Animal Spirits Podcast - [CORRECTION] The Tesla Crash (EP.289)

Episode Date: December 28, 2022

On this week's show we discuss the kid premium around the holidays, the most surprising things that happened in 2022, some thoughts on stocks vs. the economy for 2023, why consensus is wrong most of the time, the car industry is all messed up, why housing prices aren't falling faster, the year of the sequel and much more.   Find complete shownotes on our blogs...  Ben Carlson’s A Wealth of Common Sense  Michael Batnick’s The Irrelevant Investor  Like us on Facebook  And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.      (Wealthcast Media, an affiliate of Ritholtz Wealth Management, received compensation from the sponsor of this advertisement. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information.)  Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by Composer. Composer is the technology system that allows you to create systematic strategies. And if you don't feel comfortable creating your own systematic strategies, Composor has created Opus. Opus is basically their best ideas portfolio. It's interesting. I stand by my Mr. Holland's Opus comment. Great movie. The whole idea here is great. So they have five different strategies they include. So one is like a core, which is 6040 portfolio with a little bit of leverage involved. They use sector momentum, large cap value, commodity momentum, and then a volatility hedge. It's basically, the best ideas portfolio, the other investment committee, who's adding and changing if it needs to be. It's fully automated. To learn more, you can go to composer.trade slash opus to learn how this works. It's kind of, again, their best idea is portfolio. It's composer.dotrade slash opus. 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 Batnick 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. Michael, it's in between Christmas and New Year's. Let's do a little holiday banter because, I mean, Is anyone really paying attention to the markets right now?

No, but for those who are, let's just give a little update. It's Tuesday. Where's your timestamp? December 27th, 1041 in the morning. The S&P is down 11 basis points on the day after being down as much as 60-something or maybe more earlier. Santa Rally would start today, correct? Or they just started last week?

I think the Santa Rally does start today. All right, we still have time. I know it's easy to be negative and cynical in today's world, so I want to start off today today with a positive optimistic note. having kids gives you a 27% premium around the holidays, at least. I think it's one of those things where when you become a parent, you hang out with other parents who have kids at around your age. It's easier to do that that way.

If you have friends who don't have kids or friends who have kids different ages, sometimes it doesn't work. One of the things you do as parents is you get around and you complain about your kids, about not sleeping or running around and being busy and dropping off at practice and stuff, that's just like the thing that parents fall into. I want to do a positive. Credit to me. I'm looking at the positive here.

That's not my situation. I'm not a complainer. No, I'm saying a lot of parents do that, though. You're right. You don't complain. I don't think I do either. Credit to us, we're great parents. I think our wives are great mothers.

There I go. That'll do. But having kids around the holidays makes holidays so much better. So my twins are five. My oldest daughter is eight. She basically figured out Santa doesn't exist anymore, but she's still pretending. I think she just wants to hang on. She gave me a wink, wink.

Like, is Santa really real daddy? But my five-year-olds are at that perfect stage of getting presents. And we were snowed in all weekend. We got like 27 inches of snow. We didn't get to go to travel to see family if we wanted to. And my kids didn't care. They were so happy for Christmas and everything that goes with it. Obviously, they like the presents and stuff.

But my little daughter, Kate, woke up at 4 a.m. on Christmas morning. It sounded like she had four espresso in already. And she was like, all right, guys, let's go. Come on. And we're like, no, not until 7 a.m. But anyway, kid premier around the holiday. Parents don't tell you this before you have kids. It makes it so much better.

Agreed. That was a lousy loss for the Detroit Lions this weekend. They actually had something to play for. I know. We're trying to be on a positive note here. It's basically the Lions and the Giants are competing for a final playoff spot. Maybe. Maybe they can both make it in?

Yeah. Here's the thing with kids, though. You're seeing all the airplane stuff of these people getting stranded in airports. Terrible. You could not pay me money to get on an airplane around the holidays. Thanksgiving or Christmas. I'm glad that my family lives relatively close and we don't have to get on a plane, but I don't think you could pay me with kids

to try to get on a plane for Christmas to go somewhere. That was a tough soon. You might have a holiday hangover because I'm trying to get sentimental here and you give me nothing. Sorry. Are you hung over today? Yeah.

Okay, that's fine. You're a pro though. You keep going. Let's start off with something before we get into these other outlooks. So I think we got a lot of outlook stuff today. A lot of people are putting out pieces about they're predicting what's going to happen in 2023. How about this?

I didn't give you any prep for this. So if you've got nothing, let's look at the other side of this. What won't happen in 2023? A lot of people are pretty. predicting this will happen, this will happen, this will happen. What won't happen? I'll start. I can name a million things that won't happen. The S&P 500 won't go up 300%. Okay. In realistic terms, here's what I'm thinking. We're not going to have a year where the S&P 500 is up.

Why don't you let me in on these things? I know, I should have. I'm going to give you an example. The S&P 500 is not going to rise a little bit or fall a little bit. It's going to go up a lot or down a lot. How's that sound? You rarely see a year where you have an average return of 8 to 10%. So the S&P, and I've looked at this, After down years, it's either down a lot more the next year or it's up a lot more than next year. So I think big double digits to the upside or double digits to the downside is probably more likely next year than like a, eh, it's an okay year. What else won't happen?

