Staff Photo by Angela Lewis Dr. Gary Shilling speaks Wednesday in the Gailor Auditorium of the University of the South.

Noted economic forecaster Gary Shilling told a small gathering of Sewanee faculty and students Wednesday that he predicts the U.S. economy won’t fully recover from the recession for another decade.

Businesses should brace for a slow economic recovery, since tough financial times have taught families to spend less and save more, Dr. Shilling said.

“Something very dramatic is happening,” he said. “(People) are no longer on a borrowing-and-spending binge and now are on a saving spree.”

Dr. Shilling, who has a doctorate in economics from Stanford University and is a regular columnist for Forbes magazine, has drawn attention for his economic forecasts. During the dot-com bubble of the late 1990s, Dr. Shilling predicted the demise of Internet stocks, which led to a U.S. and global recession. More recently, he accurately forecast the collapse of the housing market.

Dr. Shilling was brought to Sewanee: The University of the South as part of the school’s 2009-10 Viewpoints speaker series. His speech, which included his economist outlook and future investment tips, was attended by more than 50 Sewanee faculty members, students and staff.

“I thought it was fascinating,” said Mike Forster, a Sewanee senior majoring in economics. “I think his investment analysis makes sense. I like it because it is contrarian.”

From 1982 to 2000, U.S. consumer spending increased 3.8 percent, but from 2008 to 2018, Dr. Shilling said, he predicts consumer spending will increase by only 1.4 percent.

Many families have seen the value of their homes and investments plummet. They also are burdened with debt as job prospects continue to shrink, Dr. Shilling said.

These factors are pressuring families to begin saving, reversing a decadelong trend of growing debt and spending, he said.

“Household net worth is lower than it was in the 1950s,” he said. “They are under considerable pressure to change.”

Low commodity prices, increased government regulations and deflation also will contribute to a slower economic recovery, Dr. Shilling said.

Like many in the Sewanee crowd, Robin Gottfried, an economics professor at Sewanee, had questions about Dr. Shilling’s economic theories but said he made a convincing argument for U.S. consumers and business owners to have a sober outlook.

“I thought Dr. Shilling was very good,” Dr. Gottfried said. “I can see what he is saying as a possibility.”

INVESTMENT TIPS

Smart investments during the economic recovery

1. Treasury bonds

2. Consumer staples, for example, companies that produce household products

3. Small luxuries, for example, companies that produce high-end liquors or wines

4. Affordable housing, for example, companies that build manufactured housing or rental properties

5. Health care industries

Unwise investments during the economic recovery

1. Big-ticket items, for example, airlines, car manufacturers

2. Companies with high fixed costs and slow revenue growth

3. Antiques, art and collectibles

4. Conventional home builders and their suppliers

5. Credit card issuers, consumer lenders and banks

Source: Gary Shilling