Can A Bad Recession Be Avoided? | Ed Yardeni

the Baby Boomers collectively 75 million baby boomers have a net worth of 70 I think it's 73 yeah 73 trillion dollars 73 trillion dollars and what do they accumulate this all for well when they retired they expected that they'll be a traveling playing golf traveling going out to restaurants [Music] it's true that many of the experts appearing on this channel so far this year did not predict the markets would be up so strongly as they are so far this year today's guest is one of the few who argued for more optimism what did he see and what have the Bears been missing to find out we're fortunate to speak with economists and investment strategist Ed yardeni Dr Ed president of the excellent research firm yardeni research Ed thanks so much for joining us today yeah my pleasure as a real pleasure Ed been looking forward to having you on the program for a good while I got a number of questions for you based upon a lot of you and your firm's recent Publications very quickly though just to kick things off I'd like to ask you the very general question I like to ask all my guests when they first come on the program what's your current assessment of the global economy in financial markets well I think it's actually looking better than it did last summer last summer there was widespread concern about what was going on in Europe Europe looked as though it could very well go into a very severe recession uh during the winter and it turned out that Europe did go into recession but it's a relatively mild one there was also expectations that once China eliminated its lockdowns last December that there would be a lot of economic growth led by China and that's turned out to be disappointing the the most pleasant surprise I think for to the consensus has been that the U.S economy has yet to fall into this much feared recession it's been the most widely anticipated recession of all times and maybe as a result it's not going to happen because everybody's sort of making adjustments that reduce selected of a economy-wide recession but my point is we really have been in a recession since early last year it's just been what I call a rolling recession hitting different Indus Industries at different times all right a rolling recession so is there potential here then that we we just sort of hand the Baton to different parts of the industries but the the whole economy as a whole doesn't really drop I think that describes what actually has been happening I I believe I coined the term rolling recession back in the mid 1980s we had a Plunge in oil prices after they saw it in the 70s and the techless Texas and Oklahoma and other areas where uh money had been spent on oil and gas drilling and building a lot of commercial properties for the oil Giants uh that all kind of came to a crashing end very quickly as the price of oil took a plunge and this time around I think we're seeing uh also a rolling recession uh like the mid 80s which did not turn into an economy-wide recession uh and this time around we have had a recession in the Housing Industry but let's be very specific here we've had a recession in the single family Housing Industry multi-family has been actually very strong and we will when we look at construction more broadly we've had some really strong numbers coming out of non-residential construction and out of uh Public Instruction so we know there's a lot of onshoring going on factories coming back to the U.S so there's a lot of building of factories uh and we're also seeing uh just really the early starts of an infrastructure spending program I live on the east coast and the I-95 I just uh uh was disrupted by a collapse in the the north lanes and uh we're going to have to be in Philadelphia right what's what's that I was in Philadelphia right yeah I was in Philadelphia so there's a lot of uh infrastructure that needs to be fixed in this country we've had a consumer recession but it's been in Goods people had gone on a buying binge for goods coming out of the pandemic then they had more than they wanted retailers ordered too much and they got stuck with a lot of inventory so they had to discount it which is what happens in a typical Goods recession but meanwhile the consumers swung around and started spending like mad at services the cruise lines for example those stocks have been on fire um so I think when you look at it kind of sector by sector you can see some areas of weakness offset by areas of strength and all in all it's still editing adding up to an economy that in GDP terms is growing by one to two percent all right um great answer I want to dig into it more deeply with you just to put a little bookmark to get back to GDP has been growing GDI has been contracting and we've had a couple of experts on this program recently like David Rosenberg who's been sort of looking at that contrast would love to get your opinion on it but but before we do that I do want to underscore what you talked about because you've written some very recent uh observations of this I think is really important uh you you've kind of coined a term called Mama uh making America manufacturer again um and uh you've got some great stats that you recently put out here um you know you're talking about uh the trillions of incentives that are flowing you know into the manufacturing sector correct um so much so that you say it's getting hard to find shuttle Chevrolet Mega sites for new plants so almost the demand to spend the money is is overwhelming the overwhelming you know opportunities on the ground um you said that Capital spending in Real GDP hit a record high of 3 trillion in Q uh q1 of this year right