Animal Spirits Podcast - And Then I Got Scammed (EP.207)

Episode Date: June 2, 2021

  Description: On this week's show we discuss the king of SPACs, how the internet broke people's brains, Guy Fieri, the promise of crypto, the history of money market funds, how the rent vs. buy dynamic has changed in a hot housing market, Mare of Easttown and more. Learn more about your ad choices. Visit megaphone.fm/adchoices

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is art recession proof. So check that one out too. See a disclaimer at masterworks.io slash disclaimer. 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 Holtz 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 Rit 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. There was a long piece in the New Yorker over the weekend about Chimoth Polyopatia. It was called the Pied Piper Spax. I just want to read one thing from that article. So Chimoth is in a room. I think he was pitching Virgin Galactic. One listener, an older gentleman, conservatively dressed, began interrupting Polyopatia to question both his track record and his projections. Polyopatia let the man spat off for a bit and then replied,

you're a complete fucking idiot. The older man looked as if someone had just punched him. Have you ever even looked at the prospectus? Did you even fucking Google me before you came in here? All the eyes in the room went wide. How lazy are you? Polyopatia said, I don't even want your fucking money. I think this profile was about what you would have expected from him.

He is a smart guy who is also extremely arrogant. That was the takeaway from this piece. And also extremely charismatic. Like when he is in a room, he just commands all of the attention and almost like hypnotizes his audience. So this was the juxtaposition of this with his op-ed is what they call chef's kiss. Also from the article, there was an interview on YouTube. Chamath complained, quote, in a traditional IPO, you can't show a forecast, and you can't talk about the future of how you want to do things.

So, for example, with the SPAC, you can. So in the first nine months of 2019, Virgin Galactic had collected only $3.3 million in revenue and had lost $138 million. Yet Chamoth SPAC predicted that shortly after closing the merger, the company would start sending people into space and that annual profits would hit a quarter billion dollars by 2023. Virgin failed to achieve essentially every projection set forth in Polyopatia's merger proposal. For example, the forecast of 2020 revenues was $31 million, but the company collected only $238,000. Just a bit outside, huh?

31 million, and they got $238,000. So the reason why this is very rich in irony is because Chimot had an op-ed at Bloomberg last week. The headline obviously captured people's attention because it's like the pot call in the kettle black. Spacks need more oversight and regulation. So I read the piece, and I thought it was actually fair. fairly reasonable. I didn't take umbrage with really much in here. However, he said, basically the market is signaling that there's too much shit coming out, that because SPACs are now trading underwater, that they're just letting any junk through the doors. And so Chimoth said,

the price action tells me we need more oversight and regulation. It is time to improve the regulations around the SPAC ecosystem with clear and rigorously enforced standards to push for high deal quality and appropriate investor protections. Yeah, agree. But the fact that what he was doing with Virgin, not even two years ago, and then writing this, alarm bells went awful over the place. Spacks are great because we can make up stuff about the future that's not going to happen, basically. You can make these projections that who cares, no one's going to hold you to him. It's also kind of ironic that he was there from the ground floor on Facebook, basically, and got their mobile strategy off and understands all that stuff. It kind of reminds me of Facebook saying

we need more regulation in social media. They want to pull the ladder up now that they're already at the top. It's the same thing he wants to do with specs, kind of. I don't know. Do you think it's possible in today's day and age to be a young person like this? And they said when he left Facebook, he made hundreds of millions of dollars on the IPO. He was wealthier beyond his dreams. Is it possible with so much of just a flashlight on people, this spotlight on people,

to not be completely consumed by it and become so arrogant and self-absorbed when you become famous like this. I feel like in the past so many money managers could just stay out of the public eye and it's impossible to do today. And I don't think it's possible no matter how you get famous to not become a little arrogant and like try to test things on social media. Like he seems like he's doing an A-B test on social media. Like he's at Facebook still. The stuff that he tries to do, he's very calculating about everything he does. You think that he's like flying off the handle. But I think he's testing people with this stuff and he's trying to do this. But for every Tramath and Elon, there's thousands of people doing it. I don't want to say the right way,

but not this way, that we're not seeing. You're never going to hear from the people that aren't making noise. Yeah, but I think that there's more, if you're successful today, you are making noise because you can, because of social media. And I'm just saying that that has changed the game in terms of money alone is not enough for most people anymore. You also have to be in the public eye and show how powerful you are and how charming you are or how arrogant you are. Like this stuff that he's doing it, these pitches, he's doing it as a show because he knows that it's going to get out and it's going to be his story. He's not like doing this flying up the handle. He's calculating how he does this. He also knows the audience better than anyone, given his time

at Facebook. I mean, when you heard him on Patrick's podcast, if you knew nothing about him, you would say, this guy's really relatable. He is polarizing to say the least. I think that like, you either love him or you hate him. Yeah, and they said that in the story. Okay. There's parts of him. I weirdly, as polarizing is, I don't really feel too. strongly one way or the other. It is interesting how much he is trying to make himself into the next Warren Buffett. He wants that label to stick. Very hard. His firm is called Social Capital, and the piece of the New Yorker was not very kind about the fact that he shut his fund down and 70 people lost their job or whatever, and he didn't really care, whatever, it's his money.

It's his firm he could do it every once, I guess. But in his shareholder letter this year that he just published, which is weird, is a 2020 letter that came out in June. Did you read it? I guess he was busy. I skimmed a little bit of it. But he's basically just making this comparison. He's trying to compare his first 10 years to what Buffett did at Berkshire and say like he's already better than Buffett. And I think he's trying to get that narrative a stick big time. You know what's interesting.

