Macro Outlook: Ed Yardeni raises the odds of negative outcomes to 35% amid Middle East conflict, higher inflation volatility, and layering risks, while still assigning a 60% base case to a Roaring 2020s productivity scenario.
Gold: Bullish on gold as a portfolio diversifier and geopolitical hedge, citing central bank demand and potential for higher long-term prices despite near-term consolidation.
US Treasuries: Advocates balancing equity exposure with bonds as safe-haven demand holds yields steady; references Treasury issuance tactics and bond vigilante dynamics as key market drivers.
Magnificent Seven: Moves from underweight to market weight as valuations compress from ~31x to ~25x; still views them as phenomenal growth franchises contributing significantly to earnings.
Inflation and Energy: Expects near-term inflation bumps from oil and supply disruptions (fertilizer, chemicals) but notes U.S. energy independence mitigates a 1970s-style shock.
Productivity and AI: Sees strong productivity—partly AI-enabled—as a disinflationary force supporting earnings, while acknowledging labor market disruptions and private credit as compounding risks.
Portfolio Stance: Recommends staying invested, using corrections as buying opportunities, and holding some precious metals/hard assets alongside equities and bonds for diversification.
Transcript
I raised the odds of things going wrong. That includes everything. And I raised that from 20% to 35%. So that would include a recession. That would include a correction in the market, maybe even a bare market. So yeah, I think the risks have clearly increased. I I can't I can't see a war happening in the Middle East and uh with with a lot of fog around that war as there always is around wars and not conclude that uh yeah this geopolitics can be a problem. >> Hello and welcome to Wealthy. I'm Maggie Lake and today I'm speaking with Ed Yardeni, president and chief investment strategist at Yardeni Research and we are going to be taking a look at the global macro environment. Hi Ed, thanks so much for being with us. >> Thank you. >> Uh if you're listening to this and you have any questions about allocations, you can get a free portfolio review at wealthon.comfree. We're going to cover a lot of topics, but and I feel like we need to start with uh the thing that's on a lot of people's minds and probably a worry that's on their minds, and that's inflation. And we we are just coming off a producer price reading that was hotter than expected. And that a lot of that was predated the Iran war. Uh do we have a structural inflation problem? >> I don't know if it's structural, but it's it's it's starting to feel a bit like it. Uh there is a suddenly especially with the war a sense of deja vu all over again reminiscent of the 1970s when we had two energy shocks and that led to a surge in inflation kind of a twin peaks in inflation. Eventually in the late 70s Paul Vulker came in and felt that the only way to bring it down was with a severe recession by raising interest rates. And um and not only did we have the kind of two two peaks in inflation, we also had two recessions. And economists call the whole period stagflation. For the stock market, it was called the lost decade. >> Uh so there are similarities, but um importantly, there's some very important differences. Uh productivity right now looks like it's quite strong and will continue to strengthen. And during the 1970s, productivity growth basically collapsed. Uh so that's a big difference. The other thing is the US in the 70s was very dependent on foreign oil. Uh and that's not the case today. Today today we are exporters of of oil. So the US economy is uh more resilient I think especially to an energy shock >> which is going to be you know good news for some people because you're right that 1970s scare is is certainly that narrative is certainly floating around. >> I think that if the productivity story continues to play out that's a very powerful disinflationary force. uh it's uh a key driver what's called unit labor costs which is the inflation rate in the labor market and that right now is down to about 1 to 2%. Uh so I I think uh we're going to see some volatility clearly in inflation to the upside over the next few months but you know much will depend on how long it lasts which nobody really knows other other than the president who said it'll end when he feels it in his bones. Uh but um you know it's uh the big risk we have here is oil prices going up certainly are already visible at the gasoline pumps. >> Uh but with a lag uh we got a problem with chemicals that come out of the Persian Gulf that are necessary to make fertilizer and uh and that's hitting right as the spring planting season occurs. So we could have a food inflation problem in the in the late summer and the fall. So yeah, right now we have an inflation problem. Whether it's structural or not, I'm I'm leaning towards the idea that it's not structural. As a matter of fact, I've been talking about the roaring 2020s uh scenario in which productivity does uh boost economic growth and keep inflation down. But now because of the war, I have to consider the possibility that uh there's another scenario, and that's the stagflation of the 1970s. >> Yeah. Uh, and and it's and and we've talked about your roaring 20s theory before, and I always think of you as somebody who is um willing and open-minded about the positives because it's super easy to get sucked into the negative scenarios, but you've been keeping your eye on this productivity miracle and some of the things that might come from it. So, it's interesting that you have you're raising the risk a little bit, it sounds like. >> Yeah. Yeah. Yeah. I mean, I I I love the perma bears. There's so many of them. And uh bearishness and pessimism seems to sell better than than optimism. I don't maybe it's human nature. I don't know. Maybe pessimism for some people sounds smarter than optimism. Uh but they do a really really good job of telling us everything that could go wrong. And it creates sort of a niche for me because I don't have to do as much work on what could go wrong since all I have to do is follow what they say. And then, you know, I have a tendency to look like what are they missing from the story. So, I guess, you know, I've been called a a perma bull, which I kind of view as a compliment because the stock market overall has a tendency to to to move higher. Um, but the problem with the perma bears is they'll get you out at the top, they'll get you out the middle, they'll get you out at the bottom. You'll never be in the stock market if you take that approach. But I I try to be balanced. uh and I try to you know con concede that things can go wrong and uh when the odds of the of things going wrong increase I I I I'll I'll state that uh so when when I do my uh my forecasting work I I like to do it with subjective probabilities uh just as a way there's no science to it it's just a way of conveying my my thinking on the latest developments and right now I'm still sticking with 60% odds for a um um a roaring 2020 scenario. Stock market goes up, productivity is strong, real GDP strong. Um and then uh I had been high using 20% for a meltup. Well, that doesn't look very realistic, so I dropped it down to 5%. >> And then I raised the odds of things going wrong. Uh that includes everything kind of a bucket of what could go wrong uh that the maybe a lot of the perma bears help uh me keep track of. Uh and I raised that from 20% to 35%. So that would include a recession that would include a a correction in the market, maybe even a a bare market. So yeah, I think the risks have clearly increased. I I can't I can't you know see see a war happening in the Middle East and uh with with a lot of fog around that war as there always is around wars >> and not conclude that uh yeah this geopolitics can be a problem. >> Yeah, I um I saw that I get I get uh I look for the positive in the updates I get from.com on my email in my emails um for what I should be paying attention to. But I did notice when you raised your odds of problems to 35 because I know that you look uh for the positive as well. So that did catch my eye. So uh let me ask you as you're trying to weed through this balance of risks. Uh so you mentioned the fertilizers which is really important. An awful lot of things go through the straight right. We've been really focused