12 Signs That The Economy Is Seriously Slowing Down As 2020 Begins

Lost in all of the headlines about Iran and impeachment is the fact that the U.S. economic slowdown which began during the latter stages of last year appears to be accelerating. The final numbers which will tell us if we are officially in a recession at this moment won’t be released until months from now, but for millions upon millions of Americans it definitely feels like one has already started. Yes, the stock market has been soaring, but at this point the stock market has become completely divorced from economic reality. And as you will see later in this article, stock prices are now the most overvalued that they have ever been in all of American history.

But before we get to that, let’s talk about what is happening in the real economy.

The following are 12 signs that the economy is seriously slowing down as 2020 begins…

#1 The U.S. Manufacturing Purchasing Managers Index has been in contraction for 5 months in a row, and it is now at the lowest level we have seen since June 2009.

#2 Last month, manufacturing employment fell at the fastest pace we have seen since August 2009.

#3 Last month, new manufacturing orders fell at the fastest pace we have seen since April 2009.

#4 Chicago PMI has been contracting for 4 months in a row.

#5 European manufacturing PMI declined again in December.

#6 Borden Dairy, one of the largest dairy companies in the entire world, declared bankruptcy just a few days ago.

#7 Earlier this month, the Baltic Dry Index had its worst day in 6 years.

#8 Overall, the decline in the Baltic Dry Index this month is the largest that we have seen since 2008.

#9 The auto recession just continues to get even worse. Thanks to the substantial slowdown we witnessed during the second half of 2019, the total number of cars and trucks sold in the United States during all of 2019 was actually below the level that we witnessed back in 2000 when our population was significantly smaller.

#10 Used heavy duty truck prices have fallen “as much as 50%“.

#11 Macy’s just announced that they will be closing 28 stores.

#12 To start the year, AT&T is laying off thousands of workers, and according to Robert Reich those being laid off “will have to train their foreign replacements“.

Of course many of the “experts” continue to assure us that everything will be just fine.

In fact, one panel of “experts” recently came to the conclusion that there is “almost no chance of a recession this year”.

That would be absolutely wonderful news if it was true.

Sadly, the numbers that I just shared with you tell a completely different story. They tell the story of an economy that is most definitely heading for a recession.

And according to John Williams of shadowstats.com, if the government was using honest numbers they would show that we are actually in a recession right now.

But what about the stock market?

Shouldn’t the fact that stock prices have been soaring be seen as an optimistic sign?

Well, there have been a few other stock bubbles of this nature throughout our history, and all of them have ended very badly.

In 1929, stock prices were at an all-time record high and it seemed like the economic good times would never end.

But then the stock market crashed and we plummeted into the Great Depression of the 1930s.

In 2000, the dotcom bubble pushed stock prices to absolutely absurd heights, but then stock prices quickly collapsed when the bubble burst and the U.S. economy fell into a very painful recession.

During the years leading up to 2008, stock prices once again rose to dizzying levels and it seemed like the party would last indefinitely.

But then the financial crisis struck, and the Great Recession of 2008 and 2009 was the most excruciating economic downturn our nation has experienced since the 1930s.

Unfortunately, we are even more primed for a stock market crash now than we were in any of the previous examples that I just shared.

So how do I know this?

Well, for one thing P/E ratios have become ridiculously inflated. The following comes from Marketwatch

Indeed stocks are overvalued according to the popular measure of price-to-earnings (P/E) — which compares the price of one share of stock to one year of per-share earnings relative to recent history. The S&P 500 index SPX, -0.29% is trading at 18.6 times forward earnings, according to FactSet data, above the average ratio of 16.7 during the past five years and 14.9 over the past ten.

In addition, price-to-sales ratios for the S&P 500 are now at the highest level in all of U.S. history

The above chart, from Ned Davis Research, shows that price relative to sales for the S&P 500 is at a record high, “well in excess of what they were in 2000 or 2007 at those peaks,” wrote Ned Davis in a Wednesday note to clients.

Other measures, like the median price to earnings ratio — which exclude the skewed effects of very profitable and very unprofitable companies — shows the S&P 500 overvalued by nearly 30% versus the typical valuation level seen since 1964.

In other words, in the entire history of the United States stock prices have never been more overvalued than they are at this moment.

And every other time we have seen stock price ratios get this high, an absolutely horrifying stock market crash has followed.

The optimists are insisting that things will somehow turn out differently this time.

They assure us that everything is under control and that very bright days are ahead.

You can believe them if you want, but every indicator is pointing in the opposite direction.

About the Author: I am a voice crying out for change in a society that generally seems content to stay asleep. My name is Michael Snyder and I am the publisher of The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I have written four books that are available on Amazon.com including The Beginning Of The End, Get Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned) By purchasing those books you help to support my work. I always freely and happily allow others to republish my articles on their own websites, but due to government regulations I need those that republish my articles to include this “About the Author” section with each article. In order to comply with those government regulations, I need to tell you that the controversial opinions in this article are mine alone and do not necessarily reflect the views of the websites where my work is republished. This article may contain opinions on political matters, but it is not intended to promote the candidacy of any particular political candidate. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions. Those responding to this article by making comments are solely responsible for their viewpoints, and those viewpoints do not necessarily represent the viewpoints of Michael Snyder or the operators of the websites where my work is republished. I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is a great help.

