Staying Focused Amid the Ukraine Crisis
The ripple effects of Russia’s invasion of Ukraine have already created several market reactions as investors search for “safety”, but what can you do to stay focused and prepare for the unknown?
In this live webcast, Professor Jeremy Siegel, Senior Investment Strategy Advisor to WisdomTree, Jeremy Schwartz, Global Chief Investment Officer, and Kevin Flanagan, Head of Fixed Income Strategy discuss:
- The macroeconomic impact of this ongoing crisis.
- Potential outcomes and implications for Fed policy, if any.
- Strategies for maintaining long-term goals while navigating short-term uncertainty.
Live event was held on 2/28/22 at 4:15 pm ET.
Hi everyone. Thank you for joining today's conversation on Staying Focused Amid the Ukraine Crisis with Professor Jeremy Siegel, Senior Investment Strategy Advisor at WisdomTree, and Emeritus Professor of Finance at The Wharton School of the University of Pennsylvania. Jeremy Schwartz, WisdomTree's Global Chief Investment officer, and Kevin Flanagan, WisdomTree's Head of Fixed Income strategy. And with that, I'll turn it over to Jeremy to get us started.
Thanks everybody for dialing in. A very timely call. Professor, thanks for making yourself available down from Florida. We know you've got a lot happening down there, but a lot of uncertainty in the markets on what's happening in Europe, as well as some big news happening from the Fed, which is a big story from you. So we're going to let you kick off some comments. Kevin and I will come in with some news from WisdomTree. We know there's a lot of questions coming in. We'll be here to answer any questions we can, and we'll follow up with you all if we don't get to your specific question. But, Professor, let me turn it over to you to kick us off.
Thanks, Jeremy. Yeah, let's start with Ukraine. I mean, there's two aspects that have impact. One is oil. I imagine the uncertainty is adding five to $10 per barrel to oil. It's hard to know. I mean the Saudis do have some capacity. They don't want it to go too high. That just accelerates the move towards electric. There's that sweet spot they like. Before Ukraine, we all know that oil was in short supply and going up. And way before Ukraine, the experts that I talked to said it was going to hit a hundred. We can't blame this all on Ukraine, but Ukraine will add certainly a little extra layer there.
Fortunately, I mean, some people are trying to compare this with the 1970s. It does not really compare in the following way. In the 1970s, we imported 60% of our oil. Today we're barely importers. We import some, we export some, we are almost self-sufficient. We were self-sufficient and then we become a little less so, but that's very important. We're not net importers.
Secondly, the energy efficiency of the United States has gone up by three folds since the 1970s. The amount of energy needed to produce a unit of GDP [Gross Domestic Product] is one quarter of what it used to be. Yeah, oil goes up, and gasoline is visible and has implications, but it is not anywhere near as serious as in 1970s.
There's obviously implications for the finance system. Getting Russia off of the SWIFT system, how will that mean for settlements? I'm going to talk about Bitcoin, because clearly the 10% move in Bitcoin today is related to that very situation. I will speak of that. Clearly the Russia invasion opens up a lot of uncertainties, including the possibility, although I still think definitely against the odds, will this incentivize Chairman Xi to move onto Taiwan? Which actually is far more serious than what is happening, at least the impact directly on the U.S. in the Ukraine.
So there's heightened uncertainty. You see it in the VIX index. As I say, the absolute direct effect is not all that much. Clearly, certain of the oil manufacturing, companies have ties with Russia. Some may have to mark those assets to zero. It's very uncertain what is really going to happen to some of those. One reason why, Exxon Mobil and several others have fallen and not risen as they normally do when prices soar in the oil market. So it does have some implications for some of those with ties in that, but the truth of the matter is that Russia is not an economic giant.
Let's move on to what is very important, and that is the Fed. Fed is far more important than Ukraine. Very frankly I am concerned that the problems in Ukraine will be used by the Fed as an excuse not to tighten as much as I believe they must tighten to control inflation. I was very encouraged. As some of you know, Jeremy Schwartz and I cohost a serious XM radio show every Friday called Behind The Markets. That's channel 132, am I right, Jeremy? Yes. And the whole time we spent interviewing St. Louis Fed president, James Bullard. I did make the news wires actually.
I was very encouraged by the fact that he said it's not going to delay the way...He's a voting member. It's not going to delay the way I'm going to vote. He said, "I absolutely want a rate of 1% by July. Then let's look at what is, and then continue to hike after that." I think he definitely wants a 50 basis point hike in March. I think that's absolutely appropriate. He did open up the possibility that if we wanted to go 25 because of the uncertainty, and then jack it up to 50 at the May meeting, okay, but he wanted 1%.
