The Man Who Called the Roaring 2020s with Ed Yardeni

Summary

Podcast Summary: The Compound and Friends

Episode: The Man Who Called the Roaring 2020s with Ed Yardeni

Date: August 7, 2026
Hosts: Downtown Josh Brown, Michael Batnick, Daniel
Guest: Dr. Ed Yardeni

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Overview

This episode features Dr. Ed Yardeni, renowned economist and market strategist, who famously predicted the “Roaring 2020s” before the world saw the extraordinary technological and economic developments of the decade. The conversation centers on Ed's bullish thesis, the resilience of the American economy against repeated shocks, the impact and evolution of AI, the structure of the stock market, and why recessions have been largely eluded so far. The hosts draw on Yardeni’s decades of market experience and his hands-on, data-driven approach to understanding cycles, earnings, and policy.

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Key Discussion Points & Insights

1. Personal Introduction and Background

• Leisure and Life in Long Island
  The hosts and Ed open with a friendly local chat about dining spots and life on Long Island, with Ed sharing stories on tennis, family dinners, and favorite restaurants. (00:00 – 03:00)

• Career Summary

  • Ed's distinguished background spans the Federal Reserve, top strategist roles at major investment banks, and the founding of his own research firm.
  • Ed jokes about his resume:

    “I wish you wouldn't have done all that, because now it sounds like I can't keep a job.” (08:26, Yardeni)

2. The “Roaring 2020s” Thesis

• Original Call and Historical Analogy

  • Ed details why, in August 2020, he predicted a 1920s-style boom post-pandemic, likening it to the rebound from the Spanish Flu and WWI, emphasizing economic resilience and innovation cycles.
  • Noted that at the time, “roaring 2020s” was a contrarian and even “delusional” projection, given 2020's economic fears. (10:12 – 12:08)

• On Game-Changing Technologies

  • Ed saw the “digital revolution” as evolutionary, not revolutionary. AI, for him, is just the latest in a long curve starting with 1960s mainframes.

    “In my mind, AI is evolutionary, not revolutionary… AI is part of that [digital] revolution.” (12:08, Yardeni)

  • Declares “data is the fourth factor of production,” beyond land, labor, and capital.

    “There’ll never be a shortage of data... data is the fourth factor of production.” (13:16, Yardeni)

• Blockchains & Other Tech

  • Blockchain is acknowledged as additive, especially around stablecoins and finance, but was not front-and-center in Ed’s thesis. (14:14)

3. The Power of Bullishness and Resilience

• Why Stay Bullish?

  • Hosts marvel at the American system's ability to “spring new innovations out of nowhere” (AI’s breakthrough in 2022 being the key example).
  • Ed asserts:

    “American-style capitalism facilitates these types of things.” (15:34, Yardeni)

• Forecast to 2029

  • Ed expects no recession this decade and a S&P 500 target of 10,000 by 2029:

    “I think by the end of 2029... we will not have a recession. I have the S&P 500 at 10,000 by the end of the decade.” (16:09, Yardeni)

4. Earnings, Valuations, and Profit Margins

• Are We in an Earnings Bubble?

  • The panel debates if the current earnings surge is sustainable or “pulled forward” artificial growth. Ed’s view:

    “We’re kind of building on the productivity of these companies.” (23:01, Yardeni)

  • Ed credits increased profit margins largely to tech and communications sectors, which are now 45% of the S&P 500. The process of “creative destruction” is at work.

• On Forward Earnings

  • Ed relies on analysts’ expectations, but notes they don’t see recessions coming—so it’s his job to spot a true downturn.

  “Analysts do a very good job of predicting earnings with one rather important exception. They don't see recessions coming. So that's my job.” (20:09, Yardeni)

5. Market Breadth, Multiple Expansion, and Bubble Parallels

• Dot-Com Comparison and Market Breadth

  • Multiple expansion is far less pronounced than late '90s:
    • 250% then vs. just 18% now. Earnings growth—not valuation—is driving the rally. (32:44 – 33:13)
  • Market breadth is robust; “the impressive 493” (non-Mag7) outperforming, unlike the narrow leadership of 1999.

• Addressing Pessimism

  • “Wall of worry” is healthy; skepticism and fear of another bubble have served as market governors, not accelerators.

    “The market climbs a wall of worry and it’s good to have people worrying. I mean, that creates the opportunity.” (31:33, Yardeni)

• Structural Risk: Concentration

  • Concern over S&P 500 concentration (10 stocks = 41% of weight), but Ed points out the market is now broadening out.

    “When S&P 500 information technology communication services got to 45%... we no longer want to overweight...We're just going to market weight them.” (53:08, Yardeni)

6. Recession, Labor, and Demographics

• Why Have We Avoided a Recession?

  • Multiple “panic attacks” failed to derail markets; Ed catalogs more than 80 since 2009 that were non-events.
  • The U.S. economy’s “shock absorbers” (private distressed asset funds, institutionally prepared markets, Fed agility) have diffused systemic threats that would have created panics in previous eras.

    “Things just don't blow up.” (51:36, Yardeni)

• Generational Shifts

  • Ed advances the idea of a “G-shaped economy” driven by baby boomer retirees’ immense net worth supporting both consumption (“cruises”) and intergenerational transfers.

    “Baby boomers...have $100 trillion of net worth. It is the richest retiring generation ever and everybody's ignoring it.” (36:00–37:01, Yardeni)

• K-Shape Critique

  • Criticizes pessimistic frames that assume only the rich are benefiting—there’s widespread improvement, even if not universal.

7. Risks: Tech Spending, Debt Markets, and the Fed

• CapEx, Clouds, and Risk

  • Debate on hyperscalers’ trillion-dollar CapEx and whether this is pulling future demand forward. Ed responds:

    “The digital revolution is part of the technology revolution and the future is kind of here…AI is a very profitable business on balance, but we don't know who's actually gonna make the money.” (26:00, Yardeni)

  • On debt: acknowledges that “the debt markets see problems before the stock market does”—increases in spreads and credit default swaps for hyperscalers are worth monitoring.

• Fed Policy & Bond Vigilantes

  • Ed coined “bond vigilantes,” and although the 2020s have seen massive deficits, U.S. can still manage 4–5% yields, which he views as healthy.

    “I'll worry about all this government debt when the bond vigilantes worry about it.” (66:49, Yardeni)

• Policy Innovation

  • Ed suggests the Fed could consider letting the 2-year Treasury guide policy, and calls for greater transparency and openness to new frameworks.

8. Technical vs. Fundamental Analysis

• Ed on Technicals
  • Mostly a fundamentalist, but respects charts as “the madness of crowds” indicator. Cites recent technical moves in oil and gold as educational moments. (62:07 – 64:55)

9. Investor Psychology and Practical Takeaways

• Market History and Staying the Course

  • Ed and hosts argue time in the market is more important than timing (“Buffett approach”):

    “Roaring decades are actually the norm… we've had a couple decades where nothing happened.” (49:00, Yardeni)

• Pessimism Bias

  • A recurring theme is that pessimism is easier to market and internalize, but history rewards bullishness and sticking with proven, earnings-based strategies.

• Why Ed Still Works

  • Humble and lighthearted about why he continues:

    “I don't play golf, so I don't know what else I do with myself, so I'm rolling.” (74:46, Yardeni)

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Notable Quotes & Memorable Moments

• On AI and the digital revolution:

  “AI is evolutionary, not revolutionary... The revolution is the digital revolution.” (12:08, Yardeni)

• On why the U.S. avoids recession:

  “There’s so much money chasing good ideas and bad ideas, and the good ideas turn out to be very beneficial for all of us.” (15:34, Yardeni)

• On staying bullish and ignoring the noise:

  “I made a list of all the things that were stress tests and the GDP passed it just fine… why come up with a K economy pessimistic conclusion?” (46:04, Yardeni)

• On the Fed and debt:

  “I’ve concluded that I’ll worry about all this government debt when the bond vigilantes worry about it.” (66:49, Yardeni)

• On booms, innovation, and resilience:

  “Shortages get cured by innovation... technology literally eats its young.” (29:08–29:55, Yardeni)

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Timestamps for Major Segments

• 00:00 – 03:00: Long Island life and personal background chatter
• 07:30 – 10:00: Ed’s professional history and approach
• 10:12 – 13:50: Origins of the Roaring 2020s thesis and technology as a growth engine
• 16:09 – 17:42: S&P 10,000 prediction; rationale for no recession
• 20:09 – 23:01: Earnings as investment compass; “Fabulous Earnings Momentum” explained
• 26:00 – 29:55: CapEx, tech sector risk, innovation cycles
• 31:01 – 33:13: Dot-com crash comparisons, multiple expansion analysis
• 34:49 – 37:01: Generational wealth transfer and the G-shaped economy
• 46:02 – 49:00: Learning from panic attacks and retail resilience
• 62:07 – 64:55: Technicals vs. fundamentals; Ed’s approach to charts
• 66:22 – 68:57: Bond vigilantes, deficits, and practical Fed critique
• 73:03 – 74:14: SEC proposal on earnings frequency; call for more transparency
• 74:37 – End: How to access Ed’s research and closing thoughts

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Conclusion

This episode delivers a masterclass in long-term thinking, market history, and the psychology of investing through Ed Yardeni’s blend of optimism, pragmatism, and economic rigor. Listeners are encouraged to focus on earnings, stay skeptical of doomsday calls, and recognize the structurally bullish backdrop of the American innovation cycle. For Ed and the hosts, the best path is clear: “Time in the market, not timing the market.”

