The Compound and Friends - The Man Who Called the Roaring 2020s with Ed Yardeni

Episode Date: August 7, 2026

On episode 254 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and Michael Batnick are joined by legendary economist and market strategist Ed Yardeni to discuss: the case for the Roaring 2020s, why Ed sees no recession through the end of the decade, his S&P 500 target of 10,000, whether AI is fueling an earnings bubble, rising profit margins and productivity, why this market is different from 1999, the broadening bull market, hyperscaler spending and credit risk, bond vigilantes, the Fed, and what the bears keep getting wrong. This episode is sponsored by Nuveen. To learn more, visit https://www.nuveen.com/alternatives Sign up for The Compound Newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

So what do you do when you're not? I know you're a Long Island like us. What are you do when you're not working? 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. What are your go-to restaurants?

We like Vietnamese. We like Japanese. We're at the North Shore of Long Island. There's quite a few good... Kodibuki for Japanese in Roslyn? Yeah. spot, right? That's a great spot. No reservations, though. I know. That's annoying. Yeah. But we got our own Japanese place in the Glen Cove called Asian Fusion, and that's really good.

I think I know it. It's called Asian Fusion. Asian Fusion is across from the movie theater. Is it in that old Chinese restaurant? Remember that with the lanterns? It's a cross from La Famiglia. Oh, yeah, yeah, yeah, yeah. It's a cross from Staples or yeah. You know what's great by you? Jaya. Is it Gia or Jaya? Port Washington. The, I haven't,

it's gone there. It's got, it's, it's, it's, it's, it's, it's,

it's neither. No. They have the best, yeah, place's amazing. The best, what's the duck called? Oh,

yeah, yeah, yeah, yeah. We've been going there recently, it's like the best duck place I've ever had. I've never had anything like it.

Yeah, yeah, I know. Unbelievable. Yeah, I used to, my favorite place used to be near the London airport,

but this, this tops it. It's fantastic. You've had the duck? No. Now I feel like I'm going to go there tonight. Yeah, yeah, no, it's the best. I got another Japanese place for you, dozo dozo.

Have you been there? I think it's in Woodbury. Very good. It's in the big, whatever that big shopping center is called. Yeah, yeah. Woodbury Commons. Yes, and then the best sushi restaurant on all of Long Island. Do you know what it is?

Nagahama. All those what is this? Is it Nagahama? Number one rated. Where is it at? Long Beach. So it's a Schlep for you. Yeah, yeah.

Are you in the South Shore? I live in Merrick. So does Michael. Nicole's from Long Beach. Long Islanders, you're up. We all are. Yeah, we all are. Too bad Billy Joel.

He's in Florida. That's where I'm going, as soon as I can. Do we know who bought his house? No. They just sold it, right? Yeah. The summer. They sold the main house.

I don't know if they sold the other house. What was cool about that house in the HBO documentary, that Billy Joel from, I guess it was last summer. So good. 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 he actually did it.

Early in his career, he had a terrible manager that just lost him tons of money. Yeah, it was his wife's husband. Stole from him. His wife's husband? His wife's husband. You mean him? His wife's brother. Yeah.

His wife's brother. Yeah. Clean them out. Yeah, clean them out. Like $18 million or something. Yeah, crazy story. Back then, it was a real, real money. Yeah.

The problem there is when your lawyer is also your business manager and has power of power of attorney. That tends not to go well. So, Ed, how about those bond vigilantes? Well, 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% is kind of the range.

that they should be at. But, you know, we could have a repeat of 2023. Remember when the bond deal went up from 4 to 5% in three months? And at 5% there were buyers. I mean, that's the wonderful thing about markets. 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. I agree. Okay. But I don't believe with interest rates. And here's why. That's an interesting point. 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, right, at some point. With interest rates, so if you look at the 10-year,

you would say it's an up trend and you would say it's been consolidating for a long time and it's probably going to break out of this range. If you're just looking at a chart, you don't know what it is. You'd say, yeah, buyers are control. But I don't think that 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 today.

