Last week's Associated Press headline said it all about this market: "Durable Goods Orders Plummet." According to the first paragraph, durable goods orders fell 4.9% in August, the biggest drop since January. It was not until the 10th paragraph that I found the number I was looking for: Durable goods orders ex-transportation. That was down only 1.8%. You see, the extremely volatile transportation component is dominated by orders for Boeing (BA) jets, which dropped 41% in the month. Unless you own Boeing, the transportation component just doesn't matter. But the mood out there is to provide the glass-half-empty perspective on every number that comes along, and try to scare you about a coming recession. Even before getting to the ex-transportation number, paragraph eight said: "Some put the chance of a recession as high as 50-50."

Well, I think "some" have put the chances of a recession at 50-50 every month for the last two years. I'm not sure what that comment adds to our store of knowledge, but it's an irresistible sound bite. When it comes to recessions, there are two really good predictors: The S&P 500 and the Economic Cycle Research Institute (ECRI). The S&P is within 2% of its all-time high. The Weekly Leading Index (WLI) growth rate from ECRI shows a soft patch for growth, but no recession. It fell from over 6% growth in June to under 1% in early September, but stabilized as it became obvious that the Fed would act. The ECRI said: "Following a plunge in August, WLI growth stabilized in early September, even before this week's rate cuts. Thus, a slowdown in economic growth is clearly in sight, but not a recession."

Also, one of the best concurrent indicators of real global economic activity is the Baltic Dry Index, which is the price paid to move freight on ships. It is skyrocketing to all-time highs, showing the intense demand for space to move goods.

But over 67% of Americans think that we are on the verge of or in a recession, according to a new Wall Street Journal/NBC News poll. Combine that with the scare stories about October crashes that are all around, and one wonders how the S&P can be so high.

And that is the point.

If the market is doing this well when fear is abundant, what happens when the fears go away? The most likely course over the next few weeks is a drifty consolidation between 1500 and the 1555 high, as we work our way through earnings reporting season. Then the Fed meets again on October 30 and 31, and either it's clear that the credit markets have unlocked, so they declare victory, or they cut rates another half point (50 basis points) to set the economy up for a strong holiday season. Either way, the S&P should move up 100 to 250 points by yearend, followed by another 100 to 250 points in the March quarter. That's a bull market.

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A few weeks ago, I talked about iRobot (IRBT) and tipped you off about their new Looj gutter-cleaning robot. Well recently, the Looj was finally released, and while the $149 device drew snickers from many, I know they'll sell at least one to me. In a moment of weakness, I recently bought a former B&B built in 1912 that has so many additions and gutters that it would be hard to see them, if it wasn't for all the leaves in them from the heritage oaks surrounding the place. I can't wait to turn my new Looj loose on it.

The other robot that they introduced was also very cool. The ConnectR Virtual Visiting Robot doesn't do a specific job; it is a communications robot that can run around your home providing two-way audio and one-way video. According to iRobot, it uses the internet and robot technology to let you "talk and interact with your loved ones, friends and pets -- when you can't be there in person." Think of it as a way to be in two places at once.

I'm sure Jay Leno will think of numerous situations where an unexpected visit from the robot could be interesting. I also expect the hacker/tinker community to embrace the ConnectR and come up with many nifty uses for it. In any case, the robots were released just in time for the fast-approaching holiday season. Who could resist?

Intel (INTC) will report earnings later today, and Wall Street is looking for $9.6 billion and 30 cents a share, followed by $10.4 billion and 37 cents in the fourth quarter. PC sales have been strong, up 12% in the September quarter, so I suspect inventory levels of microprocessors are a little low going into the holiday build season. Intel may guide a bit higher for the December quarter.

It's interesting that Intel had a good quarter due to strong sales of personal computers, digital cameras (+20% in the September quarter), cellphones (+18%) and other consumer electronics. Yet flash memory suppliers like SanDisk (SNDK) and DRAM suppliers like Micron (MU) are having a tough time. How can that be? There is serious weakness in spot prices for memory chips, and it is now impacting contract prices. Most memory chipmakers have seen October contract prices for DRAM drop about 20%, while flash memory fell 15%. They were looking for flat prices, based on good demand for end products. Instead, the Tier 2 suppliers are running at losses and the Tier 1 suppliers are getting squeezed. Flash memory prices are down 40% from August, when they were expected to be strengthening about right now due to a projected shortage. Because Samsung and Toshiba are still profitable, I expect further price pressure.

