Fortunately, he thinks the slow learners at the Fed may finally be grasping the problem. "In the fourth quarter, the Fed finally figured out they had to lower mortgage rates," and even though he called the glacial pace of their learning curve "mind-boggling," they may finally have uncovered a remedy with a chance of success.
Meanwhile, he predicted a horrible number for fourth-quarter GDP, with the decline ranging from minus 6% to minus 9%. (It turned out to be a little better at minus 3.8%.) The good news is that the fourth quarter was probably the worst we'd see, Yardeni said.
On the positive side, he thinks the U.S. economy will come out of this global recession "sooner and faster" than other countries, and the domestic markets should follow. Meanwhile, the goals of globalization and prosperity continue to be shared by billions of people around the world, even if they are being stress-tested by the recent crises.
On the investment front, Yardeni believes energy and commodities will recover, even though that may take two or three years. "Long-term, electric cars are the only way hundreds of millions of people will be able to become drivers without damaging the environment. Electric cars could be the next bubble."
But it's going to be hard to go back to bubbles as usual. "Some people say if you can't get credit, what's the point of living?" Yardeni said. "Well, you can go shopping." And it's a great time for shoppers.