Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

DEFLATION'S COMING, Says Gary Shilling, And It's Going To Clobber The Stock Market
The Business Insider ^ | 8-12-2010 | Henry Blodget

Posted on 08/12/2010 9:07:23 AM PDT by blam

DEFLATION'S COMING, Says Gary Shilling, And It's Going To Clobber The Stock Market

Henry Blodget
Aug. 12, 2010, 11:41 AM

All through the market rally and budding economic recovery of the past 18 months, most people concluded that the crisis was over and it was time to start worrying about inflation again. But strategist Gary Shilling of A. Gary Shilling & Co. stuck by his guns:

It was DEFLATION we needed to worry about, Gary said. And it was BONDS, not stocks, that investors should be buying.

Well, Gary's bearishness on the stock market caused him to miss a nice run, but he has been dead right about bonds. And he has also been right about the potential for deflation--as evidenced by the recent Consumer Price Index numbers and the fact that most other strategists have come to agree with him.

So what's Gary's current outlook?

Same as it ever was:

Prepare for chronic deflation, buy bonds, and sell stocks.

Why is Gary still expecting deflation? Because consumers still have way too much debt, and this debt will take decades to work off. Also, consumers are saving money again, which means they aren't spending it. Banks have plenty of cash and reserves, but the demand for money just isn't there. And when consumers are strapped and credit is contracting, prices tend to fall. (See Gary's charts here >)

Gary's biggest concern about his deflationary outlook, in fact, is that most strategists have come to agree with him (the crowd is often wrong). But, for now, is sticking with his call.

[snip]

(Excerpt) Read more at businessinsider.com ...


TOPICS: Front Page News; News/Current Events
KEYWORDS: deflation; democrats; depression; economy; fail; inflation; obama; obamadepression; recession
Navigation: use the links below to view more comments.
first previous 1-2021-4041-6061-68 next last
To: demsux

>>...additionally, the fed must weaken the dollar to pay off our debt with cheaper dollars.<<

when the gov. owes money to its own citizens, that is a very easy thing to do. When it owes the money to other countries, that is a challenge and there is a risk: The risk of war.

Our gov is between a rock and a hard place on this thing. And our situation is not a US phenomenon. It is international.


21 posted on 08/12/2010 9:35:14 AM PDT by RobRoy (The US Today: Revelation 18:4)
[ Post Reply | Private Reply | To 8 | View Replies]

To: Signalman

22 posted on 08/12/2010 9:38:47 AM PDT by blam
[ Post Reply | Private Reply | To 13 | View Replies]

To: repentant_pundit

not sure if we can uses Japan as a predictor or not
here’s gold price in Yen

(scroll to bottom for longer time windows)

http://goldprice.org/gold-price-japan.html


23 posted on 08/12/2010 9:39:46 AM PDT by nascarnation
[ Post Reply | Private Reply | To 20 | View Replies]

To: blam

Could not disagree more. We are ehaded into a gtpeinflationary depression.


24 posted on 08/12/2010 9:40:44 AM PDT by GilGil
[ Post Reply | Private Reply | To 2 | View Replies]

To: blam

Could not disagree more. We are ehaded into a hypeinflationary depression.


25 posted on 08/12/2010 9:41:10 AM PDT by GilGil
[ Post Reply | Private Reply | To 2 | View Replies]

To: GilGil
Is Deflation Really Bad For The Economy?
26 posted on 08/12/2010 9:48:29 AM PDT by blam
[ Post Reply | Private Reply | To 25 | View Replies]

To: east1234

“OK, so how come everything I go to buy at the store, food, clothes, beer, etc, is so much more expensive?”

While gasoline is still pretty high, many food items where I live (Fort Worth, Texas) are now less expensive than they’ve been in a very long time. An Aldi store recently opened nearby, and a few days ago I bought eggs there for 49 cents a dozen and milk for $1.28 a gallon. Walmart and other stores have also dropped prices on staple items, although not as low as Aldi.


27 posted on 08/12/2010 9:49:02 AM PDT by Texan Tory
[ Post Reply | Private Reply | To 10 | View Replies]

To: kittymyrib
It couldn’t happen to a better group than the gamblers on Wall St.

Deflation won't hurt them much - they'll go short and make billions. It will hurt the 401K holder who doesn't have any option but "all long equities, all the time".

28 posted on 08/12/2010 9:49:10 AM PDT by Mr. Jeeves ( "The right to offend is far more important than any right not to be offended." - Rowan Atkinson)
[ Post Reply | Private Reply | To 4 | View Replies]

To: blam
You can make a good case for deflation or inflation. I wish I had confidence either way. So I will stay diversified, Bonds, equities, both domestic and foreign. The stocks I have are are quality large cap though...

