The 35% Recession Warning Markets Are Ignoring — ft. Ed Yardeni

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You can hear my conversation with Neil Vogel now, wherever you listen to your favorite podcasts. Today's number, $48 million. Calcius trading volume on Oscars, categories hit $48.4 million this year. Up 39% from last year and 95% from 2024. Ed, I don't know if you saw the award for participation trophy.

You have to have a punchline. Well, Ed, you had to be there.

All right, never mind. I got something bad.

Maybe that was, but what happened to the timing? That's the problem when I try to go to Dadja.

“Oh, I fucked this shit. Did you hear about the new category for suicide bomber?”

No. Unfortunately, he couldn't be with us tonight. Listen, Markets are bigger than what you have here in this structure. It changed in a little history. Cash is trash. Stocks look pretty attractive.

Something's going to break. We got about it. Ed, I don't know if you heard. Anyways, any questions you want to ask me about, I think I did this weekend like anything you'd like to know about Ed, anything on your mind, anything at the tip of the tip of your prefrontal of your still evolving prefrontal cortex?

Yes, now that you mentioned it, how was the vanity fair Oscars off the party in LA Scott? Ed, Ed, Ed, Ed. I don't like to talk about my personal life. Just this once, we'll turn this back to me. Oh my god. I'd be more fucking fabulous. I mean, seriously, I was in Brnello, Kuchanalei.

“I sat next to the, uh, I think her name's Alison Brie. She's a woman.”

She was Trudy on madman. Oh, yeah. Yeah. Yeah. Yeah. And she was in glow. And she's in this new, maybe she couldn't have been more lovely, more beautiful. And then I sat next to the woman on my left was Jessica Williams, the woman in the, she's in the series shrink, also super smart and intelligent, interesting. And two seats away from me was Sam Altman. We're going to just gloss right over that.

No. And then keep moving around. I mean, I, I, at one point. Yeah. I'm totally serious. Oh my gosh. Okay. Anyways, anyways, and then at one point, I was at the bar in between John Hamm and Jacob Oloody. And I thought, oh my gosh, no chance. I'm getting laid tonight. No one's coming up to me. If Emily Rodikowski comes up right now, who is also at the party, chances are she's not going to talk to me. So take us through. I mean, one, why we there to

how was it? I mean, did give us just sort of like the play by play on this experience? Well,

the answer to your first question, uh, why was there? I have no fucking idea. I'm not exaggerating.

“I was Googling actors named Galloway because I thought I must have been a mistake. I think what”

happened was, in all seriousness, I think someone said, oh, podcasting is a new thing. And they said, who's a podcasting? Some 19-year-old intern probably throughout my name. Praise be to that 19-year-old intern. Really changed things. Yeah. 100%. But I went, um, it starts really early because I guess

110 years old going for the grand slam dinner at Dendi's. So you get there at 330. You walk in,

“and it's about 120, 150 people at the dinner. I hung out with Larry David. I'm totally”

name dropping right now. It was like, angry me to press to press me to angry. And it's the collision of detail, style, fabulousness, venue. I mean, I got to be honest, it's arguably the best

party I've ever meant to. Um, the just, the, the food was amazing. And then what happens is you go to

dinner, then they break down the dinner, you go to a different room for a party, and you do this, like photo walk. And before me, it was Nicole Kidman, and after me was Jeff Bezos, and shocking. No one really wanted to take pictures of me. No one really wanted to take pictures of the dog. So you, in, you actually, in the middle of that viral moment, I don't know if you saw this, but this is going viral. Lauren's there with Bezos. It's a Lauren and Jeff moment.

They're very excited, and then suddenly Nicole Kidman walks right by and the entire, I mean, all of the paparazzi just shifts focus, suddenly it's all about Nicole. And you can see the pain

“on their faces, but I didn't realize you were there, too. Well, this is how pathetic I am. So”

on what do they call it, the photo line or whatever, there's three axes. And so they can put multiple people out there, and you go to one of the axes, they say, one X2 X3 X and you go there and people take a time. And there must have been 400 photographers there. I didn't know how it played out.

So they said, "All right, Mr. Gallard, please go ahead." I stopped at the first axe, and everyone's

very nice to the professor that they're like, "I'm Mr. Gallard, look here and that it up." And then I went to the second axe for more pictures, and then stood there. And then as if that wasn't enough, I decided to go to the third axe, and by the time I got to the third axe, the photographers were like, "Could you just move along?" And then it dawned on me. You're only supposed to go to one axe and sit there for so literally the rookie lame move of the evening. But Nicole Kidman

actually, I'm not that into fashion, she had the most beautiful dress. Anyways, I just had a, I had a, I kind of freaked out at about midnight. I realized I was walking around, walking around sort of alone. It was either like, "I need to go deep in the pain and get drunk and get a lot more social or I need to go home." And I just had sensory, I was just over-stimulated and decided to pull the rip cord and actually went home fairly early. Oh wow, okay. But it wasn't,

yeah, I'm just, so thank you to the nice people of Anity Fair for including. It was incredible.

