Animal Spirits Podcast - Gen Z Is on Fire (EP.345)

Episode Date: January 31, 2024

On episode 345 of Animal Spirits, Michael Batnick and Ben Carlson discuss: the types of people you see on every flight in America, why new highs in the stock market are perfectly normal, why the Fed should cut rates even in a strong economy, this is more like the 1990s than the 1970s, young people are wealthier than you think, the biggest story about the economy no one is talking about, and much more! Kraneshares just released their latest content including their 2024 China outlook, 2024 Carbon Market outlook, and the 2024 Managed Futures outlook. Find it here: https://kraneshares.com/positioning-for-2024-kraneshares-firm-outlook/?adsource=wealthcast 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.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com   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. Wealthcast Media, 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

Today's show is brought to you by crane shares. Ben, it's still January for a few more news. And this is the month where everybody releases their, you're a head outlook. You're in, your end. Don't you think everyone does it in December? January, you're still good. You're playing with house money. Okay.

Good until the end. Anyway, everyone's released, it's S&P 500. Economy, this, that, Fed Outlook. Crane shares, they're outside the box thinkers. They've got outlooks on things like carbon market, a little outside the box. China. Managed futures. Managed futures.

I feel like there's more managed futures questions these days. There's a lot of them in the, after 2008, died down in 2010. Tough decade. One of the few things that worked reasonably well in 2022. Yeah, that makes sense. All good stuff. I still don't understand anything coming out of China, I feel like. So I should probably read this.

So learn more, hit the link in the show notes. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick 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 Bridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. We're live in person in the studio.

This can't be the first time we've done one in person here. It's been a while. It's been a long time, I think. We've done some in hotel rooms, but not in New York office. I was just told to look at your chin. My camera chair angle is, so I'm going to do my best. It's a good target. So I feel like a New York commuter today

Because I fly in on the early flight I fly out of a regional airport So the only straight through flight to New York is 6 a.m. So I'm like the guy who leaves his family Kind of Monday morning And I'm in the office by 9 a.m. I take the subway because you told me how to do that Because I used to take a cab

Amateur move And then you'd get stuck in traffic To go four blocks And you'd be sitting in a cab for an hour So on my flight this morning I realized every flight in America has the same people Like you see this certain characters it's almost like they're cast out of central casting

because I had the guy behind me who every flight in America has someone who has the wettest cough you've heard in your life and I'm trying to doze off because I woke up at 4 a.m. And this guy every 30 seconds has the wettest cough ever and I'm just feeling myself getting sick

every time he coughs. And so I try to figure out like oh wait a minute, every flight has like five or six people. So here they are. The wet cough guy there's always a boomer who sits in the wrong seat right? And they look at ticket, like, oh, I thought it said D. I'm in B. Right? I also had today, wide legs in his seat guy. It's always a guy who's a little huskier, you know, and he goes really wide, like a V, right? Is this like stand-up bit here? He goes really wide with a V, and this, and you can't go over

the imaginary line. This guy did it to me today. There's always a lady who can't fit her bag in the overhead compartment, someone has to come help her, right? And then there's the person who makes a phone call to tell you to tell their family they landed immediately when they land. I made it. Anyway, those are the people on every flight in America. That's a great list. There's a few others. Okay, what else we got? That I experienced last week coming back from Vegas. By the way, the sphere is everything that it's, uh, it's all the hype. All the hype. I saw like a planet earth movie called by Darren Aronofsky called, uh, I can't my what it was called. So could you see an actual movie there? I don't know, like,

oh, I watched a movie. Okay. So I'm saying like they could, they can play fascinating is 10, we could watch. This is my face the entire time. Okay. Just spectacular. There's, if you could even reasonably afford it, there's no price to pay that would not be worth it. Like, it's that special. You have to see it if you're there. Okay. So on the way, okay, airplane. There was a woman who is in the middle who was being weirdly aggressive about the elbow. Oh, yeah. You know, there's a little shared armrest. You get half. I get half. That's how it works. No?

I always assume the people on the interior, it's theirs. You could also make the argument. Listen, I'm stuck in the middle. These are both mine. I get the armrests. That's true. Anyway, she hit me one too many times. I backed off.

Okay. And then also, somebody jammed their seat back. It wasn't, listen, we've been through the reclining thing. We don't need to relitigate that. But there's the right way and a wrong way to do it. And the right way is to go slowly back. The wrong way is to press the button and lean back and somebody smashed my computer, hit my computer, did not apologize.

That's a tough look. I agree. But, yeah, people watching have the fun of the airport, I guess. I'm going to a regional airport in, actually, no, I'm not. No, I'm not. I'm flying into Denver. So the Future Proof Retreat, what's the dates on this thing? March 24th, it's at the Broadmoor in Colorado Springs.

This place looks spectacular. And it's a smaller event. It's like the festival, but a smaller event. And I encourage everyone who's interested in the industry to come and join us. Someone DM to be this week and said, it's got Lake Como vibes. Oh, wow. So I guess that's been everybody to Lake Como. I won't be making it.

I'm in spring break, I think. But yeah, it sounds lovely this time of year. All right, markets. One of the things with stocks coming back in the all-time highs, I feel like everyone assumes, okay, 2021 or whatever the peak was, that was the peak of the speculation, 2022 is the actual peak of the market, early 2022. Now that we've round-tripped, okay, that means things must be really bad again or overvalued or whatever. It's not the case, really.

So forward PE, this is from Ed Yardinney. Stocks are cheaper now than they were in 2020 and 2021. Midcaps and small caps are way cheaper. But we've round-tripped, but fundamentals actually improved, too, more than price. Because we had that two-year period where you're below it. I'd say that's good news. No? Yeah, I'm trying to square this circle.

It's probably not that complicated. You know what? How about this? I'm not even going to say it aloud. I don't want to embarrass myself. How about that? All right, I'll say it. I'll say it.

Last year, the earnings didn't grow. It was pure multiple expansion. Right? So it must be next year's earnings are supposed to be good then? Yeah. Although, how about this? This is based on forward PE. Yes.

