Transcript: Dr. Ed Yardeni


The transcript from this week’s MIB: Dr. Ed Yardeni is below.

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Stitcher. Our earlier podcasts can all be found on iTunesOvercast, Stitcher and Bloomberg.



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ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast I have a special guest. His name is Dr. Ed Yardeni and I’ve known him for a long time. He has been putting out research for decades. I always find his data-driven commentary to be very, very interesting.

He’s a realist when it comes to looking at the markets, looking at the economy and figuring out the relationship between the two. He also has a degree of infamy on Wall Street. He’s essentially the person who invented the phrase bond vigilantes and talked about the role of the bond market in keeping policymakers honest.

And he also includes movie reviews in his weekly commentary. He writes daily but we get a weekly film review which is always charming. I find his work to be very interesting and somewhat unique amongst the economists of the world.

So, with no further ado, my interview with Dr. Ed Yardeni.

I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio. My special guest today is Dr. Ed Yardeni. He’s is President and Chief Investment Strategist at Yardeni Research. He has a long and storied career on Wall Street beginning in the early days where he was Chief Economist at such August firms as E.F. Hutton and then later Prudential Securities.

He eventually became Chief Investment Strategist at giant German investment house, Deutsche Bank. This was many years ago. He worked at the Federal Reserve in both Washington, D.C. and New York City

He has a new book out, “Predicting the Markets: A Professional Autobiography.” Dr. Ed Yardeni, welcome back to Bloomberg.


RITHOLTZ: So, let’s start at the early parts of your career. You worked at the Fed both at the New York Fed and the Federal Reserve in D.C. and then you transitioned to Wall Street. What was that changeover like?

YARDENI: It was pretty smooth quite honestly. I was at the Federal Reserve Bank of New York for a little over a year. Prior to that, I basically finished my PhD dissertation done at the Federal Reserve Board for a few months. So, I don’t want to give you the impression that I had a long stint done in Washington.

But I spent a year at the Federal Reserve Bank in New York and then I got a call from a headhunter who placed economists in banks and he said, “would you be interested in taking a job at E.F. Hutton?” I jumped at it because I did actually want to go to Wall Street. I didn’t want to stay in government.

RITHOLTZ: When I was a kid — we’ll wax nostalgic here, when I was a kid, I just have such a vivid recollection of the E.F. Hutton commercials, and I’ll put a link up to this on the post about this, they were seminal. They were — there was nothing else like that.

YARDENI: They were a premier firm.

RITHOLTZ: What was it like in those days at such an August firm like E.F. Hutton?

YARDENI: Well, I felt that, you know, I was set for life. I mean, moving into E.F. Hutton back then, it was a premier firm not just in retail but also in the institutional field, just a very, very classy firm. Modern offices down on State Street and I kept pinching myself, I couldn’t believe that I’d landed at this great firm and I just was looking forward to being there for the rest of my life.

And then I started talking to some of my new colleagues and I — some of the older ones had kind of a resume where they’d worked at different firms and I couldn’t understand why they jumped around so much. And lo and behold, my resume kind of looks this way right now. You know, at Hutton —

RITHOLTZ: It’s how you get a new position, a new pay raise, more stock options?

YARDENI: It’s that and sometimes these firms don’t stay in business.

RITHOLTZ: Well, Hutton ended up merging with — didn’t it become Shearson Lehman —

YARDENI: Shearson. Yes  –Hutton and —  But that’s because Hutton had some legal issues to put it mildly. And so, they got taken over by Shearson. But I left about a year before that happened. And then I went over to Prudential-Bache at that time  because George Ball was the Head of Hutton and he went to Prudential-Bache.

RITHOLTZ: Very famous person on Wall Street.


RITHOLTZ: Is it — I’m trying to think of who would be the equivalent of George Ball today. He was —

YARDENI: He was a star. Definitely, he was a star.

RITHOLTZ: Is he — could we say he was the Jamie Dimon of the year or is that going too far?

YARDENI: I think that might be going a little bit too far. I mean, Jamie Dimon is in a class of his own but Ball was, you know, master of the universe back then.

RITHOLTZ: And how did you end up working your way to Deutsche Bank, which was then was a giant bank in Germany —

YARDENI:Yes, well —

RITHOLTZ: –and now it’s under a little bit of pressure.

YARDENI: Well, actually, from Prudential, I went over to C.J. Lawrence, Ed Hyman who’s, you know, the all-time great star in our business particularly as an economist decided to go off on his own and brilliantly created ISI Group which turned out to be a very, very successful firm.

RITHOLTZ: But he also created an opening at Lawrence.

YARDENI: I have to thank Hyman for creating opportunity to C.J. Lawrence and for me, C.J. Lawrence was an opportunity to really focus much more on working with the institutional investors. I had a great experience with Prudential and working with retail investors.

But C.J. Lawrence was just, you know, it’s nice to change careers within careers as long as it’s not I think too radical and C.J. Lawrence itself was a very classy firm in that area.

RITHOLTZ: And then from Lawrence, you ended up at Deutsche Bank.

YARDENI: Well, C.J. Lawrence was owned by Morgan Grenfell when I went over there and Morgan Grenfell was owned by Deutsche Bank and there’s also some regulatory reasons why Deutsche Bank couldn’t get into the investment business, but those regulations changed.

And eventually, C.J. Lawrence’s name disappeared and it just became series of things like Deutsche Bank Securities and the like. So, I stayed in the same office and, you know, the firm’s name changed around me.

RITHOLTZ: So, you trained as an economist. How do you affect that transition to market strategist or investment strategist?

YARDENI: Well, you know, life is full of opportunities and you just have to kind of hope that they come your way or make the opportunities come to your way. What happened at Deutsche Bank Securities is that the — Jim Moltz who was my mentor in many ways, he was the strategist, I was the economist. He does provide the economic information to them and he translated it to market blocks ideas and, of course, had his own ideas.

But Jim Moltz went over and joined ISI. He went and joined at Hyman. And so, they did replace Jim with Tom Galvin who was the auto analyst and he did a great job for a couple years as a strategist. But then he decided to go off to the buy side and manage money.

So, there was just opening and I just jumped out to that and said, “Hey, guys, you know, I’d be more than happy to do two jobs and, you know, pay me a little bit more and I’ll do economics and strategy” and somehow, they agreed to that.

RITHOLTZ: So, when did the movie reviews come into your research because you’re fairly —


RITHOLTZ: –amongst many things, you’re someone infamous for including movie — film reviews —

YARDENI: Well, I —

RITHOLTZ: –and your commentary.

YARDENI: I joke around that the reason I do movie reviews is in case this career doesn’t work out and in case this job doesn’t work out, I can always become a movie reviewer.


YARDENI: But my wife and I have always enjoyed going to movies and I guess really it was in the early ’90s when moved to C.J. Lawrence, I would have these Monday morning conferences with the sales force relaying to them what I thought, what Jim Moltz thought on the strategy side or whether I thought on the economics side and I just started saying, “Hey, by the way, I saw the following movie on Friday” and I’d say a couple of comments about it whether I like them or not.

And more often than not, I tried to — especially once I started writing these things up, I tried to relate it to the markets. But 2004 is the first one I actually have on the website. So, well, they go back quite a ways.

