Yardeni Research President Ed Yardeni Talks State of the Market

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Tom Keene** (0:07)
Joining us now, Edward Yardeni, for a two-hour conversation. I got eight ways to go here. You have a young Turk in the green room with you this morning. What's your number one advice to a 22-year-old kid who's like, my god, I'm sitting next to Edward Yardeni. What do you tell the young Turks?

**Ed Yardeni** (0:26)
Read my books.

**Tom Keene** (0:28)
Buy them before you read them, right?

**Ed Yardeni** (0:29)
You don't have to buy them. They're open to the public. You know, I share the knowledge that I've gained over the years. So in 2018, I wrote a book called Predicting the Markets. Turned out to be 600 pages long about what I learned in the first 40 years of my career. Now I'm working in the next 40 years.

**Tom Keene** (0:47)
What's the maxim that's been most true across the emotion of this bull market that won't go down?

**Ed Yardeni** (0:53)
Well, I think it's earnings. I mean, it won't go down because earnings won't go down.
I think the reason earnings have been so resilient is because the economy has been so resilient. You know, it's every time we throw something at it, it just hangs in there.

**Tom Keene** (1:09)
Are we getting a free lunch from a set of stimuli that have goosed revenues to generate that free cash flow?

**Ed Yardeni** (1:16)
I think there's certainly something to be said for that.
I mean, one and a half to two trillion dollar government deficits certainly are stimulative, but we've also had a very strong consumer, not kind of inconsistent with the so-called K economy thesis. I call it the G economy thesis. It's really the baby boomers that are keeping spending going because they're retiring and they've got 89 trillion dollars of retirement.

**Tom Keene** (1:43)
It's a wall of money Lawrence McDonald's talked about.

**Ed Yardeni** (1:46)
Yeah, that's exactly right.

**Tom Keene** (1:47)
I mean, it's just there. It's just a wall of money.

**Ed Yardeni** (1:49)
And then, of course, there's the AI capital spending boom, and there's a lot of controversy about whether that's going to pay off or whether it's not, and it's going to, it's one big bubble that's going to burst. I think it's going to pay off.

**Paul Sweeney** (2:01)
So that's kind of where I want to go, Ed. I mean, you've seen so many cycles, so many major themes in this marketplace, whether it's the Internet or how do you think about AI here? I mean, it seems like a lot of folks are telling us this is bigger than anything we've seen.

**Ed Yardeni** (2:16)
Well, that's that's my view. And the way I put it in perspective is AI is not a revolution, it's an evolution in the digital revolution. The digital revolution started in the mid 1960s with the IBM mainframes, and the digital revolution is all about processing as much information, data as we possibly can, as quickly as we can, as cheaply as we can. And we've made a tremendous amount of progress going from the IBM mainframe to PCs, laptops, the cloud, and now AIs. I kind of, I think Tom will like this.
I view us now as having four factors of production, land, labor, capital, and data.

**Paul Sweeney** (2:55)
And data.

**Ed Yardeni** (2:56)
And we never really thought of data as a factor of production. And this ties into my Buzz Lightyear theory of to infinity and beyond. There will never be a shortage of data.

**Paul Sweeney** (3:06)
Right. And Bloomberg, we are at our heart a data company.

**Tom Keene** (3:10)
Nice.

**Ed Yardeni** (3:11)
And you're creating more and more data in the world.

**Tom Keene** (3:13)
That was so good. You get to work tomorrow.

**Paul Sweeney** (3:15)
You get to work tomorrow on Juneteenth.
And the analytics around all that data is kind of what we do here at Bloomberg. So what are we doing here, Ed? I mean, can we feel comfortable with this earnings environment out there to continue to support this market? Because boy, we just came through. The last couple of quarters have just been extraordinary for earnings.

**Ed Yardeni** (3:33)
Well, let me give you some lingo on that.
I'm a believer that we're better off with a bull market based on Fimo than FOMO. FOMO is Fear of Missing Out. And if people have fear of missing out, that'll affect the PE. You'll get the valuation multiple too high. You'll get a bubble. And that's bound to burst. Fimo is fabulous earnings momentum. Earnings have been absolutely fabulous. And I'd rather have a meltdown based on earnings than one on valuation multiples. And that's what we have.