would define that as a situation where people are doing less well than they were three months, six months or eight months earlier and most businesses find themselves in that position too.”

He said housing remains a huge problem. I’ve been banging on about this for several months, even longer, about a recovery in housing being a key to a recovery in the U.S. economy. I’ve also said it would be wrong for people who bought more house than they can afford to be bailed out by the government.

Buffett, a man far wiser than me, echoed my sentiments when he said the government should help those who were misled on what they would owe, but the government shouldn’t help people who bought more house than they could afford of who’s home value has declined .He said that borrowers shouldn’t be protected against mistakes. Amen to that.

Meanwhile, Wall Street is acting like the worst is over in terms of the subprime crisis. The engineering of the buyout of Bear Stearns by JP Morgan drew the line in the sand in terms of being a watershed event. Had it been allowed to fail, the knock on effect to the financial system would have been massive.

But there’s a big difference between not allowing a major financial institution to fail, and the worse being over. That’s also something I’ve been talking about for a long time.

Buffett isn’t optimistic either. He says the sorry state of the housing market will hurt bank results for “a couple of years,” and that the industry’s write downs and losses aren’t over “by a long shot.”

When I interviewed Alan Greenspan the week before last, he also expressed skepticism at the worse being over. He doesn’t see house prices bottoming out until the second half of next year.

Buffett also said he read an annual report of a major investment bank, all 270 pages. He said there were 25 pages which he didn’t understand. Now if the world’s smartest investor can’t understand certain parts of an investment bank’s report, is it any wonder we ended up in the mess we’re in?

Buffett’s track record is legendary, annual returns of 21.5 percent over 43 years. So when he says there’s more pain too come, I’ll believe him more than someone on Wall Street who thought they were smart with their financial engineering but proved to be a fool, triggering the worst financial crisis in the post-war period.

Is it possible for a company to make too much money? It is if you are big oil. Thursday, Exxon Mobil said it made a staggering $11 billion in profits in the first three months of this year. It is the second highest U.S. corporate profit on record. (Exxon’s 4th quarter holds the top spot!) Although smaller in overall numbers, B.P. and Shell did even better during the first quarter. Consumer advocate groups are outraged. Oilwatchdog.com said the roof-busting profits are coming at the cost of squeezed consumers and the suffering economy. They want U.S. lawmakers to do something.The three Presidential hopefuls all say they have a plan. Democratic contenders Hillary Clinton and Barak Obama have both proposed a “windfall profit” tax on oil companies that would be used, in part, to fund renewable energy research. Clinton also wants to use that money to pay for a suspension of the federal gas tax this summer. A gas holiday, if you will, for consumers. The presumptive Republican candidate, John McCain also supports a gas holiday, though he is not in favor of a windfall tax.

Oh please. Energy is one of the biggest challenges facing our country and this is what they come up with? A gas holiday? Most energy experts say cutting the federal gas tax for three months would do little to actually help consumers and may actually result in worse roads. The federal gas tax goes toward highway construction and repairs. A windfall tax on oil companies doesn’t sound much better. The U.S. Congress can’t agree on anything, what makes anyone think they will be able to effectively use any new tax money to find new renewable sources of energy?

I think a more realistic solution comes from the ranks of oil royalty itself. Descendants of the oil baron John D. Rockefeller went public this week saying they will back a shareholder rebellion to try and force Exxon’s management to put more resources toward alternative energy. A group of resolutions, to be introduced at this month’s shareholder meeting, call on Exxon to adopt a new energy policy, fund research on climate change and set public goals for reducing carbon emissions. The great-granddaughter of John D. was quoted as saying, “the truth is that Exxon Mobil is profiting in the short-term from investments and decisions made years ago ….and ignoring the rapidly shifting energy landscape….” Another said, “They are fighting the last war and not seeing they are facing a new war.”

It is too early to tell whether the resolutions will pass, but if they do it could signal an important shift in the energy sector. At the very least, Exxon shareholders are thinking longer term. I wish I could say the same about U.S. politicians. Trying to buy votes with a summer gas holiday doesn’t help solve our energy problem. Neither does blaming the oil companies. We need a comprehensive energy policy that encourages private sector solutions and helps American consumers come to terms with a harsh reality: we need to stop using so much energy. Forget about knocking 18 cents off a gallon of gas this summer, how about a bigger tax break on a hybrid?