Corporations Are Defaulting On Their Debts Like It’s 2008 All Over Again

Corporate Debt Defaults - Public Domain

The Dow closed above 18,000 on Monday for the first time since July. Isn’t that great news? I truly wish that it was. If the Dow actually reflected economic reality, I could stop writing about “economic collapse” and start blogging about cats or football. Unfortunately, the stock market and the economy are moving in two completely different directions right now. Even as stock prices soar, big corporations are defaulting on their debts at a level that we have not seen since the last financial crisis. In fact, this wave of debt defaults have become so dramatic that even USA Today is reporting on it

Get ready to step over some landmines, investors. The number of companies defaulting on their debt is hitting levels not seen since the financial crisis, and it’s not just a problem for bondholders.

So far this year, 46 companies have defaulted on their debt, the highest level since 2009, according to S&P Ratings Services. Five companies defaulted this week, based on the latest data available from S&P Ratings Services. That includes New Jersey-based specialty chemical company Vertellus Specialties and Ohio-based iron ore producer Cliffs Natural. Of the world’s defaults this year, 37 are of companies based in the U.S.

Meanwhile, coal producer Peabody Energy (BTU) and surfwear seller Pacific Sunwear (PSUN) this week filed plans for bankruptcy protection. Shares of Peabody have dropped 97% over the past year to $2 a share and Pacific Sunwear stock is off 98% to 4 cents a share.

A lot of big companies in this country have fallen on hard times, and it looks like bankruptcy attorneys are going to be absolutely swamped with work for the foreseeable future.

So why are stock prices soaring right now? After all, it doesn’t seem to make any sense whatsoever.

And it isn’t just a few bad apples that we are talking about. All across the spectrum, corporate revenues and corporate earnings are down. At this point, earnings for companies on the S&P 500 have plunged a total of 18.5 percent from their peak in late 2014, and it is being projected that corporate earnings overall will be down 8.5 percent for the first quarter of 2016 compared to one year ago.

As earnings decline, a lot of big companies are getting into trouble with debt, and we have already seen a very large number of corporate debt downgrades. In recent interviews, I have been bringing up the fact that the average rating on U.S. corporate debt has now fallen to “BB”, which is already lower than it was at any point during the last financial crisis.

A lot of people don’t seem to believe me when I share that fact, but it is absolutely true.

One of the big reasons why corporate debt is being downgraded is because a lot of these big companies have been going into enormous amounts of debt in order to buy back their own stock. The following comes from Wolf Richter

Downgrades ascribed to “shareholder compensation,” as Moody’s calls share buybacks and dividends, have been soaring, according to John Lonski, Chief Economist at Moody’s Capital Markets Research. The moving 12-month sum of Moody’s credit rating downgrades of US companies, jumped from 32 in March 2015, to 48 in December 2015, and to 61 in March 2016, nearly doubling within a year.

The last time the number of downgrades attributed to financial engineering reached 61 was in early 2007. It would hit its peak of 79 in mid- 2007, a few months before the beginning of the Great Recession in Q4 2007. At the time, stocks were on the verge of commencing their epic crash.

When corporations go into the market and buy back their own stock, they are slowly cannibalizing themselves. But we have seen these stock buybacks soar to record levels for a couple of reasons. Number one, big investors want to see stock prices go up, and so big investors tend to really like these stock buybacks and will generally support corporate executives that wish to engage in doing this. Number two, if you are a greedy corporate executive that is heavily compensated by stock options, you very much want to see the stock price go up as well.

So the name of the game is greed, and stock buybacks have been fueling much of the rise in U.S. stock prices that we have been seeing recently.

However, the truth is that nothing in the financial world lasts forever, and this irrational bubble will ultimately come to an end as well.

Earlier today, I am across an article that included a comment from Michael Hartnett of Bank of America Merrill Lynch. He believes that there are a lot of parallels between what is happening today and the period of time that immediately preceded the bursting of the dotcom bubble

Back then, as could be the case today, a bull market & a US-led economic recovery was rudely interrupted by a crisis in Emerging Markets. The crisis threatened to hurt Main Street via Wall Street (the Nasdaq fell 33% between Jul-Oct 1998, when [Long-Term Capital Management] went under). Policy makers panicked and monetary policy was eased (with hindsight unnecessarily). Fresh liquidity combined with apocalyptic investor sentiment very quickly morphed into a violent but narrow equity bull market/bubble in 1998/99, one which ultimately took valuations & interest rates sharply higher to levels that eventually caused a “pop”.

Like Hartnett, I definitely believe that a major “pop” is on the way, although I would like for it to be delayed for as long as possible.

Someday we will look back on these times with utter amazement. It has been absolutely incredible how the financial markets have been able to defy economic reality for so long.

But they can’t do it forever, and according to a brand new CNN survey Americans are becoming increasingly pessimistic about where the real economy is heading…

In a new CNNMoney/E*Trade survey of Americans who have at least $10,000 in an online trading account, over half (52%) gave the U.S. economy as a “C” grade. Another 15% rated the economy a “D” or “F.”

This gloom persists despite the fact that the stock market is on the upswing again. The Dow topped 18,000 Monday for the first time since July 2015.

If some Americans think that the U.S. economy deserves a “D” or an “F” grade right now, just wait until they see what is in our immediate future.

Personally, I give our economy an “A” for being able to maintain our unsustainable debt-fueled standard of living for as long as it has. Somehow we have managed to consume far more than we produce for decades, and the largest debt bubble in the history of the planet just keeps getting bigger and bigger and bigger.

Of course we are very much living on borrowed time at this point, but I truly hope that the bubble economy can keep going for at least a little while longer, because nobody should want to see what is coming afterwards.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

(Originally published on The Economic Collapse Blog)

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