Elon Musk will not be buying another company. I can say that. Yeah, true. Tesla is down another, oh my goodness, six and a half percent today. It's going straight down every day. If we're using history as a guide, I'm going to put it out right now. 75% chance the stock market does not fall next year. How's that?

75% chance. I'm using history as my guide. A lot of people think it's going to get worse. Recession, earnings are going to fall, stock markets down. I say history as a guide says 70, 75% chance the stock market does not fall next year. How's that for something that won't happen? For the first time, I hate that I say that so much. I was not to say for the first time in a long time.

It's a crutch. I got to get rid of that thing. I can't remember a time, let's say that. I can't remember a time where so many people seem to think the same thing was going to happen next year. I think most people are in the camp. of shallow-ish recession, bad first half a year for stocks, good second half of the year. And there is a reflexive nature of the markets, which George Soros has famously talked about. And Warren Pyes wrote about this, like what happens when everyone is expecting the same thing?

Fed pivot in the spring. Equities will have a tough first half, but rally in the second half, there will be a recession, but we'll be sure and shallow. All right, so again, Soros, applying this theory to the menu of issues facing 2023 leads to a number of questions. Is there a risk that so much anticipation of the Fed pivot could cause a premature rise in asset prices and thus dissuade the Fed from pausing as soon as it otherwise would have? Is it possible for a highly anticipated recession to be very bad? Or will consumers and businesses prepare accordingly, thus blunting the impact of any downturn? And reading that, it reminded me of the scene

in wedding crashers, is she not interested, but then I'm starting to get interested. There's some of that going on in the market. And how does all of us bracing for this impact the economy in the market? Wouldn't it almost be more surprising this year if we followed script? If everyone is on the same page, if the market actually followed, because think about all the surprising stuff. I'm writing a piece about this right now. I'm sure he stole it, but I remember one of my first bosses in the industry said, it's okay to be surprised, but just don't be surprised that you are surprised.

That's your one. Think about all the surprising stuff that happened this year. Stocks and bonds both fell double digits. That's never happened before modern financial history. Never. They've fallen together four times before this, never double digits. I think one thing we're not making a big. big enough deal about because there's so much to do is the Fed actively rooting for the stock

market to fall and being happy when it did fall. I don't think anyone could have ever foreseen that in the last 10, 12 years because everyone thought the Fed was cheering on the stock market. Mortgage rates doubled. Government bond yields still remained relatively low, even though inflation hit 9%. Some people say this wasn't surprising, but it is, I still think Bitcoin falling 70% when inflation hits 9%. That has to be a surprise for some people. This has been a surprise to me. Listen, I want to apologize to the listener. If I seem like I have low energy. One of the big surprises for me in 2023 is that I would be sick for November or December the whole time. It's tough. No breaks. I saw a tweet. I thought I was in the clear this morning.

Got a lump in my throat. I don't know who to give the source material to, but someone said, everyone I know is either sick or doesn't have kids. Basically, I think if you have kids, you're sick. I think that if things followed consensus and we had a shallow recession and the stock market looked past it and that's consensus, that would be more surprising than the other side of it. I would be more surprised if things happen exactly how people think they would happen. So we've got 38 consecutive weeks with a negative AAI-I Bull Bear spread, which is now the longest streak on record. You've got Economist surveyed by Bloomberg. Say there's a 70% chance of a recession next year. 70% chance now. Let me ask you this, Ben, why can't things be pretty

okay next year? And so we're going to talk about inflation, which is cooled off dramatically. Why do we need to have a recession? Is it just simply because the Fed wants us to? And it's that simple. One of the things that you and I talked about all year was how the consumer has never been more prepared for recession than they are right now. But what if we've used all of that ammo already the consumer has to stay afloat? Yeah, but they haven't used it all. But I'm saying it almost would have been better had the recession happened a little quicker because people were so prepared. And now we've had time with inflation for people to spend down a lot of that savings. I don't know if there's two months ago we were talking about the New York Fed did a study in this and that I think they've

spent a third or fourth of their excess savings. You could talk me into when Tom Lee spoke about this. So maybe he's infecting my brain in a good way. Why does there need to be a recession next year? It's true. There doesn't have to be one. We've almost like talked ourselves into it just by being persistently negative because inflation was so high and it wasn't cooling and layoffs and tech started to happen and then stocks start to fall or stocks haven't fallen for a long time. And we just thought, well, I guess the recession is coming. Well, that probably is one of the other surprising things that happened this year. The Fed went on one of the most aggressive tightening cycles in history. Mortgage rates doubled, more than doubled. And the economy has been

fine. It's been so resilient. So I think everyone is using history as a guide to say, in the past, we've never brought inflation down without having recession. And if it was going to happen, this would seem to be the time that it could happen. I think a recession will continue in technology. I think that a lot of people maybe won't say it out loud, but we'll use the Elon playbook for getting rid of a lot of extra employees. Let's say we have, I don't know, less than 1% growth in GDP this year on a real basis. That's my no landing scenario where everyone who just wants resolution right now, one way or the other would not be happy. So we don't get a recession, but we also don't have an awesome economy and things just

kind of muddle through. Then they say, okay, in 2024, we're going to have a recession. That's the thing. You just keep moving the goalpost. This is from Tom SeraFegas, ETS below their COVID lows. So it's March 20. Cannabis, China, Arc. Wow.

