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the Bloomberg Terminal, and the Bloomberg Business App. I'm going to sell?
Can I sell a newsletter?
Sure?
Your Denny Quick Takes, folks, and we protect the copyright religiously.
Of our guests.
That's rule number one at Bloomberg Surveillance. Your Denny Quick Takes It comes in your feed in its blindingly CJ. Lawrence short and to the point. And whether you agree or disagree with doctor Yardanny, it frames an assists.
You in your equity belief.
Why don't you bring in Paul the guy who tells me I'm living the Roaring twenties.
Exactly right, Ed Yard Denny. He is a president founder of a Yard Denny Research thanks so much for taking the time to join us.
Year.
I think a lot of people are looking at the economic data we've been getting over the last several weeks, looking at the earnings we're now parsing through here over the last couple weeks, and trying to get a sense of where we go with this market here, How are you framing all that data? How are you putting it in your model and coming out with kind of a view here.
Well, it's been a go go market. I mean, it just keeps going. Certainly hasn't paused this year. It's been straight up actually since October of last year. We had a bit of a correction from August October last year, but it's also been more or less straight up with a brief ten percent correction since October of twenty twenty two. So it's been a phenomenal bull market.
And Tom, for those are viewers on YouTube, that is a bookshelf. I have like three books on my body. Doctor Denny has a bookshelf.
Excuse me. The blue button. The blue button is a Detroit Lions button. Thank you your Dennis got up there. Every book Robert Schiller's ever written, that's what it is.
So Ed I mean, one of the things that I think concerns that you know some people have now is just boy, is if we've gone a little bit too far, too fast over the last three to four months, because I haven't seen earnings necessarily follow the performance of some of these risk assets.
Well, we've seen earnings turning out to be surprisingly good for the megacap eight. Those stocks have done quite well, and we've seen as a result of that, we've seen these stocks do.
Very very well.
But overall, the economy is doing very well, and earning is I think are going to be something like two hundred and fifty dollars per share for the S and P five hundred this year, and that would be up from two twenty last year.
And then beyond that, I.
Think we'll see earnings continue to grow into twenty five and twenty twenty six. You don't see your recession. I think it keeps going.
Edgar Denny with us here for the entire half hour. We're going to take a break in the middle of it to pay for Lisa Mitato's Super Bowl gluten free veggie chips. But other than that, Edgiar Denny with us for this half hour. Ed I want to frame out the shock sixty days ago where you said we're going to fifty four hundred SPX, I did the fancy math and got the Dow Jones Industrial average out to forty three thousand. On that number, do you get any sense
that there's Schillarian exuberance out there? Are we getting a Robert Shiller Alan Greenspan irrational exuberance?
I don't feel it.
I think we've got exuberance for sure, and then it's debatable whether it's irrational. Yet right now it looks like rational exuberance. We still have a lot of money just parked on the side earning money market funds. We got something like six trillion dollars just in money market funds, So money isn't exactly pouring out of short term assets.
Yes, I don't see the market well quickly or is it going to go?
Is the money market fund going to support the yard Denny fifty four hundred SPX?
Well, fifty four hundred, it doesn't look so amazing anymore. Yeah, that's why I'm talking about six thousand by the end of next year. There, fifty four hundred isn't as impressive as six thousand by the In the next year. Given how much territory we've covered.
Ed your Denny with us, I can't say enough about his researcher comes in different platforms.
Your Denny Quick Takes is worth its weight in gold.
It's short, short, short, focused, and it synthesizes in his Yell economics all of his work on Wall Street over the decades into a call optimism in the American economic experiment to wit and I go back to what I call the yard Denny and campoora low two giants ed Yard Denny and the technical analyst Ralph and Campora lonely in October of twenty twenty two. And to get up to the Dow equivalent forty six thousand, which is ed Yard Denny's SPX six thousand, is a lift of sixty
one percent, Doctor yardnny. Is that a normal lift out of an angst time when everybody's gloomy is up sixty percent?
