While Gary Shilling doesn’t consider himself a contrarian, but his insights over the past four decades have definitely had a tendency to buck the herd.
Shilling is, of course, the President and Founder of institutional investor consultancy A. Gary Shilling, and the Godfather of the Long-Term Treasury Bond call, which he made back in 1981. He also spotted the housing boom early, back in 2002.
“I don’t consider myself a contrarian. A contrarian is someone who always disagrees with consensus. Where I agree with consensus, I pass over it lightly, but move onto things that have three characteristics.”
Whatever you call him, Shilling is making another contrarian call today. He thinks globalization will continue to be the most deflationary global trend all investors should be looking out for.
“The opening up to global supply is the biggest global event of the last 30 years. We’re no longer in a situation where you worry about just the U.S., Europe and Japan. Now, you worry about — from a supply standpoint — where they’ve basically taken Western technology and slapped it into areas with a disciplined labor force and cheap labor. That’s basically what’s wiped out manufacturing in the West.”
And that’s also why so many people voted for President Trump and the protectionist policies he represents, Shilling says. This nationalistic trend has gone global. The reason why is crystal clear. “You haven't had real income growth in G7 countries for a decade,” he says.
3 Tips For Spotting What Others Miss
Shilling offers advice for analysts looking to spot market calls that other investors miss. The three investing characteristics he looks for in making his market calls are:
- It can’t be trivial: “It has to be meaningful that can’t be revised out in next month’s data revisions.”
- It has a good chance of happening: “Ultimately, you’re judged on your forecasting record.”
- It is not yet in the purview of consensus: “You say not yet because you hope you’re right.”
“If you have those three characteristics, boy, I jump on that with all fours,” he says.
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Click here to watch the entire Shilling interview with Hedgeye CEO Keith McCullough.
