Animal Spirits Podcast - Boomers vs. Millennials (EP.373)

Episode Date: August 14, 2024

On episode 373 of Animal Spirits, Michael Batnick and Ben Carlson discuss: a history of stock market flash crashes, the end of the travel boom, why the economy is finally softening, how to predict a recession, how many households actually live paycheck to paycheck, the coming refi/HELOC boom, stock pick loss aversion, movie theaters aren't dead yet, and much more! This episode is sponsored by YCharts and Fabric by Gerber Life. Get 20% off your initial YCharts Professional subscription when you start your free trial through Animal Spirits (new customers only). Sign up at: https://go.ycharts.com/animal-spirits 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

On today's Animal Spirits, Ben and I discuss the word of the week, softening. We get into how many people actually live paycheck to paycheck. We once and for all answer the question of those surveys that don't work. The age-old fight. Who had it worse? People love to complain boomers or millennials when it comes to the housing market. We also got a good breakdown on in the movie theaters. Michael is single-handedly keeping the movie theater business alive.

Hand up. Stay tuned. Today's Animal Spirits is brought to you by our friends at Y Charts. We teased a couple weeks ago, the 2024 election guy, from white charts. They had it all ready to go. Biden drops out of the race and they updated it. I don't know what that means, but they said they updated it. Historical performance, post-election in the U.S. stock market, market volatility trends before and after the election. How many times has it been a lame duck president? I mean, off the top of my head, I had no idea.

Yeah. Zero? Where there was a one and done? Oh, no, no. That's happened before. No, no, no. We're like, but you knew it was a one and done. Not running for re-election. Ford Ford Ford Gerald Ford He was only president

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Clients of Riddholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Annal Spirits with Michael and Ben. Is that a, is that a, it's not Tropical Bros. Is that, where is that? Is that Citrix? Where did you get that? No, this is just another, another brand. Just another brand.

I got to, I stopped getting for some breakfast today at a place across the street and they say, hey, nice shirt. Make me feel like I want to go on a vacation. That is a nice shirt. You got palm trees? Very nice. Thank you. As usual, good cop, bad cop. I'm light and airy, you're darkened, right?

Dark and stormy. Black is your thing. All right. The stock market is like little kids. This is my analogy for the week. You know how sometimes your kid, it's just, it's extremes. It's, you can have, your child can be a little angel and say the sweetest thing in the world and nuzzle up against you and, oh man, this is amazing.

And then 10 minutes later, they could turn into a completely different person. snap of fingers, you know, it's, all right, I'm going to be my youngest daughter, I'm going to be sassy now. I just decided. I'm going to be sassy. Or they wake up, they go to bed one person, they wake up a different person. Not bad. That's how little kids work. This is the stock market. It just, it all of a sudden decides sometimes to change its mind. I think that's what happened last week. I was thinking, though, I was cleaning out my office the other day. I'm pretty organized person, probably too organized sometimes. Like, I'm the kind of person who, right when I get home from vacation or traveling, I immediately unpack on that kind of person, which is probably a little,

I don't know if that's OCD or whatever it is, but I imagine you are not like that. Oh, you think? Last night, we had family over and somebody saw me loading the dishwasher and they said, what in the holy hell are you doing? I don't know. Someone saw that. I was throwing my large plates in the top drawer, like face down. They don't go that way. Okay. So I was cleaning out my office a little bit, getting rid of some of the clutter. And it came across his old life magazine from 1962. Someone had sent it to me a number of years ago, one of the blog readers said, hey, I think you get a kick out of this. And what went wrong in the wild stock market is the heading. Was that a Bay of Pigs? What happened? June 9, 1962. It was a flash crash in 1962.

Look at the returns here I post. So it was the S&P, Dow, whatever, was down almost six. 7% in a day in 1962. And you can see there's a lot of volatility around that. I've just put the daily charts in here in our dock. And I posted some of the pictures from back then. Wait, what caused this? All right. There was no

rhyme or reason. And so the whole heading is like the avalanche that went up and down. You can see they put a really cool chart in here going back to the Great Depression. And it was essentially you had this huge boom in the 1950s. And then all of a sudden things in the early 60s rolled over and they were

stumped. There was no good reason given. And they even talked in the article. I read it again about how people still really didn't quite know what happened, how the Great Depression crash was caused. Like, what was the kindling that sort of did this? And it was the same deal. It was like they had a flash crash and they didn't know what happened. And stocks, they were already down a little bit. I think they were down 10% or so. And then they really fell. And stocks ended up being down almost 30% from the highs that year. And John Brooks wrote about this in Business Adventures. You ever read some of the John Brooks books? Love this book.

Business Adventures is really good. It's just 12 different stories. The GoGo Years is good. Once in Golconda. Great. Yep. So I pulled this from the John Brooks, but he said the tape delay, which by 226 amounted to 55 minutes

meant that for the most part, the ticker was reporting the prices an hour before, which in many cases were anywhere from $1 to $10 a share higher than the current prices. It was almost impossible for a broker accepting a selling order to tell his customer

what the price he might get. So they were saying, this is back when they had the tickets, you know, and they show the guys running out of the tip. Like, at the end of the day, there was, for hours and hours, all the traders on the floor had to sort through these tickets and understand what was going on. No one knew. So I guess my point is, and again, there was no

discernible reason for this happening. There wasn't like a, this is, you know, there wasn't even a Bank of Japan raises, rates, 25 basis points kind of deal. I guess my point is now these things happen faster, but it's, this is, I think, just kind of who we are as a species. Does it, does the, does the Japan sell-off feel like a month ago, two months ago? It does, a little bit. It's last week. We're good. Where's the VIX at now?

