In its latest report, “Swimming Against the Tide: How Developing Countries are Coping with the Global Crisis,” the World Bank says that 94 out of 116 developing countries have experienced a slowdown in economic growth. Of those, 43 have high levels of poverty.

And the most affected sectors are those that were the most dynamic not too long ago: Urban-based exporters, construction, mining and manufacturing – the result of shrinking global trade that’s on track to record its largest annual decline in 80 years.

Developing countries are facing a $270 billion to $700 billion financial shortfall. But the biggest private sector creditors are seeing the biggest loan demand for high-income countries, choking their ability to loan to emerging markets. And the emerging economies that can secure loans will face higher borrowing costs and lower capital flows, leading to weaker investment and slower growth in the future, the World Bank said.

“When this crisis began, people in developing countries, especially those in Africa, were the innocent bystanders in this crisis, yet they have no choice but to bear its harsh consequences,” World Bank Managing Director Ngozi Okonjo-Iweala said in the report. “We must look at poor people as assets and not liabilities. The new globalization should mean we adopt new ways of caring for our infants, educating our youth, empowering our women and protecting the vulnerable.”

All totaled, only one quarter of the most vulnerable countries have the ability to finance measures to economic downturn – such as job creation and safety programs. The rest will likely see already drastic poverty worsen, the bank said.

“We need to react in real time to a growing crisis that is hurting people in developing countries,” said World Bank Group President Robert B. Zoellick. “This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis. We need investments in safety nets, infrastructure, and small and medium size companies to create jobs and to avoid social and political unrest.”

The best way to ease the damage, World Bank Chief Economist and Senior Vice President Justin Yifu Lin says, would be for developed countries to spend a portion of their stimulus plans on developing countries.

“Clearly, fiscal resources do have to be injected in rich countries that are at the epicenter of the crisis, but channeling infrastructure investment to the developing world where it can release bottlenecks to growth and quickly restore demand can have an even bigger bang for the buck and should be a key element to recovery,” Lin said.

The World Bank’s report will be presented at Saturday’s meeting of the G-20 finance ministers and central bank governors.

Source: World Bank: Emerging Markets Will Take Brunt of First Global Economy Decline Since WWII

Anyone can look in my closet and tell that I am not much of a shopper. I generally only replace things when they are beyond repair. As my girlfriend likes to point out, I have a pair of jeans from a store that went out of business years ago. Perhaps it’s my Midwest nature, but if they still fit, I’m wearing them. Holes be damned.

Obviously, this means I don’t set foot in malls very often. Usually it is only to redeem the gift cards I get at Christmas.

So, over the past few weekends, armed with my Christmas bounty, I was off to the mall. I could see it in my mind: empty parking lots, and everything 90% off.

We are in a recession after all. And it was far enough after the holidays that the malls would be deserted. I could park right by the door, get in and out without any long lines and not return for another 11 months.

You know what they say about assumptions.

The place was absolutely packed. The parking lot was nearly full, and while it wasn’t a last weekend before Christmas throng of shoppers, there were a startling amount of people with apparently nothing else to do on a beautiful 70 degree Sunday afternoon in Florida.

But we are in a recession. How can this be? Just window shoppers?

Unfortunately, that is very likely. According to the January Business Wire’s Monthly Retail Report, same store sales still fell 1.6 percent in January, but with a very large asterisk.

That large asterisk being Wal-Mart (WMT).

While Wal-Mart saw same-store sales increase 2.1 percent in January, it’s weighting in the Index (53 percent) heavily skewed the final reading.

Take out Wal-Mart, and the rest of the retail landscape isn’t pretty at all.

• Gap – 23 percent drop
• Saks – 23.7 percent drop
• JC Penney – 16.7 percent drop

Unfortunately for retailers, it doesn’t look like they will be turning the corner anytime soon. Faced with a continued slowdown in the economy and shrinking disposable income, it may take 90 percent off sales to get shoppers in the door.

And that’s the flipside of generating foot traffic with such heavy markdowns. With such heavy markdowns, margins must be razor-thin, or just not there. My guess is to move older inventory to make way for the new spring merchandise, many items are being let go at or below cost. This is going to have a serious impact on first quarter earnings figures.

Go long WMT, short just about everything else in the retail sector. You can see the full monthly retail report here.

Source: Can Wal-Mart Lead Other Retailers Out Of The Muck?

