Animal Spirits Podcast - Is this a bear market? (EP.255)

Episode Date: May 4, 2022

On today's show, we discuss the stock and bond markets both falling, the new 60/40 portfolio, the case for buying a house right now, the greatest stock of all-time, and much more. Register for the YCharts Webinar: Mega Caps with Michael Batnick: The Real Impact of Mega Cap Stocks on Portfolios - https://ycharts.zoom.us/webinar/register/9016509832428/WN_PRXthCpDSKOJJ_uVAxNcXw   Find complete shownotes on our blogs...‍ Ben Carlson’s A Wealth of Common Sense‍ Michael Batnick’s The Irrelevant Investor‍ Like us on Facebook‍ And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.‍ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by Masterworks. Masterworks is the place where you can go to invest in contemporary art, just like Michael and I. Now we were a couple of noobs before we met Masterworks. Now they've got us a whole portfolio of contemporary art. I had an exit, not to brag. Maybe people are sick of hearing about this, but if you want to hear more about it, we talked to Scott Lynn for our next Talk Your Book episode next Monday to talk about art, how it is an inflation hedge potentially, how alternative assets work.

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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 Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's Wealth Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain position. and the securities discussed in this podcast.

Welcome to Animal Spears with Michael and Ben. Michael, you're the arbiter of these things. So I have to ask you, is this a bear market? Of course it's a bear market. You're saying bear market? What do you call it? Is this a bull market? No, but, okay, so we have bull markets.

And we have bear markets. Bear markets. We have corrections. Now you're putting me in the spot, because I don't know where this goes from here, but I can tell you one thing. This is no bull market. No, of course not.

But is this a correction or is this a bear market? I'd say for 50% of the market, this is a bare market. The S&P 500 is down 13%. You put out a post this week saying this is average. If we take the average entry year, peak the trough drawdown on the SP 500, you did this nice little chart here. And the average is roughly 13% since 1950. One of my favorite, because if you look at it, all these circles down, a lot of times stocks still finish up. So here, I did the numbers on this.

I have the data going back to 1928 for this. So it's 94 years from 1928 to 1921. 59 of those 94 years, we've had a double digit drawdown at some point during the year from peak to trough. That means roughly two-thirds of the time you're going to be down double digits at some point in the S&P 500. 58% of the time, so let's call it 60. I'm going to round up. My daughter's learning how to round up in second grade right now. I'm going to round up.

60% of the time. It works every time. 60% of the time when you had a double digit peak to trough drawdown during the year, you still finish the year with a gain. Okay. Okay. One more. 40% of the time, when you had a double-digit drawdown, you still finish the year up double digits. Now, if you're a person on Twitter, you'd say, yeah, but that's never happened when the Fed is taking the punch bowl away. True. Interest rates are rising. Inflation is high. True. True. The thing is, all these corrections in the past, they didn't happen for no reason. That's all so true. It happened because people were pessimistic.

Bad stuff was happening. That's a good point. I'm saying, okay, If I'm a betting man, and I'm going with probabilities here, is the S&P 500 going to finish down 30% this year or up 5%? I'm leaning towards up 5% because that's the way the stock market historically has leaned. Call it, again, 60% of the time, every time. You can't gauge sentiment from people you talk to on the street or Twitter or even the shoe shine guy, which is a thing that no one does anymore because no one wears no shoes anymore. You're allowed to be glass half empty without being. a crazy person. Okay?

I'm saying, quote unquote, everyone right now is bearish. There's no one who is trying to look on the bright side of things or saying glass is that full. Everyone is saying, the Fed's going to make this worse. Interested, it's going to keep rising. Inflation's going to get out of control. Listen, the glass is only going to get worse. My personal glass is always half full, but right now it's also half empty. Here's another thing. Everything that people predicted will get crushed has SPACs, IPOs, ARC, all of the alt coins, crypto, all this stuff that people said, this stuff has to crash. It's crashed and the S&P 500 is down, I think at its worst point, it might have been

down 14 or 15%. It's pretty great. It's pretty great. So, I mean, that honestly is best case scenario for the stock market. Wouldn't you say that the fact that the whole stock market is not down, and especially Facebook was off 50%? Netflix down 70%. Amazon down 35%. The market is clearly pricing in a recession. I think that's where we're getting. Is that fair to say? The market is anticipating a recession. Now, if we get one, things can get way worse. To your point, even though so many things have gotten crushed, the index is only down 13%. So if you're scared now, I'm not trying to scare anybody, it can get a lot worse. Flip side, if we don't get a recession, if we can get a soft landing, which few people think the Fed will be able to orchestrate,

