Or is the question how fast will it get bad?

Signs of economic trouble are everywhere at the moment.

BofA agreed to acquire CountryWide for $4B - a fraction of what CW was worth a year ago. Sounds like a deal but was it $4B too much? As CountryWide fights with regulators and investigators, it may turn out that the nation's largest mortgage broker is broke, insolvent. WSJ says that could be OK because BofA is large enough to take the loss.

But as banks take losses, it hurts lending, it hurts bonds.

SallieMae is having trouble selling its bonds and it needs cash. SLM holds most of the nation's student loans for education but even at 10% return, there are no takers. 10%? wow. Analysts predict they will need to offer 12%-15% but if they do, they are likely to lose money on the bonds which makes the company less attractive to invest in... Either folks think they are a bad borrower or they arent buying bonds in general.

The companies that insure bonds, like MBIA and AMBAC are also struggling.

This month we also get to see Q4 results from last year - and its not going to be pretty. Citi is rumored to be announcing a $20B loss?!

And then there are credit cards, the lender of choice for most households. AMEX just announced a "sudden and sharp" increase in delinquencies in Dec07 -- and they represent the most affluent borrowers. Similarly, the portion of the industry that catered to high net worth individuals with fancy cards are also reporting sudden rise in payment problems.

Some argue not to worry. The DJ is in good shape because the P/E ratios are at historically low levels. What they dont point out is that this is an artificial ratio created by unprecedented high profits. With all these losses and loan problems, profits are clearly coming down which makes those P/E numbers go back up.

The big question is how fast and how deep this recession will be.