Gary Shilling

Gary Shilling

Postby winston » Fri Jul 03, 2009 7:40 am

Ever since I have been reading his articles in Forbes, he always have something to worry about. However, it's not really a bad thing especially when you are surrounded by people wearing rose colored glasses. At War, prepare for Peace and vice-versa ..

Why I'm Still Bearish by A. Gary Shilling

It would be nice to believe the optimists' argument that everything's fine now, but the evidence simply suggests otherwise.

Despite the sharp stock market rally from March until June and hopes that the worst of the recession is behind us, I continue to forecast that the worst global financial crisis and deepest worldwide recession since the 1930s will last into next year.

Increases in economic activity and bear-market stock rallies are quite normal in the midst of recessions, so the recent glimmers that have given the optimists some reason to believe in their rosy outcomes should not be taken as long-term indicators, but more as aberrations.

As a result, I'm sticking with the investment strategies I outlined at the start of the year. With further house-price declines in the cards, I'd sell home builder stocks and bonds, as well as other housing-related stocks. For that matter, I don't see stocks overall sustaining the recent rally, so I'd sell equities in general.

If you're planning to sell your house, your second home or any investment houses anytime soon, do so now if you haven't already. The real estate crash is spreading beyond residential housing, and problems in commercial real estate have been brewing for the past year. So sell most commercial real estate, too.

Boy Gary, you're really a "the glass is half empty and the rest is evaporating" kind of guy aren't you. You know it's hard to walk away from a train wreck without a few bumps and bruises, but if you....

Consumers of all income levels have sharply reined in their spending and are reversing their 25-year borrowing and spending binge and embarking on a saving spree. As a result, I'd sell some consumer discretionary spending companies. And with lending standards tightening, I'd sell consumer lenders' equities.

Economies abroad will likely fare worse than the U.S. in this global recession. So I'd sell emerging-market equities and emerging-market debt. And weak economies overseas mean the dollar will rally as the U.S. again becomes the safe haven.

Commodity prices are down, but are still not back to their 2000 levels, on average. The global recession will encourage supply and depress demand, so I'd sell some commodities.

While the long rally in Treasury bonds is over, there are other fixed-income instruments that are attractive, so buy--carefully--high-grade bonds such as corporates and munis.

As we've warned, other troubled asset areas have surfaced, and they will infect financial institutions' balance sheets and likely spill over to their income statements as well.

One of these areas is nonmortgage consumer borrowing such as credit card, auto, home equity and student loans. Americans are increasingly treating monthly payments on these loans as discretionary. If, at the end of the month, it's a choice between putting food on the table and gas in the tank, or making a credit card payment, financial responsibility is going into the wastebasket. Credit card delinquencies and charge-offs are jumping.

In response to mounting losses, credit card issuers are cutting credit card lines for the less creditworthy, with total reductions of $2 trillion by the end of 2010 from the current $5 trillion, according to some estimates ($800 billion is currently drawn down). They're also raising interest rates and fees on credit card balances on good credit as well as bad. Washington is not amused. The Fed and other regulators have new rules to limit banks' ability to raise credit card interest rates, but they don't apply until July 2010.

Congress recently acted to speed up the process. The results, however, will be tighter underwriting standards, which have already leaped, and less available credit, especially for questionable borrowers. Credit card issuers set interest rates and fees with expected charge-offs in mind. If those rates and fees are limited by regulation, they'll simply cut lending to high-risk customers. Advanta ( ADVNA - news - people ), a relatively small credit card issuer, recently canceled 1 million credit cards, many of them held by small businesses that used them for day-to-day financing since banks have retreated from small-business loans. One-third of small businesses have had credit lines reduced in the past six months.

Subprime customers account for a third of credit card portfolios at three big issuers: Bank of America ( BAC - news - people ), Citigroup ( C - news - people ) and Capital One ( COF - news - people ). Furthermore, about half of credit card debt is securitized, and that market is largely closed. Many student loans issued by private lenders such as Sallie Mae ( SLM - news - people ) are also securitized, and that firm wrote off 3.4% last year, more than double the 2006 number.

In addition, state and local government spending, usually a source of economic support in recessions, is likely to remain weak as budget woes persist. Most of those governments are required to balance their budgets, but accounting legerdemain and other maneuvers allow many to honor that requirement in the breach. Still, the plummet in state revenues from all three major sources--taxes on personal income, sales and corporate incomes--has been breathtaking as it reflects the rapid deterioration of state finances.

