These are the sorts of words peppered throughout the World Bank's latest missive on the state of the world economy. That pretty much conveys the tone of the 167-page report, titled "Global Development Finance: Charting a Global Recovery."

Some of the low-lights of the report:

  • Global GDP seen contracting by 2.9% in 2009.
  • International trade experiencing the sharpest drop since World War II.
  • Subdued recovery in 2010, with 2% global growth expected.
  • "[I]ncreasingly grave economic prospects" in low-income countries if capital flows don't improve.

I think today's report brings into clear focus a very important distinction between economic stabilization and economic recovery. Ben Bernanke's "green shoots" metaphor conflated the two, in my view.

The global economy is not collapsing, but it's not snapping back to business as usual, either. We've got zombie banks like Bank of America (NYSE:BAC) that are hardly suited to lead the way in lending growth. I see busted balance sheets across the board, from underwater homeowners to touch-and-go governments. It's this backdrop that led me to challenge the crowd of back-half-of-'09 boosters two months ago, in my call to kiss the rally goodbye.

Commodities in the crosshairs
After months of chatter about green shoots, this report is akin to a brush fire, singeing investors of all stripes. Energy and basic materials-linked stocks are easily faring the worst, however:


Principal business

Intraday Decline

Precision Drilling Trust (NYSE:PDS)

Onshore drilling


Allegheny Technologies (NYSE:ATI)

Specialty metals


Freeport-McMoRan (NYSE:FCX)

Copper and gold mining



Solar wafers


Frontline (NYSE:FRO)

Oil transport


Mosaic (NYSE:MOS)



We looked at oil's flimsy fundamentals earlier this month. Aside from the gold miners, this area has been one of the most overbought sectors in the stock market. It's actually encouraging to see oil and the related stocks tank today. I was getting concerned that prices had become detached from the realities of supply and demand.

Speaking of which, the same day I urged caution about riding the energy bull, China announced that it was suspending its strategic crude stockpiling program. This leaves actual demand in the driver's seat, which makes the case for $70-plus oil harder to make. The World Bank is projecting $55.50 per barrel on average for 2009, for what it's worth.

Bottom line, the stock market has gotten ahead of itself, as has the oil market. That's not to say there aren't great investment opportunities today, but they're not to be found in an index fund. If that puts me in the Mark Cuban camp of the buy-and-hold debate, then so be it.

Precision Drilling Trust is a Global Gains recommendation. Scour the globe for world-beater stocks with a free 30-day trial of the premium service.

Fool contributor Toby Shute doesn't have a position in any company mentioned. He recently ranked 54th out of more than 135,000 Motley Fool CAPS participants. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool has a disclosure policy.