[jyl]

Do you think we are headed into the Recession of 2008?

Housing prices and sales are falling hard. Consumer spending is slowing hard. Retailers are missing earnings and inventories are rising. See financials and stock charts for homebuilders, retailers, consumer products companies. Employment growth is slowing, and temp employment has been leading the way. See labor market statistics and employment agency stock charts.

Credit markets remain dislocated, despite Fed injecting several billion $/day. Banks are missing earnings estimates, often big. Wall Street is laying off, probably 10,000 by year-end. See bank and broker stock charts, credit indicies.

Domestic freight volumes are down or slowing rapidly. See trucker, railroad, airfreight stock charts.

Construction is slowing. Residential we already know. But leading indicators of commercial construction are also rolling over, not just in FL but nationwide. Construction equipment companies are seeing slowdowns in their US sales and leaning harder on their international business.

Oil price is soaring. In inflation-adjusted dollars, crude $/bbl is approaching highs of the 1970s OPEC oil shocks.

Large cap stocks are decisively outperforming small caps. Large cap companies tend to have more international exposure and more stable business models. Small cap companies tend to be more fragile and most exposed to the US economy. They are the canary in our coal mine.

3Q earnings are overall below expectations. Even excluding consumer and financial stocks, earnings are merely meeting expectations that have been lowered, with current YOY growth rates one-half of earnings growth entering 2007. And as companies report 3Q, estimates for 4Q are being lowered further.

International growth has been stronger than US growth for some time. China is the poster child, but also India, Russia, Eastern Europe; even Western Europe has been growing well. But housing is rolling over in Europe, with house price declines from Spain to France.

I could go on, but my point is, from where I sit, the Recession of 2008 is forming. I had expected a sharper decline - the Quick Recession of 2007. But it seems like the decline may be more drawn-out, and unfortunately I do not have a good view on how deep or long a 2008 recession may be.

Do you agree? What do you see in your business? What is your outlook/prediction? If you are outside the USA, what are you seeing?