It was like one of those, "I've peaked ed, I've peaked." I mean, you say that sometimes, but this one, this one's a real contender for, for actually that statement being true. I mean, the, of Anity Fair, I mean, you just got to make sure you're invited next time. I'm curious, what did people actually talk about at these things? Like, you're standing there, you're taking the photos, you say, "Hi, do people kind of like make new friends or how, I mean,

how are the conversations conducted?" Everyone's, quite frankly, everyone just couldn't be nicer. Jeff Goldblum came up to me and talked about having sons and he seemed like just this lovely guy, him and his wife were super nice. Yeah, I, I don't, I wasn't, you know, they're just, they're all fairly successful people. Some of the younger actors of it. I mean, if you're going to be an actor, you've got to be fairly, what's the term? You've got to get a lot of reward,

“I think, for to put up in that industry and try as hard as they do, it's talent that they are.”

You've got to pretty be into, you know, really into me in, meaning you've got to get a lot of reward as seeing yourself on the screen. And half the time when I was speaking to a younger actor, I thought they were just staring at themselves and reflection in my glasses. I think they were literally, yeah, I think for several of them, I was just like a convenient make-up mirror. I could see that a lot of kind of like just not sort of zoning out, not really listening,

smiling and just kind of thinking about the cameras, which is, it's kind of a strange setup. Like, it's a weird setup for a policy where you're supposed to be having fun, but also you're technically supposed to just be looking fabulous for the internet. Yeah, it had huge expectations and an exceeded my expectations and I felt like it was one of those. And unfortunately, you can't take pictures of selfies, so. Well, I'm excited for the paparazzi photos to come out

where you're standing on three different places. Absolutely, none of them will be at me. I already Google my name, none of me. No, but it's like, let's see their go with, let's see their go with Skacky Alloway or Emily Radikowski. That's a tough call. But we're going to go with Emily. I need to hear more about Simon Altman, the fact that you sat two seats away from him. I mean, he is sort of like the chief villain of our time, whether you actually believe that

he's a bad guy or not. That is his reputation right now. And you were at the table with him. Did you talk to him? I promised I wasn't going to ship both to anyone, but come on. It's like

This guy is literally stealing. He's stealing everyone's watch while they're in the bathroom

and their future and their social security card and their health plan. And he's there. I did not speak to him. He seems, you know, he looked great. Lovely guy. I'm sure. Actually, it's not sure.

“I think he's bad for humanity and I don't know what to say here, Ed. But no, we did not figure out”

your talking points. This is what the people are going to be asking for. We did not reconnect and bond and resolve our differences. He probably doesn't even know who I am. I just introduced myself. You know, everyone was I think that nice thing about that type of event is everyone is so overwhelmed by how well it's done and how fortunate they feel to be there that everyone including me is on their best behavior. Right. So, but it's really interesting. I was shocked at how

well they curate. It was some unexpected people from different walks of life. Jane Fonda was there. I mean, it was just very interesting. And the one thing everyone had in common is everyone looked

amazing and really takes it seriously. And it's just so fun. I was thinking about one of the

wonderful things about our species is it. I think it's kind of interesting. We spent so much time

“and attention on fashion and trying to look good and express art through what we wear. And I met”

the President of Chanel. She couldn't have been more lovely and it's like out of central casting. She's this beautiful woman who looks, you know, perfectly dressed as you might imagine. And she was helping me out. She said, you look lonely. She was like, I know how to level you up in this room. I'm like, I look that pathetic. It was literally like somebody came over to me as a charity, as a charity. And said, do you want to come sit with us? And this is, you know, oh, man.

Yeah. So, but she couldn't have been more, I don't know. Like I said, lovely. And I hung out with my

friend, Jamie Patrickov who again was like, whenever he saw me alone and hitting the bar and like, you know, getting very insecure, looking, he would come over and introduce me to people. I mean, it's tough. You're there alone. You're not there with your squad. You're just kind of entering this foreign universe. I mean, I'm, yeah, it's, I'm sure it was kind of tough. Yeah. No, I was not invited with a plus one. So I was at the bar a lot. But yeah, I look, it was, it was fantastic.

And whatever intern and vanity fair fucked up and got me an invite. Dude, I owe you. Brother, I owe you internship. You want to be Ed's boss. Just give me, give me a call. Shall we get into a conversation with Ed, your Denny? Let's do it. Here's a conversation with Ed, your Denny, president of your Denny research. Ed, thank you for joining us. I want to get right into it. And I want to start with a quote from a recent blog post of yours. And here's some more about it.

