Sunday , 14 April 2024

Double-dip Recession Warning Signs Are Flashing EVERYWHERE

The bright red warning signs of a double-dip recession are flashing everywhere – and I do mean EVERYWHERE. Words: 756

Lorimer Wilson, editor of, provides below further reformatted and edited [..] excerpts from Mike Larson’s ( original article* for the sake of clarity and brevity to ensure a fast and easy read. Larson goes on to say:

The “Official” Economic Data Is Getting Worse
1. New home sales have imploded 33% to a seasonally adjusted annual rate of 300,000 units. That’s the lowest ever recorded!

2. Durable goods orders have tanked 1.1%.

3. Housing construction has skidded 10%.

4. Consumer confidence plunged to 52.9 in June, according to the Conference Board. That was a huge drop from 62.7 in May and well below the 62.5 that economists were expecting

5. The Dallas Fed’s gauge of manufacturing activity dropped to -4% from 2.9%.

6. The Chicago Fed’s activity index fell to 0.21 from 0.25.

7. The Richmond Fed’s index fell to 23 from 26.

8. The Philadelphia Fed’s index plunged to 8 from 21.4, the worst reading in 10 months.

9. The Economic Cycle Research Institute’s Weekly Leading Index is falling off a cliff. Its growth rate just fell to NEGATIVE 6.9 percent, the worst reading in a year and far below the high of POSITIVE 28.5 percent in October. The last time this index tanked this much, recession struck within a few months.

The message here? This isn’t some isolated, regional downturn. It’s one that’s spreading to every corner of the United States – i.e. EVERYWHERE!

Market-based Signals of Recession Risk and Systemic Risk Are Going Berserk
If it were just the “official” economic data that was getting worse, you might be inclined to discount it – but it’s not. Market-based signals of recession risk and systemic risk are going berserk, too! [Following are some examples:]

1. European sovereign interest rates continue to climb, despite the biggest European Central Bank bailout ever and an explicit pledge by policymakers to buy government debt to prop up prices. Spanish 2-year note yields have more than doubled to 3.28 percent from 1.51 percent, for instance. Greek 10-year yields just breached the 10 percent level again. Investors have ALREADY lost more than 25 percent on the latest batch of 10s that Greece just sold in early March!

2. Investors are fleeing the euro for safe havens like the Swiss franc, a typical safe haven currency in times of crisis.

3. Investors are dumping the euro in favor of the Japanese yen, sending that exchange rate to its highest level in eight years. That’s a market-based signal that global investors are unwinding so-called yen “carry trades” as they frantically slash risk.

4. Gold prices recently exploded to $1,265 an ounce, the highest in history.

5. Volatility gauges like the VIX are climbing fast.

6. The Standard & Poor’s 500 Index just closed below key technical support in the 1,040 area.

If You Are Not Taking Action, You Are Making A Big Mistake!
These signals are clear and unambiguous. What they are telling us is that despite the biggest economic stimulus package in U.S. history … despite near-zero percent interest rates from the Federal Reserve … despite the biggest bank bailouts on record and the government takeover of every company from Fannie Mae and Freddie Mac to General Motors and AIG … the economy is sinking yet again. Even the Federal Reserve, with all its resources, can’t keep the double-dip away.

What was previously merely the RISK of a double-dip recession is fast on its way to becoming REALITY. Worse, it’s happening at the same time as the sovereign debt crisis is gathering steam. That’s no recipe for a new bull market! Instead, it’s the kind of toxic brew that could send stocks back to the 2009 lows — all the way down to 6,470 on the Dow and 667 on the S&P 500.

Times like these present investors like you with a choice – you can either sit idly by, take the beating the markets are doling out, and lose a boatload of money OR you can go on the offense and take aggressive action to protect yourself by:
a) taking gains on winning trades and biting the bullet with losing ones
b) raising cash across the board and by
c) purchasing investments that go UP in value when stocks go DOWN, such as inverse ETFs
d) getting more of your money to safety.

The bought-and-paid-for economic recovery is coming to a close. It’s time instead to deal with the very sobering new reality that a double-dip is here.

* (Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil.)