The oil bulls stampeded last night and the herd is growing. Crude rose more than $8 per barrel on a Morgan Stanley report that Asia is taking an unprecedented share of Middle Eastern exports. The report said that oil could reach $150 per barrel within the month. Almost on cue, Nigerian workers threaten to strike if Chevron fails to meet its demands.

The broad US economy continues to find ways to grow despite mounting hurdles. Government reports this week of increases in GDP, exports, personal incomes, and new houses sold all defied economists’ estimates. Gains in some cases were significant, while others were increases on a declining scale.

With oil and gasoline prices raising to new highs daily it would be easy to paint a bleak picture for the future, particularly if energy was a large part of your expenses. Industries such as airlines, parcel delivery, and small businesses where transportation figures largely, are in a vise-like squeeze without signs of relief.

There remains at least one strong horse in theUSeconomy - exports. As the dollar falls in value relative to other currencies, American produced goods and services become more competitive in the global marketplace. Our trade deficits with creditor nations are shrinking dramatically. As a whole, our trade deficit is now 5% of GDP, down from a 7% peak. According to Credit Suisse it is only 3% when oil is excluded.

In our Brief two weeks ago we presented the possibility that the markets are sensing a comeback in the US economy. The Dow Jones Industrials are up 3.7% and the Nasdaq is up 4.7% from that point. Since their March lows the two indices are up 12.5% and 15.5% respectively. The bond markets and the currency markets are also moving in agreement as the dollar reached a five-week high yesterday and bond prices are trending down taking rates modestly higher.

For markets, the worst of the credit crisis may be over. Investors’ uncertainty over the size of financial institutions’ losses took stock prices below reasonable valuations as is typical when information is scarce. While the effects will last considerably longer for people directly impacted and for the economy as a whole, markets are indicating that knowledge is sufficiently filling the void. Citigroup, Merrill Lynch, JP Morgan, Washington Mutual, and Wachovia’s shares are all moving significantly higher after reporting huge losses due to credit write downs. The S&P is up 10% since its low on March 17th and the dollar rose the most against the euro in more than two weeks on Citigroup’s news. Perhaps investors are saying that the nearly $250 billion in financial losses reported so far represent the majority of the ultimate total.

Government to the rescue is becoming more widely accepted and even encouraged by Wall Street lately. The credit crisis hit another crescendo today as the nation’s fifth largest broker, Bear Stearns, obtained emergency funding from J.P. Morgan Chase and the New York Federal Reserve saying its cash position had “significantly deteriorated.” Traders in global currency markets are openly speculating that central banks will soon announce a concerted effort to support the value of the dollar. Earlier in the week central banks announced a concerted plan to buy troubled mortgages. On the heels of that news Ben Bernanke announced plans to lend up to $200 billion in Treasury securities in exchange for debt including private mortgage-backed securities that have slumped in value as homeowners defaulted on their payments.

It has been a tough week of news for the economy and business. US Consumer confidence dropped to the lowest level since the crash of ’87. GE reported disappointing quarterly and projected earnings sending their shares tumbling the most since 1987. Frontier Airlines, out ofDenver, was the fourthUSairline to declare bankruptcy in the past three weeks. Last, but not least, the US Congress has set a dangerous precedent on trade by halting cooperation with the Executive Branch and holding up a pact with Columbia. If the gambit is pushed it may affect numerous other negotiations and slow global commerce at a time when theUSis heavily dependant on exports.

“We are in a recession” according to Warren Buffett. “Across the board I am seeing a significant slowdown,” he said on CNBC television. Fed chair Ben Bernanke in his Senate testimony last week said that “the economic situation has become distinctly less favorable.''

Remember climbing a ladder for the first time and hearing the advice – don’t look down? Seems everybody looked down a couple of months ago and believed the worst. People seem to be frozen like deer in the headlights. In my conversations with friends and clients I hear that their businesses, some related to homebuilding and others completely unrelated, simply fell off the cliff a couple of months ago. While some can be explained by high fuel prices, poor exchange rates, and tight credit policies, the reasons are broader than the economic data. There seemed to be a psychological line that was crossed and people simply put on the brakes.