Animal Spirits Podcast - A Recession is Coming (EP.253)

Episode Date: April 20, 2022

On today's show we discuss taking Twitter private, why tech billionaires are so unhappy, why no one is positioned for a commodities supercycle, the best pool drink, a normal housing market and 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.‍ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by NASDAQ. Nasdaq sent us a report called the shifting profile of retail investors that they just put out. Wanted to just pull out a few things in here. They give a profile of all the different generations, Gen Z, Gen X and Boomers. This one stood out for me. GenX is kind of the demographic that no one really pays attention to, but it says their financial outlook. Gen X is still working and earning good incomes, but we'll start thinking about retiring in the next 10 years. Holy crap. People from Reality Bites are going to be retiring in 10 years. They'll need to start drawing income from their assets. Easier said than done. Here's another one. They asked, how often do you check your investment portfolio? And the two options are I check several times a day, at least once a day, or less frequently. Gen Z, several times a day, 48%, once a day, 24%. Gen X, 16% several times a day, 19% once a day. Boomers, 10% several times a day, 12% once a day. Millennials check it 40% several times a day, 22% once a day. Now, the Gen Z number seem high. I actually think that's just the way things are going to be from now on, no, for young people. They're going to look at everything all the time because they're phone to them, they're used to it. So some people may think that's not a great thing.

I think it might just be how they invest now. And unfortunately, I think that probably means they're going to be moving and trading stuff more often because they're looking more often. So anyway, if you want to check out this report, got a lot of interesting facts, figures, charts, all the kind of stuff we like. Again, it's called the Shifting Profile Retail, Retail Investors. Check it out. We'll have it. Our link to it in our show notes. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik 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 Ritthold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. All right, got some banter. Let's start off with some banter. So I am on my second airplane of the week. Last week I was in Miami and I got on the flight and as I'm getting on the flight, the person whose seat I was supposed to be, or my seat said, do you mind if I switch with you so I could said across the aisle from my grandson.

Of course, I always say yes, unless there's a reason in which there never has been. I say yes, but if I'm flying, you want to say yes. Unless there's a really, like if someone's asking you to go to the aisle, I won't go aisle to the middle. I won't go aisle to middle. That I will not do. I think aisle to window. I'd almost even say no, unless it's, like you said, a grandmother asking me.

I'd go aisle in a window. Service member. Because I'm that type of guy, but I won't go aisle to the middle. Anyway, I went aisle to aisle to aisle, no big deal. But then as soon as the plane takes off, he puts a seat all the way back. Your thoughts? I mean. Respect the swap. You don't do that. Oh, the person that swapped with you put their seat back?

Yeah, so he was sitting one right behind me. So we swapped and then he went all the way into my grill. I don't go back because I feel like that's not nice. Now, I don't think it makes you a bad person if you put your seat back. I'm sure I have. You have the option to do that. But I'm surprised the airlines haven't made it so you just can't put your seats back anymore. Why? I don't know, because it seems like all people do is complain about it. No one's happy when someone else puts their seat back. Here's the irony. When we are getting ready to land, the flight attendant tells me, me to put my seat up. My seat was reclined the whole time. I never knew it. But I didn't reclined it. He reclined it before he got up, unbeknownst to me. Okay. This is something that I'm sure people have very strong opinions about on either side. Yeah, I'm a don't recline guy. Even if the person

of money reclines, respect your neighbor. So, Ben could see me. I'm in this delightful natty light flaming. What does it stand in the natural light? I can't say. I just see natural light. Right here. I can't read that. Oh, it says Natterdees. Who makes this shirt? Tropical brothers. I put you on to them. Free plug for them.

They make some nice quality spring break-ish leisure wear, summer leisure wear. Okay, so Robin saw me packing this shirt, and she said, what are you doing? You're not bringing that? And I said, of course I am. We're going to Florida. What are you not bringing? Where else am I going to wear the shirt? So she said you're not.

I threw it in my bag anyway, unbeknownst to her. So as I put this shirt on to podcast slash go out to dinner, She says you're not wearing that to dinner. I said, yes, I am. Of course I am. She said, no, you're not. She goes somewhere. I walk by Kobe, and he goes, cool flamingo shirt, Dad. Yeah, and you won. I didn't win. I'm not wearing it to dinner. It's a nice looking shirt, though. So right now, the kids and my wife are at Buildabair, and you ask me how much that was. That's a good question. I don't know, but I assume that cotton prices are through the roof. You know, the great thing about vacations where you can just kind of sign your check if you're at one of those kind of places, that's like future. you. You can deal with that in a week. You don't have to worry about the prices and just sign, sign, sign, sign. And then you get the bill in a week and you're like, okay. I was in the ballpark. All right. Let's get back to it.

Where are we starting with us? I mean, we got to start with Elon Musk. Before we get into any of the details of this ongoing back and forth, I just have to say, Elon Musk Twitter is quickly working its way into like the best Twitters of all time. I think this guy just has that rare ability to, because you have people on the extremes from him, to loving him and like defending him no matter what to hating him in despising him no matter what. And so that makes for really good Twitter back and forth, I think. I'm not quite sure why. I know this is a massive story and I probably should care about more than I do. I don't really care that much. I guess I don't care as much either. I just think it's all theater and it's not going to happen. Am I misguided?

I think so too. I do wonder if Twitter called his bluff and didn't try to do this poison pill. If he would say, okay, I was doing this because I'm a bore billionaire, but they called my bluff. So now I'm going to call their bluff and I'm actually going to take it over. Can I tell you something? I know that when you learned about the poison pill and CFA level, whatever, I forgot what it was. I knew it was a way to fend off a hostile takeover. But if somebody said to me a week ago, what exactly is a poison pill? That's probably what I would have said. I would have said, ah, it's a way to make sure that hostile take it. But the mechanics of it, I got to be honest. I forgot that the way it worked. It's one of those phrases that needs a PR agency

because poison pill itself does not sound good. When somebody hears it and they already are a little unsure, they probably go, well, that sounds bad. Poison pill? A poison pill is what exactly? It allows existing shareholders to buy shares at a significant discount to the current price, diluting the shit out of the person that is trying to take over the company. I think it's more like giving them voting shares to not allow this to happen. No, no, no, no. It's allowing them the option to buy shares a severe discount, at least in this case.

