The Case for a Roaring 2020s | Ed Yardeni

[00:00:00] Welcome to Excess Returns, where we focus on what works over the long term in the markets.

[00:00:04] Join us as we talk about the strategies and tactics that can help you become a better, long-term investor.

[00:00:09] Jack Forehand is a principal Evalidia Capital Management.

[00:00:11] The opinions expressed in this podcast do not necessarily reflect the opinions of Evalidia Capital.

[00:00:16] No information on this podcast should be construed as investment advice.

[00:00:19] Securities discussed in the podcast may be holdings of clients of Evalidia Capital.

[00:00:22] Hey guys, this is Justin. In this episode of Excess Returns, Jack and I sit down with the IDR-Denny.

[00:00:26] President of AirDenny Research and yourdenniquitakex.com.

[00:00:29] Ed needs no introduction, if he's been one of those accurate Wall Street strategies out there.

[00:00:33] We cover as many topics as we could fit into an hour, including his outlook for inflation in the economy.

[00:00:37] Why he thinks the market could be in for a Roaring 2020s like period?

[00:00:40] And why he believes we might get fewer Fed cuts than anything.

[00:00:43] We also discuss the characteristics of a good Forecaster, the impact of AI on the economy,

[00:00:47] the election and a lot more. While many Forecasters can get locked into their opinions,

[00:00:51] Ed's flexibility and data-driven approach have allowed him to build one of the best track records

[00:00:55] on Wall Street and the reasons why he's shying through this interview.

[00:00:58] As always, thank you for listening. Please enjoy this discussion with Ed.

[00:01:01] Hi, Ed. Thank you very much for joining us today.

[00:01:04] My pleasure. We're excited to have you on to talk the economy, the markets and help us sort of

[00:01:09] separate what is noise out there from real signals when it comes to the economic growth and trajectory

[00:01:16] of things in the market. So this is going to be a fun conversation.

[00:01:23] And you know, you've been doing this for your entire career. So one of the things we definitely

[00:01:27] want to talk about too is sort of your views on Forecasting and what makes for a successful

[00:01:32] Forecaster. And when someone's opinion, you know, based on the data should change and then sort

[00:01:38] of how you sort of view those things. But I thought to star we could,

[00:01:44] and I was listening to the Barry Ratt Holds Master of Business interview,

[00:01:48] and you were talking about when you were at Yale in Tobin's class and how you sort of,

[00:01:54] I thank you to Janet Yell and it helped you understand some of that material.

[00:01:58] So I thought we could just start there with a fun little story.

[00:02:00] Yeah, well, it is a fun story. I graduated from Yale six years after Janet Yell.

[00:02:10] So she was there before I was and she attended the same PhD economics program as I did.

[00:02:18] She studied under James Tobin, who was in Nobel Laureate, very famous macro economist.

[00:02:26] And she, I don't know where she sat in the classroom, but I have a hunch is right in front

[00:02:31] and she took copious notes and had charts in there with, she must have brought a ruler to

[00:02:39] to the class. Anyways, that was kind of viewed as the unofficial textbook of the macroeconomic

[00:02:47] text, the macroeconomic course that Tobin taught. And what she was kind enough to do apparently is

[00:02:55] people who were Xerox those notes and six years later I was reading from those notes.

[00:03:03] So I wore a lot because Tobin was pretty hard to understand, but she made it a lot easier

[00:03:08] with her great notes. So thank you Janet Yell and that's awesome. That's a great story.

[00:03:14] You know, I'm looking at you here. And just I've always seen this backdrop of books you have

[00:03:19] and back to you. And I think it's either between you and Michael Mavasin or the two guys with

[00:03:25] like the biggest libraries, I think that we've ever had on, which is amazing.

[00:03:30] Yeah, but that's so yesterday, you know, I don't buy books anymore as well. How do you?

[00:03:35] Yeah, no, that's true. But by the way, I have to say this, I'm reading Elon Musk.

[00:03:43] I'm listening to Elon Musk, an audible and it's really worth wild just to see just the guys

[00:03:50] genius. That's for sure. Do you listen to podcasts? Yeah, occasionally.

[00:03:58] Yeah, I think that is, it seems like more and more people are. Yes, as we move forward here.

[00:04:02] But I think the book, Kana, is a, you know, kind of a nice sort of way to work into the next

[00:04:07] question, which is, you know, a lot to probably change for you over the years in terms of the

[00:04:12] tools and the resources that you use. And you're looking at day to day and you're trying to interpret

[00:04:17] what's going on in the economy. So if you were to just kind of at a high level outline, like what's

[00:04:22] changed or will last 20 to 30 years with the way that your work is done? How would you capture it?

[00:04:27] Yeah, the first thing that comes to mind is when I first started out at EF Hutton in the late

[00:04:34] 1970s when we wanted to do charts, we had to print out the data on paper. And then bring in a draftsman

[00:04:44] and give the draftsman sort of a sketch of which we wanted to have the chart look like.

[00:04:49] And then the draftsman was actually take tape and put it on a draft board to create this chart

[00:04:55] and we put in the labels and all that. So it was extremely time consuming. And then once

[00:05:03] it was done, we'd have to hand deliver it to the printer. We then took photos of it and then somehow

[00:05:10] our other transfer that into the publication. So it was like a ridiculously paint-paint-paint-staking

[00:05:16] process. And you couldn't really do too many charts. What's changed for us is several years ago,

[00:05:23] we designed our own in-house charting system that automatically updates the charts when the

[00:05:31] data is available. And recently we've converted that to LSEJ data stream and that platform allows us

[00:05:40] to do the exact same thing. So instead of having to grind out these charts manually with a

[00:05:49] help of a draftsman and a printer now, they're automatically on our website. Which means for

[00:05:55] example when the employment report comes out the first Friday of every month, the data is

[00:06:05] instantly included in the charts. And so I don't really have to wait around very long to kind of

[00:06:10] get a layer of the land of how things look. So it's really phenomenal. And by the way, most of those

[00:06:18] charts are like in front of a, they're not behind a paywall. They're not blocks. I often buy myself

[00:06:22] like Googling like, you'll SNP, SNP, TE, historic TE and then I find myself on one of your PDFs or

[00:06:29] something. It's all open to the public. And it's nice. It's nice to find design. I guess as a

[00:06:35] capitalist, I kind of hope that people like the charts and how we can be information and then

[00:06:41] kind of make some want to see what's behind the paywall for our other research. But yeah,

[00:06:47] it's like credit. It's open to the public. What's different is you can't manipulate it,

[00:06:52] but it's available instantly. And there's thousands of these charts that we create.

