Are we already in a global recession?
Evidence suggests that, despite a lofty stock market, the world economy is already shrinking again.
For 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 firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
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.
A recession is when your neighbor loses their job. A depression is when you lose yours.
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.
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)
|Measure||Not seasonally adjusted||Seasonally adjusted|
U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force
U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)
U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers
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
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
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
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.
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?
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.
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.
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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