Dismal Economic Growth to Finally Bring Down the Stock Market?

Italy’s exports to the global economy fell 2.8% in February compared to the previous year. Italy’s exports to the biggest country in the eurozone area, Germany, plummeted 9.7%, and to China, exports declined 9.2% in the same period. (Source: Dow Jones Newswires, April 16, 2013.)

During its fiscal year 2012, exports from India’s economy to the global economy declined 1.76%. (Source: The Economic Times, April 18, 2013.)

These are not the only two countries in the global economy that are facing declines in their exports. Japan, one of the world’s major exporters, is facing troubles as well—the central bank of Japan is continuously printing paper money in the hopes of achieving economic growth.

The ultimate truth behind exports falling, dear reader, is nothing but bleak demand in the global economy. Consider the stock chart for the Baltic Dry Index (BDI) below. I look at this index as one of the key indicators of demand and exports.


$BDI Baltic Dry Index stock chart

Chart courtesy of www.StockCharts.com

This indicator, since the financial crisis of 2009, has been screaming that there is no demand in the global economy. As a matter of fact, the BDI hasn’t recovered since its steep decline in 2008.

Unfortunately, as the conditions in the global economy continue to deteriorate, the key stock indices continue to rise. This may suggest that there is economic growth, but the underlying economic numbers and other indicators are suggesting the complete opposite. Don’t get lured into the stock markets; they are only rising because of extensive paper money printing.

Consider Caterpillar Inc. (NYSE/CAT), for example. This global company witnessed its sales of construction and mining equipment plunge 11% in the first three months of this year! (Source: Dow Jones Newswires, April 19, 2013.)

Before seeing any economic growth in the global economy, I believe that we will see economic conditions worsen first. U.S.-based multinational companies, such as Caterpillar, are already seeing the effects of slowing demand; soon, others will follow.

What He Said:

“I’m getting very worried about the state of the U.S. housing market and its ramifications on the economy. The U.S. could be headed for its first outright annual decline in home prices on record, adjusted for inflation. And I really believe this could be a catastrophe for the U.S. economy.” Michael Lombardi in Profit Confidential, August 2, 2006. Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else.