Legendary Economist Warns 2026 Downturn Could Trigger 30% Market Crash | Gary Shilling
Summary
Market Outlook: The guest argues sentiment is euphoric with little earnings or macro support, expecting downside in equities and a potential deep recession into 2026.
Safe Havens: He recommends a defensive stance with a preference to be long U.S. Treasuries, citing their safe-haven appeal despite near-term rate uncertainty.
Regional Positioning: He is bullish on India over China due to favorable demographics, tech orientation, and legal framework, while highlighting China’s property bust, export dependence, and demographic headwinds.
Agriculture Trade Angle: Expects U.S.–China talks to prioritize agricultural purchases, especially soybeans, suggesting a tactical long in agricultural commodities.
Equity Stance: Advises being out of stocks or potentially short major indices, noting speculation is overdone and risks are skewed to the downside.
Sector Implications: Emphasizes the rising importance of Information Technology globally, reinforcing India’s advantage versus China’s manufacturing focus.
Economic Risks: Warns that a pullback in high-income consumer spending and a shock to speculative areas could catalyze broader market weakness.
Overall Strategy: Maintain a risk-off posture, prioritize safe assets, and be selective with macro-driven opportunities.
Transcript
This is a risk off kind of environment. There's many uh investors and and even more speculators who think things are going to the moon. What is there that's solid that is accounting for the exuberance in stocks? And you really can't find anything. Sorry, what do what do you mean you really can't buy anything right now? Our next guest is Gary Shilling, president of A. Gary Shilling and Co. Gary is a legendary economist having a track record of prescient calls, including the 1969 recession, 2008 financial crisis, and the 1970s inflationary era. And now, he's calling for a deep recession to hit in 2026. He's known on Wall Street for his contrarian calls and forecasts, and in today's episode, he's going to explain why he's particularly contrarian today, being bearish while markets are euphoric. Gary set up Merrill Lynch's economics department and served as its first chief economist. You can watch Gary's last interview with me in the link down below. And as always, if you haven't subscribed yet to this channel, hit the like and subscribe button for daily updates on markets and the economy with top traders, investors, and economists, and more. This video is sponsored by Kalshi, the largest prediction market in the United States. Unlike a sports book, you're trading peer-to-peer on real-world events from economic data to political outcomes, and the price moves based on public opinion, not a house. Go to the link in the description and use code LIN l i n. New users will get $10 when they trade $10. For example, you can trade right now on which deal Trump is likely to announce as part of his China trip, which we'll discuss with Gary today. Welcome back to the show, Gary, an honor to host you as always. Thanks for being here. Glad to be with you again. There's several facets um of markets that are interesting to investors right now, among which is one of the most pronounced rallies since the markets bottomed or I guess trothed. I wouldn't say bottomed, but trothed about 6 weeks ago. Gary, the the S&P is up 15% since mid since basically just a few weeks ago. This level of movement and the speed at which it's recovering from a sell-off after the rent war broke out. Is this normal? After geopolitical, you know, we we talk about corrections mean reverting, but, uh, the speed at which it mean reverts and then surpasses previous all-time highs. What does this look like to you? You have to recognize that they today's communication uh, things happen instantly. And and the idea that that uh, what what's happening now is not going to hit the the media and the general populace for days weeks, months that's that's no longer the case. Um, so you have a situation of where um, where markets move very swiftly and in reaction, really in anticipation of of actions and uh, so it it makes it very very difficult to know what what's what's going to happen next because it's it's it's so much uh, anticipation and and uh, and has has to be laid out and a lot of times it it isn't laid out ahead of time the way it's going to unfold in in actual in actual in actual fact and that that complicates the situation but uh I think we're we're in in a situation now where it's going to be a lot of uncertainty that's going to continue to unfold and surprises are probably to be expected Would you characterize market sentiment right now as being euphoric or normal? By normal I mean just a standard part of the S&P's life cycle. Meaning if you take a look at the markets history >> Oh oh I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I think they're very much on the upside uh very much at the upper end of the spec of the spectrum and and uh but the risk is is definitely down from here because you you you you look at it and you say what what is really supporting stocks uh well it isn't consumers consumers are if anything retrenching it isn't capital spending um it isn't a big trade bonanza that's definitely not the case uh I mean you you just go through the whole the whole spectrum and try to try going what What is there that's solid that is accounting for the exuberance in stocks?" And you really can't find anything. Sorry, what do you What do you mean you really can't buy anything right now? Everything looks overvalued to you? You don't You don't have any major major courses that are are are going to support stock. And and And obviously earnings. You know, you you've got to have You've got to have support for earnings and have stocks uh respond on any long-term basis and and be solidly based. And you just don't have that. Let's talk