Shilling Sticking to S&P 600 Target, Despite Pressure to Cave

Back in early March when the market was in freefall, many of the hardcore bears like Doug Kass, Barry Ritholtz and Richard Suttmeier flipped to a bullish view. Not so for Gary Shilling, president of A. Gary Shilling & Co., who stuck with his bearish stance here on March 12.

Fast forward to today: despite a 30%-plus rally off the March lows, Shilling is still sticking with a target of 600 for the S&P 500 in 2009. Shilling concedes the rally has been powerful and that he's getting some "flack" from clients about possibly having missed a major turning point.

"It could be the bottom...but in my view there's enough in the way of problems out there that it probably is a bear market rally," Shilling says, citing the following main reasons why he thinks the economy will remain sluggish and the market will suffer another comeuppance this year:

Slowing consumer spending: Today's weaker-than-expected April retail sales report is another reminder of how strapped Americans are in saving vs. spending mode.

Financial deleveraging: There was a lot of "financial fluff" in derivatives, Shilling says, but they did help accelerate the so-called velocity of money. The end of the securitization boom means less easy access to credit and less financial activity from consumers and corporations alike.

End of the commodity boom: Along with stocks, commodity prices have been rising steadily from the March lows (prior to today, that is). But the end of the speculative fever in commodities is going to mean a lot less spending from emerging markets, he says, most notably in the Persian Gulf.

Rise of the Bureaucrats: From higher taxes to the auto industry to today's stories about the Obama administration seeking to control compensation in the banking industry, the government's role in the economy is only increasing. That can't be good for growth, Shilling says, especially as this is a worldwide phenomena

Article and video at - http://finance.yahoo.com/tech-ticker/article/246410/Shilling-Sticking-to-S&P-600-Target-Despite-Pressure-to-Cave;_ylt=AhRHpX3hDY9cqvGLSc3XMBW7YWsA?tickers=%5EDJI,%5EGSPC,SPY,DIA,F,MSFT,XLF