Bill Longbrake initiated a “Recession Watch” in last month’s letter. He was explicit, however, that a watch only means that the possibility of recession has increased, not that it is necessarily likely to occur any time soon. Thanks to the Federal Reserve once again galloping to the rescue and the decline in the value of the dollar markets have stabilized, financial conditions have eased, and eager risk-taking is once again in vogue. Does this mean that fundamental global imbalances have dissipated? Bill believes little has changed. Optimists were ready to take advantage of extreme oversold market conditions and all they needed to swing into action was policy reassurance. What seems to be supporting stock prices and optimism is belief that monetary policy will cure all that ills the economy. Is that belief well founded? We shall see. In the meantime, Bill’s “Recession Watch” continues, but as of this time an actual recession does not appear to be an imminent threat.