I guess trailing PE is probably a different story. That makes sense. It's probably back to where we were. Yeah. I'm a forward-looking guy. All right, great tweet chart from bespoke. The S&P 500 in an all-time high today for the third day in a row. Here's a stat for you.

Historically, the S&P 500 has been within 5% of an all-time high on 44% of all trading days. That sounds really high to me. It does sound high. Versus the 40% of the time it has been 10% or more below an all-time high. So said differently. You're more likely, historically, to be within 5% of all-time high than more than 10% below it. Okay.

So this is 1952. If you, I think you and I have looked at the data going back to the 20s. Yeah, it's garbage data. But that's because the depression ruins everything. 29 to 54, there was no highs. I agree. So this is more, that makes sense. What are your thoughts on people who, I mean, I don't want to think about a world where the depression can happen again.

And I would say it's more or less off the table. Not that it can happen, but. if it didn't happen in 2020, when is it going? Yeah, we don't need to spend any time thinking about the world with the Great Depression. No. There are certain stock markets that could have that kind of crash. Like Greece, I think, fell 90% or something, these small countries. But in the U.S., what politician in the right mind or Federal Reserve or whatever let that happen?

Yeah. I mean, yeah, I think there's no way. We could have a period like that again. It didn't. I mean, so the Great Depression, the high of unemployment was 25%. We literally turned a light off, light switch off and shut off the economy and it got to 14% this time. Yeah. I don't see how it could. All right, we talked last week about new highs tend to lead to new highs.

Peter Malook tweeted this, I believe this is, JPMorgan chart, and it shows one, three, five years. Invest on any day in the market, what your average return is, and then invest just at all-time highs. And the all-time high returns, this is since 1988, are better than invest on any day. So you invest just when it's at all-time highs. That's my strategy. That's all I do. Which I think is just surprising to people. So we also looked at last week, I said, how often has there ever been cuts at all-time highs?

I think you asked Neil Dodd of this too. It doesn't happen very often. Ryan Dietrich figured this out, and he said 20 times since 1980, they cut rates when the S&P was within 2% of all-time highs, which is actually more than I would have thought. It looks like most of them are actually in the 80s and early 90s, only a couple times has happened since then, but a year later, he said it's higher 20 times. So 20 times they've cut within close to all-time highs, 20 times later, stocks are higher. I don't have strong, strong feelings on this, but like, I don't know why the Fed

would cut with conditions easing so incredibly rapidly. I know PC and stuff as everything is more or less down to their target. Fed Woz wrote about this. Okay. Nick Timrose from the Wall Street Journal. He says, starts that off. Inflation has sustainably returned to the Fed's 2% target. Then real rates, nominal adjusted for inflation have risen and might be restricting economic activity too much. But it's not. This means the Fed needs to cut. Well, so he says also, normally the Fed cuts because economic activity is slowing sharply,

not this time. Growth remains surprisingly robust at the end of the year. Rather, they're mulling whether softening inflation means real interest rates will be unnecessarily restrictive if they don't act. But, okay, but there's two paths. They don't act. Well, the housing market, for one. They don't act.

Okay, fair. They don't act. And real rates are restrictive where you could say, okay, so GDP growth is not 3.3 percent. it's 2%. What's wrong with that? Then you say, well, if they do catch, there's the risk of undoing a lot of the work that they've done. If the IPO window opens back up and housing activity explodes and the stock market goes up 30%. You could see it. You could see prices start to ramp up. Counterpoint, maybe the Fed doesn't care about speculation and asset prices. Counterpoint, maybe they think that at this point, rates are just too restrictive for housing,

which is one of the biggest parts of the economy. Counter, counter, counterpoint. I'd have nothing there. Okay. If you were a Fed hater, you would say, listen, the Fed kept rates at zero for way longer than they should have, so why wouldn't they keep them higher for way longer? Like, the opposite of that. Why don't they go a little harder?

But where is the 30-year mortgage rate? Well, it's back in the sixes, but it rose a little. Is that so bad? I mean, I know it's not 3%, but is that so bad? Depends if you're a homebuyer or not. So the Fed has the rates at, what, 5.25 right now or something? Yeah. If they cut 1%, it's at 4.25, does that really change the world that much?

Does that really, is that really going to light a flare of speculation? It might. I don't know. Carl Kentonia tweeted from Redfin, Homebuyers on a $3,000 monthly budget have gained $40,000 in purchasing power since mortgage rates since mortgage rates peaked last fall. That's starting from 8% high, of course. But, yeah, that's the one thing you'd say.

The housing market was by far the biggest industry that was impacted by rising rates. I guess my opinion is this is... And that's 20% of the account. My opinion is this is not a slam dunk by any stretch. This is, this is, but I, I don't think anyone really thinks the feds going back to zero because people keep, I keep seeing people writing in there, no, it's like, we're not going back to a pre-2020 world of rates. I don't think anyone's arguing for zero percent, but I don't know, three and a half for four

percent. Does that, doesn't that seem more normal to you? Again, maybe doesn't that. So here's this, the BA had changes to GDP, which increased three. Wait, who? The B.A. Bureau of Economic Analysis. Economic what, something?

I don't know. They just showed contributions to GDP, which is 3.3% in the fourth quarter, which is higher than anyone thought. And it's basically everything. And a lot of people say, well, fiscal deficits, and look at the federal government spending. It's not that big of a piece. Consumer spending is still the biggest piece. Actually, state and local government is bigger, too, which is interesting, that they got all this money from the pandemic, and now they're sort of holding things up as well. So I did a little meme here on Twitter.

Again, I'm never calling it X. Sorry, it's not going to happen. So we have 5% nominal wage growth, which you looked at the, was that from the Cleveland Fed? The Cleveland Fed is a thing. Yeah, but they don't do the wage true. 6% nominal GDP growth. So we took that 3% and added 3% inflation, that 6%. We have 3% inflation in the Fed's cutting rates at all-time highs.

This is the 90s. People were worried about the 70s. This is the 90s. That's a good point. Stacflation was not going to name names. People said it. Yeah. Today's economy is more like the 90s than it is anything close to the 70s, which is...

I'm a geography guy, by the way. Do you know what state Cleveland is in? I think I have an idea since it touches my home state. Yeah, say it. Say it. If you know, it's say it. Ohio? Okay.