And we can nitpick all over the place. And Christopher Blumstrand sure did. We'll link to this thread in the show notes where he just absolutely eviscerate some of his numbers. But 1965 to 74 does seem like a weird cherry pick considering the numbers in 74 were not great. Well, that was the bottom of a bare market. too. There was a huge crash at the end of that. But Buffett started his fund in the 50s. Right. His first family office, basically. So partnership. Yeah. I don't know. But again, this guy started, like he understands he was on that Netflix documentary about how Facebook controls your

brain, basically. He knows what he's doing. He knows exactly what he's doing. Actually, watching Shemot in that documentary pissed me off. Right. Yeah. The fact that he's now blowing the whistle, it's like, dude, come on. The guy made hundreds of millions. You built the whistle. Yes. He figured out human nature and how Facebook could take advantage of that. Then he walked away with hundreds of billions of dollars. And now he says, oh, actually, Facebook is bad. So there does seem to be some, I guess, his whole income inequality, that seems to be why he's doing all this. At least according to him, we'll see whether or not that pans out. Okay. But again, this whole, I'm going to make myself a superstar because I've made a lot of money. That thing, I think, is just that ship has sailed and it's here to say. One anecdote in the story about income inequality that just stunk of bullshit was he was saying that Virgin Galactic was actually going to help income inequality with the super fast travel, which, by the way, he blew out of his shares. He's gone. Yeah, he sold. He was a bigger shareholder and now he's gone. So what?

Low income people are going to travel to space faster. That's going to help them? What? I know. Come on. All right. Acorns. Are they going public via SPAC?

What are they doing? Oh, yeah. Spack. By the way, did you see the news this morning? Crispy Cream is coming public? weren't they already a public company before? Then they went private and not public again. I'm not saying that history repeats or rhymes, but they came public in 2000. Okay. And they filed for Chapter 11 in 2005.

Every day, there's like 16 anecdotes that show this is the top. One of these is going to, it's going to happen. They were up 76% on their IPO day. And interestingly enough, even though they fizzled out, in the three years following their IPO, they were the most successful stock in that three year window. They're up like 550% or something like that. Oh, really? Wow. Their donuts are okay. I mean, I consider myself a donut kind of sort. Oh, what? You think? You're a big Christopher green guy? Huge. Okay. See, this is why your bagel takes don't resonate with me because you think

Krispy Cream are really good. They're just okay. They're like middle of the road. It's like McDonald's. It's like, yeah, it's okay. What type of donuts do you prefer? Oh, from like a bakery. I'm a bakery guy. I don't go to a chain like Dunkin or Krispy Cream. Come on. I don't like Dunkin' Donuts, but Krispy Kreme donuts. That's my jam. By the way, you know what the best donut in the world is? The Kronut. No, this is my dad joke. Two donuts. That's the best time, two. That's my order. All right. So acorns, they're relatively tiny, at least compared to, I guess, Robin Hood, not that the same thing. Well, $2.2 billion spec.

They're being taken public at it looks like. Okay. So I spoke to Chris like Kim from Bloomberg about this. Are the users of these companies going to support the stock? And my knee jerk reaction was, no, definitely not. Meaning if you're an acorns user, are you going to also buy the IPO or buy the stock. Yes. I don't want to say definitely not, if it works, then yeah, sure. But if it's not, they're not going to come in and, like, have any loyalty to Robin Hood. Robbenhood users, do they even like Robin Hood? It's like, same thing with Twitter. Some Twitter users hate Twitter. So I don't think they're going to show any loyalty to the stock if it's not working. I mean, Acorn, their whole plan is predicated around helping you save small amounts of money and

like leftover months of money. That doesn't seem like it's someone who's going to be an IPO buyer most of the time, right? Right. Dave. Wilson from Bloomberg showed a chart which anecdotally confirms what just watching the market has been fairly quiet. US equity volume reached the lowest level of the year on Monday. So it's been pretty quiet the past few days with the exception of the meme stocks. This is what's different about the internet age. You had GameStop and AMC and all these stocks have the huge run up that you see in a bubble and then the huge spike down. And you go, okay, this looks exactly like every bubble in history. And then they went sideways for a while, and now they're spiking again. That doesn't

happen. And it's kind of like Bitcoin. Bitcoin had the spike, and then the fall in 2017, and then it went nowhere for a few years. And then now it's back and makes 2017 look like nothing. So what do we call bubbles that burst and then reinflate two days later? What's the gum? Double bubble? This is from the Wall Street Journal. Short sellers who bet, and this is a few days old, so it's probably worse now. Short sellers who bet against GameStop Hertz and AMC have lost more than $8 billion this year shorting the stock. I mean, this is, if you're like someone who went to an Ivy League school, like you went to Wharton, got your MBA, and you have your CFA, and you've been doing discounted cash flow models your whole career at a hedge fund, and you're the smartest person there. Have you not just been punching yourself in the face for the last 18 months watching this stuff?

Okay, listen, GameStop is obvious. Here's the fair value, and here's the fair value for AMC, and then all these people on a Reddit message board come and take billions from you. This is an actual risk now for these hedge funds. Did you listen to Carson Block with Barry? No. What is his takeaway? That markets are broken. Okay.

Or as a short sale, you have to adapt. You can say markets are broken, but guess what? If there's 20 or 30 or 40 or 100% short interest in the stock, don't be in it. You can't be short a stock that has people wanting to make a squeeze on it. I agree. I get the frustration. Like, if you've dedicated your career to being a serious market observer, participate, analyzing these businesses, and then you just get blown up by the meme stocks. Okay.

Counterpoint. This stuff is not going away. We're in a new age of communication and internet and data access and people being able to move markets basically. Like, you have to adapt. I'm sorry. Like, you can't just sit there and be like, well, I'm going to change my percentage by 0.3% instead of 0.4%. And that's going to spit out the value. And like, those days are over, especially in the short term for stuff like this.

So I gave my Guy Fieri theory of the internet. I think I've been working on this for a while with you. I think I said this once in our podcast equipment got broken. We had to start over or something, so I saved it. I think people start liking something ironically, like Dogecoin or AMC and GameStop. And then you get these camps of people. So you have one on this side and one on this side. And they go at it.

