Gary Shilling joined Bloomberg TV today to discuss his outlook for equities, bonds and the US economy (via Bloomberg TV):
Economist Gary Shilling spoke about the outlook for the U.S. economy with Bloomberg Television’s Adam Johnson and Stephanie Ruhle this afternoon and said that the S&P 500 will drop 43% from its recent level this year. Shilling said, “the analysts have been cranking their numbers down"¦I think that is true because you have foreign earnings that don’t look good because of recession unfolding in Europe, stronger dollar"¦a hard landing in China.”
Shilling also said that, “in the U.S., we could see a moderate recession led by consumer retrenchment.”
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.”
Source: Bloomberg TV
/* ').html("http://api.nrelate.com/rcw_wp/0.50.6/?tag=nrelate_related&keywords=GARY+SHILLING%3A+THE+S%26%23038%3BP+500+WILL+DROP+-43%25+THIS+YEAR&domain=pragcap.com&url=http%3A%2F%2Fpragcap.com%2Fgary-shilling-the-sp-500-will-drop-43-this-year&nr_div_number=1").text(); nRelate.getNrelatePosts(entity_decoded_nr_url); /* ]]> */ Disclosures - Unless otherwise noted, authors have no positions in any securities mentioned and readers should never consider this to be investment advice. Always consult your financial advisor before acting on any ideas. Comments Guideline - Readers who denigrate authors or other readers will be banned without warning. This site does not tolerate any sort of reader abuse. The goal of this site is to create an environment that is conducive to learning and better understanding of the monetary system and the investment world. We expect readers to behave maturely and responsibly. We welcome and encourage intense and intelligent discourse, but the site adheres to a strict 1 strike policy. While it is your right to speak freely, it is not your right to behave childishly. Above all else, please enjoy the site. It is intended to be used as an educational tool and we hope the intelligent and mature debate will further that purpose. We hope readers will make an effort to respect that goal. Comments with excessive linking or foul language will be moderated before posting. Comments VII
43% X 420 = 610
Hmmm. I love a man who makes a call love it or hate him at least he put himself out there. And he put himself out there to be ridiculed and may be right.
I know of Gary…but don’t know his calls or pay much attention. Look forward to the comments on his 610 call for those who know more about him.
Can I share my gold top call. My friend who works for a well known gold company has an injunction against them. Remember my 2011 comments..this guy was a mortgage broker. In fact he was hired by other ex- mortgage brokers who are all leaving. Tonight I got a call from a buddy who started selling MRIs as a Medicare scam…moved to shady mortgage lending before the company went under than was hired by his ex- mortgage buddies who all landed at Monex. NOW he’ and two other guys are leaving for the same reasons he gave for the MRIs, and mortgage. I said back in early 2011, 2010 that when these guys start bailing on gold…that was my sign of a top. NO CHARTS, no fundamentals….purely based on the same guys who for whatever reason have followed every bubble and fad..can no longer make money on Gold. So I’m going to one up Shilling and say Gold will go down 44%. In 12 months solely based on the idea that what ever this group of guys touches always fails at the moment they call me late at night with there next venture. Which is now online real estate listings. Silly I know but I’ve been out of hard assets for awhile and won’t be coming back to Gold in my portfolios no matter what Faber or Zulaf says.
Reply 04/12/2012 at 2:14 AM Cy Hailow@ VII
not sure your math is correct, 43% down on ~1400 = ~800 target on SP500. Still I agree it’s a courageous call. Depends on EZ or China hitting a serious obstacle they can’t kick down the road.
It appears the smart money is backing a deflationary global scenario in the somewhat longer term. “Tail event risks” are being priced as if they were normal sorts of risk.
http://ftalphaville.ft.com/blog/2012/04/11/955041/when-the-tail-event-becomes-the-standard-risk/
hardly the environment for major equity gains beyond the VERY short term IMHO. Still the various casino players who comment on this site probably don’t need to worry
Reply 04/12/2012 at 5:30 AM VII@ Cy Just noticed my math…..I think I better file an extension
Reply 04/12/2012 at 9:23 AM ES71That is valuable info )). So where are these guys moving to next?
