Are we already in a global recession?

Evidence suggests that, despite a lofty stock market, the world economy is already shrinking again.

By Anthony Mirhaydari Feb 20, 2013 3:11PM

 Globe copyright Comstock, SuperStockFor weeks, I've felt like the only voice shouting against the growing chorus of overconfident optimists. 


The data and the fundamentals didn't justify the stock market's slow drip to new highs this month; nor did the internal technicals, with breadth and volume fading away. 


Of course, for those who cared to look, things weren't as peachy as they seemed on the surface.

 

In reality, large-cap stocks continue to slide sideways -- as they've been doing all month. Small-caps are stronger. But leading sectors, such as materials and emerging markets; leading assets, such as copper and tin; and leading stocks like Caterpillar (CAT) have all started to weaken significantly.

 

What gives? Well, despite impressions to the contrary, much of the world has already technically fallen into a new recession. Here are the details.

 

Some 45% of the countries in the Organization for Economic Co-Operation and Development have logged at least two consecutive quarters of negative GDP growth. And more than 70% have logged at least once negative GDP print.

 

As the chart below from the folks at RecessionAlert shows, we're in the midst of a pullback that, before the 2008 downturn, hadn't been seen since the early 1980s double dip recession. Yes, that means the current economic climate -- in the midst of multi-year highs in the stock market and widespread enthusiasm --  is worse than what was in the depths of the 2000 recession.

 

 

What will it take to bring the market back to reality?

 

Oh, I can think of a few things. Like the way the inflation hawks at the Federal Reserve are getting nervous about their extreme stimulus measures. Or the way the Chinese are starting to draw liquidity out of their financial system for the first time in seven months on inflation and credit bubble fears. Or the way Japan trade deficit has fallen to a record as its exports to Europe fall (due to a weak economy there) as import prices rise (due to a weaker yen). Or the way Islamic militants out of Nigeria, a critical oil supplying state, have become active in Cameroon -- threatening to push gasoline prices even higher.

 

The more data that is released, the more political events that transpire, the faster this farce ends since the market has been rising in a bubble, ignoring all the clear and present threats. And given how extreme investment positioning and sentiment has become, the realization that we could be falling into a new recession right now will not be a pleasant surprise for most people.

 

 

But a few are already showing signs of awareness. Consider the stocks the led the way higher on Tuesday, stocks like Pepsi (PEP), Merck (MRK), and CVS (CVS) as cyclical, economically-sernsitive stocks lagged. Stocks like CAT and Alcoa (AA).

 

 

Or consider the way materials and energy stocks are being hammered in trading Wednesday, such as Cliffs Natural Resources (CLF), which is down nearly 24% since I added a short position to my Edge Letter Sample Portfolio back in January.

 

I think the selling pressure will soon pull down a wider swath of the market. Thus, I'm adding the high-risk/high-reward Direxion Daily 3x S&P 500 Bear (SPXS) to my holdings. For those looking for less leverage, consider the ProShares Short Dow 30 (DOG).

 

This post was updated at 3:20PM ET to reflect the results of the FOMC minutes.

 

Disclosure: Anthony has recommended the SPXS and the DOG to his clients.  

 

Be sure to check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

 


 

118Comments
Feb 20, 2013 4:15PM
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It is obvious to most of us that we have never really recovered and now things are looking worse again. Obama can only tread water for so long and he is going to run out of money. At some point we have to realize Obama is driving the US off a fiscal cliff never to return. I don't know about the rest of you but I am sick of him blaming others for his mistakes and lack of ability to lead this country.
Feb 20, 2013 3:46PM
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Once again, this guy is kind of stating what the rest of us have already known. I never bought that whole 'summer of recovery' BS. And Europe is still in pretty bad shape - and it's looking to continue. Expect to tighten your belts.
Feb 20, 2013 4:13PM
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Well DUH!! There never WAS a 'recovery'! The FED has been printing toilet paper Benny Bucks for so long that it has become the new normal. And now that the FED has hinted.....HINTED that it may stop the presses...the market pinches off a fat one in its skivvies. Could it be that the can has been kicked up against the immoveable wall of reality at last?
Feb 20, 2013 3:48PM
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What total bullsh*t...not Anthony's article, but the line at the top proclaiming a 'lofty market'...yeah right...be honest MSNBC and re-state as 'PROPPED UP' market.
Feb 20, 2013 3:50PM
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The lack of volume and breadth is everything right now.  If 1 billionaire sells a 1987 Chevy Cavalier to another billionaire for $10k because it's the exact same car he had in high school, this doesn't mean that every 1987 Chevy Cavalier is worth $10k.

We're 75 minutes away from the close today and there's been less than 70 million shares traded on the Dow.  If you take out the HFT, you're probably left with little more activity than some retired dude in Florida who just sold a few hundred shares of GE so he can take his wife on a cruise.