Several other members have been a little bit more dovish. In my opinion, not moving, because the Fed is so far behind the curve. That not moving rapidly will be the third greatest policy mistake in the 110 year history of the Federal Reserve. The first one being not acting during the great depression and letting the banking system fail. The second one being, and this is what I worry about a repeat, using an excuse during the OPEC embargo which raised oil prices not to tighten. And in fact, they let the money supply increase to try to offset the contractionary forces of the embargo. That proved to be a terrible mistake. And of course Volcker had to stand in, and eventually in 1979 raised the Fed funds rate to 20%.
Now, we're not going there. I'm just telling you that all economists at studies say that was a mistake you do not delay because of some rise in energy prices. So we will see how that will play out. We will see how that plays out next week, because Chairman Powell will be testifying before both the House and the Senate subcommittee. That's going to be extremely important to hear what he has to say about his view on the tightening. We will certainly hear that.
As you know, many of you have been on my calls for the last two years. COVID struck barely two years ago, and right away I was saying the expansion is too great. And then we were just pouring fuel on the fire, particularly with the Biden administration. That rescue package was totally unnecessary, but I also fault the Fed, because the Feds increase in money has been unprecedented with the money supply increase in 2020 being the greatest in the 150 year history of data on the Fed, and the double digit increase that we have experienced even after the bubble of support from March and July, which by the way, I'm applauding the Fed and the government for what it did, but it did not pull back. And that is the cause of our problems today. They must stand firm, in my opinion. And we will get a clue to that next week.
As far as valuation is concerned, we are actually now trading on the S&P  at under 20x, next 12 months of earnings. Well, 2022 operating earnings on the S&P are forecasted $220 a share. I guess we're just under 4,400. We're just under that. I think 19.5x. If you take out tech and communications, which is like tech, you're selling it like 16 times earnings. I mean, that is cheap. In a world where interest rates are still zero, even going up, they're still extremely low in a world of negative interest rates, real interest rates. I mean, this is a cheap market.
Now, when I say cheap, it is not as cheap as it fell in the 1970s. We're not talking about 10, 12 P/E [price to earnings] ratios, but we're talking about relative interest rates. I think a bargain for long term investors. Now, what does that mean for the short term? It means that because the Fed is going to have to type much more than the market expects, a rocky road for this year. Rocky means maybe zero to 5%. I don't really foresee a bear market in S&P. I said two months ago, I thought a correction in S&P, but a bear market for NASDAQ. I don't know. We certainly, on an intraday basis, got two bear markets in NASDAQ. I'm not quite sure whether we've got it on a closing basis quite yet. I still think that the increases that will have to be initiated are greater than the market expects. Oh, we may be at well over 2% by year end. But remember, where else are you going to go? Stocks are real assets. And when we talk about tightening relative to the past, we're still talking about extremely low interest rates, even if they get to 3% or 4%.
I do want to mention Bitcoin, the ostensible reason, at least as I read in the press, and it seems reasonable to me that why Bitcoin went up 10% is because of closing Russia off from the Swiss system might cause them or other central banks to turn to transfers in Bitcoin and other cryptocurrencies. Quite interesting. I don't know the capability of anyone to close that down. You could ban banks from dealing with the Russians in crypto, but the Russians can certainly deal in crypto with the private buyers and suppliers, although if that's recorded and sanctions are initiated that could be against the law.
It does show you that you can't take a reserve currency like the dollar for granted. The inflation is already challenging the dollar. It's depreciating at a rate of over 7% to 8% a year because of inflation. You do not want other reasons to cause people to switch away from the dollar, so controlling inflation and raising your interest rates is one reason to make your money attractive. The other is to improve your entire electronic transfer systems that could do with improvement and monitor and be able to stop transactions in cryptocurrency from various sources. So, that is going to be a very interesting thing to watch.
Let me just finish up before we get comments from Kevin and Jeremy about what's coming up. Of course, tomorrow, the first business day of the month, we do get that important ISM manufacturing index. Two days later, we get the service sector. The end of the week, we will get the employment.