RITHOLTZ: This book is filled with all sorts of quotes that I really enjoy, I’m going to start with a long one and let’s have you comment on it. Economists especially of the pessimistic persuasion rarely pay attention to technological developments. Yet these developments regularly transform the course of human history. Human nature may not change much over time but technology often does so in ways that profoundly impact human societies, their economies and financial markets.

So, first, why don’t economists pay attention to technology and then secondly, why have you found it to be such an attractive area of research?

YARDENI: I guess a lot of them don’t view it as being part of their job. It’s not in their job description. They tend to be fairly narrowly focused on whatever it is that they choose to focus on in graduate school so they’re either microeconomists or macroeconomists or monetary economists.

And, you know, I’m not too up to date on what they’re teaching in grad school these days, but I don’t think there are really any courses that focus on how technology impacts economies, impacts the way economies evolve, which is kind of bizarre because when I think of it, one of the first economists was Malthus and Malthus predicted that there would be food shortages and what he didn’t anticipate was technological innovation in agriculture.

RITHOLTZ: Clearly, he misunderstood the rate of change of innovation.

YARDENI: Yes. And that — and then you also have to understand or try to think about how human beings respond to technological innovation. So, again, going back to the Malthusian dire warnings, so, as technology improve the ability of agriculture to feed everybody, he didn’t really need anybody to be out in the fields anymore. You needed far fewer workers.


YARDENI: So, you saw tremendous urbanization and guess what, when people go to cities, they have fewer kids. So, all these concerns that populations will grow faster than the food supply has totally blew up because technology cured the problem.

But, you know, economists — you know, I went back recently and I looked at Samuelson’s classic textbook on economics which is what most economics students study when they first get into the field. And if you go back to, you know, this first book I think in the mid-40s and look at the latest one which was written by Samuelson and Nordhaus, you’ll see that they defined economics as the study of how you allocate scarce resources optimally.

And I was — really after — and I kind of added this to my book after I’ve written most of it. I said, no, that’s not really true. When something is scarce, guess what, entrepreneurs come in and they figure out new technologies to make things less scarce or to substitute for the scarce areas.

And microeconomics actually teaches that, you know, there is no such concept of — there’s no such thing as scarcity. When something gets scarce as the price goes up, you can still get it.


YARDENI: You just got to pay a higher price for it and that encourages entrepreneurs to come in and figure out how to lower that price.

RITHOLTZ: My favorite example is in New York City, if you want to hail a cab, it used to be next one impossible when you wanted it.


RITHOLTZ: And then Uber came along and —


RITHOLTZ: –suddenly there are cars everywhere.


RITHOLTZ: And by the way, the value of that medallion at $4 million–
YARDENI: It’s collapsed.

RITHOLTZ: –it’s now worth 11 cents.

YARDENI: That’s right.

RITHOLTZ: That scarcity led to a technological innovation.

YARDENI: Absolutely.

RITHOLTZ: So, that really raises the question, why are we missing technology from our economic textbooks? Why hasn’t the dismal set figured this out?

YARDENI: Well, you know, economics started out being called political economy which included philosophy, included economics, included history. It was a broad range of study of human nature and how it interacts with the environment and technology was part of that.

And somewhere along the way, economics became very stratified. I think I would — I blame Keynes for a lot–


YARDENI: –a lot and, you know, when Keynes invented macroeconomics that meant that anybody who didn’t study macroeconomics was kind of a microeconomists and it’s kind of divorced the study of economics from reality in my opinion. It became too theoretical.

RITHOLTZ: And yet, Keynes was a very savvy investor. He understood how economics —

YARDENI: That’s right.

RITHOLTZ: –interacted which leads me to another quote from the book, “Investing isn’t a moral pursuit. It’s not about right or wrong, good or evil. It’s about bullish or bearish.”


RITHOLTZ: Discuss.

YARDENI: Well, I guess it was — when Obama got elected, there were a lot of policies that were being discussed that I thought were just much too interventionist in the economy and I was sort of politically biased in my writing.

And one of my accounts kicked me in the butt and said, you know, I don’t pay you to do Fox News. I don’t pay you, you know, for your political views. I pay you for what you’ve done in the past which is kind of seemed clearly where the signal is and away from the noise. And a lot of politics is noise.

RITHOLTZ: All noise. Yes. Absolutely.

YARDENI: And that kind of like brought me to my senses and being an entrepreneurial capitalist realizing this is kind of an important account. I started to realize, you know, I mean, that basically the market was telling me this is not what you really need to be doing.

What you need to be doing is focusing on is it bullish or bearish. That is it good or bad. Don’t be a policy — don’t criticize the policymakers. Tell me what they’re going to do.

RITHOLTZ: By the way, that’s my pet theory for why so many hedge funds have been underperforming in the past decade. They thought they were sitting in think tanks when they were actually managing other people’s money —

YARDENI: That’s right.

RITHOLTZ: –and they got distracted.

YARDENI: That’s right. So, I talked to people, I’m not a preacher, I don’t do good or bad, I don’t do right or wrong, I’m an investment strategist. I do bullish or bearish.

And sometimes, you can let your political views — if you let your political views get in the way, you could be bearish and miss a great bull market.

RITHOLTZ: No doubt about it. One last quote, “I’ll go out on a limb and predict there will be another financial crisis in our lifetimes. However, like previous ones, it will offer great opportunity for buying stocks.”

So, how soon is the next financial crisis coming and at what level should we be buying stocks?

YARDENI: Well, those are all great questions and I’m not going to pretend that I have clairvoyance to say exactly when this is going to occur. But, you know, over the past 40 years, I’ve observed that recessions happen and very often, they’re preceded by financial crisis.

And that what happened in the past is credit was too easily available and it was too cheap and people got caught up in how smart they were. I mean, you know, bull markets make a lot of people very smart.


YARDENI: They borrowed a lot of money and then suddenly, we got into inflationary boom. The Fed had to step on the brakes and lo and behold, a lot of debtors just couldn’t keep making their payments and the whole thing came on glued, and the history is full of this. I mean, it’s a traditional boom-bust cycle.

RITHOLTZ: So, let’s look a little closer at the boom-bust cycle. In the 2000s, at least before the crisis, you had easy credit —


RITHOLTZ: –and cheap money.

YARDENI: Correct.

RITHOLTZ: Today, we have not so easy credit and money was cheap but it’s getting a little less cheap, where are we in that long-term boom-bust cycle?

YARDENI: Well, I’m, you know, I always like to think a little bit outside the box but always stimulated by what the data is telling me. And what the data is telling me, what the experience of the past few years tells me is maybe, just maybe we can have rolling recessions that kind of roll through different industries at different time.

So, didn’t we just have a pretty severe recession in the energy and commodity space in 2014, 2015? I mean, that’s a rhetorical question and the answer is yes. It was very severe.

The amazing thing is how quickly we came out of it in 2016 and that’s because one of the big differences between the current environment and the 1930s is that in the 1930s, there’s no such thing as distressed asset funds that we’re looking to buy —


YARDENI: –things at 50 cents on the dollar. Now, there are. So, when things fall apart, there’s money that just kind of pours in to buy these things really cheap and that kind of keeps the system from really imploding completely.

