Animal Spirits Podcast - High School Reunion (EP.213)

Episode Date: July 14, 2021

On today's episode we discuss the Roaring 20s, why things are better than you think, the coming baby bust, the end of cash, who's driving up home prices, the end of the movie business, Ben's high school reunion and more. Today’s show is brought to you by Masterworks, allowing you to invest a portion of your portfolio in fine art. Learn more at masterworks.io. Promo Code: coupdegras 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

If you're a listener to this podcast and you know I enjoy the finer things in life, like buying t-shirts from Instagram and I get toasted everything bagel with cream cheese. What you may not know is that this extends to my investment portfolio. I currently have a diversified portfolio of blue chip art thanks to masterworks.io, the premier platform for investing in the $1.7 trillion art industry. With masterworks.com. You can invest in work by artists that have stood the test of time, Monet, Picasso, Warhol, not some fad that will be gone before Labor Day, like Ramp Capital.

Animal Spirit subscribers can skip their wait list by going to masterworks.io slash animal or with the link in the description by using promo code Kudegra. See important disclosures at masterworks.io slash disclaimer. 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 Batnik and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's Wealth Management.

This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rit Holt's wealth management may maintain positions in the securities discussed in this podcast. All right, Ben, what do we got today? I'm going to throw something out there. Is the Roaring 20s kind of here already? Well, it's the 20s. This is from Gallup. Survey data, take it for a grain of salt.

We'll use it when it's to our advantage and when it's not, we throw it out the window. Life evaluations of U.S. adults. So they are now at an all-time high. This data does only go back to it looks like 2008-ish, but there was a big low, obviously, when the pandemic started. It's interesting. If you're doing technical analysis on this chart. Breakout.

Well, it bottomed at the same place it did following like the layman bankruptcy in 2008. and it broke down. And now it's, again, at an all-time high, I guess you could chalk this up to a few things. Maybe relatively, people are feeling so much better that things are opening up. They've been vaccinated. They're out doing stuff again versus where they were a year ago. I don't know how they phrase these questions or whatever. I'll tell you, I'm at an all-time high. No doubt about it. Home four days a week. Well, just think about it. Is this about as good as this going to get? So net worths are at an all-time high. People are richer than they've ever been. It's also rising for people in the low-income.

Stock market, all-time high. Pay for a lot of people is now rising. Interest rates are low. I mean, is this about as good as this going to get? You get to watch crappy movies from your couch? Yes. We're going to talk about that later, but yeah, movie theaters are dead. So this is Bob Burgess at Bloomberg, who actually was my former editor there. Good guy. He tweeted out the household debt service as a percentage of disposable income. This data goes back to 1980. By far, the lowest has ever been. It's at like... Is this government data? We trusting this? This is from the Fed. This is legit. Basically 8% versus where it was before the Great Financial Crisis. It was above 13. So this is showing how expensive it is to own a home. Well, no, this is

total household debt service. Oh, I'm sorry. Okay. The next one is for home. So the first one is household debt service as a percentage of disposable income. So how much of your disposable income is going towards paying off debt? It's pretty much houses, credit cards, autos. Yeah. But then if you look at U.S. household mortgage debt service as a percentage of disposable income also at a low, below 4% versus, again, going into late 07, it was up to 7%. So can we say home prices are as expensive as they've ever been, but it's never been cheaper to service your mortgage payment? Yes, everyone who is in debt right now. So that's why these people that freak out about debt being so high don't also equate that with, by

the way, interest rates are as low as they've been. So it actually makes it easier to take care of that debt for people. People are making more money. Interest rates are as low as they've ever been, so it's easier to pay off that debt. So even we have a lot of debt, it's not that big of a deal. That's the general thing. Here's another thing, roaring 20s. Number of unemployed persons per job opening. This is from the National Bureau of Economic Research, actually. So at the height of the great financial crisis, this got to, there were seven people basically who were unemployed per job opening. Now it's one to one, more or less. So for every job open, in the country, there is a person looking for a job.

If you want a job right now, you can find it. I mean, there's workers shortages all over the place. We've basically round-tripped from where it was before, because before the pandemic, the economy was humming along nicely. And obviously, it, again, is a weird place to be because the unemployment is still, what, above 6% or something? This feels like something where you should be seeing at 3% unemployment, but I guess because people are feeling pretty good, this is where we're at.

So there's a record number of job openings, I think, over 9 million, a record 4 million people acquit their jobs in April. And a few people sent this to us. The headline didn't really match reality, but we'll run with it. It was like 95% of workers want to change jobs. That was basically the gist of it. And actually, 95% of people said they would consider changing jobs, which is still, I mean, that's basically everyone is willing to switch jobs. Listen, I'm willing to switch jobs. What are you going to pay? That's the phrasing of a survey, right? I mean, I think at a certain point, everybody's willing to switch jobs. But nevertheless, I mean, this is where we are. So Sam Rowe put this out. He's got a really good new accent.

Maxios Markets letter. Did you subscribe to that one? Of course I did. So every morning he... Big Sam Rowe guy. Yeah. He does a ton of reading on everything. It's always a good point in here. The way that they present it is really good. We'll put a link in that to anyone wants to subscribe to that. But they said data track research monitors this take your job and shove it indicator, which is kind of funny. And they said for all industries combined, the figure came in at 68% in May, which is the second highest level ever. And they're saying like when you compare that to 6% unemployment rate, it's really crazy how great things are right now in the job market for such a relatively high unemployment rate. Again, probably because there are so many jobs out there. I mean,

