If he hadn’t been guarding Louisiana from a Russian invasion, James F. Smith might never have earned a master’s and a doctorate in economics, funded his honeymoon to Mexico, and launched a career that established him as a financial genius.

Smith, a 60-year-old professor of free-market economics at the Kenan-Flagler Business School, laughs heartily when he recounts the ironic story of his entry into academia. He has received several national awards for the accuracy of his economic forecasts. But nearly 40 years ago, he could not foresee the developments that altered the course of his life.

In 1961, Smith had a newly minted bachelor’s degree from Southern Methodist University (SMU) and a quandary: Without a graduate degree, good jobs eluded him, but he didn’t have enough money to enroll in graduate school. One afternoon at the book store on the SMU campus, Smith ran into Richard B. Johnson, a former professor who was the head of the economics department, who inquired, “Why don’t I have your application for graduate school?”
Smith replied, “What are you talking about?”

Johnson had saved a fellowship for Smith, the program’s “best student.”

Two days into his graduate program, Smith left school for Fort Polk, La. A member of the National Guard, he had been commissioned into active duty as part of President Kennedy’s effort to bolster the armed forces in response to the Russian construction of the Berlin Wall.

This made no sense to me. If the problem was in Germany, why didn’t they send me to Germany?” says Smith, a tank platoon leader in the 49th armored division who logged 60,000 miles between Dallas and Fort Polk in less than a year. “As I tell all my students, at least not one darn Russian got into New Orleans on my watch.”

The young soldier returned to SMU and landed under the tutelage of another SMU professor, Paul T. Homan. “I’m going to take care of you,” Homan said.

Homan, who had flown Sopwith Camels against the Red Baron in World War I, understood how national interests could interfere with a man’s scholarly pursuits. So he reserved for Smith a National Defense Fellowship, which made the Ph.D. “pretty darn painless,” Smith says, and helped fund a honeymoon with his new bride, Susan.


An optimist by nature

Smith has made the most of his fortunate beginnings, to say the least. These days, he is regularly quoted in USA Today, The Wall Street Journal, and other financial publications—notoriety that commonly leads to inquisition. Colleagues, friends, and acquaintances constantly tune in for a “hot tip” during conversation with this top economist, an inconvenience Smith shrugs off.

It goes with the territory,” Smith says. “But that’s why you get calls from the press. My area of research is hot with the general public. People ask me if I have secrets. The secret is to ask a lot of questions of knowledgeable people and be a good listener.”

Smith, whose system of forecasting simply entails digesting every available nugget of information, has some sound advice for every investor: “Don’t get in beyond your tolerance for risk, whatever it is. I can tell you what I know, but the bottom line is, only you can make that choice. I was talking to an investor recently who was having trouble sleeping. It’s not worth it. What’s worth more, a good night’s sleep or another percentage point of yield?”

A native of Texas and an optimist by nature, Smith is forecasting rosy times for the U.S. economy—despite a shaky fourth quarter—until 9:15 a.m. on May 16, 2002, when he says we’ll plunge into recession.

This is when the Board of Governors of the Federal Reserve System will release industrial production data for April, and we will see clear evidence of widespread declines across many industries.”

When it comes to economics, Smith sees more than most, and he has a reputation for honesty.

Good or bad, he has a way of telling it like it is. He is always going to say what he thinks,” says Bill Dunkelberg, a professor at Temple University who has been a colleague of Smith’s for almost 30 years.

Unlike the army, Carolina needed several attempts to persuade Smith to join up. After 15 years as a financial economist with Sears, Roebuck and Co. and five years as chief economist at Union Carbide, Carolina called. In 1988, he filled a gap created by the death of Maurice Lee, the school’s dean for 25 years. Eight professors came and went from 1984-88 before Smith. He teaches the same economics class Lee had taught, belongs to many of the same boards, and publishes the bimonthly Business Forecast newsletter, which had been silent for four years between Lee and Smith.

The first shock is how much work it is,” says Smith. “People always say if you really want to learn a topic, teach it. But they forget to tell you how much work it is. It takes hours and hours and hours of preparation.”

He teaches only Masters of Business Administration (MBA) students—every Carolina MBA graduate has Smith as an instructor at least once. He spends the summer teaching executive MBA students and running a popular elective course in Mexico; then in the fall, he teaches executive education programs and travels to economic conferences. In the spring, he teaches four sections of macroeconomics.

Smith takes pride in the revival of the newsletter, which analyzes current trends in the state, national, and global economies. He has few peers when it comes to economic forecasting. A member of the Wall Street Journal’s forecasting panel for 15 years, he made the Journal’s most accurate forecast in 1996 and was second most-accurate in 1997 for the Journal and Business Week. A founding member of the National Business Economics Issues Council and a longtime board member and past president of the National Association for Business Economics, he has won the forecasting derby of the Forecasters Club in New York three times, including 1998.

Former Carolina professor Bob Eisenbeis, now Senior Vice President of the Federal Reserve Bank in Atlanta, has great respect for Smith, whom he has known for 20 years, and was primarily responsible in recruiting him to UNC-CH.

He is very knowledgeable and he has a good feel for the economy as a whole,” Eisenbeis says. “He has an encyclopedic mind. The way he can absorb and remember data is unique. He can tell you a number from the third quarter in 1933.”

Smith has been married to Susan for 36 years, and they have four children, including two Carolina graduates. Smith, the self-proclaimed world’s worst golfer, recently took up scuba diving and has some deep thoughts for his students.

I tell them that the only thing that will hold down their progress in life is what’s between their ears. There’s no limit to what you can do. You have to imagine it and try it,” Smith says.

A roller-coaster start has evolved into a smooth ride for Smith. He deals with the most powerful issue in the world—money—yet he conveys a nonchalance that can only be construed as confidence.

After all, Smith says, “We’re not doing brain surgery here. It’s business.”

Mark Briggs was a student who formerly contributed to Endeavors.