[00:06:56] Yeah, it's very cool. It's just one last question before we get into some of the economic

[00:06:59] stuff we do. Do you think that so your done research has been, you've been an independent

[00:07:08] research firm for, you're coming over 17 years. So almost 20 years you've been effectively been.

[00:07:13] Do you think that in some way, I'm going to use the word edge. It's probably not the right word,

[00:07:20] but because you're like independent, you can think maybe more freely and maybe more accurately

[00:07:27] than than others. I mean, this isn't like so much like throw other Wall Street strategy yourself

[00:07:32] at these big banks under the bus or anything. I'm just wondering that level of independence,

[00:07:36] do you think that's an advantage in some way? Well, you know, I'm biased to tell you,

[00:07:42] right, right, oh, right. Of course. I'm getting it in the big guys. And by the way, very often

[00:07:49] we seem to have the same forecast as goldmen and very often more often than not, we come out ahead of them.

[00:07:57] So we're kind of like minded with some of our Wall Street brethren. But I think that being

[00:08:03] independent is great. I mean, we don't have any lawyers that have to do compliance and

[00:08:13] check what we do. Of course, we don't recommend individual stocks, which obviously helps, but

[00:08:18] we don't have a bunch of administrators overlooking what we do. And as soon as we want to

[00:08:26] write it and put it down and send it out, I put out this quick digs every day. And

[00:08:32] I just said down, write it out as soon as we had it in it, and it reads right to me. We send it.

[00:08:39] So I think we have a pretty quick turnaround in our ability to respond to the market. But I think

[00:08:48] and being independent to help us because it actually also makes you more insecure,

[00:08:55] you know, Adam Smith said that capitalism is all about centrifugalness. And as an entrepreneur,

[00:08:59] I think Adam Smith completely blew it. What a terrible way to sell capitalism. It's not selfishness

[00:09:06] is insecurity. I'm insecure because I got some amazing competitors, you know, Adam is one of my

[00:09:11] competitors strategists, adjacent trainer, Nancy Lazar, they all used to work together, but their

[00:09:18] fierce, fierce competitors, Wall Street is a competitor. So you know, I have to provide some really

[00:09:25] good research in order to compete. I want to ask you about the economic landscape at a high level,

[00:09:30] at least for someone like me who hasn't seen this before. What we've been through is obviously

[00:09:34] very interesting. And we had COVID, we had high inflation, it's come back down. Can you just talk

[00:09:38] about where you think we are right now? I think one normalizing, there's been a lot of controversy

[00:09:46] since 2022 about whether the tightening of monetary policy as in response to these certain

[00:09:53] inflation, what the consequences of that would be and there are the widespread perception in 2022

[00:10:00] in 2023 was that we would clearly obviously have to fall into recession. And that was an

[00:10:08] opposition. We thought the economy would prove to be resilient for a number of reasons. And here

[00:10:16] we are again in 2024, we're getting near the end of it. But throughout this year there's been

[00:10:23] still lingering concerns about a recession and perception that the Fed has to get out and

[00:10:30] with lowering interest rates rapidly or will fall into recession. Our view is that the Fed,

[00:10:35] yes, sure they tighten interest rates, the tight monetary policy in 2023, but they also normalize.

[00:10:43] They raised the from zero to five and a quarter percent. Everybody said, well, they raised

[00:10:47] the five hundred and twenty five basis points. They raised them from zero. And if you look at

[00:10:51] the charts, four to five percent is kind of where interest rates were in the good old days,

[00:10:58] the normal days. And I'm talking about before the great financial prices. So I think we're just

[00:11:02] normalizing, which is work pretty well in terms of thinking about the markets. And so,

[00:11:10] everybody, and when an indicator comes out and it looks on the weak side, everybody jumps on

[00:11:16] and says, there's a recession now. We say, well, well, let's look at this a little bit more closely.

[00:11:21] We did that with the past two employment numbers and came to the conclusion that, you know,

[00:11:26] this is not going to set us up for a recession. And yeah, the Fed's going to ease, but we think

[00:11:32] they got to take it easy in terms of how quickly they ease because in the past they had to

[00:11:41] to a very recession that caused by a credit crisis. And our thesis is that this thing around

[00:11:48] the has been no credit crisis, because the Fed is much more a droid at playing whack-a-mobile

[00:11:53] in the financial markets with something blows up and they created liquidity facilities. So I think

[00:11:58] that has to be taken into consideration into account in explaining a lot of this monetary policy

[00:12:03] cycle and business cycle. Can you talk a little bit more about what you saw? Because we've had

[00:12:08] probably two different types of economists on the podcast. Some people would thought inflation

[00:12:11] just was not going to come down and other people who said, you know, you raised rate that much

[00:12:15] recession is inevitable. It's coming. Yeah. And you were kind of down the middle on that. So what

[00:12:19] did you see that a lot of people maybe didn't? Yeah. Well, in the summer of 2022 when inflation

[00:12:26] in fact was speaking, we said it's speaking. And we put out a chart showing what we thought it would

[00:12:32] do over the next couple of years. And you know, I've had some good forecasts and some bad

[00:12:38] forecasts. So this one's been right on the money. It came down and that we wrote that we thought

[00:12:44] that the durable goods inflation rate in the CPI and the consumption deflator. You know, it's

[00:12:49] durable goods. It's a non-durable goods and services or the three major components of the inflation

[00:12:54] indicators. And we kind of kind of went one by one and said the durable goods order inflation rate is

[00:13:00] fairly largely related to tooth phenomenon. The supply has been challenged because of the

[00:13:09] ports not being able to process all the deliveries from overseas. And the reason there was

[00:13:18] the ports were congested is because following the lockdowns, we all had cabin fever.

[00:13:25] And when when you have cabin fever in America, you tend to go shopping and make sure

[00:13:31] you feel good. It makes us all feel good. You know, it really is dope with dopamine. And so we all

[00:13:36] went shopping but we couldn't buy services. There were still social restrictions and services.

[00:13:41] Everybody bought goods by wife when added in May of 2022 and bought a gardener said so we could

[00:13:47] eat outside instead of inside now that the spring went was coming. And the salesperson said,

[00:13:52] you know what, this was early May. Salesperson said, this is the last unit we have. We just ordered

[00:13:58] a whole bunch more from China. And so kind of, you know, I looked for the anecdote was like that.