We just had a recession, we’re probably still in the recession, in the shopping malls, in the retail industry and we’re seeing how that industry is restructuring itself. So, that maybe the way things continue to unfold.

So, I don’t want to say they’ll never be a recession again, but we may just have these kinds of rolling recessions without the kind of the gut wrenching six to 18-month downturn that we have experienced during the past 40 years that I’ve been in looking at things.

RITHOLTZ: The economies that Balkanize, that you could get a narrow energy or commercial real-estate recession and it doesn’t spill over to the rest of the broad economy?

YARDENI: Well, that — you know, maybe I’m showing my inherent optimism in kind of aiming in that direction. I mean, clearly, you know, given current events, if we have a trade war — in my book, I do write about the Great Depression and I do believe that the Great Depression was at least triggered by trade wars, by the Smooth-Hawley —

RITHOLTZ: Smooth-Hawley and all that.

YARDENI: –and all that. So, you know, I mean, it’s certainly conceivable to have an economy wide global recession.

RITHOLTZ: I want to talk a little bit about commodities and what you describe as your favorite indicator. But I have to start with a quote of yours, “The best — or a quote that you write in the book, “The best cure for high commodity prices is high commodity prices.”

Obviously referring to market forces either bringing–


RITHOLTZ: –more supply on or reducing demand. So, from that, why do you come to the conclusion that raw industrial spot price index is the best of all economic indicators?

YARDENI: Well, commodity markets are probably the most competitive markets. They’re also were very efficiently organized.

We have some pretty good institutions where these things are traded where they’re self-regulating to large extents so the exchanges have a long history of being very honest brokers to suppliers and demanders of commodities.

RITHOLTZ: And your end user consumers, these aren’t like speculative maybe I want to own stocks or not. These are people who are actually buying commodities and using them in products.

YARDENI: That’s right. By the way, as a side note here, I’m not convinced that some — that commodities really should be viewed as an asset class because I think that mostly commodities do have end users who actually want to use them as opposed to just kind of stockpile them.

Commodities don’t really have D and E. They don’t have dividends. They don’t have earnings. So, they’re different kind of animal. But —

RITHOLTZ: Would you say the same about gold because I know the emails from gold bubbles are about to start?

YARDENI: Yes. Well, look I’m — gold is a unique commodities, the only one that I know that has its own fan club and they’re called gold bugs and I said that respectfully. I don’t say that, you know — I just don’t do gold.

I need dividends. I need earnings. I have nothing against owning some gold in a portfolio and most strategists will tell you, you know, sure, go ahead and own some gold.

But that’s — I’ve had some good calls, a few good calls in gold but, you know, nothing that stands out in any meaningful way. But to your question about the CRB Raw Industrials, it’s an index that’s been around since the ’50s and first monthly then weekly and now daily and I found that it’s a very highly correlated with global economic activity and therefore, also U.S. economic activity because the U.S. matters so much.

So, I watched it on a daily basis for an indication of what the global economy is doing. It’s got 13 raw industrials. It does not have oil. It does not have lumber which I think both those commodities have their own unique supply-demand characteristics.


YARDENI: And I like to divide it by initial unemployment claims and I call that the boom-bust barometer.

RITHOLTZ: So, raw spot price index–


RITHOLTZ: –divided by initial unemployment claims.

YARDENI: Unemployment claims. So, that becomes a weekly indicator.

RITHOLTZ: And what’s the signal that, hey, recession is coming?

YARDENI: Well, it’s really a coincident indicator but it’s available weekly. So, you know, I don’t have to wait for some other monthly data. So, for example, the CRB Raw Industrials index took a dive in the second half of 2014 and 2015 signaling that something was happening in the global economy. It was getting weaker.

And then it hit a bottom in early 2016 and alerted me that the global economic activity was improving. And thein I started to see it in some of the indicators that we used for forecasting corporate earnings and it all sort of kind of came together.

RITHOLTZ: Earlier this year and we’re recording this in April 2018, you had said, “I think inflation is dead.” So, what do you mean by that and what does it suggest to bond investors going forward?

YARDENI: Well, it’s not a new mantra for me.


YARDENI: I’ve been basically of that opinion since — for the 40 years of my career. I mean, it wasn’t dead in the late ’70s when I started my career.

RITHOLTZ: For sure.

YARDENI: But when Volcker adopted monetary policy procedures that led to interest rates going straight up, I concluded that he would in fact break the back of inflation. And the amazing thing — remarkable thing was how quickly inflation came down once policy really aimed at bringing it down.

And I was — I’ve been a disinflationist which means it doesn’t mean falling prices means that the price — the inflation — the rate of inflation comes down and I’ve been a disinflationist throughout my entire career and maybe at some point I need to just, you know, let go —

RITHOLTZ: Declare a victory and go home?

YARDENI: Yes. Declare a victory or, well, you know, I hope in my next 40 years, God willing, or, you know, whatever part of that, I continue to be employed the way I am.

And, yes, I think inflation what I’ve learned is it’s not a monetary phenomenon with all due respect to Milton Friedman. I mean, by now, we should all just empirically realize because–

RITHOLTZ: Clearly.

YARDENI: –clearly it’s not a monetary phenomenon. I’m not going to tell you it’s not at all related to what the central banks are doing. But if anybody tell us the central banks are going to pile on the kind of liquidity they put into the system since 2008, we would have all said by now inflation should have been soaring. I didn’t–

RITHOLTZ: Hyperinflation. Exactly.

YARDENI: Hyperinflation. I mean, I didn’t see what the central banks are going to do and I guess if you told me that, I might have turned into a reflationist.

But I think what’s continuing to work and what’s worked for the past 40 years is globalization, our global competition and that’s obviously under some stress here with the trade tensions. Technological innovation as we discussed earlier is very powerful in bringing prices down.

And then aging demographics, people getting older. Older societies I think tend to be less inflation prone.

RITHOLTZ: Let’s talk a little bit about the early days of your career. You got to Wall Street. You mentioned we were in the middle of a very recessionary period. We had stagflation. We had high oil prices. We had an oil embargo.

Stocks essentially went nowhere and we were coming out of the worst recession since the Great Depression. What was it like to start your career in that environment?

YARDENI: Well, with the benefit of hindsight, I was remarkably lucky. I mean–

RITHOLTZ: Nowhere to go but up, is that the thinking?

YARDENI: Well, yes. I mean, the ’70s were awful and I was in graduate school. So, you know, what did I know and I was studying theories and taken courses and what was happening in the real world really didn’t matter all that much to me except for the fact that I had to wait in the long gasoline lines in 1979.

So, clearly, we all experienced the angst of high inflation and two energy shocks in ’73 and ’79. But, you know, I landed on Wall Street in 1978. So, kind of in the thick of all the misery and all the bearishness.

And lo and behold, I started to kind of see the light early on in my career that maybe Volcker would break the back of inflation and if he did, that could bring bond yields down. So, I started to talk about what I called the hat size bond yields when they were over 10 percent.

And also in early ’80s, it turned bullish on stocks along with my mentor back then on the strategy side was Greg Smith at, first, at E.F. Hutton and then at Prudential. So, I mean, 40 years — during the past 40 years, the stock markets basically gone from a thousand to 26,000, maybe back down to 24,000, 25,000.

