Four bears... still gloomy

MarketWatch has a quick recap of four strategists that correctly called the bear market. My interest is superbear Gary Shilling so let me quote some of his views:

He's looking for a peak-to- trough decline of 40% in housing prices nationwide. As of the fourth quarter, the 20-city Standard & Poor's/Case-Shiller home price index had fallen 27% from its high in 2006.

At the bottom, Shilling expects some 25 million borrowers will be underwater on their mortgages. That's half of all mortgages and one-third of all owned houses in the U.S. Similarly, he doesn't think the current recession will end until at least early 2010. That would make this the longest recession by far since World War II.

He thinks the market might actually bottom some time this summer at around 600 on the S&P 500 - at 15 times estimated earnings of $40 -- six months or so before the economy does. But he doesn't see prosperity just around the corner.
"It took about 30 years to build up the credit bubble," he says. "My guess is, five to ten years to unwind this."

"What it probably means," he explains, "is longer and deeper recessions and shorter recoveries -- and reflecting that, shorter, less exuberant rallies and more frequent and deeper bear markets."

Gary Shilling, the beekeeper* :), is one of the extremely bearish investors out there. His expectation of short rallies and frequent, deep, bear markets reminds me of the 1940's or the pre-1920's. It's not clear how correct his call will be.


(* Believe it or not, Gary Shilling's hobby is beekeeping. Not that I have ever tried it but I'm not sure what's enjoyable in that.)