Normal?
Well, it doesn't come with a money back guarantee. I mean, we always have risk in our forecasts, and we have to acknowledge that there are risks or geopolitical risks. There's always the risk that the price of oil spikes up again. But my base case is what I call a Roaring twenty twenties. It does rhyme with the Roaring nineteen twenties. And in this case, I think the technology innovations that
are out there to boost productivity are already working. There's a significant shortage of vibor in our country's skill labor and technology is going to solve that problem on productivity.
And again, the Mobson Callahan Morgan Stanley essay is brilliant, and it's February and it's already my essay here.
What's that about?
Maybe subject change, but on productivity at JR. Danny, it's about corporations adapting right, there's layoffs, there's right sizing, and that it's not about cost cutting.
What's it about a new efficiency?
I think it's exactly about a new efficiency. It's technology led. It doesn't mean that people are going to lose their jobs. I mean there is always churn in our labor market. We are saying in some of these technology companies cutting back in areas where they just don't see much upside anymore. But I think most of those people are going to find jobs very very quickly. They're very skilled, and there's
a real shortage of skilled workers. I think what the chnology does is it augments the productivity of workers and therefore allows for the economy to grow more quickly. The labor force has only been growing around one percent or less over the past few years. And that's all we have to look forward to with real GDP if there's no productivity growth. But companies and businesses and entrepreneurs are aspirational and they are going to use technology to increase productivity.
And it's already happening. We had an amazing three quarters last year. Last three quarters, productivity was extremely strong.
Yeah.
For the years aholl it was two point seven percent and Paul, the world was coming to an end.
Yeah, absolutely, And that's amazing how productive folks were, even from the comforts of their own home. So ed one of the big drivers or one of the big investment themes in twenty twenty three, which looks like it's continuing into twenty twenty four, is this whole concept of artificial intelligence AI. It's not just the Magnificent seven. It seems like every company in the S and P five hundred mentions AI multiple times during their quarterly earnings calls, what
do you make this? You've seen technologies come and go. You've seen waves come and go. What do you think of this AI thing?
Well, I should really be embracing it as a confirmation of my roaring twenty twenties outlook, But I don't know. I'm agnostic on it. I want to see more evidence that it actually is making a huge difference. I'm still trying to have a conversation with Siri, and Siri you can only ask her one question at a time. You can't ask you to book you theater tickets or order dinner for you. So I'm wondering if Apple and Google
couldn't get their personal assistance to really be interactive. I'm kind of wondering whether a lot of this may be artificial but not really intelligent, just quite yet. Look, it is a statistical model. It's kind of like when you sit down to write on word and the thing anticipates if.
You write prod.
It says, oh, you want productivity, and then you say, yes, I will get it.
Partly in Twitter, it is a spectacular Bloomberg BusinessWeek effort by Ashley Vance on artificial intelligence. And they have taken scrolls in the old world.
They're all clay.
They're looking firewood logs, and they're using computers to read the scrolls, which they believe have never before seen. Classics like from Aristotle, really like Plato.
Sounds like from Dr Denny. It's a good story.
We hope to have mister Vance on next week if his people will agree with our people continue.
Hey, Ed, you know one of the things we've I think a lot of investors have become I guess used to or expect, and they expect the tech sector to drive this market, to pull this market higher. Is that still the case? It seems like it with these magnificent seven And if so, that is that okay for this market?
Well, there's this perception that that's not a legitimate little market because it's been very concentrated. It's been led by only seven or eight stocks, whether you know. I like to talk about the megacap eight because I watch a lot of Netflix, so I throw that in there with a magnificent seven. But yeah, I think technology continues to lead the way. Semiconductors have been on fire, and I
think they continue to do extremely well. But as you sort of mentioned, every company is mentioning AI these days. I think every company is a technology company. You either make it or you use it. If you don't use it, you lose it, you go out of business. You have to use technology. What's really amazing about technology today is it's really focuses on augmenting the brain. It used to be all about productivity, used to be all about augmenting
the brawn of humans. Now we're talking about the brain of humans, and we've a potential of.
