Gary Shilling

[iam802]

I am short as well...and waiting.

[winston]

This guy has been a bear for the past 2.5 decades ...

GARY SHILLING's 6 FAVORED ASSET CLASSES by Cullen Roche


Treasury bonds (favorable) - Treasurys have rallied as a safe haven in a sea of trouble and in response to slowing economic growth and looming global recession. The likelihood that inflation fears will turn soon to deflation worries will also propel them. The current 3% yield on 30-year Treasurys, however, is getting close to our 2.5% target, the 2008 post-Lehman low.

Income-producing securities (favorable) - Included are stocks of utilities, drugs and telecoms with high, safe and rising dividends. Also, investment-grade corporate and municipal bonds and some Master Limited Partnerships. The dollar vs. the euro, Australian dollar, Canadian dollar and Mexican peso as well as the yen.

Dollar Index (favorable) The buck is the world’s safe haven. The euro may break as the financial crisis remains unresolved and the recession unfolds. Australia has become a captive mineral supplier to faltering China. Canada and Mexico are export- and commodity-dependent and tied to the uncertain U.S. economy. The yen is beginning to crack, as we predicted in our April 2011 Insight.

Rental apartments (favorable) - have gained favor by those who can’t afford home ownership and are discouraged by falling house prices. REIT prices seem overblown, but direct ownership of rental apartments may still be attractive.

Medical Office Buildings (favorable) - The aging postwar babies, the 2010 health care law and the migration of physicians from private practice to hospital employment will promote robust, steady growth in this real estate sector. But government regulations can be disruptive. Implement with REITs and direct ownership.

North American energy (favorable) - The U.S. has decided to reduce dependence on imported energy from high-risk foreign areas. We like conventional energy investments including natural gas, on- and off-shore drilling and Canadian oil sands.

Natural gas prices continue to fall, but with production rising due to leasehold requirements and desirable natural gas liquids, pipelines are attractive.

New nuclear facilities may be postponed in the wake of the earthquake and tsunami in Japan.

Renewable energy, including ethanol, is problematic since it depends heavily on unpredictable government subsidies.

Source: Gary Shilling’s Insights

http://pragcap.com/gary-shillings-6-fav ... et-classes

[winston]

Over the past 4 months, do did this guy put his money where his mouth is ?


Gary Shilling: 2012 Recession Still Coming By Julie Crawshaw

Economist Gary Shilling says we're still headed for a recession this year despite the market's recent bullish behavior, the Globe and Mail reports.

"Despite the recent euphoria of investors over U.S. stocks, we believe the economy is likely to weaken as the year progresses, led by renewed consumer retrenchment," Shilling wrote in a note to investors.

Shilling points to a number of unusual indicators that suggest the U.S. economy may be weaker than most people believe.

For example, electricity generation is falling rapidly, which this may be because this winter was unusually mild but could also indicate declining economic activity.

Moreover, U.S. rail shipments and the number of containers coming into the ports of Los Angeles and Long Beach, the main entry point for Asian trade in the United States, are both declining.

And while GDP growth has been accelerating recently, Shilling says much of the increase in economic output can be attributed to rising inventories, also not a good sign.

"Either we're dead wrong on the outlook or investors are ignoring reality as they emphasize risk on trades," he says.


http://www.moneynews.com/StreetTalk/Shi ... /id/434758

[winston]

That Gary Shilling Video with the S&P 800 Call Everyone’s Talking About by Joshua M Brown

This is just banoodles, summary below the video courtesy of Bloomberg TV:


Shilling on his report that the S&P will drop 43% from its recent level:

"The analysts have been cranking their numbers down. They started off north of 110 then 105. They are now 102. They are moving in my direction. I think that is true because you have foreign earnings that don't look good because of recession unfolding in Europe, stronger dollar, so they are translation losses.

A hard landing in China. In the U.S., we could see a moderate recession led by consumer retrenchment. I think that that kind of earnings estimate is not unreasonable…it's a quartet, [I am] long treasuries, short stocks, short commodities and long the dollar."


Shilling on the U.S. economy:

"The story is that there is nothing else except consumers that can really hype the U.S. economy. Consumers have been on a mini spending spree in terms of not keeping up. Incomes have simply not kept up.