and that's a big deal so we're looking at these a lot of recessionary data um but there is still a lot of fiscal spending coming into this yeah I think that's a very very important part of the story because in previous recessions the Federal Reserve which caused many of the previous recessions by raising interest rates would then reverse course and lower interest rates and it would take a while before fiscal stimulus would come into play and by the time uh fiscal authorities lowered taxes or increased spending we were already in the recovery phase this time around for the past couple of years we've had legislation being passed that spends uh hundreds of billions of dollars on infrastructure and provides incentives for technology companies to bring production back here particularly for semiconductors so that has to be taken into consideration is another source of stimulus offsetting whatever weakness we're seeing in some areas of the economy I'm curious do you think the Federal Reserve is happy to see that amount of fiscal spending coming into the picture right now or is it some ways is that sort of at odds with what they're trying to do the economy with quantitative tightening and higher rates well it's a bit baffling because they have this uh notion that the FED that they do monetary policy they don't do fiscal policy fiscal policy is up to the president and to Congress and they don't comment on it uh but they certainly have to take it into consideration uh when they uh conduct their monetary policy and right now they've been uh tapping slamming on the brakes however you want to look at it but they've been really trying to slow the economy down and meanwhile the fiscal authorities have been slamming on the accelerator uh generally speaking that's not a great way to drive a car you you wind up probably in the ditch but I don't know that that analogy that car and analogy particularly Works in this situation I think it just as I said all adds up to a soft Landing for for the economy all right soft Landing for the economy um now the FED is out there trying to tame inflation right now um and obviously the fiscal side of the story is not helping I would imagine do that so what is your inflation outlook here well I I think inflation is moderating it's it certainly looks as though it peaked last summer I think that uh one of the reasons that a lot of economists really haven't understood what's going on with the economy is they simply forgot the very simple thing and that is the pandemic was a big deal it was it was something quite different than we've ever been exposed to it's certainly uh not nothing that was ever included in any model of of the economy and so you had to really kind of scramble to really understand that the pandemic was a huge deal it was uh a huge shock to all of our lives and there have been a lot of aftershocks and one of the shocks was uh inflation and a lot of that was related to the fact that the government provided what I call helicopter money of course the originator of that expression was Milton Friedman uh at and that was picked up by Ben Bernanke and the idea is if you drop helica money from helicopters people pick it up and they'll spend it and that's basically what we did during the pandemic there were three rounds of checks that were dropped deposited in people's uh bank accounts and the Fed was at that point the very easing in its stance on monetary policy and the result was lots of spending on Goods a big jam up of at the ports of of La a big trouble getting a lot of trouble getting trucks to to deliver the merchandise and that created a huge inflation in the good side and then with a lab we started to see it also in rents and rents also was affected by the pandemic a lot of landlords couldn't raise rents maybe some couldn't even collect rents and so once the moratoriums and and landlords were lifted they scrambled to make up for what they had lost and so I think a lot of the inflation has been pandemic related and as we're uh you know moving in time away from that shock I think we're likely to see that inflation continues to to moderate I also think we're going to have a productivity boom uh to deal with the fact that we have a labor shortage uh and that being the case uh I think there are a lot of forces in play to bring inflation back down okay um well let's um let's trundle over to jobs for a moment um so given what I understand from your outlook particularly the sort of rolling recession where you I don't think you get the sense that we're going to have an economic trough that's that's coincident with a bunch of a bunch of layoffs uh like we saw in 2008 or even in in the tech sector in 2001. um so uh to folks that are worried about um uh you know the the jobs data um worsening because we've been near record low unemployment for so long seems like you think maybe we're going to sort of stick there for a lot longer stick near the the lows well you know I'm a big believer in staying close to the data and and trying to determine what what the data is saying and where it's leading and in the payroll employment numbers we've had several months of better than expected uh payroll numbers a few hundred thousand per month that the labor force has been expanding as people see more opportunities for forgetting jobs there's a real shortage of uh of Labor we know that job openings are basically running a 1.8 job openings for every unemployed person and they're still remaining at that kind of level construction Employments are an all-time record hi that doesn't happen in recessions in recessions housing activity takes a dive and so does construction but as we just discussed there's