That is awesome. How did bull markets end badly?
I mean, you know there is a potential here for something as we as you mentioned before of the nineteen ninety nineteen nineties. If there's a stock today that reminds me of Cisco, it's in video, and video made a lot of money on gaming chips. Then it became a bitcoin mining and now it's it's AI, and these are all legitimate sources of income. The stock has been on
fire for good reasons. Earnings have been very strong. But Cisco went to the moon and then back, even though it made a lot of equipment for the Internet, and the Internet certainly survived and thrived, and I think AI will survive and thrive. But I think it is a little bit more hype than that then is justified for what it can deliver just yet, Paul, what.
Do you make of that? I mean, well, here's I love the Cisco warning.
But here's another alum from CJ. Lawrence. I mean, pound for pound. If people don't know, go back and google that pound for pound. That was some of the best research coming out of Wall Street for a long period of time.
C J.
Lawrence.
Back, it was printed back in the day, Back in the day, folks, that weren't PDFs, and it was tactile, and it was visceral. There was paper and you had a pencil. And I'm sorry, Paul, I thought that oftentimes. I think that's way more valuable.
You're in Timer joins us in the studio today.
What did the charts say about the Magnificent seven? Will Danoff as twelve thirteen percent of his portfolio in meta Facebook? What do your charts say to Countrafund?
Good morning? And by the way, the charvelroom really used to be like a war room back in the day, preceding even Ned Johnson, but his father, mister Johnson, and that's where they would just you know, strategize because that was pre computer experience, and they would sit in that room and just you know, try to solve the world's from them.
Well, they're doing that at the Echos building now, and you see how that's going.
Yes, what do you say to Will Danoff about the Magnificent seven from your technical.
So so our analysts, you know, they and portfolio managers, they look for the winners over the long term, right the next five ten years. The way I look at it, and I've studied this extensively, you know, I've looked at the nifty to fifty phenomenon, which started back in the early seventies. So back then, you know, if you remember I was, I wasn't quite around there then yet. But you know, after the sixty eight speculative glamour stock bubble,
the market, you know, fell thirty six percent. It wiped out retail, and the market was in the hands of institutional investors, and everyone got so burned by the glamour stocks. They just wanted to buy tried and true earning scrollers you know, IBM, Xerox, you know, et cetera, Coalgate, and those stocks delivered, but they ended up trading at really an extreme like they ended up trading at twice the markets valuation, so there was a two x premium and
then you know, inflation happened. It wiped out valuations everywhere, and they went from twenty x to seven x by the late seventies. And then in the late nineties we had the same thing, different companies, of course, different players, but that was the dot com bubble again a two x valuation premium. The market stayed at twenty x and those nifty to fifty went from twenty to forty x. That bubble imploded on itself. Now we have again dominance
by you know, mag seven. I tend to kind of still look at it as nifty to fifty, even though they were a future than fifty. But just to be consistent, the premium on the valuation size is only about thirty percent. It's not the one hundred percent that it was the last two times. So these stocks have now dominated for almost a decade, but it's been mostly justified by earnings. Yes, and that's a different take on it.
So I mean the way I kind of phrase it is just tech has led this market for such a long time, and I kind of feel conditioned that if Tech's not going to lead this market, this market's not going higher. I'm not sure if that's the case, but do you still feel like tech and some of these things have to work for this market to work.
