Animal Spirits Podcast - 10 Predictions For 2023 (EP.290)

Episode Date: January 4, 2023

On today's show we discuss the terrible no good year that was 2022 for financial markets, some thoughts on what might happen in 2023, the 4 factors that should impact markets and the economy next year, why investors are still pouring money into Tesla shares, when luxuries turn into necessities and much more. Find complete shownotes on our blogs...  Ben Carlson’s A Wealth of Common Sense  Michael Batnick’s The Irrelevant Investor  Like us on Facebook  And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.      (Wealthcast Media, an affiliate of Ritholtz Wealth Management, received compensation from the sponsor of this advertisement. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information.)  Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain position and the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben.

I'm a basic bitch. Okay. How so? Because when the New Year turns over, so does my energy. I am one of those people who says, you know what? January 1st, going on a diet. That's good because last week to start off the show, you were a little low energy. You needed to pick me up.

I really was. I was low energy. I know you stay in shape throughout the year, but I don't. I'm a yo-ya-war. I certainly left the holidays. I ate a lot. I was eating a lot of pizza and french fries and burgers and sweets. So I don't like to give a lot of fitness influencer advice.

But if I had any advice for anyone, it would just be that have some sort of dietary system that you can easily go back to. Like Chick-fil-A at 10 a.m. By the way, I had Chick-fil-A for the first time in the other day. I had a spicy chicken sandwich. It's good, but in my opinion, Wendy's spicy chicken is still the king. Okay. I don't want to get into a fast food debate here.

My whole thing is... Sounds like you agree. Especially during the week, have four to five things that. that you can eat on a regular basis. That you don't deviate from. That's how you keep your food intake to a reasonable level. That's my only fitness advice. Here's what I'm trying to accomplish in the month of January.

I'm going to cut out carbs. I was going to do the whole 30, but come on, I need dairy. That's ridiculous. I'm just going to cut out carbs. No soda, no sweets, nothing like that. I'm just going to keep it simple. And I'm also going to try and cut out booze. But the problem is...

I'm sorry. I'm going to stop you right there. That's too much. give yourself a cheat day. You can't go from like sitting on the couch to running a marathon, baby steps. Give yourself a cheat day at least. No, I can't do a cheat day

because if I fall off, I fall off hard. I can do 30 days. The Rock gives himself a cheap meal. Be like the Rock. Close it on Instagram. I'm a little bit worried about the booze because I check my calendar and I've got a few dinners lined up in New York City.

If I'm like out with my wife and another couple, I have no problem not drinking, but it's hard when you have like people coming into town. I don't want to be like weird. And also, I have a potential trip lined up to Minnesota. to see the Giants, and a 0% chance I'm not drinking at the giant game. Plus, you can't go to a monster truck rally without drinking a beer. Yes, I can.

Although, there was a lot of chatter about what should I do. Now, credit to the listeners who informed me, I'm a bit embarrassed that the Saturday divisional games don't start until 3 o'clock or maybe even 3.30. So I am in luck because a monster truck thing starts at 12. No harm, no foul. Good to go. All right. Should we do a little ear-end review here?

I've been doing that the last couple days. Question for you. Question for you. I'm pretty sure I know the answer to this. But this is something that people seem to trip up. Year-end review or year-in review? I think it's year-end, but I could see both sides. I've heard both.

I don't think it really trips on it up because I think you could use each of them. Okay. You're trying to get tricky there. I looked at, it should be no surprise. We were looking at this. Also, I settled on the great inflation. That's 2022, unless I hear something better, I'm setting on the great inflation. Maybe like the Fed's Revenge, something like that.

Was that the name of that book? Oh, that's possible. So I had, going back to the 1920s, it was the seventh worst year for the SP 500. I'm guessing if you adjusted for inflation is probably even further up the list, but 18% a little more than that. I had this as the third worst year ever for a 6040 portfolio of S&P 500 and 10-year bonds, 10-year treasuries. This was the worst year ever for the Bloomberg aggregate, which is that hard. Hang on. Hang on. It's worth mentioning. What were the two other worst years for this balanced portfolio? 1930s. It was the Great Depression, and that was because in 1931,

I think the stock market fell 44%. And then 1937, when this stock market fell like 50%, and the 1937 crash. So, yeah, you're in the territory of the 1930s, basically, for the worst years ever for the 6040 portfolio. Then the next one down long would be 1974. This was the worst year ever for the Barclays ag, or the Bloomberg Ag, used to be the Barclays. That was incepted in 1976. There'd never been a double-digit loss there ever. This year was 13%.

Tenured treasuries were down 15% or so, maybe more than 15%. That was the worst year ever for 10%. 10-year treasuries, too, going back to the 1920s. Well, speaking of that, 10-year treasuries, look at this chart from the FTA. It was a bad year. The annual change in 10-year treasury yield. I almost find this hard to believe. 2% was the highest change in the 10-year going back to 1960.

Wow, even in the 80s. Is that surprise you? It does surprise me. I think the 80s must have just bounced around more, and it moved up much more. It was a bad year. Although in the 80s, or late 70s, I'm sorry. It was just persistent. It was like 1% a year for 5 straight years.

But yeah, it was a bad year. It was big year. Global stocks and bonds lost more than $30 trillion. And yet, Ben, and yet, it feels like it could have been worse. I do think your point about there not being a recession made it feel a lot better for people that if you were still saving, you still had a job. That's it. If there was a recession in 2022, the stock market decline, it would have felt terrible. I do my little update at the end of the year where I look at all my values on the update

I have a spreadsheet. I don't use any software. Your personal values? Yeah, no, not that. How my investments are doing. I update it once a year. That's the only time I look at the market values once a year. I update it.

