At dinner the other evening, one of the city’s leading attorneys told me he had recently sold every stock he owned, worth about $1.2 million worth in all.

The lawyer, who is in his late 60s, said that when he asked some of the smartest investment people he knew when the selling would end, he was given the same answer across the board: Who knows? That was when he decided to get out of the market. “I may done a dumb thing,” he said, “but for now I’d rather be safe than sorry.”

Judging from the views of an intriguing trio — a steadfast bull, Wall Street’s Grim Reaper, and one of the sharpest economic minds around — the lawyer may be on the money for now. The trio’s clear message is the outlook both for the economy and the stock market is growing increasingly dark.

Take Allen Sinai, who has been described as “the economist’s economist.” He has reduced his economic expectations for this year and next year and tells me: “The risk of a recession between the next three or four months and 2008 is now way, way up.” So, too, is the risk of a bear market, he says.

“I’m not ready to make the recession call,” he observes. But then, Mr. Sinai, the chief global economist for Decision Economics, tells me he believes a recession is now a 35% possibility. Among the reasons he cites is a likely balance sheet contraction, the reduced availability of credit that should tighten even more, the probable reduction of debt-financed acquisitions by private equity funds, and falling residential prices.

Interestingly, he holds this view despite seeing economic activity around the world in pretty good shape, a fair amount of liquidity in the system, and the likelihood that the Federal Reserve would lower rates if necessary.

Meanwhile, some members of the bullish fraternity are beginning to have second thoughts. That includes the chief investment strategist of Wachovia Securities, Rod Smyth, who told me a couple of months ago he felt the market was clearly headed higher.

Recent events, notably the subprime mortgage fiasco and increasing worries about the vigor of the housing market, have proved him wrong. Mr. Smyth has shifted gears by hedging his bets, moving from a solely bullish stance to where he’s now offering clients three prospective scenarios: a return to exuberance, a correction that removes exuberance but keeps the bull market intact, or the start of a bear market, according to a recent commentary issued to clients.

Actually, Mr. Smyth thinks a bear market is unlikely because he expects the American economy to avoid a recession and the global economy to continue to grow at a healthy pace. Bear markets only begin, he points out, when investors anticipate a recession. Fortunately, he notes, the global economy is enjoying an unprecedented boom, though it has led to excesses in the credit markets.

What about the huge amount of adjustable rate mortgage resets over the next year, which many pros say is bound to accelerate the record rate of foreclosures and slow consumer spending? Mr. Smyth acknowledges the ARMs risk but thinks outsize defaults are likely to be contained within the subprime market.

To minimize the danger, however, he thinks investors should underweight stocks slightly during the ongoing turmoil in the credit markets, which appears to be spreading rather than abating. Also adding to his concerns:

• Many hedge funds are experiencingsignificantlosses, which is likely to result in a wave of redemptions that may keep market psychology negative for the time being and raise selling pressure as hedge funds meet redemptions and possibly liquidate.

• Leveraged buyout activity appears to be waning as funding costs have risen.

• The normally staid, conservative commercial paper market has seen unexpected disruption due to uncertainty surrounding paper backed by mortgage securities.

While conceding there’s additional risk for stocks, Mr. Smyth argues that the bull market remains intact. He may be right, but his concerns would give any investor pause. In fact, Mr. Smyth is really flashing mixed signals, wrapping up his commentary with this observation: “Our current inclination is to wait for the next few weeks to see if technical support holds.”

In other words, he seems to be suggesting stocks could go up unless they go down.

There are no mixed signals, however, from the man dubbed “the Grim Reaper” by a number of Wall Streeters. He is veteran investment adviser Martin Weiss, whose Jupiter, Fla.-based firm, Weiss Research, has made some excellent calls over the years, especially in alerting investors to potential crises.

His view: “We’re in a bear market and the next target point is 11,000 in the Dow,” versus yesterday’s close of 12,845.78. Why so bearish? For starters, he sees a recession in 2008 and expects the mortgage meltdown to spread to other kinds of credit, notably corporate and consumer, and from subprime to prime. “The mortgage meltdown is more than just a housing issue, but an economic issue,” he says, predicting it will lead to a major credit crunch and possibly trigger huge failures in the international financial system.

The explosion in derivatives, which he notes stand at a mindboggling $415 trillion worldwide, or more than eight times the gross domestic product of the entire world economy, adds another element of uncertainty to the financial scene.

So how do you protect yourself? The Grim Reaper’s advice: “Get rid of the most vulnerable assets, like investment real estate, mortgages, mortgage-backed securities, and the stocks of mortgage, bank, brokerage, and insurance companies. Also, raise cash, sell on every rally, even some of your best stocks, and stash the cash in Treasuries.”

dandordan@aol.com