The carnage will persist as corporate profits continue to drop, rising unemployment and stock market losses devastate personal income and tax collections, consumer retrenchment keeps depressing sales taxes despite rate increases in some states, and the house price collapse whacks local real estate taxes.

http://www.forbes.com/2009/07/01/commer ... arket.html
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118541
Joined: Wed May 07, 2008 9:28 am

Gary Shilling

Postby winston » Sat Jul 18, 2009 8:24 am

Gary Shilling: Stock Market Will Crash As US Consumers Retrench by Henry Blodget

We had Gary Shilling on TechTicker this morning. We'll post the video soon.

In the meantime, here's a quick overview of Gary's outlook on things, along with a gallery of exhibits from his recent monthly Insight.

The economy won't start to recover until 2010 (versus the current consensus of now). It will recover because the government will be forced into a second stimulus.

The US consumer rules the world...and the US consumer is cutting back fast

Consumer spending will drop from 70% of GDP to 60% as consumers pay down debt and go on a saving spree.
Most recessions have a positive quarter or two of GDP, so if we get one, it won't mean anything.

The S&P will plunge 35% to 600 by the end of the year.
Buy Treasuries

http://www.businessinsider.com/henry-bl ... he-world-1
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118541
Joined: Wed May 07, 2008 9:28 am

Re: Gary Shilling

Postby millionairemind » Sat Jul 18, 2009 10:32 am

wah good leh.. just short SP500 futures :lol: :lol: and watch it crash in slow motion style...
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
User avatar
millionairemind
Big Boss
 
Posts: 8183
Joined: Wed May 07, 2008 8:50 am
Location: The Matrix

Re: Gary Shilling

Postby winston » Fri Jul 24, 2009 9:15 am

False Bottoms
A. Gary Shilling, 07.15.09, 06:00 PM EDT
Forbes Magazine dated August 03, 2009

The recession is not over. Investors will soon return to worrying about deflation and weak share earnings.

http://www.forbes.com/forbes/2009/0803/ ... ategy.html
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118541
Joined: Wed May 07, 2008 9:28 am

Re: Gary Shilling

Postby winston » Tue Aug 11, 2009 9:19 am

Slow Long-Term Growth, And Government's Response

1) Consumer Retrenchment
2) Financial Deleveraging
3) More government regulation
4) Rising Protectionism
5) Deflation

http://www.investorsinsight.com/blogs/j ... ponse.aspx
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118541
Joined: Wed May 07, 2008 9:28 am

Re: Gary Shilling

Postby winston » Fri Nov 20, 2009 8:26 am

If you are in a good mood becuz it's a Friday, then dont read what this guy has to say. He will certainly spoil your day unless you are short the market :D

================================================

V Is For Vicious Cycle by A. Gary Shilling

Abandon your dreams of a V-shaped recovery. The consumer is still too depressed to buy us a quick end to the recession.

http://www.forbes.com/forbes/2009/1130/ ... ategy.html
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118541
Joined: Wed May 07, 2008 9:28 am

Re: Gary Shilling

Postby winston » Tue Jan 19, 2010 9:33 am

2010 Investment Strategies: Six Areas To Buy, 11 Areas To Sell


INVESTMENTS TO BUY

1. Buy Treasury Bonds.
2. Buy Income-Producing Securities.
3. Buy Consumer Staples and Foods.
4. Buy Small Luxuries.
5. Buy The Dollar.
6. Buy Eurodollar Futures.


INVESTMENTS TO SELL OR AVOID

7. Sell U.S. Stocks in General.
8. Sell Homebuilder and Selected Related Stocks.
9. Sell Selected Big-Ticket Consumer Discretionary Equities
10. Sell Banks and Other Financial Institutions.
11. Sell Consumer Lenders' Stocks.
12. Sell Many Low and Old Tech Capital Equipment Producers.
13. If You Plan to Sell Your House, Second Home or Investment Houses Any Time Soon, Do So Yesterday
14. Sell Junk Bonds.
15. Sell Commercial Real Estate.
16. Sell Most Commodities.
17. Sell Developing Country Stocks and Bonds.

http://www.investorsinsight.com/blogs/j ... -sell.aspx
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118541
Joined: Wed May 07, 2008 9:28 am

Re: Gary Shilling

Postby stilicon » Tue Jan 19, 2010 10:03 pm

It is very ambitious to disagree with Gary Shilling. He has been right since the beginning of the 1980s decade about disinflation. But also, it is very rare to be right during 25 years and then be right again for the following period.

I like his points 2, 3 and 4, and 7 sell US stock ( if he is also long the USD, why not selling the Eurozone equities indices instead ? ).

I have difficulties to buy the 16th point Sell Commodities. Commodities can sure have a sharp selling period following a change in CB easing. But on the LT, I can't help but to be bearish on fiat currencies and long on commodities. Maybe I am too naive.

