Animal Spirits Podcast - Is the Housing Correction Over? (EP.315)

Episode Date: July 5, 2023

On episode 315 of Animal Spirits, Michael Batnick and Ben Carlson discuss the stock market fighting the Fed, the power of index fund flows, the most trustworthy source of financial advice, an economic miracle in the United States, how to pick a bottom in stocks, people are desperate for a housing market crash, some thoughts on fireworks, and much more! Thanks to Future Proof for sponsoring this episode! Submit your Fintech Demo Drop application before July 7th here: https://9rcge6jsij8.typeform.com/to/HnyL5rOO and secure your ticket before August 15th: http://futureproof.advisorcircle.com/ Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by Future Proof, which is coming up very, very soon. It marks the end of the summer, but it's a heck of a way to end the summer. It is our financial festival in Huntington Beach, California, September 10th through the 13th. Everyone is going to be there, yours truly, us included. It's a great way to network, to hang out, to have fun, to learn about the latest trends in asset management. and wealth tech and all that sort of stuff. Plus, I think last time you found the best fish tacos I've ever had in my life at a place right down the street from the festival.

Those were like the Antonio Banderas Giff. Right? We'll definitely go back there. Yes. I don't remember the name of the place, but there was amazing fish. And fish tacos just taste better when you're in a nice place like California. I was blown away by just the scenery of that place. People always talk about how expensive it is to live in California,

and they made to agree with the politics there and stuff. But, like, you go to California and you realize, oh, yeah, that's right. this place is amazing. That's like the scene of the beach right next to all the stuff going on and the interacting and the drinks and the conference talks and all that stuff. That part of it is what makes this thing really special, too. Just the scenery's awesome. Yeah. So, uh... Futureproof that advisor circle.com? Say that one more time because I just, sorry. Sorry, go ahead. Futureproof. That advisor circle.com. I give you props for not cut me off last week and then look what happens already.

Welcome to Animal Spirit. a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Riddholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Riddholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Annal Spirits with Michael and Bill. Ben, Michael, I'm a kind of a sucker for the aphorisms in the market.

Buy when there's blood in the streets. Be greedy, others are fearful, all these types of things, right? The ones that just roll off the tongue, I think they, if they sound better, they just work. Like, the trend is your friend, these types of things, except in the end. Don't fight the Fed is one that has caught on, is a good one, obviously. And I think in the 2010s, a lot of people learned that one the hard way. It's not working this year. Don't fight the Fed is broken.

It's a great point. Do we retire? it too early. Maybe it's just on a hiatus. So I was just looking at the biggest stock in the world, which is funny. I wrote a piece this week about how contrarians usually wrong based on what we were talking about last week. And it's funny to me that Buffett is the one who has the greedy and fearful quote and it's wait for the fat pitch. It's just hilarious to me that his number one holding is Apple. Like Buffett's number one holding is literally, but that's the thing is he he didn't fight the

trend, right? He went with it instead of being, you know. So I think some, Sometimes the quotes of his are misconstrued for what he actually does. Like, he didn't, he didn't, like, beat his head against the wall and say, I'm going to buy these three PE stocks that, you know, mine iron ore or something. I'm going to buy the biggest best company there is. And the Fed is raising rates and they said they're probably going to still raise, what, twice more this year? And Apple is up 50% this year. The whole, I think, again, the whole fight the Fed thing, it's one of those things that sounds great. But if you ever, like, had an ironclad rule like that, like, I guess maybe my point is there's no ironclad rules in the market.

No, certainly not. Hey, Ben, I got to ask your background. It looks like you're in a bunk of a summer camp or like some sort of shed. What's going on? I'm in a storage room. This is kind of my makeshift storage room slash gym. And it's the only place I'm at home. The only place I could find a plug-in so I get hard Ethernet cable so I don't have a delay with you. We've done shows with delays before. And I know it can throw you off. And so I'm taking one for the team here. And I'm podcasting from the basement. I appreciate that. I was thinking about Apple in preparation for the show. I did hang some, I hung some stuff on the walls, though. Like, I tried. Oh, it's a Man Cave?

I mean, I got weights down here. I've got, that's it, a TV? Sure, sign. That's a Middle Age thing. It's not really a Man Cave, but my gym is free weights in the basement. Do Man Caves even exist in their life? Like, you know, Cindy Fife?

What was his name for my loved man? Oh, yeah, yeah. His man cave in his garage. No, was Sydney, the main character's name? No, that's, no, Peter Claven. Anyway, that guy has an all-time man cave, which is need to hit or there. But in, okay, Apple. You can't have a man cave when you have kids.

I think when you have kids, like, my office is the kids' playroom. I lost an office to the playroom. That's why I'm in the basement. The kids take precedent over me. Well, also, I mean, you need property. True. Man Cave is a rich man's toy. All right, Apple's market cap, it crossed a trillion dollars in August 2018 for the first time.

There was no shortage of articles saying that this is the top, right? It would just be poetic if Apple crossed a trillion and then, you know, the market got rugged. Well, since then, it has passed just last week three trillion. However, so the market cap is. up 3x. But an investor's return is up 300%. So market caps with 200%. The return is up 300%. How? They bought back so much damn stock and paid a dividend the entire time. So how many other companies do we have that are a trillion? Because Nvidia is a trillion now? Microsoft? Amazon? Is Amazon still a trillion? Oh, yeah. Because Nvidia is Google. Tesla. Is Tesla? No, I don't know. Facebook's not

anymore. Well, I'm sure on its way back. That's a good question. How many... You're right, though. The, is this that was, yeah, Tesla's not, they're 900, but they're pretty close. There were so many moments of the top thing. And obviously, we had a bare market, but I think the thing that has got to be the most surprising to people who, who've been predicting a crash for 15 years or whatever, is the fact that it didn't really feel like a system wide reset of a bear market. It felt like a run of the bill and bear market, you know, it wasn't, it wasn't, this one's not going to go down in the history books. Like the inflation

and the economic story, that will go down in the history books? The bear, I, the stock market is so far down the totem pole to me of things that have gone crazy in the markets these last three years that a 25% correction in the S&P doesn't really, I don't know, that, to me, that's going to get lost in the history books, I think. Well, yeah, it's not, yeah, I agree. It's not like a top, it's not like obviously a 29 or 07 or anything. However, We were talking about this a couple of weeks back, or maybe a couple months ago, the duration of the bear market was on the longer end of things. What was it?

