Animal Spirits Podcast - Great Quartr Guys (EP.230)

Episode Date: November 10, 2021

On this week's show we discuss Elon Musk selling 10% of his Tesla shares, the pandemic trade is over, Zillow's blunder, Peloton's downfall, interest rates remaining low and much more.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's animal spirits is brought to you by our friends at YCharts. We're going to get into this today, but Elon Musk, now Lord Edge, I guess, tweeted this past weekend, much as made lately of unrealized gains being a means of tax avoidance. So I propose selling 10% of my Tesla stock. Do you support this? More than 3.5 million people voted. The yes is 1.58% to 42%. Oh, interesting.

You voted yes. I voted no. I want to see carnage. So I looked this up on Y charts. I put in Tesla. I tracked their 30-day average daily. volume. And one of the cool things on white charts you can do is add certain things that I always add in. You can annotate the charts. So you can add a min, a max. You can add recession bars.

And I just added the average here with a 30-day average volume. And so it's like 21 million on average. And I think that average is probably a little skewed by the March 2020, because this is over the past three years. Regardless, I found, there was a few different places that said how much Elon actually owns. I saw one said he owns 170 million shares, one said 190. One said more like 230. So I'm going to go the highest one just because who knows with options and stuff. Selling his 10% stake would be almost 23 million shares. Obviously, he wouldn't sell it all in one day. But he'd be selling the average daily volume in Tesla shares over the past three years if he's selling his 10%. I actually think he sold it Monday morning in the

pre-market. Okay. So Tesla finished the day on Monday down only 5%. So if he was able to pull this off, that's not bad. That's pretty impressive. You're sure he sold the whole thing? In the pre-market? No, but it was a joke. Okay. I thought you said. Okay. I missed that. Oh, pshu. Anyway. All right, one more chart from my chair. I didn't have my coffee for the entirety of my life. Tesla's percentage of shares outstanding short. We've looked at this before. It was from 2012 to 2019, around 25% probably average. It's now dropped down to three.

Can you imagine being one of those people still in the 3% shorting this thing? Anyway, if you'd like to annotate your own charts like we just did, go to whycharts.com, tell them Animal Spirits sent you, and get 20% off when you sign up for your first subscription. 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 Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion. of Ritthold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. It's our four-year anniversary. Oh, really? What did you get me? What's a four-year podcast

anniversary? Diamonds? NFTs. I don't know. Bitcoin. Yeah. So tell the tape, we're pushing 11 million downloads. Not bad. We'll take it. What do we learn? We learned how to talk, first of all. We didn't really know how to do that very well first. Harder than it sounds. I grew an appreciation for radio DJs by becoming a podcaster. I think everyone says this, but do you hate the sound of your own voice or not? Not anymore. Okay. I've learned to love it. No, no, I'm kidding. I definitely love it. But listen, I'm a fan. I'm a listener. I listen every Wednesday because like you, with the kerfuffle that just happened, with you missing my Tesla joke, we miss each other's jokes all the time. It happens.

We're thinking about what we're going to stay next. So I'm a fan. We're going to ret skiing this thing. What does that mean? We're going to where the puck is going to be. We're thinking in our head the next hot take we're going to give. And so sometimes we miss jokes. Right.

It happens. That is a long time, though. We said we missed one week in four years. That's not bad. You know what's still happening? We're still having technical difficulties. Are we not? 96% of the time it's your fault.

But yes, we are. And you know what I'm about to do? I'm about to throw in these really crummy headphones because my AirPods are dying. So bear with me. Insert GIF of Owen Wilson and Ben Stiller hitting the computer in Zoolander. All right. The market assumes the pandemic is over. So this is through last week, so pretty close.

But Live Nation, this is over the past year, up around 120%. Planet Fitness, where I used to go to work out, not to brag. Up about 50%. Zoom video, down 44%. Jeremy Schwartz. Peloton down well over 50% over the past year. I know a lot of people have already themselves assumed the pandemic is over, even though we still have a lot of cases, people still dying. The stock market has assumed it's over. I think that nail in the cough and the stock

market has said, Scott Gottlieb on CNBC said he thinks by January. He said by January, this pandemic may well be over, at least as it relates to the United States after we get through this delta wave of infection and will be in a more endemic phase of this virus. We've said it before, and we'll say it again. The stock market did a pretty good job skating to where the puck was going. The stock market was Wayne Gretzky. Yes, Wayne Gretzky, Michael Batnik. I tried to be the goalie and failed miserably.

Why? By being bearish. Did I take this analogy too far? A little bit. The interesting thing to me, the stock market continues to hit all-time highs. The S&P is up 25% this year, and it's been a very easy year. The worst... What was it up last year?

18% last year. 31 the year before that. Let's keep it going. Why can't stocks go up 20% every year? Why not? Well, here's the thing. I say this at before. The stock market goes up 20% in a given year more often than it falls in a given year. That's wild. You're more likely to have a 20% gain than a negative return in the stock market going back 100 years almost. But what about Japan? Well, all right. Here's something interesting about this. Stock market is rocking. But there's companies getting crushed all over the place. Zillow we talked about. We're going to talk about this later, was down 50%, then fell 25% after earnings. Peloton was down 50%. 50% fell 20% after earnings, 25%. Penn Gaming was down 50% and fell 20% after earnings. I think we were wondering when this would happen. What would be the cause of some of this? There's too much excitement in some of these stocks. It's pulled forward too much. It's happening. Maybe you haven't been

paying attention because stocks have been getting crushed all over the place, individual stocks. The stock market, the SP 500 has been fine, but there's been stocks getting killed all over the place. Look at this chart from... Some people would say the stock market is a market of stocks. I would I didn't say that. Some people would. Look at this chart showing the performance of stocks after they miss earnings. Crushed. Crushed, crushed, crush, crushed. This goes back to 2011. Now, the quarter's not over. It's been a bad quarter, guys. We'll get into that. But the stock market is not taken kindly to those that miss. What would it take for Tesla to actually fall? Because obviously, if Elon sells 150% of his shares, By the way, was funding secured at like $70 billion? Where was that? It was a long, long time ago. And so, yeah, Tesla was down 5% yesterday, wherever I closed, to just $1.1 trillion.

