"We're Now In The Middle Of A Market Correction" Admits Longtime Wall Street Bull | Ed Yardeni
Summary
Market Outlook: Ed Yardeni raises recession odds amid the Iran war and oil shock but keeps a bullish base case for a continued expansion if the conflict is short-lived.
Energy Sector: Extensive discussion on oil supply risks via the Strait of Hormuz and potential long-term support for U.S. energy and LNG exports due to Gulf disruptions.
AI and Tech: Despite volatility, the technology selloff and improved valuations for mega-cap tech present selective buying opportunities for long-term investors.
Bond Vigilantes: Rising global yields reflect inflation pressures, larger fiscal deficits, and potential defense spending, tightening financial conditions.
Private Credit Risks: Cracks are emerging in private credit/PE structures with liquidity constraints, posing downside risks especially if combined with sustained high energy prices.
Investment Approach: Favor dividend-paying stocks and consider nibbling during panic days; energy names offer yield while tech weakness can be an entry point.
Earnings Resilience: Forward earnings estimates continue to rise, led partly by tech, supporting the case for buying corrections if recession is avoided.
Key Risk Variable: The duration and escalation of the conflict—and its impact on oil at $100-$150—will drive recession risk and market direction.
Transcript
And I still think this will turn out to be a 10 to 15% correction. And we're halfway through that and that it it could could happen in this week or or next week. Welcome to thoughtful money. I'm its founder and your host, Adam Tagert. Ed Yardeni, president of Yardeni Research, has maintained a more bullish outlook on the economy and the financial markets than most analysts have over recent years. and he's largely been proven correct. But in the aftermath of the outbreak of war in Iran, his outlook has turned much more concerned. He now sees the return of the bond market vigilantes, a term that he coined back in the 1980s, by the way, only this time worldwide. And he now calculates rising odds of both an economic recession and bare market in stocks resulting from the current oil price shock. So, what advice does he have for investors in such an environment? Well, we'll find out from him directly. Ed, thanks so much for joining us today. >> Thank you. >> All right, Ed. Um, so first off, just want to make sure the description there in the intro correct? >> Yeah, you know, when I uh think about the outlook and try to communicate uh how things look to me, I I I typically have one uh not just one scenario, but two or three. And I I try to uh give people an idea of my conviction uh with a base case uh having the highest subjective probability and then uh alternatives. Things may be better than the base case, things may be worse than the base base case. So uh yeah the the the war up upended uh everybody's forecast I think and uh continues to upend everybody's forecast because uh uh I I guess if this war ends in a matter of days or maybe a couple of weeks uh then the uh consequences may be fairly minor to the global economy and then we can all kind of go back to the scenarios where we thought they were most likely be before the war. Obviously, the longer it lasts, the worse the outlook becomes. But when the war first broke out on Saturday, I I write on Sundays and I I I I write almost every day. And so we sent out a note to our clients that was optimistic that uh well, you know, the uh US and Israel be beheaded uh the decapitated the regime in Iran. uh Iran uh lost the war. They just don't know it yet. Uh the problem is Iran is a uh state of professional terrorists. That's that's what the what they do for a living u all all day. That's that's their uh uh that's their modus operandi. And uh it's, you know, even if you decapitate a regime like that, you're still left with a lot of terrorists. And so what took me a few more days and I said you know I think that's a that could be a real problem here is that um you know if you don't have a command and control and that you know you still have hundreds a few hundred thousand a couple hundred thousand let's say of people in the um Iran revolutionary uh uh guard then uh you you still have a problem with with terrorists and with drones and and missiles u they're not necessarily going to surrender just because you bomb them from the air. Military historians have long shown that uh military campaigns simply from the air don't really change the outcome. You really need boots on the ground to do that and that doesn't seem like a very likely scenario. In any event, I concluded that maybe I was too optimistic initially and uh so I actually raised my odds of a recession from 20% to 35%. I kept my uh what I call a roaring 2020 scenario at 60%. So I took it all from uh basically a meltup scenario. I left 5% for a meltup. I mean we can still have a meltup if uh Trump declares victory or if in fact there is a deal. Uh stock market obviously sore on that kind of news. And I think there's still a a perception that uh there are similarities between what's going on this year and what happened last year. Last year we had liberation day and April 2nd market took a dive on that with the tariffs and then on April 9th I guess after Trump had a look at the reaction to the stock and bond market he decided to postpone Liberation Day and the market was up 10% on April 9th basically from 3 to 4 p.m. all in about an hour. And I think there's uh sort of a a hope that the same thing's going to happen here. This time around, we got obliteration day. Uh about a week or so ago, Trump threatened to obliterate the power systems, the electricity systems of Iran. And then uh he postponed that for two days and five days. And now I guess the by the end of uh uh Friday, we'll we'll see where where we are with obliteration day. Uh but yeah, I think uh you know, realistically speaking, uh the the facts have changed uh and uh so there is a increasing risk of a of a recession. But notice I didn't really give up on the roaring 2020s. I think, you know, if this does turn out to be relatively short, uh there's still a a good chance that that will resume. Uh but I have to concede that there's another decade that this is similar to could be similar to and that is the um stagflationary 1970s and that was a lost decade for the stock market. Okay. Um so I think you answered a question I was going to dig into a little bit here which is let's start with the optimistic scenario where this all ends in a couple of days or weeks or whatnot. um you were quite bullish heading into the year. Again, you've referred to your kind of overall framework there as the roaring 2020s and um you know, the administration had been saying right up until the announcement of the war. I mean, they're still saying it, but they had been sort of selling us on, hey, we've done a lot in 2025 to kick off the golden age of America, which you're really going to start seeing here in 2026. Um and there were, you know, record um well, there still may be record um uh tax refunds coming and the tailwinds from the one big beautiful bill deregulation, right? >> Uh you know, the tariff revenues coming in, all that type of stuff. Um >> now that's all in up in question, right? Because how much of the of the >> refunds are going to get eaten up by higher oil prices and all that stuff. But let's let's assume it all gets put to bed real quickly. You think it's more likely than not we it's it's game back on in terms of you know the the the economic tailwinds propelling us to to better GDP growth and maybe better performance. >> The the the one thing that really like stands out uh for for reason as a reason for being optimistic is industry analysts remain very very positive on the earnings outlook. >> Yeah. Now, maybe they didn't get the the uh the memo about the war in Iran. I mean, they're clearly reading about it and seeing it in in the media, but they maybe haven't gotten any feedback from their the companies they follow yet, and they're they're waiting for that. The companies themselves don't know. I mean, that's I think everybody I mean, it's okay to say we don't know because Fed Chair Jerome Powell in his last press conference said that 20 times. So, we just don't know. And I think that that's that's an honest appraisal of what the sit situation is. And uh you know past uh history is relevant. We've we had two oil shocks in the 1970s. They led to a surge in inflation. Um they uh led to two recessions and as I said stocks were basically dead money for for a whole decade. So that's a conceivable scenario. Then last year we had a uh uh I mean in 2022 we had a surge in oil prices when Russia invaded Ukraine. There's a lot of concerns about uh grain shortages that would lead to soaring food prices and all that happened for a few months maybe about a year but inflation did come down pretty rapidly and oil prices came down and food prices did did as well. So I would say the analogy right now is more what happened in 2022. But um then again it is different this time in the sense that the straight of Hormuz is a vital choke point and uh right now it's uh it's it's been kind of shut off. I I'm also encouraged by the fact that The Economist front cover uh focus as a graphic showing uh an Iranian's hand uh squeezing the the the global uh the globe the US globe into you know uh a real distortion uh and uh with all due respect to the fine people who work at the economist their cover stories do tend to be contrary indicators. >> All right. Um, well, look, let's all hope hope that's the case. Um, uh, your your point about earnings estimates. Um, I I saw in my weekly recap of Lance Roberts over this past weekend, he showed a chart of S&P forward earnings estimates, and you're right. Um, they're they're not only um rising now, but that but the pace of the rise has has accelerated. So for whatever reason, uh the analysts are not yet projecting any real impairment from what's going on right now. >> And and by the way, uh forward earnings is actually one of my favorite economic indicators which is available weekly. It does correlate very well with real GDP. However, analysts don't see recessions coming. So forward earnings is really a great weekly indicator of what's going on in the economy as long as the economy is growing. Uh but by the time they see a recession, we all know that that's the case. Um then again, uh if you take the year-over-year percent change in forward earnings, that tends to be somewhat better uh as a uh indicator even uh anticipating recessions and that's looking, as you said, I mean the the pace of increase is actually going up. Uh some of that is of course technology companies. uh Nvidia reported gang busters earnings and uh Micron reported gang busters earnings. So a lot of it is in the technology area but the industrials are doing well. Um you know the the US economy has proven its resilience now since the beginning of the decade. Uh I uh I was uh almost alone I think in predicting that there wouldn't be a recession uh o over the past several years when people were anticipating the most widely anticipated recession that never happened. >> Um and I think this could wind up being another one of those stress tests. So yeah, going from 20% to 35% just shows that you know I'm I'm acknowledging that the facts have changed and the risks have changed. uh but we may be surprised at the resilience of the US economy once again. I mean the US economy compared to the 70s uh we we imported oil that we were dependent on foreign oil. Uh now we are self-sufficient in oil and uh the energy intensity of the US economy is greatly reduced from what it was in the 1970s. >> Okay. I I want to I want to ask you about that in just a second. Um, but uh, uh, I want to just shine a light that there's there's there's kind of a a dual risk nature to this market right now, which is that the analysts are overly optimistic and the market is pricing in, you know, currently currently priced as if they're it's taking those those earnings forecasts into its current pricing. though that's been offset. We've had a a significant correction in the PE. Uh it's the E that's I'll give you the numbers. The PE is down about forward PE for the S&P 500 uh from earlier this year is down about 16%. Uh and the market's down about 8%. So that tells you that the forward earnings is up up about 8%. So that's that's the way the markets dynamics works in a very simple way, >> right? And and so what I just want to note is the risk that the analysts are wrong. Correct. Or that they're they're they're made wrong by things worsening in the war and oil prices staying higher for longer or going even higher and all that type of stuff. So So the repricing risk there is that not only bringing the multiple down, they have to bring the E assumption down as well, right? So there's there's that downward repricing risk. But on the investor side who are bearish and everybody who's, you know, either hopping out of the market or going short, >> if this is relatively short-lived or the US economy proves more resilient