Gary Shilling's predictions – made in 2007 and repeated at the beginning of 2008.

Gary Shilling, editor of Gary Shilling’s Insight.
Gary’s predictions – made in 2007 and repeated at the beginning of 2008.

1) Prediction: The housing bubble will burst.

Result: Housing prices are down 25% nationwide from July 2006 – and they are going further. Homebuilders are down 75% from their high.

2) Prediction: “U.S. stock prices will fall below the 2002 lows in the midst of a major recession.”

Result: The current financial crisis wiped out over $7 trillion of stock market gains. The Dow Jones Industrial Average is at the same level it was in 1997.

3) Prediction: China will suffer a hard landing due to domestic cooling measures and U.S. recession.

Result: China’s Shanghai Composite Index is down 55% in the last 12 months.

4) Prediction: “Weakness in U.S. and China will spread globally, dragging down economies and stocks universally.”

Result: Morgan Stanley Capital International’s Emerging Markets index is off more than 50% since the beginning of 2008.

5) Prediction: “Treasury bonds will rally.”

Result: Yields on 10-year Treasurys fell from 5.1% in June 2007 to 2.8% recently.

6) Prediction: “The subprime slime fallout will spread.”

Result: Single b-rated junk bonds now yield 18%, up from 8% in mid 2007, as their prices have plummeted. Spreads over Treasurys are now 1591 basis points, versus about 321 basis points in mid 2007.