Just checking. All right. There's no Cleveland, Michigan. But I pulled some of these, and I wasn't trying to dunk here, but I pulled some of these headlines from before. Bezos urges consumers and business owners to reduce risk in the face of electric recession. That's from November 2022. We've seen the 100% recession thing from Bloomberg. Jamie Diamonds has braced itself for a hurricane.

And the point for these headlines is not to dunk on these people. The point is literally everyone felt we were going into recession. And there's certain people said, I didn't think so. And I predicted, no one predicted this, that growth would accelerate. People might decide, yeah, we're going to have a soft landing. You got it. But no one said that growth is going to accelerate like this. I don't think so

But yes I mean there were certain people Who were more And credit to us January 2023 We said no recession And it was painful at the time to say I was embarrassed I think I was sweating before we said it

This is with this is not going to age well All right so the one The generational thing about this is A lot of people saying okay fine If you own stocks and you own a house Which is both of them are like 60% of Americans It's a majority Right 65% homeownership rate

and I think 58% was the number for stocks. So it's a lot of people who own stocks. But people say, fine, what if I'm young and I don't own any stocks and I don't own a house yet? I'm screwed. And I have some sympathy there. But this Jeremy Horpidal guy, who I've been following more lately on Twitter.

This who guy? Jeremy Horpidal is his name. I don't know if I'm saying that right. Looks good to me. He writes this blog called The Economist We're writing every day. And he looked into the new Fed data through 2022 or 2023, I guess. and he says

if you add the millennials and adult Gen Zers 18 plus they are ahead of the boomers and Gen X in terms of wealth at the same age and we have iPhones

but look at the number and it's not just a little bit above it's way above where boomers and Gen X were at the same time so last week we talked about how more it was like 25% of adult Gen Z owns a home already

and that number kind of shocked us how many people would realize this that the because everyone always says we're doing worse off than our parents young people today are doing better off than their parents were at the same age and this is adjusted for inflation all the usual caveats i i'd be honest this number shocked me i never would have guessed that i could just uh there's so many yeah butts coming into our inbox right right and he even broke it out and he said it shows the real estate piece and all the it's it's diversified the assets are diversified enough just like the other generations this is the kind of number that i i i i

I never would have guessed. Why do we think how our parents had it so easy? I think every generation thinks the generation before them had it easier, and every older generation always thinks the new generation is soft. I think that's just a right of passage, right? I think we just, that's the, I think that's just the way things are always going to be. Yeah. Huh.

All right. I have more data later in the show from American Express and their younger users just spending. Okay. That's been a good barometer of the economy, though. So here's another one that, okay, fine, the people who don't have assets, they're making off the worst, right, especially low income. But this next chart, look at this. This is another economist on Twitter, and this is annualized percentage change in nominal hourly earnings since over the last 40 months, so basically since the start of the pandemic.

Sorry, this data is, this is confusing. Okay, I don't know why he didn't use percentages on the side, but those are percentages. So this is percentage of wage growth and hourly earnings percentile, meaning close to zero is the lowest income earners. Close to 100 is the highest. So this is going from lowest income earners to highest. And the chart is a straight top left to bottom right, meaning the lowest income percentile had the highest change in earnings. And that followed every successive income percentile. So it's like it's inverted to what we've had for inequality.

Can it be said that historically inflation has impacted the lowest rung of earners the most, except it didn't at this time? This has to be the best that they've ever done on a relative basis to people who make more than them in an inflationary environment, right? I don't think that – because this is what people have been asking for for years. The people in the low end of the income spectrum are getting left behind. And for this 40-month period, that totally flipped on its head, and now that inflation's gone, it's probably going to reverse. which is going to be, I don't know. That's the trade-off, but it's another surprising thing. All right.

So this is why the Fed's going to cut. Jason Furman, Core PCE inflation annual rate. So core PCE is the one the Fed likes. They take out what food and energy, I think, which gets people all mad, but it is what it is. Over one month is 2.1% annualized. Three months, it's 1.5 and 6 months, it's 1.9. 12 months is 2.9, but the 12 month, you basically throw out the door because the more recent

ones make more sense. So it's, they're back on target. Can there be no analysis by the Fed? Like, 2% is neutral, what, because they say so? Yes. I always feel like that 2% numbers pulled out of someone's rear end. I don't know where it came from. It's like analytics and football. Like 98% of the time in the regular season at the end of the first half, Dan Campbell goes for it on fourth down. He decided to take the three points because football is like the economy, it's situationally dependent. See, that's the problem is he, if you have an investment process, you follow it hell or high water. If you go on four and fourth down every time, you go for on fourth down every time. I kind of agree with you. I didn't mind him going for fourth down every

play, but he should have done it then too. And curb stomped. I thought going up three scores was not in high, even in hindsight, it was not a terrible decision. But my point is, football, there's context matters. Same thing with the economy. So do they need to cut just because we're back at their target? Who says that their target is, what does that mean? There's just a number that they said. I think it's, they want to be intellectually honest with themselves, and I think that's why they set a target in the first place, even though it feels like it's pulled in thin air.

I agree. Because historical inflation rate has been more like three, three and a half for the past hundred years. So 2% is a sweet spot when everybody's, that's Goldilocks? I guess. So you've seen this chart from Mark Perry. before that shows the price changes from January 2000 to December 2023. So inflation and things we need, disinflation and things we want.

Do you remember how smart you felt when you first saw this chart? Like, oh, man, I've got it all figured out. Like, I'm going to show this to someone and blow their mind. But so the college tuition, hospital services, college textbooks, child care, this stuff is all above inflation. Surprisingly, food and housing is barely above inflation. And it's just shot up there in recent years. But look at hourly wages are way higher than inflation too.

and then new cars, furniture, clothes, cell phones, computers, TVs are all way below inflation, which the TV ones still just kind of boggles my mind. It's down 98%. That's mostly because quality is better. But the ones that people complain about the most, obviously healthcare is the biggest one that just seems to be unimpeded, but college tuition and textbooks are rolling over. So if you looked at this in the past 10 years, it wouldn't look the same. Yeah. So some of these are actually moving in the right direction. I wonder if college tuition has peaked, or at least certainly the rate of inflation has to have peaked, no?

