IMF & World Bank spells reality moment for markets and traders ..

This week the World Bank report ‘downgraded’ growth, now the IMF comes out and says something similar.  What does this mean for the markets as a trader?  Probably not much if you are comfortable trading the downside; is your mouth watering at the prospect for shorting the bubble?

I wouldn’t get too excited; central banks of the industrial world will do whatever they can to prolong any massive explosion.  It’s hard to fathom that we have this repeated propensity to create debt bubbles then when they explode fight them with more debt, which creates another bubble.  It’s funny how countries in the big boys club can just keep passing the potato because everyone in the game is neck deep.

There is the link to the 200+ page IMF report.

The IMF’s forecast of slowing global growth reflects a widely-held view that the world economy is being held back by weakness in the United States, Europe and China.

Australia is directly exposed to such a slowdown because of its heavy commodity exports. Last week the RBAlast week cited softening overseas as one reason for its 0.25 percentage point cut in the cash rate. Many market watchers are forecasting another rate cut in November, which would take the official cash rate to 3 per cent, the same level as during the global financial crisis of 2008. (SHORT AUSSI DOLLARS?)

Official figures on Australia’s unemployment rate, now 5.1 per cent, will be published on Thursday.  Economists are tipping a rise after a recent wave of job cuts in the resources sector. BHP Billiton has become the latest to confirm job cuts, saying it has started redundancy and redeployment talks with staff in its iron ore division.

The latest International Monetary Fund economic growth forecasts for calendar years 2012 and 2013:

GLOBAL GROWTH: 3.3% 3.6%
AUSTRALIA: 3.3% 3%
ASIA: 5.4% 5.8%
Japan: 2.2% 1.2%
China: 7.8% 8.2%
Korea: 2.7% 3.6%
India: 4.9% 6.0%
UNITED STATES: 2.2% 2.1%
EUROPE: 0.1% 0.8%
Germany: 0.9% 0.9%
France: 0.1% 0.4%
Italy: –2.3% –0.7%
Spain: –1.5% –1.3%
UK: –0.4% 1.1%


So China slows because the usual consumers are not consuming, and Aussies were betting their entire economy on exporting raw materials.  Not so good now when your biggest customer stops buying.  High levels of debt in industrialized nations and the need to cut spending is going to drag on everything.  I worry because the U.S is going to have a Euro moment soon enough, where we have to make a choice to cut spending or see if people will loan us more money to the point we are financing interest payments with more debt.  See Japan. It’s called bankruptcy; you don’t get to do it if you are one of the stabilizing legs of the world economy.

Will the U.S. go bankrupt?  It’s unlikely, but it doesn’t mean we wont be stuck in a no growth grinding spiral for the foreseeable future.

Inflation? Probably.  The Fed calls it a manageable risk.

The best we can hope for is a deflationary spiral that’s quick and brutal.  I hate to say it because it will mean the end of the American way of life during my lifetime, people will starve, and more banks will go belly up.  When the dust settles the future generations would be better of and could start a new debt ponzi scheme.

The most likely scenario is one of slow grueling growth for a generation or more until the next technology boom, if there is one.

In the near term – the Australian situation will be forefront and over-shadowed by Europe until its too late.  The Chinese markets are down YTD and have been signaling a slowdown for quite some time. There have been bottom calls too.

Check out these growth and contraction areas YTD.  The party has already started in many places other than the headline countries.

If you have capability to start looking into ‘3rd world’ countries, possibly more for shorts than anything near term.  If the pigs (thats us) don’t buy the slop for cheap somewhere else then the game is over.

You want to be in the next ‘China’, eventually the Chinese people are going to stop working for slave labor rates and making stuff will be pushed even more into the pacific rim and other developing nations.  I would venture to say that Africa is too much of a mess to invest in for the normal investor.

If you are really brave, Egypt and the middle eastern countries might be a good diversification. Unless they riot in another spring uprising.  That Egyptian President Mursi is American educated too.  Which means he understands the the U.S. game and we’ll see if he uses it to further his country or harm the western world. – friend or foe of the free world

I will be watching commodities and things that are of limited availability in the future months and years.  Trading has taught me one thing, if you wait for the panic the profits are like an avalanche.


Here are some ETF’s to consider.:


Beware if there is another major crisis or recession, nothing will be safe.  I look at many of these ETF’s and see how very close we are to the 2007 peak.


Fund Name Get Info Overall Rating Risk Grade
PowerShares Emrg Mkt Sovereign Debt PCY C+ B
Market Vectors Egypt Index ETF EGPT C+ C
iShares JPMorgan USD Emg Mkts Bond EMB C+ B
Vanguard Total World Stock ETF VT C- B-
WisdomTree Emg Mkts Local Debt Fd ELD C- B
SPDR S&P Emerg Middle East&Africa GAF C- B-
WisdomTree Emg Mkts Eqty Inc Fd DEM C- B-
EGShares Emerging Markets Cons ETF ECON C- B-
PowerShares DWA Emg Mkts Tech Lead PIE C- C+
Guggenheim MSCI EAFE Eq Weight ETF EWEF C- B-


Full list of ETf’s:

Just make sure they have enough volume to not be a roach motel.


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