Animal Spirits Podcast - Addicted to Trading (EP.364)

Episode Date: June 12, 2024

On episode 364 of Animal Spirits, Michael Batnick and Ben Carlson discuss: our trip to Charleston, slowing vs. normalization of the economy, the loneliness of the American worker, Fed rate cuts, getting rich fast, degens trading options, car deals are coming back, the true cost of home ownership, in defense of credit card reward hunting, the poor man's Tom Cruise, and much more! This episode is sponsored by Nasdaq and Fabric by Gerber Life. To learn more about Nasdaq's ETF listing process, visit: https://www.nasdaq.com/solutions/list-etfs-with-nasdaq Join the thousands of parents who trust Fabric to protect their family. Apply today in just minutes at https://meetfabric.com/spirits. Sign up for The Compound newsletter and never miss out: thecompoundnews.com/subscribe Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. 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. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. 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. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

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this podcast. Welcome to Animal Spirits with Michael and Ben. Michael, last week, you and I took a little trip together, and on that trip, we took a romantic carriage ride, just the two of us. I have to say, when we got there, you planned this whole thing out, and I think Josh told you, hey, if you're going to Charleston, you have to take a carriage ride around the city because you learn a lot about it. It's a cool way to tour the city, which I thought was a great idea by you, great idea by Josh. As you mentioned, Charleston is a city with one of the rare cities in the whole United States with 100% approval rating. Yes. Everyone I talk to, friends, family who've been there before, said, oh my gosh, Charleston is the best. And we agree. We said dozens of times,

It was like, this city is amazing, getting around. So we get to the horse and carriage place, and there's these huge trailers that have benches on them where they can put, I don't know, 15 or 20 people for a nice ride. Not us. You decided to go for the more romantic, like white satin carriage. I prefer intimate. Yes, the two seats on each side. So it was just us, which was great.

But we had a tour guide who was a history professor at one of the local colleges there, and she was giving us all the history of Charleston and giving us a bunch of good stuff. and we decided to do some channel checks with her. And she was talking about the local economy, how Charleston has seen massive growth, but they're not building enough apartments. So rent growth has gone up, but all these people are coming there

and tourist stuff is booming. She's talking about the local economy. And I could see you, the light bulb went off. He said, you know, I'm going to see, talk to this person who's not in finance and just ask them. And you kind of said, so what do you think about the national economy?

Like, right? Because you never know how people are going to answer, and she kind of looked at us. And I think she was trying to determine, like, what way are you leading me here? And she said, she said, well, geez, it's, I don't know, more people are coming here than ever. People are getting on airlines. The restaurants are full. She said, Memorial Day Weekend and Charleston was as busy as I've ever seen it. She's like, I don't know,

it seems to me like the economy is doing pretty well. She's like, is that what you expected to hear? And you said, yeah, that's a good answer. Great answer. That's, it makes sense. So that was our channel check. And, yeah, any other parting thoughts? We had a fun time. time. A couple of surprises. Well, actually, this is not a surprise. What's your favorite part about Charleston? Oh, man, I don't know. It just seems like a very walkable city. I'll tell you mine. I like that there aren't high-rise buildings. I like that the churches are like the apex of the buildings. So it's pretty hard to get lost because she told us you can't build a building taller

than the tallest church people, right? Which seems antiquated, but it makes sense. So, Ben, we had a lovely day. We took that carriage ride. We did a podcast. We got a drink and then we went to dinner. Then we watched some basketball. We were on a rooftop bar and Ben got the absolute worst poor in the history of beer. Yeah. That was pretty bad. I've never seen anything like it. So it's just a standard pint glass that was 70% full. I don't know what happened. It was odd. It was a dos ecches and they put the lime on top. So that made it even more pronounced because you could see that there's this huge gap between the top. Yeah, it was a pint glass and it was not filled all the way to the top. Not even close. And I probably would have said something. I almost

wanted to say something in your behalf. But did Ben say anything? He did not. I drank my beer and we left. I think your martini was bigger than my beer, actually. Okay, so Tors and Sloc, Animal Spirits, researcher of the year. U.S. Air Travel, no signs of slowdown. You can see that it's basically new records, or it's going to be new records. It's above the last five years. He takes us back to 2019, and people are still traveling. It seems like every plane now I'm on is full, basically.

Tell me about this. I'm not an aviation expert. How do airlines overbook? How is that a thing that's possible? One seat, one person. One seat, one person. I don't really get it how people, I'm guessing the cheapest form of plane ticket means you don't get to pick your seat. And it's like they can have those people do bore on the floor to figure out who gets the seat or they pay them.

I don't know. Fine, but 74 seats in the airplane, whatever the number is, 74 tickets sold. That should be very, very simple. On the way to Charleston, the guy next to me got off and I took my headphones off and I said to the lady next to me, where's he going? and she said he got $800 to take a later flight. I said, $800, that's a lot of money. And as a Delta shareholder, I don't know that I like that. I don't know that I like that.

And then on the way back home, same deal. They were overbooked and they were offering $800 voucher to travelers that were willing to hop off. Do you think the calculus could be there that they assume certain people will miss the flight or not make their connection? or something's going to happen. I'm sure it's not as simple as I'm making it out to be. I'm just surprised when you see that happen.

Yes. I'd love to see the cost benefit for that. And also the pricing of that number, like where does that $800 come from? You know what I mean? Like it's $575 too low? Well, don't they start at one? It's like an auction, isn't it?

They start at a low level. And if no one takes, they raise it a little bit. Have you seen that happen before? 600, 600, anybody, anything is 30 years. Here's a question for you about travel. I did some notes. especially for first-class people,

why don't they tip the flight attendants when they bring them drinks? Ooh. I feel like every other time you get a drink or something like this is tipping everywhere these days. Why is there no tipping? I'm saying not just not economy class, just first class.

When you walk into a bar, when you walk into a bar, you don't pay $2,200 to walk in. When you're paying that kind of money, it's baked in. How about this? Because the drinks are free, people feel like they don't have to tip.

