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The “recovery” that never really FELT like a recovery for most of America is over. Finito.
Done.
That’s the only conclusion a rational investor can come to in light of the latest market action. The Dow free-fell this week, losing 759.5 just since last Friday. We’ve now given up every last penny of gains for the year.
Then there’s the economic data. Just consider what we’ve learned in the past few days …
==> The ISM manufacturing index is one of the benchmark reports we get every month. In July, it plunged to 50.9 from 55.3 in June. Not only did that miss the so-called “experts” forecasts by a country mile, it was also the worst reading in two years!
==> Personal income gained a paltry 0.1 percent in June, the worst reading since last September. Personal spending actually FELL 0.2 percent in June, the first decline in two years!
==> Outplacement firm Challenger, Gray and Christmas said planned firings soared 59 percent from a year ago in July. Total job cuts surged to more than 66,400, the highest in 16 months!
==> Gross domestic product is the broadest measure of a country’s economic output. It grew a pathetic 1.3 percent in the second quarter here in the U.S. Worse, the number-crunchers in Washington slashed the first quarter figure all the way down to 0.4 percent from 1.7 percent.
Were they “lying” when they reported the original, better numbers in order to sugar-coat the truth? That’s not for me to judge. But the unbelievably large revision — and the awful Q2 numbers — suggest the economy is tumbling toward recession!
The good news? If you’ve been reading my commentary, you were completely prepared for this turn of events. If not, there’s still time — but not much — to get your portfolio properly positioned. Let me explain how …
My Warnings Are Out There.
Have You Heeded Them Yet?
Back on May 13 — when the Dow Jones Industrial Average was trading around 12,600 — I asked a straightforward question: “Is Another Economic ‘Tipping Point’ at Hand?” My answer? “The latest economic data is starting to suggest we may be hitting a wall (again)” I explained why by saying:
“Yes, the Fed can create asset inflation in the FINANCIAL markets for things like commodities. But those of us who live in the REAL WORLD have to pay for those things. And because the Fed can’t print jobs or boost all of our wages, eventually those resources hit a level we can’t afford any more — an economic ‘tipping point.’ When that happens, the economy tumbles into recession!”
Then a few weeks later, at the beginning of June, I ramped up my warnings. I said the economy was losing even more steam, adding that “the economic and political fallout from borrowing and spending so much eventually becomes too much to bear — and you just can’t do it anymore! I believe that’s where we are now.”
I also urged you to take profits on long positions … dump stocks in sectors like banking, construction and retail … and start going on the offense, using the kinds of tools like inverse ETFs that I use in my trading services.
In another Money and Markets column after that, I told you to dump your Real Estate Investment Trusts (REITs) because the two-year rally in that sector was over.
And I said you have to “stop listening to the happy talk coming out of Washington. Take steps immediately to protect your wealth from a looming recession.”
Bottom line: You’ve been warned repeatedly to prepare for tough times ahead. So hopefully when the Dow industrials plunged for eight days in a row recently — the worst losing streak in years — you not only dodged the pain, you actually MADE money with inverse ETFs like those I’ve recommended.
Remember the Lessons of 2000-2002 and 2007-2009 —
Then Shift Your Strategies!
So what if you have NOT yet taken steps to protect yourself? Then I urge you to shift your thinking immediately. In a bear market/recession scenario like we had in 2000-2002 and 2007-2009, you don’t want to buy dips. You want to sell rallies. Or better yet, use those rallies to go on the OFFENSE — buying more inverse ETFs for the next leg down.
Take this week. After such a nasty spill, we’re likely to get a short-term rally soon. But that’s not a rally you want to buy into. Instead, these kinds of rallies are great opportunities to dump stocks that got hammered in the preceding downdraft. I would also use them to initiate fresh inverse ETF positions, or add to existing positions, in vulnerable sectors such as real estate, small capitalization stocks, or energy.
If you want specific, actionable recommendations in those sectors, then all you have to do is click here. Watch my latest update on the markets, then sign up for Safe Money Report to get those picks. Some are already rising nicely in value. But if I’m right, and we’re heading back into recession, there are plenty more gains to be had — as long as you don’t wait too long!
Until next time,
Mike
P.S. With Safe Money your satisfaction is fully assured under our 100 percent money-back membership guarantee. So you’ve got nothing to lose!
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 15 comments }
It is way too soon to say if we are heading into a recession or a bear market. At Weiss Research there’s always a recession and a bear market. If one keeps crying wolf eventually one may show up. We’ll have a better picture of the overall economy in the next 3 months.
Tooooootttallly….I would expect such succinct prose from a Journalism and English major……these cats are cut from the same cloth as the people they say we should be wary of…..which makes every piece of advice they offer suspect at best and invalid at worse….but always good to check on a contrarian…
King Ralph
You contribute nothing of any consequence to an intelligent debate with your rantings.