Again, I forgot what a poison pill is, but I think in the case of Twitter, that's what it's doing. I'm sure there are different variations of this. It's basically a way to stop a hostile takeover. That's my non-answer answer. I knew that. I don't think you need no much more than this. that. The mechanics of it, so what? Well, not so what. I'm just saying, no, it's a real thing. It's a thing.

Of course, yes. Yes, it's the thing. There's even Benedict Evans. He said Elon Musk is a bullshitter who delivers. This breaks a lot of people's pattern matching in both directions. And that's perfectly said. There was people this weekend saying, Elon Musk just landed a spaceship, like took off a space rocket and landed it right back on the pad. Like, how could he not run Twitter? And my thinking is, I actually think the physics of that rocket taking. off and landing is way easier to manage than the human nature that is involved in Twitter. Yeah, the physics is you could calculate that.

Yes, you can't calculate the amount of crazy and fighting and whatever on Twitter. Can I tell you one more thing? Hold on. One more thing I forgot to mention before we get back to timeout. So I got a sunburn. I went to unfortunately my friend. You only went there for like 12 hours I thought. No, no, no, no. So I went to a funeral a week ago and when I went there in the morning, it was dark and

rainy, cloudy, and the sun opened up and I got torched bad, like really bad. And you know me. I'm like Mark Zuckerberg with the face paint. I go hard with the SPF 97. I got roasted. And so I was thinking about that this morning, you see people at the pool. And I know it's been a long winter, but I know the sun is particularly strong down here. There's people that are like, I saw some guy, dude, looking at third degree burns. He was in a fire. Laptors. Peeling hard and still shirt off. What is that? Don't sunburns hurt badly. Sunburns hurt me a lot. I can't imagine going in the sun after a burn. Short off burn. I mean, what are you doing? That stuff. I'm guessing it's probably amateur hour,

like you said, because of the pandemic, people haven't been out very much lately. No, but that I get. I understand if you messed up. But I can't imagine going back for seconds. I can't imagine being in the sun with... I'd be in the shade all day if I got to burn that bad. Anyway, speaking of burns, what didn't you want to say? Well, when he said, I'm going to buy the company, you and I talked on my way into work that day. And I said, doesn't this just open up places like Google or Apple or someone else to swoop in and buy them maybe. Maybe this, that'll open it up. And I kind of thought, maybe he really does want to buy Twitter. And then he said, my offer is my best and final offer. And if it's not accepted, I would need

to reconsider my position as a shareholder. So my other thought was, okay, he got bored. He decided not to go on the board. And he wants out of this position. That's it. He's giving them a reason to make everyone mad. And my first inclination was the board should call his bluff and sell to him. Like, honestly, if you're on the board at Twitter or the management team, would you want to deal with all of this? I would say, let's sell to him and get out of here. What if he calls their bluff and says, just kidding? I think his ego would not allow him to do that. So I think Matt Levine had like just a Hall of Fame piece on him on Friday. He said, uniquely among public company CEOs, Elon Musk has in the past pretended he was going to take

a public company private with pretend financing. I'm not saying that he's joking now. I'm just saying he's the only person who has ever made this particular joke in the past. And he also said there's no particular good outcome for Twitter, sell to Musk and become more of a vehicle for his whims and trolling, find another imperfect buyer and try to cobble the desperation deal together, or maybe fend off Musk's day independent, watch a stock drop, alienate one of its most high profile users and get second guest by shareholders for years. Twitter is in play, but that is only really fun for Musk. I totally agree. If you're at Twitter right now and management are on the board, there's no way you can win, whatever the outcome of this is. Well, what if Google comes in

and says, we're going to give you $69.69 a share. By the way, that would be a win. So we've talked in the past on this show about how there really hasn't been a good comedy in like the last decade plus, a movie comedy, like a legendary like all-timer classic comedy. There wasn't one in the 2010s. That's not true. That's not true.

I mean, it's mostly true, but it's not entirely true. There's definitely been a few. Name one. I looked again. Neighbors is the only one that's borderline. In the 2010s, there wasn't a legendary comedy movie. Not one? Not a single.

and I've heard comedians say like comedy is dead. We can't do this anymore. Musk made his offer at $54.20. So we put $420 in there. Twitter designed their poison pill to give people the ability to buy $420 worth of stock for $210. So they used a $420. By the way, so that's the poison pill. So it wasn't just voting. And Wednesday is April 20, so it's 420. Yeah, it's going to drop the area. I think the fact that people are thinking 420 jokes are still funny when to me, they lost relevance in high school, maybe comedy is dying because if people really think 420 jokes are still funny and we're just beating the horse to death. The horse is down to its bones at this point. Maybe comedy is dead. Yeah, 420 jokes are obviously not fine. To the extent that it is funny, it's only funny

because Elon Musk thinks it's funny and I don't know if he's joking, whatever, or if he knows it's not funny. Anyway, that's the best part about it is that one of the smartest men alive has the worst most juvenile sense of humor still. So I just Googled 2010 comedies. You're right. It's pretty bone dry. I would say that I put this like in my upper echelon, the other guys is one of my favorite comedies of all time. Okay. I don't know if it's top 10 for me, but it's super good. But yeah, wow, it's not good.

So obviously my whole, I think I tweeted out like there's a 12% chance he really wants to buy Twitter, 48% chance that he's just trying to dump his shares right now and a 40% chance just gets weirder from here. By the way, I also love, so that Jonathan Haight had a piece at The Atlantic talking about how basically social media has made us worse off as a species. I think this, this is kind of a microcosm of it because no matter what Elon Musk was going to do, here. You have these one people saying, Elon Musk is a champion of free speech. And they're just like, no matter what, Elon Musk, we must defend him. Poison pills are bad. If Elon Musk doesn't

get it, the world is out to get him and nothing is fair. And then you have those other people say, no, Elon Musk is the worst. If he takes it over, we're going to have World War III. But those two, like, people already had, you could have just dialed up what those people were going to say before it even happened. Like, people had their, like, the extremes already ready. And I don't know. I've ran into some old friends in recent months, getting back together with people after of the pandemic and stuff. And I feel like I hear more and more crackpot theories from what I thought were relatively normal people. And I think it's basically, it's all the internet and social media. And I'm kind of like, you used to be kind of a normal person. And now the internet