Free. There's something to that. Okay. I just always, it seems bizarre to me because they, you know, they do. And what percentage of people in first class get a drink? Because it has to be, it's got to be a very high number. I would say, I was going to say, like, more like 80 to 90. I feel like if you're in first class and it's a free, it's a drink that's covered,

you're getting a drink. Oh, at least one. Yes. Any of the travel thoughts? I thought you had some, maybe. Well, one of the things that we spoke about, and I'm dropping the gun here, but like, how many times are you going to watch anyone but you'll, in the airplane.

That's my first airplane view viewing. We'll get to this later, but I'm a big Glenn Powell fan, okay? You're like, you're trying to corner the Glenn Powell market. I feel like you're going to get rug pulled. Did you see Hitman yet? Phenomenal. Okay. We'll get to that in Rex.

All right. So I feel like the talking points to the last couple weeks because the cycle and the narrative's change from week to week on the economy is wait a week experiencing a slowdown here, or is this a normalization? And it's funny because the GDP now thing from the Atlanta Fed, it changes on, I don't know, seems like sometimes every couple days. And it went from like above 4% to below 2%. Everyone said, whoa, whoa, whoa, okay, the economy's slowing. And then it quickly shot back up to 3%. Can you imagine trying to predict economic growth with all the stuff going on right now? And I know it's easy to make fun of economists because they're really bad

to forecasting like everyone else, but... But isn't this quantitative? Isn't it a model? Well, yeah, but the model, look at what it says. The range of the top 10 and bottom 10 average forecasts. It's taking forecasts from economists. Oh, is that how this works? Okay.

Yeah. Wage growth slowed. It's still 4.7% above inflation, but it's coming down. Job openings went from $12 million to $8 million. Credit spread still pretty tight. I had our chart guy do this. showing high yield versus investment grade versus the 10-year. And I think the average high-yield spread is like 5% going back to 1987.

It's 3.6%. So spreads are still relatively tight. But I think this is the kind of thing that's impossible to tell whether we're like things are just kind of normalizing and shaking out and whatever kind of landing you want to say versus like, oh, the economy is actually slowing. I think it's basically impossible to know. It's interesting you say that because I was thinking about we spoke to Kyla Scanlon yesterday about her book. And it's funny how easy it is to debate about what's

going on in the economy. Because we have the data, right? And now it's so much data. So much data. The day is not perfect. But we have so much of it. And maybe we have too much of it. So I think like you can make you can make certain statements. We're not in a recession, right? Like that much is clear. But to your point, it is hard to know like where, how exactly is the economy doing? I think you can you can make generalizations without really. having like it mailed down. And I've probably said this before, but I would give the U.S. economy the benefit that out. I would rather be, I'd rather sell too late than too early on trying to predict like a recession.

Not that I have the ability to predict a recession, but I'm going to give the U.S. economy the benefit of the doubt until it proves to me that I shouldn't. Yeah, that's good posture. It's like I feel like it's a momentum thing where I would rather follow that momentum and make sure that trend is clearly broken before I say. This is it. But it's not your job to make economic forecast. For people whose job it is, being late, once everybody knows, like, that's not.

That's not doing the takes game here. Doing your job. No, we're in the takes game here. There's, there's, so there's, there's stuff on the table here. Well, in that case, the economy actually is in a recession right now. Did you see that, God, it pisses me off. The Harry Dent things again, where he was out yesterday with a bunch of headlines that the S&P is going to fall 86%.

Just, I just want to stop giving action to people like this in the financial media. I know why they do it. It gets clicks. It drives headlines. But, like, what do you think this guy's thinking when he puts these forecasts out? I don't know what his motivations are, but you know the game. Newslet of subscribers, I guess. We're talking about it.

People are clicking on it. I mean, if you're wrong for 20 straight years, and he's even giving dates, he doesn't even know how to be a good charlatan. If you're a really good charlatan, you don't give a specific date. You just say, listen, it's going to crash, and it's going to be the worst crash you've ever seen. And if the crash doesn't happen, you'd say, well, the crash is going to be. be bigger now. You don't say by end of

2024, the S&P is going to fall 86%. He doesn't even know how to be a good charlatan. Yeah, I'm with you, man. It's nonsense. All right, this is mildly interesting as we're trying to piece together all of the

pieces of the economy. There's some glass door economic research. Employee confidence drops in May. This seems to be trending down a little bit, but I do wonder, you know what? Another nonsense. because this has been trending down since 2022 when clearly the economy is doing well.

So this employee confidence for their own employer, that's actually kind of surprising that it's been trending down for so long because the whole thing of I'm fine, but everyone else is screwed, this doesn't really match that. Yeah.

Like a lot of people would think, like, my company is doing amazing, but these other companies are in the crapper. All right, Ben, there was an article in the Wall Street Journal, The Loneliness of the American Worker. More Americans are profoundly lonely, and the way they work, more digitally linked,

but less personally connected is deepening that sense of isolation. Employers and researchers are just beginning to understand how workplace shifts over the past four years are contributing to what the U.S. Surgeon General declared a loneliness health epidemic. Among 1-800flower.com,

they have 5,000 hybrid and fully on-site employees. The most popular community chat group offered by the company Mental Health Provider is simply called, loneliness. I mean, it's not going to get any better. It's just going to get worse, right? Where more hybrid or remote work, I'm sure there's, yeah, that's going to be a thing where

and it does, it seems weird to think because some people just hate their jobs or hate their bosses, but if you have good coworkers, they really can't help your happiness. So there was this book called The Good Life. I think I recommended here probably a year ago. It was the authors of the longest happy. happiness research study ever from Harvard. And they actually talk about this. They say like having a work best friend actually can make you happier. So here's what it says. Research has shown that people who have a best friend at work are more engaged than those who don't. The effect is