Yeah, that's what I'm saying. If you did this over 10 years instead of the whole century, it probably looks a little better. And look at the jump in hourly earnings that we've seen in the last few years above inflation. I think if you did this in the last 10 years, things would look a lot different. It might look better. I think I might be over-saving my 529. Oh, because you're thinking it's going to fall. I guess I'd rather be safe and sorry.

Talk to Bill Sweet because you can convert the 529 into a raw fire or something afterwards if you don't use it. Really? It's a new rule. You know what I'm in the market for? A durable good. What's that? In fact, this will be the first time that I've ever purchased what I'm about to purchase. Okay.

A refrigerator. Okay, what's wrong with yours? It's like couch that way it doesn't last as long? So, my couch is junk. I don't want to buy an expensive couch, riding into the ground. Okay, it's not a bad idea. Did we have this discussion, right, about couches? Yes.

Yeah, yeah. My couch sucks. It's not comfortable. What's wrong with your fridge? All right, so my fridge, uh, it broke. The freezer doesn't work anymore. So we got it fixed twice in the last four months. And I'm not, so anyway, getting back to this point about things that are more... How much did you shout to have it fixed? You probably spent half, on two visits, you probably spent half of a cost of a deal. Things that are more affordable. I think in two visits, yeah, I probably spent five, six hundred bucks to get it fixed.

Guess how much of new fridges? Under $2,000. Yeah, might as well get a new one. We had that with our... our washing machine, there was something wrong with it, and they said, we could come out and fix it, but it's going to be a minimum of $300 to fix it. You might as well buy a new one. That's what we did. Okay. I wish this service person told me to just buy a new refrigerator.

In my head, I said to Rob it, I was like, ugh, how much is a new fridge? A couple thousand dollars? Well, I guess technically it is a couple, but it's only two. It's less than two. And they take the oil and away for free, right? Hope so. All right. This is from the Washington Post.

The best kept secret in American politics today. Almost every kind of energy is booming. Oil, natural gas, renewables. production of nearly every major source of energy has recently touched all-time highs. In fact, production of each has roughly doubled since 2000. Look at this U.S. field of crude oil hit all-time highs in recent months. To put this in perspective, the United States is producing more oil than any country in history. Can you imagine ever betting against America? And the whole point of this article was, neither political party wants to take credit for this for whatever reason. Climate stuff

for the Democrats and Republicans, they wanted to do it, but it's going well for them. It's like, One of our biggest success stories that no one wants to take credit for, which is kind of bizarre. But again, another unexpected... Speaking of energy, do you have solar panels on your house, on your roof? No. Okay? Why'd you say it like that? I don't know. Do a lot of... No one does, do they?

Unless you live in California. Do you have solar panels? No, no, no, no. It's very popular. Okay. Okay. Do you? I don't. I almost did. So the reason why I asked is, A, we're talking about energy, and B, somebody... There was a tweet thread the other day. I think Chanos quote tweeted it

talking about the financialization of these solar panels and how it's I don't know if scam is too strong of a word but there's some there's some shit going on

okay so anyway all right so people go door to door it's very common in my neighborhood salespeople go door to door to door

yes and they explain to you why you should get a solar panel who answers a doorbell I did I was home you get actually stay in the ring

go away No, you know what? I think my neighbor convinced me to take the meeting. Okay. So I took the meeting. I took the pitch. That sounds too good to be true. I agreed to it, and then I backed out.

But they tell you that, like, it's free. You get the state tax credit. It's $0 out of pocket. You pay the same thing that you're currently paying, except after X years, wherever the crossover point is depending on your situation, you won't pay for your electricity bill, gas, but whatever, we'll go down by 90%. What's the scam part of it? I don't know.

I haven't figured it out yet. But a lot of it is like... Maybe someone can email us and tell us. No, part of it is like, if you agree to it and you don't pay anything, these companies can like, if you get behind your mortgage payments, these companies can have access to your house. I don't even want to say this because I'm like probably misrepresenting what it is. But I'm surprised that that doesn't exist where you are. So I shouldn't put the wind turbine in my backyard for wind power?

You do you. I'm, you know. All right. By the way, a lot of people got really mad at us. I know we're not supposed to talk to the comment, people. Although, I never agreed to that. Year's resolution. A lot of people are really mad that we suggested, like, what does Florida subsidize insurance?

Oh, boy. We weren't really saying, we were saying, like, what is that going to happen? We weren't saying that's what they should do. People got really mad about that. Yeah, seriously. People had some very strong opinions about home insurance. I don't really care either way, to be honest. I tried to educate myself.

No, I really think the government has a responsibility. I'm only kidding. So I listened to a podcast with Joe and Tracy about it, and it's super duper complicated. I mean, I don't know what the – I'm not going to figure it out. I don't know what the answers are. I guess if you know hurricanes are increasing in severity in Florida, and you choose to live with it, that's a risk you take, right? It's just kind of – and this is why it gets very third rally

because it's like there's like politics and ethics and all this. sort of shit involved. I don't know, if that's where your family is and that's where you grew up. Like, you just have to leave because... Kind of. Or you... It's a risk, right? I don't know.

Very complicated. Yes. All right. You know what else we got in our inbox? There was two hot topics this week. One was the insurance stuff, and yeah, people were angry at us. Sorry. The other topic was your personal finance credit card scam that you're running.

Well, people were asking, the biggest question was, how do you get the money? Somebody put into subject like credit card carry trade. Yeah. Fellows, long-time listener, love the pod, Ben, your purchase of treasuries through zero-interest credit card. They'll definitely peak my interest. Does it impact your credit score if you hold a 15K balance for 21 months? Are you able to buy treasuries by using your credit card? Share your story, man.

This is revolutionary stuff. Another one said, hi, guys. These balance transfer credit cards offers usually have a three to five percent. transfer fee. So not exactly 0%. I jumped on this 21-month offer from Wells Fargo recently and transferred half my 8.5% of my 8.5% of the credit card. That's a different story. To wait out the interest rate environment, I figure 5% over 20 months is probably just under 3% a year. And then a lot of people are like breaking it down. It just seems like a lot of work for like maybe 500 bucks. And I think I'm with them. This seems like a waste of your time.