20, no, 25, I think. Do you think, though, that... Oh, it's under 90, it's under 20. If we're looking for an excuse for that type of sell-off, and obviously, there's a million moving parts, but if we just went from, I'm making numbers up here, 20% chance of hard landing, if that's what it was before, and now the past few weeks, well, we're re-rating from 20% to 40% or whatever the number is. Does that actually make sense that we had this quick re-rating of,

all right, well, it kind of does, doesn't it? But it was a perfect storm. It was the yen, unwind, which is a thing. It was Buffett dumping half of his apple steak, which probably would have sent the stock down 8% regardless. It was, uh-oh, did the AI bubble just pop? Like that trade just got too crowded.

And it was a VIX at wherever the VIX was, 12. So it was the perfect storm, we were ripe for this sort of... It was like the Minsky moment kind of thing, right? Yeah. And then also, I'm sorry, one other monster factor was the weakening data. So it was all four of those things. You shake him up and boom, powder keg. All right.

Ned Davis has a good chart. After Vicks' SPX tends to rebound, retest, and re-rally. So they show all these huge spikes in the VIX. 1987, 2011, 2015, 2018, 2018, 2024. And they show the returns three weeks later, nine weeks later, I can't do the math, 126 days later, I don't know. That's 26 weeks. And the returns tend to be okay.

We're talking like, I don't know, 10% returns over the coming four months or so. We've gone straight up since the opening bell on Monday of last week. Do we roll over? We retest those lows? Perhaps, per chance? It does seem bizarre that you had such a huge spike in volatility, and we still never technically got a correction, a 10% correction on the S&P.

The Peketrov drawdown was 8.5% or something. It seems like there should be more, but I don't know. We've had plenty of volatility these past couple of years. Are you in the... We're out of the woods camp? I'm never in there. We're out of the woods camp.

I don't know. Good answer. answer. Yeah, I got nothing. I guess I'm in the people worry about more volatility by the election. Those will be the stories in the coming weeks. It's like, okay, prepare for election volatility, regardless of whether it's going to happen or not. Cam Harvey on LinkedIn says there's still time for a soft landing. How do you think LinkedIn gets these people to do the post directly to them? Do you think some people is just, that's like their chosen platform or what? Dalia does that? Dalia does it? So, wait, I don't understand.

Where are I with consensus? Is soft landing still there or what? I feel like... So here's Cam Harvey. I believe that he does a pro and con, like soft landing versus a hard landing, a case for each of them. And he says,

I believe the pro soft landing wins. However, there are risks. The main risk factor is the Fed. They have increased the probability of a hard landing. However, the odds, at least for now, favor the soft landing. And so I think one of the reasons

that everyone is so quick to predict a recession is because we just haven't had one in so long. You mentioned this couple weeks ago. How many months have we been in a recession in the past 15 years, it's two months. That's essentially carry the one. It's like 1% of the time, right?

Two months out of the past 180 months, we've been in a recession. And on average, since 1950 or 1945, we've been in one once every seven years. So it makes sense that people think, well, it's got to come eventually. But the point is that recessions don't die because of old, or expansions don't die because of old age. They have to be murdered essentially, right? Or hit by a bus. But the Fed could murder it.

that's the realization people are coming to is that that could that's the biggest risk right now is the Fed. I would still give the U.S. economy the benefit of the doubt, but I feel like, yeah, that the risk of a policy year has increased substantially in the past six weeks or so. Are we saying if they should have cut in July that by the time September was going to be too late? I just, unless you're saying, no, no, no, they should have cut in March. But if the market knows they're cutting, shouldn't that in and of itself do some of the legwork? In fact, it has. Look at the bond market.

The bond market is already cutting. But I think for consumers and such, there is something of a lag. And I think just getting the ball rolling, I think psychologically, for consumers, that's the big piece here. Well, we're hearing from all sorts of companies in the retail space that demand is definitely moderating. There's just like no if, sense or butts, especially on the lower end. We keep hearing that consistently. Yes. But does moderating mean a recession?

What if it's just moderating from unusually large consumer demand? That's the hard. I've got some more on that in a minute. But I put this together yesterday. So I'm in the camp that moderating does not necessarily have to mean a recession. No, I agree. Yeah. Like at all.

Like we might get one. But that's the hard thing is how do you know? What's the difference between normally? Yeah. No, the way that you predict a recession, I put this together yesterday. And I saw JP Morgan raises their odds of a recession. by 35%. And I thought, man, why didn't they just go five more percent? Because if you do that, you get to 40, that's the key. That's the sweet spot. If you say 20% chance for a recession,

no one believes you. If it happens, you can't say, no, no, no, one out of, you can't say that. If you say 80, that's way too high, 40 is perfect. How about if the headline said, J.P. Morgan lowers odds of no recession to 65%. That's true. No one does the inverse. But that's why 40 is perfect because you say, I gave it, it was close to 50-50. If it doesn't happen, you go, hey, 60% chance for positive alcohol. That's why 40% is a sweet spot for economists. Our chart kid Matt did this two-year yield minus the Fed funds rate. And a lot of people say the two-year leads the Fed funds rate, usually.

And he shows the spread between the two, blowing out to, this is going back to 2000, about as high as it's been. And it usually means if that spread is this wide, a cutting cycle is coming. So the two-year is saying, to your point, let's get after it. Come on. What are you waiting for? But, yeah, we know. All right. Good question from Adam on Twitter. How low does the Fed funds rate go if we have a hard landing, unemployment above 7% and a 30% drop in the S&P? Not that the Fed cares about the stock market. But I guess if there is a hard landing, it will be interesting to see, because I know some people say never again for 0% rates. And I wouldn't be in the camp that predicts that. But I don't know. I don't know how well. I don't know what the Fed's going to. If the Fed is slow to cut, but then they over overreact on the other side. I wouldn't rule it out, but yeah, I'd say 2%. I'd rule out 0%

absent something that is not even close to in the data right now, I guess 7% would be that. 0% seems highly unlikely. It's probably pretty, it's pretty high hurdle. I agree. Yeah, going from 4% to 7% unemployment is for a recession, as far as a recession goes, is not the end of the world. If it was double digit unemployment rate, maybe we could talk. But yeah, I think 2% would probably be about the floor for me. That makes sense. All right. So you mentioned the consumer softening.