especially pronounced for women who are twice as likely to be engaged in their jobs. If they strongly agree they have a best friend at work, positive relationships at work lead to lower stress levels, healthier workers, and fewer days off or fewer days when we come home upset. They also simply make us happier. What did Chris say a few years? ago when we were together. What did he call this place that we work at? Best friend machine? Yeah. It's, right? Yeah, you're like my, uh, you're like my work partner, right? Yes, very much, sir. This is why we're happier. But this is the kind of thing that's, so another Torson-Slock one, he shows a vacancy for- Wait, hang out. Hang on, I just want

to stand this for one sec. If the only way, or if the primary way that you communicate with your colleagues, is through a Zoom call. Right. Zoom, Slack, phone calls, email. Zero small talk. If you can't ask somebody, hey, when did you get to the office? Or any other openers that Ben doesn't like, it's hard to develop relationships. The water cooler talk, yes. And I think that's the other thing. Everyone hates meetings, but the best part of the meeting for camaraderie is before the meeting and after the meeting, because there's small talk there and there's small talk here and there's walking back to your desk

and all that stuff. Seizes to exist on Zoom and listen, I'm not the most, this might shock you, I'm not the most social person in the world. I'm not a chatty Kathy. But guess what? I love going into the office. Whatever I do. It's a great time.

Not to pat ourselves in the back, but one of the things I think we've done well over the years is that when we do bring people, because we have, what percentage of people at our company work remotely? 60, 70 percent? at least. Something like that. When we get people together, we try to make sure that there's big time, like there's time for work, but there's also social interaction. It's dinners or a baseball game or something going to the, whatever it is, that there's, socializing is part of it. Because that's such a huge part about the organizational culture. So there's, there's certainly

many companies that enjoy those benefits of the hybrid that are doing what we're doing. But there's probably a lot of, not probably, there are millions of corporate jobs that don't have any of that, right? Right. Where it probably is just really truly soul-sucking and unfulfilling work. And yeah, this isn't, there's no way to spend this. This is probably not getting better. As someone who has worked in his own office, it's literally just me in one office. This has been, I think, nine or ten years. I guess it was 2015 I joined. So I've been doing this for a long time. It's really easy to get in your own head when you're by yourself, right? And you don't have people constantly coming around and interacting. And luckily, I'm like an introverted person. So

it's okay. I can handle it, but I'm sure there's a lot of people who, that has to really mess with your emotions. I'm a robot, so it doesn't mess with me. Right. But look at, so Torses slot did this office, apartment, retail, and industrial vacancy rates. And office vacancy rates have gone from, I don't know, 15% to 20% since the pandemic. That seems like a never going back kind of thing, unless we just take a bunch of these offices down or something. Like, that's not going to get better. Right. These, yeah, these empty offices are never getting filled. Right. Yes. And the funny thing is I have, by where I am, there's all these empty offices. And instead of people going in and retrofitting these,

they're just building new ones now. Like, you don't want to go into this old office building that was built in 1980 and maybe redo it when you could probably just build a new one instead that's nicer and has better amenities. So things like that, like small office parks and suburbs, like those will just get teared down and repurposed or whatever. New things will come in there. It's going to take a while, but they should. City is like, I don't know anything about zoning, but it's not that simple to just to just convert it to an apartment. Yes, right.

I'm sure it takes a long time and it's very expensive. All right. Let's talk about interest rates and central bank policies. Here's from the Bank of Canada with continued evidence that underlying inflation is easing. Monetary policy no longer needs to be as restrictive. Recent data has increased our confidence on inflation will continue to move towards the 2% target. It has the global easing cycle begun.

It sounds like it. It's not just Canada. Yeah, Canada and so U.S. will probably be the last one, I would assume, because we have the strongest economy. But it seems like that's where we're heading. I don't know. Do you think they're really going to try to sneak one cut? Not that I'd want to ever try to predict that, but they'll sneak one cut in this year just to do it. What do you mean to sneak?

Like when nobody's watching? Yeah, just let's get one. Get it out of the way. Well, we've got a Fed Presser tomorrow. I mean, I'm assuming they're doing nothing. Yeah. So there was this chart from, what was this from, Wall Street Journal. This was from Fed Woj. How come he doesn't have a Fed Shams yet as like the offset to him? Right. We only have one Fed Whisperer. By the way, 99.4% chance of no cut tomorrow, according to the FedWatch tool. Yeah, that makes sense.

So he created this chart that shows spending wages and prices since 2020. And just look at the whipsaw on this thing, especially the spending. with just spending cratered in 2020, obviously, and then penned up demand. So it just jump higher, like out of this world higher, not as slowly but surely coming back. But I don't know, just so much whipsaw in the economy. That's just why I'm giving, it's, again, it's funny to poke economists who have been wrong in, say, 100% recession. I'm almost willing to give most people a pass for being wrong about the economy for this cycle because things have been so bizarre.

So it looks like, according to this chart, This is month over month. Wages have been growing faster than prices for almost a year. It's been like 14 months, I think, that wages have been going faster than prices. And I think it was 21 months or something where it was the other way around where prices were going faster than wages. So we're making up, but it was still a decent amount of time there wasn't. Here's Neil Duda, the economist at Renback. He said there's a potential accident brewing.

The economy is weakening at a faster clip than inflation. meaning the Fed won't feel justified to cut rates as much. He quote tweeted that and said either growth is steady and inflation slows or growth slows and inflation slows. Those are the most plausible outcomes in our view. This may come as the Fed erases cuts in 2024 buckle up. So both of his most plausible outcomes are inflation slows. Either growth is steady inflation slows or growth slows and inflation slows.

I wonder what he thinks the accident does. not cutting? Could be. We're the Fed, yeah. But that does seem like the Fed is momentum players where they're probably going to be too late. Like, don't you think of the next three years if something breaks, we're going to get like a 75 basis point cut at some point where the Fed's like, whoa, whoa, we really were way too late. What's the logic behind not cutting? Everything's okay.

Nothing's broken yet. But why be restrictive then? I mean, how long has the Fed funds rate's been above inflation? Yeah, for a long time. My whole thing is... So why leave it there? That's a good question. I think...