You said quote, we raised our odds of a recession from 20% to 35% a few days after the war started. When we concluded, it might be longer than widely expected. More recently, we've become concerned that a weakening US economy might exacerbate the cracks in the US private credit market. In some, you view this war as potentially more damaging than others believe. And certainly, then US investors, at least at the moment, seem to believe. Please take us through your thoughts

on what this war has done to the US economy and what it might mean for markets. What's clear is we continue to have a price of oil of around $100 a barrel. And in the past, when we've had spikes in oil prices, let's see the cause of recession or cause some slow down

“in the economy. And I think it's reasonable to expect that the oil shock we've experienced so far”

is going to push inflation rates up over the next few months. Gasoline prices have gone up, so that's certainly going to be in there. And then beyond that, fertilizer prices have gone up because quite a bit of the material that used to make fertilizer has to transit through the state of harmonies. So that could affect food prices. That means that the Fed is most likely not going to be lowering interest rates. We have a labor market that's weak all in all.

And real GDP was growth rate was revised downwards in the fourth quarter. So the economy has been amazingly resilient during the current decade that I've called the roaring 2020s. I'm not giving up on that, but I'm simply conceiting that we've seen this before, particularly in the 70s when we saw two spikes in oil creating two recessions creating a stagflationary environment. And that's the concern. So clearly something has changed on the geopolitical front that's unstable.

and I think, you know, as I kind of scratched my head, so what am I missing here? I recognize that

some of the panic about this war related to the perception that 20 million barrels of day of

petroleum accrued was not going to get through the straight. And that's 20 percent of global consumption. However, along the way here, over the past few days, it's becoming clear that it's not a total blockade, Iranian ships are getting through there. The US was not stopping them. The Iranians have said that any vessel that's not related to the US or Israel can get through the straight.

“And as a result of that, the markets kind of calm down a bit. And now I think we're looking at”

something like 10 percent instead of 20 percent of global consumption, not being met by flows through

the straight of her moves. You mentioned the investors' reaction markets reaction. You wrote

quote, "so far the war appears to have had no adverse impact on analysts earnings per share estimates for each of this year's four quarters," which brings up something that I've been sort of puzzling over, which is, I mean, investors just seem to be quite optimistic about this, at least, optimistic that markets are resilient, that this will not be a huge problem, and notably a lot more optimistic than they were, say, a few weeks ago when people started getting worried about AI.

And that was enough to completely tack the markets and now to get everyone concerned.

“Why are investors feeling so positive on a relative basis about this?”

Yeah, that's a good very good question. And I've been thinking about it and trying to understand what's going on here, what's different about the current environment? Sometimes we say this time it's different, it's a curse and before you know it, it's not different at all. But there are a few things that are different in the 1970s. We were much more dependent on oil imports, and we actually had shortages of oil and gasoline. There were lines at the gasoline stations. That's not like that it happened

today when the United States is an energy independent, so I think that's a big deal. The analysts have been hanging on to their earnings estimates, not still early. I mean, the wars about three weeks into the war, and it may be that when the analysts do their Excel spreadsheets, they'll conclude that the earnings estimates are too strong because companies cost of energy have gone up and they're not going to be able to pass all of those costs through. But we're not

there yet. I mean, the earnings are all time record high in the fourth quarter and looks like the

first quarter based on analyst expectations is heading in that same direction. But it's been

to the resilience of the economy and the resilience of earnings that both analysts and investors are counting in. And again, if they've learned over the years that geopolitical crises create buying opportunities, so rather than getting all panicky about it, if you got any cash around, you want to look for opportunities in a geopolitical crisis. This one could settle down and sooner rather than later. On the other hand, it's pretty easy to draw a scenario where things

become uglier. So everybody's kind of a military expert here these days and we're all playing

“war games, but I think the market right now is remarkably calm. And yet your recession forecast”

has probably been a relatively recession has risen to 35%. How do you see that playing out and how bad with that bit? In every session scenario, what happens, of course, is the price of oil stays here for a while and that cuts into lower income consumers purchasing power. So they were French, many of them are all already quite stretched with consumer debt and having a tough time, you know, having their paycheck cover their needs through the end of the month.

Then upper income consumers might get rattled if the stock market just kind of stays here with a lot of uncertainty about potentially going down. Of course, if the stock market goes down substantially, then a lot of the higher income higher wealth consumers may decide to cash in some of their profits, which would accelerate any sort of correction or even potentially a bear market. And that would depress their spending. So consumers have been really spending money all along here

through thick and thin. Think of all the things that have stressed the economy and have not caused

three four percent below. It's all the time record high of January 27th. We had the pandemic. We

had the lockdowns. After the lockdowns, we had supply chain disruption. This is then we had the inflation spike, the war, Russia invading Ukraine. We had inflation going higher. And then the Fed coming in with the tightening of monetary policies. We had the bank of many banking crisis in 2023. We had tariffs last year. Underneath it all, we've also had a labor market, which is very puzzling. It's a lot of people who younger people, especially looking for jobs, can't find them.

