Animal Spirits Podcast - Is Bitcoin the New Gold (EP.178)

Episode Date: November 25, 2020

On this week's show we talk about the bitcoin bull market, the generational wealth gap, who owes all the student loan debt, why poor people still buy luxury goods, investing in TikTok mansions, young people entering the housing market and more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to by Wari Charts. They have this model portfolio tool where you can use to, you guessed it, create model portfolios. So I looked at a 6040 portfolio with a twist. I took 5% from the stock allocation. I use the global total stock market. So I used VT for that. I used AGG for bonds. But I took 5% from stocks and I put it into Bitcoin.

In this case, I used GBTC for Bitcoin. And this portfolio, even with an annual rebalance, so it's not just like 40% Bitcoin at this point, this portfolio beat the pants off of the S&P 500. I was shocked. Going back five years, this portfolio did 22.8%. The S&P did 13.5. If only we can go back five years and use this portfolio. Yeah.

Are you ready to put your $4 million price point on Bitcoin yet so we can have this going forward as well? That's a little conservative. Okay. All right. Yeah, this is cool. So we've got the whole thing here. We'll put it in our show notes. Go to Whitecharts. Tell them Animal Spirit sent to you. You can have a free trial and get 20% off your for subscription and try this model portfolios out for yourself. 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 Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Does the Bitcoin bowl market feel a little different this time around? It's evolving. I think there's this thing.

It was almost like the first time around, it was like, you know when you'd go out with a friend in college who would never really drank before in high school and they would just be a sloppy mess. That was me. People that like never went out before and they would just, by the end of the night, they'd had their head in a toilet or a trash can. Where are you going with this? That was the Bitcoin people the first time around. They were the sloppiest drunks in the world through that bull market. They were throwing out these price targets that were just absolutely insane. Now Bitcoin is sipping on some cognac. Yeah, now it feels like, okay, act like you've been there before and people aren't quite as crazy as they were last time. I haven't heard one

$400,000 price target yet. Have you this year? You just haven't been paying attention. It just feels this time around like it's kind of like, okay, everyone, settle down. We've been here before. Don't worry. Don't blow it. Is now where we show the overlay of Bitcoin price versus Bitcoin Google search trends?

Yeah, one of those things. Save for that three-day period when it went parabolic. It's basically back to the highest it's ever been. You mean back in December 2017? Yeah, in 2017. That was a lot of fun. Even though my cash was on the sidelines, that was a lot of fun. And this is a little bit more fun because you and I are crypto investors barely.

I put enough money in in 2017, so it wouldn't change my life, but it was enough where I wouldn't be annoyed if I was not involved in this. And I've dollar cost averaged ever since. Huh. How do they crowbar this into a Target date fund? Yeah, it's like, I don't know, Blade Runner instead of Target Date 2049. Here's the other ways that it's evolving, because here's one of my biggest piece with it. how many people in this space, and it doesn't matter, but how many people have been right for the wrong reasons? Like everything we heard in 2017 about, man, you're a tough crowd. No, no, I'm just everything we heard about what Bitcoin was going to do to decentralize everything has not

happened. But I think it has evolved into the point where now everyone has pivoted to, it's actually Bitcoin is going to be the next gold. And I actually think that's probably the best case scenario for this, don't you, for this asset? Where it's just, it's seen as a store of value for younger people that trust more in technology than a little piece of metal. Isn't that a better? Isn't that a better case scenario than what people were laying out in 2017? I mean, don't you think we're still super early days? What if it becomes a currency where people will actually transact? Obviously, the PayPal news makes it one step closer to that. I think that's still possible. The longer it keeps sticking around and coming back every time it has one of these big,

huge, brutal bear markets, the stronger it comes and the trust in it. Don't you feel foolish talking about it? Only because, like, I literally know nothing. I feel silly even giving opinions. Of course. It's still a speculative asset. And it's always going to be, but... What asset is not speculative, except for treasury bills? It's not useful for anything yet, is it? What can you do with Bitcoin besides make money on it? Well, today. Today.

Yeah. I'm just saying, doesn't it surprise you all the money that went in? Like, what happened to all those ICOs? Remember all those ICOs, those initial coin offerings we had? Yeah, they're gone. Okay, what happened to them? None of them worked out to do anything? But what's your point? I'm surprised that nothing, not like 2017 is that long ago, but all the money that flooded in then, When the internet in the 90s went crazy, they built all those fiber optic cables.

And those ended up, even though we had a boom and a bust, all those fiber optic cables that were made helped power the next two decades of the internet and were this amazing thing that happened. You're acting like it's been 20 years. I mean, we're just starting. This is maybe not a fair analogy. But if you looked at Netflix in 2011 like I did and you were like, this is a piece of junk, let's short it.