Look at these three headlines I put in here. These are all from the last week. So the economy is slowing news is back. This is from the Wall Street Journal. Has the U.S. economy reached a tipping point? Also the Wall Street Journal. The boom and travel spending has slowed, and this is from Bloomberg.

Flights, hotels, and parks are all flashing travel warning signs. So everyone picked up on this. The word softness came up 16 times combined on the calls for Expedia, Marriott, Airbnb, and Hilton. So that's the, remember cable guy? Remember the porno password game? The password is. I haven't seen that in a long time.

Okay. So the password for August is softening. It's not like falling off a cliff. And if you read all these articles, they all make the point of things are softening. People are, especially like you mentioned, low-income people. It said high-income people are still traveling. They're going to Europe. They don't care.

Low-income people are either putting off pre-planned trips. Like they're not planning ahead, or they're doing it last minute, or they're doing it last minute, or they're trading down. And so many people are trading down at cheaper accommodations. Here's one. Disney said this week that income from its theme parks dropped in part because of softening demand. The company pointed to economic uncertainty that has impacted consumers and said

expected weak for consumer demand at its theme parks to persist. If I had to look at one area of the stock market that is flashing at least a yellow light, it would be consumer discretionary stocks. If you look at XLY over SPY, that is at multi-year lows. but then I saw somebody tweet and I'm like, well, but 40% of XLY is Amazon and Tesla, how much it is Tesla? But if you look at the equal weight,

consumer discretionary divided by the equal weight S&P, it's the same chart. So you don't want to see consumer discretionary lagging to that degree. It's not, does not inspire a whole lot of confidence. So if you look at the cruise ETF, it's like CRUZ, it's hotel airline and cruises,

cruise ships, it's down 8 or 9% this year. So some of those stocks have rolled over pretty good. The funny thing is, though, that it, again, all these articles that point to a slowdown are saying, listen, it's not collapsing. A lot of these companies have stronger revenue than before the pandemic. Travelers are still willing to travel. It's just people are being a little more discerning in their plans, which makes sense. Eventually, people had to. And with all the trips people have taken, they had to. In fact, it took way longer. When did the travel boom start when the

economy reopened in, what, 20, back half of 21? It seems like the back, I would say, yeah, the back half is 2021. We thought it was going to be like a six months boom. Yeah, it's lessed years. All right. So I think we talked a couple times in recent weeks with a paycheck to paycheck stuff. And you always see those things. People $100,000 who make $100,000 a year or more relating paycheck to paycheck,

75% of it, whatever. J.P. Morgan did a big study on this, which was interesting. And they, because a lot of these are surveyed data, right? Could you come up with $400? J.P. Morgan looked at banking data for this. this. And I don't know how exactly they did it, but they looked at like six million households. And they wanted to know, could a household weather this emergency expense or like, how liquid could they be? So they find 77% of low income households could cover an unexpected $400 expense,

which is higher than those places usually, right? And they also say basically 92% of people can cover $400 expense in total, not just low income. I thought we were told that 70% of Americans can't cover. What was the number? Some ridiculous number? So they're saying it's more like 92%. Yes. And, yeah, they're saying people have more liquidity sources than you assume. And a lot of people, it comes down to, yeah, I could go into credit card debt.

But there's ways to make it happen. And it says 67% can cover with cash savings. So these numbers are way better than you see in, and they break it down by income as well. There's some good charts in here I put. But yes, these numbers are way higher than those. surveys have you believe. They use actual banking data from people. So this is, this seems more relevant to me. And then also like just, just in the backdrop of like where the stock market is and I know this is not the economy, but do we think that the AI boom is just going to turn on

a diamond? It's just, the bubble is just going to pop? That seems a little too easy, doesn't it? I don't know, to me it does. It does seem like it would be, I mean, whatever. If we go recession, maybe these companies backtrack immediately. It's hard for these companies to all a sudden cut in a dime, isn't it, for all the spending they've been doing? A few counterpoints. NFIB small business optimism index is at the highest since February 2022. Does that usually happen before we going through a recession? Small business optimism at a multi-year high? But isn't that the one where they've been pessimistic the whole way up for the strong economy?

Yeah, well, they're turning. Okay. The vibes are changing. You think small business owners are getting positive right before we go into a recession? That seems unlikely. I have trouble believing the vibes. I feel like the vibes have been so off for two or three years now that it's hard to place a lot of faith in their predictive power.

Is that fair? No, it's not fair. Now you want to believe the vibes? The vibes should have been strong for the last 18 months and they weren't. But it seems improbable. I agree, but these are not, these two things are not in conflict. Just because vibes were off on the way down does not mean that vibes improving here and now should also be discarded. I find it hard to believe that small businesses would be as optimistic as they have been in two years, right as we're heading into a recession.

And those vibes should get better if the Fed starts cutting rates for them. Yeah. Now, a lot of this is inflation, but whatever. I put some credence into this. Okay, I want to talk about loss aversion. I bought a handful. I haven't picked a new stock. Well, I guess Josh talked me into Pfizer a couple weeks ago.

