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I get to the nifty, let me go across. We joined by Ed Yadini. He's president and chief investment strategist at Yadeni Research. Uh Ed, great having you. Let me first start off by understanding your view with regard to bonds and and what what's happening in the bond markets especially in the US and how that is not really impacting equity markets in the US and otherwise.
Uh what's the view there? Well, we have a perfect storm in the global bond market and when you look at things on a global basis, uh we've seen Japanese bond yields increase significantly because they were so extraordinarily low and the Bank of Japan has been raising it short-term rates. So that was a very important source of very cheap borrowing money uh that was used to buy government securities around the world.
And so as that uh yen carry trade unwinds that's put upward pressure on yields uh around the world that I think explains why we've seen a synchronized increase in in bond yields. Now there's extremes in Europe. We've got the French situation which increasingly is reminiscent of what happened in Greece in 2010 with their debt crisis.
It certainly looks as though France has the potential and may already be in a debt crisis. Um, here in the United States, I think that a good part of why bond yields have risen is simply because the economy has been so strong and it's been strong because the consumer has continued to spend. the capital spending has been very strong because of AI and of course we have a huge government deficit and all those things have uh stimulated strong economic growth and I think we're seeing the bond market just sort of repric to reflect the fact that uh maybe the neutral interest rate at which the economy can grow without generating a lot of inflation on a long-term basis is higher So it's uh it's a wild situation around the world right now for sure.
And uh how do you look at uh the current situation with respect to uh the AI spend which is which has been talked about uh you know you at at one on one hand you have the uh uh recording hardening of the uh yields which are coming in uh and on the other end you have the spense which are going up. uh do you see that at some point in time there would be a balance which will be brought in and the markets will start factoring in the cost of that.
Well I I think um there is definitely a a fiscal crisis around the world and uh deficits in in in theory are very easy to fix. All we have to do is increase revenues and cut expenses. Uh the problem is the uh in many countries uh the political will to do that just isn't there. Uh liberals in various countries don't want to cut spending and conservatives don't want to increase revenues.
And so that's the problem we're having. And then around the world uh interest rates have gone up which then makes the situation worse because the cost of financing all that debt really is is troublesome. Uh there is a potential for the debt crisis that we see in France to show up in other countries as well.
Uh but uh again in the United States I'm not convinced we're getting too close to to to that dangerous situation. And I think for now it's simply better than expected economic growth. H and uh Ed I'm I'm just trying to therefore understand do you believe AI are we in a bubble uh to a large extent NASDAQ hitting record highs?
How should one reconcile? Well, I I think that uh you know I I don't know about you. I I have AI fatigue. Uh I think we all have some AI fatigue. can certainly make your head spin because every day we get different news that uh points to different conclusions and some people are very concerned that it's going to be very dangerous.
Uh others are concerned that it's a bubble. I I think the way to really calm down about it is to realize that AI is the real deal. It's it's here to stay and it's all about processing as much data as possibly as as much as much as we can as fast as we can as cheaply as we can and we're doing that and uh there's never going to be a shortage of data.
So the end the end demand for AI compute uh is going to remain strong. I don't see anything that's going to suddenly slam the brakes on it. But of course, how we develop AI is uh is very complicated. Financing is very complicated. Relationships of these companies is very complicated. U my conclusion is that investors uh have decided they're just going to buy the the NASDAQ 100 and uh assume that the winners are going to do a lot better than the losers.
And I think that's not a bad idea. I think uh uh owning the NASDAQ 100 as the AI play makes the most sense. And Ed, I wonder what you make of gold, silver at this point in time, the precious metals just given the rally in bonds. It's just eventually uh if there is uh uh a concern on on that end of asset class is likely to to benefit gold and silver, right?
Yeah. Yeah. Look, I I think uh the problem for gold right now is interest rates are going up, but that's a little peculiar because uh if if uh if the buyers of gold uh were concerned about the cost of uh of storing gold, the interest cost of of owning gold, uh yeah, I could see why gold would be uh hard hit.
Uh but the story for gold really has been central bank buying particularly Chinese uh central bank buying and they're not sensitive to interest rates. Uh these central banks they can buy gold they can store it and they can absorb the cost of financing it. Their main reason of course is uh they have a a target of ddollarization.
They want to be less dependent on the dollar and as a result they've been buying gold. So, I think uh that this uh situation where gold prices go down as interest rates go up, I don't know that that's going to last much longer. I think it at some point here I Well, I I think it'll last until bond yields stop going up and then when that happens, I think the focus will be back on the central bank buying.
All right. Uh Ed, wonderful talking to you as we always do. really good having you here and thank you for giving us that perspective.
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