It's not, though. It's, I like getting credit card rewards. And it takes, it's one click of a button once a month base. So what about the transfer fees? Well, I don't do balance transfers. So whatever we, we just put everything on our credit cards for spending. And whatever we spent that month, by the, at the end of the month, I get the bill. And the money that I would use to pay off that credit card goes into T-bills. But here's my question to you. I have all of my subscriptions on my different cards. I try to concentrate most of them on one card.

But that's most of my expenses. So like, well, I don't know if that's true or not. Yeah, I mean, think about all the money you spend on groceries and eating out and that other stuff I leave on the old, but then people did say, well, what about the credit scores? I have like 10 credit cards. I have so much credit. I'm swimming on credit. And it's 30% of your FICO score is the amount of credit that you've used. And yeah, if you're going to buy a home soon or a car and you know, your credit score dinged a little bit. But guess what? I have pristine credit. Not to break. So yeah. So maybe it's not worth it for some people. For me, it's just like it's, I'm earning like a 5% credit card award basically right now. And this is a short term thing because. it's rates aren't going to be here forever. So I'm doing this now.

And then when the rate things fall, then I'm not going to do it anymore. All right. So your advice is to buy a home on a credit card. Stop paying it. Take the equity out. Put it on to another credit card. If you have,

but if you have big purchase coming up, you did but just buy a house and you have furniture to pay, you're buying sheets and. This seems like a you think not to me. I would never do this. It just seems like a lot of work. Yeah.

It's really not, though. It's easy for me. Maybe for some people it is. But yeah, all the people who ask all the questions, It's pretty simple. I don't know. If it doesn't seem like,

and it's obviously not for everyone. But I just, yeah, I don't take out of cash advance. I don't do balance transfers. I just take what I would have spent and I throw it in there and I've got 21 months at a 0% in the current rate environment.

I see that as a pretty decent deal and if it's not going to get me a ton of money. All right. Credit card carrier trade was a great email. I like it. And some people did say that like the HELOC thing. Like, hey, I've got an 8% HELOC. I'm like 3 to 8.

That makes a lot of sense to me. All right. Harvard University. published this new piece, which is pretty cool. It shows a map of the United States and it shows a home price to income ratios. And it says they rose all-time highs in most places. And you can do this from 1980 to 2022. And you can kind of toggle it to see. And they have it color-coded. So yellow is, let's see, yellow is bad, red's bad, blues decent, right? And you can see most of the country's yellow. Most of the Midwest still is kind of blue. So still not bad. But Florida,

California, Arizona, New York, obviously, still really bad. And I pulled a few charts here. So the first one's 2022, and it's, you know, all-time highs in most places, especially on the coast and in the south. Then I look back at 2012, and this is the bottom of the real estate market. It was still pretty high in California, a little bit in New York, New Jersey, those kind of places, but pretty much everywhere else in the country. It was very, very affordable.

And even in 2017, it's starting to get a little more affordable in places. Most places in 2017 were still pretty decent as far as home prices go. But if you wanted to be one of these people who figures out a place to live, that's lower standard of living, those places in the Midwest are still pretty cheap, relative to income. Just going through these charts. Huh. Wait, I'm confused.

Home prices are more affordable? No, no, no. So this is price-to-income ratio. So you can see it went from, you know, under three in a lot of places in 2012 to now five to eight times, eight, ten in certain places. I'm just saying the price affordability thing because the pandemic rise happens so quickly, we still had affordable housing prices in like 2017,

2018, probably 2020 and 2020 and 2021 too in a lot of places. And there's not very many affordable places anymore. If you look at 2022 graph. Okay. So it's all right. So my brain was broken. Price to income ratios, You don't want this going up.

No, this is bad. Got it. That's what they're saying. They're an all-time highs in a lot of places. And there was way more blue, which meant affordable before. And now there's way more yellow and red, meaning really unaffordable. Okay. Well, I dropped this home into the dock.

This is a house in my neighborhood. Now, this is a high ranch. It's a split level, right? And this is a high ranch. A high ranch. I've never heard that. That must be in New York, third. This is the type of house that I grew up in.

I don't think we have high ranches in Michigan. Okay. Very manicured bush there in the front. That is a manicured bush. I'm going to say this house is 2,300 square feet. So for the listener, you walk up the steps. So there's a two-car garage. You walk up the steps.

And there's, is this a foyer, an entranceway? You can go up the steps or down the steps. Down the steps, there's one bathroom. There's the garage. There's one bedroom and, like, a living room. Upstairs, there's a dining room, a den, the kitchen upstairs, and three bedrooms upstairs. Not a huge house, bany means. No.

This is... It does say six bedrooms. I'm guessing they squeeze a bedroom in somewhere. No, no, no, no, no. So, like, this is the type of house that I grew up in. Again, upstairs, there was my bedroom, my sister's bedroom, my mom's bedroom, one bathroom. Kitchen right next to it. Kind of tight.

For some reason to me, a million dollars just still is kind of a line in the sand. and spending over that on something and anything, obviously a house like this, like. Well, anyway, here's a punchline. This house is listed for $1.15 million. That's what I'm, yeah. One million, one hundred and fifty thousand dollars. Now, there's no way in the world.

Matter, how about this? When my mom died, we sold this house. This is the house that I lived and we sold. You know what we sold it for? I think, could this be right? It sounds so wrong given where the house prices are today. What year are we talking here? You know, I'm going to look, because the number that I have in my head just sounds so absurd.

This is 2012. That's the bottom of the housing market. So it could have been a very low. Yeah, let's say. Yep. We sold this house for $485,000. It'd be worth two to three times that now? Two and a half times that?

Well, this person's asking $1.5 million. Now, again, it's not going to sell for that. Yeah. But the fact that it might sell for $900 is blasphemy. It's crazy. It's crazy. And it's not like there's room to build more houses where you live, right? There's no supply coming on anytime soon.