And this was the year where if you look at the change from one year to the next, if you're looking all the time, it hurts. But here's the way I'm looking at it as a silver lining. I increased my savings rate more than I lost money. The increase in savings helped eat up a lot of the losses. And I think that's like your springboard for future gains. That's the way I want especially young people to look at this, is that your savings rate should be increasing enough each year that if you have some losses,

the incoming cash should, from a market value perspective, help blunt some of those losses. Listen, that's just a fact, Jack. For people that are still investing money into the stock market, any declines are a blessing because it literally allows you to buy more at lower prices. And even though it doesn't feel good immediately, A, that's the source of future returns and B, like, you know that's how it works. We know stocks don't go up forever. And the thing is, if you look, I did this for a few different individual stocks and indexes.

if you look at the gains in 2019, 2020, 2021, the losses in 2020 make a lot more sense in that context. Yes. If you see how great the gains were. The other thing, I looked at this for a globally diversified portfolio, so global stocks and then U.S. bonds. And going into 2021, the yield on like a 50-50 or 60-40 portfolio was under two. One percent. Even coming into 2022, it was 1.5 percent. Now we're talking more like 3.3 percent for the yield, if you come up, find the stocks and bonds. It hurts when this stuff goes down and you see the market value portfolio go down, but that just means higher dividend yields, higher bond yields, lower valuations, hopefully higher expected future returns. I think that's the place we are. Even if, I mean,

the thing is, even if 2023 ends up being a good year for stocks, the probability from history says we'll probably still have a 10% correction this year, regardless of when it happens. It could happen right away. It could happen in the middle of the year after we have a little bounce. Who knows? Could be happening right now. Yes, we could have a correction. Give us the timestamp. Tuesday at 11.30. S&P 500 opened pretty strong and now it's down 80 basis points. Tesla, new lows. Tesla's down 13% today. This is nuts. This thing is going straight down. It was at 200 bucks in December. It's 107 right now. I mentioned looking at previous year's performance can help explain current performance. So listen to Tesla. This is 2019 to 2022. These are the annual

returns. 26% they were up in 2019. 743% in 2020. It was up 50% in 2021 and then down 65% in 2022. When you think about it in that context, it makes more sense. Let me ask you this. I want to talk about just some of the best performers and worst performers in 2022. So of the 10 best performers in the S&P 500, nine of them were energy. The 10th was First Solar. It was all energy stocks.

Wait, isn't First Solar consider an energy stock? I don't know. I was sort of surprised it was technology. It's certainly not a traditional energy stock, not like a fossil fuel type of thing. 26 stocks got cut in half, including... Wait, that means 50% or more loss? Yes. Just from the SMP or from the...

Just from the S&P 500, 26 stocks in the SMP 500. I'm actually surprised it's not more than that. Well, if you look at stocks that are in 50% drawdown, it's definitely like way higher. Okay, some of those drawdowns started in 2021. So I'm just saying just in 2022, Amazon, NVIDIA, Netflix, Facebook, and Tesla all got cut in half. How bonkers is that? If you want a portfolio of just those five stocks, you were patting yourself on the back for years, and then you just got cut in half. So look at this chart that I made of the market cap, then.

we're looking at Apple, Amazon, Microsoft, Google, Facebook, Nvidia, and Tesla. And this went from around $6 trillion pre-pandemic, up to $12-plus trillion at peak, and now it's under $7 trillion. So it's almost round-tripped. Wow. Is everything post-pandemic just fake gains? Was all of that just artificial? If you did a trend line on this where it's back on trend.

So you're right, it's another not even round trip, but just round trip to trend. And I was going to talk about this in terms of VCs and IPOs, how much of that stuff was fake. Obviously, a lot of it was. The gains were fake. The losses are real. True. Yes. It kind of feels that way.

I want to review my predictions for 2022. I have to say, this is a mildly fun exercise. It's not so much fun writing it because it's a lot of work. But looking back, it's hilarious. I like your idea. You said your idea for doing this is it's kind of hold yourself accountable to how you're feeling or how consensus is feeling or whatever going into the year and then looking back on it is a good way to gauge how hard this really is. That's a good way to look at it. I was four for 10 in 2022. And some of these are hilariously wrong. And some of them are hedges.

I know that, for example, I know that the S&P 500 will have its worst year since 2008, which is one of the better predictions I had. I know that can happen and also ARC can outperform NASDAQ by 20%. True. So it was basically like hedging a little bit. So all right, here's what I got right. Large value will outperform large growth by 20%. Check. Active managers will beat the benchmark, part of the same bet, but check. Active management definitely had its best year in a long, long time. The S&P 500 will have its worst year since 2008, check. Buybacks will set a record, check.

That still happened? Bybacks still set a record in 2022? I'm not positive, but I just assume they did. I'm like 80% sure they did. I would assume buybacks would have slowed considerably. Maybe you're right. I think they did. Somebody can fact check us on that.

If so, I'm 3 for 10. All right, so here's what I got wrong. China Tech Dip buyers will be rewarded. K-Web will gain 30% in 2021. That was horribly wrong. I don't know how much of... If you would have taken the last part off, you would have been right because dip buyers were rewarded just depending on when they bought. This guy, I bought 10 cent.

I'm up almost 50% of that thing. Not to brag. Just a little. Okay. Bitcoin will see 30,000. So partially, right? And 100,000. It seemed reasonable at the time.

If you did Bitcoin this year, what would it be? What would your range be? I included that Bitcoin will double this year. Okay. We'll get them a sec. I would say you could say Bitcoin will see 7,500 this year or 35,000. No, it's got to be end. It's got to be end.

Yeah, that's what I mean, both. Yeah, okay. Meta, which was an ETF at the time. That was the Roundhill meta versus ETF. We'll add a billion dollars in assets in 2022. That was the absolute peak of that ETF. Oh, right. That might have been the worst prediction on this list.

Arc will outperform the NASDAQ by 20%. How much was Arc down in 2022? It actually underperformed. Let's take a look right here. It's 60-some percent, I believe. Arc was down 60-something percent last year? Oh, yeah. ARC was down 23% in 2021 and 67% in 2022.

Oof, big oof. But again, up 150% in 2020, up 36% in 2019, 87% in 2017. So ARC underperform the NASDAQ by like 40%. So that was exactly backwards. Tesla doesn't converge with fundamentals. I actually think I might have been right on this for the wrong reasons. I might have been right for the wrong reasons. So if Tesla stock price crash, but its fundamentals actually accelerated.

So you could say that I was right for the wrong reasons, maybe? And the Fed will lower rates. The Fed will lower rates. The logic that I gave there was the Fed was going to raise rates, I think two or three times instead, and then it was going to prove too much for the market, and then it was going to reverse course, obviously. And again, it's funny, it's just reading these back. It's like, how could you possibly have thought that?