250 days. I think I'm making that up. But it was, you know that, remember that chart that we showed? Just the length. It was not insignificant. 15 months, basically, right? Bespoke tweeted, talk about emotional through the fourth to last trading day of the first half. The NASDAQ is on pace for its third best first half on record.

last year was the second worst at this point. We have spoken about a book in the past called A Very Good Year. Is that the name of the book? Yes. And it looks at the top 10 years in the stock market. And most, not all, but most of them followed a very bad year. So from that very, very simple mental model, we remember what the best year ever in the Dow is, right? The best year ever for the Dow?

1915. So in 1914, from World War I, liquidity in the stock market basically dried up, and the stock market closed for six months, literally closed. Right. And 1915, after it opened back up was the best year ever, the Dow was up 85%, I think. And then after World War I had started, which is, I guess to your point, it's counterintuitive. This, and speaking of counterintuitive, I think one of the things that we, a lesson that we learn over and over and over again is, and It's so obvious that I think sometimes we don't talk about it enough. It's gone from overrated to underrated, is that nobody knows anything. And investing with your emotions or what you think might happen, it just never works.

Yeah, sometimes it works. But generally speaking, and what I'm getting at is when everybody went risk off, the market said, fuck you, we're going risk on, right? Like in December, January, oh, my God, I can get four and a half, oh, my God, I could get five percent on my on my cash and it made it made sense and it makes sense and i did it and a lot of people did it uh and it doesn't mean i'm not saying i swung to cash but but it was it was attractive right so my point is you have to have some sort of discipline it could be loosely defined it's not i'm not saying buy and hold index funds is the only solution well it's a good one but you have to have

something that you come back to where you're not just you know flipping out up down sideways He's excited, scared. I think the other thing is people think that the market should do something. Like the interest rates went up, so the market should crash. And the Fed did this, so the market should do this. And inflation, I think that's a hard thing to follow to is that you get your mind attached on these narratives that like, well, the market should be doing this because this is what I learned. And if it's not, here's one that actually did follow through, though.

We talked about at the beginning how don't fight the Fed kind of doesn't work anymore. I think you talked about this. what's the after the elections it's uh we spoke for us a lot and so i don't i'm not a big seasonality guy but i do think that there's something here because not only because it's a hundred percent but there is there is a reason there is a reasonable explanation for why how many midterm elections have there been right so someone someone pointed us out on twitter they said hey you guys mentioned this on the show time to update it because what's the the rule after midterm elections a year later or something it's never been down

And we had Sean run the numbers again. And I think from the midterm elections, stocks are up 15% or something. And I think when you said at the time, I kind of poo-pooed it and laughed. But I don't know. Maybe there is something to people freak out about elections. I'm fairly certain that I use Dietrich's data on this because he's a big seasonally guy. But the reasonable explanation that I'm thinking of is markets like certainty. Right.

And I know that politics shouldn't drive your investing certainly. And I don't think politics is the end of LBL. In fact, I think it's very, very, very low down the list of what drives the market. But in this case, and this won't hold forever, right? So I'm not saying like bet the farm on this. But it's, what is it, 20 out of 20? It works better than selling me and go away. Is that right?

KOTU had a great presentation with some charts that I wanted to talk about. they showed the EM Cloud Index, which is 68 companies, and they showed the percentage growth in net new AOR. What would that be like Alibaba and those kind of companies? Data Dog, CrowdStrike. Oh, yeah. Okay. I thought you meant like emerging markets.

No, no, no. Yeah, I guess I threw you off. Me off tip. Okay. Probably like snowflake and whatever. Anyway. So it's shown the percent growth in net new ARR. And from 2017 through 2019, it was doing around.

20% pretty consistently. It's not a little higher, a little lower, but that was a trend line. And then pandemic happened and it basically, you know, went nose dived. Pandemic economy reopened the switch to work from home, an infusion of liquidity and stimulus and business spike. And then it went to 50% growth. And then it has since crashed to the lowest level going back to this chart, 2017. And the point is this, and again, it's a point we've made. Another thing that went overrated to underrated or just got sort of lost in the shuffle, the pandemic like changed everything. It brought forward years of demand and then it made those comms completely impossible. And investors rationally overpaid for the growth and are now

correcting the other side. And it's tough. Looking at this chart, it almost does the moves in these stocks almost makes sense. I know it was a big speculative thing that happened in the in the in that 2021 2020 kind of bubble period, but the fundamentals did really go up that much and they did really come down that much. So it's almost like the the run-up made sense and the crash made sense. It kind of followed fundamentals. Yeah, totally. And then they show market is a slide. Market is demanding profitable growth. So cumulative returns from 2022 to today, they break it down by low PE. And again, this is a co2 U.S. Internet universe with a billion dollar market cap. They show low PE, high P.E, and money losing. And the money losing companies, it's basically down 30,

down 44, down 58. And then if you show the value recovery, so from the trough to where it is today, the low P.E. Internet companies are up 33%. The high P.E. are up 28% of the money losing companies are up 11%. So the market is also rationally punishing. That era of free money is over it. The runway is done. That's it. No more. If you're not, if you're losing money and you can't turn it around, you're done. So this chart kind of shows those higher quality companies like Apple and Amazon and Google, they didn't fall as much and they, then they're rising much higher on the recovery too. Correct. Interesting. Nakeros. We haven't done flows in a while. Let's talk about it for a second. Top 10

ETF inflows for the first half of 2023. Number one, VLO, which is Vanguard's S&P 500. Number two, this is surprising. That is surprising. TLT, which is a lot of duration.

