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the Bloomberg Terminal and the Bloomberg Business App. Long ago and far away, there wasn't the Internet, there wasn't Adobe pdf. There was a guy pushing a trolley with paper research and it was literally half a hockey goal high. Buried in that on a given morning was twenty five or thirty pages from a firm called C. J.
Lawrence.
And my recollection is it was within a green ink. The titling was within a green ink. Yard.
Denny Quick takes is in the same CJ.
Lawrence Green and we are honored from the span of those multiple decades. Edyard Denny joins us this morning. I can't say enough about your Denny quick takes. It is the read to give you confidence and push away your fears of the stock market, ed Yard, Denny, what's there to be afraid of right now in the stock market?
Well, I think evaluation is a bit of an issue. I've been forecasting fifty four hundred for the S and P five hundred by year end. My concern is we might get there by midyear or earlier. I'm forecasting six thousand for next year, and I'm concerned we might get there by your end. So I'd like to have a nice, leisurely bullen market here, not to something like we had in the late nineteen nineties.
A guy at.
Yale where you got your parchment, I think his name was Schiller, used to talk a lot about exuberance that was out there. What is the character of our exuberance within the Yardenni and Kampora bull market?
Well, I think we can look back to the nineteen nineties as a possible model for the environment we're in. If that's the case, then the next question is are we in nineteen ninety nine or are we in.
Something somewhat earlier. I think at this point.
We're more like nineteen ninety six. Remember December fifth, nineteen ninety six when Alan Greenspan had that famous speech in which he did a hamlet on.
Us and he said, you know, how do we know if.
The market's irrationally exuberant? And I think we're at that point now where everybody seems to be asking is it rational exuberance or irrational exuberance?
So ed, when you look at the elements within the market, what looks most rational, what looks most irrational?
Well, the evaluation multiple on anything related to artificial intelligence certainly is very high. The so called Magnificent seven there are multiple has been very high, though they're becoming more rational actually because some of the Magnificent seven are so magnificent anymore. We've seen Apple underperform, We've seen Tesla underperformed.
So it's it's a healthy thing to see that the.
Market isn't just Willy Nearly going across the board and marking up these mega, these mega stocks, these magnificent seven. I think clearly outside of the stock market, Bitcoin has had a heck of a move I think it's having a heck of a move.
Down this morning.
But there's so many signs of speculative excesses, edge of Denny.
Is it edge of fossil?
Like me, do you believe that there's an underlying under bitcoin? Is it an actual tangible and vestment.
Well, this will probably get a lot of people mad at me, but I mean well, and that is I view I.
View bitcoin as digital tulips.
In other words, it is kind of like what happened in Holland with the bubble in tulips. But there's a huge difference here which really presents the possibility of much higher upside which we've already seen. And that is the notion that it's a global market and it's open twenty four by seven, and we're talking about tens of thousands, hundreds of thousands, millions of people playing in the bitcoin marketplace.
So I have no idea how high I could go. I have no idea how low it can go.
I'm an old fashioned guy like you are. I need earnings. I need I need coupons. I need something I can value. I need rents, something I can value, and I don't have that with bitcoin.
You know, digital tulips that have a structure of a investment tool underneath them, with all those ETFs, right and also a digital tool, a digital tool up that is going to also have what's the verb happening to? Have you went to the fall?
H Charlotte Greifeld was on yesterday and we're talking polka dot and doge and we're trying I'm trying to have a serious conversation with miss Haverford about Polka dot and doge.
This is nuts.
This is nuts. Okay, So doctor ed, let me go back to bitcoin because there are a lot of things, a lot of market structures to support this digital coin right now, when we see the happening in April, are you going to do you anticipate any kind of correlation with what we see in equities because a lot of that bullish sentiment tied to bitcoin has spilled over into equities or vice versa.
Well, I think you're right, and I think where Bitcoin's and enthusiasm is spilled over its cooling into gold.
I mean, gold was.
Kind of sitting there doing nothing, and then all of a sudden, maybe some of the bitcoin enthusiasts concluded that they haven't own enough of it and it's too expensive and they want to look for other areas to diversify.
So gold has been a winner.
The gold mining showers haven't done as well. But look, I have to admit I've got some fomo every now and then when I see this bitcoin going up to seventy thousand, I knew about.
A dollar at ten dollars. I knew it about it one hundred at one thousand. Why did I just buy a couple?