The problem is overcapacity, as the existing suppliers convert to 65-nanometer and even 45-nanometer processes, while DRAM suppliers accelerate their flash memory production in the vain hope that those products will be more profitable than DRAM. It's turning into a real mess for SanDisk, which has been quite weak during this most recent upturn, and I expect some very unpleasant guidance from them when they report on October 18.

No, I'm not talking about the backdated stock option chickens that are about to come home to roost. As many of you may know, I think Steve Jobs will be indicted in the Apple (AAPL) and Pixar backdating scandals. Recently, Apple lost two rounds. Steve was subpoenaed by the SEC in their civil case against Apple's former general counsel, Nancy Heinen. It's a very good idea to tell the truth to the SEC when under oath, as Martha Stewart found out, and in this case, the truth is that Steve knew about the backdating, understood the accounting implications and profited from it. As the only CEO of two companies on the SEC's bad boys list, it's hard to believe that he is going to walk, no matter how many strings Senator Feinstein pulls. The second round was the Boston Retirement Board winning some access to Apple board meeting minutes about backdating. They had to sue in California Superior Court to get it -- after all, they are only the shareholders who own the company.

However, the judge denied the heart of the retirement board's suit: Access to documents related to Apple's internal investigation into the backdating fiasco, led by Al Gore. And any documents that Apple hands over can't be disclosed to anyone else.

Apple's more immediate problem, though, is their lawsuit against Burst.com (BRST on the pink sheets). Burst is now a three-person company after spending 20 years and over $66 million with 100 employees developing and patenting ways to send digital audio and video over networks. They own a moat of patents covering delivery of video over the Internet. Microsoft tried to get around them, but couldn't, and after numerous nasty tricks that nearly broke the company, Microsoft finally paid BRST $60 million for a license. Apple's iTunes video downloads violate many of the BRST patents, but they assumed Microsoft would wipe Burst out when they started using the technology. Yet, instead of following Microsoft and settling, Apple sued to have the patents declared invalid. A big mistake, in my opinion, but not in the opinion of The New York Times, which published an article on September 20 that knocked BRST down to $1.40 for a split minute.

I really didn't expect to see it under $1.50 ever again. But the Times story reported on Apple's lawyers filing a motion to have Burst's countersuit thrown out and their patents invalidated as not novel, obvious, and having nothing to do with iTunes or QuickTime. The Times slant was this is just another little company trying to hold up a big company for ransom based on flakey patents, and the big company is about to cream them. The reporter included some pretty caustic comments from Apple's counsel. It read like an Apple public relations release.

That's just about 100% wrong. Microsoft gives away the technology that they stole from Burst and later licensed it for $60 million. Apple sells it, and Burst calculates their damages, based on over three billion iTunes downloads, at around $500 million. And Burst has been winning the battle with Apple so far. In patent lawsuits, there is a step called the "Markman claims construction ruling" that determines what the actual words in the patent do or don't mean. Burst won more than 90% of the Markman issues, and the judge who issued that ruling was actually surprised when Apple moved to dismiss the suit, which The New York Times didn't mention.

I still think that Burst.com is going to win the patent lawsuit with Apple, most likely in a very large out-of-court settlement.

USAToday had a story on "WiMAX rides wave of surfing technology" that featured a TowerStream (TWER) customer, the fashion designer Nanette Lepore. While I had not previously heard of Ms. Lepore, probably because I have not worn "saucy minis and sky-high platform shoes" since the '60s, she is using TowerStream to connect her 100-person company to the world. The IT manager said that his Internet and phone bills are 50% to 75% cheaper than what he used to pay Verizon. He is paying TowerStream for a 3-megabit connection in both directions, but he says speeds have hit 10 megabits.

The article quoted Ed Zander, the embattled CEO of Motorola, predicting that WiMAX will take off like a shot when WiMAX-enabled laptops, handhelds and smart phones powered by Intel chips hit the market next year. He said: "WiMAX could be even bigger and more dramatic than the original Internet. We're doubling down and betting the farm."