Yeah. So this is the thing. Like, if the Fed cuts rates, is there another 10% higher for home prices? The hope would be, there's going to, listen, there's going to be more demand than supply. The hope would be there's a decent amount of supply of people have been locked in and saying, all right, you know what, fine. We'll sell our house now that rates. We're at three, but if we go to five, that's not that bad.

It could have been eight. So now we'll sell ours. That'd be the hope. There's more supply. But there's not relative to demand. Probably not. It's going to get ugly again. The Fed can't fix the housing market, though.

What are they supposed to do? Unless the Fed gives home builders free loans to build more houses, how are they going to fix it? They're never going to fix it. All right. Let's talk about lifestyle creep. Lifestyle creep. So not, no, not really lifestyle creep. This was more housing market well.

So Fortune had this piece about how five Gen Xers share what it's like to prepare for retirement. And I always find these interesting, the personal stories, you know? I kind of feel like you're an Xer. I'm close. I'm in the middle of nowhere. But so this is just how much the housing market has changed. You mentioned you're going to Denver. Don bought a three-bedroom house in the middle of Denver 10 years ago for under 100K.

His mortgage is $950 per month. He plans to stay there forever. And this is a guy, it says he bought the house when he was making $14 an hour. And he says, obviously, that's not the case. This guy's saying, like, I'm screwed. I'm not going to retire. He makes like $50K a year. But he says his original plan was to buy one or two more properties to run out.

But once housing prices skyrocket, his own home is worth four times what he paid for it. And he says he gets calls all the time about people want to buy it. And he said he wouldn't be able to afford anything else. So this guy thinks, I'm screwed without realizing. His biggest financial asset quadrupled, whatever, since he bought it. And he made a ton of money on housing, but he doesn't look at that as wealth because it's in his house. Imagine saying, like, I put $100,000 into stocks, and now they're worth $400,000, but I'm not rich. I think there is something different there.

Well, you don't live in your portfolio. True. But I look at this thing as like this, sure, he wasn't able to buy rental properties around. him out. But he timed it perfectly. By the way, I have gotten two calls in the last couple of weeks from real estate brokers asking if I was looking to sell my house. That had been put on ice. Did you say, where am I going to move to? No. Okay, this is from D.R. Hart, and this is let's move on to Great Quarter Guys. This is a segment. Actually, I want to share some exciting news with the audience. We got a new show coming up, and the show is going to be called Great Quarter Guys.

It's me, Josh, Alex Cantoritz, and we've got a very special guest for the first show, an analyst. You probably heard of him. So there's nowhere, as far as I can tell, where, excuse me, I'm so excited, my voice just cracked, where there's an hour-long show, a real discussion, not previewing earnings, not reacting knee-jerk reactions in the after hours,

an actual thoughtful discussion about, earnings and the market's reaction to it. So the first episode we're going to record, I believe on Friday, actually. We're going to talk about, John, is that right? Yeah, Friday. We're going to talk about, we're going to do Tesla, Apple, Amazon, Google, and Microsoft, I believe. And I am super excited. It's going to be awesome. But you're doing it once a quarter? We're going to start, this is the first, it's a pilot episode. So we'll see where it goes. But I think the audience is going to love it. There's plenty of information in there. So there's D.R. Horton, who's the biggest home builder in the country. I thought this was interesting. Their C-O-O said, I think

70% of our deliveries were at $400,000 or less, which for us is maintaining a focus on affordability and a payment that works for people in their monthly budget. These home builders have moved. People keep talking about median new home prices fallen. They're actually building you can't call that a starter home, $400,000 a less. Maybe now you can. But they've moved down a little bit and they're building smaller, more affordable homes for people as opposed to just building these, you know, three-quarters of a million-dollar McMansions for people. That's a good thing. 70%.

There was a stat about how the $20,000 car doesn't exist anymore. What if that in the real estate market comes back? What if the start-at-home makes it come back? That's what the new ones are, the home builders are building those small. Again, $200,000 is gone. A lot of that is inflation, too, but I don't know. I thought that was a good thing. What does a starter home?

Is it, is it priced or is it square feet, maybe a combination of both? I would, it's definitely priced, but it's also probably a home that needs some work. What do you think? I think of, like, I guess a smaller home. I look at, I look at certain homes. Yeah, smaller, but also, like, this, it doesn't have all the amenities. It needs to be, it's a fixer up or whatever. Yeah.

That's what I would think. All right, American Express, record revenue, record net income. Is that good? Do they have zero percent credit cards there? Okay, the percentage of total spending, baby boomers, 31%. Millennials and Gen Z, 32% on Amex. That's surprising. That's a premier card for people with money.

How you like them apples? Gen X is the forgotten one that's also the highest. Gen X is the highest, 37%. That's interesting. Goods and services up 7% year over year. What's the card American Express has that's getting all the young people in? Because they don't have the Sapphire or whatever. Travel and entertainment up 8% year over year?

That's a great question. What is the Amex card? Maybe it's a lot of the travel ones. I have one of the Amex ones. I can't remember which one. Platinum something. I have three now that I think about it for no reason. I have the business one, our business one.

Then I have the Delta one. And I have the gold one. See, this is how I'm able to do zero percent credit cards because I have a million credit cards. Yeah. That's why I have plenty of credit. And you know what? You always once a year. update your income and ask for more credit.

Why do you need more credit? Because it helps your credit score. The percentage utilized, percentage spent versus percentage credit you have total available. See, I'm such a new will. I'm not playing the game. See, that's people, people try to like poke hold on my strategy.

Listen, I know it all. Okay? Come on. You act like I don't know what I'm doing here with these 0% credit cards. Come on. All right. I increase my credit as often as I can

because it's good for credit score. All right. I'm going to do that. S&P 500 at all-time highs? Ben's credit score, all-time highs. Here's a quote from the call. Our focus on continuously innovating, you know what? Allow me to just plug a quote or company that we invested in.

I was listening this weekend. Robin comes in. She's like, what are you listening to? And I showed her the email that Sammy sent to us in 2021. Yeah, that was pretty cool. We found it. I was like, how cool is this? Like, we invested in this company.