And you have a huge response on YouTube this morning worldwide. People are listening to Edward Yard Denny. I want to go to the X axis, to thetter, whether it's just a normal X axis or dare I say we.
Go log rhythmic.
You've had the courage to go out to SPX six thousand, and I think you've put a twenty five handle on it. Why can't add your Denny model out to twenty twenty six?
Oh, actually I have already.
I'm glad you asked me because just recently we were talking about sixty five hundred in terms of earnings, the underlying earnings last year we said two twenty five, and there were a lot of people who are using one to eighty for earnings per share for the S and P five hundred, and we came awfully close two hundred and twenty two dollars is what the S and P five hundred earned last year. This year we also had bullish outlook for earnings two fifty and then the year
after that. In other words, two two thousand and twenty five, we're talking about two seventy and then three hundred dollars a share for two twenty six, and we think that well, accommoday sixty five hundred on the S and P five hundred by twenty twenty six.
You asking thank you for this kind of well, you know, I'm trying ed your Denny. Thank you so much for this conversation, folks. Sarah Hunt with US chief market strategist at Alpine Wood's Capital Investors. How how did we get from Dow eight thousand or Dow six thousand for the gloom crew to Dow forty thousand.
It's just the growth of the nation, right, It's the growth of the nation.
It's the growth of the money supply. You had a huge amount of money come into the system over the last decade that started the financial crisis, and it just went right up until COVID when it was supposed to pull back, and then we flooded the system with more liquidity post COVID. So a lot of this is money looking for a home right so that you had no fixed income for a.
While, So where were you going to put your money?
You're going to put in equities.
I'm going to.
Speak for Roger Ferguson, which is always hazardous because he's a giant, he was a TIA, he's our number one person in retirement.
I take immense umbrage.
With people criticizing the ute of America, like Scarlett Foo saving for retirement, who said I'm going to buy stocks and that's supposed to be a bad idea.
I just I don't agree with that. Stocks is how you do this right.
Well, Stocks is where the liquidity went. A lot of that liquidity went into stocks. A lot of it went into real estate, and it went into real estate and pushed real estate prices high enough to the point where you couldn't necessarily afford to buy a house. Like people talk about the affordability question all the time, it's not just mortgage rates. It's the level of pricing and the house and the level of pricing, and the housing market
right now is very high. It has not come down commensurate with interest rates.
Going You just talked about that.
Yeah, so absolutely, then why wouldn't I want to put my money in an asset class that has done very well historically speaking, and is also one of the few places I can do it incrementally.
It's great.
Is if you take the twenty five foot Christmas tree out of the den, the price of your house scir that'll go up one hundred thousand dollars.
Well, I have to get that thing out first. So we talk about moving into equities that's driven by liquidy in twenty twenty four, how much of that liquidity is now going too bitcoin? And is that competition for equities?
I think it's just one more place where people can one put their opinion on, you know, the global monetary system and fiat money.
Right.
People look at golden bitcoin in a similar way for that reason, even though whether or not they actually act that way is a different question, and some periods of time they will and in some periods of time they won't. But I think that you still don't have I mean, fixed income is now a bigger competition for equity money just because you have an interest rate where for nearly a decade you did not. So I think that there
is that change is also is also there. But you've got companies with enormous cash hoards that are looking to put money to work in a variety of ways, and some of the fixed income is going to get absorbed by that. I mean, think about Apple's bounce sheet and Vedia's bounce sheet, and we've talked about how enormous they
are relative to small economies of other nations. So there's a lot of there is competition, but there's still a lot of money in the system, and this is where you're starting to see that wage hike situation going on, like you just saw in Japan.
Okay, So money in the system. We're seeing that, certainly with this past earning season, when the buzzword or the theme really was free cash flow. Everyone was trumpeting their free cash flow. Managers are getting paid based on free
cash flow. If you think about David Zaslov at Warner Brothers Discovery, the use of cash, whether it's to plow it into buyback programs or in some cases starting a dividend for some of these growthy tech companies, how comfortable are you with the use of cash and would you want to see more of it diverted to dividends? Versus buybacks.
So we like capital allocation. That's giving back to shareholders if you can afford it, right, So that's the big question. They're trumpeting cash flow because if I can afford to raise my dividend and or I can afford to buy my stock back, that tells me something about the underlying business, as opposed to I can only afford to pay a dividend, and it's lucky I can pay that dividend. In some cases, I have to borrow to pay that dividend. You don't want to see that as an investor. It happens, but
that's not what we're looking for in general. But I think that there is a trade off between those two things. I would argue I like dividends more than I like buybacks, but it does the same idea is that it's giving capital back and or to the extent that it's shrinking the share account making your metrics look better too.