They sell bonds. They sell bonds. Stop, stop. You don't say I need to borrow today because this is to 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. Yeah, yeah. Pushing yields low. Mentality. So it's the opposite of a stock market break out. That's a very good point. Well, I don't think any technicians chart yields themselves.

They chart the price of... They chart an bond ETF. J.C. would fight you. He charts interest rates. Does he? Yeah. Or he charts... Technicians will chart anything, right?

What's the difference? But I think it's a good point. Thank you, Ed. The difference is that you can't buy or sell the yield, you buy or sell the bond itself. It's the inverse of. It's the same thing. Yeah. I guess.

It makes sense. I guess. Good case. Thank you, Matt. All right, let's go. Ed. Headrons, please. If you don't mind.

No headbones. I don't look good in headphones. You look great in headphones. You look great. You're going to let us sit here with these on our head and just pretend we weren't? All right. All right. This message is brought to you by Nouveen.

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Nouveen sees today's markets as tomorrow's opportunities. New Vien, unlocking opportunity in private markets. at newveen.com forward slash alternatives to learn more. Investing involves risk. Loss of principle is possible. All right, ladies and gentlemen, welcome to the compound in front. What episode, 254?

How did that happen? Believe this, we've done 254 of these. Investors. Started in on 2021, so the fifth anniversary this summer of doing the show. That's great. All right, you 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 Yardinney. Dr. Ed Yardinney. We're out of applause. Thank you. Thank you.

Pleasure to be here. Just the ladies. Are you a doctor of markets? What are you a doctor of copper? I'm a doctor of economics. Doctor of copper. I compete with Dr. Copper. Dr. Ed Yardini is president of Yardinni Research

An independent investment strategy An Asset Allocation Research Firm He founded in 2007 He previously served as Chief Investment Strategist at Prudential Equity Group Deutsche Bank's U.S. Equity's Division and Oak Associates As well as chief economist

at C.J. Lawrence, Prudential, how do I say it? Bash? Bache. Bich. I wasn't in the business back then. E.F. Hutton, I know, because I remember the commercial. Earlier in his career, he was an economist, 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. I wish you wouldn't have done all that because now it sounds like I can't keep a job. No, no. You're a long and distinguished career. Hey, I read your book during the pandemic following the Fed for fun and profit. Is that what it was called? 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 to it. Did you ever get the urge to go back into government work or doing something for Treasury or Fed?

Absolutely not. Did you ever get the phone call? 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. No takers on that. No takers. And I was kind of annoyed that I wasn't on that shortlist 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 is not at 2%. Well, you would definitely not getting the job then.

Then I definitely, yeah, I wasn't. Can you feel better? I don't actually think it was a short list. I think the Trumps love a reality show. Yeah. And they loved parading Rick Reeder and all these people in. But it was always going to be this kid because this kid. It's like family to him.

Yeah. And what he... 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. Yeah, yeah. This was never going to be you or anyone else.

It was always going to be this. Okay. We're going to 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 heated it. And I think I'm benefiting as a result of it. You were talking about the...

Roaring 2020s, I think before the pandemic. Actually, August 2020. So right at the beginning, 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, and a couple of 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 it's going to be the roaring 1920s, you would have been looked as delusional. They had a recession in 20 and 21 or a depression.

Yeah, right. 1920. Okay. 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 going to 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, experienced rolling recessions, but not an economy-wide recession. So it worked. In the 2020s, the analog is in the 2020s, you had radio. 1920s. 1920s. You had radio. and you had the assembly lines, manufacturing, automobiles, obviously driving. A lot of technology.

