Animal Spirits Podcast - Hyperinflation, It's Happening (EP.228)

Episode Date: October 27, 2021

On today's Animal Spirits we discuss worrying too much about the markets, Tesla's impressive performance, inequality in the stock market, trying to explain crypto to civilians, Jack the macro tourist, Dune 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 Y Charts. The news this morning said that Hertz is buying up to 100,000 Tesla for their fleet. Did you see this? The news said. Yes. Breaking news. They're also going to be building out their charging infrastructure. So I pulled up Tesla price chart on Y charts.

One of my favorite ones to look at is the drawdown chart from all-time highs. So this is over the past five years for Tesla stock price. they have drawdowns of 30%, 50%, 60% and 35%. And now we're back to screaming at all-time highs. And over that time, in that five years, the stock is up over 2,100% in total. So again, five pretty much crashes and back to all-time highs at the same time. Has there ever been a more hated and love stock at the same time that has this type of profile? No.

And for the people on the long end that I've stayed with it, I don't know where you get the conviction, but gigantic kudos to you. Yes, every time. Not ironically, truly. Because think about as they were right, the stakes got bigger and bigger and bigger with every new all-time high. And they just kept hodeling through the crashes. Unbelievable.

I would not have the fortitude for that. Yes. So if you want to check out the drawdown feature on Y charts, go to Ycharts.com, tell them Animal Spirits sent you and get 20% off your initial 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 Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. I want to read something from Bill Miller's latest market update on a quarterly basis. I really like this. He was kind of going through, I think he was getting a little nostalgic and talking about his career and going through some of his investment tenants and mantras. And he said, when I'm asked what I worry about in the market, the answer is usually nothing because everyone

else in the market seems to spend an inordinate amount of time worrying. And so all of the relevant worries seem to be covered. My worries won't have any impact except to distract from something more useful, which is trying to make good long-term investment decisions. This is one of the best quotes I've read in a long, long time. I am team Bill Miller here. Would you like to go back and read this to yourself four weeks ago when you're worried about Evergrand taking down the whole global real estate infrastructure? Stop it.

I wasn't worried. I just couldn't believe how brazen you were. That's all. But this is such a good point given that we live in a 24-7 new cycle of what's the next big risk, what are investors worried about? It's constant. It's exhausting. I personally don't know how to block it out.

I can't. I'm too deep in it. But, man, did he hit the nail on the head? It's like, listen, the market worries daily. The market prices things every single day yet it's not the job of the investor to worry about the next big risk. That's the opposite of what you should be doing. So you and I in the midst of the pandemic and all the government spending was just coming online. And people were trying to figure out, well, there's no way this government spending can help us through this pandemic. We put the economy on ice. And you and I both said, like, if we get to the point where we're worried about inflation, that means we won. We defeated this thing. We saw the economy, at least, through the other side of this thing. That would

be a good thing. And now we've done that. We've got there. But people are still so worried about inflation. And it's like, if it's not one thing, it's another. I get it. I think that's partly the mentality of people in finance. They're more worried about risk in many ways than they are about the upside because of the thought it'll take care of itself. In 2012, I heard Dylan Grice. I think he was at Sachan at the time. Scared the living bejesus out of me, talking about macro stuff and all the things I could go wrong. He had a good quote that said, listen, this is my job. My job is I get paid to worry about the downside because the upside will take care of itself. That rung true with me at the time, but I don't buy that anymore

because not in the commentary on him. I'm just saying the general investor. If you spend too much time worrying about the downside, the upside won't take care of itself because you're not going to be able to hop on or stay on. You're going to get thrown off when risk rears its ugly head, which it does from time to time. So the upside doesn't just take care of itself. And the problem is it's never been easier to pay attention to the negative stuff because we see so much more stuff now than we ever did. Investors in the past were so oblivious to 99% of the stuff that we can see on a daily basis now. It just wasn't in our fingertips before. Said differently, is it hyperbole to say it's never been harder to think about the long term?

I really think that's the case. Probably. I would agree with that. So kudos to Bill Miller. Let's just one more time. He said, when I am in a asked about what I worry about in the market. The answer is usually nothing because everyone else on the market seems to spend an inordinate amount of time worrying. And so all of the relevant worries seem to be covered. Chef's Kiss. If you're on social media, multiply that by 10. One of the clear and present dangers to society, and I'm sort of exaggerating, but it's an issue. Sticking with problems are the concentration of money, income, wealth in our society. So I don't think that popular cultures in television is always perfectly right about what's going in in society, but I think...

White Lotus? Well, I'm not even going White Lotus. I've been rewatching Succession lately. And in season one, there's a buyout talk, and Kendall gets thrown out of the company because he tried to do the coup. Not the coup to garage, just the coup. And the private equity firm offers him half a billion dollars for his shares. And they're like, you can just cash out now. Oh, is that Stewie? Yeah, Stewie offers him a half a billion dollars. And he says no. And I think the reason he says no is because he has so much money that it doesn't even matter. He's more concerned about power than he is money. And I think that's a really good way to frame once you make a certain amount of money, like it doesn't mean anything anymore. They made that same point in Squid Game towards the end. I won't give any spoilers. But I do think that so much money has been made. We talked about Tesla to start the show in crypto, especially in young people's hands, that I think you're going to see some very bizarre stuff happening in the years ahead. because people's brains are going to be so warped from that. We already are. Did you see The Island Boys? That was like all over this weekend.

What the hell is that about? What is that? I can't. I couldn't with that. Without crypto, would those bros be looking like they're looking and doing what they're doing? No. Are those guys really into crypto? I tried to stay away from that one.

