Are Things Lining up Just Like 2008, Is the US Headed for Recession?

(TOPICS: US growth does not look positive, Global Markets do not look good, Economic indicators point to a Recession)

The Davos World Financial Conference started with the IMF cutting its estimate for expansion in the world economy this year to 3.4 percent from 3.6 percent. Running deeper budget deficits will thus join a long list of concerns for politicians confronting what Ian Bremmer, founder of consultancy Eurasia Group and a Davos regular, calls “more geopolitical instability, and therefore risk, than at any point since 9/11.”

Sales at U.S. retailers declined in December to wrap up the weakest year since 2009, raising concern about the momentum in consumer spending heading into 2016. Analysts estimate that profits of Standard & Poor’s 500 companies in the last quarter of 2015 had their biggest drop from the year before since 2009, according to data collected by Bloomberg. The Morgan Stanley Business Conditions Index fell this month to its lowest level since February 2009. “It’s a big yellow caution flag,” said Joshua Shapiro, chief U.S. economist for MFR Inc. U.S. retail sales fell 0.1% in December, and were up just 2.1% in 2015, compared with a 3.9% annual gain the previous year, the Commerce Department said Friday. That was the weakest year for sales growth since the end of the recession in 2009. The industrial sector also pulled back production for the third straight month in December.

In a Bloomberg interview at the Davos World Finance Conference, George Soros reiterated his concern of a 2008-like catastrophe, saying that global markets are facing a crisis reminiscent of the one more than seven years ago. Soros went on to say, The Fed made a mistake in lifting rates when it did, because deflationary expectations had already set in and consumers were less likely to respond to lower borrowing costs with increased spending. Jeffrey Gundlach, founder and chief executive officer of DoubleLine Capital, told Barrons the Fed may be forced to ease again after lifting rates one more time, given the uncertainty in the economy. Investors shouldn’t ignore the divergence between junk bonds and the S&P 500 Index, which is pointing to a bear market, he said.

The Guardian reported that Albert Edwards, strategist at the bank Société Générale, said the west was about to be hit by a wave of deflation from emerging market economies and that central banks were unaware of the disaster about to hit them. His comments came as analysts at Royal Bank of Scotland urged investors to “sell everything” ahead of an imminent stock market crash. “Developments in the global economy will push the US back into recession,” Edwards told an investment conference in London. “The financial crisis will reawaken. It will be every bit as bad as in 2008-09 and it will turn very ugly indeed.”

Jeffery Snyder reported, that capital goods orders were -7.15% in September, -1.8% in October and -0.8% in November, but in December everything went back to a recessionary -7.69%. Durable goods orders, except transportation, were -5.42% in September and -4.14% in October briefly turned to -0.91% in November before going back down to -3.09% in December. The 6-month average for capital goods orders is -4.41% vs. -1.75% for shipments. Forward-looking, then, this suggests only more cuts in production and activity to come. The Wall Street Journal reported, Demand for long-lasting manufactured products made in the U.S. fell 5.1% in December from a month earlier, and declined 3.5% for all of 2015, the Commerce Department said Thursday. The annual decline in durable-goods orders is the largest outside a recession on records back to 1992.

Almost every article makes references “like 2007 or 2008, many believe things are lining up just as they were before the 2008 Financial Crisis, but unfortunately for the US and many other nations, those differences are not positive. In the last seven years there has been a dramatic increase of central bank intervention and the printing and devaluing of currencies, as well as a significant increase of national as well as global debt. Many analysts think additional central bank intervention is not going to solve the problem and in some situations, will make it worse. The use of the USD in international trade and the level of reliance on the US by other nations, have greatly decreased. These general trends, as well as the specific events in the articles and interviews below, will make dealing with the next crisis much more difficult.

