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S&P 600: That's Gary Shilling's Forecast for 2009, Not an Index

Posted Dec 19, 2008 12:33pm EST by Aaron Task in Investing, Commodities, Recession

The S&P 500 could fall to as low as 600 in 2009 and "alternative assets" like commodities and currencies will provide no shelter for investors, says Gary Shilling, president of A. Gary Shilling & Co.

Having been appropriately bearish heading into this year, Shilling sees "few good places to hide" in 2009. Currently, Shilling is long Treasuries and the dollar, but notes the bond market's rally is getting long in the tooth.

Other than defensive plays like utilities and consumer staples, Shilling is short stocks. His "S&P 600" prediction, a 33% drop from current levels, is based on a view that S&P earnings will be $40 per share next year (vs. the consensus of $83) and the index will trade with a P/E multiple of 15. (Here's the math: $40 EPS x 15 P/E = 600.)

Shilling is also short commodities and remains bearish on emerging markets, most notably China. The theory China, most notably, could "decouple" from the U.S. doesn't hold up to scrutiny, Shilling says, as evinced by the slowdown of China's economy and the fact their middle class isn't large enough to sustain growth internally.

Against that backdrop, Shilling isn't only bearish on China as an investment, he sees the potential for major social upheaval in the world's most populous nation.

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177 Comments

Herbert
Herbert - Friday December 19, 2008 12:42PM EST

Armageddon, eh?

chubby
chubby - Friday December 19, 2008 12:43PM EST

That's the trouble with these doom guys, they're always bearish and sometimes the world comes around and stumbles over them.

you
Yahoo! Finance User - Friday December 19, 2008 12:48PM EST

Why not 500?

Mark
Mark - Friday December 19, 2008 12:53PM EST

man talks sense

__A_YAHOO_USER__
__A_YAHOO_USER__ - Friday December 19, 2008 12:54PM EST

Why are predicting the bad news why not tell the effect of all stimulus I think you are dicounting that area and effect....

Bryan
Bryan - Friday December 19, 2008 12:55PM EST

dumb

Lizm
Lizm - Friday December 19, 2008 12:55PM EST

i love gary. he is loudest at the bottoms. always. liz

Mark
Mark - Friday December 19, 2008 12:55PM EST

This shows that even a blind squirrel can find a nut once in a while

Mark
Mark - Friday December 19, 2008 12:55PM EST

This shows that even a blind squirrel can find a nut once in a while

jerry s
jerry s - Friday December 19, 2008 12:56PM EST

The US govt is just holding the markets up long enough to let the hedge funds sell high to meet large redemptions and also to let their insider buddies get out, at the price of the little guys.

Christine
Christine - Friday December 19, 2008 12:56PM EST

Chubby is right. The blood is in the streets - looks like a good time to buy to me.

rockjock1037
rockjock1037 - Friday December 19, 2008 12:56PM EST

Sell everything and sneak across the border to Mexico

rockjock1037
rockjock1037 - Friday December 19, 2008 12:59PM EST

Nothing is going to get BETTER until things STABILIZE for MONTHS

Mark
Mark - Friday December 19, 2008 01:00PM EST

yes--why not s&p 400????---dow3500????--nasdaq--600??? come on let's all get real depressed and be pesomistic maybe some suicides to go along with it--bottom line-- the majority of the americans have been living far beyond what they can afford because of the large corporate greed and scams too lend money on the risky--guess what?? the gun is shooting both ways now!!!!!

Larry
Larry - Friday December 19, 2008 01:00PM EST

What's a shilling worth now?

you
Yahoo! Finance User - Friday December 19, 2008 01:01PM EST

the hangover will be proportional to the binge ... some ppl, particularly in US, binged too much during last decades ... it's called "redde rationem" ...

Partha
Partha - Friday December 19, 2008 01:04PM EST

This time he will be wrong. He was lucky last time!!

Unclefulbert
Unclefulbert - Friday December 19, 2008 01:05PM EST

Yes sir, that why folks are buying T-bills with zero return for now?

mr good-lookinz
mr good-lookinz - Friday December 19, 2008 01:06PM EST

not necessarily doomsday, but i believe the market will be "stagnant" mostly in 2009. events that led to the downturn of the economy did not happen in 6 months - the whole mortgage industry and household debt has been an issue for several, if not many, years - therefore, it will take "some considerable time" before there is meaningful economic growth. also, no nation, including china, is immune to what is a world-connected economy to a great degree. much love and hugz to everyone.

you
Yahoo! Finance User - Friday December 19, 2008 01:06PM EST

I think Mr. Shilling is on the wrong side of the trade for 2009. Here's why: We have a lot of stimulus coming; significantly lower gas prices/energy costs; significantly lower mortgage rates causing many homeowners to refinance and free up extra money and many potential homebuyers now better able to afford a home.

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