My thinking is if they cut 50 or 100 basis points and the Fed funds rate is still above 4%, doesn't really matter? Yeah, isn't that still kind of... That's still above the inflation rate? I don't know. All right. Here's the people who would be mad about that happening. Income.

Americans have more income than ever before. from the Wall Street Journal. In the first quarter, Americans earned $3.7 trillion from interest in dividends, up roughly $770 billion from four years earlier. So this is a record. This is all income, dividend yield, all that stuff that they get from their investments. Josh has been talking about for a while saying, this is just putting more money into rich Americans' pockets and helping them continue to spend money.

I always love the Wall Street Journal interviewing regular people, right? this person who's 55, Victor Hernandez, him and his wife, higher prices caused them to sell their efforts to buy a new car and potentially improve their backyard patio, but they still had money because they have one-third of their portfolio in fixed income and their stocks are doing well, so they're planning trips to U.S. and Spain and catered meals for family get-togethers. So this is the kind of trade-off that makes sense to me. Like, you know, geez, buying a new car seems crazy. I'm not going to do that, which is something that you've decided to.

and the inflation on renovations is up, but I'm still going to take a trip, and I'm going to have family get-togethers. And, like, that's the kind of substitution I like to see in an inflationary world. That makes sense. He also says, recent stock gains and bond income have put him in a better position to achieve his goals of retiring early and helping his two boys by future homes. I'm not going to die and take the money with me, he said. I think that's going to be, I think there's going to be polar opposites. We've talked about baby boomers before who just won't spend their money because they've saved and saved and saved and it's hard to turn that a dial.

I think the other side is going to be, I'm not going to bring it to the grave with me. I'm going to spend it all. Whether that's my family or friends or myself, whatever it is. Didn't we talk about this at some point last year that a lot of the millennials buying homes, part of the down payment was coming from their parents? Yeah. It makes sense. Makes a ton of sense.

Yes. All right. So, Sean, our research channel sent us this one. This is surprising from the bottom, which was October something, mid-October 22. the bottom of the bear market. S&P and EFA, which is foreign stocks, developed foreign stocks, are basically up the same. They're both up a little over 50% from the bottom. This was surprising to me. I would not have expected this. And this is, I don't know who did this one. I remember where I found this. Probably the daily chart. What's the newsletter called?

Daily chart book? Yeah. So this is from the daily chart book. So I didn't realize there was a Magnificent 7 of non-U.S. stocks. Did you know this? We've got to put a label on everything these days. And since January of 2022, the Magnificent 7 outside of the U.S. is outperforming the Magnificent 7 in the U.S. So it's Novo Nordisk, AsML, SAP, Toyota, H.S.B.C., Siemens, and UBS. I don't know. That seems like a stretch to me to call that Magnificent 7. I'm sorry. Toyota? Come on. I was looking at like HSBC and UBS. I feel like the committee who came up with this label had to think long and hard about who do we take here.

Right, but anyway. So that surprises me, although that foreign stocks are doing so well relative to U.S. I don't think anyone would expect it, especially since the dollar has remained relatively strong. It's not the dollar has weakened, causing foreign stocks to give them the boost, especially for Americans.

I saw a chart from Mike Sokarty via fact set looking at the earning sentiment of the S&P Europe, Japan, and EM. What's earning sentiment, like, from analysts? It's upgrades minus downgrades. Okay. And it's turning higher, significantly higher, except for the SEP, which is interesting. But in emerging markets and Europe, yeah, it's had a nice run.

All right, because they kind of had to slow it on before us, right? All right, I remember you did a post a number of years ago, the cap ratio, like, why are valuations higher? And you compared, like, employee revenue or profits, whatever it was, probably revenue per employee of Facebook versus U.S. Steel. Yeah, that was a long time ago. That was probably like 2015. But whatever the number was, U.S. Steel had, I don't know.

I think it was like $400,000 in revenue per employee, and Facebook had like $37 million or whatever the number was. All right. So Charter did this post. this graph where they looked at market cap per employee of the biggest companies. And NVIDIA has a little less than 30,000 employees, $3 trillion market cap. Back of the envelope, we're talking more than $100 million in market cap per employee. The next biggest, the next best ones are Apple and Meadow, which are $19 million per employee.

Nvidia just blows these out of the water. So that's obviously an all-time record. $100 million per employee? Has to be. There probably can't be a close second. and these other ones aren't even in the same ballpark as NVIDIA. All right, I got one more anecdote from a person. I still don't understand how regular people will share their investment strategies and blunders with the financial media. I don't know, I guess everyone answered 15. But if you made a huge investment mistake,

which you've written a book about before, the investors in the biggest mistakes, would you want to share it with a financial publication? Probably not. So I don't know how you lose money in real estate, but Bloomberg has this article on syndicated real estate deals. Do you know much about these? Mm-mm.

So not that I have any personal experience of this, but syndicator real estate deals are essentially, we're going to pool a bunch of money together from regular rich people and buy an apartment or commercial real estate or something like that, right? So multifamily housing, that sort of thing. and they interview this woman, Lynn Naith was growing tired of the meager gains from her family's retirement account. In late 2021, she invested $200,000 with a company that was making 30% returns by buying the hottest ticket in global real estate U.S. apartments. Now she says most of that money is gone. She's a business school graduate who invested earnings from her husband's dentistry practice,

and the personal loss is a calamity. So they show this chart here, like how retail investors loss and they basically what it boils down to is tons of leverage the apartment like they overbuilt the apartment so it goes down a little bit and all the equities wiped out because they just levered it up so obviously if they're showing 30% returns on these previous deals it was a ton of leverage that made it happen not any smart investing or whatever so she says so some of these you know things blew up so she says I feel guilty with my own stupidity and then they end the the end the story saying she's not watching her portfolio for more trouble.

She said she's invested more of her husband's 401k in additional million dollars with other real estate syndicators. Oh boy. Didn't learn our lesson. So here's my thinking about getting rich fast. Like since 2009, the S&P's up 14 in change per year. Same thing over the last five years.

