Bull: Superlatives, only superlatives, can describe this stock market. It's a Michelangelo market, a Mozart market, a Shakespeare market.

Quandary: Don't be so metaphorical. What do you mean?Bull: It's a do-everything-right market. Stocks climb to all-time highs. Skeptics say euphoria dominates. On July 7 the market drops, a decline takes place, and then what happens? A recovery - just the right amount for a correction. That readies stocks for a surge to new bull-market highs.

Bear: What makes you so certain?

Bull: The tax bill. It enriches the U.S. economy with a long-term inheritance. It reduces personal taxes and is a government guarantee of consumer-generated prosperity in 1987 and 1988.

Bear: Cool off. The tax bill is an economic disaster. Nobody knows what's in it, not even its designers. Rep. Rostenkowski and Sen. Packwood band-aided it together in last-minute concessions to get it passed. Businessmen, consumers, and investors will be distracted from their everyday activities adjusting to a law that's in political transit. The bill is a first-class ticket to recession.

Bull: Congratulations. That's fine oratory, worthy of a Cicero. But, unlike Cicero, you haven't made a case. We've had seven, maybe eight months, of sluggish activity this year. Yet the economy still heads upward - slowly but surely. If a recession were in prospect, it would be here already.

Bear: It is here. The growth rate staggered down to 0.6 percent in the second quarter. Sometime during the quarter, there must have been minus growth - an actual decline.

Bull: When I see a minus I'll believe it. Growth is growth and corporate profits after taxes rose 4 percent. When profits improve, businessmen expand operations, investors invest and the economy does what it does historically. It keeps growing.

Bear: The stock market says otherwise. It peaked in early July and that's a barometric warning: The 1982-86 joyride is over. The Dow Jones industrials will never make it to their high of 1,909.

Bull: Would you like a bet on that?

Bear: Normally, yes, but I never bet on sure things. I don't want to take free money from a friend.

Quandary: Isn't the Federal Reserve Board likely to push down interest rates? Won't that pep up the economy?

Bull: It will. That's why Fed Chairman Volcker went to Europe. He and Secretary of the Treasury Baker want coordination on interest rate reductions with Germany and Japan, and they'll get it. Nothing could be more bullish for worldwide expansion.

Bear: Poppycock. They hope to persuade German and Japanese investors to hold on to dollars. But that isn't going to happen. Gold has risen in price

because owners of dollars are switching into gold. Foreign investors shy from a recession-prone economy. Retail sales are sluggish, office-building space is in oversupply and home demand is no longer dynamic. Housing starts sagged in July for the third month in succession. People are becoming less confident about their own financial prospects. Optimism keeps sliding.

Bull: The United States is going to get help from the Germans and Japanese. They'll stimulate domestic consumption. That will increase foreign purchases of U.S. goods and spark the economic pickup.

Bear: That's a wrong premise. U.S. goods are not competitive. We've priced ourselves out of world markets.

Bull: Don't you ever tire of putting down your own country? We're producing ourselves back into world markets. It's true that manufacturing employment has been declining since mid-1984. But production has been rising. That's plain if you see it on a chart. There are fewer jobs, but greater output. So productivity has risen. Efficiency has increased. That's bullish, long-run bullish.

Bear: If wages weren't so high here, I'd agree. But U.S. wages are high. That's why exports are weak. That's why we have such a huge trade deficit.

Bull: The drop in the price of the dollar corrects that. The basics hold promise - no one, not even you, can deny that: Lower inflation, lower interest rates, the lower-priced dollar, and lower taxes on consumers. The pickup is coming.

Bear: The pickup you expect will be a hiccup. The country suffers from fiscal paralysis. When business is in the doldrums, as it is, the Keynesian prescription is to boost government spending and cut taxes so as to buoy purchasing. But what are we doing? Because of the big budget deficit, we're trying to reduce spending and the tax bill raises business taxes. When economic history is written, this will be known as the Reagan recession.

Quandary: What makes you so sure we're in a recession?

Bear: Hunch. A gut feeling.

Bull: But the statistics say otherwise. The economy is still growing.

Quandary: If I were certain of that, I'd buy stocks.

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