The main purpose of this paper is to address a fundamental open problem in linear filtering and estimation, namely, what is the steady-state or asymptotic behavior of the Kalman filter, or the Kalman gain, when the observed stationary stochastic process is not generated by a finite-dimensional stochastic system, or when it is generated by a stochastic system having higher-dimensional unmodeled dynamics. For example, some time ago Kalman pointed out that the usual positivity conditions assumed in the classical situation are not in fact necessary for the Kalman filter to converge. Using a "fast filtering" algorithm, which incorporates the statistics of the observation process as initial conditions for a dynamical system, this question is analyzed in terms of the phase portrait of a "universal" nonlinear dynamical system. This point of view has additional advantages as well, since it enables one to use the theory of dynamical systems to study the sensitivity of the Kalman filter to (small) changes in initial conditions; e.g., to changes in the statistics of the underlying process. This is especially important since these statistics are often either approximated or estimated. In this paper, for a scalar observation process, necessary and sufficient conditions for the Kalman filter to converge are derived using methods from stochastic systems and from nonlinear dynamics-especially the use of stable, unstable, and center manifolds. It is also shown that, in nonconvergent cases, there exist periodic points of every period p, p greater-than-or-equal-to 3 that are arbitrarily close to initial conditions having unbounded orbits, rigorously demonstrating that the Kalman filter can be "sensitive to initial conditions."