The bond yield has dropped from well over 10 percent to around 3 percent. Now, we’re as low as 1.5 percent. So, I count myself just — you know, I just kind of looked to be — have 40 years of my prime focus during bull markets — great bull markets of bonds and stocks.

RITHOLTZ: You’re credited with creating the term bond vigilantes. Why did you come up with that and what do you mean by that?

YARDENI: Yes. It will probably on my tombstone, you know, that any time the bond yield goes up anywhere in the planet Earth, I get a call from somebody in the media saying, you know, are the bond vigilantes back.

So, when Greek bond yields are going up, I actually got some calls from Greece asking me if the bond vigilantes decided to take a vacation in Greece and caused some trouble over there.

But in 1983, bond yields were starting to go up. There was a fear that inflation was going to come back. And I guess I was trying to defend my disinflation scenario and said, don’t worry about it. If inflation comes back, if the Fed doesn’t deal with it then the markets will deal with — well, the bond market will deal with it. I recently sort of segue that into the Dow Vigilantes within the context of the trade diff that’s going on.

RITHOLTZ: So, let’s move into equity since you brought it up.


RITHOLTZ: A lot of people are saying U.S. equities are expensive especially relative to emerging markets. Where are we in the broader market cycle and do you think stocks are expensive here?

YARDENI: Well, again, looking over the past 40 years, I’ve come to the conclusion that what causes bear markets is obvious, it’s recessions. We had one bear market in 1987 that was not caused by recession, but with the benefit of hindsight, I think it was almost like a flash crash–


YARDENI: –with portfolio insurance (ph) that all occurred sort of in one day. It turned out to be a great buying opportunity. But certainly, there were some pretty nasty recessions in the past 40 years.

Benefit of hindsight, if you had the stomach for it and stayed with it, you’d be still very well-off. You know, the problem we all have, of course, is, you know, when I was just starting out, I didn’t have a lot of money and I couldn’t possibly anticipate the kind of bull markets we had.

But to get to the present, stocks are not cheap. They’re not cheap in the United States. But a lot of that is because the so-called FANG stocks are very expensive. Take those out and stocks are sort of fairly valued.

Factor in that inflation is low and interest rates are low then I think you can also argue that stocks are not grossly overvalued. Warren Buffett has got this famous Buffett ratio looking at market cap of the S&P 500 to GDP and it’s back to the highs of 2,000, right, before the market took a dive. But Buffet is pointing out that he’s not paying that much attention to the ratio because inflation and interest rates are so low.

You know, I guess the answer about where are we on the cycle is when will the next recession occur. If we continue to have these rolling recessions then maybe we will continue to have a very elongated, very — maybe longest expansion ever and I think people therefore would be willing to continue to pay relatively high multiples as long as earnings are growing and we just got this huge booster to earnings from the tax cuts.

So, I don’t know exactly when the next bear market is going to occur. I don’t think we’re going to have recession in 2018, this year or next year.

RITHOLTZ: 2020, March–

YARDENI: 2020 is possible.

RITHOLTZ: OK. That’s a fair–

YARDENI: But everything is, you know, I mean, you got to keep your wits about you. I mean, this trade issue is a significant one, but I’m on the side that believes that this too shall pass.

RITHOLTZ: So, you’re looking at these as pronouncements that get walked back and cooler heads prevail or a trade war is in that (inaudible) for markets?

YARDENI: Right now, I view it more as war of words —


YARDENI: –than–

RITHOLTZ: Of tweets.

YARDENI: Yes, of tweets. That’s right . That’s — rather than an outright trade war. And the fact that the United States is now finding that both Japan and the European Union is joining in basically attacking China for unfair practices particularly with regard to technology, I think it’s a positive development.

Technology, you know, I think there’s something about the idea that trade isn’t just about trade. There is a national security issue.

RITHOLTZ: Of course. We’ve already seen a number of Chinese takeovers of U.S. corporations prevented because of security concerns.

YARDENI: Well, that’s become — you know, because technology does have such an impact on national security, trade is no longer just about, you know, trading corn for silk or something like that. There are issues that do bring in some political considerations.

RITHOLTZ: So, one of the things I find fascinating about you, a lot of people who came of age as investors during the 1970s, they seem to be scarred by it.


RITHOLTZ: They have PTSD. They’re terrified of inflation. They’re terrified of recessions. You seem to have emerged from that era with nary a scratch on you. What do you attribute that to and why do you think your outlook differ so much from your peers of that same era?

YARDENI: Well, it’s possible that, you know, I am very data dependent. You know, the Fed always says they’re very data dependent. I’m very empirical in sort of the way I look at things.

I think a lot of people seem to be what are the theories and then try to stress the data to fit that. So, I think, you know, in the 1970s, a lot of people got condition to the idea that inflation is a problem that was just created by central bankers and would continue to be created by central bankers.

There’s a lot of fears that deficits would lead to ruin and I’m kind of a conservative fellow. I don’t like deficits. I don’t like central banks — I call them central monetary planners running amok.

But again, I’m not a preacher, you know. I’m not saying, you know, right or wrong. I’m saying what are we actually seeing and what I — I guess what I sensed is that there’s more to our economy than just policymakers. There’s a lot of entrepreneurs, a lot of businesses, a lot of workers.

And one of my kind of pitches when I visit accounts who get worried about policies, I said, look how well we’ve done despite Washington.


YARDENI: And that’s kind of helped me focus on the importance of understanding that people get up in the morning and they go to work and they want to work. They want to make money. They want to create something.

And, you know, I see that especially now that I’m an entrepreneurial capitalist myself, I have my own firm, and every day, I want to stay in business and I want to grow my business. And that’s completely independent of what policymakers do. I mean, if they get my way, I’ll do the best I can to run my business with the policies that I have to deal with.

RITHOLTZ: So, we’ve talked a bit about technology and the Malthusian. What do you think of the fear that we see among some economists that technology and robotics is going to take away everybody’s jobs and will — soon all of us will be unemployed and it will just be Amazon?

YARDENI: Well, in the book I addressed that issue kind of under the subheading of “Brave New World” and I know there’s a section called iSpartacus (ph), the idea that, you know, androids are going to be doing all the dirty work for us and one of them will rise up, iSpartacus (ph), and, you know, everybody will — the androids will revolt and it will launch a revolution against the humans.

Japan is a good example. Japan’s kind of — sort of a lead indicator for the rest of us. Their geriatric and aging society. Their unemployment is extremely low. They’ve got what appears to be actually a shortage of workers and yet probably they are the robotized automated economies in the world.

The demography on a global basis, we’re just, you know, we’re sort of under road to self-extinction. Fertility rates have collapsed around the world with the only exception being India and Africa and those too may change as urbanization continues.

RITHOLTZ: We were ahead of Europe for a long time here in the United States and we sort of fallen into that —


RITHOLTZ: –you know, fraction of percentage fertility rate in the U.S.

YARDENI: Exactly. And the labor force growth because of the aging of the baby boomers, we really are saying around the world with a few exceptions that working age populations are really declining. And so, we actually need robotics and automation to do things that we don’t have people to do.

RITHOLTZ: What about skilled immigration, do we want to pull the best and brightest from around the world or how should we be operating that?