Well, guess what? Same thing with this next list that I just made. Some of these are going to look absolutely heinously silly. The S&P 500 was at an all-time high the first trading day of the year. True. Go back to a year from today. The S&P hit a new all-time high. No one saw 7% mortgage rates or the Fed raising the most aggressive raises in history

or 9% inflation or a war in Ukraine. None of that stuff. No one could have predicted that stuff. True. I'm going to go through your new list and pick out which ones I think I kind of agree with. Bonds hold their own as a diversifying asset. I agree with that. I think this is the kind of thing where if you gave up on bonds, now that they have

4 to 5% yields, you're going to be sorry. Here's where this can go catastrophically wrong. It's not that hard to imagine that the 10-year goes from where is it now, 3-8 or something? Imagine the 10-year goes to 5.5 and the market goes to, down another 15%. That would be tough. But that's not impossible. But even if that did happen,

bonds would still do not as terrible as he did last year. There's more of a cushion now than there was from duration and yield. Tech layoffs continue. That makes sense. Jeff Basil turns to Amazon. This was my prediction. I just want to put that on record. Well, I'm leasing it.

You're leasing that. IPO market remains frozen. That seems okay to me. Value up performs growth again. That's got to be an interest rate story. I feel like that one I could see going either way. Did you know that the Russell 2000 beat the living crap out of Russell 2000 growth in 2021?

Yeah, a lot. By like a lot. You said gold will make a new all-time high. What's the all-time high in gold? 2000-ish? Yeah, something like that. It is nuts. And I'm definitely cherry-picking because gold had a fabulous one in the 70s.

But since 1980, literally gold has not kept taste with inflation. It's hard to believe that's that. Gold has underperformed inflation. And not shadow inflation. Straight up government inflation. So gold is 12% off all-time high. So that wouldn't be much for that. But I'm guessing a lot of people aren't predicting that.

Housing market doesn't crash. What do you consider a crash? Because I think housing could, if rates stay at above 6%, housing could fall 10% this year. If rates go back to 4 or 5... I don't think that's a crash. Okay, I agree. Here's the stat that I gave. For housing to return to its 2019 average price.

In other words, if all the gains in tech was fake and all those stocks were fake, what if the gains in housing were fake? Aha. I don't think they are, though, because I think it's structural. But if housing wasn't return to the 2019 prices, that would be a 32% plunge, which would be the deepest of the cost. crash of all time. And that's not inconceivable for houses. I don't think it's going to happen because I don't think so either. Assuming mortgage rates don't go up to seven plus and again,

if that happens, all bets are off. But assuming that doesn't happen, I just think that at the first hint of mortgage rates coming in, which we've already seen, activity will pick up and prices will remain elevate. I think a 10% pullback is likely. 10 to 15% seems reasonable to me. I agree. But to me, that's not a crash considering where we're coming from. Okay. You said crypto goes nowhere, meaning we just kind of stay in this range for a while. Oh. Well, that was my original prediction, but I changed. Oh.

But I meant to say, I need to opt to do that. That's my bad. I wrote crypto will double. Bitcoin will double in 20, 23. What's it at now? 15, 16? Yeah. So go to 30.

You can go to 30. How, why? I have no idea. It has nothing going for it right now. Well, the Fed lowering rates. The Fed backs off. If we get a rally in risk assets, this thing is going to lead the back. Energy stocks continue to outperform.

So energy stocks have been the best sector for the low. the last two years. According to Ari Wald, the only time a sector has had three consecutive years of winning was 1989 to 1991 where health care did it. So I'm predicting that energy stocks can continue to outperform in 2023. I would take the other side of that one. I think that much outperformance from one sector. I mean, technology basically did it. So you said the market avoids recession, stocks gained double digits. I think if we did a recession, that's one of those if and kind of things. It's the kind of market where you could get one or two pieces of information and think you know what's going to happen and you'd still be totally wrong?

No, I don't think so. I think if you tell me... Unemployment rate, interest rates, fed funds rate, inflation. If you tell what that is in second half a year, I think you've got a pretty good sense of where the market's going to be. Although this is interesting. Let's say the market gains 15% this year, the S&P 500. That takes us to where we were in April.

Funny how that works. That would be a very good year, and it would get us back to 4,400. The highs were around 4,800. So my only predictions would be we're going to have a double-digit correction at some point this year. And the end of the years later, they're going to be double-digit gains or double-digit losses. That's where I'm standing. What if it's like a 3% loss? Nobody would bet on that.

No, that is true. Maybe that's what we're in for. All right. So I predict that I'll go four for 10 again. How do you like that? Not bad. Bob Elliott, who was a great follow on Twitter, did a thread about what's going on. And the one that I plucked out is any way you slice it, this is one of the worst years for financial assets in all of history.

The only other years where a diversified financial asset portfolio did this bad was vocal tightening, the depression, and the premature 37 tightening. So I don't know exactly what's in here. I'm guessing, I don't know, I'm sure it's stocks and bonds and who knows what else is in here. So the big question to me is, and this is one of the things that I left off my prediction list was employment and earnings. It does seem that most people think that things are probably going to get worse, certainly on their earnings side, and yet everybody is already so bearish and stocks were down 25% of their worst. I know we keep talking about this and you might be sick of it, but is that enough? With the earnings thing, I think that is depending on, are they falling just because things are slowing a little, but they're falling

because we've gone into an all-out recession. Because there have been plenty of times where earnings have fallen on the stock market has done just fine, because the market has discounted that? There's the rub. It's like, how much of the potential fallen earnings has the market already thought of and discounted and moved on from? Ben and I just hopped off a call with the person who leads the equity investment group at Vanguard. And we said one of the nice things about index funds is that you know exactly what you're getting. You don't know what the returns you're getting, obviously. But you more or less know the risk that you're signing up for. Stocks get cut in half every whatever so often. And you know the methodology and you know what you're getting