That really is amazing. That chart right there is every fad, maybe fad's too harsh of a word, every star mutual fund portfolio manager in history. below the COVID lows, okay. So, ARC is still making new lows. It's down 80, it's an 81% drawdown. And it's down, it's lost money over the last five years. If I wanted to be the Twitter guy, I would say,

how could it possibly go lower? But then you'd say going from 80% to 90% that's a 50% drawdown from here. That's right, absolutely wild. All right, also Warren Pyes. He did a thread on the two-year treasury being below the Fed funds rate. And this is major implications, at least it has historically.

This is the market telling the Fed to stop hiking. Historically, a Fed funds rate two-year inversion kicks off a chain reaction. So what Warren is saying here is in all previous inversions, whenever the Fed funds rate and the two-year inverted, the Fed paused immediately, immediately. In every case, other than 1978, the next move was a cut in rates. The Fed is playing chicken with the bond market right now. Who's going to blink first? But so the Fed is raising in February.

Hopefully it's the maybe babyberries, 25 base points, and then they're done. The bond market is not buying what they're saying. The Fed could do too much. That's, I think, the clear and present danger for 2023. True. Also a good Harrison Ford movie. Never saw it. Is that Jack Ryan?

Yes. We just started the new series last night on Amazon. It just came out, the third installment of the John Krasinski one. Are you good? First episode, not bad. I mean, CIA spy nuclear bomb type of thing. I'm in. Also, clear and present danger, yes, you should see it.

It's been a long time since I've seen it, but I remember really liking it. I never saw the other one either, Patriot games. Both of those are great. Harrison Ford was the best Jack Ryan ever. Nick Timoreos, the core PCE index was 3.6% in November on an annualized basis over the previous three months. That is the smallest rise in three-month-core PC inflation since February 2021. So here's what I'm talking about. Of course, inflation can re-accelerate, but it appears that it's on the way down.

And if we're already there, again, I ask, why does there have to be a recession? If the fear was cost pressure, inflation, wage spiral, demand destruction, all of that jive. But the story is changing. Why do we need to have a recession? I don't know. So this is the kind of thing where looking at the past 12 months of inflation data doesn't tell you as much as looking at the last three or four months. So that 7% number now still seems really high, but that's just because it's carrying

the average of all those other really high periods with it. So look at this monthly chart. I mean, it's a precipitous decline. So over, under 4% inflation for 2023. I'd probably take the under. based on the trends that we're seeing, I mean, unless gas prices went back to $5 or something. What do you mean? You mean the average for the year? So for 2023, the average inflation rate for the year, over under 4%. I'd have to take the under right now based on the trends that we're

seeing without some other weird shock to the system. The question is you would think that the market should rally on this news, especially this, seasonality. By the way, seasonality is kind of hilarious because it works both ways. No, it works even more when it doesn't work. That's what you want to pay attention, when it doesn't respect the trend. It's one of those things that, yes, when it's going in your favor, pretty much. But so, stocks are not rallying on this news? Why? I think, are stocks falling because the revision to GDP numbers were stronger than expected, meaning that the Fed is going to have to still do more? No, this is simply window dressing and tax sauce harvesting. If stocks rally at the end of the year,

it's a Santa Claus rally. If they fall at the end of the year, it's window dressing and tax sauce harvesting. Tesla's down 7.5%. My lord. Also, Apple is below the lows made in the summer. Is Apple the most important stock in the market? I mean, obviously it's the biggest. Just for sentiment, I feel like if you own individual stocks, you own Apple. It's the most important company.

You're right. Remember, Apple came all the way back, so it's down 30% off the highs again almost. Oh, before we get into cars, Ben, my mudroom? You have one of those? Yeah, we got a little one. We wish it would have been bigger, but yes, we have a little. muddrum. So the first quote that I received from a general contractor was $31,000. I told Robin, no chance for a place to put your sneakers and book bag and drop your stuff. No way. Get another

quote. Second quote, 17 plus whatever it is for like the tiles and the better but not great. Third quote, 11-9. Whoa. Now we're talking. Okay. Obviously still a lot of money, but not even close to other ones. How does it happen? How is there such gigantic spreads for the same job? I feel like this could be a new HG TV show, people negotiating with contractors. This is the second time we've done something in my house like this, where we got multiple quotes. And it was the same thing. I had a little thing put up inside my house of Portico, just two columns and a little triangle. And the quotes were all over the place. It probably depends on how busy the people are, how much business they have. They have a lot

of business. They're willing to jack up your quote. And if you say yes, great, if Not. Who cares? There's got to be a site where, like, you could put out quotes and get... Wasn't that what Angie's list is for? Is that it? By the way, that was, like, I started making movie references, but, like, when they found out that Flesh of the Star, that Mr. Skin was a thing. Also, a lot of people said, Ben, you blew right past Michael's Willy Wonka reference last

week. That was a great analogy that you had. That was good. That actually worked. That was surprisingly well done. Thank you. I will take that backhand of compliment. Have you watched that movie lately?