It changed. I mean, in 2009 and 2010, the library on Netflix was legitimately terrible. It was all movies you've never heard of with like a few brand names. And the Netflix in 2020 looks nothing like Netflix in 2010. And I think that you might say the same thing about Bitcoin in 2030. But I'm saying I think it's a positive for Bitcoin investors that maybe all that stuff never happens and it still works out. I'm saying that's a positive that if none of these amazing things happen that they were talking about how it's going to take over the dollar and the Fed is done and computers are going to run everything. If that never happens and it's just a store of value, I still think that's a win for Bitcoin. All right, got it. Let's move out this because

we're going to be talking to Zach Prince about this in detail. Yeah, we're going to have an upcoming talkie book. We're still trying to hammer out the details when it's going to be. But we're have a full podcast to vote to Bitcoin in the coming weeks. All right, here's something for you. Is the meltup too easy now? I've moved on from first level thinking to now second level. Is it too easy that everyone's now on the meltup thing? It's almost like eventually that's too easy. The Q4 stock market? Just everything. Yeah, the vaccine's going to hit. Everything's lining up perfectly. If we get one more fiscal stimulus, it's going to get us through. I'm in the meltup camp. I guess you never know. Obviously things could unravel, but I'm just trying to see the

other side of this and think, what could derail this? It's obviously always something that you'd ever think of, but it almost feels like that's too easy right now. Well, I have an answer. Resistance. What's that? Oh, technical analysis? You're right. A line on the chart could really do it. Okay. I'm trying to see the other side of this, and it almost feels like it's too easy trade at this point. Interest rates are low. The vaccine is coming. We had another vaccine today, and it felt like, eh, whatever. They didn't even have the same feeling anymore. It's totally lost. It's like diminishing returns every time there's a new vaccine Monday. I'm just trying to see the other side that it almost feels too easy. It's three weeks in a row. Don't fight it then. All right. All right. So you're

bullish now after being a perma bearer for six months. How does it feel? If I could change and you could change. Do you remember when everyone was going to go into index funds and no one was going to trade anymore? There's a story in CNBC and Jim Kramer says, stock moves marked the end of the tyranny of index funds. He's saying, he didn't write that headline. I hope not. He's basically saying zero commissions came in and it's been revolutionary because it's forced younger people into individual stocks and the pandemic. And this is all been good because it took people away from index funds. He said, it's a return to the old days when management's execution really mattered. Every day we see individual stocks on the move because the underlying businesses are thriving.

So he's saying people are jumping into stocks and that they're trading more on fundamentals. Yeah, sure they are. I mean, come on. on. Come on, Jim. Isn't it funny how quickly the narrative changes, though, to everyone is going to index. And now everyone's a day trader. And maybe we just focus on these fads that happen and just kind of forget about there's still plenty of money plumbing into Vanguard. And I don't know, stocks have always been manic at how they trade. And guess what? Robin Hood traders are making stocks trade more in fundamentals, right? I'll go ahead and take the other side of that one. I mean, it's so ridiculous that it is actually laughable. All right. This one surprised me. Did you

Read the store with New York Times about dividends? Not yet. Okay. So Golden Sacks was predicting all these companies are going to run into trouble. Dividends are going to fall by 20% or more. This is back in the Depression days of March, which I still say people are trying to dunk on me for saying earlier in the year it was a depression. We did have a depression for March. March was a depression. March was a Depression? I think we had a depression for one month in this country. That's not how depressions work. Sorry. Why? We have the largest quarterly drop in GDP ever. That's not a depression? Nope. So what's a depression?

If something lasts 30 days, it's not a depression. Next question. Okay. Erroneous. No. I will not give in. I think we legitimately had a month-long depression. I think those are diametrically opposed.

Those words do not belong together, like lamb and tuna fish. Is it lamb or ham? Lamb. What? You lost me on that one. Big Daddy. That must be a Long Island thing. Oh, Big Daddy.

Okay. Anyway, so how far do you think dividends actually go? A Long Island thing. You guys eat the lock stuff you put on your bagels? I don't know. What is that? I'm not a locks person. My wife is. I'd never heard of it until I went to a bagel shop with you before.

Looks disgusting. Sorry. Sorry, not sorry. Smok salmon. On a bagel? I don't know what you people do there. All right. So, Golden Sachs was saying dividends were going to fall by 20% or more. How much do you think they really fell without looking? Percental. 15. 1%. Less than 1% dividends fell. Wait, what? Yes.

Less than 1% of dividends? The total decline for dividends in the benchmark S&P is likely to have amounted to less than 1%. Okay. That's got to be like cap weighted because Apple is probably the largest dividend payer. Well, he was saying because companies like Apple have increased their dividends, it's more than made up for the companies that went back on their dividends. Right. So how many companies actually did slash dividends? And what was the average slash by those that did cut dividends? But it doesn't matter because the market as a whole is still paying. I understand. I understand. I'm just saying that's pretty wild. That's not something I would have thought back in the Depression

days of March, that one month depression. Right. It's interesting. It's interesting. All right, Bloomberg Wealth, did you know that's a new thing, Bloomberg Wealth? They did this thing where they talked about the generational divide, the generational wealth gap. Joe Biden is the oldest president. So they showed a chart that we've seen this a million times. And who put us on to the fact that these charts are flawed? I think it was Russ Roberts. So there's a chart showing. It's a chart with net worth broken down by different age groups, less than 35, 35 to 44, et cetera. And it goes back to 1989. And And it says median net worth has dropped for Americans younger than 55 since 1989. But somebody that was less than 35 in 1989, they're moving. They're not stuck in this age group. So aren't young people, by definition, always going to have less money? No, what this chart is saying is that young people in 1989 had 20% more wealth than young people now. That's not what this is showing.

Yes, it is. This is showing people at that age every year for what they had. Fine, but it's such a small number. Yeah, it's a small number. And honestly, these charts, to me, of course it makes sense that young people these days have less wealth than people did back then because more people are going to school and pushing their life back and they're not buying houses that's young of age. So people back in the day were getting married younger and buying houses earlier and not going to school for as long. So it makes sense that young people, the point of these stories, and I think a lot of it has to do with, it's kind of like a stock market chart. If you pick the right date to show this stuff, you can make it say whatever you want, basically. The wealth of people in the 55 to 64 cohort peaked in, I don't know, 0405. Right, which makes sense. You can see where it peaked, the housing boom, because most people have their money tied up in their house except for people at the high end.