Of course, the real key behind that is employment. It looked earlier like jobs were picking up and that was going to provide the income and people would spend it, so on, so forth. But the employment report that we got last week throws cold water on that.

Consumers have a lot of reasons to save as opposed to spend. They need to rebuild their assets, save for retirement. A lot of reasons suggest that they should be saving to work down debt as opposed to going the other way, which they have done in recent months. So if consumers retrench, there is not really anything else in the U.S. economy that can hold things up."


On whether investors will come back to the U.S. market if the situation in Europe gets worse:

"Sure, we are the best of the bad lot. We're the best horse in the glue factory. The U.S., it certainly looks better than China or Europe or certainly Japan. But, I'm not sure that that means that people go into stocks.

Cash, although it does not pay anything, is an alternative. My 30-year favorite long Treasury bonds, I we're headed for 2.5% there. They have come down from 3.2 to 3.0 recently.

Of course the 10-year now has broke 2% again. I think there is still life there in terms of appreciation…I think that one and a half is possible on the 10-year."

"I think 1.5 is possible on the 10-year. I have to tell you, all the way down, when I got interested in 30-year bonds it was in 1981, the yield was 15.21.

All the way down in yields, all the way up in price, everyone has said, rates cannot go lower, they will go up, they will go up. They have been saying that for 30 years."

http://www.thereformedbroker.com/2012/0 ... ing-about/

[winston]

Big trouble dead ahead.

The 2008 meltdown exposed the flimsy foundation that lay underneath a housing and stock market bubble of epic proportions.

Here’s exactly why our financial future is so grim:


1. U.S. consumers are making a U–Turn from borrowing-and-spending to saving. As you might expect, that’s bad news for U.S. retailers, and worse news for foreign countries that rely on exports.


2. Financial deleveraging is still rippling through the global system—consumers and businesses are focused on capital preservation above all. Say goodbye to expansion and growth; forget about a bull market in stocks.


3. The governments of developed economies are piling on new regulations with abandon. That’s great if you want to encourage corruption, but lousy if you want more innovation and efficiency.


4. Commodity prices will fall, and keep falling as global growth slows. Expect major turmoil and possibly revolution in countries that rely on exporting commodities like grains, metals or oil.


5. Governments in developed countries are forced into austerity and fiscal restraint. That’s bad news for national GDP in Europe, America, Asia, and a disaster for citizens that rely on a safety net in those countries.


6. Protectionism is on the rise. How does that help global trade and growth? It doesn’t.


7. The U.S. housing market still suffers under excess inventories and has absolutely no appeal for investors. That’s not just bad for employment (housing construction creates lots of jobs); it’s downright depressing for homeowners who feel a negative wealth effect.


8. Deflation makes buyers everywhere cautious as they wait for lower prices. You want to think twice before you own or invest in any industry that relies on consumer spending.


9. State and local governments will run short of cash and face bankruptcy. Is your community prepared to cope with half as many cops, firefighters and teachers?


These trends are already in motion; the only question is what are you going to do about it?


Source: Gary Shilling’s Insight

[winston]

When Bad News Is Good News For Stocks

There is a “grand disconnect” currently going on in global markets. Suddenly weakening economies worldwide are driving optimism in markets. It all boils down to the global economy’s dependency on monetary and fiscal bailouts.

This grand disconnect is profoundly unhealthy–and a reconnection is inevitable.

When that happens markets will nose-dive. What will be the catalyst?

How about the looming fiscal cliff or a hard landing in China or an energy-price spike from Middle East turmoil? Perhaps a European bank will collapse. Stay tuned.

http://www.forbes.com/sites/investor/20 ... or-stocks/

[winston]

Since you are feeling optimistic, it's time to get your feet back on the ground ...

Prepare For A Stock Market Plunge by A. Gary Shilling

http://www.forbes.com/sites/investor/20 ... et-plunge/

[winston]

Best Investor of the Last 30 Years Explains the "Grand Disconnect" by Dr. Steve Sjuggerud

Gary Shilling might have the best track record of any investor over the last 30 years…

If you had invested $100,000 in Shilling's "big idea" 30 years ago, it would be worth over $6 million today.

While most investors didn't pay attention to his big idea, Shilling was right. And he never gave up on his big idea.

