Gary Shilling Sees `Significant' Stock Selloff Within 12 Months

Gary Shilling, who predicted the U.S. housing collapse, says the stock market is overvalued and foresees a “significant” selloff within a year as the Federal Reserve fails to stimulate economic growth.

The Standard & Poor’s 500 Index has climbed 17 percent since July 2 as investors anticipated the Fed’s plan to buy $600 billion in Treasuries to boost growth. The benchmark gauge for U.S. equity trades for 15 times profit from the past year, up from 13.7 in July, data compiled by Bloomberg show. Fed Chairman Ben Bernanke previewed his strategy of quantitative easing in an Aug. 27 speech in Jackson Hole, Wyoming.

“I don’t think it’s enough to make a great deal of difference,” Shilling, 73, president of the investment research firm A. Gary Shilling & Co. in Springfield, New Jersey, said in a telephone interview. “The earlier QE1 didn’t and I don’t think this will, either. The economy is weak and it doesn’t take very much of a shock to push it into negative territory. I don’t think that’s enough to justify where stocks are now.” (more)