YARDENI: Well, immigration historically has always been a source of economic growth. As a matter of fact, I would attribute some of the surprising growth in Europe over the past couple years to the million people that migrated from Africa and the Middle East to Europe.

I mean, all of us look at it as this is going to be terrible. I mean, the mix of cultures is going to be horrendous. And by the way, it hasn’t been pretty. I mean, the crime rates have gone up.

But still, you know, Germany’s economy is absolutely booming and I would say that it’s just another example that sometimes, I mean, historically, migration has been a source of growth.

RITHOLTZ: Can you stick around?


RITHOLTZ: I have a turmoil of questions for you.


RITHOLTZ: We have been speaking with Dr. Ed Yardeni of Yardeni Research and author of the new book, “Predicting The Markets: A Professional Autobiography.”

If you enjoy this conversation, be sure and stick around for the podcast extras where we keep the tape rolling and continue to discuss all things markets. We love your comments, feedback and suggestions. Write to us at

You can follow me on Twitter @Ritholtz, check out my daily column on I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.

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RITHOLTZ: Welcome to the podcast. Thank you, Ed, for doing this.


RITHOLTZ: I’ve been looking forward to going over the book and some other stuff. I’ve been getting your research for a long time and I always find it quite fascinating.

But I have to start with a question about the book. So, you crank out a lot of material every day. I could tell you read a lot, you write a lot, what was your process like for writing the book and how challenging was it on top of everything else you do?

YARDENI: Well, in some ways, I’ve been writing the book for 40 years, right?


YARDENI: That’s, you know — and in the book, I point out I really didn’t have to do much research because that’s what I’ve been there for the past 40 years.

RITHOLTZ: But still getting 300 words out on–

YARDENI: Yes. Well–

RITHOLTZ: –300 pages of words.

YARDENI: Yes. I tell you the truth, I didn’t know I had it in me.


YARDENI: I mean, when I put it all together, I couldn’t believe how much I’d written. It’s, you know, the book is 600 pages long. And so, I guess 40 years, you know, I had things to say and I wanted to write them down.

So, it’s kind of like — I don’t play the piano but I guess it’s kind of like sitting in the piano and saying — and being a composer and saying, I don’t know what I’m possibly going to compose and suddenly it just comes to you.

RITHOLTZ: There’s (inaudible). Right.

YARDENI: But once I organized the book under — once I organized the structure of the book and it’s all — every chapter is about predicting. You know, I started predicting the past, kind of reviewing a quick overview of things then predicting bonds and stocks.

Once I did that it, it was a pretty fast effort. So, a lot of it was written actually from the summer of 2006 to the summer of 2007. And, obviously, at nights and on weekends and sometimes when I had some my gaping holes in what I needed to put in the book, I’d put it in my daily, write it up there or think about it, research it and throw it into the book.

RITHOLTZ: Quite interesting. And how long did it take you to write this other than the 40 years to actually —

YARDENI: Well, the bulk of the book was written from summer of 2016 to the summer of 2017.

RITHOLTZ: So, let’s talk a little bit about index funds. You know, they had been invented around the time your career–


RITHOLTZ: –started, but they really haven’t captured the popular imagination like they have since the financial crisis. What do you think about the role of index funds in an investor’s portfolio and to what would you attribute this sudden recognition that, hey, this is cheap, easy and efficient?

YARDENI: Well, I think it’s, you know, the media made it clear that this is an alternative way. I think also a lot of stockbrokers started to promote the idea that, you know, the individual investor could buy indexes. And by the way, a lot of institutional accounts when they want to be along technology will maybe just buy an index that monitors technology or has technology stocks.

So, I think it just kind of fed on itself and here we are with an ETF that’s just about anything that you can trade on the planet Earth.

RITHOLTZ: And you’ve been doing this long enough where you’ve gotten a number of things very right. What are the things that you’ve gotten wrong that stand out in your mind and what lessons did you take from those?

YARDENI: Well, I think in our last conversation you asked me about Y2K and, you know, 2000 — in 1998, ’99, I started to focus on Y2K’s potential problem and this is a good example of how you should mess around with subjects that you don’t fully understand.

And, you know, I’m — I like technology. I use it a lot. But I used to — I study just some programming but I’m not a coder so —

RITHOLTZ: But we could make the defense for you that, hey, you helped draw attention to a potential problem and a lot of time and resources were thrown at that problem which made it considerably smaller than it might have been obviously.

YARDENI: Well, I was, at that time, very publicly monitoring what corporations were saying in their SEC filings about how much they were spending and it really added up about $50 billion. So, you know, I obviously was concerned about a problem that corporations were concerned about. But the fact of the matter is they dealt with it and nothing happened.


YARDENI: And so, when nothing happened, I was little bit embarrassed because I thought it could lead to a recession. Benefit of hindsight, I should have — I think I had the right issue but —

RITHOLTZ: You could have declared victory and said, look —

YARDENI: I was right for the wrong reason. Benefit of hindsight, what would really happen is corporations when the technology spending boomed and used the Y2K as an excuse to get all the brand-new hardware and software and then when the millennium occurred, all that spending just dried up —


YARDENI: –and the whole thing just kind of imploded and we had a tech wreck.

RITHOLTZ: It’s pretty easy with the benefit of the hindsight to look at those March 2000 earnings misses and conference calls as all that spending in ’99 was pulled forward.


RITHOLTZ: Maybe you pulled five years with the spending forward.


RITHOLTZ: And that’s what led to a dearth and suddenly even reasonably priced stocks became very pricey on the tech side.


RITHOLTZ: It didn’t take a lot to watch those profits disappear. There was one other question I wanted to ask you about the bond vigilante term. Where did the idea that there were certain players in the bond market that would either punish the Fed or at least use their portfolios as a way to draw attention to the threat of inflation, where did that come from? It’s kind of unexpected.

YARDENI: Well, you know, I — back then I was writing weekly, now I write daily, and, you know, I always find that I feel the responsibility, if I want to sit down and write something, I want people to read it.

So, I try to write it in a way that’s I’d say interesting and, you know, I’m constantly coining — you know, I coined that hat-size bond yield ID–


YARDENI: –and bond vigilantes were just something I put into I think it was July 1983 piece. They just kind of got a life of its own suddenly and it kind of caught on.

RITHOLTZ: I was looking for a film derivation that it came from some posi going after —


RITHOLTZ: No such luck.

YARDENI: Yes. No such luck in that particular case. But, you know, in the early ’90s, the Clinton administration basically paid homage to the bond vigilantes when Clinton’s advisers told him, you know, you can’t do that because the bond folks won’t let you get away with it.

RITHOLTZ: Robert Rubin, right?

YARDENI: Robert Rubin and–

RITHOLTZ: That famously said that–

YARDENI: Carville I think–

RITHOLTZ: What was the famous quote?

YARDENI: Something that, you know, from reborn, I want to be reborn as a, you know — it is a bond vigilante but, you know, a bond god or whatever.

RITHOLTZ: And so, you’ve been on both sides of the research aisle as both an economist and a strategist.


RITHOLTZ: How did those roles different and how does that affect this sort of work you do each day?

YARDENI: Well, they really should be one and the same. It kind of goes back to our conversation earlier about how academics and professionals, the nature of things as we tend to become very segmented and very kind of confined to viewing what we do very narrowly.