That had some economists swifting suggesting the Fed is in a complete state of denial.

Rob Carnell of ING quickly sent out an email with the subject head: “Who are you kidding Mr. Bernanke?”

“Our economics team view the statement as representing a Fed in denial over the scale of the forthcoming downturn and one which be forced to cut rates later this year, when the labour market starts to weigh on consumption,” he predicted.

Ian Sheperdson, Chief U.S. Economist at High Frequency Economics, also took issue with the Fed dropping the phrase about downside risks to the economy remaining.

In a sharp rebuke to the Fed, Shepherdson wrote: “We think this is completely wrong: Downside risks to growth do remain, and they are substantial.”

To underscore this point he not only italicized it, but put it in bolder and darker ink then the rest of his analysis. His rebuke didn’t end there.

“Moreover, we wonder quite what the Fed sees in the data over the past 27 days that we don’t. Mr. Bernanke himself said in Congressional testimony on April 2 that the risks remain to the downside. We have no argument with Keynes’ dictum that when the facts change, you should change your mind.

“But we’re a bit baffled by the Fed’s version, changing its collective mind in the absence of any change in the facts. Indeed we’d go further: The key incoming data since March 18 have deteriorated, with consumer confidence dropping further, the decline in home prices accelerating, and payrolls falling.”

Shepherdson thinks that by August the Fed will be forced to ease again. Several other economists also think the Fed have to cut rates further, with the most bearish down to 1 percent by year end, while others think 1.50 percent will be the floor. There is a camp who think the Fed is done easing with this latest cut to 2 percent.

In its statement the Fed did acknowledge that economic activity remains weak, but that’s a lot different than suggesting that further deterioration is behind us.

In my view, and in the view of several economists, plenty of risks remain, and they are all on the downside.

More signs of stress in the U.S. economy. Consumer confidence continues to fall and is now at its lowest level since the beginning of the Iraq war in March of 2003. Consumers are feeling the pinch of higher gas and food prices, and less wealth because of falling house prices. Plunging house prices may actually be closer to the mark.The closely watched Case-Shiller numbers showed a near 13-percent year-on-year drop in their latest report. It gets even more depressing. If you take a three month snapshot, and annualize it, the rate of decline is a shocking 22 percent.

No one’s bragging anymore about how much money they’ve made on their home. And it’s likely to get worse before it gets better, which will complicate any hope of recovery in the economy.

Consumers might get a slight reprieve from tax rebate checks now being sent out, but many of those getting it will pay down debt or save it.

And given how quickly house prices are falling, the rebate is a drop in the economic ocean. It’s estimated a trillion dollars of value has been wiped off homes in just two months … nearly 10 times the size of the federal tax rebate.

I’ve been saying for a long time, you can’t get a recovery in the economy until you get a recovery in housing, and that recovery is still a long way off.

Some blame Alan Greenspan, the former Fed chairman for helping sow the seeds of the housing bubble and the subsequent fallout. Greenspan of course has answered his critics and defends his policies. Agree or disagree with whether Fed policies played a role in the current financial crisis, everyone still wants to know Greenspan’s thoughts.

I had a rare opportunity to interview him for 50 minutes last week. It’s something few journalists get to do and it wasn’t really planned.

I had gone to the European Pensions and Investments Summit 2008 in Montreaux, Switzerland. About 450 people attend. The attendees have collectively about $3 trillion of assets under management. CNN marketing asked me to attend to underscore our commitment to business programming. I originally went to moderate a panel with five chief European economists, but while there I was asked to interview Greenspan.

The interview was conducted via satellite, with the 82 year old Greenspan in Washington. For me there was one question that loomed above all others, the question everyone wants to know: How much longer will the fallout from the subprime crisis last?

Some key players on Wall Street think the worst is now over, and judging by the performance of financial stocks since March 17 (the day the Fed announced the rescue of Bear Stearns) investors are acting like the worst is behind.

