Animal Spirits Podcast - Fed Apologists (EP.209)

Episode Date: June 16, 2021

On this week's show we discuss the most underrate innovation of all-time, why the economy is more interesting than the markets, the wild housing market, why more young people may prefer to rent going forward, where have all the movie stars gone and 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. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by Ground Floor. Ground Floor is an award-winning wealth tech platform that offers high-yield short-term real estate debt investments directly to the general public. In a few weeks, Michael and I will actually be speaking with Ground Floor's co-founder, Brian Daly, and we're going to discuss how investors are earning an average of 10.5% annualized interest without giving up control to a fund. I'm excited about this one because all things real estate are very interesting right now. To learn more about them, go to groundfloor.com.

Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's 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 Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritt Holt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. We're getting old, Ben. Yeah, tell me about

it. I was riding my bicycle back from Jones Beach on Friday afternoon, and I felt one of these. I got one of these going on. And you're back? Behind my right rib cage, and I knew immediately what it was, because I've experienced this type of pain before. It was a kidney stone. And I immediately went into full panic mode. Holy shit. I got to get home. I got to go to the hospital. This is bad. And I almost cried in anticipation of the pain. So the pain that I felt wasn't like too bad, but I, you don't forget that feeling.

So I'm on my way home and I'm going super slow because every bump is like excruciating, even though it wasn't really, didn't really hurt me too badly. I felt the comment. I called my doctor, my urologist, Dr. Sulton, great doctor if you need a urologist. And they got me in at 3.30, whatever time was. And the pain was getting more intense And I said, I'm not going to make it. I got to go to the hospital.

Long story short, I'm okay. I don't even know what it was. It was an after shock. I got a cat scan. No harm, no foul. No kidney stone. I don't know what it was. Well, my wife's had a history of those,

and I know that they come back. And every time she feels something of pain, she's worried that that's what it's going to be. Yeah. I think if you have them once, you're prone to have them again. So anyhow, the point is, the reason why I shared this is because I was at the beach on Saturday with a friend of mine telling him the story.

He goes, I need your doctor. My testicle is swollen. Sorry to overshare. So I was telling him how great Dr. Salton is. He goes, all right, send me his number. And then I was like, actually, while we're talking doctors, so I told my friend, remember this thing that I get where I chew and like the meat gets stuck and I have trouble digesting it? I had that endoscopy. He's like, dude, me too. I said, you want Dr. Tulanskals? Send them right over. Another great doctor. And then. You sound like someone who lives in a Florida retirement community right now. Seriously. Ends up. My friend needs a primary physician. I'm like, oh, Dr. Silverman. No problem.

Anyway, that was my Saturday talking with my friend about doctors. Okay. I'm breaking down. I'm breaking down. I'm 940. I took up the standing paddle board this summer. The standing paddle board. You've seen that? It looks like a big surfboard, but you stand and paddle on it. You stand on it. You're an athlete. How do you even stand on that thing? Your car is balance.

I would flip over in two seconds. So put my kids on it and I'm toting them around the lake, and I woke up the next morning and had muscles that were sore that I didn't realize that I had. Because you have to like, you have to like, you know you have muscles. No, but I'm saying muscles that you don't usually use. Do you have to like stay taught the whole time to like balance this thing? Anyway, that's me getting old, I guess. It happens. I think you're getting old and my getting old.

We have different definitions of getting old. I'll put a picture of me on the paddleboard for the YouTube crowd. Can I just mention one thing that I've been meaning to mention for the past few weeks I just keep forgetting? So in our Google Doc, we've got, I don't know, 15 categories at this point. You know what is no longer a category that we have removed from the dock. COVID. Yep, we completely took it away. Fifteen months later, basically. That felt pretty good to delete that sucker out of there. Yeah, it's bizarre going into stores and restaurants and such in places that you don't have to wear a mask. You're kind of looking around like, is this okay? It's a very

bizarre feeling. But the weird thing to us is with little kids and stuff, our life hasn't changed that much. Are you talking about you and me or you and your wife? I feel like you're speaking for both of us. I'm speaking for me and my wife. Okay. I mean, they're doing more activities and stuff, but for us, it hasn't changed that much. I don't know. I think since, by the way, I thought you were going to pull the kidney stone story all the way around to market crashes, because every time there's a 5% correction, you think there's going to be a crash, just like every time you have a pain in your back, you think, anyway. That's like you're George Soros. When he gets a sore knee or sore back, he thinks that there's going to be a crash. When I feel the kidney stone coming on, I should buy more

Bitcoin. That's the sign. So, I mean, the markets were an insane story last year. But I think, especially in like, called the last six months or so, I think the economy is way more interesting than the market. So we put the stock together as we do every week. I'd say 75% of the stories this week that we're going to talk about are economy related. I noticed that too. And I think it's just there's more interesting stuff going, especially with the housing market and inflation and all that stuff. You know what's funny? I was thinking the same. Do we even have anything stock market related in here? Maybe one or two things. I mean, Yeah, I've got something on the market, but I think the economy is more interesting.

Like, inflation came in. Stock market is so in 1997. Well, we need a correction to get people interested in it again. I think that that's probably what we need because I was going to talk about it. But the S&P 500, the peak to trough correction this year, biggest one is 4.2%. It's nothing. Give me 10% today. Maybe that's the thing.

We're overdue for a correction to get people thinking about it. So inflation, the inflation numbers came out last week, and it was 5% now for the prior, the previous 12 months, which. Little hot. Base effects, transitory, whatever. And as that came out, bond yields are falling across the board. So the 10 years back below 1.5%. I think it got as high as what, 1.7 maybe, still pretty low. Bond yields are falling across the board.