This guy is a world-class troll. He does stuff like this. So you get, either way, you have people saying he's brilliant or he's an idiot. Because the people say he's brilliant and say, oh, look, Elon Musk is going to pay taxes. And the people say he's an idiot, say, no, no, no. Elon Musk has taxes that he has to pay. Can I make a prediction? You're right down the middle at Elon Musk. You don't feel any certain way. No, I think he's a charlatan who's also the wealthiest man in the world. Who's also what? A wealthiest man in the world.

A charlatan. He's a genius who's also a charlatan. Okay. You recommended to me reading, I'm getting off on a tangent here, reading the Peter Thiel book, the contrarian. Excellent. Wouldn't it be nice if we had an Uber successful person these days that was a venture or tech person that wasn't a complete sociopath? They're out there. Are they?

Doesn't it seem like to be one of these most successful people? I guess Bezos would maybe be the most normal-like person, even though it sounds like he's not the greatest person to work for. But it just been nice if we had like a nice person who is also ultra-successful and not like a complete- Nice people don't run trillion-dollar companies. You can't get that big and be nice. I guess maybe I'm just old-fashioned that I don't like people looking up to complete sociopaths all the time. How about this? You know it's a nice guy? Jeremiah Lohen. Let's get that guy to a trillion-dollar market cap. Sure. Okay. Anyway. Nothing. All right. So speaking of, of, and you know, it's been four years

that I'm still saying speaking of. It's a very hacky move. It happens. It's hard to get out of that stuff. So CNBC said that he's facing a tax bill of more than $15 billion on stock officers that are coming due, so that's why he basically has to sell. So wait, you're saying that there's something else going on? He's not

just letting the world decide. But I mean, honestly, if Squid Game is really happening, Elon Musk is 75% chance he'd be taking part in it. Oh, it's one of those dudes with the masks. Right? Yeah. I mean, come on. Yeah, that dude definitely likes.

He's definitely into some weird stuff. All right, so. And he's probably going to change the world. Like, his push of Tesla into electric vehicles has pulled forward all of this from all these other car companies. And he's probably literally going to change the world and he's still a troll, which Doug Bonaparte has this theory that I don't know if he's said this publicly, but I'll add him that Elon is like totally Teflon, that he's got something going on with the

government where like he really, he has him by the proverbial, you know what. and he could do whatever he wants. Well, no, the reason he has the government by the you know what is because he's the richest man alive. He could pay any fine they ever said in it. Like, what are they going to do to him? And I think that theory maybe showed true over the weekend when he tweeted to the head of the finance committee. What did he say?

I don't want to say it. I don't want to say it. I'm thinking about, did he say what I think he said? I think he did. So anyway, Sam Bankman-Fried tweeted. Quote tweeted Elon when he tweeted that at whatever, what is that Saturday, Sunday, I can't remember because my first reaction was, I want to see the price. What's going on with the stock? Sam Bankman-Fried of FTX tweeted because traditional markets close on weekends, there's no way

to get liquidity, risk management, or price discovery based on this tweet. Oh, wait, there is. So 24-7 stocks coming. Yeah, it's inevitable at this point, I think. All right. The market is up a lot. A lot of the things that are up a lot are companies that are being valued on potential and hopes and dreams and not just that. A lot of these companies are delivering, some of the expensive companies, but the Lute Hold Group has this great chart showing the number of S&P 500 stocks trading above 10 times sales. And we are so far past a dot-com bubble.

We're basically double that number. And the S&P 500 median price of sales ratio also more than twice as high as it was in the dot-com peak. And I understand looking at this chart and squirming and saying this is going to end really badly. And for a lot of these companies, we're seeing that play out right now. But trying to use old metrics for new companies is probably not the best approach. Like trying to do valuation analysis on hyper growth companies in a world that looks nothing like it used to. Is it different this time?

Yes. This chart is an advertisement for software. Yeah, exactly. That's exactly right. Software is, yeah. Okay, here's another thing that doesn't make sense. So the Fed announced a taper last week. They're going to stop buying as many bonds, I guess.

They're going to stop insider trading their accounts. The labor market is improving. We'll get to that in a little bit. Unemployment rates well under 5% now. Infrastructure bill has passed this week. I know that it doesn't all get spent at once, and it gets partials out a little bit in pieces over the years. The pandemic is getting better.

The economy is chugging along. And then interest rates just continue to fall. What does? 10 years at 1.4. four or five percent as of this. And it's been falling in the last couple of weeks. Since they announced the taper. And guess what? Dollar's still strong. What will it take for interest rates to rise? An act of God. I don't know. Because people over the years have talked about how like bonds are in a bubble and shorting bonds is an easy bet here. I guess we are Japan in some ways

with rates where they're just never going to rise again. I don't know. I don't know what else it would take at this point. 10% inflation. There's a lot of stories in here. But I think it's mostly a demographic story. The demand for yield is just ridiculous. I don't know how it goes above. I don't want to give out a certain level. But yeah, I don't know how it rises materially. All right, let's talk about what we're about to do here. As we've mentioned on the podcast before, we have been working with quarter, the app, Q-U-A-R-T-R. We invested. And we were going to do four quarterly podcasts next year, where we review earnings season, what do we learn, big trends, but that is, we're not going to do it that way because earning season is too long, too many things happen, it's going to get stale if we waited. It would be too much work. So what we're going to do is during earnings season, we're going to do a segment that we call great quarter guys.