Anyway, the upshot was, they said, quote, one factor holding back younger generations is debt, especially the pile of student loans, many have accumulated, end quote. We spoke about this last week, and Logan Motashami came on and did a video with me on the compound on YouTube, I don't know, six months ago. And he spoke about student loan debt. The people that are obsessed with student loan debt on the left are like the gold bugs. This is their issue. And there's just some inaccuracies going on here.

And it doesn't matter what you tell them. They are going to think this is their topic that they're going to go out no matter what. So why don't we bring some data to this knife fight? So the Brookings Institute had some really good work on this. And they showed that most undergrads actually finished college with little or no debt. About 30% of undergrads finished with no debt, 25% with less than $20,000, despite horror stories about college grads with six-figure debts, only 6% of borrowers owe more than $100,000, and they owe about one-third of all the student debt.

And who are people that have six figures in student loan debt? It's people with graduate degrees and other advanced degrees that are ostensibly earning a good living. The people who are really screwed in this whole conversation are people that take out of a student loan and never finish college. Those are the people that have been truly left behind. That number really jumped out of you. I didn't realize it was that big. That 6% of borrowers owe a third of student loan debt. That's a huge number. So you always see any story you see in the Wall Street Journal or Bloomberg or any of these financial publications that talk about

student loans, they always interview someone who has six figures of student loan debt and they're just drowning in it. And of course, there are people who make poor decisions and get the wrong degree and that debt is just to wait on them for a long time. But you're right, for a lot of people, that's just more people going to graduate school, getting higher education. And so it's not as bad as people make it out to be. So here's a terrible number, the anti-cuda grot, if you will. 42% of households with student debt are headed by someone without a bachelor's degree. That's horrifying. Right. So the people that aren't finishing school, they start, they take some loans out. That's tough to me where that there isn't a rule in place where if you don't finish

school, you can't somehow get those loans expunged. That is the one thing that I wrote about this this week, and we put it in our compound video last week about the student loan stuff, that the fact that you can't get rid of student loan debt even in bankruptcy is still kind of mind-boggling, isn't it? Yeah. What makes student loans so special that you can't get rid of them? Let's just say that you were to wipe out all the student loan debt. That doesn't get to the root of the issue, which is just maybe, I don't know if indiscriminate lending is the right word. It's not even indiscriminate lending. It's the tuition keeps going up at college. is because they keep adding services and paying their faculty and staff more.

Bailing out the debt holders or the student loan people, it's not fixing anything. So the government lends, there was an article in the journal, the government lends more than $100 billion each year for this. This one surprised me because the headline was student loans losses are costing the U.S. more than $400 billion. And in my mind, I was thinking, okay, how does that work? If you can't get rid of student loan debt, how does this work? So they said the way that this happens is they have this debt forgiveness plan where it's an income-based

repayment. So you pay only 10% of your discretionary income. Then they forgive balances after 10, 20 or 25 years. They're looking at this number going out further. And that's where the government is losing money because people aren't making incomes commensurate with the amount of debt they're taking out in many cases. Their incomes are lower and so they're not paying back as much as the debt as they took out. So there's $1.4 trillion in loans outstanding. And they concluded to your point that borrows will only pay back $935 billion. This made me kind of the chuckle, leaving taxpayers on the hook for $435 billion. No, it's not. People's taxes aren't going up to pay for student loans. Right. It's just going away, right? This was pretty funny. This is from the

story. After decades of no questions asked lending, the government is realizing that it has a pile of toxic debt in its books, which is kind of funny. But again, this is good debt as far as that anything else goes, right? Mostly good debt. Not all of it. Yeah, mostly good debt. But it's true that J.P. Morgan has that chart in their guide to the markets where they show the average annual earnings by your degree earned. In high school graduate to bachelor's degree goes up $34,000. And bachelor's degree to advanced degree goes up another $34,000 on average. Obviously, that range is getting wider because more people are getting education. But at least student loan debt is an investment in something. This seems somewhat solvable. Unlike health insurance,

which is just an untangleable web of chaos. I feel like, I don't know, but I feel like this is something that we can wrap our arms around. But again, the article says, the government, unlike private lenders, can borrow trillions of dollars at low rates to absorb the losses without causing a panic. But taxpayers will end up paying a price because Congress will have to raise taxes, cut services, or increase the deficit to cover the losses. No, sorry to put my MMT head on, but I just don't think that's true. Well, it's the last one, increase the deficit. That'll be, you're right.

They're not going to raise taxes to pay for the student loan debt. This is a form of mental accounting that we do when we talk about government debt, right? The people that are most affected are facing student loan debt that is most punitive are people that go to college, weren't prepared for it financially, mentally, emotionally, educationally, whatever, and never finish. The 42% of households that take on student debt that don't have a bachelor's degree, those are the people that can really stand to have some relief. And so I think this segues nicely into an article by Tressie McMillan Codden called

Why Do Poor People Waste Money on Luxury Goods? Side note, she actually wrote a book called Lower Ed that looks at the for-profit university system, like University of Phoenix, for example, and I just started, but so far there's some mind-blowing data in there. For example, the president of the University of Phoenix made $5 million in 2000. So that system is totally corrupt and broken. So anyway, getting back to this article, why do poor people waste money on luxury goods? And I'm sure we've all, you saw somebody wearing Gucci shoes or whatever, and you judge them.