How is it done year to date? I think it's up a little bit. Let's take a look, see. TLT. It's not like it's knocking the cover off the ball. It's up a little bit. 5% or so. Yeah, but that's surprising, right? People want to. So does that mean people are betting on a, is that an inflation bet or a Fed bet?

Like, inflation's coming down, so I'm going long duration? Maybe it's a bet on the, yeah, I guess the Fed being done raising. JEPI number three, which is, again, probably our most asked ticker email that we've gotten from people. I remember one guy, like a year ago, emailed and said, talk me out of putting all my money into Jepi, which, the question we were getting like three years ago was talk me out of putting all my money into three-time levered NASDAQ 100. And then last year it was the covered call, but that thing's still bringing the money. Well, yeah. And that's lagging the market pretty substantially, which is not a surprise given the strategy is literally capping upside when things go straight up.

It's also interesting, if you look at this, eight out of ten of these or maybe seven out of ten are just the index funds, V-O-O, V-T-I-S-P-Y, and then B-N-D, Ag, I-E-E-E. and TLT, it's like, it's just huge stock and bond indexes. Yeah, the only, I get a couple of specialty funds. The only outlawers are JEPI, Quall, and SQQ. Is that, that is, is that two times NASDAQ? Is that short NASDAQ or? Ultrapos short.

Oh, shit. How about that? That's interesting. That's not a winning trade. Top BTF outflow. It's an ESG fund. I wonder if this is a model portfolio thing or if it's, who knows. It could be because a lot of money.

Yeah. People are still buying index funds. I don't think anything is going to come along that changes that. I know that there's a lot of people who are crusading against index funds. They cause market to do this. This whole wave of money just constantly flowing index funds through 401ks and IRAs. I don't think that there's anything that ever stops that. And I think it's only going to get slowly but surely larger over time.

Yeah. I don't know. What would have to happen to stop index flows from doing this? I don't know. Just a nuclear bear market, but even still. People have still been investing in the bare markets. All right, Ben, Betterman, switching gears. Betterment did a study of retail investors. I think it was 1,200 investors in here. And they said the company found that financial advisors were the most, so the studies

system, I'm sorry. What is the most trustworthy source for financial advice? The company found that financial advisors were the most trusted source of financial advice with 67% ranking it in top three, which makes me happy. And this also makes me even happier. Social media influencers were the least trusted, with 22% ranking it in the top three. Okay. Friends and family, that's a little too high for me.

But the thing is that that's probably the way. Friends of family is number two, yeah. Friends and, but that's probably the way most people do this, and it's probably some of the worst people you could ask advice from. Well, it depends. That's a huge crapshoot of asking. Oh, totally. I mean, we talk about this stuff all the time.

I don't like giving financial advice to friends and family unless they, like, really, like, casual advice, right? Like, giving, that's a, that's the thing with, when you talk to friends and family about financial advice, it's usually casual. You definitely get even more squirmish than I do. So I had one of these experiences over the weekend. Funny, you should mention this. Okay. Saturday morning, Kobe was playing basketball with some of the boys, and I was with two of the dad friends. And they asked me what I did.

So I told them. And the first question, as is always the first question, oh, what stocks do you like? Right? So I'm like, yeah, you know, I, you know, I mess around with stocks. I love picking stocks, but, you know, it's just, you know, I do it for fun. It's a hobby. You didn't brag about some of the bottoms you've picked lately? They're like, all right, well, which ones do you like?

I'm like, no, no, no, no. I mean, like, listen, I'm like, well, what do you guys do? So one of them told me that he bought a lot of tech stocks before the pandemic, sold them at the bottom and has been depressed about watching them run up. And when he sold them, he put all of his money. I don't know if he put all of his money. I'm sure it's not all of his money. But he put all the money that he had in the stock work.

He'd been into a company called Neo. And I'm like, well, why did you do that? And he's like, electric cars or what is that one? Yeah. So, you know, he's like, I don't know. I thought it would go up. And then it didn't. And I just never sold.

And he's like, he's like, well, what do you know, what do you actually do for your money? I'm like, well, you know, I automate it. So I invest my 401k, and then aside from that, I invest every two weeks. And he's like into what? What do you like? So I'm like, I just index funds and, you know, I just want to get the market return. He's like, well, how is it done? How is that done over the last?

I'm like, well, the market's done really well. He's like, okay, well, how is that done? I'm like, well, I just own the market, so I've done pretty well. So anyway, my point is this. I think we take for granted that people generally, and listen, people of the listeners of the show, obviously are very financially illiterate, but most people just don't know anything. And the other guy who I was talking to, he's like, aren't all the financial advisors the same?

Like, I spoke to one and didn't really know what they were talking about and I just didn't really do anything. So I'm guessing that these two dudes have more or less all their money just sort of sitting in cash and really have no idea what to do and don't want to talk to an advisor for whatever reason. That is probably a more regular person scenario than the people who listen to our show. Totally. To follow this stuff. Yeah, totally. Neo's down 84% from the high. Oh, I don't think about it at the high.

maybe he did. But anyway, anyway, I think, again, I just think that, I think that most people are like that, you know? Yes, unfortunately, because it is hard and it's hard to know who to trust, and the problem is the best salesman in the world is going to make you trust them, and they could be a moron, but they're really good with people, right? And that's the hard part about knowing who to trust with anything in life, right? All right, inflation is still going in the right direction. This is from Fed Woe. Powell Fed is focused on three baskets of core inflation. Here's what happened in May.

Core goods, 3.2 versus 2.1 in April. That's a little higher. These are three-month annualized rates. Housing, 6.4 versus 7.2 in April. That's coming down. Core services X housing, 3.9 versus 4.4. And then Core PCE is 4.1 versus 4.2. We're still going in the right direction.

I still think the Fed could be heroes here, if they want to. Yeah. Yeah. Who to thunk? Carl-Kentania tweeted, corn hits lowest since October 2021, soybean's lowest since December of 2021. Dude, it's just been one thing after the other. Like, the war in Ukraine was certainly going to lead to global inflation a surge,

which it did, by the way, it did. And then it was, I don't even know what came between that. But somewhere in between that, we had the regional bank things. And it was just fed just aggressively, aggressively, aggressively, really raising. You had all these tech layoffs. Like the market, the economy just, absorbed so much. So if you use commodities as a good inflation hedge, which they are,

you had like, I don't know what, an 18-month window because the DBC is the Invesco Commodity tracking one. That's a good ETFI track. It's on 25% from the highs. It's flat since the invasion. Wow. Yeah, that's hard to believe. This is also hard to believe. Jordan Wiseman tweeted this and two charts that he pulled, one from the White House, one from Joy Politano's subsect, which I like. Do we know this white house state is real? Do we know this white house state is real? I'm just asking questions.

It's, yeah, it's real. I'm kidding. It shows U.S. versus other developed countries, Italy, UK, Germany, France, Canada, and it shows we have the lowest inflation about all these developed countries. And then it also shows GDP growth, same countries, we have the highest growth. So we have the, out of all these big developed economies, we have the highest GDP growth, the lowest inflation. How the hell did this happen? Those numbers don't, something, something's a whack, Ben. Can't possibly be.

This is another one of the, obviously there's the, you know, Europe was more impacted by the war stuff. I honestly think if you erase the war situation, which obviously a lot of people would love to have happened, if that never happened, because it's been such a tragedy. But if you erase that situation from that comic data, inflation was going to be transitory. If you take that, that that bump up from the invasion, I think inflation, in hindsight, looks transitory. Fair? Yeah, could be. Could be.

I just, I don't, I don't know how, I don't know how to explain this, the fact that the U.S. has the highest gross and lowest inflation. It doesn't make any sense. If you're in one of these other countries, you've got to think, what did we, what did we do wrong here? Should we spend more money? The best recession ever continues. Made durable goods.

This came out last week. up 1.7% versus negative 1% expected. Hand up. Durable goods, no clue. What does that mean? Durable goods, you know what they are. It's like stuff you buy at PC Richards. What's PC Richards?

Okay, PC Richards probably regional. Clothes? Loads. Loads, Home Depot, that kind of place? Oh, yeah. No, it's exactly. It's stuff that you... Tangible products.

It can be stored or inventory. It's stuff that you don't replace often. like your dishwasher, your stove, a refrigerator. There you go. They have an average life of at least three years. All right. They're goods that happen to be durable. It's a great name.

Anyway, May new home sale, 7163. You know, that reminds me of a great line from Wayne's World. It's been a while since I quoted Wayne's World. You put Wayne's World like once every week. The guys go up to the concert and Meatloaf is the valet. It's the bouncer. Do you remember that? I'm going to have to rewatch it because you quote it all the time and I don't

remember any of the lines from it. And so I'm going to, it's been, it's been 20 years since I watched it probably. So, so Meatloaf opens the door and they ask who's playing. And I can't remember the first name, but they said, and the shitty Beatles. And Wayne goes, the shitty Beatles, are they any good? And Meatloaf said, no, they suck. And then Wayne said, so it's not just a clever name. Okay. So durable goods. There you go. Perfect name. Perfectly named. All right. May new home sales, 763,000, 675 expected. Consumer confidence is jumping. I don't know, not that I don't know what the bear case, but I don't even know what the bears

would say at this point. It's just, it's got to be just wait, which I guess is like fairish. I don't know. I think the goalposts have been moved to just wait, monetary policy acts on a lag. That's what we're holding on to this point. Which is true. But it's like we're approaching bear who cried wolf territory. I'll give him another six months.

Isn't it always that though? Doesn't the bear always cry? Yeah. Renus off macro research. Quote, I think this from Neil Dota. You cannot talk about late cycle dynamics with housing turning up and inventory is likely to follow. There will be no recession in the next six months

and it's increasingly likely that we're not seeing one in the next year either. Wow. Wow. The housing stuff, I have a, I've been thinking about this. I feel like there's so much home equity locked right now because rates are at 7%. And so the cash out refinances have stuff. stopped, the helix have stopped. People have always said, like, it's going to be a mild recession if we have one. And there hasn't been really good explanation for it. I think it's just

like, well, there's no big system-wide thing that's going to bring us down. But I think housing is the thing that is going to carry us through the next recession and make it if and when it happens, it'll be ultra short because if mortgage rates come down from seven to four or five, you're going to see a home equity line of credit and cash out refi boom unlike we've ever seen before. People are going to be yanking because the housing market hasn't fallen like people thought, and the equities stayed relatively similar, I think we're going to see a massive refy boom when mortgage rates come down in the next recession. Like, that's going to, like, be the way for the next, to hold people through when the stuff hits the fan. But didn't we just

have a massive refight boom? It didn't get as big as, there wasn't enough time, really. Okay. It didn't, it wasn't nearly as big as, like, what happened in the 2000. I think, because of the increase in equity and the money just sitting there for people, I think it's going to be the next wave. It's going to happen. All right. Here's, this may be a little worried, I guess. This is from the Wall Street Journal. U.S. single family housing construction has rebounded recently thanks to historical low numbers of houses for sale, talking about the things we, people refinance are in the pandemic and locked in low mortgage rates. And so they don't, and then this Tom Barkin, who's the Fed Bank chair of Richmond, which is another like, when did they set up these,

these bank chairs? The locations of them always kind of are. It was in, You ever read the book, America's Bank by Roger Lowenstein? I did read that. Okay, good point. Yeah. I should, okay. Tom Barkin says, I didn't fully anticipate how much the move in interest rates would convince people not to put their houses on the market. That's kind of got me a little worried that the Fed didn't realize like, oh, if we let mortgage rates go to 7%, maybe people won't want to move because housing is unaffordable.