Right. So in that time, that was the technology of the day. And it increased standards of living and people were feeling good and it was the roaring 1920s. So right now, from the safety of 2026, we could all say, oh, yeah, of course the roaring 2020s. We have AI. But you said that in August of 2020, you could not have known about the existence of chat GPT or any of these things. 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, chat GPT would kind of get everybody excited about this new technology. Let me just say something about that. And that is, 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. 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, 1.0, 2.0. And it's the next Internet. 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. It's an economist's job to figure out how to optimize everybody's happiness with the scarce resources. There's no, there'll never be a shortage of data. And data is the fourth factor of production is the way I look at it. We're creating more data every month than has ever existed in the world before. That's correct.

Something crazy like that. Okay. What's ironic is if somebody would have in August 2020, taking what you said, we could be setting up for a roaring 2020s, you think about like what's the revolutionary technology you probably would have been talking about blockchains no i mean maybe space a little bit yeah i think you know blockchain obviously has a role in things like stable

coin and that's probably going to revolutionize uh finance in in many ways so blockchain is just another technology that uh you can kind of throw in and say here you know make a list of all the technologies that could make this the roaring 2020s and you could add that to that list for sure. Michael and I were debating somebody, good nature 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, all the biggest companies. And then all of a sudden, on November 30th,

chat GPT is released by December 15th. It's all anyone is talking about on Twitter. Yeah, yeah. And it sort of just kickstarts this brand new bull market for the most. 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. Absolutely.

You don't have to anticipate what it is. You just have to recognize that American style capitalism facilitates these types of things. Absolutely. springing out of nowhere. 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. Does the roaring 2020s run through the end of the decade? Well, we're in the seventh year of it. You know, everybody thinks it's six, but, you know, count it on your fingers. Yeah. And we're actually in the seventh year. Inclusive 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. No recession before the end of the decade, you say? No recession before the end of the decade. And all I'm doing is. is 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 zero to 5.5%. That's why everybody thought there was going to 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 an all-time record high. We've thrown a lot at this stock market. Yeah, yeah. I mean, it's, it's been extraordinary. And the last serious, the last recession we had

was in 2008, 2009. It wasn't that two-month lockdown recession. And, you know, recessions don't happen that much. And they seem to be happening less. And bear markets don't, as a result, bare markets don't happen that much. You're right. 2022 was one of the rare bear markets that did not have a recession. I think if not for the AI explosion, it's possible that 22 led to something worse. That was my opinion. As a matter of fact, I didn'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's expectations for earnings, dipped a little bit in 2020, but they certainly weren't falling off. Companies were still saying business is okay.

So we're going to get some modern markets in a second. But before we do, I mentioned that we had made a chart for you. You have on your website at your dendee. It's your identity.com slash market dash calls. And this is a running record going back years of all of the things that you've said, either CNBC, Bloomberg, Barrens, 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 going to, but it's close enough, right?

Look what we made for you. Tell me if you think that's cool. Wow, that is cool. 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 going to, like, you kind of were steady through that. I just, I think it's, 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. Yeah.

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? are for investors, not to time the market, but to just feel confident that there's a reason to stay put. 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 that don't see recessions coming. So that's my job. And, you know, 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 FEMO,

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

Yeah. Earning, can you answer? Is there an earnings bubble? Well, that's a very good, yeah, irrational exuberance and earnings those times. That's why I came up with FEMO, fabulous earnings momentum. Not the estimates. The alternative is the result. No, no, no.

The actual. The results. The bears pivoted. In 2024, they said it's all P.E. multiple expansion. And they were right because the MAG 7 were getting re-rated on it. 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 other income that the alpha. Forgetting about Amazon. Yeah, the real stuff. about the anthropic right-ups and all. Operating earnings. Operating earnings. 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? Well, you know, earnings, 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.

We had 15% profit margins now? Yeah, yeah. It's huge. Is this the thing the bears missed the most that profit margins would not, in fact, have to mean revert back to 1985 levels? 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 is 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. 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, the vibes I get out of the hypers the managers 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, it's a very competitive market. I think the point is, though, that the hypers are going to spend an estimated a trillion dollars next year on CapEx, whatever it is. And that's going to somebody's bottom line.