I saw it so many times as a kid. I have no interest in seeing it again. I've touched it with my kids. The Johnny Deppin was horrible. The original, it's more of a pop culture force. The movie's kind of depressing, actually. It's not very uplifting. No, no, no.

All right, what do you want to talk about cars for? I want to talk about cars because there's some interesting things happening in the car market. So this guy dealership, who is a very good follow-up for the car market, said, imagine you're a 750 credit score. Now, imagine you come to buy a car and I offer you a 9% APR. I don't need to say much more. High weights are killing the car business right now. It's 9% to borrow to buy a car right now?

I guess. I mean, that's wild. CarMax missed on the top and bottom line. This in the transcript hears from the CEO in response to the ongoing pressures across the used car industry. We are managing our business prudently and prioritizing initiatives at reduced costs. Unlock operating efficiencies,

profitably grow market share. Stock got wrecked. We talked about Carvonne a couple weeks ago, right? What is it, down 98% or something? For some reason, I was looking at my home equity line of credit today. I think at the lows it was 3%. It's now 6.75 for a helock. Maybe this is your other side of why do we have to have a recession? I don't know. It's expensive

people to borrow stuff. They just stop borrowing money. I think that would be the thing is if all these people who did their Disney trips and their vacations and the airports were full, if they eventually tap out and say like, all right, I did my two or three trips this year, I'm pulling back, I'm not spending as much money. Well, yeah, I mean, it's very simple. That's the only lever the Fed has is really interest rates. Now, what is so predicated on interest rates? Well, obviously, the housing market. Can we have an ice cold housing market? without a recession. That's a big question for 2023. All right, here's the car. So you talked about killing the car business.

Maybe the car business needs to be killed a little bit. All right, this is from this piece about America's love affair with pickup trucks. Trucks represented about 20% of U.S. auto sales this year, tad more than cars. Pickups account for three of the best five best-selling vehicles this year, F-Series, Chevy Silverado, and Ram pickup. I've been beating this drum for a while. Jim Farley says F-Series is the second most valuable consumer product in revenue behind the iPhone. What? Yes.

Then they talk to someone who says, F-150 is like a modern horse. It's a reliable partner. You can do work on. You can have fun with it. But then they said, according to JD Power, millennials buy the most trucks these days, which is kind of surprising. And then they asked, but most of them aren't using it. Like, if you're in construction or you're a painter or something and you need a

truck for whatever, you work on a farm and you need a truck for work, that's one thing. But it's basically saying the majority of these millennials buying trucks are doing it because they like the look of them and they like driving them, not because they need a truck for something. So they're paying, let's see, the new RAM-1500 TRX starts at 80 grand. GMC's electric Hummer EV is going to cost over 100 grand

and people just love driving trucks. It's not like they're all using them for that they need a truck. Yes, 9% is high but maybe also don't buy an $80,000 truck if you can't afford it. How's that? Yeah, that's good advice. I'm going to beat this drum until a dead horse. So U.S. Consumer Confidence

rose by more than forecast to the highest since April as inflation eased and gasoline prices dropped. It really is that simple. It's all about inflation. I got gas with $2.93 the other day. You? I've got $2.99. If I was running for president,

my only platform would be lowering gas prices. That's it. Not a Republican, I'm not a Democrat. I'm in the lowering gas prices platform. That's it. That's all people care about it, seems like. Yeah, it's all people want. Here's a thing, though.

Let's say I'm going to start my own coffee shop. I don't drink coffee. But if I'm starting my own coffee shop, I'm putting my prices outside like the gas stations do. Black coffee, $2.99, and I'm going to lower and raise those prices. Whatever you're selling, if I did an antique store, the antique rooster, $3.99, whatever it is. I put the big prices and try to make them more important like gas prices. How's that?

Antique rooster. I don't know. My mom buys that stuff. That's a good platform. All right. Another one from Fed Woj, using U.S. tax records. Researchers at the JCT, which I don't know what that is, and the Federal Reserve found that the lowest income earners saw earnings gains in 2021,

while the top quintile of earners saw declined, the opposite of what occurred after the recessions in 2001 and 2008. I'm usually decent with acronyms. The JCT. Yeah, I got nothing there. What could the J stand for? Jewish. No, journal?

Got to be journal. This is one of those economic outcomes that you would never predicted in a million years. We're going to shut the economy off and people on the lowest end of the income scale are going to see the biggest gains. Oh, Joint Committee on Taxation. Oh, okay, joint.

Not bad. This is from the Wall Street Journal. Restaurant staffers are coming back to work after COVID. And this is one of those things where a lot of this stuff is thawing now, and things are getting back to normal. But they said restaurants and bars have nearly doubled the number of employees working at the pandemic low in April 2020. Past month alone, over 60,000 jobs added.