a lot of reasons why Construction is remaining strong in multi-family starts and non-residential construction and in infrastructure spending by by the uh by the government another kind of pet theory of mine and it's uh related to my age I'm I'm 73 I'm a baby boomer and I'm increasingly unique because I have no plans to retire all my friends are retiring and uh that leaves them with a lot of free time and a lot of them have accumulated a pretty good amount of wealth between pension payments and the Social Security 401k and just what they've accumulated in their house and in their own investment portfolios and the Baby Boomers collectively 75 million baby boomers have a net worth of 70 I think it's 73 yeah 73 trillion dollars 73 trillion dollars and what do they accumulate this all for well when they retired they expected that they'll be traveling playing golf traveling going out to restaurants and when you look at the restaurants you see they're full with a lot of people with gray hair when you look at the airports you see there's a lot of people with gray hair that are traveling this all leads to a tremendous demand for waiters and waitresses and Airline staff uh and uh that's where we've seen a lot of the the the job demand and as we said the fiscal stimulus is very big and we need a lot of construction workers for infrastructure and onshoring all right um and it is and you know look as long as the as long as the Baby Boomers are are feeling flush right and uh and and right now we have uh you know last year I think was a probably a pretty nerve-wracking year for many of them right seeing their the net worth at least of their financial assets go down 20 plus percent right um but this year obviously is off to a much better start when we talk about that for just a minute so um uh uh I like I said in my introduction that you were a lot more optimistic about where the markets could go earlier this year they've now had a really big run they've they've been largely powered Higher by the mega cap eight um and I've seen some recent writings of yours saying um you know the downside to these sort of melt UPS is they do tend to be followed by meltdowns how are are you as sanguine about the prospects for the markets now as you were at the beginning of the year or have things maybe gotten a little bit too far ahead of themselves given this run up well it was really at the end of October that uh I looked back and I said you know I think we might have made a low in the S P 500 on October 12th the NASDAQ didn't really bottom until uh late last year uh and it's actually up a lot more than the S P 500 uh but uh my call was based on just the tremendous amount of pessimism that I saw out there to be quite honest I actually thought we bought them on June uh I think it was 16th June 16th when we got down to 366 I've had something about these Da Vinci numbers in my career and so I was like maybe that's maybe that was the low uh we did have a nice rally through August 16th uh last year but then I anticipated that uh pal uh fetchair Powell might be a spoiler and sure he sure was and uh it started talking about you know interest rates having to go still a lot higher uh and then the market took a dive live through October 12th and I think it was a very successful retest of the June the June low it was about two percent below the June low but I figure that technically speaking we've we retested the low pessimism was about it was as thick as it was back in March 2009 and surely things aren't anywhere near as bad as they were during the great financial crisis and then I've been in the rolling recession camp that seems like uh most other economists and strategists were convinced we were going to go into recession and their simple observation was they've we've had a tremendous increase in interest rates perpetrated by the fed and that's got to lead to recession and some of them said when we run out of excess savings built up during the pandemic will surely fall into recession and I've been saying you know we're in a recession it's just a rolling one and meanwhile there's a lot of reasons to believe that uh it's not going to turn into an economy wide recession and that was really the heart of my fundamental analysis for believing that we weren't going to have a severe earnings recession and that earnings would recover all right so for folks that are pointing to you know a lot of these classic recession indicators like inverted yield curves leading economic indicator you know data that data sets that are that are down only in at levels you see during recessions I I guess you would say yeah because we're in a recession um it's just it's just sort of evenly just or not evenly distributed but it's it's I guess rolling probably is the best term yeah um and uh and therefore we're just not going to see the the typical kind of widespread pain that we expect to see during a normal recession so like if the nber came out and said hey a recession started in November of last year and ended in September of this year I don't think you'd be that surprised well um I I I would be surprised in the sense that that my my definition of a recession that I share with the NBR is really based on the index of coincident economic indicators uh one one of the uh recession indicators of course has been the index of leading economic indicators uh it's been uh down since uh December of 2021 uh and so it's really been predicting that a recession is due by now but meanwhile the index of coincident economic indicators and I think through May is at an all-time record high uh usually in a recession you see a peak in the index of coincident economic indicators