But I bought it only for the dividend, not for the breakout, or whatever you guys talk about, okay? I'm not a technical analyst. I don't buy that many individual stocks anymore. But I bought a few handful of growth stocks that got hammered. I own 14 stocks. Probably six stocks. Concentrated investor. Okay, I like it.

and which stocks do you own so i'll tell you a few last week there was three names that reported and they were all up or down big and on the same day i think or within one or two days of each other so i own Airbnb zillow and shopify and i bought these all these stocks when the growth stocks got hammered some of them i i don't know i think i bought Airbnb right off the IPO so i'm down on that going back to the IPO not a great trade for me or investment but zillow was up like 18% because Rich Barton stepped down, which is surprising to me, because he seems like he's got a pretty good following and he's done a lot of great things. So I was surprised that Zillow popped that much on the naming new CEO. And Shopify was up like 25% or something whenever they reported.

But then Airbnb was down 15%. So I got a perfect test and loss of version. I have two stocks up big, one stock down big. Which one do you think I focused on? Every day. Even the two winners don't negate the one loser. psychologically I know this and I still can't grab my brain around it. Loss aversion is one of the most powerful forces

in all investing in money. Totally. That's it. What stocks have you been buying lately? My most recent buy? Sharon Williams? Really? The paint? The paint.

You're hoping for a refight boom? Or like a renovation boom? This was a technical trade also in interest rates trade. Why is Sherwin-Williams in interest rates trade? Because I don't know how much of their paint is in like the home sector.

I feel like it's got to be a large part of it. So refi's moving, new mortgages, all that's been on ice forever. And so if we get some sort of refi boom, interest rates come down, the housing trade picks back up. That was the thesis. Okay.

And all-time highs. Don't hurt. This is from MarketWatch. The refinance index jumped for, jumped by 15.9% recently. A separate report for Fannie Mae on Tuesday showed that refinance applications rose by 21% from the previous week. An activity jumped to the highest levels since September 2020. So mortgage rates across the board, having decreased, has increased refactation. Now, if you look at the numbers from the past, it's still way, way below.

But it's off of the low. number. So what if we get, you don't even need a mortgage refy boom. What if you just get like a normal housing market? What if the ice thaws out? Shouldn't that put a floor under the economy? Is that not one of the biggest sectors of the economy? I mean, it's, I keep saying this is the biggest piggy bank people are going to tap. So home equity line of credits are up 20% since the end of 2021. So this is turning up too. Again, way lower than it was in normal times. But I just can't imagine people are going to let that equity sit there. We've added like $15 trillion in home equity since the pandemic. And to your point, if rates come down and people are feeling like things are slowing a little bit,

they're going to tap that cash. A lot of people are, have, I've been saying this for a while and people come back to me, mostly perma bear types, I think, but well, people can't tap their home equity line of credit if they don't have a job. But guess what? If the unemployment rate goes from four percent to eight percent, doing the inversion thing, 92 percent of, the labor force is still employed. That's not that big of a number. And the people are still employed probably have enough means and inequity to tap it. So that's my thinking is just maybe we've turned over New Leaf and we learned our lesson,

but I highly doubt that people, if they want or need the money and you want to keep that travel boom going, you think people aren't going to tap that home equity, just sitting there? I find that hard to believe. Also, people are still traveling. Like, I know that guidance matters more than the Rear of America. but if you look at like the, I think we might have this chart later in the show. The TSA numbers, we're at all-time highs. It was the most summer air travelers ever this year.

Yeah. All right. So the Wall Street Journal had a really good piece on boomers versus millennials. And I feel like this is going to be, you kind of have like the tail of the tape, like a boxing match, you know, over here. Millennials have a, you know, 80-inch. reach and boomers, whatever. So they did, they're trying to figure out who had it worse in terms of home buying experience. The boomers in the early 1980s were millennials in Gen Z now.

And they look at this affordability index and it was, it was worse in the early 80s. And they show how many people earned enough to qualify for a mortgage on a median single family home? And it was, it was way lower in the early 80s. But they said, because buyers in the mid-80s had so much more housing supply available, it was a temporary thing. So homes became more affordable really quickly, and there were more homes for sale. So in the subsequent years after the early 80s, things perked up immediately, basically, right? Whereas now millennials are facing unaffordability levels at pretty similar range, but they don't have the housing supply to back them up as well that we were building it.

Because in the 70s, they built a lot of houses. We haven't built enough houses in the past 10 or 15 years. So that's why we're millennials tip the scales and can complain that, sorry, mom and dad, I know you had an 18% mortgage for like a year, but I have it worse. Yeah, it's bad, really bad. They also show consumer sentiment, and they say, like, now they look at, is it now a good time to buy a home? And they say, in 1982, it was 15% of people, and right now it's 12% of people. But it's funny, by 1985, 72% of consumers said it was a good time to buy a home.

and mortgage rates then were like 10 to 12%. So it is so much funny how that anchoring and like the relative, so mortgage rates were 18, now they're 12, now it feels like a great time to buy. Even though if you did the opposite, going from 8% to 12, you'd say this is the end of the world. Yeah. So maybe that helps us now with mortgage rates getting to 8%.

If they go to 5, people are going to go, oh, this is amazing. I'm definitely seeing more Zillow notifications on my phone for homes being listed. Yeah, I get the email ones too. And I'm sure that there's, it seems like there are some that are seeing price declines. You know the thing I don't get is,

so there's a handful of, around me, around our house, there's a handful of like new homes that were built in the past two to three years. Modern farmhouse? Probably modern farmhouse. And you can tell that they're custom homes, right?

They're not just like the cookie cutter ones, or custom homes. And they're built. And then two years later, they're put on the market again. And I just, I know life happens and life gets in the way, but I can't imagine going through the whole process of building a new home and then immediately selling it two years later

and all the frictions that you incur along the way. I know sometimes people have to do it for jobs or whatever. That would be painful to me as a finance person to do that. Because I know how much of that, even if the housing, the price went up, how much if it gets eaten a lot, eaten up by the cost involved. And for you. And moving stinks. For me, what?

