The U. S. is a Safe Haven for Equity Investors: Ed Yardeni

By on December 12, 2011

Ed Yardeni - Yardeni ResearchBecky Quick of CNBC interviewed economist Ed Yardeni, president, Yardeni Research, this morning. Yardeni said he feels the stock market is a bargain with the forward P/E on the S&P 500 being about 11.5. He added the average historic P/E is 13.5, while only half a year ago 14 to 15 seemed normal.

Yardeni considered the U. S. a safe haven for equity investors as it has been outperforming the global markets. Quick asked Yardeni if he still thought the S&P 500 would be at 1,350 by the end of the year.

Yardeni believed the European solution was a continuation of the “muddling along.” He said at some point the ECB will come in. Yardeni said the ECB made an important comment on Thursday when they stated they would provide unlimited lending to European banks for a three-year term. Yardeni added that Nicholas Sarkozy said maybe what the banks can do is borrow as much as they need and buy our government bonds. At the same time “the Merkozy pair” said there would be no more haircuts outside of Greece indicating the bond vigilantes are “getting a lot of cover.” Yardeni felt the CDS market outside of Greece might continue to work.

Yardeni said the bond yield in Italy this morning is still below 7%. He added there’s a lot of recent talk that the Euro would “be zero and just disappear, implode.” However, the Euro is still out there and hasn’t imploded. Yardeni continued, “there was some talk about December 9th being a day of infamy, it wasn’t VE day, for sure, but it looks more like D-day.” Yardeni added it’s going to be “a long, long battle, but i think they’re actually on the road to get this thing fixed.”

The conversation continued with Yardeni’s opinion on ECB President Mario Draghi’s role in the crisis, the current state of affairs in the U. S. and China, more on the bond vigilantes and the yield curve, Italian bonds, the labor market, profit and economic growth prospects, and the resistance of Washington to allow expansion of oil reserves.

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