How Profitable Has Following the Conventional Wisdom Been for You?
 
 

What kind of financial and economic information do you use in planning your investments? Is it unique or simply more of the same? How much of the information you get simply follows the consensus? How profitable has relying on the herd in recent years been to you? We think it's time for a new voice, one that is fiercely independent.

We think that voice is respected columnist, economist and stock market forecaster Gary Shilling. In the January 2007 issue of his monthly Insight newsletter, editor and Forbes magazine columnist Gary Shilling laid out 12 investment themes for 2007. Two of them have already happened. In the coming months six of them are likely while four others may take a while longer to unfold. What they're not is just a rehash of what most Wall Street analysts, economic forecasters and other cheerleaders are saying. All 12 are contrarian to the core and, therefore, could help you reap significant financial rewards when the Wall Street and other investors are caught off-guard.

Gary Shilling’s 12 Investment Themes

  1. The housing bubble has burst

  2. The Fed will ease; meanwhile, the yield curve will remain flat or inverted

  3. U.S. stock prices will fall, perhaps below the 2002 lows, in the midst of a major recession

  4. China will suffer a hard landing due to domestic cooling measures and U.S. recession

  5. Weakness in the U.S. and China will spread globally, dragging down economies and stocks worldwide

  6. Treasury bonds will rally

  7. The dollar will rally, but not before the recession is global

  8. Commodity prices will nosedive

  9. Maybe global and chronic deflation will commence in

  10. Maybe U.S. consumers will start a long-run saving spree, replacing their 25-year borrowing and spending binge

  11. Maybe deflationary expectations will become widespread and robust

  12. Speculative areas beyond housing may suffer in 2008.

You can find out more about these 12 themes when you subscribe to Gary Shilling's Insight. But, first, ask yourself if you’ve read much about them. Are the brokers and television analysts who constantly parrot the "conventional wisdom" paying serious attention to any of them? Probably not. Gary looks for hidden investment opportunities, which often means going against the conventional wisdom. And when you learn more about Gary's credentials and his track record, you will realize that everyone who doesn't pay attention to what he says might end up with some serious egg on their faces.

Gary has twice been ranked as Wall Street’s top economist by polls in Institutional Investor; he was also named the country’s number one Commodity Trader Advisor by Futures magazine. And in 2003, MoneySense ranked him as the 3rd best stock market forecaster, right behind Warren Buffett. He also challenges the consensus in appearances on CNBC.

Gary also has a long-standing reputation for independent thought...and for getting it right. Back in 1969, he correctly predicted, to the surprise of many, the 1969-1970 recession. In the early 1970s, he stood alone in predicting the severe 1973-1975 global recession. In the late 1970s, when double-digit inflation was raging, Gary was nearly unique in forecasting dwindling inflation rates as well as the wonderful stock and bond markets that lay ahead.

Gary has been running away from the herd for years, and he’s been nearly alone in making some early, and accurate, calls:

  • In early 1999, in the midst of the Internet stock boom, Gary Shilling was nearly alone in warning of a collapse in tech stocks. In January 2000, with stocks still strong, Gary Shilling said a major bear market was at hand. In November 2000, he foresaw total declines of 30%-40% in the Dow Industrials, 40%-50% in the S&P 500 and 70%-80% in the Nasdaq—right on target with the overall decline of 35% in the Dow, 49% in the S&P and 78% in the Nasdaq.

  • Unlike the near-unanimous consensus forecast, Gary Shilling correctly predicted that Treasury bond yields would decline in 2004.

  • Gary has pointed out to Insight readers that despite investors’ affection for stocks in the 1980s and 1990s, bonds, especially zero-coupon Treasuries, far outperformed stocks—throughout the long 18-year bull market of 1982-2000 and during the 2000-2002 bear market.

  • He has been nearly alone for years in seeing increasing signs of mild, good deflation driven by new tech-inspired productivity advances and excess supply, not the 1930s-style bad deflation of deficient demand that scares the Fed and the few others who also foresee deflation.

  • Last year, as oil prices skyrocketed and many feared a return to 1970s-style inflation, Gary noted that energy is less important to the economy than in past oil shocks and, as a result, an inflationary surge was unlikely, especially in a highly competitive global world.

Wouldn’t you have benefited from such insights? Gary Shilling's Insight readers were not only well-prepared when the bad news began to unfold, but were also equipped to make money while others suffered.

Each month’s information-packed issue of Gary Shilling's Insight contains:

  • In-depth analyses of current economic, political and financial trends and how they affect the investment world.

  • A look at our specific investment themes that are derived from our overview, like our positive views on healthcare productivity enhancers, Treasury bonds, dividend-paying stocks and the dollar as well as our negative stances on consumer discretionary spending, subprime lenders and conventional homebuilders.

  • Charts, graphs and data on all of the relevant indicators.

  • Gary's famous back page Commentary on matters great and small, complex and mundane, serious and frivolous.

Our Guarantee to You

Gary Shilling's Insight is not a "tip sheet." We don’t guarantee 1000% returns. We provide a serious and sober examination of macro forces such as Fed policy, global competition in goods and services, and U.S. consumer attitudes—and their effects on the U.S. and foreign economies and financial markets.

With Gary Shilling's Insight, you’ll be able to understand how these forces affect your investment decisions. We bring you independent, informed, carefully-researched economic analysis and investment advice—not just more of the same old melodies from the chorus of the consensus or perennially bullish and perennially biased Wall Street analysts.
 