How do you like dividends if I'm paying a tax on it.
I don't like paying taxes on anything, but I still have to pay. That's part of the zeitgeist. If it's a buyback and my capital gains go up, then I've got taxes on that side too. Taxes are going to be part of Taxes are going to be part of the equation about SPA slice it.
Yeah, okay, I want to talk about April twenty fifth, and I just randomly picked it. I picked a big, ugly company that's doing better than good. Microsoft announces earnings basically a month from now.
Isn't the heart of the matter.
The stocks we've chosen to be in, we believe the cash flows will be there.
Do you see.
Any risk of cash flows diminishing in the second in the first quarter report or the second quarter report?
This is one of those areas that we keep talking about, which is that the largest companies now are those companies that have some very good base cash flows, and so do I see it? Could there be volatility within a quarter to quarter?
Yes?
Is there a long term issue with the cash flow of something like Microsoft right now? I don't think so. And I think that's one of the reasons that these large dominant tech stocks are remaining large and dominant because the cash is there. In the last run up that we had major technology run up in the early two thousand like that, the cash wasn't They're in a lot of those companies the stock rises move, but they weren't
making any money. A lot of these companies are making a lot of money right now, and I think that that's one of the reasons that they end up remaining dominant.
Does a lot of recash low repel activist investors or does it give them? Does it attract them in a way where they're thinking, Oh, there's something there's something more here.
I think that it depends on what management's doing with that cash, lil and whether or not they think they can do a whole lot of a better job.
Right.
So that's a question of what you're doing, and somebody looking at that going I could take that cash and do a whole bunch of other things with me.
A really interesting discussion here, inequities. What's your portfolio turnover rate? How much are you moving in and out of stuff?
It is not that high. We tend to buy and hold things for longer periods of time, right, So, I mean, I probably could give you a number off the top of my head, but it's going to be somewhere in the thirty to fifty percent releases ofso hire Right.
Do you rebalance?
Yes, we rebalance, but we also don't want to cut our winners off too early. So it's really a question of if I'm looking to rebalance, why am I looking to rebalance? Is it because everything else has gone down? Because something's gone up so much that now I'm afraid that it's too big in the portfolio, and I don't want to take a single stock or a handful of stock risk that's too big. But that's the problem with underperforming the SMP last year, right because the sixth biggest,
seven biggest stocks were all of the performance. So if you rebounce too much, you're you're trailing those indices.
Talk about overseas markets, is there anything attractive about them?
Right now?
You know, we tend to be American US centric in terms of our investments. There are a lot of ways to play overseas markets with US companies. I think that for US, the difficult thing is seeing why another economy is going to either outstrip the US or do something more than just have a giant move. Now that Japan had a big move, but the currency had a big move, So if you're not in Japanese, yeah, that big move doesn't necessarily feel as good unless you completely hedge that
move out. So for us. We like to look at things that we like to look at ways of playing overseas markets with US centric stock.
Sir, thank you, Sarah Hunt. We'll have her in off in here. Just a great guest.
Unlike the reality of a portfolio.
This is a joy. Paper Soldiers. Don't look for the movie there it is.
I'm sure she hasn't sold the movie rights, but it's under consideration.
Salaiah Mosen.
And the reason we're talking to her is because she's a real journalist. There's this rumor I'm a journalist. Guess what I'm not. Only Marty Schenker thinks I'm a journalist. My great advisor here at Bloomberg. Selaiah is the real deal. And she's gone out and put together the soap opera of your United States Dollar under Risk at Treasury. Given the crises that are out there, she runs our Treasury covers in Washington. The book is a piercing two hundred
pages how the weaponization of the dollar changed the world order. Seleiah, congratulations and the courage on writing this. When Tim Geidner reads this book, when he reads Paper Soldiers, how upset is he.
Going to be?
I'm so excited this book is coming out on Tuesday Day. Tim Geidner is actually going to be excited, and not because of how he may or may not look at it. My conversation for the book with him came right before, about a month before the Russia invasion Ukraine, a month before those historic almost earth shattering sanctions that the US led the world on applying on Russia. And somehow he was so pressy in our interview. I asked him all
of my questions. He answered everything patiently, and then he held me back at the end and he said, Seleia, when you're writing this book, I want you to think about how the next generation of policymakers at Treasury are going to have a different America that they're facing. And that shifted the lens through which I was looking at.
