Subscribe to Money Morning get daily headlines subscribe now! Money Morning Private Briefing today's private briefing

Recession

Article Index

This Policy Will Beat Down U.S. Profits

U.S. profits

The new rules from the U.S. Treasury and Congress on tax inversions will hurt U.S. corporate profits.

The Allergan/Pfizer deal makes these problems clear.

Here's what investors need to know about the new tax rules...

What Is a Recession and Are We in One?

what is a recession

The Dow Jones Industrial Average is off nearly 13% from its May highs. And the Nasdaq is down 17% from its July highs. The steep drop in the major indexes has investors worried about a recession in 2016.

But first, what is a recession?

A recession is two consecutive quarters of negative economic growth, which is measured in gross domestic product (GDP). Our last major recession was in 2008.

And our expert, Shah Gilani, has reason to believe another one is coming in 2016...

Recession on the Horizon? Look at the Big Picture

u.s.recession

Recent events only add to speculation that we're headed for a global recession as soon as 2016.

Here U.S. Global Investors CEO Frank Holmes looks at how previous recessionary periods have affected stocks.

All investors - especially those fearing a stock market crash - should take a look at this...

Recession 2013: The Signs Don't Look Good

Cloud

The government keeps telling us that the economy has turned a corner, that growth is picking up, that people are going back to work, that consumers are more optimistic. But we've got cold, hard numbers that tell an entirely different story...

Read more...

Does Weakening Eurozone Mean Recession 2013 for U.S.?

The Eurozone economy contracted in the second quarter, increasing fears that "Recession 2013" for the U.S. is a step closer to reality.

From April to June, gross domestic product (GDP) in the ailing Eurozone region withered 0.2%.
That compares to the prior three months where there was no growth as the area was besieged by the ailing economies of Greece, Italy, Spain and Finland, which all sharply contracted.

"[The contraction] confirmed that the Eurozone is to all intents and purposes in recession, even if it has avoided the technical definition of two successive quarters of negative quarter-on-quarter GDP," Howard Archer, an economist at IHS Global Insight wrote in a note to clients.

The only thing preventing the Eurozone from contracting more in the second quarter and falling back into its second recession in three years was a buoyant economic performance from Germany.

Healthy investment and domestic consumption boosted the German economy and helped it grow 0.3% in the second quarter, topping expectations of 0.1%. The Netherlands also beat expectations, reporting growth of 0.2% for the quarter.

Meanwhile, French GDP didn't budge, sidestepping a highly anticipated contraction.

To continue reading, please click here...

Fiscal Cliff 2013: How Investors Can Prepare

Late science fiction writer Ray Bradbury wasn't referring to investors when he said, "you've got to jump off cliffs all the time and build your wings on the way down," but he might as well have been referring to the upcoming fiscal cliff in 2013.

The fiscal cliff is a real crisis looming at year's end. The fragile U.S. economy could face an unparalleled fiscal punch of as much as $720 billion if the scheduled changes go through as planned. They include the Bush-era tax cuts set to expire Dec. 31 and billions of dollars in programmed federal spending cuts.

U.S. Federal Reserve Chairman Ben Bernanke has warned that shocks from such changes will most likely cause the economy to contract, causing a recession.

And without cooperation from Congress, there's no alternate route for the U.S. economy to take.

Ernie Gross, Ph.D., MacAllister Chair and professor of economics at Creighton University, told Forbes, "The fiscal cliff is an almost 100% certainty."

To continue reading, please click here...

Disastrous U.S. Jobs Report Pummels the Market

Let's just say it: The May U.S. jobs report released today (Friday) was abysmal.

American businesses in May added the smallest number of workers in a year, only 69,000 - less than half of the median analysts' estimate of 150,000.

The unemployment rate unexpectedly ticked up from 8.1% to 8.2% as job seekers returned to the workforce, the Labor Department report revealed.

In addition, revisions from previous months showed the economy gained fewer jobs in March and April than originally believed. March's employment numbers were reduced by 11,000 jobs to total 143,000, while April's plunged by 38,000 to total a lousy 77,000.

The disappointing numbers cast doubt on the strength of the U.S. economic recovery, and also overshadow any evidence that the labor market is improving.

The news sent the Dow Jones tumbling some 160 points on the open and more than 220 points by noon, with the other indexes following. While many traders were anxious to see May end, June hasn't started off in the right direction.

"Yuck, this is really not good," Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust, bluntly told Bloomberg News. "We're at a very precarious point right now as far as investors' psyche is concerned."

To continue reading, please click here...

To continue reading, please click here...

What U.S. Consumer Spending Data Is Telling Us

The markets slid yesterday on news that U.S. consumer spending increased by 0.3% in March, while income rose 0.4% over the same time frame. This is the first time since December we've seen income rise faster than spending.

I can't say I am entirely surprised.

As prices for "must haves" like gasoline and food continue to rise, consumers are digging into their savings to cope. This is not small potatoes, given that the average family saved a mere $38 out of every $1,000 in take home pay last month, according to the U.S. Commerce Department.

I can't help but have huge concerns about Team Bernanke's plan; no amount of stimulus is going to overcome the struggle most families are having - which is to boost savings and shed debt.

Here's the thing... if consumers can't save, then they can't buy. And if they can't buy, they can't build up the nation's wealth, which is predicated on consumer spending.