This feels to me like last year when unemployment numbers were skyrocketing by the millions each report and the stock market was taking off. That kind of feels like this where you have this backward situation where everyone goes, wait a minute, what? I don't get this. I'm seeing the inflation numbers. Why aren't bond yields soaring too? and it seems like the market is saying I trust the bond market at least is saying I trust the Fed

here we don't believe these not so Matthew Bozler at Bloomberg had this graph and he showed CPI index which is less food and energy which kind of takes some of the volatility out of it and then CPI less food energy and transportation and the one with the transportation because it's used cars and plane tickets is 1.5% higher than if you take those out so again That's this other thing where use cars. How many things do we need to take out before it just goes negative? And then we could say, see, deflation? But this is why individual inflation in your life depends so much on, like, timing and

luck and just where you are in your life cycle. Because if you're buying a home right now or a car and you're just getting into that part of your life for the first time, you feel inflation. There's people that are getting crushed by inflation right now. And then there's other people who don't notice it. People that aren't buying a house, aren't renting a car. Grocery store people, yeah, I'm sure there's grocery store inflation. Yeah. If you own a home, like, you can't call that inflation. That's a positive for you. Like,

it's almost deflationary because you're making money and not spending more. Somebody reached out to say one of the downsides of rising prices for a homeowner. Was it property taxes? I feel like we covered that. What was it, Ben? Do you remember that? We got an email. Yeah. He was saying property taxes could rise here. Which, yeah, of course, that happens. But I still think it's one of the best. By the way, recent homeowner thing for me, this is the second time in two weeks that our air conditioning went out at home last week. There was a Friday night air conditioning went out and it was hot like 90 degrees. A wire was jiggling against the air conditioning running and then the wire snapped or something. I don't know. Like I would ever figure it out.

That's just what the guy told me. He fixed it, a few hundred bucks, whatever. Surprisingly came the very next morning. So we were only out for like 12 hours. Today in my office, no air conditioning. Is this not one of the greatest inventions of all time? It's one of those things that you only realize how much you need it when it's not there in the summer. I never thought about air conditioning. until that book by Steve Johnson, how we got to now? I think he covered it. Yes. Yes. And it's supposedly that completely changed the dynamics of people moving to the south. And that helped like a big population boom in Florida and Georgia. But air conditioning itself is not that old. It was created in like the 1950s. What the hell did people do in the summer before air conditioning? Nothing? Did they just

not do any work? How would you ever get anything done without air conditioning? I don't get it. I don't know. I really don't know. All right. You shared this with me. Lumber price. had their worst week ever, I guess, going back to 1986 and lumber... They fell 18%. It's in a 40%... Futures. So, yeah, it's on 40%. This is interesting.

This lumber quote from an analyst is basically like our housing price quote, or quote, we're quoting ourselves. What we spoke about in the last few weeks that there's probably a higher floor because there's so much demand. Same thing with lumber. This guy said nosebleed prices won't last, but strong demand, a limited supply response and a rising cost curve all point to above trend prices for at least. least the next 12 to 24 months. But how long does it take for lumber futures prices to hit actual

lumber prices? Because there's no way that adjusts immediately. It's got to be on a lag. And what I've heard is it could be one, two, three months even before these futures prices start hitting the actual lumber market and those prices come down. So that's not going to happen immediately if you're in the market for a new home. I had another anecdote of this where we were up in Northern Michigan this week and there's this huge piece of land where they tore down an old hotel restaurant that had just been like decaying for years. And there's this big huge open field where they're going to put in a housing development, like nice houses right on the water and was walking by it and was talking to someone about it and said, what's taking so long? This has been an empty field for 12 months.

And they said they want to build houses there. They're waiting for lumber prices to come down. It's another thing that's like holding the builders back. So this kind of seems like to your point about a floor, lumber prices come down. People jump back into the housing. market, prices go back up. It's one of those things where that's probably going to happen for a while. There's a house nearby that just went on the market. It's on a corner lot. And just for context, like the homes in my neighborhood are on top of each other. Do you live on an acre, Ben? You probably have an acre, right? No, it's a quarter or a half. Maybe I don't even know these things, but it's a decent lot, yeah. There's no acres here. It's 60 by 100 lots.

My neighbors, I'm looking at my window, I don't know, 15 feet away from me. So there's a house on a corner lot on a fairly busy main street. And it's just got listed for $1 million. And it's, I think, 30, 200 square feet. It's a pretty good-sized house, but it needs a ton of work. I can't even believe that they're listening for that. And I don't know, they might get it. Someone will pay it. I'm going to guess pre-pandemic, this house was like maybe $750, maybe, and it probably would have been on the market for months and months. So I'll update everyone when. People are taking advantage. It's not just lumber, by the way, that's coming back down.

Here's a headline today. Crop prices plunge on prospects of better weather ahead for the U.S. Outlooks for better weather in a critical period for U.S. crops has corn skidding to its lowest price in more than a month. And soybeans and wheat plunging as rains and cooler temperatures offer potential relief to parched fields. This is my way to hedge against inflation. I don't eat corn. Not a corn eater. Never ahead. Wait a minute. Wait just a minute. I understand some people that are not corn on the Cobb fans. Yeah, not me. What about like the corn salsa from Chipotle? No, I like the green sauce. stuff. What about corn chips? Okay, corn chips, I will eat, and then the corn tortillas. How's that? All right, fine. Kind of like, I don't eat tomatoes, but I love ketchup. How's that? It's the same thing.

Popcorn? True. Popcorn, yes, but not that corn in the cob. I don't want to belabor the point. I just last question. What exactly don't you like about corn? Is it the texture or the taste? Because I've never heard anybody not liking corn. Oh, really? Like corn in the cob? Which part don't you like? Just the taste, the smell. I don't know. Everything. All right. All right. Learn something to me overdue.

It's like my coffee thing. So, with all these prices falling, doesn't it, doesn't kind of feel like, what if the Fed just... Wait, wait, whoa, whoa, whoa, all these prices falling. Well, lumber prices are falling, corn prices are falling. I'm saying some of this stuff is starting to come in a little, where the demand supply imbalance has, it seems like some of the stuff is even though the inflation numbers are high, it sounds like because of the base effects, this thing is going to settle in over the next few months at like 3% inflation, call it. What if the Fed does it again and threads the needle? They haven't painted themselves into a corner. Again, the Fed apologists, hand up. That's me. Everyone,

Someone on the YouTube comments last week called me a bootlicker, apparently, which is nice. A bootlicker? Because I'm a Fed apologist. Accurate. What if we get higher inflation, but it's only like 2 to 3% instead of 1 to 2% versus the 4% to 5% or 6% some people have been waiting for? Like, what if the Fed does it again? And Jerome Powell threads the needle and we get a little higher prices like they want, but not too bad. Then everybody who bash the Fed will say sorry and we'll go.

I don't know. Nothing. You're right. Yeah. it's asking too much. So John Hilsenrath from the Wall Street Journal had this good piece about how people took to the streets over inflation in like the late 60s and 70s. And he had this really cool chart. It shows inflation going back to 1915. And it shows how in the 20s and 30s you had this wild swings from huge inflation to these huge deflationary bus. And it was like double

digits in both directions. That pretty much lasts through World War II. And then in the 70s, you get this inflationary spike again. But then from like 1990 on, inflation is just sort of plotting along. And you don't get these swings anymore. You get a little bit of deflation in 2012, actually, or 20, I guess right after the, I guess it was more like 2008, I guess. And it gives an update on each, but it just kind of shows like the Fed has, and obviously part of it is because the U.S. is just a more mature economy. And technology. Technology helps, but things in the U.S. economy are just so much less volatile than they used to be. The economy is way less volatile. Yes, but it's like everything is just so much more compressed. And, and, and, you know,

And I wonder how much credit you can give to the Fed for doing that, for massaging things and putting some boundaries around the economy that they certainly didn't in the past. You could also make the case of that Fed policies led to too much credit in the system and then hence 2008. They're obviously partly to blame for that. I think you can almost blame the banks more than the Fed. Are you eyeing a second career as a Fed chairman? What's going on here?

No, I'm just, I think it's a lot of boots. It's so funny how people like almost want to go back to the days. of the gold standard, but you look at what that was, and you have 20% inflation and then 20% deflation. And we don't want to go back to that type of system. That was just, like, they basically did away with depressions, I think, is probably the main takeaway here. Like, the Fed took depressions off the table, I think. Why just survive back to school when you can thrive by creating a space that does it all for you, no matter the size. Whether you're taking over your parents' basement or moving to campus,

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from direction about commodities. And we were wondering, like, are we going to see a lot of money pouring into commodities? Sure enough, we have Arbor, Data Science, posted a chart of ETF flows for broad-based commodities are at an absolute record.

Like, not even close. If my next job is going to be working for the Fed, your next job is going to be as someone who works in ETF flows. You love ETF and Mutual Fund flows. Big flow guy. You're a big blow guy. Big flow guy. John Street Capital did this fantastic piece on Defi,

and we keep saying, like, where's it be, what's the use case? Here we go. Defi allows for money to be. become programmable. What if, in the next round of fiscal stimulus checks, the government restricted what the money could be used for. For example, essential goods and services, not GameStop or AMC calls, and when it could be used inside of 90 days. Thoughts. Oh, boy. That would really anger a lot of people if that would have happened. I understand like the whole programmable money thing sounds cool,

but that's the point where if the government is doing the programming, I feel like that's where you come to a head with the crypto libertarians and this stuff where they would go, whoa, this is not what we intended for this. But yeah, it's an interesting thought experiment, especially spending it within 100 days or 90 days or whatever it is. So we complained recently about ACH. He said the most common form of electronic payments for business to business is ACH. Approximately 92% of value transfer over these ACH's B to B, which is growing at a rate of around 6.9% a year. The ACH network is built an archaic infrastructure from the 1970s, and despite the $55 trillion per year in transaction volume, it is riddled with fraud

as nearly 5% of transactions are fraudulent. So if there's fraud that happens in crypto, it's pretty much par for the course then, right? I don't think that's what he was saying. That's what I'm saying. People always worry about fraud in crypto. There's probably going to be some fraud regardless of the system. So we might as well use the best one. This is an interesting take.

Mark Rubinson also did a piece on MakerDAO, or just I think it was called Reinfected the Financial System. So Rune Christensen, who is the founder of Maker Dow, said, I don't think that it will necessarily replace everything. The traditional financial system will actually largely remain the way it is. It will just replace certain parts of it that right now are really bad and really old. Those things will be replaced with defy and blockchain, but the actual bank itself will probably remain. That's probably where I would fall on this.

Pretty level how to take. When you see this stuff from Johnson Capital about $55 trillion in transaction volume, and you go, oh, that's the Tam for defy here. No, no. Yeah, you're not going to ever replace. the existing financial stuff. I don't think so. I agree they're going to run in concert with each other probably if this defy stuff works. I meant to run downstairs before the show and grab this piece of paper, but I didn't, but I'll just tell you what happened. I got a check from my title

insurance company for 115 bucks. Did you send it back and say, your money's not good to me? I guess they overcharged me or something. I forget exactly what the language was. How many people do you think actually go through all their paperwork when they're refinancing and to actually look at what those fees are. Do you have ever go on a line-by-line item for that stuff? Of course I have. It's so ridiculous sometimes, though. All right. Cuban did something. Ben, you've been kind of on him, but I just wanted to hear your take on this. He said, this is Mark Cuban. He said basically traditional centralized businesses raise capital first, start a business, and then hope they make enough revenue to return enough

capital to their investors and their founders to make them happy. And the crypto defyre world organizations don't require near as much capital to start and operate rather than and money in a traditional sense. They can sell tokens to raise capital, then reward the liquidity. I don't want to read the whole thing. If you're interested, you can read it. But the last part of it, I thought was kind of nice to see. As always, tell me what you think in the comments below. I'm still learning, so all comments are welcome. Kudos to Mark Cuban. Here's my comment to Mark Cuban. I hate to always be ripping on him, but have you seen his blog? It looks like it was made in 2010 and it hasn't been updated since. It looks really like, I'm just saying. He's like a big tech guy apparently.

Like, he looks like he made this in 1999 and-cudos to him. You don't often see a billionaire saying, tell me what you think in the comments below. I'm still learning. Yeah, and I think it's cool that he basically laid out what he's doing in this space, in the yield farming thing. He's like, this is the money I put up. This is what I'm making. This is how I'm doing it.

I don't want to make this an anti-billionaire thing. But listen, if you've got a billion dollars, like, I would probably would stop learning. What's the point? So I'm saying that sort of tongue-in-cheek, but I thought this was good. Yeah. And again, he's saying, like, this is the experiments that I'm doing. What are the people doing? This is good.

All right. But listen to this, Ben. So all this ransomware Bitcoin stuff. So I put this in the dock from the Wallsheet Journal. JBS U.S. holdings paid an $11 million ransom to cyber criminals. This is the meat supply company. The ransom payment in Bitcoin was made to shield JBS meat plants from further disruption, whatever, whatever. And I was about to write in the dock in a non-troll way.

I honestly thought that one of the purposes of Bitcoin or one of the good things about Bitcoin was that it's traceable. Unlike what's a cash or whatever, you could find wherever it's going, right? It's the ledger. It's public. Everybody could see. And then there was another... You can't put the die packs in Bitcoin, right? Where they blow up in the bank robbers. What's the best die pack blowup soon? I don't know. So I worked as a bank teller for two years in college. And I have to say, there wasn't a day that went by that I didn't think to myself, this is how I would rob this bank from the inside. It seemed like it would be so easy to do. But in my little teller window every day, I had a stack of hundreds.

with a die pack in it. You know there's a good dipak blowup? Good time. The Safty Brothers movie? Oh, yeah. Robert Patton's one? Yeah, not bad. What was it saying?

Oh, okay. So anyway, so then there was another article that I'm saw, and I'm glad that I saw this because otherwise I would look like a new whale. So the pipeline, colonial pipeline, paid $4.4 million in crypto to hackers. And then here's what happened next. Over the next 19 days, court records show a special agent watched on a publicly visible a Bitcoin ledger as hackers transferred the 75 Bitcoins to other digital addresses. I made 27th transfer of nearly 64 Bitcoins landed at a virtual address to which the FBI gained access.

So they recovered 2.3 million of it. Here's a quote from Elvis Chan, great name, a special agent in charge of the cyber branch of FBI in San Francisco. He said, you can't hide behind crypto. See? Bitcoin fixes this. The funny thing is they actually lost money on this because Bitcoin crashed after they paid it. Ooh, tough. But 75 Bitcoins is still worth 75 Bitcoins.

Isn't that what you'd say of a crypto expert? But here's more. Federal officials have previously dismantled Melissa Crypto Networks operating abroad, including the August seizure of accounts and funds tied to the al-Qaeda and the Is Adin-Aqasem Brigades. Well, that's a mouthful, the armed wing of Palestinian militant group Hamas. So when are these people going to start requesting Doge instead of Bitcoin for their ransom requests? Well, I learned something. Zcash is the one that's not traceable.

Okay. But do you think that the people would say, sure, here's five million dogecoin. We don't care. It's worthless anyway. So anyway, I just thought that was interesting. That Bitcoin is getting a lot of negative press, understandably so. But that is the one thing that people who don't seem to want to allow Bitcoin any room in their brain. They always say that it's just for criminals and porn or whatever. The people who are always anti-Bitcoin are always going to use that against it. I don't know if this is a straw man, but it's true. Like, most fraud is conducted in dollars. I don't want to say that. How many billions of dollars have been conducted? the U.S. dollars. And bank heists, people use cars to escape from money from banks. Should we outlaw cars? That might be a step too far. Does that mean Bitcoin is going to do away with bank robbery movies in the future then? I hope not. It's going to be gone. Yeah, me too. Those are the best ones. While we're on that topic, real quick, are you a big end of the world movie guy? Oh yeah, of course. Like I am. Yes. That's sci-fi stuff. I am legend. Yeah, I love it.

2012 wasn't really good. I don't think I saw 2012. I think it's kind of hard to make a go on because sometimes the stories, like, just are so silly. 2012. Oh, John Cusack. No, I never saw this one. Over the weekend, I saw Greenland with Dror Butler. How was it? Good enough.

Like, not a great movie, but certainly entertaining. 5.5? 6-2. Okay. Same thing. Hens Puts it on, HBO Max. Okay. Definitely good enough.

All right. Here's a weird thing about the current job market. Again, get back to the economy, being interesting. Unemployment remains high, but people are now quitting their jobs. It's acting like, so this, unemployment is, what is it still, 6% or something? But it seems like with wages rising, it feels like it should be 3%. So this is from the Wall Street Journal. In April, the share of U.S. workers leaving jobs is 2.7% according to the Labor Department, a jump of 1.6% a year

earlier to the highest level since at least 2000. So people are feeling good about their prospects, obviously, if they're quitting jobs. Either their finances are good or they have better offers elsewhere. And this other one from Jed Colco on Twitter that you put on, showed like how this core unemployment remains stubbornly high because of this. So like, unemployment could never be zero unless people stop changing jobs for good. There has to be some sort of unemployment for some churn there. But he's saying it's remaining higher because of this job changeover. Are you about to credit the Fed again for something? What's going on? No, I just, it's a weird job. I mean, this is probably more credited to the government for giving people checks and they're not

rushing to get back to work. But it's weird that like the labor dynamics feel like three or four percent employment as opposed to six, even though it's acting like it is lower. That's the way people are feeling good about it. It feels like almost things, the numbers should be better than they appear based on how people are acting because they have money. Just kind of bizarre. All right. So last week, Black Rock was trending on Twitter, and we talked about this a little bit in our Twitter spaces. Basically, someone did a thread about this story from Wall Street Journal in April about BlackRock buying all the homes. And I do want people to listen to our podcast from last Friday with Logan Motishami, if they hasn't. And subscribe rate review? Sure, if they want to. But we went through

everything. He made the point. We said, like, are people making too much of the professional home buyers? And he said, listen, BlackRock has bought in 200,000 homes in the last seven years or something. In that same time, 40 million homes have changed hands to put it in perspective. Like, yes, there are more professional home buyers in the market than they were before. And they're probably going to get bigger, but it's still not anywhere near. But this, they had a piece from the Wall Street Journal. But, Ben, think about like the outrage that was on Twitter last week. To your point, they're dropping them bucket and they're going to get a lot bigger. They are. So this Wall Street Journal had a big profile called Built to Rent suburbs are poised to spread across the U.S.

And they talked about this. And the funny thing is, it talked about how many young professionals don't want to be tied to a 30-year mortgage because maybe they want to move more or don't want to have all the ancillary costs that come with home buying. So they want to move. So they want to move into these built-to-rent communities. They talked about, especially Phoenix, again, always comes up in our real estate discussions for some reason. That's like a testing ground for all things, mortgage and real estate, or maybe Phoenix will be the first one to do with title insurance, just for you. But they talk about these communities that have been built up, and they're two or three-bedroom places, and they're nice and new, and they have all these amenities, and everything

is taken care of for you, and you just rent the place. And they made the point here that we've talked about in the past with Fundarize when they've come on that, what if some of these people do this? And instead of building equity this way, they invest in. in these same companies. And they put money into real estate in a different way instead of building equity in their home. And a lot of young people might want to do that. Joe Paul and his wife Ali said, we didn't want to get into home ownership. Let's see. This is in Arizona, of course. He said, we still want to travel and don't want to have to maintain a house. So the company's goals are focused on paying down existing debt. I think there's a lot of people like this.

Yeah, and I think it's the survey I sent you this. We got out of the exact numbers. It's like 64% of all millennials regret their home buying purchases, which no effing way. That's a true survey. But I do think that it's possible young people have a different. Well, the survey is real. The results are bunk. Yes. But I do think that there is something to young people just not wanting that same being tied down.

And maybe that's one of the reasons they've been putting it off. For some young people, obviously, the other ones that really want a home and are having trouble getting as a starter home, the pain is real there. But maybe this market right now forces people into saying, you know what, let's look for an alternative. This is an interesting question that I hadn't thought about. What comes to the suburbs if one day homeowners are outnumbered by renters? What do you mean? What just comes to the dynamic of? Just, yeah, to the community. So like they said, suburbs may become more transient places where residents move in and out more often. Tenants of single family homes typically stay around longer than apartment renters, but tend to move sooner than homeowners who stay for an average of seven years. So like, will it disrupt community dynamics? I think we're so far away from that being a thing to worry about. And apparently this is a government problem. So this is an email from a list. Center, who she told us she works for a civil engineer in Nashville. She does the land planning and design. She designs residential neighborhoods. So she says they work with a big builder like D.R. Horton

and Centex. She said what we're seeing is that people, cities want larger home with larger lots because they don't want these cheap vinyl-siding homes and communities or whatever. But she says what cities want are too expensive for first-time homebuyers and builders because builders want to build in larger market fees homebuyers, but the actual government is not allowing that. So she says if a city won't pass the development, the builder walks away from the property because they know they won't make any money building houses on it. So she's saying, this is not the builders. This is more the dynamics of the government not allowing builders to come in and do all these starter homes to begin with. So she's blaming the government for not opening it up. That's, I think, probably a big part of it

is that the government has totally dropped the ball here. We got another email. That's something similar I got to in a second, but this was interesting. Christopher told me from the housing and urban DeLand Institute said he sees a potential for fractional ownership model. So for example, a neighborhood real estate investment trust. And these structures, people would own stocking companies that hold commercial and residential properties in their area. Thoughts. I don't know that I'd want that. Would you, like if you're going to be able to diversify and just invest in real estate, I'd want more diversification. But yeah, I guess that's kind of, it gives you similar exposure to your home. Maybe people feel more ownership of their neighborhood. I don't know. Could be. It's an interesting idea.

Well, so there's another one. Invesco are backing min management to spend as much as $5 billion, which is not a lot of money in the grand scheme of things, but so it's $5 billion to purchase about 20,000 single family rental homes in the U.S. in the next few years. This was interesting. More than half of the country's multifamily properties are owned by institutional investors compared with an estimated ownership of 2 to 3% for single family rentals. So again, 2 to 3% of single family rentals, not that much. But by the end of the decade, if it's 10%, or would that surprise you? I think it's going to be higher. It sounds like this stuff is here to stay, which I don't know, kind of makes sense to me. Here's one more. Oh, that goes to your point. Awesome email with Logan. What are the big issues on the supply side is a ridiculous amount of time it takes to get land ready for development. I'll use Florida as an example since that's where I am most familiar with the timelines. From the time you purchase raw land, it could take anywhere between 12 to 24 months to simply go through the permitting approval process before you can even put a shovel in the ground. Depending on the situation, you could have six to eight months for

rezoning, six to eight months for a comp plan amendment, and four to six months to get a jurisdictional survey. From there, you could expect, so anyway, I mean, this is ridiculous. The timeline it takes forever, basically. So then he said, it may look like builders aren't building, but the truth is that they truly can't. So, I don't know. One more on the Zillow side. Regarding your comments on the latest pot. By the way, we're getting a lot of emails about people using eye buyers, which is surprising to me, because I didn't think it was going to be that big, but maybe it's just our audience, but it's bigger than I would have thought. Was this person from Phoenix as well?

Probably. Regarding your comments on the latest pot, I signed to sell my home to Zillow. I was familiar with the model from reading reviews online. They generally come in with at market price, then do a tour and lower the offer 1 to 5%. They ask for a 6% fee, then they ask for 10 to 30K in repairs. To my surprise, though, Zillow changed their model. They offered me 480.

My realtor was going to aggressively list at a 450. The kicker is that Zillow only asks for a 1% fee versus the realtor's 5% fee. That's huge, by the way. So they're saying, I would have had to sell my house for $500 with a realtor to make it work. So if Zillow is charging a 1% commission, that immediately makes them more attractive. If that's what they're doing everywhere. Yeah. So then he emailed us again today.

I had a second thought about this for Zillow, time on market isn't a bad thing. The longer they have a house on the market, the better, it's like free marketing for them. Okay. He said, I'm glad you'll share it because I thought like everyone else that I buyers were taking advantage of people. But I got 50K more net proceeds than I was expecting with a realtor. Very interesting. Especially in a seller's market. Yeah, we're getting a lot of these eye buyers.

Here's something else we asked to Logan. I said, and people have pushed back to me on this because, so someone actually sent us this. I apparently call, credit to me, pat on my back. I've been wrong plenty of times. Apparently in 2018 on this podcast, I called for a housing shortage, which I can't believe. We were talking about the most common ages in the United States. And I said by 2020, it's going to be all millennials. And I said there's going to be a housing shortage.

Don't let your head get too big. We make a lot of calls here. All right. I think all these young millennials, millennials that are turning 30 are going to be moving out of the cities or within the cities are going to be buying real estate. And so I think by 2020s, 2030s, I don't know when, I think we're going to see a real shortage in real estate and young people bidding up prices of houses. All right. So buy home builders. You heard it here first.

The funny thing is about these kind of macro predictions. I was technically right, but it took a pandemic to make it happen. All right. Let's just try something, Ben. Let's just try. You're hot. Where's the market going next? Maybe I'm better at Dem. Maybe I should become the next Harry Dent because I'm better at demographics than I am at the stock market. But a lot of people push back to me whenever I say, millennials are going to buy all these homes and that is going to carry the housing market for a long time. And they say, well, what about boomers when they start selling?

So Bill McBride calculated risk had this chart that shows that he says the leading edge of baby boomer generation is currently 75, born in 1946, and these people are returning 80 in 2026. The peak of the boomers will be turning 80 in 2035 or so, and the tail end turning 80 in 2044. sense is there will be a pickup and boomers selling their home in the second half of the 2020s lasting until 2040 or so. These homes will be older and most will need updating, but many of these homes will be in prime locations. So he's saying like maybe the end of this decade, probably through the 2030s, where boomers finally decide to either downsize or move into a retirement community or whatever it is and you're going to see more supply come on.

But that'll take time and it'll be very sporadic probably. How wild is this consumer sentiment chart for buying a home? So they're asking consumers, is it a good time to buy a home? Oh, right. So it's dropped to the floor. Looks like as low as it's been since 1985. This is a watch what they do, not what they say thing. Because I'm sure people say, yes, this is a awful time to buy a home, but I'm still going to buy a home. I think that we're nearing the peak. We might already be past it. Peak of what? Craziness in terms of buyers. The buying frenzy. I think we're past it. I don't have any evidence. We'll find out data soon enough. It could be. The way I look at it is like schools start again in the fall. I think this could carry over another couple months or so as people try to figure out their lives before then, especially younger people that are pushing the real estate market around, but you're probably right. All right. Last week, I wrote a piece about, or I talked about the fact that travel card rewards are going to be booming. And CNBC had one that said

Citigroup came out with another thing, that they're having a 5% cash back and giving a huge sign-up bonus like the JP Morgan we talked about last week. Here's another call for you. now that I'm hot at the craps table. I'm listening. Hold on. Let me get a pen. In the next 12 to 18 months, Airbnb credit card. Mark it down. Okay. You get rewards for a free night for Airbnb if you spend a certain amount or 5% back on all Airbnb purchases. I don't like that. I don't like that call. I love that call. I love that call. Great call. All right. I think that's coming. A few people, when I wrote about this travel rewards card thing, sent me a piece from Vox that was just written, basically saying,

good for you, you get all these credit card rewards points. They're more or less being paid for by the poor. And I guess I've always kind of known that. There were some of the stats in here that, I mean, obviously... You buried it deep in your subconscious? Well, no, you know that people who pay off their balance each month and just live on the rewards, like they don't give those away for free. Part of it is... But wait, but wait, hold on. American Express, their transaction fees. So not late fees. A lot of it is the transaction fees. Their transaction fees are $24 billion in 2018. Which, okay, I don't know how this would work.

Why can't DeFi fix this? Why are the credit card companies still allowed to charge 2 to 3% on every transaction to the merchants? How was that still a thing? Why can't DeFi come fix that? How about DeFi credit card? We do away with transaction fees or credit cards. You're an ideas guy.

You're an ideas guy. I don't know what that means. I'm just saying maybe DeFi can come fix this. But the other part, this article, they had some research from these economists who tried to say that people who pay with cash at stores. actually end up paying more money than people who pay with credit cards. I guess adjusted for rewards, that didn't really make sense to me. Saying that people who pay with cash end up paying more at stores than people who don't.

So they said, you have this phenomenon in the point of sale, which is consumers who use credit cards and rewards cards more specifically tend to be cross-opsetized by consumers who use cash or debit cards. This is from Joanna Stavans, senior economist, economist, at the Federal Reserve Bank of Boston. Ben, when you apply for the Fed job, don't go to Boston. She said, it's specific to what you pull out of your wallet. It just so happens that payment instrument use is correlated with income pretty strongly. So higher income consumers are more likely to hold a credit card in their wallet. So they found that in the U.S., high-income consumers pay an average of $13 less per month through retail prices. And low-income people pay 60 cents more because of swipe fees on merchants.

So basically, the merchants who get their prices increased, they pass it on to people who are paying with debit cards or cash. That makes sense. So here's another one. I mean, you figure that the people who don't pay their credit card balances, those are the ones who are subsidizing rewards as well, besides the transaction fees. But they say, that's what I thought. But they're saying it's just, it's everybody else who uses debit cards and cash as well. So they also show more than half. So that's a problem with the credit card companies, not anything else. More than half people with a credit card debt have had it for a year, more than a third for two years and more than one in 10 for five years. Can you imagine the fees racked up on credit card debt, even if it's a small balance over five years when it's compounding at 15% a year?

This is my thing that I always pounded the table on with credit cards. Obviously, the transaction fees are part of the system that maybe someone could fix that, I guess. But I still don't understand why every other interest rate in the world comes down except for credit card rates. I will never understand that why auto loans come down, mortgage rates come down. Everything comes down and credit cards remain at 15%. Because there's probably so many delinquencies. Unlike any other instruments. When you're being extended credit, some people...

Think about junk bond yields are like 4% now. There's delinquencies there, too. but yet they've come down because of the market. Not to the same extent. I'm not defending 26% fees. I just don't understand why every other interest rate in the world falls but not credit card. Why doesn't it fall a little from 10 to 15 or from 15 to 10 or something? It just makes no sense to me that it.

Well, from 25 to 15. It holds steady for so long. I just don't get it. Why that is not something that has been, I don't know. So we spoke about, this made me laugh. I listened to you guys talk about micro strategy and Ben mentioned something to the effect of, I don't know why you don't monster, not just Bitcoin, which is a fair point. I think I've got me thinking since I do own Monster, Stephen A Smith voice. However,

wait, why are you calling it Monster? Why, I don't know. I'm sorry. MSTR. Micro Strategy. Yeah, okay. I think Monster is MNST, okay. Sorry. That's okay. So anyway, the point is that people own micro strategy in their IRA as a way to get exposure to Bitcoin in their IRA. And by the way, who are three emails like this. Yeah, we got a number of them like this, which. By the way, the kids are all right. The kids are all right. Yeah, this is a lot of young people say I want to own Bitcoin in an IRA and I own it through. micro strategy.

