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Speaker 1: Joining us now as someone who's gotten it right all

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Speaker 1: year at your Denny, President of your Denny Research, you

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Speaker 1: called for the roaring twenties, is leaning into that now

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Speaker 1: talking about disinflation, we're seeing it now. What keeps you

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Speaker 1: up at night, ed, considering that so far you've gotten

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Speaker 1: a lot of things very right.

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Speaker 2: Well, I've been sleeping pretty well quite honestly. I guess

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Speaker 2: I do worry about the Middle East, the geopolitical situation,

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Speaker 2: the fog of war. You never know how things unfold

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Speaker 2: once a war starts, and we have this fairly contained

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Speaker 2: localized war in Gaza, and that the risk is that

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Speaker 2: it becomes a regional war and it affects the price

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Speaker 2: of oil. But so far, the price of oil has

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Speaker 2: been telling me, telling me that there's not going to

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Speaker 2: be a regional war going on here anytime soon.

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Speaker 1: So putting aside some of those tail risks is the

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Speaker 1: risk in your mind that people aren't bullish enough, considering

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Speaker 1: that everyone's been upping their expectations for end of the

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Speaker 1: year targets.

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Speaker 3: But we're catching up.

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Speaker 1: To it really quick already. It hasn't even been the

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Speaker 1: end of the year.

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Speaker 2: Yeah, I think that's true. At the beginning of the year,

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Speaker 2: I was talking about forty six hundred. That wasn't bullish enough.

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Speaker 2: We're already above that for the end of this year,

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Speaker 2: and then I'm looking for fifty four hundred next year,

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Speaker 2: and now there's more people talking about over five thousand,

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Speaker 2: and then for twenty twenty five, I'm talking about six thousand.

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Speaker 2: So I think I'm bullish enough. I don't think things

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Speaker 2: can get much better than that. So that's kind of

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Speaker 2: at the top end of the scale and optimism, I think.

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Speaker 2: But I think in the near term here we've got

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Speaker 2: everybody seems to be too happy, at least in terms

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Speaker 2: of the sentiment indicators. So that's on a near term basis.

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Speaker 2: I don't lose any sleep over it, but I do

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Speaker 2: watch it.

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Speaker 3: And with only what a week or so left until

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Speaker 3: twenty twenty four, the fact that everyone is maybe too

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Speaker 3: happy right now, is that why you haven't boosted your

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Speaker 3: year end target for this year? I believe that was

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Speaker 3: at forty six hundred, and we're pretty firmly above that

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Speaker 3: right now.

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Speaker 1: Ed.

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Speaker 2: Yeah, well, you know, I don't find to in my

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Speaker 2: forecast that much because we are, as you said, we're

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Speaker 2: only a week away, so what's the point of getting

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Speaker 2: cute about it? Instead, I did talk. I am talking

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Speaker 2: about fifty four hundred by the end the next year

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Speaker 2: and six thousand after that. So that's that just puts

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Speaker 2: me in the bullish camp pretty clearly.

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Speaker 3: Yeah, if I, of course had to put out these forecasts,

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Speaker 3: I think I'd revise on December thirtieth every year and

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Speaker 3: just nail it every single time. But I do want

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Speaker 3: to talk a little bit about twenty twenty five because

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Speaker 3: six thousand is a staggering number and twenty twenty five

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Speaker 3: feels very very far away. What is the work that

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Speaker 3: gets you there and how do you project that with

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Speaker 3: a certain degree of confidence.

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Speaker 2: Well, first, on a short term basis, looks like there's

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Speaker 2: still some what I call die hard hard landers who

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Speaker 2: think that we're going to have a recession next year.

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Speaker 2: I've been talking about a rolling recession for the past

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Speaker 2: two years, and I think in the next and the

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Speaker 2: next two years will have rolling and recoveries. Clearly, we're

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Speaker 2: starting to see a rolling and recovery in the housing market.

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Speaker 2: I think we've bottomed in terms of retail merchandise, a

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Speaker 2: lot of inventories piled up now. I think consumers are

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Speaker 2: going to go back next year and buy some goods

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Speaker 2: in addition to services. And I think commercial real estate

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Speaker 2: will be in a rolling recession in this coming year,

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Speaker 2: but then beyond that, I think there will be a recovery.

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Speaker 2: So I think that's the way I look at the

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Speaker 2: business cycle is sort of spread out. Most importantly, I

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Speaker 2: think we've got a labor shortage, significant chronic labor shortage.