has kind of broken your brain. I think, by the way, best comedy of 2010s, bridesmaids. That's an all-time. I'll give you that. It's dry. That was probably 2010 on the dot. Wasn't it when it came out in 2011, maybe? Don't know. All right. So I also saw people complaining about this. This is from the Wall Street Journal. Vanguard disclosed on April 8 that it now owns 82.4 million shares of Twitter, 10.3% of the company, which is more than Elon Musk, so he's not the largest shareholder anymore. And people were like, down with Vanguard. Not understanding that it's... Vanguard owns. Come on, come on. What are we doing? Okay. By the way, sorry, speaking, what are we doing? We got an email from Vanguard to issue a retraction

about my joke about that I saw Vanguard on the street to buy one of the residential real estate homes in my neighborhood. I can't tell if they were joking, but in case they weren't, Vanguard doesn't buy residential real estate. Yes, you're offering a retraction. Let me clear the record. Although they probably should. This is some counterstand where the Vanderbilt and Rockefellas morose in their old age is depressing to see billionaire technologists who built or financed all this stuff who are clearly unsatisfied and unhappy despite quote-unquote winning life in the American system.

And I feel like if you follow a lot of these billionaires and 100 millionaires, wherever you want to call it, on Twitter, a lot of them do seem increasingly cynical and just kind of unhappy based on their social media persona. Maybe in real life they're fine. You sent me this one from Vlad, who runs Robin Hood and Jack, who used to run Twitter, going back and forth. You thirsty, you mad, not like just this back and forth. Peter Thiel called Warren Buffett a sociopathic grandpa from Omaha and Bitcoin's number one enemy. I mean, I could go on and on the list. I honestly think it kind of bums these technologists out a little bit that, like, hey, we gave you all this wonderful technology to get a new job and communicate with your friends from anywhere and work from anywhere you want. But people still complain about all the new technology and how it harms us. and I kind of feel like their egos are hurt that people aren't just like bowing down to them and kissing the ring a little thoughts.

I'm not sure. The great thing about technologists in the past was always that they were so optimistic and that's one of the reasons that they kind of won, especially like the 2010's post great financial crisis period. Everyone in technology, they all won because they were optimistic while everyone else was pessimistic

in reading Zero Hedge and buying gold news ledges and stuff. Now it seems like these people are turning into the cynical pessimists and it's kind of sad. People don't like to hear this, but does this show that, like, having that much money, I don't know, does that make you happier? I mean, I don't think it does. Clearly not. And maybe that is like one good takeaway there is that like all the money in the world,

it still might not make you happy because then you just have more and more critics and more people. What's the difference, honestly, between having $5 million and $4 billion? Maybe $5 million is low for some people. Whatever, what is the difference? If you read the story about the guy from Myspace, the guy who founded Myspace, I can't remember his name. There was a story about him a few years ago, how he got this huge payout after selling MySpace. And he just travels the world now and posts pictures of all the cool places. He goes on Instagram.

Otherwise, he stays out of the social discord. He doesn't, like, do angel investments. He's not trying to make another company. Maybe the fact that they're so ambitious and they can't just get out of the public limelight and they can't stop making new companies. Maybe that's part of it, too. It's just, but also, this is casting a wide net. But like, generally speaking, the drive to become a billionaire, I think, means that

somewhere along the way you have to have like a pretty big ego slash be insecure slash need people's adoration and approval and you can't turn that off and so that's not a money thing that's a personality thing yes normal people say once i had 10 million dollars i'd quit and live in the beach somewhere whereas those people are so driven you're right they don't have that ability they want to keep going which maybe is why Elon Musk is going to try to take over the challenge of taking over Twitter i still say there's no way it happens and then watch tomorrow he's going to buy it Peter Thiel, speaking of, I guess, more of the same, calls Warren Buffett a sociopathic grandpa from Omaha and Bitcoin's enemy number one. Man, I wonder why people don't like Bitcoin.

Yeah, you must have missed it when I just read that five minutes ago, but... Did you? I'm sorry. I'm sorry. It's okay. I think, well, Robin texted me, let me know when we can come back. We just started the podcast. She's not a podcast listener. She doesn't know how long it lasts. Okay, by the way, what's your pool drink? What's your go-to pool drink? Have you tried a Miami Vice before? No, what is that?

Okay, go down to the pool. and get a Miami Vice. It's half Pena Colada and half strawberry daquery. It's basically the 60-40 of pool drinks. It's probably going to cost you $25 down there. But trust me, try a Miami Vice. That sounds amazing. So today was our first day here.

We did the beach, a little bit of pool. I don't know if I could do day drinking with kids. I mean, I'm sure I can, but. You have to have like three drinks max. Remember? Three drinks is the perfect number of drinks in the sun. I can't do three drinks max. Just spread them out a little bit.

Three drinks. That's the perfect amount of day drinking. Then you can go take a nap when the kids are getting ready for bed and turn it around for the night. All right. Here's a tweet from at retail geek, Jason Goldberg. U.S. Department Commerce March data. March 22, non-store sales, so e-commerce, was up 2.6% versus March 2021, and up 35% versus March 2020. So start of the pandemic.

Thoughts. We did a pretty nice pull forward there, huh? So we pulled all that stuff forward and now it's back to trend growth, basically, or pre-pandemic growth for the last year. No, no, no, we're still significantly above. Look at this chart. No, I'm saying we're above, but we had a huge jump in the first year, and now the second year, the second derivative is much slower.

No, no. I'm saying March 22 was up 2.6% versus 2021. That would mean 2021 to 2020 was up 30% or whatever. But look at the dollars. Look at March. Look at the gray, then the yellow, then the blue and the red. I mean, it's way, way, way higher. Yeah.