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To learn more or access Ed’s research: yardeni.com
(“Everything’s there.” – Ed Yardeni, 74:37)

Transcript

[Michael]

So what do you do? What do you do when you're not. I know. You're a Long island like us. What do you do when you're not working?

[Ed Yardeni]

It's a good question. Go out to dinner with my family. And I used to play tennis, but my eyesight on this side isn't what it used to be, so tennis is not my thing anymore.

[Michael]

What are your. Go to restaurants.

[Ed Yardeni]

We like Vietnamese. We like Japanese. We're at the North Shore of Long Island.

[Michael]

There's quite a few good Kotobuki for Japanese in Rosslyn.

[Ed Yardeni]

Yeah, it's really good.

[Michael]

Great spot, right?

[Ed Yardeni]

That's a great spot.

[Michael]

No reservations, though.

[Ed Yardeni]

I know, that's annoying. Yeah. But we got our own Japanese place in Glen Cove called Asian Fusion, and that's really good.

[Michael]

I think I know it.

[Daniel]

It's called Asian Fusion.

[Ed Yardeni]

Asian Fusion. Original from the movie theater.

[Michael]

Is it in that old Chinese restaurant? Remember that? With the lanterns?

[Ed Yardeni]

It's across from La Familiglia. I've with the.

[Michael]

Oh, yeah, yeah, yeah.

[Ed Yardeni]

It's across from Staples or.

[Daniel]

Yeah. You know what's great by you? Jaya. It g Or Jaya in Port Washington? The Port Washington.

[Ed Yardeni]

I haven't gone there.

[Michael]

It's got. It's.

[Daniel]

Don't tell me. It's Gaia.

[Michael]

No, it's neither. No.

[Daniel]

They have the best.

[Michael]

Yeah. Place. Amazing.

[Daniel]

The best. What's the duck called? The Peing Duck.

[Ed Yardeni]

Oh, yeah, yeah, yeah, yeah. We've been going there recently. It's like the best duck place I've ever had.

[Daniel]

I've never had anything like it.

[Ed Yardeni]

Yeah, yeah, I know.

[Daniel]

Unbelievable.

[Ed Yardeni]

Yeah, I used to. My favorite place used to be in. Near the London airport, but this. This tops it. It's fantastic.

[Daniel]

You found the duck.

[Michael]

No.

[Ed Yardeni]

Yeah, it's.

[Michael]

Now I feel like I'm gonna go there tonight.

[Ed Yardeni]

Yeah, it's the best.

[Michael]

I got another Japanese place for you. Dozo. Dozo. Have you been there? I think it's in Woodbury. Very good. It's in a. It's in. It's in the big. Whatever that big shopping center is called.

[Ed Yardeni]

Yeah, yeah. Woodbury Commons.

[Michael]

Yes. And then the best sushi restaurant on all of Long Island. Do you know what it is? Paul knows what it is. Nagahama. Number one rating.

[Ed Yardeni]

Where's it at?

[Michael]

It's in Long Beach. So it's a schlep for you, but yeah.

[Ed Yardeni]

Yeah. Are you. Are you in the South Shore? Did you move somewhere else?

[Michael]

I live in. I live in Merrick. Yeah, so does Michael. Nicole's from Long beach, and Long Islanders here.

[Daniel]

Huh?

[Michael]

Yeah, we all are.

[Ed Yardeni]

Yeah.

[Michael]

And too bad. Billy Joel, he's in Florida. That's where I'm going as soon as I can.

[Daniel]

So do we know who bought his house?

[Ed Yardeni]

No.

[Michael]

They just sold it, right?

[Ed Yardeni]

Yeah, the summer they sold the main house. I don't know if they sold the other house.

[Michael]

What was cool about the house? That house in the HBO documentary about Billy Joel from I guess it was last summer.

[Daniel]

So good.

[Michael]

It opens with him telling the story of working on a boat in the Long Island Sound and seeing that piece of property and saying, one day I'm going to own that. Way before he was a musician, and

[Ed Yardeni]

he actually did it early on his career, he had a terrible manager that just lost him tons of money.

[Michael]

Yeah, it was his wife's husband stole from him.

[Daniel]

His wife's husband?

[Michael]

His wife's husband. You mean him, his wife's brother? Yeah, his wife's brother cleaned him out.

[Ed Yardeni]

Cleaned him out like $18 million or something.

[Michael]

Yeah. Crazy story.

[Ed Yardeni]

Back then it was real money.

[Michael]

Yeah. The problem there is when your lawyer is also your business manager and has power of. Power of attorney, that tends not go well.

[Daniel]

So, Ed, how about those bond vigilantes?

[Ed Yardeni]

Well, they're. They're kind of restless. You know, they're pushing bond yields up a bit. I don't think it's to the point where I'm concerned about it. I think 4 to 5% is kind of the range that they should be at. But, you know, we could have a repeat of 2023. Remember when the bond yield went up from 4 to 5% in three months and at 5%, there were buyers? I mean, that's the wonderful thing about markets.

[Daniel]

I'm so glad you said that. I want your take on this. I think you might agree with me. I am technically inclined. I believe in technical analysis, but I don't believe in it with interest rates. And here's why.

[Ed Yardeni]

That's an interesting point.

[Daniel]

I'll tell you why. I'd like to hear your take. When a stock is consolidating or it's in an uptrend, eventually it breaks out and it continues to go higher.

[Ed Yardeni]

Right.

[Daniel]

At some point with interest rates. So if you look at the 10 year, you would say it's an uptrend and you would say it's been consolidating for a long time and it's probably going to break out of its range. If you're just looking at a chart, you don't know what it is. You'd say, yeah, buyers in control. But I don't think that with. With the stock market. When a stock breaks out, people chase it. Holy shit. It's going to go higher. I better buy today. It doesn't work with interest rates. Holy shit. I need to take. I need to borrow money. Stop.

[Michael]

Let me finish.

[Daniel]

You don't say, I need to borrow. You don't say, I need to borrow today because this would be more expensive to borrow tomorrow, number one. Number two, it might even be the opposite, because at higher yields, a ton of buyers come in. Holy shit. I actually lock it in. I want to lock it in.

[Ed Yardeni]

Yeah, yeah.

[Daniel]

Pushing.

[Ed Yardeni]

It's a different mentality.

[Daniel]

So it's the opposite of the stock market breakout.

[Ed Yardeni]

Very good point.

[Michael]

Well, I don't think any technicians chart yields themselves. They chart and eat a bond etf.

[Daniel]

JC would fight you. He charts interest rates.

[Michael]

Does he?

[Daniel]

Yeah.

[Ed Yardeni]

Or he charts he charges anything. Right.

[Daniel]

What's the difference?

[Ed Yardeni]

But I think it's a good point.

[Daniel]

Thank you.

[Michael]

The difference is that you can't buy or sell the yield. You buy or sell the bond.

[Daniel]

It's the inverse of. It's the same thing.

[Michael]

I guess it makes sense.

[Daniel]

I rest my case.

[Ed Yardeni]

Good case.

[Daniel]

Thank you, Ed. All right, let's go. Oh, headphones, please, if you don't mind.

[Ed Yardeni]

No headphones. I don't look at headphones, though.

[Daniel]

You look great in headphones.

[Michael]

You look great so that you could hear yourself. You're gonna let us sit here with these on our head and pretend we weren't. All right. All right. This message is brought to you by Nuveen. Private market investing is no longer just for large institutions and forward thinking investors are taking notice. Nuveen combines decades of private market expertise with innovative solutions across real estate, credit, infrastructure and natural capital, giving investors access to new sources of return and diversification beyond what traditional markets offer. From navigating volatility to managing risk in an uncertain environment, Nuveen strategies are engineered to complement traditional portfolios and unlock lasting growth potential. Grounded in experience and focused on the future, Nuveen sees today's markets as tomorrow's opportunities. Nuveen unlocking opportunity in private markets. Visit Nuveen.com alternatives to learn more. Investing involves risk. Loss of principle is possible. All right, ladies and gentlemen, welcome to the compound in front. What? Episode254 how did that happen?

[Host/Announcer]

Believe this.

[Michael]

We've done 254 of these.

[Ed Yardeni]

Fantastic.

[Michael]

Started in 2021. It's our fifth anniversary this summer of doing the show. That's great all guys. We have a living legend with us today. One of My. One of the people that I probably have learned more from than almost anyone I can really think of. I've been consuming his research and his commentary for as long as I can remember. For as long as I'm doing this. And we're super lucky to have him in the house today. His name is Ed Yardeni. Dr. Ed Yardeni. Round of applause.

[Ed Yardeni]

Thank you.

[Host/Announcer]

Thank you.

[Ed Yardeni]

Pleasure to be here.

[Michael]

Just the ladies.

[Ed Yardeni]

All right.

[Daniel]

Are you a Doctor of Markets? What are you a doctor of?

[Ed Yardeni]

Doctor of Economics? Doctor of Copper? I compete with Dr. Copper.

[Michael]

Dr. Yardeni is president of Yardeni Research, an independent investment strategy and asset allocation research firm he founded in 2007. He previously served as Chief Investment Strategist at Prudential Equity Group, Deutsche Bank's US Equities Division, and Oak Associates, as well as Chief Economist at C. C.J. lawrence Prudential. How do I say it?

[Ed Yardeni]

Bash Bagel beige.

[Michael]

I wasn't in the business back then.

[Ed Yardeni]

Yeah, yeah.