on crude rightly so but a lot of inputs go through there. >> Yeah. Aluminum. Aluminum too. I think one of the states, you know, one one of the nations there produces a lot of aluminum and that's not going to get through the straight, >> right? So, is that going to hit is that a problem for earnings? Um, especially when we couple it with this sort of uncertain tariff situation that we still find ourselves in. >> Well, what's really fascinating is uh how well the stock market's held up so far. Uh even today when the uh PPI came out uh I I I was not looking forward to looking on my screen to see how the market would react to it because it was hotter than expected. Therefore uh the odds of the Fed cutting rates uh uh uh uh anytime soon kind of diminished pretty pretty rapidly here and market wasn't really down that that much. Oil was up a little bit. Bonds didn't do much. Uh gold's kind of floating around $5,000 $5,000 an ounce. So it's been like remarkably calm uh in in the financial markets. Um and um I I think the markets are probably discounting that this isn't going to last too long. Uh I think they're also discounting that there's plenty of oil and one way or the other the stuff that's blocked uh in the Persian Gulf is going to get out. Um some people were talking about a 20% uh decline in uh oil um available for for global consumers. Uh that would be 20 million barrels per day basically. Uh but uh and looking at things more closely uh oils getting out through pipelines to the Red Sea from Saudi Arabia. Um there's the release of strategic petroleum reserves. uh the United States uh lifted sanctions on Russian oil that's uh at sea right now. Uh so the price of oil may just kind of hang around a $100 uh a barrel here. Um and um I think that's what the market's kind of counting on. I I think um the the market also perceives that uh the United States is energy independent. So it's not going to be like the 1970s for us. M is there a So, it doesn't it sounds like you're not overly concerned about a long-term inflation problem. Uh >> are we facing a recession though, especially because, you know, if we look at the lower K that even if it's for a few months, those higher gas prices, that's going to hit people hard. >> Yeah. By by the way, I didn't completely uh answer your question on earnings. Uh that's been a a surprise so far. uh we we have data on analyst expectations for earnings going into u into March so far and u so they they didn't apparently the analysts didn't get the the the memo about um uh higher energy prices uh cutting into earnings because earnings expectations actually continue to be raised uh by analysts. So that I think that explains why the market's been the stock market's been relatively calm because uh there have been increasing concerns about a recession. We can see that in poly markets on a daily basis. Uh there's an indicator uh of and you know the odds of a recession I think are now up to about 35% kind of similar to mine. Um but u I I think the markets perceive that uh a rec overall the market's not discounting a recession but the PE has certainly come down some but meanwhile earnings have gone the other way. They've gone up so that that explains things. Now the longer this thing lasts um the uh the odds of a recession may increase which would lower the valuation multiple and then the analyst might get the memo that hey you know what this is going to start to cut into earnings and if you get a combination of a lower PE and a lower E you got a bare market. So that's that that I think is the way things are headed. So right now right now that that it's it's it sounds like everyone's still thinks that we're going to get past it. Now it depends on >> Yeah. >> So uh if that's the case, why do you think talk to me about the dynamics that are keeping earnings moving because a lot of people felt like things were frothy. There was you know too much around AI spend. Mag 7 was stalling out. Is this are the earnings coming from different parts of the economy? Where is the resilience coming from? >> Well, first and foremost, it's coming from uh information technology and communication services. Uh there are 11 sectors in the S&P 500 and and those two u a few months ago got to be 45% of the value of the stock market or the S&P 500 I should say the the market cap share of just those two sectors was 45%. And I think that's come down to about 40%. uh December 7th, I I looked at the data. I said, "You know what? I'm I I can't continue to recommend overweighting these two sectors when they're already accounting for 45% of the market cap. They're not that big. They're more like 30% of of earnings. Uh but yeah, I think the earnings picture is pretty much across the board. uh and I think a lot of that has to do with productivity >> uh and a lot of that has to do not just with AI but uh I think companies are are managing their efficiency much much better because it is a very competitive uh market out there for many companies. So the earnings picture has uh been looking really good with regards to uh whether this can cause a recession. It c certainly could. Uh but uh in in my roaring 2020 scenario which has been which you know so far so good until the war started um in the roaring 2020 scenario what we're we're seeing is that uh uh companies are managing their efficiency and productivity. And what we're seeing is that the economy has been remarkably resilient. I mean, it can only be resilient because the consumer spending, because capital spending is strong. Um, obviously, we've also got some fis quite a bit of fiscal stimulus going on with the size of the of the deficit. >> But Maggie, think of all the stress tests that the economy has already been through and earnings have been through. So, we we started out the roaring 2020s with a pandemic. Uh, we had a lockdown that lasted all of two months. So, we had a two-month recession, but that was the the the the last time we had a a real recession uh was back in 2008. So, the economy's uh done pretty well through through the pandemic. And then when the lockdowns were lifted, we had supply chain disruptions that led to inflation that led to the Fed uh raising interest rates. Uh we had a mini banking crisis >> uh with three banks uh that was resolved very quickly uh in response to the Fed tightening. Uh then the Fed started to ease everything look great and then President Trump came in with tariffs and that kind of messed everything up. Uh but the economy didn't didn't flinch and now we've got a labor market that's looks a little bit uh uh weak. Uh and again GDP has been relatively strong and then in the second and third quarters of last year fourth quarter was weaker than expected but nevertheless real GDP all-time record high. The stock market what four or five% off its all-time record high. Not not too shabby considering that now we've got a another stress test and that's the war. And I'm going to continue to bet on the economy's resilience and if the economy is resilient earnings are going to be resilient. So, it's interesting. I mean, it's such a compelling case that you just laid out and I yet I think there are many who are thinking that it's kind of the roaring 20s and we're all, you know, dancing on the deck of that Titanic and some of the things that supported it or look like they're supporting it. The fiscal, we're kind of running out of runway with that because of the deficit. the consumer spending is really tied to the wealth effect and those who have assets and the rest and you know the rest of the hardworking folks are just really sort of fed up and can't and make ends meet. So if the stock market goes down that looks vulnerable like there all these things that look like um complacency and like you know is because we know what happened after the 20s it was the depression right so >> yeah well to address that question um and people have said said to me oh yeah yeah yeah you're saying it's going to be like the roaring 2020s like the 1920s but that ended very badly we actually uh just last year got a test of uh similar to the 1920s, but actually it was the spoot holly tariff that was passed uh at the end at the beginning of the the following decade in May 1930. That's when the great crash really started. If you look at the market, it actually recovered about 50% of what it lost in the late 29 crash and it was back to where it was in April of 