Bullshit survey of the week. What? You have something to say? No. It's a risky strategy. Listen, just because you don't have... That's a risky strategy, cotton. Let's see how this plays out, that sort of thing.

Well, micro strategy, up 16% today. Wow, this guy's got conviction. Although, with the bonds, so you talk about interest rates coming down, the interest on that was like 6% or so. I bet you people that bought those bonds are up like 30% already. Can you add laser eyes to a ticker? Is that possible? Is that what he's going to do next?

Conviction. Yeah, no. It's madness. All right. So survey of the week, this is such nonsense. The headline was, let's see, half of the pandemic's unemployment money may have been stolen. So by the numbers, this from Axios, Blake Hall, CEO of ID.Me, a service that tries to prevent this kind of fraud. By the way, it's like asking Barbara if you need a haircut. Yeah, it's like asking you if you need to wear a hat. Right. Exactly. I do. I definitely do. So the CEO of a service that tries to prevent this kind of fraud, tells Axios that America has lost more than $400 billion to fraudulent

the Games, as much as 50% of all unemployment monies might have been stolen. Do we even need evidence to say this is complete nonsense? This next one, someone from the CEO of some risk solutions place, estimates at least 70% of the money stolen by imposters ultimately left the country, much of it ending up in the hands of criminal syndicates in China, Nigeria, Russia, and elsewhere. What? Come on. So can you imagine how much stronger the economy would be if it wasn't all stolen by an Nigerian print scandals, we'd be rolling in it. Okay, I got my oil change last week.

Every time you go do oil change, they ask you a bunch of questions, and I just say no, I'm like deflecting, deflecting, deflecting, deflecting. Like, I don't want, no, I don't want your expensive tire pressures and new wiper blades. And after they're done,

they pull the dipstick out and show it to you. Here's your line, see? And, like, they show it to me. Like, I know. I thought it was called the drip stick. No, you right? It's a dipstick. Yeah.

They could put this thing in guacamole and show Go to me and I'd go, yeah, it looks good. What do I know about? I mean, obviously, they have to do that, but I know nothing. What am I supposed to say? Like, do it again. I don't think that worked. Like, I know absolutely nothing about cars.

Like, they could show me anything. And I'd say, yeah, it looks good. It's so true. When they show you the brake pads, you see this with the... Yeah, right. You're like, me. I'm kind of like that, though. Like, if the waiter or waitress at a restaurant ask for the food is and it's terrible,

I'd say, yeah, it's pretty good. I don't ever complain. I don't want to rock the boat. So I had a thought is I was watching The Gambler on Amazon Prime. An old Jimmy Khan movie, 1974. So this is from a Roger Eber review. There's a scene in the gambler that is James Kahn on screen all by himself for two minutes, locked in a basement room waiting to meet a mafia boss who will arguably instruct that his legs be broken. In another movie, the scene could have seemed too long, too eventless. But RISE, Khan, and screenwriter

James Tobac have constructed the character in the movie so convincingly that the scene not only works, but it works two ways. I don't need to read you the two ways. And I was thinking about Jimmy Kahn and all the actions of that generation. And I had a thought, what the hell happened to movie stars? TV. TV having to movie stars. But so I was just thinking about it. So listen to this. So this list that I compiled just from a simple Google search of all the movie stars from yesteryear. And I didn't even go back too too far. I'm talking like 70s, 80s, maybe a little bit of overlap with the 90s that people that are still around today. But here we go. Jimmy Conn. Clint Eastwood, Barbara Streisand, Bert Reynolds, Paul Newman, Robert Redford,

Steve McQueen, John Wayne, Woody Allen, Dustin Hoffman, Al Pacino, De Niro, Schwarzenegger, Charles Bronson, Mal Brooks, Stallone, Travolta, Harrison Ford, James Alderones, Carrie Fisher, Eddie Murphy, Bill Murray, Jack Nicholson, Sigourney Weaver, Glenn Close, Meadow, Danny DeVito, Michael J. Fox, Danny Glover, Sean Conner, Jane Fonda, Jane Hockman, Steve Martin, Gina Davis, Sally Field, Darrell Hanna, Beth Midler, Goldie Horn, Christopher Reeve, Kevin Bacon, Nick Cage, Samuel Jackson, Morgan Freeman, Sean Penn, Richard Gear, Tim Robbins, Kevin Costa, Albert Brooks, Gene Wilder, Patrick Swayze, Billy Crystal, Joe Pesci, Jeff Bridges, Roblo, Demi, Moore, Christopher, Christopher, Wookiee, Mia Farrow, John Malcovich, Ethan Hawke,

Sarah Jessica Parker, Julie Roberts, Gwyneth Paltrow, Kurt Russell, Will Smith, Jamie Fox, George Clooney. How did you allow Daryl Hannah on that list? I don't know. She was on the list. All right. But anyway, I'm sure I missed, like, a lot. But so then I wrote a list for today. We've got The Rock, Vin Diesel, Brad Pitt, DiCaprio, Ann Hathaway, Mark Wahlberg, Amy Adams, Johnny Depp, who arguably should be on the other list.

McConaughey, Cape Lanchette, Emma Stone, Hugh Jackman, Matt Damon, Kiana Reeves, Scarlett, Joe Hanson, Liam Neeson, Leigham Neeson, Wynnex, Daniel Craig, Tom Hardy, Bryce, Dallas Howard, Jessica, Jessica, Jennifer Lawrence, Christian Bale. That's all we got. And Vin Diesel? He's on this list. That's the other problem is that the Avengers and Star Wars kind of killed the movie Star Wars. The intellectual property matters more than the start. Did you leave out Tom Hanks on your list? I thought Tom Hanks was on the first list.

Okay, that's fine. I certainly meant to put him there. But, like, is Chris Pratt a movie star? Is Christopher Evans a movie star? I mean, I guess, but... Because the intellectual property matters more than the names there. But all of those people could have, like, carried and opened the movie. So back in the day, in the 90s, John Hamm and...

What's the Breaking Bad Guy's name? It's escaping me. From Your Honor? Oh, my God, me too. I told you, I'm in cognitive decline. Walter White. Brian Cranston. Yeah, thank you.