Here in 2013, Shilling has some new big ideas… and some bold predictions… particularly about what he calls the "Grand Disconnect."

Thirty years ago, Shilling's big idea was that inflation would go away. He made this prediction in the early 1980s, when inflation was double digits.

He put his money where his mouth was… and put clients into the one particular investment that would profit the most (long-dated zero-coupon U.S. Treasurys). Shilling's strategy of rolling money every year into the longest-dated Treasurys paid out 60-fold returns.

Stocks and gold couldn't compete at all with Shilling's strategy over that time… $100,000 invested in gold turned into $400,000, and $100,000 invested in stocks turned into $2.1 million. Shilling's recommendation beat both of those by $4 million.

Last week, Shilling spoke with Canada's Globe and Mail newspaper.

He explained his big idea today – he explained the "Grand Disconnect"…

Right now we're in what I call The Grand Disconnect… The economies of the world are growing slowly… But investors couldn't care less. All they are concerned about is the money being shoveled out the door by central banks.

And I call that the grand disconnect between the real economy and investors' view of the world.

Shilling thinks the world economy isn't really doing that well… and that you can't get sustainable prosperity and sustainably higher stock prices by printing money. He thinks the Grand Disconnect has to end badly…

I think sooner or later it will be eliminated by some big shock… I think it could [be this year] but forecasting big shocks like this is obviously difficult. It's in the cards, it's just a question of when it will happen.

So where should you invest while governments are printing money today? Shilling's answer will surprise you. He doesn't like stocks or real estate at all. And he's "agnostic" on gold.

So where is he recommending you put your money? Cash.

There still is some inflation in the economies of the world – but not much. So cash is not eroding due to inflation the way it was way back in the 1970s… cash is not a bad place to be.

Astoundingly, Shilling is not giving up on his 30-year-old big idea either. He's buying Treasurys, even though they only yield 3%. Why? He explains it:

I've never, never, never bought Treasury bonds for yield. I couldn't care less what the yield is, as long as the [yields] are going down. In other words, I want the [price] appreciation… If they go down further, we will go from 3 percent to two percent… On a zero coupon bond, it'll be a total return of about 25 percent.

Because of Shilling, I have never bet against Treasury bonds in my near-two decades in the markets. It's been the right thing to do, every time.

And I think Shilling is right about the Grand Disconnect.

His idea is not far from my Bernanke Asset Bubble idea. As regular readers know, Federal Reserve Chairman Ben Bernanke's zero-percent interest rate policy and enormous money printing has fueled a "bubble" that has propelled asset prices higher.

I agree on the Grand Disconnect – in the sense that you can't create prosperity out of printing money… and that the piper has to be paid someday.

But we disagree on the date that bad things start…

Shilling thinks the Grand Disconnect will cause stock prices to crash in 2013. I think we have a couple more years left.


Source: Daily Wealth

[behappyalways]

I am reading Gary Shilling "The Age of Deleveraging" and a paragraph caught my eyes.....

Food For Thought

I was invited by Professor Jeremy Siegel to Wharton for a public debate on stocks versus bonds. He, of course, favoured stocks and I advocated Treasury bonds.

At one point, he addressed the audience of about 500 and said, "I don't know why anyone in their right mind would tie up their money for 30 years for a 4.75% yield[the then yield on the 30-year Treasury].

" I got no answer, but pointed out that unless a company merges or goes bankrupt, the maturity on its stock is infinity - it has no maturity.

My follow-up question was, " What is the yield on stocks?" to which someone correctly replied, "It's 2% on the S&P Index."

So I continued, " I don't know why anyone would tie up money for infinity for a 2% yield."

[behappyalways]

They’re all, in effect, devaluing versus the U.S. dollar, which, as the key international currency, can’t join the parade. In 1981, when the 30-year Treasury yielded 15.21%, I wrote, “We’re entering the bond rally of a lifetime.” Since then the zero-coupon Treasury bonds have risen six times more than the S&P 500′s total return. The 30-year Treasury yield is now around 3%, but I see further appreciation in a slow-growth and deflationary world where Treasurys as well as the dollar are the ultimate safe havens.


Deflationary Game Plan
http://www.forbes.com/sites/investor/20 ... game-plan/