for the most part. You can't say that about too many other investment strategies. Certainly you can't say that with stock picking. So I say that because according to the Wall Street Journal and Vanda Research, retail investors bought Tesla more than any other stock in 2022. And we already went over what happened to Tesla. It's down 13% today. I have no opinion on Tesla stock. But what I do know is that this is painful. And what do you do now? Do you buy more? Do you bail? I don't know. But that's the point is that the trouble that you get into investing is arguing with yourself, which you can tell them very good at it. You twist yourself into a pretzel. We had huge inflows into arc last year, huge inflows into Tesla. People were still buying tech

stocks. I think some people assume right when the performance dives, people are automatically going to bail out, there was this book by Maggie Mayhart called Bull. And it was a history of the 1980s and 1990s bull market. And she talked about the aftermath. two. And I pulled up this stat, and it was something like, once by 2003, you knew that the bull market was over and you've been in a bear market for a long time. The 12-month ending first quarter, like March 31st, 2003, there was only like 3% of all fund went out flow mode. So it's not like you had this mass exodus, even after a three-year bear market. And so I think people hold on hope much longer than you would assume for something like this. And maybe

that's why behaviorally people are still piling into this stuff. even after huge losses. It depends, because I think that coming off such a long bull market, like bowl and this one, people are going to hold out hope for a longer period of time. I can't remember when, but it was a Jack Bogle quote that there was 12 consecutive quarters of outflows after the 73, 74 bear market, which had already been a lousy decade. So that part is not surprising. What do we make at this arc thing, which is hard not to talk about, even though you're probably

sick of hearing about it? It brought in $1.3 billion in 2022 despite a 60 plus percent drop. Do we have a repeat performance in terms of investor enthusiasm, or will 2020 be the year that investors throw in the towel? I'm going to say the latter. And in fact, I actually was on the arc will still get inflows trained in 2022, I believe. I think that people weren't going to be so quick to abandon shit. But now it's been a year.

It's been a couple of rough years. I think that if there are continuing declines in the price of the ETF, people will, in fact, leave. Do you think a lot of it is enough people added arc to their model portfolios and this was all just rebouncing? Well, it can't be retail. It's not $5,000 clips. Speaking of retail, here's my other favorite one from the past few years. This is AMC's gains and losses per year since 2017. I thought about this because I saw an AMC movie theater. I was in Chicago and saw one. 2017, the stock was down more than 50%. 2018, it was down 8%. 2019, it was on 5%. 2019, it was on 37 percent. 2020, it was on 70 percent. And then it was up more than 11 hundred percent in

2021 and then down 85 percent in 2022. I feel like you could look at this 20 or 30 years for now and not realize what happened in the meme stock craze and go, what, wait, what? What was that? What happened? They had a good article in the Wall Street Journal where they interviewed people who were dabbling in the market and talking about how in 2020 and 2021, they became obsessed with this. They talked about this husband and wife talking for two years. Mr. Garcia, a 34-year-old Houston resident, started watching investing videos in bed. His wife said he was here, but he wasn't here. In early 2022, he lost everything on a bad options bet.

The wife is happy. He lost $2,000, but the whole story is just about these people who came obsessed with the market. How about the guy that wouldn't stop talking to his mom about the blockchain? Yes, they're worth a read. My favorite part was this one guy gave up trading, and he said, without investing to keep him occupied, Mr. LaHaud said he felt the press and for the first time in his life, threw himself into a new endeavor researching the year 536 AD, which a Harvard professor dubbed the worst in history. So it could always be worse. Was it worse in 2020? 30 trillion dollars in

stock and bond market losses? So at a holiday party over the past couple weeks, I had a friend who we were talking about the markets. And he said he started dabbling in the stock market in 2020. And I think dabbling is potentially one of the worst words you can use when it comes as an investor. I think dabbling is code for like obsessive, addictive behavior. He kind of said, so I paid attention to it for a while and then I just lost interest and didn't have the time anymore because work got back and I stopped dabbling and just forgot it. And I do think that is a huge mistake. A lot of new investors make that they assume that you can't invest in the stock market if you don't have time to pay attention to it and like have the blinders on and I'm going to watch the stock market

and I'm going to make moves. And for most people, they should be trying to not pay attention as much as possible. Such a great point. You should be fighting the urge to look. Yes. You can be part of the stock market without having to pay attention to it all the time. Let the idiots like us pay attention to it all the time. That's our job. Let us pay attention to it so much that it probably doesn't phase us as much. But if you pay attention to it a little bit, devote all your energy to it and then it doesn't work out for you, that's when you probably don't come back. I think that's probably what's going to happen to a lot of people. Famous last words, I think I've become immune to losses. Check back next year.

I will say March 2020 felt way, way, way worse to me than 2022 did. Even though it came back so fast. I was never scared in 2022. No, I was scared in March 2020. In fact, I really do believe what I said earlier in the podcast. Listen, obviously my feelings about money and risk will change over time as it does with everybody else. But right now, I'm in like accumulation mode. I'm fine with stocks going lower. Obviously, I'm never hoping for it. I don't want the market to crash. I'm there too. I also think at a certain point, if you're in this industry, and you and I pay attention to this stuff obsessively. We read about it. We share charts all the time. We are constantly in this, I think at a certain point, you can learn to detach yourself emotional a little bit.

And I think sometimes it rolls into my life a little bit. My wife wishes that I wasn't so emotionally detached sometimes. I don't show as much enthusiasm or finance can seep into your life a little bit where you don't get so worked up about stuff. I'm the other way. Like when my wife is watching Good Morning America, I'm like, do you not see the futures? Hello? I wish this works as far as sports go for me, but I had another New Year's Eve ruined by Michigan football. Two years in a row. My dad's advice to me was stop following sports teams. That's horrible. Yes, I know. I felt that way over the years several times about the Knicks in particular and more recently about the Giants. But what would my dad and I talk about if we didn't have sports? That's true. That is 90% of a conversation with me and my dad

as well. And I love my dad and we have plenty to talk about. Not really. But it's such a bonding experience. Yes, it is. Can't put a price on that. I had to teach my eight-year-old daughter some Daniel Kahneman this weekend. That's pretty lame. Go ahead. Explain. No, listen, she picked up Michigan football this year and I'm trying to tell her all year. run defeated going into the semifinal game. Listen, Libby, you got to think fast and slow. No, but I told her, listen, just so you know, the losses feel 10 times worse than the gains feel good. And she, after the game, said, I know what you're talking about now. The loss always feels way, way, way, Kobe this morning, he's fully out of the boot. He's fully healed. He came

into my bed early in the morning, and he had his backpack on. He was fully dressed. He goes, I blushed my teeth, smell my breath. I ate. He had his hat on. He was ready. I'm like, Kobe, the bus isn't coming for two hours. He was so excited to show everybody that he's healed. Oh, from that. My daughter, Kate, got her ears pierced over the break, and she has been hyped up to go to school for three days now to show everyone. I'm going to show this person first. I'm going to show my teacher, and she was excited to go back to school, too. Here's one thing that investors pulled money out of. Technology funds. Investors pulled 18 billion from tech funds, most unrecorded in Morningstar data going back to 1993.