The rate of increases maybe slowed down, but, but anyway. That pull forward has kept it high. The reason why we're sharing this is because Mokaya, E.K. Mokaya on Twitter, shared from the Amazon CEO. What's the Amazon CEO's name? I can't remember his name. I don't remember who the new guy is. Adam something. I can't remember. Sorry, we're about 1% of the worldwide retail market segment and 85% of retail still lives offline. That's remarkable. 85% of retail still loves offline. So we're so early in all these areas. AWS is a $70 billion revenue run rate business growing with 37% year every year in 2021. And still, 95% of the world's IT spent. on premises and not in the cloud. Is Amazon going to get a lot bigger? I mean, it's basically the implication of this tweet. I think you could myth bust some of the stuff in here. I think it's true that it's still small, but I think one of the reasons in some of it, I don't believe the

first sentence were about 1% of the worldwide retail market segment. Well, I think one of the big reasons is because automobiles technically are retail and no one buys cars online that much. Well, also, here's a thing. They're not in China. Right. They're not in China, are they? Crickets. I don't know. I'm assuming. I don't think they are. All right. Here's another tweet. They were talking about their fulfillment network. Amazon has spent 20 years and over $100 billion to build out its fulfillment network and currently have over one million employees working on it. As Grandpa Buffett likes to say, that's a moat.

Okay, Amazon closes China domestic business in June 2019. You're saying Amazon is still early days here. Day one. Okay. So I was looking at some commodities stuff the other day because I keep seeing a lot of these podcast that we've listened to, and the commodities people are all talking about a commodity super cycle, which I think we talk about, we talk to someone and talk your book about this six, eight months ago maybe, who's saying commodity super cycle is coming.

Who said that? Who said that? A lot that's changed since then. I don't remember who we had on. Sorry, it's been a while. Credit where credits do? I'm really bad with names. I'm the kind of-

Oh, my God. Wait, so you remember who it was, but you don't remember the name? Yes. Okay. So we've done like 400 podcast episodes. Don't put me on the spot. I meet someone at a party and hi, my name is right over my head and I'm gone and I forget their name immediately. Yeah, what is that? Why do we do that? I do that too. What is that?

I don't know. I just immediately. But then you have the people who say someone's name 15 times in a sentence so they remember it and that's even worse. I'd rather forget it. Okay, so the DBC is the biggest commodity ETF like X gold, silver, you know, those kind of ones. From the bottom in March 2020, it's up 160%, which the S&P is up 100. It's had some pretty good growth. but if you look at this thing since inception, which is like 2006, it had this huge spike up in 2007, up to 2008 before the crash. Since inception, this thing is up 26% since 2006. In total, the S&P is up 370% in that time. So this biggest commodity ETF is up like 1.4% per year since 2006. So two things here. Number one, no one, absolutely no one, is positioned for commodity super cycle if it happens. This thing has 4.5 billion in assets.

assets. And again, it's the biggest like diversified basket of commodities. And two, when do people pour into the inflation trade like right is it about the peak? Like, which is more likely to happen? The super cycle or inflation peaking and people like pouring money into commodities and tips and all these things and then getting crushed. Well, a boy Sam Rowe tweeted, or he quote tweeted from Renaissance macro research, quote, when the sell side consensus is competing to see who can pencil in rising recession probabilities fastest, and ordinary people, are searching about these topics on the internet, you can be sure the news is already reflected in market prices. Why am I reading this? I don't know. I guess I thought there was a

segue here. Maybe there's not. But I guess what we're talking about is... Because he didn't want to answer my question. No. I thought there was something in here related to commodities. My bad. I guess what we're talking about here is what's priced in. And I've been thinking a lot about this because I mentioned to Josh the other day that if there was a recession, this to me is to be the most obvious recession in a while besides of the pandemic. There's a lot of people calling for a recession. You're right. But stocks are getting hit decently. The S&P's still hanging in there, but some stocks are getting hit pretty good.

And the question of what's priced in is probably the hardest one to answer, always. That would be the ultimate head fake for people is we do go into a recession in 2023 and the S&P 500 ends a year up and just screws with everyone again. On the way up and on the way down, what's priced in on the way up when things are going well, how much future growths have been pulled forward? I was looking at a chart of Disney. Disney is flat. Listen to this. since 2015, since August 2015. Wow.

So almost seven years, Disney's up like 12%, which is insanity. This is a really like sort of a bullshity stat, so forgive me, but I'm going to say it anyway. Since 2015, Disney has earned net income of $44 billion and the stock is flat. Wow. 2019 is that when they released Disney Plus, which was a huge deal. Imagine what they would be without Disney Plus because obviously ESPN is not their crown jewel. I'm guessing the parks are in Marvel and stuff. But ESPN is in trouble.

The parks obviously were shut down for a year and a half. ABC, I can't imagine that things are going that great there in general. But anyway, look at the stock. It looks horrible. Horrible. Close out of 52 week low today. It looks terrible. It's in a 37% drawdown.

It looks like it's going way lower. I own it. Of course it is. Credit to me. All right, what's going on here? This is from Bespoke. This week's AIAI bullish sentiment reading came in at just 15.8%. This is the least bullish individual investors have been.

since September 1992. Well, I think what's going on here is inflation really, really pisses people off. I think it's very simple. Who do they ask this, by the way? Who gets this survey? I don't think this bullshit survey. It's a lot of people. I think it's the same people.

Okay. By the way, 1992, not a bad time to be buying, I suppose. But it's always a good time to be buying. Don't get it twisted. I can be bearish, but I'm a buyer always. So I think inflation is part of it. I also just think it's- Just keep buying.

Shout to Nick McGuilly. If you haven't read Nick's, Okay, see that? How great is that book? I read it. Save it for recommendations. I'm going to talk about it. I also think that the speed of information and not just social media has made investment

sentiment indicators almost impossible to gauge anymore based on the past. Think about how much information people in 1992 had versus now. I agree. But people had a lot of information in March 2020 and they're more biased today. But think about how fast the market moved back then. In March 2020? You think that people have more information today than they did 24 months ago? No, I'm saying think about how fast the market moved back then.

I'm saying market moved too fast for people to say bearishly. Okay, okay. Scroll up a second. Look at this chart from Bank of America. This is sort of a funky chart. It's looking at CPI and the trailing price to earnings ratio in the SP500. So it says today's PE multiple is over 70% higher than that based on the historical CPI PE relationship.

Basically what we're showing here, it's hardly linear. But the higher the CPI, the lower the PE. That makes sense. Like inflation sucks. High inflation sucks. Where are we today? Currently, oh, there we are. We're at around 20 times.

So there's a weird market, definitely a weird market. Yeah, this is also one of the times take all these other ones out that interest rates were never quite as low, probably. Interest rates were way higher on all these other ones. Very, very, very weird. All right. This chart from Pitchbook is showing VC exit value plummetz relative to 2021's record numbers. Probably the least surprising thing ever.