I was thinking this weekend at a few places going out, seeing like younger people serving us at the local pizza place or whatever. I mean, you're making 15 bucks an hour as a young person these days. If you decide to work, I mean, I don't know, if you worked at the mall or something, wouldn't every break you had go to a different store and say, hey, I'm making 12, 15 an hour? Can you top it? Like, isn't it the best situation for that person ever to be able to have the upper hand if you want to negotiate or even try to do that? And yet, this poll notwithstanding, who was this from? Gallup. I don't know. I feel like if you ask people, are things great right now? Like, is the world amazing right now? And I'm not saying it is for everyone. I don't know if you

would get numbers like this. This is why being online all the time does not ever tell the whole story. Of course it doesn't. Because if you're online all the time, you think the world has never been worse. You think the U.S. Empire is failing. And if you watch and listen to the news, I was with a family member the other day, said to me, boy, scary time in the world. And I said, well, when isn't it? You grew up when you were a kid, you had the Cuban missile crisis. It was a cold war for your entire adolescence. What do you mean? It's scary now. Yeah, things are always scary. How is it any scarier now than it was when you were a kid? Because now we're seeing videos of stuff happening and people fighting or people going crazy

and you didn't see that before. We know about all the scary shit. What was that book about the Cuban Missile Crisis, actually, something minutes to midnight? I never read that one. Well, anyway, there was a point in that book where Bobby Kennedy was talking to one of somebody in the cabinet, and he said, like, does the president know? And this was an event, this was like three days old or something. You know what I mean? Does he know? Right. If something of that magnitude happened today, everybody in the world would know. Yeah, everyone knows everything. Here's a YouTube comment on our unemployment story last week. So we talked about the fact that I can't remember how many millions of people, nine million people didn't get paid out

state unemployment benefits or something. Okay. So someone wrote it and said, this was a bit misleading. I write and cover federally funded U.I programs on my site and my channel. And your graphic on missing benefits was under regular state employment, not federally funded unemployment. So apparently what happened is many states stopped paying the regular unemployment and moved it to federal programs.

Fine. I love being corrected. I don't want to put out misinformation. But for the record, it was not our chart. I didn't make that chart. True. Yes. Don't shoot the messenger.

Yeah. But thank you for shooting the message. in this case. All right. Here's another pretty crazy one for New York. And I think you said you've taken the train a few times in. What's your capacity estimate if you had to give one? So the Long Island Railroad is probably 25 to 35% full off. I had to guess. I actually almost tweeted but didn't like how this would have came out. I was on the subway, went to Johns of Bleaker. We took the subway. It was pouring, so maybe this was skewed, but literally the subway was empty. Completely empty and not a person there. And I almost tweeted New York is back, but I didn't want to do

that. Well, this is, your train riding anecdote seems pretty close. So this is from Bloomberg. What are we showing? They have a stat that says only a fifth of workers are back in their offices despite widespread vaccine availability and plummeting COVID cases. Now, they're saying, well, maybe it's the summer and people just decided not to come back. Let's wait until September and see if this gets better. I mean, it's basically barely budged off the bottom. So it's at, you know, what are 20%. That's kind of surprising to me. We talk about this a lot, but I really still do feel like the work-from-home thing is like not being spoken about enough. Especially in a big city like New York, I can't imagine how many different people or industries

this impacts. I was at a party this weekend with people. It was a get-together of sorts. Yeah. And I was engaging in small talk quite successfully, if I have to say, but how many times did this come up? So you're going back to the office full time yet? Are you just going to?

Well, that's exactly where I'm going. What else you're talking about? Listen, I'm not a great small talker, but I feel like the pandemic has like a built-in, gives us something to talk about. So I spoke to somebody and she said that she was just called back into work five days a week and she's like, I'm probably going to leave. Oh, because I'm not going to go back, right? Yeah, I can see it.

She's like, we were at two days a week and that was actually pretty good, but I'm just, I just can't go back. I totally get it. And you wonder how many companies are going to bought, like if she went to her employer and said, okay, no, I'm not coming back if they're going to be forced to have to negotiate with her and then open it up to everyone else, right? That puts employers in a tough place. when you actually, as the worker, have the upper hand kind of now, if you're willing to do that.

All right. So this is, we've talked about demographics a lot in terms of young people, forcing up the, buying up all the houses, and then old people potentially what happens when they're retiring. And here's the other side of this. So I guess the U.S. fertility rate in 2020 fell by 4% to the lowest level on record. Italy fell to similar amounts. They're looking at Japan, South Korea, England, all these places have basically the lowest fertility rates ever, since they've been tracking this stuff. And this is a piece in the new statesman someone sent us about the... What are the implications of this?

What are the takeaways? They're kind of saying that, like, this was already happening, and now it just went in the tank and they said, basically, isn't it funny how for years people worried about, like, there's going to be too many people on the planet, and then it's going to use up all our resources and drain them? I don't know how you can completely take it this far out without some potential changes,

but they say population is going to peak in 2064 and then decline. So by the end of the century, the population of the world is going to be lower than it is in the middle of the century. And by 2,100, so whatever, 80 years from now, the number of people over 65 will outnumber the people under their 20s by 670 million. So we'll be moving to this aging population and not enough babies coming up to fill the void, which I look at in two different ways. One, I think it's a sign of progress that people don't need to have 10 children anymore

because three of them might die before they turn five or whatever, like back in the day or to get enough kids to work on the farm or whatever it is. So part of me looks at this and says, this is progress. People don't need to have kids anymore. Part of me says, oh, this is not a good sign because a lot of people think having a kid is probably too expensive. I don't know. I mean, how many people do you know our age, 30s, whatever? It's basically one or two kids. That's it. Like going over that amount is very rare these days. I would say just one out of ten couples have three kids. Maybe one out of eight. Okay. So we have three and we wanted two when we had twins. Worked out fine, but we went to my high school reunion this weekend. I went to a small Catholic school.

Maybe we need more Catholic schools for this to happen because I was shocked at how many these people have four, five or six kids. Wow. Our age. So I didn't get to complain about having three and how chaotic it can be. Tell you what, Jews don't have four or five kids. Why is that? We just don't. Okay. Maybe because the cost of living where Jewish people tend to be located is too high? I don't know.

I guess you could say the other implication of this is because you say, like, two of the things that matter for economic growth are population growth and then productivity. So you're going to need technology to step in, basically, to keep growth going, I would say. So it's safe to say, you know what, unless a radical health, something technology, I don't want to be alive in 2100. I don't want to be 120 years old. Not for me. If you could just ask one question about 2100, what would it be? What would you want to know about the year 2100? Price of Bitcoin? I don't know. That's what I was going to say.

