SOS 5 factors USA growth will derail

By Gary Shilling:

1. HOUSING - unsold inventories of 2 to 2.5 milllion houses, will cause another 20% drop in prices




2. UNEMPLOYMENT - persistant high unemployment - reduce consumption, increase savings (12% in 80s to zero in 2008 and now is 6%), slow consumer credit demand (historically 65% debt to income, grow to 131% in 2008 and now is 116% due to foreclosures). High oil price will have not much effect due to high unemployment (high oil price is a tax to consumer, not inflation)




3. JAPAN DERAIL - need foreign debt to refinance due to export growth may slow and weak demographic population




4. EUROZONE DEBT CRISIS - PIIGS - USA has exposure of 28% debt in Europe




5. CHINA HARDLANDING - inflation of 12%, historically in USA Fed fail in engineering soft landing (11 out of 12 times), so will China

MyView

You cannot discount his view as he made 20% CAGR for last 30 yrs when he bought bonds at 15% yield and sold in late 2009 at yield of 3%. Unless all the 5 major factors can be debunked, then, he will be wrong.