And then the stuff we first started liking ironically, we end up like kind of, digging our heels in and then we accidentally really like it. So Guy Fierry, when he came out in the Food Network, he became wildly popular. But then he had like crazy hair and the sunglasses from like 1994 in the weird clothes. And he was easy to be like mock, like people mocked him easily. If you're a hipster, you don't like Guy Fieri. But then the backlash to that happened. And everyone's like, wait, wait, this guy's actually not bad. He likes what he does. He's all this food looks great. Guy Fierry is a man, Flavor Town. And it's like people like ironically liked Guy Fierry because everyone else already hated him. And then that irony actually turns into white. People actually

like him. And now like Guy Fierre is like a hero. I feel like that's what happens in the internet. Like these lines get blurred. I said the same thing happened with Steve Ney Smith and Joe Buck and some of these people. This is what's happening with like Dogecoin and AMC and GameStop where people like get into it because it's fun and it's a meme. And then the irony goes away. And then they're like, oh, we actually kind of like this actually. And then they push it to heights that it's wild. So I don't have a counter theory. So let's just go with your Guy Fieri theory. because it's really difficult to explain what's going on. Right.

I just think, I don't want to do that thing. Most of you can, like, craft a narrative, even if it's like kind of bullshit. But like, you're like, oh, yeah, yeah, that makes sense. Like, right now, like, what's the story here? What are people telling themselves this happening with GameStop and AMC? Here's the thing. The internet has broken our brains. Like, I don't want to do the whole, we were on the Savannah and there was tigers

chasing us, that whole thing that everyone does on every behavioral book and podcast. But the sheer amount of opinions and data and information, and pictures and what social media posts flying at us every day, we're not ready for this. And I think we've even become more ingrained. I don't want to turn this into a diet try, but you look at all the weird stuff happening now with people's behavior coming out of the pandemic. There's fights at airports and fans at NBA games throwing stuff and being nasty. And I think living on the internet for 15 months has screwed people's heads up even more.

Think about the insurrection thing on January 6th. They didn't really even want to do anything. They wanted to get pictures for social media. They didn't actually want to overturn the government. They wanted to have social media posts. I think that's where I think the internet has just broken a lot of people's brains. And I think some of this stuff is, and I would just say expect weird stuff in the markets to keep happening because the internet were just not ready for it. That's kind of where I stand.

I went back to the theater on Saturday night to see a quiet place too. How was it? How was it? How was the theater? Theater was good. Every other row was vacant. And so it is. That sounds lovely to me.

So, like, no one can sit by you? That's great. It was pretty great. Well, people could sit next to you, but whatever. So a quiet place is the perfect movie theater movie. It is so freaking tense. And I think the second was- So you, of course, went alone?

Yeah, of course. Okay. The second one was actually, I think, better than the first. Did you enjoy the first? I love the first one. That was one of my favorite movies of the last five or ten years, whenever it came out. Me too. The second one was even better.

They just killed it. So that's the type of movie that is about 2x better in the theater than at home. It's quiet often. And so there were some kids in the back, being kids. They were probably 13 years old. They wouldn't shut up. They were making noises, scary noises, whatever. And a good Samaritan next to me was like, got up.

And he was like, can you all shut the fuck up? I paid money for this movie. I was like, well, I'm glad he did it because I was getting kind of annoyed. Would you have said something if no one else did? No, never. Okay. No. No, I'm afraid of 13-year-olds.

So that was early in the movie. Then they shut up for the rest of the time. Okay. So they needed to be put in their place, huh? I don't know if that was a pandemic thing. I feel like 13-year-olds are going to be 13-year-olds regardless, but it was good to be back in the theater, that's for sure. Okay.

Counterpoint, whatever they charge, I would pay for right now if I could watch it at home. I would go to the theater for that one, but if they had it on demand, I would certainly buy it right now. I probably would have too, but boy, Mike, glad that I went to the theater, because that was one hell of a movie theater experience. I'm going to create, like, some sort of Daniel Kahneman bias for you in movies at the movie theater. Like, what's that bias, the movie theater bias or something? Yeah, well, but it's a real thing because at home, unless it's like gripping, like mayor of east time, which we'll get to later, is the first show in quite a while that I don't have my phone. And it's not because I want to pay attention. It's because the show is gripping and I'm not distracted. Same thing with in a movie. At home, unless the movie is really gripping, you're going to be on your phone. You're going to have the lights on. You're going to get whatever. In a movie, I just love that it's distraction free. That's like to me, that's the big thing. It's distraction free. You listen to every word. And of course, the same.

and the big screen. It's just, yeah, movies are way better than theater. I don't know. Pre-streaming days in high school and college, once a week, at least we'd go to the movie. I can still enjoy a movie at home. That's where I am. Call me an old man. I still get as much enjoyment watching at home as I do with a theater.

I don't believe you. That's, okay. I know you're saying that, but I'm just telling you, if you went to see a quiet place, too, like objectively, it's just better in the theater. Not every movie, but that movie. All right. I don't see it. All right.

Back to Market. So State Street did this interesting. piece where they break down where companies are spending their money. So over the last five years, M&A, 13%, R&D, 13%, dividends 19%, buybacks, 27%, Kappax, 28%. So this chart that this show of research and development, companies are spending money. There's like this whole thing about companies are buying back shares instead of putting it to productive use. That's nonsense. That's just not true. The whole point here is like this unappreciated business spending boom is a bullish indicator for the stock market. There's been more investment than meets the eye. I also think

all the shortages we're seeing, it could be a short-term negative, but a long-term positive if it gets more investment from some of these companies. And don't you think it's possible that, like we thought, okay, the roaring 20s this year. It sounds like we're still going to have relatively high economic growth this year, like six or seven percent, which is the highest has been in a long time. But don't you think all this shortage, stuff that is going to hopefully cause people to just lower their demand, is going to maybe extend this economic run for us? Like a lot of this, people can't buy cars and they can't buy houses and stuff right now because there's so much of a shortage. Doesn't that just extend those

purchases into the next year? And maybe this boom lasts longer. So maybe 2022 is the boom year. Yeah, like this year is going to be potentially stops and starts because of all this stuff. And then 2022, if these companies are able to get their supply chains back online, then that demand will come to fill it again. I don't know. Just a thought. Did you listen to Rosh and Patel with Tracy and Joe on Adlots talking about like what's going on over the weekend? Why are markets crashing Bitcoin markets? No. Is he following my 24-7 theory that them trading 24-7 is making the crashes we're weirder? Yeah. So it's kind of like a shoulder shrug. Like we're not really exactly sure what's going on. But one of the things that he was talking about was that like Western markets and