And we had in the dock a place for this that we called company specific. Basically, we're swapping out that name. We're calling a great quarter guys. And we're going to discuss some of the earnings calls that we've listened to. over the past week. And on today's episode, we're going to discuss Zillow, Peloton, Airbnb, shake shack for a second, and maybe AMC. We're going to try and move fast because there's a lot going on. Listen to. In full disclosure, this was in CNBC that we have made an investment in this company. We're trying to help them. Ben didn't make the cut. I don't know what happened there. CNBC cut me out. I think someone at CNBC has a grudge against me because they cut me out of the release. No Ben Carlson mentioned at all. I feel slighted. So Zillow is the first one we have to

talk about because we've talked about this a lot. Before we talk about this company specifics, do you want to talk about how to listen to an earnings call? So someone actually asks us this on Twitter. How do you listen to earnings calling? And we're not experts of this because we don't do this all the time. This might be the blind leading the blind, but let's try. Here's my assessment. First of all, one thing you have to remember, I used to work for cell side analysts with my first internship I ever had. And these analysts, these are the ones that follow the companies in industries and they are the ones who ask the questions on the calls for the most part. These analysts have to kiss the asses of the company management because that's where they get their information from.

So you have to understand that they're never going to go that hard at these people. So if they do pry a little bit, and this happened in the Zillow call where they're like, wait a minute, you are kind of singing a different tune than you were last quarter, but they say it in a very nice way. Like that's a huge red flag, I think, from the analysts, if they just pry a little bit. So that's one thing to understand. You know who goes in a little? Rich Greenfield.

Okay. That makes sense. I think it also helps to listen to multiple calls to see all the narrative changes. So I listened to the last two Zillow calls before this one. and you could hear between the last call and this one, it was a totally different. I mean, it was a huge pivot away, like the stuff they said in the previous. So I think that helps too. Obviously, the quarter has the Q&A button.

I think unless there's a huge announcement, just skipping the stuff that they read that you can probably read in the letter anyway and going right to the Q&A helps. I didn't skip the Zillow one because I wanted to hear Rich Barton speak. That was the same for me for this one because it was a big announcement. And what about the transcript? The transcript is huge because oftentimes a lot of the canned stuff that's pre-written, I want to listen to. to some of the before the Q&A, but not all of it. So if you have the transcript open while you're listening, you can easily skip ahead. So the Zillow one we both listened to, and there was a lot written about this last week. We've talked about it a lot, too, the Ibuyer thing. Remember a few weeks

ago, we had someone say, listen, if and when Zillow gets to scale, this could be an amazing business. I think Zillow kind of admitted getting to scale is really difficult, and especially with our model, it's probably never going to happen. There were some things that were, frankly shocking to me how they were going about this. Their pricing model was trying to forecast housing prices three to six months into the future, which is that how like most house flippers work? You think the way you do it is you find a house that's relatively decently valued. You fix it up, you clean it up a little bit, puts a paint on, new carpet maybe, and you sell it for a little more and you have scale because you have relationships with these contractors and

you don't pay as much as you can sell it for for the upgrades. That's kind of my thought process of house flipping. It doesn't seem like that was what they were doing at all. Well, the other thing that we learned, and we heard this from listeners, is that they were just buying indiscriminately. And I wonder if this is an incentive problem where the people, the Zillow employees that were making these purchases had no skin in the game. And so their job was to buy houses. So they bought houses, right? But for example, that one email that we got where the house was unsellable because the big dog barking in the backyard, they couldn't sell the house. And Zillow came in. It was like, boop, boop. Yeah, we'll take it. Hercules, though.

Hercules. I called them zoos. Yeah, Hercules. So examples over and over like that. So Rich Barden said, put simply, our observed error rate has been far more volatile than we ever expected possible and makes us look more like a leveraged housing trader than the market maker we set out to be. The other thing that I thought was interesting, he said, we risked alienating our current clients. He said, 90% of the people we made an offer to turned us down. And like we thought we were maybe breaking that relationship we had with them.

Because they said there, they still bring in like 230 million unique visitors to their website a month. This thing is still an enormous brand that people love to check their houses or look for other houses. So 90% of people turn them down. Is that because the whole premise of the eye buyer is that they just make it much easier to sell your house? Selling a house has never been easier given the everything that we've been discussing for the past year. Maybe more people wanted to have people outbid each other instead of having just a number. So was this the worst possible environment for Zillow? Could they have been successful absent? And I think Mark Andreessen has talked about this. There's three places where technology is at a hard time making things

more efficient. One is health care. Two is education. I think a lot of that is because the government is heavily involved in both of those industries. But three is real estate. There hasn't been a technology company who's been able to come in and chip away at realtor fees over time. There's still five or six percent for the most part. Do you think Open Door is a shot? I think that they're probably going to be more of a niche player than a get to scale. But this is all Open Door focuses on, whereas with Zillow, Zillow came in late, tried to copy. This is one of the there's half a dozen business lines. What Rich Barton said was, before I close and handed over to Alan, and this is what we were betting on with the turnaround. Like, I bought the stock down 50%,

I sold it down 30%. I bailed right after earnings. I'll get to Y in a second. Rich Barton said, before I close and handed over to Alan, so sorry, Rich Barton is the founder of Expedia and Glass Door and Zillow. Yeah, the guy running Zillow is very talented. Yeah. Rich said, before I close and hand it over to Alan. I'd like you all to know how personal this is for me. Can you say before I I close to hand over to Alan one more time? I know. I'm sorry. I am founder and first money into Zilla 16 years ago. And I'm the largest individual shareholder. I'm sorry for how difficult and disruptive this will be. I am grateful to them, meeting his employees. They have worked hard and will be missed. We are committed to providing a smooth transition for those affected. So

they're laying off 25% of their workforce. And Ed Borgato, front of the show, said the criticism Rich Barton gets will be deserved, as would the praise had he got it right. But give me the CEO who has the guts to exit a bad trade and face the market consequences over the one who won't. They pulled the plug on this very quickly because obviously the last quarter they were still kind of hopeful about it. So they decided like, okay, we're going to lose even more here. We have to do it.

That's the fail quickly thing. That's what everyone in Silicon Valley wants you to do. McMurtry said something interesting, Superma got through. He said, Zillow shuddering eye buying is the first super popular bad thesis to play out in like 10 years. It actually ended badly. I forgot that was even possible. Just seemed like a thing people say before they lose money.

that's probably why so many people were dancing on their grave as they were falling and saying, see, we told you this couldn't happen. Here's my thought process for selling. So I wrote a post about this, what I learned being wrong. I already knew that trying to be a value investor with growth stocks is ridiculously hard. Trying to say, okay, Zillow got cut in half. All of this bad news that we've been discussing is mostly in the price of the stock. I believe in Rich Barton, I believe in the team.

I believe in the thesis, and over time they can turn it around. But I already knew that this was incredibly difficult, which is why it was my second smallest position. It was not a meaningful number. The next day, I had two decisions to make or two choices. There was a fork in the road, Ben. What was it down? 25%, 22%. It doesn't even matter. It was down a lot. I can either double down or bail. And I do think that the brand is strong, and I do genuinely believe that the stock will be worth more than five years that it is today. However, turnarounds are incredibly rocky. They take a long time. And the bottom line for me is it wasn't just a financial decision. Like, oh, do I put more money in? I don't want to. I don't want to.

want to commit any more mental capital to this. So I was dating, wasn't looking to get married. I was wrong. I sold. No harm, no foul. Your thoughts? I'm going to stay together for the kids. So you're sticking with it. I still think that my thesis is housing is going to remain strong for a number of years. I am hoping the brand helps. And if I'm wrong, so be it. Okay. I want to talk about one more. And this is, we spoke about it. I was debating whether I do this, lest I look like an absolute moron and embarrass myself. But I'm going to talk about Palaton. Credit to you for wanting to look like a moron and embarrass yourself. Well, here's the thing.

I'm kidding. Losses are way more fun to talk about than winners. I think so, too. I had seven stocks. Now I own five because Peloton was one of them. That's why. On the weekends, you and I, when we're betting on sports, we share our losses with each other. We don't really brag about the gains. It's way more fun. It's not fun. It's not fun. So I do have wins. I do have stocks that are doing phenomenally well. I don't want to talk about them because yeah who cares who cares exactly there's a lot of stocks going up i'm not a genius so peloton was literally my smallest position like absolutely immaterial same thesis i understand why i was down 50% strong brand name i think it could be the gym of the future all that sort

of shit obviously fell 30% on whatever day it was and just to give you context for how small this position was peloton was down 30% i sold my portfolio was down like 0.2% when i sold so it was like truly and really a meaningless position. It was a starter position that if I could add to it and the turnaround was there, whatever, it didn't materialize. My thoughts on this one were always like, I still think their brand is strong. I am a user who thinks that it's a great product and platform. My whole reason for staying away from it when it crashed initially was because I think

a lot of workout stuff is faddish. And yet this still surprised me how much they're down and how much people are like trying to just kick them to this eye. Why wouldn't a company like Apple step in and buy them? What's their market economy? I mean, it's below 20 billion at this point? I don't know. I still think the brand is stronger, even though that this stuff is... So, credit to me. If you're going to buy growth stocks on the way down like an idiot,

at least keep it very, very small, which I did, because I already knew that this was unlikely to work. So what's funny, Ben, is that Morty, I was telling you, my neighbor, we said the kids together on the bus. My neighbor was talking about, he's like, what idiot would own Peloton? If you couldn't see this coming, you should never be allowed to own stocks. And I did that meme where the guys like this, the cartoon character. And, but again, credit to me, very small position. I was wrong. Same thing with Zillow. Do I think it'll be higher in five years? Yes. Am I willing to ride it out? Commit more money, more mental energy. No. This is what makes picking stocks both so enticing and so maddening because these stocks both had Black Monday, like in 1987 crash in an individual stock. When the market's at an

all-time high, that's what makes this so difficult if you're going to be a stock picker. Like you said, do I get out or do I double down or do I hold? It's not easy this stuff because there are so many instances where stocks have gotten pummeled. Netflix was down 70% in 2012. You look back and now and say, why wouldn't you buy that? At the time, it made sense. Same things I think could happen with Palatown and Zillow. The story is still yet to play out, so we will be monitoring, but I lost a fingernail, whatever, no big deal, not even a fingernail. Zero Hedge tweeted Bally Gifford down $800 million on Palaton on the day that they reported earnings. So they lost like five of their toes. Yikes.

