The Market Can Remain Irrational Longer Than You Can Remain Solvent

Published on
June 24th, 2019
44 minutes

The Market Can Remain Irrational Longer Than You Can Remain Solvent

The Interview ·
Featuring Gary Shilling

Published on: June 24th, 2019 • Duration: 44 minutes

Even though this quote is attributed to John Maynard Keynes, it was actually Gary Shilling who was the first known user of it in print. The president of A. Gary Shilling & Co has enjoyed a long and storied career in finance. And in this interview with Real Vision’s Ed Harrison, he takes us back to the days of fixed commissions on Wall Street as stagflation became entrenched. Shilling also talks at length about why he thinks a recession has just started, making Treasuries still the asset class to own. But as he looks forward, Shilling also sees a bright future of technological advancement, productivity growth and above-trend economic growth. Filmed on June 18, 2019 in New York.



  • AS
    Alex S.
    4 March 2020 @ 18:05
    This aged well. He nailed it.
  • SG
    Sven G.
    16 July 2019 @ 18:23
    i want him to be my grandpa!!! what a cool dude
  • TS
    Tim S.
    2 July 2019 @ 20:43
    So that is what expertise and experience look like. More of this please. :-)
  • SM
    Stephane M.
    26 June 2019 @ 11:07
    I really like Mr. Schilling but his 16.6% annual rate of return on 25 years zero coupon bonds is not real!! It doesn't include trading fees. In REAL LIFE, you have to pay for the bid/ask spread and for retail investor it can be really expensive (+2.5%). So, in theory, buying 25 years bonds and selling it after a year, then buying a new 25 years coupon bonds will give you over 16% but in real life it WON'T!! How come nobody talk about this?????
    • KA
      Kevin A.
      26 June 2019 @ 13:15
      That trading friction cost doesn’t seem right to me. I use a large online brokerage and it isn’t that bad to get in and out of bonds. My concern is that I think the horse has already bolted on the trade. Seems too late to put it on.
    • TC
      Tim C.
      26 June 2019 @ 14:36
      Spreads are not that large on treasuries. Corporates and munis yes, but not on treasuries in my experience.
    • SC
      Sean C.
      26 June 2019 @ 16:54
      I think his point is you buy 25 year zero coupon bonds and then hold then for 25 years, so no trading costs at all
    • PP
      Peter P.
      1 July 2019 @ 13:53
      Income taxes are due yearly on the amount that zero coupon chart is “re-investing” to compound like that, but the ZERO does not pay any income to the taxpayer. Spectacular interview however !
  • VP
    Vincent P.
    28 June 2019 @ 19:21
    .....Wait, What?? Did I hear him just say, "sure a negative 4% bond can be sold at negative 6% right"? Tell that to the retirees and pension funds who are not structured to watch markets daily, trade and take capital gains. The impact of growing negative yielding debt has not yet been felt and remains unsolved with no solution in sight. Try to imagine ECB raising rates or what about Japan fro cryin' out loud?? The implications are completely left to your imagination and think way outside the box because it's likely something our current model cannot survive.
  • VP
    Vincent P.
    28 June 2019 @ 19:08
    Hmmmm a 1% 10yr suggests NIRP/ZIRP by then, especially if there's chances of .75bp% cut over the mid term already, IMHAO. Haven't seen any other country get out of that position yet and will likely never see it until a giant structural change occurs in the global financial system. Needless to say the unpredictable triggers of this happening to the reserve currency. I wouldn't call THAT a "run of the mill" recession dude. Otherwise a great interview. Thank you.
  • MR
    Max R.
    25 June 2019 @ 16:18
    Good interview! Shilling says, " Equilibrium is simply a momentary point through which you pass on the way to one extreme to the other." Couldn't agree more. The other extreme we're heading towards is war. That's what happened last time we had this much debt and stagnant income. Shilling says, "Trump's able to basically say, well, it's those foreigners, and that's who we blame" Then Shilling, our objective economist, says "They (China) steal our technology required to be transferred as a price of doing business in China and so on." Where is the middle ground? From Trump to Shilling, the U.S. is ramping up war with China. Shilling should know better than to accuse anyone of stealing, period. That isn't economics. That's a personal attack by a well-known economist. If inflation is caused by demand, as he says, and there is no demand, then what does that say about the animal-spirits health of society? Shilling is so happy he's made his family financially set for life in 1981 he won't look at what that means for the rest of the country today. I'll help him get up-to-date: The world can go to war faster than the FED can write off its QE debt.
    • DR
      David R.
      26 June 2019 @ 06:06
      Interesting. Stealing is stealing. But what is NOT "stealing" is voluntarily agreeing to provide something like IP in exchange for doing business. That's called dealing. Even trump says, the chinese are smart to have done that. So put that blame where it belongs, to the greedy executives who agree to an IP transfer in exchange for short-term boosts to their bottom line and executive bonuses. Those execs don't care about the longer term consequences as long as they get rich beforehand. That's the primary issue that needs to be resolved.
    • MR
      Max R.
      26 June 2019 @ 17:57
      I see I have some thumbs down. I would have toned down (edited) my comment but RealVision seems to be running FORUM software from 1990. "Stealing" is a nasty word. I'd feel the same if a Chinese economist said the U.S. was "Extorting" cheap goods from China through the petro-dollar. I don't dispute that the Chinese used Western IP. But we also indirectly sent many Chinese to their deaths jumping off buildings. There is no end to the name calling possible. Shilling if a brilliant guy, no question. But he stepped over the line there. And he didn't respect his own logic that we go from one extreme to another. What extreme are we heading to? I called him on it. Sorry that got a thumbs down.
