Recession Is Here

by Larry Levin

The markets were hammered today not because of a new wrinkle in the credit crisis, but because of old fashioned economic data. The Dow was massacred -733.08, the NASDAQ -150.88, and the S&P500 was down a huge -9.03%. Adding yesterday's small loss with today's beating, the Dow has given up all but 126-points of its monstrous 936-point gain on Monday. Said another way, the $1/4-TRILLION that will be taken from your wallet and stuffed into banks are worth just 126 Dow points. As I write this, however, Dow futures are down another 115-points.

Any fear that had been swirling about concerning the Wall Street implosion spreading to Main Street was confirmed in this morning's retail sales report. Analysts got it wrong again with a guesstimate of -.7% - it was nearly double that at -1.2%. With their inability to borrow money they haven't earned yet to buy things they don't need, Joe Six-pack stopped spending. How that came as such a surprise is hard to figure; wasn't it obvious?

The economy is pretty much showing what we thought all along, that we're slipping into or already in recession, said Sam Stovall, senior investment strategist at Standard & Poor's.

In this country, spending accounts for 2/3 of the GDP so when the spending report is bad, the market reacts. I know traders and investors don't want to think like this - but this is a GOOD report. In order to stop this insane debt slavery, spending must slow dramatically or stop altogether for a while! It is absolutely necessary. We need to get back to saving at least 10% of what we earn, and never spend it. Currently, Americans save less than zero; they spend more than they earn. We need to say no to the conspicuous consumption, which is an economic term for buying unnecessary bling.

This afternoon the Fed released the Beige Book, which is its assessment of business conditions in its regional areas. It wasn't good. The report found that the economy continued to slow in the early fall as financial and credit problems took a turn for the worse. Vanishing jobs, shrinking paychecks, dwindling nest eggs and falling home values all are making consumers more cautious and less inclined to spend, slowing the overall economy. Retail sales, auto sales and tourism all turned weaker, the Fed said.

Even though the banking sector may be returning to normal, the economy still isn't. The economy continues to face a host of other problems,We're in for a tough ride.

Today's reports prove that the recession most of the so-called experts have denied - is here.

The difference between bad news and uncertainty is the ability to quantify, Stovall of S&P said. You can quantify earnings being cut in half, but not a global recession that will wreak havoc on earnings.



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