All but 2.1% of the 12.2 million food service and drinking establishment positions that existed in November 2019 have returned as of the past month. Here's the crazy one. Fast food workers earned an average hourly wage of $15.17 in October, up 26% from the pre-pendemic. Wages for workers at sit-down restaurants rolls 21% to 1870 an hour. Both categories increase faster than the average workers' wages, which are up at 16%. If you're earning 15% on average at a fast food place, the government doesn't need to increase the federal minimum wage. It's already there at $15. If you can earn that as a fast food worker, if that would have been offered to me in high school, I would have worked at McDonald's and gotten free food and gotten $15 an hour.

Yeah, that's great. The downside is you're going to end up on a viral video of someone climbing through the window because you've got their order wrong. But that's pretty crazy, correct? Yes. That is that high? Oh, did you see there was a video of a fully automated McDonald's? Yes.

I didn't see that. That's why maybe all those jobs I never come back. So I have a new Chick-fil-A that they open right by my house, which is, just great because my kids love the chicken tenders. They made this Chick-fil-A explicitly for drive-thru. They don't even have a drive-thru window anymore. They have a drive-thru automatic door

where the people walk out and there's like a huge heater in there. And it's just like two lanes and people are running stuff out all the time. They're not even hanging out at the drive-thru. They're just walking right out to you. We took a little bathroom break for Michael. And while Michael was in the bathroom, I looked at this real quick.

Duncan and I were talking about this offline. Listen to this. These are drawdowns from all-time highs. Tesla's 72%, Meta, 69%, Amazon 55%, Netflix, 58%, which was worse. If you would have just told me that at the beginning of the year and the S&P is only down 18%, I would have said that's a win. That's surprising that the stock market is actually not down more this year.

Correct? A little? I know we've been talking a lot about this, but if people are just expecting a full reset, the clock strikes midnight on Jan 1 or December 31st, and then it's like, all right, new year, new us. Very well, it could be more of the same. Yes, you're right. It is one of those things. But, you know, it starts over.

year-a-day returns. Yes, and people do change their mindset. I do. Guess what I'll start to January in my diet? Why? I don't know. It just does. It's a mental...

Why do people do New Year's resolutions? They could do that any time they wanted to. And why do they wait until January 1st to do it? Well, you don't. Credit to you. The only reason that I go to the gym year-round is so I can say in the first week of January, like, oh, look, it's amateur hour in here. That's why you go to the gym.

One more thing on automation here before I move from the labor market. Ethan Mollick tweeted this. Just one of the 270 jobs in the 1950s. census has been eliminated by automation, elevator operator. They show how even with all the ATM machines that have been installed, there's still more bank tellers now than there were when the ATM first got in place. He's saying hopefully AI follows this pattern. What, automation destroys jobs but creates new ones. Yes, and maybe it doesn't destroy as many jobs as you think. To his point, again, 270 jobs in the census, and only one of them has been eliminated. Matt Hogan tweeted,

Coinbase raised money in 2018 at an $8 billion valuation. It's currently trading at a a $9 billion valuation. Meanwhile, then, so this is 2018, it did $520 million in revenue. It did $3.3 in 2022. And it had 22 million users and it has $1001 today. And it had $11 billion on the platform back then. It has $101 billion on the platform today. 101 million users sounds way high to me. Does it not? 1001 million users. On Coinbase, that's a way bigger number than I would have thought, just not knowing what that number is. I don't know what I would have guessed, half of that, maybe. So his point is that the business is obviously in a better place and the valuation is

roughly the same. Truth is probably somewhere in the middle. But this is what makes stock market investing hard. The stock is down 89% since the IPO. And the big question is, obviously, okay, it's in a better place now with these revenues. What is the future going to hold? That's where the money is made, obviously.

Always two ways to look at these things. Let's talk real estate, Ben. Lance Lambert at Fortune says, this is just as of this morning. Seasonally adjusted case Schiller, U.S. home prices nationally are down 2. 2.4% since June. That's the second biggest home price correction in the post-World War II era. That's bonkers. Here's the other thing. There's only been two of them. In 1990, 1991, national housing prices fell 2.2%. And then 07 to 2012, they fell 26%. Those are the only two national housing price declines we've had since World War II. It rarely, rarely ever happens. Obviously, the gains we saw we've never seen before either. So the fact that they're coming in makes sense. Did you read this Atlantic piece about homeownership? It's called The Home Ownership Society was a mistake. Jerusalem Demsys wrote this. She's been on Derek Thompson's playing English.

podcast before. You know, read a piece here. This is kind of the main crux of the argument. At the core of American housing policy is a secret hiding in plain sight. Home ownership works for some because it cannot work for all. If we want to make housing affordable for everyone, then it needs to be cheap and widely available. And if we want that housing to act as a wealth building vehicle, home values have to increase significantly over time. How do we ensure that housing is both appreciating a value for homeowners but cheap enough for would-be homeowners to buy in? We can't. And the whole thing is just that telling people that owning a home is this big wealth-building machine was a bad idea to start with because now we need rapidly rising

home prices to make people wealthy or make them financially secure. She also has this chart in here that shows that wealthy Americans rely on housing the least. We've talked about this before. Real estate makes up about 50% of financial assets for the bottom 50%, even for the top 10 to 50%, so I guess it would be the next 40% after that. It makes up roughly a third of their value. My whole take is, without house equity and social security, a large percent of their population would be totally screwed in their finances. If you say, okay, the housing market, we made a mistake, we shouldn't have made it the American dream.