then stocks can do absolutely fine from here. And also, what's our time horizon? I mean, I'm I'm a perma ball. My portfolio is always invested. My portfolio says permable, but my heart says Norealeigh, no, I'm kidding, but that's where we are. What happened to that guy? He had a moment there. I guess what, what do you guess? People are freaking out. I think the biggest thing people are freaking out about is because stocks and bonds are both down together. This is something that has caused people to like totally reassess the idea of diversification. And I mean, it's been, here's my thinking, though. It's four months. I know it's painful. Stop trying to minimize the pain. People are in pain.

The 6040 portfolio over the last, from 2009 to 2021, was up 300% of Vanguard balance fund, 11.3% annualized returns. Over 13 years. And we have four months of a 10% correction. I'm with it. I'm with it. And people are losing their minds. I'm all about perspective. And I agree. People need to take a breath. However, it's not, people aren't worried about the damage that's been done, they're worried that it's going to get worse. Would you agree with that? That's the thing. Everyone says, okay, great, Ben, zoom out, look at historical returns. That means nothing for us going forward. Here's Ben's glasses have full take on the 6040 portfolio, okay? Expected returns and bonds are now much higher than they were just nine months ago. The average

yield to maturity for ag, AGG, which is the aggregate I-share bond ETF, is 3.4% now. Average yield of maturity. That's way higher than it was in the past. Stocks, do much better in disinflationary environment than they do in a rising inflation environment, guess what? Inflation might be peaking. It could be coming down. That, to me, I think that's even more important than, like, is the economy going to technically go into a recession? By the technical definition, are we going to go into recession? Who knows? But if inflation is falling when that happens, I think that means way more to the stock market than anything else. I want to pull up this piece. I was doing some research. I don't know why I'm quoting my own blog here. Just go with me.

I wrote this in March 8th, 2020. So this is two weeks before the bottom. And I said, this is why I'm more worried about the bond market than the stock market. So scroll down a little bit. These were the returns, the one-year returns in March 2020. TLT, 20-year bond ETF, was up 42%. The 7-to-10-year treasury was up 18%. The U.S. aggregate bond ETF was up 13%.

And even the 3-7-year treasury bond was up 11%. in a year. If you want to know why bonds are down 10, 20, 30% in some cases, it's because leading into March 2020, look at the rates. They fell off a clip. This is from Jason's lag. This is probably why there's so much pain. From 1990 through 1990, so this is a piece he wrote for the Wall Street Journal in March 2020. 1990 through 1999, bond funds and bond ETFs accounted for only 10% of the cumulative of $2.4 trillion of flowing into funds. From 2000, 2009, bonds made up 26% of the total. Over the 10 years just ended. This is as of 20,000. 20, 74% of the total $2.7 trillion that investors added into mutual funds and ETFs went into bond

funds. There was so much money that poured into bond funds over time because boomers were derisking. People were scared from the great financial crisis. So this is the thing. There have been bond bear markets before, but there have never been bond bear markets where so much money was invested in bonds. And this is why everyone right now is freaking out, I think. It's also, I agree with all those points. In addition to those points, it's because the type of stocks that are blowing up are stocks that are stuffed into people's portfolios. And I'm not just talking about the arc names. I'm talking about the Apple and the Amazons of the world. And it's been a while, Ben, it has been a while since we lost the leaders. The median fan mag stocks, so we're talking

Facebook, Apple, Amazon, Netflix, Google is down 29%. And so it's different. And so it's different. to see where the leadership comes from when these names are getting destroyed. By the way, Netflix down 70%. Is Fang gone? Is it just Gaff now? Here's what I think is dead. Come on. Dad joke. Gaff. Gaff. It's a gath. The V-shaped recoveries that we've gotten so accustomed to, in my mind, I'm going to take that off the table. I might be wrong, but I think this idea that we're going to be at new highs eight weeks from now, I think that's off the table. I think that was a feature of the market

when the Fed had our back, and it no longer does. I think it's really important. I think you would have to have inflation go from eight to four. Which is not happening. Yeah, there would have to be something like that, where inflation had this enormous fall off a cliff, but I agree. So corporate balance sheets have never been better prepared for a recession. If we get one, the consumer balance sheet has never been better prepared for recession if we get one.