Now, honestly, what I am looking at most closely nowadays, and have been for over a year, is the price components of all these announcements. It's the inflation component that will change the minds of the Fed towards aggressive tightening. Do not think that the Fed just decides in January, "We're going to tighten five times in this year." They really don't know. They bounce around with the data. And we are, on March 10th, going to have another CPI [Consumer Price Index]. If you want to know the truth, besides Powell's testimony, which will be the question of how firm he's going to stand, and I think he has to take a firm stand, but we'll see, that's not a slam dunk, because he's been very dovish. But the price index that comes out on March 10th for the month of February, which I fear will be worse than expected again, and which of course prompted very hawkish comments after the January figures were released, may bring other members of the Fed to the 50 basis point side.
Of course, developments in the Ukraine as they come about over the next several weeks will play into it, but given that that does not get worse and stays on par with what it is, the Fed still has to go about the tightening that it must do. It is March 16, so following the CPI, the meeting will take place and the decision will be made, and that's a quarterly meeting, so we will also get the set of dot plots and projections for all the major macroeconomic variables through 2022, as well as '23 and '24. So with that, I'm going to hand it over to ... Well, so Kevin, do you want to speak? Or Jeremy?
Sure. I'll chime in for a second. I was certainly an avid listener on Friday to your guys' conversation with Mr. Bullard. I thought it was interesting that in the beginning he was talking about things from an economic standpoint, how Russia really doesn't have much of an impact, I think, macro wise, on the US economy. And the way that I was looking at it, especially after the announcements this week with respect to SWIFT and some of the things you were just referring to, was looking at the funding markets. Just like we had in the financial crisis with March of 2020 and COVID, I like to look at the funding markets to see, are we seeing any kind of stresses? And if you are, does that impact, perhaps, where the Fed goes?
So I was looking today at some of the dollar swap markets and they're slightly elevated from where they were earlier in the year, but they're certainly not showing off any alarm signals quite yet. Now, do you think there's anything along that kind of line of thinking that the Fed would, at any stretch of the imagination, do you think there's any chance the Fed does not raise rates in two weeks? Because I know I've gotten some questions on that. Is there a black swan event that would actually prevent the Fed from raising rates, in your opinion?
Well, the only thing that would be such an event is if there is some very aggressive moves by Putin towards the NATO countries. Now, he has made reference to nuclear readiness and several other statements that seem threatening. However, most experts believe he will not go into any of the NATO countries. Now, if he goes in the NATO countries, we are in basically a war mode, because we are by Article Five, forced to defend those NATO countries, and we should. That takes everything off the table. I think that's an extraordinarily remote possibility. However, you could call it a black swan type of event.
Another one could of course be some sort of Chinese attack on Taiwan, but it's way too soon. I think, basically, she is waiting to see how Putin's aggression in Ukraine turns out, which could take months and months and months before he makes any decision on the matter
One other quick question Jer, and then I'll throw it over to you. I was also looking at where we are with respect to the yield curve. I think what you said, and the title of this, “Staying Focused”, I think is so important and how the Fed, the inflation backdrop, is still really the primary focus here, and more than likely will be, not withstanding at a black swan event going forward.
So let's go back to the Fed raising rates, whether it's 25 or 50 on March 16th, or five, six, seven times this year. We've talked about the shape of the yield curve and where it could be going. And I know, Jer, I think you asked Bullard this question on the podcast, and I was actually going back to 1990s. There's only one other time the curve, looking at Treasury too, 10s, has been this flat before the Fed were to begin to tighten. And I thought it would be good if you could share that thought process from Bullard, what the Fed is thinking. Because the Fed doesn't want to invert the curve too soon, and he talked about using the balance sheet, perhaps as a mechanism where they could maybe forestall a inverted yield curve for a while longer. Because one of the questions came in talking about why would they go 50? They should just do a quarter, because they're actually still doing quantitative ease right now. So I wanted to tie it into that question we just got, if you could go through that a little bit with the yield curve, what Bullard was talking about, using their balance sheet perhaps to, I wouldn't say manipulate the curve, but to try to prevent it from inverting too soon.
Yes, he did bring up the quantitative tightening run off of the balance sheet. I pointed out that we have $4 trillion more reserves than we had prior to March 2020, the COVID pandemic, and he then quickly corrected me. He said, "Oh, we have $5 trillion more reserves." Now don't forget, this is on top of $4 trillion of reserves added during the quantitative easing episodes of Ben Bernanke following the financial crisis. I tried to pin him down, I said, "Well, do you know how long it would take to run off those excess reserves just to get to where you were in March 2020?" I mean, if you think about a hundred billion a month, you're talking four years. He didn't really go there, like they haven't set a schedule. I don't know, Jeremy, what did you ... I was a little bit left at ends with his answer there. However, I agree with him. A signal that ... I mean, it's a double signal. We raise rates and we're draining reserves, but to drain reserves so that it bites, in other words really restricts financial institutions to lend, you've got to get rid of trillions of dollars of excess reserves. And in terms of any sort of schedule in terms of the quantitative easing that they've been doing and all the others, it doesn't appear they're going to get there.
