Posted Jun 16, 2010 02:14pm EDT by Aaron Task in Investing, Newsmakers
Related: ^DJI, ^GSPC, UUP, TLT, FXE, FXI, XLF
In case you hadn't noticed, Gary Shilling is here to let you know what's become apparent to just about everybody: "It's difficult to make a lot of money in this environment from a long only portfolio, especially from a long only stock portfolio."
The best bet for most investors right now is probably a highly diversified portfolio with uncorrelated assets that can profit (or at least preserve capital) as the market seesaws back and forth between the "risk-on" reflation trade and the "risk-off" deflation trade.
But Shilling, president of A. Gary Shilling & Co., is a charter member of the risk-off deflation camp and is positioned accordingly:
Short Stocks: Never a believer in the recovery, Shilling says stocks "have gotten way ahead of themselves" and says there's a 30% chance the devilish lows of March 2009 (S&P 666) will be retested before this secular bear market ends.
Long Treasuries: Treasuries are "THE safe haven," Shilling says, predicting the yield on the 30-year bond will go to 3%; that would be an over 30% appreciation from current levels and about 55% for his old favorite, zero coupon bonds. "That not a bad return when you look at the alternatives," he says. "I don't think we'll get anything close to that from stocks."
Long the Dollar, Short Commodities: Shilling is long the dollar vs. the euro, British sterling and Aussie dollar, the latter of which is a bet on a slowdown in China. Australia "has become a Chinese colony," Shilling quips. But it's no joke that a China slowdown will, by definition, hurt demand for commodities, most notably copper.
Broken Clock or Crazy Like a Fox?
Anyone familiar with his work and writings knows these are time-tested themes for Shilling. In December 2008, he put a 2009 target of 600 on the S&P 500, which nearly came true. But instead of declaring victory, Shilling reiterated that forecast here in March 2009, and stuck by the bearish guns in May 2009 and again in February 2010.
Back in February, Shilling was starting to look stubborn at best, and out of touch at worst. Now, however, his bearishness doesn't seem so crazy, what with:
The U.S. housing market downshifting, unemployment still high and consumers cutting back again.
The euro zone teetering on collapse about about to trigger another global financial crisis or "just" heading for a steep drop in growth amid all the austerity measures. (For more on why Europe matters, see: No Escape from Europe's Rubble)
China trying to tamp-down inflation.
Japan still a basketcase.
Sovereign debt looking like the new subprime.
The dollar benefiting from its "best house in a bad neighborhood" status, which is lulling policymakers into a false sense of security about America's ability to continue its profilgate spending.
U.S. stocks expensive on a long-term cyclically adjusted P/E basis.
"Trying to time this is tough -- it always is," Shilling tells Henry in the accompanying clip. "Deleveraging is difficult to predict [and] it's happening in discreet pieces. That affects investor sentiment and market behavior. "
Check the accompanying for more on why Shiling isn't worried about inflation (hyper or otherwise) and doesn't think you should be either.
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..34 Comments
Showing comments 1 - 20 of 34Next.Yahoo! Finance User - Wednesday June 16, 2010 02:21PM EDTDespite all the printing press of the FED, inflation is not here. This is a deflationary crash. Japan had it for 20 years. Do not think we are immune. Stocks are a bubble. We have not seen the bottom back in March 2009. Here is why: http://kondratieffwinter.blogspot.com/2010/02/deflationary-depression.html
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.shai - Wednesday June 16, 2010 02:29PM EDTthe stock market is hardly likely to under go correction as long as it's being pumped look at all the negative news but the market is still going up it doesn't even follow fundamentals any more
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.Yahoo Finance User - Wednesday June 16, 2010 02:29PM EDTI have to bash Schilling for the first time. Previously, I had agreed with him a lot. Our agreements end in the "Long Treasuries" Gary, you are insane. This is for you, Gary. Can you possibly refute. People need to be careful with this BEAR camp. Most of whom have a lot stakes in the fiat currencies, which prevent them to "see" the truth. Pure BS. There are 3 levels of debts: 1. Debt to income ratio tolerable 2. Debt to income ratio intolerable. 3. Debt to income ratio NOT ONLY intolerable, but also uncollateralized or under-collateralized, AKA Ponzi Scheme AKA Unfunded liabilities AKA synthetic CDOs, CDS'. We are on the level 3 and multiply that by a factor of 3-5, you get the true picture, a PONZI sheme on a global basis. ******************** I will have more next time. ********************* In short, the path is unmistakeably currency devaluation as the central banks are monetizing the debts right at this moment. This will end very quickly as people, no matter how stupid they are, realize that deflation can co-exist with the currency devaluation, incorrectly called inflation. Such a misuse of language prevents many from realizing the inconvenient truth: these 2 can co-exist. ***************** I hereby declare that US Federal reserve is no longer relevant as the day when fiat currencies are not accepted has already arrived!! Barter will become realty. Gold is the only reserve currency in the near future when no dealers will accept any fiat currency for gold. **************** Gold is the ultimate short of the fiat currencies and current out-of-whack resource allocation. This missing phrase in the GOLD definition is the ultimate sign of the truth concealment from the uninformed MASS. The reality will force the looters' hand decisively.
