As promised, here is an update on where we are in the economic and market cycles and the outlooks going forward. I will divide this update into two parts. Part I will focus on the short term and Part II will focus on the long term.

In my prior notes, I stated that I believed economic growth and corporate profit cycles were going to peak in the first half of 2006 and slow in the second half of this year into 2007. At the same time I have been concerned about the rise in inflation from higher commodity, interest, labor and other costs, particularly in the services sector that would hurt consumers and businesses alike. However, I also stated in my June 30 note that I thought the fragile status of consumer finances in this country was going to be a danger for the US economy in terms of possible recession and the FED was going to pause its monetary tightening policy at the first opportunity to allow the economy to slow and hopefully restrain further increases in inflation. I believed the FED’s ... Log in to view full article.