I mean, I just assume they have face tattoos and hair up the wazoo. And I just assume that they're into crypto. I just think stuff is with the amount of money that's been made, especially made in the hands of young people. I think things are going to get really weird, whether that's political. clear. I don't know, but I just think that it's not normal for that to happen in that short amount of time. So, all right, we're burying the lead. What we're talking about is there was a port that rich people own 89% of all stocks. We don't need to get into the exact numbers. But, Ben, you have a thing in here that it used to be worse. I mean, what are we talking about

like the Rockefeller years? No, it's, well, so surprisingly, one of the thing, I've read in a bunch of the books about, I love reading about the Great Depression. I read a ton of books about that. only like 1% of the country owned any stocks during the Great Depression. So the whole idea that like everyone got wrecked in the stock market back then, it's kind of a number because back then it was so much even the gap between the poor and the rich was even more so that only really, really rich people own. But this is from Maggie Mayhar and the book Bull, which covers like the 1980 to 2000 bull market. Awesome book. I read it way late. So she said in 1983, three individuals of incomes over $250,000, owned 43% of all publicly traded equities by 92

that had fallen to 23%. Meanwhile, Americans with incomes under 75,000 to watch the state grow from 24 to 42%. She was saying in like the 80s and 90s, people with lower incomes actually were brought into the stock market. But she was saying 56% of those who own stocks or stock funds had purchased their first share sometime after 1990. 30% of all equity investors had come in after 1995. So that dot-com bubble when it started inflating actually bought a ton of people off the sideline. But what they found is that in 1983, 19% of the Americans owned stocks, some piece of the stock market in a fund or a company itself. And by 99, it was 49%. So this, starting in the 80s, it was actually even worse. Even worse, how? Only 19% of Americans owned any stocks in 1983.

Yeah, but these are different data points because what I'm saying is rich people own 89% of all stocks. Yeah. So I'm saying it went from 19 to 49. I'm saying, regardless of rich people the majority of them, you still want to have more people be involved. Oh, for sure. Yeah, of course. But again, that's not the issue, dude. The issue is that rich people own basically all of the stocks. Okay, so here, one more point from the 90s. She said from 1989 to 1998, people who were in the lower income threshold that were in the stock market saw their net worth increase by 20%. But people in the wealthiest 5% saw their retirement funds grow by 176%. So I think my point is, if financial assets do good. Of course the wealthy are going to get wealthier. They have the biggest stake. But I think,

unless you just add on a wealth tax, the only solution here is to get more people involved. Baby bonds or baby stocks. I don't know. That's kind of where I'm getting is that you could try to tax these people's unrealized gains and whatever. I don't think that's going to do anything. No. So this got to 50% of ownership in 1999. And it's basically been constant there ever since. We haven't had any leaps forward in equity ownership. Maybe this last period. I bet you once the numbers come out, equity ownership is going to be way higher than it's ever been. With Robin Hood and this past year, I wouldn't doubt it.

But people are going to spend a disproportionate amount of time worrying about the 89 percent, which understandably so. But the other part of that, not that offsets at all, is that more people are in the market and that's a good thing. Yeah, that's kind of what I'm getting out here. All right. So Jay Powell, your boy, Ben Hunt wrote a piece. On October 1st last year, the same day that he had four calls with Steve Mnuchin about the White House pushback on fiscal stimulus and fed liquidity programs, Jay Powell sold one to five million because we don't know exactly, one to five million dollars of his personal stock market

portfolio. Okay. This one didn't get me all up in arms like a lot of people. Shocking. Well, no, he's selling stocks. Is the stock market not up since October? That's not relevant. Why is that not relative?

I don't trust the process. Don't be outcome oriented. Why is he trading stocks at all, at all? He's the most powerful financial person on the planet. Is he rebalancing? I don't know. I agree that. I'm just, I'm saying.

He was overweight stocks. It's just prudent. No, fine. The stock market is up 100%. He's selling some. Rebalancing. We don't know all of the details. But what we do know is that Fed officials, it's over.

It's over. It's over. Sorry. No more. Fed officials can no longer own individual shares, nor can they invest in individual bonds. The new rules will replace existing regulations, blah, blah, blah. All right, so listen, that's it. But this is the thing.

There was a couple headlines about Fed people trading, and then all of a sudden, they took it away. So I think that's great. They helped themselves accountable. Why do we have to see 10 stories about Congress people inside or trading every year, and they never do anything about it? They just don't care. I'm with you.

It's outrageous. The Fed obviously realized like the optics here, even if I'm just rebalancing my $5 million stock portfolio, the optics aren't great. So let's do away with this. And they did away with it. So I don't know why Congress doesn't do the same thing. They just don't care. Well, because they make the rules.

They're not going to tell themselves. Okay. So early on in the pandemic, I did a couple of Zoom calls to some different groups. In the past, you would have gone to a lunchroom instead of at a podium and give it a presentation. But because of the pandemic, they decided to make these things remote and do over Zoom. And I was totally anti. The more I've done of those, I don't know, I've done a handful of them. The more I like it because I realize I don't have to get on it.

airplane. I don't have to take an Uber from the airport to a hotel. I don't have to get ready the next day and put on a suit and tie and I don't fly back. And I don't have to be away from my family. For me, doing it that way over Zoom, you could have more people, the interactions better. I actually kind of like it. So my thinking is from this, I'm going to need a really good reason to attend an event in the future. When technology can make it more easy, why would I go to a conference event when I can just do it over Zoom? It's much easier. Obviously, there's something to be said for being in person, but my point is it's got to be more than just having an event and having like a banquet table with cookies and bad food on it. So we are launching an event for next year, our firm

in concert with some other people who know what they're doing as far as conferences go. And this isn't even a conference, right? It's a festival. It's a festival. Think of it as a fire festival. That's a good way to put it. Are you going to hawk your own credit card? What was the credit card called for fire festival? Remember the guy tried to do his own credit cards? I don't. But we should bring that back. Okay. So it's more like South by Southwest of finance and tech. I was told Burning Man, that's a conference, right?

