Cisco’s new outlook calls for a revenue decline of 5%-10% next quarter. The Street was looking for +6%. October was apparently awful. Worldwide.

It is increasingly clear that the global economy fell off a cliff at the end of September, around the time that the global credit markets ceased functioning.

Cisco sells to huge corporations across the globe. If they aren’t buying routers, etc. from Cisco, then their business is slowing too. Not a good sign.

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Looks like a grim Christmas season, both for retailers and for websites that generate revenue from Google ads. With sales down, advertisers are cutting back on search engine advertising.

So, for those wondering, why did my Google income drop off a cliff in September, now you know.

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The NY Times has a poignant article about a 49 yr old man forced to move back home with his mother after the plant he worked at thirty years shut down. He was working hard, doing everything right too.

It’s going to get worse, what with the recession coming on. I caught part of an NPR piece about a small town where the factories closed. Most commute 60 miles to the nearest jobs. Do the math. You make $10 an hour ($80 a day) and your car gets 20 mpg. So you’re using 6 gallons of gas a day costing you about $20 - or 25% of your pretax income. Ouch.

What happens when there are many more millions of people like that?

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Goldman Sachs says a recession is near with Merrill Lynch saying it’s already here.

Triggered by the subprime debacle, the rot has spread through all residential real estate and is now impacting commercial real estate, credit card and auto loan debt, with businesses having to pay sharply higher rates for loans, if they can get a loan at all.

The foreclosure rate is climbing, with a mass of resets coming in the next few months.

Just a month or so ago, the investment banks were still saying if the economy hit a bump at all, it would be minor. That’s all changed.

And, according to the venerable Dow Theory, it’s officially a bear market. Yeah, my puts are exploding in value, but I’d rather it was calls that were going up. But I’m doing swing trading now (holding positions from a few days to a few months) and the obvious trend for the market now is down.

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That’s the opinion of Jim Rogers, legendary investor and co-founder of the Quantum Fund with George Soros.

“It’s going to be one of the worst recessions we’ve had in a while because we had so many excesses going into it”

“The dollar is a currency that’s terribly flawed and it’s going to be under duress for many years to come.”

He’s massively short the dollar and encouraging others to do the same. The dollar is becoming the hunted, not the hunter.

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This worsening housing recession, together with the worst liquidity and credit crunch in the last 20 years, oil close to $100, faltering capex spending by the corporate sector and a saving-less and debt-burdened consumer that is on the ropes and stopped spending (in real terms) in December will lead in 2008 to the worst US economy wide recession of the last 20 years.

– Perma-bear Nouriel Roubini, who did indeed predict the housing crash early and accurately.

Commercial real estate is starting to wobble. Credit card debt is soaring as are late payments on them. The economy will be the major issue in the presidential elections, not the war. The war is far away while layoffs, foreclosures, and bankruptcies will be up close and personal issue for many.

If you haven’t done so already, batten down whatever financial hatches you may have. If you have investing money, is any of it in “enhanced” money market funds? If so, move it out, as the “enhancements” are now toxic. Cash rather than stocks is always a good place to be. Pay off credit card debt if you can, as interest rates and late penalty fees are high and rising.

The stock market, from all indications, is about to tumble. So it might be time to sell iffy stocks. Right now, Sue and I are almost entirely in cash and I’m using a tiny percentage of that, no more than 5-7%, to buy puts on homebuilder and financial indexes as well as on financial stocks. With puts, you make money if the price of the stock drops. This is not a strategy for all, as option trading, is extremely fast moving and tricky. But it could work for some. Another ploy is to buy short or ultra-short EFTs, which go up if the index they are based on goes down. If what I’m saying appears to be in a strange space alien language, then don’t even think of acting on it! Seriously.

But what about those with no financial resources? Job layoffs and company bankruptcies will hit them first. Maybe they have an ARM about to reset. They could lose everything. Given that millions or ARMs will be resetting in the next year or so with a spike coming early next year, this is no theoretical matter. Real people will be feeling real pain, just in time for the elections too.

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Thus, at this point the debate is less on whether the US will experience a soft landing or hard landing but rather on how hard the landing will be, i.e. whether the coming recession will be “mild” or “severe”. That is a radical change of the macro debate relative to a few months ago.

Indeed. Until just a few weeks ago The talking heads on Bloomberg were saying everything is just fine and we’ll get through this little speed bump of a subprime thingee no problemo. But then, darn it, that subprime thingee metastasized and has now spread to commercial real estate and the credit markets at large.

Yet even with that the talking heads almost comically persist in their folly. Morgan Stanley announced yesterday that, oopsie, they lost $9.4 billion last quarter. I guess that speed bump must have somehow morphed into a high speed run off a cliff. But, eternal optimists that they are, it wasn’t more than about 60 seconds after the news was announced that someone on Bloomberg said, so this must be a buying opportunity now for Morgan Stanley, right? Ah, no. Sometimes stock go to zero, as witness Enron.

But more and more those talking heads are getting a bit grim about what’s coming. Which is something that readers of blogs like Calculated Risk, Mish’s Global Economic Trend Analysis, and The Big Picture have known about and been discussing for months.

The combination of a worsening housing recession, a severe liquidity and credit crunch, oil prices well above $90, a retrenchment of capex by the corporate sector, and a saving-less and debt-burdened US consumers being buffetted by a variety of negative shocks is making the recession as the leading scenario for the US economy.

So now the question is now longer if there will be a recession, but rather, how bad will it be.

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