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    Thoughts From the Frontline, November 2007

    The Financial Fire Trucks Are Gathering

    November 30, 2007

    The markets rebounded strongly this week, bouncing off a 10% drop in the previous weeks. Is it a signal of renewed economic vigor? Or is it a dead cat bounce? This week we take a look at problems at the edge of the economy which threaten to derail not only the recent robust growth (at least in the statistics) but also the markets. And we start with a personal story which I think will help us understand the current situation. Stay with me here.

    Last Thursday, we sat down for a massive...

    How do You Spell Stagflation?

    November 16, 2007

    This week we look at inflation. Is it just over 2%, giving the Fed room to cut rates, or will it be closer to 4% by the next FOMC meeting, making a rate cut problematic? How do they get those numbers? When and how can two opposite things be true at the same time? The answer depends on how many dimensions you are living in when you are asking the question. The Fed is going to be faced with a very difficult decision at its next meeting, and there results of there deliberations will be felt by...

    Credit Crisis to Credit Crunch

    November 9, 2007

    Just when it felt like it was safe to get back in the water, a second and potentially much meaner version of this summer's credit crisis has reappeared. This week we look at why there are more mortgage write downs coming (in a self-fulfilling prophecy) in the financial sector, how an obscure new accounting rule is shedding light on a lot of risk in the world's banking system, how this is all tied to the consumer and is part of the reason for the fall in the dollar. It's a complex world, and I...

    Why the Fed Will Cut Again and Again

    November 2, 2007

    The economy added 166,000 new jobs last month, almost double the average estimate. GDP for the US came in at a blowout 3.9% growth, well above trend. The Fed cut its rate by another 25 basis points, but many observers see language in the accompanying statement which they think suggests the Fed is done with cutting, at least for now, as the economy appears stronger.

    But appearances can be deceiving. This week I lay out a partial case for why the Fed will cut again and yet again (all the...