[Michael]

E.F. hutton. I know. Cause I remember the commercial. Earlier in his career, he was an economist at the Federal Reserve bank of New York. Held positions at the Fed Board of governors and the U.S. treasury, as well as teaching at Columbia Business School. Ed, thank you so much for coming.

[Ed Yardeni]

I wish you wouldn't have done all that, because now it sounds like I can't keep a job.

[Michael]

No, no. Long and distinguished career.

[Daniel]

He.

[Michael]

I read your book during the pandemic following the Fed for Fun and Profit. Is that what it was called?

[Ed Yardeni]

Yeah.

[Michael]

Okay. I loved it. And I learned so much about the history of the institution and why the investment markets at one time ignored it and then started paying really close attention.

[Ed Yardeni]

Really close.

[Michael]

Did you ever get the urge to go back into government work or doing something for treasury or Fed?

[Ed Yardeni]

Absolutely not.

[Michael]

Did you ever get the phone call?

[Ed Yardeni]

No, I did not get the phone call. As a matter of fact, in writing a few times, I've offered to do what the Fed does for half the price.

[Michael]

No takers on that.

[Ed Yardeni]

No takers. And I was kind of annoyed that I wasn't on that short list of possible Fed chairs. But then again, I've been saying that the Fed was wrong to lower interest rates because the economy is resilient and inflation's not at 2%.

[Michael]

Well, you were definitely not getting the job then.

[Ed Yardeni]

Then I definitely. Yeah. I wasn't making you feel better.

[Michael]

I don't actually think it was a short list. I think the Trumps love a reality show.

[Ed Yardeni]

Yeah.

[Michael]

And they loved parading Rick Reeder and all these people. But it was always going to Be this kid. Because this kid is like family to him.

[Daniel]

Yeah.

[Michael]

And fine. But it's a kid to Donald Trump. Donald Trump's best friend is Ron Lauder. He's Ron Lauder's son in law.

[Ed Yardeni]

Yeah, yeah.

[Michael]

This was. It was never gonna be you or anyone else. Yeah, it was always gonna be this. Okay, we're gonna talk Fed stuff in a little while. I want to get to, I think one of the best calls you've ever made. And I listened to it, I heeded it, and I think I'm benefiting as a result of it. You were talking about the roaring2020s, I

[Ed Yardeni]

think before the pandemic, actually August 2020. So.

[Michael]

Okay, right at the beginning.

[Ed Yardeni]

Yeah, right after the lockdowns. And there was a lot of angst obviously about what was going to happen. But I try to point out that if you look back at the 1920s, a few years before that, Spanish Flu. Spanish flu. And a couple years before that we had World War. The Great War, they called it back then. And as a matter of fact, in 1920, they had what they called the depression back then. And so if you were forecasting the 1920s in 1920 and said there's going to be the roaring 1920s, you would have been looked as delusional.

[Michael]

They had a recession in 20 and 21. Or a depression.

[Ed Yardeni]

Yeah, right. 1920.

[Michael]

Okay.

[Ed Yardeni]

Yeah. And this time around, we didn't really have a recession. It was a two month lockdown. And I kept betting on the resilience of the economy. As a matter of fact, early on in the decade, I kept saying that, you know what, I think we're experiencing the most widely anticipated recession of all times. That just ain't gonna happen. I call it the Godot recession. And so I was a big fan of the economy. I had lots of reasons for believing that the economy would, if anything, experience rolling recessions, but not an economy wide recession.

[Michael]

So it worked in the 2000s. The analog is in the 2000s you had radio and you had 1920s. 1920s you had radio and you had the assembly lines manufacturing automobiles, obviously driving

[Ed Yardeni]

a lot of technology.

[Michael]

Right. So that in that time that was the technology of the day and it

[Ed Yardeni]

increased standards of living and people were feeling good and it was the roaring 1920s.

[Michael]

So right now, from the safety of 2026, we could all say, oh yeah, of course, the roaring2020s, we have AI. But you said that in August of 2020, you could not have known about the existence of ChatGPT or any of these things.

[Ed Yardeni]

I made a list of some of the technologies that were already existing. So obviously robotics and automation, humanoid robotics, nanotechnology, cloud computing, all that stuff. And I said an AI. But no, I didn't anticipate that. In November of 2022, ChatGPT would kind of get everybody excited about this new technology. Let me just say something about that. And that is, please. In my mind, AI is evolutionary, evolutionary, not revolutionary. The revolution is what I call a digital revolution, and it started in the mid-1960s with the IBM mainframe. And the whole point of that digital revolution is to process more and more information as quickly as possible, as cheaply as possible. We've come a long way since the mid-1960s, and AI is part of that revolution. Part of it.

[Michael]

Okay, so you don't see this as being. I mean, I think you see it as being transformational, but you see it as more iterative. On top of Internet 4.0, 2.0, and

[Ed Yardeni]

mainframe, all the way back to mainframe computers. I mean, that was revolutionary at the time. I think what AI has done is it got us to the point where we realize we're sitting on a lot of data that we're not taking advantage of and really understanding what we could learn from that. So, you know, as an economist, I was taught that there's three factors of production, land, labor, and capital, and that they're all kind of scarce, and that it's an economist's job to figure out how to optimize everybody's happiness. With the scarce resources, there'll never be a shortage of data. And data is the fourth factor of production is the way I look at

[Michael]

it, we're creating more data every month than has ever existed in the world before.

[Ed Yardeni]

That's correct.

[Michael]

Something crazy like that.

[Ed Yardeni]

Yeah.

[Michael]

Okay. What's ironic is if somebody would have, in August 2020, taken what you said, we could be setting up for a roaring 2000s. Think about, like, what's the revolutionary technology they probably would have been talking about? Blockchains. No, I mean, block space a little bit.

[Ed Yardeni]

Yeah. I think, you know, blockchain obviously has a role in things like stablecoin, and that's probably going to revolutionize finance in many ways. So blockchain is just another technology that you can kind of throw in and say, here, you know, make a list of all the technologies that could make this the roaring2020s. And you could add that to that list for sure.

[Michael]

Michael and I were debating somebody. Good natured debate. In 2022, it really felt like the economy was headed Off a cliff. And the stock market was front running. That tech was down huge.

[Ed Yardeni]

Correct.

[Michael]

All the biggest companies. And then all of a sudden on November 30, ChatGPT is released. By December 15, it's all anyone is talking about on Twitter. And it sort of just kickstarts this brand new bull market for the most established tech companies and then a whole slate of brand new startups. Okay. And somebody was like saying, well, we were supposed to have a recession. But then this like, almost like the kick save of AI isn't what happens all the time. These innovation waves are unpredictable. Which is why you stay bullish.

[Ed Yardeni]

Absolutely.

[Michael]

You don't have to anticipate what it is. You just have to recognize that American style capitalism facilitates these types of things.

[Ed Yardeni]

Absolutely.

[Michael]

Springing out of nowhere.

[Ed Yardeni]

And it's absolutely flourishing in all sorts of ways. I think one of the things that, if I may say so what makes America exceptionalism is in fact our capital markets. There's so much money chasing good IDs and bad IDs and the good IDs turn out to be very beneficial for all of us because they're creating goods and services that can be sold and then the entrepreneurs get benefited from that.

[Michael]

Does the roaring 2020s run through the end of the decade?

[Ed Yardeni]

Well, we're in the seventh year of it. Everybody thinks it's six, but count it on your fingers. And we're actually in the seventh year exclusive of 2020. Yeah, let's get through this. And then I think by the end of 2029, which will be the end of the decade, I think we will not have a recession. I have the S&P 500 at 10,000 by the end of the decade.

[Daniel]

No recession before the end of the decade.

[Ed Yardeni]

You say no recession before the end of the decade and all I'm doing is taking pointing out that look how resilient the economy has been so far. We hit it with a pandemic, lockdowns. Then we had a buying boom that ran smack dab into supply disruptions. Inflation surged. The Fed went from 0 to 5.5%. That's why everybody thought there was gonna be a recession. So how could you not have a recession with the Fed tightening like that? And then we had a mini, mini, basically a weekend financial crisis in 2023. And then Trump comes along with tariffs. And then there's the war and there's tariffs again. And here real GDP is at an all time record high.

[Michael]

We've thrown a lot at this stock market.

[Ed Yardeni]

Yeah, yeah. I mean it' extraordinary and the last serious, the last recession we had was in 2008, 2009. It wasn't that two month lockdown recession. And bear, you know, recessions don't happen that much and they seem to be happening less and bear markets don't. As a result, bear markets don't happen that much. You're right. 2022 was one of the rare bear markets that did not have a recession.

[Michael]

I think if not for the AI explosion, it's possible that 22 led to something worse.

[Ed Yardeni]

That was my opinion. As a matter of fact, I don't remember if it was late October or early November. I said, I actually thought the bottom was made in June. And we kind of retested it, made a little, came down below it. And I said, I think it was early November. I said, I think that's the low. And the reason is because I look at forward earnings and forward earnings, which is analyst expectations for earnings dipped a little bit in 2022, but they certainly weren't falling off. Companies were still saying business is okay.

[Michael]

So we're going to get to modern markets in a second. But before we do, I mentioned that we had made a chart for you. You have on your [e-mail], it's yardeni.com market calls. And this is a running record going back years of all of the things that you've said, either cnbc, Bloomberg, Barron's, anytime that you're interviewed, just like the headline, which, and you don't get to pick these headlines. The editors pick how they're gonna. But it's close enough, right?

[Ed Yardeni]

Yeah.