about what's going on right now in Beijing. So, as we speak, Trump and a host of CEOs are meeting with Xi Jinping and his administration. Xi reportedly told Elon Musk and other CEOs that China will open wider for their companies. Now, if China does make more business deals with the US, what does that mean for markets? Well, China has got plenty of problems and and and probably the biggest one is their collapse in their property market, uh which is not going to is not going away. And the government [clears throat] the government is not uh all that interested in supporting property prices. Uh so, that continues to be a a real drain on the Chinese economy. And uh unless they unless the government decides uh to bail out real estate in a massive way, that problem is going to continue. And the government really doesn't doesn't believe in um consumer spending. Um and and uh I would say they they're much more interested in capital investments and productivity enhancements and exports. Well, if you heard us all this stuff, what do you do with it? Yeah, export it. Um hurting the domestic demand. And and it and it and it gives a very precariously balanced economy. Uh and I don't the Chinese leaders um they this seems to be what they want. Um they don't really care that much about consumer spending. Um And of course I'm sure they look on us and say we're um the US is is absolutely going haywire the other way and emphasizing consumer spending and and uh and backing it uh in all in all sorts of ways, but um we you know, I think the Chinese have a very different view of the world and from their standpoint uh their their economy is is is doing pretty much what they want to do. Which country, the US or China, has more to gain from an immediate stop to the Iran war? Do you think? Well, um probably the US. Um and I say probably because it is you know it's it's a complicated issue and very good question, but um um you know China is is being financed by export. You you look at what's what's driving the economy the Chinese economy and it's basically export. Um Mhm. And and if if if uh if you had a rapid termination of hostilities um I I think I think that would be very very difficult for the Chinese to adapt um to that very quickly. Well, this is from uh this is this is what investors are looking at right now. What will Trump announce as part of his China trip? This is from Caucasians, a prediction market in the US, the largest prediction market in the US. And um investors have several trades that they're looking at either uh the Chinese and the Americans will make a deal regarding soybean purchases, US oil purchases, uh aircraft purchases, rare earth export extensions, um or reduction in the tariffs. Which do you think or what do you think is the most likely outcome from a high-level meeting between Trump and a host of American CEOs and China's Xi Jinping? Well, probably um um With all the lot of you've got listed there, but but I think the the agricultural purchases and soybeans first and foremost, but I think that's probably the most sensitive area and the one where the US has got plenty of supply and the Chinese have the basic demand. So, I think that's the one that's probably most likely to to see to see considerable actions and agreements. So, would you be would you be long agricultural products in anticipation of you know, a deal to be made in the sector? Yeah, I you know, it's one of these deals where they they'll probably you know, they want to announce a number of of deals, if you will. And you say, "Well, which are the important ones?" And I think the agricultural products are probably the most significant. Um >> Mhm. Um Yeah. of of all the issues. Now, you have said that a 20 to 30% correction is normal by historic standards. Right. Um normal in what context? In the context of a bull market where you have pullbacks of that magnitude or in the context of a recession hitting the economy in which a 30% correction is inevitable? Yeah, I think it's the latter. Okay. Yeah, I mean there just isn't a lot of basic support for the economy. US economy as I mentioned earlier in our conversation. And uh as a result I I think we're very like very likely to have a considerable recession and sell off in in stocks. You know. You know, the whole the whole accompanying apparatus that comes with a weakening economy and recession. Well, what would you as an investor do with that kind of outlook? Would you sell everything? Um well, if you look at uh you know, we we have a in our monthly Mhm. in our monthly publication called Insight Mhm. we have a we have a recommended list of investments. And you know, what what what you buy, what you sell. And and uh we think that this is a this is a risk off kind of environment. Uh now that's not a very popular belief right now because there's many uh investors and and even more speculators who think things are going to the moon. Uh and maybe you'll get there before the astronauts do. Uh but uh we'll I I think the I I think the uh I I I I I I I think the speculation is uh really overdone in terms of euphoria uh for the economy. And what that means for um particularly particularly the stock market. You are legendary for having called several big recessions in the past. In fact, I believe if I I'm give if I'm getting my history correct, you've been let go from Merrill Lynch because you've been bearish and accurately so. And uh you've called the um recession in 1969. You've called the end of uh the 1970s inflationary era. And you've warned in 2006 that there's a housing bubble. And you've been twice named Wall Street's top economist by institutional investors for some of these calls and much more. What does this year look like? You know, sorry, let me rephrase that question. How does this year compare to prior recessionary periods? How does this compare to 2008? How does this compare to 1969? And people warned us of inflationary pressures from