Also Gary Shilling doesn't evoke the possibility that sovereign debt might be unsustainable somewhere in the future, and any of the possible consequences of such an event. That seems strange to me.

Concerning his eternal deflation call, I just re-read the beginning of his 1997 book Deflation, Why it's coming.... He then cited a list of prevailing Deflation Forces :
1- End of Cold War led to global cuts in defense spending (I doubt very much it is still prevailing)
2- Major country government spending and deficits are shrinking (again, no more and by a widening margin ...)
3- Central Banks continue to fight the last war: inflation (with almost 0% interest rates, you definitely can't say that today)
[...]
9- Ongoing deregulation cuts prices (on the contrary, increasing regulation will inevitably increase users costs, starting now with the banking industry, and even before with the Sarbanne-Oxley monster etc.)

So, a lot of the arguments for deflation are no more. But of course, some others still exit.

I can't help but think that this honorable man is biased, in that he doesn't want to contemplate the end of an american centric world, nor the end of a fiat currencies ruled world. He basically likes and can't disapprove the world in which he mostly lived.

Never mind, maybe with points 2, 3, 4 and 7 alone, one can set up a succesfull 2010 strategy.
stilicon
Coolie
 
Posts: 201
Joined: Fri Sep 12, 2008 5:21 pm

Re: Gary Shilling

Postby winston » Wed Feb 24, 2010 10:21 pm

Shilling: Euro Poised to Plunge 27 Percent By: Dan Weil

Economist and money manager Gary Shilling says the euro is likely to drop about 27 percent from current levels.

“I think the currency could go back to 1-to-1 versus the dollar,” he says.

“The problem is that Europe has a one-size-fits-all monetary policy but very different fiscal statuses in individual countries. Greece is the poster boy, but you have the rest of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) right behind it,” he told Bloomberg.

Greece, for example, has a budget deficit totaling 12.7 percent of GDP.

“It’s really an insoluble problem because these economies are very different,” Shilling said. “They’re much weaker; they need to issue all these sovereign debts. And ratings agencies are downgrading them.”

Whether the euro zone will survive as one is an open question, he maintains.

That doesn’t make Shilling a bull on the U.S. economy. “It isn’t so much that we’re doing anything right, but that Europe has serious problems,” Shilling said.

While the economy has benefited from a bounce in inventories, “The question is does this have legs?” he said.

“What we’re missing is a bounce in housing. There’s way too much in the way of inventory there.”

Others see danger ahead for the euro zone too.

“The risk of contagion is a real one,” Scott Thiel, head of European fixed income at BlackRock, told The New York Times.

“Investor sentiment is now focused on countries like Spain and Portugal, where fundamentals are weakest.”

http://moneynews.com/StreetTalk/Gary-Sh ... /id/350654
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118541
Joined: Wed May 07, 2008 9:28 am

Re: Gary Shilling

Postby winston » Wed Mar 31, 2010 9:00 pm

Shilling: Euro to Fall 25 Percent, Matching the Dollar By: Dan Weil

The euro will fall another 25 percent against the dollar, meaning a euro will be worth close to one U.S. dollar, says economist Gary Shilling.

The euro recently traded at about $1.3445.

And what will spur the move? While the U.S. economy may have some problems, it’s a lot better off than Europe, he says.

“We’re the best of the bad lot,” Shilling says. “Whatever happens, I think the U.S. will continue to be the safe haven in terms of the dollar and in terms of Treasuries.”

Indeed, he told Bloomberg he sees the 30-year Treasury yield dropping to 3 percent from 4.6 percent currently.

“In our portfolio, we are long the dollar against the euro, and we’re long 30-year bonds,” he says. Shilling likes 30-year Treasuries over the 10-year bond.

“You get the most bang for your buck (with 30-year issues) when rates go down,” he explains. The rate drop he forecasts would produce a 32 percent return, he says.

Shilling is less enthusiastic about stocks because he sees the economy facing significant headwinds.

First, the housing sector still faces a huge supply overhang that will push prices down further, he says. In addition, consumers aren’t spending, and unemployment remains a drag.

Investment guru Marc Faber has a vastly different view of the Treasury bond market.

He thinks prices will collapse, sending yields up to a range of 10 to 20 percent over the next five to 10 years, as inflation and supply explode.

"I still think that Treasuries are overpriced," Faber told CNBC.

http://moneynews.com/StreetTalk/Gary-Sh ... /id/354224
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
User avatar
winston
Billionaire Boss
 
Posts: 118541
Joined: Wed May 07, 2008 9:28 am

Next

Return to Market Gurus

Who is online

Users browsing this forum: No registered users and 6 guests