So it's a nuance of overall participation in the market versus who is outperforming. Right, So last year we had the record narrowest market. Only twenty six percent of the socks and the S and P outperformed the S and P. So that's the lowest we've ever seen, but and on par with early seventies, late nineties. So the market does eventually broaden. I mean, that's just the mean reversion nature of the market. And I am in the bullish broadening
camp for this year. I mean when you look at obviously S and P five cap weighted is making new highs it's at five thousand. But I look at SPW five hundred equal weighted indext to me, that's the most important chart, and that's been sitting below its all time highs now for like one hundred and seven weeks, but it's like two percent below, right, it's on the cusp. And I do think that history will tell you, right, market goes up seventy percent of the time, by about
ten to eleven percent. It's the market's inherent nature to go up, So you know you want to be a bear at like with some caution because you're really fighting the odds. So to me, it's a question of the generals are leading the soldiers. Obviously, the market made a new all time high in January. January is an up months, so these things are momentum builders. So in my sense,
the SPW will follow suit. The market will broaden. But that doesn't mean that other stuff will outperform the megacap growers, right, that doesn't mean the banks are going to outperform. So I don't have a good handle on who's outperforming, but I do have a sense that the market's going to broaden out. And for an investor who might have missed out the rally last year, that's kind of a second chance to still participate.
You guys did sector funds. It was like resolution funds. Select excuse me, select funds. It was revolutionary. People though you're authors, can't do this. It breaks prudent maneral people over putting on their heads are spinning.
They can't do that.
And now it's one big sector E t F. You're in timor on how we're handling passive and active E t f's forget about bitcoin, and you know, thats just for mere mortals like me. We've become one big select fund, haven't we.
It depends.
I mean, there there's a fund for for everyone, right, I mean there's many of them. And you know now now even in digital assets, there are options, and I'm very proud of our our team and how well we've done in terms of launching.
You think bet Dog's a legit asset.
But you know, but it's it's a question of portfolio allocation and having blunt instruments versus you know, surgical tools, and it's good to have the options, and they're not for everyone. I mean, for many investors it's fine just to buy some SMP or some MSCI EPHA or world x US. But others want to get more specific, and so we can go value growth, small, large, US, non US developed, emerging, and there are areas where you want
to be nuanced, like in emerging markets. You know, they're not all created equally, and so you want to be discerning there.
What's the biggest mistake thirty seconds, what's the biggest mistake people make in technical analysis?
They don't back test the indicators and they lose the context because without context, they're all a coin toss and so you need to have a you need to have a thesis saying okay, this is a consolidation and an up trend. If you don't make that assumption. You can never get around assumptions in our world, even though they make asses out of you and me. But you need to have some context around the indicators. Otherwise it's noise.
You can could you see Belichick running money? Yeah? I mean you can't get a job coaching.
Football now you can, but he can get an office.
The Belichick Fund. Sure, it's fideling.
It works.
Urin Timmer from Boston, thank you so much, just at I can't say enough over the place about his technical work. Look out on linked in. It is the best technical work on LinkedIn. Urion Timmer t I, M M E. ER can't say enough about it. There's something that we haven't done recently. It's just been off the news radar, and that's a shock when you see what's going on
in the Eastern Mediterranean. As President Biden mentioned as he walked back to the podium yesterday after the end of the press conference, there's some geopolitical risks out there and it gets you. As as Lisa was mentioning the oil prices elevated imics seventy six a barrel bread crude eighty two dollars a barrel exquisite on this is Emrita Sen. We're thrilled that she joins us.
Right now.
Emrita, you're just wonderful On the supply and demanding, which is most interesting right now?
I'd say supply for two reasons all or we've had supply surprise to the upside last year, particularly US supplies, and that's what caused the correction in prices. Now what we're seeing is actually the market having tightened up more than people had expected. We've had inventory draws, unexpected inventory draws in January, probably looking like small draws in fab as well.
Not that the Red Sea has caused supply.
Outages, but it is creating a lot of stresses and strains on the supply chain.
From where you said, I understand it's a global basis, But as a leader of petrol or a gallon of gas, is it going to.
Be elevated over twenty twenty.
Four, Yes, it will be much more than crude will be.
It will very much be petrol prices and gas prices because of what we're seeing when the red sea shipping costs are very, very elevated, and what happens is therefore delivery of all these products that we consume is just going to get more expensive, and therefore we're going to have to pay more at the pump.