All three sets of figures in isolation really don't tell you much. But when taken together - spending, income, and GDP - they suggest our economy is too weak to put millions of Americans back to work, much less in jobs for which they are appropriately qualified.

To continue reading please click here...

Four Reasons to Invest in ETFs – And Five Ways to Get Started

A mere 15 years ago, selecting the right exchange-traded fund (ETF) was no big challenge. That's because the first ETF wasn't introduced until 1993, and the second didn't follow until 1995. Since then, however, the growth rate among these versatile investment vehicles has been exponential - so fast, in fact, that the monitoring firm Morningstar now tracks the performance of 854 ETFs, with new funds being added almost weekly.

So, from this mushrooming roster of new ETFs - now covering virtually every market sector, both domestic and international - how do you select the right one (or, more likely, ones) for your portfolio?

If you're not already familiar with ETFs, here are four reasons why you should consider adding some balance to your portfolio.

Read More…

Big Banks May Be Forced to Buy Back Bad Mortgage Loans

Major U.S. banks are under pressure from government officials, as well as groups of investors and insurers, to repurchase or modify bad mortgage loans they pooled into securities and sold to unwitting buyers.

In the latest effort, a group of investors with roughly $500 billion invested in 2,300 mortgage securities is trying to force the large banks that originated or are now servicing faulty subprime-mortgage loans to repurchase or modify them, The Wall Street Journal reported.

Some investors "had no idea that their money was being invested in mortgage-backed securities," Dallas-based attorney Talcott Franklin told The Journal. "And yet somehow these people are now the ones being punished, and that's just not right."

Read More…

U.S. Vacationers Deliver a Profitable Boost to Travel Stocks

The number of U.S. travelers hitting the road - and the air and sea - is on the rise, bringing profit-making momentum to travel stocks that will continue into 2011. 

While the U.S. economic recovery is slowing down, travel has picked up since 2009's fourth quarter. Consumers are facing less debt and an increase in household net worth, and those who have weathered the worst of the storm have saved enough to treat themselves to a trip.

While 2009 was the year of the "staycation," travelers in 2010 have opted for more traditional vacations.

AAA projected the number of Americans traveling over this Labor Day weekend will be up 9.9% from 2009.

Read More…

Three Ways to Brace for a Double-Dip Recession: Going Global

The last time the U.S. economy suffered through a double-dip recession, this country was struggling to overcome the fallout from an Arab oil embargo, Vietnam War-era deficits, and an inflationary spiral that just wouldn't let go.

That 1981-82 double-dip downturn - the result of an economic "shock treatment" aimed at curing those ills - consisted of two recessions that were separated by a single quarter of growth.

The current backdrop is very different from the one that was in place back then, but the threat of a double-dip recession is no less real.

The world's No. 1 economy lost 8.4 million jobs during the recession that got its start in December 2007, making it the worst national downturn since the Great Depression and the biggest loss of employment since the end of World War II.

Read More…

Three Ways to Brace for a Double-Dip Recession: Going for the Gold

The last time the U.S. economy suffered through a double-dip recession, this country was struggling to overcome the fallout from an Arab oil embargo, Vietnam War-era deficits, and an inflationary spiral that just wouldn't let go.

That 1981-82 double-dip downturn - the result of an economic "shock treatment" aimed at curing those ills - consisted of two recessions that were separated by a single quarter of growth.

The current backdrop is very different from the one that was in place back then, but the threat of a double-dip recession is no less real. Indeed, with each passing week, and with every new economic report that comes out, the possibility that the U.S. economy will backslide into a double-dip recession seems to become more of a probability - or even a likelihood.

"For me a 'double-dip' is another recession before we've healed from this recession [and] the probability of that kind of double-dip is more than 50%," Robert Shiller, professor of economics at Yale University and co-developer of Standard and Poor's S&P/Case-Shiller home price indexes, told Reuters. "I actually expect it."

Read More…

Why Upbeat Earnings Reports Mean Caution to Investors

While earnings reports continue to pour out each day, investors should be careful before being excitedly swayed by strong financials - there is much more of the big picture to consider.

Stocks failed to get traction in the middle of last week after Alcoa (NYSE: AA) and Intel (Nasdaq: INTC) earnings reports underwhelmed investors, and Friday they spun off the road. The culprit: Fears that recent earnings gains represented a peak, and that weak readings on the economy were more representative of current conditions.

Retail sales disappointed and the Federal Reserve cut its 2010 growth forecast. Even word that Singapore grew at a record pace of 19.3% in the second quarter couldn't lift the air of despondency on Wall Street. 



To read why there's a cloud over Wall Street, click here.

State Budget Crises Threaten U.S. Economic Recovery

Across the country state budget crises are threatening to undermine the U.S. economic recovery.

Some 48 states are emerging from a round of painful budget cuts for their 2010 fiscal budgets, and at least 46 states face shortfalls for the upcoming 2011 fiscal year, which in most states began July 1.

The recession has caused the steepest decline in state tax receipts on record - and states will continue to struggle to find the revenue needed to support critical public services for a number of years as a result.

Since virtually all states are required to balance their operating budgets each year they cannot maintain services during an economic downturn by running a deficit, as the federal government does.

Read More…