And yet despite all that, the economy's done very well. And productivity has been a big story of

“late. And if it continues to be the story that I think my calling this the roaring 2020s will play”

out pretty well. It's worked out pretty well so far. But now it's getting stressed us with a potential for a stack of inflationary scenario. Just in terms of, it feels like in the past,

it's always a stuff you're not expecting. It hits your heart. And DCS scenario maybe where some

really energy can sum to a dependent emerging markets. You know, a currency decline, dollar denominated debt. Could that potentially be where this unwinding starts? It just feels as if I'm old enough to remember, I don't remember this. But it feels like we spent a year obsessing over Greece to fall to him. And it didn't happen. And now I wonder if it just feels unlikely that there isn't going to be collateral damage from oil spiking like this. Do you see

a scenario where this starts where we don't expect it? And if so, any kind of, you know, longball predictions here about what we're not focusing on? One of the reasons I went from 20% to 35% on a recession risk, because it's not all about the oil shock. We also have some real issues with

“cockroaches. That's what Jamie Diamond, the head of JP Morgan said he was fearing that if you see”

one cockroach, there's usually a lot more in the woodwork somewhere. And we're talking about the private equity and private credit markets. And I haven't been particularly concerned about those markets. I figured that unlike the banking system, when the banks get a lot of bad loans, suddenly they bank lending freezes up because their capital is depleted and it forces them to try to shore up their balance sheet and lend less. And then, of course, they have to recognize where the

losses actually are. And you get a credit crunch economy wide. And the private credit might thought it was, well, you know, what's the big deal? You have sizable institutional investors, big boys and girls investing in these private credit funds. They're doing it because they get a better return on their money, but they also know there's more risk. And if a couple of these loans blow up, this has been that way to return, it gets clipped, gets a haircut. And, you know, life goes on.

Nothing terrible happens. But Wall Street decided that just in case things didn't go right, let's share this with the individual investors with retail. And they started making these kind of

alternative asset vehicles available to the public. And I think something like one third of the

financing of private credit has been financed by retail investors through funds. And often said, this is making the news that some investors are trying to get out of these funds and they didn't read the fine print that said, you know, these things are not that liquid. And we can't just like accommodate your needs for getting out just because you're getting a little nervous. Well, then if you get a bunch of people getting nervous, that makes the headlines. And so that can create a bit of

a credit crunch in the private credit marketplace. And they combine that with a economy that's

“being stressed, tested by the oil shock. And you have to ask yourself, well, now we've got”

kind of a layer cake of risks. And I don't know where to take that metaphor. But you know what I'm saying. They can interact. So concerns about the US economy, but if you didn't know what was going on, I'm not sure you would know what was going on. I'm not sure you'd look at the numbers and say, there's clearly some huge exogenous event right now. But with respect to private credit, you have seen some impact. The biz dev firms that a lot of the issuers in the business of

issuing private credit, the KKR, the Apollo, the TBGs, their stocks have been hammered.

terms? Because when I look at those firms underlying fundamentals, they're AUM their fees,

“I see no evidence that they're under strain right now. I think this sell-off isn't confirmed”

by the actual facts on the ground. The problem I think is the retail investor, because to the extent that the private credit market has been growing with funds coming in from retail investors, and suddenly those funds aren't coming in anymore and quite the opposite when they can get out, they are going to get out. That changes the market. It means that credit will be less available to the companies that borrowed in the private credit marketplace. But then the banks might come in.

They're always looking for opportunities and they might manage the risk a lot better.

They have to, because they're regulated, or is the private credit system is not regulated. So there could be pockets of problems. But again, I think, I'm counting on the underlying

“resilience of the economy. It's, we have a huge capital market. There are distrust asset funds”

that are always looking to buy things on the cheap. And so they might get something for $25 on some of the dollar that somebody paid a dollar for. So they took a big hit. But on the other hand, the distrust asset funds has the, wherewithal to restructure that asset. And we move on.

So that's one reason to believe that the economy is resilient. By the way, in the consumer side,

another reason that the consumers have been surprisingly strong is there's a lot of people like me, baby boomers, that are retiring. I'm still working for a living. I enjoy what I do and I don't play golf. So I don't know what I do with myself. But my friends are retiring. And the baby boomers collectively have $85 trillion dollars. That billions, $85 trillion of net worth. That includes houses,

“includes stock portfolios, includes cash value of insurance. Obviously, it's net worth. So it includes”

their mortgages with a negative sign. But a lot of them have paid off their mortgages. And so we've got this, the wealthiest retiring generation ever. And they're spending their nest eggs. And when this, if the stock market keeps going up, it might be hard for them to spend it and see their net worth go down. The net worth might actually hold in there or go up even as they're spending. And then on the capital spending side, the whole technology revolution, which has really been,

it's really been the digital revolution since the mid-1960s. But the pace of technological innovation is increasing quite dramatically in all sorts of areas. It's not just AI, it's electric vehicles, it's robotics, space companies, and so on. We'll be right back after the break. And if you're enjoying the show so far, send it to a friend and please follow us if you haven't already. Support for the show comes from Quints. If you've ever peered into your wardrobe and felt

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getvcx.com. This is a paid sponsorship. We're back with Profty Markets. When you talk about some of the resilience that we've seen and all of the large events that happen over the past few years that turned out to not be that big of a deal, at least from a market's perspective. There is this clashing of viewpoints that I find very interesting in markets right now. And there are the people who kind of believe that nothing

ever really happens. Things change, we might have wars, we might have big catastrophic events, but ultimately things don't really change. And then there are the people life goes on. And then there are people saying, no, there are things that really do change things. Things do happen.