than folks think, there's an upside risk to this market. >> That's correct. Yeah. Everybody's nervous because they they'd like to believe this is going to be like last year all over again and that uh there will be uh some events that make make the recession risk go away and then you get this big surge in in pees. I I mean the simple u way of looking at it is that corre corrections uh tend to be caused by uh recession fears that aren't realized. And so what happens is the PE goes down, but the E keeps go going up. And that's kind of what we got going on right right now. And I still think this will turn out to be a 10 to 15% correction. And we're halfway through that. And that it it could could happen in this week or or next week. And sentiment's getting very bearish, which is bullish from a contrarian perspective. bare markets occurred when the PE goes down on expectations of a recession and then the analysts aren't seeing that and then suddenly when the analysts do see it as you said the PE has room to go down some more and the E goes down some more and then you get a a very nasty bare market when you have both PE and E going down. So, um it's just it's it's a I mean obviously the market can obviously go up or down at any point in time, but it seems that the um potential for a lot of people to get caught in the wrong wrong side of the boat here is high because you have lots of different camp or two big camps making their bets right now in different directions. >> Um we'll we'll see and a lot of this is going to come down to exactly as you said how long this war um continues. So, let let me ask you this first before we we get into just sort of the nature of the oil price shock and what's happening in the bond markets. Let me just ask you this, Ed. I I know you're not a geopolitical strategist or or an oil expert, but you are an economist. >> I I pretend to be one, just the way everybody does else. >> Okay. >> Even the military experts don't know what's what's next. I I just want to get your sense on what would happen if the US just picked up stakes and walked away tomorrow and ju just said you know what we've achieved enough of our military objectives and you know what we don't depend on the oil coming out of the Gulf so you all figure it out >> that's a plausible scenario and uh I think as a result of uh the shutting off of the straight of Hormuz uh there's going to be a lot of money spent on uh pipelines to to to the Red Sea and uh other ways to get the o oil out. Um however, some of the damage that's been done particularly to uh LG production in Qatar, I believe it is, um uh it may take a while to to rebuild. People have been talking about as much as five years damage and that's a lot of LG liquid natural gas and uh as I mentioned before that's also helium which apparently is critically important for the production of uh semiconductors >> of semiconductors uh but the initial reaction uh would be uh you know Trump uh you know maybe you know if Trump had to do it all over again he should have done what he did last time when he attacked Iran. He he bombed the nuclear sites and and and and went home. Uh and maybe this should have been more a mow the lawn approach that, you know, telling the Iranians, you know, you could you could do whatever you want, but every six months we're going to destroy whatever you've done on the nuclear and and ballistic missiles side. And he could have just played it that way. But uh I think >> I think he still can play it that way if he wants if he leaves. >> He could still he could still play play that way. And that that may very well be the most likely scenario. It's uh I you know I mean you get boots on the ground and you get Americans getting killed and the the domestic political uh impact would be uh pretty pretty ugly. Um but as it is, it looks like he's going to lose the midterm elections uh according to poly markets anyways. Uh he could lose the the he's almost certainly going to lose the house according to poly markets and uh he could lose the the senate. So uh things could get uh pretty ugly on the domestic political side. I mean some people say they already are ugly but u you know having even more uh partisanship in the US would would not be a happy scenario but the market would initially obviously surge on it and then we back back to the same old same old issues and that is you know how do you invest in artificial intelligence? Are they spending too much money? um you know rate of technological innovations is is so great that u it just creates a lot a lot of uncertainty but uh the earnings story is great uh the economy is resilient and uh uh you know I'm I'm still using 7700 uh by by the end of u of the of the year maybe I got I'm I'm being uh too stubborn and hanging on to that given the risks uh but the reason I'm doing that is I I guess I recall what happened to mine and weather forecasts. Last year when Liberation Day occurred, we all lowered our uh uh you know, I had 7,000 by the end of of last year at the beginning of last year and I think I lowered it to about 6,400 um and all the commotion with with tariffs and then I went back to 7,000. So, it's I I think we all have to get neck braces here. You can you can really uh get get some damage here from all the all the whip whips whip saws. >> Okay. Okay. All the whiplash. Um, okay. So, sir, just to be clear, you you even with r your rising odds of a recession in a bare market to 35%, you're still you still have your 7,700 target. >> Yeah. I mean, my my base case is still roaring 2020s. I, you know, it's it's worked like a it's worked great up up until the war. And um I I guess uh I'm still hanging on to it recognizing that uh this could turn out that there's some variation of the seven uh of of the 1970s which was stagflationary and dead money for the stock market. >> Okay. So one of the reasons why I asked you about the scenario where the US just pulls up stakes and and folks look I get it that that not that we're making a ton of friends in the world right now but that that might be even more unpopular globally. Um if we say we broke it but you guys buy it. Um but uh could that also increase global demand for America's energy exports right where people would say look you know the the I I was buying the cheap oil from the Gulf. I'm now less comfortable about doing that. Now maybe I'm a lot more com uncomfortable um with doing that if if it's left in a place where Iran is using it like a toll booth. Um, and so they're going to look for quote unquote safer sources of supply. And the US is totally happy to increase its production. And in a lot of cases, especially especially kind of the Indo-Pacific, the energy gets there a lot faster and safer than when it comes from the Gulf. >> Yeah, absolutely. And uh I think this is a more or less a done deal with liquid natural gas to the extent that even if the streets were open, the damage done to LG production in the Persian Gulf, so it still would favor more exports from the from the US. So I think u that's definitely going to happen. um you know when talking about geopolitics uh kind of wondering why China doesn't take this as a great opportunity uh to invade Taiwan and maybe the answer is uh because we've just learned just how much oil uh China gets from the Persian Gulf and uh how how easy it is to shut shut that oil off. I mean, the the the Chinese government must be kind of really uh trying to figure out what happens if uh these American uh troops that have been sent over there. And and again, they're already troops in the Middle East. So, if we send 15,000 more, there's about going to be 50 to 60,000 in the in the Middle East. Uh what if they do go for Car Island and control uh uh where where Iranian oil goes? Um, and a lot of that goes to to China. >> So, let me ask you a question about that. And again, sorry to be asking you questions that might be a little bit out of your purview as an economist, but you're a smart guy and I don't know who else to ask this to. Um, >> so totally understand the logic of, hey, we take Car Island and we basically have an economic chokeold on Iran. Um, where literally we can send their economy back to the stone age because it's so dependent upon their oil exports. Now, there's a lot of danger if we put troops there as you just noted, right? So, instead of doing that, why don't we just sit outside the straits of Hormuz? And as Iranian tankers come out there or tankers with Iranian oil come come out there, why don't we just take those? They're already under sanction. Yeah. And I'm assuming we're not doing that right now because that might be a line too far for China given China's dependence on that. But it would be it would effectively accomplish the same thing just with I I would think a greater market It's a it's a great idea and uh m makes sense since uh you're you're a geopolitical uh military strategist uh par excalance. Uh make yeah I mean we we could just say you know we we're we're confiscating the Iranian oil uh outside of the straits. It's now American. That's, you know, the Iranians say they want reparations, say, "Well, we want reparations." And so we take their oil and we sell it to the Chinese and they have to pay in dollars and we deposit it in our account. >> And it's exactly what I was thinking. We literally just take the tanker, we we remove whatever flags on it, we put a US flag on it, we bring it to China and say, "Here's your oil plus 10%, you know, for our handling fees." >> And oh, by the way, if you invade Taiwan, you're not going to get our oil. So I I yeah I mean I'm sure there's lots of concerns about this we'll hear about in the comments but to me that seems sort of a safer way to to not have to put troops on the ground in the Gulf itself. >> Yeah. Well I I I don't I don't want to name any names but uh every now and then Larry Cuddlo asks me on the show and he he knows a lot of those people from his his first stints. So I'll I'll I'll share that with him and I'll I'll I'lluh make sure that you get credit for it. Well, thank you. I'm sure somebody has thought of this and smarter ideas, but uh but I've been wondering about it's the first I've heard of it and it's uh it's I I don't see any downside to it quite honestly. >> Wow. All right. Well, look, I'm honored that you think the idea is at least worth entertaining. >> Yeah. >> Um All right. So, now uh I asked you about sort of the best case scenario. Okay. Let's let's just flip to what is. So what is right now is um oil and gas are very compromised and coming out of there. It's about 20% of the world's supply. Um uh there the markets are pricing at a premium here by shooting the price of oil you know to the moon. Um and to your point um or to your your particular area of expertise uh the bond vigilantes kind of worldwide um are showing up now on the yield curve. So just just kind of give me the playbyplay right now as you see what's going on. >> Yeah, the uh the bond vigilantes uh people asking me where where are they and they've been in Japan obviously bond yields have increased rather dramatically there um before the war and the same thing was happen happening in the United Kingdom. So they were expressing uh their dissatisfaction with some of these governments that have even bigger debt to GDP ratios than we have in the United States. Uh but now with this war uh clearly the inflationary pressures are going to be mounting for the next several months uh or longer depending on how long the the war lasts and inflation is bearish uh for for for bonds. In addition to that, um I think a lot of countries are going to be increasing their spending and therefore their deficits and their debt to GDP ratios on defense. Um and some countries might uh try to uh offset some of the recessionary impacts of this war in terms of its pushing up oil prices and depressing consumer spending uh by providing fiscal stimulus. So that too will will increase the deficit. Uh so we we have seen a backup in bond yields. I guess we went from four to about 4.5% in the US on the 10-year. Other bond yields have gone up around the world. Uh so the bond vigilantes are basically demon telling policy makers, you know, get get this straightened out or we're going to continue to tighten credit conditions. Uh, I mean things on the downside, it's not not too hard to paint a scenario which I'll have no choice but to raise my odds of a of a recession because we do have cracks in the private credit market and they probably won't cause a recession on their own. Uh, but if u consumers decide to retrench because uh the higher gasoline prices and the nervousness about where this all leads, uh it could turn into a recession. um and that would exacerbate the the credit uh problems in the in the private market. So that's uh so you know in terms of credit spreads they could widen and in terms of government yields sovereign debt uh they don't have a credit issue generally speaking uh but uh those yields u I think have already sort of discounted uh the a transitory and I know nobody likes that word uh but uh or something like what happened in 22 23 something that lasts a year