I don't know if anyone would be any happier if Black Rock owned all the homes or whoever is buying these homes and rented them to us, and they were the only ones who took part in the gains in the equity. Yeah, no, I don't think so. The only solution really is for the government to mandate that it's easier to build homes. Short of that, I don't think, unfortunately, it's ever going to change. I see this stat, Ben, I just, I've a hard time believing it.

Which one? Even though I don't doubt the data. Nearly 32% of U.S. home purchasers were paid for in all cash in October. The highest share in eight years. One out of three? All cash? Are there that many people with money? That's how you get out of mortgages.

So maybe investors can be part of it. Also, maybe boomers who sell their other house and can pay in cash. Or I was to say parents buying a house for their children and acting as the bank. That does seem really, really high, though. You're right. Obviously, there's less sales. Maybe another surprising thing. The number of transactions has dropped a ton. It probably didn't drop as much as I would have thought for how much mortgage rates have risen. And maybe it's because of something like this. So here's the thing. Activities dried up, but prices are just taking a long time to adjust. U.S. existing home sales

slid in November for a 10th straight month. The longest streak on record, going back to when the data started in 1999. Existing home sales are down 28% new over year, the worst decline since February 2008. But the median existing home price rose 3.5% of November from a year earlier to $370,000. It was a high of $4.13, but $370 is still fairly high. Did your neighbor sell their house yet? No. Do they roll over the price? I don't think they've lowered the price yet. If I was in the market for a house right now. And you weren't in a rush. I would be making low ball offers to 15 houses. And someone is probably just waiting for a low ball offer to be like, all right, fine, I'll take it. This is from city. Overall households are entering 2023 with balance sheets at least as strong as

pre-pandemic and by some metrics with more room to take on more debt. There's so many parts of the economy that are like the most important thing. Well, not somebody. It's housing and consumer spending. And consumer spending is basically two-thirds of the economy. And so long as the consumer is in decent shape and they have their jobs, no recession. The thing is, I also think consumers will be willing to get themselves out of decent shape into way worse shape. I think people are going to be willing to spend as much money as they can to just keep this thing going. I just don't see a reason for a lot of consumers until they lose a job to stop that. Maybe that's why the Fed wants people to lose their jobs, because that's the only thing that's going to stop people from spending money. We love

to spend money in this country. That's true. It turns out that Goldman is winding down its personal loan business called Marcus. Does that mean they're winding down the whole thing or just a personal loan part of it? Guessing the savings account is still open. The firm will stop making new loans. Okay. It is also abandoning a plan to launch Marcus checking accounts. This is from Semaphore, by the way. After four years and $100 million spent. Isn't Semaphore the arm of FTX for distributing information? Is it? I'm kidding. Didn't he invest in that? I thought he invested in Semaphore. Anyway, it turns out that this for, I'm sure, various reasons didn't work. They spent a lot of trying to make this a big thing, correct?

They had budgeted $250 million for marketing campaign. They were in on this. Did you see what they increased our rate to now? $3.5.3. So they did a much lower hike than the Fed did this past time. All right, let's talk about Tesla real quick. But you know why Tesla is down so much, 72% because savings accounts are paying 3.3%. Right.

Finally, someone says the truth. It's down 59% in the last three months. So Elon's been talking about this on Twitter that it's due to it. macro conditions and the Fed. But look at Tesla compared to the NASDAQ or Tesla compared to the other automakers. I mean, clearly that is a line of bullshit that people should not be buying. So, Duncan and I were talking about this when you were on your little bathroom break. All right, stop relaxing my bathroom break. Just when you have to go, you have to go.

The hardest part about this is Tesla still could be this amazing company, and we don't know how overvalued it was in that runoff in 2020 and 21. It was, it was. up so much. It could still be this amazing company and still sell a ton of cars and change the EV market as we know it. And the stock price might have already discounted that. So, Drew Dixon, this is as of December 20th. So there's a weak stale, but whatever. Tesla had an enterprise value that was bigger than Toyota, Volkswagen, Mercedes, GM, BMW, Ford, Honda, Ferrari combined. And if you look at its EBITDA compared to all of those, this does, I don't know, one-tenth. So bigger than all of those

on an enterprise value level and just one-tenth of the earnings. I mean, that would be my biggest question is just overvalued. If Tesla pulled all these other places into it, I mean, the one thing they have going for them is they're the only company that's EV-only. These other cars companies are still doing

the legacy stuff, some of it still attention stuff. They're still producing gas guzzlers. But how much did Tesla actually pull these other places forward and force their own competition? They sow the of their own demise, so to speak. That's hyperbole, but...