the oil shock. How does this compare to the end of the '70s when OPEC's oil shock impacted um oil prices and inflation? Can you draw any historical parallels to what we're seeing today, Gary? Well, there always there always differences, but uh I I I think we have many of the characteristics uh of of uh overdone speculation, which is the prelude to major um bear markets and stocks and um recessions. Right, there was I mean you know, there they're never history never repeats itself, but um I think Mark Twain said it doesn't repeat, but it rhymes." Uh and and uh that's that's what I think you have now. Uh it isn't it isn't a uh it isn't a a line by line repeat. What what it is it is resembling it and and uh there's there's a lot of been a lot of speculation. Um you know, and you you know, there's a lot of money floating around out there. And where is it going? It's it's going into speculations. Mhm. And and uh overwhelmingly, I think that's that's very risky. When this recession does eventually hit, Gary, where in the economy where we see it first? In the credit market? In consumer spending slowing down? Or do you think that a stock market crash would lead to consumer spending less because the wealthy would have less money to spend after their wealth takes a hit? Yeah, well, the the latter uh of of of the possibilities you just outlined is is certainly very inviting. It it's it's it's concrete. Um see the idea that the economy has been supported by spending spending by people who have money. And and and and uh if if they if they decide to stop spending for whatever reason, uh the economy is in big trouble. So, that's that's the most That's easiest one to identify, but looking for the easiest one is a lot of times not not the correct one. The easy ones are are the ones that are Mhm. So, uh are Trump trying hiding what's really happening, but but you know, you could get I I I think there's probably some kind of shock there that uh we could see whether this is a major fraction in stocks. Um Is it Is it uh Is it a problem with uh speculation that we've seen in a lot of areas? Uh dot-com area. Um Given that we now have a more risk-off posture and that risks are skewed to the down to the downside, Gary. The question is where do we hide? How do you feel about Treasuries? The uh 10-year yield closed at 4.46% yesterday. It hit a 2026 high of 4.48 in March. Are Treasuries a place to go? >> I I I I mentioned earlier our monthly newsletter, uh which we label Insight, uh gives a a um a um recommended list of of uh investment ideas every month. And and we're suggesting that uh investors be um should be very cautious and and really take a defensive posture and that means being long treasury bonds being out of stocks or possibly short major stock indices and being uh very very cautious about other other investments. Right. So so are Do are you still Would would would you still be long treasuries uh in this environment especially now that some people are saying that the market is pricing in the possibility of rate hikes not cuts? Yeah, that that's a that's a good question because you know, if we're if we're having this conversation couple [clears throat] of weeks ago Uh-huh. it would have been a lot more tilted toward being long treasury bonds. Uh now it's it's less it's less certain if that's the proper way to address the future. But um you know, you say what are the alternatives? And I I I I still think that the safe haven effect of treasuries is ultimately going to be very important. Would you go overseas, Gary? I believe in one of your recent pieces you addressed how India may be a bigger growth engine than China. Yeah, well we're we've been um we've been very positive on India. And particularly India versus China. India has a lot of advantages over over China. It It has no limits on population growth. Um it's uh uh it has a the Indians are very good at technology. Um and the Chinese are concentrating on manufacturing. And if you look at the future um as as the economies grow it's going to be the technology, I think, which is more important than uh than production of and export of goods. Uh-huh. And uh and in China um so the China is is is limited. Um they had the, you know, one one child of a couple policy. Now, they have rescinded that, but the but the Chinese people have not responded uh with a lot more births births, so um the China is is definitely going not going to see population growth um for uh >> Mhm. decades. And um I I think India has Now, India's got problems. Um but uh I I we're we're betting on India versus China. That brings me to my last question for the today, Gary. Looking ahead long-term investors would probably look at demographic trends as a guidepost on where to invest. Now, several of the OECD countries naturally for most of the developed world populations are shrinking or at least the fertility rate is below two. In fact, countries like South Korea are projected to experience severe population decline over the next 50 years. Um there's two ways to look at this. One is that the economy's going to collapse because there's literally nobody left to consume. Or we have we have a situation where machines and perhaps artificial intelligence will control most of the means of production and the few people I guess remaining relatively few people remaining will still live in abundance and be prosperous. What do you think the future looks like in 50 years, Gary? Uh well, it'll turn out to be something quite different than any of us can anticipate now. That that's the one thing I think we can be certain of. Uh but uh you know, there has been a great feeling I don't know for some time that demographics are the most important aspect. Mhm. And if you have a lot of you'll have a lot of people um you're going to have a lot of output. It's it's going to it's going to provide uh economic growth uh military military uh wherewithal. And and in in that