All right. So what happened in Peloton? Here's a quote. From forecasting consumer demand to accurately predicting logistics costs, our teams have never seen a more complex operating environment in which to guide our expected results this year. Basically, the growth has slowed dramatically, riding has slowed dramatically. The treadmills, I don't think are growing very well. But you saw, you heard the same exact thing when I listened to the Shake Shack report, just the unpredictably environment. And I'm sure on every single earnest call, there's the same thing over and over again, how difficult it is to forecast right now. And navigate. And this is one of the things that we're going to try to get from listening to these calls from quarter is like, what are some of the themes that all these companies are looking at? Inflation. It is more interesting, I think, to talk about these companies that are getting dinged than the ones that are doing amazing. Because the ones that are doing amazing, everyone's already bragging about them. Who cares? Airbnb, for example, they just crossed a billion cumulative guests. So Airbnb was one that I wanted to buy when it crashed, and I just didn't.

But sometimes buying growth stocks when they crash works, Airbnb did. The rebound has been tremendous. Hand up. Good for you. Same thing with snow, same thing with unity. And other times it doesn't. Zoom, Peloton. Shopify came back.

A lot of companies came back. Yeah, so some do come back, some don't. All right, AMC just reported earnings for the three months ended September. What? What are you going to say? What are you going to say? LOL, does the market care about AMC's earnings? It's a meme stack.

I just care about it from the movie theaters or dead point of view. Oh, okay. So I don't care what the market thinks about AMC. Let's say that's not training fundamentals and leave it at that. AMC, three months revenue ended September 30th, in 2020 was $63 million, obviously was basically zero, $425 million in 2021. Okay, I've never looked at this before. The fact that their food and beverage revenue almost equals their, it's like two-thirds

of their admission. That jumped out of me, too. So why? The revenue for admissions was up 7X from 2020 to 21. Pretty sure that's all inflation, though. But the food and beverage is up 10x, and I'm not kidding. That has to be inflation. Okay. So what do you buy when you go to the movie theater by yourself? What do you buying for snacks? I'm a popcorn sprite guy. That's almost the only time I ever drink Sprite. What are you? Like milk duds or something super lame? No offense.

Yeah, something chocolate. Something like that. Well, you don't go to theater. So what do you eat at home? It's been a while. Do you do popcorn on the couch? I'm like a chocolate covered raisin kind of guy. You mean raisin nuts? Yes. Good stuff. All right. I spent some time over the weekend on OpenC playing around NFTing, this, that, the other. And I was thinking, I don't want my wallet public. What does that mean? There are these accounts on Twitter that show big empty purchases. And they show like big losses, big gains, all the sort of stuff. And it tells you, like, whose wallet it is, how much money they have. So look at this new will. He spent 0.5 eth on something and now it's worth 0.000001. Exactly. Exactly.

But you have no choice in the matter. No. What you can do is you could have an anonymous account, obviously, so that people don't know who it is. And that's, I'm guessing what most people do. Here's what I mean. Let's say that you tweet out your NFT, because it's community. That's the whole point point is to share. Now, somebody could find your NFT and look at your entire wallet. It's like you're naked. It feels like very intrusive. Can I just point out here? Please. I'm never going to wear a headset thing. Okay. So whatever happens with the Metaverse, I'm happy. All the nerds are going to love it. Don't put that sort of pressure on yourself. What if headsets become a thing? I'm laying it out now. I will not be wearing a headset. I will be the one person who does not wear it. If that passes me by and my kids do it and everyone else do it, fine.

I'm not going to wear a headset. Ron Burgundy, I don't believe you. You probably also said that you would never wear AirPods. Oh, I love AirPods. AirPods from the beginning I was all in. Where are you? The Google Glass things, I'm sorry. I sell those right away and said, no way.

The Snapchat glasses, the Facebook glasses, no out. Sorry. All right. So, Wall Street Journal had an article at the labor market, and we've had some people question asking us, like, do you think this stuff is here to stay? Like, is this just a demographic story and people have changed their minds? And I think they're going to figure it out. This one surprised me, though. They talked about how companies are figuring out, but they said this beauty product retailer of the body shop is dropping educational requirements and background checks for job applicants.

UPS is making some job offers as a little 10 minutes. CVS. no longer's require college graduates to submit their grades. Can you imagine thinking that college grades mattered when hiring someone for anything. What job has ever been, I mean, I get it if you're an Ivy League person, you get a full point. That's such a great point. Who cares? Why would they ever ask for those in the first place? I think these places are going to figure it out. Did you see the tweet? Actually, you might have shared this with me. Somebody saying that NFTs are going to fix hiring. Yes. What? I know. That's. What? I don't know. Okay. So Joe Wiseman, we talked last week about how, like, why does the Fed steal their foot in the gas pedal? And credit to them. Credit to them.

They're taking their foot off. Yes, a little bit. Too little too late, but... So he's talking about how, like, there's people who might otherwise be at a job site or not because of child care. They're saying they're committed to keeping it higher than... And I think whatever you want to say about the inflation stuff, what the Fed has done, if you can credit them, it's working. So this, I think this is probably one of the best econ chart of the pandemic from Bill McBride that shows the percentage of job losses in post-World War II recessions. And we got down to 15%, which is way deeper than any other recession in post-World War II era.

and you can see the blue line here, the one that started in 2007, took forever to get back to trend. This is a wild chart. This one is almost all the way back on trend from some of these tiny downturns in the 80s and the 50s and the 60s. This is insane. Look at the unemployment chart. It's spiked to 15%.

