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Presentation
By
A. Gary Shilling, Ph.D.
To
Texas Municipal Retirement System
May 19, 2017
A. Gary Shilling & Co., Inc. 500 Morris Avenue
Springfield, NJ 07081 (973) 467-0070 / Fax (973) 467-1943
Email: gary@agaryshilling.com / www.agaryshilling.com
2007 2008 2010 2011 2013 2014 2016600
800
1000
1200
1400
1600
1800
2000
2200
2400
600
800
1000
1200
1400
1600
1800
2000
2200
2400
S&P 500 Index
Source: Thomson Reuters
Last Point 05/08/17: 2,399.38
Chart 1
Nov-16 Dec-16 Jan-17 Jan-17 Feb-17 Mar-17 Apr-17$2.2
$2.3
$2.4
$2.5
$2.6
$2.7
$2.8
$2.2
$2.3
$2.4
$2.5
$2.6
$2.7
$2.8
Copper PriceUSD/pound; nearest futures contract
Source: Bloomberg
Last Point 05/08/17: $2.49
Chart 2
Nov-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-1718.0
18.5
19.0
19.5
20.0
20.5
21.0
21.5
22.0
97
98
99
100
101
102
103
104
Pesos/USD - left axisU.S. Dollar Index - right axis
Mexican Pesos Per U.S. Dollar and U.S. Dollar Index
Source: Thomson Reuters
Last Points 05/08/17: Pesos/USD, 19.21; USD Index, 99.06
Stro
nger
U.S
. Dol
lar
Stro
nger
U.S
. Dol
lar
Chart 3
Nov-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17820
840
860
880
900
920
940
960
980
1000
151152153154155156157158159160161162
MSCI Emerging Market Stocks Index - left axisBloomberg Emerging Market Bond Index - right axis
Emerging Markets Stocks and Bond Indices
Source: Bloomberg, MSCI
Last Point: 05/08/17: Stocks: 978.27; Bonds: 160.72
Chart 4
Nov-16 Nov-16 Dec-16 Jan-17 Jan-17 Feb-17 Mar-17 Mar-17 Apr-171.6%
1.8%
2.0%
2.2%
2.4%
2.6%
2.8%
3.0%
3.2%
1.6%
1.8%
2.0%
2.2%
2.4%
2.6%
2.8%
3.0%
3.2%
10 Year Treasury Yield30 Year Treasury Yield
10 and 30 Year Treasury Yields
Source: Federal Reserve
Last Points 05/08/17: 10-Yr: 2.39%; 30-Yr: 3.02%
Chart 5
1970 1975 1980 1985 1990 1995 2000 2005 2010 20150.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
Cumulative Number of Federal Restrictionsin millions
Source: The Wall Street Journal; Mercatus Center
Chart 6
1991 1995 1999 2003 2007 2011 2015-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
GermanyJapan
United KingdomUnited States
Real Annual Wagesyear/year percent change
Source: Bloomberg; OECD
Last Points 2016: Ger., 2.9%; Jap., 1.4%; U.K., 1.6%; U.S., 1.0%
Chart 7
1991 1995 1999 2003 2007 2011 2015-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
CanadaFrance
Italy
Real Annual Wagesyear/year percent change
Source: Bloomberg; OECD
Last Points 2016: Can., 1.4%; Fra., 0.9%; Ita., 0.6%
Chart 8
1980 1990 2000 2010 2016-1600
-1400
-1200
-1000
-800
-600
-400
-200
0
200
400
-1600
-1400
-1200
-1000
-800
-600
-400
-200
0
200
400
Federal Budget Balancebillion USD
Source: Congressional Budget Office
Last Point 2016: -$587
Chart 9
Real GDP Growth During Expansionsannualized rates of expansion from NBER trough-to-peak
*Through 1Q 2017Source: BEA; NBER
7.6%
4.0%
5.6%4.9% 5.1%
4.3% 4.4% 4.3%3.6%
2.8%2.1%*
1950 1954 1958 1961 1971 1975 1980 1983 1991 2002 20090%
1%
2%
3%
4%
5%
6%
7%
8%
0%
1%
2%
3%
4%
5%
6%
7%
8%
Recession Start Date
Chart 10
1990 1995 2000 2005 2010 201510%
15%
20%
25%
30%
35%
40%