It's way higher because you have to hire a lawyer and do a seance and all the weird things that New York makes you do to sell a house. I don't know what you're talking about seance. I don't know. Actually, you know there's a movie called Tarot. I think it's on Netflix. Oh, you pronounced it right this time. Well, in the first five minutes in the movie,

somebody says, oh, a tarot card. And they say, actually, it's pronounced tarot. And actually, speaking of pronunciations, we got an email somebody said that like sauna is the only finish word in the English language or something like that it's a finished word and it's actually pronounced sauna see I've never see this is like oddie or outy to me just go the one that sounds better sauna oddie sounds better going to those I say sauna oh sauna okay did you get one yet a sauna put in your mudroom All right.

The other thing people say about the non-refinance thing, like here's why the refinance boom won't happen. Well, everyone who had three or four percent mortgages, so what if rates go to 6 percent or 5 percent? They're not going to refi. Mike Sicardy has this one. So 92 percent of outstanding mortgages have interest rates below the primary surveyed rate, which is, you know, 7 percent when he did this or something.

But you can see that there's, it's going to be a few, because there's been, you know, four or five million. million homes that have a transaction every year for the last two or three years. How many of those are getting refined? Because people are lazy and they just don't know. Half? You don't think a lot more of the people who have bought in recent years are going to, like, that's on their radar big time.

Totally. They're just chomping at the bit to refinance. Is it half? More? More. Don't you think? I don't know. Just because rates change so much.

I'm sure that's top of mind for a lot of people. I'm sure their realtors sold them on that when they bought the house. Listen, it's fine. You can refinance in a year anyway. Yeah. I'm sure a lot of those people are worried. All right, Tors and Slack chart of the week, share of fixed rate mortgages. 1990, it was 72%, so the other 28% were adjustable rate.

Today, it's 95% is fixed rate mortgages. 2000 is so 75%. So I feel like people kind of learned their lesson with the adjustable rate thing in the 2008 crash. Or why would you not lock in a 3% mortgage? Yeah. True, but I know a lot of people who were seeing the praises of adjustable rate mortgages as rates kept falling. Like, why are you idiots locking these rates in? I can, my rate keeps going down and down and down. So it is kind of surprising people didn't really get into that. But I still think, if you look at the numbers of fixed rate mortgages by country, like a lot of the other countries don't have the ability to do this. And you know why we have 30-year mortgages, right? This is another artifact of the Great Depression. And I heard this on a podcast recently, and the guy said that in the Great Depression, because something like 40% of all mortgages in the Great Depression went to the default,

like people couldn't pay them. And back then, they were like five-year loans. It was a really, you had to put like 50% down in your house, and you got like a five, maybe a 10-year loan. And so what they did in the Great Depression to help these people stay in their home, so you didn't have just a mass exodus of homeowners is they extended the terms to 15, 20, 30 years for mortgages. And that stuck.

I still think that was by far your best inflation hedge if you had it. It's a fixed rate mortgage in the past four or five years. Yeah. I mean, you're saying that that's a controversial opinion. No, I'm not. I'm just, I'm restating a cap an obvious fact here. I feel like sometimes we take for granted the ability that we, because we have a lot of foreign listeners that will email us and be like,

this, I can't believe you guys have this. Yeah. I'm saying appreciate the fact that we have a 30-year fixed-rate mortgage here. I appreciate the shit of it. It's great. I'm showing some gratitude. Love it. What's Albert's Bar? Albert's Bar, you know, this is a great hat.

This is the type of hat that fits my head. There's no padding or lining on the front. However, I'll tell you a little secret. Hats that have this for listeners. What does that, Ben? What do you call this thing? The Dad Loop? So instead of a snapback hat. This thing.

A little metal clasp? It's a metal clasp, and it's not just on hats. It's on seatbelts. It's on all sorts of things. I don't know how to work it. I got to be honest. I'm sure it's not that hard to figure out. My brain just, I...

It is a little harder, and you have to push through and pull and push and pull. You push and lift it up, and it is, yeah, the clasp, but that, that's a... I feel like in my first try, I always, it always goes the wrong way, and then I just... Okay. But anyway, you ask, Albert's bar is a bar in Manhattan. It's a restaurant bar. Josh and I went there with a group of fellows last week, and when I walked out, the owner said to me, I'm a big Michael's movie, Michael movie guy. Really?

Okay. He's a Michael Horror guy. He gave me a pound. I mean, I gave him a pound, and he gave me a hat. Okay. Would he like taro? I only watched the first five minutes. I fell asleep.

Okay. All right. You listen to the Airbnb conference call? I listened to the Airbnb call. And I remember a year ago, Brian Chesky was talking about how they're going to integrate AI into a lot of the stuff that they do. I think maybe the idea is you're going to have an AI travel agent eventually, right? And he talked about, hey, listen, we're still excited about AI. He said, but I think one of the things we've learned over the last, say, 18 months or near the two years is that it's going to take longer than people think for applications to change. So he said, if I were to think of AI, I'd probably think in about three layers. So he talks about all these, he's saying, yes, this technology is amazing. It's going to take longer to implement it than most people realize. And I think that they've run into, I don't know if they're running into a problem, it's not working as good as they think, or what. But I think this is the, this is where the AI hiccup comes, the relay race of all the investment

into it versus the actual application that people are using it, is that could be the problem. is this stuff is not quite ready in the time we want it to be. You know what? It's also the problem. Look at this chart from Alex Morris. He shows the year-over-year change in room nights for booking holdings and Airbnb. And it's going down. Okay.

