Stocks to buy in a recession: Nuthin' says Shilling

Stocks to buy in a recession: Nuthin'

Monday, March 03, 2008

When economists were still forecasting sunny skies ahead last year, Gary Shilling was one of the few who stuck out his neck and called for a U.S. recession by the fourth quarter of 2007 – a call that is beginning to look spot-on.

Now, far from updating his initial call with told-you-sos, Mr. Shilling – president of A. Gary Shilling & Co. Inc. – is taking things to the next step. Forget about a shallow recession; this one is going to be deep. And forget about making money on specific sectors of the stock market; the downturn will be broad.

“Yes, it’s puzzling that equity price declines so far have been small in the face of the rapidly expanding cancer in financial markets, which has metastasized in the consumer spending body,” he said in his monthly letter to clients.

His theory, though, is that investors are still pinning their hopes on a massive rescue effort from the U.S. Federal Reserve – which he figures will not help this time around because of the severity of the U.S. housing market downturn.

He looked at various industry groups that make up the S&P 500 and charted their results for the seven previous bear markets that were tied to U.S. recessions. Making money on the stock market certainly seemed like a fruitless task, even if you concentrated on defensives.

The household products group did fine during the 2000-02 bear market, rising 33 per cent. But it fell 35 per cent in the 1972-74 bear market. The life insurance group rose 27 per cent during the 1980-82 bear market, but fell 45 per cent in the 1968-70 bear market. Even major pharmaceuticals have an uneven record as defensives.

“In this environment, it’s best to prepare for further big stock declines.” Mr. Shilling said. “[W]e favour buying Treasury bonds and buying the dollar sometime soon, but the rest are sell recommendations – selling housing and related stocks, selling consumer discretionary stocks, selling commodities, selling commercial real estate, etc.”



© Copyright The Globe and Mail

And This:
Lord Black behind bars

PAUL WALDIE

Monday, March 03, 2008

Coleman, Fla. — Conrad Black drove into the Coleman Correction Complex in Coleman, Fla., with his wife Barbara Amiel Black just after noon EST on Monday. He arrived about 2 hours ahead of the court-imposed deadline for him to report to the prison.

He will now begin serving his 6.5 year sentence for fraud and obstruction of justice.

The Blacks arrived in a grey Cadillac Escalade and drove past a throng of media. When the SUV left 30 minutes later, Ms. Amiel Black could be seen in the back seat through the vehicle's tinted windows.

Lord Black will now be searched, fingerprinted and given a brief orientation. He will share a room in a dormitory like complex with about 100 other inmates, mostly men convicted of non-violent drug offences.

He will go through a brief orientation and receive four sets of clothing.

Eventually, he will also be assigned a job, at a starting rate of 12 cents an hour.

Coleman is one of the largest prison complexes in the U.S. with more than 7,000 inmates. It has low, medium and maximum security wings. There are about 2,000 inmates in the low-security unit.

Lord Black had asked to serve his time in a prison camp in Miami but the request was denied. Lord Black is British and in general foreigners are not allowed to serve time in prison camps.

The prison in Coleman is about a 4 hour drive from Lord Black's ocean front mansion in Palm Beach, Fla.