WEBVTT - Edward Yardeni, president at Yardeni Research, Talks Earnings

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>In October of a number of years ago, Ralph Ankopora,

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<v Speaker 2>the giant of technical analysis, and Edward, you're Denny, with

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<v Speaker 2>all of his synthesis of economics and fundamental analysis, got

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<v Speaker 2>on board this bull market. There was fear on the

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<v Speaker 2>streets and they said go along. It's one of the

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<v Speaker 2>great calls of the modern age. Edward, your Denny joins

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<v Speaker 2>us this morning readjusting ever higher, ed with your beautiful CJ.

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<v Speaker 2>Lawrence like charts, even with CJ. Lawrence Green in the banner,

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<v Speaker 2>you do a log extrapolation of the s and P.

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<v Speaker 3>Five hundred.

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<v Speaker 2>Is that all this is we're climbing a wall of

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<v Speaker 2>worry because no one else out there has a courage

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<v Speaker 2>to simply extrapolate forward.

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<v Speaker 3>Well, I think we definitely are climbing a wall of worry.

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<v Speaker 1>And that's the best kind of bullmarket you can have.

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<v Speaker 1>You don't want everybody being belief. You want people to

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<v Speaker 1>to have concerns. I don't want people to to worry

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<v Speaker 1>on a personal level, but on a professional level. When

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<v Speaker 1>I see a lot of bearishness from a contrarian perspective,

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<v Speaker 1>it usually works.

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<v Speaker 4>Uh.

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<v Speaker 1>I've made some of my best calls on market bottoms,

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<v Speaker 1>uh when my gut was hurting and everybody was was

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<v Speaker 1>in a panic mode. So we're not in panic mode

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<v Speaker 1>right now. But on the other hand, there are a

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<v Speaker 1>lot of people worrying about what's going on in the

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<v Speaker 1>Middle East, and I'm not saying that's not worrisome, but

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<v Speaker 1>it's it's certainly adding to the concerns. They're worrying about

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<v Speaker 1>the bond market, they're they're they're worrying about a k

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<v Speaker 1>economy that the consumers not going to continue to spend,

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<v Speaker 1>and they're working worrying about too much capital spending. So

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<v Speaker 1>there's a lot of worries up there out there. But meanwhile,

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<v Speaker 1>it's really pretty simple or the market is also getting

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<v Speaker 1>kind of rushed up. It's been a rocket ship because

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<v Speaker 1>of earnings.

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<v Speaker 4>And what we're starting to see once again that you know,

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<v Speaker 4>as a pillar of this market. I guess last year

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<v Speaker 4>was you know, kind of a narrower breath in this marketplace.

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<v Speaker 4>Is the big tech stocks once again leading this market

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<v Speaker 4>on good earnings. Certainly, are you concerned about that, I guess,

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<v Speaker 4>narrowing breath in the market.

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<v Speaker 1>Yeah, Well, again, I think people are always looking for

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<v Speaker 1>something to worry about with regards to the market, and

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<v Speaker 1>the breath issue is back. But however, once again I

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<v Speaker 1>would point out that the earning story is fantastic for

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<v Speaker 1>the S and P five hundred earnings breadth is actually improving.

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<v Speaker 1>And not only that, but we've got the small cap

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<v Speaker 1>and MidCap earnings which had been kind of in a

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<v Speaker 1>coma since twenty twenty two. For the past six months

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<v Speaker 1>or so, they're starting to really perk up, and expectations

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<v Speaker 1>are already showing a record high earnings outlook for this

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<v Speaker 1>mid caps.

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<v Speaker 4>So I mean again, I guess towards the end of

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<v Speaker 4>last year, we did have kind of a rotation out

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<v Speaker 4>of some of those big cap growth names into some

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<v Speaker 4>more Is there any legs left in that kind of trade,

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<v Speaker 4>maybe a small MidCap as you suggested, maybe some other

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<v Speaker 4>sectors here.

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<v Speaker 1>Well, I think that other sectors will participate in this

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<v Speaker 1>latest rally in this bull market. I think we're saying,

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<v Speaker 1>you know, one of the problems is the Magnificent seven

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<v Speaker 1>are are contributing to that. So consumer discretionary has been

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<v Speaker 1>boosted recently by improvement in Amazon, and communications services have

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<v Speaker 1>done well because Google and Meta dominate that space. But financials,

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<v Speaker 1>I think as still have prospects of doing better. You

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<v Speaker 1>know that there are signs that private credit situs not

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<v Speaker 1>get the worst, might actually be be getting better as

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<v Speaker 1>the economy continues to chuck along.