Not great. A, I could have saved him, I guess. Didn't happen. Did you listen to the Disney call? No, I did not. Do you still own Disney? Yeah, I guess I do. I bought it for my kids to kind of, I guess, prove them a point that even well-known brand companies can be really crappy investments.

You lost money to teach them the lesson. Yeah. So, yeah, attendance was flat in the first quarter, I'm sorry, in the recent quarter for the theme parks. And that had been one of the strongest areas. So they're getting, they're getting hit from all angles. I can't tell if this is a good thing or a bad thing for Disney because it was like they had their parks business booming in the streaming business stunk. Now the movies are finally coming back. They have like the top three movies this year, and now their parks are slowing.

So is that a good thing for diversification benefits, or is it like, eh, can't win? But it's the linear thing that's really hanging over them and just drowning them. So what do you mean the linear thing? ABC, ESPN. Oh, okay. Oh, the linear cable, gotcha. We talked about the fact that the lower income consumer is feeling a little bit of stress. The high income consumer is traveling internationally a bit more.

So, yeah, they're mentioning what everybody else is. Look at this, so they show the Disney experience, which is really the theme park. And it's at an all-time high, but the guidance wasn't great. Look at just a reminder of how crazy COVID was. Jeez. Just a complete shutdown. All right, here's a counterpoint. And they're back on trend.

Yes. Here's a counterpoint to all the moderating consumer things slowing down. Softening. Softening. They got a question about the ad market. And he said, the ad market is actually very healthy right now. We saw overall advertising grow 8% for the quarter. ESPN was up 17%.

Direct to consumer streaming was actually up 20%. So certainly feels very, very positive in that regard. Again, something you don't see when we're about to enter a recession. Advertising is the first thing to go. That's something companies are willing to cut back on. It's the first thing to go. they have a chart of the operating income for Disney Plus. And it bottomed out in the fourth quarter of 2022 with a billion and a half dollar loss.

And look at that. They just turned a profit. Alex Morris has a chart showing the Disney video business annual revenues. And it's showing Disney Plus versus the linear networks. And in 2018, when they first launched this, of course, they were effectively at zero. and the linear networks were at a $20 billion plus run rate. When's the last time you watched a show on Disney Plus? It's been a long time for me.

Probably, I don't know. Did they, not the Mandalorian, there was one after that. Obi-One, was that a show? I tried one or two of the Star Wars shows. Garbage, just garbage. But anyway, so next quarter, they're going to, they're going to flip-flop. Disney Plus will have gobbled up linear. networks, which is pretty remarkable. But all these streamers are in such, such hell, Paramount,

Water Brothers. These stocks are just garbage. The linear cable, they're all writing down the linear cable businesses. That's the, that's the, that's the, yeah. It's bad. Okay. The Wall Street Journal had a good one on movies. Did you see this or not? I did not read this yet. Okay. How going the movies is changing, and they did a bunch of cool charts. And they show, where would you prefer to watch a movie? And they show before the pandemic, go to 2019. And before the pandemic, it was close to 60% preferred in a theater. Now it's flip-flop, 65% at home versus 35% in a theater. I can't tell for me it's because of the experience or just the fact that I'm,

because we used to, when I was young, we're talking middle school, high school, college probably. I'd go to a movie once every other week probably. That was just a thing to do when we, like, maybe it's because we had less to do back then, but we'd go to a movie at least once every other week. Now I feel like it has to be a good excuse to get me out of the, And I think a lot of it is just better speakers, better TVs, HD. I think all that makes it better, a better experience where it's not that much of a difference to me.

Well, how about the fact that you don't have to wait seven months to see a movie after it comes out? That's true. It's way, yeah, it's much quicker to get it. I mean, that's it. That's the whole deal. If you wanted to see movie X, Y, Z, you're not going to wait. Like, literally, it was how long before a movie came to DVD? Yeah, it was a long time.

It took forever. months and months. So now if you miss movies, so, oh, Apple's, the movie with George, George Clooney and Brad Pitt is going to be in the theater for a week.

How many people were seeing that in the theater? I don't know, 47? Yeah, what's the point? So they looked at the theater revenue, box office revenue till now,

like through early August, and then added on the rest of the year going back to 2015. And you can see we're way below. And so 2024 is below 2022 and 2023, even after having some pretty big movies. And so this is the new normal, I guess, where it's just, and I'm not sure, do they, this probably isn't even inflation adjusted.

Because I feel like that's part of it. People don't talk about enough is that movie ticket prices are so much higher because you have the IMEX screens and you have the better seats and all that stuff. But if you inflation adjusted this, I bet it's way, way worse even than before the pandemic. But what's the lines on these charts? So there's a dark right bar and a light red bar. So the dark one is up till year to date, and then the light gray is from that point on. Okay. So look at 2024.

It's not that bad. I don't know. What do you mean? It's not that great either, though. I'm not saying it's that great. But people are talking as if movies are dead, and that's just not true. There was an article in Puck. They say, given the disastrous early months of the year, it's extraordinary to think that the

24 box office could catch up with last year's $8.8 billion. Hall, or at least surpass the $7.4 billion from 2022. It's not that bad. And if it were that bad, the Cinemark Holdings, which is one of the publicly traded movie theater chains, wouldn't be doing what it's doing. Look at this next chart. This is the Mag 7, though. It's Inside Out 2 and Deadpool and Wolverine.

There's like four big movies this year that are lifting everything else up. Equal-weighted. Equal-weighted is not doing good. Longlegs did $90 million. That's like one stock that did good. That's like picking one stock. It's not, no, no, no, no, it's not just inside out. There's a lot of moves that are doing very well.

