Tags: shilling | head | fake

Shilling: Improving Economy Just a Big Head Fake

Tuesday, 19 May 2009 11:16 AM

By Julie Crawshaw

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

Uber-bear Gary Shilling, president of A. Gary Shilling & Co., says the recent improvement in economic activity was not a sign the worst has passed.

It's a head fake that's typical in most recessions, Shilling told Yahoo! Finance.

Three trends must emerge in order to declare the end of the downturn, Shilling says: A housing bottom, resolution of the financial crisis, and more stimulus.

Shilling wants to see a serious reduction in the excess inventory of homes.

He’s also concerned about the rise in bad loans in sectors other than residential mortgages, including commercial real estate, auto loans, student loans, and credit cards.

Shilling estimates that only about $200 billion of the stimulus package actually went into things that will stimulate the economy and says that government must do more to "break the cycle of a consumer who is cautious, which means less spending, less production more inventory problems, and more layoffs."

If these three trends occur, he expects the recession will end in 2010.

Even then, “we're going to see a distinct contrast of lower growth," Shilling warns. "Not a depression, not 'recession forever', but muted, lower growth."

Pimco co-CEO Mohammed El-Erian also expects that economic growth will be muted for the foreseeable future.

“The world has changed in a manner that is unlikely to be reversed over the next few years,” El-Erian wrote in a note following his company’s recent annual secular outlook forum.

“For markets that are highly conditioned by the most recent periods of ‘normality,’ this will feel like a new normal.”

© 2014 Newsmax. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved