Brendan believes that US is facing a recession and it will cause the global markets to fall even further. By: Brendan Lee Trying to catch a falling knife can be dangerous — very dangerous, especially when it is pointing downwards! We have recently seen figures reported for consumer confidence; home prices and purchasing manager orders are falling. In turn, retail sales are markedly down, as is our growth index. In addition, the important Baltic Dry Shipping Index is down. This is a measure of demand for world dry cargo shipping (excluding, for instance, oil). The dry shipping index decline indicates that, as I said a few weeks ago, the so-called “decoupling” of the rest of the world from the U.S. economy remains a myth. In short, if America sneezes, the world still looks set to catch a cold. Global demand elsewhere will not make up for a shortfall in the U.S. economy. Indeed, the looming American recession may affect the rest of the world even more badly, since much of the rapid international growth has been attributed to countries with a very low level of internal demand, compared to export demand, which is largely to the U.S. This will likely hurt the future earnings of our major exporting companies especially hard. It could also be particularly hard on U.S. exporters if, as I said last week, our U.S. dollar begins to recover as it become increasingly apparent that the U.S. will be the first world economy out of recession. Furthermore, the U.S. monetary base (cash and reserves at banks) appears to be decreasing, lending yet further credence to the idea that cash is becoming progressively scarce — a hallmark of a recession and of falling asset prices. Read more...