1929. What's the big deal? Uh but then when Congress and the President Hoover um enacted the Smudhali tariff in May of 1930, the stock market uh took a crash uh that that caused the depression that shut off world trade and um so last year we had a pretty significant uh uh tariff scare and all in all we got through that uh reasonably well. There's still issues about the tariffs, but I think the economy handled that uh ve very very well. I think with regards to the consumer, um I think what's what's often um not discussed in explaining the resilience of the consumer is demography. Uh we've got baby boomers that are retiring. I'm still working for a living, but a lot of my friends are retiring. And the baby boomers collectively have $85 trillion dollars of net worth. Uh, and as they retire, they're they they're no longer getting uh wages and salaries. They're no longer paying income taxes. Uh, they're no longer um uh contributing to disposable income. So, re the real uh real disposable income has been flat for the past several months as they retire and the savings rates been heading low. It's all because uh the retiring baby boomers are starting to spend uh what what they what they had saved all these years. Um and now they're they're they're finding that even though they're spending more out of their retirement assets, for many of them who have stocks, their stock portfolios have kept going up. So if we do get a bare market here, that could depress the baby boomers uh who suddenly get a little bit cautious about continuing to spend. But right now they are spending and right now uh there's evidence that they're also helping their young adult children and uh and their grandchildren uh with uh helping out on the financial side. Uh there is an affordability problem and a lot of it is for younger Americans and a lot of baby boomers are are helping them. >> But you're right. I mean the consumer could be vulnerable. Um you know the the K-shaped economy I think a lot of that has to do with with demography. Younger people are having an affordability crisis. Older retiring people have done just fine, especially if they own houses and stocks. >> Yeah. And and AI's layered on that as well, right? Because the the sort of flip side of that productivity boom that we're seeing is now, especially in the last few months, real fears of what happens to the job market, especially for entry- level workers. >> Does that create a problem? And does that sort of offset the positive benefits of productivity? >> Well, I I think you know when you go into that bucket of what could could go wrong, u if you look at kind of the indiv individual pieces, you can kind of come up with reasons why they're not going to cause a recession. Uh I I have a concern though that uh there's you're seeing sort of a layering of of risk. Um I wasn't particularly concerned about the uh p private uh debt market, private credit markets. Uh figured you know if few loans go bad that reduces a rate of return on somebody's port portfolio. Uh but uh there is uh there is risk in private credit. Usually it's uh credit crunches that cause recessions. So it's something to to to be aware of. But now if the economy does in fact get hit uh by this surge in oil prices, this inflation uh issue that might force the Fed to raise interest rates. If all that kind kind of comes together, we could have a recession, which is again why I'm lifting my recession odds. And with regards to AI, um, a lot of people, especially younger people, are very concerned about, um, their jobs, whether they're going to be replaced by AI. I I I think that a lot of this, uh, is consistent with historical experience that when you do have a major technological innovations, let there's somebody trying to call me here. >> It's uh, it's the it's the Fed. >> Yeah. >> They need help, Ed. >> Yeah. Well, you know, as a side note there, I um I I many times have offered to do what the Fed does for half the price if they'll let me do it from home in my home office, but I >> they haven't taken you up on it yet. >> No, I wasn't on the list of of of candidates. >> They're they're refusing to acknowledge the world has changed. Work from home. >> Anyways, I I I don't know that they even want the job right now. The >> who would want the job, Ed, who that's got to be the toughest job in the world. We'll get to that in a second. >> Pal doesn't look very very happy right now. But with regards to AI, it's sort of like another layer of risk. Um it it may exp it's it's part of the explanation for why u the labor market isn't creating jobs. Um, the other thing is the baby boomers are retiring and there's a lot of them and they had a lot of experience and it's it's hard to get younger people obviously that can can do what they're doing unless you augment their their productivity. But I think between the private credit issue uh now this inflation issue and uh fears about AI I think it's it's reasonable to say that yes there are increasing risks of a recession put it at uh 35% and uh you know stay stay vigilant. >> Yeah. But again uh even last year uh the the polyarkets uh uh.com where you can trade on uh you know are we going to have a recession or not and other issues. Uh last year the poly markets I think got up to 60 65% and there was no recession. >> It's the this has been years now. It's the recession that everyone worries about constantly never comes but I think you laid out >> the GDAU recession. The GDO recession. >> Yes. waiting for. Exactly. I think you've laid out this great balance of um which is getting you know when we've talked before it was looking really good and there were some concerns but but now it's a little bit more you know a little bit more even uh and so how do you think about portfolios in this kind of situation because obviously majority people have exposure to equities. So, first of all, >> um are are you concerned about complacency? Are there areas of the equity market you think look better situated to weather the kind of, you know, uncertain forecasts we're facing? >> Yeah, I mean it it looks like complacency when you look at the S&P 500 uh being down only I think right now it's maybe down 4%. Uh, it's certainly not a a official correction, which is a 10 to 20% decline. I I thought, and I still think that it's possible we'll have a a correction here, but I'm very impressed with the um the fact that the S&P 500 isn't down that much. However, when you look uh a little deeper, uh you see that, you know, we we certainly have had a uh a plunge in software prices that now seem to be stabilizing. We certainly have had a drop in airline stock prices because of the surge in u in in oil prices. Um we've had a uh big jump up in energy prices as an offset to that. Uh the uh gold uh I would have thought would have done very well when you have a war in the Middle East, but the dollar has been strong and so that seems to have be be weighing weighing on gold. So there's actually a you know a lot of turbulence under the column of the uh o overall stock market indexes and um I I think you just got to have to kind of stay put. Um I mean uh the markets are not panicking. I don't think investors should panic. I was kind of actually hoping there would be a 10 to 15% correction because I I have this uh uh view that corrections are buying opportunities. You don't want to panic in them. You don't want to sell into them. Uh you just want to pick up some of the some of the securities that you that you thought had run too fast and they they also tend to be the ones that that correct the most. Uh but uh overall it hasn't been u much much of an opportunity to kind of jump in. So I I would stay put. Uh I uh I had recommended underweaiting the Magnificent 7 back in early December of last year when they were selling at a 31 multiple. Uh but now whether they're down to 25 uh multiple so I think they're cheaper. 