Correct. They're not going to be doing that in 2029, 2030. Now, who knows? Who knows? Google, I think Google just raised $25 billion worth of debt. And there was like a hundred-something billion dollars worth of demand. Right. They're still spending, obviously, but at some point, that spending, you would think,

is going to come back. I can't say that it, that I won't. I mean, it's conceivable. But I think, I think we, 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 is going to look like. And I think it's making everybody's headspin.

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 going to make the money and who's going to go out of business. Somebody said it's all the sci-fi movies from the 70s and 80s that we grew up with are now being productized. So drone warfare, robots, humanoid robots, space, satellites. Sure. I don't know.

Are they working on teleportation? Somebody probably is. Be me up. 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. 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 you. 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 socialist to figure out. Who was the guy that said everyone was going to starve, Malthus? Yeah. It almost sounds like that.

Yeah, there's been lots of. These are the constraints. They miss technology. 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, scarcity exist by raising prices.

And then some entrepreneurs says, wait a second, I got a better ID and this idea is going to, you know, be far better than what this is, and we're going to sell a little 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. 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. Yeah. So 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? 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. The profit margin is 60, 70%. So compute should come down, and those chips may not be obvious holds going into year three or four.

Shortages get cured by innovation. 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, somebody else is going to do it. So, you know, technology literally eats it's young. I mean, it's a crazy kind of business. But it, you know, all you got to do is sit back and watch what they're doing.

Sandus just reported, not Sandus, Western Ditch 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 shit ton, all right? So whatever. It's just. So on the news. Right.

So there is, there's still a lot of doubt. in this market. Daniel, chart, P.E. Please. For the last six months, I think you'll like this one. The six-month forward P.E. 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.

Correct. So normally when it happens, the market is down 9% over the same time. The market's gotten cheaper on fabulous earnings momentum. Because people don't believe it. Because the people don't believe it. They don't believe it will continue. Yeah. And they have some legitimate concerns about circular financing.

And, you know, this is the dot-com bubble all over again. But do you worry about it at all about just, well, because you mentioned it? No, I, you know, 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 P.E. rally and the earnings really turned out not to really be there. This time around, it's grounded on earnings. You 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. 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 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 out to new highs. In 99, it was only, it was tech. If you were investing in anything else, you look like an idiot. You felt like an idiot every day. Yeah, yeah. I mean, look at this year, we've had.

I call them the impressive 493, have significantly outperformed the magnificent sub. Got oil stocks, biotech stocks. Biotech, yeah. Finance. It's everywhere. And biotech's using AI to go where none of us have overgone before. So that's not 1999-esque at all. In 99, it was very narrow.

1999 is so yesterday. Yeah. You know. Okay. 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 pay. the pace of which the future is coming at us. 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 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. Yeah, well. Here, I mean, it's basically flat of the list. three years. It's 18% versus 250%. Hope was doing all of the heavy 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 was early on in the decades. 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. It took, as you said, it was pretty garden variety correction as a sell-off. I mean, it's 25% over nine months, but no recession. And I think the markets come around, to my view, that this economy is, I don't know that it's bulletproof, but it's. 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.

It feels bulletproof. Without embarrassment. Saying, Yuri and Timmer at Fidelity, who's great. Rick Reeder, who's great. Yeah, great. 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 or prone to the types of what we used to refer to as vanilla recessions? Yeah. Where a manufacturer takes on too much inventory, customers stop buying it, take losses, lay people off. I've thought about that and I figured it out. And that's because I have insight information.

What is that? 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 going to get older and they were going to start to retiring. And I figured that that could create a skills mismatch in the labor market. It creates shortages in the labor market. And I figured, well, technology solves problems.

The problem is the baby boomers, a huge cohort is going to retire. And what are we going to 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 am 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. The first part is true. The rich are getting... Yeah. Yeah, it is. And a lot of the poor that were poor are also doing well, but... Or doing better.