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<v Speaker 2>Ed your Denny with us, folks are going to can't

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<v Speaker 2>say enough about his newsletter. It's wonderful daily brief, really

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<v Speaker 2>one of the major subscriptions out there.

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<v Speaker 3>Ed, I'm going to assume long ago and.

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<v Speaker 2>Far away at Yale they didn't have econ five seventy

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<v Speaker 2>four applied empirical methods. This is back, Ediardenny, Folks was

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<v Speaker 2>back in a simpler time of macro micro our. Simon

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<v Speaker 2>White this morning at off the London Desk has a

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<v Speaker 2>spectacular walkthrough of derivative finance, looking at the Greek letters

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<v Speaker 2>of gamma, dispersion and correlation, and it's worry, worry, worry, OMG,

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<v Speaker 2>things are terrible. If we created a wall of worry

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<v Speaker 2>with our mathiness in modern global Wall Street.

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<v Speaker 1>Well, I don't think I'm a inventing a phrase here,

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<v Speaker 1>but it's all Greek to me. I actually did an

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<v Speaker 1>econometric dissertation for James Toubin, and I proved that his

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<v Speaker 1>theory was right for corporations, and so he loved it

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<v Speaker 1>and I got through, I got my PhD and moved on.

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<v Speaker 3>But yeah, I think there's too much.

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<v Speaker 1>I think a lot of economists start with theories, start

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<v Speaker 1>with the models, and then look for the data to

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<v Speaker 1>confirm it.

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<v Speaker 3>I worked the other way around.

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<v Speaker 1>You know Ben Bernanke and his memoir of being at

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<v Speaker 1>the FED that when he joined the FED, he had

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<v Speaker 1>to learn something that was rather new to him, and

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<v Speaker 1>he called.

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<v Speaker 3>The current analysis. And I kind of like that.

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<v Speaker 1>In other words, he had to learn how the world

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<v Speaker 1>really works, had to learn about markets and how markets

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<v Speaker 1>interact with data, and data impacts the markets. And that's

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<v Speaker 1>what I practice, I've been practicing on all along, is

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<v Speaker 1>current analysis, and that's a reality based economics.

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<v Speaker 2>Let me get the seconds. Got four more questions. The

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<v Speaker 2>bottom line, ed, is we have physics envy. And it

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<v Speaker 2>started with you know, Newtonian mechanics nineteenth century, and now

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<v Speaker 2>we've got alpha, beta, gamma, epsilon, delta, the others. And

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<v Speaker 2>I just, folks, I just think the difference, the distinction

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<v Speaker 2>between a Yar Denny strategy and some of the quad

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<v Speaker 2>strategy is the angst of the age worry, worry, OMG.

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<v Speaker 3>Paul Gamma dispersion. We used to call it.

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<v Speaker 1>We used to call it political economy, and then suddenly

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<v Speaker 1>it became a social science. Uh, and it's not a science.

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<v Speaker 1>It's uh, it's political economy. It it's too complicated to

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<v Speaker 1>put in a formula.

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<v Speaker 4>So ed, I mean on that front, there we've got

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<v Speaker 4>the market's got a lot of cross winds as it

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<v Speaker 4>released to geopolitics, whether it be tariffs from earlier this

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<v Speaker 4>year and last year, to the war in Iran. But

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<v Speaker 4>boy that at least the stock market seems to look

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<v Speaker 4>through all of that and focus on maybe just the earning,

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<v Speaker 4>which are arguably the most fundamental.

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<v Speaker 3>Yeah.

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<v Speaker 1>I think what's going on in the stock market is

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<v Speaker 1>everybody knows that based on history, that crises, a geopolitical

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<v Speaker 1>crises in the past, have turned out to be buying opportunities.

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<v Speaker 1>So when we get a geopolitical crisis, we get kind

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<v Speaker 1>of scared for a couple of weeks, maybe four weeks,

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<v Speaker 1>as we did in March, and then everybody remembers that

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<v Speaker 1>that's actually a buying opportunity. And that's exactly what happened

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<v Speaker 1>on March thirty first, is suddenly investors said, well, you know,

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<v Speaker 1>if the president's going to be looking for an exit

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<v Speaker 1>ramp and we're going to have a cease fire, then

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<v Speaker 1>we can buy stocks today at a lower price with

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<v Speaker 1>record high earnings ED.

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<v Speaker 3>Thank you so much. How's your beast doing.

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<v Speaker 2>I don't see your dog in the background there in

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<v Speaker 2>your couch dog

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<v Speaker 1>Okayans As Max is walking about, he's walking, probably reading

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<v Speaker 1>the Wall Street Journal or peing on it one of

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<v Speaker 1>the Ardn't you think you so much?