which is a monthly data and then you see it going down and then at some point it troughs and the recession Peaks and troughs always have in the past coincided with that index of coincident economic indicators so you know I I don't know that we really need the dating Committee of the National Bureau of economic research to come up with that observation and you could all do this anybody could do this at home but they like to get together and chat about these things and they pretend that their insights are based on a lot more than just one index but I kind of questioned that but uh look um the leading economic indicators uh one of them of course is the inverted yield curve they've been pointing out to us traditional severe recession uh I've often said that you know any data that doesn't support my my Outlook is bad bad data it's going to be revised I'm not really making that argument about data the the data that's out there now all I'm saying is that uh well most economists who said you know the leading economic indicators have never been wrong they've gotten eight of the past recessions absolutely right the same thing for the yield curve I said well it doesn't mean that they they aren't due to be to be wrong I mean they could be wrong once uh in in a long track record of being right especially when you consider the things that are different this time like the demographics that I uh alluded to with regards to the consumer having a tremendous amount of retirement wealth like the fiscal stimulus which is very unusual to occur before a recession and to stimulate an economy in a way that makes a recession uh less less likely all right and we've had a lot of conversation on this channel of what we refer to as the pig through the python right which was all that stimulus that was pumped into the economy monetary and fiscal and you know once it starts coming out it was you know starts getting used up then people were predicting okay we're going to have that really nasty recession we've talked about how the fact that okay yeah the monetary stimulus really those nozzles got turned off the fiscal stimulus though is still still kind of roaring so we do have that making its way into the real economy with all these construction projects we've talked about you're kind of adding almost a third uh source of stimulus now which is retiring Boomers right and and that's what you say 73 trillion I mean that that's that's a big yeah that's that's uh the data compiled by the Federal Reserve as part of their U.S financial accounts data it was a few years ago they started to create a distribution account uh framework where they see who's got who's got the dough and they look at baby boomers silent generation Gen X Millennium and uh you know it's one of the reasons that uh we have income inequality uh in America is because older people tend to make more money than younger people they also tend to have more money stashed away saved away invested and we have a huge generation here baby boomers that have accumulated a lot of wealth uh over the years and you could say well it's only the the top one percent that have accumulated that well it's probably not true a lot of wealth has been accumulated in pensions uh Social Security is is a source of wealth uh and uh then of course the the housing Equity is is big for a lot of people and you know when people retire they no longer have kids the kids are out of the house they don't have that expense they got more time to travel to go out to eat they certainly don't want to cook dinner and just have the two of them sitting at home so uh the demographics is a very very important factor so is the fiscal stimulus so is the onshoring uh and so is the underlying resilience of the uh economy and financial system the banking system just had a little bit of a stress test and it actually passed it pretty well okay um I think that's a really important element to consider and I just being honest I don't think we've talked about it enough on this channel in the past which is that the spending coming from the boomer generation really as sort of a third stool here of stimulus um because you mentioned it I'm curious what's your outlook for the housing market right it definitely seems to have peaked so we seem to be undergoing some sort of Correction I think the question is how much we've seen I mean I could put together a long laundry list I think of depressive factors on the housing market but the big one obviously is the fact that mortgage rates are more than doubled right um do you expect to see perhaps a bigger correction in the housing market that we see in other parts of the financial markets themselves the economy or are you optimistic about its future too well I'm relatively optimistic I don't see it uh being a a huge booming sector anytime soon with a mortgage rates so high but there have been a lot of unusual developments in the housing market again there's a lot of aftershocks uh related to the pandemic uh when the pandemic hit uh we were all locked down and then as soon as the lockdowns were starting to get lifted people ran out especially Urban folks and started to look for houses in uh in Suburban in rural areas and uh a lot of that Supply was taken uh very quickly in reaction to that kind of behavior uh and then some of these Urban folks started moving back to cities because uh they they missed the the urban environment but a lot of people who have houses decided that even if they could trade down because the kids are gone they really didn't want to do that because they basically locked themselves in to very low mortgage rate and so we've had a real shortage of of housing for houses for sale