Gary Shilling explains the only way to beat the market and win

Financial analyst Gary Shilling reveals the lessons he has learned about the economy and markets, how to stay ahead, and why everybody can't win. Following is a transcript of the video.

Gary Shilling: Well, I've learned a lot of lessons over the years, and most of them the hard way. But, there are a couple of basic facts.

If you look at the economy, it grows over time. Not at a steady rate, but it grows over time. And markets, particularly the stock market, reflects that. In other words, if you have the economy growing at, let's say the nominal economy, nominal GDP growing at 4%. Long-term, corporate profits are going to grow about the same rate.

Obviously, they can't continually expand faster than the economy or decline relative to the economy. So, that's where you start.

So, in terms of stocks, the only real difference between how the nominal economy is going, and how the stock market is going, is price-to-earnings ratios, and they move in long cycles. 10, 15 years, they move up, then they'll tend to move down. And that's pretty much it.

Now, that's the overall economy and that's the overall investment.

Of course, everybody thinks they're going to beat this, there's that great gambling instinct in all of us. That's why people watch financial news programs. That's why they're watching us. Everybody's trying to get a leg up here.

Well, of course everybody can't win at this game, I mean, on average, it's going to average out. There is that hope that springs eternal within the human breast, as somebody once said, that you're going to be ahead of the game.

Now, what that means is, if you are trying to beat the game, you've got to be against the consensus. It doesn't mean that you simply are a contrarian in a sense of, "whatever the consensus is, I'm going to take the opposite side." No, no. 'Cause there's times the consensus can be right, and often is.

But, what it means is that, when you come up with an idea, and it is counter to the consensus, and you think it's got a good chance of happening, and it's a trend that's working, well, then that's where you want to really jump on it with all force.

That's what we did in the early 2000s. We saw as early as 2002, what looked like a developing housing bubble. And, so we said, "This isn't ready to crack yet, but it looks like it's getting there."

You had people who were putting nothing down on houses, they assumed that the appreciation would be such they'd never even have to make one monthly payment, because they could refinance, you had the no-doc loans, all this nonsense.

It really was clear.

Now obviously that bubble would not have been developed and not broken 'til really the end of 2007, unless everybody, or most people, were convinced it was going to last forever.

So, there's a case of where you had an extreme situation, it was against all reality in terms of how long it could last, and it was one of these rare opportunities where going against the trend with a major bubble having developed, where you could make some serious money.

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[viniciusantonio]

The money market provides financing to local and international traders who are in urgent need of short-term funds.

[kreshko]

"You can't beat the market but you can beat your meat" - Warner Buffet

[CaptainBenjamins]

Everybody wants to beat the market, how come nobody ever wants to just be one with the market? VOO and chill baby

[MizThe]

After building a rental property portfolio, I became exhausted with real estate market challenges and decided to sell. Now, with about $5 million, I'm contemplating investing in the stock market with solid positions. What are your thoughts?

[mikebayless]

They should have this guy teach a course on finance to every high school student in America so they can learn the valuable lessons on how to beat the market which we didn't learn in this clip! 😂😂😂

[ElenaWhite-twpx]

I'm interested in investing, but I'm not sure where to start. Do you have any advice or contacts who can help me out?

[jsnam]

"Cut your losers short and let your winners run". This is the million-dollar quote guys.

[connietimoney]

I learned something very valuable from Gary. Most of the best lessons are the hard ones. Thats true. You never forget a good kick in the ass.

[kevinhoward]

That's all very well, but...

What gets us into trouble
is not what we don’t know
It’s what we know for sure
that just ain’t so

– Mark Twain

[lostmarxbro]

So basically time travel is the only way to make money

[bluelemonade]

Just take the opposite side of r/wallstreetbets, leverage the herd

[BrunoLuke]

While trying to build passive income and prepare for retirement, It’s important to choose stocks that are expected to hold up in inflationary environments. To combat the negative effect of inflation, it’s a good idea to diversify your portfolio across different asset classes, such as stocks, bonds, and real estate, since this can help protect your portfolio against inflation. I have seen people making up to $800k in a month during high-inflation

[dannypowers]

It's simple, buy low sell high. Do not hold on to the stock because it will go back down.

[tuna]

95% of traders lose money for a reason. Not to be a contrarian like he said but separate yourself from what a retail investor in that 95% population would do.

[gino]

last amazing case Moderna stock. Up 400% in few months .... for a very specific reason. I believe in strategical stock picking. The market is like a food market. You can buy good food or half rotten. The P/E tells about the past ... but often who bets looks at future earnings.

[Lunixas]

In other words.. “I haven’t been able to beat the market after all these years”

[patelvidhu]

I believe stock market is currently costly and chance of crash is high.

[gormenfreeman]

You have to find the inefficiency in market pricing to profit. The Efficiency is the spare money left over. People make mistakes, specially during panics or heights of greed. Those are good times to buy or sell into inefficiency.

[jamalm]

Replace “housing bubble” with “bitcoin bubble” and everyone will call you crazy now. Most people can see bubble but they either too early or too late.

[makaveli]

In case you didn't catch it the answer is "trend". Meaning risk little to win