Okay. Yeah. Anyway, the point is what it's not going to be is a hotel-based conference where we're sitting in a ballroom. There's four people on a stage. Nobody cares what they want to say. It's going to be less of what you don't like and more of what you do like, which is networking,

seeing your friends, meeting new people, doing business. That's what this is going to be about. The people who are running this conference have ran previous conferences before, they said, we want to do it outside. We want to do it by the beach in Huntington Beach. And we want to have it just be more networking and less people sitting in there listening to four people argue about emerging markets in their portfolio. So it's called Future Proof.

You can go to futureproof.advisor circle.com. It's going to be for financial advisors and investors and tech people and entrepreneurs and all this different stuff. We're going to try to have like 3,000 people there. Will we have a link in the show notes? We will have a link in the show notes. and we may even have a live animal spirits there. Oh, we're definitely going to have a live animal spirits there.

Okay. So it's next September in Huntington Beach, California. I think it's going to be awesome. They rented out four hotels. They worked with the mayor to, like, shut this part of the city down so we can just have this one space for ourselves. It's going to be sweet. Michael's probably going to be pumping on the beach, maybe. He's going to bring his bowflex dumbbells, right?

I got to get my back right for that. All right, what do we call this? Soliciting? Self-promotion. Okay, while we're doing self-promotion, let me just do one more thing. Are you a financial advisor? Are you looking for a new home? If so, no, the truth is we're always talking to financial advisors all around the country.

And if you are looking for a change and you want to talk to us, we never do this. We should because we have a lot of advisors. Listen, please shoot us an email. We're always happy to have that conversation. This is a true story. It happened right here in my town. One night, 17 kids woke up, got out of bed, walked into the dark. And they never came back.

I'm the director of Barbarian. A lot of people die in a lot of weird ways. We're not going to find it in the news because the police covered everything all up. On August 8th. This is where the story really starts. Weapons. All right. So every Saturday now, you know the gif of the guy walks up to the soccer game, unfolds the chair with one hand and sits down?

Love that gift. That's me every Saturday now. Three kids, and my twins are a boy and a girl, so they're on different teams. We have three soccer games every Saturday. Every Saturday morning, my wife pulls out like her Google Doc, and she asks me to look at it on it before, and of course I never do. So it's got to be, you take them this time, and I'm taking them this time, and we're running around the city doing different soccer games.

It's actually very fun. The kids seem to love it. But at one of the soccer games this weekend, my father-in-law was there, and he started asking me about crypto. He's an old-school CNBC watcher kind of guy, stock market all the way. I'm curious his exact wording. has never asked me before, but he just said, what's the story with crypto? He goes, I don't get it, explain it to me. That is not an easy thing to do. When you're coming from someone who,

he just basically said, I don't know, I don't understand it. I tried to explain it to him about permissionless money and sending stuff around and making it easier and skirting the financial system and starting your own sort of new technology, all this thing. He said, all right, that kind of makes sense. He said, so why does Bitcoin go from $40,000 to $60,000 in a month then? After everything you just explained. Because you're asking me. So that's the hard part of it, is that... Explaining it? Yes.

I think it's very hard to explain. That was always my initial problem with it when I started learning about it early on is I didn't understand it. I think the easiest way to explain it is to tell somebody that we don't understand the mechanics. And I think, who's the HBO guy? I'm drawing a blank. Not John Stewart.

The nerdy guy who looks like Matt Levine. John Oliver. Sorry, Matt Levine. He said Bitcoin is everything I don't understand about computers mixed with everything I don't understand about money. That's the best way to explain it because then people go... Oh, okay. Nevermind. Right. Right. Okay. Yeah.

So people might think, oh, contrarian indicator, your father-in-law was asking. I told you, my stepmom and stepdad asked me about Bitcoin, I don't know, when it was 35,000. But I looked at this as an anti-contrarian indicator. Like, it's getting more mainstream. Exactly. This is not antennas up. I mean, maybe it is. But this is bullish. It's bullish. It's bullish because the only reason why I'm bullish on Bitcoin is not because of the inflation or the macro or whatever new monetary system. I mean, I understand those arguments. It's because of adoption. And all of the boomers, with all of the money, when they come into crypto and they're coming, they're not going into Olympus Dow. They're going into Bitcoin. After we talked about this last week, I looked up

the numbers and the Fed has this. And we talked about 10% owns 89% of the stocks. Guess who mostly makes up that 10%? It's boomers. So this is actually through Q2 last year. It still needs to be updated a little. It takes a while. But boomers have close to $60 trillion. assets. If you added up the silent generation above them, which is shrinking by the year, of course, and Gen X and Gen Y and Millennials, Gen Z sort of thing, all three of those other generations at 52%. So boomers by themselves have close to 55% of all the wealth in this country. They have a huge amount of money. And now that we're making this more amenable to the wealth management space, I think you're going to see some of that money come into it.

That's what this ETF stuff is. You last week said this new Bitcoin futures ETF, Maybe by the end of the week, it could have $250 million. And that sounded like a pretty high number. Within two days, it had a billion dollars. It was by far the fastest ETF to ever reach billion dollars in assets. Happened in two days. Nobody's waiting for the spot price. I still think they could be.

Put it this way. I don't think so. If advisors and brokers were looking to get their clients' exposure to Bitcoin, an advisor that works at a wirehouse, you think they're telling their client to pause, let's just wait for a spot price because this is going to have some tracking error? Of course not. And guess what? We know that they're not because there was a billion dollars in two days. That's all you need to know.

I'm just saying, what if there's more? What if there's more behind it? Maybe there is. I think that such a small fraction of advisors are telling their clients. I know you've been asking about a Bitcoin ETF, but let's wait for the spot one. What I'm curious about, and I don't know the answer to this, once they open the floodgates and they allow a Bitcoin ETF and they approve 10 of them or whatever, how many of there are, and they let gray scale convert to a Bitcoin ETF. How does the price war work? So let's say it gets down to 10 basis points or 20 basis points or something. Do you see money moving around from these ETFs?

No, I don't think so. You think it's sticky. It depends on the price. If Bitcoin's down 40%, then yeah, absolutely. But if people aren't going to sell, pay the taxes and then leave to go to a cheaper one. So it just depends on the price. All right, Nate Karasi said BITO finishes number two on the weekly inflows. Number two, behind SPY, ahead of XLF, ahead of XYG, ahead of VTI.

