Fear and retribution are in the air this month, as the markets continue to cascade down despite decent numbers on the economic front. Are investors panicking, or are they being realistic? That's the question on many readers' minds, as we start a new feature: Supermodels Inbox.

Question:

It's time for you to face the music on your bullishness for the economy and stocks. In several columns this year you wrote that both were gaining strength that would last through the year. In one you quoted mail from readers who tried to set you straight. One said, "Be careful spewing out all the hurrahs that the bull market has returned. We are going through a typical bear-market trap. Come mid-year, the markets will turn down, and the real carnage will begin. Save this e-mail for future reference." Another said, "Your article about a 'recovery' is about the stupidest article I have read this year. Get a job that you are suited for, like flipping burgers." So I'm wondering, how's the fast-food training coming? -- Gene Jackson III.

SuperModels:

Would you like my answer well-done or medium-rare? Of the 27 columns I've cooked up this year, I count seven in which I expressed bullishness on the economy. And in a couple of those, a certain hopefulness about stocks was sprinkled in. It was a mistake to mix those two ingredients, so let's separate them.

I have been right about the economy. The first quarter showed a robust 6.1% growth in gross domestic product. And it looks like the second quarter came in slightly less than half that, according to economist Karina Mayer at International Strategy and Investment, or ISI.

The crystal ball is a bit cloudy for the next six months. Mayer and her team each week study 11 economic indicators that successfully called the last downturn and recovery. So far, she says, it looks like the economy is still in a stall, or what

Fed

Chairman Alan Greenspan calls a "soft spot." Mayer says it is more like a soft spot "channel," as the indicators bump along from week to week, a little bit up and then a little bit down.

Currently seven of the 11 indicators are showing some renewed strength, including the Economic Cycle Research Institute's Weekly Leading Index, initial jobless claims and the JOC-ECRI Industrial Price Index (which serves as a proxy for the demand for raw materials by manufacturers). Neutral indicators include the consumer confidence measures, First Call's upside earnings surprise ratio and ISI's own economic strength/weakness diffusion index. Mayer says ISI is currently forecasting 3.2% growth for the third quarter and 4% for the fourth quarter. She begs off on relating economic growth to stock market performance, as will I -- this time.

Question:

Read your column " Dow 1200? The View From the Bear's Den" in which you listed 10 stocks to short. I'm not that sophisticated, but wouldn't buying options/leaps on the major indexes be as good a bet as shorting a selective list of stocks? -- Edward Kierklo

SuperModels:

It's certainly a lot cheaper and easier to buy one of the bear mutual funds, or to buy puts on the major indexes, than it is to short individual stocks. However, to get maximum bang for your bearish buck, you can't beat shorting an individual name. The 10 stocks listed as short candidates based on their low StockScouter scores were down 18% from June 18 to July 3, while the

S&P 500

was only down 8%. My best picks,

ImClone Systems

(IMCL)

and

Micromuse

( MUSE), were down 36% apiece. The

(BEARX) - Get Report

Prudent Bear Fund was down 11.5% in the same period, and the

(RYAIX) - Get Report

Rydex Arktos Fund, which performs inversely to the

Nasdaq Composite

Index, was down 17%. Bottom line: So far Arktos is the winner, since there were no transaction costs.

Question:

In your " View From the Bear's Den" column you recommended shorting Infinium Software (INFM) .You should check this out -- it will be one of your famous turnaround stories! Lots of insider buying, new management, low price-to-earnings multiple. I find the MSN stock ratings very outdated and not thoroughly done. It's totally irresponsible just to go by that number. This stock is a winner. -- Paul V. Buckley

SuperModels:

It's only been two weeks and shares of Infinium are down 24% -- including a 7% setback on July 3 when the market finished up. Granted, Infinium shares were one of the most spectacular performers following the Sept. 11 terror attacks, rising from around 75 cents to $8. But sales growth has been somewhat anemic and the valuation has gone from extremely low to relatively normal.

The company, which sells back-office software applications at services companies -- particularly in the hospitality and gaming industries -- has virtually no analyst coverage or mutual fund sponsorship. StockScouter is hypersensitive to volatility, so even if this was the greatest company on earth it would get a low rating for its parabolic price move. Caution is warranted.

Question:

Long-time reader, first-time writer. It has been a long time since we heard from your source, Mr. P. He seems to have disappeared. What's his take on all of this craziness we see going on around us? -- Christopher Pickett

SuperModels:

Mr. P is never far away. He's always ... out there. He was traveling to Australia, Hong Kong, Taiwan, Japan and Germany recently to get a better feel for international economic prospects and foreign investor sentiment. His findings, plus his partners' systems work, led him to be heavily short the dollar, and long the euro, short-term bonds and energy in the past six months. He's also been short the U.S. stock market, but is not pessimistic about its prospects as he says he has been adding shares of fallen big-cap stocks to his personal retirement portfolio.

So far, so good, as his fund is up more than 80% in 2002. Mr. P says he is currently neutral on bonds, neutral to mildly bullish on U.S. stocks, bearish on the dollar, bullish on wheat and bullish on natural gas. He's also concerned that seismic activity around Mt. Hood in Oregon could be an early warning that a volcanic eruption may be near.

Question:

I read your column, " Home Is Where the Investor's Heart Is". I must tell you that, as a real estate developer, you have no idea what type of bubble we are in. This real estate market is equivalent to the tech bubble we just went through on the stock market. People are over-leveraged and the value of their homes is probably half what their mortgage lender tells them it is. The market will be sensitive to any upward trend in interest rates. That is when the bubble will burst. -- Gunti

SuperModels:

Interest rates reached multiyear lows in the past few weeks, and refinancing continues to boom. Homebuilding continues to be one of the few bright spots in the economy and in the stock market. The eight stocks I listed are collectively flat since June 12, while the S&P 500 was down 9%. The leader is

Deltic Timber

(DEL)

, which combines an asset play (forestry products) with its homebuilding efforts. Market cycles are ever-changing, however, so we can speculate that if investors catch a bullish bug, they will rotate their profits out of the homebuilders into something else faster than you can smash your thumb with a hammer.

At the time of publication, Jon Markman owned shares in none of the equities mentioned in this column.