Okay. I think it's top-heavy. I mean, that's probably always the case, but my point is, the theater, the state of the movie theater is not nearly as dire as most people probably think. Okay. And I think part of it is inflation. I think if you inflation adjusted these numbers, it would look a lot worse. Right?

Take 25% off the top of this compared to pre-pandemic levels from. inflation, and it looks way, way worse. But I don't think that that's something we don't do. We only inflation adjusts certain things and not other things. Well, you, no, you, I mean, you inflation adjusts. If you're looking at, like, top box office in the 90s, that's all inflation adjusted. I feel like sometimes they do, sometimes they don't. All right, a bunch of people said, we asked for what's the godfather of this century,

and a bunch of people said to departed. I still think I would prefer gladiated over that, but not a bad choice. I think the question was, the way that you were it, was sort of vague. I think if we're getting answers to the, if the departed kept coming up, it's only because they probably thought, like, what's the best gangster movie of the 21st century? True. I said, not just gangster. I said just high quality.

That's why I picked a gladiator. But I thought that was okay. Somebody emailed us. They got burgers from five guys delivered on DoorDash or Uber Eats. He said it was $60. plus tips. It's called $70. He then made his own ingredients or bought his own ingredients made at home, $23. That's not a huge difference. Don't you think five guys burgers are three times as good as the ones you make at home though? Have you ever had a burger from someone's grill and

go, oh, that was amazing. I feel like burgers on someone else's grill, whether you're making him or someone else, they're always just okay. I've never had a burger off of a grill and gone, oh, that's like the best burger I've ever had. Never happened. That's a good point. Right? But nevertheless, that's a lot of money. Why are burgers at restaurant establishments so much better than someone's grill? I would guess a pound of butter. Yeah, it could be. More fat.

That's true. All right. Story time. I work out of a little office complex that's kind of shared office space. I'd tell you office people from me working in a single office by myself to other places that have, I don't know, 10 or 15 people, very small. I'm on the second floor. Once a week or so, I find this guy in the bathroom, same guy, and he's washing his dishes from lunch in the sink.

And he takes his time. He's in there for a long time. Hang on. How long does it take to wash a dish? Yeah, well, I mean, that's a good question, you know. But he, so he does this constantly after lunch. What's your thoughts on people washing dishes in a bathroom? I think it's, I don't know.

I'm not a fan. And I preface this with in the first floor, If you walk down a level, there is like a shared little place where there's a little kitchenette thing. My thought is, and I respect the environment, bring a paper plate. Yes, right? That's what I do. I use paper plates. I'm not going to, I feel like that's the sink in the bathroom is different than the sink in the kitchen.

I agree. Let me ask you this. You walk in to the bathroom and he's washing the dishes in the sink. Does he give you a, hey? No, head down, which is better. old the guy. This has got to be a boomer, right? He's probably 50s. Okay. Middle-aged.

Yeah. We had a bunch of people from Riddle's wealth management out to Long Island last week. We get together and we were on the water and Sean was on the back of my jet ski

which was a dumb idea. Sean is 6-6. Sean's a left tackle. Yeah, Sean was an offensive lineman in college. So I won't say his weight. He's, he's slim, but he's a giant man. He's a big guy.

And the ski just, it just tipped. You were driving and he was on the back? Yeah. Yeah. And my phone was in my pocket. And I thought, okay, well, there it goes. There's salt water. Apparently phones are, I was like, oh, no, and somebody says, no, they're waterproof.

They've been waterproof for like 10 years now. Did you know that? You don't have to do the, I think I've heard that, because I talk about my wife, Drap and hers in the lake, and people said, if you got it out, it probably would have been, so you don't need to do the rice thing anymore? No, and I don't think that ever really worked, if I'm being honest. But how did that, how is that possible? How did they make a phone that is saltwaterproof?

I have no idea. And it works just fine. I mean, I would assume that eventually, if you submerged it, eventually would stop working, but all good. Same as watch technology, right? You have a watch that can go 40 meters underwater, something? I don't know. Isn't it funny, though, how watches have never made the jump from the metric system?

Like, if you go to watch, it'll say 40 meters or 30 meters or whatever. It doesn't say feet. No watch ever says feet. Because they're made in Europe. I guess so. Yesterday we were doing a podcast, and you said, like, you know, it's like impossible to explain words to your kids, the word rhetorical. I don't even know where to begin.

Yeah, I was trying to explain it to my kids. I couldn't. So I tried to explain the word pressure. How would you explain pressure to a child? Because I had nothing. I said, you know, the... What kind of pressure we're talking about here? There's, like, different ways of explaining, like, I wouldn't know.

I wouldn't have a good thing. I think Kobe was playing a game, and there was a lot of pressure on the line. And he said, what's pressure? And I was like, you know, it's like, pressure. You know what you see it, right? I explained the word with the word. All right, Ben, so I, and... breaking out in the movie theater category.

Earlier in the week, I saw an independent horror film by Neon, the production company. Do they know you at the movie theater yet? Because I feel like you're at least, I said I used to go once every other week. You go once a week at least. Not once a week, but I'm breaking out. So I went to see a movie called Kuku, which was a bit too Kuckoo for me. It was quite odd. This is a, I don't know how, I feel like I'm pretty in the know on pop culture stuff.

Not everything. But you find these movies that I have just. never heard of like not even like on the radar for me yeah well this is not a ben movie quite frankly it's not even a michael movie this was just this was out there um even for me uh last night i saw the movie trap the m night movie oh okay how was it it was incredible he truly is a one of one uh so the movie for those of you who have not seen the trailer josh hartnett takes his daughter to a concert. And he finds out very early in the movie, that's not a spoiler, that the movie, I'm sorry, the concert was a ploy to trap him. He's a serial killer. And so there's SWAT.