I don't know. Are people fighting to the death on the internet at that point for entertainment? How far does the internet totally change society? Or is it, I don't know. I guess technology, that would be the thing that I want to know. How different is it today versus is it really that much different in 80 years. I guess I'd be curious, like, what does modern medicine look like in 80 years? So I agree. If I'm still alive then and I'm 120 years old, yeah, that's, I don't know, I'm good. Price of Amazon? Is Amazon still the biggest stock in the world? Well, it's not right now. Apple is. All time high. So is Amazon all time. All right. Oh, yeah, Apple's $2.4 trillion. Unreal. Remember when a trillion dollars was going to mark the top? Remember that? That was like a thing,

A big thing at the time. The first company that hits a trillion dollars, that's going to be the top. So now we have five companies because Facebook did it a couple weeks ago too, right? All right. John Street Capital, who is excellent, by the way, follow that person on Twitter, did a... Lots of threads. Lots of threads. Good threads.

Well, you know why I like his threads? Because most of the times threads are like stories, inspirational stories. I don't have any time for that. This, there's meat. It's all data. Yeah, it's all data. All right. So this chart was basically saying that it was showing the share of U.S.

non-cash payments by transaction. And ACH payments are 66% of volume, $64 trillion in 2018. Wow. ACH has gained 6% since 2015 at the expense of checks while the share of card-based payments has been studied. Let me ask a question. Why do checks still exist? Why is that a thing? Every time I write one, I ask that. And honestly, it's the only time I ever write anything down anymore. Everything else is typing. I feel weird, even writing when I read a checkout. It does seem so bizarre because all you do, anytime I do a check, I deposit it using my phone. On your phone. This is a generational thing. Nobody our age writes checks, but in 2018, in the latest data that we have, 66% of non-catch payments by value were ACH.

27% was by check. It's unbelievable. It really is surprising. It's one of those things that there isn't a better system, but what a waste to have to still use those and not have it all be electronic. I mean, what a waste of everything. All right, we spoke a few weeks back about when is cash, maybe that's a question for 2100. Is cash still a thing? I say no way. When is cash going to disappear? So Jason's why did a post also on this recently, or just this weekend. He said people made 63% of their payments with debit, credit, or other payment cards up from 55% five years earlier. And oh, I was thinking about this actually, about just like cards and whatever. Jason said, said, the dematerialization of money feels good in our daily lives, but it may have long-term

consequences we've only begun to face. Do you carry cash ever? Probably only by accident sometimes. Probably five to six years at least, I never carry cash. And if you need cash somewhere, and I notice, I think 2020 might be a change. So even like our local ice cream place would only accept cash. And then in this past summer, they finally added the little square machine. And I feel like every small business now after the pandemic has one of those with a little iPad screen and the square thing to put your credit card in. So I just, I never have cash anymore, ever. All right, let's stick with this. So they said studies on debit cards and mobile payments show that spending with credit cards rather than cash activates the same reward center of the brain

that are triggered by cocaine. Wow. Cocaine just from spending a credit card. Another addictive drugs. If spending cash hurts, perhaps using credit makes you high. And I thought about this because yesterday, I don't know how this got into my feed. I'm not a watch person like a fan. fancy watch person, but I clicked on a bright link. There was like a brightling ad in my feed. And I was scrolling through it. I was like, wow, these are very nice watches. And I clicked on shop now, just to see. So these were like in the $7 to $8,000 range. Is that all? Unless you buy them with a firm. In which case, they're only $275 a month, Ben. For how many years? Four years? I don't know. It makes sense. Like when you spend cash back in the

day, you would feel it instantly. There's no feeling right now when you spend on a credit card or it's just a click of a button. Don't you think it makes it harder? Like, how do you teach kids about money? We tried to do the little piggy banks in our kids room and we put quarters and coins in, but we don't use cash anymore. How does that work? I feel like money to them, the next generation of kids coming up is going to mean absolutely nothing. Everything's going to be probably paid on their cell phone. I've already seen a lot of my spending, especially like during the week, migrate there where I can just buy food and stuff that's in a credit card that's stored on my phone. I don't have to pull my credit card out at all. I love not having cash. I love paying on the phone. The only bad

thing about cash going away is like, it's always fun finding a 20 in your jacket pocket. Yes, I agree. And if you're paying cash at the bar, you don't as a young person wake up the next day and go, oh no, did I leave my credit card at the bar? I feel like you probably did that a lot. Oh, I'm like, dude. Where did I leave my credit card the other day? I feel like, don't you think we'll get to that point somewhere too, or cash will not like away, but probably credit cards too. It'll just be the number will be stored on your thumbprint or in your eye scan or your face scan or whatever it is. And we wouldn't have the need for these credit cards to be sent out. I think so. Jonathan Parker made this an economist at MIT. And this is

kind of obvious. I guess I never really thought of it. He said, one of the main factors driving the long-term decline of savings in the U.S. is the fallen interest rates at this early 1980s, lower interest rates reduce the return on bank accounts, cut the cost of borrowing, and raise the value of stocks and real estate, making people feel like they can spend more. So, it's not just that things have gotten more expensive. We're spending more in a session. It's almost like the opposite. Like we feel rich so we're spending more. Do you also think though that this is, we've talked about this in the past, the financialization of everything where the number of financial assets has just gone up over time too? That's probably an outcropping of this savings interest rate falling as

well. Yes. You're just forced to put money elsewhere. And maybe that's the way it will be or should be going forward. Like, isn't it possible that people look back at the 70s, 80s and 90s and go, Why were people ever paid rates that high? These people didn't do anything. They didn't take any risk. They just let their money sit in a bank account and earn six or seven percent. Why were banks paying that? Like, don't you think that's more...

I don't think we're ever going to get paid on cash again. I really don't. So am I making a bold claim that rates could be low forever? Yeah, I guess I am. Marcus, this is, I mean, the nerve of them. We wanted to remind you that there's still time to take advantage of this limited time opportunity to lock in this rate on our 18-month CD. What was the rate?