So I sat across from Parliament with John Taylor, who was at a G seven meeting for a very ill John Snow and they were at the time with the fear of terrorism, foreign exchange transfers, and will as well.
I want you to sell to our.
Audience on Apple car playing YouTube, the why of this book.
They're interested in the Fed, the Fed, the Fed, the Fed.
Why does Albert Gallatin's Treasury matter in our nation's security.
The US the world runs on US dollars. The Treasure Department is the steward of the dollar. The dollar touches everyone's life. You could be a cocoa bean picker in Ghana, you could be an oligarch or a business tycoon somewhere, and you need the dollar, the global financial system to make any kind of transactions to keep up your livelihood. The US has used that dollar to protect itself after nine to eleven. The global the war on terror did
not start with military tanks rolling toward a country. It started with the stroke of the pen when George W. Bush gave the Treasure Department fresh authorities to track money that the money flow of terrorists, and to use economic sanctions. So the dollar gets us health, it gives us the pursuit of happiness, It gives us connection to the world.
And an alshy protext in the Scarlet is Valerie, you started just staying said in the Great Barrier, I con greeted Berkeley. It is our exorbitant privilege.
It is our exorbitant privilege, and it's one that we don't have to think about a whole lot when it comes down to it, because day in and day out, sleiha. Most Americans aren't really concerned with the relative strength or weakness of the US currency unless they're traveling abroad. You mentioned an oligarch overseas, you mentioned a foreign business owner, But for ordinary Americans, day in and day out, it's
not something we have to trouble ourselves with. In your reporting, what do you think will most distress ordinary Americans about the dollar and how the government has weaponized the dollar.
I think the most distressing thing is what's playing out every day across the country and in Washington. It's the self inflicted wounds that we are giving our country, and that is actually damaging the US's dominance in the world and the dollar's dominance in the world. If Washington can't get if the US can't get its fiscal house in order make sure it's electorate feels heard, feels happy, becomes united, then dollar dominance and American hedge money around the world is not going to last.
Okay. The US Treasury, as you know, has always pledged allegiance to a strong dollar. They all answered that they want a strong dollar. Obviously, we know it's much more nuanced than that. What are they really saying, sal how or is that statement nothing at all?
Now? It's really nothing at all. You know, it was treasury lore. It was a mantra from the strong, from the Bob Ruben administration. At the time. It meant that we are relying on our economic strength to rule global commerce and to run our own economy, and it underpin globalization. And now Trump started a movement to look inward more populous policies, and Biden has carried that fourth By America friends, shoring sound a lot like make America greater again and
America First. And so we are shifting toward a policy where there's no real dollar policy, because no one wants to admit to a week dollar policy because with one hand, peak exchange rate is good for manufacturing. With the other hand, dollar dominance and hegemony is really good for a.
Celeyah off of paper soldiers. And I guess it's after the book. It'll be for your second edition, your sequel. I should say, how's Yellen doing? Has she been a successful Secretary of Treasury?
She's still there. She has navigated through a lot. You know, she had to be there to oversee the execution and implementation of some really complicated, huge sanctions on Russia and take a lot of the flak. A lot of people these days are wondering whether those sanctions really worked or not. The oil price cap was a really big deal for Janet Yellen, and of course inflation. She was one of the people who was calling it transitory while millions of Americans were seen and then it turned out to not
be true. But I think we still need some time to know whether how her legacy will stand after her.
I can't say enough about this book. It's a little book, but it's a powerful book. Paper Soldiers, How the weaponization of the dollar changed the world order Selaya Moss, And it just can't find the words for the dialogue and the velocity as through it of all these people worrying about crisis one in crisis too, Sleiah, thank you so much for Paper as Soldiers.
She is with Bloomberg.
News in Washington.
You daily look at the front pages without royal coverage.
It's from around the world except the UK. Lisa, what do you got?
All right?
We're starting with the Wall Street Journal. Apparently there is a fake Bill Ackman that is scamming investors out of millions of dollars on Facebook. So the problem is that the real actman can't do anything about it. Okay, so his company has found more than ninety different ads that
are impersonating him. One of them promised annual returns of one hundred and twenty five percent, another twenty five exactly exactly, another twenty five percent return in a week, and told victims to hold these three stocks and you'll.
Get a million.
The entity is doing so he can't go out to.