We're talking like 14% returns. I just can't imagine living through one of the greatest stock bull markets in history in thinking, nah, that's not good. enough. I need more. I guess that's just what happens in bull markets. And they say the reason that they're behind is because they put four kids through medical school or something, which just I can't even imagine. But I guess my one rule of thumb for avoiding big investment stakes is like if it sounds too good to be true, it is. Like someone's promising 30% returns. There's

something wrong there. Yeah. Right. Yeah. If 30% returns can actually be had, it wouldn't be going to you. No offense. Whoever you are. Yes. Right. But I think if you're someone who has a little bit, a little bit of money, you think like, well, it's just us handful of millionaires who are doing this. There has to be this, like, secret side door for us. Sure, not everyone else can access it, but we can. Right. But yeah. And they interviewed one of the guys who actually was part of the deal, and he said, listen, this was a perfect storm, blah, blah, but it's, it would be weird telling people, I lost all of my money in real estate during one of the biggest real estate booms in history. Tough.

It's possible. Tough soon. All right. Options activities, going crazy. Yeah, the Wall Street Journal had a piece on the DGEN's, which I guess is like a loving phrase now. Not, it's, I don't know, it's not a put down anymore. No. But remember in the pandemic, people thought, well, you can't gamble on sports anymore because there's no sports going on right now, which I still can't believe was a thing that happened, that just sports. Remember sports just stopped completely? How long was it? I don't know. Six months or so. We just literally had no sports. I feel like I've blocked a lot of that out of my memory. But the thinking was, well, people are messing around in Robin Hood and they're trading options because there's nothing else to do and they're bored and they're sitting on their couch at home. But Wall Street Journal shows

average day options volume and the percentage, which is just continued to skyrocket, and the percentage of U.S. trading stemming from penny stocks, which went from less than 2% in 2016 to 15% now. Wow. So this stuff is just not going away. I think I was pretty right about this. I was of the opinion that people don't get unaddicted. And I said that whatever they're trading, if it stops working, they'll find something else. And sure enough, that's what happened. And the bear, the, the, the, the, the market wiped this out, would wipe this behavior out. Nope. Because so much of this stuff, crypto and growth stocks, growth tech stocks, we had stuff fall 70, 80, 90% in cases. And it must have been like, okay, that's it. It's gone.

And it's not. Nope, not gone. Addiction. Yeah. I think the ease of access is part of it, too. Well, it's the phone. It's so damn easy. Yeah. It's wipe up. All right, we got an email about Costco. Kirkland brand, we're talking about inflation now. Kirkland brand flushable wipes are on sale at Costco. I've been coming to Costco at least twice a month for the past five years. And I don't think flushable wipes have been on sale more than twice and five years. All of the prices for everything are coming down. And it's very clear the show is not over, but it is ending.

That's a person who has a budget right there. Another chart from Yardini corroborating that small business planning to raise prices leads CPI by six months. So this chart shows the small business survey, Are they planning on raising prices? And that is going down in the right direction. Rolling over hard, huh? Rolling over hard.

So another feather in the cap of people who say that peak inflation is behind us. That's a pretty good chart. No one else is behind us. Insane car prices. Bad for me. Good for you. West Lutz. Worst trade of your life, that Audi.

Worst trade in my life. This is an owner of a Dodge dealership in Michigan. Oh, Ben, right in your backyard. Had several Dodge challengers and charges that were eligible for $11,000 discounts. Do we still make the Dodge Stratus? Do you think that Will Ferrell put that out of business? Dodge Stratus. What is it, Dodge Stratus?

It's like a little sedan. But I feel like Wilfarrell single-handedly put the Dodge Stratus out of business. Why? What do you do? I drive a Dodge Stratus. You remember that one? What's it from? SNL.

Okay, no, I don't. But. They're all fighting at the dinner table. and okay, I'll send it to you. Last night, I had trouble sleeping, so I put the tube on, try and knock me out. I turned on a movie from the early 2000s called Kicking and Screaming with Will Ferrell

and Robert DuVall that I've never seen. Not great, right? Horrendous. Holy shit. The premise sounded great. It's a good premise. He is a dad who coaches little kid's soccer, right? Yeah.

stunning. I'm at a loss of words. Just really bad. Really, really bad. All right. Anyway, back to the car dealership quote guy. He said it seems like we may be headed back towards incentives and over production. He said it may not be good for me or for the manufacturer, but it sure is good for the consumer. And in the article, they said, among the most heavily discounted cars are electric vehicles. So the next chart from Sherwood shows that Tesla produced 47,000. more cars than it delivered in Q1, which is, goes back to 2019, by far and away a record. Not great. And the stock looks like crap to boot. So I saw one of the cyber trucks in the wild the other day at the grocery store. So did I. Horrendous looking, right? I mean, it's just, it's, it's awful.

But I almost, here's a thing. And I saw a funny tweet about it saying that, like, there's only been 3,000 sold. And it's like, if you see one in your town, you know that that's like the biggest dip shit in your town. who's driving it. Yeah. Which I feel bad. But so here's, here's my competing thoughts on this.

Like it obviously, it looks awful. It's just terrible looking. Just like you see it and you want to laugh. But you know how they always have those, the car, like the car shows where it's like, here's the futuristic version of this car.

And then they never produced them. They finally produced one of them. So actually, even though it looks horrendous, I give them credit for actually producing the, like, the futuristic looking car, even though it looks like something people in the 90s thought a car should look like in the 2020s.

Yeah. So, like, they went for it. Like, I gave them credit for these going for it. I don't love to judge people by their cars, but let's be honest. I kind of do. So what does that say about you if you're driving, and I hope none of our listeners are driving a cyber truck. You might be a lovely person, but it says something.

I'm not sure it's a great thing. I'm a tech person with zero self-awareness. I'm extremely insecure. Look at my car. I don't know. You're going against the grain if you're buying one, but hey, more power to you. Drive what you want. If it makes you happy, just like you when you get your Porsche in a couple of years.

