Posted on 01/29/2013 7:07:26 AM PST by blam
Gary Shilling Expects Great Disconnect to Cause Stock Market Crash 2013
Stock-Markets / Financial Crash
January 28, 2013 - 06:20 PM
By: DailyWealth
Steve Sjuggerud writes: Gary Shilling might have the best track record of any investor over the last 30 years...
If you had invested $100,000 in Shilling's "big idea" 30 years ago, it would be worth over $6 million today.
While most investors didn't pay attention to his big idea, Shilling was right. And he never gave up on his big idea.
Here in 2013, Shilling has some new big ideas... and some bold predictions... particularly about what he calls the "Grand Disconnect."
Thirty years ago, Shilling's big idea was that inflation would go away. He made this prediction in the early 1980s, when inflation was double digits.
He put his money where his mouth was... and put clients into the one particular investment that would profit the most (long-dated zero-coupon U.S. Treasurys). Shilling's strategy of rolling money every year into the longest-dated Treasurys paid out 60-fold returns.
Stocks and gold couldn't compete at all with Shilling's strategy over that time... $100,000 invested in gold turned into $400,000, and $100,000 invested in stocks turned into $2.1 million. Shilling's recommendation beat both of those by $4 million.
Last week, Shilling spoke with Canada's Globe and Mail newspaper.
He explained his big idea today – he explained the "Grand Disconnect"...
Right now we're in what I call The Grand Disconnect... The economies of the world are growing slowly... But investors couldn't care less. All they are concerned about is the money being shoveled out the door by central banks.
And I call that the grand disconnect between the real economy and investors' view of the world.
Shilling thinks the world economy isn't really doing that well... and that you can't get sustainable prosperity and sustainably higher stock prices by printing money. He thinks the Grand Disconnect has to end badly...
I think sooner or later it will be eliminated by some big shock... I think it could [be this year] but forecasting big shocks like this is obviously difficult. It's in the cards, it's just a question of when it will happen.
So where should you invest while governments are printing money today? Shilling's answer will surprise you. He doesn't like stocks or real estate at all. And he's "agnostic" on gold.
So where is he recommending you put your money? Cash.
There still is some inflation in the economies of the world – but not much. So cash is not eroding due to inflation the way it was way back in the 1970s... cash is not a bad place to be.
Astoundingly, Shilling is not giving up on his 30-year-old big idea either. He's buying Treasurys, even though they only yield 3%. Why? He explains it:
I've never, never, never bought Treasury bonds for yield. I couldn't care less what the yield is, as long as the [yields] are going down. In other words, I want the [price] appreciation... If they go down further, we will go from 3 percent to two percent... On a zero coupon bond, it'll be a total return of about 25 percent.
Because of Shilling, I have never bet against Treasury bonds in my near-two decades in the markets. It's been the right thing to do, every time.
And I think Shilling is right about the Grand Disconnect.
His idea is not far from my Bernanke Asset Bubble idea. As regular readers know, Federal Reserve Chairman Ben Bernanke's zero-percent interest rate policy and enormous money printing has fueled a "bubble" that has propelled asset prices higher.
I agree on the Grand Disconnect – in the sense that you can't create prosperity out of printing money... and that the piper has to be paid someday.
But we disagree on the date that bad things start...
Shilling thinks the Grand Disconnect will cause stock prices to crash in 2013. I think we have a couple more years left.
All the ObamaBot cheerleaders on CNBC, who didn’t foresee the financial collapse in 2008, are whistling “Happy Days Are Here Again.” They won’t see the next collapse coming, either. Bernanke, the Man Behind the Curtain, will be seen as a fraud in our lifetime.
Milton Friedman predicted today’s happenings fifty years ago. If you borrow heavily, debase the currency and deficit spend wildly, you will temporarily see upticks in economic parameters and a rise in the stock market. However he gravely cautioned that there was no real corresponding production of wealth from all the financial gimmickry. Eventually the stock market will descend rapidly and the country will be worse off.
That’s why this Uncle Miltie is heavily in cash and more out of stocks than at any time in his life.
RIP MF
Few are those who are not blinded by self interest.
Not saying bad economic things won’t happen, but it really doesn’t help to continually announcing that doom and gloom is coming... in the next 6 to 12 months.
This has been going on now for years and people are just weary of hearing that there is an impending disaster... in 6 to 12 months. And this cycle of warnings seems to keep perpetuating.
I take this whole thing seriously enough that I moved from my 45 year home of Seattle to a small farm in central Kentucky. I bought it two weeks before the 2008 election - and I expected McCain to win! ;-)
Someone said that these sorts of things always take longer to come about than the predictors anticipate, but once they do come about, they unfold with such rapidity that they catch everyone off guard.
I LOVE my new home. I hope the doom doesn’t happen but I still strongly believe (more than ever) that it will and it will produce suffering on a global scale not seen by mankind in history.
And I expect it this year - but I could be wrong. I’m amazed at their ability to continue kicking the can down the road. But the road really DOES come to an end and the longer it takes to get there, the more it’s going to hurt.
I too am prepared, it's just that it gets tiring living under a cloud. At some level you have to prepare all things as much as possible, maintain your close relationship with the Lord, and live your life. That's all I'm sayin’. Best to you.
When the debt bomb explodes and hyper-inflation is a reality, you will wish you had gold.
You did the right thing. We are preparing to flee to a rural retreat also. This thing is going to unwind at some point in the near future. Better to be prepared too soon than not soon enough. My personal guess is the govt will be able to keep it cobbled together for another 18-24 mos. After that I wouldn’t bet on it.
People that looked at us like we were nuts a couple of years ago are now stockpiling food and the where with all to protect it like there is no tomorrow.
People that looked at us like we were nuts a couple of years ago are now stockpiling food and the where with all to protect it like there is no tomorrow.
That is one of the most telling signs, and I’ve experienced it too. I used to be a “lone nut”. Not any more. And around here, all the locals are talking about what’s happening in the same way I was talking about it five years ago.
It’s not a matter of “if”, but “when”. And even then, the “when” will be in a pretty narrow window. At the very latest, I would say some time within the next four years of Obama’s presidency.
Feel it’s my duty to mention living aboard a boat is an ideal platform for survival/retirement for those who love the water. Texting this from aboard my 30’ sailboat in FL.
Apr 12, 2012 - 03:17 AM
By: Bloomberg
Stock-Markets
Best Financial Markets Analysis ArticleEconomist 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.”
I thought of that but sailing is too difficult and a diesel motor needs diesel fuel. Plus a steady diet of fish could get dull.
No offense intended.
I’d rather have land planted in perennial crops that would provide me with food and a good water source, solar water pumps. A tractor with 500 gallons of diesel fuel in storage. Lastly, prepared neighbors that would help fend off those who would take what we all have.
I can imagine sitting around with family staring at the gold as we slowly starve as there is no food to buy.
Weary?
You're not weary.
You're always one of the first on these threads trying to tell other people what they should or should not post.
The MSM is in a 'full-court-press' telling everyone that things are okay now. Things are not okay.
This post is a counter point to that view and I will post them as often as I desire.
If you're so weary, quit clicking on the threads and trying to disrupt them.
I have all that plus gold and silver. The Road Warrior Zombie Apocalypse scenario, if it even sinks that far, will not last long. America will bounce back and precious metals will quickly replace barter items.
When a majority thinks “it’s different this time” that’s when it crashes.
I've considered a houseboat up some of our inland waterways as a 'bugout' location. It may still be a good idea but, I've decided I'm getting to old for that.
Good luck. There are other FReepers who have sailboat refuges.
I just bought more junk silver dimes to add to my stash.
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