Feb 20, 2013 3:36PM
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For quite a while now. How stupid could it get was all I was waiting for. It has gotten mighty stupid. The Fed now says it will stop or 'slow' buying assets. Kiss banks good bye. Start with the big ones. There's no pulse in banking, they totally f'd up credit, for sure. HIRING must commence. The trick is-- unless it fully concentrates on family-sustaining jobs and on-boarding fully paid out of those bloated executive's compensation, we will continue to slide. HIDE all you want grubbers. Here, let me say it again... where do you go now that you've screwed the whole planet? Buy a hand basket.
Feb 20, 2013 4:03PM
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was waiting for his next update to come....
weird. today there are people's getting on this analyst's bandwagon in comments. he's been hammered on previous articles for a message that remains consistent.

this guy's gonna either be right, or go down with his ship. commendable. i happen to agree with him since he began sounding the alarms, that things aren't all together right, in denmark... or, something smells fishy here.....

Feb 20, 2013 4:28PM
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Several things are wrong. First, this huge push for Corporatism by the elite and the government. Second, the Fed's irresponsible QE actions. These two ingredients are going to wipe out everyone except for the top 1%. Ayn Rand's warnings are coming to fruition. The government and the corporations are a production pillage vortex. Why do you think most corporations are exempt from corporate taxes while the taxes for individual people went up. The Fed is monetizing debt at an alarming rate. There are currency wars as we speak. Who can debase their currency the fastest to off set trading deficits and national debts. It's an experiment for inflation that the central banks really have no grip on to actually control. It's a recipe for disaster. Meanwhile, Russia and China are buying up every natural resource known to man.
Feb 20, 2013 4:21PM
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The US is the largest producer of greens nowadays. Dollars, I mean... Bernanke must go, end the Fed !!!
Feb 20, 2013 4:04PM
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What'd you mean 'already' in global recession again???

 

 we're not outta our own recession!! the stock market is nothing more than a show place at this point for crony capitalism at it's best, and we're now calling it 'lofty'?? huh???

 

John Q. Public is still outta work!!!! foreclosed on!! his car towed away since HE"S OUTTA WORK PEOPLE!!! so who in the hell is 'investing' in the market then???not the PRIVATE SECTOR!  certainly not the aforementioned dude outta work now is it! so all this hoopla is alot of smoke and mirrors smoke and mirrors, pay no attention to that man behind the curtain, obama!! thevery  architect of the demise of this nation with his bullshiiiiiit marxist policies and naturally like good little obamazombies the media gives him a pass and they're living the same dismal economy the rest of America is!!!!

 

 oh and hey dirtbag libs, how bout that jessie jerkson jr. huh? well what'd ya know?? another cheating, lying pig liberal rippin' off the very same public they claim to be fightin' for!! seriously, you liberal vermin, aren't you even sick and tired of every public official democrap being this arrogant and this much of a thief and liar? oh, no, right, you're just as proud as you can be right? hehe oh wait! I've got more, why is it that your pig messiah is playing golf with a 1 %er like tiger woods?? hmmmm, I mean he didn't contribute to ANY campaign, not one thin red cent, and meanwhile the very same people osama claims to despise is the one he's playing golf with, hmmm, funny, he never plays golf with the welfare cheats in the ghettos, those are his people after all, looks like your muslim trouble maker is a really BIG STARFUKERRRR, interesting? ain't it??

 

meanwhile  back to the recession, global or domestic, this current regime is directly responsible for all this mess and wait till your taxes skyrocket, oh and anyone here wanna explain why Blue/Cross/Sheild's co-pays are goin up?? what happened to "free"??? hmmmm, funny how "FREE" is the most costliest when a democrap marxist is at the helm

Feb 20, 2013 4:55PM
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Some wizard just figure this out??  It started in 2007 and has never left.  On the other-hand I personally am looking forward to a nice relaxing extended stay at the beach during the 5th Annual Summer of Non Recovery. 

Sure wish I could make that zoomy noise that always used to come on the radio before a Walter Winchell news flash!!  Well, you're just going to have to imagine that part...  Newsflash!!  There has been no recovery, the unemployment rate is not appreciably different than it was in late 2007 (don't take my word for it...google for the U-6 unemployment rate...you'll find it on the US Dept. of Labor's website), we have pissed away more money in less time for less benefit than ever in the history of the world and presently have the least capable government in control than ever in the history of this country.