sense, China's got major problems. Um their one-child per couple policy which they now have have uh rescinded, but the Chinese people have not have not responded with increased population. So, um uh I I I think the demographics very much favor India. Um To mention India also um gains because their orientation is toward technology. Mhm. And um China, it's it's sort of manufacturing. And you know, that's all well and good, but it it it doesn't have a future uh appeal that uh that that that technology does. With with India. Um India also inherited um from the British uh a legal system. Now, it's it's it's not it's not exactly up to the standards that we we would like to see be in the US, but it's it's certainly uh a lot better than China where you know, they you either do what you're told or they kill you. Uh And uh you know, there there there's just a lot of ways in which um China has concentrated on on top-down control, on manufacturing, uh and and it just it it it doesn't have a long-term prospects that you know, technology does with India. And and with a unfettered population growth. Okay, my last question to you, Gary. I see a lot of newspapers in front of you. What's your morning process like? what's your morning routine? Do you scan the front page of the Wall Street Journal um and then call it a day? Or are there particular pages on the newspaper that you always go to first? And particular pieces of news or uh sectors that you watch more than others? Well, I I uh everybody's got their own approach to this, but I I I think that for me uh reading the Wall Street Journal cover to cover is pretty much required morning reading. Um and you know, there there there obviously that isn't the only source of of news. Uh but uh I I think it's a lot it's a lot more straightforward uh reporting, a lot less political. The New York Times is I mean, very much uh geared toward socialism. Um and you know, that's all well and good if you're if you're in that frame of mind, but in terms of markets and what's going to happen, I think the Wall Street Journal is is going to give you a lot better uh perspective on what's going on. So, that But there you know, other things you should certainly I want to be aware of uh uh the financial Well, let's let's suppose you don't have time to read the entire paper. Uh what do you what do you skip to in the morning? You know, what do you what do you prioritize? What do you gather information >> would I I would I would uh probably skip the the the New York Times. And uh I I would I would skip um um you know, I read Barron's when I get a chance, but um not always a reply. Um, and uh Economic data comes out every week. Are there more Are there indicators and data releases that you find are more important than others for an economist like yourself? Yeah, that's a good question because our clients pretty much expect expect me to have digested the important news in the morning. There's I I've I'm If I'm talking to them in the morning, they they pretty much assume that I'm familiar with what happened overnight. And if I if I'm not, um you know, that it may it may not be important, but it it it can be it can be detrimental. Um So, I'd say I start there. Um, but there are but there are, you know, plenty of other plenty of other sources. And oftentimes, uh clients, friends, fellow travelers will say, "Oh, did you see um did you see this article in such and such publication?" Well, if I haven't, take a look. Okay, good. Well, thank you very much, Gary. Uh where can we stay up to date with your work and learn more about your views? We we'd be happy to send people a sample copy of our monthly newsletter, Insight. And uh we can we can get that uh by our just by by requesting it. Okay. >> [clears throat] >> W W W brought inside AGS and company. Excellent. Well, thank you thank you very much, Gary. Uh we we appreciate your insights and we we look forward to staying in touch some more. And um what what do you think was your proudest work looking back at many decades of you know, service on Wall Street and to your clients? Was it your books? Was it your newsletter? Uh was it the founding of Merrill Lynch's economics department? Was it beekeeping? You know, what do you what what do you you know, what do you want people to remember you most for? In in in my in my profession the top of the tree is when you go against the crowd Uh and are right for the right reasons. You know, it wasn't just dumb luck. But you you correctly understood what was going on and made a forecast that turned out to be correct. Uh in line with that. And I've had a I've had I guess more than my share of that. Uh but I but I think that that's that's where I would concentrate and I think uh some of those calls um particularly uh the unwinding of inflation and and and the uh effects on on on Treasury bonds. Yeah. Probably the one that was the most spectacular Mhm. in terms of being completely opposite from the from the herd. And you know that's that's what really that's what really counts. I mean being being right with with the consensus you know you don't add any value with that. Why why are you and then we'll end it here. Why are why is it important rather why is it important for you to be contrarian at times and unique in your thinking. As for example, you've been warning us throughout this interview of risk and valuations and risk to the downside at a time when like I started in the interview by saying markets are up 15% in the last couple of weeks. New all-time highs are hit daily for the last couple of weeks. And the Dow just regained 50,000 points. You're you're very much against the herd now. Why is that important for somebody to understand? Well because you don't get being being correct and with the herd um doesn't add much value. Um but going against the herd and being correct does add value. Mhm. I think it's that simple. Okay. Thank you very much. Appreciate it. >> Okay.