VTI. I, VTI is the Vanguard Total Stock Market Index Fund. But look at this list, though. One, two, three, four, if you count the total stock market index fund, four of these are S&P 500 or S&P 500 like in the top 10. All right, so Bitcoin is bigger than silver. Paul Tudor Jones says that crypto is his preferred inflation hedge over gold. You said something on spaces that really did for me. I'm giving you the opportunity to rethink it.

But for people that didn't listen, you said, and I, I am not paraphrasing. I'm basically quoting, Bitcoin is going to be bigger than gold, comma, it's inevitable. And which would imply at least, at least 10x appreciation. But what you were saying was that you think that gold's going to get cut in half, so it'll flip it that way. Okay, fine. So you're saying that Bitcoin will go up at least 5x.

So let me make my case. Bitcoin $300,000 is a bank costing price target. I feel like I'm taking crazy pills. Explain yourself. All right. Maybe I didn't do the math. before I said that. Okay. The good thing is Twitter spaces is you can't record it yet. So maybe I said that. Maybe I didn't. That was a headline. Paul Tudor Jones says, maybe I didn't.

Okay, I did. It says, crypto is his preferred inflation edge over gold. I'm just saying like, what if one of the reasons that Bitcoin takes over gold is because gold starts to lose its shine, pun intended, and people just decide. So I think the estimate is, it's hard to estimate this stuff, obviously. It's like $9 to $10 trillion in gold. That's the market value of all the gold in the world. If you took, so 21 million Bitcoin, there was only ever going to be that many. But just use 18 million, because we're not going to be a 21 million until like the year 20, 49 or something. Okay, sorry. I was multiplying 21 million by 250K. That gets you like 5.5 trillion. Sorry, I didn't look at the schedule.

Schedule. So a four and a half, five X of Bitcoin price from here and you need gold to fall 40%. In the next decade, you really think that's not feasible? I think that's... I do think it's feasible. I don't think it's what you said. You said inevitable. Bitcoin is going to be bigger than gold. I'll say it. I think it's going to happen. Millennials are never going to invest in gold. But that's fair. I don't want to say probably or anything. I think it could happen. Sure, why not? But inevitable is a very strong word. It's just a word that doesn't typically come out of a Midwest in his mouth. True. I think it's too late. The train is left the station. Okay. I think there's not another generation coming in that's going to be investing in gold.

I think this is more an indictment against gold as much as it is as a bullish pronouncement about crypto. I think people are going to view Bitcoin as the next gold for the next generation. I think that's fair. So this is more of a commentary on gold than it is Bitcoin. If you're picking one of the two, which one would you prefer for hyperinflation? Okay, I think this is a Friday night tweet from Jack at Jack Dorsey at Twitter, CEO at Twitter and Square. Hyperinflation is going to change everything. It's happening. Now, I do have to give Finance Twitter some credit. Everyone on Finance Twitter is out with a good joke or take on this. This has to be the most quote-tweeted one of the year, right, for finance

Twitter? Oh, yeah. Ooh, 69,000 likes, 16,000 retweets, 6,500 quote tweets. And this is stale, so the numbers are even bigger. My knee-jerk reaction is the Logan Roy, oh, fuck off. I thought maybe we're misreading him and he's making like some sort of Bitcoin reference here, but I looked in the actual comments. He's saying he thinks hyperinflation is going to happen around the globe, which, I don't know. I know a lot of people, they make a lot of money, and for some reason they get attached to this inflation needs to narrative. I want to talk about one thing with this. So Square just paid $29 billion for the company after pay, which is buy and I'll pay later.

Do you know what the worst business model in history would be if we're actually going to have hyperinflation? A company that charges zero percent interest on installment payments. Would that not be the dumbest? The weird thing to me is people make these macro proclamations without ever thinking through what they're saying. If this was the case, Twitter should be borrowing as much money in Square. should be borrowing as much money as they can because hyperinflation means debt is going bye-bye. Like your debt is inflated away immediately. So Colin tweeted, if Jack was serious about hyperinflation, he'd require all of his advertisers and vendors to pay him BTC, not USD.

He won't do that because he needs USD and knows his revenues would collapse because whatever. We see this contradiction all the time, the most famous of shadow stats, who gets paid in USD and hasn't raised the price in the newsletter the entire 20 years they've been predicting hyperinflation. These people don't actually believe the narrative they're selling. They do. Maybe they don't. But the thing that pisses me off so much about this is that there are Bitcoin maxis who do want to see hyperinflation just so that their Bitcoin goes up and that they're right. But I don't know if they realize that how hyperinflation is like the end of society. Do you understand what you're saying? What has cost hyperinflation in the past? Things that are seriously, seriously up. Yes. And saying it publicly, you get married to that and you want to be right. at the expense of everybody else? Are you out of your mind? The good thing is, so he's obviously an amazing entrepreneur.

He's built two huge companies that many people use and are aware of, and you and I are on Twitter all the time. I don't know. It's good to know that some people just aren't perfect. You can be a great entrepreneur and still be an awful macro tourist, and that's okay. I don't want to put thoughts in Jack's head. I'm not saying that he's rooting for hyperinflation and he wants currencies to collapse and the end of society to, I'm not saying he wants that.

but that's what hyperinflation is. It's the collapse of society. It's really bad. We had Kathy Wood come to the rescue. She had a quote tweet thread about why this won't happen. And again, listen, hyperinflation, what does that really mean? It means basically the dollar will be worthless, but what type of inflation are we talking about here? Is that like 20% a year for 30 years? Or I don't even know what that means. What's the definition of hyperinflation? Basically, the currency becomes worthless. And how do you have hyperinflation with, I know, maybe saying in the future, the 10 years at 1.5%. What's a federal minimum wage? $8 an hour? I don't know what it is. But so Kathy said basically that the reason why we're not going to see hyperinflation is twofold.

