The 26-Year Reign of Economist Ed Hyman
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Ed Hyman, head of International Strategy & Investment, has been the country’s no. 1 ranked economist for 25 consecutive years. Wait – make that 26.Institutional Investor magazine has already asked for this year’s photo, relieving the suspense.
No one in any other discipline even comes close to matching that performance. What makes Mr. Hyman so special?
The president of New York Life Investment Management, Brian Murdoch, has been a fan for more than 20 years. “Ed is extremely engaged with his clients,” he said. “He’s focused on giving useful advice. He knows he has to remain relevant. It’s a give-and-take process. It’s amazing how humble he is. Also, ISI is independent and unconflicted. It is truly client focused.”
Mr. Hyman has for many years cast a wide intellectual net, and synthesized a huge catalog of disparate facts and figures. He puts together all this intelligence toward the single goal of helping people make good investment decisions. He is not enamored with the arcania of economic theory. The president of Merrill Lynch Investment Managers, Robert Doll, says, “We really like the way he translates what’s going on into simple pictures. He makes me think.”
Because he is a modest sort of fellow, he also doesn’t get stuck. This may be his greatest asset. There have been many economists and strategists over the years (think Abby Joseph Cohen, for one) who win a reputation based on one or a few good calls. They sometimes fall in love with their position and can get mired on the wrong side of an issue.
That doesn’t mean he’s wishy-washy. The former chief investment strategist for Invesco, Patricia Walsh, says, “He is willing to stick his neck out and take a stand. I have often disagreed with him, but have always respected his view and his intellect.”
Mr. Hyman understands that the world and his forecasts are fluid. In fact, he routinely includes in his projections a list of why he might turn out to be wrong. That makes it pretty easy to change course and stay on track.
Clients respect that flexibility. Still, 26 years is a long time to be the reigning authority on the economy. Perhaps as important as his mental flexibility is his determination to be helpful to investors. This, in turn, is likely the dividend from having spent most of his career at CJ Lawrence, a firm that was about investing, not about investment banking.
Mr. Hyman is a native of western Texas. Though the accent has long since disappeared, there is a certain courtliness about him that suggests “not from New York.” He went to the University of Texas and then to MIT for an M.B.A. While in Cambridge, he began to dabble in econometric forecasting, then a new discipline, using the most rudimentary computers.
After a brief stint at Otto Eckstein’s Data Resources, Mr. Hyman joined CJ Lawrence. Mr. Hyman created a product for money managers, startling the investment community first by publishing a weekly, rather than the standard monthly forecast. Over time, he progressed to daily updates, often hastily patched together with headlines and news clips, with arrows drawn in and notes in the margins.
These briefs come across as the most up-to-the-minute information, hand selected by someone brilliant at separating wheat from chaff.
Mr. Hyman and other important figures such as oil analyst Charlie Maxwell and strategist Stan Salvigsen helped build the prominence of CJ Lawrence. In due course, Mr. Hyman became vice chairman of the old-line firm, which was sold in the late 1980s to the British investment bank Morgan Grenfell.
That firm in turn sold to Deutsche Bank. The remaining CJ Lawrence refugees left for a variety of reasons to branch off on their own, founding ISI.
ISI today is a broker-dealer of about 85 employees that peddles economic forecasts, as well as portfolio strategy and energy reports, a valuation model, and a variety of unusual surveys and reports. Just this week, the firm has added an economics team in China, responding once again to the needs of their clients.
It is safe to say that almost every significant investment operation around the world is a client of ISI. Does it bother some that they all receive the same information? Apparently not. Mr. Murdoch said, “A lot of smart people are comfortable making their own decisions. This is not a paint-by-the-numbers approach.”
One of the more unusual products issued by ISI is a weekly survey of 400 companies engaged in trucking, retailing, home building, and manufacturing, trying to tap the pulse of economic activity on the ground. Recently, they began a survey of home prices. Mr. Hyman personally participated in the start-up. It took him half an hour to persuade one agent to quantify her information.
So, as all this information flows in, what is Mr. Hyman thinking now? He expects the market to be in thrall to Fed activity as it has been so often in the past. He considers current events similar to the last two mid-cycle slowdowns, in the early 1980s and 1990s. Having said that, he acknowledges that “I generally live in a state of paranoia that this time things will be different.”
His most recent forecast is that the Fed will stop tightening when short-term rates reach 4.25%, probably in December, paving the way for a market rally. He recalls that the last two times we went through such a tightening cycle, the market climbed about 40% in the year that followed.
Naturally, Mr. Hyman hedges his projections with concern about the price of energy. “China and India are the X factor for oil prices,” he said. “Capitalism is like a strong vine – it grows like crazy, and right now it has taken hold not just in those two countries, but all over Eastern Europe and Southeast Asia. Those economies drink energy.”
The chief executive of ISI may have to change his outlook if the price of oil stays higher than his internal energy team expects. Not a problem. “I tinker a lot. There are two evils – tinkering too much and becoming prone to flip-flopping back and forth, or getting really out of whack. I might err on the side of change.”
Unlikely. Nearly everyone is confident that his string will go to 27 years and beyond.