Uber bear economist Gary Shilling thinks the financial crisis is still unfolding, and advises to buy Treasuries and the dollar and dump commodities.
First, the consumer is on a big saving tear and as long as that’s the case, we’re not going to see an economic rebound that amounts to anything, Shiller says.
It isn’t just that consumers are on a saving spree, it’s that they are reversing a 25-year trend, Shilling told Bloomberg.
“Recognize that really, we have one big trade out there,” Shilling says. “If you’re looking at one, you’re looking at all of them.”
However, Shilling likes the following investments now:
Treasury bonds, income-producing securities, consumer staples and foods, “small luxuries” because consumers are trading down; the U. S. dollar and eurodollar futures.
Shilling advises avoiding U.S. stocks in general because they are too expensive, especially homebuilder and related stocks as he expects home prices to fall another 10 percent this year.
He also counsels avoiding big-ticket, discretionary consumer items, banks and other financial institutions, consumer lenders’ stocks, low and old-tech capital-equipment producers, junk bonds, commercial real estate, most commodities and stocks and bonds in developing economies.
Above all, beware risky investments.
“The rebound in stocks has taken a lot of pressure off of financial reform,” Shilling points out.
“We’re seeing again the big wage increases, the big speculation on Wall Street.”
U.S. stocks and commodities slid last week, while the dollar and Treasuries rose, as a loss at JPMorgan Chase & Co.’s retail bank and growing concern over Greece’s budget deficit triggered a flight from riskier assets.
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