And I'm always stuck on this question because, you know, part of me believes, yes, of course

“things happen. Of course things change. But then I also look through recent history and I think,”

well, maybe it doesn't really. And I guess the question becomes, if things do change in a dramatic way, what would it be if not war, if not AI? What are the kinds of things that you're looking at that could fundamentally change America? Most recessions were caused by credit crunches. The Fed would raise interest rates in an attempt to slow down inflation and along the way, some borrowers who thought that interest rates would stay low,

suddenly I'll refinancing at higher rates or they can't get credit. Something blows up in the financial markets. In one corner of the financial market, before you know it, it becomes an economy wide credit crunch. And when you can't get credit, you clearly get a recession. We've also had some of these recessions that were caused by tightening a monetary policy, but conciting with that was an increase significant spike in oil prices. We had that in 2008, everybody thinks

“that the only thing that happened was the housing market melted down. But we also had a significant”

spike in oil prices at the time. You know, these commodity price spikes, they're called spikes for reason. We saw just what, a week ago, the price of oil, and I think it was, and a Sunday night trading overseas, a spiked up to $120 a barrel. And then by the next Monday, it already had come back down to $100 a barrel. What sounds like a high number? Well, we've been there before without the economy really taking a dive on that. But I think right now, I would say that geopolitics

are sort of one of the more obvious areas of concern. I hope the markets are right. And I'm coming around to the idea that it's kind of like the awful situation in Ukraine with a Russian invasion. I mean, you go outside of Ukraine into Europe, and there's sitting there in cafes and

A similar situation may be occurring in the Middle East. We've had lots of wars and attacks

“and bombings in the Middle East and yet our economy certainly has continued to grow.”

I mean, it's easy to come up with a World War III scenario, but I'm not going to do that unless you really ask me to, because I tend to be an optimist. But you know, the sketch of that would be China has this right where they want to kind of preoccupied in the Middle East. Oh, I guess I am telling you the scenario. So, I was going to follow up anyway. So, you might jump to the gun. China must be very pleased to have the U.S. stuck in the Middle

East where only a couple of years ago we were saying, you know, everything's hunky-dory in the Middle East. We're not going to bother there anymore. We're going to focus on Asia, particularly China, particularly Taiwan. And there are some changes recently in China where President Xi approached four out of five generals. And nobody knows why. They don't know because the generals wanted to attack Taiwan and he didn't, or whether he wanted to attack Taiwan and they told them

the generals that they're not ready to do it. Whatever it was, it's a strange development. But, you know, if I was a Chinese communist leader that had promised to bring Taiwan back, I mean, it's a pretty opportune kind of environment. And that would be an absolute disaster for

the global economy because Taiwan basically has a monopoly on chips. Then again, the U.S. military

forces are right there in the Middle East. And all we've got to do is take over Carg Island, and that's a huge source of oil for China. So, you know, you can't even war game this stuff quite a bit. And then, you know, Russia might say, well, you know, the United States is preoccupied the Middle East. Let's go after Estonia, Latvia, and so on. So, I would say geopolitics is really the top of a list of my concerns. And that's very hard to incorporate into an investment strategy.

And the markets have learned over the years that geopolitical crises create buying opportunities.

“I think we have learned it to such an extent that you really don't get the buying opportunity.”

Look at the current situation. You know, I thought, well, this one, this one will be a buying opportunity and buying opportunity to me means that you can buy this stock market on a correction

10 to 15 percent. And we barely got to 5 percent sell off so far. And nobody seems to be in a particular

panic to sell stocks that suddenly creates a buying opportunity for the rest of us who've learned that, you know, when things look bad, that's exactly when you're supposed to be buying. Two of our big themes for 2026, and that's just before the war in Iran, was one that we would start to be for the first time in 17 or 18 years. He outflows from the U.S. markets to emerging markets that we'd been on this incredible 17 year run. And the rivers or the capital

“flows were about to reverse flow. And that you need to be more diversified into emerging markets.”

Well, houses, 2010 through last year, I was recommending stay home rather than go global. That didn't mean don't invest at all overseas, but overweight the U.S. and underweight everybody else. And that worked out remarkably well. I mean, I was kind of surprised how well it worked out. Now, I overstayed my welcome because 2025 was a great year to go global. I emerging markets to extremely well Europe, Japan. I mean just across the board, the U.S. was a total under performer.

