OVERVIEW

I am not ready yet to throw in the towel on this economic recovery. The short and longer range
indicators that traditionally presage an economic downturn of consequence are not in place. I
would not argue with the idea that the economy is fragile, and I would not rule out a "near death
experience" for this recovery, but for now I expect more positive than negative for the economy.

We have had a bear rundown in the stock market. For now, I see this more as a form of psychodrama
akin to the Oct. 1987 crash when players suddenly and wrongly came to believe that all options led
to an economic downturn and bear market for stocks. Back then, it was believed that either interest
rates would have to rise sharply or the US dollar would crash, with either leading to a downturn.
It is not easy now for players to see how they can "win" owning stocks in a troubled global
environment, but there is plenty of wiggle room for the economy and policy to sustain the recovery,
just as there was after the '87 blowout.

The 1987 crash not only scared investors but Main Street as well as the weekly leading economic
indicators fell for several months after it. The buffoonery over the debt ceiling and fast market
slide have hurt confidence in the short run, but these events need not be fatal.

The frustration, anger and fear felt over the past several weeks has been strong enough to warrant
an interval of 2-4 months before the stock market can right itself firmly enough to sustain another
leg up in price. Experience with sudden, steep downturns in the market suggests patience should
be in order even if I am correct that the economy will soldier on.