Reply 04/12/2012 at 9:22 AM VII@ES71
I know it’s silly. One firm is in Santa Monica and has over 120 in the Bull Pen all leaving. The other is in Orange County and much bigger but who’s clients are wealthier. Oddly..I can remember having drinks on a Friday with all the mortgage guys all talking about their month end numbers. But they were all nervous about something. I didn’t figure it out until later. They kept talking about how much money they were making BUT..they were all leaving to a new company that a co-worker left to. This was the last stop. 6 months later the entire thing imploded and I got a call about how they had this new job from an ex-mortgage guy to work for Monex. Same call last night. One guy is moving to a smaller firm..so there seems to be consolidation at the end. And the other guys are totally bailing. Both have said the action is gold is making it hard for them to make a living. I give it 6 months and Gold tanks. Tha is how the MRI worked, The Mona Vi juice, The mortgage and now Gold. It’s probably nothing more than a fun story. But all of us in our circle have all said that when this happened we knew in the coming months Gold was done. The most unscientific, vooodoo investing ever. There’s no point in discussing how silly my thesis is. But..I’m actually going with it.
Reply 04/12/2012 at 12:02 PM SCYou see ,you are smart also
Reply 04/12/2012 at 3:45 PM VII@SC
I’m probably the least intelligent person on this site. I don’t feel so bad I think I was in the bottom 20 when I came here but due to Cullens 1 strike rule I’m not number 1 or 2 based on attrition. That being said..at least my upside is unlimited.
I was going to respond to your other comments about Spain. But the short version is.. I agree with you and your take on my comments. It’s tough to really respond in writing. It just goes back and forth and some things get filtered wrongly by each of us. Let’s keep an eye on Spain…we may be able to work together to figure out a decent entry point into Europe and Spain in the coming months for each other and some readers.
Reply 04/12/2012 at 4:54 PM SCYou’ve got competition for that claim.I am and always have been mediocre,but the good news for you based upon my life’s experience at any rate.To make money and indeed to be successful in life in general you don’t need to be more than mediocre in any academic sense.Certainly the markets don’t care about intelligence as we know it as long as you can do some undemanding maths.
Reply 04/13/2012 at 2:48 AM Gerald PConsuming is not just related to employment. Consider the long-term growth in income disparity.
Reply 04/12/2012 at 7:01 PM In AccountingI’m sure Shilling is smarter than me, but how bad must GDP look for a 40% drop in the S&P? Unemployment back at 12%? The last time the S&P was that low, Karl Denninger was a guest on CBNC (no joke).
I think this guy maybe had one too many at Nouriel’s last party.
Reply 04/12/2012 at 5:53 AM Wells Fargo Must DieIf you are going to make a call, make a big one. That way you get all the credit if you are right. If you are wrong, no one remembers.
Reply 04/12/2012 at 10:01 AM BJMSchilling’s a loon. He calls for a 40%+ drop every year. As they say, a broken clock….
Reply 04/12/2012 at 11:02 AM charlesdIf you are an old-timer, you will know that Schilling has been a bull on bonds since the early 1980s, as he points out. Good call. He fails to point out that he has been a bear on stocks since at least 1984 – that’s not a typo. He has some interesting insights but, regarding the stock market, he doesn’t seem to understand the actual drivers of profits (deficits, investment, etc) So his analysis is flawed. He can be ignored.
Reply 04/12/2012 at 12:42 PM yourejammingmeupWe are in a bull rally and this guy and other people are worrying. That makes me think 40% up is much more likely than down.
Reply 04/12/2012 at 2:29 PM Leave a Comment Name Mail (will not be published) Website Click here to cancel reply. Research & White Papers Twitter Updates new TWTR.Widget({ version: 2, type: 'profile', rpp: 1, interval: 6000, width: 'auto', height: 300, theme: { shell: { background: '#c3c4c7', color: '#000000' }, tweets: { background: '#ababab', color: '#000000', links: '#3507eb' } }, features: { scrollbar: false, loop: false, live: false, hashtags: true, timestamp: true, avatars: false, behavior: 'all' } }).render().setUser('pragcapitalist').start(); Register for PC LOG-IN TO PC var sc_project=5036143; var sc_invisible=1; var sc_partition=57; var sc_click_stat=1; var sc_security="5e6f901b"; Read Full Article »