But if you change this to a percent, it's probably not nearly as stark. I'm actually surprised the inflows weren't bigger than this in the last few years. It didn't really happen until 2020. Yeah, that's a good point. Look how crazy the flows were in 2000. Again, this is not adjusted for size or inflation, and the flows were so much bigger. They were a lot bigger. That is kind of surprising.

Maybe people were just buying the individual stocks. Oh, Ben, remember when Credit Suisse was the next Lehman? For like five minutes. We had a five-minute layman. So European banks, EUFN, outperformed XLF in 2022. As a matter of fact, this is in dollar terms. But European banks were down less than 10% for the year. That's surprising.

I would not have guessed that. Although, what is Credit Suisse doing? I don't think it's bouncing very much. No, it's not. It's not bounce very much at all. Good one from Connorson that, again, if you can just pick out like two or three data points, it might change the way you think about the world. 2022, he said four plus million jobs added.

Earnings likely grew 5% plus. Back half of the year, real GDP probably grew 3% or so, and stocks were down 20%. unlike who ever see a year like this again. I tend to agree. The way stuff lined up this year in 2022, if you would have been given the economic numbers, sans interest rates, you probably would have thought stocks would have done okay. This would f*** everybody up. What if we do have a repeat? What if the excess savings still buffers us and even if it gets depleted and we don't have a big recession or a recession at all? But interest rates stay high and stocks fall into 15% without a recession. That would be very unusual. Last year was unusual. Without a recession. What if we do have a repeat? What

if it is more of the same? I think it's very unlikely, but. The other head games would be if we had a repeat of the economic situation, stocks actually rallied. Because then you'd say, I got the economy figured out. Now I know what stocks are in the stock market does the opposite. If 2023 is the mirror image of 2022. This is the second, third, fourth level kind of things you're thinking about. It's never a dull moment. All right. This is from Renaissance macro research. Sorry, but recessions don't happen when real incomes, net of transfers are on the rise. And this is up 3.2% annualized since June. gas prices have declined about 25% per gallon so far in December. Thus, one should expect to see real incomes continue climbing. This is kind of a crazy thing, is that as inflation comes down and

gas prices come down, wages are not falling with them. So people on a real basis are going to see income gains that they haven't really experienced in the last 18 months or so. If inflation continues to fall. Where does the recession come from? The Fed overtightening. Short of a left field thing, the Fed over tightening and staying too long. The Fed crashing the housing market. Yes. Despite the unknowns that you never are going to guess in that. that something will happen out of the left field. I don't know. That's the biggest risk that you could see clearly, I think. I agree. All right. Here's something from the Wall Street Journal. More than two-thirds of the economists at 23 large financial institutions that do business directly

with the Fed are betting the U.S. will have a recession in 2023. Two others are predicting one in 2024. Majority of them think it'll be shallow or mild. They expect the U.S. economy and equity markets rebound in late 2023. Second half story. Thanks largely to Fed pivoting to cutting rates. 40% chance. Well, it's more now, but do you think if the Fed didn't pivot this year, that would be a good sign or a bad sign. If the Fed doesn't pivot. If the Fed doesn't cut rates this year. I think it would be a good sign.

It'd probably be a good sign for the economy. Because that means that the economy is stabilized and swallowed higher rates. Which, by the way, I kind of want to live in a 4% world. It's not bad to see some interest on your savings for once. That would be ideal if we could swallow higher interest rates and it doesn't totally destroy demand. My whole thing is I don't think we can keep them high for long. You know where high prices are destroying demand? At least maybe not because that would make sense.

but have you checked out prices for April flights? I locked them in a few months ago because they were so high. Holy moly. Yes. No, I don't think we're doing it. So we're going to Disney in February. I think we might do like some driving trips. The prices are like ludicrous.

Yes, airline prices are still. And if you have a big family, it's tough. I think kids should be able to share a seat. Small kids, only think they could share a seat, give me the seatbelt extender thing, they'll be fine. It's tough. I got three kids paying for plane tickets. It's tough.

Did you read this Wall Street Journal article? Did not. Your coworkers are less ambitious. Bosses adjust to the new order. For a growing number of professionals, the days of unpaid overtime and working through weekends are in the past. Firms add people to finish projects, close to the holidays, and take other steps. This one was being shared on social media quite a bit. Here's the summary.

This is from someone who's a president of some digital ticket scammer company. The passion that we used to see in the work is lower now. And you find it fewer people, at least in the last two years. She says since the onset of the pandemic, several employees have asked for more pay when managers asked that they do more work. It was not like that before COVID at all. And the whole point of it is, a lot of these young people are going, wait a minute, I worked at home. I had a better work-life balance.

I didn't have to go in all the time. Maybe some of the extra work I wasn't really being compensated for. If you want me to do extra work, fine, pay me for it now. All these employers were complaining about it saying people aren't as ambitious anymore. And I take that as a load of crap. I think people finally realize they're worth now that there's actually a job market that is in the way of labor and not capital. And the bosses are finally having to realize like, oh, wait, I can't just have a

of people do the work for me and not get extra pay. I think this is a good thing for workers. A lot of people were saying, well, we're all the go-getters, people are lazy. I look at it the other way. I think that the bosses were the lazy ones and not compensating people well enough in the past. Not good. People share that with us in the Discord, two of their favorite clips from 2022. It was the not good clip, which I watched back and I did laugh. That was pretty funny. You were on vacation. I was making some eloquent point about rental gains or something, and you totally whiffed and said, not good. And what I was saying was a good thing. Like, what do you mean, not good?