There's FBI. There's cops all over the place. And so the first, like, hour of the movie with him trying to figure out how to escape, like really pretty compelling and good thriller. And then there was a second act that got a little bit crazy. And then I went my friend and I turned him, I said, this is about to go off the rails. And the third final act was completely, completely fucking insane. Absolutely absurd and ludicrous. And he's in on the joke, but probably one of the better, like, 6.2s I've ever seen. Just a hell of a good time. The premise you described actually sounds like a pretty interesting movie. It was great. And then, again, the ending was just absolutely wild. Life out loud funny. In a good way.

Okay, all right. Just completely, yeah, M-Night is... I'll run it at some point, or watch it on streaming. On HBO. On Thursday, I'm going to see aliens, one of my favorite franchises, if not my favorite of all time. What was the last... I've liked the last two.

Does Prometheus count as an aliens movie? Oh, yeah, yeah. Prometheus and Covenant. And Robin has walked in on me watching Prometheus a dozen times, and every time she goes, how are you watching this again? I think that's one of my favorite. favorite alien movies there is.

Really good. So I'm going to the IMAX and Lincoln Square by myself. I've never done that before. I'm going to the IMEX by myself. And it's going to be sold out. Okay. Lastly, I'm taking my wife on a date night to the movie theater on Friday. We haven't seen a movie together since...

What's the last movie? A Star is born. What year was that? 2017? So wait, can I guess what you were taking or two? There's only one that there is. It's the Blake Lively one. That's got to be it.

Correct. So, okay, 2018 is the last time we went to the theater together. So I said to my wife, have you, have you read this book? Because she's read all those books. I didn't know. It was a book. I said, we're going on a date. We're on the theater.

So that'll be Friday. Okay, I think the guy from 1823 or 19, one of those, the Harrison Ford one was in it, looks okay. So don't tell me movie theaters are dead, sir. All right, you're keeping them alive. Here's me not keeping movie theater live. So I saw the instigators on Apple. This was a straight to Apple streaming.

I only think it was in the theaters. I never heard of it. Matt Damon, Casey Affleck on Apple. Oh, that came out? It's a heist movie. It came out last week, so we watched it. How is that possible? How is that possible? Like, I'm on the internet.

I haven't seen anything about it. You knew Kuku came out, but you didn't know the instigators of Matt Damon was out. Shame on Apple. So how was it? Was it terrible? So it's a 6-5 kind of movie, but it's a heist movie, but it's a heist movie, but it's a, it's a, it's a, it's a Heist movie, but it's a lighthearted one. Casey Affleck plays a smart out guy. Matt Damon plays more of the straight guy, and it's kind of a run of the joke, but it's also a ton of

actors are in it. So it's those two in Ving Rames and Ron Perlman and the guy from Bordock Empire who plays the rival bad guy, what's his name, Michael Schulman or whatever. Oh, he's great. One of the worst Boston accents of all time in this movie. But it, so it's not, don't go into a thing that's going to be a great heist movie, but it's kind of a after we got done, I said, good, not great, I enjoyed myself. Okay. So, and it was Matt Damon and Casey Affleck, just the two of them for most of the movie, just kind of cooking.

But yeah, you're right, straight to Apple. Apple does not do a very good job. It seems like they have the Netflix style of advertising, but no one watches Apple. So it does just get lost in the ether. You know what? I saw Neon tweeted something about Kuku. I went and I saw it. That's how I get influenced.

I saw it on the internet. I did see... Instigators, I've seen nothing. I saw those guys on a few podcasts, but that's about it. What are they doing? Why even make these movies if they're not going to promote it? I really don't get what the strategy is there. Yeah.

Worth watching, though. Are you sad that the Olympics is over? I am. I think recency bias, that was the greatest Olympics I've ever seen. I think the... And I mentioned before, the peacock streaming aspect of it helped. But I think that was the best Olympics I've ever seen watching the gold medal. I was trying to explain to my...

kids how unbelievable it was to watch Steph and Katie and LeBron all play together and close out games and they were like yeah whatever and the fact that they were like in their mid to late 30s and but all the other stuff I watched I got into ping pong a little bit I got into we watched badminton we like the gold zone thing where you can just skip around to different sports truly was awesome and if you didn't I'd see something on Twitter like oh can't believe that race that just happened and I'd immediately pull up on peacock and then fast forward to that race and watch it, was really an awesome way to watch the Olympics. I thought the Olympics were dead like eight years ago. I was like, it's just not the same. And now I feel like it came back.

First time in my entire life that I watched a sporting event after I knew the result. I watched the Serbia game the next morning. Okay. Yeah, I caught the end of that a lot. I'm never in my life have I done that, not a single time. Yeah. I see, I do that a little bit with the kids, but it was, I would just have it on in the background of my office on the gold zone and occasionally check in and look and it, it was a really great experience. This is like the streaming networks are like, again, figuring this stuff out. Where's the next Olympics? Los Angeles. That's going to be even better. Is that winter? Well, no, there's a winter one in two years. They go every other, every two years, but the next summer Olympics is in the L.A. And the winter, no, nobody pays attention to the winter

Olympics? Not as much. I don't mind the Ointer Olympics. Good for you for watching. one Olympic sport. Thank you. You're a patriot. Email, anything else? Nope. All right. Send us an email.

Animal spirits at the compound news.com. Thanks to all our production staff, as always. Duncan didn't have any comments this week. We must have been pretty clean. I didn't see any. Usually Duncan chimes in with a few slack comments about something we've said and he was good. I think I won our man of the people fight last week. That's based on the comments and emails.

I'm pretty sure I was a slight I slightly edged you out okay um we did get a funny email somebody said like uh not to outman of the people you but I also was a dishwasher yes everyone's got their thing all right thanks for watching thanks for listening see you next time Thank you.