Super Bull Versus Super Bear

In this edition of 2013 outlooks I bring you a super bull and a super bear.  In the super bull corner is Ken Fisher, founder of Fisher Investments and well known permabull.  In the bear corner is Gary Shilling of A Gary Shilling & Associates.  Shilling famously predicted the housing bust and has been very bullish on government bonds for decades.   These views come via Money & Markets:

Ken Fisher, Mega Bullish for 2013:  US and global stocks will be up big in 2013—more than most expect—with the biggest global stocks (what I call “mega caps”) leading. We’re in the bull market’s latter stages—when the biggest, best known global stocks typically lead.

But doesn’t all the news seem so bad? Most negatives you hear endlessly now are so long and widely known, their impact is already priced into stocks. That’s basic to how markets work. Widely circulated “news” is either wrong or pre-priced into securities. Europe, Obama-noia,  excess debt, the  “fiscal cliff”?  All very old news. The only people who don’t know about the fiscal cliff are in the Upper Amazon basin long fleeing humanity.

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Gary Shilling on 2013:  A grand disconnect has developed between weak and weakening economies worldwide and optimistic investors hooked on continuing massive monetary and fiscal stimuli. The U.K. and the eurozone are in recession, the U.S. economy continues to be at risk and a hard landing is unfolding in China. Softness in these three paramount areas is dragging down the rest of the world’s economies.

Treasury bonds (favorable): The rally in Treasuries resumed in March as a safe haven in a sea of trouble and in response to slowing economic growth and looming global recession. The likelihood that inflation fears will turn soon to deflation worries also helped. The yield on 30-year Treasuries actually reached our 2.5% target, the 2008 post-Lehman low, in early June. A 2.0% yield is possible as economic and financial conditions deteriorate.

Developed country stocks (unfavorable) With a hard landing in China and the resulting negative effects on commodity exporters, a major recession in Europe and a strong dollar, earnings of U.S. multinationals will be hurt. A moderate recession in the U.S. will also damage corporate profits despite more cost-cutting in response. We look for $80 per share in S&P 500 operating earnings over a coming four-quarter period and a bottom P/E of 10.