"U.S. Economy Screwed"

The recession-deniers were muzzled by a horrendous last two weeks of December, and the gloom-and-doomers are now out in force. Their key arguments:

• Plummeting housing will now drag down the rest of the economy.
• The "bad debt" problem is not just "sub-prime" folks who should never have have taken out mortgages in the first place. It includes credit card debt, "high quality" mortgages, car loans, and other leverage that have recently become a consumer way of life.
• Pressure on consumers is leading to a reduction in consumer spending (70% of economy), which, in turn, will lead to a reduction in spending by companies that sell stuff to consumers.
• The question now is not "will there be a recession?" but "how bad will it get?"
• The most optimistic forecasts in a NYT gloom-and-doom round-up are for three crappy quarters, regardless of what the Fed does. Less optimistic forecasts suggest that we are, well, screwed.
  

After blowing the last downturn, we've been worried this one since last summer (see below).  We also suspect that, given the importance of housing to the economy and debt to consumer spending, the recession will be deeper and more prolonged than people think. 

We expect advertising spending to start slowing (or even dropping) within a couple of months (See: "When Will The Ad Recession Hit? This Quarter"). We think all the major Internet and media companies will get hit. We agree that Google will likely do better than display- and US-dependent companies, but  "doing better than others" is not  the same as "doing well" (at least not as far as stock prices are concerned). We expect the downturn will dampen VC and angel financings, which, in turn, will dampen entrepreneurial activity. So we continue to suggest that digital business executives brace for harder times.

Recession Timeline

Jan 11:   Stocks Pole-Axed Again: How Bad Could it Get?
Dec 31:  Shiller: Housing Has Not Yet Begun to Collapse
Dec 30:  Holiday eCommerce Falls Short

Nov 16:   JC Penney cuts outlook, blames economy and housing.
Nov 13:   Echostar says US Already In a Recession
Nov 8:     Toll Brothers says Oct Worse Than Sept, Bernanke cautious, LOOK whiffs

Nov 2:     Mortgage plague spreads, $96 oil
Oct 30:    $93 oil, falling houses, UBS blows up
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?