Legendary Economist Warns 2026 Downturn Could Trigger 30% Market Crash | Gary Shilling
Summary
Transcript
This is a risk off kind of environment. There's many uh investors and and even more speculators who think things are going to the moon. What is there that's solid that is accounting for the exuberance in stocks? And you really can't find anything. Sorry, what do what do you mean you really can't buy anything right now? Our next guest is Gary Shilling, president of A. Gary Shilling and Co. Gary is a legendary economist having a track record of prescient calls, including the 1969 recession, 2008 financial crisis, and the 1970s inflationary era. And now, he's calling for a deep recession to hit in 2026. He's known on Wall Street for his contrarian calls and forecasts, and in today's episode, he's going to explain why he's particularly contrarian today, being bearish while markets are euphoric. Gary set up Merrill Lynch's economics department and served as its first chief economist. You can watch Gary's last interview with me in the link down below. And as always, if you haven't subscribed yet to this channel, hit the like and subscribe button for daily updates on markets and the economy with top traders, investors, and economists, and more. This video is sponsored by Kalshi, the largest prediction market in the United States. Unlike a sports book, you're trading peer-to-peer on real-world events from economic data to political outcomes, and the price moves based on public opinion, not a house. Go to the link in the description and use code LIN l i n. New users will get $10 when they trade $10. For example, you can trade right now on which deal Trump is likely to announce as part of his China trip, which we'll discuss with Gary today. Welcome back to the show, Gary, an honor to host you as always. Thanks for being here. Glad to be with you again. There's several facets um of markets that are interesting to investors right now, among which is one of the most pronounced rallies since the markets bottomed or I guess trothed. I wouldn't say bottomed, but trothed about 6 weeks ago. Gary, the the S&P is up 15% since mid since basically just a few weeks ago. This level of movement and the speed at which it's recovering from a sell-off after the rent war broke out. Is this normal? After geopolitical, you know, we we talk about corrections mean reverting, but, uh, the speed at which it mean reverts and then surpasses previous all-time highs. What does this look like to you? You have to recognize that they today's communication uh, things happen instantly. And and the idea that that uh, what what's happening now is not going to hit the the media and the general populace for days weeks, months that's that's no longer the case. Um, so you have a situation of where um, where markets move very swiftly and in reaction, really in anticipation of of actions and uh, so it it makes it very very difficult to know what what's what's going to happen next because it's it's it's so much uh, anticipation and and uh, and has has to be laid out and a lot of times it it isn't laid out ahead of time the way it's going to unfold in in actual in actual in actual fact and that that complicates the situation but uh I think we're we're in in a situation now where it's going to be a lot of uncertainty that's going to continue to unfold and surprises are probably to be expected Would you characterize market sentiment right now as being euphoric or normal? By normal I mean just a standard part of the S&P's life cycle. Meaning if you take a look at the markets history >> Oh oh I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I think they're very much on the upside uh very much at the upper end of the spec of the spectrum and and uh but the risk is is definitely down from here because you you you you look at it and you say what what is really supporting stocks uh well it isn't consumers consumers are if anything retrenching it isn't capital spending um it isn't a big trade bonanza that's definitely not the case uh I mean you you just go through the whole the whole spectrum and try to try going what What is there that's solid that is accounting for the exuberance in stocks?" And you really can't find anything. Sorry, what do you What do you mean you really can't buy anything right now? Everything looks overvalued to you? You don't You don't have any major major courses that are are are going to support stock. And and And obviously earnings. You know, you you've got to have You've got to have support for earnings and have stocks uh respond on any long-term basis and and be solidly based. And you just don't have that. Let's talk about what's going on right now in Beijing. So, as we speak, Trump and a host of CEOs are meeting with Xi Jinping and his administration. Xi reportedly told Elon Musk and other CEOs that China will open wider for their companies. Now, if China does make more business deals with the US, what does that mean for markets? Well, China has got plenty of problems and and and probably the biggest one is their collapse in their property market, uh which is not going to is not going away. And the government [clears throat] the government is not uh all that interested in supporting property prices. Uh so, that continues to be a a real drain on the Chinese economy. And uh unless they unless the government decides uh to bail out real estate in a massive way, that problem is going to continue. And the government really doesn't doesn't believe in um consumer spending. Um and and uh I would say they they're much more interested in capital investments and