Mike

29 posted on 08/12/2010 9:49:12 AM PDT by MichaelP (Democrats are the party of Special Re-education)
[ Post Reply | Private Reply | To 1 | View Replies]

To: steve0
Gold will fall too.....that's when u buy it!...just before the inevitable hyperinflation...

now..having said that...the price will go down....but...the premium you pay over listed price will skyrocket!

30 posted on 08/12/2010 9:49:17 AM PDT by M-cubed
[ Post Reply | Private Reply | To 9 | View Replies]

To: blam
...calls for deflation or inflation.

I confidently predict one or the other, commencing at some undetermined time and for some indeterminate period of time. Further, I predict both, eventually.

I'm not mocking you but wondering what value this advice is to the average shmo investor. Me, for instance.

31 posted on 08/12/2010 9:49:20 AM PDT by decimon
[ Post Reply | Private Reply | To 11 | View Replies]

To: steve0
What happens to gold in a dollar deflationary environment?

What happened to gold in the disinflationary early 80s?

32 posted on 08/12/2010 9:50:13 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 9 | View Replies]

To: Signalman

“Today, I can buy a 46 inch LCD Hi-Def TV for 1600 dollars. But next month, I should be able to get one for 1500 dollars. I think I’ll hold off purchasing one right now.”

This concept, while true, is not introducing any new deflationary pressure into the mixture. People are accustomed to the fact that electronic items are continually becoming cheaper (priced) and with better features. Eventually customers reach a point where they don’t want to wait any longer, so they go ahead and purchase the items they want. The idea that your house is becoming worth less and less every month, that is a new, very serious deflationary pressure.


33 posted on 08/12/2010 10:01:27 AM PDT by Texan Tory
[ Post Reply | Private Reply | To 13 | View Replies]

To: anniegetyourgun

Well, your car is always worth less now than it was 2 years ago, unless it is a cherry ‘57 Chevy Bel Aire 2 Door.
House? Not sure. Real Estate market says so. County taxing authority doesn’t seem to agree. :-(


34 posted on 08/12/2010 10:04:39 AM PDT by rickb308 (Muslims need to check with Native Americans & ask how that whole cowboys & indians thing worked out.)
[ Post Reply | Private Reply | To 6 | View Replies]

To: Toddsterpatriot
What happened to gold in the disinflationary early 80s?

If I remember correctly, gold was over $700/oz in '79, and came down dramatically in the early 80's.

35 posted on 08/12/2010 10:09:15 AM PDT by TnGOP (Petey the dog is my foriegn policy advisor. He's really quite good!)
[ Post Reply | Private Reply | To 32 | View Replies]

To: decimon

Heh! Reminds me of what a frustrated Harry Truman reportedly said, “Would somebody please get me a one-handed economist.”


36 posted on 08/12/2010 10:14:54 AM PDT by Ken H
[ Post Reply | Private Reply | To 31 | View Replies]

To: TnGOP
Yeah, the price tanked, with lower, but still present, inflation.

If we get real deflation, the reaction might be stronger. Or maybe this time it's different?

37 posted on 08/12/2010 10:18:00 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
[ Post Reply | Private Reply | To 35 | View Replies]

To: steve0
What happens to gold in a dollar deflationary environment?

It seemed to do well in the 1930's.

38 posted on 08/12/2010 10:22:04 AM PDT by NeoCaveman (Defeat Dingy Harry Reid)
[ Post Reply | Private Reply | To 9 | View Replies]

To: Ken H
Heh! Reminds me of what a frustrated Harry Truman reportedly said, “Would somebody please get me a one-handed economist.”

If Truman didn't say it then I'm glad someone did.

My comment wasn't to deride anything but to question the value of the advice. It's good as topic of discussion but of questionable value. If I took the advice to sell stocks and buy bonds then I'd likely be so far behind the curve as to be selling the stock low to buy the bond high.

39 posted on 08/12/2010 10:28:01 AM PDT by decimon
[ Post Reply | Private Reply | To 36 | View Replies]

To: blam
I'd been hearing Larry Kudlow and one or two other supposed gurus on WMAL in DC claiming we were experiencing inflation around 1% while Ellen Brown has claimed we were heading into deflation and the news about the Fed over the last two or three days has basically answered the question as to who was right. Brown mentions "shadow lenders" i.e. Japanese, Chinese and others who were buying the toxic mortgage securities in bulk quantity and have now left the scene, probably permanently, and the fact that the Fed and government cannot take up that much slack, i.e. that about 40% of the wealth in the world as of three years ago has simply disappeared. The recent Fed move was a desperate attempt to put some of that head room back and, as Limbaugh notes on the air today, it didn't work.
40 posted on 08/12/2010 10:37:19 AM PDT by wendy1946
[ Post Reply | Private Reply | To 1 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-2021-4041-6061-68 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson