Animal Spirits Podcast - Everyone Hates AI (EP. 453)

Episode Date: February 25, 2026

On episode 453 of Animal Spirits, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠���⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ben Carlson⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ discuss the AI doom scenarios, the value of human relationships in a digital world, housing as an AI hedge, the AI backlash, a very weird stock market, the global bull market, consumers keep spending money, Bitcoin is a software stock, the Blue Owl fiasco, the perfect movie run time and more. This episode is sponsored by Betterment Advisor Solutions and ClearBridge Investments. Learn more about Betterment Advisor Solutions at: https://betterment.com/advisors  International and emerging market stocks outperformed the U.S. in 2025. At ClearBridge, we believe this momentum can continue. Find out more at https://www.clearbridge.com/ 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 Feel free to shoot us an email at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[e-mail]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ with any feedback, questions, recommendations, or ideas for future topics of conversation.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠⁠⁠⁠⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

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going forward. Position your investment portfolio for wider equity participation with fundamentally driven Clearbridge active activity strategies. Clearbridge, a Franklin Tepleton company, go to clearbridge.com to learn more. 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. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholt's wealth management.

This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael, I talked to you yesterday. You were feeling a little down, I think. Is that fair to say?

Not down. Yes. Okay. The AI Doom is reached escape velocity. and it's now a daily weekly occurrence where we have one of these big pieces that paints the doom. And as a glass half full guy,

I like the other side of these, but I don't mind the AI doom porn. I think it's good to go through these scenarios. I don't necessarily agree with them, but I think it's probably healthy for people to think through what the potentially bad ramifications could be on these things. I appreciated the craft and the effort

behind the post. I thought it was incredibly well done. It comes from a Satrini research. And this person is not a bare pornographer. Like this is a legitimate research person. They are not one of these people that has been saying the world that's going to end for the last 10 years. So I think that context is important. We'll get into some of what was said.

The part that bummed me out the most is let's say that, I don't know, 30% of it comes true. Who the hell knows how to handicap this? the thing that I was thinking about where my head went was there are people in and around our lives, everybody listening, who are going to be impacted in a material way, and they don't know it yet. And I can see this coming where there will be people that get laid off from a very nice white collar salary that won't be able to replace it. And first they're going to miss a vacation. and then they're going to miss a this,

and then their kids won't be going to camp, and then they're going to have to move. And that is going to happen all across the country, and the human element of it breaks my heart a little bit. All right. Maybe. We don't know yet. We still don't know how this is going to play out.

To me, this is all science fiction still, okay? None of this stuff has happened yet. The unemployment rate is at 4.3%. Come on. Yeah, but isn't there, but isn't there, an inevitability feeling that you had reading this. Well, listen, here's my take... Even if it doesn't lead to 10% unemployment,

I mean, it's not a stretch. Like, it's not... The thing that bummed me out... But the Michael, the bearish arguments always saw more plausible. Always somehow plausible. Yeah. Always.

I agree. This stuff is more plausible than a lot of the other stuff that technology people have been telling us is going to happen the last five to seven years. But a lot of the stuff they've told us hasn't happened. That's true. for me, this feels personally different from every other stock market linked event.

And it is wild that what this piece did to the stock market yesterday, which is already very fragile on thin ice, what it did to Capital One and American Express merely by mentioning what would happen with stable coins. So this piece went mega, mega, mega viral. It actually did move the market. No, it really did. But I feel like for the tariff tantrum, like, I think, I, I, I, I, I, I, I, I think there was a, I was able to look past it a little bit because it wasn't, yes, I guess the global world order was changing, but like it was very easy to see that, maybe not in real time.

That like it was hyperbole that he was going to be able to walk some of these things back and not just the tariff tantrum, but every like market related selloff when in the spring of 2020, when Netflix got bombed out. I know that's like a very, you know, it's a Netflix issue specifically, because they had business issues, right? Like they lost subscribers and they were able to figure it out eventually. this is just so much bigger than all of that. And it does seem like there's an inevitability of some of this happening,

even if it's overblown. All right. All right. I'm going to paint it with a much brighter brush than you are. So it starts out saying that in 2028, you know, the unemployment rate is 10% and the market is down 40%. And the reason for this is because AI leads to white color job loss. That leads to demand slowing because who's going to.

to spend money if a bunch of people losing jobs, and that, in turn, impacts the economy. That's the, that's the, that's the, that's the, that's the, that's the, that's the, TLDR of this piece, right, even though it was a lot longer than this. And it went through specific examples. And it's basically saying, like, listen, AI exceeded all expectations. It's just the economy wasn't ready. It says the AI capabilities improved, companies needed fewer workers, white color layoffs increased, displaced workers spent less, margin pressure, push firms to invest more in AI, and AI capabilities

improved, and it was a negative feedback loop. That's what it's saying happened. And then it's also saying, you know, this is good impact for the mortgage market because people aren't going to be good on their loans. And that was the cascading like, oh, no, here's the doom. Okay? I get it. Hold up.

Before the other side, there was two things in particular that like, oh. And I'm generally always in the same mood. I'm not a moody person. I don't have a temper. I never yell in my house except for where my kids are getting me upset. I'm a very sort of down the, I don't wake up on the wrong side of the bed. But this definitely changed my mood. Financial advice, tax prep, routine legal work, any category where the service providers

valued disruption was ultimately, quote, I will navigate complexity that you find tedious, end quote, was disrupted as the agents found nothing tedious. And here was the coup de grace in terms of like putting my head in my hands. We had overestimated the value of human relations. Turns out that a lot of what people called relationships was simply friction with a friendly face. And that is some real talk. I absolutely don't agree with that at all. I think that's the most wrong thing in the whole article.

Oh, guys. Over to you. Make me feel better. There are so many things we could do right now without human relationships that we choose to do. So the big one that they talked about was real estate. Like, hey, listen, agents are going to be able to comb through everything. Listen, real estate has already been disrupted by the internet. You can go on Zillow and find anything and everything you want about a house.

How much it sold for in the past, all the different rooms, what people have said about it. You couldn't do that in the past. You literally had to go to a house. And realtors still exist because people like working with humans to make these transactions possible. You don't need a human to buy a house right now because all the information is there for you to see. It already happened. And we still require humans. Think about all the things that we could have done this with and we didn't.

Okay. So I think that this is just making a huge leap. This is like saying everyone in the world is going to act like an economics one-on-one textbook. Everything is going to follow supply demand. You're going to look out just for yourself. And that's just not the way the world works. True. The biggest thing that they said that, like, it's going to be disrupted is network effects.

There's going to be no more network effects because these agents will find everything. And I just don't really agree with that. I think network effects are still going to be very important. And you're going to because you look to see what other people are doing to do stuff that makes sense to you. You don't do it just because this is the app. absolute right decision. There's jealousy and envy and what does the

Cildini call it? Like you look to see what other people are going to do and then you do it yourself. Like that stuff still exists. The human element. Like there's no way you can take away the human nature out of this. That's the part of Pete I absolutely say throw that in the garbage. That is not how the real world works.

All right. More practically, Gavin Baker tweeted and Gavin is all over the stuff. He's an analyst. He's a he's a PM. Love the Satrini piece, thought piece. However, it seems unlikely we will have enough compute for the scenario in 2028 or even the early 2030s. Distillation, quantization, and edge AI cannot bridge the gap. AGI is an event horizon with a significant compute dependence.

So I said, oh, enough said. I feel much better now. And then I saw Jake's tweet, Economic, said, The AI will create new jobs we haven't thought of argument falls apart the moment the moment you assume AI will probably be better those jobs too. But here's the thing, though, I thought the best pushback was this stuff costs money. Like, running these agents is very expensive. You can't just say, I'm going to have AI run these agents for me all day and all night,

and they're going to find the best of whatever's out there, and they're going to do it all for me. It costs money. It's going to be cost prohibitive. And then guess what? Other companies are going to say, you're going to have to go through 50 different steps, and you're going to be running your agents so hard, and you're going to spend so much money to do this stuff.

It's not going to be worth it anymore. You don't think that there's going to be hurdles in, And please stop this stuff. Of course, of course, of course. So, all right. On the one hand, I definitely feel bummed out. And I'm not going to say that I feel a lot better this morning. Like, I'm still pretty uneasy about everything.

And there people were, I saw people like, did this only just occur to you? Like, why are people? It is weird that we feel like we've been talking about this for two years now. Like, what AI could do to people. Yeah, you know what? I guess this was just so well done. It just seemed like, yeah, this could happen. And again, there was a million different.

industries that he got into quickly that I don't know if I'm gullible. I'm sure I am to a great story, right? Morgan always says best story wins. This is a really well done story. And I don't know enough about each of the industries to say, oh, no, that can't happen with these agents with DoorDash or whatever. Can I give a market explanation of this, though? This is back to the Kane's beauty contest. This is kind of like how what happened with crypto and what happened to the meme stocks is that investors are trying to think about what other investors are going to do next. What are people going to think the next meme stock is? And so they think, listen, everyone thinks software is going to be disrupted.

What companies do they think are going to be disrupted next? And let's sell those. And I think that's where a lot of this is is just getting ahead of it. So I thought Ben Thompson had a really good piece this morning. He said basically the view in this article and from all the anti-monopolis is grounded in a fundamental lack of belief in dynamism, human choice, and markets. DoorDash didn't always exist, because DoorDash was one of the big things he took down. He said, hey, listen, there's going to be a million apps being created,

and they're going to create their own DoorDash. DoorDash ceases to exist. So he said, DoorDash was built, and it wins through affirmative choice of all three sides of the market it serves, customers, restaurants, and drivers. Does the company have varying degrees of power over different sides of that market based on its dominance of other sides? Absolutely. But that power follows from delivering value, not from extracting it. And that's the whole point is that, like, these companies exist not just because, like,

We use them because they make us use them and we're forced to. Like the human element here cannot be taken out of this. Yeah. Okay. So that part I totally agree with. And also for as not great as I'm feeling, which I hope will pass, I also think that the market overreaction is stupid. So American Express and Capital One falling 8% yesterday.

Now on the one end, I am a big, I am a big efficient market sky. I really am. Not in the sense that markets are, that the prices are. that the price is always right at every time and not that the market can't get drunk, which I think the market is more drunk than sober right now. I do think there's information

in American Express and Capital One falling 8% of the day, but I also think it's an overreaction if I'm trying to like thread that needle. So I am going to buy Microsoft today. I am running into the fire. That's the only thing I know how to do when I'm scared.

Maybe I'm early. I'm sure I am. It's okay. You're like an octopus lately catching falling knives. You got tentacles ever, catching knives all over the place. Daniel makes Michael an octopus for me, please. I know this is,

I've said a million times why this is a bad strategy. And please, this is not investment advice. I'm not trying to make you feel better. I'm trying to make me feel better. I feel like you've taken over my mantle here of being the person who's trying to catch the... Listen, here's a good thing about investing in a brokerage account. You either make money or you make tax losses.

Either way you win. See? That's Michael Math. So, all right, these are the stocks that I'm, that I'm, these are the knives I'm catching. I bought Blackstone on Friday. I'm already down 7%, L.O.L. Wait, wait, we talk about,

we'll get into that later, but all the private market stuff is getting slaughtered because that was part of it too. Private credit is going to get killed in this. Anyway, so Blackstone is in a 43% drawdown. Yeah, I'm comfortable holding this stock. I understand. So here's the thing, oh, these names are risky. No shit.

The stock is down 43% soft. just had its worst month since October 2008. Don't tell me it's risky. I know. The market knows. Instead of buying the individual names, why wouldn't you just buy IGV? You think there's more money to be it? Because I'm buying, I bought Salesforce and Service Now.

These stocks are both down. And I'm down 7% on each of these names, by the way. Just full transparency there. I want nothing to do with these stocks. Fair. Listen, maybe I change from mind next week and say, yeah, I sold it for 10% loss. service now is down 57% Salesforce is down 52%

Those I am definitely not getting married to But like Netflix, I'm not selling Netflix I bought Netflix last week I'm not selling Netflix I don't care what happens I sold it a couple weeks ago Okay I feel like see we've we've changed spots here That's okay listen I'm changing my mind every other day

S&P Global not scared I bought Crash Strike yesterday This seems like a really really really really stupid overreaction Like you're gonna clawed away Claude Caudaway, their cybersecurity, get the fuck out of here. And about Schwab. That never would make sense. And I'm buying Microsoft at the open.

If AI is so powerful, I think Microsoft does a buy down 30-something percent. It is kind of funny. You can't have these two competing ideas that AI is going to kill the technology industry, but it's also going to be so powerful that, so these tech companies have to be part of this. Let's also say that right now, yeah, the market looks abominable. There's no evidence. So this is where I'm taking, I'm going against my money. The market looks fine.

These stocks look about. Okay. The market's 2% from highs. I've always said to people, and this is maybe not watch what they do. I don't know. I'm being a hypocrite. Wait for any evidence that there's a bottom. Wait for a higher low.

Wait for the sellers to dry up. The sellers have not dried up. They've got all the ammo. I don't care. I'm running to the fire. Here's one thing that I might. The sellers are David Goggins running an ultramarathon. Here's what I take comfort in.

There you go. It's not hard to imagine us laughing about this in six months at all. Think about how fast sentiment changes. I think when we get to 2028, they're going to look back at this piece and go, why did people believe that? I totally wholeheartedly believe that in 2028, people are going to look back and go, oh, my gosh, how could we be? Of course, of course.

Think about how fast narratives changed last year. And over the last couple of years, this can, it seems really hard that this is all of a sudden going to dry up because this fear that is spreading rapidly, it's COVID. It's a virus.

And we're not going to get vaccinated and all of a sudden like, or a magic wand, Bing, forget about it. So that's the part that it's like, it is hard to foresee this changing or stopping at a dime. But things change.

Narratives change. There was a story flying around Twitter yesterday of someone from META who put an agent to work, and it went through and deleted all of emails. Even she said, don't do it. There's going to be a story where someone's going to be using this software, you're using Cloud or whatever, and it's going to make a mistake, and everyone's going to go, oh, it made a huge mistake.

I feel way safer in these software stocks. That's kind of thing where AI is going to have a mistake, because, of course, it's not perfect. That's going to have it. I want to talk about one more thing with this article. He talked about how the real estate market is going to get hammered, right? I actually think that real estate is the best AI hedge that there is. I think the physical world becomes way more important

in a digital environment, in a digital world that we're moving into. And I think, especially if you really believe in the AI case, that it's going to be deflationary, rates are going to fall, guess what the government's going to have to print more money? That's the other thing that this piece didn't mention is the fact that there's going to be a fiscal response

and a political response. I think in that scenario, I think housing prices are going to be one of the strongest hedges against AI that there is because we're obviously not building more of it. I thought, anyway. I guess what he said, which was like what happens when the top of the K gets busted and we start seeing mass unemployment

and the mortgages are no good. Yeah, that to me was a stretch. Whatever, listen, it was a good piece. Really well done, obviously. Here's the thing. For your worry about all the white color workers going out of jobs. So he mentions tax client, taxes, lawyers, there's going to be when lawyers don't have to hire paralegals to do all this grunt work and they don't have to be reading all the time, guess what there's going to be? There's going to be a million more lawsuits. There's going to be a million more people that you can do taxes for. There's going to be more financial advisory clients. There's going to be more medical testing.

Think about if you can use an AI chatbot for customer service, think about how many more complaints there are going to be. And someone's going to have to take, go up, run up the poll, and then take care of those complaints. Good take. Okay. There's going to be more media. There's going to be more work to be done.

We're not going to be laying on a hammock doing nothing. People are going to be doing more work with this. I completely agree with you on that front. I completely agree. No hedge. Think about what? By the way, you know what's funny? Open eye ain't shit.

Nobody was worried about chat Chb-T f***ing up the labor market. At all. You're right. Anthropic is the one that did it. Facts a lot anthropic. Everything was hunky-dory. People were laughing at Sam Altman.

This thing gets everything wrong. Don't worry about it. Here's the thing, though. And then comes Darya. So last week we talked about how, like, is AI a mistake and people are going to hate it? And the media picked up on that narrative really big this week. Time had this article.

But wait, hold on, just before we shift on to this point of it, I just want to stick with the productivity, the workpiece of it. Okay. Think about how much better you're getting at the work that you do as a result of having access to these tools. I feel it. I feel like every time I open these things up and I type something in and I'm talking to it, I feel like I'm getting so much smarter, so much more effective. being able to communicate and understand. But are you, is it making you work less?

Are you working any less because of this? No, no, no, no. Exactly. Same for me. I'm working more. I'm doing more stuff because of AI. I'm not working less. Right.

So that's the part of it that gives me hope and excitement. And again, I'm not saying it's all doom. I'm just saying that some of the stuff like the stuff I said at the top of the show about people that we know that are going to be made obsolete. Like that's, that sucks. It's, it is fair to think that the transition is going to be bumpy. It's just, it's kind of crazy that something. like DoorDash and Uber were created, and now we have three million people doing these jobs,

and then you look ahead and you go, oh my gosh, autonomous vehicles are coming. What are those two or three million people going to do? But what did they do before? That's like, that's the thing is like how dynamic this you cut. But you're right. I totally agree with you that the transition period for millions of people is going to be very painful. And I don't think anyone wants to look at the mirror and go, that's me. Even though, I think a lot of, I think a lot of tech people right now are doing that. Anyway, thinking through all this doom porn, though, this is why Everyone hates AI. Sorry, I will let you get to this piece.

But that's also what is putting such. That is also why the stock market feels so bummery right now. We'll get to the overall stock market, how well different parts of it are doing. But that's what can shift like the what would stop the buy the dip mentality. It's like, well, if I'm like sort of anxious about my job, I'm probably not psyched to put money to risk that I might need. Yes, right. Yeah. people, if it changes people's appetite for risk. And we've kind of wondered, like, boy, it seems like

this risk-on attitude for this decade has just been unstoppable. What could stop that? And maybe AI is that thing. You're right. Unreal. Okay. Let's get to this cover. All right. I totally understand why people hate AI. We started to see last week. Time did this thing about the people versus AI. It's called like the growing backlash. The New York Times had a piece called People Loved the dot-com boom. The AI boom, not so much. And they interviewed this guy who's a co-author of Boonbus. He said, I can't remember a boom with such active hostility to it. People used to find new technology exciting. It happened with electricity, bicycles, motor cars.

There were fears, but also hopes. AI is notable, perhaps, unique for the lack of enthusiasm. Because, duh, hey, do you want a CAPEX bubble or a bunch of job loss? Which one do you want? No one wants either of those things, because that's what's being presented to us. And I think the tech people have done a horrible job of telling people why they should want this technology. I think that you can't. The tech people and Blue Owl shared the same PR manager.

Right. Sam Alvin needs a new payout. And he's not the guy to lead this because he was telling people, listen, yeah, it takes a lot of energy to run AI, but it takes 20 years of life and food before someone gets smart enough to work at a job. This guy, he's not the person to do this. And so the thing we're learning is that tech people, obviously, their intrapersonal skills are not very good.

And that's one of the reasons why I think that they're overlooking the fact that the human element of this because they're not good at being humans. No offense. They're not good at the emotional side. They don't have IQ. They don't have EQ. There's a deficiency of EQ among the tech leaders, and they don't understand that part of it.

And they just assume everyone is going to be a robot, and that's not going to happen. But I totally understand why people hey-to-I because the way that they're presented is, listen, you don't even know what's coming. Just wait. You have no control over this. There's no stopping it.

Job loss. And it's like, why would I want this? So my question is, what's the political blacklash going to be? If all this stuff comes for fruition, we're going to have a socialist president in three years. Jamie Diamond was talking yesterday at an investor event. And he was saying, like, for people running companies, if you can eliminate $150,000 jobs

and replace them with $20,000 line item expenses, like, are we sure we want to be doing that as business leaders? Like, is that good for society? And I hope more CEOs are thinking like that. You're right. Jamie Diamond probably could snap his fingers and replace a lot of the people at JP Morgan with AI. But politically, how does that work for him?

Finanials are a regulated institution. Is the government going to let kindly if you just all of a sudden let go of 25% of your labor force? No way. So there's going to be other human elements to this, these decisions, like career risk, right? Do we trust government to step in and make good decisions here? That's the problem. Because I think a lot of people think, well, listen, in 2020, we learned the fiscal response when something like this happens, we throw a bunch of money at it and the economy's fine.

So if this happens with AI, we'll throw a bunch of money in it. But yeah, you're right. I don't have faith that the government is going to like thread this needle. I think they would have to, they'd probably wait for a crisis first and then do something. That's my worry. Here's another interesting thing. Somebody tweeted, who is this? We sort of hit on this last week.

James Wong said, I followed tech for 25 years and I've never felt a larger gap between the million people using Codex Claude and the rest of humanity. And it's like, are they, are they gaslighting us? You know what I mean? Like, are we just believing? Or is the rest of the society just like walking dead and they don't even know it yet? I'm sure it's not either or. It's probably somewhere in the middle, hopefully. Don't you think it's possible in the future that people are just going to be using these tools and they don't know it?

It's going to be part of their life. And it's like, oh, that's easy. But they're not going to like celebrate it every day. it's just going to be slowly ingrained into our lives. I don't, the tech people still want it to be like, boom, this day, it's like BC and AD, right? All right. I don't think it's going to be like that. Maybe there's a prediction market for this.

Will unemployment be over 10% in the next five years? Oof. I would need a caveat there because it's like, is AI going to cause a massive recession? Well, yeah, obviously. Obviously, that's it. Will unemployment be over 10%? No, but I think some people think that there's going to be a, you're going to get this, this unemployment in this, at the same time, the economy is booming. That's what the AI people are trying to tell us.

Productivity is going to go through the roof. You're going to get huge unemployment. All right, that's a separate, that's part, that's part two. Will unemployment hit 10% or higher in the next five years? I would say, I would say no. I mean, you're going to need some pretty juicy odds to make me better. Not that I would bet on that, but. Right.

You say no? I say now. Some of the stock market. So last week I said, you know what? I'm still bullish, like the macro back job. Sorry, I'm going backtrack one more time. So you said like you were walking on, I like try to talk to my wife about this occasionally. And you're right, there's a lot of people.

There's what percentage of the population just isn't paying any attention to this? 80? No, more. More? Yeah. Like most people that just aren't online that just live a normal life, why would they be paying attention? And the other thing, I think a lot of people assume Twitter is. is like this dead place.

But Twitter is the reason all this stuff has blown up in the last month. If Twitter didn't exist, this stuff doesn't blow up as much as it used to it. So Twitter is still like a market-moving mechanism for even for warts at all. I feel like they try to change something to make me hate it more all the time. Like the way videos play now is way worse. The way you read stuff and links is way worse. But they keep trying to make it worse on purpose, I feel like. And they can't make it go away, though.

Anyway, let's talk about the stock market. Okay. So last week I said, I think this is healthy. Like, rebuilding the wall of RIA is a good thing. You need that. I love that the stock market is that that stocks are outperforming the stock market, like 65% are outperforming the index highest on record or something like that. That's a crazy highest in the last 50 years from Ned Davis.

66% of index constituents are up performing the S&P itself, which is nuts. Yeah. Especially since you hear about all these stocks crashing, you would never think that. I do love that. And I'm not going to change my team. there. And the macro backdrop is still good, like inflation, okay, consumer spending. See, this is what's funny to me about your strategy. Instead of buying, instead of doubling down and buying these areas of the market that are going up, you're trying to buy the one that are going

down. Usually a momentum trader would say, no, no, no, I'm going to keep, I'm going to buy stapled in industrials and materials. Okay. We haven't spoken about this, and maybe we will at some point, but we have a strategy internally that I put a lot of my money into the momentum strategy. me too because I don't I would rather have an algorithm or rules pick my stocks than me that's why I've decided to you know what I did you said you're going to do this I sold all my individual stocks

like three weeks ago and all I have is this one rules based strategy so I told bet I'm done picking individual stocks I'm just gonna I'm just gonna put I'm just when I want to buy stocks I'm just gonna put it back into whatever strategies we run internally and one of them being a momentum one and I meant it I did meet it

and then sometimes opportunity to strike I didn't think that crowd strike was going to fall 15% in two sessions. Like, I meant what I said three weeks ago and then the world changed. All right. So getting back to like the backdrop, like everything fine. Like earnings, revenue, top line growth, multi year high, things are good. The thing that worries me, there's two things. One is the rotation, the hard rotation into risk off names out of discretionary

and not just the cap weight, but the equal weight basket into staples. That worries me, seriously. And... So this is more like a late cycle kind of stuff, right? And just the... Just if the Mag 7 keeps getting killed, like the market can only take so much. So right now, Microsoft is down 30%. Apple's fine.

Meta's not doing great. Amazon's not doing great. Google's fine. And video reports later this week. Like, I feel like the MagS7 as a group can't fall 20% without the market, without bringing the market down. Don't you feel like we're at the point where everyone kind of assumes we deserve to be in a correction right now? Like, it should be worse.

It should be worse. It should be worse. I just said that revenue growth is added in all the time. Revenue growth is accelerating. The market is forward-looking. In 2028, this market's going to be down 38% remember? Right. So might as well get to getting there now. Yeah. But you know what?

For all of the anxiety that I'm feeling and I'm sure I'm not alone, Listen, imagine people that like, what if you're a Salesforce employee? What if there's a lot of people probably listening that work inside these companies. Yes, I agree. Michael, shut up, asshole. Oh, you're down 6% in Salesforce. This is like my life. Yes.

If your retirement plan was all based on I'm going to get shares in these companies and now my shares are down 60%. It's devastating. Yes. Yes. I totally get. But here's the thing. If we do get an AI-induced sell-off, if people like start extrapolating and oh my gosh, if this technology is as great as they think.

it is, I think it's going to be a wonderful buying opportunity. I think every beer market is a wonderful buying opportunity, but I think that if you get a tech-induced innovation sell-off, and as we sort of slowly but truly integrate this into our society, I think that's a fantastic buying opportunity. How about this? You heard it here first. All right. If you've ever said buy when there's blood in the streets, if you've ever used that quote and you're selling here, you're a clown. I'm not saying you have to buy, but if you are selling right now, you don't get to quote Warren Buffett ever again.

Fair? Mm-hmm. Okay. So the Mag 7 is in an 11% drawdown. The equal weight index, or let's use the cap weight actually, just apples for apples. The cap weight is down 2%.

Unbelievable. So I'm not suggesting that the Mag 7, which is what, 35 to 40% of the index, I'm not suggesting that 35 is bigger than 65, but I'm just saying if the max 7 falls 15%. Forget about it weighing mathematically on the market. I'm saying the psychology of the market is going to shift. I agree. It seems like there's only so long that these stocks can crash without people saying,

okay, now I've got to sell something else. Exactly. That's my take. So if a lot of ifs, a lot of ifs. You know what I'm doing? Every month I buy stocks in my IRA, every paycheck, every, every, every, every, twice a month, I buy my 401k. Twice a month, I put in my brokerage account.

Once a month, I put in my kids' $529 plan. And AI is not going to cause me to change that. Ever. Yet. Of course. No, of course. Listen, auto buys for the win. Always.

If you really think AI is going to be this disruptive, invest in the stock market. Okay? If profit margins are going through the roof and profits, like, the stock market is going to be the savior in the future. Okay? I totally disagree with the fact that, this is going to cause a stock market collapse.

That makes no sense to me at all. Keep going. Okay. Oh, this is a good one. All right. For financial advisors, we built a platform called Exhibit A. We've spoken about a million times. We do these charts of the week, different charts,

upload your logo, your color scheme, blah, blah, blah. We're working on something. I'm going to be doing some more commentary there. Yeah, well, we'll tease that later. Yeah. All right. There's a great chart that chart go created, chart can mat, that shows the number of 1% up and 1% down days by decade.

And the average is 507. We are halfway through the 2020s, and we're basically right at the average. This is, are we going to break the record? So this shouldn't happen. The thing is, this shouldn't happen in a bull market. This should happen in a crappy market, right? Right. This is, it's all weird.

Yes. Anyway, things are just happening way faster these days. The repricing. So there was really, everything is like pretty much in line with like they all cluster in a pretty tight range. As you would expect, like market, like normal markets. The 20, the 2000s was through the roof, right? Yeah, the dot-com bubble and the GFC. So that was 840.

But we're on pace to smash that, which is kind of. nuts. Yeah. It's been a nuts. It's been a crazy decade. It's only going to be crazier. Yeah. These overreactions aren't going to like just die down all of a sudden. You know what? Right. Can I put it in some hedge and trades? All right. I'm buying Microsoft right now. So Microsoft, I'm looking at the Mag 7, is down 21% on the year so far. Oh, it's what? Down 30% from its eye? Yeah. So three of the Mag 7 are down more than, are down double digits this year. That's Tesla, Amazon, and Microsoft are all down double digits.

Microsoft being the worst. All right. Godspeed. Listen, if I'm wrong, I'm a big boy. I've lost money before. Many times, I should say, many times if I lost money before, not to brag. But do you think that the Mag 7, so I saw that you have the global breadth chart in here showing that the most number of markets near highs in over 20 years, and this is like the global stock markets. If the Mag 7 and AI, takes a bigger tumble here and software socks continue to get hit. That's not going to impact overseas markets at all, is it? Like, that's the, that's the hedge, isn't it? It depends how bad it gets. I mean, obviously in a bare market, or correlations go to one. So it, I guess it, if the, no, the max haven't fallen 40%, the rest of the market will tumble to, no?

Okay. That's, yeah. All right, I am actually buying Microsoft. Bear with me. First time, a long time I've done this on the show. Locked in. All right. Let's move on. Market order kind of guy? Market order.

I mean, especially with a stock like that, right? Isn't it a new move to buy in the first half hour of the market, first or last half hour? I don't know, man. I'm scared I'm buying. Okay. All right. This is a good chart. It's so far.

I mean, it's markets, man, am I right? How much fun? It's unbelievable how, I know we're broken record here. Broken Horse, Dead Horse, Dead Record? Walking Dead. Yeah. Beating a dead record. Dead man walking?

Never saw that one. Sean Penn. Not a good hang in that movie. Oof. All right. Of course, coming into 2025, it was like, all right, came on. I'm sure there were many episodes where we said, is it even possible that we avoid a AI bubble?

That's how we were talking. Right? Like, eh, probably not. It's probably coming. Wrong. All right, here's a go one. Steve Donz tweeted, I definitely did not pronounce his name right, but there's a, there's a line, a diagonal line over the A. I don't know which, I don't know what you do.

Is that Don Zay? Don's eye? Who knows? He has a chart showing global IT sector in the late 90s and the global IT sector today. and the 90s chart shows the price and the earnings. And of course, the price diverged bigly from the earnings versus today where the earnings are ahead of the price. Nothing like the 90s. Couldn't you say- Nothing?

We never really, so like we're already separating the wheat from the chaffer, we're trying to. And it feels like people are in the stage of, the surprising thing to me is that, where people are more looking for losers than winners, right? It feels like when this, usually in innovative bubbles, everyone's looking for winners. It was not like this in the dot-com bubble where people are trying to figure out, who's the losers going to be?

Let's sell those suckers, right? This is different. A great use of suckers. We never really got our like blow-off bubble here because people are looking for the losers as opposed to the winners. Which, by the way, let's assume that we're like somewhat in the vicinity of a bottom, right? Let's say that the S&P falls 10%, I don't know, whatever.

that we don't like the wheels don't come off. As shitty as this feels, I still maintain this is a much better outcome for all of us, stock market investors. Because had it gone, how'd the S&P gone straight to 8,000? You know it's coming back. You know it would have come back.

This probably is a better outcome. I agree. All right. Oh, speaking of 1999, I haven't told you this. I've been slowly getting back into the Sopranos. Okay. So we didn't have HBO growing up.

No, me either. That was a sign of wealth for me. When I grew up, if you had HBO, you were a rich kid. Yeah, so I definitely felt like from that angle, I didn't feel very good about my standing in life. It is funny how everyone has every streaming service now, it seems like it. But back then, like HBO was a really big deal if you had it.

Yeah, so however old I was, as a 13-year-old, you say, you're not watching this past? Eh, I don't like it. But do you remember when you'd get a free weekend once a year of the movie channels? Yeah, it was nice. Oh, man. Yeah. That was a great weekend.

Anyhow, so I'm on season three. And I'm not like plowing through it because I just fall asleep in 20 minutes. But it's a season where Tony and Ralphie are fighting. Anyhow, I was at the dump last week. Guess what's not being disrupted by AI? My dump runs. Your favorite plays. Gandalfini, that's the best TV acting in history, though, right?

There's no one that has a better performance than him. Maybe John Am and Madman. So absurd. I can't get used to it. Really? Okay. I think he's the best TV character of all time. That's where I landed on Sopranos. There's a lot of really bad acting in that show,

though that's the thing that, like, is kind of hard to, isn't there? There's a lot of not so great. So anyhow, I bring this up because I was at the dump, and I saw something that just brought me back to simpler times. A box of DVDs and CDs, and I couldn't. Oh, wow. You take a look. I couldn't help but give one of the, one of these.

And so the Sopranos was on top. The Sopranos DVD was on top. So back in the day, like when I used to live in like in a story in Brooklyn, people would leave on the sidewalk a cardboard box of books, CDs, DVDs. And there was just, that was, that was peak life from me. You would stop, you would look, well, what do they got to? here. I'm glad I never got into the collecting DVDs.

I was obviously one of those maniacs. I would go to Blockbuster, get two for 10. Or was it two for 20? I spent all my money on DVDs. Not a great investment, but good memories. What's your retail flowch?

All right, check this out. You mentioned like global breadth, global stock markets. The number of markets overseas near a 52 economy, I'm sorry, more than 2% above their one-year peak has jumped to its highest level since 2004.

So amidst all of this, global markets are on fire. But that's what I was asking. So that's why I say, like, I don't know, man. I know I'm flopping around like a dead, like a dead fish. But it is hard to get too bearish when the global markets are like this. That's what, I mean, the pushback would be, listen, this is the peak before, with it because I'm thinking the S&P is almost at all-time highs, global stock markets are breaking out to all-time highs, the economy is still growing, interest rates are falling, inflation is relatively

benign, and the unemployment is 4.3% unemployment rate. It hasn't happened yet. So people say, no, no, no, no, this is the worst before, this is the best before the worst comes. That's the pushback. I don't know. I go back to the Charlie Munger line. Like, if you're not, if you're not confused, you're not paying attention right now. Software stocks are bouncing pretty hard the open. Salesforce is up 5%. Who knows? Let's see what happens at the close.

This probably could easily fizzle. All right. Hit the sell button. I'm not selling. I'll sell when I'm down 30% or up 2%. That's it. There's no between. I've got a great risk reward here.

Okay. This is a good one. Exchange traded call options are slowing dramatically. from retail. Yeah, people are, people are, people are scared. Oh, okay. So the, the bullishness, it really, really peaked towards the end of the last year.

And now people are pulling back. Okay. Yeah. That's interesting. All right. Here's a great chart showing why investing is so much fun and so exciting and so frustrating and so maddening and probably a great chart on why you should just index, but I can't help myself.

I mean, I do index. Who am I kidding? but why I also love the, love the game. So Netflix, clearly, clearly a global winner, right?

It won streaming. Now, of course, it's not, it didn't win, it's not the only winner. YouTube, we get it. But Netflix beat Disney,

it beat Paramount, it beat Prime, it beat Max, like it won. It's not even close. No, it won. There's no, the,

the, and the war is over and Netflix is the winner. Right. Okay. And if I gave you the financials of Netflix and the free cash show, you'd be like, wow, five years ago, I would have loved to buy that stock. Netflix has underperformed. Not just the, not just the S&P.

Netflix is underperformed, let's say the average stock over the last five years. Netflix is underperformed the Equalway, more specifically. Netflix, the, the, The biggest winner of one of the biggest categories of the decade has underperformed the equal weight S&P over the last five years. Why would you ever buy another individual stock ever again, I say to myself as I'm buying another individual stock at the open? Do you know how much less brain damage I have now that I don't have to like check my app every

day to see how my individual stocks are doing? So it's such a freeing feeling. I know. Why am I doing this? It's fun. It's a game. It's like, it's entertaining. right? It's part of the game.

All right, so I was thinking all the crazy stuff we've thought about. This is like in the, when you hear the bad stuff, excuse me, when it doesn't happen, you just kind of move on. Remember how long we debated hard landing versus a soft landing? That was the number one debate in finance. And then it just went away. And then it just went away, right? And that's what happens with a lot of this stuff. All right. What does Lexi Cartier have for us this week? Okay.

Let's talk about something fun. Let's talk about how AI is impacting the labor market. All right. Average monthly job growth in AI-affected industries over the last three months. So in here is management consulting, graphic design, office administration, telephones, call centers, computer systems,

and a bunch of others. And it's just negative. This is not AI related, though. The reason this happened is because look at how many more jobs they put on in 2021 and 2022. True. Over hired. True.

So there's still not an AI. story yet. Okay. Warren Pius has another chart showing AI exposed versus non-I-exposed payrolls. And I don't know what's exactly in here, but I trust Warren's intuition, not intuition, skills, research skills here. And these charts are diverging bigly. This is payrolls. Okay. All right. I mean, there's no doubt about it that this is a thing, right? Like, companies are not to be hiring at the same level as they were. I agree. I actually think that If we're going to have this mass unemployment, it's not going to happen on its own. There's going to be fewer job openings.

And it would be in the recession scenario, that would be when this really drives into hypergear, right? Because in recession, people lose their jobs and then they don't get them back. That would be the fear for me is that it, that's, I don't think companies are just going to rip the bandit off and just do mass layoffs outside of a recession. You know, it's not, Market Express is not bouncing today. That's interesting. Let's see what else is going on. Are the asset manager is bouncing? A little bit.

All right. So I thought this was interesting. I think this was Goldman Sachs via Samarrow at his substack. This is interesting. So, and maybe why a lot of this is just really feels like it's overdone. One nugget buried in the January jobs report was a notable drop in tech employment over the past few months. And the recent disruption in software stocks could foreshadow further pressure down the road. But it is worth keeping in mind that tech employment,

it counts for only 2.3% of overall payrolls and software publishing for just 0.4%. So as big as tech is in the stock market, as far as the economy goes in the labor market, it's still a tiny, tiny piece of the labor market. Because guess what? You don't have to hire those money of people in tech. We've talked about this. That's one of the reasons it's so profitable in a big profit margin. So just because you're seeing a bunch of software people potentially losing their jobs

or laid off, that doesn't mean that it's going to impact the entire labor force yet. All right. Let me read you some quotes about the economy from the transcript. This is from Thomas Pederfee, CEO of Interactive Brokers. There are two economies in this country. If you listen to the BLS, the economy is doing great. If you listen to the big firms that are making huge capital investments, the economy is doing great. If you listen to the newspapers and the television, the economy is doing extremely poorly.

So I don't know quite how to interpret that, but I believe the economy is doing great and it will continue to do great, okay? I don't interpret that. The media is negative all the time now. Right. Everything is bad. That's how you interpret that. It's been like that the entire decade for the economy. economy. The economy hasn't changed at all, really. In the past, I don't know, three years,

you're right. You're right. The view of the economy has. Nothing has changed in the economy. Walmart, CEO, across our customer base, spending continues to be resilient. In the U.S., we see the customers choiceful in their spending, okay? Capital One, the one word I would use to describe the consumer these days, and everything we observe at Capital One is the word stable. Let's just start with the store from a macro point of view, things despite all the noise in the economy, things are pretty stable. And lastly, this is my favorite one from Truest Financial CEO. I'm sorry, senior EVP. Consumers' beliefs don't match their behaviors. And my dad used to tell me a long time ago, watch what people do more than what they say. And you'll learn a lot more. So they're giving

surveys or taking surveys that sentiment may not be as high as we would hope that it would be, but what they're actually doing is totally different. They're spending, they're active. and so that's something that we're seeing. You could have said this every year. These quotes could have been read every year since 2022, and it would have been true. It's been the same thing the whole time, this whole economic cycle.

It's the same thing. People say they're bearish and they keep spending money and they don't act bearish. All right, let's talk about some funny AI stories. A $7 billion Japanese toilet company just discovered its ceramics tool can be used to make bleeding edge AI chips.

That's a $60 billion market. Their stock is up 60% on the news. That's a funny story. Right? Okay. Mike Isaac, Amazon's internal AI coding assistant decided the engineer's existing code is inadequate, so the bot deleted it to start from scratch. That resulted in taking down a part of AWS for 13 hours and was not the first time it happened.

And everyone and their brother pointed out this actually was a plot on Silicon Valley the show. Like the AI bot decided to like just delete stuff. I rewatched the first season in the last five years. That show particularly... that early was so funny. Mike Judge is a genius. He is such a genius and ahead of his time with office base and idiocracy and Silicon Valley. But don't you think that's going to be a savior for, I keep saying this. Stop. Like, AI is going to start making mistakes. Of course it is. It's going to do something. And that's when people go, okay, I'm going back in the loving arms

of Salesforce or whoever. Like, I can't, I need someone to blame if there's a mistake. I can't have the vibe coding do a mistake for me. The push and pull is humans always figure it out, right? We've always adopted new technologies and like, yeah, but this technology is different. And Michael, people, there literally used to be a job of someone would walk around and light gas lights before electricity was around. People would knock on people's windows because alarm clocks didn't exist. They used to be telephone operators. I know, I know, I know.

There used to be elevator operators. These things all used to exist and they don't exist anymore. Yeah, we all know all of this. to me why that's like sort of erroneous is because none of the inventions and the new technologies that to place specific industries like the blacksmith, for example, it wasn't like a technology that applied

that could be applied to every single sector and industry and job. Like that's the obvious difference. But it can't. You're not going to displace a plumber. The person drywalling is not going to be displaced. I know. You're right.

The reason this is so scary because it's coming for white-collar workers. Because for blue-collar workers, that took place over 30 or 40 years. And you're saying, this is happening faster. That's why it's so scary. Okay, this is hilarious.

Charter has a chart showing the free cash flow that companies burned on their way to profitability. They're looking at Tesla and Netflix and Uber and just for context. Netflix, which was spending, I remember when they were spending $7 billion on content and people were like up in arms, like this is irresponsible.

It's crazy. And it was. It's easy to say now that they want, but it really did seem nuts at the time of how much money they were spending on content and how much free cash flow they were burning. So Netflix burned $11 billion. Tesla building electric vehicles burned $9 billion. And Uber building out this three-sided network built burned $18 billion. Open AI is telling investors that I think through 2030, they're planning on burning $218 billion. So if you could right now in their public, short Open AI and go long claw,

Anthropic, would you do it? No, because OpenAI would be down 70% and the cloud would be up 40%. But wait a minute. Which corporation has the biggest partnership with OpenAI? Microsoft. What stock did you just buy? All right. I just sold it.

All right. Going down to the ship. All right. So Bitcoin is still just a software stock. The charts line up perfectly. I know like the analog charts aren't always right. But this is pretty right. It's amazing.

It's kind of amazing. It's just, it's a software stock. But I guess it makes sense. Maybe we're retrofitting the narrative, but it is software. I guess. It's code, right? I just don't know how this happened. With all the things that Bitcoin was supposed to be, how it ended up just being like

a software stock. It's really surprising to me. With all the stuff that we read about it over the years and all the podcasts and all the think pieces and then it's just, it's a risk on, risk off software stock. Maybe that'll change. Right, crazy, let's talk about real estate. Let's talk about some real stuff. Crazy chart from Mike's... But by the way, hold on. Just one last thing. I probably said this already. The, everybody back in the boat can happen really fast.

Oh, yeah. I agree. Yes. Like, well, the deep seek thing lasted a weekend, remember? This is longer than that, obviously. It sounds implausible now given how, you know, whatever. Because it's not, because it's not going to end, right? The threat is not going away. It's just a matter of how investors interpret and digested and react to it, which is, you know. All right. Mike Simonson says this just blows me away. He has inventory change from 2019 to 2026 by state. So, for example, Michigan, the inventory is down 40% almost. New York is more than that. Texas inventories up 42%. Florida is higher. A lot of places in the southeast are higher.

This is showing that like the bifurcation we're seeing in the housing market. Like it's, it's not a net, it's always been kind of a local market. But I feel like for a few years, there, it was what happened nationally impact on the housing market. Now it's totally changing. And the location matters more than anything. It's like a buyer's market, but there's no buyers. People still don't want to buy. There's a house on my street on the water, listed for $1.2 million. And it sounds like an absurd price and it is. It's not a big house. But this would have gone in two seconds. Right, because it's not water. And I don't know. I mean, there's just, there's no buyers.

Yeah. Look at this. In Illinois, it's down 70%. Did buyers dry up? Like, did, if you wanted to buy a house, you would have bought a house? That doesn't make sense because there's demographics-wise. Or how about this? If you wanted to buy a house and you could have afforded to buy a house, you already did?

Yeah. I mean, there's still activity, but it's just, it's certainly slowed. Maybe the risk appetite of change. Slowed. Pending home sales hit like an all-time low? Did you see that chart? Modern, yeah. Not great.

The company pool, pool, the ticker's pool. What's the name of that company? Pool something. They pool corporation. Sales, they just reported last week. Sales are down like 1% I think you're over year. Well, think about how many pools were pulled forward during the pandemic. That would have happened anyway.

Yeah. All right. We'll do blue owl real quick. If you want to hear a deep dive, I suppose. to Brian Moriarty yesterday on the Talking Wealth podcast about what happened here. To me, this is not one story. It's a lot of things happening. I think this was a, this was a PR mega, mega, mega, mega fail.

Like mega fail. So the story with these BDCs, these business development corporations think publicly traded private credit or not even publicly traded, some are listed, some are not listed. It's private credit. These things first started to go sideways to south when interest rates peaked and started to come down because these are floating rate loans. And they worked really, really well in 2022 because it kept up with increasing interest rates. It didn't destroy the price.

And there was really very little defaults. So in 2022, this thing was a home run, especially compared to bonds that were down 15%. And then money flooded in. And there was a lot of questions. Like, wait a minute, how are you putting the money to work so fast? Like, are there really this many decent loans? What are the underwriting standards look like? And of course, investors, like, this is what we were asking over the last couple years.

Like, how would we know? I don't know what you guys are doing. I'm not reading the sub-docs, even if I wasn't, it would be, I wouldn't, it's not my language. So that was the first threat. And then there was the tricolor first brands, which ironically wasn't even a private credit thing anyway, but it got lumped in with them. And I was able to like hand wave away some of the cockroach type stuff. You can't hand wave away the software exposure.

B-Cred just put out a thing, Blackstone, 26% of their funds is private, is software. Like this is a thing. So it's just like a triple whammy of like bad shit. And then potential deflation. is bad for these funds too. That's not great. Right? So I listened to your talk with Brian.

I thought the best point you made was that isn't it weird that this stuff is happening when there's no credit problems? Like the high yield spread spreads are still very tight. Yeah, there's no stress yet in the portfolios. Yeah, there's no stress in the economy. There's no stress in spreads. And this stuff is already happening. Blue Owl stock is down 60%.

So I actually listened. I got bumped. I had the phone call to take. But they did a call yesterday at 1130. Blue Owl did. And they just seem to be just deflecting and not taking responsibility and acting like there's nothing to see here. It's just bizarre. And yes, I'm sure that the article in the FT didn't help.

