Monday, February 12, 2018

Gary Shilling interview on the stock market - Part 1

Gary Shilling talks with ThinkAdvisor on the markets 

THINKADVISOR: Are you bullish about the market?

SHILLING: No, I’m not rampantly bullish. Stocks are expensive. The economy is getting long in the tooth. There’s reason for caution. But by the same token, I don’t see the party coming to a grinding halt in the immediate future.

THINKADVISOR: When we talked last July, you said the biggest threat to the market was complacency. Is it still?

SHILLING: Yes. It’s very much there. When you see this mad rush into index funds — passive investments — the attitude is: “I don’t care what the fundamentals are. I’m buying it because it’s going up.” So it’s onward and upward with no discrimination. The other manifestation is speculation — the same kind of speculative complacency we’ve seen in the Bitcoin area.

THINKADVISOR: What’s the stock market’s tipping point?

SHILLING: Good question. Historically, bull markets haven’t died of old age. There’s always some trigger mechanism. In the post-World War II period, they’ve come from two sources. One is that the Federal Reserve worries about an overheating economy and tightens up credit. By my reckoning, in 11 out of 12 tries, that has precipitated a recession. The only soft landing was in the mid-90s.