I mean, there's people who've always had the strongest opinions on both sides of the extremes. This is the greatest short ever, or this is going to be a greatest company ever, and it's always been way too hard to wrap my mind around what it means for the stock price. I have a dilemma. That's not really a dilemma,

because I'm going to lose this one, but Robin booked a date for us and the boys and some of their friends. We're taking into, like, a monster truck show. Oh, okay. What's your dilemma? Not okay. Why?

January 21st. Which is? What day is that? Saturday, divisional round of the playoffs. It's like the best weekend of football. Ah, okay. I'm not going. No way.

Not a chance. I'm not going. She goes, all the other dads are going. They're not football fans? Clearly they're not football fans. I'm not going. What do I do? I've been in this situation before.

You devr it. Sorry. No, no, no. I'm not DVR in football. You've never devoured football before? I've never devoured football. Okay. I do that a lot in the fall because

Saturdays we have so many events for the kids. I devr it, and you know how much easier it is to watch a game? Obviously, you lose some of the mystique, but DVRing a football game, there's so much downtime in a football game you can make it through in like 60 minutes. So the divisional round is the most exciting. Those are great games. Here's my out. My only out is if the Giants make it, which let's be honest. It's probably not going to happen. So this is why your wife should be rooting for the Lions. You should want the Giants. Anyway. Not make the playoffs, so you have to go to the Monster Truck trip. I'm going to the Monster Truck thing. but none too pleased about it.

I'll tell you that. All the other dads are going, you can't beat that one. Sorry, she gave you the Trump card. This is like people thought that Rudy Gobert trade was setting the market for Rudy Gobert. Well, just because the Timberl said something stupid

doesn't mean that every other team say that's my predicament. Just because I don't care what the other dads are doing. Why should I go? What if they're not football fans? You watch all season for this. You're not going to win this one. Here's a question, Ben.

Airlines. Also, did you wear that giant sweatshirt just because you're in protest of this? No. Just a comfortable sweatshirt. The airlines, so the most recent debacle aside, and I can't imagine getting stuck in the airport having a flight canceled after months of prep, but that's truly miserable stuff. But the airlines have never been more packed, or they're doing well, I should say,

even though like the makeup's changing. So there was an article in the journal talking about before the pandemic, 12% of airline passengers flying for business generated about half the profits. and their disappearance is problematic. But be that as it may, look at this chart of the revenue for Delta Ben. Jeez. That's a pretty crazy chart. Back on trend.

All-time highs. And the stocks look terrible. Airline stocks look really, really, really bad. They've never been busier, and the stocks are, Delta's down 15% for the year. It's slightly outperform. That's terrible. With as busy as airports have been, you wouldn't expect. So obviously, it's what, higher costs?

harder to staff and paying more money for pilots and all that stuff that's getting them? I would guess. So was Buffett right or wrong to sell these stocks in the pandemic? I can't remember where we sit on that these days. Well, Buffett basically said that he had to sell them because they need a bailout and the government cannot have bailed out a company that was partly owned by the richest man in the world. Obviously, it would have looked terrible.

He sold it not necessarily for economic reasons. But also Warren Buffett cuts his losers quickly. I want to talk about Twitter real quick. you've seen the new Twitter thing where they're now showing the views number. It's not just likes and retweets and quote tweets. It's also views. Like, how many people saw this tweet and maybe didn't do anything? I know a lot of people on Twitter have been complaining about it because it looks stupid.

And those numbers, I'm sure they're not accurate in any way. Because you can see like a tweet with like three likes and it's got 15,000 views or whatever. I actually think it's a really good idea. If you're talking about social media and getting people hit that dopamine hit, if you're someone who tweets and doesn't get a lot of interaction or in your comments, you're doing comments and you see up, I think it's actually a really. really good idea, to get people to be more engaged on Twitter. It makes sense. If you're just going for, I want to get people addicted to Twitter and dopamine hit and all that stuff,

I think it was actually a good business decision. It makes sense. I don't hate it. I wanted to take a look back at the 10 predictions I made for 2022. I've got 10 more for 2023. Some real zingers on the list. You told me one already, so don't you take your victory lap? No, no, we'll do it next week. I'm not prepared. Oh, you want to give your other ones? Okay. Yeah. I want to lay out my new ones and we'll do a quick review of my other ones. Here's another surprise for me this year, if we're going into recommendations. 2022 was the year of sequels, and I can't believe this happened because I'm pretty ardent going on against sequels. I don't like the fact that it's all superhero movies and sequels and old IP that are being reused and reused again.

2022 is an awesome year for sequels. Here's what we had. Top Gun Maverick. One of the best viewing experiences of my life in that Dolby surround whatever, second Avatar was great, great movie. I watched The Glass Onion this weekend. It was not nearly as good as the first one, but it was very enjoyable. Sign me up for another one. White Lotus Season 2.

Better than the first. Game of Thrones prequel. That was... Very good. Strong to quite strong. What else? I'm probably missing something else, but it was a great year for sequels. So I was pretty disappointed with Glass Onion, only because I loved the first one so much.

