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Gary Shilling: ‘Stocks Are Way Overpriced’

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Gary Shilling, founder of the investment advisory firm A. Gary Shilling & Co., is probably best known for declaring that the U.S. bond market was on the cusp of “the rally of a lifetime” in 1981. The 30-year Treasury bond yield then was 15.2%. Today, it’s near 2%, earning investors about four times the gains they would have collected from the S&P 500 over the past 40 years.

Shilling is a contrarian who has often, though not always, recognized a turn in markets, like the subprime mortgage debacle, well before almost anyone else. For that reason and his in-depth analysis of markets, ThinkAdvisor asked Shilling to participate in a new series in which we ask 10 questions related to financial markets, work and after-work activities. Here are his answers.

1.What market indicator, industry statistic, regulatory change or advisor trend are you watching most closely right now and why?

The lasting impact of the pandemic, Federal Reserve moves and inflation.

2. How has it been changing recently (2021) and how do you expect it to change (2022)?

Inflation has spiked. Now there’s the question of whether inflation expectations will develop. What consumers are expecting in the next five years is important and that hasn’t seen an appreciable change.

3. What would you suggest advisors do now or consider doing in the future about it?

Be cautious. Stocks are way overpriced, given the uncertainty of the outlook and the corporate earnings outlook and an over-dependence on the Federal Reserve’s largess.

4. Who or what critical source of information do you track, or follow online, to keep up with this or other trends?

The Wall Street Journal, government data releases, reports by independent analysts and economists I know and trust. (Asked to name a few, Shilling said Dennis Gartman and Philippa Dunne.)

5. Are you changing any of your work habits at this stage of the pandemic? Why/why not?  


6. What’s your biggest hobby and what was the last event/activity you did related to it?

Beekeeping. I closed up my 70 hives for the winter recently.

7. How about your latest community/charitable activity/event/cause?

I founded the Episcopal Preaching Foundation 34 years ago and I still am its CEO. Our mission is to improve preaching with conferences and other efforts to provide career-long help for preachers. Good preaching helps put life in perspective.

8.  What book are you reading now and why?

History books. (He didn’t provide any names). Human nature changes very slowly, if at all, over time so people react to similar circumstances in similar ways. The aim is to find similarities of today’s events with the past, and then see how those past events played out. I went from being a physicist to an economist. If I was to do it over I would rather be a historian. I’m intrigued by history, learning what happened in the past as a precedent for the future.

9. Any special holiday plan, activity or focus you’d like to share as we near year-end? Or a New Year’s resolution that you’ve decided on?

Nothing unusual. I plan to spend time with family and friends.

10. Any other update/fact about you or piece of advice/wisdom you’d like to share with our advisor audience? 

Remember that most Wall Street wizards are paid to be bullish. Also, the media always sees current events as earth-shattering and doesn’t separate the ephemeral from important trends. The consensus view offers little value added since it is fully discounted in business plans and security markets.