[Michael]

Look what we made for you. Tell me if you think that's cool.

[Ed Yardeni]

Wow, that is cool.

[Michael]

These are all of your calls. The red ones are where you were a little bit cautious. The blue ones are just, I guess your commentary that they turn into headlines. And this goes back to 2009. And to your credit, you've basically been overall bullish almost the entire time since the market had its generational low. You really didn't get shaken out by tariffs. You didn't get shaken out by, oh no, now it's Omicron or like the virus is gonna like you kind of were steady through that. Yep. I just, I think it's commendable. I think it's remarkable. And it's been really helpful, obviously to people that are listening to you and tuning out a lot of other voices and you focus on earnings growth so much. So here's my. So when you look at this and look, you're talking about all types of scenarios, things that could happen. But in the big picture, are earnings the best North Star for investors not to time the market, but to just feel confident that there's a reason to stay put?

[Ed Yardeni]

Well, I think at the end of the day it's the perception of what the economy is doing. Because the economy more than earnings. Well, the economy is the fundamentals behind the earnings. And so if you do your homework on the economy and the economy looks like it's hanging in there pretty well through thick and thin, then you can pretty much conclude that earnings are doing. So. I do look at analyst consensus expectations, something called forward earnings, which is time weighted average of this year and next year's expectations. And analysts actually do a very good job of predicting earnings with one rather important exception. They don't see recessions coming. So that's my job. And you know, with, if you agree with me that there's no recession through the end of the decade, then analyst consensus forecasts, which are, I call them fimo Fabulous Earnings Momentum, that's what they're seeing and that's what they're expecting. Then I think we're in pretty good shape. But yeah, I think earnings is a key and I do have my opinion on valuation multiples.

[Daniel]

So is there too much earnings? Are we pulling forward? Is this as good as it gets?

[Michael]

Yeah. Ernie, can you answer the ear? Is there an earnings bubble?

[Ed Yardeni]

Well, that's a very good. Yeah, irrational exuberance and earnings those times. That's, that's why I came up with fimo Fabulous Earnings Momentum. And that's the.

[Michael]

Not the estimate.

[Ed Yardeni]

The alternative is the result.

[Michael]

No, no, the actual. Ask you the results. The bears pivoted in 2024. They said it's all PE multiple expansion and they were right because the MAG7 were getting re rated. Yeah, okay, that's not this year. This year it's 28.8% earnings growth this quarter, which is absurd. Are we pulling forward not including the

[Ed Yardeni]

other income that forgetting about Amazon. Yeah, the real stuff.

[Michael]

Forgetting about the anthropic write ups and all that.

[Daniel]

Operating earnings.

[Ed Yardeni]

Operating earnings.

[Michael]

Okay, so are we over earning this year? Are we pulling forward earnings from two years from now into this quarter? Is it an earnings bubble? So they're not saying stock bubble because you can't with earnings growth like this. So they're saying earnings bubble. What do you think about that?

[Ed Yardeni]

Well, you know, the arithmetic of earnings is real simple and that's revenues times the profit margin and revenues are doing fine even with the war in the Middle east and all the other crazy stuff around the world forward revenues are an all time record high. Analysts keep seeing that companies are reporting better and better revenues and at the same time, the profit margin keeps going up. It's going up into record high territories.

[Michael]

We have 15% profit margins now.

[Ed Yardeni]

Yeah, yeah, it's huge.

[Michael]

Is this the thing the bears missed the most, that profit margins would not in fact have to mean revert back to 1985 levels?

[Ed Yardeni]

Well, they actually have an upward trend now. You know, they kind of looked at the history before the past several years. In the past several years, we actually have seen an upward trend in the profit margin. Now part of that is because S&P 500 information technology and communication services now account for 45% of the S&P 500. And those companies tend to have high profit margins because they do creative destruction better than anybody else. They're always creating new product and when you bring in a new product to the market, you can have a high margin on that. But they know it's going to collapse and they know that they've got to come up with the next innovation. So yeah, the short answer is, I don't think that we're taking earnings away from the future. I think we're kind of building on the productivity of these companies. Look, I think what AI forced a lot of companies to do is say, okay, stop the music, we're not hiring anymore, we're not firing anymore. I want an up and down investigation of our company. Where can we use AI most effectively? What departments can we shut down? And that was a hugely important exercise because in some departments it's like, well, we really, AI is irrelevant here. They're doing a good job, let's keep them. Or AI is irrelevant here and they're irrelevant, so why do we even bother keeping them? So I think there's been a lot of cleaning house as a result of AI, But I think AI is also already and will continue to increase productivity of companies. And we're seeing that in profit margins.

[Michael]

So when you hear people say things like everybody, the reason it's an earnings bubble is because everybody is getting ahead of their future demand. Stockpiling GPUs because they think the prices will be higher in a year. Stockpiling compute, stockpiling memory chips, they're buying out the whole supply, therefore they're pulling forward. And there's just no way two years from now there will be the same level of demand for these components that are driving the S&P's earnings higher. Based on how big tech is well,

[Ed Yardeni]

the vibes I get out of the hyperscalers, the managements wish they had more compute today because they could make a lot more money today if they had it. And then we've had a couple of episodes I think where Elon had more compute than he needed and he just rented it. So you know, it's a very liquid market, it's a very competitive market.

[Daniel]

I think the point is though that the hyperscalers are going to spend an estimated trillion dollars next year on Capex, whatever. And that's going to somebody's bottom line.

[Ed Yardeni]

Correct.

[Daniel]

They're not going to be doing that in 2029, 2030 now who knows?

[Ed Yardeni]

Who knows?

[Daniel]

Google, I think Google just raised $25 billion worth of debt and there was like 100 something billion dollars wor they're still spending obviously, but at some point that spending you would think is going to come down.

[Ed Yardeni]

I can't say that I won't. I mean it's conceivable. But I think the digital revolution in turn is part of the technology revolution and the future is kind of here. I mean we're already talking about 2030 and 2040 and what the world's going to look like and I think it's making everybody's head spin. We really don't know. We have a good idea that AI is a very profitable business on balance, but we don't know who's actually gonna make the money and who's gonna go out of business.

[Michael]

Somebody said it's all the sci fi movies from the 70s and 80s.

[Ed Yardeni]

Exactly.

[Michael]

That we grew up with are now being productized. So drone warfare, robots, everything. Humanoid robots, space satellites.

[Ed Yardeni]

Sure.

[Michael]

I don't know. Are they working on teleportation? Somebody probably is.

[Ed Yardeni]

So. But it's beat me up.

[Michael]

But that's why it's so. You said dizzying. That's what it's so disorienting because these are the sci fi tropes that we all grew up with from Star Trek, Star Wars. Like now we're actually seeing these things in the wild.

[Ed Yardeni]

Let me just take a slight diversion here and that is I mentioned before how economists are trained to think about the economy. Three scarce resources or scarce resources. And it's their job to optimize these things so that increases prosperity. That is in Samuelson, it's in economics 101. That's the way they teach it. And it's very pessimistic, it's very depressing because it's like what? There's only so much and we all have to figure out the market figures out. Some people want the market to figure out. Other people want the socialists to figure

[Michael]

out was the guy that said everyone was gonna starve. Malthus.

[Ed Yardeni]

Yeah, Malthus. It almost sounds like that these are

[Michael]

the constraints, these miss technology.

[Ed Yardeni]

Economists aren't taught as the impact of technology. To my mind, what I've learned over the years is that actually economics is very positive. It's all about letting the free market tell you where quote unquote scarcities exist by raising prices. And then some entrepreneur says wait a second, I got a better idea. And this idea is going to be far better than what this is and we're going to sell at a lower price. So economists just aren't really good at anticipating technology. I'm not saying I am, but at least I'm open minded about it and recognize that technology is hugely important.

[Michael]

All right, so to that end, a great deal of the earnings growth that we're getting is thanks to companies like SanDisk and Micron, which are now gigantic index weights. And they're in a position where they can sell their product for whatever they want. And they are right. And it's not like they've thrown up all these new fabs and they're selling more chips. They're selling out of their supply. There is no inventory and the earnings growth is coming as a consequence of them raising the prices on every unit they sell.

[Ed Yardeni]

Yeah.

[Michael]

So to your, to what you just said, I guess my argument has been, well, won't people come along and say exactly, why don't we figure out how to get more juice out of this chip?

[Ed Yardeni]

It's already happening. I mean research is already going on and it's the price mechanism. The price mechanism says, wait a second, these guys are making a ton. Their Profit margin is 60, 70%.

[Michael]

So compute should come down and those chips may not be obvious holds going into year three or four. Well, shortages get cured by innovation.

[Ed Yardeni]

Well, it goes back to what I said about creative destruction. The same company that just put out an amazing new innovation and has a huge margin on it is already working on making it obsolete because if they don't do it, someone else, somebody else is going to do it. So you know, technology literally eats its young. I mean it's a crazy kind of business, but all you got to do is sit back and watch what they're doing.

[Daniel]

SanDisk just reported, not SanDisk, Western did just reported a $3.2 billion quarterly profit. It was up from $282 million a year ago. The stock is down 15% or whatever. Now in fairness, it's up a ton. All right, so whatever, it's just sell on the news. Right? So there is, there's still a lot of doubt in this market. Daniel, chart B please. For the last six months. Ed, I think you'll like this one. The six month forward, PE is down 8% and yet the price of the index is up 11%. This is very unusual. Normally when you have multiple contraction between 8 and 10%, that's because the price is coming down.