Eastern markets, they're different in the way that they treat Bitcoin or crypto currencies in general. So there's more speculation in the other markets or what? I'm just going to tell you to listen to the podcast, but it was interesting that I never really considered that that there's different people all playing in the same market at different times. All right, that makes sense. I can see that because it is such a global asset. So we've had a few people email us about having some issues with their crypto getting taken or scammed or some of these things. Do you think it's a good thing or a bad thing right now that it's hard to send people money to because I had to send you some money for something that you and I are investing in in the last week. And I needed to send you

$6,000. And I couldn't do it in one day. I had to do it in like a three day increment because I had a level of $2,000 to send you. Or you could pay $50 for a while or however much it costs. So instead of paying the money, I sent it to you over a course of a few days. I guess that's the whole blockchain solves this. Of course it does. Is the thing. But here's something I've been thinking about. And the block wrote a post about this, how total stable coin supply is now across the $100 billion mark. The tether thing, like, there's a lot of smoke out there. Yeah. But this is not real.

Okay. But hear me out here. This is, I'm preheating a take. It's still at 100 degrees. You remember in John Bogle's book, Stay the Course, he did like a history of himself and Vanguard. It was his last book. It was an amazing book.

Excellent. He wrote a chapter about the history of money market funds, which sounds awfully boring to someone who's not in finance. But to me, I found it fascinating because money markets basically saved Vanguard until they could convince enough people in the late 70s, early 80s that time period of no one still wanted to invest in index funds, that money markets really saved them because they were not a thing back then. And Vanguard became a huge player in the money market fund. And that saved them until enough people came in index funds. And money markets were really only created in like the

late 70s, early 80s. Now they're sort of ubiquitous as a cash equivalent. Could stable coins be that to crypto? Stable coins are the money market where whoever, figures this out the most and gets the most money in stable coins, ends up winning the crypto game in terms of they're the vanguard of it, because that is the boring thing that keeps them along until they can create other products where people to get into. Thoughts? Sure. Sure. Or are you looking at it from the people think stable coins aren't backed by enough dollars and it's all a big Ponzi scheme? That's the worry. Okay. So that's where you're going. Well, I don't know. So somebody sent this a video. I watched it and compelling, but I

can't prove or disprove it. Okay. I'm thinking of these things have gotten so huge in the chart in that, I mean, it's just like a straight line up in terms of the value of these things. And are those things going to be enough to get the ability to transfer money? It seems like the stable coins are coming as a way for people to speculate. It's being used as collateral. So Mark Rubenstein did this post. So Mark Rubenstein is a traditional finance guy, hedge fund bank analyst for his whole career. And then he wrote about his experience down the crypto rabbit hole. Read the highlighted part that you. sent to me. I thought this was pretty funny. He's on the phone talking with a customer rep.

And he said, Rob's the person who was talking to. Rob left me with a caution to be careful about being scammed. Ha. He doesn't know that I'm a financially literate professional investor with 25 plus years of trading and investing experience. I hung up and moved the funds across. And then I got scammed. What was he investing in? Shit coins, basically? I forget. What was the email that we got by the way, by the guy being scammed. It was a fishing scam. It was basically like, hey, Coinbase says log onto your account to make sure something is not wrong with your Bitcoin and he logged on.

And then the people had his loving credentials and stole all his Bitcoin. You wrote a book called Don't Fall for it. And we spoke about this. Like, this is just, there already are. Rule number one, if a company emails you to tell you, if it's a bank or Amazon or whoever, if they email you to tell you, your account has been compromised, click here to log on. Never click the link. Log on to the account yourself or just delete it.

because it's probably fake. So Mark Rubenssey was buying dye, which is a stable coin. And he said, which just echoed my sentiments perfectly. My only problem is that I'm not entirely clear what borrowers are doing with my die. Most of the activity on the platform and across Defi generally appears to revolve around speculation. Others are borrowing my coins so they can buy more coins. There's a great line. Speculation accompanies real world activity everywhere, but it rarely leads it. For now at least, the impact my new decentralized bank has on the real economy appears limited. So until they figure out how to handle title insurance, DeFi doesn't do much. But I don't know. Everybody's convinced that this is the future. Here was the line from Drucken Miller that someone

posted this weekend I thought was good. He basically said, whatever all the rich young people that graduate from Stanford put their money into, that's where I'm going. And they're all putting their money into this. And he goes, I don't know what it means, but it means if these rich, smart people are doing it, it's going to lead to something. That's the hope. But it is still a strategy that's based purely on hope and not on real-word applications yet. We spoke maybe on spaces. By the way, we do spaces every Wednesday at 4. And we said, like, are there any relatively old people that are actually bullish on crypto?