Howard,
King Ralph is actually right. The Weiss bear cave hasn’t made any money for stock investors telling them to get out since Q2 of ’09 and the market kept climbing. In fact, if you followed their advice and went short, then you lost big.
As KR says, if you cry wolfe long enough, and Weiss been doing it for 24 months, eventually one could show up. Overall, lousy investment advice.
We never got out of a recession. The market has just become a bigger casino with no connection to the reality of the economy. Lay off workers, bump the bottom line, payout bigger dividends, and Wall Street is as happy as a frog in a slowly heating pot of water.
I was just wondering if you still have that TBT you bought in the 50’s?? It’s in the 20’s today.
Wow, regarding the three posts prior to mine, are they from Weiss competitors, with an agenda? Clearly they haven’t been privy to the accuracy of the Weiss long term, and short term projections on the state of our economy, government responses, and/or market reactions.
Really? These geniuses challenge the issue on recession? Next they’ll question the inflation, which has already been in place since 2008, and MUST get worst, before it gets better.
These wise men sound like the few, remaining Obama, Pelosi and Reid supporters in America. I presume they saw wisdom and leadership in Pelosi’s famous, “We have to pass the bill, in order to see what’s in it!”
Say what you like, but thanks to the steadfastness of Weiss guidance and warnings I was prepared for, watching, and jumped on appropriate investments when the bottom fell out of the markets this time.
Thank you Weiss team!!
I check in on Mike once in a while. I generally do the exact opposite of what he says. I do make my own decisions. I remember the gloom and doom predictions of 2008 / 2009 and I bought precious metals, energy, emerging markets. Yeah, they doubled and tripled and the DEPRESSION never happened. Then there’s the short the bond scenario like TBT so I bought HYG, another BIG winner. Then the short the REITS with REK, my VNQ tripled since 2009. So you remember that change Obama promised, it sure came my way as the stock market has doubled since March 2009, and I’m laughing all the way to my gold vault. I’ve taken my profits too before the recent debt ceiling debate expecting a market correction. I bought today at SP1170 by the way. And my stops are in.
Regardless of ones position, bull or bear major technical damage has been done this week, after following last week’s sell off and bearish engulfing pattern on the DJIA, and S&P, the follow through has been impressive. We should see a bounce that could last for 1 day, 2 weeks, or range bound for 2 months, but after that expect an even larger drop, the charts just dont lie.
James Switch that Weekly to Monthly – their lies the true – Shooting star, followed by Doji, followed by the suicide lover, followed by the Hanging Man and July confirmation with August showing it’s teeth.
IF we close on the lows for august – Well you know the rest of the story ……. TARGET ………. Have a great trading day.
Dellaroush – love some of your trading books and times sounds like you never lose want some of that stuff please.
Taking my licks on the short side till now – what are you buying now – Beside the trading bounce for the next 3 weeks.
In today’s world of non-asset based currencies the stock market moves not on fundamentals but on exaggerated expectations. Until a few days ago the market had shrugged off bearish fundamental news regarding inflation, depressed housing, unemployment, crazy out- of- control spending and mile high debt burdens. However, in spite of it all, the market moved ahead. Now the illusion has been shattered again ( second time in several years ) the DJIA has plunged. Yet will anything be learned from all of this? I think not. In October, the market will again make a dramatic surge to which all the pundits will say we have turned the corner. One cannot trade the markets on fundaments alone. One has to trade these markets as opportunities arise. Since the American dollar is a fiat currency with nothing tangible to back it up one can only hope to be nimble as a trader. Also, do not be deluded into believing that gold and silver is your safety net–they are not. Fools rushed in in the early eighties a got severely burned.
mr. Market
Even the biggest Bear on the Planet – Mark Faber says buy Equities he just doesn’t say which and at what level.
Sounds logical
I’ve been reading Martin Weiss & Co. (Mike Larson) since 2004. They have been right about 90% of what they have written.
I recall getting chills when I read the following (www.moneyandmarkets.com/financial-wmd-8784) and realized our government was playing a ponzi game that only the institutional investors and ratings agencies were privvy to. It made me realize that I, an individual investor, was on the verge of being thrown to the wolves….
My broker (at the time) tried to get me to keep his proprietary stocks and buy junk bonds. The final straw was when he sold my Vanguard 500 index without contacting me first.
I transferred my account to another brokerage and picked up some ETF’s, Treasury only money markets and a couple other things that Martin recommened.
I am so grateful that I ran into Martin when I did. It saved my retirement.
Thanks to Martin, etc for helping me stay out of the soup line.
Martin should have recommended Green Mountain Coffee Roasters in 2004. It’s gone up 7000% since then! My point is only that the stock market is still a valid place to invest. It’s one thing to be bearish on the economy, and another to be doom and gloom about the opportunities for trading. There are some good insights here, and then there is some questionable investing advice, particularly the idea to keep trying to short the market. I’m sure a lot of people have been burned following that advice. Instead of thinking about gimmicky ways to try to capitalize on bear markets, I think people should focus more on value.