or two and then inflation come declines. Again, going back to the roaring 2020 scenario comparing to the n 1970s. Uh in the in the 20 in the um 1970s, productivity growth collapsed. It went from about 3 4% down to zero over that decade. And this time around, the productivity outlook is actually pretty pretty positive. And that could be a big offset to some of these inflationary pressures. >> Right. Right. And it's also the inflationary pressures again it's such a function of what happens from here with this war. Right. So let let me ask you this. Um all things being even and I'm going to I'm going to ask you a correlary to this in a second. All things being even meaning like no more greater destruction of the energy production infrastructure in the in the Gulf. Um, at at what time from here would you say, "All right, I got to I got to increase um my recession odds because this has gone on for long enough to now become I'm real worried about this manifesting further economy. Is that a week? Is that a month? Is that six months?" >> I think it's in weeks. So, I don't think it's a months. Uh, in other words, I think we're going to I think we're going to realize pretty quickly here whether this thing is going to last longer. Obviously, it'll depend on what we do with the the troops that uh American troops are in the Middle East. Uh what kind of assault is intended. Uh are we going to try to uh take over the street of Harmuz? Um are we going to take try to take over Car Island? Are we going to try to do both? Um so um any clear escalation of the war uh with a clear indication that uh diplomacy negotiations isn't going anywhere. I mean we've been negotiating with Iranians for years and it's gone absolutely nowhere. Um and uh so uh it's it's hard to get too excited about negotiations and and we don't even know whether we're negotiating with with the right people um since we don't really have uh we've wiped out a lot of their leadership kind of the next level of leadership may we may be sitting with them coming to an agreement and there could be uh kind of a civil war within the revolutionary guard where some some uh groups of them say we're you know we're going to fight to the death and we're we're gonna we have access to missiles and drones. So, it's uh it's complicated to say the least. >> Okay. So, um Okay. So, it sounds like a couple weeks of kind of the status quo going on, you're going to say, "Okay, I got to ratchet things up." What would you do if we get to the just screw it scenario and um the US just says, "We're done negotiating with you." when they start they and Israel just carpet bomb the the energy installations there and then Iran retaliates blowing up more energy infrastructure in the Gulf kind of a worst case scenario for future production wise >> yeah I mean the United States declaring victory wouldn't necessarily as you just laid out you're a pretty good geopolitical strategist by the way um yeah I mean in that scenario uh the initial reaction of the market might be oh you know Trump Trump is walking away from this thing and uh leaving it to the locals to to sort it all out. But as you say, the the problem with leaving it to the locals is they might continue to bomb the living daylights out of each other, including the infrastructure, which means that um the the Straight of Hormuz hasn't been opened. uh and maybe some of the some of the players that uh get along with the Iranians like the Chinese and Indians will still be able to get their tankers to pass through there and there might be a toll for that but it wouldn't necessarily be a you know all all clear signal. >> Yeah. I guess to my point was is if it devolved to the point where there was a lot of destruction in the energy infrastructure there, would you then be forced to to write up your economic damage forecast by a moderate amount? A lot >> depends on how much oil gets taken off uh the market. I mean, you know, Iran itself accounts for significant amount of oil for for the global economy. China imports like 90% of their oil from uh from Iran. So, um yeah, I think I'd have to con consider the possibility that uh this uh this is a structural problem now w with enough oil to meet demands. Oil prices stay high and so the you know from an American perspective the war could be over but it wouldn't be over in terms of what the price of oil says. I I I think what you know at the end of the day we're all watching the price of oil is the obvious key indicator here. If uh if it's if it stays uh at 100 that's one scenario not a happy one but not terrible. If it gets to you know 125 150 I mean everybody kind of has these alternative scenarios. So um it depends. >> Okay. All right. I'm going to fully commit to this geopolitical analyst role. Um, so first, >> you're on a you're on a roll. Why not? >> Oh, thanks. Um, on that last point you made, I do wonder, um, so oil is a global commodity, so we are impacted by, uh, what's going our oil prices are impacted by what's going on in the Gulf. But I I do see the potential for, you know, not just America, but but all oil producing countries um to to ramp up supply to to meet the unfulfilled demand that's going on right now through there as we talked about earlier and and that could moderate the price of oil somewhat somewhat, right? So almost sort of no matter what's going on in the Gulf, >> um yes, we'll have a higher oil premium than we had before, but but we won't be as tied to what where it is right now. It's going to they'll be somewhere in the middle to meet. >> Well, it's uh it's what commodity traders always say. The best the best cure for high oil prices is high oil prices. >> Oil prices. Yeah. >> Because that that that does create a tremendous incentive, you know. I don't know if you watch Landman. Uh yeah, I mean it I learned a lot about the oil business from that show and it's uh it's all mo motivated by profits. Uh and if uh the price of oil stays at a 100 bucks, uh a lot more oil is going to come out come out for sure. The the Brits might actually open up the North Sea uh for for more more production. >> Yeah. >> Um you know, I I think there is going to be definitely a geopolitical response to the re realization just how vulnerable uh passageages through the street of Hormuz. >> All right. So in in some ways, you know, this could be a net long-term boon to >> the energy production other countries. >> I I think mo most uh uh people would agree that uh you know given what what Iran's reaction was to this war, which is just to bomb everybody and and create chaos. It's like uh imagine if they actually had nuclear weapons, >> right? Um and so um this this two shall pass things will stabilize um you know we'll kind of everybody just kind of learn a lot of geography um about you know where things pass through where they have to pass through and uh that's a good thing. >> Yeah. I I I chuckle there and it's somewhat of Galler's humor. I can't remember who said this. this I think it was a comedian, but he said um you know basically the purpose of war is for Americans to learn geography because we're so bad at understanding it otherwise. >> It's very sad and true. >> Yeah. Um okay, so here here's here's the other geopolitical question. So, um, uh, you know, the there's there's the the possibility, as we talked about, that that America could just walk away and say, "Look, rest of the world, this this isn't our problem. You know, you figure it out." And Trump has certainly been vocal in his frustration that, >> you know, especially the NATO countries haven't come and participated more than they than they have. And um I do wonder, you know, if if if the pressure of the situation isn't sort of on Trump's side here where the longer this goes on in in the Gulf and the more that it becomes unstable and the more that Iran if it if it were to remain if America left would be you know potentially be the the bully gatekeeper where these countries collectively might say you know that's not what we want and then you end up getting some sort of international flotillaa that says look we are just going to be the the the policing naval force of the Persian Gulf, right? So Trump may actually get what he wants anyways just by letting this persist long enough, right? >> Absolutely. Yeah. I mean, if he walks away and and the chaos continues, uh it it will be up to others other countries that have a lot more skin in the game in the Persian Gulf to uh stabilize the situation. And that includes China, it includes India, it includes Europe. Uh so that's absolutely um like I said we could have a situation where he declares victory and stock market soarses and then then it maybe has a significant correction on the realization that that's still a mess in the Middle East and that uh vital commodities still aren't fully getting through and then there'll be a another policy response. You know, you know, that's that's why sentiment works so great as a as a particularly as a as a buying signal is like when when we all get super pessimistic, that's when you get a policy response, >> right? >> Um it's it's and it's different this time than it was last year. Last year was like Trump postpones liberation day. It was totally up to him and he did it and the market went up and then uh up up and away. this time around it be maybe a little messier and trickier. Uh but um you know the the the world can't can't take this this uh this situation. It's not a a viable stable situation. So the world's going to have to respond and it could be without us. >> All right. And last question on this then we we'll get to your your kind of how to invest in all this. Um, so let's assume for a moment that Trump sticks to landing here and that this uh this operation is wound up relatively quickly and he comes home with Iran's enriched uranium that either through negotiations or we send in the special forces and they successfully take it. But let's let's just assume for a moment that happens. Folks, I realize this might not be a super high probability, but if he were to, would would the net result of this Iranian incursion in terms of its impact on the midterms, in your opinion, be a net negative because folks are still remembering the pain from oil prices, or would they say, "Oh my gosh, that was actually a really low price to pay for, >> you know, security for America and and its Western allies and and its Gulf allies." um with a now a non-uclear Iran. >> Yeah. Look, I I I think uh it's all right for all of us to first and foremost acknowledge we don't know. I mean, even Fed Chair Jerome Palace, as I mentioned in his press conference, mentioned it 20 times. He said, "We don't know. We don't know." Uh and uh there's there's it's the fog of war. You never really know how it's uh is it's gonna play out. I mean, uh, uh, I I I I like your original proposal about, uh, t taking Iranian ships once they're on the other side of the straight. Uh, trying to find that nuclear uh, uh, material with with military forces. That's going to that would be an ugly ugly scenario. much better if we that there was somebody rational in Iran said, "Okay, just we we'll give you the material as long as you don't wipe out our our electricity and and power." >> Right. >> Um but there's just so many ways this this thing could could could play out. Um I think there's there's just a worldwide recognition that Iran is out of control. Uh and in fact, that is exactly the uh the strategy of the Iranian regime. It's chaos. Create as much chaos as you possibly can. Uh hurt everybody. So everybody comes back to Iran says, "Okay, if we if we leave the regime intact and we uh, you know, and you do you agree to do a few things, uh then this whole thing can come to an end. And oh, by the way, as part of this agreement, we want your your uranium." Um so that's that's conceivable. Um but um uh the the geopolitics is is is a is a tough one to uh to get around and everybody's kind of like coming up with uh the best case and worst case scenarios and maybe it'll be something in between kind kind of messy and that lasts a while and the market nevertheless looks through and recognizes that uh this will all stabilize. >> All right. Well, uh I think we can all agree that everyone just hopes it ends sooner with the least amount of bloodshed possible in every >> Absolutely. >> Um okay, so two last main topics and then we'll wrap it up. Um you mentioned private credit briefly earlier. Um how concerned are you right now just about the potential contagion of private credit? You know, some have worried this is this this decade subprime. Others have said ah it's much more contained. where do you fall? >> I think that uh there's a chart I I monitor weekly and that is uh the year-over-year growth rate in bank loans. Uh the reason there's a private credit market is because um uh the banks have been uh highly regulated and there's a lot of loans that uh they really didn't want to make. And so the private credit uh markets uh saw a great opportunity to to make those loans. And I think everything was okay until uh Wall Street decided that uh they wanted to be able to uh sell some of this to uh