productivity enhancements and exports. Well, if you heard us all this stuff, what do you do with it? Yeah, export it. Um hurting the domestic demand. And and it and it and it gives a very precariously balanced economy. Uh and I don't the Chinese leaders um they this seems to be what they want. Um they don't really care that much about consumer spending. Um And of course I'm sure they look on us and say we're um the US is is absolutely going haywire the other way and emphasizing consumer spending and and uh and backing it uh in all in all sorts of ways, but um we you know, I think the Chinese have a very different view of the world and from their standpoint uh their their economy is is is doing pretty much what they want to do. Which country, the US or China, has more to gain from an immediate stop to the Iran war? Do you think? Well, um probably the US. Um and I say probably because it is you know it's it's a complicated issue and very good question, but um um you know China is is being financed by export. You you look at what's what's driving the economy the Chinese economy and it's basically export. Um Mhm. And and if if if uh if you had a rapid termination of hostilities um I I think I think that would be very very difficult for the Chinese to adapt um to that very quickly. Well, this is from uh this is this is what investors are looking at right now. What will Trump announce as part of his China trip? This is from Caucasians, a prediction market in the US, the largest prediction market in the US. And um investors have several trades that they're looking at either uh the Chinese and the Americans will make a deal regarding soybean purchases, US oil purchases, uh aircraft purchases, rare earth export extensions, um or reduction in the tariffs. Which do you think or what do you think is the most likely outcome from a high-level meeting between Trump and a host of American CEOs and China's Xi Jinping? Well, probably um um With all the lot of you've got listed there, but but I think the the agricultural purchases and soybeans first and foremost, but I think that's probably the most sensitive area and the one where the US has got plenty of supply and the Chinese have the basic demand. So, I think that's the one that's probably most likely to to see to see considerable actions and agreements. So, would you be would you be long agricultural products in anticipation of you know, a deal to be made in the sector? Yeah, I you know, it's one of these deals where they they'll probably you know, they want to announce a number of of deals, if you will. And you say, "Well, which are the important ones?" And I think the agricultural products are probably the most significant. Um >> Mhm. Um Yeah. of of all the issues. Now, you have said that a 20 to 30% correction is normal by historic standards. Right. Um normal in what context? In the context of a bull market where you have pullbacks of that magnitude or in the context of a recession hitting the economy in which a 30% correction is inevitable? Yeah, I think it's the latter. Okay. Yeah, I mean there just isn't a lot of basic support for the economy. US economy as I mentioned earlier in our conversation. And uh as a result I I think we're very like very likely to have a considerable recession and sell off in in stocks. You know. You know, the whole the whole accompanying apparatus that comes with a weakening economy and recession. Well, what would you as an investor do with that kind of outlook? Would you sell everything? Um well, if you look at uh you know, we we have a in our monthly Mhm. in our monthly publication called Insight Mhm. we have a we have a recommended list of investments. And you know, what what what you buy, what you sell. And and uh we think that this is a this is a risk off kind of environment. Uh now that's not a very popular belief right now because there's many uh investors and and even more speculators who think things are going to the moon. Uh and maybe you'll get there before the astronauts do. Uh but uh we'll I I think the I I think the uh I I I I I I I think the speculation is uh really overdone in terms of euphoria uh for the economy. And what that means for um particularly particularly the stock market. You are legendary for having called several big recessions in the past. In fact, I believe if I I'm give if I'm getting my history correct, you've been let go from Merrill Lynch because you've been bearish and accurately so. And uh you've called the um recession in 1969. You've called the end of uh the 1970s inflationary era. And you've warned in 2006 that there's a housing bubble. And you've been twice named Wall Street's top economist by institutional investors for some of these calls and much more. What does this year look like? You know, sorry, let me rephrase that question. How does this year compare to prior recessionary periods? How does this compare to 2008? How does this compare to 1969? And people warned us of inflationary pressures from the oil shock. How does this compare to the end of the '70s when OPEC's oil shock impacted um oil prices and inflation? Can you draw any historical parallels to what we're seeing today, Gary? Well, there always there always differences, but uh I I I think we have many of the characteristics uh of of uh overdone speculation, which is the prelude to major um bear markets and stocks and um recessions. Right, there was I mean you know, there they're never history never repeats itself, but um I think Mark Twain said it doesn't repeat, but it rhymes." Uh and and uh that's that's what I think you have now. Uh it isn't it isn't a uh it