Who's going to want to go public in this environment? Yeah. Late stage growth obviously is basically public already. they're not going to IPO into this market. So a VC exit value down 80 to a half percent quarter over quarter. What do you think is worse? You went public in 2020, your stock shot up, and then it's down 80 percent since then? Like Coinbase?

Yeah. Or you just never went public and you had to wait. I guess at least you gave yours. I think being public is worse. I think you're private. You could wait until the could have changed. Now, you could also say that things are never getting back to 2021, ever, ever, ever. But I'm saying at least if you went public, you gave your employees.

and your investors an off-ramp, whereas if you're still private, no one can sell. Well, fair. I mean, you can sell in other areas. But, you know, fair point. I don't know. I don't really have a strong opinion there. I guess I'd like to speak to somebody that has more knowledge there. All right, tech crunch.

Does that mean I have no knowledge there? Well, Forge Global, a secondary market for private company shares said the prices of companies on its platform had fallen 19.9% in February and March compared with the fourth quarter of last year. Again, these are big companies. there's no reason why they would be immune from market conditions. And if those companies were public, I bet that number is low. Oh, yeah. 20% right versus...

They're lucky they're private. Yeah, exactly. Maybe that's part of it. You can keep your... On paper, you're still wealthier than you would be if it was public. So a tweet from Lizan Saunders showing the single most important problem gets us in a survey, National Federation of Independent Business. Single most important problems.

It goes back to 2000. We're looking at quality of labor. We're looking at taxes. Government red tape. in inflation. Look at this chart, Ben. I mean, this is a chart? This is your sentiment reading here. Here it is. Through the roof. People hate inflation. They really, really hate it. All right. Matt Klein at the overshoot talked about inflation. And I think you talked me into getting a subscription to a substack. Totally worth it. It's good. I love reading about the components

of inflation. Even though if it probably, I don't know, you could say at this point it doesn't matter because it's such a moving target. Like one month, something goes up and nothing else does. then it comes down, but something else goes up. So he said, outside of food, one category to watch is airline fares, which jump 11% in March, the most ever. Omar Sharif of Inflation Insights thinks this was mostly due to the ongoing normalization of demand as the Omicron wave receded. Use vehicle prices finally fell 4%, while new prices were essentially flat.

The other part, he said the explanation, sadly, doesn't seem to be recovering supply so much as falling demand, particularly from rental car fleets. It's crazy to me that there still are no new cars for sale anywhere. Like, when you drive by a car dealership, it's still empty. What else is the semiconductors? It's got to be semiconductors. I just can't believe how long this has gone on for. This is interesting.

Rental inflation has accelerated somewhat since most Americans got vaccinated, but the national rental price index is still below where it would have been if the pre-pandemic trend had persisted. In San Francisco metro area, rents are in almost 10% below local pre-pendemic trend. That's surprising me, because you see all these charts with rents going up 20% a year or whatever. So if they would have just stayed on trend from before, they're lower than they were because of the pandemic. But because we live, our brains only work on a relative basis, we're comparing to them getting lower during the pandemic and then having a huge catch-up period. So a lot of other stuff is back on trend.

Rents are not. That surprised me. Yeah, I was just reading this as you're saying it. Yeah. Not good. Why is that not good? That is good. Rents are lower than they would have been without the pandemic.

You call me. I wasn't paying attention. How many natty lights did you have in the sun today? You say you can't drink during the day with kids. All right, Boston. I see how far our dinner reservation was. All right. That's great news.

Are you eating at the hotel? Are you going out? No, we're going out. We ate at the hotel last night. Okay. Go to the Mexican place down the street. Amazing fish tacos. I can't remember what it's called.

Okay. Give it a try. All right. You have my full attention now. That's no good. I meant that's very good. That's funny about it's very, it's great news. Okay.

Speaking of bad news, natural gas futures. at their highest level in over 13 years, Ben? Last time there was high, there was a combination of a hurricane and a heat wave at the same time. Have you been getting higher bills for utilities? Do you pay attention to this stuff? No.

I track it. Got a little tracker. Mine are definitely a little higher. Not good. Not good. That's my default response going on when I stop paying attention to anything. It's not good. All right, so this is a question from J.P. Morgan's quarterly conference call.

A question from an analyst basically said, Are there any income buckets that you're seeing early stage delinquencies picking up in terms like credit cards? And the CFO of JPMorgan basically said, no, right now we're not seeing anything that gives us reason to worry. Like they're saying across the income spectrum, people are not slowing down yet. People are still spending. I think there's a sentiment.

Can we have a recession where consumer spending doesn't slow down? That would really break people's brains. My thing is... The economy turns down, but consumers are unchanged. Okay. Inflation has only been high for a year. don't think it's being here long enough to completely change people's way that they react and spend money. I think it's got to be here longer for it to have more of a reaction. Maybe we'll

get to test that out, but it seems like, okay, here's something. Social Security, I think, is one of the most massively underrated retirement assets people have. Based on the data, Senior Citizen League estimates Social Security cost of living adjustment or COLA for 2023 could be 8.9% would be the biggest increase since 1981. It's not good. Retirees win again. They have an inflation-adjusted annuity. That's going to be paying them 9% more. Oh, retirees win again.

All the past 10 years, I've heard that retirees are being punished. Savers are being punished. Well, not for serious eye bonds anymore. We talked about this a little bit on Portfolio Rescue last week, but 9.6% you can get now for six months annualized. That's a pretty good deal. It is. I just wish that they would lift the cap.

I'm sorry. I can't get excited about that number. I agree. But for people with just savings, it's not a bad deal. It's pretty good. Lift the cap. It's true. Lift the cap.

I'm in. Let's make a push. All right. Do you think we could get a petition going? Eh. We can get signatures. Call your congressman or congresswoman. Whoever, call somebody.

How many people do you think know what a serious eye savings bond is? 5% of the population? 100% of our listeners. All right. Now they do. All right. Carl Kintanaia tweeted, UK households

cancel streaming subscription and record numbers is from the F.T. Oh, Ben, you're saying that it's not changing people's habits. How about now? How about now? Netflix is a leading indicator.

Okay. They don't consume like we do in Europe, though. Europeans are not the same consumers. This says UK, like, do they even have American shows over there? What? I'm just saying.