[00:14:03] And so, you know, what if everybody else is doing that? And sure enough, it was kind of a short term

[00:14:09] buying binge combined with a supply problem that we thought would be emallulated over time at the

[00:14:17] binge's the last that long. And so the durable goods inflation rate has come down and it's

[00:14:22] now she's negative again. And historically, at least, you know, for 10 years prior to the

[00:14:28] great virus crisis, durable goods prices were down. Now under a bulls, we said, look food and

[00:14:37] energy, which are the main components there. There are commodities. And there's a lot of people

[00:14:47] 2022 when Russia invaded the Ukraine. But we just came out, we came up with the old adage

[00:14:54] the best cure for high commodity prices, high commodity prices. We thought the prices would cure

[00:15:00] the problem and they did. And now we're looking at oil prices taken a dive here actually.

[00:15:06] And then on the services side, you know, most of that is the service, the service side,

[00:15:12] rented gets the biggest weight. And we thought that there were a lot of

[00:15:18] pandemic-related pressures on rent that would dissipate, that we'd see an increase in

[00:15:24] multifamily housing construction, which is what happened. So they all came together really quite

[00:15:28] nicely for us and we just kind of put it together that way. Do you see any kind of near-term risk

[00:15:34] of recession? We had seen so softening in the data that doesn't seem like it's on the near-term

[00:15:38] horizon, but what do you think about that? Yeah, I don't think it's on the near-term horizon.

[00:15:44] You know, I'm trying to stay open-minded about it because we have been sort of on this role

[00:15:52] speaking of roles. I've been telling these paths everybody that since 2022 that we're in a recession,

[00:15:58] it's just a rolling recession getting different industries at different times, particularly the

[00:16:03] history-ate sensitive areas. And basically it was housing and commercial real estate, auto sales

[00:16:11] having gone straight up or they having gone straight down. They've been holding up remarkably

[00:16:14] well in the face of higher, higher interest rates, auto loan rates, mortgage rates are coming down

[00:16:23] now sharply with the bond yields. That means that the role in recession in housing should

[00:16:29] be coming to an end and we should see some improvement there. But the key is that clearly the

[00:16:34] consumer in this of an hour observation that you can't generalize about the consumer, people try to

[00:16:39] say, you know, the delinquency rates going up the consumer's love about the, uh,

[00:16:44] is it going to be forced to retrench us? A lot of consumers were different kind of experiences

[00:16:51] and maybe maybe by insight information, my edge and understanding the consumer is I'm one of them

[00:16:59] and then my wife was one of them and then I got five kids so I kind of know what kind of younger

[00:17:04] people are buying. And then my youngest of them all is a world-class shopper, so I kind of

[00:17:12] watch which she's doing what her friends are doing. But I also saw what my friends were doing.

[00:17:17] A lot of them are retiring. The baby boomers are retiring. And they're retiring,

[00:17:21] I said, well, it's kind of curious. I mean, how much did they have in retirement has it?

[00:17:26] The answer is 75 trillion dollars. Not billion trillion dollars is what the baby boomers have. So basically

[00:17:32] 75 million baby boomers have 75 trillion dollars in, uh, in, in, in, in, in, in, in, net worth.

[00:17:39] And now they're retiring and when you retire, guess what? You don't say because you don't want to

[00:17:43] become any more. Maybe you have interest income and dividend income, but you don't have earning income.

[00:17:48] And now you start to, I, dip into that nest egg. You live on interest and dividends if you were lucky enough

[00:17:55] to that they're substantial. Otherwise you start to spend that money. And especially coming out of

[00:18:01] the pandemic, a lot of people had some time to think about the means, meaning of life. And I guess

[00:18:06] a lot of my friends thought the meaning of life is to retire and travel and eat out and just have

[00:18:12] a grand, grand time. The baby boomers with most of them don't really have mortgages anymore.

[00:18:17] And they're not paying for college as much anymore. So there's kind of this free as birds and

[00:18:22] there's spending money that you love like mad. And then that gets to the other issue. You know,

[00:18:27] there, you see these surveys where the interview people will say, uh, uh, do,

[00:18:32] does your paycheck last to the end of the month? And you see a fair amount of people saying that

[00:18:37] I don't make it to the end of the month. As some of them are probably young people and one of them

[00:18:41] is, uh, one or two of our probably my younger kids. And they probably will say, you know, my

[00:18:47] paycheck doesn't get to the end of the month. But my dad pays my credit card. Uh, so I think there's a lot

[00:18:53] of that going on. A lot of baby, a lot of baby boomers kids, um, young, the younger ones anyways

[00:19:00] are still living at home. Uh, I guess it's, you know, and they're getting rent free. Uh,

[00:19:07] and so, uh, when you look at all together, I concluded, you know, you really had to see

[00:19:12] super's losing jobs. And uh, we just don't see that currently happening. You talk about

[00:19:19] you're keeping your eye open for the potential signs of recession. Are there any like most important

[00:19:23] indicators you follow or anything you look at most closely when you're trying to analyze that?

[00:19:28] Well, I think at this point in the business cycle, clearly everybody, including ourselves

[00:19:32] is looking at the, at the labor market. The, uh, you know, the capitals spending looks

[00:19:38] right strong because a lot of it now is technology. And you know, a lot of people rent a software

[00:19:43] for example. So, for interest rates go up and you're a company and you spend a lot of money

[00:19:47] and software. It's not like you're buying a package of these things. You're renting it. Uh,

[00:19:52] okay. So, capitals spending hasn't really been very interest rate sensitive. So it really gets us

[00:19:56] back to the consumer and that in turn, I think really focuses this on the employment indicators,

[00:20:02] which is why the markets are so sensitive to the employment indicators. But you know, when

[00:20:08] the past, uh, in the latest month and so we're talking about the data for August that came out

[00:20:17] a couple of a couple of weeks ago, we looked at the data and said, yeah, yeah, it looks

[00:20:22] weak when you look at non-farm payroll employment up 140,000 or so during the month. And then

[00:20:30] we're down under visions, uh, the previous month. But what about the average work week? And the

[00:20:35] average work week actually rose a quite nicely in August and so when you look at the

[00:20:42] aggregate hours work to total hours work, it actually rose an all-time record high in August.

[00:20:49] It's one of the reasons that they Atlanta feds GDP tracking model actually revised upwards

[00:20:56] of the outlook for GDP after the so-called week employment number. And then we go further than that.

[00:21:02] It's okay, that looks pretty good. Now how about the impact on wages and salaries? So

[00:21:07] there's something called average hourly earnings, which is wages in the employment report.

[00:21:12] And it's okay, let's see what this looks like in terms of hours work and, uh, and, and the wages

[00:21:19] and that too is that an old time record high. And it actually rose quite sharply in August.