         

  Meet our Forbes Guru: A. Gary Shilling

Dr. Shilling is the President of A. Gary Shilling & Co., Inc. He received his bachelor’s degree in physics, magna cum laude, from Amherst College, where he was also elected to Phi Beta Kappa and Sigma Xi. Earlier, as a high school senior, he ranked 12th in the nation in the Westinghouse Science Talent Search. Dr. Shilling earned his master’s degree and doctorate in economics at Stanford University. While on the West Coast, he served on the staffs of the Federal Reserve Bank of San Francisco and the Bank of America.

Before establishing his own firm in 1978, Dr. Shilling was Senior Vice President and Chief Economist of White, Weld & Co., Inc. Earlier, he set up the Economics Department at Merrill Lynch, Pierce, Fenner & Smith at age 29, and served as the firm’s first chief economist. Prior to Merrill Lynch, he was with Standard Oil Co. (N.J.) (now Exxon), where he was in charge of U.S. and Canadian economic analysis and forecasting.

A frequent contributor to the financial press, he is a regular columnist for Forbes magazine and his articles appear in The Wall Street Journal and The New York Times, among others. He is a member of The Nihon Keizai Shimbun (Japan Economic Journal) Board of Economists. He appears frequently on radio and television business shows. Recognized as an effective and dynamic speaker, he often addresses national and international conventions of various business groups, including the Young Presidents Organization.

Dr. Shilling has published numerous articles on the business outlook and techniques of economic analysis and forecasting, and he serves as Associate Editor of Business Economics, the journal of the National Association of Business Economists. His first book, Is Inflation Ending? Are You Ready?, was published by McGraw-Hill in early 1983. His fourth book, Deflation: Why it’s coming, whether it’s good or bad, and how it will affect your investments, business and personal affairs, was published in June 1998 and has been translated in China and Korea. In 1999, McGraw-Hill published Deflation: How to survive and thrive in the coming wave of deflation, which was translated for readers in China. He is also the creator of The Deflation Game, a board game that illustrates and reinforces his long-term forecast that deflation is a greater threat than a return to high inflation.

Dr. Shilling does not yet manage any mutual funds, but CNBC anchor Bill Griffeth was so impressed with his investment approach that he profiled him along with 19 well-known mutual fund managers in his book, The Mutual Fund Masters (Probus Publishing, 1995).

Dr. Shilling is well known for his forecasting record. In the spring of 1969, he was among the few who correctly saw that a recession would start late in the year. In 1973, he stood almost alone in forecasting that the world was entering a massive inventory-building spree to be followed by the first major worldwide recession since the 1930s. In the late 1970s, when most thought that raging inflation would last forever, he was the first to predict that the changing political mood of the country would lead to an end of severe inflation, as well as to potentially serious financial and economic readjustment problems, and a shift in investment strategy from one favoring tangible assets to an emphasis on stocks and bonds.

The July 5, 1991 edition of The Wall Street Journal stated, "Mr. Shilling was one of the few analysts a year ago to forecast a recession. At that time, he said a recession ‘may already have started,’ a forecast that now looks prophetic."

The January 22, 1993 edition reviewed the track records of interest rate forecasters polled semiannually by the Journal since 1981 and said, "The economist with by far...the best record in picking when to buy long-term bonds: A. Gary Shilling, who heads an economic consulting firm and manages money. During the 1980s, Mr. Shilling...saw sharply lower interest rates ahead. ...investors who bet on his rate forecasts by putting their money in long-term bonds did very well."

The July 7, 1997 edition stated that "Mr. Shilling...had the best overall forecast" of the economy, interest rates, exchange rates and inflation "among the...57 economists polled in the latest survey."

The January 2, 2003 edition, in reviewing the forecasts of its poll taken six month earlier, stated, "In June, only one forecaster...Gary Shilling, expected the Fed to cut short-term interest rates in the second half, as it did in November....Only one forecaster, again Mr. Shilling, expected the Dow Jones Industrial Average to finish the year below 9000. Twenty-seven of the 55 saw it finishing the year above 10,000." (It finished at 8342.)

Twice, a poll of financial institutions conducted by Institutional Investor magazine ranked Dr. Shilling as Wall Street’s top economist. Futures magazine also ranked him the country’s number one Commodity Trading Advisor.

Dr. Shilling is on the Board of Directors of National Life of Vermont, the American Productivity and Quality Center, Palm Harbor Homes, and the Episcopal Preaching Foundation, Inc., of which he is Chairman; an Advisory Director of Austin Trust Company; and Chairman of the New Jersey State Revenue Forecasting Advisory Commission. He is a former Director of the American Republic Life Insurance Co. of N.Y., the Henry H. Kessler Foundation, Inc. and Aim Packaging; a former Chairman and Trustee of the New Jersey Shakespeare Festival; a former Trustee of Bates College; and a former Trustee and the Treasurer of the General Theological Seminary (Episcopal). Dr. Shilling was a member of the National Commission on Jobs and Small Business. He also was an informal economic advisor to former President George Bush and an Executive-in-Residence at the Amos Tuck School of Business Administration, Dartmouth College. He has testified before various Congressional committees, including the Joint Economic Committee and the House Committee on Banking. He is also an avid beekeeper.
 



 
 

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