[Ed Yardeni]

Correct.

[Daniel]

So normally when that happens, the market is down 9% over the same time,

[Ed Yardeni]

the market's gotten cheaper on fabulous earnings

[Daniel]

momentum because people don't believe it.

[Ed Yardeni]

Because the people don't believe, don't believe it will continue. Yeah. And they, you know, and they, they have some legitimate concerns about circular financing. And you know, this is the dot com bubble all over again.

[Michael]

But do you worry at all about the. Just while mentioned it?

[Ed Yardeni]

No. I've been pointing out recently that the whole case for 1999, 2000 all over again has just been blown apart by this amazing earnings surge. Back then we had FOMO fear of missing out. So we had a PE rally and the earnings really turned out not to really be there. This time around it's grounded on earnings.

[Michael]

I think we'd all be better if we didn't live through 1999. I think I would be making more money and taking more risk if I hadn't been through that.

[Ed Yardeni]

Yeah. But on the other hand, the market climbs a wall of worry and it's good to have people worrying. I mean that creates the opportunity.

[Michael]

Michael showed me a chart of the advanced decline line two nights ago on our YouTube show. As another way to blow up the 1999 analogy, we have an all time record high in the ad, meaning stocks in every sector, almost every industry group, are breaking down to new highs. In 99 it was only, it was tech. If you were Cisco investing in anything else, you look like an idiot. You felt like an idiot every day.

[Ed Yardeni]

Yeah, yeah. I mean look at this year we've had, I call them the impressive 493 have significantly outperformed the magnificent sector.

[Michael]

Got oil stocks, biotech stocks.

[Ed Yardeni]

Biotech, yeah.

[Michael]

Finance, it's everywhere.

[Ed Yardeni]

And biotech's using AI to go where none of us have ever gone before.

[Michael]

So that's not 1999esque at all. In 99 it was very narrow.

[Ed Yardeni]

1999 is so yesterday.

[Michael]

Yeah. You know, okay.

[Ed Yardeni]

Yeah. I mean I'm looking at the future. I'm not. I Mean, clearly we can learn from the past but let's not ignore the pace at which the future's coming at us.

[Daniel]

I think you make a great point about the dot com bubble is acting like a governor on this stock market rally a little bit. I think people are so freaked out about blowing another bubble. So I actually think it's a good thing. I hear, I totally hear what you're saying. This is a great point. A great chart from Truist wealth showing the multiple expansion in the dot com. Leading up to the dot com peak it was 250% multiple expansion.

[Ed Yardeni]

Yeah, wild here.

[Daniel]

I mean it's basically flat over the last three years.

[Michael]

It's 18% versus 250%.

[Daniel]

Hope was doing all of the heavy

[Ed Yardeni]

lifting and well, people could come back and say well the multiples come down but it's still high at 20 and mean reversion. We should be going down to 15. But you know all these technical rules of thumb. You have to give the fundamentals some weight too in all of this. And again I think, and I was early on in the decade saying I don't think we're going to have a recession. And the markets come around to that view. It didn't believe it in 2022, as you said, it was pretty garden variety correction as a sell off. I mean 25% over nine months but no recession. And I think the market's come around to my view that this economy is, I don't know that it's bulletproof, but it's.

[Michael]

We've had, we've had some very smart people sitting in your chair that I don't think they emphatically stated this but they're pondering now out loud bulletproof without embarrassment saying Urian Timmer at Fidelity, who's great. Rick Reeder, who's great.

[Ed Yardeni]

Yeah, great.

[Michael]

They're asking questions out loud without the answer, but just like daring to ask the question. Is it possible that this economy is not subject to or prone to the types of what we used to refer to as vanilla recessions where a manufacturer takes on too much inventory, customers stop buying it, take losses, lay people off.

[Ed Yardeni]

I've thought about that and I figured it out and that's because I have inside information.

[Daniel]

What is that?

[Michael]

On the future.

[Ed Yardeni]

I'm a baby boomer. I'm a baby boomer. And so in the beginning of the decade I knew where the baby boomers were going. They're gonna get older and they were gonna start to retiring. And I figured that that could create a skills mismatch in the labor market. It create shortages in the labor market. And I figured, well, technology solves problems. The problem is the baby boomers, a huge cohort is gonna retire and what are we gonna do without them? And the answer is technology comes to the rescue. We have to augment the skills of younger workers with technology. And that's exactly what's happening. So you know, people have been talking about the K shaped economy. I'm a little bit of a contrarian when I hear that everybody has bought into it. I said, what's the matter with that thesis? And the K shaped economy is that the rich are getting richer and the poor are getting poorer and it's not sustainable.

[Daniel]

The first part is true.

[Ed Yardeni]

The rich are getting. Yeah, it is. And a lot of the poor that were poor are also doing well, but are doing better. But look, I'm not saying there is.

[Michael]

Is that why we have all these communists running around? Well, this is no bottom.

[Ed Yardeni]

Yeah, they just want to get everything for free. But the point I want to make is I'm not denying that there are people that are struggling out there. I'm just saying that the K economy isn't an explanation. It's a pessimistic theory that it's not sustainable and therefore we have to get into recession. There's even a cockamamie notion that 5% of the population, the rich, are accounting for 50 to 60% of consumption. Really? I mean, have you been to Costco recently? Have you been to a mall? Have you been to a restaurant? The rich don't eat more than the rest of us. They don't. Let me get right down to the point here. The G shaped economy, which stands for generational, is the baby boomers. The baby boomers and the silent generation, which are actually older than the baby boomers. There's still some still kicking around. They have $100 trillion of net worth. It is the richest retiring generation ever and everybody's ignoring it.

[Michael]

I think that's a good thing.

[Ed Yardeni]

It's a great thing.

[Michael]

They're in comfort, they're not starving.

[Ed Yardeni]

Think about it. Interest rates go up, they love it because more Yield. They own 60% of money market funds, so they love it. The unemployment goes up or down. They're on a cruise. They're on a cruise. Mortgage rates, they locked them in at 3% or they paid off their mortgage. So what are they doing? They're helping their younger kids. The younger kids are the ones that have the affordability problem. And I see just so much intergenerational, even personally I'm helping my kids out. And you have to. When I graduated from, when I came out of graduate school, I didn't even think about asking my parents to move in. I mean, you know, back then things were really affordable.

[Michael]

But this is the problem. This is the problem. Not everyone's parents can help them.

[Ed Yardeni]

Not everybody.

[Michael]

Correct. So you have a lot of stuff going on in social media where a person who's 27 years old will go direct to camera and say, I don't understand, I live in New York City. How are all these people doing this? Because I can't do it. I'm bartending at night, I'm working a white collar job during the day. And the answer is. Well their parents had money in the stock market, in real estate, maybe small business ownership. And you didn't and yours didn't and it's horrible, but it's the reality.

[Ed Yardeni]

Yeah. I think there's stories about older people that saved for retirement and they're not, they didn't save a ton of money but all of a sudden they have to help their kids. So even people, younger people who don't have very wealthy parents, they're still helping them out. And maybe you know, with childcare for example, you're going to live closer to your parents so they can help with childcare because it's unaffordable to actually remember.

[Michael]

Remember Harry Dent?

[Ed Yardeni]

Sure.

[Michael]

So his shtick from I guess the 90s on, maybe it predated me, was the boomers would retire, they would all sell their houses at once, they would liquidate their stock portfolios. The opposite happened. Nobody downsized. Now they're maintaining two homes, they're borrowing against their stocks rather than selling them. It's more tax advantageous to live that way. And they're in bigger homes than every prior generation, in many cases two homes. And they're also paying rent for their 20 something children who are out of college with a degree and not earning enough to live in the places they want to live. So that demography argument for why the 2000 and tens and 2000 and twenties.

[Ed Yardeni]

Yeah. I mean we know that some of

[Michael]

disastrous did not work.

[Ed Yardeni]

Yeah. We know that some of the socialists have very well off parents and actually don't have a life that they're struggling that really well.

[Michael]

That's how they can afford to protest all day.

[Ed Yardeni]

Yeah, all day, exactly.

[Daniel]

Ed, getting back to where we are today, I want to throw a theory out at you.

[Ed Yardeni]

Sure.

[Daniel]

What we just saw with situational awareness and the blow and awareness and the blow up any Any resemblance to the tremors of Long Term Capital Management. Now I looked at that, what they were doing was obviously very different, right? Like that was levered fixed income arbitrage and it's, it's different thing but some of the ingredients need to be in place for that amount of leverage and excess to happen. Any, anything in there that we've got another two to three years left and then we will look back on the blow up and say yeah, those are the seeds of destruction. Not that per se, but yeah, I

[Ed Yardeni]

mean it's, it's possible that this was sort of a warm up act for big, bigger blow ups. Long Term Capital Management I think took like something like under $200 million and leveraged it into a trillion dollars. So back then that was serious, serious money. And then of course they were rescued and nothing terrible happened in the economy in 1998. As a matter of fact that set the stage for the 1999 bubble in technology. The euphoria, I mean clearly the blow up of situational awareness has been almost irrelevant. Has had really no impact on the economy.

[Michael]

I would take it further. I would say actually it's the healthiest possible thing that could happen. You have somebody that has really brilliant ideas about technology but no idea how to risk manage a portfolio.

[Ed Yardeni]

Correct.

[Michael]

Having that person carried out feed first and the market is up the next day.

[Ed Yardeni]

And by the way, the people that got hurt are very rich people.