It was interesting because he was one who's been afraid of the inverted curve before, I believe. We've had him on in the past. He's expressed concern of not wanting to go there. And he did answer in questions of things like, "It's more debated, the balance sheet runoff, how much they ..." That's why he didn't want to commit. It doesn't seem like they've got that full agreement done. And they probably want to see what is the impact on the markets? How much does the markets react to those raising of rates and the balance sheet. It's definitely very interesting.
Some of the questions we've been getting, there was about 60 different questions submitted. And a lot of them come back to ... There's some on, well, what's doing well. And you have this rotation, you talked about the NASDAQ bear market and maybe less in the S&P. Certainly one of things we're seeing is high dividend stocks after a tough stretch have been by far top performers. They've been when, when the S&P, not quite down double ... Or just hit the 10% correction, you have high dividend stocks that were positive around the world, really. And I think one of the surprising things that happened is the emerging markets, which have some of these big Russian banks and Russian energy companies.
As of Friday, we're ahead of the US high dividend stocks, very interesting, by a very, very small amount. Today, I think, they fell below, but as of Friday, the EM was slightly ahead even. And if you say, "Where is the most Russia exposure?" It is in an EM high-dividend basket. We had DEM. It was in February above 5%. It's come down a little bit. But again, that was still outperforming US high-dividend stocks, as of Friday, so very interesting.
Some of that's the Russ…, the just general energy, commodities versus tech, which has been a big part of other emerging markets. You only get 2 to 3% Russia in a broader emerging market strategy, our ex-state-owned owns only 2% Russia. So very, very different, but I get it. The high dividends around the world has been where you go.
I know you've been talking about inflation being a challenge for the 60-40. One of the questions came in what's ... Is 60-40 appropriate? Do you want to talk about where you see the appropriate allocations, given these dynamics of the interest rates, the bonds and equities?
Yeah. First of all, let me say that ... And I've maintained this for a long time, we live in a world of very low, long-term Treasury rates. As I've been saying, Treasury Bonds are the hedge asset, the negative beta asset of choice. They have a huge multi-trillion dollar hedge demand that is going to be there. And as a result, I don't think inverting the curve has the same negative implications that it used to have. And it did, as I taught in so many of my courses, we had a recession after every inverted curve in the post World War II period, except 1967. But I think in the future, because of this hedge demand for long Treasuries, keeping that rate always lower, we're going to have a much flatter yield curve in our future, and one where a mild inversion does not signal a recession. It would have to be a very strong inversion going forward.
Nonetheless, even though I'm not one of these people, even with inflation 7, 8% says the bond should go to 4, 5, 6, 7% because the hedge demand is so strong. Even if ... What is it, 180 today? If the bond stays at 180 and 7% inflation, you're still losing 5% your value every year. If the rate goes up even to two or two and a half, you're going to be a double whammy on the downside. It still cannot be an effective ... It's an effective short-term hedge, but it is an extremely bad investment for your longer term clients, in terms of certainly hedging against inflation or, in fact, providing any reasonable real returns.
You know, Jer, on the bond side, I've seen a couple of questions just asking what, if anything, I guess, is working in fixed income. And we've done a few calls with you, Professor, after the Fed meeting just a few weeks back in January. We were talking about Treasury floating rate notes, our Treasury floating rate notes strategy. And it was interesting to see how the Treasury market responded last week, that you had that initial flight to quality move. You actually finished the week with ten-year Treasury yields a couple basis points higher than where they were week over week. Now, of course, again, today you're going to get that saw tooth pattern, that volatility back and forth. But what I found interesting, staying focused once again, to use those terms, that if in fact the Fed is going to move here, which I think we all agree on, the Treasury floating rate note strategy [WisdomTree Floating Rate Treasury Fund, USFR] is certainly one to continue, I think, to consider in this kind of environment.