There’s a rumor going round, that’s someone’s underground, no wait, there’s a rumor going around that Ireland had requested aid from the IMF… Whoa there Partner! I know that things in Ireland have turned around on a dime from boom to bust, but I wasn’t aware of a problem that would run that deep… The rumors were denied, of course, but you know me… Where there’s smoke, there’s fire… I’m reminded of an email I received 2 weeks ago from a reader in Ireland, that talked of a major slowdown in the economy. The writer, was very adamant about how bad things had gotten that he compared Ireland to a banana republic! I responded to him, and said, no… That can’t be, because we’ve got a corner on being a banana republic right here in the U.S.A.!

You should have seen the sell off in euros when this rumor hit the streets! It was scary how fast a currency could lose a handle! But, after the rumors were denied, the single unit rallied back nearly as fast as it fell, and is now trading, as I write at 1.3225. The dollar is swinging a mighty hammer once again…

Talk about a flight to Risk Aversion! This rumor has the Risk Aversion campers battening down the hatches and heading to the cellars! Risk Aversion is NOT good for currencies and commodities.

Another reason for the Risk Aversion campers to batten down the hatches is the report from yesterday that Citigroup is going to sell their brokerage arm, Smith Barney, to Morgan Stanley for $2.7 Billion in cash… This to me, sounds like a fire sale, and that Citigroup is in deep dookie once again… Citigroup has already received $45 Billion from the Gov’t in TARP money, much more than any other bank has received, for sure!

This news scares the bejeebers out of me, as Citigroup has always prided themselves on the fact that a customer could do “one-stop investing”… I guess, we’ll have to wait-n-see if Citigroup announces a sale of another unit somewhere down the line, eh? But for now… This news is not good for any asset!

Well… Today, we’ll see the color of the Retail Sales for December. We all know that December Retail Sales should be kicking rear and taking names later… But… And that’s a BIG BUT… Not last month, unfortunately. As we get ready for the printing of Retail Sales, the experts say that Retail Sales will have fallen -1.2%, following a -1.8% in November. The Butler Household Index (BHI) tells me that while Christmas shopping was good, it wasn’t on scale with other years, and I believe the Retail Sales will be very disappointing this morning.

OK, what do we have here? A Fed Head talking about our ZIRP (zero interest rate policy). I know, we’re not quite at zero yet with the official rate, but the Fed Funds people would tell you differently! So, in my book, I say ZIRP! Well, this Fed Head, Lacker, thinks that interest rates will stay very low for some time… Say it ain’t so, Joe! I don’t want to see rates at zero for a long time, folks! That’s part of the reason we’re in this mess to begin with!

Oh, and yesterday, Big Ben Bernanke, was speaking over in London, and kind of threw some cold water on Obama’s $800 Billion stimulus plan… I can hear Obama saying… “Hey! He backed all the other stimulus plans, but now he’s throwing cold water on mine!” Well… I said “kind of threw” I didn’t say he DID throw cold water on the plan… I’ll let you decide… Here’s Big Ben… Fed Chairman Ben Bernanke said the “stimulus package being crafted by Barack Obama and Congress could provide a “significant boost” to the sinking economy. But he warned that such a recovery won’t last unless other steps are taken to stabilize the shaky financial system.” And what is he talking about in the “other steps”?

Here’s more Big Ben… “There will be no lasting recovery without further government action and funds to strengthen the financial system, with the timing of an economic recovery “highly uncertain.” OH GREAT! More Government action! That’s Central Bank parlance for “we’re getting our hands deeper into the cookie jar”!

OK, I’ve gone this far, and have not mentioned the huge drop in the Trade Deficit that showed up in the print yesterday… The Trade Deficit fell from $56.8 Billion in October to $40.4 Billion in November! WOW! This fabulous! Or is it? Let’s take a closer look at the numbers… U.S. exports fell $8.7 Billion and imports fell $25 Billion. Lower oil imports accounted for more than half of this drop, but ex-petroleum imports also fell $10.5 Billion.

So… Here’s the problem folks… As I tried to explain yesterday… A narrowing Trade Deficit because of less spending and larger exports would be manna from heaven… But a narrowing Trade Deficit because spending was slashed, and exports also fell, is not a good thing for the economy. It simply means that 1. The U.S. consumer has dried up and with consumption at least 70% of GDP, we’re in for a long recession… And 2. that the dollar is too strong, otherwise exports wouldn’t be so far off too. Yes, I’m quite aware of the fact that the recession is hitting all over the globe, but come on, we still buy Chinese and Japanese and even German exports even in a recession don’t we? These same countries would be doing the same with U.S. exports…

And then there’s this… News of the weird… Chris Gaffney saw a story yesterday that he sent to me, that qualifies for this category… Here’s a snippet of the story… “The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy.” Oh boy! Just what the pound sterling needs as a stabilizer eh? NOT! This is awful news for the pound folks…

I’ve said for months now that the Bank of England (BOE) was following in the Fed’s & Treasury’s steps, which could be to ruin, but following nonetheless! This is just another step in the Fed’s & Treasury’s direction. The free use of a printing press… The story went so far as to say “this will spark comparisons with the Weimar Germany and Zimbabwe, were uncontrolled use of the printing press ultimately caused hyperinflation.” This is where they’re getting a little out of control with the sensationalism… I prefer to say that it should compare to the U.S…. Which may still see hyperinflation in the future… But not the kind of Germany and Zimbabwe! YIKES!

