Investing guru Gary Shilling, president of A. Gary Shilling & Co., says caution is the name of the game for investors, because there's as much as a 50 percent chance stocks will crash to a new low this year as consumer spending continues to be weak.
“I think you’ve got to be very, very cautious,” he says.
“Stock markets rallied like a scalded dog from last March, but, to me, they’ve gotten way ahead of themselves,” Shilling told Ticker Tech.
Shilling doubts this year’s economy will have the kind of growth that will support either the revenues or the profits that are built into the market right now.
What’s been supporting it thus far, he says, is that more sales are coming out of new production than old inventory and the economy is still on government life support.
Neither of those is sustainable forever, he notes.
Investors, Shilling says, can protect themselves by selling commodities and buying 30-year Treasury bonds, which are currently yielding about 4.6 percent.
“I think they’re going to 3 percent,” he notes.
“And if they do, on a 30-year coupon bond, you’ll make about 25 percent on your money, and on a 30-year zero coupon, you’ll make about 50 percent.”
This advice, of course, depends o some degree on what happens in the economy, Shilling acknowledges.
“If I’m right, then the economy is weakening and we’re going to have deflation,” he says.
“We have excess supply all over the place.”
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