0.7%. Open today. This limited time offer expires. No, it doesn't. Interest rates don't expire. What are you talking about? All right. So someone just sent this to me before we started taping. What do you think the rate is for a series I savings bond? The maximum money can put in is 10 grand. It's like three and a half percent. Yeah, three and a half percent. The maximum you can put in is 10 grand. But you can put in 10 grand a year now. Oh, is that the deal? Okay, maybe that is. But is for our favorite question, everyone always asks, where do I save for my down payment? Three and a half percent for a treasury

bond? Yeah, but ultra safe. That's not bad. No, it's great, but your down payment is more than $10,000. All right. But for part of it, I'm just saying. What did they say the average down payment was? A few weeks ago, we said it's like $30,000 was the average down payment last year. I think we said that one of our Twitter spaces. That's a third of it at least. Anyway, so I got the brightling. You'll pay it off in 2046. See, if you paid it off by month, your debt as a percentage of your disposable income is still not that bad. We spoke about crypto last week about liquidity staking and apparently we misspoke, Ben, you misspoke, whatever. was trying to explain it to a five-year-old.

Dude, I cannot have done better. I'm not pointing figure. So we got two ones that were very helpful, actually. I read these emails and I nod at my head. I was like, oh, it's great explanation. I wanted to clarify a point Ben made. Okay, I think he's conflating two different concepts, which are staking and liquidity providing. Staking requires putting up your tokens as collateral to the network in order to help confirm transactions. This can only be done for networks that rely on the consensus mechanism of proof of stake as opposed to proof of work. Bitcoin and Ethereum currently are proof of work networks and require heavy amounts of computing power to confirm transactions on the network. By staking your tokens, your tokens actually

become illiquid as they are required by the network to help secure it. For providing the service of securing the network, you are usually rewarded a yield in the same token that you've staked as a form of compensation. This is similar to how Bitcoin miners receive a certain amount of Bitcoin for helping confirm blocks. So that's staking. Yeah, I got staking in yield farming confused. That's okay. Liquidity providing is where you pledge a certain dollar amount of two or more assets into a liquidity pool. Your pool tokens are then used along with all pool tokens from thousands of other liquidity providers to help make markets for users who want to swap between these two same assets. Almost done. If I want to purchase

Ethereum using USDC, I deposit my USDC tokens into the liquidity pool and receive ETH tokens back. Those that had provided liquidity for that trade end up earning a fee proportional to their share of the pool. If their assets represent 1% of the total value of the pool, they receive 1% of the fees from every transaction. Liquidity providing can be done on a number of decentralized exchanges. The most popular million being Unisrop. So, sorry for reading all that, but I thought that was very helpful explanation. So this is why this stuff is not taking off with normal people yet because it's still confusing.

This is why Robin Hood or Coinbase or whoever is going to own this because there's kind of a button that says, want to earn 5% and then it'll give you a rundown and fine print of this is what's happening and blah, blah, blah. That's why you and I could not figure this stuff out even. So somebody sent us stakingrewards.com. This seems pretty intuitive. It shows you the top 10 crypto assets by staked value. But again, so I'm looking at this. Okay, great, Cardano, 6.63% reward. It's like, I guess it's like the risk-free rate for crypto. I know it's not risk-free. That's to make sense, but you get where I'm going with this. But let's, like, I can't navigate this. What am I going to do with this? Yes. You need to really be in this to be in it. Exactly. Someone has to make it easy. Oh, last week, we spoke about how maybe the past 10 years are a better representation of, history than the last 90. Or at least the present day. Right.

Dave Nadeg did a post, a really good post on what we've been talking about how markets moving faster. And he spoke with a lot of the experts. One of them was Jason Buck who does this really, actually, Corey Hofstein, they have a series called Pirates of Finance, which is excellent. So Jason Buck said to Dave, if anybody has a back test prior to 2015 on a long volatility strategy, I almost throw it out the window because the markets have changed that much. And so now you have flow-spaced world, and then now the derivative world is becoming so big,

it's the tail that wags the dog. Well, think about it. The VIX was started in 1993. I'm guessing I have nothing to back us up. It took years and years for people that pay attention to it enough. And now there's products created on the VIX, and people are paying attention to it. And it's like a derivative of a derivative where people are... Exactly.

The VIX of the VIX is like a real thing. So I'm just saying it's still so new. wasn't the cape ratio invented in like 1997 or something by Schiller? 1999. All these things are relatively new. And now we're trying to use them and then force them back in history and say like, what would we have done if we would have known this? It's like, well, now that you know, it changes everything.

Correct. I love how Natick put this. He said, this is the TLDR. It was a fairly long post. It's definitely worth the time. If you're connecting dots here, what this means is that the hedging activity of the options dealers is actually a pro-cyclical force. If most people want to hedge the downside, then a,

time passes, the index will rise. Again, if most people want to hedge the downside, the index will rise. So when you get a calm week or two, the hedges roll off, which in turn becomes buying activity, which further supports the market. That is, until you get some exogenous shock to the system and those fat tails show up. So the very tools we have to mitigate the fat tails are likely contributing to them in both directions. And people wonder why the market feels janky most days. So I really do think that a lot of this positioning is way more important and then people probably think. So it would be nice if there was an equilibrium, but oftentimes most people either over hedged

or underhedged. And then when something happens, then they try to fix that and it offsets it in one way or the other. It pushes things up or pushes things down. So I think even though this is like materially impacting the market on a day-to-day basis, I don't think it's distorting markets in the sense that it's propping up bad companies or anything like that. Like still, I think fundamentals do matter.

But on the day-to-day, like flows over pros. All right. Here's another thing that probably matters too much. All the stuff we hear about game. That's a Tracy Alloway quote, just for the record. I know we've given her credit in the past, but... Yeah. All the GameStop and Yolo option stuff.

This is another one from Sam Rell. This is the second time we've used his Axios, Markets & Do's letter. $5.4 trillion in S&P 500 index funds now. Trillion. I think it first passed one trillion. It looks like in the late 90s, early 2000s. That's just a massive, massive number in index funds. We're saying this thing that everyone is active now.

Everyone's a stock picker. So here's another one from... I'm skipping ahead a little bit here, but this is. from, oh, this is Mark Rubinstein on his net interest one. He broke down Schwab versus Robin Hood versus E-Toro, and he looked at average assets per account. And we kind of backed into this one a couple weeks ago talking about Robin Hood, but for Schwab, it's almost like 200 grand per account. Robin Hood, it's average account size in a brokerage account. For Schwab, it's like 200 grand, not bad. For Robin Hood, it's like $4,500 on an average. E-Toros, $5,600.