Fortunately, for me, I was able to segue from economics into investment strategy and make them sort of the same subject.

RITHOLTZ: Really? Because people — some people say that predicting the economy and predicting the stock market are two totally different–

YARDENI: Well, I just wrote a book that, you know–

RITHOLTZ: Says the opposite.

YARDENI: –it says the opposite that, you know, you want to understand the economy and you want to understand the financial markets and you want to appreciate how the two interact. Markets can affect policy. Policies can affect markets. Economic events cause people to change the way they view market. So, I think they’re very much one and the same.

RITHOLTZ: So, in other words, you’re not going to get your economic forecast wrong but your market forecast right. If you’re getting one right, you should get the other right–

YARDENI: You should.

RITHOLTZ: –and if you’re getting one wrong, you probably going to have problems in the other one.

YARDENI: You should. But, I mean, it’s — I mean, I –it’s conceivable that you could get an economic scenario right overall and yet still miss the markets. But I think it’s — for starters, it’s always get — good to get the economy right and if you can do that. And I found that historically getting inflation right has been paramount.

RITHOLTZ: Paramount. So, everything comes down to the right inflation forecast. Inflation gets you the economy right. It also gets you the Fed right and then it gets you–

YARDENI: The markets right.

RITHOLTZ: –the markets right.

YARDENI: Valuation right. I mean, right now, if I’m going to be just dead wrong, inflation would make an amazing comeback and suddenly, all these deficits that we’re looking at become a real concern.

RITHOLTZ: Much worse. Right.

YARDENI: Much worse. Well, interest rates will be a lot higher and the deficits will still be completely different scenario. But, hey, look, if I have to change my views, I’ll do that.

I mean, again, I’m not stuck to theory, I’m not stuck to right or wrong. I just do bullish or bearish.

RITHOLTZ: That’s quite fascinating. There was one other question I wanted to ask you about the market cycle and you almost addressed it before but I want to bring it back to this.

So, here we are, the market made its lows in March ’09, it made new highs in 2013. The economy continues to expand. However, we’re starting to see the average job creation slide a little bit.

You go back five years and we were doing 250 a month and then two in a quarter in 220, now, we’re on track to doing something like 165 a month and we’re recording this after a disappointing–


RITHOLTZ: –110,000 scenario. Is the economy cooling off? What does this mean for inflation and what does this mean for stock markets?

YARDENI: Well, in the past when the unemployment rate was this low, we would have a boom. I mean, companies would scramble to hire workers. They’d be paying much higher wages. They’d be expanding their capacity and inflation would take off, Fed would tighten then you have a recession.

RITHOLTZ: The old days.

YARDENI: The old days. Right now, we’ve got a very tight labor market, but we’re not seeing wage inflation takeoff.

RITHOLTZ: Why is that? Because that seems to be the key to a lot of future issues.


RITHOLTZ: Both policy and market wise.

YARDENI: –I’m 68, I just wrote a book about the past 40 years and I hope to write another book about the next 40 years or 20 years whatever that I’m granted. But I haven’t had a pay increase in about 10, maybe 20 years.

RITHOLTZ: Is that true?

YARDENI: There’s a lot of baby boomers that made a lot of money in their careers, you know, I’m making a lot more money now than I was making when I was first started in the business. But the reality is I think there’s a lot of baby boomers just aren’t retiring–

RITHOLTZ: Those bastards.

YARDENI: –and they’re not getting pay increases because they’re getting paid enough.


YARDENI: And in some cases, their pay is going down because — but they still want to work.

RITHOLTZ: So, how much of this is just a hangover from the great financial crisis and a loss of people feel like, hey, I lost a good couple of years before and after that, I can’t retire, I have to keep working?

YARDENI: I think that’s well — I think we’re well past that. I think people that are people working now — I think a lot of baby boomers that are still working really do want to work.

RITHOLTZ: So, this isn’t I have to work because I need to. This is, hey, I like working and it gives me confidence and a purpose.

RITHOLTZ: I think so. I think so. That people are living longer and, you know, some people can retire and play golf and tennis and go travel around the world.

I personally can’t do that. I mean, I need to be working. I need to be thinking, keep my mind going. I love this business because I don’t know of any business that kind of keeps you so focused on current events and thinking about how the world actually works.

RITHOLTZ: So, let’s stay with the issue of wages.


RITHOLTZ: You said your wages have — your personal wages–

YARDENI: My personal, yes.

RITHOLTZ: –have been flat for a decade.

YARDENI: Right. I’m not complaining.

RITHOLTZ: But lots of people’s wages have been flat for several decades —


RITHOLTZ: -what does this mean?

YARDENI: Yes. Well–

RITHOLTZ: They’re real wages.

YARDENI: Yes. There’s a section in the book where I focused on predicting the consumers and predicting demography which I think I may — I convinced myself that the notion that real incomes have been stagnant for the past 15 years, it just doesn’t jibe with the data.

RITHOLTZ: Now, when you say the data, I want to really get into this a little bit.


RITHOLTZ: I don’t have any doubt that the quality of life for people has gone up significantly–

YARDENI: Exactly.

RITHOLTZ: –even as their wages have remained somewhat flat.

YARDENI: Well, that’s — the flat earth concept is based entirely on a series that’s produced annually by the census bureau on money income where they ask people about their money income. They don’t ask them about non-money sources of income.

So, entitlement programs — I mean, Social Security’s in there but not Medicare, not Medicaid. There’s just a huge discrepancy between personal income, which is available monthly.


YARDENI: But the problem is when you look at median, the census data is median, I can’t give you a median on personal income. I can give you a mean, I can give you an average, but I can’t give you the, you know, the family in the middle.


YARDENI: But when you look at the average, it’s up like 25 percent in real terms over the per household. And by the way, I believe household is the best way to measure for measuring standard of living. My kids have a great standard of living. I wish I lived as well as they did.

But the data for average real incomes is up like 20, 25 percent whether you use personal income, if you use average hourly earnings, you’re up about as much. So, I think there’s — for some reason, there’s been this focus on this one data series and Trump mentioned it when he was running for president that people’s earnings have stagnated.

The data just doesn’t show that. Consumption is at an all-time record high.

YARDENI: No doubt about that.

YARDENI: And so–

RITHOLTZ: Even if stores closed, consumption continues to rise.

YARDENI: Yes. Yes.

RITHOLTZ: How much of that is healthcare spending and how much of that is goods and services that aren’t related to that?

YARDENI: It’s really all of the above. You know, I mean, standards of living have gone up across the board.

RITHOLTZ: So, if there was one area that you had one magic wish to fix in the economy, in public policy and what have you, what would that be? Because I know you think about these things long and hard.

YARDENI: Well, you know, I’d like to believe the supply siders that you cut taxes and you’re going to get a lot more work and a lot more income and it will kind of pay for itself–

RITHOLTZ: I sense some skepticism on your part in the way you frame that question.

YARDENI: Well, it’s faith-based economics, you know.

RITHOLTZ: OK. It hasn’t — it always unleashes some animal spirits but it rarely pays. It never seems to pay for itself.

YARDENI: Well, that’s because, you know, maybe the politicians use that as an excuse as like, we can go ahead and increase entitlement programs and not being tested them and not worry about all these pensioned — you know, I mean, school teachers are basically on strike in some states because they’re not getting paid enough.