Maybe Cuban. Not that he's old, but he's probably close to 60. Every time we talk about it, I get an email from a boomer reader who says, like, I just don't get it. It's tulip bulbs. Tell me why I'm wrong. Well, and actually, Drucker Miller and Paul Tudor Jones, they're not spring chickens. So Carl Icon, definitely an octogenarian. he said that he's interested in getting into crypto in a big way, may eventually put more

than a billion dollars into an alternative currency. Here's a quote from him. Well, what's the value of a dollar? The only value of the dollar is because you can use it to pay taxes. I'm looking at the whole business and how I might get involved in it. So I don't know what he's doing, but there you go. By the way, do you remember when six years ago Carl Icon drew the picture of the Fed pushing a bus off of a cliff saying that BlackRock high yield fund was going to take down the market? Yes, I do remember that. And I wrote a post called, with all due respect, Mr. Icon. This is 2015. Yeah, I think it was a long time ago. And he said high yield is going to bring down the market. Yeah, he's like, this is the Rascati in plain sight. But this is the interesting thing about the

anti-fed people to me. So many of the people who have been anti-fed and wrong about the markets and wrong about Fed policy and what it means and the Fed is painted into a corner. There's nothing else they can do. A lot of those people have now gone from like being gold bugs because that hasn't worked to being crypto people. And it's really interesting to see that shift to be like, you know what, instead of bashing the Fed from this angle, I'm going to bash the Fed from this angle. And they're not really like true crypto believers. I think they're just more anti-fed people that are being embraced by crypto because of it. It is weird how a lot of the financial media, and I get why they do it, but just the nonstop obsession every single day with risk, with the big risk.

For individual investors, I feel like every single day they have to like constantly like fight away negativity. You know that Shaq Giff where he's like fighting away the headlines. It's just constant. And Druck and Miller was talking about it. Well, it's kind of funny he would talk about it because he's been warning about stuff to every speech too. But one of my favorite cartoons is the people on an airplane and the guy is yelling, we're all going to die. And it was like minor turbulence. And it was like what's his deal?

And it's like he's a financial media member or something, one of those. Yeah. I don't know. I think a lot of that is still stems from 08. And I think a lot of media feels like they missed the boat before that crash. And it was kind of like, that's not going to happen to me again. I think that's certainly a part of it. I think it's also like that sells, that clicks.

Like Drucker Miller warns or economist warns. It's the same thing with the weather channel. You're not going to watch it. Oh, it's 70 and Sunday, no clouds. Like they have to sort of scare people because if it bleeds, it leads. All right. Benjamin Applebaum did this thread on inflation. He wrote that great book, The Economist Hour, one of the better books I've read in the last few years.

I find the fixation on 1970s inflation puzzling for several reasons. Inflation really wasn't that high, certainly not by the standards of historically memorable inflation. Also, high inflation was good for a lot of people. Student loan debt disappeared. Homeownership spiked. I think a lot about this guy, quoted in the times in 1978 from his book. But Americans were losing patience with inflation.

People tended to see higher wages as just rewards and higher prices as theft. They dreamt of what their increased wages could have purchased if prices had just stayed the same. Terry McClam, a bread salesman from Raleigh, North Carolina. See, Ben, they found these people even 40 years ago. Terry McClam, I wonder what he's doing. Terry McClam, a bread salesman from Raleigh, North Carolina, told a reporter in 1978 that he had abandoned his dream of buying a home. He didn't seem to realize that his income had outstripped inflation by 14% over the previous five years. People hate the loss of purchasing power. It's that this whole, I don't know if it's a conspiracy mindset, but it's this whole erosion of dollar. They're stealing from

me, this is the end. That's that whole mentality. Probably the two things people hate the most realm is inflation and taxes. We've talked about working in the most management industry. You could make someone hundreds of thousands of dollars on an investment and they wouldn't be nearly as excited as if you saved them $1,000 in taxes. I think it falls under that same realm. So somebody emailed us. You say owning a house is a good thing in an environment of inflation. How is a house a bond? With higher inflation, home values would decrease as demand shrinks. Sure, and real returns home, whatever he said. But no, I think the point is a house is the opposite of a bond. If you're a bond holder, inflation is bad because fixed income is fixed. And every coupon payment

that you're getting is worth less and less and less. It's the exact same thing in opposite with a mortgage. Right. The bank is the bond owner in this case. Exactly. Your mortgage is fixed and it becomes relatively less and less and less over time. That's the point. Yeah, you're paying the same exact amount over time and that money is worth less. That's good to you. That's why a fixed rate mortgage is one of the best inflation hedges that there is, bar not. And by the way, somebody emailed us saying, I'm surprised that you guys are hating on real estate as an investment. Did we ever, I don't think we put that out there? I think we just said historically, the numbers show real estate doesn't grow much above

the rate of inflation. Yeah, I think maybe people tend to overstate what a good investment real estate is. But I'm not. No, obviously, real estate's been a great investment in recent years for sure. It's just that people look at gross returns without really thinking about the net. That's all. All right, there was an interesting article in the Washington Post that is that rents are falling for the rich and the rising at the lower end. So, for example, in Dallas, Fort Worth, rents for apartments at the top end were 1% cheaper in the last quarter of 2020 compared with the year earlier. In Chicago, they were down 7.6%. Meanwhile, rents for lower end apartments, older to lower quality structures with fewer amenities, have held steady or increased. So they said, what's going on?

Well, it's pretty simple. When the economic crisis hit, more people decided to move down the housing ladder to save money. There was already a shortage of affordable units, though. So this surge in demand for lower price point homes ended up bidding those rents higher, which is pretty rough. That makes sense. It also shows like if you were a young person in thinking about relocating to a city, Los Angeles, New York, Chicago, D.C., San Francisco, all the rents for higher in places are down 10, 15, 20% or whatever. This is your moment that lock in low rent before. I mean, it's probably already starting to end. But finally, for some of these places, if you're a young person, not a lot of money, you can potentially go rent in one of these big cities. So we got another listener email

sharing about what's going on in Phoenix. This is pretty wild. Why is Phoenix always the epicenter of this housing stuff? It was last time. I don't know. This is another double bubble, right? Because they were in the 2000s as well. For some perspective, we purchased our home in February 2016 for 215K, which was 10K under asking price. Good condition. This guy remodeled. About the very same his neighbor purchased his home a very small two-bedroom, 840 square feet for about 150K. Two weeks ago, he sold his home to Open Door for 282. So again, purchased for 150 in 2016, sold for 280 and 90% ROI in six years. That's not the crazy part.