Update: (I'll save you the trouble)
HOUSEHOLD DATA
Table A-15. Alternative measures of labor underutilization
[Percent]
Measure Not seasonally adjusted Seasonally adjusted
Jan.
2012
Dec.
2012
Jan.
2013
Jan.
2012
Sept.
2012
Oct.
2012
Nov.
2012
Dec.
2012
Jan.
2013

U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force

4.9 4.2 4.3 4.8 4.3 4.4 4.3 4.3 4.2

U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force

5.4 4.3 4.9 4.7 4.2 4.2 4.1 4.1 4.3

U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)

8.8 7.6 8.5 8.3 7.8 7.9 7.8 7.8 7.9

U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers

9.4 8.3 9.0 8.9 8.3 8.4 8.3 8.5 8.4

U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force

10.5 9.2 9.9 9.9 9.3 9.3 9.2 9.4 9.3

U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

16.2 14.4 15.4 15.1 14.7 14.5 14.4 14.4 14.4


Feb 20, 2013 4:24PM
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The fed may stop buying assets. It is about time. The per capita income is 100% plus taken up by taxes 59%(local, state and federal), debt 30% (consumer and business) and by real inflation of 11 to 12%. The American people have no money to make the economy grow!!!!!

 

The fed has two jobs, one, come up with a REAL inflation rate. and two keep the real inflation rate between a deflationary 1/2% and 0% inflation. Never again to have inflation. In the short run commodity and stock price will drop like a rock. If the congress will now cut spending (not by cutting social security and Medicare) but buy cut an welfare to business (agriculture, finance, energy, communications, etc.. They can cut social security and Medicare later if need be. Than reduce taxes on business over the next 5 years and replace it with a final consumption sale tax, giving the American people the direct right to decide what they will buy throw government. Let the American people themselves determine what is to happen to social security and Medicare, not congress.

Feb 20, 2013 5:16PM
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You´re correct this time, Tony. There is a worldwide recession going deeper, being combated by rhetoric and a lot of money printing. In the US, the Fed is guilty of preventing the economy to self adjust and of causing wealth concentration as never seen before. It´s becoming a land of a few billionaires and many miserable people.  
Feb 20, 2013 5:29PM
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The Middle Class knew that there has been no recovery since the meltdown in 2008 - 2009.  I have said this all along.  The corporations and the governments around the world cannot fool us!

 

We live in a global economy, and I do not think anyone but the Middle Class knows this because the burden was put on us economically.

 

Remember the Middle Class Rights march on Washington:  08-28-2013

Feb 20, 2013 5:13PM
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Inflation is in full swing, look at gas prices!
Feb 20, 2013 4:56PM
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Sure most of us here knew this....

I approached this definitively a few years ago.  This is "churning" for the "same" and there is no recourse .... not one.  It is a done deal and it will not change. I will say this again for those that believe, otherwise.  We have two lost generations and it is what they know and cannot do anything else. They will not work given they do not have to and go to college for nothing gained other than lost 'benefactors' that cannot support them, anymore.  Our "system" is broken in fiat monies and it cannot now be corrected.  Harsh..yes.  We have whatever he is in office and Congress is just that poor. 

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Gas prices are going up to over $4/gallon this spring. We are sending more refined gas overseas than ever before. The Federal Gov't is limiting the use of our coal in our electrical generating plants, raising prices here even while using cheaper Nat. gas; then allowing exporting to China and Europe our Natural Gas and boatloads of coal, more than ever.
KMP is taking over the Baltimore Harbor and will be adding another pipeline from Alberta to the west coast of Canada soon. Long KMP & PBA. The President is adamantly against the Keystone project.
The pundits are touting the USA will be the next Saudi Arabia for oil with all our private land drilling areas, (Bakken, etc.). Food stock will be limited due to last years drought. Price of meat is already going through the roof. There is a decline in Apple production in Wisconsin and other states so there will be a shortage of that fruit. The bees in the California Almond groves are dying and not fertilizing the tree's flowers along with other crops in that area of the country.
The Gov't agencies are reportedly purchasing large amounts of ammo and for "personal protection only", the Dept of HLS is purchasing 7,000 full auto M-16s, while the Gov't is limiting the semi-auto "assault weapons" for the individual citizen along with their high capacity magazines.

North Korea just told the United Nations they will be wiping So. Korea and America off the map with their next step (nuclear weapon). Iran will be getting their Atomic bomb this year to wipe out Israel.
A recession and trouble brewing on the horizon? Phew, you guys are all a bunch of whacko's.

Feb 20, 2013 3:44PM
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Feb 20, 2013 4:49PM
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if  you are in dividend stocks for income and you diversify even if the market goes down your income will

remain the same and you can pick up the stocks at a cheaper price with an even higher yield...forget the'

growth stories...chipotle, apple, netflix, all go up and all go down...dividend stocks go down as well but

you get paid for waiting

Feb 20, 2013 5:45PM
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One fact alone constitutes recession. Net job gain under Obama, 28,000 if you subtract the job losses from the total created. Of course this requires using real math, not the math of libs, dems, or the admin.

28/000 or more enter the workforce each week. Do the math.

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