CHESSNOID

It’s here and happening right now. It is real. Hopefully, it will be over sooner than later. From Wikipedia:

Many economists defer to the judgment of the business-cycle dating committee of the National Bureau of Economic Research regarding the exact dating of recessions. The NBER has a looser framework for judging recessions:

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.^[1]

A recession may involve simultaneous declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. Recessions may be associated with falling prices (deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. A severe or long recession is referred to as an economic depression. A devastating breakdown of an economy (essentially, a severe depression, or a hyperinflation, depending on the circumstances) is called economic collapse. Newspaper columnist Sidney J. Harris distinguished terms this way: “a recession is when your neighbor loses his job; a depression is when you lose your job.”

The headlines are starting to fly now as many more companies start making announcements of their economic forecasts and their disappointing earnings. These types of headlines will not just be on the business section but on the front page. When I watch news at night, most of the main stories they run are business related such as those below:

U.S. Stocks Plunge on Evidence of Slowing Economy, Outlook for Bank Losses U.S. stocks tumbled, capping the market’s fourth-straight monthly drop, after a report showed business activity fell to the lowest level since 2001 and UBS AG said losses in credit markets may top $600 billion.

Inflation Erodes Gains in U.S. Consumer Spending, Chicago Index Declines Consumer spending in the U.S. rose more than forecast in January, reflecting a jump in prices that is eroding Americans’ buying power.

Buffett’s Berkshire Hathaway Profit Declines 18% on Lower Insurance Prices Billionaire investor Warren Buffett’s Berkshire Hathaway Inc. said fourth-quarter profit fell 18 percent on declining insurance rates.

AIG Says Unit Head Cassano Leaving After $11 Billion in Derivatives Losses American International Group Inc. said the head of its financial products unit, Joseph Cassano, is stepping down after the insurer reported $11.1 billion in losses on contracts sold to fixed-income investors.

Pimco’s Gross Plans to Purchase Municipal Bonds, Subprime-Casualty Assets Bill Gross, manager of the world’s biggest bond fund, plans to invest in municipal bonds and mortgage loans as banks’ reluctance to lend forces hedge funds and other investors to unload the debt.

The only thing I want to suggest is recognize the situation we are all in and stop denying the obvious. There is no reason to panic since this recession will come to pass. I would recommend getting yourself ready by becoming a more frugal or smarter shopper and stretch those dollars as far as you can. Update your job skills and do some social networking, in case you are one of the unlucky ones working for a company forced to downsize.

The market was down from all the bad news that keep confirming a recession (click here for the youtube summary):