Speaker 1: Bloomberg Audio Studios, podcasts, radio news, single best idea and
Speaker 1: we could have had many voices today. Very strong, strong
Speaker 1: Monday for the end of August. The team just did
Speaker 1: a great job getting smart conversations. Henrietta Trees was just
Speaker 1: on fire in studio with Veda partners on the political
Speaker 1: moment of the nation. But without question, the conversation of
Speaker 1: the day it was with a great optimist, Edward Yard
Speaker 1: Denny of your Denny Research. There's two ways to look
Speaker 1: at this. The first is that I was at Jackson
Speaker 1: Hall and I spent more time there than ever ever,
Speaker 1: ever talking about nominal GDP, the combination of real GDP
Speaker 1: and inflation. So if you have buoyant nominal GDP, is
Speaker 1: it because you're getting real economic growth over inflation, or
Speaker 1: you have the same nominal GDP from Okay economic growth
Speaker 1: but more buoyant, larger inflation. Here's Edgyar Denny on how
Speaker 1: it doesn't.
Speaker 2: Matter revenues or revenues. The PE times is done in
Speaker 2: nominal terms, and the E is in nominal terms, so
Speaker 2: that's correct. We look at revenues and then we look
Speaker 2: at earnings, and the implication is profit margins and what
Speaker 2: we see in the data is that the first and
Speaker 2: second quarter earnings were remarkably strong, much stronger than expected.
Speaker 2: They usually is a positive earning surprise, but there was
Speaker 2: particularly strong in both quarters. And now during the second quarter,
Speaker 2: we have earnings on the S and P five hundred
Speaker 2: at an all time record high, and no wonder the
Speaker 2: stock market is an all time record high. Of course,
Speaker 2: it helps that the valuation multiple is elevated at twenty two,
Speaker 2: but I'm thinking the bill market cantinues here on earnings,
Speaker 2: and I think that earnings will continue to push stock
Speaker 2: prices higher.
Speaker 1: Late in our conversation, ed Yard Denny extrapolating out but
Speaker 1: in a very sound, not mathematical, but almost fundamental basis.
Speaker 1: This is the first time I've ever modeled this. While
Speaker 1: ed was talking, and I think Paul Sweeney saved me
Speaker 1: and had a brilliant question. I was on the Bloomberg
Speaker 1: doing the interpolation of if you have a certain number
Speaker 1: for the standard and pores five hundred, it's mathematically better index.
Speaker 1: But if you bring that over to what we're wedded to,
Speaker 1: which is the Dow Jones Industrial average, what number do
Speaker 1: you get. Let's listen to Edgar denny on the standard
Speaker 1: and pores five hundred end of decade.
Speaker 2: If you just kind of take normal assumptions of what
Speaker 2: the economy can deliver and has delivered in the past,
Speaker 2: you get to ten thousand on the S and P
Speaker 2: five hundred by the end of the decade. That's the
Speaker 2: end of twenty twenty nine. And the assumption there is
Speaker 2: that earnings expectations get up to four hundred dollars a share.
Speaker 2: And again, that's all pretty straightforward, consistent with the kind
Speaker 2: of growth, right of six seven eight percent that we've
Speaker 2: seen in earnings over the years. And if we get
Speaker 2: better than that, the market I could very well close
Speaker 2: even higher than that.
Speaker 1: I can't convey how lonely that discussion is. That's the
Speaker 1: first time I've heard SPX ten thousand, by let's call
Speaker 1: it twelve thirty one, twenty nine. I've never thought about
Speaker 1: twenty twenty nine. I'll be like sixty seven years old then.
Speaker 1: But what it comes down to is what does that
Speaker 1: mean for the Dow? And the answer is SPX ten
Speaker 1: thousand is in the vicinity of Dow seventy. I've never
Speaker 1: framed that. I got to go back and do more
Speaker 1: work on this we'll be here all week. Exciting week
Speaker 1: to say the least. On podcasts on Apple, on Spotify,
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