[00:21:25] So we're expecting a pretty strong retail sales report. Now in just a production, this hours work

[00:21:31] in manufacturing. And that like, uh, here kind of middling. It's been kind of weak to

[00:21:37] flat to weak of late. But we noted that in July there was a big drop in auto production that probably

[00:21:43] had a lot to do with this, uh, screwed up seasonal, but also in fact. And so we think that

[00:21:48] we could have a couple of numbers here that suddenly make everybody like it. I had turned it's

[00:21:52] a little bit of a waste. So maybe there isn't a research about there, and maybe the economies

[00:21:56] are going to continue to perform well. So you know, it's how it's a hand-to-hand warfare in this

[00:22:01] business. You know, we go kind of indicator to indicator. We have our views of what they're going

[00:22:06] to do. And then when they come in, you know, if they come in supporting our story, they're good

[00:22:11] numbers. If they come in questioning our story, then of course they're better numbers. And they're

[00:22:16] going to be revised to your point of the employment report. I've always found it interesting,

[00:22:21] as someone who's outside of this, like, I probably before 2021 had never cared about a CPI

[00:22:26] report Michael Life. And then that was the absolute center of everything. And now it seems like

[00:22:30] just recently we've had this shift, like the inflation report doesn't matter anymore. Now the

[00:22:33] employment report matters. Right. It's interesting to see those as someone who's like outside of

[00:22:37] this face. Well, you know, um, it's all because of the fed, you know, um, I think one of the things

[00:22:46] we do pretty well is as fed watching. It's a matter of fact, the couple years ago I wrote a

[00:22:51] book called Fed Watching for Fund and Profit. And so I went back to Paul Volcker, actually I went

[00:22:57] back even earlier than that just to get a sense of what drives the Fed. And the focus is very much

[00:23:04] on the, um, the chairs of the Fed because they fully influence and control the message coming out of the

[00:23:13] heads. So, uh, and August 23rd I believe it was in Jackson Hole, Wyoming. We have that famous annual

[00:23:21] conference at the monetary policy makers get together and everybody looks forward to the

[00:23:27] speech by the Fed chair and sure enough, uh, it was a consequence of consequential speech given by

[00:23:35] Fed chair Jerome Powell in which he said that you know what, he didn't say mission accomplished.

[00:23:41] You can pretty close of that. So, you know, we're pretty confident we're going to get to 2%

[00:23:47] on the inflation rate or we're not quite there but we're kind of close enough. And so instead of

[00:23:52] for the, the balance, you know, they have this dual mandate of unemployment and inflation. So instead

[00:23:57] of being kind of biased towards worrying about inflation being too high, we're not kind of

[00:24:04] switching to being more concerned about the unemployment rate going up. And so everybody said, okay,

[00:24:10] that's the rules of just change. So let's put a big focus on the employment numbers more so

[00:24:16] than the CPI. Of course, that sets us up for some surprises to the upside and inflation

[00:24:23] and suddenly everybody will change the rules again. But that's what's one about this business.

[00:24:28] Sort of sort of on the fly here like if you were to think back to the last, you know, five

[00:24:33] Fed governor or so or Chairman, Bulkor Green's Van Bernaki, Yelene and Tal. Just is there any

[00:24:40] let me ask you about Bernaki like my view is he was a great chairman during the financial crisis.

[00:24:47] And so that was the guy we needed sort of lead lead lead the Fed during that period. But, you know,

[00:24:53] just in general, do you think that these Fed chairman have done, you can pick any one or maybe just

[00:24:59] the last three, Paul, Yelene and Bernaki, like how in your view have they done in terms of leading

[00:25:05] that? Well, I think Yelene we started not talking about Yelene. I think Yelene did a reasonable job

[00:25:13] running my policy. She was kind of low key about it. I think the problem I had with Green

[00:25:21] Span and N-E-L-N is that they added a obsession with avoiding deflation. And so they kept

[00:25:36] interest rates way too low, you know basically it's zero. And so I think, you know, you're giving

[00:25:42] a Green Span some credit, but I think it made some pretty significant mistakes in not raising

[00:25:52] interest rates more going into the housing bubble and fueling the housing bubble.

[00:26:00] Bernaki had this also this concern about deflation. So we had three Fed chairs

[00:26:09] and that gave way too much weight to the risk of de-eatization and kept interest rates too low.

[00:26:19] And then the whole process of quantitative easing where they actually metled in the markets.

[00:26:25] It's one thing in the Fed funds rate market, the short term interest rate market, but they

[00:26:31] really had no business going in and buying bonds. But that's what they did. The ECB did

[00:26:37] other central banks did it. So we had this great abnormal environment where interest rates were

[00:26:42] near zero and there's so-called quantitative easing. I think all in all of the ones that

[00:26:51] the United Nations, I'd say Palau probably did they probably the best job of them all. I know

[00:26:57] you get criticism for being late on raising interest rates too as it's holdoff inflation in 2022.

[00:27:07] I don't know, he'll never admitted but I think part of it was that his

[00:27:11] chairmanship, his chairmanship was coming up and he wanted to get reappointed. And so

[00:27:18] he went totally woke and said, all he really cared about was keeping the unemployment rate down.

[00:27:23] Which at the time was legitimate because it was, you know, 2021, 2021, 2021, you know,

[00:27:37] labor market was still having issues. But labor market tightened up real, real quickly.

[00:27:45] And he did make an adjustment quite quickly and made a very credible stance on breaking

[00:27:52] and flation down and so far so good. I mean it has come down. And I think he'll get credit though,

[00:27:59] I think the economy deserves credit more than he does but he'll get credit before having

[00:28:07] managed to fly the plane and landed in the soft way, soft landing. In other words,

[00:28:13] I call it immaculate disinflation. The idea that inflation, I always thought inflation could come down

[00:28:20] without a recession and Palau every now and then said that that's what they were aiming to do.

[00:28:26] And I think they got it and it wasn't all because of what the Fed did. There were other things

[00:28:31] going on in the economy that made that happen. It's funny we did an episode with Medtavor,

[00:28:36] we talked about things that he believes that most investors disagree with and the thing we got the

[00:28:40] most pushback on was he thought the current Fed had actually done a pretty good job but like you survey

[00:28:44] investors I would have to think like what like 95% of investors always think the Fed is doing a bad job.

[00:28:49] Yeah, you know, I always consider the contrary case. I don't take a contrary viewpoint just to

[00:28:57] be different because you know, you've concertedly get some an order right that way and then you

[00:29:04] get a lot of an order righty when you're just dead wrong. But I do kind of, I say well what

[00:29:11] what is the crowd believe and what might they be missing? And by the way, I think that's one of

[00:29:17] the reasons that I'm off a label does a permaboole is because the permabairs do such a wonderful

[00:29:24] great job all the time of telling us everything they could possibly go wrong. They make life very

[00:29:31] easy for me. I don't have to do a lot of work to figure out how things are going to blow up.

