How Much Worse Will the Global Slump Get?

I caught Larry Kudlow's CNBC show Friday evening, which included Gary Shilling on the show's roundtable. Shilling said we'll NOT see a pick up in the second half of this year and sounded like there's more bad stuff to come.

Some on the panel laughed off Shilling. But my recollection is he appeared on Kudlow's show forecasting the housing slump before most anyone else. And the perma-bulls snickered at him then, too.

Well, Shilling got the last laugh on that. And, besides, he's a man of substance and worthy of listening to. I'm not sure he calls himself a value investor, but he strikes me as someone trying to take the facts and see the world as it is -- instead of confusing optimism with being a virtue.

Referring to the troubles AIG reported at the end of last week, Shilling said AIG management probably doesn't even know how much toxic financial waste (my term) is on their balance sheet. THAT sentiment will sound familiar to anyone reading this blog regularly because I related the same belief from Francis Chou's latest letter to shareholders.

I don't know if Gary Shilling reads or even agrees entirely with Ambrose Evans-Pritchard. But Evans-Pritchard's column in the Daily Telegraph certainly rhymes to my ears with some of what Shilling's been saying:

The avalanche of bankruptcies has begun. Six US companies of substance have defaulted on bonds over the past fortnight, against 17 for the whole of last year.

As a "non-believer" in the instant rebound story, I am not easily shocked by gloomy reports. But the latest note by Standard & Poor's - The Bust After The Boom - gave me a fright.

I don't know how much worse things will get. Or even if they'll get worse at all. That's not my game. I just try to buy stocks that will endure economic slumps until times get good again.

In the meantime, I read, read, and read some more.