One is that the velocity of money is falling, which makes sense. If all of the wealth is concentrated, which we know that is, they're not spending money that is. They're hoarding it. They're sitting in it. So the velocity of money is just not what it used to be. And then technology, which Jack should know better than anyone, is massively deflationary. So what the fuck? is he talking about? I wrote about this. Josh and I talked about this on all your thoughts. This is a while ago when Michael Burry made the Weimar reference that we could see Weimar here. By the end of 1923 in Germany, the average weekly wages for a metal worker were 30 trillion marks for 850 billion times the wages from 1913. Inflation was up 1.25 trillion times in that decade. That's hyperinflation.

How many times? 1.2 trillion. Bitcoin fixes us. I don't know. It's kind of read a book. It's really gross, honestly. I don't want to put intentions in anybody's mouth. But you know, there are some people that are legitimately rooted for hyperinflation. Probably. Again, to your point, without understanding what it is, this piece by George Perks at Business Insider, we're talking, like, actual inflation here. It is funny, though, because we go from like 2% inflation to 5% and all of a sudden people start talking hyperinflation. We're not even close to the 70s or early 80s yet. That was actual double-digit inflation. That wasn't hyperinflation, but that was like even a worst-case scenario than what we're seeing now.

It destroyed the economy. And to Ben's point, that wasn't hyperinflation. Yeah, that was just a bad bout of higher inflation. So George Perks said from Bespoke, non-managerial workers are seeing their wages grow at the fastest pace in 40 years. So you and I have talked about this. We spoke with that last week. But, yeah, so you're going to have talked about this.

If we're going to see actual sustained higher inflation, it's got to come in wages. And that's kind of what I believe, too. George says he doesn't necessarily believe this. He said that if wages rise, then we have to see higher inflation. So he says here, if labor costs and productivity are moving up together, that's a much smaller problem than labor costs moving up on their own. He was saying the 1970s saw wage price spiral, but productivity didn't rise to meet it. He's saying now, right now we're seeing like output per hour of work and wages growing at the same pace. So he's saying wages are

rising, yes, but so is productivity. So he's saying that we could actually see a scenario where businesses get more efficient and more productive. At the same time, wages are rising. that wouldn't lead to higher inflation. So he's saying this is an example. Non-managers at restaurants and bars seen a massive 22% annual jump in their wages through August. But the revenues pulled in by restaurants per hour by those employees has jumped $60 per hour from before the pandemic to $75 per hour now. So the cost is rising, but their employers are bringing in more money because they're becoming more efficient in doing so with less labor. That's how we see the velocity of money increase, though, is with all these wages because the wages at the lower end,

those people are spending their money. Yeah, but he's saying as long as productivity keeps rising and technology can help that, higher wage growth doesn't automatically equal higher inflation. This is an interesting take. I'm not saying he's right, but it's an interesting way to think about it. Yeah. You don't buy it? No, no, no.

I'm still on the hyperinflation thing. I agree. I guess I've heard it so many times now since 2008 that it doesn't really, it just kind of rolls off and it seems like one of those things that people just say without really thinking through what they're saying. My only prescription for that is read a history book. I mean, hyperinflation. I know.

This can of Laquiry is going to cost $4,000. That's what hyperinflation is. Pretty much, yes. And what did Jack say? It's happening? Is it? Is it? I know.

All right. Good piece by JPMorgan here. Who's your boy there? Michael Sembalest. Yes. I'm just going to guess that this is his work. So they're talking about there's this shortage. There's almost 8 million workers that were shortage.

And they're trying to figure out like, where is the shortage coming? from. And they're figuring out part of it is labor force people that left. So people probably retired or stopped working. Some of it is people becoming entrepreneurs and doing something on self-employment. Part of it is like we're not seeing as much immigration led into the country. Remember a number of years ago when the trope was all these immigrants are coming into our country and stealing our jobs? Don't we need to open the borders more now to let people come take some of these jobs that can't get filled? That's going to be a popular take. I'm just saying. I'm just saying how funny, how quickly the narrative changes to everyone is

coming here to take our jobs, and now we can't fill any of those jobs anymore. I know, I know. Anyway, so basically they're saying there's a bunch of different reasons. Some of it is people got this unemployment benefit. They made more money. The Wall Street Journal had this article about how a lot of this is COVID-related in child care. So they say, we've talked about the daycare problems, how they can't staff enough. They said in September, more than 300,000 women ages 20 and over dropped out of the workforce. The highest rate since the 1970s. We spoke about that like a few months ago when this was coming out. So 5 million adults who aren't currently working reported they were caring for children

not currently in school or daycare. This is a COVID thing. Five million. Five million. They had some survey by the U.S. Census showed that more than 7 million adults had to make adjustments in the past four weeks when children under age of five were unable to attend daycare due to safety concerns. Having little children, I know that this is a real, we had a COVID outbreak in our house.

That disrupted our lives for three or four weeks, basically. from quarantining and staying away and all that, like, it's a lot. If you had a job where you, like I was able to be remote, it didn't matter. I didn't have to go somewhere. If you have a job that you have to go somewhere for, it's a huge disruption in your life. If your daycare can't take people, obviously this is hopefully a short-term problem, but this is the kind of thing that could extend and turn into a longer-term issue potentially. Well, these are separate issues. So this particular COVID-related disruption with child care is a short-term issue, hopefully. Hopefully. The bigger issue is daycare on affordability. There's two separate

but related issues. I just think the COVID stuff is actually making that worse. No doubt. They're having to raise wages because they can't find enough workers. So guess what? When you raise wages, daycare is not becoming more expensive for people. We spoke about this last week. The National Restaurant Association recently reported that four and five operators are

understaffed, four and five. So we got an email talking about restaurants are going to be hiring robots. And this is probably in place before COVID, but I guess like many things, it's accelerating that. So Buffalo Wild Wings, as an example, are going to be having robots. I really like this. I really like this rendering here. It's a great visual.