Open Door sent in a cleaning crew, didn't update a thing, and had the nerve to list it for 335. Per a family who's a real estate agent, it received multiple offers, And it was under contract in two days. At what point does a stop? At what point does some type of regulation take place on these larger corporations, inflating prices, flip the coin, how long it will take for folks to realize, wow, that's ridiculous. I'm not paying 50K more for the same house that sold 15 days prior.

Who's going to be left holding the bag? Sure, maybe the company is a little bit, but more likely folks who just want a place to live. I guess holding the bag is, but that's kind of the thing with the real estate, why it's such a funky thing, because it's not like stocks where you're flipping them. Yeah, you might overpay, and obviously you can't overpay by a ton. but I don't know. I don't see what regulation does. If someone's willing to pay that money, it is what it is, unfortunately.

There's nothing you can do. By the way, this is back to Chmoth. Open Door is a SPAC company of this. Did you read Derek Thompson's take? On housing, yes. He interviewed Bill McBride. We've mentioned a number of times who's a housing expert in some that I track on this stuff. This was a very nice counterpoint to what we've been saying.

Not that it necessarily contradicts it, but my take has been like, I don't think this turns around. I don't think it's going to continue forever. I definitely do think that it will slow down and maybe we'll get a little bit of a pullback, but I don't think it's like a bubble that's going to pop. So should you buy today? Probably not if you can help it. Bill McBride was saying you should probably think about waiting a year at this point.

I think we're getting to the point where waiting makes sense. Here's the thing, though. Let's say you decide you don't want to wait because you're worried housing prices are going up. Let's say housing prices go up another 8 or 10% nationally over the next year. That'd be crazy, but not out of the wrong possibilities. Let's say in a year you wait and there's demand finally slows. and it's just a less stressful process because you don't have to deal with a bunch of people bidding you. So even if home prices are up, but the bidding wars are not there, maybe it makes sense.

I like how he ended it. So he talked about the end and he said, I think when you put it together, the odds that things are getting more normal in a year make a lot of sense. He said, I also want to add something else for couples. Relationships are more important than a house. But I think you can flip this the other way, too, where sometimes the relationship part is the reason for buying the house because you want to keep someone else happy that wants to buy in a house. And the spouse may say, I don't care how crazy the housing market is. I want a house now. And so I think you're probably getting a lot of that too. So I can see it going both ways. But I do think with the rent stuff falling, if you're someone who's renting and could potentially wait,

and I think renting is becoming more attractive by the day for people who are okay with it still. And not in need that they have to move right this instance. An executive of Toll Brothers said, we've never seen migration like this. The real estate company sent an earnest call, just shy of half the buyers are coming from out of state. And the hottest markets of Idaho, Texas, and Florida, when people leave a multi-million dollar house in, say, Los Angeles to plunk out a million dollars in a house that was worth $500,000 a year ago, they turned a merely frenzied housing market into a once in history, hair on fire, what the hell is happening, Bonanza?

So these people who are already used to paying high real estate prices are not going to other places. Unfortunately, for people who live there, it's like, you live in a desirable area, this is what is potentially going to happen. There's, again, nothing you do to stop this. I want to think that if I was in the position of trying to buy a house right now that I would wait, but there's no foma like real estate foma. Right. I agree. Yes. And especially if you're at that point in your life, you realize like, okay, we've done it. We've rented for a while. I'm ready to be in a house. I don't care. Let's make it happen. If it's an extra 30 grand, let's do it. Some people are just going to say that. Yeah. Getting back to the, if it bleeds, it leads, this headline from the Washington Journal, suddenly wealthy from markets, some millennials are stressed. Is this really a story?

Well, I mean... Yeah, so talk about basically... This is nothing but clicks. Pretty much. But I think there's something to the fact that... Don't you think some millennials are just going to be anxious about everything? They're anxious about the job market coming out. They're anxious about paying off student loans.

People are anxious. Now it's saying people have money. Now what are they going to do with it? And they're saying, like, this is my one chance. I don't want to mess it up. And I get that. But at a certain point, you just have to, like, be okay that things may work out great or they may not, but like if you're constantly worried about money. So this is this one from

market. You know my superpowers? Remember in, I'm drawing a blank, what was the Marvel show that was just on with vision? A Wanda Vision. You know the witch that like, there's like superheroes I can like suck in people's powers? Okay. My superpower is sucking people's anxiety. Like, if I'm around people that are like anxious, I absorb all that anxiety. And I don't think I'm like an anxious person myself, but when I'm around people that are anxious. You get anxious as well? Or you stem the tide is what you're saying? No, I absorb it all. Maybe both, actually. interesting. Okay. So here's another one from MarketWatch. They have these questions asking I'm 49. My wife is 34. We have four kids and $2.3 million saved. I own 300k a year, but lose a lot

of sleep worrying about tomorrow. And oh, by the way, this person also owns eight rental properties that spit out income on a monthly basis. Just like the British saying, oh, fuck off. Oh, session. Come on. They said they lose a lot of sleep worrying about tomorrow. So this is what I'm getting at, like the anxiety thing. Like, I understand no one's life is perfect and there's always something going to worry about, but like the Nick Murray from simple wealth, inevitable wealth, his line that always stuck with me is no matter how much you have, how much money you have, if you're still worry, you aren't wealthy. At a certain point, it's like, yes, you can still think through everything and pay attention to risk. But at a certain point, like, if you're not content, I don't care

if you have $30 million or whatever it is, you're not that rich if you can't enjoy it a little and just be like, okay, you know what? Things are probably going to work out for me. I don't know where the level is, but at some point of wealth, money becomes like a liability. where it just consumes you and your spending inflates bigly and you just can't stop worrying about it. Obviously, I have no idea where that is. So I guess it's different for everybody. It could be a million for some people, 10 million, 50 million for others. But getting back to the anxiety thing, are we making too big a deal out of this?

Is this social media? Do we see headlines like this? And then we inflate what's actually going on with society. It's very hard to really drill down to see what's happening. I do think part of it, there's been some stories written that millennials, like in 2008, saw their parents potentially lose their home. And they've seen, like, what a crash can do. And so they are thinking from a totally different mindset than baby boomers or Gen X because they've been through the ringer kind of.

