What I like most about Gary Shilling's economic analysis is that it's thorough. In the piece that follows – an excerpt from Gary's monthly INSIGHT – he ranges from the importance of US consumer spending and the unemployment rate, to the actions of the Fed, to business cost cutting and productivity, to the housing crisis and household debt, to state and local government fiscal issues, to US exports – Etc.! So by time he gets ready to deliver conclusions, you know they're well-supported. And Gary's overall conclusion here, regarding the rest of 2012, is a strong one and maybe not quite what you'd expect.
As part of the deal with Gary to send you his material, he has asked me to offer you the chance to subscribe to his letter. If you like his work as much as I do, I suggest you consider it. Outside the Box readers can subscribe to INSIGHT for the special rate of $275, and you'll receive 13 reports instead of the normal 12, plus a free 10-page Special Report outlining Gary Shilling's investment strategies for 2012. (This offer is available to NEW subscribers only.) To subscribe, call them at 1-888-346-7444 or 973-467-0070, and be sure to mention Outside the Box to receive your special rate and free report.
Your home at last but not for long analyst,
John Mauldin, Editor
Outside the Box
U.S. Consumers: Still Key to the Outlook
(Excerpted from the April 2012 edition of A. Gary Shilling's INSIGHT)
In the Dec. 2011 issue of my Insight newsletter, I wrote: "In the U.S., major new fiscal stimulus is on hold, and monetary policy is impotent. State and local spending, housing, inventory investment, capital equipment investment and commercial construction are likely to remain subdued. U.S. exports are curtailed by sluggish foreign economies. So U.S. growth in 2012 will be decided by consumer spending, 71% of GDP. With declining real wages and incomes and low confidence, continuing strength in outlays is unlikely. A 2012 U.S. recession is probable, but milder than the 2007-2009 nosedive, unless another financial crisis unfolds."
Four Months Later
Well, here we are, four months later. Do the economy and financial markets in the ensuing times substantiate our forecast? The chorus of bullish investors bellows, "No!" as they point to the 29% rise in the S&P 500 index from its October 2011 low (Chart 1). They even believe that a continued sluggish economy is good news.
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