Edward Yardeni is an Israeli-born American economist. He is the president of Yardeni Research. He is also the former chief economist for Deutsche Morgan Grenfell.
Yardeni is known for his coining of the "Fed model", a disputed theory of equity valuation, and his economic predictions, including predictions that the Year 2000 problem would cause severe economic problems. He also coined the concept of "bond vigilante" in the 1980s. [1]
Yardeni was born in Haifa, Israel. His father worked as an engineer and his mother as a teacher. When he was 7, his family moved to the United States, first settling in Cleveland, Ohio, though his family later moved to Campbell, California, and New Rochelle, New York. He attended Cornell University, [2] and pursued higher education at Yale University, where he earned a PhD in economics. He taught at Columbia Business School after graduation, and also had stints working for the Federal Reserve Bank of New York, Federal Reserve Board of Governors, and the US Department of the Treasury. [3]
By the 1990s, Yardeni was a well regarded economic forecaster. He drew media attention for his bullish predictions for the Dow Jones Industrial Average. [2] [3] In 1998, he was named as having done the best job of forecasting the nation's economy for last quarter of 1997 in a semiannual survey conducted by The Wall Street Journal. [4]
In the late 1990s, Yardeni coined the "Fed model", a disputed theory of equity valuation that compares the stock market's forward earnings yield to the nominal yield on long-term government bonds, and that the stock market – as a whole – is fairly valued, when the one-year forward-looking I/B/E/S earnings yield equals the 10-year nominal Treasury yield; deviations suggest over-or-under valuation. He first used the term when commenting on a report on the July 1997 Humphrey-Hawkins testimony by the then-Fed Chair, Alan Greenspan on equity valuations. [5] In 2014, Yardeni noted that the predictive power of the Fed model stopped working almost as soon as he noted the relationship. [6]
In the lead up to the year 2000, Yardeni predicted that computer problems related to the Year 2000 would lead to a recession that year by disrupting global supply chains, sinking earnings projections for thousands of companies, and bursting the stock market bubble. [7] [8] In January 2000, after no major issues occurred, he admitted he had been wrong. [8]
In 2018, Yardeni published Predicting the Markets: A Professional Autobiography. [9] In 2021, he published In Praise of Profits!. [10]