My advice: if you want to know what’s happening in the global economy, do not look to the key stock indices. They are misguiding investors into believing all is well, while the global economy stands on the verge of an economic slowdown.
In these pages, I have written about major economic hubs in the global economy, namely China, Germany, and France, going through an economic slowdown. But now the smaller countries are flashing warning signs as well.
India grew at the slowest pace in a decade in its fiscal year (ended March 31, 2013). The Central Statistical Office reported that production in India at factories, in utilities, and at mines only increased by two percent in April from a year ago. In March, it increased 3.4%. (Source: Bloomberg, June 12, 2013.)
The troubles for the global economy don’t end there.
In April, Malaysia reported its trade surplus fell to the lowest level since 1997. The country’s exports to the global economy surprisingly declined 3.3% from a year ago. There are now fears that Malaysia can very well run its first trade deficit in 16 years. (Source: Reuters, June 12, 2013.)
Exports from the Philippines fell 12.8% in April from a year ago. Indonesia has been witnessing an export slump for 13 consecutive months and recorded a trade deficit in April.
In the other parts of the global economy, the situation is similar.
We have no further to look than exports of iron ore from Brazil to China. In terms of tonnage, in 2012, Brazil exported 170 metric tons of iron ore to China, three percent higher than the previous year. But in terms of value, iron ore exports to China from Brazil were $14.9 billion in 2012 compared to $19.8 billion in 2011. (Source: Shanghai Metals Market, May 30, 2013.)
The chart below of the Baltic Dry Index (BDI) is a good indicator of demand in the global economy.
Chart courtesy of www.StockCharts.com
The BDI has been declining since the beginning of 2012, suggesting demand in the global economy is bleak.
As the optimism of stock advisors rises, I’m keeping a keen eye on the weakening global economy.
Where the Market Stands; Where It’s Headed:
This morning we woke up to the news that the Japanese stock market fell 6.3% overnight. Japan’s stock market boomed as the country’s debt-to-gross domestic product (GDP) ratio hit 200% and the Japanese central bank printed an enormous amount of new money to spur the economy. Sound familiar?
Now, Japan’s stock market is falling like a rock as people figure out the economy was never really improving. Money printing and artificially low interests rates masked the true economic picture—the same thing that will happen here.
What He Said:
“I’ve been pushing gold bullion and gold shares for over a year now. Bank in January 2002, I personally started buying gold shares.” Michael Lombardi in Profit Confidential, December 13, 2002. Gold bullion was trading under $300.00 an ounce when Michael first started recommending gold-related investments.