Yeah, maybe keep that to yourself, dude. Yes. All right, good news of the week, labor market. Ethan Mollock tweeted this. The good old days were much harder. In 1865, the average British worker worked 124,000 hours over their life. Kind of like the U.S. in Japan. In 1980, only 69,000 hours.

Nice. Don't do it, despite living longer. Since then, it has dropped by 6%. We went from spending 50% of our lives working to 20%. Pretty amazing. I think one of the reasons that we have so much, that people complain about much more minor details in their lives, I think than people probably did way back in the day,

Back in the day, people didn't have any time to sit around and think about stuff and complain. Because they just worked all the time. And then they died young. I read a book on this. Oh, called the Comfort Crisis, which was exactly about what you just spoke about. And quality of life is up the billion X. But it's made us soft because there are less real threats to us. And so everything is relative.

And so I'm not saying that I want to go back or that humanity was, you know, things were better in the 1910s. It just is, right? Yes. We have more leisure, more luxury, less threats, more time to complain. Right. There's fewer diseases or fewer, there's fewer ways to like be impaled and die. So like the way that they, have you read any of the books about how they made the buildings and the bridges back in the day and how there's just like dead bodies in these big cement pillars when they made the bridges. and stuff, because it was so, like, working conditions were so much unsafe.

Unsafer. So, yeah, anyway, good news of the week. All right, is the housing correction already over? This is from, you know, finance. Home prices grew for the third straight month in April, potentially cementing a recovery in values and reflecting a housing market that is sorely undersupplied. Case Schiller was up 0.5%.

I showed the drawdown here on Y charts. So it got to as low as 2.85% for Case Schiller National Home Price Index. It's now, I'm using two decimal points here. point seven, eight percent. It's coming up, meaning housing prices are going up. Is that it? Could be. If we see a three percent correction, I suppose if we want to add inflation, it's been a little higher than that, a lower than that. That, I mean, I don't know, that's another brain breaker, right? Mortgage rates go to seven percent from three percent in the housing market and the housing prices go up 50 percent and then they fall three. I think people are so desperate

for housing market crash. It's probably not coming. Did you see this viral Airbnb tweet? I did. He talked about how the Airbnb collapse is real. Revenues are down by 50% in cities like Phoenix and Austin. Watch out for a wave of force selling from Airbnb owners later this year in the areas hit hardest by the revenue collapse.

And that got like a million views. It's got 17 million views the last time I saw it and thousands of retweets and people thought, oh, this is it. This is the thing. And then some other guy wrote back and said, this viral tweet I'm going to fact check it. And know

the average trend is down 3%, not 40 or 50%. I think because of the thing, so Logan Motashami and his Housing Warrior podcast talked about this. They asked him about it. They said, is this Airbnb collapse thing real? He's like, listen, I'm not an Airbnb expert, but if this was real, you would see it in the supply of houses for sale. There would be a wave of housing on the market. And instead, we're seeing the lowest supply of houses for sale in history. Can I just ask a question? Has anybody fact check the fact checker? I don't know. I'm just going to

go ahead and say that like the it's it's impossible that you could lose that much money on these when everything has been going so long people are spending so much money i i know i have not seen a fact check of the fact checker but i'm uh so the the the the original guy is saying that all of the people that loaded up at homes the Airbnb they're screwed and they're going to have to sell yeah and and yeah just just come on just come on and uh as as two Airbnb shareholders we're this is not i don't even think This is not even necessarily like a stock. Well, I guess it would impact the stock if it was right.

But it's more just like this guy's not talking about the stock. He's talking about much bigger things. He's talking about the housing market. But my point is. And there's just no way. There's just no way. No. But people wanted so badly for this to be true.

Because I think some people just want, and I get it. If you missed out on it, I totally get wanting the housing market to crash so you can buy a lower. But it's a housing market. If all the people that bought multiple homes in the last two years sold them on Airbnb. You know what happened? They would get bought. That's what would happen. Yes. Right. And you'd see an increase in the supply of homes being sold or bought in it. Unfortunately, for people who are looking at, it hasn't happened. All right, Ben, somebody, not somebody, I'm sorry, financial times. In New York, buildings are selling for less in the value of the land they sit on. We are seeing

prices lower than they have, but in 20 years in absolute dollar terms. It comes from Will Silverman. He is a managing director at a real estate investment bank. And they show U.S. commercial real estate foreclosure by property type. And of course, office. is way higher. There's been almost 30. The next is apartments, which is like six. So it's all in office real estate, specifically within the commercial real estate category.

How hard is it to turn these offices into apartments? If they're really selling for less than the value, the land they sit on, why couldn't these be turned into condos or apartments? It's not that simple. There's a whole, like, zoning type of thing. It's not like they could just flip a switch. But anyway, my point is this.