But look, I'm not saying there is... Is that why we have all these communists running around? Well... Because there's no bottom... Yeah, they just want to get everything for free. Right. 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 doesn't 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 cacamamee notion that 5% of the population, the rich, are accounting for 50 to 60% of consumption. Really? I mean, have you been to a 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. Let me get right down to the point here. 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, some still kicking around. They have $100 trillion of net worth. It is the richest retiring generation ever, and everybody's ignoring it. And I think that's a good thing.

They're in comfort. They're not starving. Think about it. Interest rates go up. They love it. Yeah, 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 percent, 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 intergeneration, 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. But this is the problem.

Not everyone's parents can help them. Not everybody. And then, so you have a lot of stuff going on on 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.

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. Yeah. And maybe, you know, with child care, for example, you're going to live closer to your parents so they can help with child care because it's unaffordable to actually. Remember Harry Dent?

Sure. So his stick 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. Yeah.

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 20-teens in 2020s. I mean, we know that some of the... Disasterous did not work.

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, that's how they can afford to protest all day. Yeah, all day, exactly. Ed, getting back to where we are today, I want to throw a theory at you.

Sure. What we just saw with situational awareness and the blow of... Unawareness. And the blow up. Any resemblance to the... 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 a different thing. But some of the ingredients need to be in place for that amount of leverage and access to happen. Any thing 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 that environment. Yeah, I mean, it's possible that this was sort of a warm up act.

for bigger blowups. Long-term capital management, I think, took something like under $200 million and leveraged it into a trillion dollars. So back then, that was serious money. And then, of course, they were rescued. And nothing terrible happened in the economy in 1998. As a matter of fact, that's at the stage for the 1999 bubble in technology, the euphoria. I mean, clearly the blowup of situational awareness has been almost irrelevant.

It's really no impact on the economy. 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 your portfolio. Correct. Having that person carried out feet first and the market is up the next day. And by the way, the people who have got hurt are very rich people.

Yeah, I made this argument like they're the most risk-tolerant people there are. They're venture capitalists with billions of dollars. Just, okay, so one blew up. Who cares? Look, that goes back to the shock 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 going to blow up.

And it reduces a rate of return. It's not like the banking system blowing up the way it did in 2008. So that's a pretty significant. 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 a 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 or continuance funds because they know there's an opportunity. If somebody has to get out, So an opportunity. Then that's an opportunity for somebody that doesn't have to get out. You 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. Yeah. But, yeah, Leo, the first name of the guy who ran that fund, was a newbie. He had no business playing with that kind of fire. Your S&P 500, year-end target? 8,250.

All right, 8250. Where does that come from? You're on the high side versus the street, but there are some people at 8,000 now. Yeah, yeah, there are. Look, I do P.E. 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, and 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? For S&P 500 earnings? Yeah. 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 going to 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. So why doesn't everyone, what's the biggest obstacle to that coming true? Recession, which everybody fears is inevitable. The Fed makes a mistake. Fed makes a mistake. the war in the Middle East gets worse.

So the usual shit that we always worry about. Over and over again. But something has to start the recession. I just want to say that between 2009 and 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, 2000. So it's going to be pretty easy to scare people.

And there's always a perma bears, the pessimists out to do the job. So I kept adding to the list. I made 80 panic attacks that turned out to be non-events. 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 Laslo Barini?

Yeah, Laslo. Remember the book? Yeah, yeah. Okay. R-I-P, Laslo Barini. But he used to send out, like, I don't know, it was quarterly. Yeah. Here are all the news stories that moved the market.

Yeah. That was a great affirmation to flip through that and just say, wow, none of that mattered. Yeah, yeah, yeah. What's that? What's that's it? Right. So 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, you know, again, why come up with a K-economy pessimistic conclusion and why not really just look around you? Remember Peter Lynch? The stores are full.

The planes are full. The concerts are full. The ball games are full. It's not just the top one percent. They're paying $80,000 to watch a Knicks game. Yeah. Now, I understand that's not everyone. but I think it's emblematic of everyone.