I'm asking, if you live in the UK, can you consume all American Netflix shows or you just have British Netflix? I don't know these things. It's global. Hello. Earth 2 Squid Game. True, but not all of them are global.

They've got to have differences among the countries. Yeah, I think you're right. I don't know how that works. That's a good point. Also from Carl Cantania. I'm sorry, Americans are lazy. They don't cancel stuff. Once you start paying something, you're paying it for the rest of your life.

That's true. We are annuities for all of our products. Yes. Since 2018, Netflix has traded down on 13 of 15 earnings prints. Watch it. You have like 11% going to the... No, there's no way. There's no way.

If it was Michael's trading journal from 2012, you'd be shorting this thing into the next print. No, no, no, no, no. You'd rock it up 30% higher. I would be buying puts. I would not be short. All right, Goldman tweeted or Goldman said, the historical G10 evidence suggests the odds of a recession are higher than normal. I agree.

And we now assign roughly 15% odds to a recession in the next 12 months and 35% within the next 24 months. 35% how does that help anyone? Just say something. That's a wimpy call. Say anything. There's 35% chance. That doesn't help anyone.

Say it or don't say it? Here's my new rule for economists. You have to either say 49% or 51%. Okay? That's it. 49% means less than... And 51 means it's, eh, we're leaning there. That's it.

I'm on board. I am on board. I feel like the Twitter sentiment is like 75% recession in the next 24 months. Well, 75 is so high. So I feel like there's going to be a recession, but again, I have to caveat with... I'm not saying that the wheels are going to fall off and like the economy's going to absolutely going to the toilet, but what? I think there's going to be recession, except I don't.

know when it's going to happen. I don't know how bad it's going to be. I don't know how long it's going to last. Yeah, exactly, all that sort of stuff. But 75%? I go 60. I go 60. Oh, I'm not 60. Twitter sentiment. In the next 24 months, you say 60% chance of a recession. Yes. I would take the other side of that. 2024. Time stamp it. What do you mean 2024? That's when it's going to happen. Oh. Sorry. Yeah. That's right. You heard it here. 2024. I guess technically that includes the next 24 months. But what about this? Delta 1 tweeted, Apple, New York retail union organizers asked for $30 an hour. Okay. Who's the bot that does these Walter Bloomberg posts? It's a bot, right? I don't follow this guy. No, that's a real person. It's a real person that is just copy and pacing Bloomberg headlines or CNBC headlines.

Is his name actually Walter Bloomberg or does he work for Bloomberg? No, I think it's his name. I don't think it's a bot. There's no way the guy's name is Walter Bloomberg. You're telling me that much of coincidence that he's posting news the second it hits. and his name is Walter Bloomberg? I think his name was Walter Bloomberg. 40% chance. I'm going to go ahead and take you the side of that one, too. All right, from Felix Salmon today at Axios. Housing is affordable if you already own one.

Good headline. Nine out of ten mortgages in America care an interest rate of less than 5%, which is the official level at which most new 30-year fixed mortgages that are being written. According to Fannie Mae's most recent National Housing Survey,

92% of homeowners say their current home is affordable. I think that makes sense. I'm surprised there's 3.7 million people with a mortgage rate of over 5.5% right now. Do you think there's some people that just, I'm not going to go through the problem of refinancing or they can't refinance for some reason? Is that it? No. No. What is it? Look at this chart. Are people not refinancing? There's 1.6 million people with 6.5% or higher rates on their mortgage. Oh, those people can't refinance. Or they're just so close to paying it off. They say it's not worth it maybe. That number

just kind of surprising. I think the reason why they have a mortgage rate that high is because their finances were probably not great to begin with. we talked to Ben Miller from Fundrise last week. It was on Monday's show. He said he thinks higher rates are going to normalize stuff. This doesn't sound normally yet to me. Maybe it's getting there, but this is from Redfin. It was the hottest march ever for the housing market, with homes selling at their fastest pace and for more above list price than any other march on record. Median home sale price rose 6.2 percent. Fastest month over month gain at this time of year since 2013. It's at $4,000 now almost. But seasonally adjusted home sales fell 4% from mortgage rates.

I think that there's still follow-through from people who were already in the system and just said, screw it, I'm not going to wait. Typical homes sold in March one under contract in 20 days, six days faster than a year earlier, shortest time ever on market. 54% of homes sold above list price, up 12% to the points from a year earlier, highest March on record. I just think the odds of a national slowdown. It's going to be a while. This is from Bloomberg. They said, Boise. Walter Bloomberg? It's his cousin, I think. Boise home prices are 70% higher than the median household income of city. residents. And this is like one of the hottest markets in the country. That's all implants.

But they said it rose just 0.4 last month. So people are saying, okay, we're seeing a slowdown. I think it's all about location where some of these places that have just went massively higher, Austin and Boise, aren't those the kind of places that it would make sense for to see a slowdown more than like national home prices? Yes. If you're a first time home buyer in Boise and that's like where you grew up, you just got so railroaded. Yes. Oh yeah. For sure. People with their high incomes that came to your neighborhood. We have a. friend who is a realtor here in Grand Rapids, and we went out to do it on this weekend. And she said that she's talking about people buying $700,000 homes here, which five years ago would

have seemed like a really expensive house. Wait, who is Vanguard? You better retract that immediately. But we said, who's buying them? She said, they're getting a ton of people from California and you're coming here because they can now. And for them, that seems like a steal. Look at this. This is from a suburb of Denver in the Wall Street Journal article. Half of our buyers got priced out of the market. If half of our buyers got priced out of the market, we still have eight buyers for every listing. The people that think it's going to stop somewhere, I think they're in for rude awakening. I think it's just, it's going to be all about location and that's it's it. First time home buyers got a raw deal. No sugar coating it. But we do have to point out

that two out of three Americans own a home. Yeah, the people who own one already are in an unbelievable position. It's just luck of the draw. Okay, here's someone who got lucky who was a first time home buyer at the right time. This is kind of by you, Naples, Florida, just north of you from Marco Island? Don't know. Just got this one into date. Bought a newly renovated place in Naples, August 2020, 1,600 square feet, classic Florida ranch in a nice neighborhood, paid $490.

