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Dean Anil Puri, CSUF Mihaylo College of Bus/Econ  

Click Here for Dean Anil Puri's Bio

Thursday, June 05, 2008
Headlines vs. inflation
Tuesday, July 08, 2008
The Big Question: Stumble or Fall?
Bad news comes in 3s...
They say bad news comes in threes. As I see things, we had that happen over the last few days.

The Fullerton Titans lost to Stanford Cardinals in the Super Regional baseball tournament. Big Brown failed to capture the coveted Triple Crown when it not only lost at Belmont but came in last. And, finally, the stock market took a tumble on Friday with the Dow-Jones index dropping almost 400 points.

While the sports results were but once-a-year events, will the stock market repeat its disappointing performance in the near term? After reaching a Bear Stearns low of 11,740 on March 10th, it rose 11.3% to 13,058 by May 2nd. But the latest economic news is giving it indigestion.

The stranglehold of high oil prices seems as tight if not worse than the continuing fall in housing prices. The loss of jobs last month and rising inflation have people talking about the dreaded phenomenon of stagflation, a la nineteen-seventies. The Fed appears to be changing its tune and appears not to favor further loosening of the monetary strings. In fact, it may be getting ready to sweep up the liquidity it so recently created.

So is there any ray of hope in this June gloom? Or, are we headed for a real down-and-dirty recession? (Contrary to the pre-mature claims of some, the official data do not indicate that we are in a recession at this time). Productivity growth has, surprisingly, held up so far mitigating the fear of stagflation. The banking sector in the U.S. appears to be more than half way towards cleaning up its balance sheet. And there is still a possibility of further fiscal action to ameliorate the mortgage woes.