to to retail investors >> and u institutional investors you can you know they have lawyers they look at the contracts they look at uh the the prospectuses and said oh I see that you know we can't get out of this thing for 10 years and they look at their previous track record and say you you know it seems like you know what you're And so we'll put the small piece of the portfolio in what we know is an illquid kind of uh investment. Uh the individual investor you you tell them, "Oh, you you can be investing like the rich uh people and the rich uh portfolio managers in private credit. Uh but by the way, you know, there's going to be limits on on whether you can take it out." Oh, that's fine. That's fine. and then all of a sudden they all want to get take it out at the same time. So you get a liquidity crisis and not only that you don't get it any money coming in even the institutions uh start to slow it down. So yeah I think there is uh definitely cracks in the private uh credit system. I think a lot of it though is u not like the uh subprime mortgage situation where that affected the capital of banks and once you you reduce the battle capital banks they have to reduce their lending activity. Uh in the case of private credit uh a loan blows up here, a loan blow a loan blows up there and you reduce the rate of return on your portfolio. It's not exactly a calamity. Um and if the banks are still making loans and they actually see an opportunity to to pick up some loans uh at distress prices, they'll probably do that. uh as long as as the underlying uh business is in a distressed business. So I I don't think we're going to get a a credit crunch. But uh there's a sense of deja vu and you know Lloyd Blankfine of previously of Goldman Sachs has been uh giving lots of talks saying that this is as bad as the supreme mortgage situation. And so I >> sorry Lloyd Blink was saying it is or isn't. >> It is as bad. >> Really? Lloyd Blankfine is saying that. >> Yeah. Yeah. That's the way I've been reading his his commentaries. >> Oh my goodness. >> Yeah. Um and you know, he throws in private equity. You know, we tend to uh view private credit and private equity as different markets. Actually, it's kind of one and the same, and they're they're the the loans are made to private equity. And it's it's it's a a pretty convoluted uh system. So I guess like the subprime market uh only the people who actually created these instruments know what's going on and just the way in 2008 they actually didn't know what was going on at least in terms of the macroeconomic consequences of building these uh these credit pyramids house of cards. Uh so yeah I think it's an issue. I think it's something that that needs to be watched um as as a risk for creating a a recession. Uh but u I think everything would have uh kind of continued along relatively well without that kind of risk. But for the fact that you combine cracks in the credit markets with >> an oil price shock >> in an oil price shock that's you know again I've been betting on the resilience of the economy since the beginning of what I call the roaring 2020s and it turned out to be a really good call until this war hit and uh I'm still counting on the idea of the economy's resilience uh but uh I'm I'm less sure about that. >> Okay. So, you're watching it, you know, closely with one eye, but it's not um >> yeah, >> it's not pushing your your recession odds into the majority case yet. Um Okay. Um let me just ask you one question as we leave this this uh topic. In your opinion, Ed, has the move to bring the retail investor into the private equity and private credit world, um, has it been motivated by good intentions or has it been motivated by, hey, here's a here's a pathy to dump, you know, all the things in our private portfolio we don't like on them. >> Uh, door number two. >> Yeah. >> Yeah. I I I I mean Wall Street really uh I think kind of viewed it as just another market uh without assessing the u whe whether this is particularly uh uh good for the individual investor. But uh look uh we we do have free capital markets. people are are free to make their own decisions and uh if Wall Street comes up uh I mean the prospectuses gave you all the warnings they said you know you you're not going to be able to take your money out and now if somebody says well you know I want my money so well look at what you signed >> so uh I I I I think Wall Street you know did disclose what was being bought and and the risks Um they and if some of these uh deals go bad again it's reduces the rate of return and a portfolio maybe even you lose some some money but uh that's that's the nature of of investing you know be be aware of what you're getting into read the perspectives talk to the financial advisor and decide whether this is really for you personally I don't like ill liquid assets I don't like assets that have no price uh other than some accountant uh >> right >> price of them quarterly. So, uh, I mean, I I think that's that's always been pretty obvious to me and I can't quite understand why, you know, I mean, I can understand why institutional investors, but, you know, for a long time there was this Yale model where Yale and uh, portfolio was being invested in a lot of these uh, private equity deals and everybody was uh, jealous about their amazing performance and then, you know, it worked until it didn't work. >> Mhm. Uh, it sounds like a lot of Wall Street fans. Um, they work until they don't work. Um, all right. So, we have this environment, Ed, where um, you were pretty bullish before the outbreak of this war. Now, there's a lot of uncertainty, as we've talked about in this conversation. >> We there's a lot of uncertainty that we really can't control here. Like, we just don't know how long this war is going to end or last and how bad it might get before it ends. and that's putting increasing pressure on weak points in the system like private credit. So rubber meets the road. Um h how does one invest for for this type of scenario and what do you like right now and what do you particularly not like? Well, I I think uh when it comes to an environment like this, uh you have to go back to understanding that the the stock market uh is uh is for long-term investors. Um if you're going to try to be a trader and and call all these turns, uh you're not going to be happy. Um and there are these times where it's just uh stomach turnurning. Uh and historically those tend to be the the right times to actually be uh be be buying. Um look, I I I have uh in the past been accused of being a permable, which I kind of use as a compliment because the stock market generally speaking goes up. Uh bare markets are infrequent. They don't last very long. Uh and uh the same thing with with recessions. uh the perma bears will will sometimes will get you out at the top, but they'll also get you out at the at the middle of a move and they'll get you out at the bottom. You you'll never be in the stock market. So, I I would say that uh you know, dividend yielding stocks have have always been kind of the the appropriate place to be for long-term investors because you can reinvest the dividends. the dividends uh increase o over time and I think those are still the right place uh to be. Uh energy stocks happen to pay pretty pretty good dividends. They've had a a pretty good move here. Um and they you know certainly on a uh announcement that uh we're we're pulling out of the Iran situation uh oil prices could come down and the energy stocks could come down. But um I think uh you know that that's that's where I would look for opportunities is not buying them here but on a selloff. I think the technology selloff is also creating uh opportunities. Uh the magnificent 7 are less magnificent now. Uh they had been selling at something like a 31 forward PE. I think they're down to below 25 now just in a matter of of a few weeks. So there's uh been a lot of repricing of uh of risk uh but these are great great companies and I think uh this this is creating a an opportunity. Look historically geopolitical crises have in fact turned out to be buying opportunities. Um it's it's it's when things look really grim. So I I I have a hunch that there's going to be one more scare uh in the in this whole situation. Uh and I again back in early March I said I think this could be a 10 to 15% correction. Uh we're down 8% uh as of uh yesterday and um I think we could still see something like 10 to 15%. Uh but uh you know you strategists always like to tell you you know uh this is an opportunity to buy and there's the the response of most people is like oh what are you talking about? I'm fully invested and you're telling me to this is an opportunity to buy and they're they're wondering whether it's too late to u to to panic. I I think it is kind of too late to panic and I wouldn't panic and I think I'd kind of hold on into into a good portfolio and I'm very encouraged by the the earnings assessments of of the analysts. Uh they are getting feedback. I mean, if if they weren't getting good feedback, you wouldn't see them raising their numbers at a faster pace, and that's what they they've actually been doing. >> All right. So, sort of sounds right now that you're you're saying, "Hey, uh, whatever you've done to date, this is sort of a ride it out scenario. You got some liquid liquidity, >> maybe start nibbling into some of these things like the Mag 7. uh but don't necessarily go big yet because you you see one more big downward scare >> for for the folks that have capital and are looking to deploy it in addition to kind of that nibbling >> would you recommend that they they really think about deploying it once >> there is good news >> right so don't try to catch the bottom but but when you get the the announcement that okay yeah we're pulling out or the wars over >> the problem is the problem is it'll be like liberation day uh >> you'll have one day where it goes up by like 7% Well, it went up 10% in one hour. Um, and there's there's so much wealth and liquidity in the world that um these things don't give you an opportunity to, you know, to kind of jump in and um so I would say just as nibble on the panics. The days that uh everybody is really panicky is probably a good day to be be adding to some of your uh portfolio. Okay, nibble in on the panics. I'm writing that down here. Um, all right, Ed. Um, it's great discussion and it's always so um pleasant and educational to talk with you. >> Well, I I learned about a lot about geopolitics and uh I'm going to see what I can do about uh getting the US to change it to to to consider your proposal to just take the Iranian tankers once they're on on the other side of the street. Well, Ed, if you can if you can force an end to this war in a way that serves our interests, go forward for that with God. >> I'll give I'll give you full credit. Thank you. >> Thank you. >> Um, all right. Well, look, most important question of the day, though. Um, for folks that would like to follow you and your work in between now and your next appearance on this channel, where should they go? >> You go to yardenny.comi.com and there's an option for individuals and options for institutions. Okay. And I do just want to let folks know as a personal subscriber to your work, um, it's something that I read every day and I find it super useful. So folks, if you've enjoyed listening to Ed here, I highly recommend you go do that. All right. Well, in wrapping up here, folks, please join me in expressing your gratitude and appreciation for everything that Ed shared with us here today by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. Um, you know, it's a tricky time to invest right now. So, if you would like to get some help in doing so, well, first, if you're a DIY investor, recommend you go check out Ed's material, as we just mentioned. U, but if you'd like to get some help from a professional financial adviser, feel free to talk to one of the ones that Thoughtful Money endorses. These are the ones that you see on this channel with me week in and week out. To do that, just fill out the very short form at thoughtfulmoney.com. Only takes you a couple seconds to fill out that form. These consultations are totally free. There's no commitments involved. It's just a service these firms offer to be as helpful to as many investors as possible. Lastly, um a lot of what Ed and I talked about, particularly the impacts of uh an oil price shock on the economy. Uh these were discussed in great detail in Thoughtful Money's spring online conference that was held a week ago. If you didn't watch that, but uh wish you had, uh don't worry, you can still buy your replay video of the entire event. To do that, just go to thoughtfulmoney.comconference and you can buy it there. Um, Ed, I can't thank you enough. It's always such a a pleasant and educational experience listening to you. Um, look forward to seeing you back on here again soon and hopefully with good developments in between now and then. >> Absolutely. Absolutely. Thank you. All right. >> Thank you and everybody else. >> Everybody, thank you. >> Thanks so much for watching.
