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In the latest Forbes magazine Gary Shilling believes conditions are still supportive of falling interest rates, and therefore, rising prices for bonds. He predicts a total return of 10% for 30-year Treasuries in 2012.
According to Shilling he was calling for the bond rally of a lifetime back in 1981. Then yields were above a stunning 15% and he predicted they would eventually fall to 3%. For properly positioned investors the returns were remarkable:
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Professor Charles Nenner, former Goldman Sachs technician, thinks the S&P 500 will bounce off the 1139 level. He said his system is showing a lot of risk. Nenner would only buy bonds for a bounce. Regarding specific stocks Nenner mentioned a couple of names.
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Nouriel Roubini made headlines three years ago when he correctly forecasted the dire economic times that befell the world economy. Roubini also made some decent stock market predictions back then. Of course, he ran into a rough spell where he had difficulty forecasting as his predictions of continued disaster and deflation were off the mark substantially. Economic forecasting with any degree of accuracy has been demonstrated to be challenging even for those proclaimed as experts.
However, Roubini is still interesting to listen to simply for his educated viewpoint. He now sees a perfect economic storm possibly developing in 2013. The ingredients for the storm include:
Henry Blodgett and Aaron Task comment on the latest warnings of Roubini in the following video:
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The Wall Street Journal’s Connor Dougherty reports there is virtually no inflation in the U. S.:
A key gauge of U.S. inflation has fallen to its lowest level since record-keeping began in 1957, underscoring the continued weakness in the economy.
Consumer prices rose 0.2% in October compared with September, almost entirely because of higher energy costs, the Labor Department said Wednesday.
When volatile food and energy are subtracted, prices were unchanged last month—the third straight month in which this so-called core measure of inflation was flat. Compared with a year ago, consumer prices other than food and energy have risen 0.6%.
The article underscores the reasoning behind the Fed’s QE2 program, in which Ben Bernanke is attempting to fight off deflation.
Source: The Wall Street Journal
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In the following video interview, economist Gary Shilling expresses his view that the Fed’s QE2 easing will not stop deflation from occurring. Shilling continues to recommend 30-year Treasury bonds, which he expects to get down to a yield of 3 percent.
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Some high profile investors are concerned about deflation, which could prove problematic for economic growth and corporate profits. The worrywarts include Bill Gross, Jeremy Grantham, and hedge-fund managers David Tepper and Alan Fournier.
Mr. Gross urges investors to focus on cash flows that are “relatively certain,” such as dividends and interest from stocks and bonds of quality companies.
Although there is concern out there, the general feeling is that the odds aren’t skewed towards a deflationary outcome.
Deflation is no sure thing, the investors say. Mr. Tepper says that if the U.S. economy expands 1% or so over in the next few years, deflation and troubles for stocks will arise. Growth of 3% would boost profits and stocks, he says.
At Pimco, Mohamed El-Erian, the firm’s chief executive and co-chief investment officer, says “the risk of a deflationary spiral has increased, but it is still not the most likely scenario.”
He says investors need to prepare for an unusually wide range of possibilities. The risk of so-called fat tails—or extreme outcomes—including a bout of prolonged deflation, are “not insignificant.”
Source: The Wall Street Journal
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Crushing Deflation Ahead According to Prechter, Shilling and Dent
December 20, 2009Duncan Davidson, in an article entitled “The Fed Slipped Up Big Time: Deflation Coming,” argues that devastating deflationary forces are heading our way. Davidson discusses the reasons for this view, along with citing Robert Prechter, Gary Shilling and Harry Dent as supporters of this depressionary outlook at the link below. SMA Comment: Having just seen [...]