Just weren't paying attention. And then the other one was Ben Carlson. By the way, the guy kept saying anything funny. He was like, Ben Carlson. Is that how they say in the Midwest? I guess so. What was the other clip? He shifted.

You wanted for a touchdown? Oh, my parents pulled out the old DVD of the Ben Carlson football highlights this weekend and showed my kids. And it was like an interview of me after the game. And my daughter just goes, you look exactly the same as you do now. I can't tell if that's good or bad. How is that bad? I look nothing the same. That's bad.

By the way, were you watching the game last night? Yes. Holy shit. That was scary. It does make you think about kids playing football. So for people that didn't watch the game last night, I haven't seen the news this morning, a safety on the bills,

this guy, DeMarne Hamlin, in a fairly routine play, made a tackle, and I guess took a helmet to the chest. We tackled the guy, got up, and just collapsed. And the reaction from the players with the tears, and apparently they had to do CPR for nine minutes, and the guy's still in critical condition. Absolute nightmare. And Roger Goodell, you piece of garbage,

giving them five minutes to get their shit together and go back on play on the field and it took them like an hour to call it. What an absolute scumbag. Yeah, that was tough. It was a tough look all around. It's a violent game. All right, from Lance Lambert.

For 124 consecutive months, spanning the bottom of the previous bus in February 2012 to the top of the pandemic housing boom in June 2020, U.S. home prices grew. But now we're in a new streak, four consecutive months of U.S. home price declines. I think it's reasonable to suggest

and you could see price of clients for the rest of the year. How about that? And so let's see crash. I think we just spoke about this. But if you look at the price of the median home sale, post-pandemic, it just complete aberration. This is one of those where you tell me where mortgage rates are going to go this year, and I'll tell you how the housing market is going to do. I feel like if rates stay at six or seven percent, it's going to be probably a pretty bad year in housing. If rates go back to four or five percent, I think you could see prices stabilized very quickly and a lot of people rush in. Did you see this tweet from someone in Europe? I did. Things Americans have that seem very rich to me,

European. Kitchen Islands, bathrooms connected to the main bedroom, two sinks in said bathroom, niche in shower, which I think is like a little building in the shower, huge stainless steel fridges with built-in ice makers. They followed up and said, men interpret this as me being envious of Americans. I'm not. My life quality is not worse than an American because he has two sinks. Luxury does become a necessity, though. It would feel worse for Americans to lose these things, and it feels for Europeans to not have them. There's no doubt about that. I agree. And my wife and I we're talking about this again the other day. I was back in my hometown and looking around and there's all these new houses. I have two sinks in my bathroom. I don't know if it's standard now,

but it's a standard middle of the road luxury. People want to have it. But I agree. In the past houses just weren't set up as efficiently as they are today. There's no thought put into them, how they're structured, open floor plans, all these things that we now take for granted. But I agree, housing prices have risen a ton in the past, whatever, 20, 30 years. But there has also been a ton of improvements in them. I don't think that stuff is being taken into account. I know this is a first world comment. I'm being relative. My house growing up stunk, relatively speaking, relative to where houses are now.

But we talked about this before. No one had a nice house when we were growing up. Guess what? No one did. This actually sounds weird now that I say it out loud. There was one bathroom for us to share upstairs. And when I say we, I mean all the whole way, all of us, everyone that was in that house shared one bathroom.

And there was a bathroom downstairs, but there's no bedrooms downstairs. That's the thing. The kitchen was next to the bathroom. None of it made any sense. Who did that? Yeah. But now you think, oh, this friend has a great house or that person. No one had nice houses back that because houses weren't very nice.

In like the 80s and 90s, there weren't nice houses. I feel like that's a 2000s thing in the HGTV turn us on to that. Who did this? Duncan, John, and Nicole, what do you think we'll perform best in 2020? They did a poll for our viewers in YouTube. Stocks, bonds, crypto commodity, real estate. And first place, by a wide margin, 47% of the voters, 3,700 votes. 47% said stocks, bonds and commodities came in next at 19 and 18%.

Then crypto at 9% and real estate at 6%. That's interesting. People are relatively bearish on real estate. It is interesting that crypto and real estate at the bottom because if you would have done this poll in 2020 or 2021, it would have been the opposite. This kind of makes sense to me. I think this is not like egregious. I think we have some pretty intelligent viewers here.

I think that makes sense. CNBC had this tech IPO collapse thing. According to Ernst & Young, IPO deal flow plummeted 90, 24% in 2022, from 156 billion to 8.6 billion. Hey, you know what we should start doing? I feel like we don't incorporate pens enough into our podcast. Makes you look more serious. This?

How often do you write? When I write, I feel like I'm five years old again. I can't write anymore. Like, if I go to write a check... I can never write, period. But, yeah, not good. No, I never write. My handwriting is an abomination.

So is mine. I feel like you're a neat handwriting guy. My handwriting is neatish, but it hurts my hand if I write for more than like five minutes. It's tough. But they talked about how in 2021, VC firms raised 131 billion, and first time it was ever over 100. And the average post-money valuation for VC deals across all stages rose to 360 million in 2021 for about $200 million in the prior year. Do you think, since we're seeing a lot of these companies that are now below where they were in public markets are now below where they raise in private markets? Coinbase, for example.

Do you think a lot of the VCs got just super lucky? A lot of the people that we think are like these amazing investors and they just cashed out at the perfect time. I mean, I'm sure there's certainly parts of it for sure. I think it's impossible to say. Not all or nothing, but do you think a lot of people got really, really lucky by cashing out when they did? How about this? The wind was certainly at their backs. Let's put it that way. My whole thinking is, I feel like the VC's got a lot of trust and faith in like 2020 and 2021 as being brilliant. And now in 2022, they look like idiots. And I think it's usually somewhere in between. but I think maybe we gave them a little too much credit.

For sure. I don't want to disparage and say that all of it was locked, but the same thing with stock investors. I mean, or any investors that have the wind of their backs. How much of it is luck? How much of it is skill? I mean, Mopis and wrote a whole buck on that. I guess that's the thing. It's hard to know.

