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Strategic Investment Conference: Luminaries In Finance Presentation Series: Part 1 - Gary Shilling

Tyler Durden's picture




 

Back in April, some of the most prominent economists and market visionaries took part in the annual Strategic Investment Conference among which such luminaries as Marc Faber, David Rosenberg, Gary Shilling, Neil Howe, Martin Barnes and Jean-Vincent Gave. While a few short months have passed since then we are delighted to present our readers with their comprehensive presentations and summary outlooks on the economy, markets and the world. Today we launch part 1 of this series, by sharing the outlook of Gary Shilling of A. Gary Shilling and Company, one of the original bears and a man who was one of the few to foresee the second great depression. In future posts we will complete the series by presentations the opinions and outlooks all of the above financial legends who, unlike 99% of Wall Street, stick with their opinion regardless of where now completely irrelevant intraday market gyrations push the prevailing conventional sentiment.

So without further ado...

Dr. A. Gary Shilling

President
A. Gary Shilling & Company
Synopsis:

"2011 Outlook for Global Economies and Investment Strategies"

Gary Shilling opened the conference with a bearish view, as a strong believer in a deflationary scenario for the US. His prediction is that Treasuries and other high-yielding bonds are still a "buy" and that the dollar will bounce back. Whilst the Fed has created a huge expansion in bank reserves, this has not translated into an increase in money in the economy.

The US: At the heart of his analysis is a belief that the US consumer is the key driver of world economic growth, and the US consumer has not recovered ."If you want strong growth, you need consumer participation. This won’t happen!"US consumers are still paying down debt. Unemployment remains high, while oil prices place a heavy tax on consumer spending, further slowing global growth. Home equity is no longer a source of cash. He believes US housing markets still have another 20% leg down, driven by excess inventory. At the same time, he believes Baby Boomers need to replenish retirement savings.

Japan: Shilling characterizes the situation in Japan as a "slow motion train wreck",and fears a possible debt spiral downwards. With internal savings,both personal and corporate, drying up, and slow global growth placing a drag on its export economy, Japan will face future problems financing its significant government debt and will have to import capital.

Europe: The risk of bank and sovereign debt restructuring is high, which he believes could drive Europe into recession, further weakening demand for US imports.

China: Shilling foresees a high likelihood of a hard landing in China, with an accompanying fall in commodity prices. He believes China needs 8% GDP growth to sustain the rural to urban migration; at even 6% growth, recession is likely. China’s economy is still export-led. Chinese consumers will not be in a position to take over this role anytime soon. In his view, the commodity bubble has already broken, in falling prices for Copper, Cotton and Sugar. This signals trouble in the Chinese economy.

 

Shilling-2011

 

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Thu, 07/21/2011 - 17:38 | 1478806 lolmao500
lolmao500's picture

30h21 till kabooooooooom time.

Thu, 07/21/2011 - 17:44 | 1478819 Franken_Stein
Franken_Stein's picture

 

Pertaining to what ?

U.S. budget talks ?

 

Thu, 07/21/2011 - 18:12 | 1478887 lolmao500
lolmao500's picture

No deal by July 23, not much of a chance that they will pass something before D-Day.

Thu, 07/21/2011 - 17:52 | 1478845 cossack55
cossack55's picture

You have a time-bomb in your pants?

Thu, 07/21/2011 - 19:12 | 1479001 disabledvet
disabledvet's picture

naww. He's just happy to be first poster.

Thu, 07/21/2011 - 17:43 | 1478811 Highrev
Highrev's picture

I’d say that it’s probably safe to say that the probability that we've begun another leg higher in world equity prices is much better than for a BTFD opportunity first. ;-(

Europe is not being the drag I thought it might be. All of Europe is inside an extremely important short setup on the daily charts though (except for the MIB and IBEX), but I see a lot of strength going into that setup and it just might fail. (That same setup is broken on the majority of the U.S. majors, but Asia needs to get in gear tonight.)

