I HAVE good news and I have bad news. I also have powerfully great news. The good news is the US economy will get better; in fact, it is already showing good signs. The economy may improve significantly for the next nine months. The bad news is the world economy, including the US, will get much worse. Then there will be a long period of prosperity. When a metallurgist tests steel to determine its tensile strength, each end of the test piece is clamped firmly in a devise and each pulled in opposite directions until the piece breaks. The strength is recorded on a dial, and the metal can be seen to weaken as the pulling tension continues. But when the metal eventually appears to break, a strange phenomenon occurs. The dial suddenly changes direction and the piece of steel strengthens, or appears to strengthen, for a period, before snapping. This is the phenomenon we are experiencing in the US economy in 1993, which may last into 1994. The Gross National Product (GNP) has risen from zero to about two per cent. But two per cent is not enough to cause new factories to be built and put the unemployed back to work. Past recessions have always required five per cent to 6.5 per cent growth in GNP to end. What we are seeing is the steel appearing to strengthen before it finally breaks. Everyone seems to be excited about the mixed statistics, they find joy in the favourable numbers and proclaim the recession over. This happened in the 1930 depression. In 1932 the economy looked good and there was a stock market boom. Then the depression renewed its frenzy, the economy worsened and it required World War II to end the recession almost 15 years later. The US recession has not lasted long enough to deleverage the debt, to rebuild personal savings, to settle the colossal government current account deficit or to force a lower standard of living on Americans. My guess is the US recession can end by 1996, provided taxes are reduced and government waste stopped and the new administration does not meddle with business. The recession could end sooner with inflation but this would ruin the dollar and pass the problem to the next generation. After the short good period there will be a period of accelerated decline, business problems, and a massive slow down. It is always best to buy in periods of distress. During this period, property, art, stocks and other investments will be at their lows. With modest capital in the distress period, you can become wealthy in the next period.