They're like, listen, I finally got something I don't want to mess it up. So I get that. But it's like if you've gotten to the point where you've made some money in the market, it's like, you can't just worry about every little thing. You have to like actually enjoy it at some point, too. So Danville tweeted that the Knicks announced round two tickets, which is not looking very likely, will be sold exclusively to fans who are very valuable. vaccinated. Yeah, that was a kiss of death. Didn't they announce it after like game one or two? Thanks a lot, jerk. But is this going to be, like we spoke about this, probably pre-vaccine, was like once there is a vaccine, are people going to need to show it to get into places? Is this going

to be the thing? I hope so. At this point, if you haven't gotten it and a business does this to you, like, okay, it's on you. What about an airline saying like, you can't fly if you're not vaccinated? Yeah, I don't think that would ever fly. Do you? No pun intended. I don't know. That's just, Why not? Do you think it's a little late for that for an airline to do it? Yeah, probably. Like, if concerts and stuff doing this, like, if this is the push, like, they showed the Ohio data that they started doing a lottery and a bunch of people went out and got vaccinated.

If we have to do this last little push to get enough people there where we're, and I think we're already there. Well, what about if an airline said, this is ridiculous. Vaccinate people can only fly and three random people will get a free flight. Yeah. They have to do stuff like that? I am perfectly fine with it. Why do you think it wouldn't fly with airlines?

Would they receive backlash? Yeah, and they got bailed out, and I don't know, that's just my thinking. But don't you think that they said initially, like July 4th is going to be the weekend? Didn't you feel like Memorial Day was like, okay, this felt pretty normal? Well, the weather here sucked, but yeah. It seemed pretty back to me as far as I'm concerned. I want to get your take on this. You know the car engine to on off when you're out like a red light?

Yeah, it's very bizarre. Is that a scam? What does that do? I don't know. It saves you 10 cents of gas a year? What's even the point? I got my new car two months ago, I guess, a month ago. I don't remember. And they had it. I didn't realize that was a thing. And the guy explained

to him, like, is that really do something? And he's like, well, you can turn it off if you want. And I don't know. But it's very bizarre. Is it to save gas? It's gas. Remember back in the day, though, it used to be like turning your car on and off, wasted gas? Yes. I don't know. Yeah. I don't get it. Because you're at the stoplight and your car is totally silent. It's very bizarre. You got into green beer. You sent me a picture. What are you drinking? Was that Rolling Rock? I was drinking Rolling Rock because they were drinking at a mayor of Easton. And I was like, Oh, I haven't had that in a long time.

Wait, were they drinking Heinikins or Rolling Rock? They were drinking Rolling Rock and Yengling, which is the East Coast beer from Philadelphia area. As much as people hate IPAs, or some people, that's my feeling on green beer. Okay, and I get that. It's like bitter, kind of. If you have a Rolling Rock or Estella that is ice cold at some point, like, I don't know why it just, it looked good to me. And I had one. And that's just like that stuff I drank in high school.

But I've gotten to the point where I sometimes make fun of IPA people because it just, it doesn't make sense to me. I don't get it. But like, I'm an IPA person. Well, what about an 8.3% beer doesn't make sense to you. It's like, they're too happy to me, but like, it's just I've gotten to the point in my life where trying to decipher someone else's taste in food or drinks or it's like, people have their own taste and they like what they like. There's no point in trying to talk them down anymore. People like what they like. Get over it. I like Rolling Rock. Some people don't. Yeah, not for me. David Chowell tweeted something that was like the thinking man, like the tapping head thing. Everybody and people like myself are trying to like look for concrete use cases with like the whole D-5. I think I just see it as a tool for more speculation in a way to lend and stake and make money. And Shalda tweeted, speculation thrives in ambiguity and hope, not concrete use cases. I thought that's a pretty good take. This is why every innovation in history has led to a bubble because people have the railroads

and automobiles and new financial products and the internet. This is why it always ends in a bubble because people are more excited about what could be, not what is. Well said. All right. I forget who tweeted this. but a picture from 1983 where it shows the age

of different people this dude who's 35 I mean Ben that guy's younger than us Cliff Clavin I'm gonna be 40 this summer I look like I could be Cliff Clavin's son This is unbelievable

Why would you be so much older? I'm trying to think like if you change the hairstyle Would that have done it? I have no idea I told you this before like the pictures in my old fraternity house in college

from the 70s they all looked like they were 50 years old What was it just because everyone smoked and just ate whatever they wanted and didn't take care of themselves? Why did people look so old in the past and they look so young now? Inflation? I guess. I don't know. I still look like I'm 17, so you tell me.

Let's do some listener questions. I've been most interested in your latest habit of pointing out the questions that you're getting are only questions during a bull market. We got one this weekend. Somebody said, hey, I'm saving for a house. I've got 100 grand. What do you think about putting in a block five? get 8.5%. Absolutely not. Absolutely not. And it's not, I mean, listen, 8.5%. Do you think that's like risk free? 8.5%? You have to assume that there is a certain level of risk. First and foremost,

it's not FDIC insured. You cannot speculate with your housing money. You just can't do it. And so this question that we keep getting is certainly a feature of like a bull market type question. For sure. Wanting more. And especially if it's something you're going to want to in, I don't know, one, two, three years maybe, how much more are you actually going to earn that's going to be worthwhile to you in something like that? That's the way that I look at it, like the upside versus downside. I just, I don't know. I was wondering what your thoughts are on the future of the financial advice portfolio management business, 21 years old, finishing my bachelor's in finance and I have an opportunity to take over someone's

book of business, $150 million in a couple of years. How would you guys think about it? So this person's from Canada. I don't know what the wealth management business is like in Canada. But here in these United States, this is the promise that every senior advisor makes to their junior partner, and it never, ever happens. It never happens. We're going to retire in a few years because it's not like this is backbreaking work, especially if you can hire a junior person to take it over for you. You're probably going to be servicing those clients and they're still going to be earning all the money. That's probably what would happen. A, they're not going to retire. B, let's just say that they do. You're taking