RITHOLTZ: You know, there are places where they literally have had no raises for 10 years.

YARDENI: Yes. And then we–

RITHOLTZ: And they have to buy books for the kids out of pocket.

YARDENI: –have a situation in Flint, Michigan where the water supply has been polluted and a lot of that is because we have this kind of amazing concept that you’re entitled to retire and if you have municipal work, you’re allowed to retire at a very early age and those bills are extremely expensive.

RITHOLTZ: It’s one thing for cops who take their life into their hands every time they go to work and the same with firemen. But when you have clerical workers with these very generous pension funds, although–

YARDENI: It’s generally — yes, exactly. I mean, it’s — I agree that an individual basis people who have risky professions but, you know, a lot of municipal workers when they retire early get another job.


YARDENI: And they get another pension. And maybe we should consider that come back when you’re 65 and then we’ll pay you the pension at that point. I don’t want to get a lot of people mad at me here but–

RITHOLTZ: Too late.

YARDENI: It’s too late. I guess I’ve crossed the line.

RITHOLTZ: But that is not a radical philosophy that you’re saying and also lots of these pension funds, they’re wildly underfunded and it’s questionable if these people are going to get–

YARDENI: Well, that’s right. I mean, while a lot of municipal workers who retired years ago have done extremely well, I think we’re getting to the point where the pension funds just — the money just not there and people have been made promises that can’t be delivered.

RITHOLTZ: Right. Right. Charlie Ellis has been running about this for a while. I know I only have you for a finite amount of time. So, let me get to some of my favorite questions. Tell us the most important thing that people don’t know about you.

YARDENI: Well, there a lot of things that are too personal to share obviously. So, I’ve only — that’s why I wrote a professional autobiography.


YARDENI: You know, it is very professional and I don’t say anything bad about anybody. I don’t have any grudges that I settle in the book.

RITHOLTZ: No grudges.


RITHOLTZ: I’m shocked.

YARDENI: No. I’ve–

RITHOLTZ: Six hundred pages, not a single grudge.

YARDENI: Not a single thing. I would say about they don’t may not — what they don’t know about me is I’m working on my second book already.

RITHOLTZ: Already?

YARDENI: Already. Yes.

RITHOLTZ: God, it took me like five years before I can even think about a second book.

YARDENI: Well, this is — this book is the book that I had to write just because, you know, I’d learned so much over 40 years. Just not to do it would be a shame.


YARDENI: The book I’m working on now is the one I want to write. It’s more philosophical. It’s more about what I’ve learned philosophically about things and it’s called “The Theft of Nations.”

RITHOLTZ: You better go trademark that before someone grabs it.

YARDENI: Well, with book titles, they’re already–

RITHOLTZ: Anybody can use that.

YARDENI: Anybody can use it. There already is a book of that but it’s basically the capitalist ideal and its corruption. Capitalism makes so much sense, entrepreneurial capitalism.

I’m an entrepreneurial capitalist. It makes so much sense that it benefits consumers and consumers are the only class where they should care about. So, why does it constantly get corrupted? Why can’t we stick with it? And so, that’s what they don’t know about me is I’m writing another book.

RITHOLTZ: That’s interesting. Tell us about some of your early mentors. You already mentioned Mr. Smith. Who else were–

YARDENI: Well, Greg Smith and Jim Moltz were my mentors on the investment strategy side. But my role model, I never worked with him, was Henry Kaufman. Henry Kaufman was the Chief Economist at Salomon Brothers, highly regarded in the ’70s and–

RITHOLTZ: Helped to save New York City, right?


RITHOLTZ: If I remember it correctly.

YARDENI: I think — I believe so. But when I was a graduate student, I was impressed by how he had taken economics and used that for a very successful career on Wall Street and that very much appealed to me.

And, you know, a lot of the ways he looked at things using a flow of funds approaches kind of the way I started. But I developed my own tools that worked better for me than it was worked for him.

RITHOLTZ: Who else influenced your approach to economics and investing?

YARDENI: Well, I think that’s it. I mean, it’s not really–

RITHOLTZ: It’s one and the same.

YARDENI: It’s kind of one and the same. Right.

RITHOLTZ: Tell us about some of your favorite books be they fiction, nonfiction, market related or not.

YARDENI: Yes. You know, I guess I like history quite a bit. And because I am so involved and fascinated by what I do for a living, my day job, I read a lot of stuff that’s relevant to do that.

So, I really like reading biographies, autobiographies. So, I really enjoyed Ben Bernanke’s book, “The Courage to Act.” You know, there’s been books written by and about Alan Greenspan. So, those have been some of my relatively recent reads and–

RITHOLTZ: “Age of Turbulence”? Was that Greenspan’s book or was that–

YARDENI: Yes, “Age of Turbulence.” I also like watching movies but I’ve started to really get into some of these docudramas and there’s one about the men who kind of overcame the American frontier. It’s about frontiersmen. It’s fascinating how few individuals really sort of opened up by the American cut (ph) and they unfortunately displaced a lot of native tribes here and there was a lot of wars that were just — and massacres are awful. But it’s fascinating to watch some of these docudramas.

RITHOLTZ: What excites you about the markets right now?

RITHOLTZ: Well, I would say that the drama is always exciting. I mean, it was getting kind of dull there in 2017.

RITHOLTZ: Right. Relentless, simple–

RITHOLTZ: Just market going as low as 40, 50 a day.

RITHOLTZ: Right. No volatility.

YARDENI: No volatility.

RITHOLTZ: It’s just boring.

YARDENI: Yes. And I was — you know, I mean, for me, it was fortunate because I can focus on my book without having to suddenly scramble to learn about something that was occurring.

And now, all of a sudden, I’m scrambling to kind of review what I know about trade and those kind of issues. So, I mean. Trump right now is a fascinating character. I mean, love him or hate him. Again, I don’t do–

RITHOLTZ: He’s not boring.

YARDENI: He’s not boring.

RITHOLTZ: Right. I got to do that.

YARDENI: Yes. I mean, sometimes, I just — you know, he really should have just stopped tweeting and should have like take — going to take a vacation after the tax cut and just kind of wing it until the midterm elections. But he just can’t — he can’t stop.

RITHOLTZ: He’s compulsive. He cannot help himself.

YARDENI: He’s compulsive.

RITHOLTZ: There’s no doubt about it. I’m shocked that he finally came out and said something about Stormy Daniels because he had been radio silent on that for — while the whole thing was unfolding. You know something had to come out eventually.

YARDENI: Well, again, I think, you know, we live in interesting times, we always do, and, you know, seeing a president that, you know, one month can give you extraordinary bullish policies of cutting taxes and then one — a month or two later start to talk about protectionism and suddenly that’s extremely bearish. It’s wild. It really makes a very interesting times.

RITHOLTZ: Let me push back on that and touch because I have–


RITHOLTZ: –friends who are investors–


RITHOLTZ: –on both sides of the aisle and collectively they seem shocked, shocked to discover gambling going on, you know. He’s been talking — he campaigned on–

YARDENI: It’s all there.

RITHOLTZ: Right. Like who is or did they think — well, he’s just kidding.