So there was a chart going around over the weekend showing tech shares have crashed in private markets, and they're showing bite dance, which is TikTok and Epic Games and Klarna and Stripe and all of these different private companies have crashed. and the one standout was SpaceX at 80 billion. Oh, no, I'm sorry, that's the price. It's just 80. Okay, and you're like, LOL. Like, this is total bullshit.

And then literally the next day, SpaceX is raising a $700 million funding round at $137 billion valuation. Is that a new high? I'm guessing it is, but maybe not. Probably. At this point, do you think SpaceX is more impressive than Tesla is for him?

Don't know. I just don't know. SpaceX doesn't have a natural competitor. They're competing with NASA. They're competing with governments from around the world. Does SpaceX generate revenue? I would imagine. I don't know.

At that valuation, I would guess they would have to. But what if in the future, it turns out that SpaceX is a company more people look back fondly on for him than Tesla? That's like his lasting legacy is SpaceX and not Tesla. It says a company raised more than $2 billion in 2022, including a $250 million around in July that was valued at $127 billion. Oh, interesting. Why did it take so long for this to get out?

How did to stay quiet for so long? I'm surprised he didn't tweet it. All right, Wall Street Journal, they have the good profile pieces. They talked to four people, and it's this personal finance profile and says, here's what a million dollar retirement looks like in America. Four retirees open up about their financial lives and how they spend their time. And my main takeaway from this is the way people calculate their wealth, most people don't know how rich they really are.

They wanted to talk to people who had a million dollars in liquid savings. So they talked to this one guy, he's a million dollars. He said he spends between $85,000 and $100,000 a year. but also has a pension, which is an asset. And then it says that in 2017, him and his wife sold their vacation home and built a $1.4 million house. So again, he's a pension. He's got Social Security. And so this person and his wife think that they have a million dollars, but they also have a $1.4 million house. They have a pension income. They have Social Security, like all these other things. They're way more wealthy than they think.

There are literally hundreds of thousands of people like that in the United States. Yes. That would say, well, my portfolio is worth a million dollars. Actually, we're talking about this. There's millions of people like that in the United States. Yes, that don't really realize how they're probably more wealthy than they assume. And maybe that's why we always talk about these studies for millionaires who don't spend down enough of their money in retirement. Maybe that's why, because people underestimate how much wealth they actually have since they don't spend enough of it. Interesting story. Anyway, so speaking of savings, I've had this tweet from JP Morgan showing that excess savings are now below a trillion dollars.

And I know we spent a lot of time on this in 2022, but I don't know if we spent enough time on it. We're going to spend more time because this is a huge story. This was one of the sources of inflation, and it simultaneously kept us out of a recession in my estimation, which is very interesting. I've got to throw a flag on this chart. It's not a truck of crime, but it's a hard chart to read. It is. The blob and the line. I didn't even look at the chart. I just read, yeah, it's a weird chart. It says the peak excess savings was $2.1 trillion, and now it's $0.9 trillion. I got to share something with you. I learned something. There was an article, man, we are leaning leaning on the journal this week. Credit to them. They do good work.

Way to go. They do good work, yes. So there was an article on credit unions and cars showing that there's a big spread between what a credit union charges for a car versus what the bank charges. So the gap was the widest in at least five years, 4.4% versus bank 6%. This is news to me. And I'm not embarrassed to admit it. Guess what? I didn't know this. That's okay. You don't have to know everything. Credit unions are not-for-profit cooperatives that are owned by their members and don't pay federal income taxes. Their profits funneled back to members, partly in the form of lower borrowing costs. Unlike finance companies and lending arms of automakers, credit unions typically

don't pull auto loans into bonds and sell them to investors. Keeping loans on their balance sheet gives them flexibility to veer away from the rest of the market. So they're now the leading lender, bigger than banks. Vanguard is like a credit union. Did you know all that? I know a little of that. I use a credit union because I use them for my mortgage and have used one for years. They do typically offer better rates. So how much of the auto market is leasing versus buying? I'm sure that's readily available via Google search. I probably should have done that before the show.

Yeah, I don't know. But get this. My wife hit me with, although it's maybe mutual. My wife hit me with, we needed a bigger car. And we have a big car. She has a big car. Tahoe. Don't get one.

Don't do it. I said, Ben's going to shame me. I am going to, here's the problem. It makes parking lots impossible to navigate. They take up the whole parking lot. I'm not that type of guy. I'm not a selfish guy. I want to jam up the parking lots.

But here's the thing. We go upstate a lot. And we packed. Hey, I have three kids and you have two. Get a minivan. Well, hand up. I would love a minivan. Matter of fact, that's not going to happen. I mean, because I've brought that up many times. Huge trunks in minivans. They go down lower. But here's what I can do. So my Jeep only has like 14,000 miles on it, which is very low. So I feel like there's a lot of equity in there. I could trade that in in September when my lease is up. I could buy it and trade it in and I think knock the price down off the Tahoe, which is an expensive vehicle. Thoughts? I think Tahos and Suburbans are much like double vanity sinks in people's bedrooms. People in the past didn't need a Tahoe to get around with other kids. And now today we think we do. How's that?

That's such a great point. How did people get places? Because my poor dog is sandwiched between the two car seats. And you know what it is? Because my wife overpacks. There, it's no mystery. She over packs. Too many toys.

We have way more stuff. When we were growing up, our parents didn't get us any stuff. We have so much stuff for our kids. I had no stuff. You're right. My kids have so much junk. It's ludicrous. It is hard to pack for somewhere.

Once you get out of the car seats and you're on the boosters, life is much easier. But push for the minivan. Your life will be easier getting around. I have to pick and choose my battles. I've tried, but it's not going to happen. All right. There was a threat about what happened to Southwest, which is, what a nightmare. Holy moly.

If you were stranded in the airport, I mean, that just sounds beyond horrific and super stressful. So somebody did a thread about what happened is a Southwest employee. And there's a very good life lesson in here. The TLDR is that there was a CEO at the helm who was very much an employee operationally oriented CEO, boots on the ground sort of guy. When he left, he was replaced by an accountant. The Warren Buffett Acolytes loved that guy. Herb, what was his name?