In any event, if you were expecting prices to be higher intermediate term, you’d at least be mildly long, and therefore not too upset about not getting that short term buy spike to load up on first.

http://www.zerohedge.com/article/what-volume#comment-1471757

Thu, 07/21/2011 - 17:44 | 1478822 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

What, no ES/Risk basket arb today tyler?

Thu, 07/21/2011 - 18:21 | 1478905 Stoploss
Stoploss's picture

What, you missed it?

Thu, 07/21/2011 - 17:52 | 1478844 rocker
rocker's picture

Great Work from Gary.

It's just a dam shame that the United States of America could not make page 22.  I mean W.T.F.

We really are stupid sheeple, aren't we?  At least we have ZH to help us.

Thu, 07/21/2011 - 17:53 | 1478847 Caviar Emptor
Caviar Emptor's picture

Unfortunately, there's a lot more structurally wrong with the US economy than just "too much debt" and a "balance sheet recession". That's the prevailing view. It pre-supposes that once debt is either paid-down, defaulted on, marked down, forgiven or inflated away that everything will be right back to where it was on September 14th, 2008. Not. 

Thu, 07/21/2011 - 18:11 | 1478880 Cdad
Cdad's picture

All those things sound great...paying down debt, deleveraging, defaulting on debt that can never be paid back.  The stuff of dreams.

However, there is no f'n deal!  There is a Wall Street generated sense that things will get done, Rs in the house that will not vote for taxes, some worn out old term limit candidates in the Senate who would sell their children's kidneys for a deal, and a nation infuriated with all of it.

And as for Europe, I'll believe "Greece is fixed" again [for the sixth time] when someone tells me how private participation [in absolutely certain future losses] are going to be implemented within a group of 17 nation states, all with their own central banks...because Zarkosy hugged Merkel?

Day by day, the absolute steaming pile of bullshit gets so high that the outcome of all of this is so clear that almost nothing else can be seen except the inevitable.  WE'RE ALL FUCKED with these daily assclown reports!  And in the corners, the very theives that created this shit pile are algorithmically printing more money.

I cut my teeth in the markets exactly during the dotcom bust.  And the market behaved then exactly as it is behaving now.  And NO!  It isn't fucking different this time.

We have arrived...at our deserved end...and I expect things will be very clear...and very soon...not three years from now but possibly as soon as the AH session ends and the dumb ass Chinese start pulling down their dumb ass Euro exposure.

Good grief! [and by that I mean fuck me]

Thu, 07/21/2011 - 18:56 | 1478973 Caviar Emptor
Caviar Emptor's picture

Day by day, the absolute steaming pile of bullshit gets so high that the outcome of all of this is so clear that almost nothing else can be seen except the inevitable. 

Old Italian saying: The longer the bullshit lasts, the less it smells

Thu, 07/21/2011 - 19:14 | 1479007 disabledvet
disabledvet's picture

new media saying: "you have 45 characters or you pay. begin."

Thu, 07/21/2011 - 17:57 | 1478850 bigwavedave
bigwavedave's picture

i would be more impressed if he dropped the 'and' from his firm name.

Thu, 07/21/2011 - 18:01 | 1478859 gulf breeze
Fri, 07/22/2011 - 06:16 | 1479844 Ricky Bobby
Ricky Bobby's picture

+1

This guy tells it striaght from the ground level. NO BS

Thu, 07/21/2011 - 18:03 | 1478861 Growyourownfood
Growyourownfood's picture

Hahahaha Jean-Vincent Gave. Is he still around??? Are people still listening to him, paying money to hear him speak??

Please see "Brave New World" by GaveKal as the nonplusultra of being on record absolutely, entirely, completely and massively incorrect.

Thu, 07/21/2011 - 18:03 | 1478862 Rainman
Rainman's picture

Excellent charts.....a handy reference to assess overall global economic fuckedupedness. 

Thu, 07/21/2011 - 18:04 | 1478865 Franken_Stein
Franken_Stein's picture

Since nothing meaning ful is happening here:

 

Some days ago I presented this chemical reaction to you:

Fe2O3 + 2 Al -> Al2O3 + 2 Fe

 

Now why is that so important ?