But that's after several years of outperforming. A little ironic, because in I think it was in 2024, the economist had a three cover stories on why America is exceptional. And that was kind of the front cover curse because in 2025 we had the tariffs and a lot of confusion about where American foreign policy was. And suddenly investors were investing more overseas. Now, it's kind of weird, though, because when you look at the actual data that the Treasury collects on foreign

net foreign purchases of assets, securities in the U.S., they were actually showing that last year

foreign is bought a record $700 billion of U.S. stock. Maybe it was all in video for all I know,

but the data belied the notion that people sold the U.S. in order to get into other markets.

Europe, and so on. I mean, from a fundamental perspective, it's hard for me to get real excited about Europe, but the European banks were out performers, the defense stocks were out performers, and a lot of that had to do with the specific fundamental changes that we're going on in the banking industry. And of course, the geopolitical changes going on in defense. Last December, a little late, I said, "Okay, maybe it's time to re-balance." And the argument was pretty simple on the domestic

front technology and communication services got to be something like 45 percent of the market cap

at the S&P 500, and I felt uncomfortable telling people to overweight something that was already 45 percent of the entire U.S. market. And this same thing happened to me with the reds to thinking about the U.S. relative to the rest of the world. It got to be 65 percent of the market cap of the MSCI. America may be exceptional, but how can I recommend overweighting something that's basically worked the way I expected it to work, so sometime point you re-balance, and how

were the rest of the international situation? The wars upended my idea of going global,

because suddenly the U.S. looked like the place you wanted to park your money, and so the U.S.

“market is down, but it still outperformed the rest of the world. I think as this war settles down,”

it may just be a kind of a persistent problem in the Middle East, as it's been forever. I don't know why it should suddenly change, but if it just kind of becomes less headline news, then I think we could see the go global working again, particularly with emerging markets. The story for emerging markets was a lot of emerged. A lot of them have large middle classes, they have large populations, and I can't go country by country kind of figuring it all out,

so I either would use the EEM, which is the emerging markets MSCI ETF, or prefer the

fund that excludes China. China is a big part of the MSCI index, but China has been kind of a play on an AI, and I'd rather play in our sit-in boxes than in their sit-in box. A lot of people might have heard the term bond vigilante. This was a very important term last year, especially when tariffs were placed. They went into effect, and then the bond vigilante is the people who sold bonds, which drove up yields, which sort of punished the government.

Some people might not know, U.K. came up with that term. That is your term bond vigilante. It seems to be less of a topic right now. People aren't really talking about it,

“but I just want to get your reactions. What are happening in the bond markets right now?”

Is there anything that is striking to you, and why on the bond vigilante is supposedly as active as they were last year? Well, it's been eerie, actually, in the U.S. bond market, it's been kind of stuck in a range, which means four and a quarter, maybe four and a half, for the past four years. It's been a couple of times when it was above that. A couple of times when it was below that. But all in all, the bond market has been remarkably quiet.

I came up with the idea a while ago that bonds, the bond vigilante, normalized. This is where they should be. The aberration was when they were down to 0.5% for the tenure. When the Fed was providing quantitative easing, buying bonds, that was the aberration, that was the abnormality. And to me, an economy that can grow with bonds of four to four and a half percent, that's a good economy. That's an economy that's providing a good rate of return to

bond investors. And that's a bond market that's probably doing a pretty good job of allocating what capital goes. When you have a bond deal of 0.5%, it distorts the allocation of capital

“quite measurably. And so, yeah, I think the U.S. bond market is kind of fine where it is.”

I've been doing this for over 45 years. And back in '83, I came up with the idea of bond vigilante. I went back in my bookshelf and I read what I wrote back then. And I said, you know, if the sheriff's in town, if the monetary and fiscal authorities don't do their job and keep inflation down, the bond vigilantes will do it. They'll push bond yields up to levels that slow the economy

is concerned about now is $250 billion deficit. So now, we're talking about one and a half to

“two trillion dollars. And we're at 4.5%, no big deal. But, you know, over the past year, two years,”

when people ask me what happened to the bond vigilante is, I said, you know, have you looked what's going on in Japan? During the tourist season, apparently Japan is overwhelmed with tourists, well, now they're overwhelmed by bond vigilante. And I don't think they're there for the blossoming of the cherry trees. They're there because Japan has been a poster child for other developed countries. You know, they were early on and having a speculative bubble burst and

having to lower interest rates to zero. And they were early on in accumulating huge amount of debt relative to their GDP. And over the past years, so the bond market over there, the bond yields have gone up dramatically. But it really hasn't had any significant impact on the Japanese economy. We'll be right back and for even more markets, content sign up for our newsletter at profgmailkits.com.