  • YB
    Yuriy B.
    26 June 2019 @ 13:09
    Brilliant conversation. Excellent work Ed!
  • JS
    John S.
    25 June 2019 @ 03:58
    Dude is 20 years my senior and his brain operates at warp speed. One place I think he may be miscalculating is policy maker's total commitment to inflation. Deflation may prevail in the end but there will first be one hell of a battle.
    • DR
      David R.
      26 June 2019 @ 06:15
      Historically for thousands of years, it's deflation first then inflation second in reaction. The big question to answer in real time is when is the tipping point from deflation to inflation. Adoption of MMT will make the answer clear. Refer to Dr Lacy Hunt. He says MMT would be hyperinflationary and the worst thing in history for the economy and society, but he's skeptical MMT will come to pass because it's unlawful, or at least it'd take a year to make lawful and require a supermajority in congress and change in mindset at the Fed and likely different FOMC members.
  • NR
    Nelson R.
    25 June 2019 @ 00:30
    Back to serious topics and serious interviews. Glad to see the crypto bubble 2.0 nonsense is over.
    • MK
      Michael K.
      25 June 2019 @ 11:03
      I agree I think it’s a little too hot, but I am glad they did the crypto content. I learned a lot that I otherwise would have no chance to learn because I don’t even know where to start reading what. I should think RV would take that as a compliment and it is.
    • MS
      Michael S.
      26 June 2019 @ 04:18
      Jeez, a few days every year or two in order to focus on crypto has everyone in a bunch? Don't you people have anything to do for a few days while the rest of us with inquiring minds try to figure out of this new shit is really anything? Do you need help with your reading lists?
    • DR
      David R.
      26 June 2019 @ 06:09
      Another person who will miss the money train for a SECOND time, lol.
  • RA
    Robert A.
    25 June 2019 @ 23:15
    Ed Harrison has evolved into a REALLY good interviewer. He is always prepared, is very knowledgeable about the subject matter, is conscious of the pacing of the back and forth and knows how to get those points of relevance to the RV audience from his guests. Ed comes across as a very humble and caring host in every interview. He has been a real find for RV and we consumers of it’s content.
    • TF
      Tyler F.
      26 June 2019 @ 00:28
      I could not agree more. I have been a fan of his since watching him on RT several years ago. Great to see he has joined the Real Vision team!
  • CG
    Chuck G.
    24 June 2019 @ 19:03
    I like Gary Shilling - Very smart and not so promotional. Not sure I'd use him for timing tho, as he called problems in housing market in 2002!
    • CC
      Charles C.
      25 June 2019 @ 23:09
      and again around 2010
  • ME
    Michael E.
    25 June 2019 @ 11:16
    Mr. Shilling & Dr. Lacy Hunt are the greatest economist of our time.
    • CC
      Charles C.
      25 June 2019 @ 23:08
      I sure hope that's right. sure seems they have the best handle on things but I can't help wondering if that's simply because I agree with them
  • JB
    Joe B.
    25 June 2019 @ 15:16
    My favorite interview on Real Vision! Best guest with best interviewer.
  • fc
    flavio c.
    25 June 2019 @ 12:00
    awesome interview!!! Thanks!! wisdom never gets old
  • DS
    David S.
    24 June 2019 @ 20:43
    Great interview. I wish a question would have been asked about MMT. If Congress increases the money supply by 25% for any reason, what would the effect be on long-term bond rates? My concern is that MMT, printing money, would put the money supply in the hands of Congress instead of the FED. Congress has abdicated many of its most important responsibilities to the Executive Branch over recent decades like tariffs, declaration of war, and more. I cannot image Congress and/or the Administration under the control of either party controlling spending when they can print money to get reelected. DLS
    • BM
      Bryan M.
      25 June 2019 @ 00:47
      I will answer your question. Rates will go negativo or actually, BIG TIME negativo.
  • NI
    Nate I.
    24 June 2019 @ 23:41
    Good interview. Really wish you would have asked his views on MMT.
  • KB
    Kirk B.
    24 June 2019 @ 21:57
    Gary Schilling has proven to be one of the true sages of Wall Street. When Gary prognosticates, one is wise to pay attention.
  • FB
    Floyd B.
    24 June 2019 @ 19:07
    Far more positive than I expected.I also expected him to discuss his concerns over the Federal debt which has been a issue he has rang the alarm bell on very often. Regardless is historical perspective is valuable.
  • TD
    Thomas D.
    24 June 2019 @ 18:14
    I hope to hear more from Mr. Shilling on Real Vision in the future.
  • TS
    Tyler S.
    24 June 2019 @ 17:15
    the interviewer has to just talk, stop the unnatural dialog
  • PJ
    Peter J.
    24 June 2019 @ 14:02
    Good interview. A man who definitely thinks in an independent way and presents his view in straight forward easy to understand manner. Was surprised that he only sees a fairly shallow recession ahead and that corporate and government(s) debt were not seen as more significant threats in his thinking. Agreed with him on technology that we are still in the early days of economic influence.
    • AT
      Alun T.
      24 June 2019 @ 16:16
      I have tt the world
  • TJ
    Terry J.
    24 June 2019 @ 14:34
    Another invaluable history lesson on the markets over the last fifty years from this clever gentleman. I always learn so much from these types of interviews with Ed. Just a little surprised Dr Shilling only sees the UST 10 year going to 1% and not zero. I hope also his take on the next recession proves accurate, although I somehow doubt it.
  • CR
    Charlie R.
    24 June 2019 @ 14:09
    Always good to hear from Dr. Shilling! That Zeros v. SPX chart - YOWZA! Given his multi-decade prescience, magnitude accuracy and conviction, hard not to run out and buy more ZROZ! Will wait for slightly better entry at UST10YR yield ~2.15%. Great interview!
  • RG
    Razmig G.
    24 June 2019 @ 09:08
    Always great listenning to Gary Shilling.