10%
15%
20%
25%
30%
35%
40%
China Exports of Goods and Servicesas % share of GDP
Source: The World Bank
Last Point 2015: 22.1%
Chart 11
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 20144%
6%
8%
10%
12%
14%
16%
4%
6%
8%
10%
12%
14%
16%
Chinese Real Gross Domestic Productyear/year percent change
Last Point 1Q 2017: 6.9%
Source: Bloomberg; Chinese National Bureau of Statistics
Chart 12
1947 1955 1963 1972 1980 1988 1997 2005 201311
12
13
14
15
16
17
18
19
20
5%
10%
15%
20%
25%
30%
35%
Level (millions of employees) - left axisShare of Total Nonfarm Payrolls - right axis
Manufacturing Payroll Employmentlevel and share of total
Source: Bureau of Labor Statistics
Last Points April 2017 - Level: 12.40, Share: 8.49%
Chart 13
Fertility and Life Expectancy Rates Fertility Rates Life Expectancy Rates 2014 estimate Total Pop. Women Men
Japan 1.4 84.46 87.99 81.13 Australia 1.77 80.17 83.24 77.25
Italy 1.42 82.03 84.82 79.4 Canada 1.59 81.67 84.42 79.07 France 2.08 81.66 84.91 78.55 Spain 1.48 81.47 84.67 78.47
Netherlands 1.78 81.12 83.34 79.02 Germany 1.43 80.44 82.86 78.15
U.K. 1.9 80.42 82.69 78.26 Eurozone 1.55 81.5 84.1 78.7
South Korea 1.25 79.8 83.13 76.67 U.S. 2.01 79.56 81.94 77.11
China 1.55 75.15 77.43 73.09 Brazil 1.79 73.28 77 69.73 Russia 1.61 70.16 76.3 64.37 India 2.51 67.8 69.06 66.68
Source: CIA and eurostat
Chart 14
Working Age Population
15-64 year olds as a share of the total population
Canada France Germany Italy Japan UK USA China
1960 59.0% 62.0% 67.2% 65.5% 64.1% 64.9% 60.0% 56.4%
1990 68.0% 65.9% 69.1% 68.6% 69.7% 65.3% 65.8% 66.0%
2010 69.5% 64.8% 66.1% 65.6% 64.0% 66.0% 66.9% 72.4%
2030 60.7% 59.4% 58.2% 60.3% 57.3% 61.3% 61.0% 68.9%
2040 59.7% 57.7% 55.2% 55.0% 53.4% 59.7% 60.3% 63.1%
Source: United Nations
Chart 15
G-7 and BRIC Population and Projections; Millions
2017 2025 2050 Japan 126.0 122.8 107.4
United Kingdom 65.5 68.5 75.4 France 64.9 66.9 71.1
Germany 80.6 80.0 74.5 Italy 59.8 59.5 56.5
Canada 36.6 39.1 44.1 United States 326.5 345.1 388.9
China 1,388.2 1,414.9 1,348.1 India 1,342.5 1,461.6 1,705.3
Russian Federation 143.4 141.2 128.6
Brazil 211.2 223.0 238.3 Source: United Nations
Chart 16
1955 1963 1971 1979 1987 1995 2003 2011 2019-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Japanese Populationyear/year percent change
Source: Japanese Statistics Bureau
Projected
Chart 17
G7 Labor Force Participation Rates
Female Male Total
Canada 61% 71% 66%
U.S. 56% 69% 62%
U.K. 56% 69% 62%
Germany 54% 66% 60%
France 51% 61% 56%
Japan 49% 70% 59%
Italy 40% 60% 49%
Source: The World Bank
Chart 18
1980 1990 2000 2010 2020 2050120
140
160
180
200
220
240
260
120
140
160
180
200
220
240
260
Chinese Population Aged 15-24millions
*Projections start after 2015Source: United Nations
Projected
Chart 19
Productivity in the U.S. Nonfarm Business Sector avg. annual growth rate by decade
NBER BLS 1901-1910 2.34% na 1911-1920 2.64% na 1921-1930 2.07% na 1931-1940 2.39% na 1941-1950 2.46% na 1951-1960 2.28% 2.14% 1961-1970 2.49% 2.71% 1971-1980 na 1.45% 1981-1990 na 1.61% 1991-2000 na 2.18% 2001-2010 na 2.36% 2011-2016 na 0.53%
