Recession !!! Are we there yet?

Mr Greenspan has warned that he see the recession within one year. (See the news) However today he realized that it has big negative impact on the financial market. So today, he corrected that recession is possible not probable. I think he just try investor not to panic, which they already. First correction happens in India, down 5%, then in China down 9% (Remeber China Stock Market went up from 1000 to 2200 in just one year), then US down 3.5%, then Europe down 2%, who is next? It can be any of above.

What is Recession? It is the name of period where economic growth is negative for two consecutive quarters. I do not belive completely with this defination. To me, when corporate profit are sinking and household income/cash flow are reducing cause slowing economic activities. This can happen in cycle, corporate profit sinks followed by increase in unemployment and then hit by consumer and eventually hit hard on corporate.

We have not faced real recession for 15+ years. What we saw in 2001-2002 was sinking in corporate profit only and dot com bust, but the consumer spending were never went down significantly, and eventually it brougt up the corporate profit. How did consumer get the money to spend during this period? I think majority of due to very low/zero percent loan and big home equity due to significant increase in house prices. Internatial growth from China and India also help during last 4 years and it will continue to help.

Lately I saw everyday one company announce layoff and M&A activity. M&A is good for short term but longer term there will be more lay offs. And this is happening right now even though the job market is tight. Today I saw this news, which mention corporate layoff increases 33% in Feb 2007, it may be because of slowdown in Housing and Auto sector. But if it continue to like this you will see higher unemployment and lower corporate profit that mean recession.