But everything's not going great. The stock is down 60%, okay? So there's obviously like some shit happening that investors don't care for. There's no way to CEO survives this. Knowing nothing else about the company, there's no way to see. So all right. The way that they've handled this is awful. So I didn't even know.

And I followed this pretty closely. anytime there's an article about this, I'm all over it. I'm reading the substacks. Like, I'm all over this story. I had no idea that OBDC2, the one that is in the headlines now, that air quote, gated redemptions, that was always supposed to be a finite fund. That always had a 10-year life. Did you know that? No.

Why did it? Why, how did I not know that? I don't know. I'm not a big, I'm not a BDC expert over here. No, but how did I not know that? That's a big part of the story that I only just found out about. You're a private credit tourist. I guess so.

I guess so. No, yes, absolutely. I am. Here's the part that I spoke about this with Josh maybe six months ago. You listen to the Blue Owl, Ernie's call, and you listen to Mark Rowan at Apollo, and Mark Rowan is being very candid about the opportunities and the environment. and Mark Lipschultz is just like, I don't know what he say. He said facts matter or you got to look at the facts, facts do matter like eight times on the call.

So he was asked about the stock reaction. And he said, the end of the day, stories don't drive results. Results drive results. Oh, yeah? And as you can see, we have delivered on every one of our products, that absolutely top-level performance. thinking about what we've run at an eight basis point net net loss rate.

And so these facts do matter. What else did he say? I mean, it was just a lot. He's like, we don't see red flags or yellow flags. We see green flags. It's like, bro, your stock is getting murdered. There are redemptions out the ass. Like, it's not all misinformation.

Now, fine, maybe some of it, the media has taken too far. But just, if I'm a shareholder, I'm losing my mind, listen to this guy, act like nothing's going on. Yeah, that's not great. And even on the call yesterday that I was on. So you've been very bullish on the wealth channel getting into this stuff. Do you think this totally slows the pace of this?

Yes. Right? Of course it does. Of course it does. Now, the good news is you're not going to see like, is private credit going to take down the economy? It's like, listen, there's no rush for the exits. That's sort of part of the point is that there was an asset line. liability mismatch here.

These loans were liquid and investors all want their money back. Like, this is not a great, this is not a great scenario. Do I think that the private credit, the asset class is dead? No, of course not. But I think that like, well, Blue Owls done. They will not raise another dollar in these private credit funds. How about this? It's probably better that this stuff happened now before the spreads blow out in a recessionary

environment hits. And people kind of understand, okay, this is how, because it's, I'm guessing with my experience with, like, credit hedge funds that have shut down in the past that I was involved with, in my prior life, it's going to take years to get all these assets back. Years. Not months, years. And you're going to realize like, oh, my God. Oh, this is what we own.

Okay. So here's what they did that even when they announced this, I was like, what are you doing? This is so stupid. So they said, okay, you want investors keep asking for 5% of their money back. We're going to give you 30% of your money back. Take that. How do you like that? See, we're good.

And we're going to sell for 99.99.79.7. on the dollar. They said yesterday that they were completely surprised by the market's reaction. They thought that would be interpreted positively. And anybody with a brain or common sense, I'm sure these guys know math very well, could have seen, hey, wait a minute, there's so much smoke. You would think that the market will take this at face value, nothing to see everything's fine.

See, we just did $1.6 billion with the sales. By the way, you asked like how a flow is going to do. So Blackstone, for example, monthly inflows, this is from the Wall Street, monthly inflows into the largest fund managed by Blackstone, dropped to $600 million in January from $1.1 billion in November. So still positive in January, I would be very surprised if they were positive in February, but who knows? Anyway, Blackstone, yeah, these stocks got murdered yesterday.

Murdered. There's one subsect that I follow called Covenant Light that writes about the stuff. And he said, using, this is a bit mathy, so just bear with me for a second. Using OBDCs, that's the publicly traded one. Using their 1.19 debt-to-equity leverage, a 23% discount implies a 10.5% gross markdown on the portfolio. Okay? He said we can further break this down to see what it implies about future defaults.

If you assume a 50% loss given default, a 10.5 portfolio loss implies about 21% cumulative defaults. Spread over time, that works out to roughly, 11% annualized defaults over two years, 7.5 over 3 years annualized and 4.5% of for 5% of 4% up for 5 years. For context, leverage loan defaults in the worst stretch of the GFC ran at roughly the mid-single digits annualized. So 6% from 2008 to 2010. So in other words, here's the TLDR.

If you take OBDCs discount literally as a pure credit loss forecast, the market is pricing something like a GFC level or worse. So why am I like even moderately comfortable catching some of these falling knives? there is a lot of fear out there. And yes, of course, it can get worse. There is no valuation support. It's not going to stop. I get all of that.

I get all of that. I might lose money on these trades. I'm probably well. Let's be honest. But there is blood in the streets. You've diversified your blood, too. Very bloody. Very bloody.

All right. I want to talk about some of the prediction market stuff from Mike Seleck, who's ahead of the CFTC. but we're going to say this to next week, because we're already going very long here. All right, let's talk about movies. All right, so Mike Sikardi gave us a chart that shows movies are getting longer. So it shows the average runtime of movies

going back to 1980. And in the 1980s, 1990s even, it was right around 100 minutes, a little over 100 minutes. That's perfect. Which is perfect. Now we're up at 115, 120 minutes. Movies should not be getting longer.

There's a lot of movies I watch these days where I go, man, that would have been a great movie if it was 90 minutes instead of two hours and 20 minutes. I just clown myself twice. I'm like, you know what? Think back to the 90s movies that were the perfect runtime. Go to The Rock. Go to Con Air. Whoops. Conair runtime.

Two hours, three minutes. Face off two hours, 19 minutes. The Rock, two hours, 15 minutes. All right. Maybe not Nicholas Cage movies. What about Demolition Man? You're right. It was really like the comedy.

Demolish man at hour 55. That's under two hours. Under the only, you know what needs to be more than two hours? Shawshank Redemption. Right. And that's about it. Yeah. But the comedies and the rom-coms and like that kind of stuff, that can be an hour and

half. We don't need to longer movies. I took Robert to see Wuthering Heights. Yeah. Speaking of long movies. So this Emily Bronte, she did saltburn and what was the other one? I never subject myself to saltburn. Not for you.

I'm promising young woman. You saw that one, right? Sounds familiar. That was with Carrie Mulligan? Oh, yes. Yes. Okay. So Wuthering Heights had a lot of highly anticipated.

Marga Robbie, Jacob Allorty. It's a romantic movie. It's a rom-com without the com. Way too long. No nudity. How do you have sex scenes with these two people with clothes on? there was like a lot of sex with cloth. They're wearing cloth or whatever they were wearing.

People used to wear a lot more layers back then. This movie, this was like the zebra to the donkey meme for me. I really enjoyed like the first, I really enjoyed. I tolerated the first two acts. There were some stuff that I, and then to me the last,

the last act completely fell off the rails. But this was two hours and 20 minutes. I took Robin to it. And the person next to her, her entire tub of popcorn fell into Robin's pocket. book. So are you watching a love story with Robin? I mean, you have to.

It's the JFK Jr. story with Carolyn Beset. It's on Hulu. It's actually pretty good. I think Robin might be watching it. She spoke about it. Should I watch it? I'm watching it with Courtney.

And it's, yes. I mean, as a New York person, too, it's all about New York, essentially. And the guy looks a lot like JFK Jr. They did a really good job getting the guy who looks at him. Anyway, I reject, I don't want to sit in the out. So once it goes, Like, it felt just the last 20 minutes, unless it's like a banger, it just feels way too long. Yes.

I don't want to sit in the movie for two hours and 20 minutes, ever. I agree. Well, let's wrap it up. Oh, I think I'm having an impact on the culture. Or maybe I just identified it. I don't want to act like I invented the question mark. But in Miami, Ben and I did a bit about things people say in group settings when you meet somebody, this guy, there he is, here comes trouble, that sort of thing. Like, I feel like that's taken on.