Greenspan however sees it differently. He told me he wouldn’t go so far as to say the worst is over, even in the financial sector. In terms of the economy itself, he sees a turnaround in housing as a key to moving beyond the crisis. And here’s the bleak news, he doesn’t see house prices bottoming out until the second half of next year, specifically in the third quarter.

The panel of European economists I interviewed, with the exception of one, is fairly bearish on the outlook for the U.S. economy, with one of those economists seeing no recovery until 2010.

And course, the longer the U.S. economy stays weak, the greater the knock on effect on the global economy.

There are a lot of headwinds for the U.S. economy… banks are keeping lending tight, consumers in the U.S. are getting squeezed by rising petrol prices, rising food prices, and falling house prices.

I think it will take much longer than many expect for the economy to recover. That’s why I wasn’t surprised when Greenspan told me he’s not convinced the worst isn’t over. It may be easy to criticize him, but on this score its tough to disagree with him.

Americans woke up Thursday morning to some shocking headlines. Some of the country’s biggest warehouse retailers were limiting how much rice customers could buy.

Rice restrictions at a Costco store in San Francisco.

Sam’s Club, a division of Wal-Mart, said customers would only be allowed only four 10-kilogram (20lb) bags of jasmine, basmati or long grain white rice. Its competitors, Costco and BJ’s, were also said to be contemplating limits. Food rations of any kind are unheard of in the U.S., so this was very big news indeed. For at least a little while.

It didn’t take long for everyone to figure out the rice shortage was mostly media hype. Yes, some warehouse discounters seem to be experiencing inventory issues as small businesses and restaurants stockpile to avoid higher prices. But the majority of supermarkets have no restrictions whatsoever. Unlike places like Haiti and Egypt where real shortages have resulted in riots, in the U.S. rice is readily available. Expensive, but available.

That doesn’t mean the news reports aren’t useful. There is a school of thought in financial circles that when the media finally sits up and takes notice, the tide has already turned. This may be true for commodities. After making a record run at $120 a barrel Tuesday, crude oil fell $4 in Thursday’s New York session before finally settling around $116 a barrel. Gold fell to a four-month low. Rice prices stayed close to record levels, but wheat, corn and soybean futures all moved lower.

Global consumers could clearly use some relief from sky high fuel and food costs. But investors who have exposure to the commodity markets might want to take profits and take cover. An oil trader I spoke with in New York warned crude was no longer trading based on the rules of supply and demand. Instead, he said oil had now become a financial tool. Farmers have complained the same is happening in grain markets. Speculators are in the driver’s seat. Up till now they have been buyers. If that changes, the sell-off could be swift and painful. 

LONDON, England – Don’t know if you caught the article on CNN.com/living about what some parents spend on children’s birthday parties, but it speaks volumes about what’s gone wrong in our society.

Just to recap, one woman from Manhattan spent $5,000 on a birthday party for her daughter. She booked a fondue restaurant, hired a musical troupe to perform as the Wiggles (her daughter’s favorite group) and ordered a four-layer cake. Each guest took home a Fisher Price guitar and custom CD. Her daughter’s age, 3. I didn’t even know that 3 year olds like fondue.

And apparently it’s not just in Manhattan. There’s a children’s birthday party planning company in Southern California where parties can take six weeks to plan and cost as much as $10,000 dollars. The parties can range from former Marines running military themed parties to tea parties with expensive china.

The owner of the party service says: “We really promote a healthy balance of living year round, but it’s OK to indulge your child once a year, because it’s about making a memory.”

Making a memory, give me a break. It’s making a statement, which is about skewed values and bragging rights to your friends. What child of 3, let alone 10, needs to have $5,000, let alone $10,000 spent on a birthday party? She gives the word indulgence new meaning. The one thing she has right is calling her party planning service Over the Top Productions.

When I was growing up it was about getting some other children to come to your house, having a cake with candles, playing a few games, and that was enough.

I realize the world has moved on, but now it’s gone mad, and it sends the wrong signal.

Most people of course, don’t have $5,000 to $10,000 to blow on a child’s birthday party, let alone $1,000, or even $500. Want to create a memory for your child? How about lots of love and laughter. Looking back, your child will remember that much more than fondue and fine china.