That person can't afford them. Why are they driving that car, et cetera, et cetera. This article was eye-opening from that point of view. A listener sent us this, and I had never heard this before. they said, why do poor people make stupid illogical decisions to buy status symbols? For the same reason, all but the only most wealthy by status symbols, I suppose. We want to belong and not just for the psychic rewards, but belonging to one group at the right time can mean the difference between unemployment and employment, a good job as opposed to a bad job,

housing or shelter, and so on. It's belonging. Right, exactly. And the fact that people literally judge you for how you look. Yes. Maybe the spreadsheets say you're insane to spend money on that bag or that watch or whatever. But maybe that can open doors for you that wouldn't otherwise be open. And obviously this is- Well, it's a self-esteem thing too, right? How that stuff makes you feel for some people. So I didn't grow up like this. I can't put myself in those shoes. I wasn't there. But this article did a great job. So here's another quote. You have no idea what you would do if you were poor until you are poor and not intermittently poor or formerly not poor, but born poor, expected to be poor and treated by bureaucracies, gatekeepers and

well-meaning respectability, authorities as inherently poor. Then and only there. then, will you understand the relative value of a ridiculous status symbol to someone who intuits that they cannot afford to not have it? It's one of those things where it's so hard to put yourself in someone else's shoes, especially when thinking about their actions and their decisions, because you're always looking at it from your point of view and not the point of view of someone else and what they've gone through in their circumstances. And that is very hard to do.

But yeah, it's hard to not judge people, but that's the idea here is that you don't know what these people have been through and what can help them in a little way by spending some money. It's like, are people supposed to go their whole lives without having anything that makes them feel a little better and spend some money? Otherwise, what's the point, right? Yeah, this is a good one. Again, we'll link to this in the show notes. Okay, craziest story of the week. I got to say this. I still don't get the whole TikTok thing. I tried it once and it just didn't work for me out. I'm just I'm an old. I still see people post TikTok videos on Twitter, which is probably as close as I'm ever going to get to it. You know what I enjoy? What's that? One of the bright spots of this whole thing

has been Sam Rowe's Instagram feed. So Sam Rowe is posting these amazing meal prep videos on Instagram, and he's also doing his stories of TikTok videos. I don't know how he finds these or how he imports them onto Instagram, but that's my only exposure to TikTok is through Sam Rowe's Instagram account, and it's fantastic. Okay. I got to say Instagram has kind of fallen off to the wayside for me.

I don't have enough bandwidth to do more than one social media thing. I can't go back and forth. I don't know what it is. It's Twitter, nothing for me. So anyway, Taylor Lorenzo wrote this at the New York, times. And they have these TikTok influence for houses where they bring people in and then they're supposed to influence. Yeah, they influence other people from these. So they talked about how these companies, they bring them in and kids don't pay, and they're all kids, it seems like,

in a lot of ways. They don't pay rent. But what they do get is the people who give them these houses take like a percentage of whatever they put. And they promote their products and brands. And they said that there's this place that, okay, West of Hudson was acquired by some healthcare group. And it was incorporated by a Chinese hospital in 2006. It had no assets. And then they did a reverse takeover for this influencer house. And it now is a publicly traded company. It trades on the pink sheets, I guess, but you could buy shares in a TikTok influencer mansion house. I'm thinking about buying the whole thing. What's the market cap? They did 90,000 in revenue. Was that the number? Yeah, I think so. They lost a million dollars. So what's it worth,

four or five billion? Are we slapping a Tesla multiple on this? I don't. I don't know. If you read the story, it is so bizarre how this could ever happen. I don't try to explain some of this 10 years ago. Their eyes would go across. But don't you think every one of these TikTok kids eventually is going to end up like a child actor and just be completely messed up for the rest of their life? Anytime you get hundreds of millions of people following you at such a young age, these kids are like 16, 17, 18 years old. They have so much adulation. They have more money they could ever ask. They're living these mansions and they have cars. You do not end up normal after going through that. I do not envy the life of

of a 16-year-old influencer or a 20-year-old influencer. These kids are all going to be so messed up someday. I feel like I hope I'm wrong, but that seems like that's the path they're going. If so, short the mansions, right? Is this in the next housing bubble? I guess so. Speaking of, it's a bizarre one. The New York Fed did their total debt report.

Is that what it's called? It's called the quarterly report on household debt and credit. What do we learn? For chart people like us, this thing is great. So they break out like the total debt composition by all these mortgages and home equity lines and auto loans and credit card student loans. Here's the thing that jumped out to me. They do mortgage originations by credit score. And in the latest quarter, which is third quarter 2020, mortgage originations are higher than they were in the bubble. The highest level was 2003,

actually. It's back up to that level. But the biggest jump came from people at the high end of the credit score, 760 and above. That's not because they're relaxing their credit standards. If anything, it's the opposite. I think what happened was I refinanced my house and then because I've such a good Credit score, sorry. Well, your credit score is $1 billion, so it raised the average for everyone else. Did we tell everyone you sent me? What did the T-shirt say that you sent me? I said you a T-shirt that said, whatever you said.

I think it was I have pretty pristine credit score. Yeah, although that was my exact quote. I'm like, okay, I didn't realize that. Is that a workout shirt? What do you do with that? I don't know. I think I whipped up the floor for my kids when they spill stuff, no. But the biggest jump was all in people at the highest end of the credit score.

