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.

 


 

129Comments
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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 5:10PM
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WHAT DO YOU ALL THINK ABOUT SILVER AND GOLD PRICES ?
Feb 20, 2013 5:10PM
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his is wishfull thinking for the bears that want the market to go down to zero so Obama

looks bad.When the Dow is at 20,000 they still be be saying "WE`re going down

the tubes"Sorry, wrong about the market and Obama.

Feb 20, 2013 5:07PM
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A recession is when your neighbor loses their job. A depression is when you lose yours.

Feb 20, 2013 5:06PM
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For years, the US has essentially been a tax haven for foreign investors as our government hasn't reported earnings on investments held here by foreigners. That changed last month and could easily be the stimulus for a major sell off if capital flees, as I expect.  
Feb 20, 2013 5:04PM
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This guy Anthony is always preaching doom and gloom.  Look at most of is past articles. 
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. 

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 4:51PM
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well it not april yet. but then everyone be in a full recession.  
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 4:46PM
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We were doomed the moment  Reagan proclaimed it was okay to use debt as a tool of Guberment.  The federal political institution adopted this economic posture and have never looked back.   Bankers stopped shopping at Pennys and began wearing Armani suits.  We then started believing you could make something from nothing.  Hunger is the only cure now.    

Feb 20, 2013 4:42PM
Feb 20, 2013 4:41PM
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Such a waste of time reporting the obvious and to think we thought things actually are better when in reality, they are much worst unless you are a person with money and have enough not to lose and you are winning still with what made you your money in the beginning, Good investments and Greed.
Feb 20, 2013 4:31PM
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Am I the only guy sick and tired of Anthony's Humpty Dumpty sky is falling dribble?  The market may very well retreat.  It is probably overbought, as Anthony's charts indicate (man he loves his charts).  But how much profit would you have missed since October if you followed this guy's advice? 

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 4:25PM
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Oh, come on. Anybody who is anybody knows that the stock market is the only thing that matters. Mir-ha-ha-ha-ha-ha-ha-dari said this in one of his previous posts.

 

The world? Who cares about the world? What American really gives a hoot about the world? The only Americans (if you can even call them citizens),  who care about the world are the rogue U.S. corporations trying to find some dink-a** country to shove the few remaining U.S. jobs into. The world. Like most Americans, I could care less about the world.

 

The only thing any American needs to know about the world is how they will always try to find some way to stick it to Americans.

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 4:23PM
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If we're in a world-wide recession, why are corporate earnings so high?  Just imagine what will happen to corporate earnings during the recovery.  Meawhile, valuations seem normal by historical standards.  I own a lot of blue-chip / large cap stocks (JPM, GE, JNJ et. al.) and the portfolio average is 14X earnings and a 3.2% dividend rate.  Meanwhile, if I assume I can't time the market (and if I'm willing to live through the ups and downs, including the overall "ups" of the past few years), is there anyone out there who thinks that my portfolio over the next 10 years will lag a 10-year treasury (approx. 2%)?  If anyone should be nervous, shouldn't it be the LT bond holders (not much to gain and much to lose)?  Market timing, as suggested by this article, is a losing proposition for most of us.  How many of you "lost" money by staying on the sidelines for a large portion of the post-recession recovery?
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 4:15PM
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Charts, charts, charts.  This guy tries to predict stocks and economies like a star gazer.  He shines about as bright as a black hole.  Who is actually paying him to have his position?  What a piece of cotton candy.........his foundation is commensurate with it.
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