Absolutely. Okay. Yeah. I'm with you 100%. Can we do some of your charts? Yeah, sure. All right. S&P 500 bull markets since 1966.

Yeah. And then you've got this red line, which is where we are now. Yeah. 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 22? Yeah, October 12th, 2022. Okay.

Are all of the. others dated from a similar low? Yeah, yeah, yeah, for sure lows. Okay, all right. So once we're down 20%, that starts the clock for, and then we recover. That's the new bull market. Once we actually make the low, all of these is from the low. So can I ask a philosophical question?

People say the 1982 to 2000 bull market, but if we were starting from the low, it would have been the 1974 to 2000 bull market. So why do we start the secular bull market count at the new high? which was 1982 in that case. Yeah. 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... No, I think... I mean, I never even thought about it that way. To me, it's like, you know, the bear market takes it down 20, 25, 50%. And then there's clearly a bottom with a benefit of hindsight.

And then just you take that bottom and say, how much are we up today the next day until the next bear market. So most people don't agree with this, but I've always thought of it like the bull market starts when it eclipses the prior ball markets peak. So 2013. Oh, I see what you're saying.

2013 is the first time you got to book 2007. You just got your money back. And now, yeah. So that's the way. That's another way to look at it. Well, that's what they do with 82. And that's what they do with the, I guess they do that with the 40s and 50s is when you get back to the starting point before the Depression.

Where you were. But I guess it's probably semantic. That's a good point. But look, we were talking about the roaring 2020s or the roaring 1920s. Those are not the only roaring decades we've had. Oh, 50s, 80s, 90s. Yeah, roaring decades are actually the norm. We had a couple of decades where nothing happened, and that was the 70s.

20s. 20 teens were underrated. Yes. Right? I think that was 14% average annual returns. Yeah. Nobody talks about the 20 teens like it was the good old days. Yeah, yeah, exactly.

They definitely were. Yeah, yeah. It's a good point. What's the takeaway from this chart, though? Which one? Daniel, give me that back. Well, it's kind of the Warren Buffett approach, right? It's time in.

The market is more important. If we follow these prior bullet, markets. We could be a third of the way in only. Yeah. That's incredible to me. That visualization. Yeah.

Okay. I love it. What do you think? I love it. Bye. Bye. All right. I think the point is 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. They happen because of credit crunches. The Fed raises interest rates. It gets up to a lot. level where the bond markets has, man, if they keep raising short-term rate, 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 with 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 to 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-mola in the credit markets

from the great financials crisis, the great virus crisis. And so in March 20-23, we had a mini, mini-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. Yeah. So. That's another depression. The Bears were robbed of the Bears.

The Bears thought that that would be the next banking crisis. And they said, no limit on deposits. Don't worry about it. 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 got to do is ask, well, what are they missing? And they rarely miss anything.

But the permam 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. So good segue. Daniel, can I have chart for historical concentration peaks? This was one of the other big things that the bears were talking about.

We had this highly concentrated tape where you know, 10 stocks were 50% of the market cap or whatever it is, and they were all of the earnings growth in one year and, you know, et cetera, et cetera. So this is showing the nifty 50 concentrated peak, the tech and telecom bubble, Japan, because of course always now show Japan. Okay, here you go. So now we're calling this one the AI Big Ten. And, you know, to the bear's 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 this going from 41 to 45 or 50, and that being a blow-off top moment for the overall tape? When S&P 500 information technology and communication services got to 45% of the market cap of the S&P 500 last year, on December 7th, we said we'd no longer want to overweight information. technology, 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 has done great this year, the impressive 493, 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, you know, those guys run out at the first signs of a possible recession. How would you sniff it? You would look at the small caps?

Yeah. Russell 2000. I mean, I think they were kind of held back all this time because of all this recession that, you know, widely expected recession that didn't happen. The last time we got a real broadening, what was at the top? You have this chart, chart five, where you show a ratio of the 100 divided by the 500. Yep. and what's with the circles? Do you think we're going to start to see another broadening

like we did then without the recession? 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. The rate of change looks similar. Yeah, the rate of change looks similar.

