There are rumors swirling around many cities that major layoffs are coming.  A few friends in the Seattle area have told me that there are rampant rumors about an impending Microsoft layoff.  Would not surprise me at all.  While we do not have any verifiable facts on whether Microsoft is really going to layoff or not, it still gives us some information.  It shows just how nervous the consumer aka the worker is about the economy and their job.

As far as the rumors at other companies all around the US, I just do not see how they are not true. In my opinion we are already in a recession as bad as after 9/11.  Will it get worse depends on how long it will take the Treasury and governments around the world to unfeeze the credit markets. How bad will things get?  Well, things are already bad.  Let's look at one example.

Linens and Things.  They are bankrupt.  The liquidation has begun.  No one going to bailout this one.  The consumer is definitely doing without new Linens right now, and certainly doing without Things.  Bed Bath and Beyond is the clear winner here.

Pepsi also announced major layoffs because of consumer reductions.  Everyone has seen the carnage of layoffs in the financial industry.  It is really hard to tell how much this will spread, but there are a few things that could help mute the severity of the cutbacks.

Cheap oil and gas.  One of the contributory reasons we are in this mess is because of $147 a barrel oil.  As the demand for oil plummets, the price of oil is contracting.  53% down using intraday trading values.  Now we hear that OPEC is going to cut supply significantly to support prices.  Ok, then we will just cut demand more.  Did you not learn anything OPEC last time around????  This is good in a way.  The tyrant dictators of Chavez and that fool in Iran that I cannot even spell his name will really take it on the chin.  You think we are in a recession, those guys may get carried out of office in a wheel barrel.

As the credit markets unfeeze, companies carrying low debt and high equity will be able to get funding to grow.  A lot of the high debt and low equity companies will go out of business.  Those that survive will be many sizes smaller after selling assets to survive. 

There is a bright light at the end of this tunnel.  This is the economic winter that will change our behavior as a country and make us stronger.  When will things start to get better?  In the stock market we think we will slowly inch up over the next 18 months.  The stock market has already priced in a doozy of a recession.  As it starts to understand the extent of the companies that will go out of business, it will either stabilize or go lower.

My own prediction is that we go sideways from here.  Until companies are done missing analyst targets, we will have no reason to start a bull run.  We could certainly go up though.  As companies continue to cut deeply into costs and layoff significant portions of their workforce, this is unfortunately great for the stock.

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