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Markets At The Beginning Of Something, Or The End?

Monday, 26 Jul 2010 | 5:28 PM ET

Better economic sentiment drove the markets higher on Monday. But how much longer will it continue?

According to Gary Shilling, the president of A Gary Shilling and a self described realist investors shouldn’t get too comfortable.

”I’d go to the sidelines,” he counsels. “I don’t think the second half and into next year we’re going to see great strength in the economy.”

In fact, he feels investors are getting wildly carried away with stronger than expected earnings, which he considers backward looking.

And in their euphoria they have forgotten about all the economic headwinds out there.

Bull Market or BS?
Insight on whether when investors should get short, with Gary Shilling, A. Gary Shilling & Co. president.

Shilling ticks off the following list of economic obstacles:
- No stimulus anymore
- Housing credits are gone
- People are underwater on their mortgages
- No auto rebates like last year
- Europe woes not behind us

Brian Kelly agrees. “When you look at some of the leading economic indicators they’re not just falling, they’re plunging,” he says.

He points to ECRI, an index that’s widely considered a reliable guage of strength and weakness. It’s down to – 10.5%. “In the last 42 years every time that indicator has hit negative 10% we’ve had a recession,” Kelly says.
(That fact is getting a lot of attention lately. David Rosenberg of Gluskin Sheff has said much the same.)

If you fall into this bearish camp camp how should you position?

Shilling is bullish bonds. "We still have a strong position in 30-year bonds . And I’ve cut back my dollar long positions.”


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Trader disclosure: On July 26, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Finerman owns (AAPL); Finerman's firm owns (BP) calls; Finerman's firm owns (PM); Finerman's firm owns (JPM); Finerman owns (JPM); Finerman's firm owns (BAC); Finerman owns (BAC); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (IWM); Finerman's firm is short (SPY); Grasso owns (ASTM), (ABK), (BAC), (BA), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (NDAQ), (PFE), (PRST); Kelly owns (BP) puts; Kelly is short (GS); Terranova owns (AMZN), (EMC), (CREE), (CRCM), (LRCX), (COP), (AXP), (BMO), (CSX), (PEP), (CVS), (GS), (PCP), (C), (GLD), (APA), (FCX), (JOYG), (MMM), (MOS), (GLD), (UAUA), (WYNN), (GOOG), (BBY), (SU), (KOL)

For Steve Grasso
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (IP)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (SYMC)
Stuart Frankel & Co and it’s partners own (TBT)
Stuart Frankel & Co and it’s partners own (TLM)
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Stuart Frankel & Co and it’s partners own (XRX)
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Stuart Frankel & Co and it’s partners are short (QQQQ)

For Brian Kelly
Accounts managed by Kanundrum Capital own (ELX)
Accounts managed by Kanundrum Capital own (QLGC)
Accounts managed by Kanundrum Capital own (BIG)
Accounts managed by Kanundrum Capital own (GME)
Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own (NWL)
Accounts managed by Kanundrum Capital are short (GLD)
Accounts managed by Kanundrum Capital are short (EWO)
Accounts managed by Kanundrum Capital are short (EWI)
Accounts managed by Kanundrum Capital are short the Euro
Accounts managed by Kanundrum Capital are short the UK Pound
Accounts managed by Kanundrum Capital are short (JOE)
Accounts managed by Kanundrum Capital are short (IWM)

For Joe Terranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLP)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)

For Dennis Gartman
Funds Managed by Dennis Gartman Own (FCX), (PCU), (XLB), (IYT)

For Mike Khouw
Cantor Fitzgerald makes a market in (MEE)

For Niamh Alexander
KBW expects to receive or intends to seek compensation for investment banking services from Nasdaq OMX Group in the next three months.
KBW currently makes a market and/or acts as a liquidity provider in Nasdaq OMX Groupsecurities.
KBW expects to receive or intends to seek compensation for investment banking services from CME Group, Inc. in the next three months.
KBW currently makes a market and/or acts as a liquidity provider in CME Group, Inc.securities.
KBW has received compensation for investment banking services from CBOE Holdings, Inc in the past 12 months.
KBW has managed or co-managed a public offering of securities for CBOE Holdings, Inc in the past twelve (12) months.
KBW currently makes a market and/or acts as a liquidity provider in CBOE Holdings, Inc securities.
CBOE Holdings, Inc currently is, or was during the 12-month period preceding the date of distribution of this report, a client of KBW.
KBW expects to receive or intends to seek compensation for investment banking services from Intercontinental Exchange, Inc. in the next three months.
KBW currently makes a market and/or acts as a liquidity provider in Intercontinental Exchange, Inc.securities.
KBW expects to receive or intends to seek compensation for investment banking services from NYSE Euronext in the next three months.
KBW currently makes a market and/or acts as a liquidity provider in NYSE Euronextsecurities.
Keefe, Bruyette & Woods is a member of the New York Stock Exchange.

For Mark Gilman
***No Disclosures***

For Gary Shilling
***No Disclosures***


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