But it certainly looks as though we're not going down that road. And look, there's sometimes as a coincidence between these charts and the recessions and the business cycle. But at the end of the day, with the most recent exception of 2022, we typically do not get bare markets, stock market panics without a recession. Our earnings have to take a dive. If that's not going to end, not only the earnings take a dive in a recession, but the PE takes a dive. I'm a catch-up person versus a catch-down person. The small caps did not participate in the first two years of this three-year bull market. They were completely on the sideline, and with good reason.

Interest rates were too high, and they didn't benefit from any of the AIs or very few. There were a few 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, industrial's work. It's the catch-up trade. It happens all the time that way from my experience.

Why don't people understand that that's how it goes? I think there is a pessimistic streak and 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 It's kind of trying to hold their hand during the bad times And say, well, you know, here's why this is not going to continue But I don't know.

I mean, pessimism just seems to sell better. 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? Tuesday. Monday and Tuesday, really? Monday and Tuesday. Yeah. And all of a sudden, it just felt like whatever we were worried about last week

with margin calls and but don't worry about that. Look at these fabulous earnings reports and people just wanted to buy. Yeah. And it's not just tech. They're buying Goldman Sachs. They're buying Morgan Stanley. It's, well, do you worry it's as good as it gets? On Sunday, I wrote one of my quick takes. Yeah. 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. But does it feel Goldilocks-esque right now? I had a call for one of my accounts this morning said, are we in a meltup? And so I sent them a chart that compares the current S&P 500. And I did the same for it to the NASDAQ to what happened in 99 and 2000. And you can argue that we're still on course like that. The difference, though, is the P.E.

As much is hired now than it was back then. So it's earnings led. That's a big difference. Let's look at this. This is from Chart Kid, Matt. 45% of S&P 500 stocks. I should have hired Matt. Yeah, we got them.

We got it. 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, it's, that's brought it down to 45% left. 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.

How are we looking? 85%? 85% what? Are up rising. Rising, you know. Unbelievable. Yeah. Now, you can look at that chart if you're a pessimist says, 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%. Do you worry about the rate of spending at the hyperscalers? Just thinking about prior CAPX bubbles throughout history, we'll skip 1999. Think about the canals, the railroads, the whole litany of booms and busts. Yeah, the dark fiber. So Daniel, chart 9, just to set the table. So these are, this is fixed income. But we're talking about debt.

Yeah. 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. Yeah. 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. Yeah, look, I'm not going to.

close my eyes to things that I'm not that thrilled with, and that's just 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. I credit default swaps on Oracle, I think, are at like a multi-year high. Yeah, yeah.

Because the debt investors are not focused on an upside. They're focused on getting their money back. Yeah, I mean, they're basically looking at open AI and saying, you know, Oracle depends on open AI 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,

of the economy. And I think you're going to 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 on 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 that the productivity is like non-existent.

But they're catching up now. You know, they're starting to, you know, 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, you know, hold on. Can I ask you some research questions? Sure. Okay.

What do you do in the technicals and the fundamentals disagree? Do you say price must be right? Therefore, my research must be missing something? 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 because we've been in a bare market.

and 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 bare market. And then in early this year, it started coming closer to the downtrend, then went through the downtrend. And meanwhile, on the news is saying that America is sending all these military, I mean, I'm kicking myself. It was so obvious.

The technical as 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 5,500 by the end of the year. But it had a pretty reasonable correction. and now it's been holding it 4,000. I think gold particularly leads itself well to being technically analyzed rather than fundamentally.

Oh, I do too, because it's pure supply and demand for the asset itself. There's nothing else. 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. You know, maybe what's relatively unique

about the way we do things is we do economics and strategy together. You know, we don't, I don't have to go talk to a strategist to kind of get the story lined up. You have a technician in-house? Me. It's you. Okay.

