David's intro to his piece on the U.S. consumer "not exactly stepping on the gas" is priceless. Download U.S. consumer holding back.

"An 11% slide in gasoline station receipts in September opened the door for a 0.4% increase in ex-gas retail sales. Now how bad is that? And in a sign that consumers treated the drop in energy prices as a temporary as opposed to permanent development, 100% of that windfall went into just three categories " music stores, clothing stores and eating establishments. So basically, after feeling the jingling sound in their pockets after filling up their SUV in the month of September, consumers went and bought a CD, a sweater and took the family out to dinner. Oh yes, a real long-term commitment to the economy. A real bellwether sign of a strong holiday shopping season. Please " spare us."

UBS, which is the world's largest wealth manager for the wealthy, agrees. Strategy teams from equity, fixed income and forex departments at UBS combine to make the following statements in their Global Risk Report: Download Nov 20 UBS Global Risk Report.

"Risk appetite crosses into "extreme" territory: Risk appetite continued to rise last week, crossing over into "extreme" risk seeking levels (defined as +1 standard deviation) for the first time since May. The index has been led up by equity out-performance, both lower equity and currency volatilities (EURUSD) and tighter corporate spreads.

Equities worldwide have rallied hard reflecting this increase in risk tolerance. However, investors have chosen to gain exposure to risk assets through the less risky defensive sectors which may suggest that investors are concerned about a cyclical downturn in earnings growth."

It is so important to listen to experts who are not selling you down the river. The sell side has a selling job to do, which is fine, as long as you heed the warnings of the most competent, objective people in our midst. These people are not "perma bears"; they have a job to lay the facts on you and help you understand the risks.

Post-Spitzer, and the 2000-2002 Bear market, this is one of the best results that have come out of Wall Street, ie, the propensity of most of the major broker-dealers to permit their best people to speak their mind.

It's still an over-lawyered corporate world, but at least the info you and I need is there for the asking. The onus is now on us to receive it with an open mind and to make trading decisions accordingly.

Many of you have been listening to a slew of Talking Heads (including Alan Greenspan) tell you to watch the share prices and ignore pundits who claim the housing recession is still in serious decline. But, the data and the interpretation of experts like ML's Rosenberg are telling you a very different story, as follows. Download Nov 20 ML Report on Housing Recession. Note that Rosenberg uses the "R" word with respect to housing, while others sugar-coat it as a "conundrum" or a "downturn".

"The NAHB index reportedly "bounced" to 33 in November from 31 in October and 30 in September. Remember " this is a diffusion index in which the cutoff for expansion and contraction is 50. The builders are telling you here, despite what speculators are doing to their stock prices, that things are getting worse " but at a less rapid pace than they were before. Anyone ; should ; be worried that this index is still flirting near 15-year lows.

And as for the homebuilding stocks,; building permits fell 6.3% last month for an unprecedented nine months in a row (data back to 1960). Permits are now down 28% y/y (-32% for single family) in a sign that we have yet to see the bottom in construction activity " remember that permits lead starts, and starts lead construction in the national accounts data. Indeed, permits are now running at their worst pace since February 1991 " and we know that overall conditions in residential real estate did not bottom out for at least a year. Single-family starts may be down 32% on a year-over-year basis, but when you look at the past two housing downturns they didn't bottom until hitting -45% in 1991 and -52% in 1980."

Regarding currencies and gold, Rosenberg had the following notable remarks. Download ML Nov 20 Rosenberg Notes.

"On the policy front, ECB chief Trichet sounding hawkish (must maintain "strong vigilance") " which stands in contrast to the BoJ's Fukui, who just reiterated that Japan does not face an imminent inflation threat (hence the euro is firming sizably against the yen). Then again, Germany did just print a higher-than-expected +0.3% on its October PPI today (+4.6% y/y); Even after reports that China was going to start diversifying its $1 trillion cache of FX reserves, not to mention the raft of soft US economic data last week, the US$ refuses to go down; The yuan has hit a fresh high and is now about to test the level at which the HK$ is pegged to the greenback. This in turn has sparked some market chatter that the HK dollar is going to be repegged to the yuan (though such may await the time when the yuan becomes fully convertible). Increasingly, however, those Asian FX trackers are looking like a pretty attractive long-term hold, and given gold's historic 85% inverse correlation to the dollar, we think investors are well advised to use intermittent periods of weakness to build positions in the yellow metal.