Central Banks New World of Negative Rates and Cash (2-1-16) Bloomberg Video
http://www.bloomberg.com/news/videos/2016-02-01/central-banks-new-world-of-negative-rates-and-cash
U.S. Factory Activity Contracts in January (2-1-16) WSJ
http://www.wsj.com/articles/u-s-factory-activity-contracts-in-january-1454339800
Trauma Lingers as Stocks’ Worst January Since 2009 Incites Angst (1-29-16)
http://www.bloomberg.com/news/articles/2016-01-29/trauma-lingers-as-stocks-worst-january-since-2009-incites-angst
U.S. Consumer Sentiment Stumbles in January (1-29-16) WSJ
http://www.wsj.com/articles/u-s-consumer-sentiment-stumbles-in-january-1454080093
The Shipping News Says the World Economy Is Toast (1-28-16)
http://www.bloombergview.com/articles/2016-01-28/shipping-news-says-world-economy-is-toast
U.S. Durable Goods Orders Tumbled 5.1% in December (1-28-16) WSJ
http://www.wsj.com/articles/u-s-durable-orders-fall-sharply-in-december-1453988247
Durable Goods Confirm Again the Slope Is Down (1-28-16) by Jeffrey P. Snider

Durable Goods Confirm Again——The Slope Is Down

Soros China Hard Landing Is Practically Unavoidable (1-21-16) Bloomberg Video
http://www.bloomberg.com/news/videos/2016-01-21/soros-china-hard-landing-is-practically-unavoidable
Are We Headed for Recession (1-21-16) http://www.bloomberg.com/graphics/2016-another-recession/ By Peter Coy
Death Throes of The Bull (1-28-16) by David Stockman | http://davidstockmanscontracorner.com/death-throes-of-the-bull/
We Are at Peak Debt Headed for a Recession Says Stockman (1-21-16) CNBC Video http://video.cnbc.com/gallery/?video=3000485766
U.S. Stocks Sink With Markets Around the World (1-20-16)
http://www.bloomberg.com/news/articles/2016-01-19/asian-stock-outlook-mixed-after-u-s-equities-dip-to-august-lows
Davos Gets Jittery as Trump Rises, Oil Falls and China Slows (1-19-16)
http://www.bloomberg.com/news/articles/2016-01-19/davos-gets-jittery-as-trump-rises-oil-falls-and-china-slows
Gundlach Says Fed May Have to Ease Again: Barron’s Roundtable (1-16-16)
http://www.bloomberg.com/news/articles/2016-01-16/gundlach-says-fed-may-have-to-ease-again-barron-s-roundtable
Beware the Great Financial Crisis of 2016 (1.16.16) by The Guardian
http://www.theguardian.com/business/2016/jan/12/beware-great-2016-financial-crisis-warns-city-pessimist
Retail Sales in U.S. Decrease to End Weakest Year Since 2009 (1-15-16)
http://www.bloomberg.com/news/articles/2016-01-15/retail-sales-in-u-s-decrease-to-end-weakest-year-since-2009
US Retail Sales, Factory Output Data Lead to Lower Growth Expectations (1-15-16) WSJ
http://www.wsj.com/articles/u-s-retail-sales-fell-0-1-in-december-1452864829
Earnings Season Set to Confirm U.S. Slipping Into Profit Recession (1-14-16) http://www.bloomberg.com/news/articles/2016-01-14/earnings-season-set-to-confirm-u-s-slipping-into-profit-recession
RBS Cries Sell Everything As Deflationary Crisis Nears (1-12-16) The Telegraph http://www.telegraph.co.uk/finance/economics/12093807/RBS-cries-sell-everything-as-deflationary-crisis-nears.html
Strategists Are Growing Increasingly Negative About U.S. Markets and Growth Agree to Disagree (1-7-16) | http://www.bloomberg.com/news/articles/2016-01-07/strategists-are-growing-increasingly-negative-about-u-s-markets-and-growth
Manufacturing in U.S. Contracts at Fastest Pace in Six Years (1-4-16)
http://www.bloomberg.com/news/articles/2016-01-04/manufacturing-in-u-s-contracts-at-fastest-pace-in-six-years
Half a Million Bank Jobs Have Vanished Since 2008 Crisis (12-31-15)
http://www.bloomberg.com/news/articles/2015-12-31/half-a-million-bank-jobs-have-vanished-since-2008-crisis-chart
Junk-Bond Debacle has Bond Fund Investors Feeling like it’s 2008 Again (12-29-15) by Marketwatch
http://www.marketwatch.com/story/junk-bond-debacle-has-bond-fund-investors-feeling-like-its-2008-again-2015-12-28?dist=beforebell