[00:29:36] But then what I do is I'm talking about what's wrong with that picture, what's wrong with that story?

[00:29:40] And more often than that I come up with a story that I believe in the sort of kind of

[00:29:46] push that and we did that. I know recession, we did that on inflation coming down

[00:29:50] and we even did that as exactly as you just said. We said, you know, maybe the contrary story

[00:29:56] here's the friend mine actually get it right and they and so far so good. It's funny and you're

[00:30:02] thinking about the permabairs. I mean when you have an YouTube channel like we do,

[00:30:05] I mean those are the people that really grow their YouTube channels. If you just do them in

[00:30:08] gloom after doing gloom after doing gloom or whatever reason people love watching that stuff.

[00:30:12] Yeah, I mean I I I I I'm on these podcasts very often and

[00:30:20] the host interviewers often tell me that just for a change of pace they decided to have me on

[00:30:28] there's so much doom and gloom out there and you know, you'll get the comments and the

[00:30:33] comments will say you know, our daddy's delusional and he's looking at you know he's far-fetched.

[00:30:39] And what about the deficit and what about this and that and I'm perfectly aware of all the

[00:30:46] things that could go wrong. But yeah I've been doing this for a while and uh uh more often than

[00:30:55] not we've kind of got gotten there right. I've had a couple of issues along the way but uh

[00:31:02] we're really good at actually picking market bottoms. We're still working on market tops and I

[00:31:09] offer point out that if you're if you tell somebody that you have every reason to

[00:31:16] believe that the market's stopping and we're going to have a bear market. That's fine if it works out

[00:31:21] that's even better but don't forget to tell them when to get back in. See, right.

[00:31:27] Two decisions now. I want to shift an ask you about the fed now. It seems like we've had this

[00:31:32] back and forth where we get a bunch of re-cuts priced in things get a little bit better. We

[00:31:36] get less rates, less rate cuts priced in and then it kind of reverses back and right now we're

[00:31:40] back at the place where we've got a bunch of re-cuts priced in. But I think you said you don't

[00:31:45] think there'll be as many as there are priced in. Is that right? Yeah, that's correct. I mean again

[00:31:51] because we weren't looking for a recession in 2023. We're totally puzzled. You know I mean

[00:31:58] by by 2024 people were starting to acknowledge that hey we didn't have a recession and maybe

[00:32:04] we're not going to have a recession yet when you looked at market pricing at the beginning of

[00:32:09] 2024 the market was pricing in 6725. Basically cuts in the federal funds rate and we were scratching

[00:32:18] our hands saying where's that coming from? People are saying that they're not as fearful about

[00:32:23] a recession but that almost suggests that they were of that they really thought that the fed had to

[00:32:28] cut six to seven times to avoid a recession and we said it kind of just proved its resilience. Why

[00:32:35] would you possibly be for S. and six to seven? But we kind of came into the consensus and said

[00:32:41] all right we'll give you two or three rate cuts and so far there have been absolutely zero

[00:32:48] rate cuts whatsoever and there will be one in September 18th and the big debate is going to be

[00:32:55] 20 at 25 or 50 we think 25 and then we're still still kind of skeptical about whether there

[00:33:02] might be another one before then after that I'll can see the point that probably will be one but

[00:33:10] next year maybe you know two to four not another fiber or six which is what the market's

[00:33:18] expecting and that's largely because of the residential economy largely because

[00:33:23] the residents of the credit markets we have this credit crisis cycle thesis it's not really a thesis

[00:33:29] we love data and that we like to start with the data before we come to our conclusions a lot of

[00:33:35] people with this particular conclusion and then find the data to support it and so we love data

[00:33:41] and the data the history of the the credit cycle shows and the monetary cycle shows that they're

[00:33:49] kind of intertwined that when the fed tied this was monetary policy at some point something breaks

[00:33:54] along the way you get an inversion of the yield curve so the inversion of the yield curve predicts

[00:34:00] not that a recession will happen it what it predicts is that something will break in the financial

[00:34:04] system and sure enough something breaks and that becomes a credit crunch and that causes the

[00:34:09] recession so inverted yield curves predict a process that leads to recession and we were arguing

[00:34:16] over and over again that we didn't think was going to work this time said the same thing

[00:34:20] by the leading economic indicators we didn't think they're going to work this time and what really

[00:34:25] made a difference is we think is the threads experience with playing whack-a-mole as I mentioned

[00:34:32] in the credit markets they've learned how to create liquidity facilities when something breaks

[00:34:37] and sure enough something that the whole thesis the pessimism right monetary policy did cause

[00:34:44] something to break it happened last March the banking system broke because three banks in California

[00:34:50] had happened on a Friday and by a Sunday the Fed had created liquidity to facility and they didn't

[00:34:56] lower interest rates they just created liquidity to facility and it worked like a charm

[00:35:00] and they were able to maintain their interest rates at high level in the past something would

[00:35:05] break and they would scramble to lower interest rates that should not try to keep that from

[00:35:10] coming a credit crunch and recession but it didn't work by the time they got around to it we

[00:35:16] got a credit crunch and a recession this time around the financial crisis so far has not led to a

[00:35:22] credit crunch and of course then with the Fed talking about easing it's hard to really worry

[00:35:28] about a recession because if we're going to be wrong it'll be that the trade will have

[00:35:33] a recession by lowering interest rates a lot more than we think they have to but I can live with

[00:35:39] how do you think of an inflation on a more secular level like I think looking back if I think

[00:35:44] about globalization technology demographics those is maybe being the more deflationary trends we

[00:35:49] had before this whole thing and now I think about it now you know globalization maybe going the other

[00:35:53] way but technology with AI maybe deflationary like do you think we're in for higher secular

[00:35:57] inflation going forward than we've had in the past no I think if we're lucky will stabilise around 2%

[00:36:05] think we're about to get there in the next few months but I think I mean that's what makes

[00:36:14] this business so much fun is you never know exactly what's going to be next and I won't be

[00:36:19] surprised if we start worrying but deflation again I hope the central banks don't respond to it

[00:36:25] by lower interest rates to zero on having quantitative easing all over again because I don't think

[00:36:29] that's that's the answer but I think a lot of the inflation is rooted in global

[00:36:34] demography fertility rates have collapsed below replacement everywhere except Africa and India

[00:36:40] and so we have rapidly aging populations almost everywhere particularly in China because of

[00:36:48] the one child policy and right now that's a big source of deflation in the global economy