Lance Lambert tweeted. I'm not getting a Porsche. That's not a thing. But if you're going to get your midlife crisis car, a Porsche is... I'm too young. Stop saying that. You've been going through midlife crisis for four years. If, if you, but here's the thing, a Porsche is your safest bet.

Like, I don't think people who drive Porsches get made fun of. If out of all of those cars that if you're going to be one of those guys, a Porsche is your safest bet. That is the, right? That's a T-bill of midlife crisis cars. When I, I saw another Porsche this week, and I thought what I always thought, that's a great-looking car. Percentage of people who are bald who drive Porsche's.

It's got to be a high percentage. How much? Yeah, probably. That's fair. How much do you think a Porsche costs, like, what's a monthly payment to Porsche. I have no idea. Is it $3 grand? Is it $5 grand? I would guess five and up. Five is like the baseline probably, don't you think? When you put it, when you put it that way, it's like, yeah, a mortgage payment or a Porsche. It's tough choice. Okay. Speaking of mortgage payments,

Lance Lambert tweeted a 7% mortgage in 2024 is like a 15% rate in 1982. When accounted for U.S. home prices, home insurance incomes, property taxes, and a 10% down payment, housing affordability in 2024, similar to 1982. And I know we're beating this dead horse, but this is I'm not sure if national crisis is too strong of a word, but it's fucking bad. It's really bad. For first time, home buyers. I hate to keep pounding this drum, but it's been this way in other countries for years. Like, we're probably going to get worse. Like, if you, Canada, France, all these Italy, all these other countries are worse than we are. All right, so what? And I wish I had an easy, easy fix. My dad was talking about it this weekend. He goes, is there any fix to the real estate market that you can see? And I said, if they build a million homes a year for the next 10 years, that, that'll probably do it, which is, I guess, just never going to happen because we don't care, I suppose. So my point is, unfortunately, it's not going to get better. That's the only fix I can see. And so this is from Bloomberg. They say the cost of homeownership jumped 26% since the pandemic. And

Now they're looking at taxes, insurance, energy, maintenance, and they say this number went up to a total of over $18,000, which is about $1,500 a month. And they estimated it at like 2% of the value of the home. And a lot of it is, they say maintenance is the biggest piece just because costs of everything have gone up to keep your house in line. It's too expensive. Does that seem high to you? They showed across different states saying that it's obviously higher in certain areas. More people have to shop around for insurance like me. They need to get a broker.

But yeah, but I think this is, I've always heard one to two percent value of the home for ancillary costs. This is the thing that people never take into account when they talk about home. Well, what's baked into that? Maintenance, taxes, insurance, utility. I'm just trying to think in my house. 2% sounds, does that sound? It seems high to me. Oh, does it?

Our taxes, my taxes in Michigan are, my taxes and insurance are relatively low compared to the rest of the country, I would imagine. Yeah, not mine. Yours are probably higher. Oh, yeah, yeah, mine's definitely, mine's definitely higher than that. I would have to add them up. Okay, so you talked about how, what do they say, this is 1982 levels? today is like 1982, there was this guy who wrote an op-ed in the L.A. Times about California, homelessness, and like the housing crisis there. He says in 1981 at 24, about my first house at a

price of 70 grand, it cost less than three times my salary, which is roughly median at the time. If adjusted for inflation, the homes value would be $218,000 for decades later. Instead, the house is $580,000. We talked about this a little in Charleston when we were walking around, because they were telling us the values of some of the homes there, and it was just an ungodified. oddly sum of money for a lot of those to live in a nice place. I do feel like a light switch was hit at some point where people realized, oh, maybe real estate in nice areas should be more expensive, or there are more people are flocking to these areas and buying them up.

So is the take that real estate has always been undervalued? I think you could probably say in the 80s and 90s was undervalued, but it probably deserved to be because let's be honest, the houses back then were not very nice. Okay, counterpoint. How can we say that real estate was undervalued when it had one of the biggest crashes in history? Okay, well, I think we can say in the 2010s, the real estate was historically undervalued. How about that? Fine. Based on demographics. And it's, this is the thing. It's not, I think the 2030s could offer at least a slowdown in this stuff. I'm not necessarily predicting a crash, but there's going to be some houses hitting the market from boomers dying off. I don't know how that it will impact prices. the coldest hot take I've ever heard. What do you mean?

Boomers will die and some of them, some of the houses will at the market. It's true. 70 million boomers, they're... Yeah, no, of course it's true. Their time, undefeated. All right, this is interesting on private markets. It was mentioned in the podcast

that if these private credit deals were public, they'd be down 60%. I don't think we'd necessarily said they'd be down 60%. We said some of them would be down more than they would be in certain instances. We're not like predicting private credit should crash. No, I'm not.

However, there are public BDCs holding very similar deals. BXSL has a 30% position with B-CRED, and these trade in a healthy way. This perplexes me to no end. What is your opinion on this paradox? This person is basically saying, like, why aren't these BDCs down more? I don't think we're even saying, like, a reckoning is here for private credit yet. We're just saying that, like, when the reckoning comes, you won't see markdowns on the private stuff like you would if it were public. Why are you saying when the reckoning comes?

Do you think there's going to be a reckoning? Oh, I don't know. there has to be. There's a reckoning and everything. Okay. I don't know. Anytime money comes in to something like this, there has to be a reckoning, right?

No? I don't know there has to be. Okay. Well, we recorded a podcast yesterday that's coming out next week, I think, all about private credit for talk your book. So I think we go through everything.

All right, I have a bone. Well, to answer this person's question, I honestly don't know enough to answer this question. Yeah, and I honestly don't follow the BDCs either. But I thought it was a legitimate question. I've a bone to pick with colleague of ours. Nick McJuliet, dollars in data, is maximizing credit card rewards worth it?