and that's actually benefited the home builders who've been able to uh produce some houses and get get buyers for them without having to really slash their prices so what's been unusual about this housing recession is we really haven't seen a big drop in home prices because the supply is so slim relative to uh to to the demand and so I think the the housing markets actually in a pretty good balance at this uh where we are now and and you can see that by where the the prices are I think that as people get used to the fact that we're back to a more normal interest rate environment where a mortgage rates may be seven percent is excessive maybe we'll get back down to five to six percent uh I think that'll be enough to bring back some buyers uh maybe uh requiring a little bit more of a haircut off the price being asked by the sellers but all in all I think that markets uh despite uh this huge increase in mortgage rates has uh whether the storm reasonably well I mean housing starts are down for single families and existing home sales are down for single families but I think you you'd see a lot more single existing single-family home sales uh if those if those Supply just can't find it right um so I I totally get what you say we on the other side of that is we have a housing being the most unaffordable it's ever been in in U.S history right now right so you know the the question becomes uh you know they're they're always going to be even if if sellers are on strike right we're not moving we've got our low mortgages right there's always going to be some organic amount of sales being done for deaths and divorces and all that type of stuff right so that does set price Discovery but that that can take a long time and if we don't have an earnings recession like you're talking about you know maybe the economy continues to recover enough where it becomes a little less unaffordable to folks or to your point if mortgage rates come down that obviously helps things a bit yeah um so I I guess just what I'm what I'm not hearing you say is is hey I think housing looks you know like it's got a pretty Grim future ahead of it here I think you're saying it's going to muddle through probably at worst I think that's where we might want to think about the demographic angle again too uh uh the Baby Boomers that uh are retiring uh the thing is 46 million people that are seniors 65 and older that are not in the labor force and presumably many of them are simply retired it's uh in relatively good health um but uh they may very well be willing to provide the down payment for a house for their kids I mean people sort of make adjustments and then maybe a generational shift I mean the Baby Boomers uh main question right now is how much to leave the kids versus how much to splurge on themselves and uh some of them might just kind of split the difference and said you know uh the the we love the kids but they were noisy we didn't like their friends uh so we don't have to leave them everything let's let's have a good time and let's let's travel let's go to restaurants uh let's uh check in with the doctor just to make sure we're uh that this little ailment isn't anything serious uh and so um they're spending money and they could also afford I think some of them to provide the down payment and maybe a little bit of monthly support to support a mortgage so I I would underestimate that uh demographic phenomenon as a source of uh surprising uh resilience even in the housing market yeah um yeah I wasn't going to ask this question Ed but you're really making me want to ask it so I'm going to do it um so uh we we have uh the dynamic here of a large uh generational cohort that has amassed a lot of wealth right that's right um and uh the problem is is that wealth it isn't evenly distributed right right so uh what's the stat it's something like 10 of households own 90 of the the financial wealth something like that I mean it's quite lopsided like that right so the the the policies of the Federal Reserve um have been um very rewarding to people who have had assets over the past 12 years or so right uh it's created this big wealth Gap in the country and um we now have you know the 75 million baby boomers that you mentioned um that 73 trillion isn't evenly distributed right A lot of it is in a relatively few households right and they're going to power the spending that you're talking about yeah I'm gonna do I've got the data I've been looking at the charts I just need to to write up the story but when you actually look at the distribution of assets held uh by the Baby Boomers there's pension benefits which isn't just rich people you know there there's houses which isn't just uh rich people um and uh so it's it's a little bit more nuanced than just saying that uh you know there's a minority that has all the wealth and how many kids do they possibly have and how much can they actually leave the kids I I think uh we're looking at a much uh much more wealth more uh I wouldn't say evenly distributed but enough uh to uh you know create uh the question for retiring Baby Boomers about how much to spend on themselves and how much to uh leave to the kids okay so so you're saying it's not quite as lopsided as I was making it sound oh and it does and you know where where in our arguments people always seem to ignore Social Security uh but Social Security when you take the president discounted value of that it's it's it's it's wealth when you look at some of these uh Municipal workers that get to retire at the age of 50 and get uh retirement benefits for the rest of their lives they're basically millionaires I hope they don't get any bad feedback on all this but