"We're Now In The Middle Of A Market Correction" Admits Longtime Wall Street Bull | Ed Yardeni
Summary
Transcript
And I still think this will turn out to be a 10 to 15% correction. And we're halfway through that and that it it could could happen in this week or or next week. Welcome to thoughtful money. I'm its founder and your host, Adam Tagert. Ed Yardeni, president of Yardeni Research, has maintained a more bullish outlook on the economy and the financial markets than most analysts have over recent years. and he's largely been proven correct. But in the aftermath of the outbreak of war in Iran, his outlook has turned much more concerned. He now sees the return of the bond market vigilantes, a term that he coined back in the 1980s, by the way, only this time worldwide. And he now calculates rising odds of both an economic recession and bare market in stocks resulting from the current oil price shock. So, what advice does he have for investors in such an environment? Well, we'll find out from him directly. Ed, thanks so much for joining us today. >> Thank you. >> All right, Ed. Um, so first off, just want to make sure the description there in the intro correct? >> Yeah, you know, when I uh think about the outlook and try to communicate uh how things look to me, I I I typically have one uh not just one scenario, but two or three. And I I try to uh give people an idea of my conviction uh with a base case uh having the highest subjective probability and then uh alternatives. Things may be better than the base case, things may be worse than the base base case. So uh yeah the the the war up upended uh everybody's forecast I think and uh continues to upend everybody's forecast because uh uh I I guess if this war ends in a matter of days or maybe a couple of weeks uh then the uh consequences may be fairly minor to the global economy and then we can all kind of go back to the scenarios where we thought they were most likely be before the war. Obviously, the longer it lasts, the worse the outlook becomes. But when the war first broke out on Saturday, I I write on Sundays and I I I I write almost every day. And so we sent out a note to our clients that was optimistic that uh well, you know, the uh US and Israel be beheaded uh the decapitated the regime in Iran. uh Iran uh lost the war. They just don't know it yet. Uh the problem is Iran is a uh state of professional terrorists. That's that's what the what they do for a living u all all day. That's that's their uh uh that's their modus operandi. And uh it's, you know, even if you decapitate a regime like that, you're still left with a lot of terrorists. And so what took me a few more days and I said you know I think that's a that could be a real problem here is that um you know if you don't have a command and control and that you know you still have hundreds a few hundred thousand a couple hundred thousand let's say of people in the um Iran revolutionary uh uh guard then uh you you still have a problem with with terrorists and with drones and and missiles u they're not necessarily going to surrender just because you bomb them from the air. Military historians have long shown that uh military campaigns simply from the air don't really change the outcome. You really need boots on the ground to do that and that doesn't seem like a very likely scenario. In any event, I concluded that maybe I was too optimistic initially and uh so I actually raised my odds of a recession from 20% to 35%. I kept my uh what I call a roaring 2020 scenario at 60%. So I took it all from uh basically a meltup scenario. I left 5% for a meltup. I mean we can still have a meltup if uh Trump declares victory or if in fact there is a deal. Uh stock market obviously sore on that kind of news. And I think there's still a a perception that uh there are similarities between what's going on this year and what happened last year. Last year we had liberation day and April 2nd market took a dive on that with the tariffs and then on April 9th I guess after Trump had a look at the reaction to the stock and bond market he decided to postpone Liberation Day and the market was up 10% on April 9th basically from 3 to 4 p.m. all in about an hour. And I think there's uh sort of a a hope that the same thing's going to happen here. This time around, we got obliteration day. Uh about a week or so ago, Trump threatened to obliterate the power systems, the electricity systems of Iran. And then uh he postponed that for two days and five days. And now I guess the by the end of uh uh Friday, we'll we'll see where where we are with obliteration day. Uh but yeah, I think uh you know, realistically speaking, uh the the facts have changed uh and uh so there is a increasing risk of a of a recession. But notice I didn't really give up on the roaring 2020s. I think, you know, if this does turn out to be relatively short, uh there's still a a good chance that that will resume. Uh but I have to concede that there's another decade that this is similar to could be similar to and that is the um stagflationary 1970s and that was a lost decade for the stock market. Okay. Um so I think you answered a question I was going to dig into a little bit here which is let's start with the optimistic scenario where this all ends in a couple of days or weeks or whatnot. um you were quite bullish heading into the year. Again, you've referred to your kind of overall framework there as the roaring 2020s and um you know, the administration had been saying right up until the announcement of the war. I mean, they're still saying it, but they had been sort of selling us on, hey, we've done a lot in 2025 to kick off the golden age of America, which you're really going to start seeing here in 2026. Um and there were, you know, record um well, there still may be record um uh tax refunds coming and the tailwinds from the one big beautiful bill deregulation, right? >> Uh you know, the tariff revenues coming in, all that type of stuff. Um >> now that's all in up in question, right? Because how much of the of the >> refunds are going to get eaten up by higher oil prices and all that stuff. But let's let's assume it all gets put to bed real quickly. You think it's more likely than not we it's it's game back on in terms of you know the the the economic tailwinds propelling us to to better GDP growth and maybe better performance. >> The the the one thing that really like stands out uh for for reason as a reason for being optimistic is industry analysts remain very very positive on the earnings outlook. >> Yeah. Now, maybe they didn't get the the uh the memo about the war in Iran. I mean, they're clearly reading about it and seeing it in in the media, but they maybe haven't gotten any feedback from their the companies they follow yet, and they're they're waiting for that. The companies themselves don't know. I mean, that's I think everybody I mean, it's okay to say we don't know because Fed Chair Jerome Powell in his last press conference said that 20 times. So, we just don't know. And I think that that's that's an honest appraisal of what the sit situation is. And uh you know past uh history is relevant. We've we had two oil shocks in the 1970s. They led to a surge in inflation. Um they uh led to two recessions and as I said stocks were basically dead money for for a whole decade. So that's a conceivable scenario. Then last year we had a uh uh I mean in 2022 we had a surge in oil prices when Russia invaded Ukraine. There's a lot of concerns about uh grain shortages that would lead to soaring food prices and all that happened for a few months maybe about a year but inflation did come down pretty rapidly and oil prices came down and food prices did did as well. So I would say the analogy right now is more what happened in 2022. But um then again it is different this time in the sense that the straight of Hormuz is a vital choke point and uh right now it's uh it's it's been kind of shut off. I I'm also encouraged by the fact that The Economist front cover uh focus as a graphic showing uh an Iranian's hand uh squeezing the the the global uh the globe the US globe into you know uh a real distortion uh and uh with all due respect to the fine people who work at the economist their cover stories do tend to be contrary indicators. >> All right. Um, well, look, let's all hope hope that's the case. Um, uh, your your point about earnings estimates. Um, I I saw in my weekly recap of Lance Roberts over this past weekend, he showed a chart of S&P forward earnings estimates, and you're right. Um, they're they're not only um rising now, but that but the pace of the rise has has accelerated. So for whatever reason, uh the analysts are not yet projecting any real impairment from what's going on right now. >> And and by the way, uh forward earnings is actually one of my favorite economic indicators which is available weekly. It does correlate very well with real GDP. However, analysts don't see recessions coming. So forward earnings is really a great weekly indicator of what's going on in the economy as long as the economy is growing. Uh but by the time they see a recession, we all know that that's the case. Um then again, uh if you take the year-over-year percent change in forward earnings, that tends to be somewhat better uh as a uh indicator even uh anticipating recessions and that's looking, as you said, I mean the the pace of increase is actually going up. Uh some of that is of course technology companies. uh Nvidia reported gang busters earnings and uh Micron reported gang busters earnings. So a lot of it is in the technology area but the industrials are doing well. Um you know the the US economy has proven its resilience now since the beginning of the decade. Uh I uh I was uh almost alone I think in predicting that there wouldn't be a recession uh o over the past several years when people were anticipating the most widely anticipated recession that never happened. >> Um and I think this could wind up being another one of those stress tests. So yeah, going from 20% to 35% just shows that you know I'm I'm acknowledging that the facts have changed and the risks have changed. uh but we may be surprised at the resilience of the US economy once again. I mean the US economy compared to the 70s uh we we imported oil that we were dependent on foreign oil. Uh now we are self-sufficient in oil and uh the energy intensity of the US economy is greatly reduced from what it was in the 1970s. >> Okay. I I want to I want to ask you about that in just a second. Um, but uh, uh, I want to just shine a light that there's there's there's kind of a a dual risk nature to this market right now, which is that the analysts are overly optimistic and the market is pricing in, you know, currently currently priced as if they're it's taking those those earnings forecasts into its current pricing. though that's been offset. We've had a a significant correction in the PE. Uh it's the E that's I'll give you the numbers. The PE is down about forward PE for the S&P 500 uh from earlier this year is down about 16%. Uh and the market's down about 8%. So that tells you that the forward earnings is up up about 8%. So that's that's the way the markets dynamics works in a very simple way, >> right? And and so what I just want to note is the risk that the analysts are wrong. Correct. Or that they're they're they're made wrong by things worsening in the war and oil prices staying higher for longer or going even higher and all that type of stuff. So So the repricing risk there is that not only bringing the multiple down, they have to bring the E assumption down as well, right? So there's there's that downward repricing risk. But on the investor side who are bearish and everybody who's, you know, either hopping out of the market or going short, >> if this is relatively short-lived or the US economy proves more resilient than folks think, there's an upside risk to this market. >> That's correct. Yeah. Everybody's nervous because they they'd like to believe this is going to be like last year all over again and that uh there will be uh some events that make make the recession risk go away and then you get this big surge in in pees. I I mean the simple u way of looking at it is that corre corrections uh tend to be caused by uh recession fears that aren't realized. And so what happens is the PE goes down, but the E keeps go going up. And that's kind of what we got going on right right now. And I still think this will turn out to be a 10 to 15% correction. And we're halfway through that. And that it it could could happen in this week or or next week. And sentiment's getting very bearish, which is bullish from a contrarian perspective. bare markets occurred when the PE goes down on expectations of a recession and then the analysts aren't seeing that and then suddenly when the