And he kind of makes the point, which I think a lot of personal finance people make, like, just the cost-benefit analysis, like, is this worth my time and energy? Right? Nick says, like, you know, pick a card that pays you back two or three percent and get out of your life. And don't do the game

where you're constantly looking for stuff. And I don't know. I still think it's worth it every once in a while to play this game. I probably play it once or twice a year, maybe. What do you mean? What do you mean? How do you play it? I look for big sign-up bonuses. If I'm going to be spending money on something, hey, we're buying some new furniture or something. Like, I know I'm going to hit that minimum threshold.

I'm going to, I'm okay doing the sign-up bonuses. I mean, I don't know. I think about it. You get upgraded status for flights. Like, I got a Delta card and I got enough miles for spending, so it took me from silver to gold or whatever it is. So you get upgraded status. You get more miles for your, you get I think with my Delta card, I get one free airline ticket a year for companion fare. Free hotel stays with a Marriott card. I think we've basically paid for two-thirds of trips to Marco Island at the JW with our Marriott card a few years ago. Probably doesn't do it anymore because it's so much more expensive now.

But we probably paid for two just through sign-up bonuses alone. You get cash back. This is the big one for people. You get better credit score if you have more credit taken out. So I think there are, and for me, we're talking tens of thousands of dollars over the years. in benefits and cashback and I think it is worth it for people and I'm not one of these people

who will go to the websites that like how do you use your miles better to find this flight or that flight but I think I haven't spent a lot of time on this and it still has gotten made me tens of thousands of dollars over the years yeah no I'm with you

I'm not a hacker I actually did listen to Chris Hutchins' podcast all the hacks with somebody who was an expert on juicing the miles and I don't go that far and I thought it was interesting And there is, they get a lot of value out of it, but they do put in the work. I don't put in the work, but even just having the Sapphire Reserve, I can't tell you how

many free flights I've got in over the years. And if you're going to be spending the money in a credit card, you might as well get the rewards. Yeah, and you get the, I get the TSA precheck paid for. I get the clear paid for. I don't know. I get the Walmart plus paid for. You pay the, whatever, 500 bucks for the annual fee. and it probably, a lot of that stuff washes out.

But I think it's worth it. Well, you know what else? I get a lot of joy from, even if it's an illusion that you're paying for it in hidden fees, I still get that what you call psychic income. Is that psychic income? I think so. Okay. Well, it's like, it's one of those things where you feel like you're taking advantage

of Wall Street for one, so the financial firms. It's like, listen, they're paying me to do this. Yeah. All right, Ben, I want to ask your take on this. Okay. I got an email. We got an email from a young person in the industry. I think there's CFP, asked for career advice, and I told this person to call me, which is

something that I do frequently. Give them my phone number. This is on Saturday at 10 of the morning. Now, if I was in the, and then I emailed that person back at 10 o'clock on Saturday. If I was in this person's shoes, I would respond right away, oh, my God, thank you so much. I'm excited to talk to you. Right, because we're always hiring. We always have a stable of people that we're talking to.

Even if there's not a fit today, you never know, right? It's a small industry and whatever, whatever. Always looking for good people. The person didn't get back to me until Monday at 3. Now, I'm going to talk to this person, but I'm much less enthusiastic than I was when I got the email. So I'm already going in glass half full. So it's just a PSA. Don't do this.

Am I wrong? So you wanted him to write you back right away? This person's a kid, reaching out to somebody that they respect about, and this person, I gave him my phone number and I said, call me any time. And it took him two, two and a half days to respond. Seems weird. What if he got bad advice from his friends? Remember in Swingers when they debate when Mikey should call the girl back? And they say like, no, no, no.

You call her in like three days. And then Sue and Trent say, actually, we call him back in four days or whatever. Maybe they got bad intel from someone who said, like, I don't want to seem too excited. Should have him back right away? And his friend said, no, no, no, you can't do that. He'll be way too. That's clever, but I just don't buy it. True.

But right, like there could have been a world where this person email me back. We had a great call. and I offered him a job. Now, I mean, unless he blows me away, which I'm guessing he's not going to. I'm already out. I think we can say one of Michael Battenek's biggest areas of pet peeves is email etiquette. You're a big email etiquette guy for timing and when to respond and calls. It goes beyond just email.

I'm a life etiquette guy. Do the right thing. Yeah. I'm not saying I always do the right thing. I make plenty of mistakes. But in this situation, it's just very easy to just respond. I would try to give this kid the benefit out and say maybe some people just don't check the email very often.

But if it's a young kid, they're checking it all the time. Come on. Come on. Recommendations. Yes, I did watch another Glenn Powell movie on the way down to Charleston. It's not even a good movie. Like, it's a good airplane movie. Is this your third time watching it?

Second time, I think. I don't know. I also watched a league of their own on the way home. I couldn't find anything else. Just Tom Hanks just cooking. Can I tell you something? I don't think I've ever seen it in fall. Really? Okay.

It aged pretty well. And man, Gina Davis was so good. Whatever happened to her? She was amazing. She was so good. Favorite Gina Davis role? You know what's an underrated one? A Long Kiss Good Night with Samuel Jackson.

Love that one. That's what I was going to say. Were you? That's a good movie. All right. So I watched Hitman with Glenn Powell. And... Did you watch it with Courtney?

No, but she got mad to me because I cheated on her. I watched it by myself. She wasn't, she, whatever. Kids were, we had busy stuff, and she went, but early, I stayed up and watched it. What genre, what genre is Hitman for you? Here's the thing. It's two different movies in one. The first half of the movie is a comedy.