I rewatched the first one this weekend because I watched the second one. It was two completely different movies, like tonally, and the second one was ten times. more over the top than the first one. I thought it was just convoluted, the storyline. I didn't really care about the characters that much. But Daniel Craig is amazing. He's great. I'll follow that guy. The first one was so much better.

Anytime in a movie you have a detective who walks you through what happened and why. So satisfying. But this is what really happened. The middle of the movie, when you finally realize what's going on and the misdirection at play. I didn't care about the reveal.

It just didn't do it for me. But the audience seemed to like it. It got like 93% of a lot of tomatoes. I'm from the critics alike. I enjoy it. It surprised me. The first one was so. much better, but I still really enjoy it. Kate Hudson's character was always talking about people

canceling her and how she can't say what she wants, but he had a great quote. He said it's a dangerous thing to mistake speaking without thought for speaking the truth. I don't know if he ripped that off from Plato or someone like that, but I thought that was a great quote. Who do you think they were making fun of with the dumb billionaire? Here's my thing, though. I thought about the dumb billionaire. In pop culture, rich people are no longer cool. Remember in like the 80s and 90s, especially like the 80s, doctors and lawyers and rich people were cool. People looked up to rich people. Greed is good and all this stuff. Rich people in pop culture are no longer cool.

Every TV, like, Succession and White Lotus and this, they are making fun of the lack of self-awareness of rich people, and I think it's actually kind of spot on. People want that money and people want the fame, maybe, and the power, but rich people are no longer cool by any means anymore. They get dunked on. No, it's a good feature on Verizon Fios. I was scrolling through the channels the other day,

and it's caught my eye. When you're scrolling through the guide, you see the Rotten Tomato Score. Oh, yeah, it's not bad. I've seen that on a few things. But this one stopped me dead in my tracks. I said, wait a minute, this can't be right. Rocky 4.

The critics gave of a 37? I went to the Rodney's Madison, sure enough. 37. And the audience only gave it a 78. That's 100. I'm surprised the audience score. That is 100 out of 100. That's one of the best movies of the 80s.

Easily. Easily. I saw a really dark film. You ever seen leaving Las Vegas? Yes, where Nicholas Cage is an alcoholic. It's been a while, but it is very dark. Probably the least rewatchable movie ever. Yeah, you watch that movie one time.

Yeah, he plays a drunk who basically drinks himself to death, and it's him and Elizabeth's show. And did you know that he won best actor for that? I did know that. Deserved. I've seen a few Nicholas Cage movies in the last couple weeks, just in and out, raising Arizona and the family man, and Nicholas Cage in the 90s. He had something. He hit an interesting. The arc of his career was interesting.

I was listening to I Am Legend. The rewatchables? Yeah, and I was thinking, hey, wait a minute, is this my favorite Will Smith movie? And I was going through his catalog. I feel like he had a relatively disappointing career, given how incredibly talented he is. Also on the list, I guess, would be Independence Day when I was nine when I first saw it was incredible, but it didn't really age of that well. Obviously, bad boys and bad boys, too. Pursuit of Happiness was very good.

I like Hitch. Hitch is very muchable. Oh, really? It's like the only one I didn't say. It's a rom-com, but it's Will Smith and Eva Mendez. and Kevin James. I like the one where they play con artists. Is Margaret Robby in that?

Focus. That's not bad. But anyway, I think I'm legend. It might be my number one. It's on HBO Max. I listened to The Rwatchables and I went and watched it. One of the best things about that movie, it's only 90 minutes long. If I see a movie's only 90 minutes long, I don't care how bad.

I'm watching it. I really like that movie, too. Here's when I saw. I was going through all my holiday movies. I haven't seen The Ruff in a while. The Ruff. The Ruff. The Ruff.

Never heard of it. Dennis Leary is a robber. And he takes hostage Kevin Spacey and his wife. and they are going through a divorce. And it's kind of the hijinks ensues by he takes hostages. They hate each other and want a divorce. I never heard of it. It's an okay holiday movie.

It's a Christmas one. It's like 94. Here's one thing that caught my eye, though, finance wise. It's an okay movie. Dennis Lear in the 90s was really funny, though. They talked about someone getting an 18% loan from their family for a mortgage. And no one even blinked twice. We talked about high rates, killing everything off.

People just powered through that in the past. That was just the thing. rates were a thing before. Like I'm powering through this cold. Credit to you. For the audience. Was this a good year? It was a tough year.

Not a great year. But a lot to be thankful for. It was a bad year for financial markets. It still, to me, doesn't feel as bad as things felt in like a 2008 or even like the depths of 2020. It doesn't feel that bad to me. There is a disconnect between the economy and the stock market. I think that's the reason.

Will the economy catch down to the market? Will the market catch up to the economy? we'll find all that out and more in 2023. That should be your prediction for next year. What will outperform the economy of the stock market? Because the economy easily outperform the stock market this year. Let's go the other way. I want the stock market to outperform.

I'm saying, put that in a new prediction. Because the economy is not in terrible shape. Let's go stock market. Go stock market, go. Send us an email. Michael will be back with his 10 predictions next week. Animal Spiritspod at gmail.com. Thank you.

Thank you.