isn't a a line by line repeat. What what it is it is resembling it and and uh there's there's a lot of been a lot of speculation. Um you know, and you you know, there's a lot of money floating around out there. And where is it going? It's it's going into speculations. Mhm. And and uh overwhelmingly, I think that's that's very risky. When this recession does eventually hit, Gary, where in the economy where we see it first? In the credit market? In consumer spending slowing down? Or do you think that a stock market crash would lead to consumer spending less because the wealthy would have less money to spend after their wealth takes a hit? Yeah, well, the the latter uh of of of the possibilities you just outlined is is certainly very inviting. It it's it's it's concrete. Um see the idea that the economy has been supported by spending spending by people who have money. And and and and uh if if they if they decide to stop spending for whatever reason, uh the economy is in big trouble. So, that's that's the most That's easiest one to identify, but looking for the easiest one is a lot of times not not the correct one. The easy ones are are the ones that are Mhm. So, uh are Trump trying hiding what's really happening, but but you know, you could get I I I think there's probably some kind of shock there that uh we could see whether this is a major fraction in stocks. Um Is it Is it uh Is it a problem with uh speculation that we've seen in a lot of areas? Uh dot-com area. Um Given that we now have a more risk-off posture and that risks are skewed to the down to the downside, Gary. The question is where do we hide? How do you feel about Treasuries? The uh 10-year yield closed at 4.46% yesterday. It hit a 2026 high of 4.48 in March. Are Treasuries a place to go? >> I I I I mentioned earlier our monthly newsletter, uh which we label Insight, uh gives a a um a um recommended list of of uh investment ideas every month. And and we're suggesting that uh investors be um should be very cautious and and really take a defensive posture and that means being long treasury bonds being out of stocks or possibly short major stock indices and being uh very very cautious about other other investments. Right. So so are Do are you still Would would would you still be long treasuries uh in this environment especially now that some people are saying that the market is pricing in the possibility of rate hikes not cuts? Yeah, that that's a that's a good question because you know, if we're if we're having this conversation couple [clears throat] of weeks ago Uh-huh. it would have been a lot more tilted toward being long treasury bonds. Uh now it's it's less it's less certain if that's the proper way to address the future. But um you know, you say what are the alternatives? And I I I I still think that the safe haven effect of treasuries is ultimately going to be very important. Would you go overseas, Gary? I believe in one of your recent pieces you addressed how India may be a bigger growth engine than China. Yeah, well we're we've been um we've been very positive on India. And particularly India versus China. India has a lot of advantages over over China. It It has no limits on population growth. Um it's uh uh it has a the Indians are very good at technology. Um and the Chinese are concentrating on manufacturing. And if you look at the future um as as the economies grow it's going to be the technology, I think, which is more important than uh than production of and export of goods. Uh-huh. And uh and in China um so the China is is is limited. Um they had the, you know, one one child of a couple policy. Now, they have rescinded that, but the but the Chinese people have not responded uh with a lot more births births, so um the China is is definitely going not going to see population growth um for uh >> Mhm. decades. And um I I think India has Now, India's got problems. Um but uh I I we're we're betting on India versus China. That brings me to my last question for the today, Gary. Looking ahead long-term investors would probably look at demographic trends as a guidepost on where to invest. Now, several of the OECD countries naturally for most of the developed world populations are shrinking or at least the fertility rate is below two. In fact, countries like South Korea are projected to experience severe population decline over the next 50 years. Um there's two ways to look at this. One is that the economy's going to collapse because there's literally nobody left to consume. Or we have we have a situation where machines and perhaps artificial intelligence will control most of the means of production and the few people I guess remaining relatively few people remaining will still live in abundance and be prosperous. What do you think the future looks like in 50 years, Gary? Uh well, it'll turn out to be something quite different than any of us can anticipate now. That that's the one thing I think we can be certain of. Uh but uh you know, there has been a great feeling I don't know for some time that demographics are the most important aspect. Mhm. And if you have a lot of you'll have a lot of people um you're going to have a lot of output. It's it's going to it's going to provide uh economic growth uh military military uh wherewithal. And and in in that sense, China's got major problems. Um their one-child per couple policy which they now have have uh rescinded, but the Chinese people have not have not responded with increased population. So, um uh I I I think the demographics very much favor India. Um To mention India also um gains because their orientation is toward