Because it is the so-called Thermite reaction.

It takes place at around 2500 °C.

 

Since steel melts at 1400°C, this reaction is armor-piercing.

Need I say more ?

 

They will probably make use of the active-denial system, but the solution to this is you need a mirror to deflect micro-waves.

Or a material to absorb it.

 

Well, should they go as far as to use the neutron-bomb, well, then all bets are off of course.

Then you can just try to hide near the rich guys, because that's of course, where the bomb won't hit.

 

Thu, 07/21/2011 - 18:18 | 1478898 caerus
caerus's picture

chemistry bitchez!

Thu, 07/21/2011 - 18:22 | 1478907 YesWeKahn
YesWeKahn's picture

Do you agree with his last page? Sell commercial real estate? IYR has been only up for the last 3 years.

Thu, 07/21/2011 - 18:26 | 1478911 geno-econ
geno-econ's picture

The only strength for US multinationals is demand in China. US consumer market on life support breathing credit card oxygen as Shilling describes. Consumer recession inevitable and bolstered by any adverse budget cuts contemplated in entitlements,and pork. Real estate dead for at least 5-7 years. Unemployment systemic with global economic model. Only bright spot is stock market which relies on QE continuation and unsustainably low interest rates. Nevertheless, I look forward to other presentations but troubled that economists in power tell you what is wrong , but no guts to offer  suggestions for real change. In that sense they are just as guilty as polititians. Only one with guts was Volker and no one listened.

Thu, 07/21/2011 - 18:29 | 1478917 Cheesy Bastard
Cheesy Bastard's picture

This is the theme to Garry's show...the theme to Garry's show.  Garry called me up and asked if I would write his theme song.  I'm almost half way finished, how do ya like it so far....OH Shilling, not Shandling.  Sorry.

Thu, 07/21/2011 - 18:33 | 1478921 slewie the pi-rat
slewie the pi-rat's picture

i'm giving the blue ribbon for this month's entry to chart # 32 [US Bank Exposure To The EuroZZZone & UK (as of 9.30.10, in $ billion)] where the grand total is: 

2,146,074 $ billions, or

$ 2,146,074,000,000,000

i have no idea what this means, but that is a very large #, and the only way i can relate to the sheer magnitudinality is,  ^?uncle scrooge?^  

where's elmer fudd when you need him? 

Thu, 07/21/2011 - 18:43 | 1478951 caerus
caerus's picture

i like faber's weird little pony tail

Thu, 07/21/2011 - 18:51 | 1478966 I am a Man I am...
I am a Man I am Forty's picture

i think he is wrong about the 20% to go in housing, so many homes are going for less than construction costs now

Thu, 07/21/2011 - 18:59 | 1478978 gwar5
gwar5's picture

The US consumer is the driver of economic growth going forward?  Maybe if we double the amount of 18-34 year olds living with their parents to 26%?

Between Spilling's 20% more down in housing to go, need to replenish retirement accounts, higher oil costs, small savings rate being inflated away, and insolvent governments clawing away at consumers with higher taxes and fees, I don't see how how the US consumer can restore global economic growth. 

 

Thu, 07/21/2011 - 19:58 | 1479116 PulauHantu29
PulauHantu29's picture

Good information..ty for posting it. Shiller puts his finger on the key point....our GDP is 70% consumer spending---which produces nothing, nada, zero.

Why are Larry Summers, Timmy and Barry trying so hard to bring CS back to life when they might better focus on creating jobs where we actually produce something, somebody needs? OUr GDP numbers would sore and we could handle the deficit better; i.e. work it off realistically as opposed to inflating it away via more massive printing?

Thu, 07/21/2011 - 22:02 | 1479457 voss
voss's picture

Classic.  slide 41, sell item #12:  Japan_ slow train wreck. 

Fri, 07/22/2011 - 09:09 | 1480109 Agent 440
Agent 440's picture

Seems like Japan is the model of economic success... avoiding high speed train wrecks.

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