Brother, that Robin in numbers remain pretty steady as they've grown. Yeah, which is interesting. So we talk about Robin Hood investors. You and I make this mistake, too, like saying that people talk about them in the finance world, like this is all the money in the world they have. Obviously, for some people, it is if they're younger, they may only have a few thousand dollars in the market and that's it and they're playing with it. But for a lot of people, this is their fourth account or something after their 401k and their 529, their HSA, and maybe a brokerage account at Schwab, and then they have Robin Hood for play money. It's so far down the line. By the way, speaking of fun, are you still betting on baseball?

You D-Gen? No, I've taken a break. Okay. I've made a bunch of money betting against the Tigers and all of a sudden they got good and I stopped betting on them. So, yeah, I bet a little in the NBA. I got some money in the sun's winning it. We'll see.

So I keep asking, like, where is this money coming from with these flows? And I guess it's not really rocket science. I read this from a global wealth report. Earlier this year, a Deutsche Bank survey found Americans aged 25 to 34 planned to invest 50% of their stimulus check on stocks. A potential U.S. equity market infusion of 100,000. $70 billion. So I guess that's where it came from. Cash and the checks. There it is. I guess it's not a mystery. All right. So this is a couple of charts from Bespoke. I guess value had like a six

month window where it outperformed and now growth is back. I guess call this an interest rate thing what you will. But value was kind of crushing it, especially early through the year. Growth was negative through the end of February. Now they're both up over 15% for the year and growth is now beating value again. Just it's tough. man. Being a value investor, you had like a sixth month window to post some memes, talk crap to the growth people who've been winning for like nine years straight, and then growth comes all the way back. That's tough. Here is a Robin Hood thing. Great stat from Barron's via Nicarasi. The average daily value of shares traded in AMC in June was $13 billion. That's more than Amazon

and Apple. So have you seen the AMC people on Twitter? I don't know what that means. Apparently there are, so Nate also said that their market cap was $217 million last April. Now AMC's market cap is $21 billion. $21 billion. Good grief. You have the Bitcoin people on Twitter or social media where Bitcoin's in their handle or their profile and then they have the laser eyes. There's AMC handles. There's AMC people. People with like AMC shareholder, whatever words they're using to describe AMC. They're like AMC fans. Wow. I guess people are just so, so yearning for some sort of sense of community or something. They're now jumping, I don't know.

But there's like, I think a lot of people saw what happened. What was the guy's name? The Kitty guy, The Kitty Guy, Roaring Kitty. Oh, deep-fitting value? Yeah, that guy. I think a lot of people wanted to be that. Even though he kind of developed that organically, I think a lot of people wanted to be the deep value of AMC.

So I think a lot of people have tried to hop on that train and they've got followers. And anyway, there's a community of people who just shill for AMC shares. which is just bizarre. I've been talking a lot about the houses all around me that are being listed for sale. How quickly are they all selling, do you think? I got an anecdote, sentiment he check, one of them cut their price. And get this, I thought that they listed at a low enough price so that they were going to start a bidding more.

I was way off because not only did that not happen, they lowered their price. Okay. Here's a counter anecdote from my parents in the last month. they had a house list by them for, I don't know, it was like $3.99. And I don't know if it was by accident, but he said one week later, they raised it from $399 to $4.99 and then it sold above $4.99. So I don't know if the people tried to list it on their own. And someone came in and said, no, this is way undervalued. And it's still sold for more than the second higher value. I don't know.

So home prices are rising fastest in the areas without mass transit. So I guess what does I mean? suburbs. Obviously, a remote work story. So from Housing Wire, this data comes from RedFid. The median home sales price in card-dependent areas nationwide has increased 32.8% to $418,000 since January 2020. It has risen 15.6% to a record $540,000 in transit-accessible neighborhood. So obviously the city is more expensive than the suburbs, but the increase in suburbs warfs the increase in cities. That's a great stat right there. Car dependent areas.

I like it. All right. So we got an email from a listener, Kobe Lefkowitz, who did a great post on debunking the myth that institutional buyers were pushing up home prices. So you wrote a piece about this. and some of the stats that he shared were even surprising to me. So one of them showed the percentage of housing units owned by single family rental home companies. Of all single family homes, it's like a little over 1%.

Of all housing, it's 20 basis points. For all rental units, it's like 0.6%. It's a tiny, tiny, tiny. You told me back into the numbers of how many houses that would be, credit to you. What was that? I just said, well, let's say, so each year there's roughly 6 million homes sold, existing homes. Okay.

Someone like Blackstone or Black Rock, every time they put something out, it's like, they're going to put $6 billion into these. Okay, so I say the average median home price now is $350, call it. If you try to back in that $6 billion number, the amount of $6 million that they're going to sell out of that, it's such a tiny, minuscule number. What was the number? $17,000? Yeah, it was like $17,000, if my math is correct.

And now that's assuming that it's deployed on day one, which it isn't. Now, granted, $6 billion is a drop in the bucket in terms of instruments. to buying. That's just one fund. But still, quadruple that. I mean, even if it was $50 billion, it's definitely having a pronounced effect in the areas where it's happening. Like, if Blackstone is coming into a community, that's definitely impacting the local community. But it's not moving national numbers. But yeah, it's very hard for them to come and buy tracks of 50, 100, 200 houses at once because it's such a local, unless they're building those houses, which that is actually a good thing, but they can't just do that and come in and say, we're going to buy 100 houses in the same

general vicinity because guess what? Not that many houses are for sale. It's a lot of work for them probably to put this money to use. One of the amazing things in here, amazing pieces of myth busting, we'll link to this. I forget who did this. So there's this story that after the housing bust, a lot of institutional investors were scooping up houses for pennies on the dollar. That's like a thing. So this data comes from Freddie Mac and the Census Bureau. So I guess I would take this for what it's worth, like it seems pretty legitimate. During the years of the Great Recession, so 2007 to 2011, single-family home rental companies purchased approximately 2% of homes sold through foreclosure and short sales. Is that even possible that it's at that low, 2%? Maybe the most surprising thing