technology. Mhm. And um China, it's it's sort of manufacturing. And you know, that's all well and good, but it it it doesn't have a future uh appeal that uh that that that technology does. With with India. Um India also inherited um from the British uh a legal system. Now, it's it's it's not it's not exactly up to the standards that we we would like to see be in the US, but it's it's certainly uh a lot better than China where you know, they you either do what you're told or they kill you. Uh And uh you know, there there there's just a lot of ways in which um China has concentrated on on top-down control, on manufacturing, uh and and it just it it it doesn't have a long-term prospects that you know, technology does with India. And and with a unfettered population growth. Okay, my last question to you, Gary. I see a lot of newspapers in front of you. What's your morning process like? what's your morning routine? Do you scan the front page of the Wall Street Journal um and then call it a day? Or are there particular pages on the newspaper that you always go to first? And particular pieces of news or uh sectors that you watch more than others? Well, I I uh everybody's got their own approach to this, but I I I think that for me uh reading the Wall Street Journal cover to cover is pretty much required morning reading. Um and you know, there there there obviously that isn't the only source of of news. Uh but uh I I think it's a lot it's a lot more straightforward uh reporting, a lot less political. The New York Times is I mean, very much uh geared toward socialism. Um and you know, that's all well and good if you're if you're in that frame of mind, but in terms of markets and what's going to happen, I think the Wall Street Journal is is going to give you a lot better uh perspective on what's going on. So, that But there you know, other things you should certainly I want to be aware of uh uh the financial Well, let's let's suppose you don't have time to read the entire paper. Uh what do you what do you skip to in the morning? You know, what do you what do you prioritize? What do you gather information >> would I I would I would uh probably skip the the the New York Times. And uh I I would I would skip um um you know, I read Barron's when I get a chance, but um not always a reply. Um, and uh Economic data comes out every week. Are there more Are there indicators and data releases that you find are more important than others for an economist like yourself? Yeah, that's a good question because our clients pretty much expect expect me to have digested the important news in the morning. There's I I've I'm If I'm talking to them in the morning, they they pretty much assume that I'm familiar with what happened overnight. And if I if I'm not, um you know, that it may it may not be important, but it it it can be it can be detrimental. Um So, I'd say I start there. Um, but there are but there are, you know, plenty of other plenty of other sources. And oftentimes, uh clients, friends, fellow travelers will say, "Oh, did you see um did you see this article in such and such publication?" Well, if I haven't, take a look. Okay, good. Well, thank you very much, Gary. Uh where can we stay up to date with your work and learn more about your views? We we'd be happy to send people a sample copy of our monthly newsletter, Insight. And uh we can we can get that uh by our just by by requesting it. Okay. >> [clears throat] >> W W W brought inside AGS and company. Excellent. Well, thank you thank you very much, Gary. Uh we we appreciate your insights and we we look forward to staying in touch some more. And um what what do you think was your proudest work looking back at many decades of you know, service on Wall Street and to your clients? Was it your books? Was it your newsletter? Uh was it the founding of Merrill Lynch's economics department? Was it beekeeping? You know, what do you what what do you you know, what do you want people to remember you most for? In in in my in my profession the top of the tree is when you go against the crowd Uh and are right for the right reasons. You know, it wasn't just dumb luck. But you you correctly understood what was going on and made a forecast that turned out to be correct. Uh in line with that. And I've had a I've had I guess more than my share of that. Uh but I but I think that that's that's where I would concentrate and I think uh some of those calls um particularly uh the unwinding of inflation and and and the uh effects on on on Treasury bonds. Yeah. Probably the one that was the most spectacular Mhm. in terms of being completely opposite from the from the herd. And you know that's that's what really that's what really counts. I mean being being right with with the consensus you know you don't add any value with that. Why why are you and then we'll end it here. Why are why is it important rather why is it important for you to be contrarian at times and unique in your thinking. As for example, you've been warning us throughout this interview of risk and valuations and risk to the downside at a time when like I started in the interview by saying markets are up 15% in the last couple of weeks. New all-time highs are hit daily for the last couple of weeks. And the Dow just regained 50,000 points. You're you're very much against the herd now. Why is that important for somebody to understand? Well because you don't get being being correct and with the herd um doesn't add much value. Um but going against the herd and being correct does add value. Mhm. I think it's that simple. Okay. Thank you very much. Appreciate it. >> Okay.