Perhaps It's A Housing and Financial Company Recession!

Today Citi announced another loss, $5.1 billion on top of last quarter's $9.8 billion, nearly all of it a result of credit and real estate. In response, Vikram Pandit is expected to cut 9,000 jobs at Citi in the next few months on top of the 4,200 already announced. Some analysts are predicting total job cuts at Citi rising as high as 25,000 in the next few quarters. On Thursday, Merrill Lynch reported a $2 billion loss and said it would cut 4,000 jobs, many from its S&T and IBD divisions. At JPMorgan the cost is estimated at over 10,000 jobs, mostly from its purchase of Bear Stearns. What's the total job toll of the credit crunch? This week's news brings it to over 40,000.

However, Wall Street topped off a strong week with a big rally Friday, after results from companies like Citigroup Inc. and Google Inc. helped ease investor anxiety about the health of corporate profits. The major stock indexes at times rose more than 2 percent. Investors have been worried that recent data indicate a slowing economy, which would cut into profit growth at some of the nation's biggest companies. But, results so far have shown that earnings, for the most part, are meeting or beating expectations, and the major indexes all posted gains of more than 4 percent for the week.

This has been the first full week of earnings reports, and all of the major companies, especially IBM, came in with results which were in line with or slightly ahead of expectations. While many analysts have been saying the economy has been in recession since the beginning of the year, there is still no definitive consensus that this is the case. The beginning and end points of recessions are determined in retrospect, so all we can do at this juncture is plan for the worst and perhaps if there is a recession it will be shallow. Meanwhile, enjoy the good week, but be ready for more volatility going forward as the various forces which drive the market struggle for the upper hand.

John Kaighn

Jersey Benefits Advisors

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