[00:36:53] is because you know old people don't spend as much as young people young people have families

[00:37:00] families by houses they have to spend on education they need cars they need to get around

[00:37:06] older people don't move as much you know the Chinese built all these super duper

[00:37:11] wonderful fast trains but old people don't go anywhere so yeah who's who's going to buy the tickets

[00:37:17] and then you know that they really make that affordable and meanwhile they had a

[00:37:22] property bubble bigger than anything we've ever seen on earth probably bigger than what

[00:37:27] Japan did bigger than what we did and that property bubble is burst and now the stack

[00:37:32] mark has been going down for several years so they've got this huge negative wealth effect

[00:37:37] which doesn't turn consumers on and wanting to spend money and then you got all these old

[00:37:42] folks that have seen that their life savings aren't anywhere near what they hope they would be

[00:37:49] they don't have the kind of social safety net the way we do and so this is a country that was

[00:37:56] accounting for a lot of global growth a lot of global demand for commodities and now that's

[00:38:01] not happening so we're seeing copper prices steel prices all prices decline and you know energy

[00:38:07] prices on a huge driver of inflation if inflation if oil prices remain down that helps to reduce the

[00:38:15] cost of transport transport transport food goods and so on so no I I'm not too worried about

[00:38:24] inflation and inflation tends to be spiky I mean the one next time when I really lasted longer than

[00:38:31] it the news was in the 70s other than that it kind of goes up and kind of goes down which is

[00:38:35] another thing that we just got by looking at the data and having freedom of data that you know

[00:38:42] inflation is very symmetrical the faster it goes up the faster it comes down and again that

[00:38:47] that inside helped us this time around too before we shift to the stock market I just want to

[00:38:54] drive to you have some great videos you do with you and your analysts I learned a ton

[00:38:58] watching them prepare for this but this chart is federal the federal funds rate in financial

[00:39:02] prices and it shows the fed funds rate over time and it also shows when we'd have recessions

[00:39:06] and I'm just wondering if you could talk about what the takeaways are from this yeah well again

[00:39:10] it all goes to the kind of the blending in our way of looking at things at the monetary

[00:39:16] cycle at the credit cycle and the business cycle they're all clearly interrelated I think it's

[00:39:23] logical it makes kind of sense why wouldn't they be interrelated I think what happens is

[00:39:29] a kind of this for some reason that kind of become tribal about it and some of them say

[00:39:34] the monetary cycle is the only thing that matters and a few say well the credit cycle matters

[00:39:40] and others say the business cycle is its own logic it's like I don't get that why don't we just

[00:39:44] to recognize that these things have worked all all in tandem and what history shows at least

[00:39:51] prior to the recent experience and we're not talking about a lot of history by the way I mean

[00:39:57] I'm most of the kind of has really started there looking at the data and modeling in 1945

[00:40:04] I'm in 1960 and the fed really only became extremely relevant to the monetary policy cycle

[00:40:14] in the since the early 60s and what that shows is that when there's an inflation problem

[00:40:21] with or the economy because the economy is booming then what happened was the fed tightens

[00:40:29] and has it tightens the yoke of inverts because bond investors start to believe that

[00:40:37] we're getting close to a peak in rates because something is going to break as a result

[00:40:42] of this tightening cycle and sure enough something breaks we get a financial crisis as the

[00:40:48] charge shows and that's very quickly leads to a credit crunch so my contemporaries have retired

[00:40:57] Henry Coffman was very famous for really focusing on the credit cycle more than anything else

[00:41:04] and so and he talked a lot about the impact of credit crunches on the economy and the business

[00:41:10] so something breaks get a financial crisis and then suddenly it's a credit crunch

[00:41:15] a difference between a financial crisis and a credit crunch is an a credit crunch even good borrowers

[00:41:20] can't borrow and a lot of those financial crisis happened to occur in the banking system

[00:41:25] which then had this kind of parental back and lending and so that would then cause a recession

[00:41:34] and then when the financial crisis hit the fed would panic and start lowering interest rates

[00:41:40] and they'd lower in as a credit crunch in the recession occurred and then they started to

[00:41:47] raise them once they had some confidence that the economy was what was improving and again

[00:41:53] what's different this time so far I'm adding so far so you won't accuse me of jinxing it

[00:41:59] but so far you have to admit it's been different I'm not telling you it won't be the same up ahead here

[00:42:08] but what's been different so far that we can't disagree on is that there that there has been

[00:42:15] no credit crunch as a result of the crisis financial crisis last year which turned out to be an

[00:42:21] unavened I mean that could have been it I mean that could have been a bank run it could have been

[00:42:25] a national bank run instead of the fed provided liquidity to the banks and the FDIC

[00:42:32] back to the deposits of those banks so everybody said hey if the government's going to protect this

[00:42:38] there's no no reason to run out of our deposits so we didn't have the bank run but if we did

[00:42:43] we'd be looking at a credit crunch we'd be looking at a recession and it would have been

[00:42:47] deja vu all over again but so far that's not the case I out all concede that the

[00:42:53] full-pomitted case made a lot of sense it made a lot of sense to believe that if the fed's

[00:43:00] raising the fed funds rate by 525 basis points how could it not cause a recession and I think

[00:43:10] certainly with a benefit of hindsight as again we they tightened from zero to five and a quarter

[00:43:17] percent so some of that tightening was actually normalizing so I think that's an important thing

[00:43:25] to what the fact factor into once thinking about the the current cycle yeah now you could

[00:43:31] argue the pessimistic case made sense with a stock market as well but that also didn't work out

[00:43:36] right you've been pretty bullish during the full thing and I saw another interview you talked

[00:43:39] about you know you think we might have like a roaring 2020's type bull market here so can you

[00:43:47] at the beginning of the decade and look on I'll admit I do tend to be an anapornist you have five

[00:43:55] kids you have to be an optimist these days you have to be up up beat on the future and

[00:44:03] and your ability to take in at least grow them right but so in the beginning of the decade

[00:44:12] I said hmm there's something rhyming here that you know 1920s and 2020s could this be a

[00:44:20] a roaring 2020 scenario and you know I wrote my professional autobiography looking back at the

[00:44:28] 40 years that I've been in the business I did this in 2018 and one of the points I made in that

[00:44:36] autobiography is that when I first studied economics even before I went to graduate school

[00:44:41] in the in the Tobin we all kind of studied from the Samyleson textbook on economics

[00:44:48] for economics 101 and there's a very depressing thought in that book that says that economics is about

[00:44:56] the optimal allocation of scarce resources I mean that is so depressing you mean there's only so

[00:45:03] much out there and we all have to kind of figure out how to fight for it and some people some