over a book of business where the average age is way older than you. So they're probably not going to want to work with you. You're probably not going to want to work with them. It's just a mess. You're probably going to end up having to build your own book of business eventually. That's probably how to end. That's what I would think. Maybe instead of being negative, we could turn this into a positive. Maybe get in there and try and make relationships with these people and or their children. Maybe that's an idea. Yep. Okay. Recommendations. I thought Mayor of East Town finale was awesome. actually excited about it for like a few days in advance thinking about it. We were not at home. We were away for the weekend. So we didn't have our cable. This is another reason why I'm never

cutting my cable. And all we had was access to the internet. HBO Max was down. It crashed. And everyone was tweeting about it. I said HBO Max is the Robin Hood of streaming services. It goes down every time you need it. That's a good one. How good was mayor? Like, what a fantastic show. It's the first show in a while where, again, I said this earlier. I wasn't on my phone not because I was like, okay, I'm going to not, I just, I only wanted to watch a show from Sunday to Sunday. I couldn't wait for the finale. This is why the week to week format, if it's a good show, it works so well. The anticipation building was, it was just great. This is the one that was better in a week to week than if you just binge the whole thing

straight through. If you binge it, you would have been like, yeah, good show. Yeah, but it was Kate Winsett is awesome. We talked about her. But that show, like, I was excited for it and they, we don't do any spoilers or anything, but absolutely delivered on the finale. And you're kind of waiting and waiting, and you're going, something else is coming. Something else is coming. And it didn't. You're like, oh, okay. Yeah, it was great.

New podcast I started on the ringer called Flying Coach. It's with Peter Schrager, who's on like this. Is that about the Mighty Ducks? No. Sean McVeigh is a Rams coach, and he's good buddies with Peter Schrager, who's on this NFL, Good Morning Show on the NFL Network. And they just talk, and it's Sean McVeigh, became the Rams coach at age 30, which is wild.

And he's kind of telling stories and opening up about it. And they had these two other coaches, the coach from Green Bay and the new Jets coach on. And they're all buddies, all young. guys who came in at coaches the younger and very open about like the coaching process and dealing with fans and the expectations. It's very good. I don't know how the coach from Greenback didn't lose the locker room after last year's debacle. He's best friends with McVane. They kind of talked about that. Yeah. Anyway, so I watched the Friends reunion on HBO Mac. I can't see you being a Friends Watcher. I was. You were? Okay. That's surprising. So you watch Friends

when I, okay, here's one of the reasons I hate the Internet. All the sudden, all week, because of the Friends reunion, which did you watch the reunion or not? Half of it. I fell asleep. Okay. Some parts of it were kind of cringe, but it was really good. I liked it. I mean, Friends is the kind of thing where it was on for 10 seasons. Like the first four or five seasons were, I thought, amazing. But then at the last five were kind of give or take. I hated the end with Joey and Rachel. That was awful. It kind of overstayed as well. I mean, think about it. They used to do like 22 episodes a year or something, like so many more episodes than they do on shows today. What's your take? So then all of a sudden, these people had to have these arguments about Friends versus Seinfeld and which one is better. And it's like, I liked Friends and I like Seinfeld. We don't have to.

crown the champion of everything. And so people had to, like, prove how cool they were to say how they never liked Friends anyway. Did this, yeah, Friends was overrated? Yes, people are saying Friends is overrated and like 50 million people watch that show back in the day or something. That was a huge show. Friends was a great show at the time.

If it aired today, would it be a successful? No, but it was a great 90 show. It was. All right, one more. I caught a long came Polly this weekend. It was on. This is my thing. Love that movie.

I've been going on for a while about more comedy actors getting. Philip Seymour Hoffman deserved a best supporting actor for that. Make it rain? He was amazing in that movie. How about when Alec Baldwin took the grease off his pizza? Yes. Oh, no, it was Philip Seymour Hoppin to do that, not on Elk Baldwin. Alec Baldwin was in the bantam scene when he hit him on the ass when he was at the year at all.

He touches his ear. Yeah. All right, that's all I got. I finished Premonition by Michael Lewis, which was more a story as it always is about the characters than it is the actual pandemic, although there are certainly some of that. But you saw his daughter died in a car crash over the weekend, which is obviously just beyond horrific and unimaginable. And my God. Do you think that feeling ever goes away of... Which feeling?

When you have kids of the thing in the pit of your stomach, like what if something really bad goes wrong? Like, I feel like I have that once a day at least. Just what if this one thing goes wrong with that. I don't know. I don't think that feeling ever goes away. Yeah, I don't even know what to say. Just unimaginable tragedy. All right, let's end on something positive.

Oh, this is also pretty good. When Bradstone wrote The Everything Store, which I didn't read, he wrote that in 2013. So let's say he started writing in 2011. I bet he never thought that eight years later he would be writing the sequel. Did you finish it? I'm still reading it. I'm about halfway done. Amazon Unbound.

There's so much in here. I mean, I know it's stating the obvious that Amazon has done a lot of things. It's a captain obvious, Captain Sherlock situation. Surprising how much they open the kimono for him, though. There's pretty in-depth knowledge of their inner workings and how things were made. And like, obviously, Bezos didn't open up to him, but a lot of people within Amazon. on did. Well, one anecdote that stood out, there's many, was, I forget what sort of they were talking about. But Bezos said to his deputy, like, you see this? And he goes, yeah, I'm on it.

Right. Yeah, that's good. What is this? Find out what they're doing. Build it, buy it, squash it. He's, like, very short to the point in, like, people take its direction and go with it. He does not sound like a fun person to work for. No, awful. It's great for us that we've reap the fruits of his labor and that company built. But, yeah, working there, I would not last. my personality would not make it in that setting. He would crush me like an ant. Okay. All right.

Animal Spiritspod at gmail.com. Thank you for listening. We'll see you next time.