[Michael]

I made this argument like they're the most risk tolerant people there are. They're venture capitalists with billions of dollars.

[Ed Yardeni]

Just okay, so one blew up. Who cares? Look, that goes back to the sh absorbers in the capital markets during the Great Depression. There was no such thing as distressed asset funds. Now we've got distressed asset funds with hundreds of billions, maybe a couple of trillion dollars. And they're always depressed when things are going well and they're just waiting around until something blows up and they clear the market. They clear the market maybe at 25 cents on the dollar somebody gets hurt. But basically it's like if private credit blows up. We haven't talked about private credit in a while. It's a portfolio of private credit and some of them are blow up and it reduces the rate of return. It's not like the banking system blowing up the way it did in 2008. So that's a pretty significant.

[Michael]

Goldman Sachs has a rescue fund immediately as soon as commercial real estate starts to wobble in the pandemic like nobody will ever go to the office again. These buildings are zeros. Blah, blah, blah. The next day there are newspaper articles. Goldman is launching commercial real estate focused distressed asset fund. Like, you're exactly right. And then in the case of credit, they all launch secondary funds for private equity because. Or continuance funds because they know there's an opportunity. If somebody has to get out, that's an opportunity. Then that's an opportunity for somebody that doesn't have to get out.

[Ed Yardeni]

Look, in 2008, I think Buffett came in and he was sort of the rescue fund. And I think in the current situation, Citadel turned out to be the rescue fund and they bought it the next day. I think they had already made a lot of money on that nice clean deal. But Leo, the first name of the guy who ran that fund was a newbie. He had no business playing with that kind of fire.

[Michael]

Your s and P500 year end target 8,250. All right, 82.50.

[Daniel]

Where does that come from?

[Michael]

You're on the high side versus the street. But there are some people at 8,000 now.

[Ed Yardeni]

Yeah, yeah, there are. Look, I do PE times E. And I use my assessment of what analysts, what the market's expectations is going to be at the end of the year. Right now I look at forward earnings, but let's not get into that. Right now the analysts are looking for $403 a share for next year. Okay.

[Michael]

For S&P 500 earnings.

[Daniel]

Yeah. Okay.

[Ed Yardeni]

Multiply that by 20 and you've got yourself over 8,000 and it's still. The year isn't over. And all they've been doing is raising 2027 all along here. And by the way, the 2027 number is a clean number. It doesn't include any mark to market capital gains. So it's really that simple. And Same thing with 10,000 by the end of the decade. I think by the end of the decade the market's gonna be discounting $500 a share. Times 20 is 10,000. I mean, it's. You know, you can do this at home, folks. I mean, it's.

[Michael]

So why doesn't everyone. What's the biggest obstacle to that coming true?

[Ed Yardeni]

Recession, which everybody fears is inevitable.

[Michael]

The Fed makes a mistake, Fed makes a mistake.

[Ed Yardeni]

The war in the Middle east, it gets worse.

[Michael]

I mean, so the usual shit that we always worry about over and over

[Daniel]

again, but something has to start the recession.

[Ed Yardeni]

I just wanna say that between 2009 and the. Between the great financial crisis and the great virus crisis, I actually, for my accounts, kept a diary of what I call panic attacks. And I said, look, we all got panicked. We all got totally burnt in 2008, 2009. So it's gonna be pretty easy to scare people. And there's always a perma bears, the pessimists out there to do the job. So I kept adding to the list. I made like 80 panic attacks that turned out to be non events.

[Michael]

We have. We have a reason to sell chart. We do the same thing. We compile. Who used to send the books out with the newspaper? Was that Laszlo Burini?

[Ed Yardeni]

Remember the book?

[Michael]

Yeah, yeah, okay. RIP Laszlo Barini. But he, he used to send out like, I don't know, was it quarterly?

[Ed Yardeni]

Yeah.

[Michael]

Here are all the news stories that move the market. Yeah, that was a great affirmation to flip through that and just say, wow, none of that mattered.

[Ed Yardeni]

Yeah, yeah, yeah.

[Michael]

What's that?

[Daniel]

What's this?

[Ed Yardeni]

Well, that's. That's it.

[Michael]

Right.

[Ed Yardeni]

So you have to. You have to kind of learn. It's like learning by doing. I mean, learn from recent experience. Recent experience shows I made a list of all the things that, you know, were stress tests and the GDP passed it just fine. And you know all these things about the consumer. There are high delinquencies and the rate of employment is low. I mean, at the end of the day, look at what the consumers are doing with retail sales and they're still spending. And so again, why come up with a K economy pessimistic conclusion? And why not really? Just look around you remember Peter Lynch.

[Michael]

The stores are full, the planes are full, the concerts are full, the ball games are full.

[Daniel]

It's not just 1%.

[Michael]

They're paying $80,000 to watch a Knicks game. Now, I understand that's not everyone, but I think it's emblematic of everyone.

[Ed Yardeni]

Absolutely.

[Michael]

Okay. Yeah, I'm with you 100%. Could we do some of your charts?

[Ed Yardeni]

Yeah, sure.

[Michael]

All right. S and P500 bull markets since 1966. And then you've got this red line, which is where we are now. This is one of the most bullish ways to look at the current environment. What's your starting point for the current bull market? You did October 22nd.

[Ed Yardeni]

Yeah, October 12th, 2022.

[Michael]

Okay. Are all of these others dated from a similar low or.

[Ed Yardeni]

Yeah, yeah, official lows.

[Michael]

Okay. All right, so once we're down 20%, that starts the clock for. And then we recover. That's the new bull market.

[Ed Yardeni]

Once we actually make the low, that's. All of these is from the low.

[Michael]

So can I ask a Phil question? People say the 1982-2000 bull market. But if we were starting from the low, it would have been the 1974-2000 bull market. So why do we start the secular bull market count at the new high, which was 1982, in that case. But then when we look at the chart like this, we're starting from the lows. Why do we. I mean, is it not inconsistent or.

[Ed Yardeni]

No, I think. I mean, I never even thought about it that way. To me, it's like the bear market takes it down 20, 25, 50%, and then there's clearly a bottom with the benefit of hindsight. And then you just. You take that bottom and say, how much are we up today? The next day until the next bear market.

[Michael]

So a lot. Most people don't agree with this, but I've always thought of it like the bull market starts when it eclipses the prior bull market's peak. So 2013.

[Ed Yardeni]

Oh, I see what you're saying.

[Michael]

2013 is the first time you got.

[Ed Yardeni]

Otherwise you just got your money back and now. Yeah.

[Michael]

So that. So that's the way.

[Ed Yardeni]

That's another way to look at it.

[Michael]

Well, that's. That's what they do with 82, and that's what they do with the. Yeah, I guess they do that with the fifth. The 40s and 50s is when you get back to the starting point before the Depression. But I guess it's probably semantic.

[Ed Yardeni]

That's a. That's a good point. But look, we were talking about the roaring 2000s or the roaring 1920s. Those are not the only roaring decades we've had.

[Michael]

Oh, 50s, 80s.

[Ed Yardeni]

Yeah.

[Michael]

We've had 90s.

[Ed Yardeni]

Yeah. Roaring. Roaring decades are actually the norm. We had a couple of decades where nothing happened. And that was the 70s.

[Michael]

20 teens were underrated.

[Ed Yardeni]

Yes.

[Michael]

Right. I think that was 14% average annual returns.

[Ed Yardeni]

Yeah.

[Michael]

Nobody talks about the 2000 teens like it was the good old days.

[Ed Yardeni]

Yeah, yeah.

[Michael]

But they definitely were.

[Ed Yardeni]

Yeah, yeah, yeah.

[Michael]

It's a good. It's a good point. What's the takeaway from. From this chart, though?

[Ed Yardeni]

I. Which one?

[Michael]

Daniel? Give me that back.

[Ed Yardeni]

Well, it's kind of the Warren Buffett approach. Right. It's time in the market is more important than.

[Michael]

If we follow these prior bull markets, we could be a third of the way in. Only.

[Ed Yardeni]

Yeah.

[Michael]

That's incredible to me, that. That visualization.

[Ed Yardeni]

Yeah. Yeah.

[Michael]

Okay. I love it. What do you think?

[Daniel]

I love it.

[Michael]

Bye.

[Daniel]

Bye.

[Michael]

All right. I think the point is

[Daniel]

for there to be. The recessions don't just happen because people just Decide like, oh shit, like I don't want to spend money.

[Ed Yardeni]

They happen because of credit crunches. The Fed raises interest rates. It gets up to a level where the bond market says, man, if they keep raising short term rates, something's going to blow up in the credit system. So the bond guys start actually buying the bonds and then sure enough, something blows up in the credit system and that becomes an economy wide credit crunch. But it usually needed to involve the banks. The banks were the regulated institutions, are the ones that their capital were depleted. What's different this time, ever since we've created a lot of shock absorbers in the market. Not necessarily the government created, but created by the private market. In the capital markets there's a lot of shock absorbers and things just don't blow up. The other thing you have to say is the Fed's not exactly irrelevant here. The Fed has a lot of experience playing whack a mole in the credit markets from the great financial crisis, the great virus crisis. And so in March 2023, we had a many, many, many banking crisis. Lasted a couple of days because they came in and provided liquidity and basically said all deposits are going to be protected.

[Michael]

That's another depression the Bears were robbed of. The Bears thought that that would be the next banking crisis. And they said no limit on deposits, don't worry about it.

