This week we further explore why this recovery will be a Statistical Recovery, or one that, as someone said, is a recovery only a statistician could love. We look at capacity utilization, more on housing, some thoughts on debt and deflation, and some intriguing charts on volatility in the last secular bear-market cycle. This letter will print a little longer, but there are lots of charts. I have written this during the week, and I finish it here in Tulsa, where Amanda gets married tomorrow. (There is no deflation in weddings costs!)

Thanks to so many of you for your enthusiastic feedback about my latest Accredited Investor Newsletter, in which I undertook to examine the impact of last year's dramatic increase in volatility on the performance of hedge funds and to ascertain those elements that led to success in the industry, such as select Global Macro and Managed Futures strategies, as well as the challenges. If you are an accredited investor (basically anywhere in the world, as I have partners in Europe, Canada, Africa, and Latin America) and haven't yet read my analysis, I invite you to sign up here: www.accreditedinvestor.ws

For those of you who seek to take advantage of these themes and the developments I write about each week, let me again mention my good friend Jon Sundt at Altegris Investments, who is my US partner. Jon and his team have recently added some of the more successful names in the industry to their dedicated platform of alternative investments, including commodity pools, hedge funds, and managed futures accounts. Certain products that Altegris makes available on its platform access award-winning managers, and are designed to facilitate access for qualified and suitable readers at sometimes lower investment minimums than is normally required (though the net-worth requirements are still the same).

If you haven't spoken with them in a while, it's worth checking out their new lineup of world-class managers. Jon also tells me they just added yet more brilliant minds to their research team, making it, in my opinion, one of the foremost teams in the industry, focused solely on alternative investments. I invite you to have a conversation with one of their professional and seasoned advisors. (In this regard, I am president and a registered representative of Millennium Wave Securities, LLC, member FINRA.) Now, let's jump into the Statistical Recovery.

This week we briefly look at a few choice economic insights, and then I once again will close with a portion of my book-in-progress about how to successfully invest in secular bear markets. Despite some non-writing business issues which are eating up a lot of work time, I am making good progress (finally) on the book, which I hope to have finished in less than a month and with some hard work on the part of my publisher available in bookstores and over the internet this summer. My intention was to call the book Absolute Returns, but it seems someone has just beaten me to the title. At the end of this letter, I will initiate a contest to help me find a new title.

Today we return to our assigned task of trying to find some patterns in the data to help us determine the direction of the economy and the markets. There are lots of bread crumbs on this trail, so let's see what conclusions they lead us to.

First, the evidence mounts that we are still in what I call the Muddle Through Economy - a slow growth, no-new-jobs type of recovery that seems to be alternately teasing us with potential for growth and frustrating us with weakness. Weakness is winning.

September is the month set into my personal rhythms, and that of my generation, as a time to reflect upon the past and look to the future. The first week of school was always a time for review and to get a sense of what we would be looking forward to in the new school year. Even though school has been in session for several weeks, to those of us who went to school in the 50's and 60's, it does not feel right until after Labor Day.

With that cycle in mind, it seems that we should briefly look at the broad investment themes that have been so much a part of this letter, and speculate as to their future usefulness. That will give us a launching pad to look at some very disconcerting economic news from around the globe, and see how it all fits into our personal investment portfolios. Pay attention, class. There will be a test.

Today we examine several fundamental and criticaly questions, to see if they give us come clues as to the direction of the economy and the stock markets:

"Why do we have no inflation since the Fed has been growing the money supply at very high levels for a very long time?"; the ever popular, "Is the Fed pushing on a string?" and "Is the United States headed down the same path as Japan?"

In the 17 years from the end of 1964 to the end of 1981, the Dow gained exactly one-tenth of one percent. In the bull market which followed from 1982 to the peak in March of 2000, the Dow rose from 875 to 11,723, a spectacular rise of 1,239% or over 13 times from the starting point.

We all remember what a difficult time that first period was. You had three recessions, oil shocks, Viet Nam, stagflation, the collapse of the Nifty Fifty, Watergate, short term interest rates rising to 18%, gold at $800 and very high inflation.