So that's a good thing. But they also broke it down by age. And so it's broken down by 20s, 30s, 40s, 50s and up. There was this huge jump in people in the 30s and 40s. And so here's the numbers. People in the 30s, I looked at the low. This includes refinances too. So that could be part of it. The reason that people with higher credit scores are able to refinance and they did it en masse. But either way, that's a good sign, right? If people are refinancing, that that's more disposable income that they can use. I saw Len Kiefer tweet that the average savings from all those refies was, I think, $2,000 in the first 12 months.

That's great, right? That's money in people's pockets for lower interest rates. That's the cash in the sidelines, by the way. That's where it came from. So people in the 30s went from a low in 2011 in Q3 of 62 billion in mortgage originations to nearly 300 billion in Q3, 2020. And they went from 21% of total mortgage originations, I can't say that word, to more than 28%. So this 30s cohort went from basically doing nothing in the real estate market to now having a huge jump up.

And I think that is just going to continue to steadily rise, don't you? There's this trend. Back to your talk with Logan. So the Census Bureau puts out the most common average age over time. So in 2025, the most common ages will be 30 to 34, 35 to 39, 25 to 29, and then 20 to 24. That was a top. And if you go out to 2035, the most common ages will be 40 to 44, 35 to 39, 30 to 34, 45 to 49, and 25 to 29. The 2030s are going to be so bullish for stocks with all this pent up demand, peak earning years. Or Bitcoin, right? Yep.

I'm just saying the housing market, if I had to bet on what it means for the financial markets, that is not quite as easy for me to make that connection. Are demographics not destiny? I would say demographics are more destiny in the real estate market than the stock market. How's that? I think demographics are a ticking time bomb. Okay. Speaking of demographics, the Niki now show Japan, it's like a 30 year high. We haven't spoken about that. If you put your lump sum in in 1989, you've now been a hole, right? And all the people on Twitter are wrong now. What if you would dollar cost averaging along the way? Then you did pretty well. So this chart showing the total debt balance in its composition, it makes you realize that for as much as we talk about

student loans, credit card. They are a big number, so don't get me wrong. But by far, by far, by far, the biggest number, 69% of all total debt is the real estate market. Actually, not even just mortgages. Yes, it's a huge, huge number. And the fact that people are now doing so at lower interest rates. So if you bought a house previously, now you're refinancing at a lower rate, you're in a pretty good position financially. Your housing price has gone up and now your payment has gone down. That's a pretty good place to be, right? Yeah. So the one pushback I've gotten from people saying, well, we've done all this forbearance stuff. And that means when this all goes off the books from the pandemic, there's going to be a

huge flood of supply to the market because these people who haven't been able to make payments, they're going to get backlog on payments. And then they're not going to be able to, you know, so those how, and to me, I think demand would take that up right away. Don't you think? Yes, especially because maybe this is actually part of the reason why. But single family homes dropped to record low, 2.4 months supplied. This came from the National Association of Realtors. And I think the president of this company said that we're short like millions of homes. Not that they're short in the housing market, but we need more homes. Right. There's not enough homes being produced. I really don't think that the home builders are incentivized to do so because

it would eat into their margins and it's easier for them to produce what they can now instead of like just all of a sudden ramping up. They almost need what happened after World War II or the government just said go crazy and build more homes. But I think so if there was a, huge rush of supply, I think demand would soak that up really quickly because there's going to be all these young people who just want and need homes. Yep. All right, while we still have your attention, I just want to say that we're going to be conducting a survey. We want to learn more about our listeners. So what we're going to do in exchange for you to offer the truth about yourself, being that we are an anti-survey podcast, we're going to offer $6.50 Amazon gift cards.

Will we deliver this electronically? I believe so, right? Yeah, just email the people. All right. So we're going to do $6.50 gift cards so you could get something nice for the holidays. It's going to be at surveymonkey.com slash R slash animal spirits. Again, that's survey monkey.com slash R slash animal spirits. And of course, we will link to this in the show notes on my blog and Ben's blog. It'll just be three or four questions. We're not going to be too invasive.

Seeing that we're an anti-survey podcast, we're going to believe these results. Ooh. All right. We'll talk about it. All right, Chris Mim, he was a cent there in the NBA. Chris Mims, not Chris Mim, Chris Mim's wrote an article. By the way, speaking of the NBA, I can't believe that the Hornets went on margin for Gordon Hayward.

Did you see that? Yeah, I don't know. They gave him four years, $30 million. It was like they had to start cutting, dumping cap because they couldn't afford him. Now the Fed has really gotten out of control. All right. I mean, is Michael Jordan the greatest basketball player of all time who's also the worst owner of all time? How about that? The worst. All right. Anyway, back to business.

So Christopher Mims did this article. The stay-at-home economy is here to stay. And there were some just wild data points here that I wanted to share. From the start of 2020 through the end of October, Amazon added 400,000 workers, mostly in its e-commerce distribution system. That's the equivalent of the entire workforce of Home Depot. Wow. The fact that they were able to take on that many people in such a short amount of time is this is what I was talking about from Last week or two weeks ago, what if certain companies have a hard time staffing after this because people get taken away to other jobs? This one from Chipotle was interesting. Any orders made either through DoorDash or on its app to be picked up at the restaurant,

which is how I do it. I think if you don't use the app, your total new will at Chipotle, if you don't just walk in and pick it up and leave. I haven't had Chipotle in months. I used to eat it almost every day. I get it all the time. So DoorDash and app-based purchases now make up 50% of revenue with Chipotle. That's insane, right? Yeah. What do you think that's going to drop to? Because I was using the app pre-pandemic. I bet you that never goes below 20% in my lifetime. I'm going to make a Gartman call. Once you see how easy it is, I don't ever take my credit card out for anything when I'm getting pickup anymore because everything is app-based, it seems like. I don't think that stuff really goes away for a lot of people. Once you figure out how convenient it is.

Yeah, I agree. Amazon spent $30 billion on Kappex in the first nine months of 2020. 30 billion. In this article, they talked about how the fact that hundreds of thousands of Americans have lost their jobs in retail and service, but many of them found new ones like at Amazon, fulfillment and delivery, other people's job has been shifted. So they quote Jerome Powell in here, and he says, we're not going back to the same economy, we're recovering, but to a different economy. And I think that that's probably true. A lot of these things just aren't going to be same. So Bill Gates had an online summit somewhere, and he said his prediction is that 50% of business travel and 30% of days in the office will go away, which tend to kind of kind of. of agree with. How many days will you go back into the office when we open up? Two days a week maybe. No, no, no, no. Two days a month. Yeah, for a lot of people, that's true. And I think the business

travel thing, too, I'm sure there will probably be a short-term boom in business travel. If you were a salesperson that's out on the road all the time and used to schmoozing it up, going golfing and taking people at the dinner, I'm sure a lot of them are going to be looking for excuses to get on the road for a while. But companies are going to still say, I think they're just going to be much more heavy-handed in letting people travel and pay for it all the time like they did in the past. They're not going to want to. I went into the mall last week to do a pickup. I went to Nordstrom. And they have like just racks of orders waiting for people to come in and pick up. And I think that is definitely here to stay. And by the way, Nordstrom is up 10% today.

Macy's up 15%. Did you buy those for your post-vaccine trade as well? I wish I did. I did. I did not. So I went out to one of our local places, Uchellos is a local pizza place bar around here. And the indoor dining is now closed. And I went in there to pick up our order on Saturday. That nice little cheese pizza for the kids. Anyway, a sub sandwich for myself. And they just had lines across the bar of food, orders ready to go. So even like these regular restaurants have now been thrust into this. So you think about the fact that everyone wants to say that technology stocks are going to continue to dominate for the foreseeable future because they had this big head start. But all these other businesses have been forced to play catch up. So doesn't it mean that

there's now more competition for these tech stocks. Absolutely. And I think that's like what people don't carry up their head around is that these other places have been forced to go online. Let's just be clear. You mean like the e-commerce companies, like Amazon, for example. I just think the competition has now all been shoved in there at the same time. And there's going to be more companies.

The fact that a company like that you've talked about in recent weeks, like Best Buy has done way better than anyone ever thought could have been pot. Like I thought they would have gone the way of Circuit City by now. You'd see a bunch of those Best Buy stores that were turned into a Jake's fireworks or a Halloween store, Christmas store, seasonally. Or four seasons landscaping. Yes, exactly. Hey, what is Macy's going to start competing with Peloton?

Why don't they build a bike? How hard could it be? Macy's? Yeah, pivot. Okay. Sure. I don't know. What?

All right. Hey, some drugs land, some don't. All right. So Barry Riddholtz had a piece the other day that was pretty mind-boggling to me. He said if the pandemic truly started in March 2020, which I think, we can all probably say it probably did, especially in the U.S. If it ends in June 2021, which they're now predicting, we're only halfway there. Isn't that kind of painful to hear that this is the halfway point?

Doesn't it feel like we've been in this for four years? Although I guess the one saving grace is we have a light at the end of the tunnel. Yeah, this is like the opposite of all I want to know is where I'm going to die so I never go there. Yeah. We know where the end is and it's actually a good thing, but it's also kind of a... Like when you'd go on a long road trip when you were young, it always felt like it took forever to get there. but on the way back, it felt quicker. I feel like that's the way this could be because you know when it's going to end.

So one of the epidemiologists on Twitter said, based on the timeline laid out, by the end of January, we could have 50 million people vaccinated. And they think by then it could be 60 million infected and recovered. So that's like 30% of the population that's immune. So if we can get through this next couple months, boy, it sure seems hard to not see a huge spike after Thanksgiving and Christmas, right? I mean, it's going to get worse the next couple weeks, is it not? A couple months. If we can go over that, we're getting there. We're slowly getting there.

But do you think people like me and you, youngish, healthy, not frontline employee, are we going to be the last people to get the vaccine? Why, because we're so healthy and physically fit? Yeah, I mean, they're going to see that you have a peloton. They're going to say, why is this guy need one? He's on his peloton all the time. By the way, speaking of, you finished what you were going to say. I don't know what the order, the rank is, but I would think we're going to be. at the end of the line. Probably. I mean, obviously, the anti-vax people will be behind us, but yeah. So I feel like last week was like S-1 week with all these companies filing. Julie Verhage

tweeted that, so affirm the company that it's basically buy now, pay later. Peloton represented approximately 28% of our total revenue for the fiscal year end of 20 June 30th. Isn't that nuts? I was thinking about this the other day, too. I think it makes sense for Peloton, even if they're losing money, remember I said, time value of money, why would I not borrow over four years of 0% for this? Because you pay, what is it, $39 a month for a Peloton membership. So I think as long as you're still paying the bike off, it would be harder for you to cancel your membership of them. So I think that's why it's smart that they did this. Because if, let's say you paid for the bike up front and it's whatever, $2,000, I think it would be easier for you in a year if you

didn't use it to say, all right, this is going in the trash or in the garage and it's going to be used as a clothes hanger now. And I'm not going to pay my membership anymore. But if you're still paying the bike off, I think that would almost incentivize you to keep paying for the membership as well. I wonder how that works between a firm and Peloton. So does a firm take whatever, let's call it a 6% cut. I'm making that up. Do they take a 6% cut of every multi-payment? Or do they pay Palaton up front and then take a 6% cut? Like, does Peloton get paid up front? I don't know. One of the listeners is going to have to read the whole S-1 for us to figure this out because I didn't do it. All right. So I wrote about the healthcare stuff in the recent weeks.