The guy in like the black vest with a tie. He looks like he's going to a wedding. Yeah, that's the guy who's serving the wings at the Wild Wings. Ben, the word inevitable, I don't throw that around lightly. This is inevitable. So the Wall Street Journal, and they have their daily podcast, they interviewed someone this past week who works in hospital care. And they're having a problem finding nurses. Of course, a lot of them are burnt out.

and there are so many more people coming to the hospital. So they're testing out technology that allows one or two nurses from a station to monitor all the patients through technology. Instead of the nurses having to do the rounds and going to each bed individually, they can monitor them from one space. And he's saying, we still want nurses to do the nurse stuff they do. But if we can have technology, take away some of that other stuff that just waste time, let's do it.

So yeah, I think you're right. That's more inevitable than Bitcoin surpassing gold. How's that? Yes. By the way, jobs like this that disappear, not to be insensitive, But isn't this a good use of robots replacing people that are frying French fries or chicken wings? Well, especially if people don't want to do those jobs anymore. And right now, maybe people decided they don't.

So I talked a couple weeks ago about the fact that we got a new car for my wife. I told you you need to get on it when your lease is up. I did. I'll tell you after you go. We drove around this week for some reason and we were driving to go pick up Chick-fil-A for lunch maybe, Chipotle. I don't know, one of the two. And we drive by the dealership where my wife just got her new Hyundai Palisade. You eat like shit.

No, I don't. How do you look so good? There, I said it. You want to know the secret? I know. You take the bread off? I just eat the protein. But you're still eating a piece of chicken deep fried.

Chick-fil-A has a little bit less breading. And I get the grilled chicken sometimes too. All right, so where were you driving? The protein. So we were driving around and you have the role of car dealership after car dealership. Why are they all next to each other, though? By the way, does that just so it makes it easy for people to shop? I feel like I heard that on NPR.

Yeah. It's the same thing. Why do you see mattress stores all cluster? So people could shop. We're driving by to where my wife got her new SUV, and we see her old car on the lot there. We go, oh, let's go check it out. Wait, pause. Time out.

Hold on. Did you bring the truth to Courtney about the square footage of the minivan versus the pilot? She said, I didn't actually want to get it because it was bigger. I wanted to get it because it handled better in the snow. The van actually didn't handle the good in the snow. And I think it was easier to put the twins in out of their car seats in the SUV two versus the van. But that was her story. So we see her car.

So when we traded it in, I think when we got it three. years ago. It was a lease, but they gave you the market value of the car. So it was a Honda pilot. I think it was $33,000 for the pilot. It's good value. It's not bad. You couldn't get that now. So when we traded it in, the value, you know you have the lease table and they give you what it should be worth and what you owe. And I think it should have been worth 27 when we turned it in, something around there. And they gave us 30. And I thought, that's great. 3,000 over, so we got that 3,000 baked into the new car we're getting because that's the higher value. we look and see what they're selling it for they were selling it for 34 we bought it for 33 put

probably 30 some thousand miles on it and multiply those miles by 11 based on three little kids in there with they cleaned it up obviously but car dealerships are like the opposite of the zilla business model yes this is all supply demand because guess what the rest of the lot was empty more or less so they're selling a three-year-old car with 30,000 miles on it for a thousand dollars more than it was when it was new. Wild. I went to get an oil change today at the dealership and they said, do you have a reservation? I always make a reservation. I said, no. It's Monday. I figured I could just walk in. They said, we're booked a week out. I've booked a week. I didn't need an oil change. All right. Whatever. Do you have any cars? Because my lease is coming up in February. No.

What about the one in Lindbrook? Same thing. So I called my car broker and I said, hey, it's Michael Baddick. Do you know who I am? I think I've sent a bunch of businesses your way. He's like, yeah, of course. Thank you for all the business. What can I help people? with. I told them what I need. He said, you can't be picky with the color, but I get you a car. So, car brokers for the win. Okay. We'll see. I'll see it once you have it in your driveway. Fair. Did you see this amazing piece of twittery, twittering? Not a fan of Jack's hyperinflation, but a fan of his product. This person, Ryan Peterson, went through a tour of the Port of Long Beach. And you've heard him on Invest Like the Best Before in Oddlots. He runs a logistics company that

helps with the shipping situation. He's been on odd lots in the last three or four weeks. I might have missed that episode. I don't miss many. I might have missed that one. All right. Anyhow. So he went through this long a thing and he said, basically, the issue is the damn government and the zoning issues. And they've got to rule on the number of empty ships or empty chassis or whatever he was talking about. He's saying, yeah, you should be able to stack them up higher than two storage units at once. Right. Exactly. So it's incredible. So he tweeted he said, update. The city of Long Beach just announced it as temporarily suspended container stacking limitations. Thank you everybody who called the governor and made a request. They got the

message. You could stop now. It's just, it's kind of amazing and sad that something like this could even happen, that this person, thank you, Ryan, could do a tweet storm and easily see a solution. Hey, idiots, this is the problem. Let's fix it. I guess this is like a feather in the cap of people or consultants because you always think like, why would you pay consultants to come in and do something that you can just do yourself? I think there's something in the idea of like, well, we've always done it this way. Why wouldn't we do it this way? It's also feathering the cap of people that are anti-big government because there's no incentives. It's all, nobody wins or loses the way that you do in business, which is why not always, child care. Okay, we need government subsidies. But shit like

this has to drive you mad. The fact that, yes, we've had this huge backlog for so long and they go, oh yeah, that makes sense. Thanks. When you see it every single day, yeah, you'd think that someone would have said something. Okay. I just thought this is a really good tweet I wanted to share from Value Stocky. He said, people are in with real estate returns because it's the only asset that people hold long enough to experience compounding. So, so true. Every homeowner has held a house for 20 years. How many people have held a stock or even a stock index fund for 20 years? Very few people. So he said anecdotally, everyone knows someone who paid 150 and 95. That's now 300. That's a 2.7% kegir. Even compounding