Now it's down to 4.6. We're almost back down to where we were. And look at how fast this happened. So your theory about markets moving quicker and rebounds happening faster, I feel like that's going to happen more maybe in the economy than in the stock market. Potentially. But for the people who complain about inflate. and all this is crushing us, would the alternative of 15% unemployment that takes four years

to work out, would that have been a better alternative? Everybody who we hear complaining about inflation has a job and would not have been affected by this pandemic, by this recession. That's the thing like, yes, prices are higher and supply chains are kind of a mess, and it's made our life more inconvenient. But there's also millions of people who now have a job that wouldn't have had one otherwise if we would have just let this thing work its way on its own. This actually made me laugh when I saw this.

This was on, I guess, CNN. Somebody said a gallon of milk was $1.99. Now it's $279. When you buy 12 gallons a week, four times a week, that's a lot of money. The replies are hilarious. Somebody tweeted, if you're going through 12 gallons of milk a week, it's time to invest in a motherfucker cow. This one was easy to dunk on.

It gets back to the point that we've been trying to make for a while, that inflation is personal. The stuff that you spend your money on, and if you're in one of these categories that's gotten higher prices. You feel it more than other people do in certain areas. And that's why people complain, because it doesn't matter what the overall CPI is or it's what stage of life you spend your money on. And I saw that you actually wrote an op-ed for MSNBC, why the inflation we're seeing now is a good thing. I did see this. Yeah, unfortunately. That was obvious that someone was going to say that, though, right? Yes, of course. We spoke earlier about Zillow and

incentives for the buyers, the employees doing the work. I want to talk about incentives. I want to talk about incentives for a journalist for a second because this thing went viral, the 12 gallons of milk thing. All right. So Jordan Wiseman, I forget where he works. I apologize. Tweeted, if you want a sense of the dumb incentives policy journalists are facing at the moment, a few weeks ago, I wrote an article. I was pretty proud of that correctly anticipated that the climate section of BBB was going to be shockingly strong despite the demise of CEPP. I don't know what either of those things are. But then he said it was ultimately one of the worst red pieces I've ever written in at least four years. BBB is the build back better infrastructure. Oh, okay. Got it. Got it. Thank you.

And then he wrote, last week, I tapped out a kind of dumb but fun article with some charts about the 12 gallons of milk discourse turned into one of my top 10 articles of the year. And this is not his fault, but it's basically why the internet sucks. I think it's also why we suck as people, though, because we like to blame the internet and social media and politicians and clickbait and all this stuff. But guess what? We're the problem because we would rather read an article about 12 gallons of milk than something about an infrastructure plan that could help future us in the future.

So good take. It's the audience. We're the problem. We're the one who votes for these people. We're the one who... Hand up. I'm sorry. We're the one who reads this stuff.

I'm sorry. But at a certain point, people love to talk smack about Facebook. There's three billion users of the product. Guess who the problem is? The users. It's not the platform itself. It's the users. Ben, last week, when we were talking about transitory, you said something about like,

it's inflation than disinflation, it's not inflation than deflation, but actually, remember lumber? Remember that chart? Lumber saw inflation than deflation. Lumber crashed. Isn't it still above where it was pre-pandemic, though? Well, point for me. I don't even know which camp I'm in this week, but point for me. No, that was my camp. That's disinflation. It's still higher, but it's lower than the highs. Okay. You're just setting up a new camp with me. You want to shack up on my camp this week? Let's bunk. Transitory.

All right. All right. Dumb survey of the week. Very dumb survey of the week. Have you or someone you know quit your job at some point over the last year due to financial freedom earned by investing in cryptocurrency? 4%. 4% said yes, I have. 7% said yes, someone I know has.

So ipso facto 11% one out of 10 people aren't working because of crypto. Gaines, I'm going to say, I'm going to call bullshit. shit. Did they ask like an NFT platform for this? It all depends on who you. They pulled coin desk users. I guess that's part of it. So speaking of, it's mostly young people, I'm sure, who have done that, that have become Uber wealthy from crypto. The Wall Street Journal had this article about how rich millennials are not flocking to financial advisors. And they said, thanks for the golf invite, but you can't invest my money. We're probably guilty of this too. But how many advisors really find their clients in the golf course? Is that something people just

say, like, talking about your stocks at a cocktail party? Like, no one actually does that, but we still say it. Yeah, it's a fair point. I feel like business does happen on the golf course. No business happens at a cocktail party. I just think this was kind of an unfair dunk on golfers, even though I'm not a big golf person. But they said, here's another survey, 70% of households with the net worth of $500,000 or more, headed by a person under 45, had an investing style that was either strongly or mostly self-directed in 2019, up from 57% in 2010. Basically, it's saying young people aren't going to go to advisors and a lot of these people that they profiled in here said, well, the advisor doesn't do crypto. They don't do startups.

Why would young people go to an advisor? It makes no sense. Given today's environment, why would a young person use an advisor? And the thing is, sometimes people just aren't ready for a financial advisor or don't need them. And some people, frankly, never will. But a lot of times it gets to the point where the money becomes overwhelming or you just have financial planning and tax issues you need to work through. Sometimes you make some mistakes. Sometimes there's like a huge life event. Young people have none of those things. Yes. So obviously there are advisors out there who cater specifically to millennials. That's their whole schick. And that's fine. That's helpful. But some of these millennials that are rich aren't going to want or need an advisor

for many years now. We're also painting an entire group of young people with a broad brush. What I'm saying is the people that are on Robin Hood, that are in crypto, that are crushing it, don't need a traditional financial advisor. They don't need one. They don't want one. Everything they're doing is working. Fine. They have no bigger responsibilities, no need for financial planning. They're young. They're working. They're having fun. They're taking risks. Cool. But there also are young people and I don't know where you draw the line at young that aren't trading all day. That do need financial advice. That do need help with the basics. 529, 401k funding. And those people are using an advisor. So you can't say yes, they are. No, they aren't. But the people that