the idea is you need a million dollars to generate that kind of income over the rest of your life so the the whole uh income distribution argument uh is a very complex one I've done a lot of work on it I wrote a book called uh uh In Praise of prophets and uh basically looking at the the wealth statistics and the the traditional argument that uh we have a tremendous amount of uh wealth inequality it's it's it's it's it's it's it's somewhat exaggerated it's not wrong uh it's definitely true we can definitely see it and and sense it but uh there's a there's a lot of uh 73 trillion dollars is a tremendous amount of wealth and it's not all just a few families okay I I appreciate the nuance and this is I'm enjoying this discussion um I'm gonna finish the question just to get it out there and you can you can shoot it down but um I'm glad you brought up pensions too because I've mentioned that actually a lot on this channel that uh if you've got a pension um it is like having millions of dollars in the bank um and of course we know that that pensions uh are largely an artifact of the boomer generation now they're not as easy to get so kind of where I was going with all this is is if we have a a you know relative minority of the Boomer households that have a lot of financial wealth and they're potentially helping their kids out you know with that um and then we have the other cohorts that have pensions or whatnot right um the younger Generations are sort of looking at that and saying hey unless I've got rich boom repair it's I I there seems to be a real disadvantage here and it seems that policy has really been favoring one part of the the populace and not the other I'm just curious if you have thoughts about that well I I think policy is uh has been disadvantaging younger folks uh while uh the Baby Boomers may have 73 trillion dollars to pass on in some portion of that as a legacy let's not forget that uh the the Baby Boomers and we know that all of our political leaders in Washington are baby boomers uh what have they been doing on the deficit side the federal deficit uh depends on how you measure it it's somewhere between 20 30 trillion dollars it's it's it's it's it's huge and this is sort of the the quest we're leaving to the younger generation people often ask me why isn't the deficit already created all sorts of problems why hasn't all this debt already created some sort of problems in it I tell in a sense it's uh the the the the baby boom generation has basically taken money from their kids or they passed on debt to their kids uh and Future Generations I think are going to be more constrained in their ability to for the government to issue debt in order to finance social welfare programs infrastructure and and so on uh so I I don't disagree with you I think that's that's been the case I think uh We've disadvantaged younger people with these student loans uh when I went to uh to college uh I remember I don't remember college being expensive I I know it was like just a couple of thousand bucks and maybe a on a current basis that's a lot more but it just didn't it wasn't a lot of money back then uh and uh there was financial aid for those who couldn't afford afford that but now what we're doing is we've seen these uh colleges dramatically increasing uh tuition uh to you know a quarter of a million half a million dollars for an education and then these poor students have to borrow all this money in order to do this and the college's uh are building stadiums and they're building more buildings and hiring and more administrators so I think that's uh that's not fair that you know I I got I got a really good deal on an education and uh I've got five kids and the first three uh I don't recall being feeling like it was a particular burden to uh to pay for their education the last two was the killer so I was like I'm I'm all too aware of just how ridiculously expensive uh college education is and that's a major source of income inequality between Generations as is the deficit and so I think uh you know the the Baby Boomers uh do have uh have some uh responsibility and blame here in the inequality and as I said the politicians are all baby boomers Ed boy I I'd love to spend another hour kind of peeling this back with you because because I agree with everything you're saying and there's there's so many other questions related to this I'd like to ask you and and I just want to make the point here too that the college education element is a big factor in the explosion of costs there has happened after the government really pushed out the other lenders and got involved in the financing of uh College loan debt right so it's sort of policy related absolutely but uh but maybe we can have you back on to really uh explore this topic again um Let me let me just sort of end this part of the conversation by asking you if on this sense of sort of um you know we've we've pulled a bunch of prosperity from the future to enjoy in the baby boomer generation and we're leaving the younger Generations kind of with the bill right it's a simple way to look at it um uh if if we made you Emperor tomorrow Ed is there any particular reform that you would be challenging to try to address this well um yeah I think uh you know we need more competition in a lot of Industries uh we need more competition in the healthcare industry we need more competition in the education uh Industries uh you know some of these industries uh have become a oligopolies uh and uh you know trying to figure out uh hell you know I I've got my own little company and uh health insurance just keeps going up double digits every single year and uh you know my employees