The second half is like a, almost like a noirs. I'm trying to explain, like, it's like a- Rom-com. It's, I would call it a rom-thriller. Yeah, but it's, it is two different, like the first 45 minutes, you're kind of like, what's going on here? Then the second half, the movie completely flips, and it's a totally different movie. Now, if you wanted to, you could depict some of the parts.

parts of the plot are absurd. I really, really liked this movie. I really, it's just a fun movie. It felt like a little bit of throwback. I thought it was great. I agree. It was, it was, it was great. So, I was thinking, Glenn Powell is our only male movie star under 40 years old. That's not true. Like movie star, not actor, like movie star. So Shalame is an actor? Shalmay is an, he's not a movie star. He's an actor. Okay. You could say Gosling. Gossin's like, he, but Glenn Powell is like our own, I mean, because all the other actors coming up are British or, you know, they're... So, he's the only American movie

Star Under 40? He's like our only chance for, like, a poor man's Tom Cruise. Like, I think Glenn Powell could be a poor man's Tom Cruise. Yeah, he's good. And you think you could see Tom Cruise playing that part that he played? So I like this movie so much. I read the... So the movie was based on an article from 2000. You like this movie so much, you went to Glenn Powell's house. Yeah. So I read the story about the hitman...

So, you know, so the first half of the movie is based on a true story. Like, there really was a guy who did fake hitman calls for the police. And then all the stuff about him getting involved with one of them, that was like the embellishment. But this is interesting. So I read this story about it, and they interviewed this guy who sounds like just a total character. And it says, in the late 90s, fewer people were looking for a hitman, a phenomenon that Johnson, that's the guy's named Gary Johnson, attributed to the economy. When the economy is good as it was then, people don't get so frantic. But when it starts going bad, as it's doing now, and this is written in 2001 after the dot-com bubble blew up,

everybody gets a little bit crazier and starts thinking about knocking someone else off. Sure enough, in the past 12 months, his workload has returned to normal. So during a recession, more people would like to kill someone using a hitman than during a boom time. So right now, this is why murders are dropping probably because we're in boom times. Yeah. A lot of the motivation for taking out a hit is insurance money. Yes, that always seems to be the case. But did you get the part of the movie where they said, like, hitman aren't real?

Like, it's just a fabrication of movies. Is that true? Do you believe that? I don't know. Kind of. I kind of did too. When they said it, it's like, oh, yeah, that makes sense. I've never met a Hitman.

Yeah. If a Hitman did exist, do you think it'd be easy to find him? Craigslist? Yeah, I don't know. All right. What else do you got? Anything else? All right, on the airplane, I saw a great one.

Land of Bad, Russell Crow, who looks a little bit different than his gladiator at these. Let's just say that. That sounds like a straight-to-d-d-d-d-movie, if that was such a thing anymore. Land of Bad, I think it did. I mean, it was, it was good. 64% of on tomatoes. It's perfect. Oh, it's got one of the Hemsworth brothers in it?

That's my sweet spot. 64%. Oh, 94% from the audience. See? That's, that lines up perfectly. So here's a plot. How did Russell Crow get to the point where he's doing a movie with two of the Helmsworth brothers who aren't even the guy who plays Thor?

There was two of them in here? That's what it says. Liam Helmsworth? And Luke? Huh. I don't even know there was a more. more than one. All right, anyhow, Russell Crowe plays a drone operator, and he's communicating with a couple of badasses that get into trouble. It was good. Good airplane movie. Very good

airplane movie, in fact. I wouldn't watch it at home, but... Okay. A junkie action movie. So my son is addicted to junkie action movies. Do not show him this. Don't show him this because it's pretty violent. Oh, no. He watched this twice. Shut up. No, no, I'm sorry. No, this, you put in here. Under Paris. You said, this is the number one movie on Netflix. All right. So under Paris, before Hitman came out, was the number one movie on Paris. And I feel like I should take a victory lap here. Because let me read you the blurb of Rotten Tomatoes. To save Paris from a bloodbath, a grieving scientist is forced to face her tragic past when a giant shark appears in the Sen, which is a river in Paris. Did they not write this

exactly? If there was like a Michael AI movie writer, this would be the movie. So did you watch this? Of course I watched it. Awful. Terrible. Really bad. Just my son loved it. Did it? It was really bad.

But I will say, some of the shark kills were really good. Like some of the best shark attacks. He just kept being like, Dad, watch it. This guy gets eaten in half here in two pieces. Some really good shark attacks. But it was a horrendous thing. So my son is totally screwing up my Netflix algorithm. Every time he watches a junkie movie like this, he hits, I love it.

And so then he watched, you know what we watched last night? That was just, I didn't want to watch it because I never should have made. They did Independence Day 2. Never saw it, never will. Independence Day, about as bad as you'd think it would be. Just really, really, really bad. Oh, I can't imagine. So we were going through Robbins' grandmother's house sold.

So we're cleaning it out. She passed away. And there's just boxes and boxes. Robbins family keeps everything. So we're going through boxes. So I saw one box that said memorabilia on it. So I opened it up. And on top, I see man on the moon, like the, from the full newspaper from 1969, very nice, intact, perfectly.

So I'm like, oh, let me see what else is in here. And it's just like cards and envelopes and empty envelopes and empty cards literally that we're going to frame the man on the moon thing. You sent us a picture of it. That's an amazing keep right there. Yeah, I'm going to frame that. So as I'm going through the box, it's just, it's really truly the definition of all garbage. When people took vacations back in the day, they used to send postcards. Oh, yes.

Right? Like, hey, I'm in Bermuda. We got here yesterday and we're having so much fun. The weather is great seeing you when I get home. Like, that was the thing that people did. So there's a bunch of postcards in there? Oh, my God. Hundreds.

Okay. Happy Valentine's Day, Bubby. So wait, how did the sale of her house go? So she lives in an area that has turned very ordinary. Orthodox. And so, boom. Immediately. Immediately. Yeah, immediate. All right. All right, Ben. Do we have fun in Charleston sharing that coconut cake? Was that delicious? Not bad. Yeah, we did it fun. I tried to turn you on to espresso martinis. You wouldn't have it? No. Gross. Sorry. It's never going to happen. My wife likes those two. It's never

going to be me. All right. Send us an email. And if you do send us an email and Michael responds to you, hit reply back immediately. If I give you my phone number, say thank you. Animal Spirits at the compound news.com. See you next time.