Hard landing for China, S&P to 800 and deflation warns veteran economist Gary Shilling
Posted on 29 September 2011 with 2 comments from readers
Veteran economist Gary Shilling appeared on Bloomberg TV yesterday (link here) and forecast a massive deflation with a hard landing for China compounding an already difficult position for commodity prices. He predicted the S&P 500 index would drop to 800, still above its 2009 low of 666.
‘In the portfolios I manage, we’ve maintained our 30-year bond positions. We haven’t really changed them. We’ve changed them a little bit over time. When they got to 2.5% at the end of 2008, I said, we’ve gotten every pullback….It is awfully tricky to do this on a daily basis.
‘At this point, I don’t see anything that has fundamentally changed either in stocks or bonds. You have this volatility, this event-driven market. It’s great for the latest news. Is Greece like to pass a law to tax itself or not? Markets jump up and down 100 points on the Dow. That is ridiculous. That is whipsaw. It shows a lot of day trading. It shows a lot of program trading. It doesn’t show a lot of investing.
‘There are some [safe havens] in the real estate area. We like medical office buildings. That’s because of aging populations, the new medical health care bill, and improving technology. Also, 55% of physicians work for hospitals. Private practices with a storefront are disappearing. They’re moving into campuses…
‘Another one is rental apartments. People are deciding a house is no longer a sure shot investment. Prices can and do fall. They have, for the first time since the 30’s…Rental apartments will continue to be very attractive.
‘What I think will really knock the pinnings out from under all commodities is a hard landing in China, which is what we’re forecasting. [The Chinese] are trying to cool off a red-hot economy. They’re worried about the property bubble and the high inflation rate. They are affecting a soft landing and with their crude economic tools it’s tough.
‘Bear in mind, the Fed, with more sophisticated tools, tried, by my reckoning, 12 times in the post World War II era to cool off the economy without precipitating a recession. They only succeeded once. What are the chances for China?’
2 Comments posted by readers:
When Gary Shilling writes a commentary about coming economic conditions, we should all read it very carefully. Then we should read it again.
His track record, going back many years, is excellent. The only flaw is that his timing is not perfect; then again, no one can be perfect in their timing. But like Gerald Celente, Shilling’s long term economic trends are on target.
The United States Department of Justice is investigating Chinese companies on New York stock exchanges for FRAUD. What a shock. Next thing you know, Putin’s buddies may be found out to not be all that honest.
Elon Musk, the genius behind PayPal. and SpaceX, told the Washington Press Club today that the reason he files so few patents is because the Chinese routinely steal intellectual property. He says Russian rocket technology is decaying. China is the only threat to SpaceX because it is hard for a private company to go up against the Communist Chinese monopoly government with unlimited funding.