So… As I get ready to head to the Big Finish… It looks as though that Trading Theme is back in force again, and the dollar will benefit any time the data shows the recession to be deeper, darker and more dangerous… Makes no sense to me! But that’s the work of the mental giants these days… So… If Retail Sales is as disappointing as I suspect it to be in about 15 minutes, then the dollar should be supported today…

Currencies today 1/14/09: A$ .6670, kiwi .5440, C$ .8185, euro 1.3190 (slipped back again), sterling 1.4535, Swiss .8925, rand 10.0450, krone 7.14, SEK 8.30, forint 210.20, zloty 3.1420, koruna 20.42, yen 89.45, sing 1.4920, HKD 7.7570, INR 48.83, China 6.8350, pesos 13.83, BRL 2.3140, dollar index 84.15, Oil $38.87, Silver $10.76, and Gold… 826.50

Source: The Dollar Swings A Mighty Hammer!

Tuesday morning starts off with the final GDP report for the third quarter, and it looks like there won’t be any changes to the figure since the last report. As it stands, the report will likely show a contraction of a half-percent for the quarter. In my opinion, with everything that has transpired in the market, that isn’t so bad. If you think about all the job losses, failed businesses, etc. it seems like it could have been much worse.

The other big reports on Tuesday are the Existing Home Sales and New Home Sales reports for November. The Existing Home Sales report is expected to show a drop of 50k units, and the New Home Sales is likely to report a drop of 13k units. Without being able to see the breakdown per region, it is tough to say if this shows the further decline of the housing market, or if it is simply a seasonal slowdown in the Midwest and Northeast. I would tend to believe it is the latter.

Wednesday sees all three reports announced simultaneously at 8:30 am. The Durable Goods report for November is likely to show another dip of over three percent. Without sounding like a broken record, this shouldn’t surprise anyone. No one has money to purchase big-ticket items, Christmas discounts or not.

The other two announcements on Wednesday are the Personal Income and Personal Spending reports for November. Personal Income is expected to hold steady from last month, while the Spending report is likely to show another decline. Since the holiday shopping season really kicked off at the very tail end of last month, it probably didn’t boost the Spending report last month, but I definitely expect it to boost the December report.

Have a safe holiday break.

Source: GDP and Home Sales Highlight A Short, But Very Busy Week

With that being said, the calendar this week is full of some important reports that could set the tone for the early part of next year.

On Tuesday, the Building Permits report for November is released, and is anticipated to show only a slight decline of around 8k units. I am not sure if this is simply due to the seasonal slowdown of building in northern climates, or if perhaps builders have finally found an equilibrium point with the market, but I view it as a positive sign if the number holds close to expectations.

The same can be said about the November Housing Starts report that comes out at the same time. A decline is expected, but again, it could just be do to seasonal issues (you can’t build in northern climates when the ground is frozen) rather than a worsening housing sector.

The big reports of the week are the November CPI and Core CPI figures.  Much like last week’s PPI and Core PPI reports, the Core CPI figure is expected to show a slight increase while the CPI figure will likely show a continued drop. Energy costs (oil) continue to drop, and this will be reflected in the CPI figure.

The Philly Fed report comes out Thursday morning, and it looks like reality has set in again. As I reported last month, expectations for the November report were for a rather large improvement versus October. Well not only did that not come true, but the report was actually worse than October. This month, expectations are for a slight decline.

The attention grabber this week is the FOMC Policy Statement on Tuesday. As it stands, expectations are for a huge rate cut. Currently the Fed Funds rate is 1.00%, and the probability chart shows a 65 percent chance of a cut down to 0.25%. This is especially shocking for two reasons. One is the shear size of the cut, which would be three-quarters of a percent. The second aspect is that if the cut is down to 0.25%, it leaves only one more bullet left in the gun for the Fed to cut rates.

Source: FOMC Statement Highlights The Week … Will The Fed Be Left With One Bullet?