Legendary economist Dr. A. Gary Shilling, President of A. Gary Shilling & Co., an economic consulting firm and a registered investment advisor, joins Julia La Roche on episode 301 on FOMC day. In this episode, Dr. Shilling warns that the economy is cooling with weakening labor markets and stagnant job creation, yet security markets continue to rise without reflecting this underlying weakness. Despite the government shutdown limiting official data, private sector information reveals businesses are cautious about demand and inflation, while consumers face limited financial slack due to heavy student loan and credit card borrowing. Shilling believes the Fed is cutting rates because they fear a recession is on the horizon, and he cautions that "we're probably gonna wake up one of these days and find that things are really a lot weaker than we expect" - at which point markets could deteriorate quickly. He also expresses concern about the "debt bomb" - the massive accumulation of government debt now exceeding $38 trillion with no logical endpoint in sight. However, Shilling remains impressed by the adaptability and resilience of the US economy, noting how it has successfully adjusted to disruptions like tariffs that many predicted would be disastrous.
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Timestamps:
0:00 - Introduction & welcome
0:48 - Big picture macro view: economy appears to be cooling
1:30 - Government shutdown: private data filling the holes
2:00 - Weakening labor markets: limited new hiring
2:45 - Businesses cautious about demand and inflation
3:17 - Recession concerns: won't know until well into it
3:45 - Security markets not reflecting economic weakness
4:03 - Fed Chair Powell presser context (October 29th FOMC meeting)
4:32 - Why markets are overly focused on Fed actions
5:30 - Fed's tightrope walk: keeping economy above water
6:25 - Are rate cuts signaling recession fears?
6:34 - Fed concerned about softening labor markets
7:20 - Finding hidden vulnerabilities during data blackout
7:51 - Labor market concerns: limited consumer slack
8:20 - Heavy borrowing: student loans and credit cards
27:24 - US fiscal picture: debt north of $38 trillion
27:45 - The debt bomb concept explained
28:45 - Massive global debt expansion concerns
29:49 - What happens when debt reaches its limit?
30:23 - What's keeping Dr. Shilling up at night
31:15 - Lack of concern about debt accumulation
32:00 - What makes him hopeful: US economy's strength and adaptability
32:46 - Economic adaptability to disruptions
33:11 - Tariffs discussion: six months later perspective
33:46 - How economies adapt to tariff disruptions
35:03 - Where to find Dr. Shilling's work
35:25 - Parting thoughts: avoiding fads of the moment
36:37 - Closing remarks
Access Dr. Shilling's monthly newsletter INSIGHT by calling this toll free number (1-888-346-7444) or visiting his website (https://www.agaryshilling.com/).
The Julia La Roche Show