Chart 20
1948 1956 1964 1973 1981 1989 1998 2006 201455%
60%
65%
70%
75%
80%
85%
90%
30%
35%
40%
45%
50%
55%
60%
65%
Male - left axisTotal - left axisFemale - right axis
Labor Force Participation Rateseasonally-adjusted
Source: Bureau of Labor Statistics
Last Points April 2017 - Male, 69.2%; Total, 62.9%; Female, 57.0%
Chart 21
1948 1955 1963 1970 1978 1985 1993 2000 2008 201550%
55%
60%
65%
70%
75%
80%
85%
90%
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
16 - 24 - left axis25 - 54 - left axis
55 - 64 - left axis65+ - right axis
Labor Force Participation Rateby age group; seasonally-adjusted
Source: Bureau of Labor Statistics
Last Points April 2017: 16-24, 55.9%; 25-54, 81.7%; 55-64, 64.5%; 65+, 19.7%
Chart 22
1997 1999 2002 2004 2007 2009 2012 201411%
12%
13%
14%
15%
16%
17%
11%
12%
13%
14%
15%
16%
17%
United States Manufacturing Value Addedas % share of GDP
Source: Bureau of Economic Analysis; The World Bank
Last Point 4Q 2016: 11.6%
Chart 23
Jan-07 Sep-08 May-10 Jan-12 Sep-13 May-15 Jan-17-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Chinese Exports year/year percent change
Source: China General Administration of Customs
Last Point April 2017: 8.0%
Chart 24
2004 2006 2008 2010 2012 2014 2016150%160%170%180%190%200%210%220%230%240%250%260%
150%160%170%180%190%200%210%220%230%240%250%260%
Chinese Total Debt as a Share of GDPincludes corporate, household, government and bank debt
Source: Bloomberg
Last Point 2016: 257.6%
Chart 25
G7 and BRIC Gross Domestic Product Per Capita: 2015thousand USD
Source: The World Bank
56.12
43.88 43.25 41.3136.21
32.4829.96
9.09 8.54 8.03
1.60
U.S. U.K.
Canada
GermanyFrance
Japan ItalyRussia
BrazilChina
India0
10
20
30
40
50
60
0
10
20
30
40
50
60
Chart 26
G7 and BRIC Personal Consumption to GDP Ratio: 2015
68.1%
65.1%
63.4%
61.0%
59.6%
58.6%
57.5%
55.1%
53.9%
51.9%
37.0%
30% 35% 40% 45% 50% 55% 60% 65% 70% 75%
U.S.
U.K.
Brazil
Italy
India
Japan
Canada
France
Germany
Russia
China
Source: The World Bank
Chart 27
PCE Deflator seasonally-adjusted
Source: Bureau of Economic Analysis
Last Points March 2017 - M/M: -0.2%; Yr/Yr: 1.8%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
-9.0%
-6.0%
-3.0%
0.0%
3.0%
6.0%
Month/Month % Change - left axisYear/Year % Change - right axis
Fed Target: 2.0%
Chart 28
Historic Inflation and Deflation
Period Military Engagement No. of Years Annualized Wholesale Price Change
1749-1755 Peacetime 6 -0.50% 1756-1763 French-Indian War 8 2.27% 1764-1774 Peacetime 11 -0.35% 1775-1783 American Revolution 9 12.31% 1784-1811 Peacetime 28 -1.91% 1812-1815 War of 1812 4 7.78% 1816-1845 Peacetime 30 -2.36% 1846-1848 Mexican-American War 3 -0.40% 1849-1860 Peacetime 12 1.05% 1861-1865 Civil War 5 14.75% 1866-1916 Peacetime 51 -0.74% 1917-1918 World War I 2 23.92% 1919-1940 Peacetime 22 -2.31% 1941-1945 World War II 5 6.12% 1946-1992 Cold War 47 4.20% 1992-2000 Peacetime 8 1.43% 2001-2014 War on Terror 13 2.81%
2015 - Q4 2016 Peacetime 2 1.48%
No. of Years Avg. Price Change Wartime: 96 8.20% Peacetime: 170 -0.47% Total: 266 3.86%
Chart 29
1994 1997 2000 2004 2007 2011 2014100
