Sunday 24 July 2011

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

http://www.zerohedge.com/article/strategic-investment-conference-luminaries-finance-presentation-series-part-1-gary-shilling

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.

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