This is definitely, I promise this is a not-to-brag thing. I'm up 50% or so. I'm the SL green stock that I bought. I don't know. You've been bragging about it a little bit lately, a little bit. No, I haven't. De Niro, a little bit. I got the receipts on Slack.

No, but let's... Yeah, but I can brag on Slack, I mean... Okay, fair. To your credit, credit to you. You've, like, you've bottom fished like five stocks in the last 12 months. Like, and you can't... And we always say, like, it's impossible. nail the bottom, you kind of had nailed the bottom like four or five times.

It's closer to 10, but, but no, but it's not credit to me. It's credit to the market. I said, I said, I said, uh, yes, I said with Josh, yes, I have gotten lucky some cold skill. Listen, I'll call it luck, but it only works in a bull market. Like if you're trying to catch bottoms in bare markets, you're, like obviously. Okay, but anyway, my point is this with Ls old green. This is how markets work.

The news is bad and it's not getting better. and the stock is up 50% off the lows. And if you contrast this with Netflix, which we spoke about last week, Netflix is flat over the last five years, and it won. If your thesis in 2018 was that, and we spoke with that guy,

Bucco Capital tweeted this, if your thesis is what Netflix is going to win streaming, you were right and you made no money. Conversely, this piece of shit, the news is bad and getting worse, but the stock is off 50% from the lows. It's all expectations. Netflix had such high expectations built into it.

So that's how the market works. Yes. All right, let's... Even though what S.L. Green does, is it just commercial real estate? They own a lot of... New York real estate? Like, AAA luxury buildings in Manhattan. So this is a trade for you then,

because obviously the fundamentals long term are horrible. Yeah, I mean, I am probably going to be a seller soon. Yeah. I'm not looking to, like, get married here. Lordstown Motors, Remember that one, Ben? What was that one again? Was that an EV player or something else? Which was the one where the dude rolled the truck down the hill?

Oh, no, that was... Was that Nicola? Yes. Well, Lordstown Motors came and went. Rest and peace and peace. I don't really remember what they did, to be honest. Shouldn't this be the way to... Wasn't this the case with...

When automobiles first came out in the early 1900s, there was like 130 different manufacturers. and four of them survived. Isn't that, I mean, there's not that many electric vehicles, but isn't that going to be kind of the same thing that happens here? Could be. You would expect a lot of these to go out of business and not work. It's a hard, hard business, obviously.

I was hoping my next car would be an electric vehicle, and it's not, they're not cheap enough yet for me, I think. I think they're going to be. Tesla keeps lowering prices. I was surprised, though. Our guy, car dealership guy, tweeted a few weeks ago, here's where you're finding deals and he listed Ford on there

and I drive a Ford Explorer and I call them up and I said hey I got like 10 more months on my lease sounds like you guys having some deals what's the story and my monthly payment only went up I was because I you know interest rates went from 3 to 8

in auto loans too maybe 9 or 10 I thought my monthly payment would be a way higher it was 7% higher than I paid 3 years ago CPI and that time was up 15% Yeah not bad My negotiating skills allowed me to hedge inflation. It's all relative. You're a good negotiator in Grand Rapids.

Trust me, you get crushed in New York. Hey, you use a car broker. You don't even negotiate. Yes, I can't. I got destroyed. Speaking of cars, when I was in California last week, I sent a picture of me and Chris. We used a company called Turo, which is like Airbnb for cars, which is awesome. Wait, did you learn about that one from your idea you had, right?

Huh? You asked, you said, I've got this. great idea. Oh, that's right. And so someone told us about that company, so you used it. And your middle age, your middle age transformation was complete. You were driving a convertible with a Hawaiian shirt on and middle age is here. Wonderful service.

It was like probably cheaper than Hertz and a much wider selection. And you don't have to wait at the airport. Yeah, it was really good. But it was all like higher end cars? No, not at all. Oh. Not at all. Okay.

You could spend, I don't know how low it goes, but no, it's not high end at all. It's all over the place. Yeah, car rentals is the kind of business where I don't think you ever have a really good experience at one of the chain places. Oh, okay. I was about saying, I had a great experience. It's T-U-R-O if you're traveling. All right. I got, just before we started, I got an email from Rocket Money saying that my subscription

increased for Amazon Kindle Unlimited. Guess what? I didn't even know that I paid for Amazon Kindle Unlimited. How about that? So it went up. Hi Michael, you would just charge $11.99 by Amazon Kindle Unlimited. This is a price increase of $2. Well, good to know.

I'm going to cancel this because I don't read, and I definitely don't read on the Kindle. How much of a bare market is you're reading in these days? Like all the way. I actually got a book. The author is Jack Carr, and it's like an ex-Nabby-CL writing like, I think, a fiction book. And I thought to myself, you know what?

Maybe this is like the gateway. maybe this is how I get back into reading because fiction is fiction when I start when I the first book that I read on like my reading journey it was 2008 and I remember because I was I remember where I was and I was in an airport and I picked up the Pelican brief John Grisham and I had so I had so much fun reading that book and I said you know what I should do more of this so maybe and then that led that led to a multi-year bull market in my reading but now I used to trade books all the time. I only read fiction. I did get an early copy. William Bernstein has a new edition of the four pillars of investing coming out. And I got an early copy of it. And I'm excited

about that because he's my all-time favorite finance writer. So I've had this book on my desk for a long time. Price of Time. The Price of Time by Edward Chancellor. He wrote Devil Takes the Hindmost. Oh, that's the interest rate book, right? It's about the real story of interest. And I really want to read it. Like, I really want to, but how? Why do I read this? It's 200, it's 300 pages on interest rates. I did too many podcasts to read. Yeah.

