Oil is not at $200. It trades just below $100, and there are some reasons it could drop. The economies in the US and Europe are probably slowing, which should bring down demand. China has put the brakes on bank lending, which might cool that economy off, at least for a couple of weeks.

Even in the hardest hit areas like Detroit, home foreclosure rates run about one in every thirty-five households, about 3%. And, across the country, that number is well under 1%.

Secretary Paulson says foreclosures will rise in 2008. The Fed sees slower growth. But, that is "slower" growth, not "negative growth". There are plenty of newspaper writers and pundits who think that the government is sugar-coating things, but there is not yet a vast pool of evidence that the economy is falling into a deep recession.

But, by looking at the headlines, and the stock market, it may be that the country is trying to talk its way into a bad economic period.

Over the last month, shares of Exxon (XOM) are down more that Goldman Sachs (GS). Does Exxon really face more risk than the investment bank? Shares of Dell (DELL) are down more than Lehman (LEH). Shares of Time Warner (TWX) are down about the same amount as JP Morgan (JPM).

Perceptions of the economy have become disconnected from the economy itself. Banks, mortgages companies, and home builders made horrible mistakes. Now they are paying for them. But, no more than car companies did two years ago. No more than internet companies did in 1999 and 2000. Investors may forget that the Dow traded at 11,000 in January 2000. It traded there in April of that year, and was even higher in August 2000. The tech-heavy Nasdaq took a brutal beating that year. The Dow did not. There was a huge recession in tech, but not in the rest of the market.

The headline are not the market. And, the front page of the newspaper is not the economy. GDP in Japan was up 2.6%. Europe’s GDP rose more than forecast in the third quarter. US GDP was well over 3%.

Will the economy slow in the next two quarters? Probably. Will rising oil prices and mortgage problems bring the US industrial and financial worlds to their knees? That remains to be seen.

Douglas A. McIntyre

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