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Why a Global Recession Is More Likely Than Anyone Realizes

Back in the summer of 2008, I told my hedge fund clients to sell everything. That saved them a ton of cash.

Then in the following March, I published a front-page article predicting an "oncoming and unexpected bull stampede." And that made people a lot of money.

In August 2015, I predicted a mighty steep drop in stocks ahead, and then in December, I warned about what would happen in January.

That got people out of this sell-off's way (and it made my Short-Side Fortunes readers some "easy" money, too).

Each one of those calls was the right one, and today, I'm here to tell you I see a dangerous situation shaping up.

That's because, right now, the signs are telling me that the next global recession is coming soon.

Here's what I'm looking at…

Scary Warning Signs Are Lit All Over

red-down-crash-arrowA recession is very simply defined as two consecutive quarters of negative economic growth.

In the real world, nation-states that experience negative growth over longer periods, interrupted by occasional paltry-positive readings of GDP are, for all intents and purposes, in a recession.

Countries now in recession include: Greece, Belgium, Italy, Portugal, Netherlands, Czech Republic, Venezuela, Brazil, Russia, Taiwan, and as of Monday, Ireland.

I believe the United States is closer than anyone realizes to joining them.

The U.S. saw a mere 0.7% annualized GDP growth rate in the fourth quarter of 2015.

On the other hand, for all of 2015, the country turned in an estimated 2.4% growth rate, so it doesn't appear close to falling into recession.

But those figures are deceiving, and a whole host of recession barometers, like industrial production, consumer spending, and stock prices as a reflection of sales and earnings, are dialing higher and higher.

There's a saying on all our cars: "Objects in the mirror may be closer than they appear." But as far as the U.S. economy is concerned, those objects are filling up the windshield.

Industrial production in the United States showed negative readings in 10 out of the last 12 months. It's down 3% in the last six months alone.

What's more, the Institute for Supply Management (ISM) Purchasing Managers' Index just came in at 48.2.

That's four months in a row the index has been below 50 – and a reading below 50 points to contraction in U.S. manufacturing.

The January ISM report additionally says customers' inventories are "Too High," the backlog of orders is "Contracting," that exports are "Contracting," and prices are "Decreasing."

But don't take my word for it: Willard D. Oberton, Chief Executive Officer of Fastenal Co. (Nasdaq: FAST), North America's largest fastener manufacturer and a major supplier to other businesses, this month repeated that "the industrial segment of the U.S. economy is in the midst of a recession."

And CSX Corp. (Nasdaq: CSX) CEO Michael J. Ward, who was trying to explain why his company's shares had fallen to two-year lows, said demand will drop amid a "freight recession" of decreasing coal carloads and slackening international demand.

The American Consumer Won't Ride to the Rescue

Don't expect consumption to spur growth, either. In spite of the apparent growth of jobs headline unemployment down to 5%, U.S. consumers, responsible for around three-quarters of GDP growth, aren't stepping up.

According to the U.S. Commerce Department, personal spending in December was flat from a month earlier. Spending on durable goods, meant to last at least three years, fell 0.9% in December. And spending on nondurable goods also fell 0.9%.

Those numbers mean the end retailers' most important quarter – and a true picture of consumers' propensity for spending – has been a disaster.

It's not hard to see why… Those consumers' wages have only increased 2.2% in the past five years.

It gets worse…

Join the conversation. Click here to jump to comments…

About the Author

Shah Gilani is the Event Trading Specialist for Money Map Press. He provides specific trading recommendations in Capital Wave Forecast, where he predicts gigantic "waves" of money forming and shows you how to play them for the biggest gains. In Short-Side Fortunes, Shah shows the "little guy" how to make massive size gains – sometimes in a single day – by flipping large asset classes like stocks, bonds, commodities, ETFs and more. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

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  1. Toni Jerkovic | February 5, 2016

    Dear Mr. Gilani,

    With all due respect and despite the fact that I also fear the global economic downturn, please kindly advise where did you get the information that countries like Belgium, Italy, Ireland, Czeh Republic, Netherlands and even Portugal are in recession. I am aware that some of these countries have had anemic growth but they are not yet as far as the data is concerned in recession.

    Regards,
    Toni Jerkovic

  2. John Duncan Innes | February 5, 2016
  3. Mike Scotese | February 5, 2016

    The Czech Republic is a surprise for sure.

  4. Al Finnell | February 8, 2016

    Toni Jerkovic
    There is to the best of my knowledge NO Catholic nation that is a success. This does not mean that other nations cannot also fail. (There is also no Muslim nation that is a success).
    Most of those listed by Mr Gilani are Catholic.
    Look south of the USA and give a successful nation. All are Catholic, all failed. (As some of the benchmarks, try GDP per capita, education, health.

  5. Ian Edwards | February 14, 2016

    I too was surprised by the list of countries in recession, I expected to see Canada, Japan and Puerto-Rico who appear to at least be hovering with in recession.

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