October 23, 2012

Legendary Bear Shilling Full of ‘Bull’—on Investment Advisors

New book reveals some surprises

Is Gary Shilling changing his tune?

In a pleasant surprise (or eighth sign of the apocalypse), Shilling, known best for his bearish take on markets and economies, has a few sectors he actually likes. And one, detailed in his latest book, “The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation,” is raising some eyebrows—the investment advice and financial planning sector.

Gary Shilling“People are deciding that they need help and that ‘do-it-yourself’ hasn’t really worked,” Shilling (left) told AdvisorOne on Monday. “It might have been true in the 1980s and 1990s, when corporations were restructuring, profits were growing exponentially and there was a huge P/E expansion, but that’s no longer the case, and really hasn’t been since 2000.”

The investment play is a “twofer,” Shilling acknowledged, offering education and a firewall against the client's own worst instincts, while at the same time providing the possibility of a positive impact to the investment portfolio.

“By seeking the help of an advisor, the client might be tempered from jumping in at the peak of a bubble,” Shilling said.

But in a flash of the more bearish Shilling, he added, “hopefully, by going to the advisor, it will also result in better returns in the portfolio than they would otherwise have gotten on their own. Everyone’s a great advisor when markets are strong and things are going well. It’s a rare advisor that performs well when things aren’t going all that great.”

As to specific areas of the financial services sector in which clients should invest (wirehouses, large broker-dealers like LPL, etc.) Shilling said advisors and clients should tread carefully and, as always, do their homework.

“If you look at domestic equity mutual funds, you’ve seen massive outflows since 2008,” he explained. “Any sector with that kind of exposure and experiencing those kinds of issues are to be avoided.”

As to the bearish label he’s attracted, Shilling didn’t buy it.

“I’m not a bull and I’m not a bear, I’m a realist,” he concluded with umbrage. “If anyone takes the time to read my latest book [The Age of Deleveraging], they’ll see we have sectors that we like and sectors that we don’t like. We take a look at the current market and simple say, ‘Where can we make money?’”

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