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Two Ways: World Bank Pulls Plug on Economic Recovery


Strengthen your portfolio in good times and bad.

The World Bank may have pulled the plug on the economic recovery. This morning, it issued a statement saying the global economy would contract more than previously expected: It now projects a 2.9% contraction for the year, as opposed to the 1.7% it offered up in March.

The bank projected net private capital inflows to fall in the developing countries to $707 billion in 2008, down from $1.2 trillion in 2007. This, along with new regulations and increased scrutiny of the financial system, will put a squeeze on the global economy.

Economies for developing nations are now expected to grow by only 1.2%. In 2008, they showed 5.9% growth; in 2007, the number stood at 8.1%. Excluding China and India, GDP for the emerging markets is projected to fall 1.6%, which will likely cause an increase in both poverty and unemployment.

For more, see Professor John Mauldin's Reports of Economy's Recovery Have Been Greatly Exaggerated.

From the Bull Pen: Although commodities were one of the hardest-hit sectors today, consider Schlumberger (SLB) pulling back to $50, the level where it last broke out. Bulls can fade (read: buy) into that mark, with a sell stop below $49.

From the Bear Cave: Bears can look to JC Penney (JCP), which could be in the early stages of a downtrend. Look for a snapback to $28, with a downside entry if and when.

I hope the worst is over. See you tomorrow morning!
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