Recession Watch: $93 Oil, Falling Houses, UBS Blows Up

New Items: Another house-price drop (Case Shiller Index), UBS blows up, oil to $93.  Fed in a bind: Wall Street convinced of more rate cuts, but inflation still cranking.  NYT reported last week seeing weakness in some retail advertising spending (early sign of consumer weakness?).  Color commentary about current trends from media companies will be important in next few weeks.

Overview. We continue to believe that we may be in the first stages of a cyclical downturn for advertising and the Internet sector--one that could affect not only start-ups and second-tier players but majors like Google (GOOG), Yahoo (YHOO), AOL, et al.  Such downturns do not begin suddenly, and they are not instantly obvious (except in hindsight).  Rather, as with the housing market, the environment changes gradually, over many months, with early signs slowly becoming a steady torrent of bad news.

For the past two months, we have been tracking and analyzing data points that we believe illustrate the changing environment.  It's always possible that the worst is over, but these cycles usually take years, not months, to play out.  Full timeline after jump.

Timeline

Oct 25:    Merrill blows up, Caterpillar says weakness spreading, BOFA whacks 3,000
Oct 23:    Omnicom Fine Q3, but New York Times sees October weakness in retail ads
Oct 19:    WPP Misses targets, Wachovia and BOFA bomb, $90 oil
Oct 18:    Yahoo and then Google report strong quarters, no evidence of slowdown.
Oct 17:    Thornburg, mortgage-banker to rich people, bombs: not just sub-prime problem
Oct 15:    Beazer, Countrywide, Tax receipts down to "recession levels."
Oct 12:    Spending by Top Ten Web Advertisers Drops in Sept vs. Aug?

Sep 28:    News Corp's Fox Interactive Media misses sales targets in July/August
Sep 28:    Housing gets even worse.
Sep 20:    Google reports anecdotal advertiser cutbacks from mortgage crisis (though not on Google)
Sep 19:    CBS and Viacom say they see no signs of advertiser cutbacks
Sep 18:    NY VC Fred Wilson: The Coming Downturn

Sep 14:    First online ad estimate cut for mortgage crisis.
Sep 13:    Countrywide gets life support, but we still worry about online ads.
Sep 12:   Ad network Burst Media reports cancellations from "budget constraints"
Sep 11:    Mortgage giant Countrywide fires 12,000, WaMu sees "perfect storm"
Sep 11:    TNS reports two quarters of decline in US ads--first since 2001.
Sep 10:   Online mortgage ads remain strong in August: Good sign or false signal?

Sep 6:      Countrywide crumble and stock foreshadows Yahoo, Google, et al?
Sep 5:      OpCo "cautiously optimistic" about mortgage mess.  We're cautiously pessimistic.

Aug 30:    How Bad Could Mortgage Mess Get for Google, Yahoo, et al
Aug 29:    Will mortgage crisis hurt web ads?  Sure looks that way.
Aug 29:    Bankrate CEO call provides more reason to worry about online ads.
Aug 27:    Cracks in Manhattan's commercial real-estate market?
Aug 22:    JupiterMedia CEO Meckler says every Internet company now for sale.

Aug 17:    Dear Internet Industry: Brace for harder times
Aug 17:    What happens to Yahoo, Google, et al, in recessions?
Aug 16:    About that crashing stock market
Aug 3:      Bankrate confirms online ad market strong, print weak
Aug 1:      The market's crashing: Are you recession proof?

July 20:    Google blows up the stock market

Recommendations/Ramifications

Sep 18:      NY VC Fred Wilson: The Coming Downturn
Aug 17:     Dear Internet Industry: Brace for harder times
Aug 17:     What happens to Yahoo, Google, et al, in recessions?
Aug 1:       The market's crashing: Are you recession proof?