a low rate is damn impressive. Because yeah, big amounts of money compounded on themselves look even bigger. All right. Some listener emails schooling us, helping us understand what's going on. You guys mentioned Toronto and its prices. My mom sold her average home for a $1.3 million. You ask how people can afford these homes. CIBC came out with the average gift from parents to first-time home buyers. It's $200,000. The great wealth transfer has begun. When I tried to buy a house to Toronto, every mortgage broke and realtor I spoke with asked if I would get a gift of $2,000 to $300,000. Holy moly. Toronto does sound like the craziest market and maybe in the world right now. Another feather in the cap of not to rehash this debate about the average

minimum down payment that George was talking about with the FHA loan. Yeah, maybe that's true on paper, but nobody, houses aren't selling for that. Okay. You want to go round four here on housing affordability? No, no, no. All right, this is a really interesting email. Anecdotal evidence of why I buying in Zillow's plan might be misguided. Last November, my parents were selling their home amidst their early stages of the hot

property market while other homes in their area were under contract. Their house went several weeks without a single offer. They consistent showings, but no offers. Why? No structural issues. House was built in 2015. and the major negative was no yard for pets and families had a gigantic beware of dogs out on the neighbor's fence. Anytime a prospective buyer went out on the porch, they were greeted by a barking dog.

That sucks. Who wants to live next to a barking dog? In the midst of every single prospective buyer shying away, Zillow enters the equation. A Zillow contract and employee comes in for the inspection, takes a few pictures with his tablet and the center of the living room and leaves no business to the porch, completely checking the box for the inspection with that camp. By the way, great lessons on incentives here. Same thing with the government. Like, there's no incentive for this process. He's not a broker.

So ultimately, Zillow put an offer on the house, which my parents quickly accepted. Three months later, Zillowl sold the house to another buyer for 50K less than they purchased it. We get the point. It's hard to do that much legwork if you have a ton of houses, basically. SpinZone, this could be a sandlot reenactment. We're the dog in the backyard. What was the name of the dog? Was it Zeus?

I think it was Zeus. Yeah. Good movie. Great movie. All right. Netflix reported earnings last week. This is wild. I listened to the quarterly call in a quarter app.

So did I. Straight to the Q&A. Guess what the whole thing was Q&A, I think? Yeah. I hit the Q&A at the start at the beginning. I said, wait a minute. No, the whole thing was Q&A. All right, Squid Game was our biggest show ever, ever.

142 million households globally. Watch it in the first four weeks. The breadth of Squid Games popular is truly amazing. The show has been ranked as our number one program in 94 countries. 94 countries. By the way, shout to quarter because not only do you get the doc, the Q&A, now that transcripts, some of the transcripts are actually in the app too. So that's where I pull this from.

94 countries, unbelievable. And Dune did 40 million in the opening week. That's it. 40 million. 40 million what? 40 million dollars. I'm sorry. I would love to see HBO share some numbers about how much increases they've had when big movies like that hit.

Do they actually get more subscribers to just watch it at home versus going to see it in the theater? So you shared this one on Twitter, I think. This is from the Netflix one. This was surprising. So the share of total U.S. TV time, September 2021. I don't know how accurate these are, if it's a survey or what, but cable is still 38%. Broadcast is 26. Streaming is 28, and they break it down.

Netflix is 6. YouTube is actually 6%. Hulu is 3. Amazon Prime is 2 and Disney is 1. Streaming is still relatively small in the grand scheme of things, correct? Did that surprise you? Yes, it did. It was much smaller than I would have thought.

There's still room to run there. So somebody said, who released these numbers? is the Cable Association of America? And I said, actually, it's from Netflix. And the person's like, well, that doesn't make sense. What is Netflix trying to show that they have a longer runway ahead? Probably. And we have more room for streaming.

There's going to be more streaming stations. The cable number is shockingly big. But listen, that's what this country is. We're cable watchers. Yes. I've said in the past, I'm never cutting the cord. Me either. But you still have the line on your TV.

I do. Okay. All right. Let's put it out there. All right. Let's get to these two emails. So the same thing. Two questions about using margin.

I'll read the second one. First time, long time, question about leverage, a normally taboo subject in the safe investing world. Quick background, early 30s, totally financially secure, spillover into a sizable taxable brokerage account, blah, blah, blah, blah. Given this financial security, we understand the risks. What could be the case for not taking a portion of the taxable broker account and levering, margining up on the S&P in order to further boosts return? Say we take 25% on this account to lever up, know that even in a market down to we're well protected, I know it's tough to give advice to lever up, but am I missing something? Not really. Leverage has become a dirty word because of all the catastrophes and blowups that it's caused. But there are responsible ways to

use leverage. And assuming that you have financial security and assuming that when you get a margin call, you don't panic and you actually can meet it and deposit money, I don't see anything wrong with this. Now, a lot of assumptions, but... This isn't long-term capital management where you're levering up 50 to one. If you're talking about taking a quarter of your portfolio and increasing that, barring against that, that's a totally different story. And I think people are going to get a little more intelligent about this. There will be people who blow themselves up, but I think it makes sense if you're someone who's financially literate.

Of course, filed this on their things you don't see in a bare market. Listen, we're not in a bare market, okay? These anecdotes are completely meaningless. If you want to use this as a sell signal by all means, but anecdotes like this, sorry. They stopped working, I don't know, 47 years ago. And I think there are certain people of Tesla that we talked about at the beginning of the show means anything. Some people are willing to sit through larger losses these days. That's a very good point. Not everyone. Some people, though, are willing to sit through larger losses. Our investors becoming better behaved. I don't know. We were talked about that before? No. Okay. All right. So here's a deal. I went to the movie theater at 9 o'clock on Friday.

was it Friday? I think it was Friday. And I went to see the last duel, because I'm a huge Ridley Scott Stan, and it looks like a good movie. It looks like a movie theater movie. Matt Damon with a mullet? Yes. They told me it was sold out, and I gave the gift. Are they separating by seats now? Is there like a seat in between everyone? Is that why? I don't know. Because I thought the movie kind of bombed in the first weekend. It did. But then there was resurgence in the second weekend. I think it did $10 million. I can't remember it on the second weekend. So, I heard it was a good movie.