No hard landing? Our recession-risk probability model has been over 50% now for six days in a row. Hmmmm. And we have come off now September and October declines in both retail sales (-0.8% and "0.2% respectively) and manufacturing production (-0.2% both times) for the first time since June-July 2001. Think about it.

Beware of this stock market rally " this last leg since July that has taken the Dow to new all-time highs and the S&P 500 to fresh six-year highs has been 100% due to P/E multiple expansion " this is not an earnings driven rally. And rallies that are not underpinned by improved corporate sector fundamentals are best left to the speculators, because they can be expected to ultimately fizzle, and fizzle badly. After last month's barrage of weak data, fully 61% of the incoming economic reports since Labor Day have come in below expectations and barely more than 30% have surprised to the upside. For every economic surprise to the upside, there have been two to the downside, and there are still calls out there for the Fed to tighten and no shortage of "pundits" telling investors to chase this speculative stock market rally.

; We like talking about things that nobody else is " and what no one else is discussing is the "passive" tightening in Fed policy over the past few months ("passive" tightening was first discussed openly by Alan Greenspan at the 24 February 1998 Humphrey-Hawkins Testimony " but at that point, the economy was growing 4% in real terms, as opposed to sub-2% right now). Since the Fed went on hold in June at 5.25% on the funds rate, the headline inflation rate has sagged from 4.3% to 1.3%. So in effect, the "real" funds rate has soared 300 basis points in the past five months to around 400 bps (and this will still be an above-average 300 bps by year-end after the Katrina base-effects of a year ago fall out of the y/y CPI calculations). No wonder the economy is slowing down so rapidly.

Finally there are datapoints all of us need to be aware of regarding the lowering corporate earnings estimates coming down from Wall Street. Download ML Nov 20 Rosenberg on Earnings.

"; the "bottom up" equity analysts have not only been busy cutting Q4 estimates in recent weeks but have also begun to take a knife to first quarter S&P 500 operating EPS forecasts. The consensus is now at 9%, whereas in August it was at 10.7%, so estimates have come down almost two percentage points in the past three months. Energy, consumer discretionary, utilities and telecom have been cut the most, in that order; only tech has been on the receiving end of EPS upgrades, to +17% from +10% in August. So during this three-month span, tech has gone from being the perceived sixth-best earnings growth performer for 1Q to first place status, and what is clearly helping out this sector is its way-above-average foreign sales exposure. Not only that, but tech may also be getting a lift from the recent cyclical slowdown in productivity growth as companies move to shore up their sagging output/hours worked ratios and thereby preserve their margins (which have come under some compression).

Indeed, the tech sector is actually looking to be in pretty good shape " in fact, it has re-emerged as a growth leader: Tech industrial production was up 2.3% in October " in a month when the rest of the manufacturing sector posted a 0.2% decline. This took the y/y tech IP trend to +26.4% y/y. Computers (+1.2% m/m and +14.3% y/y) look to be giving up leadership to communications equipment (+2.4% m/m and +24.8% y/y) and semis (+2.5%and +30.5% y/y). The y/y tech IP trend accelerated to +26.4% y/y, which is a pace more than five times as strong now as for the entire manufacturing sector. So the fact that we now have the Nasdaq up 24% since mid-July certainly is backed up more by the economic data than the surge we have seen in retailers and homebuilders."

I may have started this story about the "boy who cried wolf", but the important point I am making is that at certain times in the business inventory and capital market cycles (they are a little different), there are times to focus more on risk. At other times, it is appropriate to focus on capital growth.

Now is the time to focus on risk.