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about the state of the labor market due to pressures from AI. You're thoughts on whether this

destruction and in the labor force or jobs is overblown or underblown or number one. It's overblown. So, nobody's going to get fired at the Rdenny Research. You're just a small dinky little research firm because suddenly, Claude, Claude's allowing us to do stuff we just wouldn't have done before. For my personal experience, I think AI instead of requiring coders requires prompters,

“you have to really learn how to talk to it. Ask the right questions. Be very specific about what”

you want and then you got to check it because it's still not perfect. But I think what's happened over the past year or two in the labor market is AI became such a big deal that every company basically decided to freeze their payrolls so we're not going to hire anybody. We're not going to fire anybody. We're going to do a lot of research and we're going to do a lot of trials to see if AI can make the people we have here even more productive. And I think what a lot of

companies are concluding is that in some areas, AI is amazing and it can augment the productivity

of the people you have. There's no reason to get rid of them. These people can be taught if they can't naturally get off a feel for how to use AI. And then in other areas, AI is irrelevant, but you know what? We finally looked at this division that nobody's really looked in for 20 years and maybe let's just sell it. We're not making any money in this division. So I think there's a lot of focus on productivity as a result of AI. And I think like all technological, I'm not a lot

I think like all technological revolutions. There's a transition phase. People are going to kind of

“have to reinvent themselves. And I think that's what they're doing and we'll continue to do. And”

I think the labor market will continue to do well. If I'm wrong, there's some people talking about universal income. I guess the analogy would be something like the Romans, the Romans, you know, conquered so many people who made slaves out of them that they didn't have any work to do that. Everybody else, everybody they conquered did all the work. And I guess, you know, we could be poets and have parties and all that the way the Romans did. But I don't think it's

going to go that way. I think I think we're all going to have jobs earlier in the program. We were talking about things that really shake the markets, things that actually have a dramatic impact. And you point it out correctly that what they all have in common is there is a credit crunch.

“There is some sort form of credit crisis that stems from too much debt that we cannot”

cannot handle. So this makes me believe that the thing that's going to bring everything down is

ultimately just the US national debt. The fact that we're up to nearly $40 trillion in debt,

we are adding to it with the big beautiful bell, as I said, $4 trillion added to the deficit over the next decade in more deficit spending. And when you talk to people about Japan, people go, well, I guess Japan's okay and no one really has an answer as to why it's okay, but we just they say, okay, it's okay. And so maybe that means America is going to be okay. I'm a little skeptical of this and I just like to end with your thoughts on what is the what is the deal

with the US's debt situation and is it going to come back to bite us? I have to tell you a little story here, one fair amount of the people who sign up to our research service, our institutional investors, private wealth managers, they manage money for wealthy individuals. And they particularly like my work because I tend to be balanced and when things look terrible, you know, you read some of my permanent bear competitors and you want to, you know, you start reading what they're writing

and you want to pull out a gun and blow out your brains, you know, when you wake up in the morning, you can actually read mine without going that far even during bad times. But so a lot of them over the past couple of years have been telling me, you know, I really appreciate your work because it's been balanced because our accounts are very, very nervous. The more the stock market goes up the more nervous they get, I said, what are they nervous about? Well, the person

while they're wealthy individuals, they're conservative, they want to conserve. They want to

go up in the stock market. But as I goes up, they say, you know, maybe we should get out of the market.

“So, what do you so worried about they ask? And these wealthy individuals will say, well, I'm”

really, I'm very concerned about the deficit of very concerned about the debt. It's just, there's no way we can keep doing this. So then the manager tells me, so what do they want you to, I ask them, what do they want, you to invest in? So they want to, they just want to be safe and tenure treasuries. You know, they're worrying about the debt blowing up and they just want to

be in tenure treasuries because, hey, what the hell I can always, you know, sit on for 10 years,

you know, even if, you know, if we get a debt crisis and everything blows up, eventually rates will still come back down. One of the ways to understand why things haven't blown up is because the world has got the richer and richer. I mean, for all the geopolitical stresses and strains

“and crazy stuff going on, the world on balance continues to grow. People are aspirational.”

If they're prosperous, they want to prosper more. If they're not prosperous, they want to prosper. There's still a fairly heavy dose of capitalism on a global basis. There's competition and there's companies that are under pressure to provide the best goods and services they can

for customers at reasonable prices. And that's created on a tremendous amount of wealth.

Hundreds of treasuries are dollars and wealth likes to diversify. They don't want to be on in one sector. And so, for example, I have a chart that I've been showing these days showing the S&P 500 versus the price of gold on the same scale. And what's interesting is they are kind of inversely related, which means a gold is really a pretty good diversifying asset for a stock

“portfolio because when the stock portfolio goes up, you take a little bit out in the chain for”

that insurance policy. But when stocks are going down, gold's doing well. That's, that's been trusses, gold's have been set free by Nixon back in the early 1970s. But when you look at the trend, they're almost the same identical trend. So here in my roaring 20 scenario, I have the market, this, and P500, getting to 10,000 by the end of the decade, by the end of 2029. And based on that chart, I'm extrapolating in the trends. Gold could get to 10,000 dollars per ounce as well. Why? Because

of diversification. And so that's kind of the way I'm looking at it is the world is getting wealthier and wealthier. And that's a good thing. And we want more and more people to be prosperous. You know, we want more and more neighborhoods to be good neighborhoods, aspirational neighborhoods. Certainly want a lot fewer wars, but I guess we can't fight the human nature and human history. But I guess I would say that the one thing that I often told investors are interested in my

