The bright red warning signs of a double-dip recession are flashing everywhere. And I do mean EVERYWHERE.
In just the past few days, we learned that …
• New home sales imploded 33 percent to a seasonally adjusted annual rate of 300,000 units. That’s the lowest ever recorded!
• Durable goods orders tanked 1.1 percent in May, while housing construction skidded 10 percent.
• 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
• The Dallas Fed’s gauge of manufacturing activity dropped to -4 percent from 2.9 percent. The Chicago Fed’s activity index fell to 0.21 from 0.25. The Richmond Fed’s index fell to 23 from 26, while the Philadelphia Fed’s index plunged to 8 from 21.4, the worst reading in 10 months.
The message here? This isn’t some isolated, regional downturn. It’s one that’s spreading to every corner of the United States.
• 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.
Talk about a laundry list of worrisome reports.
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!
Take European sovereign interest rates. They 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!
At the same time, investors are dumping the euro hand over fist in favor of the Swiss franc — a typical safe haven currency in times of crisis. And they’re 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.
Gold prices just exploded to $1,265 an ounce, the highest in history. Volatility gauges like the VIX are climbing fast. And the Standard & Poor’s 500 Index just closed below key technical support in the 1,040 area.
If You’re Not Taking Action,
I Believe You’re 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.
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 sit idly by, take the beating the markets are doling out, and lose a boatload of money. That doesn’t sound like a very sound strategy to me.
Or … you can go on the offense. You can turn lemons into lemonade. You can take the bear by his fur, and take aggressive action to protect yourself — and even profit!
How? By taking gains on winning trades and biting the bullet with losing ones. By raising cash across the board. And by purchasing investments that go UP in value when stocks go DOWN, such as inverse ETFs.
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, with all the attendant consequences for stocks, currencies, commodities, and more.