here is that most home rentals are just owned by individuals. It's surprising that it hasn't been more professionalized before. I guess what I'm asking you, Ben, I'm sure you don't know, maybe a listener will set us straight. Is it possible that this is like correct data, but they're playing games with words, word games? I don't know. It makes sense to me. Two percent just sounds so teeny. Yeah, I don't know. I'll take it for us worth. Agree to agree. All right. This is from Bloomberg. They had this story about how housing prices in New Zealand are going crazy. And they made the point that the housing market stuff is not just the U.S. It's global. So real estate consultant Knight Franks Global Price Tracker shows 128 out of 150 cities. They look in all across the globe, saw prices rise

on a year-to-year basis in the first quarter of 2021, with 43 growing at double-digit rates, more than twice the amount in the previous year. So it's not just the U.S. housing prices are going bonkers everywhere, which this is one of those things why people want to blame everything on the Fed because they've kept interest rates low. Interest rates aren't that much lower now than they were before the pandemic started. I refinanced, I might have saved 50 or 75 basis points on my mortgage. Like, yeah, that helps over time. But rates were already pretty. pretty darn low before. And so it took the pandemic to get these, sorry for lack of a better term, animal spirits up and running for the housing market. Like, we already knew the millennials were going

to need to buy houses someday. We already knew interest rates were low. That stuff was already in place. It just took the pandemic to set it off. So I think the people that want to blame everything on the Fed for manipulating markets, like it took this other exogenous shock, this event, to actually force people to make this happen. There you go again. Apologizing for the Fed. Speaking of refinancing, I've been trying to refinance since February, and it's just been an absolute nightmare. I got an email. I feel like I've refinanced four times since you tried to do your first one. It was May 12th. They said, we're getting close. We just need your docs one more time. So I called them, I said, listen, I'm not giving you my documents until you tell me we're ready to

close. I'm not because I don't want to do this again in 30 days. He's like, well, we can't close without your doc, so it's up to you. Why do you think it's so far behind? You think it's they're so busy. They say they're not staffed for this. They weren't prepared. This is a major bank, by the way. And so it's July 12th. I got an email from him this morning asking for like explanations detailed for like 30 different transactions. So I called him and asked for more statements. And by the way, I did give them another batch of statements a week ago, which I knew was going to happen. So I called him. I said, I honestly feel like the bank is telling me they don't want my business. I feel like that's what's happening. I'm telling you right now. There's no way

I'm giving you an explanation for 30, just... Michael's putting out the bat signal right now for any mortgage broker who's listening to the show to tell them that you can close in three weeks. These are regular transactions. Like, oh, what's this dinner you went to? It's like absurd. I ran into a friend this week who has been in the mortgage business since like 2004 as a mortgage broker. And I asked him, like, how crazy has the last year been for you?

He's like, well, even more than the housing bubble, this is by far my busiest year. And I said, what's the breakdown between new loans and refi? And he said, refas are probably 20% of our business. 80% is just putting on new loans. He's like, I don't know if it's the economics of it, but he made it sound like... Oh, 100%. The home loans are way more lucrative, obviously, than the refi. He made it sound like, we just don't care about refis.

Yeah, I said to him, I'm like, dude, honestly, I'm done. If I have to give you explanations for all these charges I'm at, I don't want to do this. I'm absurd. All right, this is from apartment list.com. They said, it sounds like rents are playing catch-up. In 2021, rental prices have grown a staggering 9.2%. And I guess the previous years, like two to three percent gain would be average. Rents in San Francisco are still 14 percent lower than they were in March, but they've increased by 17 percent in January.

So basically, you had this short period of time. And if you look at San Francisco, New York, they've got some charts here, still well below, but coming off the bottoms. So you had like this one, the fat pitch stuff is still closing pretty quickly here with these distress prices. You can still get into a big city for much lower. But I guess if your rent is coming up soon, you could have some sticker shock. If you're not in a lower rate. The bargains are disappearing. And I guess it makes sense that they would.

Why? Well, if housing prices are rising so much, you can't keep rents low. Like, there has to be some sort of catch up there. If you're a landlord and you're seeing that, people aren't going to be able to fight it as much. Okay. You had this presentation from J.P. Morgan on private equity. It's called Food Fight and Update on Private Equity Performance versus Public Equity Markets. Last week I talked about how I said, you know what, I've been wrong about private equity.

And I decided I was going to write a piece about this. Like, okay, I'm going to show, performance. performance has been better than I thought for private equity. It's impossible to write. There's no S&P 500 index for private equity because I found reports that show, and JPMorgan kind of shows it in here, all these different papers that have been done. I showed reports that show private equity has crushed the S&P 500 in the last 10 years. I sure found other reports that say, no, no, no, if you actually look at it this way, because we're talking about IRRs and the timing of cash flows because you don't put all your money in a day one, that actually it's underperformed, the Russell 2000 and the S&P.

So I don't think anyone knows what their private equity performance really is overall. I think it's still too hard to tell. I tried to research this and do a piece on it and I couldn't do it because I didn't have good enough data. The charts that I pulled out of this presentation was this. Private equity is huge. How much money is this? Private equity in LBL, and this is commitment. So it's not, oh, wait a minute.

Oh, this isn't showing what I thought it did. These are just commitments. It's not the size of the overall industry. What I was going to say was the industry is still tiny relative to public markets. So they're showing commitments to U.S. private equity and LBO partnerships at $200 billion. So I'm thinking like, $200 billion, that's nothing. I guess I didn't really read the labels. It's still smallish relative to them.

Because it's 0.6% of the total stock market capitalization. But why is that even relevant? Why would you show it this way? I don't even get the point of this. Yeah, that's not the total assets. All right. Anyway. It's dry powder, basically.

Okay. Sorry about that. Oh, but this is interesting. So I got an early look at Robin Wiggles Worth. So that's a mathful. He has a new book called Trillions. It's coming out, I guess, later this fall, how a band of Wall Street Renegades invented the index fund and changed finance forever.

