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 21, 2013 2:33PM
avatar
The real estate market is anything but rosy. It looked like a modest recovery was underway in the last few months of 2012 but since January 2013 people are not buying real esate and we are almost two months into 2013.  And we all know this hype and ludicrous bull market we have just witnessed in the stock market is anything but real.  Recovery, I think not, we are in for a very hard landing.
Feb 21, 2013 1:52PM
avatar
We were trying to hang in there but at 1230 hrs they called to accelerate the selling....Sell orders coming in quickly....No doubt they want to repeat yesterday's triple digit drop...The S&P was even worse percentage wise....All we can do now is try to minimize the damage...Manipulators own it all
Feb 21, 2013 1:16PM
avatar
Remain cautious, scumbags selling on every rally attempted so far....They are in control on and off the floor...Just be careful...More later
Feb 21, 2013 10:56AM
avatar
What's going on down here this morning? Basically, a continuation from yesterday's selloff...Manipulators took control immediately, and not wasting any time...This morning's numbers were not good either...Do not forget, everyone's taxes have gone up (the ones that actually pay taxes), this is Obama's economy and it is horrible....Like we keep saying, if the economy and the market were one and the same, the Dow would be at probably 2500 points or so...Oh well....Lets see if anything can be saved this afternoon.
Feb 21, 2013 10:27AM
Feb 20, 2013 9:06PM
avatar
Why folks don't get the arbitrage going on in our economy is unfathomable.  The more cheap labor stuff Americans buy the more pressure to devalue their own worth.  It is simply water level economics.  Picture a barrel with a bunch of holes in it from the bottom to the top.  The water level will never rise above the lowest hole.  The same with the standard of living.  As Americans buy more and more cheap labor products the economic arbitrage is too lower the inherent value of that production whereby Americans must work or accept the same value as the person in China, Korea, or Mexico that that worker was paid to produce or assemble it.  So allowing cheap labor products to enter our market is about the same as allowing a drunkard to buy cheap booze to kill himself.  Our elected officials and the International Corporations are making money while they watch Americans destroy their own economic futures. It is simply a matter of time before Americans will have the same buying power of one of the 800 million Chinese workers.  It is called a given!  So how does this affect stock values? Well as we continue to lose water through the lowest hole in the proverbial barrel these American Internationals will be able to make less and less profit until there will be no difference between selling here or China.  Profits will most definitely be less and consequently we see these organizations refusing to invest in new plant and equipment, hire more employees, or commit to any long range product development. And as we see presently they are hoarding with no clear idea of what or where to go or what to do next. JMHO
Feb 20, 2013 8:56PM
avatar

Recession Realities,

I don't need a stock market guru or an economic analyst to tell me that we are in a recession because we really never emerged from the first one five years ago. Since then I've been living on P&J sandwiches, beans and soup ... and it looks like I will have to continue with this 'feast' for the foreseeable future.

 

Peace to all ~

Feb 20, 2013 8:54PM
avatar
When the head Financial officer of Wally World tells you it's the worse Feb sales start he's ever seen it's not as MSN wants you to believe that Target ate their lunch. I work for a large muti-national company and have been in this business for thirty years and guess what MSN: It's the worst end of January and first of Feb in sales I've ever seen. MSN( Government puppet) news is fabricating the facts and lying through their teeth. They'll still be reporting DEC sales figures in April hoping you don't catch on that the bottom has fallen out and that it's this administrations baby. If this administration had any accountability or ability they wouldn't still be trying to blame everything on previous administrations. They'd own up to that they lied to you when they told you they could fix it.
Feb 20, 2013 8:21PM
avatar
This guy is all doom and gloom.  The US had been in the tank for years, nothing new here.  Remember the Ford, Carter, and Reagan years?
Feb 20, 2013 8:19PM
avatar
Fed apocalypse.  Tony looks a lot better in his posted picture than in real life.
Feb 20, 2013 7:55PM
avatar

Or the SH, s&p 500 short that i got in yesterday morning. No Tony you aren't alone.