So what's the outlook here, doctor Sen? On demand? Here? I know you know when I talk to energy folks like you, I know you have to have a clear view of not only supply but demand. I mean, I look at the European economy is a little bit weaker than people would expect, China weaker than people would like to see. So what's the demand that look?
I would say demand is okay, it's not like you know, last year we had two point two million barrels, but demand growth in part because it was a post COVID recovery in China.
This year we're calling for one point four but we have raised it.
It has been coming in stronger than expected, particularly in the US Europe. It's, if anything, it is bottoming out. China is the worry. Right In Chinese demand hasn't been great, the property market isn't great. But again we are not expecting much out of China. We're expecting about half a million barrelspe of growth out of China, so it's in our numbers, but that would be very much the worry right now.
And on the supply side the US, I mean, you know, we're obviously we're not used to being net exporters of oil here in the US, and I don't see any you know, signs that some of these producers are pulling down production.
How do you view the US as a supplier of the US is continuing to grow, And yes, we had a bit of a setback because of the freeze offs, but the reality is is that we continue to we expect to see continued growth out of the US, even if it is kind of gradual increases. This year growth rates should be a lot slower than last year. Of last year, it was also boosted by M and A activity.
So we're expecting about five hundred thousand bars per day of your on your growth in crude production this year out of the US versus close to a million last year, but still definitely growth.
So a term that we used to talk about a lot when talking global energy was peak oil. I don't hear that very much anymore. How do you think about that big, big theme there.
Depends on whether it's pea coil supply or pea col demand. I think people not talk about pe called demand a lot more, which is also not true.
Look, I've never.
Believed in pea coil in the sense that we always have enough reserves. It's always about the price. At what price do we exploit those reserves? Right, we're not going to run out of oil. It's but if it's at fifty dollars, fifty dollars, you're not going to exploit that. It's more that explorations getting more expensive. That's the point. Demand equally, the IA keeps talking about pea coil demand, but that hasn't been the case. And if anything, demand keeps coming in higher and higher.
Yeah, well demand comes in higher and ir But the great theme for those over one hundred dollars a barrel two years ago was a Pacific rim lift that just basically developing economies. You know, I guess they care about climate change, but they're saying, let's go, let's go, let's go.
And you get an EM. Demand is that still there?
Oh? Em, demand is still very much there.
I just got back from India today and it was there for India Energy weekend.
It was absolutely massive, like Indian demand.
You know, India's very much on the path that China has been in the.
Past couple of decades ago.
Southeast Asia, Yeah, and then there's Latin America, Africa. Yeah, absolutely, em demand is very much there.
But equally oecity demand isn't really falling either.
So how's the energy going to be there? The energy usage in those developing markets is it? How much of it is going to be fossil fuels versus maybe greener energy As those markets.
Develop, they of course want to not create pollution if they if they can, But for their energy security and energy affordability ranks above anything else. India is really pushing hard for evs, but not because they want to get away from petroleum. It's because coal is the cheapest and most secure form of energy. EV's there will be fired by coal. I don't think it's going to actually reduce emissions, So I think we need to be very pragmatic when
we talk about energy transition. I continue to believe it's a very privileged Western concept. When you don't have basic electricity, you are not actually going to care about whether the elect whether the electricity is going to be green or not and soon.
Thank you so much greatly, Gally appreciate it with the energy aspects of it.
Today's front page. Put the terror chips down, give us the headlines. What do you have?
All right? Since we're talking food, we might as well go there. We're talking about the super Bowl. How much people are spending at home. This is from the National Retail Federation. Okay, Americans plan to spend seventeen point three billion dollars on the super Bowl. That is up one billion from last year. Okay, eighty percent of that food and drink. There's also apparel, decorations, things like that. But why is it so much higher? Here's the thing. You
have this new demo coming in. You have the tailor swift crowd coming in, so now they want to have their own parties. They're pumping up spending as well, and it's changing what people are eating. Two for the super Bowl. So usually it's burgers, barbecue like that kind of thing. Now the top three items wings, which is still up there, pizza, salsa, dip, and spreads because apparently women like that better. They think it's a staple. You gotta always have chips and salsa.