share some of that but it's my responsibility to carry most of it and uh you know there's there's I've tried reading these plans understanding and then when I actually need them and and go to see what what I'm getting charged it's like I haven't a clue what they're charging or why they're charging and uh you know to hold the deductibles it's it's it's a real uh it's it's really not a a good good system whatsoever uh and so I think we we need to figure out ways to bring more competition there and as we just discussed uh there's uh there's way too much cost embedded in uh the colleges which then they pass on to the students and that just uh burdens them dramatically okay we've talked a lot on this channel in the past Ed about sort of the the corporatocracy sort of these corporate cartels that that have emerged in most sectors now um so just for the record I'm I'm I I vote for you as Emperor let's put it that way look um I I think it's corporatism it's you know it's when the government uh and and big business get together and uh basically conspire uh the businesses write the regulations uh and the government says yeah that's okay as long as I can be a lobbyist once I am no longer a politician I mean there's a lot of corruption uh in in our political system but you know what that's kind of human nature I mean there's no country that doesn't have corruption but uh I I think we need to blow the whistle on these things and recognize when it's affecting the uh prosperity and the standard of living I mean you know you can see Prosperity going up in countries with corruption uh the problem is that the prosperity could be a lot greater and a lot more equal equally distributed uh if if there was better control of corruption better can kind of uh you know inspect your generals and uh prosecutors focusing on some of the excesses that go on with corporatism I couldn't agree more well Ed you know talking about emperorship but there's a presidential election next year if you want to uh you know get yourself on a ticket I'll vote for you all right yes I want to be very respectful of your time it's been a great discussion um before I wrap it up and ask where folks can go to learn more about you and your work um if we could just end sort of on your Market Outlook in general so as you look ahead for the rest of this year um what do you see I'm not looking for Price targets but but do you see a continuation of of the rise that we've seen this year and and in particular um as you know most people who watch this channel are just regular investors who are trying to figure out whether it's going in position are there any sort of allocation strategies that you think will perform well given what's ahead well I think first and foremost uh yeah my my viewers I share a view with Warren Buffett and with Jeremy Siegel that stocks are really meant for long-term investors trying to you know pick the top and a correction or even in a bear Market uh is is great if you could do it uh but then you also have to remember to pick the bottom uh because if you miss the bottom you just wind up spinning your wheels and uh missing out on dividends for for a period of time and paying commissions and so on and so forth I think you really have to view sell-offs as opportunities to buy more stock not to uh you know suddenly bail out in a panic fashion I don't think we're going to have the Great Depression again I don't think we're even going to have the great financial crisis again uh and uh uh we just at a bear Market that didn't really last that long uh the s p was down 25 percent uh but it's already made quite a bit of that back so I think stocks uh should be uh in in portfolios especially for younger people uh you may not have the money but you you allocate some money to stocks and keep in mind that the biggest return from stocks can actually be dividends just compounding dividends and I think you have to have the same attitude towards bonds you know I think current bond yields with current deals look pretty attractive to me especially since I think inflation is on its way to Coming Down Still Still further but I do have a target for the S P 500 uh I think right now it's around 4 300 I think it's going to go to 4 600 before the end of the year or by the end of the week the way things are going at this rate right yeah it's been a little faster than I anticipated and I've I've been almost pleading uh with the market please don't go up so fast belt apps do sometimes lead to meltdowns but you know the Melt Up's been led by the mega cap eight stocks and these are you know top quality companies with profits with cash flow with great Technologies so I don't you know I think we had a great opportunity back in January to buy the mega campaign I don't think we're going to get that opportunity again next year uh I think the market could be get to 5200 uh by the end of next year so I remain uh fundamentally bullish uh on stocks and I think the Market's broadening out uh you know it narrowed there uh with a banking crisis people bail out of the banks and ran into the mega cap eight uh I think the financials will make a comeback I think the energy companies make a comeback and I really like Industrials I think we've recently seen the Industrials materials uh and materials have made a comeback because people are starting to realize there's a tremendous amount of money that's going into infrastructure and into uh onshoring yeah and you you gave us some of the the numbers earlier here um all right so um thank you that's uh that it's very specific and uh uh you know very very actionable which is exactly what we're looking for here um all right well look uh this