Yeah. He was replaced by an accountant who was only concerned with financial engineering, property of the stock price, cowtowing to Wall Street. Is cowtowing a word? Is it a cowtowing? I don't know what that means. I think I used to write. Yeah, you're good.

and he even replaced the C.O. with another accountant. And so they were just behind operationally. Their technology was a mess. And so it was a long time coming. Sad situation. Shame on that guy. Counts really get dragged, don't they? No one sticks up for accountants. You know what? We got a great accountant at Redholds wealth management. The bills, the arts and the suites. Come on. All right. Any good entertainment for you this week. You finished. Fleishman is in trouble. They'll get it to Fleischman a second. I watched a movie called The Invitation. Let me see how it was explained. I saw it on Netflix, 2022. Here it is.

After the death of her mother and having no other known relatives, LVey takes a DNA test and discovers a long-lost cousin she never knew she had. Invited by her newfound family to a lavish wedding in the English countryside, Eve is at first seduced by the sexy aristocrat host. However, she soon thrust into a nightmare of survival, blah, blah, blah, blah, blah. This is my type of movie, okay? I'm in. And so I'm watching it.

And the first hour, I'm going to give spoilers, nobody watched this movie. Never heard of it. The first hour or so was thoroughly entertaining, the buildup, the suspense, it was humming. And then the reveal was a light bulb moment for me, Ben. The reveal was their vampires. It just fell off the rails immediately. Okay, this thing has a 5.3 on IMDB. To me, that's an immediate, don't watch.

5.3, yeah, it sounds about right. You know what I realized? And I've always known this, but I never said it out loud. I hate vampire movies. Horrible genre, maybe the worst. In the mid-2000s, there was a huge vampire push. The only good vampire movie is from Dust Till Dawn. And guess what?

Same situation. The first hour of that movie, Clooney, Keitel, Tarantino? That was a weird movie. Great movie. And then once the vampires came out, it sort of fell off the rails for me. But just a horrible genre. You agree? Yes.

I'm not a big vampire person. I watched Logan Lucky. I think it was on Showtime. It was on Amazon forever. Not that good. I didn't mind it. It was way better cast that movie, so it was Adam Driver. I didn't mind it. Channing Tatum, Daniel Craig, yeah. It should have been really good. Katie Holmes. And then Hillary Swank made it. There was a ton of appearances by people that you know. It was basically Redneck Ocean's 11, but not as good. That's exactly what it was. I kind of enjoyed it. Maybe it was just where I was and nothing else to watch.

Speaking of good casts, I saw this movie a few weeks ago, I didn't bring it up because it wasn't really worth talking about. But tell me if this cast intrigues you. Christian Bale. Casey Affleck, Woody Harrelson, Zoe Saldana, Willem Defoe, Forrest Whitaker. I really like that movie. What's it called? Does that peak your interest? Oh, you saw that out of the furnace? Yes. I like it. I liked it. It was good. Woody Harrelson was a great bad guy in that movie. He was so scary. That movie should have been so good. Yeah, it was just good. It wasn't very good. And no offense to Scott Cooper, who has an interesting catalog, right? He did the mayor of Easttown, right? He did.

The guy who wrote that movie did the Mayor of Easttown. He did Merivistown? Well, whoever wrote that movie did. The screener and not the director. Okay, the writer, not the director. The guy who wrote Mary of Easttown wrote that movie. All right. I mean, it was a good movie, but it should have been so good. Okay, I got a movie that you should definitely not watch. It's called The Banshees of Innersherin.

It's Colin Farrell. You know that so well because I watched 36 minutes and I turned it off. It's got like a 7.9 on IMDB. It's going to get some awards probably. For what? Putting people to sleep? I thought the first hour of the movie was clever. It was kind of funny.

It's like the whole premise is two guys in the 1920s and one of the guys decide, I don't want to be your friend anymore in this small town. The fact that they could make the movie interesting from that premise was interesting, but the further along the movie went, the darker it got and the sadder it got. And it's one of the movies that just kind of ends. Those guys, Colin Fowl and the other guy and in Bruges were fantastic. That movie was awesome. The same guy did this movie, who did that one.

I'm sorry, this movie stunk. If this wins an award, I give up. I think it's going to win some awards. And people who like film like this movie, but as far as the movie goes, I was intrigued the whole movie, and the ending really was bad and it got sad. And anyway, I finished two shows over the break. The English with Emily Blunt on Amazon was really good. good. I started it. It's worth watching. It was a little weird and a little different, but it's worth

a payoff, I think. The tone of it is different. Fleshman is in trouble on Hulu. I thought the last two episodes are fantastic. Loved. Absolutely loved. That movie's definitely not for everyone, but it's definitely for me. It's divorced, 90s kids, New York, and I check all the three of those boxes. Yes, there was stuff for you, but I thought just the whole thinking being in middle age with kids, that vantage point of thinking through that. How about the twist? Good twist. No, spoilers, It was two episodes too long, but Jesse Eisenberg and Claire Danes and the one who played live, I mean, it was phenomenal.

I hate this word, but the penultimate episode, the second to last, that people love to talk about, the pen ultimate. It was really well done. Really good. But they had two realistic scenes in this show. One was trying to get your kids ready to go to the pool and get sunscreen on them and bathing suits on them.

It was just so realistic to me. And there was another one where the three friends from college get into a fight because one of the friends is self-absorbed. One of them is kind of an afterthought, and one of them only talks about themselves, those characters were very real to me. I liked it. Did you notice when they were at the barbecue how there was a live band and they were playing just straight 90s sets in the background? Yes. That show sung to me. If you're a middle-aged person, that show will speak to you. So that's all I got. Anything else?

You know where to reach us? Animal Spiritspot.com. I think we're going to change it, actually. I think it's time to change to get rid of the Gmail. Then it's time to up argument in 2023. What does that mean? We have an idea for a better URL. By the way, you're going to see me trim weight, cut fat, bed. All right. Let's do it before and after picture right now. I'm actually at an all time high in terms of my weight, but you wouldn't know it because not to brag, I'm adding some muscle before I was 100% fat, now I'm only 96% fat. I've been told muscle weighs more than fat. Okay, you take the fat off and then you're good to go.

There we go. All right. Animal spiritspot at gmail.com and we'll talk you next time. Thank you.