We're talking about flat or an inverted yield curve. You're talking about an instrument that has essentially just one week duration to it. And I've noted that some of the ultra short duration counterparts that are out there that include credit have actually been in the red six months, year to date. And I found it interesting that some of these other products out there, oftentimes you think they're interest rate kind of hedges, but the credit sometimes can overwhelm what you're seeing on the rate side of the equation. So I was just curious on your thoughts on Treasury floating rate notes here.
Yeah. Well, clearly they're going to be much better, because I still think long rates are going to go up because I think the Fed is going to be more aggressive. Again, I think you're going to get inversion at the end. And as I say, doesn't necessarily mean a recession. If the longer the Fed waits to tighten, the more they're going to have to tighten more later to produce a session somewhere down the road in 2023, not in 2022. In any case, you'll see the long rate go up, short rates go up more. You want to be floating. You don't want to take the capital loss on the long term buy. The only reason you might want to hold those long term bonds, again, wonderful, short, wonderful, very short term hedges against market chaos is the Treasury. But for long term planning, it is not the answer.
One thing, coming back is the 60-40 question. And we've talked a bit with Professor Siegel about, and some of you all, that we've launched Siegel-oriented models. And so those Siegel models, some of them use a ... We go more into equities, but we've also added more to commodities. So there's a few questions. Has the macro cycle turned away from tech towards commodities, or what are vehicles to look at commodities? One of the things we've been talking a lot about ... Actually our top performing fund this year is GCC, which is a broad-based diversified commodity fund. One of the things I think not a lot of people have been talking about, and I wrote a blog on this called The New Regime for Commodities a few weeks ago.
For the last two decades, commodities were in contango, and it was costing 7% a year, on average from the late '90s to now for the cost of rolling these futures, but has now come very sharp backwardation. And in GCC, our average backwardation has been 9 to 10%. So it's gone from a 7% cost to because where we're positioned, it's a very big difference today, so a very different regime. Even for broad commodities, it's became a net positive the last 12 months. So I think that's one we've added to the Siegel models, GCC as part of the commodities play. And that is part of that inflation story.
Professor, there's some questions on is the hostile actions towards energy going to change? Some of that's a European question. Do you think some of this politics towards ... A lot's happened in the last few weeks, but anything you see happening in the US and Europe about energy policy?
Yeah. Now everyone says, "Gee, I wish I could be independent ..." the Europeans, "I wish I could be independent of Russian oil and gas." They put themselves into that situation. Fracking actually got us energy independent, and they banned basically fracking in Europe. And then when Western Germany decided to close all its nuclear power plants, that became a further critical situation, going forward.
We should also say that the fracking slow down, a lot of them say, "Oh, it's Biden," or, "It's the regulations." It's not only that. It's partially that. But we all know ... We all remember negative oil prices two years ago, and that devastated a lot of the fracking. And I mean, the capital had dried up there. Fracking Wells don't last like normal wells on oil. I mean, they basically two or three, four years, they get drilled out and they have to keep on going elsewhere. So the capital disappeared.
So it is coming back. The rigs are coming back, which is good news. But a lot of that was capital starvation as a result of collapse of prices, because of the pandemic and other factors. But regulation, over regulation is clearly not going to be in our interests or anyone's interest to become energy independent.
So on that note Jer, on the energy, the inflation, there's a lot of inflation questions Professor, as you can imagine, so I'm going to try to bunch a few together. First one was thoughts about stagflation, and that combining with what part of inflation do you think could be transitory? So I'm going to try to combine a couple together.
Yeah. Okay. Well, and I didn't, I'm glad you brought that up, Kevin, because I didn't give my inflation forecast. It's not a pretty one. A year ago. I said that we were going to have cumulative of 20 to 25% inflation. Again, not in one year, but over two, three, four years. I said five, five, five, seven, seven, seven. Wow. Last year was really close to that, seven. I think we have another seven this year, eight. I do not think it's going to quiet down by the end of the year, because I looked at money growth and it is still in double-digit area. And double digit is not consistent with slowing inflation. And I don't see what they're doing now, raising rates, by one or two percent and doing a little bit of runoff is really going to do it right away. They're going to have to become much more aggressive on terms of slowing the money. So I think inflation is going to be a problem in 2022, is going to be a problem in 2023, and let's hope that we begin to get it under control if the Fed starts now in 2024.
So what about the stag? There's deflation? What about the stag part of stagflation?