Anyway, just my point is, I don't even pay for Rocket Money, but it's a hell of a service. So it was a nice to, yeah, it was nice to get the, I have to sign up for it. They emailed me about this, and they said they're going to give me a free shot at Rocket Money, and I haven't done it yet. Give me a free shot. Oh, wait a minute. Oh, because you still use a spreadsheet, like an absolute clown. I mentioned I use Excel still and Rocket Money reached out and said,

hey, give us a try. We'll give you a free try at it. I don't even understand what you mean. When you say you use a spreadsheet, you're talking about like big stuff, not like, you don't like track your subscriptions obviously, right? No, no, but yeah,

all my big monthly recurring bills, I have them in there. And yeah, I have a system. Don't worry about it. All right, last week we talked to, you just mentioned Netflix. A good one from Lucas Shaw at Bloomberg. He's the guy who was always on Matt Bellany's podcast.

the town. They're great. So he shows Netflix versus Paramount, Disney, and Fox, and then Warner Brothers. And he said net income at the largest U.S. entertainment company has declined by more than 60% over the last decade. Basically, these companies trying to chase Netflix and get that Netflix multiple that was never going to happen. They've just decimated themselves. Like the profits they're making in 2013, and obviously a lot of it is the movie industry has changed a lot. I think, I mean, movies really are dead. I was predicting this throughout the pandemic. I think movies are just like top guns are not dead movies are not dead movies are so the movie theater is dead man it's not dead it's not doing good it's on life support i would say it's a critical

condition maybe maybe stabilizing you're like personally trying to keep it going but it's i actually haven't seen a movie indiana jones i think bombed this week it's 60 million i think it's great oh and speaking of so that this is one of my investments that has not worked out uh disney which i asked a few weeks ago, is this just a value trap? Me too. Guess what I did? Guess what I did? I bought more. I told you I bought more. Double down?

I feel like, because this is like multi-year support right here. And, uh, but here's the other thing. If it breaks, I don't even know if I'm going to sell. I feel like, I feel like it's too late to sell. Doesn't someone have to come by them eventually? I don't know. I don't know about that. If I wanted to sound really smart, I would say, if we did some of the parts

valuation here, I don't know what that mean. I wouldn't actually, I don't know how to do that. but if I did, it sounds intelligent. Listen, this is like maybe keeping it too simple, just not overthinking it. Disney has a lot of problems, right? Like, everyone, they're well documented. You're starting to see analysts downgrades. The stock is in a 60% drawdown.

Do you not think we know? And sorry, if I could buy one of the best brands of all time here, you know, when it's just a complete washout. So getting back to the expectations thing, yeah, Josh sent us last week on Slack, one of the analysts that were downgrading Disney and upgrading Netflix. Yeah, I bought more. Thanks now. Yeah. But I think that's the thing is like the expectations that are built into Disney are so, so low right now.

That's your upside. Yeah. Yeah, they're in trouble. I know. You would hope. I know when the market knows. We all know. We all know.

Tough business. All right, real quick, there was a, I don't remember where I saw this, but number of annual U.S. pedestrian fatalities, this is the United States. It's pretty horrifying. It is at the highest level it's been out since 1980. So one from 8,000 to 4,000 and back to 8,000. Look at the next chart. U.S. pedestrian fatalities.

Deaths of people walking surge 19% in just three years. Is this people on their cell phones? Well, but here's... Yeah, but here, so they show you like states where it's most common and... Michigan just put a new law in that went in... Michigan has a new law this week that went into effect that you can't look at your phone while you're driving. Good.

It's a $200 ticket if you get... Exactly. But, but, but, but, so that was the most common response, but, but, but, but, but, They compared it with other countries and were way higher than everyone else. And guess what? There's not just cell phones in the United States. So I don't know what's going on, but I've become, since I saw it, I'm much more kind of it because I looked out of my phone all the time when I'm walking.

And it's dangerous, especially in New York. Yeah, that's a New York thing. I don't know how people don't get hit more in New York with the way that people just fly through those intersections and the cabs and sticking out. But now what I did this weekend? I did my annual power washing routine. And I got to tell you something. I love...

Power washing is a great dad experience. Yeah, it's so much fun. I love an activity where it requires your full dedication. So, for example, I don't, I wouldn't say I love doing the dishes. That makes no sense. But I like doing the dishes and like cutting vegetables only because you're not on your phone. Sure, I listen to a podcast, but you're not like doing a million things. You're doing two things.

With a power washer, you can only do one thing. It's too loud so you can't listen. to music. You have a task. You get the shit off your house, off the fences. I love it. It gives me a ton of joy. The other great thing about power washing is that you see the start and the end. Like I did one of those college painting crews in the summer when I was in college for a couple years. And the greatest thing about- Wait, wait, wait, wait. A what? A house painter. You have seen those like college pro house painters. Like, it's a bunch of college kids who run their own business and they charge way less because they're probably bad at it. So it was me and a bunch of college

buddies that were on a painting room. We painted the outside of houses all summer. And the best thing about that, yeah, I learned how to paint, actually. The best thing about that was, is like, you see your progress. It's right there for you to know how much you've got done. And it's, like, at the end of the day, you see how much you've done. And, like, it kind of is, like, fulfilling. Incredibly fulfilling. That's what I like about it. All right, I've got a fireworks take. So the fireworks, we're going to, we're recording this on Monday morning, because we got, we're not going to record on Fourth of July. What are we, Maniacs? And people are starting light off fireworks already last night. I've, I've done the whole spiel before.

how I hate fireworks because like it wakes my kids up and it's bad for dogs and all this thing. Here's my other fireworks take. Like a fireworks show, you know, like the towns and municipalities and stuff put on, those are the same, those fireworks have not improved for like 30 years. I feel like it's literally the same show every year. And so if you've seen one, you've seen them all, but the firework improvement for regular people, the dumbass who lives down the street are next door to you, those are up like, those are like 10 times bigger and better. So we've given idiots the ability to do huge fireworks shows out of their driveway and like shoot off these like, it's like a war zone, but the regular ones, they're still the

same. Is there a crypto ETF analogy coming? I don't, I just, I don't, maybe. I don't get, like, I just don't get fireworks. I feel like if you've seen one show, you've seen them all. And I just don't, the downside of lighting off these huge mortar shells versus the upside is just, it's the worst investment opportunity there is. Well, I agree with you. I agree with you. I don't know that I would be... I sound like an old man here. I don't care. But, but I do enjoy, I'm on the complete other side of as far as I love fireworks. I enjoy it. I like seeing the kids' eyes light up. I like see my eyes light up. I just love it. I think they're pretty and... They're too loud. They're too loud. Ah, man. You are sounding very old man. Now, my dog hates him. I'm going to feel bad for her.

