Get Gary Shilling's Market Strategy

The Dow Jones Industrial Average has rallied 34% higher since March 9.  Many of the CNBC pundits and talking heads take this to mean that the stock market and the economy have put the housing bust and credit collapse into the rearview mirror. 

Not me.

I see more trouble ahead for top stocks to buy, corporate profits, housing, the economy and the U.S. dollar.  When the gathering tsunami of commercial real estate foreclosures hits the market in full force, it will be too late to get out of top stocks safely.  Now may be one of your last chances.

As a reader of my Forbes columns, you're probably aware that the investment strategies I laid out early last year were extremely accurate.  In fact, I batted 13 for 13.

I said that homebuilder top stocks for 2010 should be sold along with consumer discretionary spending-related equities.

I also urged selling commodities as well as emerging market equities and bonds. The same went for junk bonds.

Early last year, I also said the dollar would rally later in 2008, and it did, starting last July, and I forecast its latest swoon since March.

I urged selling U.S. stocks market in general in anticipation of spreading financial woes and a deep and global recession. The S&P 500 index nosedived 39% last year.

My final strategy, lucky 13, was to buy long Treasury bonds. Long-time Forbes readers know well my love for 30-year Treasurys since 1981 when they yielded 14.7% and I said, "We're entering the bond rally of a lifetime." In 2008, they returned 42% including interest as their yield dropped from 4.5% to 2.6%.

Even with top stocks substantially off of their lows, the financial and economic problems continue to unfold along the lines that I've been telling subscribers to my monthly newsletter, Insight.

Don't be suckered in by the recent bear market rally. This won't last.

It's important to focus on the long run, beyond the deepening global recession and worldwide financial crisis. That's what I do in our new June 2009 Insight. The long economic upswing that started in the early 1980s ended with the dot-com blowoff in 2000. The onset of the secular downswing was masked by massive monetary and fiscal stimuli, especially after 9/11, but it is now in full flower.

Overleveraged U.S. consumers have exhausted their borrowing sources due to the collapse of top stocks of 2010 and evaporation of home equity. In response, they are switching from a 25-year borrowing-and-spending binge to a chronic saving spree that may reduce GDP long run annual growth by one percentage point. The effects will be even more depressing for the many foreign lands that depend on Americans to buy their surplus products and generate their economic growth.

Years of financial deleveraging here and abroad will also slow global growth as cautious lenders retard areas ranging from U.S. housing to Eastern European economies.  In addition, weak commodity volume and prices will depress producing countries.

Protect your wealth from further financial meltdown. Click here to access Gary Shilling's new report in this month's issue of Insight.

Increased government regulation and economic involvement here and abroad are the normal results of severe economic and financial problems. By curtailing risk-taking and efficiency, they too will impede economic growth. With most nations still zealous to produce and export while the U.S. is no longer the big importer, protectionism is a serious threat, especially with sluggish global business activity. It will slow growth and could stop it if serious enough. In this environment, chronic deflation of 2% to 3% annually is likely, a combination of the good deflation of productivity-driven excess supply and the bad deflation of weak demand.

I personally invite you to subscribe and benefit from our long-term economic outlook, spelled out in detail in our April Insight and in many useful and informative reports in future issues. In fact, we just publishined an in-depth report, "Powerless Corporate Profits," included in our May issue of Insight. Don't miss it!

About Gary Shilling

Dr. Shilling is the President of A. Gary Shilling & Co., Inc., the editor of A. Gary Shilling's Insight and a long-time Forbes Magazine columnist. Besides Forbes, his articles appear in The Wall Street Journal and The New York Times, among others. He is a member of The Nihon Keizai Shimbun (Japan Economic Journal) Board of Economists and appears frequently on radio and television business shows. Recognized as an effective and dynamic speaker, he often addresses national and international conventions of various business groups, including the Young Presidents Organization.

Dr. Shilling is well known for his forecasting record. In the spring of 1969, he was among the few who correctly saw that a recession would start late in the year. In 1973, he stood almost alone in forecasting that the world was entering a massive inventory-building spree to be followed by the first major worldwide recession since the 1930s. In the late 1970s, when most thought that raging inflation would last forever, he was the first to predict that the changing political mood of the country would lead to an end of severe inflation, as well as to potentially serious financial and economic readjustment problems, and a shift in investment strategy from one favoring tangible assets to an emphasis on top stocks and bonds market.

Gary Shilling received his bachelor's degree in physics, magna cum laude, from Amherst College, where he was also elected to Phi Beta Kappa and Sigma Xi. Earlier, as a high school senior, he ranked 12th in the nation in the Westinghouse Science Talent Search. Dr. Shilling earned his master's degree and doctorate in economics at Stanford University. While on the West Coast, he served on the staffs of the Federal Reserve Bank of San Francisco and the Bank of America.