It was like, it was an idea. Now it's this. She's like, I don't care. She's like, who's him? I don't care. Okay, our focus on continuously innovating our value propositions. to meet the needs of our customers is driving increased brand relevance across generations, including millennial and Gen Z consumers.

These customers represent over 60% of the new consumer accounts we acquired globally in 2023, and 75% of new consumer platinum and gold accounts acquired in the U.S. come from this cohort. Wow. Don't tell me the young person is not doing okay. I think one of the reasons that it's so easy to focus on the negative and, like, people being, it's good to obviously focus on that, like, listen, not... Well, yeah, people are going to email us about some personal experiences, about young people. It's always the case that there are certain people that are not doing well.

It's really unfortunate that there's never going to be a time when 100% of the people are going to be doing well at the same time. We can't highlight the positive. We get ding for highlighting the positive. And it's never been easier to focus on the negative either, like, or to know that the negative exists. In the past, no, not as many people realize the negative stuff existed. So maybe it's a good thing because people are highlighting it.

Like, yes, it's not perfect for... everyone right now. But for a lot of people, it is. And yes, it's okay to highlight when stuff is going good for a large group of people. Ben, do you think that who do you think has a better sense of how the economy is doing? People in the comments section that we're not talking to, talking to you? Or American Express? I don't know. There's this one guy who lives in Topeka. Okay. So there's a chart that they show card member loans and card member receivables credit metrics, okay? 30 plus days past due. Now, that's not feelings. That is actual data. 30 days past due. The number in the fourth quarter was 1.3%. Pre-pandemic in Q4, 2019, it was 1.5%.

Yeah. And whenever we see the pre-pendemic markers now as, like, the benchmark, things weren't bad before the pandemic. Like, the economy wasn't falling off a cliff in 2019. In 2019, the economy was doing okay. Right? So even if it gets back to that level, you can't say, like, oh, it's time to work. Like, things were okay back then. We're not talking about comments, people. But there was a guy in the comments last week. He said, the first 20 minutes of this podcast sounds so top-y. Oh, top-y. Well, but.

That's not, guess what? He's talking to himself. The market's on an all-time high. That's not us. Yes. And that's the thing is that, do you remember people saying that in 20- What was the one line? I can't believe you could read the comments.

I mean, I'm not going to lie. I peek from time to time, but every time I open the comments. 90% of them are positive in people saying and people giving us recommendations and inside jokes. And so I respond to those people. But every once in a while, there's, uh, I respond to every email. The comment section, it gives me, I get anxiety. And I don't get anxious about a lot of things.

I don't mind getting in there and mixing it up a little bit. Okay, good for you. But what was, do you remember the line in 2013? You know what I'm talking about? This market is running on fumes. Not only do I remember it. I don't even want to say the rest of it because, but yes, I remember it very well. But that's the thing.

Every time the stock market hits all-time highs, and listen, it could. It could have a reversal. That could happen. But the weird thing is, in 2013, we came all the way back from the huge. huge 2008 crash, and then people thought, okay, this is it. Think about how long it's been. That was 2014. Josh and I were on a bus in Texas, and while we were on a bus in Texas, that's not important.

But I remember, like, absolutely belly laughing at the absurdity of the line that we're talking about, about how the market's about to fall out of bed. Not because it wasn't possible, because this guy had been saying it for so long, and it's a decade later. Yeah. And the person is still saying the exact same thing. That's the thing is people in, it was kind of worrisome back then

because the great financial crisis was still so fresh in your mind. Like, what if, you know, it does roll back over again? And you're right, that was, I don't know, 200% ago or something, 300%? I'm always worried. No, like, I just don't act like the, okay, whatever. All right.

So, Corder has this great slide is content still king. And they show Apple, Disney, Pam, and all that sort of stuff. and they break down the number of TV shows on each major platform that are rated between 6 and 5 and 8, which is junk. I'm sorry, under 6.5, which is junk, and the most is Hulu. Now, this is, this isn't adjusted for percentages.

It's just total number. So Hulu is the most junk, again, not as percentage. Most junk on the platform. But let's forget about junk. Let's focus on the quality. I'm sorry, if I'm picking the junkiest one, it has to be Netflix. I would say so, too. But I'm also surprised that the quality rated 8 and above number of TV shows, Netflix is the highest as well.

That is interesting. That's surprising. You know, I saw Ben Stiller tweeted about severance this morning. New season coming? We're coming out of the doldrums. There was a deep freeze due to the writer's strike. Yeah. So one of my favorite shows, that's in a stretch.

One show that I enjoyed a lot, and I don't know anybody else who saw the show except for me, which is weird because it was on HBO. Tokyo Vice. I liked that one. Oh, you did like that one. Pretty sure I gave that one to you. No, no, no, no. Yes. No way.

I was in on that one from day one. I think I gave it to you. I'm willing to be wrong. Check the tapes, John. So that's coming back. Okay, good. I did what I like that go on. Love that show.

What else is coming back? Curb Your Enthusiasm. I've got death and other details and I've got a true detective. We're back. Okay. That murder at the end of the world kind of died off. I heard that fizzled out. Glad I didn't watch it.

The first episode is the best one. I still have to finish it. Once House of the Dragon come back. I don't know. I'm sure we'll hear about it a lot, though. Last week when WWE... I need some WD40 over here. You hear that?

Yeah. Last week when WWE four went, what's the... What's past tense of four... They foregoode? What do you... I don't even say. They were getting $250 million from USA.

I'm saying they gave it up to go to Netflix. So I'm saying they forewent that. They foregoed it. I'm pretty sure four went is not a word. Okay. Well, they went to Netflix. They're getting $500 million a year. The reason why that was a watershed moment for me personally was just a bit of a captain

obvious, but a lightball moment. Like, obviously cable peaked a long time ago. It's never going to have more subscribers than it does today. Like that is just secular. It's mutual funds versus ETFs. But that was a big one. But I'm still holding on for dear life. I mean, I'm not, I'm never cutting.

Not never. I have no plans to. Anyway, so Matt Bellany at the puck, or just puck, wrote about the transition that Netflix is company making. You know what, do it for me? Yeah. If Google offered internet with YouTube TV. Because the part of, you still have to buy the internet.