Well, this year's, this quarter GDP is going to be low however with the requirements on the pandemic opening up and people still have a lot of money, stagflation means bad economy with inflation. I think we're going to have a strong economy but inflation. Boomflation, you can call. Stagflation is a result of when they squeezed our energy prices and we were importers. Now energy price are going up and we're kind of balanced, so everyone in the energy area is going to get benefited. Everyone as a big user will be squeezed, but it's not anywhere near what it was in the seventies. I let off my discussion in that way with the reopening of the economy and with money in people's pockets and the Fed and the government still pushing money, I think we have boomflation. So, I think that we could easily have three and a half, four percent real GDP growth with still seven percent inflation on top of that.
There was a few questions on international markets and some on, there was one specific in the chat on European equities. There was a few who had pre-submitted on Asia versus Europe and some of the bank impact. I think that's, one of the questions is banning the Russian central bank from... The sanctions on the central bank is sort of a very interesting move and you did see European banks really hit hard today.
One of the strategies that we've been talking a lot about is international quality dividend growth. IQDG is our international quality, has very little financials because it screens for things like profitability and earnings growth and dividends and that's been one of the strong, long-term performers internationally but also for people looking for a little underweight financials. I think that's an interesting way to play Europe and international. But do you have any comments on that bank impact across Europe?
I think we're going to have to see it's very early stages. I mean, how do you remove one central bank or one set of banks from the Swiss system? I'm not a technical expert on that system to know how easily it is done, and whether we can smoothly affect transfers after that. I believe we can, but let us see.
I don't know how much loans European banks have that are backed by Russian assets, so I can't speak to whether those are the assets you want to buy, but clearly that has been a major reason why Europe has been hit certainly harder in the financials than the US. In fact, the US should really benefit on the financials. I think the only reason they're down today cause the interest rates were down and that is a major macro factor for, of course the banks.
But if the Fed gets back to raising rates, we don't need the tenure to go up. What's important is the short term rate goes up. Don't forget all the... Well, it's not LIBOR anymore, but SOFR, which is the descendant of LIBOR. The prime rate and everything is dependent on that Fed rate. The loan rates are dependent. We don't need the 10 year to go up to be profitable. All we need is for the Fed to raise rates. The banks then will get a margin on their loans that they have not had for years.
So professor, any chance, so say the Fed continues like we were thinking and they go five, six, seven times this year, and perhaps the ECB taps the brakes a little bit and says, maybe we want to see how this plays out before we raise rates. Do you think with interest rate differentials and perhaps central bank policy differentials, do you think there's a chance? I mean, we're getting close the Euro and the dollar could get to parity.
Well, you have a lot of things. Of course, interest rate differentials are probably the most important, but what should also take a look at the trade deficit? I don't know if anyone saw what happened this morning. 8:30, it was a monstrous trade deficit, actually had much above expectation, actually lowered most forecasts for first quarter GDP by between one half and one percent. So there's, I mean, we're importing an awful lot.
I mean, we're throwing a lot of dollars abroad. So yeah, they want to buy our dollars because they have a good return, but we're throwing a lot of dollars, so I still have an ambiguous view on exactly what might happen on the dollar.
Let me, as far as the Europeans are concerned, they did not raise their money. They did raise their money supplies, but nowhere near as much of the United States. So actually, the inflationary impulse in Europe is not as great, at least in money growth that I have seen in the data. The Euro did not have as big a bulge as we did. We had a record bulge. Virtually no other country matched our increase in money. So that actually plays against the dollar in a longer term situation. Because that means there's going to be more inflation in the United States and purchasing power parity comes into play when you look at a longer term view of exchange rate.
Maybe as you think about there was some questions, you mentioned the valuations and how you look at it. One of the latest questions came on your earnings yield as an estimate for returns, sort of contrast that with like a [Jeremy] Grantham super bubble, which was one of the questions like, are we in a super bubble for all these major assets?
No, we are not and that's why I pointed out that we're selling a 19.5x, next 12 months of earnings. In a negative real interest rate world, that is not expensive. Let me just mention that in March of 2000, when we were selling a 30x earnings and we had a tips where you could get 4.4% positive, that is a disaster waiting to happen.
Today is a world of difference, negative on tips, an earnings yield of 5% or more. Five and a half to six, if you avoid the more expensive tech. I'm not saying there couldn't be a bear market. There clearly, we all know about the volatility in the short run but long term values I think are still very sound for the long term investor.
Professor, I know five o'clock we want to get to wrap up by five. Thank you so much for taking the time with this on this very important day. Kevin, always a pleasure to share the stage with you. Thanks everyone for dialing in.