We need to... Duncan's with me. Duncan's with me. It's just, it sounds like you're in a war zone. The ones that they sell to people for their house now are so big. You don't like fireworks. You don't like fireworks. All right. Overlaid. I watched. What did I watch?

I didn't see anything good on the airplane. In fact, I think I saw something really bad. Oh, I rewatched Blood Diamond. Not rewatchable. I rewatched it, too. It was on the rewatchables. And I saw Blood Diamond in the theater. What year did that come out?

And I just feel like... I liked that movie. Oh, I loved it. Oh, 2006. No, I really like that movie a lot It's just one of those movies that's That's so It's just such a

It gives you such a visceral reaction It's, I don't need to rewatch it I remember it vividly Yeah, a lot of downer movies It's hard to root They're not rockably That's why comedies are so much more rewatchable So the Mule

Movies stunk Is that the Clint Eastwood one? It stunk relative to what it could have been Yeah, it was bad Was it Bradley Cooper in that too? So Bradley Cooper and Lawrence Fishburn Arend of the cops tracking him down And I don't know

It's just weird It feels like there was like some really bad editing done or the story was incomplete. It just doesn't feel like one of his movies. It just, yeah, it stunk. It was watchable, but it was not, it was not good. I mean, the guy's like 85 years old, isn't he? Yeah. That's no excuses.

All right. I don't remember what your feelings were on the bear season one. Did you watch it like it? I don't remember. So I did not like, you weren't on board. I did not like season one. However, I'm like a huge outlier. And whatever, it just didn't resonate with me.

But I'm excited for season two because you and everyone else seems to really love it. So I will watch it. I was pounding the table on season. One, I said it was the best new show of last year. Yep. And I thought, like, I thought it could have been a one-season show. Like, the way they ended it, it was, like, it was an amazing ending last. And I'm like, I don't know what they're going to do for a second season.

It's going to be weird. And I think it, like, not hyperbole, I think it was one of the best seasons of television I've ever watched. Like, the first two or three episodes were kind of the same as last year. And it's like, okay, they're sitting on the same beats. And then the second half of the season, they have a Christmas episode that was just a murderer row of cameos. It's like, whoa, that person's in it. Holy crap.

And that, it was like an hour-long episode. It could have been a movie. And then the next episode after that, and the episode was just like on fire. It was amazing. The next episode after that was even better. The cousin Richie, I love, he has a line.

He's talking to his five-year-old daughter. And he says, honey, I love you. I'll see you later. He's dropping her off at the mothers because they're divorced. And he says, honey, I just want you to know. I love Taylor Swift, too, but I just needed a break. And I said that exact same line, I swear to my daughters in the last week because they've just been on a Taylor Swift kick. And it just, I don't want to, like, I don't want to oversell it because someone's going to watch it and say, oh, what are you talking about?

But for me, this is my favorite show I've seen in a long, long time. And it kind of feels like it could have been a movie because it's just like these short 30 episodes. But I'm pounding the table on this one. If you're a Ben Recommendations person, I couldn't believe, like, this show went up another level that was just like, I don't know. It was awesome. So you liked it? I freaking love. The last five episodes of the season were just on fire.

It was so good. I will definitely watch. All right. And I don't know if it's a Michael show. But the thing is the thing that you get out of thrillers, like this is a very chaotic show, like the cooking stuff. I think the thing that you like out of the horror movies that makes you feel uncomfortable,

like this show has moments where it really makes you feel uncomfortable. And I kind of like that part of it. Okay. All right. By the time you're listening to this, you will have hopefully enjoyed a very nice 4th of July with all the great fireworks and other things that this country does so well. Hey, I'm fine with sparklers. We're going to do sparklers. But I don't need a, I don't need a, I need a bazooka in my backyard.

Quick plug. Josh and I, when we were in St. Petersburg, did an episode with this incredible guy who was, I think he was a Navy seal or Green Beret. I can't remember, but he now owns a distillery, and the bourbon is called horse soldier bourbon, and it's incredible. We did an interview with him and Cheryl Penny about just his experience and entrepreneurship, and it was exciting. That guy was amazing. So check that out.

The people who have gone through those programs and have served, like, those people blow me away. I think those people are 10 times more impressive than any CEO or entrepreneur. were. So they made a movie about this guy's battalion. And what's his name? Chris Helmsworth was the leading man. So these dudes literally, they took Afghanistan via horseback. Bad ass.

Literally had horses. Yeah, totally. All right. Hey, wait, one more plug. Our Chris Hutchins, talk your book. Oh, yeah, yeah, that was great. Up on Monday, too, all about credit cards and credit card awards. Michael learned what Google Flights was.

Dude, I learned a ton in that. Yeah. So if you're a big life hack person, credit cards, Chris is very well educated in this and very well versed. And it was a good one too. All right, Animal Spiritspod at gmail.com. Thank you for listening. Happy fourth and we'll see you next time.