150
200
250
300
350
400
450
500
100
150
200
250
300
350
400
450
500
Reuters/Jefferies CRB Index
Source:Thomson Reuters
Last Point 05/08/17: 179.69
Chart 30
1774 1814 1854 1894 1934 1974 20140
200
400
600
800
1000
1200
1400
0
200
400
600
800
1000
1200
1400
Real U.S. Commodity PricesCRB Index Deflated by CPI
Source: Bianco Research, Bureau of Labor Statistics, Historical Statistics of the United States
Last Point March 2017: 75.96
Chart 31
2007 2008 2010 2012 2013 2015 2017-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Consumer Price Index Services Index
Durable Goods Index
Consumer Price Indexes year/year percent change
Source: Bureau of Labor Statistics
Last Points March 2017: CPI 2.4%, Services 2.9%; Durable Goods -2.0%
Chart 32
Dec-13 May-14 Oct-14 Mar-15 Jul-15 Dec-15 May-16 Sep-16 Feb-1720
30
40
50
60
70
80
90
100
110
120
20
30
40
50
60
70
80
90
100
110
120
Brent Crude OilWTI Crude Oil
Brent and WTI Crude Oil Pricesdollars per barrel; nearest futures contracts
Source: Thomson Reuters
Last Points 05/08/17- Brent: $49.34; WTI: $46.29
Chart 33
2000 2004 2008 2012 20162%
3%
4%
5%
6%
7%
8%
9%
10%
11%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
Nonstore Retailers Department Stores
Department and Nonstore Retail Salesas percent share of total retail sales
Source: U.S. Cenusus Bureau
Last Points March 2017: Nonstore, 10.6%; Department Stores, 2.7%
Chart 34
1999 2003 2007 2011 20152%
3%
4%
5%
6%
7%
8%
2%
3%
4%
5%
6%
7%
8%
CPI : Tuition, School Fees, Childcareyear/year percent change
Source: Bureau of Labor Statistics
Last Point March 2017: 2.4%
Chart 35
The Vanguard Groupassets under management; trillion USD
Source: AdvisoryHQ
Last Point 2016: $3.6
1975 1979 1983 1987 1991 1995 1999 2003 2007 20110.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Chart 36
2007 2008 2010 2012 2013 2015 2017-4%
-2%
0%
2%
4%
6%
8%
-4%
-2%
0%
2%
4%
6%
8%
HomeAway From Home Source: Bureau of Labor Statistics
Last Points March 2017: Home -0.86%; Away 2.12%
CPI: Food at Home and Food Away From Homeyear/year percent change
Chart 37
1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 20140%
2%
4%
6%
8%
10%
12%
14%
16%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
20 Year Treasury Yield - left axisConsumer Price Index (Yr/Yr % Change) - right axis
20-Year Treasury Yield and Consumer Price Index
Last Points March 2017: CPI, 2.4%; Yield, 2.62%
Source: Federal Reserve Board; Bureau of Labor Statistics
Chart 38
2007 2008 2010 2012 2014 20160%
1%
2%
3%
4%
5%
6%
0%
1%
2%
3%
4%
5%
6%
FED Funds Target Rate
Source: The Federal Reserve
Last Point 05/08/17: 0.87%
Chart 39
Nov-81 Nov-86 Nov-91 Nov-96 Nov-01 Nov-06 Nov-11 Nov-160
5000
10000
15000
20000
25000
30000
35000
0
5000
10000
15000
20000
25000
30000
35000
25 Year Zero Coupon Bond (Oct-81=100) 27,165 or 17.1% Annual ReturnS&P 500 Total Return (July-82=100) 5,338 or 12.1% Annual Return
Comparative Stock and Bond Performances
Last Points April 2017: Bonds, 27,165.0; Stocks, 5,338.2
Source: Bianco Research; Haver Analytics
Chart 40
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