are on robin and trading don't have any use for an advisor, nor should they. They wouldn't want to use what the advisor is going to tell them, which is more reasonable advice. And I knew an advisor back in the day who told me that he had an hourly financial planning business, and he would have clients come to him. And some of the clients, he would just say, you're not ready to work with me. And the clients would say, what are you talking about? And he'd say, you have to go out and kind of learn more for yourself before you. Like, some people just are never going to be ready. Dude, when I was 25, I was literally trading the triple levered inverse bearish ETF. I knew about index funds. But if I went to an advisor and they tried to put me an asset allocation portfolio, I would have said, go, you know what?

I would never have listened. And a lot of young people want. their hand in the steering wheel, and then you get older and you go, I have better things to do with my time. I want someone else to be there to help me make these decisions. Yeah, I got it out of my system. I get it. I had fun. But now I have job, responsibilities, kids. I don't have time for this. Just like the stakes are too large, et cetera. People said millennials are never going to buy homes after 2008 after the crash. They'll come around eventually, just like everything else. Yes, I will. All right. You guys continue to crush a podcast. Thank you. The banter is quite enjoyable. And Michael's ability to seamlessly take both sides of an argument in the same breath to get stronger

every day. Thank you again, I guess. I think listeners would appreciate hearing that you can have a 1% interest checking account at M1 spend. It's FDIC insured. Okay. I have no affiliation other than being a satisfied customer. I've done stable coins, CDs and all the options, trying to park money in a safest account. I might as well throw out a referral code too, because there appears to be no shame in much anymore, but don't expect anyone to say it. Now, we'll link to this. We'll give you a referral code. He says there was a cost of $120 per year or something to have access to the checking account since you need to be an M1. plus member. Hey, what are you pushing a 1% checking account here for? I don't know. Honestly, I don't

know. I get 3% on my local credit union on checking. How? Up to $15,000. Oh, right. It's kept at 50. So, do the math. It's not that much money, but 1% checking, that's not that much. You're right. Maybe I just wanted to read an email that said you guys continue to crush your podcast. Maybe that's all. Okay. Maybe that was surreptitious. Did I just use a big word? What is this black thing that keeps going in front of your camera? It's falling down more and more. That's my phone. Oh. Oh, I just used the word absolutely. I nailed it. I said I was doing it surreptitiously. Okay.

Not to brag. Okay. So this was a fantastic piece by full stock economics. They're new to me, or I'm new to them, I should say. I forget who tweeted this. You know when we show the charts of anything related to the stock market, you have the 2000 bubble, we're way above whatever those levels are, whether it's price, valuation, blah, blah, blah.

We say bubble and then we point to this and we say probably nothing. So for whatever reason, we don't do that with the U.S. National Home Price Index. because we are above those levels. And we thought there was a housing bubble in the aughts, but there's not one now. So I wrote a piece about this a few months ago as well, saying if you would have just held on from 2006 at the peak of the bubbler or 2007, you've been made whole and been fine. The problem is so many people were over leveraged, they didn't have a chance.

They got knocked out and had to sell their home at a loss. I'm going to offer some pushback on this one. They're saying that the 2000 housing bubble is greatly exaggerated. I'm going to push back on that. Okay, fine. The TLDR of this, it's similar to our theory that we laid out. I don't know, six months ago about all of the bubbles that we're seeing started inside the stock market. Not all of them, but what I was talking about was the massive gains from giant tech

trickled out into crypto and then that started the wildfire and it all spread from there. So the bubble started inside the stock market. Similarly, what these people are saying is that the bubble started from a shortage of housing at the coasts, particularly San Francisco and pushed out. So, Ben, I'll let you push back a little, but let me just set this up. So they said a shortage of housing led to the bubble. So the overall scale of California to Arizona migration was massive. In 2005, for example, Arizona welcomed about 90,000 new residents of California, 1.5% of Arizona's population.

Around 50,000 people moved from California to Nevada, with many settling in Las Vegas. So the TLDR was in effect, superstars cities were outsourcing their housing development problems. So of course, of course, there was a housing bubble in certain geographies in 0607, but the big point is that they say that the policy response got it wrong because they only identified it as a demand problem when really it was more supply. And so if you look at our housing recovery compared to the UK, France, hours took much longer to rebound because of our policy response. Yeah, in the aftermath. But leading up to the bubble, we had a huge spike in housing starts. It was like the highest has been since the 70s in the mid-2000s. So there were houses being built. You could say that there were certain shortfalls places. But the difference between now and then is that like that was a bubble because of the credit profile of borrowers. They were just offering credit to anyone who wanted it. And now they're being a little more exacting about it. So prices are higher, but the credit profile of borrowers is so much better. It wasn't just prices back then. It was a credit worthiness of borrowers. People were just. were taking on loans that they couldn't possibly hope to service to live in a house that they couldn't afford. Do you think Logan Motishami would have an opinion on this? Maybe. Just maybe. All right. One more listener email. Guys, I hate all the dealerships. So I decided to buy a Jeep from Vroom. Before it was

delivered, I noticed a mistake in the description. I called to make a change. Two weeks later, and several days of my life, I will never get back. I finally spoke to intelligent life. How can this be the future of buying a car? So he's not happy with the service? So maybe cars, Houses, some things are difficult to disrupt with technology. Insurance. My parents bought a car through Carvana last year, and they made a similar claim that talking to people and getting some of the paperwork sorted out was a huge pain in the butt. So I guess that's kind of the problem with trying to make this process more efficient

is that sometimes the customer service could be lagging. Here's another one, Ben. Did you know that you're a policymaker? Somebody emailed us. P.S., I work as a regulator for Canada's federal banking insurance co-pension fund. It's a regulatory body, similar to the Office of the Comptroller of Currency, blah, blah, blah. You influence me, and I influence policy. So by extension, you guys are truly influencers in the Canadian financial system.