There's a swift angle to everything.
There's a swift angle. Yes, a new demo. So the younger ones are having their own parties.
Boost she like in the locker room.
I mean she's like up up for the cheapsis right?
Yeah, I mean jetting in from Tokyo.
Next.
All right, here we go h World Cup Finals. Because Paul you mentioned this yesterday, this article stood out for football. Yes, yes, you like this. It's coming to met life as we know. But how did the fans get there? So you asked this questions yesterday. New York Times says a couple of things. They have about two and a half years to figure this out. But it was home to the Super Bowl in twenty fourteen. If you remember that, traffic was a nightmare.
It didn't work.
Out very much. Yes, it did handle three Taylor Swift concerts.
Okay.
But here's the thing with the metal lends no direct trains, like you mentioned to New York City's from the state to the stadium. The nearest transit hub Secoccus Johnson that's a few miles away, and it's been known to sit in traffic. Given you know, when you go in the turnpike, you always gauge around when is the game? Who's playing Jets Giants home? So that's the problem. Here's what they do,
State legislators. They allocated thirty five million dollars that you're going to design a dedicated transit system similar to like the Disney World's bus system, and on game days, those buses are going to travel along the back roads that's currently closed. And it's going to dedicate lanes on the New Jersey Ternpike to these buses too.
So that's that's a plan. But here's my plans for a worldwide audience listening. This is from a native New Jersey who goes to MetLife Stadium for Jets and Giants games. Just take New Jersey transit. I'm telling you, it's the best way to go. It's yeah, it's ten minutes from Manhattan to secaucas You switch to secaucas and the train is five minutes to MetLife Stadium. Yes, you have to wait coming back a little bit, but you've already had a couple of Right.
When when is the World Cup?
Like, is it not like this two and a half years?
Pharaoh says, this is like a ginormous thing. He says, America's not ready for this.
It were coming from everywhere every year.
Yea, yeah, and it's like, I don't know, it's all over the country.
I don't know if they mean all.
The time we're having breakfast or something.
You know, we're over the Saint We're you just putting down a good morning, Gretto, keeper of the MX, and you know I'm putting it down with John. We're just building up a two hundred dollars tab. I don't even listen to the football talk now. I mean, you know it means but the World Cup's going to be genormous?
What else? This is great? What else do you have say?
Okay, Tom, you asked this question yesterday. So I found this out why paypalace strugglings out today as well? Yeah, so the Financial Times did a look into this. Apparently there's a gen Z problem. Okay. The younger generation, they like to pay with the click and their phone. You know, they just like the click and tap and that's what they like. So they like Apple Pay, you know, they like those autofill payments. They like buy now pay later
services like Affirm and after pay. They like that. Three quarters global iPhone users used Apple Pay in twenty two, nearly one third of them were between the ages of eighteen to twenty nine. So you see that big group there. Fifty prefer PayPal. Well they're forty five years and older, so that's a group and PayPal. I didn't realize. But they do have Venmo. But the problem is that they can't monetize it because you can't charge people to use Venmo because Zell's for free.
So it's competitive that I mean, Brian Moinian has been very clear on this Bank of American Earnings. The zel growth they feature in their power point when you come out with their earnings is right, this whole digital thing.
I'm still writing checks at home. I'm the last person. Really, Yeah, I dipped the quill in. I forgot, I got.
I got the old far checks for the blind. You know they're great, and you know you put only and you know that I'm not going to do Venmo to write a tuition check, you know.
I mean they make it so easy to pay tuition.
Oh they do.
Now.
Penn State University was the absolute best. They were on par with Amazon. Literally one click and then twenty five grand right out of your account. One click.
Yeah, they know what they're doing. It's just a whole new world. After all, go go back and have some vegetable chips.
Taylor, Lisao, Lisa Mateo.
Thank you so much.
This is the Bloomberg Surveillance Podcast, bringing you the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.