I thought it was a bit over my skis, but it was a four savings vehicle for me. Since I bought 20 months ago, home prices started to move as they had everywhere else. But until about two months ago, since February, homes in my neighborhood have gone parabolic, two to three times that of the national average. He gave an example of this Zillow home. By the way, I still love searching for homes on Zillow. It's just the best.

I'm so old. House above was listed two years before mine for 400, and just sold for $1.3 million cash five years later. Naples is not known for his cheap real estate, but it has gone absolutely bonkers. I've been approached five or six times by agents trying to list my house for north of seven figures. In the best market, my house should never even remotely come close to seven figures. In fact, I'd say 750 is ridiculous. Let own 1.3.

Here's my question. Single 26-year-old living in a geriatric town. Hey, no one in a geriatric town wears a natural light shirt to the pool. I'm sorry. It's still pretty hip. Would this be a scenario in which you'd take the cash and wait this out a few years? I'm all for having an asset rather than renting, but in all seriousness, I have a couch, TV and a bed essentially, hence why I would not need a house, an apartment would do more

than just fine. After tax, I'd make out with approximately the total value of the home I purchased 20 months ago. So this guy would make out with like half a million dollars. I think there's nothing wrong with that. Nothing wrong with it at all. For this particular person, given everything that he just told us. Counterpoint, home equity line of credit. What's the rush? Is all I'm saying. Let's say housing price is flatline for five years, but you can pull 500 K out in equity. as a young person, or move to that apartment and rent the house out, put it on Airbnb. You're in a nice place in Naples in Florida, maybe you have a pool? I don't know. I've heard a lot of questions like this from people saying, is it time to cash out?

I'd be careful. I would be looking into ways to borrow against it rather than cashing out. That's all I'm saying. I probably would not catch out. I adjust for hassle. You ought to adjust for the hustle. Yes. All right. Time for our great quarter guys. I feel like we just did this. We had to breathe it for a couple of weeks and we're back in it. back in earnings season. By the way, download the app, Q-U-A-R-T-R. It's like a podcast for earnings calls. It's great. And they've got some great new features coming out that we've got behind

a curtain for. That's true. What do we got? All right, let's start with Delta. They reported a $940 million loss in Q1, greater than expected, but they were profitable in March. Well, I hope so. Didn't they say this is like the busiest month ever? Yes. How were your plane tickets going down there? Because I'm surprised plane tickets haven't been going up more. We bought tickets for May. They weren't that expensive. I can't believe we haven't seen any fuel surcharges yet. That's coming because it says their fuel costs are up 155% to a year ago.

It says one cent gallon increase adds $40 million annual cost. It says airfares costs are up 20% compared to 2019. I can't imagine that plane tickets won't be going up soon. I booked my flight before the surge. Credit to you. Credit to May. All credit to May. Revenue hits 79% of the level seen prior to the pandemic.

So they're getting there. The CEO said over the last five weeks. weeks. Here it is. We've experienced the highest level of sales and booking activity at any time in our history. People want to travel. There you go. Inflation and airline prices. Don't fly anywhere and you don't have to run about inflation. Stock's looking better. Been crap for years. All right. J. P. Morgan, what do they say? Remember when you bought Jets? How long ago was that that you bought and sold it? That was a great trade. Right? I made like 30% in a couple of weeks. That was early in the pandemic. Nailed it. Actually, credit to me, I have not stepped in.

I have not bought any of the growth stocks. I'm just not doing it. Way to go. Pat and the bat. Thank you. All right. What's Jake Morgan say? They budgeted $900 million for higher credit losses because of inflation and the war with Ukraine. I thought that they said that they weren't seeing any stress. So which is it?

Not from consumers. These are probably all institutional buyers. They probably have some Russian bonds in their book, maybe? I don't know. That's probably a drop in the bucket for them, don't you think? $900 million, yeah. I saw the Wells Fargo CEO said, we're probably not going to change rates much for consumers on savings accounts until we get 100 basis points from the Fed.

Thanks. I think banks just like they don't care anymore. not going to give you anything. Sorry, good luck. 5% of mortgages and we're paying you zero on your savings account. Yeah, consumer spending on credit cards rose 29% and credit card loans increased 15%. I thought that we pulled forward everything in the pandemic. People are still spending like there's no tomorrow. We love spending money. It's what we do. What is it? Consumer is 70% of the economy in the U.S. I think that's about right. Black Rock, did they have anything interesting

to say? They have almost $10 trillion in assets. Man. They have a lot of money. They buy homes, right? Somebody emailed us, it's Blackstone. Yeah, we know Blackstone buys homes, but BlackRock buys homes, too, no? That's what I thought. It was in a Wall Street Journal article. All right. Maybe we have to issue all sorts of retractions.

I am pretty sure Black Rock, again, Vanguard, not in the home buying business. But Black Rock, certainly, I thought. Did Bedbeth-Mion get crushed or did I miss that story? What happened with them? Let me look. Bed-Beth Bion, this stock has been for long. Well, oh, actually, this is a meme stock. Remember that?

Mm-hmm. How did this become a meme stock? What was the story there? I'm guessing it's got to be because, People make a 20% off coupon jokes. That's the only thing I could think of. Seriously? I don't know.

I'm kidding. I have no idea. I'm looking at this stock. Going back 15 years, it's flat. Junk. Anyway, what are they saying? Abnormally high level of inventory wasn't transvit, unavailable, or held at ports. That's great.

Through the early part of this quarter, which contributed to a large than expected drop in sales. Same store sales down 20%. Oof. Yuck, yuck. By the way, I said last week, I don't really see myself going into a mall anytime soon for any reason. Beth and beyond. I don't know that needed to go anymore. Those days from me are gone. Oh, so gone. I wonder, do they own their real estate or do they rent it? Why, you want to turn them into a reet like Bill Ackman? Dude, the market cap is $1.7 billion. I feel like if they own their real estate,

some of the parts, no? Some of the land. I'm sure no one's ever thought of that before. No. Yeah. All right. Zing. You always say that. Like, the best business models are the one where people think, like, it's so easy. Anyone can do it. All right. Sure. We Hold on, hold on. Before we move off, Bad Bath Beyond, let's do this. The market cap got as high as almost $18 billion in 2000 and, when is this? 2011.