25 seems high but they're they're really a phenomenal growth companies. They have been and will continue to be in my opinion. So um I I went back to a market to market weight on the magnificent seven. Um I would you know I would balance off a portfolio of of stocks with some bonds u which have held up very well in the face of this inflation scare. But I'm uh I I think gold should also be in a portfolio where precious metals uh hard assets would make sense uh as a as as some protection for inflation uh and just overall craziness. >> Yeah. >> You know, >> I certainly we would you expect to see those uh gold and silver the precious metal prices moving higher? As you said, we've been sideways here. A lot of people think it has to do with the dollar. Also some people have to sell their winners and you know need liquidity times of crisis. Would you expect that to resume higher? Because we saw some big moves at the end of last year, beginning of this year. >> Yeah, absolutely. And uh it was actually one of my my good calls last year is I thought we'd go from uh uh about 3,000 to to 4,000 by the end of uh last year. And I wasn't bullish enough. Uh, I thought I was, but we got to 4,500 and then came back settled down around 4,000 and then I I predicted we'd get to $6,000 an ounce by the end of this year. And uh, boom, you know, we went up to over 5,000 a few uh a few weeks ago, almost to 5,500 and now we're back to to to 5,000. I think it's going to consolidate for a little while. Uh but uh I'm I'm I'm pretty impressed with with my uh record on call calling gold since uh I know nothing about supply and demand. I I've never bu been a a proponent of owning gold simply because I I have no way of valuing it. Uh but when I saw that u when the gold market saw that Russia invaded Ukraine and the US and Europe froze the foreign exchange reserves of Russia, that's when a lot of central banks said to themselves, well maybe we bettered buy more gold and not not so much in uh in dollars. Uh and so gold took off above 2,000. And I I saw that and I called that. I said, you know, I don't know much about gold, but you know, if the central banks are going to be buying more of it, that should be a good that that should be a tip off. Uh along the way, I noticed that the Chinese were buying more gold because they got >> absolutely hammered in the property market there. And uh they got whipsawed in their stock market and here's a an asset that just seemed to go up every day and so that clearly attracted them. uh in India they buy gold and silver silver all the time and there was more of that kind of activity and the world as I've mentioned got crazier on the geopolitical side so all that added up to a good environment for gold now I do have one chart that kind of works pretty well in um explaining why gold could go higher if you put the S&P 500 on the same chart as uh as gold same scale uh make it logarithmic scale just so you get the proportions right of of moves. And what you see is that they're inversely related on a cyclical basis. So gold really is a good diversifier for a stock portfolio. If the stocks are going up, you're going to pay for that insurance because gold might underperform for a while, but when stocks are going down, gold m makes up for that. Uh, however, the trends of both are almost identical. And so I've been arguing that the S&P 500 could get to 10,000 by the end of the decade. And that's still my my roaring 2020s base case outlook. And if that happens, then I think uh natural diversification. You know, a lot of people who are in the market actually get more and more nervous the higher it goes and they want to diversify and they do buy gold. So I I think we could see gold at 10,000 by the by the end of the decade. both at 10,000 by the end of uh 2029. >> Wow. And so ju and and that's very interesting because just to underscore, you're not talking about the sort of supply demand dynamics of the gold market itself. You're looking at this as just sort of a portfolio vehicle. The the richer the valuations of stocks, you're just going to need to see that diversification play and gold is increasingly the choice for diversification. >> Yeah. for all the uh volatility and insanities and ups and downs that we've seen in our in our economies in our politics. Uh you know, the the the reality is the US economy continues to perform well on a trend basis. Every now and then we get hit by a recession, but we really haven't had one since 2008, as I mentioned. And I don't view the two-month lockdown as a legitimate uh business cycle downturn. Uh so we've got the economy at an all-time record high real GDP. Stock market uh until until January 27th was um at a record high and I think it I I got 7,700 by the end of the year. Still I'm I'm sticking with that. But yeah, I'm looking at as a as a portfolio situation. You know, the Maggie, the the world has never been richer. uh there's just an enormous amount of wealth on a global basis and um you know I I I I talked to uh you know we have a lot of institutional and individual investors and some of the private wealth managers who manage money for rich people say you know uh rich people are conservative. they they want to keep what they got. Uh they worked hard for it, but on the other hand, they want to get a decent return on it and they so the private managers, private wealth managers are telling me, you know, uh our accounts want to get out of the market. They're very nervous. I said, what are they so nervous about? So, they got big capital gains and they and and they don't mind cashing them in and even paying the taxes on it. But what's really worrying them is the size of the federal deficit and the the debt. and they say, you know, this this can't go on. I've been doing this for over 45 years and people have been worrying about the deficit uh for all that entire period, but they say they can't go on. So, I said to the private wealth manager, so what if they want you to get out of the stock market, what do they want you to put the money in? Um, and so 10-year treasuries. I said, how does that make any sense here? They're worrying about the deficit and the debt. And this one security that they want to hide in in a as a safe haven is a 10-year Treasury. And a lot of them have the attitude, well, you know, even if if the yields go up, I'll just hold it uh to to maturity and I'll I'll still feel pretty safe that I I know what I'm getting. So yeah, I think you have to think in um portfolio portfolio balance terms and that uh the wealthier the world is, the more demand there is for diversifying into bonds and into gold uh and so on. >> It's funny because I thought the bond diversification was dead. I mean the you know the idea that that could be a safe haven I thought was under question because as you mentioned and this is the you know the Fed meeting as we speak and this is I think the the the dilemma that people feel like they're grappling with as well which is you know they've they can't they there's they're limited on how much they can hike rates because they've got the ro this rolling interest that they've got to service on this massive deficit. So at some point are we looking at yield curve control or are they gonna face uh be faced with a choice of either saving the bond market or saving yeah the dollar? Does it come down to that? >> Well, I it was a 2024 we had a mini debt crisis or example of what could happen uh when the bond deal went from 40% to 5% in three months. uh and that was um August, September, October and on November 1st uh we had sort of a yield curve control play coming out of the Treasury not out of the Fed and Janet Yalen who was Treasury Secretary basically you know I I coined the phrase bond vigilantes back in 1983 in effect she was telling the bond vigilantes okay I get it I get it you know you just took you got my attention you pushed the bond yield up from four to 5% in in three months I don't want to see it go up any higher. I want it lower. You know what? If you don't like my bonds, I I need more money, but I'm not going to raise even more with the bond market. I'm going to do more of what I the additional that I need in in the bill market. And bam, the the yields came down. It also helped that inflation was continuing to moderate. Uh but that was a pretty good example of uh what could happen if we really get into a bond vigilante caused debt crisis. But to the point you just made, um, you know, here we've got a war. We got the inflation outlook suddenly looks worse again and the bond yield is just sitting there at, you know, four four and four and a quarter% which suggests that uh, yeah, there's safe haven buying in in the bond market. >> It's always great to catch up with you um, and get a balanced look, not just a bearish look. It's important to consider both sides of the equation. So, it's been such a pleasure. Thank you so much for your time. >> Thank you.
