Ed Yardeni
Ed Yardeni
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Nobody believed in the model when it said that stocks were 60 percent overvalued and nobody believes in it now. Valuation is like beauty -- it's in the eye of the beholder.
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I think the folks at the Fed would like to raise the federal funds rate as high as they can short of seriously depressing economic growth. They want to make sure they have plenty of room to ease next time they have to do so.
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The market goes through these bizarre mood swings. All of a sudden, people are concerned that we're in a soft patch and that it may get worse before it gets better.
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Early in 2004, I predicted that energy's share of the S&P 500's market capitalization would rise from just below 6% at that time to 15% before the end of the decade. In January, its market-cap share was up to 12.1%, while its share of earnings had risen to 9.1% from 6.0% in early 2004.
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After rounding up all the usual bearish suspects to blame for the market's disappointing performance this year, I've narrowed the problem to the price of oil. Investors fear that higher energy costs must eventually depress earnings growth.
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The surprises should be on the upside. It all adds up to very good fourth-quarter numbers.
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Earnings are still going to grow as interest rates and inflation remain low.
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For two years, we've seen this tremendous increase in prices, yet the core inflation rate has stayed at 2.3 percent or less, and the only explanation for that is globalization means inflation is contained.
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If Y2K is a disaster it will be a global one, not a local one,
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Earnings will recover and valuation multiples, which got crushed, will get back to where they were at the beginning of the year,
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The actual end users, the businesses that actually need these commodities, are discovering that they are making more money by accumulating inventory than turning it into products. It's sort of creating a panic-buying situation, scrambling to hoard.
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There could be a severe recession. That doesn't mean there won't be life on the planet Earth in the year 2000, 2001 and beyond.
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What is really new in the commodity world is the extent to which hard commodities have been converted to financial assets through exchange-traded funds and hedge funds.
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the government is one of the choke points in the year 2000 problem. It's one of the areas where we could have disruptions that could in fact produce a recession.