I saw, we saw the Instagram meme of that. Oh, yes. Right. So, we got a great email. Don't know whether this is in addition to the, this guy lexicon or just a variation. I was sitting at Starbucks next to two well-groom guys in the early 30s. They were talking about buying a local business. Another 30-something prances by my table in sneaker shoes, slim-fit chinos, and a three-quarter length Trent Chodot because it was raining. He stops, opens his arms and says, look at these guys. I never thought about the plural.

The three of the brohugged and I almost shouted, there he is. That's pretty good. That's a thing. Great email, right? Yep. Okay.

Recommendations besides Wuthering Heights. So I was a Game of Thrones person from the very first episode. I watched it. I was always a little confused, but I was very entertained. And then when the next Game of Thrones show, The Dragon, when I came out, I was like, do I need another game of Thrones show? Like, how many seasons was that?

But I watched it, and I liked it. I loved that show. Do you watch it? Yeah, so I watch it. And I like, and then I saw a preview for another new show. And I'm like, do I really need another one? And I didn't watch it. And you said a couple weeks, say, hey, give it a try.

So we binged it, and we watched the whole thing in the last week. And the finale was on this week, too, Night of the Seven Kingdoms. It's my favorite one of the three. It's not the best. It's not the best. It's my favorite because they were half hour episodes. It had a way more humor to it. It had like a heart. And it was just I like I can actually understand what was going on. And it's not the bad.

The other ones are by far better. There's better actors. There's better characters. This is a little bit more fun. Yeah. It was more fun. And it was my favorite versus the best. I really enjoyed it. Okay.

I can't believe I like it so much. Can I ask you a question? So I've said this a million times. I stopped watching Game of Thrones in season three because I remember just like, looking up one time and like not knowing a single character. And I was like, why am I watching this? I have no idea what's going on. I've not a goddamn clue what's happening.

For the season finale, I, shame on me. I was on my phone the entire episode. And then the episode just ended. I'm like, wait, what happened? What did I miss? The funny thing is, is I don't know what it's about my brain in particular with this type of show that like I just, and I really enjoyed the first like, five shows because there was only six episodes.

For some reason, I just, my brain has a blockage with this type of show. It was a lot. I was thinking after we finished this, I don't remember how the Game of Thrones show ended. I remember the finale. I remember kind of being underwhelmed, but I don't remember who won. All right. So I finally, I've been working through my action movies. I showed, because George is such a big action fan.

We watched Terminator 2 this weekend for the first time. And, man, I mean, I told them, like, the two greatest action movies of all time are Terminator 2 and Die Hard. as far as I'm concerned. Terminator 2 is, it's up at the top of the mountain. You can't make a better action movie. Cannot. Well, not. Cannot. And Kate kind of strolled in halfway through, and she's like, what this? And she just sat transfixed to the rest of the movie. And it really is, and the funny thing is, is you can tell so much of it is just actually done by real people and stunts. Because you can tell the person on the motorcycle is not really Arnold. It's a guy with a wig, you know? When he lands, but George just kept saying, he kept saying, why does this look so real? Because it's not AI.

Like, he's, like, all the stunts are actually done. He's like, why does this look so real? He kept saying that. And I think they liked it so much because it wasn't just this AI computer-driven garbage. And man, that was a movie. Just, I still remember, like, the thing is, to this day, it came on 1991. It still holds up. But you don't look at it and go, oh, man, that doesn't hold it. It still holds up. I wish Kobe would, like, watch that's, Kobe, so, Kobe, so, he's still, like, a baby. Like, he's still, like, he watches diary of a wimpy kid all the time. He just hasn't graduated yet. I obviously will to like growing up movies. Even like moderate, like Ace Ventura.

Like I don't think he would sit through. Oh, yeah, that's my daughter. She still likes the movie when he gets up to. So I decided to watch a movie from 2013 to figure out how the future is going to play out. So I watched her again, which is a really good movie. We got Joaquin Phoenix.

It's amazing how much stuff that show really. But here's a great optimistic take on AI. Everyone had their own AI system, you know, and Joaquin Phoenix wrote greeting cards to people. And he lived in a sweet apartment. So I think everyone's going to be fine. Right? But Chris Pratt was in that movie as kind of like the schlubby friend.

And he was like the schlubby guy in Parks and Rec, too. He weighed like 300 pounds. Has there ever been a better glow up than him going from like this schlubby dude who was like the sidekick and funny to like the leading man chiseled, you know? I completely, I have no memory of him being in that movie. Yeah, he's like the friend and he's kind of forgettable in it. It's crazy what happened to him. All right, I guess it's on the watchables this week, but I watched Crazy Stupid Love Again on Netflix

just because it kept feeding it to me on the algorithm. I said, all, fine, I'm going to watch it again. It's the best rom-com cast ever. And I don't think it's even, that's even, like, you can even argue it. Ryan Gosling, Emma Stone, Steve Correll, Julianne Moore, Marissa Tomey, and Kevin Bacon. Plus, like three that guys. That's the best rom-com cast.

It's the most, like... There he is. Right? Anyway, I love that. Ryan Gosling is so good in that movie. I only recently saw that for the first time, maybe six months ago. Phenomenal. When all the stories coming together at the end,

that one scene is just, that one scene is just, I think we came on 2011. There's no more spoilers for something that old. All right, what are you going? All right, not to be annoying, but industry is so good. And I know, like, nobody watches it. I think I'm the only person that does. It is, season four is the best season.

It's easily, for me, my favorite show that I feel like I'm on an, island. I feel like nobody else watches it. Okay, it was so depraved. Here's my problem with it. I never believed that any of the lead characters were going to be in those jobs. It was just, it was too unbelievable for me to grasp.

It was unrealistic. So the first two seasons, they're like trainees in the bank and then I think, I think they leave in season three and season four is completely outside of it. Okay. Season four is so good. It's unbelievable. And it is, it is completely depraved.

They do not make shows like that. See, that's the problem with me is that I feel like the depravity, like that was the stuff with like the show girls. I feel like they did it just to like really push buttons and it's like it didn't help with the story at all. It was, it was unnecessary. It was a gratuitous. Don't make me say the Patch Adams line. Patch is a hula hand. Patches a hula hand. Patch Adams. That was Robin Williams. All right. I can't believe you're going to quote Patch Adams.

Patch Adams. I did like that. I cried like that. With like the clown nose on, yeah. Rest and peace, Robin Williams. All right. And of course I watched primate over the weekend. Robin was playing mahjong with her friends. I fired a primate, which is about a chimpanzee that kills its entire family. Ah, how's that one? Great stuff.

Really. What's it? Is Mahjong making a thing? Because my wife is playing it now, too. Is it like a fan? Yeah. Yeah, yeah. I thought it was like only for older women,

although I guess our wives are getting older. They're not chicks anymore. Little chicks. I wasn't using the misogynistic. Is that misogynist? I don't know. Either way. They're not baby birds, is what I was trying to say.

Don't put me out of me. All right. How are you feeling better now after this? What's the stock market doing? No, listen, I'll snap out of it. Or maybe I won't. I'm optimistic. You know the scene in the Wedding Singer?

Where the old guy at the bar says to Adam Sandler, I just see somebody to hug me and tell me everything's going to be okay. I feel like that guy. We human beings have survived and made it through worse than this. That's what I'm choosing to believe. We're a dynamic species. We're going to figure it out. We've survived worse.

It's true. All right. All right. It feels like so much has happened in between these episodes, right? I feel like we could do like two a week. This feels like pandemic times. That was, yeah. You burned out pretty quickly, though.

I mean, no, I didn't. We did it for like a year and a half. Was it that long? Okay. I thought we were done pretty quick. I don't remember. The pandemic is like, when you have kids, the first three months, you black out, that's the same thing with the pandemic for me.

I, nothing. The only thing I remember from the pandemic, other than drinking every night, which is maybe why I don't remember a lot, is Tiger King and the Last Dance. Okay, the last dance did get us through. All right, email us, Animal Spirits at the Compound News.com.

What do we say? Personal emails, personal responses. Thanks to production team, filling in for Duncan, who's in Japan. this week. Thanks to Daniel and everyone else. All right. See you next time.