So it's $1.6 billion. It was $1.6 billion in 1996. Jeez. Yeah, but do they pay a dividend? Maybe even paid to wait. Another one. All right. So this Jack Dorsey thing, not necessarily an indictment of NFTs, but a good reminder about

speculation, I guess. So some crypto entrepreneur paid $2.9 million in March 2021 for an NFT of Jack Dorsey's first tweet, like setting up my Twitter or something. And then he said, he thought he was going to sell it for $25 million, this guy, and he's going to give half to charity. And when they auctioned it off, the very first bids were $280. I think it's now up to $14,000, but obviously this guy lost a ton of money. So hopefully he's writing it off for his tax purposes. But I think this is a good thing. Which part? Just the whole thing that like speculating at like just not everything you speculate and pay a lot of money for should automatically be worth a lot of money.

The market should have to tell you that this thing is worth a lot of money, not just you because you wanted to buy it. Oh yeah. By the way, I saw people saying that like NFTs are dead and good because of this. NFTs are on pace for their second largest month ever. I know it's still early in the month. Well, you saw the Kevin Rose NFT drop, right? That did like huge. Took over.

Took over the internet. $200 million. Yes. They're not dead. but it's just, it's good to see that some of these, just because some rich person paid a lot of money for it, doesn't mean that's what it's worth. Yes, totally agree. Totally great. All right. Let's go on to recommendations. Recommendations. First, just keep buying. Nice little cover. Act smarter, live richer, proven ways to save money and build wealth by our own Nick Majuli. This book is great. I, not to brag, got to read an early copy of this, gave Nick some notes on it because that's the kind of guy I am. This is the kind of thing I do for young authors. I didn't get an early look.

sorry. Your note must have got lost to the Slack channels. But this is not hyperbole to say that, like, I think the smartest and also my favorite investment writer is Bill Bernstein. I've learned more from him than I think any other investment writer over time. He's probably the smartest person in investing, but he also is very good at storytelling and using data. And I think Nick is similar in that way, that he is very good at weaving stories together. Yeah, that's high praise. But he also uses a bunch of data to back. back up what he says. And he has a few hot takes in here that when I read it, I kind of went, oh, I've never heard that in like a personal finance investing book before. Go ahead. He has a whole chapter about how people are probably saving too much money. That's great. Those numbers in there, me too. I was like, oh, okay. I talked last week about how it's hard for retired people to spend money. And then I wrote a blog post about it. And I got a ton of feedback from actual retirees who said, Ben, this is spot on. It's so hard to force yourself to spend money. And a lot of them said, if I don't,

spend a lot. I'll just give it to the next generation and it's fine. But you're right. Maybe Nick's point is, okay, then maybe people are over planning because they're giving themselves such a huge cushion because it's so scary because health care costs and what if inflation eats it up and what if the market does crappy? Like retirees have a hard time forcing themselves to spend money. His point is, okay, then enjoy it now and don't save as much, which is antithetical to everything you hear in personal finance and kind of makes sense. New show on HBO, we're three episodes in, Tokyo Vice, based on a true story loosely about a guy who goes to work at a newspaper in Tokyo in the early 90s, and he's like the first ever expat to do so. And he gets into the

Japanese mob and try to report on them. It's really pretty interesting. It's not a great show, good show. We watched Spider-Man Homecoming this weekend. That's the biggest movie of last year, I guess. Now, I've seen all the Spider-Man because my son, George, loves all the spider. Like, he'll watch them over and over again. So I'm caught up. And I will say, this was a very entertaining movie. I'm not a big marble guy. I just kind of take it or leave it for me. I'm not a hater, but I don't love it.

This was very enjoyable and entertaining. And because I've watched all the other movies 10 times a piece for the last year or so, I got all the references. But here's my one drawback to this. I feel like it's a little lazy. So the last Avengers was like this walk down nostalgia lane, like, oh, there's that character and that storyline and let's revisit it again. And that's kind of what Spider-Man did too.

And I feel like they're going to be out of bolts for that eventually. You know, it's funny you should say that. I don't disagree. I didn't need to see Toby McGuire and Andrew. Is it Andrew Garfield? Yeah, I didn't need to see them. I actually thought Andrew Garfield was kind of funny in the movie. Toby McGuire, I haven't seen him in like 10 years or anything, so he looked a little older.

I can't remember. Did it get cheesy? Got cheesy, right? I thought Andrew Garfield was good. He had some good one-liners, but Toby McGuire, yeah, felt a little out of place. But I just feel like they've basically run out of storyline. So it's like, all right, here's a walk down memory lane and we're going to use nostalgia. How much was the build a bear?

No, seriously, we were... No comment. We were just... How much was it? Well, it ended up being like $100. Yeah, right. That's it. Oh, 100 bucks.

What? And those memories are priceless. Amazing. All right, what else, Ben? We're almost done. What else? Okay. I'll put the list up.

The 50 best rom-coms for the ringer did a thing. Okay. I didn't have too many arguments. You could shift into ground, but I think they actually did a pretty good job of that list. I'm when Harry met Sally and Nauting Hill. Is Harry met Sally? That's my one A and a big.

It goes in the top ten. So I thought they did a pretty good job of the list. Okay. Your turn. I rewatched Sicario. You ever see that? Really good. And in the lesser director's hands, I feel like that's just a generic movie.

You've seen it a million times. You know who wrote it too, right? The Yellowstone guy. Oh, I did not know that. That's how he got his big break. He wrote Sicario. Actually, the sequel's good, too, I think. I did not see the sequel.

Sequel's good. Deni did not do the sequel. But, okay, I'll watch a sequel. And then on the plane, I watched Mad Max. It's just one action scene What a great movie That is my type of movie What is Michael like?

He likes that That is my type of movie But I said who directed this So it's a guy George Miller Who did the original one So I'm looking at his IMDB I don't really understand This is a weird IMDB

He hasn't done anything He's done like He did Babe And the sequel to Babe Pig movie Yeah And he did Happy Feet And then he did Mad Max

That's really about it What a weird resume Mad Max, babe and Happy Feet Yeah that Tom Hardy Mad Max Mad Max is really good holy moly was that a good movie i love that one all right ben go have fun in florida try a miami vice trust me tell robin to have one too they're very good okay all right animal spirits for two of them at animal spirits pod at gmail dot com thank you for listening we will see you next time

Thank you.