You said, like, that's going to be impossible untangle. I said unless the government or Jeff Bezos gets involved. So last week, Amazon jumped in and said that they're offering online prescription fulfillment for delivery for free for prime members. It seems to be this is their toe in the water. They're going to get into health insurance. That's coming, right? I don't know.

So they said when this happened, CVS shares fell 9%, Walgreens fell 10%, right aid fell 16%. Good RX fell 22%. If they wanted to, let's say Bezos just came in and said, we're going to ensure all healthy people who want it with us, and it's going to cost you half the money it costs. Couldn't they almost take that market over immediately if they wanted to? I don't know. Isn't it so complicated? I don't know anything about that. But if you trusted anyone to do it, would it not be Jeff Bezos? I would trust him over anyone in our government right now to do this. I'd go Tesla first, personally. Okay.

So next week, we might get to Airbnb's S1. In the meantime, we're going to link to the show notes. If you want, Byrne Hobart broke it all down on his substack, the diff, which is great. By the way, I think we mentioned this in the past, but some of these substacks are great. Like I read Bern-Hobart, Mark Rubinstein, and Paki McCormick, almost everything that they write. If you don't profile some obscure Chinese internet company no one's ever heard of, can you really say you have a substack? I mean, this Chinese internet company is growing at 9,000% a quarter. They're a hater.

I agree. I agree. No, I like these substacks. I do. But I can't keep up with all the internet companies out there sometimes. Let's move on to listener questions. You guys keep talking about canceling student debt, credit card debt, about loans becoming grants and the Fed's increasing interference. We're in a global pandemic recession, so of course some response is expected and warranted, but we've seen absolutely for you this year. I think you said 24 new climb highs. My question of this is, where's the line? When does a market

stop being an actual market because of practically free debt, unlimited government debt and market intervention where there's no consequence for ignoring investing norms, no personal accountability, Are we seeing disproportionate rewards going to participants who should be punished for taking excessive and unnecessary risk or even doing things that at any other time would have been unlucky? To spend it another way, when should accountability risk and consequence return to personal finance and investing? And what effect will that have in the market? Free markets. Basically saying, has the government gone too far and all this? First of all, I think the tentacles are there, trying to think that all this stuff is going to magically go away and the Fed's just going to back out and the government debt is magically going to disappear. if that's your baseline, you're going to be sadly disappointed.

Do you think that this markets are broken forever and fundamentals don't matter and all this stuff that people are saying? Or do you think these people are just wrong? We're not going back to whatever world they think existed. Okay. So here's my point about this. And obviously, the Fed is way more intertwined than they've ever been. But don't you think if they could have been in the past they would have? This is from Devil Take the Hindmost by Edward Chancellor. He said at the outbreak of the American Civil War in 1861, ushered it in a new era of speculation. Sound familiar? After the stock market had a huge decline

in early 1862, Congress passed the Legal Tender Act, authorizing the issuance of $150 million of new paper currency, and speculators went crazy. Markets went nuts. Stocks began to rise. This is in 1862. So this stuff is nothing. Remember in 1907, the panic? Do I remember. J.P. Morgan stepped in and saved the financial system. J.P. Morgan, the man, not the bank, stepped in and saved the banking system single-handedly. So this stuff has never not been rigged or manipulated or it's just now they've learned from past mistakes and they do it better. So if this stuff all existed in the past, the Great Depression never would have happened. If the Fed would have known what it knows now, they would not have allowed the Great Depression to happen.

There would have been so much money pumped in it that it wouldn't have happened. Yeah. And this idea that businesses aren't training on fundamentals. I mean, you could point to a lot of excess. I think Tesla is probably the poster child for this. you could look at, I don't know if Zoom is a great example of this, but they're training at 70 times sales, something outrageous. But what we just spoke about with all the substack people, they're just a microcosm of how smart people are and how deeply people understand

these businesses that they're studying. Can you make the case that the stock market, even at the micro level, has never been more efficient, that these stocks are actually reflecting underlying economic reality? Of course, not all. But in aggregate, stocks are actually reflecting billions of hours of research and things like that. Every time in history that we've had technological revolution, certain stocks go bananas because people extrapolate and they take things too far. This has always happened. In this year, the stocks of the businesses that did the worst got hammered. You said last week, small cap stocks, like how many were down 90 percent?

Some of these stocks got just crushed. I agree. I think the free market stuff and guess what? If the Fed wasn't holding interest rates down. I mean, would they have really have risen any further in the past? Past 10 years or so? Maybe not. I don't know. It's hard to say. There are no counterfactuals. But I think things have always kind of been like this. Good question. Thank you for Sunday yet. We'll get to some more next week. This episode is running a little long. Let's move on to recommendations. Two people recommended that we watch Logan Lucky, which I did on Amazon Prime. And I thought it was me. I didn't love it. I actually didn't really like it that much at all. Great cast. Channing Tatum, Adam Driver, Daniel

Craig, Katie Holmes. I wanted to like it. And then I was glad when I saw your comment, you didn't really care for it either. I thought it was me. I wanted to like it to. It had an amazing cast and it was a cool premise and then it just kind of fell flat. Didn't do it for me. Yeah, me either. All right. I watched two movies this week. By the way, I feel like, I don't know about you. My kids are in bed at 7 o'clock, 7.15 every night. I'm home seven days a week. You know, I feel like we're like consuming so much content. I don't know. I feel like I have more time than I've ever had. Obviously, we're at this stage of our lives where, like I said, My kids are in bed at 715.