[Ed Yardeni]

I love the Perma Bears because they do a lot of work that I don't have to do. In other words, if it wasn't for them, I'd have to do all this research of what could possibly go wrong. And they do it all for me. And all I gotta do is ask, well, what are they missing? And they rarely miss anything. But the Perma Bears will get you out at the top, they'll get you out in the middle, and they'll get you out at the bottom. You'll never be in the market, you'll always be scared of it.

[Michael]

So good segue. Daniel. Can I have chart 4, historical concentration peaks. This was one of the other big things that the Bears were talking about. We had this highly concentrated tape where 10 stocks were 50% of the market cap or whatever it is, and they were all of the earnings growth in one year and et cetera, et cetera. So this is showing the Nifty50 concentrated peak, the tech and telecom bubble. Japan, because of course, always. Yeah, now show Japan. Okay, here you go. So now we're calling this one the AI Big ten. And you know, to the Bears Credit, they're sort of right here we're at 41% concentration in the 10 largest stocks and they're all the same theme pretty much. Do you worry about, do you worry about this going from 41 to 45 or 50 and that being a blow

[Ed Yardeni]

off top overall tape When S&P 500 information technology communication services got to 45% of the market cap of the S&P 500 last year on December 7 we said we no longer want to overweight information technology and communication services. We're just going to market weight them. And we reiterate our stance on overweighting financials, industrials and we added health care. So in other words we were saying that we thought the market was going to broaden and it has. 493 have done great this year. The impressive 493. The small caps. Look, if a recession was coming you'd probably start to sniff it in the small cap index because those guys run out at the first signs of a possible recession.

[Daniel]

How would you sniff it? You would look at the small caps.

[Ed Yardeni]

Yeah. Russell 2000. I mean I think they were kind of held back all this time because of all this recession. That widely expected recession that didn't happen.

[Daniel]

The last time we got a real broadening was at the top. You have this chart, chart five where you show a ratio of the 100 divided by the 500. And what's with the circles? You think we're going to start to see another broadening like we did then without the recession?

[Ed Yardeni]

Well, I think what I'm trying to point out and I do it when I write this chart up is that the current situation kind of looks similar, but it's not. We're not anywhere near that peak.

[Daniel]

The rate of change looks similar.

[Ed Yardeni]

Yeah, the rate of change looks similar but it certainly looks as though we're not going down that road. And look there. Sometimes there's a coincidence between these charts and the recessions and the business cycle. But at the end of the day, with the exception of most recent, exception of 2022, we typically do not get bear markets, stock market panics without a recession. Earnings have to take a dive. If that's not going to. And not only do earnings take a dive in a recession, but the PE takes a dive.

[Michael]

I'm a catch up person versus a catch down person.

[Ed Yardeni]

Okay.

[Michael]

The small caps did not participate in the first two years of this three year bull market.

[Ed Yardeni]

Right.

[Michael]

They were completely on the sideline and with good reason. Interest rates were too high and they didn't benefit from any of the AI or very Few. There were component suppliers. So you had a moribund economy. It wasn't bad, it wasn't great. And they just were not growing earnings to the extent that large caps were. And so as a result, they were held back. And if you're looking at that and you're negative and you're predisposed to being a bear, then the thing that you say when the TV camera goes on is this is a negative divergence. And ultimately this will end with the large caps catching down to what the small caps are already signaling. It almost never goes that way. In my experience, everything's a catch up. So this year, small caps explode, higher bank stocks work, industrials work. It. It's the catch up trade. And it happens all the time that way. From my experience. Why don't people understand that that's how it goes?

[Ed Yardeni]

I think there is a pessimistic streak in a lot of investors. They do get nervous. It's pretty hard to kind of stay the course when there's so much negative news and analysis out there. But that's kind of where I try to help people out, is kind of trying to hold their hand during the bad times and say, well, here's why this is not gonna continue. But I don't know, I mean, pessimism just seems to sell better.

[Michael]

Do you worry about this week? It felt like Goldilocks. So I don't even know what triggered it. Maybe it was an earnings report, but there was just this explosive euphoric run. Was that on Monday or Tuesday?

[Ed Yardeni]

Monday and Tuesday. Really?

[Michael]

Monday and Tuesday?

[Ed Yardeni]

Yeah.

[Michael]

And all of a sudden it just felt like whatever we were worried about last week with margin calls and don't worry about that. Look at these fabulous earnings reports. And people just wanted to buy. And it's not just tech. They're buying Goldman Sachs, they're buying Morgan Stanley.

[Ed Yardeni]

Well, do you worry?

[Michael]

It's as good as it gets.

[Ed Yardeni]

On Sunday I wrote one of my quick takes.

[Michael]

Yeah.

[Ed Yardeni]

And I said, information technology is on sale. And I looked at the pe. So maybe some people read my piece and said, you know what? The stock really is dirt cheap if you believe the earnings.

[Michael]

But does it feel Goldilocks esque right now?

[Ed Yardeni]

I had a call from one of my accounts this morning, said, ed, are we in a melt up? And so I sent them a chart that compares the current S&P 500. And I did the same for the NASDAQ to what happened in 99 and 2000. And you could argue that we're still on course like that. The difference Though is the PE is higher now than it was back then. So it's earnings led. That's a big difference.

[Michael]

Let's look at this. This is from Chart kid Matt. 45% of S&P 500 stocks.

[Ed Yardeni]

I should have hired Matt.

[Michael]

Yeah, we got him.

[Daniel]

So we are starting to see a broadening. Just a week ago 59% of the index was outperforming the index itself which is pretty high. It's been way lower than that now with the tech rally that's brought it down to 50%.

[Ed Yardeni]

We actually do a weekly chart on the breadth of forward earnings on a three month basis and a 12 month basis for the 500 stocks.

[Daniel]

How are we looking?

[Ed Yardeni]

85%.

[Daniel]

85%.

[Ed Yardeni]

What are up? Rising, Rising. You know.

[Michael]

Unbelievable.

[Ed Yardeni]

Yeah. Now you can, you can look at that chart if you're a pessimist. Yeah, but the next thing they do is they take a dive. Well, yeah, but there have been times when they just stayed at 85%.

[Michael]

Do you worry about the rate of spending at the hyperscalers? Just thinking about prior capex bubbles throughout history. We'll skip 1999. Think about the canals, the railroads, the whole litany of booms and busts.

[Ed Yardeni]

Yeah, the dark fiber.

[Michael]

So Daniel, chart nine just to set the table. So this is fixed income but we're talking about debt. So this is the hyperscalers, what they're able to sell bonds for above a treasury and as you can see it's rising like one of their share prices. Do you think that it's getting carried away? Is it a systemic risk to the market if the bond market decides they no longer want to go along with these spending plans?

[Ed Yardeni]

I'm not going to close my eyes to things that I'm not that thrilled with. And this is not a very thrilling development on the debt side. And I think it is very important to bring this up because usually the debt markets see the problems before the stock market does.

[Daniel]

And credit default swaps on Oracle I think are at like a multi year high.

[Ed Yardeni]

Yeah, yeah.

[Michael]

I mean debt investors are not focused on upside, they're focused on getting their money back.

[Ed Yardeni]

Yeah, I mean they're basically looking at OpenAI and saying, you know, Oracle depends on OpenAI and Nvidia and so it reminds them of the kind of circular financing we had. So I'm not telling you there aren't similarities but it's a much bigger economy today. It's a much more diversified economy today. And I think the market has overdone it in terms of giving the market Cap share to technology and communication services. I mean they don't really account for 45% of the economy. And I think you're gonna see technology used. Blockchain and AI and other technology used by financials to dramatically increase their productivity. I still don't understand why I get clients send me checks. I mean, I wish we could just make that all Venmo, you know, and healthcare, you go to a doctor or a hospital and it's like the productivity is like non existent. But they're catching up now, you know, they're starting to. Doctors are actually now being forced to type in your information instead of just kind of taking random notes. And AI is being used in biotech to dramatically increase the efficiency of researching for new drugs. So again, I think I'm just betting on the future. I'm just betting that it's here and. Hold on.

[Michael]

Can I ask you some research questions?

[Ed Yardeni]

Sure.

[Michael]

Okay. What do you do when the technicals and the fundamentals disagree? Do you say science must be right, therefore my research must be missing something?

[Ed Yardeni]

Yeah. Well, over the past couple of years, I wish I'd followed. I'm a very amateur technician. I take a ruler and a pencil and I draw a line. And I saw that in oil. I mean, I'm kicking myself. Cause we've been in a bear market in oil from 2022 when Russia invaded Ukraine and it spiked up right until before the war. And so I have charts on the website where I drew the line and said, look at that, we're in a bear market. And then in early this year, it started coming closer to the downtrend than went through the downtrend. And meanwhile on the news it's saying that America's sending all these military. I mean, I'm kicking myself. It was so obvious, the technicals, the market was just screaming at you that something like that was going to happen. On gold, I noted that we're in a channel that started a few years ago and I got a little bit excited in the situation because we were predicting 5,000, we'll raise it to 5, 5,500 by the end of the year. But it had a pretty reasonable correction and now it's been holding at 4,000. I think gold particularly lends itself well to being technically analyzed rather than, oh, I do too.

[Michael]

Because it's pure supply and demand for the asset itself. There's nothing else.

[Ed Yardeni]

Yeah, but to your point, at the end of the day, I guess I have to stay true to my school. I'm a fundamental analyst. Maybe what's Relatively unique about the way we do things is we do economics and strategy together. You know, I don't have to go talk to a strategist to kind of get the story lined up.

[Michael]

You have a technician in house, me, it's you.