has been fantastic and I did find one other question I wanted to ask you I'm kind of shoehorning it in here at the end um it doesn't fit kind of the flow we've been in but um I have been a long time follower of your research and your charts you do a very good job of tracking the activity by the central banks and um I'm just curious I feel like I can't leave you without asking you this question um we've just seen an explosion in the balance sheet of central bank balance sheets all right over the past decade plus right um do you expect that to moderate in any material way as the economy you know global economy recovers here and the pandemic Fades into history or is this really just an inexorable March towards purchasing power destruction well I I certainly hope that uh the central bankers get off this obsession with things like quantitative easing and namely increasing the size of their balance sheet uh in an emergency situation uh it's it's fine for six months or so but don't keep going on and on and on qe1 the first round of quantitative easing after the great financial crisis uh made sense uh the uh liquidity that was provided uh when the pandemic first hit with the lockdowns that that made sense the liquidity provided to uh contain the banking crisis made sense but that's all has to do with the central bank's primary function is should be Financial stability forget about this dual Mandate of uh inflation and unemployment it should first and foremost be Financial stability and so they have the tools for financial stability but they can also abuse those tools and create Financial instability so I am concerned that uh you know they've they've got too much power and that there's too many macro economists like myself running these institutions that just base what they do on their theoretical models and don't seem to have any relationship with real human beings and our our needs wants and desires uh but uh I I hope that the experience of the past decade or so convinces Central Bankers that you don't want to go there again you don't want to go to zero interest rates you don't want to go to quantitative easing you you want to stay as normal as possible uh and I think we're kind of moving in that direction certainly in the United States and then we didn't even talk about this I think uh we're in the early stages of the Roaring 2020s uh where uh technological innovations like artificial intelligence and other Technologies are all going to combine to increase the productivity of workers increasing prosperity and uh being quite bullish for the market oh gosh you're opening a door here I'd love to walk into right now but we're near the end of the conversation so next time you come back on the program Ed we'll focus on the Roaring 2020s um really interesting thought bomb you just dropped there all right well look um having to leave it there sadly um for folks that have really enjoyed this discussion maybe this is the first time they've been exposed to you and your work at where can they go to follow you in your work there at your identity research yeah about a year ago we uh created a research product for individual investors uh it's uh www.yardeni so my last name y-a-r-d-e-n-i followed by quick takes uh so your dennyquicktakes.com and it's exactly what it says it is it's quick takes it's basically you know what economic indicators came out today and how do they affect the markets why do they affect the markets this way and what might be the next Market mover all right um and uh I know your firms also got a Twitter account correct yes correct okay all right when we edit this I'll put up the links to uh yardini quick takes and to your Twitter account on the screen there so folks know where to go okay also put links and your LinkedIn in the description of the video below folks as well okay uh and Ed this was a great conversation uh you gave a lot of great actionable investing ideas there for folks uh folks if you have a uh a good financial advisor who is um considering all the macro issues that Ed and I talked about here helping build a personalized portfolio plan for you and then executing that plan for you fantastic you should stick with them guys like that are rare uh if you don't have one or if you'd like a second opinion from one who does uh consider talking with one of the financial advisors endorsed by wealthy on uh to do that just go to wealthyon.com fill out the short form there only takes a couple of seconds uh these consultations are totally free they don't cost you anything um they uh and there's no commitment to work with these advisors uh they're just offering these consultations and their Council uh as a free public service to help as many people as possible position themselves to protect themselves against what might be coming in the markets or to profit from what may be coming and Ed gave us a lot of you know potential reasons we may be able to have some good opportunities to profit ahead here um and if you enjoyed having yet on this program would like to see him come back on the channel uh please cast a vote in favor of that by hitting the like button then clicking on the red subscribe button below as well as that little bell icon right next to it Ed it was a real pleasure to have you here on the show today I really enjoyed this conversation pleasure all the best all right everyone else thanks so much for watching thank you

Channel: Wealthion

Views: 40,258

Keywords: Wealthion, financial markets, how to invest, how to make money, investing, investment, investment advisor, investment opportunities, savings, trading

Id: NO4Rr5j9BmA

Length: 48min 34sec (2914 seconds)

Published: Thu Jun 15 2023