00:00At seven weeks into the war, I mean, are you seeing through the fog yet?
00:03I mean, there's a sense that perhaps investors feel we are closer to the end of the war now.
00:09Yes.
00:10Well, it's interesting when you look at the history of geopolitical crises,
00:14especially as they affected the S&P 500,
00:18history shows that geopolitical crises turned out to be great buying opportunities.
00:23So just when everything looks most dire and grim,
00:28that's when investors come in and conclude that the war will eventually end and peace will follow.
00:38So I think that's the situation we're in right now,
00:41is investors are looking past the war, figuring that it's not going to last much longer,
00:47that they could be wrong about that.
00:48Much depends on how the Iranian regime responds to negotiations.
00:56Both sides are kind of dug in.
00:59The U.S. thinks that we've won and Iran thinks that they've won.
01:03And so nobody's ready to concede much.
01:09Ed, you called the bottom to the market on March 30th.
01:13I'm just wondering whether there is a sense that investors are dangerously complacent.
01:18I mean, some are saying that the lasting impact of this Iran war is going to be stagflation.
01:23Is that being priced in or not?
01:25Right.
01:26Well, for a while, there was a concern that the relevant decade that we had to worry about
01:32was all of a sudden the 1970s, the stagflation of the 1970s.
01:37We had two energy shocks.
01:39The second one was, of course, related to the Iranian revolution.
01:42And those energy shocks spread very quickly into other prices and caused a recession.
01:50And it wasn't until late in the 70s when Paul Volcker came in that he slammed down the monetary
01:56brakes.
01:57And then we had a really very severe recession at the tail end of the 1970s.
02:02I think that's still a concern.
02:03It's still a relevant analogy.
02:06But I've actually been talking about the roaring 2020s, the 1920s as an analogy.
02:13Economy has been remarkably resilient.
02:15I mean, when you think of all the stress tests that the economy has passed since the
02:20beginning of the decade, it's really quite impressive that we had the pandemic, the two
02:25month lockdown in the United States.
02:27Then we had the supply chain disruptions, the surge in inflation, the Fed raising interest
02:35rates dramatically, little mini banking crisis in 2023, and then tariffs last year.
02:43And here we are with real GDP at an all time record high.
02:47It does look like it slowed down in the fourth and the first quarters.
02:51But I think a lot of that was actually weather related, but some really bad weather.
02:56And I think the spring is going to be pretty strong.
03:00So you're expecting resilience.
03:02Does it necessarily justify the kind of price action we're seeing in the tech space right
03:08now?
03:08I mean, we talked about how, you know, that rebranded failed sneaker company just because
03:13it's been rebranded as an AI infra company.
03:17It's our surge of 600 percent.
03:20Yeah, well, I'm thinking of adding the, you know, AI to the name of Yardini Research, you
03:25know, and see if anybody wants to buy us for skillions of dollars.
03:32There is a lot of money out there that's chasing some pretty crazy ideas.
03:36So there is an aspect of a bubble to it.
03:38But I think one of the reasons that we're seeing AI stocks leading the way here is because
03:44with all the stresses of the past several weeks, the AI stocks really just had a correction.
03:49And the first, you know, knee-jerk reaction of buying the dip led to the Magnificent Seven
03:56outperforming the rest of the market again.
03:58So, look, I think AI is here to stay.
04:02I think everybody agrees with that.
04:03I think the big companies involved in AI are going to be the survivors and going to have
04:09the greatest profits.
04:10Maybe they'll buy up some of these dinky little companies that rebrand themselves or maybe
04:16they'll just fail.
04:19But again, the resilience of the economy really speaks to the fact that our capital markets
04:24can absorb a lot of stress without really seeing much downside in economic activity.
04:33Look, the private credit situation was already of concern before the war.
04:39So if you had the war and what it could do to consumer spending, maybe cause a recession
04:44and then you get private credit concerns, it could have all turned out to end rather badly.
04:51But instead, the market started to see that that's not necessarily the case.
04:56I mean, banks are still lending.
04:58The bank profits that came out this week, the last week, were extremely strong.
05:04The bank CEOs like Jamie Dimon said that consumers are in good shape.
05:11And by the way, Jamie Dimon has been consistently an alarmist about the economic outlook.
05:17And I, with all due respect, consistently wrong.
05:20But then again, his stock has gone up.
05:22So he can't feel too bad about a bad forecast.
05:25But seeing his stock doing so well.
05:28So, Ed, what do you do with AI?
05:31What do you do with tech stocks?
05:33I mean, you ended your 15-year overweight call on tech recently.
05:37And also recently, you said that, you know, tech valuations are looking pretty attractive.
05:42What do you do?
05:43How do you square that?
05:44Yeah, well, I've been promoting the idea of stay home.
05:50In other words, overweight the United States really since 2010.
05:55The problem is that it worked out so well that the U.S. got to be 65% of the
06:01market capitalization of the MSCI all-country world.
06:06And for me to recommend overweighting something that's already uncomfortably overweight, 65%, I mean, yeah, America's got a lot going
06:13for it.
06:14But, you know, there's definitely opportunities in the rest of the world, particularly in emerging markets.
06:20Emerging markets used to do well just when commodity prices went up.
06:24And they did very badly when commodity prices went down because many of them were commodity producers.
06:29But now a lot of them have very large middle classes that are very aspirational, want to prosper even more.
06:37And so there's tremendous potential demand, not for commodities anymore coming out of emerging markets, but consumer demand domestically in
06:49emerging markets and health care demand in emerging markets.
06:52And then they all, you know, want to have industrial basis of the industrial stocks.
06:59And I want to touch on Treasuries, 10-year yields at 425.
07:03Where should it be?
07:04Is it still too high currently?
07:07Well, I've been talking about the bond yield likely to trade between 4.25% and 4.75% this
07:18year.
07:18I don't think we'll get back up to 5% because I think at 4.75% you'll get lots
07:22of buyers.
07:23But I'm amazed, really.
07:26You know, here we're going to have a more troublesome inflation environment for the next few months at least.
07:33And yet everybody seems to, nobody wants to utter the word transitory because it's kind of a jinx based on
07:41what happened in 2021 and 2022 when everybody thought it was transitory.
07:47And it turned out to be a little bit more persistent than people thought.
07:51But the bond market seems pretty comfortable to me right here, quite honestly.
07:56We've got some bearish factors out there.
07:58But on the other hand, the U.S. bond is still viewed as a safe haven.
08:03And it's been calm compared to soaring bond yields in Japan or in some European countries like the U.K.
08:14And how about the dollar?
08:16It's given up gains since the start of the Iran war.
08:21Where do you see the dollar headed?
08:24Nowhere fast.
08:25I mean, you know, the beauty of our business is it's not that complicated.
08:30Things either go up, down or sideways.
08:33And, you know, usually people kind of say there's only two ways, up or down.
08:37But it's been going sideways.
08:39There's no reason why you shouldn't continue to do that.
08:42Foreigners aren't bailing out on buying U.S. equities and debt.
08:47Quite the opposite.
08:47Last year, they bought something like $700 billion in U.S. equities, all-time record high.
08:52And that was the year where everybody was talking about de-dollarization and, you know, very bearish environment for the
08:59dollar.
09:00But I think there's no reason why it can't just kind of hold its own right around these current levels.
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