I'm going to the theater to see it. I came home and I watched Dune. And damn it, the irony here is that my boy, Deneville Nufo I totally stand for, said that watching Dune at home is like racing a speedboat in your bathtub. So shame on me. I was sitting in my speedboat in the bathtub. So I watched it, as did you, and I'll give my take and then you will give yours. I fell asleep a few times, which is on me.

This is why I hate watching theater at home. I hate it. I fell asleep two or three times. I've never fallen asleep in a theater one time in my entire life. I was on my freaking phone. I pressed pause twice. I'm like, what am I doing? I threw my phone on the other side of the couch.

I got up and I got it. I hate watching movies at home. All right, be that as a May. I love it. Here's my review. I know you do. My review. I really didn't understand like anything.

I feel like if this content is not native to you or if you did not read the books said differently, this is a tough follow. However, De Neville Nouve is an absolute master because even though I didn't understand anything, I still had a good movie experience. And the next day, I've never done this before. Never, ever, ever, have I done this before. The next day, you know what I did, man? I watched it again.

I didn't finish it, but I watched it again. And it was better the second time because now I had a frame of reference. And in the lesser director's hands, that movie completely implodes. He is an absolute master. Was it my favorite movie ever? No, because I didn't really understand what's going on. Do I bow down? Yes, I do.

Okay, your thoughts. I'm sure some people have said in their reviews of it. It's visually stunning. Stunning. So it's a two and a half hour long. And the music? The whole thing. Two and a half hour long movie.

It was epic. That's what it was. Epic. Me and my wife watched it over the course of two nights. Friday night, she went to bed a little early, tired from the kid. See, you can't do this. No, listen, here's a thing. Halfway through, I was like you going, wait, what is going on here?

I kind of get it, I don't really. I was kind of like on the fence about the movie as a whole. Like, oh, it's beautiful, but I don't really care about the characters. Then the second half totally brought me in and I loved it. I really liked it. I still didn't find myself rooting for any of the characters. Maybe that's the second part of it, but I thought it was really well. done and they better make a number two to finish it off. They have to. So hopefully HBO Max is pulling

in enough money, but I liked it. I might. I don't know how I'm going to do this. I like want to go see it in an IMAX. Here's a simple take. This movie by itself was better than any of the 19 Star Wars prequels and sequels that were made. Oh, 100%. By the way, on Friday night, Robin's like, why you go to the movies now? Like we just, because we were out with the kids. We did like a pumpkin patch thing. And I got home at 8.50. She goes, the movie they want to see is playing at 9. I said, see ya. She goes, why? I said, I'm trying to save the industry.

I'm trying to do my part. And then I came home 10 minutes later. She's like, what are you doing here? And I didn't see Dune because Dune was playing at 10 o'clock. I wasn't about to wait there for an hour. I really do think it's movie theaters or novelty going forward. It's going to be like very specific. Don't say this because now.

I'm sorry. This is like your hyperinflation call. You want to be right. And you know why? I don't want to be right. I love going to movies. I would go to movies every single week. If movie theaters are dead, we're not going to get these movies anymore.

Don't you understand? They're not going to make these movies. Who's going to finance them? The streaming companies have so much money. Apple and Amazon and Netflix all have so much money. They're going to be the ones that finance all this stuff. That's where it's all going to go. And they're going to be competing against each other.

So they're going to have to do some big budget things. All right, one more for you. I rewatch Bottle Rocket this weekend. It's the very first movie. Not a West Anderson guy. Okay. After Royal Tenen bombs is when I was like, okay, I'm out. That's actually the only one I liked.

Okay. So I'm saying Royal Tenen bombs and before, anything after that has got way too weird. like his new one French dispatch. It looks so... His movies are way too pretentious for me. But his early ones, Rushmore and especially Bottle Rocket. Bottle Rocket is the one that him and Owen Wilson wrote. It might be my favorite Owen Wilson character of all time.

He just plays this dimwit who's trying to do a heist. And it's the kind of movie, like people tell you, if you watch Big Loboski for the first time, then you've got to watch it seven more times to pick up on the joke. It's that kind of movie. Each time you watch it, you pick up on another little subtle joke that they have. And I think it's one of my favorite Owen Wilson characters of all time. I respect your opinion.

I've only seen Bottlewocker once. I was going to get it. I don't think you'll like it. I don't think it's the moment. I told you. I hated it. I hated it. One more recommendation.

We talked about, we had a couple of wine episodes where we talked to Vino Vest on our show. And we mentioned one, which, by the way, people were dunking on me last week because I said grape trees. And people said, no, Ben, there are no such thing as grape trees. It's grape vines. Sorry. Excuse me. Like, come on. I'm team bet on this one.

Vine is in the tree family. But we had a listener reach out and say, hey, I'm part owner of a winery. Would you guys like to try some of my wine? And of course, being a wine connoisseur myself, of course. So, foolhardy wine in Walla Walla, Washington. And where? Walla, walla. That's what it says on the bottle. John was nice enough to send us some of his foolhardy wine. My wife and I cracked open a couple bottles this weekend. Great. My sister who works in the wine industry said very good wine, good selections. So check it out. It's foolhardy vinters.com.

Did you have the red of the white? My wife had some white. I tried some red. I'm a red guy. Me too. So very good. Thank you, John, for sending us. Thank you, John. I can't wait to crack mine open. All right.

Animal Spiritspod, gmail.com. Thank you to everyone who always sends us an emails. Michael put an email up on his blog this week that made us laugh. We really do appreciate all the feedback we get. Most of the time it makes us laugh, and it gives us good feedback and good questions, and so we appreciate everyone who always writes us in. See you next time. Thank you.