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.Big E. - Wednesday June 16, 2010 02:30PM EDTDiversify, at least that way you will not feel guilty about losing all your money in one bet. Hello! returns these days are from measely to non existant, whether it's savings, investment or purchasing. It's more like ouch, ouch, than choo, choo.
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.Tups - Wednesday June 16, 2010 02:33PM EDTHi Gary, I'll take the opposite side of your positions. Put a number on it!
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.Nick - Wednesday June 16, 2010 02:35PM EDTSorry Gary, but you are wrong. In from 1995 to 2006, the best investment was real estate (in SOME markets). During that same time frame, stocks did almost nothing. We kept putting on and taking off our DOW 10,000 hats. Now it's back to a 15 year bull market in stocks. (Just like the one we have from 1980 to 1995.) Why? Corporations are getting rid of works. Boohoo right? Well, yes. But, that just means more black on the bottom line. In other words, businesses are getting leaner and meaner. Eventually they will go too far and have to start hiring again, but in the meantime, bottom line profits are going to be going up. As for me, I am not looking to hit anything out of the proverbial ballpark with my stock picks. But, I know that people need things like gasoline, heating oil, electricity, food, transportation and clothing. So that means I am buying oil companies, utility companies, and a few select retailers. Right now banks are willing to pay you about 1 percent on money market account investments. Whoppie! I would rather be earning 4 to 5 percent (with some risk) on utilities and some oil stocks. if I can earn 4 percent in dividends and another 3 percent in capital appreciation each year (and that is NOTHING), that brings me pretty darn close to the 7.2 percent I need to earn (compounded) to double my investment every 10 years. No, I am not greedy. Feed me 7.2 percent a year for the next 20 years and I will be content. That means, start with $100,000 today and have $400,000 in 20 years. Or, one million today and have 4 million in 20 years. Do the math. It ain't hard.
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.Yahoo Web Police just pulled you over. - Wednesday June 16, 2010 02:35PM EDTGary shilling is on target both on housing and the economy. However, regarding his statement on housing… the real question is will it stop at 10 to 20% drop. Personally… I think it will drop another 25 to 50%. ------------------------------------------------------------------------------------------------------------------------------------------ In every major economic event there is a catalyst… ours has many but the big one… will be the catastrophic “Gulf Oil Crisis.” It will push employment, housing and business off the edge of a very unstable cliff. ----------------------------------------------------------------------------------------------------------------------------------------- You see… it’s the wild card Wall Street hasn’t acknowledged and is America’s new "Dust Bowl"… the “Gulf Oil crisis.” It will have a huge economic and psychological impact on consumers.... lasting many, many years. A negative impact on both Gulf and east coast economies.... maybe even the World. ----------------------------------------------------------------------------------------------------------------------------------------- The environmental consequences are unknown and potentially huge… could change the warming/cooling patterns of the earth… plus the actual damages could run into the trillions of dollars… much of it unrepairable. ----------------------------------------------------------------------------------------------------------------------------------------- All the stupid Elites and Wall Street see is greed and $$$$$$$ signs… money from the clean up.... and it isn’t going to happen. The Gulf oil spill is going to suck the life out of the American economy.
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.Yahoo Web Police just pulled you over. - Wednesday June 16, 2010 02:37PM EDTCash will be king.
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.Quick - Wednesday June 16, 2010 02:37PM EDTThe "recovery" has been smoke and mirrors. $1.4 TRILLION in funny money -- "Bernie Bucks" dumped into stimulus programs the only encouraged consumers to get deeper into debt on new cars and new homes -- creating false trends in consumption numbers that are now collapsing after programs like cash for clunkers and housing purchase rebates are ending. Lots of non-productive government jobs created at levels of spending that cannot be maintained -- national debt increasing by ONE THIRD in just a year and a half.
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.William C - Wednesday June 16, 2010 02:37PM EDTWelcome to Tech Ticker - Land of hysteria
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.Johnny - Wednesday June 16, 2010 02:38PM EDTThe Roman Army under Julious Caesar is now passing the Rubicon Line and he break through beyond line and Conquer Rome to bulit a strong Roman Empire and he made it......Now the Dow Jones break the Bordeline of 10,200 from below 9,800 last month sell in May and it is above 10,200 passing to above 10,400 plus today.....It is indicating the Dow Jones will heading to 11,000 very quick and easy this time..........The forecast is 12, 500 by Christmas day.........Buy to make money until Christmas day.................That us my Tip.......My Chart is very good and accurate .....BUY.........
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.Johnny - Wednesday June 16, 2010 02:40PM EDTDo not bearish all the time Mr.GARY SHIlling otherwise your client will go out and you end up no Client at all.........