[00:45:07] kind of is think the best way to you know do it properly is with the with a market other people say

[00:45:13] you know the government should allocate the resources and I said you know I don't think that's really

[00:45:19] what economics is about I think what economics really is about is having technology solve the problem

[00:45:25] of scarce resources in a relatively free market in other words if there are scarce resources

[00:45:31] and their prices are going to go up in a free market and that gives some entrepreneurs and

[00:45:36] incentives say you know I think I can come up with a better way to do it that you're not

[00:45:41] going to need as much of that of that resource and so I came to the conclusion that economics is

[00:45:49] largely about technological innovations leading to more progress leading to more productivity

[00:45:55] so you know you'll find that a lot of the pessimists never really talk about I never used the

[00:46:02] productivity word they just don't mention it and we talk about it all the time and we think

[00:46:08] with that we are in the early stages of a productivity boom we think it actually started in 2015 but

[00:46:16] was interrupted by the pandemic but in 2015 productivity at an annual rate on a five year training

[00:46:25] was rising zero point five percent it was pathetic then right before the pandemic we almost

[00:46:31] got to two percent I mean think about that's a quadrupling of productivity grow to that go straight

[00:46:36] into real GDP it goes straight into reducing unit labor costs which is another reason why we thought

[00:46:42] inflation would come down and now we're basically around that again at around two percent

[00:46:48] and it looks like it's actually doing better than that it did better than that last year

[00:46:52] so if we're right technology led productivity gains are kind of like cherry dust they make everything

[00:47:00] better then it will grow better higher they make inflation lower they boost real wages wages

[00:47:06] right faster than prices as they as they have been by the way just 1995 and that gets kind of screwed

[00:47:14] up during the pandemic but now we're back where the past year and a half where wages are rising

[00:47:20] faster than prices it's not just employment that drives purchasing powers also obviously wages

[00:47:26] relative to its prices and real wages are in fact going up so yeah I think the roaring 2020's

[00:47:34] ideas still one that we're promoting it's our base case it's not something the only thing that can

[00:47:40] happen we've been worrying a lot about geopolitical risk but we've been basically saying the most

[00:47:46] like the scenarios are roaring 2020's which means higher earnings you know earnings have been

[00:47:52] going up to record highs over the past couple of quarters during the third quarter they'll

[00:47:56] go they're going up to another record high and that's what's really essential to driving a

[00:48:03] bull market you you have to have something under the air that's inflated into the market

[00:48:09] with valuation multiples and we think the earnings are actually there so I'm using look

[00:48:15] last year I was using if if memory serves me right I think we were using 4600 by the end of

[00:48:25] last year we got the 4600 by the middle of last year so we said all right we're going to stick

[00:48:31] kind of stick with it and in fact we got the 4800 by the end of last year so that's close enough

[00:48:38] and just kind of ahead of schedule and sure enough we were ahead of schedule again this year we thought

[00:48:44] that we get to 5400 by the end of the year which looked ridiculous at the beginning of the year

[00:48:50] you know nobody else maybe one or two guys a timely maybe was it was there but

[00:48:56] 5400 looked totally delusional epic at the 5400 high the middle of the year again

[00:49:02] and so what are we doing there so it's okay let's let's raise it let's go to 5800

[00:49:08] and so we're still there and then next year year and a half 6500 and probably 8000

[00:49:16] but I mean 8000 by the end of the decade is actually fairly conservative assumption on what earnings

[00:49:22] will grow at kind of consistent with with history and what the valuation multiple will be I do need

[00:49:27] multiple of about 20 which again seems delusional but that's where we are and a lot of the

[00:49:33] has to do with the fact that the market is different it's got the magnificent seven and they really

[00:49:39] are magnificent they're not going to go away and they're going to have high valuation multiples

[00:49:43] so we're talking to you on Tuesday September 10th and tonight it looks like the first and only

[00:49:51] debate between Trump and Harrison do you have any

[00:49:56] does it really does it matter who wins does the market react favorably or negatively to either one or does it should we really care of that much I

[00:50:04] I can now kind of

[00:50:07] get the feeling of what it must have been like to go to a Roman Colosseum

[00:50:12] the excitement of seeing this is battle you know when look at the with the swords and the tigers and lions

[00:50:20] everybody just you know what violently attacking each other

[00:50:26] fortunately the market the bikes aren't going to be live all the time but so hopefully we'll

[00:50:34] have the the interruptions but yeah I'm looking forward to the to the games and

[00:50:43] I've learned over the years that if you let your politics get in the way of investing or

[00:50:50] your investment strategizing you're going to miss some pretty good bull markets

[00:50:56] because there's always somebody that you're not going to like in the White House and the fact is

[00:51:01] the market learns to kind of learn to live with whoever's there but I'm I'm rooting for gridlock

[00:51:06] I'm rooting for a rep checks and balances to win the election that you know whether it's Harris or

[00:51:13] Trump that they don't get a Congress that they can just kind of roll roll over if we do in fact

[00:51:19] get a sweep of the Democrats or sweep of Republicans I may have to radically change my

[00:51:24] base case to be more concerned much more concerned about the deficit much more concerned about

[00:51:29] inflation much more concerned about geopolitics you know we're we're we're definitely getting a

[00:51:36] choice here between kind of two quite extremely different sets of policies but much will depend on

[00:51:44] the balance of power and and Washington DC so I'm rooting for hoping for

[00:51:51] a gridlock winning the election if it does and I think roaring 2020's will remain intact

[00:51:59] as we kind of get to the end here we just want to get your take on some of those things that

[00:52:04] come up often on our podcast regarding different like trends in the market that we've seen over

[00:52:10] last 10 or 15 years and the first thing I want to ask you about is this value stock under performance

[00:52:16] of growth stocks and do you ever what what are your thoughts on the under performance of value versus

[00:52:24] growth well I'm not a big fan of that dichotomy I as a matter of fact there is bullmark

[00:52:34] we've been recommending technology and communications which is a growth we've been also

[00:52:40] recommending financials which is tends to be kind of viewed as is value and we've been in

[00:52:48] recommending industrials I don't know what they are I mean you don't usually think of

[00:52:53] industrials as growth stocks but you know there's cyclicals but they've done well and our one

[00:53:00] clunker was energy but the energy idea was you don't really have to have a lot of energy to overweight

[00:53:07] energy to portfolio these days it's so tiny and you want to have some just as a shock absorber

[00:53:14] in the event that things really do do go mad in the middle east or matter in the middle east

[00:53:21] so that's we're still with that kind of portfolio composition not kind of doing a growth versus