analysts do see it as you said the PE has room to go down some more and the E goes down some more and then you get a a very nasty bare market when you have both PE and E going down. So, um it's just it's it's a I mean obviously the market can obviously go up or down at any point in time, but it seems that the um potential for a lot of people to get caught in the wrong wrong side of the boat here is high because you have lots of different camp or two big camps making their bets right now in different directions. >> Um we'll we'll see and a lot of this is going to come down to exactly as you said how long this war um continues. So, let let me ask you this first before we we get into just sort of the nature of the oil price shock and what's happening in the bond markets. Let me just ask you this, Ed. I I know you're not a geopolitical strategist or or an oil expert, but you are an economist. >> I I pretend to be one, just the way everybody does else. >> Okay. >> Even the military experts don't know what's what's next. I I just want to get your sense on what would happen if the US just picked up stakes and walked away tomorrow and ju just said you know what we've achieved enough of our military objectives and you know what we don't depend on the oil coming out of the Gulf so you all figure it out >> that's a plausible scenario and uh I think as a result of uh the shutting off of the straight of Hormuz uh there's going to be a lot of money spent on uh pipelines to to to the Red Sea and uh other ways to get the o oil out. Um however, some of the damage that's been done particularly to uh LG production in Qatar, I believe it is, um uh it may take a while to to rebuild. People have been talking about as much as five years damage and that's a lot of LG liquid natural gas and uh as I mentioned before that's also helium which apparently is critically important for the production of uh semiconductors >> of semiconductors uh but the initial reaction uh would be uh you know Trump uh you know maybe you know if Trump had to do it all over again he should have done what he did last time when he attacked Iran. He he bombed the nuclear sites and and and and went home. Uh and maybe this should have been more a mow the lawn approach that, you know, telling the Iranians, you know, you could you could do whatever you want, but every six months we're going to destroy whatever you've done on the nuclear and and ballistic missiles side. And he could have just played it that way. But uh I think >> I think he still can play it that way if he wants if he leaves. >> He could still he could still play play that way. And that that may very well be the most likely scenario. It's uh I you know I mean you get boots on the ground and you get Americans getting killed and the the domestic political uh impact would be uh pretty pretty ugly. Um but as it is, it looks like he's going to lose the midterm elections uh according to poly markets anyways. Uh he could lose the the he's almost certainly going to lose the house according to poly markets and uh he could lose the the senate. So uh things could get uh pretty ugly on the domestic political side. I mean some people say they already are ugly but u you know having even more uh partisanship in the US would would not be a happy scenario but the market would initially obviously surge on it and then we back back to the same old same old issues and that is you know how do you invest in artificial intelligence? Are they spending too much money? um you know rate of technological innovations is is so great that u it just creates a lot a lot of uncertainty but uh the earnings story is great uh the economy is resilient and uh uh you know I'm I'm still using 7700 uh by by the end of u of the of the year maybe I got I'm I'm being uh too stubborn and hanging on to that given the risks uh but the reason I'm doing that is I I guess I recall what happened to mine and weather forecasts. Last year when Liberation Day occurred, we all lowered our uh uh you know, I had 7,000 by the end of of last year at the beginning of last year and I think I lowered it to about 6,400 um and all the commotion with with tariffs and then I went back to 7,000. So, it's I I think we all have to get neck braces here. You can you can really uh get get some damage here from all the all the whip whips whip saws. >> Okay. Okay. All the whiplash. Um, okay. So, sir, just to be clear, you you even with r your rising odds of a recession in a bare market to 35%, you're still you still have your 7,700 target. >> Yeah. I mean, my my base case is still roaring 2020s. I, you know, it's it's worked like a it's worked great up up until the war. And um I I guess uh I'm still hanging on to it recognizing that uh this could turn out that there's some variation of the seven uh of of the 1970s which was stagflationary and dead money for the stock market. >> Okay. So one of the reasons why I asked you about the scenario where the US just pulls up stakes and and folks look I get it that that not that we're making a ton of friends in the world right now but that that might be even more unpopular globally. Um if we say we broke it but you guys buy it. Um but uh could that also increase global demand for America's energy exports right where people would say look you know the the I I was buying the cheap oil from the Gulf. I'm now less comfortable about doing that. Now maybe I'm a lot more com uncomfortable um with doing that if if it's left in a place where Iran is using it like a toll booth. Um, and so they're going to look for quote unquote safer sources of supply. And the US is totally happy to increase its production. And in a lot of cases, especially especially kind of the Indo-Pacific, the energy gets there a lot faster and safer than when it comes from the Gulf. >> Yeah, absolutely. And uh I think this is a more or less a done deal with liquid natural gas to the extent that even if the streets were open, the damage done to LG production in the Persian Gulf, so it still would favor more exports from the from the US. So I think u that's definitely going to happen. um you know when talking about geopolitics uh kind of wondering why China doesn't take this as a great opportunity uh to invade Taiwan and maybe the answer is uh because we've just learned just how much oil uh China gets from the Persian Gulf and uh how how easy it is to shut shut that oil off. I mean, the the the Chinese government must be kind of really uh trying to figure out what happens if uh these American uh troops that have been sent over there. And and again, they're already troops in the Middle East. So, if we send 15,000 more, there's about going to be 50 to 60,000 in the in the Middle East. Uh what if they do go for Car Island and control uh uh where where Iranian oil goes? Um, and a lot of that goes to to China. >> So, let me ask you a question about that. And again, sorry to be asking you questions that might be a little bit out of your purview as an economist, but you're a smart guy and I don't know who else to ask this to. Um, >> so totally understand the logic of, hey, we take Car Island and we basically have an economic chokeold on Iran. Um, where literally we can send their economy back to the stone age because it's so dependent upon their oil exports. Now, there's a lot of danger if we put troops there as you just noted, right? So, instead of doing that, why don't we just sit outside the straits of Hormuz? And as Iranian tankers come out there or tankers with Iranian oil come come out there, why don't we just take those? They're already under sanction. Yeah. And I'm assuming we're not doing that right now because that might be a line too far for China given China's dependence on that. But it would be it would effectively accomplish the same thing just with I I would think a greater market It's a it's a great idea and uh m makes sense since uh you're you're a geopolitical uh military strategist uh par excalance. Uh make yeah I mean we we could just say you know we we're we're confiscating the Iranian oil uh outside of the straits. It's now American. That's, you know, the Iranians say they want reparations, say, "Well, we want reparations." And so we take their oil and we sell it to the Chinese and they have to pay in dollars and we deposit it in our account. >> And it's exactly what I was thinking. We literally just take the tanker, we we remove whatever flags on it, we put a US flag on it, we bring it to China and say, "Here's your oil plus 10%, you know, for our handling fees." >> And oh, by the way, if you invade Taiwan, you're not going to get our oil. So I I yeah I mean I'm sure there's lots of concerns about this we'll hear about in the comments but to me that seems sort of a safer way to to not have to put troops on the ground in the Gulf itself. >> Yeah. Well I I I don't I don't want to name any names but uh every now and then Larry Cuddlo asks me on the show and he he knows a lot of those people from his his first stints. So I'll I'll I'll share that with him and I'll I'll I'lluh make sure that you get credit for it. Well, thank you. I'm sure somebody has thought of this and smarter ideas, but uh but I've been wondering about it's the first I've heard of it and it's uh it's I I don't see any downside to it quite honestly. >> Wow. All right. Well, look, I'm honored that you think the idea is at least worth entertaining. >> Yeah. >> Um All right. So, now uh I asked you about sort of the best case scenario. Okay. Let's let's just flip to what is. So what is right now is um oil and gas are very compromised and coming out of there. It's about 20% of the world's supply. Um uh there the markets are pricing at a premium here by shooting the price of oil you know to the moon. Um and to your point um or to your your particular area of expertise uh the bond vigilantes kind of worldwide um are showing up now on the yield curve. So just just kind of give me the playbyplay right now as you see what's going on. >> Yeah, the uh the bond vigilantes uh people asking me where where are they and they've been in Japan obviously bond yields have increased rather dramatically there um before the war and the same thing was happen happening in the United Kingdom. So they were expressing uh their dissatisfaction with some of these governments that have even bigger debt to GDP ratios than we have in the United States. Uh but now with this war uh clearly the inflationary pressures are going to be mounting for the next several months uh or longer depending on how long the the war lasts and inflation is bearish uh for for for bonds. In addition to that, um I think a lot of countries are going to be increasing their spending and therefore their deficits and their debt to GDP ratios on defense. Um and some countries might uh try to uh offset some of the recessionary impacts of this war in terms of its pushing up oil prices and depressing consumer spending uh by providing fiscal stimulus. So that too will will increase the deficit. Uh so we we have seen a backup in bond yields. I guess we went from four to about 4.5% in the US on the 10-year. Other bond yields have gone up around the world. Uh so the bond vigilantes are basically demon telling policy makers, you know, get get this straightened out or we're going to continue to tighten credit conditions. Uh, I mean things on the downside, it's not not too hard to paint a scenario which I'll have no choice but to raise my odds of a of a recession because we do have cracks in the private credit market and they probably won't cause a recession on their own. Uh, but if u consumers decide to retrench because uh the higher gasoline prices and the nervousness about where this all leads, uh it could turn into a recession. um and that would exacerbate the the credit uh problems in the in the private market. So that's uh so you know in terms of credit spreads they could widen and in terms of government yields sovereign debt uh they don't have a credit issue generally speaking uh but uh those yields u I think have already sort of discounted uh the a transitory and I know nobody likes that word uh but uh or something like what happened in 22 23 something that lasts a year or two and then inflation come declines. Again, going back to the roaring 2020 scenario comparing to the n 1970s. Uh in the in the 20 in the um 1970s, productivity growth collapsed. It went from about 3 4% down to zero over that decade. And this time around, the productivity outlook is actually pretty pretty positive. And that could be a big offset to some of these inflationary pressures. >> Right. Right. And it's also the inflationary pressures again it's such a function of what happens from here with this war. Right. So let let me ask you this. Um all things being even and I'm going to I'm going to ask you a correlary to this in a second. All