Over the past 15 years, we've conducted our semi-annual economic forecast interviews with our friend and award-winning economist, Gary Shilling. Aside from having a long list of accolades, the reason our audience has found these interviews worthwhile is because of Gary’s ability to go beyond the headlines in highlighting things that will likely impact the economy.
Overall, there seems to be a lot of confusion about what’s happening in the world of economics right now. Having attended several logistics conferences and events recently where economists have offered different thoughts about trends and conditions, it struck me: There is no consistency to the predictions and they have been all over the economic spectrum.
So, last week when Gary and I got together for a new interview, I was curious to get his perspective on the economy here in the United States as well as globally in places like China and Europe. I am pleased to say that Gary had some valuable insights in addressing some of the concerns I raised during the interview. The information he shared is important for our audience on both a personal and professional level.
For example, in leading off the interview I noted the historical correlation between what is happening in the freight markets and economic conditions. When the freight markets are up, the economy is up; and vice versa. With that thought in mind, I mentioned that the freight markets have been and continue to be in an historic recession. As we have highlighted in recent Two Minute Warnings, the current freight market recession has been longer and deeper than any in modern times. Yet, the economy hasn’t yet fallen into the deep recession that economists have been predicting for the past couple of years. Gary offered some reasons for this anomaly.
In the interview, Gary highlighted three items you need to understand:
• First, he highlighted that the Federal Reserve seems to be taking a new stance on interest rates. While in the past they were adamant on lowering inflation before cutting rates, they now appear to be watching a number of signals and waiting to respond. One moment they’re looking at potentially cutting rates, and the next moment, based on inflation data, they’re looking to raise interest rates.
• Second, he covered how to gauge trends in the economy. Gary shared that in the current environment, he's watching consumer buying behavior and the labor market trends for signals. The consumer has been carrying the economy but with credit card debt soaring, that is likely to change.
• Third, we discussed what’s happening in Europe, and particularly in China with all the new tariffs just imposed. In the current economy, Gary noted that there is an eagerness to emphasize exports – difficult during a trend toward protectionism.
Finally, Gary had some advice for people running businesses: Be cautious and fortify your balance sheet! There are things in play that could very likely affect your business and increase your risk. To learn more, I encourage you to watch the interview – and to share it with anyone else who you believe could benefit. What’s going on in the economy affects your company and your future.
If you’re looking for help or on cost saving initiatives in the freight or supply chain areas, we can help! Simply give me a call at 630-530-6190, send me an email, or schedule a meeting with me.
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BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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