[00:53:29] value and also we've been arguing at the market wood broadened out and we think with the the

[00:53:34] Fed lowering it just rates it's already broadening out to the the Smith caps we prefer the S&P

[00:53:41] 600 to the Russell 2000 Russell 2000 has a lot of companies have no earnings the S&P 600 has

[00:53:48] a lot more companies that smaller companies that have earnings but yeah we think the market

[00:53:54] broadened out and we have this so thesis that all companies our technology companies now either

[00:54:01] make technology or use technology you have to use the technology tools that are available

[00:54:07] for every business model in order to stay competitive to increase productivity

[00:54:14] we do on Thursdays we write a lot about disruptive technologies

[00:54:19] so we kind of do research kind of consistent with Kathy Woods portfolio's tend to look like

[00:54:29] and there are a lot of very exciting technologies out there we're we see the pros and the

[00:54:33] kinds of artificial intelligence we are watching the development of humanoid robots

[00:54:40] to work in Elon Musk's factories there's a lot of technologies that are

[00:54:49] happening already are being implemented already and making a difference when the when

[00:54:56] Chetchy PTFers came out I signed up for the $20 model and quickly became disillusioned with it

[00:55:03] because it elucinated and it wrote very well but there's a lot of nonsense and misinformation

[00:55:09] in there but I've recently been using copilot on a microscope and what's cool about that is it

[00:55:16] I'll answer your questions and give you the references of where it got the information from

[00:55:22] I think it's a big challenge to Google because instead of having to kind of look for the articles

[00:55:28] I now look for the conclusion that's got references to the articles

[00:55:33] yeah that's the thing with like AI as you could see it being somewhat deflationary right in terms

[00:55:38] of making things more efficient and the savings that you might get but then again that kind of plays

[00:55:45] into margins so if companies are utilizing this technology to become more efficient

[00:55:49] then maybe they become more profitable and that you know plays into sort of the market

[00:55:55] and valuations and things like drive performance yeah people for a long time thought that

[00:56:00] the profit margin for the S&P 500 or just a cyclical variable it just kind of goes up and down

[00:56:05] but you know we're starting to see an uptrend in that variable over the best several years

[00:56:11] and we think that the profit margin is going to be hitting a new hide later this year or

[00:56:17] early next year of about 14 which would be a record high for the S&P 500 and it could

[00:56:24] go higher you use the word deflation to describe the consequences of technology I would start

[00:56:31] by giving it a happy or spin by saying its productivity and the difficulty has deflationary

[00:56:39] consequences which are actually very positive you know it keeps a lid on pricing and it justifies

[00:56:47] workers do get paid more in real terms as a result of better productivity I

[00:56:54] wanted to two more questions for you and very generously your time we really appreciate it well

[00:56:59] just talk about how to couple questions on forecasting but just in general

[00:57:04] when you think about what makes a successful forecaster because you have a tough job I mean you

[00:57:10] have to interpret this data you're putting your thoughts out there you're pinning out there someone's

[00:57:14] holding you accountable by the way you hold yourself accountable because you have on your own website

[00:57:19] you know it from the major media outlets going back to oh nine your thoughts on the economy and

[00:57:26] the market and very few people do that so I certainly applaud and appreciate the fact that you're

[00:57:30] doing that I just have an interjected if I'd been wrong all those years I don't know

[00:57:36] that I would have both of what that's true I'm not in it how do my record you should be and

[00:57:41] so so you know in terms of thinking about how you've been able to be more right than wrong

[00:57:49] how would you kind of bottle that up I think um I've had sort of an interdisciplinary approach

[00:57:56] to forecasting involving obviously macroeconomics but also some appreciation for the fact that

[00:58:06] macroeconomics is really just the aggregation of what happens at the micro level you know Peter Lynch

[00:58:14] once said look around you and see what you're buying what your kids are buying and all that and

[00:58:20] maybe they'll give you some ideas for investing and so I I speak to a lot of people you know

[00:58:26] asking what what they're doing you know my friends that are retiring I ask them what

[00:58:31] what they're going to do and so it's you know I pick up a lot of you know the fact

[00:58:37] puts out this beige book so I don't I don't have a beige book but I talk a lot of people

[00:58:43] I'm fortunate enough to have a gardener so I ask him you know what's going on in his life

[00:58:49] would what he's buying uh Dr. Taxi drivers I talk to clients that's just about the

[00:58:56] markets but you know what what what they're doing in the spare time are they building a new house or

[00:59:02] you know how they go in some place so I think just kind of being in touch with reality

[00:59:11] helps a lot the other thing is I um I think a lot of economists really start out with the theory

[00:59:19] and then look for their uh the data that supports their theory and that's just not not the way

[00:59:25] we do it you know we as I said we love data we love charts we kind of look at the charts and

[00:59:33] then ask yourself what's really what's going on behind the charts in terms of people making

[00:59:40] decisions people buying things and so I think that that helps quite a bit we have a standard

[00:59:50] closing question that we like to ask all of our guests which is based on your experience in the

[00:59:54] kids if you could teach one lesson to your average investor what would that be? Oh I mean that's a

[01:00:00] way up you know for stock investors by dividend yielding stocks put them away you know obviously

[01:00:07] good good companies are better than that the dividend growers are better than that and uh you're

[01:00:13] gonna get a lot of you lot of sleep you know I think uh to make money in the markets by picking

[01:00:20] tops uh is uh is it is tricky because then you've got to pick the bottom um fortunately for me

[01:00:28] that's one of the things I'm supposed to do and so it gives me something to do if I just told people

[01:00:34] all the time you know just just but don't yeah I got nothing to tell you but by stocks uh that's uh

[01:00:40] you know people want to hear well yeah but are we about to see like a 50% impulsion and nobody wants

[01:00:47] to kind of live live through that but I think um I'm in the Warren Buffet Camp of viewing stocks

[01:00:55] as long run investors I haven't said that I see Warren Buffet's got more cash in his portfolio

[01:01:01] so he's had it in a very long time so that kind of has me a little bit concerned so I do kind

[01:01:07] of pay attention to that on a short time basis I think you know being somewhat skeptical about the

[01:01:14] senses uh when when when everybody's so convinced things are gonna go wrong uh ask yourself you know

[01:01:22] try to think about what might might go right then again look look around you you know you know

[01:01:28] what do you see do you see do you see do you see some some optimistic things going in out there

[01:01:36] from great I thank you very much we really appreciate it very welcome thank you I enjoyed it

[01:01:41] thanks so much for tuning into this episode of excess returns you can follow Jack on Twitter

[01:01:46] at at practical quant and follow me on Twitter at at JJ Carbano if you found this

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