Ed Yardeni: I Just Raised My Recession Odds
Summary
Transcript
I raised the odds of things going wrong. That includes everything. And I raised that from 20% to 35%. So that would include a recession. That would include a correction in the market, maybe even a bare market. So yeah, I think the risks have clearly increased. I I can't I can't see a war happening in the Middle East and uh with with a lot of fog around that war as there always is around wars and not conclude that uh yeah this geopolitics can be a problem. >> Hello and welcome to Wealthy. I'm Maggie Lake and today I'm speaking with Ed Yardeni, president and chief investment strategist at Yardeni Research and we are going to be taking a look at the global macro environment. Hi Ed, thanks so much for being with us. >> Thank you. >> Uh if you're listening to this and you have any questions about allocations, you can get a free portfolio review at wealthon.comfree. We're going to cover a lot of topics, but and I feel like we need to start with uh the thing that's on a lot of people's minds and probably a worry that's on their minds, and that's inflation. And we we are just coming off a producer price reading that was hotter than expected. And that a lot of that was predated the Iran war. Uh do we have a structural inflation problem? >> I don't know if it's structural, but it's it's it's starting to feel a bit like it. Uh there is a suddenly especially with the war a sense of deja vu all over again reminiscent of the 1970s when we had two energy shocks and that led to a surge in inflation kind of a twin peaks in inflation. Eventually in the late 70s Paul Vulker came in and felt that the only way to bring it down was with a severe recession by raising interest rates. And um and not only did we have the kind of two two peaks in inflation, we also had two recessions. And economists call the whole period stagflation. For the stock market, it was called the lost decade. >> Uh so there are similarities, but um importantly, there's some very important differences. Uh productivity right now looks like it's quite strong and will continue to strengthen. And during the 1970s, productivity growth basically collapsed. Uh so that's a big difference. The other thing is the US in the 70s was very dependent on foreign oil. Uh and that's not the case today. Today today we are exporters of of oil. So the US economy is uh more resilient I think especially to an energy shock >> which is going to be you know good news for some people because you're right that 1970s scare is is certainly that narrative is certainly floating around. >> I think that if the productivity story continues to play out that's a very powerful disinflationary force. uh it's uh a key driver what's called unit labor costs which is the inflation rate in the labor market and that right now is down to about 1 to 2%. Uh so I I think uh we're going to see some volatility clearly in inflation to the upside over the next few months but you know much will depend on how long it lasts which nobody really knows other other than the president who said it'll end when he feels it in his bones. Uh but um you know it's uh the big risk we have here is oil prices going up certainly are already visible at the gasoline pumps. >> Uh but with a lag uh we got a problem with chemicals that come out of the Persian Gulf that are necessary to make fertilizer and uh and that's hitting right as the spring planting season occurs. So we could have a food inflation problem in the in the late summer and the fall. So yeah, right now we have an inflation problem. Whether it's structural or not, I'm I'm leaning towards the idea that it's not structural. As a matter of fact, I've been talking about the roaring 2020s uh scenario in which productivity does uh boost economic growth and keep inflation down. But now because of the war, I have to consider the possibility that uh there's another scenario, and that's the stagflation of the 1970s. >> Yeah. Uh, and and it's and and we've talked about your roaring 20s theory before, and I always think of you as somebody who is um willing and open-minded about the positives because it's super easy to get sucked into the negative scenarios, but you've been keeping your eye on this productivity miracle and some of the things that might come from it. So, it's interesting that you have you're raising the risk a little bit, it sounds like. >> Yeah. Yeah. Yeah. I mean, I I I love the perma bears. There's so many of them. And uh bearishness and pessimism seems to sell better than than optimism. I don't maybe it's human nature. I don't know. Maybe pessimism for some people sounds smarter than optimism. Uh but they do a really really good job of telling us everything that could go wrong. And it creates sort of a niche for me because I don't have to do as much work on what could go wrong since all I have to do is follow what they say. And then, you know, I have a tendency to look like what are they missing from the story. So, I guess, you know, I've been called a a perma bull, which I kind of view as a compliment because the stock market overall has a tendency to to to move higher. Um, but the problem with the perma bears is they'll get you out at the top, they'll get you out the middle, they'll get you out at the bottom. You'll never be in the stock market if you take that approach. But I I try to be balanced. uh and I try to you know con concede that things can go wrong and uh when the odds of the of things going wrong increase I I I I'll I'll state that uh so when when I do my uh my forecasting work I I like to do it with subjective probabilities uh just as a way there's no science to it it's just a way of conveying my my thinking on the latest developments and right now I'm still sticking with 60% odds for a um um a roaring 2020 scenario. Stock market goes up, productivity is strong, real GDP strong. Um and then uh I had been high using 20% for a meltup. Well, that doesn't look very realistic, so I dropped it down to 5%. >> And then I raised the odds of things going wrong. Uh that includes everything kind of a bucket of what could go wrong uh that the maybe a lot of the perma bears help uh me keep track of. Uh and I raised that from 20% to 35%. So that would include a recession that would include a a correction in the market, maybe even a a bare market. So yeah, I think the risks have clearly increased. I I can't I can't you know see see a war happening in the Middle East and uh with with a lot of fog around that war as there always is around wars >> and not conclude that uh yeah this geopolitics can be a problem. >> Yeah, I um I saw that I get I get uh I look for the positive in the updates I get from.com on my email in my emails um for what I should be paying attention to. But I did notice when you raised your odds of problems to 35 because I know that you look uh for the positive as well. So that did catch my eye. So uh let me ask you as you're trying to weed through this balance of risks. Uh so you mentioned the fertilizers which is really important. An awful lot of things go through the straight right. We've been really focused on crude rightly so but a lot of inputs go through there. >> Yeah. Aluminum. Aluminum too. I think one of the states, you know, one one of the nations there produces a lot of aluminum and that's not going to get through the straight, >> right? So, is that going to hit is that a problem for earnings? Um, especially when we couple it with this sort of uncertain tariff situation that we still find ourselves in. >> Well, what's really fascinating is uh how well the stock market's held up so far. Uh even today when the uh PPI came out uh I I I was not looking forward to looking on my screen to see how the market would react to it because it was hotter than expected. Therefore uh the odds of the Fed cutting rates uh uh uh uh anytime soon kind of diminished pretty pretty rapidly here and market wasn't really down that that much. Oil was up a little bit. Bonds didn't do much. Uh gold's kind of floating around $5,000 $5,000 an ounce. So it's been like remarkably