RITHOLTZ: Well, what’s unusual about it, I mean, he’s going through a checklist–


YARDENI: –and that, you know, I mean, if you’ll go and read his speech on — his campaign speech on trade, it’s — he’s just going through this checklist.

RITHOLTZ: This is it. He’s doing — that’s why I’m always surprised when people say, well, the market wasn’t prepared for this.


RITHOLTZ: Really? Did you not see 86 speeches where this exact thing was laid out?

YARDENI: Well, you know, we’ve kind of got slow and lazy in 2017, I mean–

RITHOLTZ: I guess.

YARDENI: –he came after healthcare and that did fall apart. So, everybody figured there is–

RITHOLTZ: That was much harder though when you–

YARDENI: Yes, but everybody–

RITHOLTZ: Taking an entitlement away–


RITHOLTZ: –is very challenging.

YARDENI: Yes. But the result was everybody figured that his agenda was dead, that he couldn’t get anything through. Then all of a sudden, we’re almost on vacation on December 22nd–


YARDENI: –he passes amazing tax legislation. And by the way, its ultimate impact is kind of confusing. It may already actually be depressing, New York and California and other places where, you know–

RITHOLTZ: High tax states, high–

YARDENI: Yes. Absolutely.

RITHOLTZ: –deductibles are going to be problematic.

YARDENI: Yes. We may find that whatever stimulus it provides to some people are offset by the tax increases to others.

RITHOLTZ: I just read that California, if it was a country, has now become the six largest economy in the world.


RITHOLTZ: It doesn’t seem to be really having that bad of an effect although we really haven’t seen the tax SIT but everything we’re doing now for April 15th is 2017.

YARDENI: That’s right.

RITHOLTZ: We won’t really feel the tax SIT until 2018.

YARDENI: I don’t — yes. I mean, that’s–

RITHOLTZ: Until 2019.

YARDENI: I personally don’t know what my taxes are going to be in 2019 other than they’re going to be higher.

RITHOLTZ: Because you’re a New York resident.

YARDENI: Because I’m a New York resident.

RITHOLTZ: You actually live 10 minutes from me.

YARDENI: Long Island.

RITHOLTZ: Yes. We’re–

YARDENI: Next to you.

RITHOLTZ: We’re one town apart.


RITHOLTZ: Let’s talk about what you do for fun. What do you do to relax? What do you do when you’re out of the office to just sort of kickback and get away from it?

YARDENI: Well, as I said, my wife and I like to go see a movie every Friday night. So, I’m not sure what she’s going to — she usually is the one who picks them and I review them.

RITHOLTZ: What has been the — tell us the last three movies you saw.

YARDENI: Well, the one that sticks out is actually the one that won an Academy Award for something. I’m not — I don’t recall what it was but it wasn’t for Best Picture. It’s called “Get Out.” You know, it’s–

RITHOLTZ: It’s a comedy?

YARDENI: It’s sort of a comedy.

RITHOLTZ: Or parody?

YARDENI: It’s a strange movie. It’s a movie about a fellow who goes visit his girlfriend and his girlfriend’s parents and there’s just something totally odd about the whole situation and everything suggests that he should just get the hell out of there as quickly as possible.

And he just doesn’t get the message and I kind of try to relate that to the market as like, you know, sometimes just look around you. But in terms of what I really enjoy, I like to play tennis quite a bit but I just —


YARDENI: Yes. But I — but the problem is when I play with my wife, she’s very competitive and I’m not. So, she’s always beating me. But I don’t really get upset about that, but I think she’s mad that I don’t try to be more competitive. But I just do it for the exercise.

RITHOLTZ: It’s a great sport. I’ve come to it late in life and find it to be–

YARDENI: Yes. It’s fun.

RITHOLTZ: It’s — when I started playing, the next court over, there these four guys, they have to be 100 years old and they’re — they play every week–

YARDENI: It keeps you going.

RITHOLTZ: –and they’re great.

YARDENI: Yes. Yes.

RITHOLTZ: That’s the crazy thing is–


RITHOLTZ: –you don’t have to run around like other sports.


RITHOLTZ: You basically just have to be aware of where you–

YARDENI: Right. And I don’t think you hurt yourself as much like playing basketball or–

RITHOLTZ: Well, I got — my wife killed my basketball career in my late 30s. I rolled my ankle, came home and she’s like–

YARDENI: Yes, as I was saying. Yes.

RITHOLTZ: –you’re done.

YARDENI: You’re done.

RITHOLTZ: And that turned out to be pretty accurate.


RITHOLTZ: Have you seen “Ready Player One”?


RITHOLTZ: That — the book was wonderful. It just came out. I’m looking forward to seeing.

YARDENI: Maybe that will be the one I’ll see with Martha (ph) tonight.

RITHOLTZ: I don’t know how Spielberg is going to take this — the whole film is essentially — the whole book is essentially existing in an alternative–


RITHOLTZ: –cyberspace world.


RITHOLTZ: And there’s an ongoing internal dialogue–


RITHOLTZ: –for the main character. It will be interesting to see how he did that.

YARDENI: Well, we’ll definitely go see it.

RITHOLTZ: What sort of advice would you give to a millennial or a recent college graduate who said, hey, Dr. Ed, I’m thinking about going into market strategy or economics?

YARDENI: God, I mean, you just set me up for commercially, read my book. I mean, that’s, you know — throughout my career, I’ve had people asked me, you know, what — is there one book that they should read or that they should have their interns read to really understand the markets. And I think I have to write the book partly and to say, well, read my book.

RITHOLTZ: That’s your answer–

YARDENI: That’s my answer.

RITHOLTZ: That the answer is it’s all in there.

YARDENI: It’s crass commercialism but it is what it is. It’s all in there.

RITHOLTZ: And tell us something you know about the world of markets, investing and economics today that you wish you knew 40 years ago when you were first starting?

YARDENI: Well, I think this idea of just stay laser focused on, you know, what we really have to do in our business is just — is to focus on whether events, policies are bullish or bearish. And that’s just not at the macro level. That’s, you know, you could be looking at companies as well and you can be critical of management and stock goes up anyways and you have to really try to figure out what is it that the markets focus that’s important to the market.

So, don’t — you know, it’s — I just — I learned the wisdom of old adages like don’t fight the market, let the trend be your friend. The best cure for high commodity prices is high commodity prices. You know, that’s why they’re old adages because guys like me after a while appreciate just how much (inaudible) is there.

RITHOLTZ: Well, this has been fascinating. Thank you so much, Ed. I appreciate your time.

YARDENI: Thank you, Barry.

RITHOLTZ: We have been speaking with Dr. Ed Yardeni or Yardeni Research and author of the new book, “Predicting the Markets: A Professional Autobiography.” If you enjoyed this conversation, be sure and look up an inch or down an inch on Apple iTunes, Overcast, SoundCloud, wherever you find your favorite podcasts and you could see any of the other 200 or so such conversations we’ve had.

We love your comments, feedback and suggestions. Write to us at You can check at my daily column on Follow me on Twitter, @Ritholtz.

I would be remised if I did not thank our crack staff who helps to put together this conversation each week. Michael Batnick is my head of research, Taylor Riggs is our producer/booker, Madina Parwana is our audio engineer/producer.

I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.

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