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Speaker 2: I think companies will use technology to increase productivity dramatically.

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Speaker 2: Right now, we're averaging about one point eight percent over

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Speaker 2: the past five years. I think by the end of

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Speaker 2: the decade we'll be looking at three and a half

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Speaker 2: to four and a half percent, which sounds far fetched,

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Speaker 2: if not illusional, I admit, but that's the way productivity

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Speaker 2: boom cycle have gone in the past, and this one

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Speaker 2: should do the same.

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Speaker 1: Does it worry you at all? And I realized the

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Speaker 1: anecdotes can't tell entire stories, and you can't extrapolate out

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Speaker 1: an entire research paper from one particular example. But let's

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Speaker 1: take a look at Nike. They came out and they

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Speaker 1: said that they're going to be cutting workers, They're going

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Speaker 1: to be having cost cuts, and it is because yes,

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Speaker 1: they are working down their inventory, but because of weakness

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Speaker 1: and weakness that they expect to continue going forward. Does

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Speaker 1: that kind of contradict some of your optimism about the

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Speaker 1: recovery and the retail space.

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Speaker 2: Yeah, well, that's a good point, and that's why I

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Speaker 2: think a lot of forecast years have missed the past

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Speaker 2: couple of years and had this attitude that or view

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Speaker 2: that the only way inflation could come down in the

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Speaker 2: United States is if we have a recession. You mentioned

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Speaker 2: the phrase immaculate disinflation, and I think that's what we've had.

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Speaker 2: We've had inflation come down without a recession, and the

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Speaker 2: reason for that is because the Chinese and the Europeans

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Speaker 2: have done us a great favor. They've had the recession

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Speaker 2: so on a global basis, particularly China has been exporting deeply.

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Speaker 2: Their PPI is down on a year over year basis,

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Speaker 2: even their CPI is down a little bit on a

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Speaker 2: year over year basis. So I think the United States

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Speaker 2: is going to benefit from the recession the property depression

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Speaker 2: in China for a long time in terms of having

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Speaker 2: a low inflation. And I think year starts to recover

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Speaker 2: from its shallow recession next year, which will help us

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Speaker 2: on the export side, and let's.

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Speaker 3: Bring this conversation to the bond market, because the reversal

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Speaker 3: that we've seen there has been stunning, And of course

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Speaker 3: you've done a lot of great work on deficits, what

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Speaker 3: that means for bonds and the demand for bonds, and

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Speaker 3: it felt like for a while maybe the bond vigilantes

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Speaker 3: were reappearing. Why did deficit concerns seem to fall off

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Speaker 3: the radar.

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Speaker 2: Yeah, I've had the point of view for many years

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Speaker 2: that I'll care about the deficit when the bond market

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Speaker 2: cares about the deficit, and the past supply really hasn't

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Speaker 2: been much of a problem because you get the biggest

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Speaker 2: supply in recessions when interest the FED was cutting interest rates.

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Speaker 2: We had this brief period where the bond vigilani is

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Speaker 2: saddled up and started to move on concerns of fiscal excesses.

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Speaker 2: And that period didn't last very long. Basically, from August

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Speaker 2: to October we saw this monstrous increase in the ten

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Speaker 2: yure bond deal from basically four and a quarter percent

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Speaker 2: to five percent, and here we are back below four percent.

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Speaker 2: I think, you know, there's an expression, don't fight the Fed.

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Speaker 2: Maybe we should also say don't fight Janet Yale and

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Speaker 2: now that she's a treasury because she was very cleverly

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Speaker 2: cut back on the supply of long term bonds and

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Speaker 2: notes and issued a lot of bills and the bond

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Speaker 2: Vigilani said, Oh, if that's the way you're going to

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Speaker 2: play the game, we can live with that. Meanwhile, I

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Speaker 2: think the big story has been how inflation has come down.

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Speaker 2: I mean it's been only the past couple of months

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Speaker 2: that the consensus really has become that we can't have

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Speaker 2: immaculate disinflation. Even bet chair poll and as press conference

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Speaker 2: seemed to indicate that, you know what, we may actually get.

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Speaker 1: It, and everybody let out a collective cheer, and you

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Speaker 1: still hear that cheer today. Edier Dunny of your Dunny Research,

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Speaker 1: Merry Christmas, Happy New Year, have a wonderful, wonderful end

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Speaker 1: of the year, and thank you so much