James Pethokoukis

Politics and policy from inside Washington

Ed Yardeni doesn’t need Prop. 19

Nov 2, 2010 12:10 UTC

The investment strategist just needs the right electoral outcome today to be bullish:

I’m high on America. I expect that stock prices will move higher over the rest of the year. I’m still targeting 1250 by the end of this year and 1400 by the end of next year. I’ve been expecting a decisive regime change in Congress for over a year. Today’s election may be even more decisive than I expected. That will certainly lead to gridlock on lots of issues. However, I believe that the Democrats and Republicans will agree to extend the Bush tax cuts for two years across the board during the lame duck session of Congress. They won’t agree on much else, but that’s probably a good thing.

We are all Austrians now (when it comes to economics)

Feb 3, 2010 15:19 UTC

Or so says Ed Yardeni, who puts the current economic situation in a philosophical perspective:

We are all Austrians now. Over the past few weeks, in Los Angeles, San Francisco, Sacramento, New York City, and London, I’ve run into more and more institutional investors whose economic and financial views either knowingly or unknowingly reflect the influence of the Austrian School of Economics. I am in Zurich today and Geneva tomorrow.  … How do you know if you are an Austrian? Here is a simple test. Answer yes or no to the following question: “I believe that this will all end very badly.” If you agree, then you are probably worried that all the government policies that rescued us from a depression in 2008 and 2009 only postponed the coming wipe-out of debt and the collapse of asset prices–and will actually make the inevitable calamity even worse.

I share these concerns, but I believe that Globalization will save us from such an awful fate. The end of the Cold War marked the end of the greatest trade barrier of all times. The resulting proliferation of free trade liberated billions of people around the world from their lives of quiet desperation. Standards of living are rising rapidly, especially in emerging economies, as prosperity displaces subsistence. Previously immiserated people are less miserable. They are earning enough so that they can both save and have more discretionary income to improve their material well-being. In other words, Globalization is stimulating more growth in incomes, saving, and consumption. Such growth is the best antidote for the grim Austrian prescription of debt deflation.

COMMENT

Yes, we are all Austrians now…

http://www.youtube.com/watch?v=d0nERTFo- Sk

Posted by Austrian School | Report as abusive

A bullish case for the US dollar

Jan 12, 2010 14:15 UTC

Ed Yardeni expounds:

I’m not sure, but it seems to me that the dollar is the best of a dodgy breed. The Old World nations–Europe, Japan, and the United States–have rapidly aging populations. Their outlays on social welfare are rising faster than their GDPs. Their dependency ratios–the number of retired persons supported by each worker–are taking off. This suggests to me that the dollar, the euro, the pound, and the yen (DEPY) might all continue to be good shorts relative to gold. (See Figure 5 in our Gold chart book linked below.) Gold is widely viewed as a hedge against inflation. More broadly, it is a hedge against out-of-control debt-financed government spending.

The currencies of the New World should also continue to outperform those of the Old World. While the economies of the Old World are likely to stagnate as a result of the expansion of their social welfare states, the economies of the New World are likely to continue to rapidly improve their standards of living. The proliferation of free trade and globalization should continue to boost prosperity in the emerging economies of Asia, Africa, the Middle East, and Latin America. As discussed below, China is leading this charge and pushing up commodity prices. Australia, Canada, South Korea, and Taiwan are included in my New World paradigm.

COMMENT

May this new year really be the time for economic growth and development for all.

Tracy, Velocity Fulfillment

Healthcare math doesn’t work

Oct 20, 2009 13:36 UTC

Ed Yardeni runs the numbers:

Nominal GDP rose at a compounded rate of 4.2% from 1999-2009. It isn’t likely to grow any faster over the next 10-20 years. However, extrapolating the same growth rate of per capita retirement spending (5.1%) and adding the higher projected growth of the senior population (3.0%) suggests that social welfare outlays might grow by 8%. That’s significantly higher than the likely growth of nominal GDP (say 5%). Since the tax base can’t grow faster than nominal GDP on a sustainable basis, something has to give on the per capita spending side.

I’m not sure how we are going to pay for the welfare needs of all the Baby Boom seniors. The only logical solution is to continue to extend the retirement age for beneficiaries. Bismarck invented social security and picked 65 as the retirement age figuring that few Prussians would live that long. Retirement is a rather modern concept. In the not too distant past, people worked until they couldn’t, and then passed away soon after. Now we are living into our 70s, 80s, and even 90s.

M2M and the financial sector rebound

Sep 29, 2009 18:47 UTC

Ed Yardeni and mark-to-market accounting:

Do you recall “Time of the Season” sung by The Zombies in 1968? The Q3 earnings season is about to start. For the third quarter in a row, there will be fewer zombies in the S&P 500. These were the living dead companies that finally died during 2008, or they survived and are mostly coming back from the dead. Many of them are in the Financials sector. They could deliver some big positive earnings surprises during Q3 thanks to the suspension of mark-to-market accounting on April 2. … The Doomsters were quick to add up all the write-offs they projected as the financial crisis intensified largely as a result of the death spiral attributable to marking the value of assets into the oblivion of extremely illiquid or nonexistent markets. It was insane that the MTM rule wasn’t suspended sooner. Yet both Ben Bernanke and Hank Paulson insisted that it would be unwise to change the rule in the midst of a crisis. They were dead wrong as evidenced by the extraordinary rebound in the stock market ever since March 12, when Rep. Gary Ackerman, my Congressman, leaned on Robert Herz, the head of FASB, to suspend the rule, which is what he did on April 2. The grand total of all the write-offs attributable to the financial crisis is now likely to fall quickly.

COMMENT

I do not even know how I ended up here, but I thought this post was great. I don’t know who you are but definitely you are going to a famous blogger if you are not already Cheers!

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