point of view on what I've learned is, one of the things I've learned over the years is amazing how

well the U.S. economy, and the global economy, but the U.S. economy, and the U.S. stock market, and foreign stock markets have done despite the politicians, despite the dictators and the military and the wars. It's really quite extraordinary. And that's because people are aspirational. So here in the United States, we're constantly reading the news about the Fed and about the Treasury and the White House. And so you know, it's amazing how we keep doing well

despite these clowns. And we just kind of take them into consideration when we're going about our business all day and thinking about how can we prosper despite what's going on politically. Hey, your identity is the president of your identity research provider of global investment strategies and asset allocation analysis. He previously served as chief investment strategist of Oak Associates potential equity group and Deutsche Bank's U.S. equity division in New York City. He taught at Columbia

University's Graduate School of Business and was an economist with the Federal Reserve Bank of New York. He also held positions at the Federal Reserve Board of Governors and the U.S. Treasury Department in Washington, D.C., Ed. Thank you very much for your time. If I made just say, I am a entrepreneurial capitalist of anybody wants to trade the research, just go to yodany.com. Yodany.com. You got it. Thank you, sir. Thank you. Thank you, Ed.

Ed, what'd you think? Well, Ed yodany is legend in the world of economics and markets. I thought

our fiscal situation. Our deficit spending and our increase in debt. And the fact that you have

“all these investors, I don't know what to do. I think I want to get out of the stock market. Okay,”

well, what do you want to do instead? Oh, I want to buy treasures. I want to buy more U.S. debt. Which is a great example of kind of the the paradox that a lot of investors in facing right now, which is they know that they're getting too risky because of the amount that we've seen in the stock market. We know that we keep on spending more money than we should really be spending. But then the question becomes like, well, what is your safe haven? What is your insurance policy?

What is your protection? And some people would say it's fixed income. It's treasuries. It's private debt. Somebody would say it's gold or bitcoin. And in all of these assets, you can also make the case that actually these are quite risky assets as well. And so I think it's leaving investors in this very tricky place where it's like, no one can agree

“on what the safe haven even is anymore because there seems to be risk everywhere. But if someone could”

come up with the asset that is the true safe haven, the Bitcoin is what say it's bitcoin. We already did it. I don't know if everyone really buys that. I don't think we really believe you based on what we've seen with Bitcoin price movements. But if someone could do that, that guy would get very, very rich. I was thinking that we need a new term. It's not safe haven. It's least fucked up or least dangerous haven. There's markets that have greater debt than us or there's markets that

have less debt than us, but aren't growing. And so where the fastest turtle, if you will, so yeah, I'm not sure safe haven is the right term. I really, the term he used that I thought was

really appropriate was balanced. He starts me as very balanced and it's always good to hear from

someone who's not easily, I get the sense that it's, you know, seen a few cycles and doesn't scare

“that easily. I also thought it was interesting and contrast. I think it's terms about the same”

size as property media technically where research firms, what's research terms and he said that they weren't planning to lay off any people because of AI, whereas I'm planning to lay off most of the staff here. Oh, is that make me happy? I've been thinking about that for the last 20 minutes. No, but he did strike me as is very balanced and, you know, quite frankly, I just don't scare that easily. I think he's probably, I think he's probably one of the few investment

newsletters where you read it. Your blood pressure comes down. Where's everyone else is, you know, the world is falling and credits spreads are going to blow out, etc. Anyways, I'm very much enjoyed enjoyed the interview. Did you blood pressure go down when you listened to all content?

So speaking of blood pressure, I was diagnosed for the first time. I've told you this. Let's

bring us back to me at every year. I got a physical and every year it's like your superhuman, your good cholesterol's high, your bad cholesterol. I love getting my physical. So at this time, they told me I was shrunken in and I have high blood pressure. And so I work my ass off. I'm getting my blood pressure down. I'm drinking less, I'm eating no processed meats, you know, trying to do more cardio. And I got my blood pressure below 130, her down to like 127. And all of a sudden,

the American Heart Association is now lowered with defines what fits the qualification of blood pressure down 10 points. They move the goal post on me, Ed. Anyways, uh, whatever it is, it's a tough case fault. No, I don't, I don't have measles. That's one thing that I have going for me. That's true. But anyways, that's my high blood pressure story, Ed. Well, I don't have much, I don't know. You are so bored by that. A year age, you know, you don't

need to worry about any of this. You don't, anyways, don't, don't, yeah, you got time still, Ed. Yeah, time. You got time. Eating steak, eggs and raw milk and all be good. Yeah, but I, I do believe they are going to replace you. I got a lot of the things to worry about. This episode was released by Clay Miller and Alison Weiss and engineered by Benjamin Spencer, a video editor as Jorge Carty. A research team as Gatchellon is about a pencil christiner

down here in Mia Savario, Jake McPherson is a social producer. Drew Barrows is a technical director and Catherine Dillon is our executive producer. Thank you for listening to "Proftly Markets from Proftly Media." If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.