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In October of a number of years ago, Ralph Ankopora, the giant of technical analysis, and Edward, you're Denny, with all of his synthesis of economics and fundamental analysis, got on board this bull market. There was fear on the streets and they said go along. It's one of the great calls of the modern age. Edward, your Denny joins us this morning readjusting ever higher, ed with your beautiful CJ.
Lawrence like charts, even with CJ. Lawrence Green in the banner, you do a log extrapolation of the s and P.
Five hundred.
Is that all this is we're climbing a wall of worry because no one else out there has a courage to simply extrapolate forward.
Well, I think we definitely are climbing a wall of worry.
And that's the best kind of bullmarket you can have. You don't want everybody being belief. You want people to to have concerns. I don't want people to to worry on a personal level, but on a professional level. When I see a lot of bearishness from a contrarian perspective, it usually works.
Uh.
I've made some of my best calls on market bottoms, uh when my gut was hurting and everybody was was in a panic mode. So we're not in panic mode right now. But on the other hand, there are a lot of people worrying about what's going on in the Middle East, and I'm not saying that's not worrisome, but it's it's certainly adding to the concerns. They're worrying about the bond market, they're they're they're worrying about a k economy that the consumers not going to continue to spend,
and they're working worrying about too much capital spending. So there's a lot of worries up there out there. But meanwhile, it's really pretty simple or the market is also getting kind of rushed up. It's been a rocket ship because of earnings.
And what we're starting to see once again that you know, as a pillar of this market. I guess last year was you know, kind of a narrower breath in this marketplace. Is the big tech stocks once again leading this market on good earnings. Certainly, are you concerned about that, I guess, narrowing breath in the market.
Yeah, Well, again, I think people are always looking for something to worry about with regards to the market, and the breath issue is back. But however, once again I would point out that the earning story is fantastic for the S and P five hundred earnings breadth is actually improving. And not only that, but we've got the small cap and MidCap earnings which had been kind of in a
coma since twenty twenty two. For the past six months or so, they're starting to really perk up, and expectations are already showing a record high earnings outlook for this mid caps.
So I mean again, I guess towards the end of last year, we did have kind of a rotation out of some of those big cap growth names into some more Is there any legs left in that kind of trade, maybe a small MidCap as you suggested, maybe some other sectors here.
Well, I think that other sectors will participate in this latest rally in this bull market. I think we're saying, you know, one of the problems is the Magnificent seven are are contributing to that. So consumer discretionary has been boosted recently by improvement in Amazon, and communications services have done well because Google and Meta dominate that space. But financials,
I think as still have prospects of doing better. You know that there are signs that private credit situs not get the worst, might actually be be getting better as the economy continues to chuck along.
Ed your Denny with us, folks are going to can't say enough about his newsletter. It's wonderful daily brief, really one of the major subscriptions out there.
Ed, I'm going to assume long ago and.
Far away at Yale they didn't have econ five seventy four applied empirical methods. This is back, Ediardenny, Folks was back in a simpler time of macro micro our. Simon White this morning at off the London Desk has a spectacular walkthrough of derivative finance, looking at the Greek letters of gamma, dispersion and correlation, and it's worry, worry, worry, OMG, things are terrible. If we created a wall of worry with our mathiness in modern global Wall Street.
Well, I don't think I'm a inventing a phrase here, but it's all Greek to me. I actually did an econometric dissertation for James Toubin, and I proved that his theory was right for corporations, and so he loved it and I got through, I got my PhD and moved on.
But yeah, I think there's too much.
I think a lot of economists start with theories, start with the models, and then look for the data to confirm it.
I worked the other way around.
You know Ben Bernanke and his memoir of being at the FED that when he joined the FED, he had to learn something that was rather new to him, and he called.
The current analysis. And I kind of like that.
In other words, he had to learn how the world really works, had to learn about markets and how markets interact with data, and data impacts the markets. And that's what I practice, I've been practicing on all along, is current analysis, and that's a reality based economics.
Let me get the seconds. Got four more questions. The bottom line, ed, is we have physics envy. And it started with you know, Newtonian mechanics nineteenth century, and now we've got alpha, beta, gamma, epsilon, delta, the others. And I just, folks, I just think the difference, the distinction between a Yar Denny strategy and some of the quad strategy is the angst of the age worry, worry, OMG.
Paul Gamma dispersion. We used to call it.
We used to call it political economy, and then suddenly it became a social science. Uh, and it's not a science. It's uh, it's political economy. It it's too complicated to put in a formula.
So ed, I mean on that front, there we've got the market's got a lot of cross winds as it released to geopolitics, whether it be tariffs from earlier this year and last year, to the war in Iran. But boy that at least the stock market seems to look through all of that and focus on maybe just the earning, which are arguably the most fundamental.
Yeah.
I think what's going on in the stock market is everybody knows that based on history, that crises, a geopolitical crises in the past, have turned out to be buying opportunities. So when we get a geopolitical crisis, we get kind of scared for a couple of weeks, maybe four weeks, as we did in March, and then everybody remembers that
that's actually a buying opportunity. And that's exactly what happened on March thirty first, is suddenly investors said, well, you know, if the president's going to be looking for an exit ramp and we're going to have a cease fire, then we can buy stocks today at a lower price with record high earnings ED.
Thank you so much. How's your beast doing.
I don't see your dog in the background there in your couch dog
Okayans As Max is walking about, he's walking, probably reading the Wall Street Journal or peing on it one of the Ardn't you think you so much?