Nice. So I work for the Fed and the Canadian financial system. How about that? All right. One more thing. We mentioned this a few times now, foolhardy wine, which we got sent a few bottles. I drank the white. The white was good, too.

Is it Kabsav. Kavsov? Khabernay Savignon. So Jonathan, who runs the winery, who's nice enough to say, hey, we've got a few people coming and asking. We're going to give 20% discount on all wines on your first purchase if you use the code spirits. I'm going to use that code actually. I'm going to stock up. This is good wine. Foolhardy Ventures. F-O-O-L-H-A-R-D-Y vinters. We're going to put this in the show notes.

Put it in the show notes. Spirits gives you 20% off. How about that? We're giving you guys money off of your wine. A few weeks ago, Ben, you discussed something with your parents, explaining something to your parents. And I was talking with a family member who went, he was in the airport. And he was trying to find his ticket. it. So he put it on his phone, then he could have find it. The people behind the counter were saying open your wallet. He took out his physical wallet. They were like, no, your Apple wallet. He's like, I don't even know what you're talking about. I tried to disappear. Yes, trying to explain this stuff to older people. And when I say this stuff, I'm talking about crypto, web three. I forget about it. Never going to happen. Anything on your phone even. It's hard. I still can't figure out how to

podcast. And I've been doing this for four years. This is true. All right, I got one for you. So my Sunday night TV schedule is just packed now. So these are my new shows that I watch, Succession, Curb. I still watch Insecure. Yellowstone, it's coming new, and the new Dexter season. All on Sunday nights. Here you go. So what do you think the current drawdown of Waystar Royco is, the company on Succession? So they had a CEO who had a brain hemorrhage in season one. They had a failed takeover attempt of that PGM, the Pierce family. The son tried to overthrow the CEO twice, Kendall, and failed. Then the CEO, Logan, flees to Bosnia. Then they have the FBI late night raid. So in the newest one, Adrian Brody, who is like a hedge fund.

an investor and owns 4% of the company, he says, I'm down 10% of my stake. Now, he could have been up a lot before, but what's the drawdown in this company? What do you call a stock that's down 80% that got cut in half? The stock that's down 90%? Yeah, whatever. I think I butcher that. Waystar Royca. I think that the stock was probably down 40%. And then on this news fell another 25. I sold my shares. I tried to buy the dip. Do you think that they stopped paying their dividend like AT&T or they cut it in half? Oh yeah. This is a debacle. I think an activist, well, activists are involved. Here's my take. Cousin Greg is a young Bob Odenkirk. Oh, that's not bad. He's pretty good. They have the same mannerism, same sense of humor. What do you think? That's pretty good.

Thank you. He's one of my favorites. What did you think of Yellowstone? I didn't catch the new one yet. We're still catching up all my other Sunday night shows. Curb this week? The dinner party? The middle? You're not a middler? See, I'm still catching up. Oh, okay. So here's the problem. We were watching the show you on Netflix. That's like the new age take of Dexter, the guy who's a serial killer. Oh, my wife watches. it's on the third season looks like a watered down dexter it's kind of my guilty pleasure show and i gotta say there's certainly some cringe worthy moments but they nailed this season like parents in the suburbs being really weird about kids and diets and parents trying to be influencers even though it was like satirical they kind of nailed it and the finale was awesome it's one of those things where you're like

wait they're gonna have to kill off like five characters here for this storyline to move on and somehow they tied the show on season three into a nice little neat bow they're gonna go on in season four but what was kind of on and off on this show, season through is very good. I'm in. Oh, you know what else I was just thinking about, just randomly? I'm thinking about what we're going to do for the great quarter guys for next week, because it's a busy week. There's a lot of earnings calls.

How do we do it? Well, A, I was literally in bed at 530 to listen to an earnings call, so that was fun. But you can, on the app, you can listen on 1.5 times speed. You got to dial it up. I go two times. You go two. Okay. Two.

All right, one more. I watched Finch, the new Tom Hanks movie on Apple streaming. It's crazy that Tom Hanks has a new movie coming out on Apple streaming. Did not hear good things. Okay, I will say, I liked it, even though it wasn't like, I mean, 6-5 liked it, but it was a better performance by Tom Hanks than it was a good movie. Okay. It was kind of, I Am Legend, mixed with The Martian, and maybe a little castaway, but not as good as those movies. Oh, how good was Tom Hanks with Bill Simmons?

Yes, but Tom Hanks, if this was someone else, the movie would have been awful. So Tom Hanks made it watchable by his performance, even though the movie was just okay. Okay, all right. That's where I fall on it. By the way, he has not had a good movie in a long, long time. Like a really great movie. I didn't care for the last Apple TV one, the Navy one. That was boring.

He's had some decent movies, nothing great, which is kind of surprising because he is like a dad figure. I'm surprised he hasn't transitioned to that role with his movies. We got Zach Prince from BlockFi on next week. Yes. And no shortage of stuff to talk about in Crypto World. Yes. All right. Animal Spiritspod at gmail.com.

Thank you so much for listening. We will see next time. Thank you.