But, I mean, it's amateur. I'm not even claiming that there's... An amateur can look at it and say the trend is up, the trend is up. 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, you know, a roar shark.

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. Commodities mean revert. They mean revert.

Yeah. But we just saw that in the Korean stock market, we've seen it the semiconductors. but is that the end of the rally, not if you look at PE, which gets you back to the fundamentals. Do you read the research of other strategists or do you find that that would cloud your own ability to come up with? No, I, I mean.

Who do you like to read or who do you pay attention to? I pay attention to all the perma bears. Okay, me too. Because I think I do relatively good work on the bullish side. Yeah. 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. Do 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. You know, 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 wasn't, 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 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. You invented that term. Back in 1983. And back then, I went back and rented 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. People have been saying bond vigilantes for 45 years. Apparently, there's no level of debt that the U.S. can take on where they will actually do anything. Well, I tend to be pretty pragmatic about these issues,

especially the ones that people get all huffy and puffy about. deficits in debt, you know, I do occasionally appear from my home office on these Zoom calls and things like that. I tell them, look at in the back, all these books at the top, 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 at November 1st, 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. And a 5% bond yield in the 90s, one of the greatest decades for stocks ever. 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 great vice crisis. And it was just a dumb policy. It shouldn't have happened, but it did. So if you ever got the call, your government needs you, you wouldn't consider it? Oh, absolutely. I know you love your life the way it is, but if they needed you. If they needed me to run the Fed, but I have conditions.

One is I'll do it from home. Do you live in D.C.? All right, that might be a knockout factor. What are the other conditions? Well, you know, I would actually experiment with a, differently than Warsh, I would say, okay, I would kind of up the ante on Worse's idea that Warsh wants to have the market express an opinion that's not about where it should be without being polluted by what Fed officials are chattering about.

Yeah. Right. And then he says, and we will take our guidance, basically, 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? Many people think they do that anyway.

Well, why follow the two-year. Make it official. 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. 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 3.5% to 4%. So. Do you think 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?

I never got anything from that. the beige book. Of course not. Yeah. 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.

Right. No press conference. If they change weights, maybe you find out about it a week later, maybe you don't. Sure. That's the real tradition. Yeah. And then we had this very aggressive kind of communication era post-financial crisis, which I understand. Maybe the time for that is.

gone. Maybe. And we don't need to hear from wash every month. But I'm biased. You'd make me very unhappy. One of my jobs is to be a Fed watcher. I know. What am I going to do?

You know, I need. You watch the two-year, like they will. I need, yeah. I mean, I think I have 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 going to stop talking. I mean, Warsh might have nothing to say.

Right. And what's going on right now at the Fed is very concerned. 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 change the streets before the elections. So revenge was what is all about. I don't know where

Warsh's head is. You know, he's keeping it pretty pretty quiet. 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? Yeah.

Will it lead to more financial crimes? 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 earning seasons because there isn't that much time for one to another. I think that's very useful information. I mean, again, I follow weekly. analyst consensus expectations. And I'll look at this year, next year, and do a time-weighted average.

And the revenues, forwarder, 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. More information is better. Yeah. Okay. Ed Yor Danny, ladies and gentlemen, thank you so much for being here.

Did you have fun on the show? Absolutely. Okay, that was the first half. We're going to take an intermission. We'll do a dinner break. I got you. Almost. All right.

I want to tell people where they could subscribe to your research and learn more about what you do and your books. So what is the website URL? Yeah, you just go to Y-D-D-D-E-N-I dot com. And everything's there. Okay. And you're going to keep going? You can keep it rolling? You know, I don't play golf.

So I don't know what else I do with myself. I'm rolling. I get so much out of it personally, and I know thousands of other professionals on Wall Street to as well. So thank you on behalf of everybody for everything that you do. I appreciate it. Of course. All right, guys, that's it for us this week. Please go to Yardini.com.

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