Two important questions are weighing on investors: (1) WHEN, not if, Greece defaults, will some other country or mega European financial entity be dragged into default/bankruptcy? (2) Will the U.S. economy slip into a recession?

The importance of the first question is markets usually do a pretty good job of coping with default problems one at a time. When one default occurs, analysts analyze and investors reach conclusions and calmly adjust their portfolios. But when more than one defaults occur close to each other, the markets can become overwhelmed and lose their ability to function (this state of affairs could result in a large drop in the equity markets). The probability of this occurring is difficult to compute. But, I can tell you that I am hearing more and more experts say it is likely.

As to the second question we have stated in past issues of The Weekly Commentary that changes of a recession in the U.S. are approximately 50%. For this reason, we have continued to recommend the Action Plan for your portfolio described below.