And the opening chapter is about Ted Seidy's bet with Buffett when he was at Protégé Partners, the famous bet that Trisic Fund to Funds would outperform the index. They didn't. And I was thinking about that when I was reading this book, like hedge funds were the thing. Yeah, they had their time in this on, yeah. Every young person who got into finance wanted to be at a hedge fund. hedge fund. And there was a chart in that JP Morgan report showing that private equity is about to pass hedge funds. The number of private equity funds is about to pass hedge funds. And hedge funds

hit 10,000 hedge funds in 2006, 2007. That was the heyday of hedge funds. That was everyone wanted to put money, especially institutions. And it's basically flatline since then and now fall in a little bit. I still think 10,000 hedge funds is way, way too many. But relative to the Fed's balance sheet, It's just, I mean, it looks pretty, doesn't look like much. But to your point, I think young people now, private equity and venture capital, they would much rather be there than a hedge fund, even though the economics of bringing a hedge fund are still pretty darn good. So Barry Diller had a quote, he was an executive at all sorts of movie studios.

The movie business is over. The movie business is before is finished and will never come back. There's a great quote from him. He said, these streaming services have been making something that they call movies. They ain't movies. There's some weird algorithmic process that has created things that last 100 minutes. or so. Excuse me, Barry Diller. Have you seen The Tomorrow War? I think he has. Maybe he was actually talking about the Tomorrow War. I kind of agree with him. In terms of like pre our heyday, this Black Widow thing

was shocking to me. So they said Black Widow did $80 million in box office, $60 million street. So Disney Plus sells it for 30 bucks, some of these new ones. That ratio is crazy to me because there has to be some sort of pent-up demand for the movies. People want, like I can't wait, like you, I can't wait to get back to movie theater, which you haven't been back at, have you, or have you? Yes, I have. I saw a Quiet Place. Oh, yeah. Which, by the way, excellent. By the time this comes out, you can now, if you become a Paramount Plus, I think it's Paramount Plus subscriber, Quiet Place 2 is going to be there before you can get it

anywhere else. You can buy it. So I'm going to become a Paramount Plus subscriber for a month or a week, however long I can do my free period, and then I'm going to watch Quiet Place 2, and then I'm going to cancel it. So which part about this shocked you about this data? The fact that $80 million in box office and $60 million to Disney, if that's going to be the case where it's going to be whatever half and half. If they just keep allowing us to do this where you have a chance to do it streaming somewhere or the theater, and streaming is making up 40% of it or whatever. If they're going to say, all right, let's just see what people choose and people continue to choose the streaming. I think that seesaw is going to be more and more

people choose streaming over time. And the movie's just fall, fall, fall, especially for a movie like this. I was waiting for the reviews. I listened to Sean and Fennessee and Amanda Dobbins on the big picture. They said it was good and not great. Sounds like the concept. So I don't want to pay $30 to watch it in my couch. No way. I also don't really want to go to the movie for it. Okay. Then you wait three months and watch it when it just is on Disney for good then. It's on Disney in October. That sounds kind of like a long time to wait, but I'll wait. I don't care. Still I haven't seen Tenant. By the way, you know what's going to happen with Tenet? I'm going to see Tenant in like ten years. And I'm going to be like, wait, there's a good movie.

What is everyone talking about? My expectations for that movie cannot be lower. Yeah, it's not going to happen. So, but F-9, the Fast and Furious. That's second place for box service to $10.8 million. So what do we got here? I mean, they did great globally. So in the future, there's going to be like one movie at every movie theater, and that's it. It's just going to be like a Marvel movie and that's it. The 24 Marvel films have done $22 billion since 2008. I don't think their numbers are going to be changed much. Maybe they'll make up for it with streaming. But is Marvel worth more than like the Yankees at this point? It's got to be. But yeah, of course. Well, they mean Disney bought them for $4 billion. It's probably worth more

than Major League Baseball. How about this? So for my markets are speeding up stuff, why won't movies just be in the theater for like three weeks and then you can buy it. So give the diehard people a little bit of time if they want to see it. There's going to be a way shorter window for even those ones that just go to the theater before you can then buy it digitally. Yeah, I think that's coming. How about that? We spoke last week about nobody reads books anymore. I got to say, I did some hefty reading this week and it felt very good. I don't know if I'm back. That might be premature. I just, I feel good when I'm reading. You're learning. You're getting ahead. Yeah, I like it. I'm interested to see if the cult of we blows up. I feel like people are talking.

talking about that. It's been a while since there's been like a popular book. I mean, I saw the documentary on it on Hulu, and I feel like if I've already seen the doc in the podcast and stuff, I don't know if I need the book. Can't do that. Can't do what? You can't watch, then read. That's what I'm saying. I already saw the documentary. I don't know if I need to read the book. You read then watch. So speaking of, in preparation, I saw some people tweeting about Project Halmerry, the guy that wrote The Martian. Okay. I haven't read a fiction book in a long time, but my hundred pages in. It's on my Kindle. Tons of fun. I'm into it.

Okay. It's going to be a good movie. This could be a great movie. Well, yeah, it should be. All right. I was reading Alison Schrager's recent known unknowns. That's her newsletter, by the way, which I'm also a subscriber to. I'm a subscriber as well.

She mentioned something I'd never thought about in regards to Roth IRAs and I quote, personally, I've never totally trusted the tax stream of Roth accounts will still be in place when I retire. Too many affluent people have money in them, so they are ripe for taxes when the revolution comes. And that's from Allison. This hit me like a bucket of cold water. I have a Roth IRA, and last year switched my six-figure 401K to a Roth contributions

because I'm only 30 and decided the hit on taxes will be well worth at 30 plus years of untax growth. Your tax specialist bill seemed to agree with my approach during your Q&A a few months back. I plan to go back to traditional in 10 years or so. What's your take on this? I know no one has a crystal ball, but I'm considering going back to traditional because she has a good point with so much wealth inequality in the recent pro-publica leaks showing Peter Thiel's $5 billion Roth IRA. Could this be the canary in the coal mine? Certainly could. All right, so this is a valid thought, I can't dismiss it out of hand, but I cannot imagine the outroar from people that have already paid the taxes. In other words, not just using after tax dollars, but what if you do a

conversion? There's no way they could renege on this. Like, I don't, wait, I just paid $30,000 in taxes to convert. Give my money back. I mean, could they say no more Roths? Sure. They could say that, but thinking that you wouldn't be grandfathered in, there's no way, I'd say two percent chance of happening. There's no way. I don't say it. I wouldn't get too work about this, even though Peter Thiel has $5 billion in there. All right, recommendations. Why don't you go first? Well, I recommend Project Hail Mary if you're looking for a fiction book.