[Ed Yardeni]

Okay, but I mean, it's just amateur. I'm not even claiming that there's an

[Michael]

amateur can look at it and say, the trend is up, the trend is down.

[Ed Yardeni]

Yeah, I mean, I have a lot of respect for technicals, let me put it to you that way. And I think the charts do tell you about the madness of crowds, the psychology. It's a psychological indicator. It's like a Rorschach. And if you can say, well, what's the market telling me? That can be very, very important. I mean, we do this over and over again. You see some of these stock charts or other charts like commodity prices going straight up. I think we all know by now that the next thing they do is they go straight down. The only question is how far down.

[Michael]

Commodities mean revert.

[Ed Yardeni]

They mean revert. Yeah, but, but we just saw that in the Korean stock market. We've seen it. The semiconductors. But is that the end, you know, is that the end of the, the rally? Not if you look at pe, which gets you back to the fundamentals.

[Michael]

Do you read the research of other strategists or do you find that that would cloud your own ability to come up with.

[Ed Yardeni]

No, I, I, I, Yeah, I mean,

[Michael]

who do you, who do you, who do you like to read or who do you pay attention to?

[Ed Yardeni]

I pay attention to all the perma bears. Okay, me too, because I think I do relatively good work on the bullish side. And so the perma bears are great, because when I see that what they're saying is kind of becoming the popular view, it does bring out my contrary instincts of like, what could they possibly be missing?

[Michael]

You pay a lot of attention to the people that write about the Fed, or do you just kind of digest what the statement is and move on just for amusement?

[Ed Yardeni]

I mean, I've got my own amusing views on what the Fed's doing. I've been wrong on the Fed, but. Right. And what I mean by that is I was against the Fed lowering rates. And again, this is why I'm not Fed chair, but I was against the Fed lowering rates. In 2024, they lowered it by 100 basis points, the Fed funds rate. I said, I don't think the bond vigilantes are going to be happy with what you're doing. And sure enough, the bond Yield went up 100 basis points.

[Michael]

You invented that term back in 1983.

[Ed Yardeni]

And back then. I went back and read it recently. I said, the bond vigilantes are worried about $250 billion deficits. And now we got one and a half to $2 trillion. And it's like we're at levels of the bond yield that the economy can deal with. It's not really a problem.

[Michael]

People have been saying bond vigilantes for 45 years. Apparently there's no level of debt that the US can take on where they will actually do anything.

[Ed Yardeni]

Well, I tend to be pretty pragmatic about these issues, especially the ones that people get all huffy and puffy about and deficits and debt. I do occasionally appear from my home office on these zoom calls and things like that. I tell them, look in the back, all these books at the top two shelves. I got books from the 1980s called Living beyond our means and the debt bomb and all these kind of all doom and gloom scenarios. And I've concluded that I'll worry about all this government debt when the bond vigilantes worry about it. And they did worry about it. In 2023. We went from 4 to 5%. But what I learned from that is kind of like what that experience reminded me of is like it's a market and at some point you're going to have a price. And 5% did the trick. Also, the bond vigilante on the 10 year, on the 10 year. And also the bond vigilantes are not the only players in the bond market. There's also the treasury and the fed and a whole bunch of other people around the world. And on November 1, 2023, Janet Yellen came in with her quarterly refunding announcement. Said, I need more money, but I'm not going to increase what I usually get from the bond market. I'm going to do it in the bill market. And also Ackman announced that he shorted the bonds at 4%, covered at 5%. So a lot of things kind of came together. I think 4 to 5% is kind of the old normal. This is where we were before the great financial crisis. This is where we were before the inflationary binge of the 1970s.

[Michael]

You had a 5% bond yield in the 90s, one of the greatest decades for stocks ever.

[Ed Yardeni]

Well, 4 to 5% is healthy. It's a bullish level. It means that the capital markets are actually free to allocate. The bond market was rigged between the great financial crisis and the great virus Crisis. And it was just a dumb policy. It shouldn't have happened, but it did.

[Michael]

So if you ever got the call, your government needs you, you wouldn't consider it?

[Ed Yardeni]

Oh, absolutely.

[Michael]

I know you love your life the way it is, but if they needed

[Ed Yardeni]

you, if they needed me to run the Fed. But I have conditions. One is I'll do it from home.

[Michael]

Do you live in D.C.

[Ed Yardeni]

all right,

[Michael]

that might be a knockout factor. What are you doing? What are the other conditions?

[Ed Yardeni]

Well, you know, I would actually experiment with a differently than Warsh. I would say, okay, I would kind of up the ante on Warsh's idea that Warsh wants to have the market express an opinion that's not about where REITs should be without being polluted by what Fed officials are chattering about. Right. And then he says, and we will take our guidance. Basically he's saying, we'll take our guidance from the market. And then the next sentence he says, but we're not going to necessarily do that. So he's all over the map on that. Why not? And this is a first, this is a scoop for, if you will. Why not take the two year treasury and use that to run monetary policy?

[Michael]

Many people think they do that anyway.

[Ed Yardeni]

Well, why follow the two year.

[Michael]

Make it official.

[Ed Yardeni]

Make it official. Why not? Right now the two year is saying that the Fed should raise rates three times. Okay, here's what I would do. I would say, okay, let's raise it a quarter and see what the two year tells me. After that, if the two year tells me I still need two, then I'll give them one more. And that's a scenario. The Fed funds rate could move daily. Right? I mean, why does it have to move when this committee gets together? Now Warsh wants to have fewer meetings if he wants to do it quarterly and he wants to know what inflation number to watch. I'd watch the GDP deflator. It's the inflation rate for the entire economy, not just consumers. And right now, with and without food and energy, it's like three and a half to 4%.

[Michael]

So do you think they just, they're doing things because they've always done them and they like it. Like collecting anecdotes for the Beige Book. Like sitting in a truck stop and like sitting in a diner and talking to a farmer.

[Ed Yardeni]

I never got anything from the Beige Book.

[Michael]

Of course not. But they just have always done it. Yeah, there's a lot of that. And so when somebody like Warsh comes along, the traditionalists, they don't know the previous Tradition, which is the Fed never speaks.

[Ed Yardeni]

Right.

[Michael]

No press conference. If they change weights, maybe you find out about it a week later, maybe you don't. That's the real tradition.

[Ed Yardeni]

Yeah.

[Michael]

And then we have this very aggressive kind of communication era post financial crisis, which I understand maybe the time for that is gone.

[Daniel]

Maybe.

[Michael]

And we don't need to hear from Washington every month.

[Ed Yardeni]

But I'm biased. You'd make me very unhappy. I'm. One of my jobs is to be a Fed watcher. What am I gonna do?

[Michael]

You know, you watch the two year like they will.

[Ed Yardeni]

I need. Yeah. I mean I think I had the one who first called them the Federal open mouth committee, but I've heard others use that expression. Yeah, but I don't think they're gonna stop talking. I mean, Morsh might have nothing to say. And what's going on right now at the Fed is very confusing. He's got three dissenters at the last meeting who wanted to raise rates. Is it possible that he wanted to raise rates but couldn't get the votes and it would be too embarrassing for him to be the fourth dissenter? Or is he kind of thinking about his boss, the fellow who hired him? His actual boss? Yeah. And saying, do I really want the President to start beating up on me the way he did on Powell? I mean the reason the President hated Powell is simply because Powell raised interest rates before the elections. So revenge was what it's all about. I don't know where Wash his head is. You know, he's keeping it pretty, pretty quiet.

[Michael]

So they want to talk less. On a parallel track, the SEC is floating a proposal whereby corporations only report twice a year terrible. Instead of quarterly terrible. So tomorrow Berkshire Hathaway is going to report. They'll report on Saturday. There'll be no conference call. The stock is fine. It's at an all time record high right now. I feel like it would be okay. You think it would be terrible?

[Ed Yardeni]

Yeah.

[Michael]

Will it lead to more financial crimes?

[Ed Yardeni]

Again, I'm biased. Right. I want the Fed to meet often and to chatter a lot so I can comment on it. I want quarterly earnings seasons because there isn't that much time from one to another. I think that's very useful information. I mean I again, I follow weekly analyst consensus expectations and I look at this year, next year and do a time weighted average and the revenues, great economic indicator. Weekly and forward earnings is a great leading indicator of actual earnings. So I would kind of miss it. But I think for investors, investors should have more, not less information.

[Michael]

More information is Better. Okay. Ed Yardeni, ladies and gentlemen. Thank you so much for being here. Did you have fun on the show?

[Ed Yardeni]

Absolutely.

[Michael]

All right, so that was the first half. We're gonna take an intermission. We'll do a dinner break. I got you.

[Ed Yardeni]

Almost.

[Host/Announcer]

All right.

[Michael]

I want to tell people where they. They could subscribe to your research and learn more about what you do and your books. So what is the website URL?

[Ed Yardeni]

Yeah, you just go to yardeni.com y a r-e n I.com and, okay, everything's there.

[Michael]

Okay. And you're gonna keep going and keep it rolling.

[Ed Yardeni]

You know, I don't. I don't play golf, so I don't know what else I do with myself, so I'm rolling.

[Michael]

I get so much out of it personally, and I know thousands of other professionals on Wall street do as well. So thank you on behalf of everybody for everything that you do.

[Ed Yardeni]

I appreciate it.

[Michael]

Of course. All right, guys, that's it for us this week. Please go to yardeni.com. thanks so much to everybody for watching and listening. We'll talk to you soon.

[Host/Announcer]

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