This will not be the case forever. Are you starting to slowly go insane yet from being home and doing the same thing every day? I'm not even close. Okay. You're still holding out. Every once in a while I'm like, wait, I'm doing this again, but whatever. I'm very routine based, so I don't care either that much, I guess. So I watched two movies that I enjoy, neither of which I would say are broad-based recommendations.

By the way, Robin just made an awful face at me. Like, you have to be kidding. The first one was recommended by Ben C. Sorry to bother you with Lakeith Stanfield. and Army Hammer. Is that his name? Army Hammer? The guy from Atlanta is, I like that guy in Atlanta, so he's hilarious. All right. So this movie was complete satire and totally absurd and over the top. If that's not your thing, definitely do not watch it. And the movie's going in a certain direction. So he plays a telemarketer who puts on white voice. Maybe you've seen the trailer.

Yeah, I saw that. I remember the commercial. It is not what you think it is. So the movie's going a certain direction. He's worked his way up. And then it takes like a hard, I don't know if it turns left or right, but it turns, and it is not at all what you think it is. The other one was very good, but not really enjoyable. Did you see Manchester by the sea? It sounded so depressing. I couldn't beg myself to watch it. Everyone said, like, don't watch it. It's too depressing. Tough watch. Great movie. Okay. Like good acting, but it's depressing, right? You'd never watch it again in a million years. Never see it again. And you're not going to feel too great about life after having watched that. So if you're a melancholy person and...

I need the uplifting ending in a movie like that. If I don't get it, I need to pay off. Okay, I definitely don't. One of the only magazines I still get is my GQ gentleman's quarterly once a month. And they had the story about George Clooney this week. Did you hear about this? I read it. You read it?

Okay. The part about how he gave all his friends $14 million. I just loved the fact that he had to go to this undisclosed location in Los Angeles. And there's a place that you can go there and they have giant pallets of cash. And he had to go there and just put him in suitcases. is, isn't this the perfect thing for Bitcoin? I'm happy you went there, yes. He should have just given his 14 friends a million dollars in Bitcoin instead of giving

them cash, although the cash probably, that was way cooler, though. By the way, we spoke about his career a few weeks ago. He had a great career, great acting career. Was it maybe underwhelming relative to expectations? Maybe, but pretty solid. He's the kind of guy that his life is cooler than his movies, so it doesn't really matter what he does, right? He's just like the coolest guy.

George Clooney could look cool wearing cracks, right? Anyway, I finished how I invest my money in like three sittings. That's Josh Brown and Brian Portnoy's new book. Very easy read. I thought it was great. They had a bunch of great stories. I knew a lot of people in the book, but there was a lot of people that I didn't know. Some of the stories I wish would have gone longer. Like I could have read longer story from Desarte. Ted Seidies had a great chapter. It was really good. And it's an easy read. It's not like too taxing and overwhelming. I loved the idea. My big takeaway was how far we've come in an era of transparency in terms of the fact that people are, I mean, there was very personal.

stories in this book about family and divorce and growing up. And that's not a kind of thing that you've got in Wall Street over the 1980s or something, right? No. Open and willing to sharing about their life and how they invest. It's not something you've got before. My background show lately has been the Dave Chang cooking shows on Netflix. So he was on SmartList the podcast last week and he talked about he's at this show called Ugly, Delicious, and then he's got one called Breakfast, Lunch, and Dinner. He's got a podcast on the ringer, great guy. But in one of the episodes, he talked about how he was freaking out because he was having a kid. And he interviewed all these other chefs and a lot of them have good restaurants and they talked about how going from being

a chef where you just work all the time and the restaurant is your baby to having a kid is a really big shock and it just got me thinking listen to these people describe how invested they are on their restaurants how hard it is for those people right now how tough that industry is right now like these people are talking about how their restaurant is like their livelihood the people they work with they're there all the time they're working seven days a week working until like two in the morning sometimes it's just kind of drove home like that's just i don't know how a lot of those places survive the winter. It's tough. Started the Crown on Netflix. I'm so out. This is the best season by far. I'm halfway through it. Oh, you're on season four. Yeah, we're on season four. I never watched. I don't think it's

for me. Okay, I love it. Honestly, you could start in season four. You might miss a little of some of the intricacies. I don't care if a lot of his happenstance and it's probably kind of made up the conversations and stuff and a lot of it's not always historically accurate. It is so good. I think it's one of the best shows on television. Getting into the 1980s now with Margaret Thatcher and then when Princess Di joins the family. It's so good. If you started at season four, you'd like it. Even me.

Well, you might not like it. I think it's excellent. And going from the Queen's Gambit into the Crown, and I keep calling the Crown the Queen, Netflix is just, they're on another level in terms of quality of their shows. Are there giant sharks in the Crown? No, no alligators, no sharks, nothing like that. But it's excellent. So that's all I got.

All right. Last thing. SurveyMonkey.com slash R slash Animal Spirits. we'll put it in the show notes please be honest in the survey we will not call you please be honest Animal Spiritspod at gmail.com

Thank you for listening If you want Michael to call you he will Animal Spiritspod at gmail.com We'll see you next time Thank you.