I don't watch anything this week. I watched nothing good. I've been a little lowly. I finally caught all the way up to mystery in between, and they had a high school reunion episode, which was pretty funny. So I'm going to make the case for high school reunions. I went to mine this past weekend. I had to basically drag my best friend from high school there.

He did not want to go. I'd say 97% of these people I literally have not seen since high school. I don't have Facebook, so I haven't been following their pictures. Like, I have no idea what the majority of people are doing. We had a very small class, so we all knew each other. How many people? How many people? 60 people in my graduating class. I had a very small school. How many people were at the reunion? Honestly, like half of them showed up. It was really surprised. Did they bring their spouses? And people brought spouses. So we're all approaching 40. Here's the case for a high school reunion, open bar. So it was kind of like a wedding. Anytime there's an open bar, people drink more.

Of course. That's a fact, the psychology of free. Almost everyone there had kids. So this is a night out away from kids, and most of them came back to the area from another place. So drop the kids off with grandparents, go party. I was surprised how much fun it was. Was there dancing? No dancing, but I mean, mostly everyone that I saw got drunk. Was there a DJ? No, they had a guy playing live music around the area, but here's the thing. You knew there was going to be awkward conversations, but alcohol helps, and you didn't really have to talk about yourself. You just had to say, hey, I have three kids. I have two kids. I have four, whatever.

That's the icebreaker. So we were talking about this before we went to it. You've heard, like, the happiness you that, like, you get to your 40s, and then it says, like, your lowest point is winning, like, 47, because you can look back. You failed. Yeah, well, you look back and you say, I wish I would have done some things different. And then you get older. So you're looking back.

So I think the way that you get over that is like nostalgia. My wife always gives me crap that whenever I go home or see high school or college friends, all we do is spend time telling stories about the past. Well, what else are you to do? But I'm saying that's how you get over like this happiness you. It's like you just tell stories about the past. And like the mystery in between episode, there was almost a fight at the high school reunion. Oh, really?

Yes, which was great. Was it beef that it simmered for 20 years? It kind of seemed like it. And one of my friends was involved. So that made it just, the entertainment value was great. So like I said, I was at a party this weekend, and I saw several high school people, but I don't know if I could do it like a reunion. I feel like that would be anxiety overload.

There are a lot of people who were like that, I think. I was like, you know what? I'm going to embrace the awkwardness. And it was way more fun than I thought it would be. And so my recommendation this week is... Wait, hold on. Just one more thing. Okay.

Actually, I texted you this week, speaking of 40. This is 40 has been on. It's much better than I remembered it. Maybe because I'm getting close to 40. I enjoy that one. I'm going to have to watch it this summer, I guess, since I'm approaching. Paul Rudd is fantastic in that movie. I'm butchering this.

Leslie Mann, too. And Judd Apatow and Lizzie Mann's kids, one of them goes like, it was like very quiet. And Paul Rudd said that is the sound of silence. That's a joke that you don't laugh at it when you're 25, but it's just funny now. When he gets angry, he rides on his bike so fast. That end part, it just, it kills me. Okay, here's my one movie recommendation from going to high school reunion. Ten years is a movie about a 10-year high school reunion.

And somehow I missed mine the first time, which has probably made this one even better because it was 20. It's Chris Pratt, Channing Tatum. Oscar Isaac, one of the Mara sisters, Kate Mara. I never heard of this. A bunch of actors, Justin Long, total ensemble cast. You stand Justin Long. I think he's funny. But so Chris Pratt, he's like a character actor.

It's before he got jacked for Jurassic Park. He was like this slubby dude and he played the drunk kid from high school who his wife never lets him drink anymore so he goes over the top. I think Chris Pratt is better as a character actor than a lead actor. Yeah, he's not a good lead actor. I understand why he did it because he got in shape and he's got the jizzled jaw. and he's got this double. But like in the five-year engagement in 10 years and then in Parks and Iraq, he's actually better as a funny friend than he is as a leading man. You're absolutely right

about that. Anyway, 10 years. I think it's on HBO Max. Who organizes the high school when you our high school president? It's whoever the class president was is usually tasked with. So we had someone who did it. And she did great. She found all these old pictures that she had streaming up on the wall of us like during high school and middle school. It was very bizarre. But I was surprised. I thought it was going to be like that's 50-50. This is going to be awful. or it's going to be okay and it was fun was there any bald people that you didn't recognize that's another fun part about it you go oh this person still looks the same this person looks completely different this person lost a lot of weight this person gained all that stuff so there's a lot of that

people watching like oh that's that person okay so did you like discuss afterwards with your friends oh yeah during i think like did you see what happened to yeah that stuff that's fun right yeah so anyway probably not for me i'm one of the people that looks different okay that's true Can you believe Michael lost out of his hair? Yeah, but then you can say, but I do ride the Peloton four times a week, so I want to see my caps? Okay. Don't forget, every Wednesday, 4 o'clock, we're doing spaces. And I think we have gotten the question thing figured out.

So we're doing like rapid-fire questions now. All the people on spaces have figured out. The audience has adapted. They've gotten better. No lousy questions. I agree. It's gotten a lot better. Last week we got some guy just, I just quit my job today.

Some guy was just going to get married. We had some really good questions. So remember, check us out on Twitter at 4. And you can now do it on your desktop as well, not just your phone. Okay, there you go. Other than that, Animal SpiritsPod at gmail.com. New show on Monday. Okay, new show on Monday.

This was one of the more interesting conversations we've had. It's a new type of factor investing, I think, or a different one than we've talked about with New Age Alpha. It comes out next Monday. Good? Good. All right, Animal Spiritspod at gmail.com. Thank you.