The government was slow to see that recession is more of a threat than inflation right now but they have taken actions in the right direction recently. The headline of Warren Buffett saying we are in a recession isn't exactly correct though because he said that we aren't in a recession by the textbook definition of 2 consecutive quarters of negative economic growth. He said by a "common sense" definition we are in a recession. Granting that economics is an inexact study (I wouldn't really want to call it a science) the definition does matter as we need to be able to distinguish among things like a slowdown (slower growth) which everyone agrees we have, a soft landing in which we avoid a deep, lengthy downturn, a recession, a deep recession and a depression. Traditionally, a recession connotes at minimum a high rate of unemployment (which we don't appear to have yet) as well as lower business profit. Once in a recession, it can take time to get out of it because the dynamic of recession can feed on itself and on self-fulfilling prophecy. The sense that we have a recession can be a self-fulfilling prophecy causing people and businesses to pull back from spending and from buying stocks or houses which is one reason to avoid calling a recession before it is evident especially when the economy is slowing and maybe teetering on the brink as it could be now. Recently, we have seen many commentators talking recession using their own concepts of what a recession is-- Jim Rogers, for example has talked about autos being in recession. This might be reasonable but if you take a view like that to its logical conclusion there are always some areas of the economy that are in recession even as other areas or most of the economy might be doing very well. In that case, many negative effects of a "textbook" recession might be avoided-- if you can't get a job selling cars maybe you can do some public relations work for a large oil company. If you can't get a job in a department store you can get a job at Wal-Mart. The textbook definition matters for other reasons as well-- if you are an investor you may want to use historical guidelines as to when it might be good to start looking for a time to put money in the market based on historical trends (see also items on recession in the Spotlight section, top right at http://www.Barrelomoney.com). If you are in the media or academics or politics you should want at least for private analysis an accurate view of what is happening in the economy as a whole. That may require a better textbook definition than what we have but it does seem better to have a well-worked out concept of what a recession is than to just say something feels like a recession or looks like part of a recession based on very incomplete data. In a recent interview real estate mogul Sam Zell not only took the view that we are not in recession but that the problems in the economy are worsening because of the media fixation on bad news--- such as seeing a recession when we haven't yet had one quarter of negative economic growth. I recall many years ago when we were in a slowing economy and all the buzz in the media was about a soft landing. In the end we had a soft landing but it may have been partly due to the fact that so many people believed in that and the media had people expecting that.

Mike, as always, thanks for your thoughtful commentary. The 2 quarters definition is mentioned. We both could have added the joke about the guy that predicted 14 out of the last 3 recessions.

Well, I was reading that the author purchased Wamu shares at 39 dollars. Now that it is scraping $10 what will it take to convince you that we have a problem? BTW you still don't hope for a comeback do you?

This is the issue, we have two problems that the fed has with only one way to fix it. If they fight inflation the credit markets will crash. If they fight deflation and credit problems, the superheated world economy will continue and we will have major inflation as the dollar will continue to fall. More bubbles will start, and oil will be 125 dollars a barrel. Gary http://bgamall.stumbleupon.com

Gary,
The author sold WM at $36 in all but one portfolio. I would not expect the stock to recover in any practical time to this level. There is a higher probablity that it will be acquired.

If WM is not acquired I would expect it to beat the market. Meaning, that you might buy in at 10 to 12 and see it at 14 to 15 next year. This is a possibility and the overall market will not offer those returns.

We simply do not know what surprises WM will share in the future, but we do know there is a ton of pessimism and fear affecting the stock price now.