Can't do nothing about it, and that's the problem. It's not just Acman. I mean Kathy Wood's Ark investment matter. She had this caleto and a lot of people. I even my own brother in law had his Facebook account taken over and he can't do anything.
But what's Facebook doing about this?
They're doing nothing about it, and.
That's the problem. Full disclosure.
You're sending out my stock messages when someone complains.
I have a secret account on Instagram, but I had to leave Instagram because Instagram wouldn't.
Fix the problem.
What happened when you tried to consent with that?
Yeah?
Oh it was a great bloomberg. We have a whole team here that does this. It wouldn't like any other firm.
But the answer is you're telling me about mister Ackman, and I'm saying, okay, Facebook, can you fix it by Friday twelve noon.
Don't tell me they can't.
Yeah, well they can in certain intoms like they have. But the problem is that more just keep popping up. So once they delete a few a few.
More bim with two ends or black three ends.
It just continues and continues. So next it's a tough one. But the red flags, yes, you have to be aware of those red flags. This is from Bloomberg Law. It's it's kind of I have to kind of dig into this one. There's saying new lie detecting AI for job interviews, violating some old laws. This was a case bought over in Massachusetts the use of ARTI artificial intelligence as a lie detector when people are interviewing for a job. So this is a problem. This is a court case with
CBS Health. The person said they use this video interview technology that was developed by a company that reported their job reported these job seekers while they were answering questions. They then took that video and sent it over to an AI company that basically starts to interpret how the people are reacting, So it's it's giving them their emotions, it's making an assessment on the person from that, you
know information we feel uncomfortable. Yeah, so it's like you're being recorded and then you're having AI tell the company who you really.
Are train the AI.
Yeah, it's well, it's of the real world Adobe. I think this morning was done ten percent or something. And then you know there's some financial issues. But also there's this like, Okay, when's the AI click in? And I really wonder if that's when we look ahead?
Is that the discussion?
Is this the best use of AI? Is this what we want the AI to be used for?
Right? That's a good question.
That's one thing to make things more productive and more seamless, But is this the seamlessness we're seeking?
Right?
Maybe minution will make TikTok the new AI. Next?
Yeah, Okay, Wall Street Journal Luxuries resorts, they are ramping up their kids club. They're going all out because more families are traveling. So you have accommodations that started about fourteen hundred dollars a night. You have places that offer kids programm like Spanish language lessons. They can learn Spanish while they're on vacation.
Kids want to do that.
They can take dance lessons.
I think kids just want to go in the water pool. I don't know, but they're doing it. It's like kids clubs on steroids, that's what they're calling it.
It's a huge deal.
Yeah, And to give a snapshot into this, it's cheaper for me. I'm leaving for Paris tonight. It's cheaper for me to go to Paris than to go to some resort with kids clubs. Because the key number you just said was fourteen hundred dollars a night.
That's cheap.
That's cheap, trust me, that's cheap in prime season the Caribbean. And it's gone up from the pandemic. I had the last plane out of Jamaica literally when the pandemic collapsed everything.
And I would say.
Since twenty nineteen it's gone up eighty percent.
I'm guessing eight zero.
That's pricing power.
And it's all yeah, talk about pricing and every unit sold. It's like, I'm sorry, mister King, we can slip you in a Jamaica in July.
That really works out.
But you know that is this goes to the real estate scarlet you were talking about. I'm sorry, I'm looking around and it's a boom economy.
Everyone's trying to get into the towns where the schools are good so they can set their kids up so that maybe one day their kids can have a similar standard of living that they enjoy right now.
Yeah, I would say that's part of what do you got? You got something last week?
Taylor Swift it's a Friday Royal, so they got a special treat Disney. Plus, remember they're going to stream her concert. It was supposed to be tonight. Well they did it last night, what at nine pm? So all the Swifties. It was a surprise the Swifties got. They're probably a bit tired this morning. They've seen a plate to watch it. But I mean, Disney report, you played like seventy five million dollars for those worldwide streaming rights. So it went
off last night. They had a few extra songs in there, and yeah, it was like a special treat for them.
So we got a day or like, do you have a Swifty.
In your family? Oh yeah, oh yeah.
Yeah yeah hardcore I.
Think every family does. I've said this before. There's a spectacular video of her with the guitar. It's a number of years ago at the Bloomberg Cafe. The sounds terrible, the mic is terrible for guitars and two and I'll give her that. And she literally just walks up there and sits down, and you know, seeing her in really difficult conditions.
She's the real deal.
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.