 

KOO, gold can, and will, fall with stocks. Maybe as low as 1300 depending on how you read the charts. Charts look bad. If you are into that type thing.

 

AM is a trader and has at times been bullish. Going into the end of the year he was. I agree with him 100% on his outlook. FED stops printing and things could get very interesting.

Feb 20, 2013 7:53PM
avatar
Will Aapl still dominate the stock market at 29 dollars a share.
Feb 20, 2013 7:51PM
avatar
Obama is so clueless he could take economic lessons from former pres Jimmy Carter.
Feb 20, 2013 7:42PM
avatar

Obama wants to end social security and medicare but wants Obamacare?

No wonder this country is falling into the blackhole of the sun, following Barry Obama Sorretor  Hussein  Gonzalez Conchita, the first non-American President of these United States. 

Feb 20, 2013 7:37PM
avatar
I would love for a client of Mirhaydari Capital Management to come on this blog and tell the truth about whether they ever made any money with Tony. How can they when he is constantly wrong? Tomorrow it will be Jubak, Fleckenstein or a mystery guest with another Doom and Gloom piece. I blame you, Bill Gates, for allowing this to continue. How can a multi-billionaire hire so many negative and stupid people? Why can't you write stories about new ideas, new companies, new trends...anything but constantly biased pieces for short-sellers?
Feb 20, 2013 7:28PM
avatar

Have you noticed Tony "Meerkat" Mirhaydari "pops-up" right after every sell-off pronouncing the mantra of MSN MONEY which is always Doom and Gloom???

 

Why did the market drop? It's quite simple.

1. Gold is in freefall mode because stocks are going higher with no inflation.

2. Oil is in decline because of more fuel-efficient cars and because oil company executives fear the loss of your federal tax dollars from Obama which they used under Bush to pay off murderous dictators and mercenaries to protect their oil fields in Africa and the Middle East and Central and South America. No more free money means a decline in profits.

3. Too many illegal aliens still on American soil sucking federal benefits.

4. Too many bankers leaking false stories to the press because they want QE to end.

5. Too many short-sellers like MSN MONEY writing false stories to crash the market.

6. Too many street gangs and criminal organizations driving up city and state enforcement costs.

7. Too many do-nothing Congressmen getting a paycheck.

 

Don't believe the hype, things are improving dramatically and new money is flowing into stocks.

Shame on you Meerkat.

Feb 20, 2013 7:25PM
avatar

 Even without current global economic conditions as a whole, phony stiumulus efforts by the admin and politicians coupled with high oil/gas prices, climbing as we read this post assure a no recovery future as far as we can see. The perfect model for this admins approach is Spain which after massive building of roads, bridges, airports, green energy facilities as stimulus, now finds those facilities unused or shut down, unemployment at over 25% and the country BROKE. Any government attempts to grow an economy through monetary policy and distribution of public wealth through politicians pet projects will always fail in the long run.

Only a Caterpillar, Boeing, John Deere, oil and gas explorers, etc can stimulate an economy with permanent jobs that dont rely on breast feeding from the government. I fully expect GM to fail again when the give aways $ to unions  and accounting trickery has run its course.

Feb 20, 2013 7:11PM
avatar

And once the global recession hits the US, Obama will blame it on sequestration.  Mark my words.

 

That's why he's out on his Blame & Shame tour right now preaching all the doom & gloom crap - to cover his A*S*S..

Feb 20, 2013 7:09PM
avatar
Heck.  We really never came out of the current recession.  The growth is the worse in almost 100 years.  And, we reelected a President that has no clue on what to do, does not care, wants the economy to tank so he can blame Republicans, or all of the above!!!
Feb 20, 2013 7:09PM
avatar
I have not believed our recession ever ended, no matter what the White House has said.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

112
112 rated 1
270
270 rated 2
444
444 rated 3
693
693 rated 4
637
637 rated 5
692
692 rated 6
615
615 rated 7
498
498 rated 8
265
265 rated 9
126
126 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.