Those guys would have been movie stars. Instead, they're on two of the biggest TV shows. is ever most acclaimed. And so now they can just do small movies here and there when they want. They don't have to sell all these big budget movies because they don't need to anymore. So TV has kind of killed the movie. There was a book called Blockbuster. And I think it spoke about just like Marvel movies, there's no risk anymore. I mean, the risk is, yeah, they're expensive, but they're sure things. Exactly. So the movies at the middle, like the call it, I don't know, $90 million budget. So those are gone. They're on TV now. Okay. Listen to her questions.

Love the pod. In a situation, love your thoughts on wife and I are both 36, two children who are young in the finance industry and solely run our retirement accounts. We have 900K saved retirement, good for you, but do not have a non-qualified investment account. Keep wondering what our retirement balance would need to be for me to pull enough money out to pay off our house. We've been getting this question a lot. I understand all the penalties and taxation in doing this, but am I really supposed to stare at a $2.5 million portfolio on making that number up and keep paying my mortgage every month? I understand the most common answer is never pull that money out, but do you guys think there is a number the portfolio could get to where I feel comfortable pulling that

lever? Thanks for your help. Yeah, I thought this is a good question, but I think have a pretty obvious solution. Maybe take your retirement funding down and open up a taxable account. Or alternatively, take some of the money you're saving every month and pay down your mortgage faster. If this is really going to, again, so you get rid of those penalties and taxes, I think just paying those penalties and taxes seems just wildly inefficient from a financial perspective. I understand like not wanting, but if you think you're in a good place right now and it will compound, stop putting so much money into the market and increase the amount you're paying off your mortgage with. Pay it off faster. Go to a 15-year mortgage. Go to a 10-year mortgage. Something

like that. I think that would make more sense than paying the penalties and the taxes. That's my thought. Let's knock this one out real quick. Somebody said, it seems like both of you guys reading a ton of content. My question is, do all have you have any tips? But why don't you just answer the question? You have any tips? We get this a lot. Like, how do you guys find time to read so much or watch movies or TV and blah, blah, blah? Most of it, I think, is just because we don't have a lot of other interests besides that. Like, the stuff that we talk about, those are our interests. The markets in TV and movies and then doing stuff with our family, that's what we do. Well, so there are no hacks. There are no shortcuts. I mean, I don't think there

is advice you can give people on time management. Like, you know what you do with your day and your job and stuff. Like, there's not much we can say because our situations are unique to your situation, which is also unique to someone else. Well, there's one hack at abnormalreturns.com. If you're struggling on what to filter out, Tadas of Wisconsin does it for you. Outside of that, I guess the hack is And I've said this before, I'm sure Ben, you too. I put my kids down at 7.30 or 8 o'clock whenever they go to bed, and then I'm back on my computer. That's the hack.

I don't want to pat ourselves on the back too much on this podcast, but we've had someone in the finance interest to say, I don't read the week to week or day-to-day stuff anymore. I just listen to you guys because I know you're going to talk about it. So I'm not saying that you should just listen to Nal Spirits, but that's a good start, right? All right, recommendations. What do you got? We finished hacks this weekend on HBO.

It's a show that grows on you, the more you watch it. You kind of think about the – no, no, I loved it. I thought it was really good. and Gene Smart, who plays, I think I first knew her from designing women back in the day, like the 80s and 90s. She's been a million things. Yeah, she's been a ton of, I looked at her IMDB. She's been in everything. You know what I noticed, and I'm doing it right now, listening back to when I listen to the podcast, one of the things that jumps out to me and my behavior, this is the segment, which I cut you off all the time.

Every time you speak, I cut you off. And the reason why I cut you off instead I'm out, I don't think I have patience right now for a, it grows a new show. No, I liked it from the start, but I think it gets better. It's the kind of premise where I go, really? It's one of those shows where you go, oh, wow, that really surprised me how much I liked it. I think she is fantastic. She's a completely different actress in this show than she is in Marevistown. And she's like the actress of the year for me.

Like, she was awesome in this. And it was only half hour episodes, very good. Bo Burnham's Inside on Netflix. I didn't get it. He's a genius, probably. And he did this whole thing where he filmed and edited all these songs that he wrote inside his house during the pandemic. In some of the social commentary he had was kind of like, oh, that's funny. It didn't do it for me. I don't know. I just didn't get it. I made it 10 minutes. And I also didn't

get it. I'm not saying it wasn't good because it's obviously objective because I know a lot of people loved it. Two things that don't, for whatever reason, make me laugh. They can't penetrate my brain and make me laugh. I don't laugh at cartoons. So like... I'm the same way. Oh, really? So South Park and the Simpsons. My entire college career, my friends were trying to get me into family guy. And I just said... Oh, so that's another one. it, but it's just, for me personally, it's never going to do it. Yeah, same. I just, it doesn't register with me.

The other thing was the singing stuff. I don't know. I just, I couldn't, it was not my taste. I understand why people love it. And again, the guy is a genius probably, but just not for me. All right, what do you got? All right, so Greenland, I mean, I'm not really recommending that. If you're an end of the world person, who isn't, the gambler, good and not great.

Good night great. You're in a big 70s kick. All right, this is as big a recommend as I could possibly give. I saw it before sunset. I saw before sunrise, I don't know, a few months ago. I watched before sunset. It might be like a perfect movie. It was an hour and 20 minutes long.

That's it. And the last 20 minutes of that movie are probably like the best rom-com 20 minutes that there are. But you know what's interesting? I was thinking about it. It's not a comedy. It's not funny. It's not a rom-com. It's just a romantic movie, I guess.

Is that even a genre? Yeah. That movie is excellent, though, right? Holy cow. I mean, I can't say enough good things. I don't know. What's my score? 9-2.

For as good as the original was, they actually topped it with that movie, which is hard to believe. It was better. So, yeah, wow, what a movie? Okay. Friday, what do we got? Friday, what do we got? Oh, we're talking with James McDonald of Hercules investment on Friday. That should be good.

We haven't, so we're going to talk a lot about hedging, the downside. We haven't had one of those conversations and maybe ever. And volatility is an asset class, which I think is an interesting topic. I've got a lot to say and ask on. Matt. I'm excited to talk to him. All right. Animal Spirth Pod at gmail.com. We'll see you then.