things being even meaning like no more greater destruction of the energy production infrastructure in the in the Gulf. Um, at at what time from here would you say, "All right, I got to I got to increase um my recession odds because this has gone on for long enough to now become I'm real worried about this manifesting further economy. Is that a week? Is that a month? Is that six months?" >> I think it's in weeks. So, I don't think it's a months. Uh, in other words, I think we're going to I think we're going to realize pretty quickly here whether this thing is going to last longer. Obviously, it'll depend on what we do with the the troops that uh American troops are in the Middle East. Uh what kind of assault is intended. Uh are we going to try to uh take over the street of Harmuz? Um are we going to take try to take over Car Island? Are we going to try to do both? Um so um any clear escalation of the war uh with a clear indication that uh diplomacy negotiations isn't going anywhere. I mean we've been negotiating with Iranians for years and it's gone absolutely nowhere. Um and uh so uh it's it's hard to get too excited about negotiations and and we don't even know whether we're negotiating with with the right people um since we don't really have uh we've wiped out a lot of their leadership kind of the next level of leadership may we may be sitting with them coming to an agreement and there could be uh kind of a civil war within the revolutionary guard where some some uh groups of them say we're you know we're going to fight to the death and we're we're gonna we have access to missiles and drones. So, it's uh it's complicated to say the least. >> Okay. So, um Okay. So, it sounds like a couple weeks of kind of the status quo going on, you're going to say, "Okay, I got to ratchet things up." What would you do if we get to the just screw it scenario and um the US just says, "We're done negotiating with you." when they start they and Israel just carpet bomb the the energy installations there and then Iran retaliates blowing up more energy infrastructure in the Gulf kind of a worst case scenario for future production wise >> yeah I mean the United States declaring victory wouldn't necessarily as you just laid out you're a pretty good geopolitical strategist by the way um yeah I mean in that scenario uh the initial reaction of the market might be oh you know Trump Trump is walking away from this thing and uh leaving it to the locals to to sort it all out. But as you say, the the problem with leaving it to the locals is they might continue to bomb the living daylights out of each other, including the infrastructure, which means that um the the Straight of Hormuz hasn't been opened. uh and maybe some of the some of the players that uh get along with the Iranians like the Chinese and Indians will still be able to get their tankers to pass through there and there might be a toll for that but it wouldn't necessarily be a you know all all clear signal. >> Yeah. I guess to my point was is if it devolved to the point where there was a lot of destruction in the energy infrastructure there, would you then be forced to to write up your economic damage forecast by a moderate amount? A lot >> depends on how much oil gets taken off uh the market. I mean, you know, Iran itself accounts for significant amount of oil for for the global economy. China imports like 90% of their oil from uh from Iran. So, um yeah, I think I'd have to con consider the possibility that uh this uh this is a structural problem now w with enough oil to meet demands. Oil prices stay high and so the you know from an American perspective the war could be over but it wouldn't be over in terms of what the price of oil says. I I I think what you know at the end of the day we're all watching the price of oil is the obvious key indicator here. If uh if it's if it stays uh at 100 that's one scenario not a happy one but not terrible. If it gets to you know 125 150 I mean everybody kind of has these alternative scenarios. So um it depends. >> Okay. All right. I'm going to fully commit to this geopolitical analyst role. Um, so first, >> you're on a you're on a roll. Why not? >> Oh, thanks. Um, on that last point you made, I do wonder, um, so oil is a global commodity, so we are impacted by, uh, what's going our oil prices are impacted by what's going on in the Gulf. But I I do see the potential for, you know, not just America, but but all oil producing countries um to to ramp up supply to to meet the unfulfilled demand that's going on right now through there as we talked about earlier and and that could moderate the price of oil somewhat somewhat, right? So almost sort of no matter what's going on in the Gulf, >> um yes, we'll have a higher oil premium than we had before, but but we won't be as tied to what where it is right now. It's going to they'll be somewhere in the middle to meet. >> Well, it's uh it's what commodity traders always say. The best the best cure for high oil prices is high oil prices. >> Oil prices. Yeah. >> Because that that that does create a tremendous incentive, you know. I don't know if you watch Landman. Uh yeah, I mean it I learned a lot about the oil business from that show and it's uh it's all mo motivated by profits. Uh and if uh the price of oil stays at a 100 bucks, uh a lot more oil is going to come out come out for sure. The the Brits might actually open up the North Sea uh for for more more production. >> Yeah. >> Um you know, I I think there is going to be definitely a geopolitical response to the re realization just how vulnerable uh passageages through the street of Hormuz. >> All right. So in in some ways, you know, this could be a net long-term boon to >> the energy production other countries. >> I I think mo most uh uh people would agree that uh you know given what what Iran's reaction was to this war, which is just to bomb everybody and and create chaos. It's like uh imagine if they actually had nuclear weapons, >> right? Um and so um this this two shall pass things will stabilize um you know we'll kind of everybody just kind of learn a lot of geography um about you know where things pass through where they have to pass through and uh that's a good thing. >> Yeah. I I I chuckle there and it's somewhat of Galler's humor. I can't remember who said this. this I think it was a comedian, but he said um you know basically the purpose of war is for Americans to learn geography because we're so bad at understanding it otherwise. >> It's very sad and true. >> Yeah. Um okay, so here here's here's the other geopolitical question. So, um, uh, you know, the there's there's the the possibility, as we talked about, that that America could just walk away and say, "Look, rest of the world, this this isn't our problem. You know, you figure it out." And Trump has certainly been vocal in his frustration that, >> you know, especially the NATO countries haven't come and participated more than they than they have. And um I do wonder, you know, if if if the pressure of the situation isn't sort of on Trump's side here where the longer this goes on in in the Gulf and the more that it becomes unstable and the more that Iran if it if it were to remain if America left would be you know potentially be the the bully gatekeeper where these countries collectively might say you know that's not what we want and then you end up getting some sort of international flotillaa that says look we are just going to be the the the policing naval force of the Persian Gulf, right? So Trump may actually get what he wants anyways just by letting this persist long enough, right? >> Absolutely. Yeah. I mean, if he walks away and and the chaos continues, uh it it will be up to others other countries that have a lot more skin in the game in the Persian Gulf to uh stabilize the situation. And that includes China, it includes India, it includes Europe. Uh so that's absolutely um like I said we could have a situation where he declares victory and stock market soarses and then then it maybe has a significant correction on the realization that that's still a mess in the Middle East and that uh vital commodities still aren't fully getting through and then there'll be a another policy response. You know, you know, that's that's why sentiment works so great as a as a particularly as a as a buying signal is like when when we all get super pessimistic, that's when you get a policy response, >> right? >> Um it's it's and it's different this time than it was last year. Last year was like Trump postpones liberation day. It was totally up to him and he did it and the market went up and then uh up up and away. this time around it be maybe a little messier and trickier. Uh but um you know the the the world can't can't take this this uh this situation. It's not a a viable stable situation. So the world's going to have to respond and it could be without us. >> All right. And last question on this then we we'll get to your your kind of how to invest in all this. Um, so let's assume for a moment that Trump sticks to landing here and that this uh this operation is wound up relatively quickly and he comes home with Iran's enriched uranium that either through negotiations or we send in the special forces and they successfully take it. But let's let's just assume for a moment that happens. Folks, I realize this might not be a super high probability, but if he were to, would would the net result of this Iranian incursion in terms of its impact on the midterms, in your opinion, be a net negative because folks are still remembering the pain from oil prices, or would they say, "Oh my gosh, that was actually a really low price to pay for, >> you know, security for America and and its Western allies and and its Gulf allies." um with a now a non-uclear Iran. >> Yeah. Look, I I I think uh it's all right for all of us to first and foremost acknowledge we don't know. I mean, even Fed Chair Jerome Palace, as I mentioned in his press conference, mentioned it 20 times. He said, "We don't know. We don't know." Uh and uh there's there's it's the fog of war. You never really know how it's uh is it's gonna play out. I mean, uh, uh, I I I I like your original proposal about, uh, t taking Iranian ships once they're on the other side of the straight. Uh, trying to find that nuclear uh, uh, material with with military forces. That's going to that would be an ugly ugly scenario. much better if we that there was somebody rational in Iran said, "Okay, just we we'll give you the material as long as you don't wipe out our our electricity and and power." >> Right. >> Um but there's just so many ways this this thing could could could play out. Um I think there's there's just a worldwide recognition that Iran is out of control. Uh and in fact, that is exactly the uh the strategy of the Iranian regime. It's chaos. Create as much chaos as you possibly can. Uh hurt everybody. So everybody comes back to Iran says, "Okay, if we if we leave the regime intact and we uh, you know, and you do you agree to do a few things, uh then this whole thing can come to an end. And oh, by the way, as part of this agreement, we want your your uranium." Um so that's that's conceivable. Um but um uh the the geopolitics is is is a is a tough one to uh to get around and everybody's kind of like coming up with uh the best case and worst case scenarios and maybe it'll be something in between kind kind of messy and that lasts a while and the market nevertheless looks through and recognizes that uh this will all stabilize. >> All right. Well, uh I think we can all agree that everyone just hopes it ends sooner with the least amount of bloodshed possible in every >> Absolutely. >> Um okay, so two last main topics and then we'll wrap it up. Um you mentioned private credit briefly earlier. Um how concerned are you right now just about the potential contagion of private credit? You know, some have worried this is this this decade subprime. Others have said ah it's much more contained. where do you fall? >> I think that uh there's a chart I I monitor weekly and that is uh the year-over-year growth rate in bank loans. Uh the reason there's a private credit market is because um uh the banks have been uh highly regulated and there's a lot of loans that uh they really didn't want to make. And so the private credit uh markets uh saw a great opportunity to to make those loans. And I think everything was okay until uh Wall Street decided that uh they wanted to be able to uh sell some of this to uh to to retail investors >> and u institutional investors you can you know they have lawyers they look at the contracts they look at uh the the prospectuses and said oh I see that you know we can't get out of this thing for 10 years and they look at their previous track record and say you you know it seems like you know what