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.Thomas T - Wednesday June 16, 2010 02:42PM EDTEverbody in America without a job, get on the boat- we are going to China. You will like China, real kind people, rice everyday for all of you. If you go to China, osammie can claim a win in the job market. Just think of all the new people you will meet. Don't worry about not being able to speak the language, you have to seak spanish to order anything at Micky D's now so no probelmo. Priceless
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.Dane Gun - Wednesday June 16, 2010 02:46PM EDTGo global i have and i am loving my returns! Take a look at this! I have cleaned a 43% profit so far this year and do not get bothered by American markets constant whipsaws. All trades are traded on US markets in American brokerage account but companies are based in booming economies :) I can't tell you how much i love this program and have the best returns ytd and it only June and i have been trading for 5 years. Do you your self a favor and check it out. http://wealthinsideralliance.com/global-investing/?aff_id=588
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.Yahoo Finance User - Wednesday June 16, 2010 02:47PM EDTSyntax corrected version, sorry, hard for me type and say in this little box... I have to bash Schilling for the first time. Previously, I had agreed with him a lot. Our agreements end in the "Long Treasuries" Gary, you are insane. This is for you, Gary, Can you possibly refute against what is said below? People need to be careful with this BEAR camp. Most of whom have a lot stakes in the fiat currencies, which prevents them from "seeing" the truth. Pure BS. There are 3 levels of debts: 1. Debt to income ratio tolerable 2. Debt to income ratio intolerable. 3. Debt to income ratio NOT ONLY intolerable, but also uncollateralized or under-collateralized, AKA Ponzi Scheme AKA Unfunded liabilities AKA synthetic CDOs, CDS'. We are on the level 3 and multiply that by a factor of 3-5, you get the true picture, a PONZI sheme on a global basis. ******************** I will have more next time. ********************* In short, the path is unmistakeably currency devaluation as the central banks are monetizing the debts right at this moment. This will end very quickly as people, no matter how stupid they are, realize that deflation can co-exist with the currency devaluation, incorrectly called inflation. Such a misuse of language prevents many from realizing the inconvenient truth: these 2 can co-exist. ***************** I hereby declare that US Federal reserve is no longer relevant as the day when fiat currencies are not accepted has already arrived!! Barter will become realty. Gold is the only reserve currency in the near future when no dealers will accept any fiat currency for gold. **************** Gold is the ultimate short of the fiat currencies and current out-of-whack resource allocation. This missing phrase in the GOLD definition is the ultimate sign of the truth concealment from the uninformed MASS. The reality will force the looters' hand decisively.
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.Yahoo Finance User - Wednesday June 16, 2010 02:49PM EDTSyntax corrected version, sorry, hard for me to type and say in this little box... I have to bash Schilling for the first time. Previously, I had agreed with him a lot. Our agreements end in the "Long Treasuries" Gary, you are insane. This is for you, Gary, Can you possibly refute against what is said below? People need to be careful with this BEAR camp. Most of whom have a lot stakes in the fiat currencies, which prevents them from "seeing" the truth. Pure BS. There are 3 levels of debts: 1. Debt to income ratio tolerable 2. Debt to income ratio intolerable. 3. Debt to income ratio NOT ONLY intolerable, but also uncollateralized or under-collateralized, AKA Ponzi Scheme AKA Unfunded liabilities AKA synthetic CDOs, CDS'. We are on the level 3 and multiply that by a factor of 3-5, you get the true picture, a PONZI sheme on a global basis. ******************** I will have more next time. ********************* In short, the path is unmistakeably currency devaluation as the central banks are monetizing the debts right at this moment. This will end very quickly as people, no matter how stupid they are, realize that deflation can co-exist with the currency devaluation, incorrectly called inflation. Such a misuse of language prevents many from realizing the inconvenient truth: these 2 can co-exist. ***************** I hereby declare that US Federal reserve is no longer relevant as the day when fiat currencies are not accepted has already arrived!! Barter will become realty. Gold is the only reserve currency in the near future when no dealers will accept any fiat currency for gold. **************** Gold is the ultimate short of the fiat currencies and current out-of-whack resource allocation. This missing phrase in the GOLD definition is the ultimate sign of the truth concealment from the uninformed MASS. The reality will force the looters' hand decisively.
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.Common Sense - Wednesday June 16, 2010 02:50PM EDTDon't believe this dude. S&P 500 will not hold 666. Look for the S&P 500 to test 525.
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.Dr. D. - Wednesday June 16, 2010 02:52PM EDTGrrrrrooooowwwwwlllll....the bear lurks for thee....
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.Lorraine - Wednesday June 16, 2010 03:07PM EDTSorry Gary, you are one of MANY bears here. The shift downward in the dollar will move stocks up here. Beware of economists giving stock market predictions. No volume, many shorts, a summer coming and a dollar coming down spells pain to A. Gary and countless others.
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.mayon - Wednesday June 16, 2010 03:07PM EDTWOW--It Must be RECOVERY !!!--My 500.00 limit Capital One credit card---I got a letter from Capital One---They(Capital One) want me to now pay a 59.00 annual membership fee or If I don't agree,I have to close account---Holy-Cow--IS this a sign of "Recovery"???---Even here in the great pacific NW of WA State--mall shops=LESS--State Budget=in the red,city,county-more lay offs,budget in red,more short sales & foreclosures,small businesses can't get a bank loan & closed,state,counties raising taxes--Hmmm=Recovery???
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