And they just jack up the internet cost for you. So that's part of it for me is like at the internet, too. So if Google said, we'll throw an internet with YouTube TV. I'd probably do it. By 2022, Netflix was releasing 85 original movies a year, all while overpaying talent up front to buy out their back end.

At that insane pace, many of the Stuber films, so this guy Scott, I think his name's Scott, Stuber, he's leaving Netflix and he was the guy of response before all these movies. Stuber films felt about 80% 50% finished,

like the production executives in charge hadn't yet given back her notes. That's what he said. The something always feels off about the Netflix movies. It just feels like they weren't done. They weren't done at the beginning, which was the case.

Because they were putting out so many. It wasn't a quality. Oh, so there wasn't enough time to like... Yeah, they were just pumping them out. So our intuition was right. Some, like the $200 million star vehicle's red notice and the gray man played like unintentional parodies of better movies released in theaters. That's true.

So true. So he said to that end, a Morgan Stanley report called the WWE deal, a seminal moment for sports. It just felt like a really, really big deal that Netflix is slowing down their movies and focusing on sports. So what's the first domino to fall? Like, what's the first merger to happen? Is it just Paramount Plus? Well, that's where all the smoke is.

But now they're talking about, like, there's a lot of debt, and Larry Ellson's son might just want to buy the core assets. Who knows? But I did see it, Netflix tweeted, long-time collaborators. So I'm not done with movies. They're just not going to do 85 a year. Long-time collaborators, Ben Affleck and Matt Damon are teaming up once again. Affleck will direct Damon into kidnapping thriller, Animals for Netflix.

I mean, I don't need to hear more I'm in. Yep. I think there's a new Adam Sandel movie called Spaceman. Did you see the trailer for that? Pretty weird. I thought it was, what was that book that we read? And I don't want to turn into my dad and just make up the name of it. The spacebook that we would, with like the Rock, Spider.

The Martian one, yeah. The guy who wrote the Martian, Andy Weir. Was there a Project Hail Mary. Project Hail Mary. Thank you, John. They're already making that into it. So when I saw the trailer for Spaceman, I thought that was Project Hill Mary. It's not.

It kind of looked like that. Yeah. All right, Matthew Ball tweeted, Peacock is way ahead of subscribers and revenue, but way behind on profit. Cumulative losses are now five times what was originally pitched to investors in 2020. How crazy is that?

They're going through what Netflix did five years ago. They're all like five years behind Netflix, right? Just a streamer was just a debacle. All right, somebody emailed us. We were having, like, trouble with the spelling, just not trouble, just thinking about how weird it is and Kobe keeps telling me, why isn't it spelled with this? Like wild, why isn't there?

and he at the end and all this sort of stuff. So somebody emailed us. Cow when eaten in his beef. Pig when eaten is pork. Deer is venison, poultry, et cetera. The keepers of the animals were poor and spoke old English. The eaters spoke French. So it was called one thing by the workers and another by the eaters

because of the predominant languages of each position. A lot of fascinating stuff here. Yeah, I get, a lot of people did tell us, like, yeah, the reason that the words are so messed up is because English is a jumbled-up language of all these other languages that came before. That's fine. Yeah. Just cut it off and start over.

Yeah. That's all I'm saying. All right. So I watched The King on Netflix. Movie? Which was a great plain movie. And I say plain movie because it was a drama and it was a bit slow. I probably would not have had the patience for it on the couch.

But this is one of those rare Netflix movies that felt baked. Timothy Shalamey. I've never heard of this. Is it new? No, you've heard of it. Once you see the image, I'm like, oh, yeah, I remember this. I think it was from 2019. Okay.

It was quality. And I'm not... Where do you stand the medieval films? Yeah. Yeah? It was kind of dark and everyone's dirty.

Yeah. This is a good one. Okay. This is a good one. I do recommend it. It was good. But again, more of a plain movie

for me personally. Fair. I made my wife watch past lives with me because I'd already watched it. You re-washed it. So I said I'd watch it with her because she got mad at me

because I watched it. Did she love it? Yeah. It was obviously the endings kind of, sad, but that's, that's, that's got to be best picture. That's my call. Wow. I mean, Oppenheimer's probably going to win. It should be that. Here's one from the... You really are a film guy. No, I'm not a film guy. No way. Past Lives is absolutely a film.

What are you talking about? As long as it's like a coming of age, kind of, then I'm in. Watch burning on the, on the plane on hub. Okay. Here's one from you from the early to mid-2000s, maybe late 90s. Ed Burns, underrated as a film person. Is he new, What happened to him? Yeah, he is. So we started with the Brothers Macmillan. What? And then did she's the one, which was Jennifer Anson and Cameron, Cameron Diaz.

I never saw that one. In, like, the 90s, both throwing, like, 95 miles an hour. And he did this other one in, like, 2006, I rewatched this weekend on Stars, called The Groomsman. I haven't seen any of this. And his, they're all just very simple movies. He basically plays himself, but he wrote and directed and starred in all these movies. He's got a few other ones, too. But I don't happen to either, but.

That's my take is Ed Burns was... There's no Ed Burns is anymore who are writing, directing these simple little indie movies. And I always enjoyed most of those. I thought the Groom's one was pretty well done. The Saffty Brothers are doing that. Okay, just in a different genre. I can see that.

Anyway. Yeah, Ed Burns was a... There's so many actors like that. Like, whatever happened to that? Daniel Stern. You keep coming back to Daniel Stern. It's true. How about this one?

What did I watch for you some? Brutiful. Matt, Matt Dillon. See, this is like the tweet where people say that guys could just sit in a room and name sports players.

For us, it's accurate. I mean, something about Mary and wild things. That was, I mean, he was on top of the mountain. Yeah, same kind of guy. Okay. All right. Ben, you're in New York City because we're going to be at Stock Exchange tomorrow.

That's right. We're going to be filming a live podcast from there for a talk of a book that's coming up. We're going to, not the seller tonight. I think we're going to the village on the ground. or fat black pussy cat i can't remember which one but comedy show okay comedy show i'm in you always take care of me when i come to town good host what a guy all right anal spirits at the compound news dot com personal emails personal responses see you next time