you're And so we'll put the small piece of the portfolio in what we know is an illquid kind of uh investment. Uh the individual investor you you tell them, "Oh, you you can be investing like the rich uh people and the rich uh portfolio managers in private credit. Uh but by the way, you know, there's going to be limits on on whether you can take it out." Oh, that's fine. That's fine. and then all of a sudden they all want to get take it out at the same time. So you get a liquidity crisis and not only that you don't get it any money coming in even the institutions uh start to slow it down. So yeah I think there is uh definitely cracks in the private uh credit system. I think a lot of it though is u not like the uh subprime mortgage situation where that affected the capital of banks and once you you reduce the battle capital banks they have to reduce their lending activity. Uh in the case of private credit uh a loan blows up here, a loan blow a loan blows up there and you reduce the rate of return on your portfolio. It's not exactly a calamity. Um and if the banks are still making loans and they actually see an opportunity to to pick up some loans uh at distress prices, they'll probably do that. uh as long as as the underlying uh business is in a distressed business. So I I don't think we're going to get a a credit crunch. But uh there's a sense of deja vu and you know Lloyd Blankfine of previously of Goldman Sachs has been uh giving lots of talks saying that this is as bad as the supreme mortgage situation. And so I >> sorry Lloyd Blink was saying it is or isn't. >> It is as bad. >> Really? Lloyd Blankfine is saying that. >> Yeah. Yeah. That's the way I've been reading his his commentaries. >> Oh my goodness. >> Yeah. Um and you know, he throws in private equity. You know, we tend to uh view private credit and private equity as different markets. Actually, it's kind of one and the same, and they're they're the the loans are made to private equity. And it's it's it's a a pretty convoluted uh system. So I guess like the subprime market uh only the people who actually created these instruments know what's going on and just the way in 2008 they actually didn't know what was going on at least in terms of the macroeconomic consequences of building these uh these credit pyramids house of cards. Uh so yeah I think it's an issue. I think it's something that that needs to be watched um as as a risk for creating a a recession. Uh but u I think everything would have uh kind of continued along relatively well without that kind of risk. But for the fact that you combine cracks in the credit markets with >> an oil price shock >> in an oil price shock that's you know again I've been betting on the resilience of the economy since the beginning of what I call the roaring 2020s and it turned out to be a really good call until this war hit and uh I'm still counting on the idea of the economy's resilience uh but uh I'm I'm less sure about that. >> Okay. So, you're watching it, you know, closely with one eye, but it's not um >> yeah, >> it's not pushing your your recession odds into the majority case yet. Um Okay. Um let me just ask you one question as we leave this this uh topic. In your opinion, Ed, has the move to bring the retail investor into the private equity and private credit world, um, has it been motivated by good intentions or has it been motivated by, hey, here's a here's a pathy to dump, you know, all the things in our private portfolio we don't like on them. >> Uh, door number two. >> Yeah. >> Yeah. I I I I mean Wall Street really uh I think kind of viewed it as just another market uh without assessing the u whe whether this is particularly uh uh good for the individual investor. But uh look uh we we do have free capital markets. people are are free to make their own decisions and uh if Wall Street comes up uh I mean the prospectuses gave you all the warnings they said you know you you're not going to be able to take your money out and now if somebody says well you know I want my money so well look at what you signed >> so uh I I I I think Wall Street you know did disclose what was being bought and and the risks Um they and if some of these uh deals go bad again it's reduces the rate of return and a portfolio maybe even you lose some some money but uh that's that's the nature of of investing you know be be aware of what you're getting into read the perspectives talk to the financial advisor and decide whether this is really for you personally I don't like ill liquid assets I don't like assets that have no price uh other than some accountant uh >> right >> price of them quarterly. So, uh, I mean, I I think that's that's always been pretty obvious to me and I can't quite understand why, you know, I mean, I can understand why institutional investors, but, you know, for a long time there was this Yale model where Yale and uh, portfolio was being invested in a lot of these uh, private equity deals and everybody was uh, jealous about their amazing performance and then, you know, it worked until it didn't work. >> Mhm. Uh, it sounds like a lot of Wall Street fans. Um, they work until they don't work. Um, all right. So, we have this environment, Ed, where um, you were pretty bullish before the outbreak of this war. Now, there's a lot of uncertainty, as we've talked about in this conversation. >> We there's a lot of uncertainty that we really can't control here. Like, we just don't know how long this war is going to end or last and how bad it might get before it ends. and that's putting increasing pressure on weak points in the system like private credit. So rubber meets the road. Um h how does one invest for for this type of scenario and what do you like right now and what do you particularly not like? Well, I I think uh when it comes to an environment like this, uh you have to go back to understanding that the the stock market uh is uh is for long-term investors. Um if you're going to try to be a trader and and call all these turns, uh you're not going to be happy. Um and there are these times where it's just uh stomach turnurning. Uh and historically those tend to be the the right times to actually be uh be be buying. Um look, I I I have uh in the past been accused of being a permable, which I kind of use as a compliment because the stock market generally speaking goes up. Uh bare markets are infrequent. They don't last very long. Uh and uh the same thing with with recessions. uh the perma bears will will sometimes will get you out at the top, but they'll also get you out at the at the middle of a move and they'll get you out at the bottom. You you'll never be in the stock market. So, I I would say that uh you know, dividend yielding stocks have have always been kind of the the appropriate place to be for long-term investors because you can reinvest the dividends. the dividends uh increase o over time and I think those are still the right place uh to be. Uh energy stocks happen to pay pretty pretty good dividends. They've had a a pretty good move here. Um and they you know certainly on a uh announcement that uh we're we're pulling out of the Iran situation uh oil prices could come down and the energy stocks could come down. But um I think uh you know that that's that's where I would look for opportunities is not buying them here but on a selloff. I think the technology selloff is also creating uh opportunities. Uh the magnificent 7 are less magnificent now. Uh they had been selling at something like a 31 forward PE. I think they're down to below 25 now just in a matter of of a few weeks. So there's uh been a lot of repricing of uh of risk uh but these are great great companies and I think uh this this is creating a an opportunity. Look historically geopolitical crises have in fact turned out to be buying opportunities. Um it's it's it's when things look really grim. So I I I have a hunch that there's going to be one more scare uh in the in this whole situation. Uh and I again back in early March I said I think this could be a 10 to 15% correction. Uh we're down 8% uh as of uh yesterday and um I think we could still see something like 10 to 15%. Uh but uh you know you strategists always like to tell you you know uh this is an opportunity to buy and there's the the response of most people is like oh what are you talking about? I'm fully invested and you're telling me to this is an opportunity to buy and they're they're wondering whether it's too late to u to to panic. I I think it is kind of too late to panic and I wouldn't panic and I think I'd kind of hold on into into a good portfolio and I'm very encouraged by the the earnings assessments of of the analysts. Uh they are getting feedback. I mean, if if they weren't getting good feedback, you wouldn't see them raising their numbers at a faster pace, and that's what they they've actually been doing. >> All right. So, sort of sounds right now that you're you're saying, "Hey, uh, whatever you've done to date, this is sort of a ride it out scenario. You got some liquid liquidity, >> maybe start nibbling into some of these things like the Mag 7. uh but don't necessarily go big yet because you you see one more big downward scare >> for for the folks that have capital and are looking to deploy it in addition to kind of that nibbling >> would you recommend that they they really think about deploying it once >> there is good news >> right so don't try to catch the bottom but but when you get the the announcement that okay yeah we're pulling out or the wars over >> the problem is the problem is it'll be like liberation day uh >> you'll have one day where it goes up by like 7% Well, it went up 10% in one hour. Um, and there's there's so much wealth and liquidity in the world that um these things don't give you an opportunity to, you know, to kind of jump in and um so I would say just as nibble on the panics. The days that uh everybody is really panicky is probably a good day to be be adding to some of your uh portfolio. Okay, nibble in on the panics. I'm writing that down here. Um, all right, Ed. Um, it's great discussion and it's always so um pleasant and educational to talk with you. >> Well, I I learned about a lot about geopolitics and uh I'm going to see what I can do about uh getting the US to change it to to to consider your proposal to just take the Iranian tankers once they're on on the other side of the street. Well, Ed, if you can if you can force an end to this war in a way that serves our interests, go forward for that with God. >> I'll give I'll give you full credit. Thank you. >> Thank you. >> Um, all right. Well, look, most important question of the day, though. Um, for folks that would like to follow you and your work in between now and your next appearance on this channel, where should they go? >> You go to yardenny.comi.com and there's an option for individuals and options for institutions. Okay. And I do just want to let folks know as a personal subscriber to your work, um, it's something that I read every day and I find it super useful. So folks, if you've enjoyed listening to Ed here, I highly recommend you go do that. All right. Well, in wrapping up here, folks, please join me in expressing your gratitude and appreciation for everything that Ed shared with us here today by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. Um, you know, it's a tricky time to invest right now. So, if you would like to get some help in doing so, well, first, if you're a DIY investor, recommend you go check out Ed's material, as we just mentioned. U, but if you'd like to get some help from a professional financial adviser, feel free to talk to one of the ones that Thoughtful Money endorses. These are the ones that you see on this channel with me week in and week out. To do that, just fill out the very short form at thoughtfulmoney.com. Only takes you a couple seconds to fill out that form. These consultations are totally free. There's no commitments involved. It's just a service these firms offer to be as helpful to as many investors as possible. Lastly, um a lot of what Ed and I talked about, particularly the impacts of uh an oil price shock on the economy. Uh these were discussed in great detail in Thoughtful Money's spring online conference that was held a week ago. If you didn't watch that, but uh wish you had, uh don't worry, you can still buy your replay video of the entire event. To do that, just go to thoughtfulmoney.comconference and you can buy it there. Um, Ed, I can't thank you enough. It's always such a a pleasant and educational experience listening to you. Um, look forward to seeing you back on here again soon and hopefully with good developments in between now and then. >> Absolutely. Absolutely. Thank you. All right. >> Thank you and everybody else. >> Everybody, thank you. >> Thanks so much for watching.