Economy Watch:  When I made my list of 10 Potential Surprises on December 24, I didn’t expect one to come true so fast.  Potential Surprise #5 has come to pass.  The Fed Funds rate is now at 3%, with the potential to go a bit further to the down side.  Another of my surprises is looking promising – #10, that John McCain would be the Republican nominee.

Another now looks like it will certainly not come true, #9, that John Edwards would be the Democratic nominee.  As I said in my December 5th essay, Assessing the Presidential Race, I thought John Edwards was the best general election candidate.  I probably overestimated how good Mike Huckabee would have been, but I stand by my analysis that John McCain is a better general election candidate than Hillary Clinton.  I acknowledge that the tide is swelling Democratic big-time this year.  For that reason, I don’t guarantee that McCain would beat Clinton, but I do think he’s the best shot the Republicans have this year.

I stand by, with trepidation, my prediction that the economy will avoid recession this year.