calm uh in in the financial markets. Um and um I I think the markets are probably discounting that this isn't going to last too long. Uh I think they're also discounting that there's plenty of oil and one way or the other the stuff that's blocked uh in the Persian Gulf is going to get out. Um some people were talking about a 20% uh decline in uh oil um available for for global consumers. Uh that would be 20 million barrels per day basically. Uh but uh and looking at things more closely uh oils getting out through pipelines to the Red Sea from Saudi Arabia. Um there's the release of strategic petroleum reserves. uh the United States uh lifted sanctions on Russian oil that's uh at sea right now. Uh so the price of oil may just kind of hang around a $100 uh a barrel here. Um and um I think that's what the market's kind of counting on. I I think um the the market also perceives that uh the United States is energy independent. So it's not going to be like the 1970s for us. M is there a So, it doesn't it sounds like you're not overly concerned about a long-term inflation problem. Uh >> are we facing a recession though, especially because, you know, if we look at the lower K that even if it's for a few months, those higher gas prices, that's going to hit people hard. >> Yeah. By by the way, I didn't completely uh answer your question on earnings. Uh that's been a a surprise so far. uh we we have data on analyst expectations for earnings going into u into March so far and u so they they didn't apparently the analysts didn't get the the the memo about um uh higher energy prices uh cutting into earnings because earnings expectations actually continue to be raised uh by analysts. So that I think that explains why the market's been the stock market's been relatively calm because uh there have been increasing concerns about a recession. We can see that in poly markets on a daily basis. Uh there's an indicator uh of and you know the odds of a recession I think are now up to about 35% kind of similar to mine. Um but u I I think the markets perceive that uh a rec overall the market's not discounting a recession but the PE has certainly come down some but meanwhile earnings have gone the other way. They've gone up so that that explains things. Now the longer this thing lasts um the uh the odds of a recession may increase which would lower the valuation multiple and then the analyst might get the memo that hey you know what this is going to start to cut into earnings and if you get a combination of a lower PE and a lower E you got a bare market. So that's that that I think is the way things are headed. So right now right now that that it's it's it sounds like everyone's still thinks that we're going to get past it. Now it depends on >> Yeah. >> So uh if that's the case, why do you think talk to me about the dynamics that are keeping earnings moving because a lot of people felt like things were frothy. There was you know too much around AI spend. Mag 7 was stalling out. Is this are the earnings coming from different parts of the economy? Where is the resilience coming from? >> Well, first and foremost, it's coming from uh information technology and communication services. Uh there are 11 sectors in the S&P 500 and and those two u a few months ago got to be 45% of the value of the stock market or the S&P 500 I should say the the market cap share of just those two sectors was 45%. And I think that's come down to about 40%. uh December 7th, I I looked at the data. I said, "You know what? I'm I I can't continue to recommend overweighting these two sectors when they're already accounting for 45% of the market cap. They're not that big. They're more like 30% of of earnings. Uh but yeah, I think the earnings picture is pretty much across the board. uh and I think a lot of that has to do with productivity >> uh and a lot of that has to do not just with AI but uh I think companies are are managing their efficiency much much better because it is a very competitive uh market out there for many companies. So the earnings picture has uh been looking really good with regards to uh whether this can cause a recession. It c certainly could. Uh but uh in in my roaring 2020 scenario which has been which you know so far so good until the war started um in the roaring 2020 scenario what we're we're seeing is that uh uh companies are managing their efficiency and productivity. And what we're seeing is that the economy has been remarkably resilient. I mean, it can only be resilient because the consumer spending, because capital spending is strong. Um, obviously, we've also got some fis quite a bit of fiscal stimulus going on with the size of the of the deficit. >> But Maggie, think of all the stress tests that the economy has already been through and earnings have been through. So, we we started out the roaring 2020s with a pandemic. Uh, we had a lockdown that lasted all of two months. So, we had a two-month recession, but that was the the the the last time we had a a real recession uh was back in 2008. So, the economy's uh done pretty well through through the pandemic. And then when the lockdowns were lifted, we had supply chain disruptions that led to inflation that led to the Fed uh raising interest rates. Uh we had a mini banking crisis >> uh with three banks uh that was resolved very quickly uh in response to the Fed tightening. Uh then the Fed started to ease everything look great and then President Trump came in with tariffs and that kind of messed everything up. Uh but the economy didn't didn't flinch and now we've got a labor market that's looks a little bit uh uh weak. Uh and again GDP has been relatively strong and then in the second and third quarters of last year fourth quarter was weaker than expected but nevertheless real GDP all-time record high. The stock market what four or five% off its all-time record high. Not not too shabby considering that now we've got a another stress test and that's the war. And I'm going to continue to bet on the economy's resilience and if the economy is resilient earnings are going to be resilient. So, it's interesting. I mean, it's such a compelling case that you just laid out and I yet I think there are many who are thinking that it's kind of the roaring 20s and we're all, you know, dancing on the deck of that Titanic and some of the things that supported it or look like they're supporting it. The fiscal, we're kind of running out of runway with that because of the deficit. the consumer spending is really tied to the wealth effect and those who have assets and the rest and you know the rest of the hardworking folks are just really sort of fed up and can't and make ends meet. So if the stock market goes down that looks vulnerable like there all these things that look like um complacency and like you know is because we know what happened after the 20s it was the depression right so >> yeah well to address that question um and people have said said to me oh yeah yeah yeah you're saying it's going to be like the roaring 2020s like the 1920s but that ended very badly we actually uh just last year got a test of uh similar to the 1920s, but actually it was the spoot holly tariff that was passed uh at the end at the beginning of the the following decade in May 1930. That's when the great crash really started. If you look at the market, it actually recovered about 50% of what it lost in the late 29 crash and it was back to where it was in April of 1929. What's the big deal? Uh but then when Congress and the President Hoover um enacted the Smudhali tariff in May of 1930, the stock market uh took a crash uh that that caused the depression that shut off world trade and um so last year we had a pretty significant uh uh tariff scare and all in all we got through that uh reasonably well. There's still issues about the tariffs, but I think the economy handled that uh ve very very well. I think with regards to the consumer, um I think what's what's often um not discussed in explaining the resilience of the consumer is demography. Uh we've got baby boomers that are retiring. I'm still working