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Thursday, March 14, 2013

Global economy slowing again?

In Global recession? I showed a chart indicating enough OECD countries had negative GDP prints to indicate a high likelihood of a global recession. The latest Goldman Sachs business cycle swirlogram shows the global economy may be in slow down mode again.  Here is the chart.


This same thing happened last year as we can see that last Feb. it was in slow down mode.  The U.S. stock market did not top until April and did not sell off hard until May.  However, the global economy is much weaker then it was in Feb. of last year.  Will that make a difference?  The copper chart would seem to back up the assessment of the weaker economy this year.  Here is the weekly chart of the copper ETF JJC.

The blue arrow marks price at the end of Feb. last year.  We can see that copper is about 10% lower at this time.  It has taken quite a tumble of late also.

I thought this was an interesting quote from the BHP CEO.
"...we've had volatile times and I think while the world has on balance, poured a lot more into equities; the reality is that the underlying situation in the world has probably not changed as much as the equity markets reflect."
Marius J. Kloppers, CEO BHP Billiton

Back in Jan. the pundits were proclaiming an upturn in China was going to speed up the global economy.  Most people pointed to the rise in Chinese stocks as a sign.  Here is the weekly chart of the China ETF FXI.

There was a pretty big rally into Jan., but the chart has certainly lost quite a bit of the gains.  It is now negative on the year (marked by the blue line).  I think the chart of CLF also confirms a global slow down.

This company makes products used in the making of steal.  Clearly the demand for their products is suffering.  The BRIC ETF is also showing some weakness over the last few weeks.

All signs point to more weakness in the global economy.  That is likely to affect corporate profits and be a drag on the U.S. economy.  However, I guess the fundamentals just don't matter anymore as long as the FED keeps printing money.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.