for a living, but a lot of my friends are retiring. And the baby boomers collectively have $85 trillion dollars of net worth. Uh, and as they retire, they're they they're no longer getting uh wages and salaries. They're no longer paying income taxes. Uh, they're no longer um uh contributing to disposable income. So, re the real uh real disposable income has been flat for the past several months as they retire and the savings rates been heading low. It's all because uh the retiring baby boomers are starting to spend uh what what they what they had saved all these years. Um and now they're they're they're finding that even though they're spending more out of their retirement assets, for many of them who have stocks, their stock portfolios have kept going up. So if we do get a bare market here, that could depress the baby boomers uh who suddenly get a little bit cautious about continuing to spend. But right now they are spending and right now uh there's evidence that they're also helping their young adult children and uh and their grandchildren uh with uh helping out on the financial side. Uh there is an affordability problem and a lot of it is for younger Americans and a lot of baby boomers are are helping them. >> But you're right. I mean the consumer could be vulnerable. Um you know the the K-shaped economy I think a lot of that has to do with with demography. Younger people are having an affordability crisis. Older retiring people have done just fine, especially if they own houses and stocks. >> Yeah. And and AI's layered on that as well, right? Because the the sort of flip side of that productivity boom that we're seeing is now, especially in the last few months, real fears of what happens to the job market, especially for entry- level workers. >> Does that create a problem? And does that sort of offset the positive benefits of productivity? >> Well, I I think you know when you go into that bucket of what could could go wrong, u if you look at kind of the indiv individual pieces, you can kind of come up with reasons why they're not going to cause a recession. Uh I I have a concern though that uh there's you're seeing sort of a layering of of risk. Um I wasn't particularly concerned about the uh p private uh debt market, private credit markets. Uh figured you know if few loans go bad that reduces a rate of return on somebody's port portfolio. Uh but uh there is uh there is risk in private credit. Usually it's uh credit crunches that cause recessions. So it's something to to to be aware of. But now if the economy does in fact get hit uh by this surge in oil prices, this inflation uh issue that might force the Fed to raise interest rates. If all that kind kind of comes together, we could have a recession, which is again why I'm lifting my recession odds. And with regards to AI, um, a lot of people, especially younger people, are very concerned about, um, their jobs, whether they're going to be replaced by AI. I I I think that a lot of this, uh, is consistent with historical experience that when you do have a major technological innovations, let there's somebody trying to call me here. >> It's uh, it's the it's the Fed. >> Yeah. >> They need help, Ed. >> Yeah. Well, you know, as a side note there, I um I I many times have offered to do what the Fed does for half the price if they'll let me do it from home in my home office, but I >> they haven't taken you up on it yet. >> No, I wasn't on the list of of of candidates. >> They're they're refusing to acknowledge the world has changed. Work from home. >> Anyways, I I I don't know that they even want the job right now. The >> who would want the job, Ed, who that's got to be the toughest job in the world. We'll get to that in a second. >> Pal doesn't look very very happy right now. But with regards to AI, it's sort of like another layer of risk. Um it it may exp it's it's part of the explanation for why u the labor market isn't creating jobs. Um, the other thing is the baby boomers are retiring and there's a lot of them and they had a lot of experience and it's it's hard to get younger people obviously that can can do what they're doing unless you augment their their productivity. But I think between the private credit issue uh now this inflation issue and uh fears about AI I think it's it's reasonable to say that yes there are increasing risks of a recession put it at uh 35% and uh you know stay stay vigilant. >> Yeah. But again uh even last year uh the the polyarkets uh uh.com where you can trade on uh you know are we going to have a recession or not and other issues. Uh last year the poly markets I think got up to 60 65% and there was no recession. >> It's the this has been years now. It's the recession that everyone worries about constantly never comes but I think you laid out >> the GDAU recession. The GDO recession. >> Yes. waiting for. Exactly. I think you've laid out this great balance of um which is getting you know when we've talked before it was looking really good and there were some concerns but but now it's a little bit more you know a little bit more even uh and so how do you think about portfolios in this kind of situation because obviously majority people have exposure to equities. So, first of all, >> um are are you concerned about complacency? Are there areas of the equity market you think look better situated to weather the kind of, you know, uncertain forecasts we're facing? >> Yeah, I mean it it looks like complacency when you look at the S&P 500 uh being down only I think right now it's maybe down 4%. Uh, it's certainly not a a official correction, which is a 10 to 20% decline. I I thought, and I still think that it's possible we'll have a a correction here, but I'm very impressed with the um the fact that the S&P 500 isn't down that much. However, when you look uh a little deeper, uh you see that, you know, we we certainly have had a uh a plunge in software prices that now seem to be stabilizing. We certainly have had a drop in airline stock prices because of the surge in u in in oil prices. Um we've had a uh big jump up in energy prices as an offset to that. Uh the uh gold uh I would have thought would have done very well when you have a war in the Middle East, but the dollar has been strong and so that seems to have be be weighing weighing on gold. So there's actually a you know a lot of turbulence under the column of the uh o overall stock market indexes and um I I think you just got to have to kind of stay put. Um I mean uh the markets are not panicking. I don't think investors should panic. I was kind of actually hoping there would be a 10 to 15% correction because I I have this uh uh view that corrections are buying opportunities. You don't want to panic in them. You don't want to sell into them. Uh you just want to pick up some of the some of the securities that you that you thought had run too fast and they they also tend to be the ones that that correct the most. Uh but uh overall it hasn't been u much much of an opportunity to kind of jump in. So I I would stay put. Uh I uh I had recommended underweaiting the Magnificent 7 back in early December of last year when they were selling at a 31 multiple. Uh but now whether they're down to 25 uh multiple so I think they're cheaper. 25 seems high but they're they're really a phenomenal growth companies. They have been and will continue to be in my opinion. So um I I went back to a market to market weight on the magnificent seven. Um I would you know I would balance off a portfolio of of stocks with some bonds u which have held up very well in the face of this inflation scare. But I'm uh I I think gold should also be in a portfolio where precious metals uh hard assets would make sense uh as a as as some protection for inflation uh and just overall craziness. >> Yeah. >> You know, >> I certainly we would you expect to see those uh gold and silver the precious metal prices moving higher? As you said, we've been sideways here. A lot of people think it has to do with the dollar. Also some people have to sell their winners and you know need liquidity times of crisis. Would you expect that to resume higher? Because we saw some big moves at the end of last year, beginning of this year. >> Yeah, absolutely. And uh it was actually one of my my good calls last year is I thought we'd go from uh uh about 3,000 to to 4,000 by the end of uh last year. And I wasn't bullish enough. Uh, I thought I was, but we got to 4,500 and then came back settled down around 4,000 and then I I predicted we'd get to $6,000 an ounce by the end of this year. And uh, boom, you know, we went up to over 5,000 a few uh a few weeks ago, almost to 5,500 and now we're back to to to 5,000. I think it's going to consolidate for a little while. Uh but uh I'm I'm I'm pretty impressed with with my uh record on call calling gold since uh I know nothing about supply and demand. I I've never bu been a a proponent of owning gold simply because I I have no way of valuing it. Uh but when I saw that u when the gold market saw that Russia invaded Ukraine and the US and Europe froze the foreign exchange reserves of Russia, that's when a lot of central banks said to themselves, well maybe we bettered buy more gold and not not so much in uh in dollars. Uh and so gold took off above 2,000. And I I saw that and I called that. I said, you know, I don't know much about gold, but you know, if the central banks are going to be buying more of it, that should be a good that that should be a tip off. Uh along the way, I noticed that the Chinese were buying more gold because they got >> absolutely hammered in the property market there. And uh they got whipsawed in their stock market and here's a an asset that just seemed to go up every day and so that clearly attracted them. uh in India they buy gold and silver silver all the time and there was more of that kind of activity and the world as I've mentioned got crazier on the geopolitical side so all that added up to a good environment for gold now I do have one chart that kind of works pretty well in um explaining why gold could go higher if you put the S&P 500 on the same chart as uh as gold same scale uh make it logarithmic scale just so you get the proportions right of of moves. And what you see is that they're inversely related on a cyclical basis. So gold really is a good diversifier for a stock portfolio. If the stocks are going up, you're going to pay for that insurance because gold might underperform for a while, but when stocks are going down, gold m makes up for that. Uh, however, the trends of both are almost identical. And so I've been arguing that the S&P 500 could get to 10,000 by the end of the decade. And that's still my my roaring 2020s base case outlook. And if that happens, then I think uh natural diversification. You know, a lot of people who are in the market actually get more and more nervous the higher it goes and they want to diversify and they do buy gold. So I I think we could see gold at 10,000 by the by the end of the decade. both at 10,000 by the end of uh 2029. >> Wow. And so ju and and that's very interesting because just to underscore, you're not talking about the sort of supply demand dynamics of the gold market itself. You're looking at this as just sort of a portfolio vehicle. The the richer the valuations of stocks, you're just going to need to see that diversification play and gold is increasingly the choice for diversification. >> Yeah. for all the uh volatility and insanities and ups and downs that we've seen in our in our economies in our politics. Uh you know, the the the reality is the US economy continues to perform well on a trend basis. Every now and then we get hit by a recession, but we really haven't had one since 2008, as I mentioned. And I don't view the two-month lockdown as a legitimate uh business cycle downturn. Uh so we've got the economy at an all-time record high real GDP. Stock market uh until until January 27th was um at a record high and I think it I I got 7,700 by the end of the year. Still I'm I'm sticking with that. But yeah, I'm looking at as a as a portfolio situation. You know, the Maggie, the the world has never been richer. uh there's just an enormous amount of wealth on a global basis and um you know I I I I talked to uh you know we have a lot of institutional and individual investors and some of the private wealth managers who manage money for rich people say you know uh rich people are conservative. they they want to keep what they got. Uh they worked hard for it, but on the other hand, they want to get a decent return on it and they so the private managers, private wealth managers are telling me, you know, uh our accounts want to get out of the market. They're very nervous. I said, what are they so nervous about? So, they got big capital gains and they and and they don't mind cashing them in and even paying the taxes on it. But what's really worrying them is the size of the federal deficit and the the debt. and they say, you know, this this can't go on. I've been doing this for over 45 years and people have been worrying about the deficit uh for all that entire period, but they say they can't go on. So, I said to the private wealth manager, so what if they want you to get out of the stock market, what do they want you to put the money in? Um, and so 10-year treasuries. I said, how does that make any sense here? They're worrying about the deficit and the debt. And this one security that they want to hide in in a as a safe haven is a 10-year Treasury. And a lot of them have the attitude, well, you know, even if if the yields go up, I'll just hold it uh to to maturity and I'll I'll still feel pretty safe that I I know what I'm getting. So yeah, I think you have to think in um portfolio portfolio balance terms and that uh the wealthier the world is, the more demand there is for diversifying into bonds and into gold uh and so on. >> It's funny because I thought the bond diversification was dead. I mean the you know the idea that that could be a safe haven I thought was under question because as you mentioned and this is the you know the Fed meeting as we speak and this is I think the the the dilemma that people feel like they're grappling with as well which is you know they've they can't they there's they're limited on how much they can hike rates because they've got the ro this rolling interest that they've got to service on this massive deficit. So at some point are we looking at yield curve control or are they gonna face uh be faced with a choice of either saving the bond market or saving yeah the dollar? Does it come down to that? >> Well, I it was a 2024 we had a mini debt crisis or example of what could happen uh when the bond deal went from 40% to 5% in three months. uh and that was um August, September, October and on November 1st uh we had sort of a yield curve control play coming out of the Treasury not out of the Fed and Janet Yalen who was Treasury Secretary basically you know I I coined the phrase bond vigilantes back in 1983 in effect she was telling the bond vigilantes okay I get it I get it you know you just took you got my attention you pushed the bond yield up from four to 5% in in three months I don't want to see it go up any higher. I want it lower. You know what? If you don't like my bonds, I I need more money, but I'm not going to raise even more with the bond market. I'm going to do more of what I the additional that I need in in the bill market. And bam, the the yields came down. It also helped that inflation was continuing to moderate. Uh but that was a pretty good example of uh what could happen if we really get into a bond vigilante caused debt crisis. But to the point you just made, um, you know, here we've got a war. We got the inflation outlook suddenly looks worse again and the bond yield is just sitting there at, you know, four four and four and a quarter% which suggests that uh, yeah, there's safe haven buying in in the bond market. >> It's always great to catch up with you um, and get a balanced look, not just a bearish look. It's important to consider both sides of the equation. So, it's been such a pleasure. Thank you so much for your time. >> Thank you.