We're going to talk about us a little bit, but Apple just had its best March quarter of all time. But guess what? With inflation high and the Fed removing liquidity, we are clearly in a re-rating process right now. And so maybe people don't want to pay 20 times for Apple. They want to pay 14 times for Apple, and that's it. I agree with you the fact the V-shaped recovery thing, a lot of that was the Fed. Because 2018, the stock market fell 20%, 19 in change, call it.

The S&P did. And what happened? You guys said hour bad. You said our bad. The Fed backed off. And whoosh. Yeah, the same thing happened in March 2020. I agree.

That whole thing of the Fed having our back doesn't exist anymore. so maybe people aren't quite as quick to pounce. If you just take a step back here and think about how quickly the pandemic, I know we've done this before, how quickly the pandemic changed everything from it. That's your let that sink in. Take a step back. All right, take a step back. But inflation is dead.

Rates will never rise again. Growth stocks are undefeated. All this stuff that happened that changed because of the pandemic. Now we have inflation. Interstates are finally rising, even though it took a while for it to happen. We finally have some economic growth and value stocks are finally working again. stocks, gold, all these things that just were left for dead for 12 years are now working again. Gold died again. And no one could have ever predicted the reason for this happening.

Here's the thing. The chance of a recession happening, in my opinion, hasn't been as high as it currently is in a long time. Guess what? The market is reflecting that. Clearly, like the market is discounting a potential recession. I think that we are entering a period of the thing that people have been warning about for years. I think it's finally here. Low returns, I think are here. Not forever, but I wouldn't be surprised if we get a choppy, nasty 24-month period, which we had from 14 to 16. And guess what? It would be fine.

I think everyone would sign up for a dead two-year period. The problem is people are afraid of like a down 40% period. Given that we've had 50% a year for 10 years, even if we got zero percent returns for two years, the 10-year returns would still be off the charts. How about this? S&P is down 13% from the highs. Inflation is 8.5%. We're already in a bare market on a real basis.

Nobody thinks in reals. No, no, but fair point. But I'm saying maybe that low return environment is on a real basis. So maybe we just get in the next two or three years ahead, let's say it's 6% per year in stocks instead of we've been getting 13 or 14. And on a real basis, it's more like two because inflation is 4%. So what do you do? What do you do?

This idea that I think people have that they're going to sell and then that they're going to get back in at the right time when the dust settles, L.O.L. We know how market's bottom. I see a lot of people saying cash is the best place to be, unless you're going to try to go into some of the hedges and say commodities or whatever, but a lot of people saying cash is the best place to be because stocks and bonds are both going to continue to get hammered.

Fine. When do you get back in? Exactly. Listen, I get it. Selling is easy. It feels good relief. Ah, and you feel smart when the market goes down and you tell yourself, I'm not going to buy it back yet. We're going lower.

Or you sell, the market goes higher and you're done. You're never getting back in. How have we learned this lesson over and over? And you get addicted to cash. Getting back in is impossible. So guess what? Right now, I don't want to over exaggerate because we're down 30%. I get not everybody owns the SP 500.

This is what it is. Sometimes you got to eat. How much gains have we had? What do you think the market does? It goes up uninterrupted forever? Grow up. The stock market doubled in a year, basically. You have to learn to expect that, okay, it's not going to always be so great after that.

of course, there's going to be some give back there. Oh, I'm down $50,000. Okay, to Ben's point, take a step back. No, you're not. You're up $190,000. Exactly. Two steps forward, one step back. Bob, what if it's two steps forward, nine steps back?

Yeah, we'll deal with that later. What do we make of Arc? Is this just Teflon? Like, is there, everyone's got a point where they cry uncle. Do you think that this is an internet thing where the internet has made cult-like behavior more acceptable? because the way that people always frame retail investors is they buy high and they sell low. Well, they've had the opportunity, Ark.

So Eric Belchunis said, Ark brought in a billion dollars year-to-date through April. Top 3% among all ETFs, despite being down 47% year-to-date, 67% over one year. Ben Johnson said, Ark pulled it. Yeah, $900, new million. He's saying theories, investors are doubling down. Shares are being created as short, super volatile ETFs. What am I missing? Because a billion dollars has come in.

I think there's just more believers than ever in like this kind of stuff that you just didn't have before. So Arc is down 70% from the highs. That's nuts. It would be way worse if they had a bunch of redemptions from their fund, would they not?

Because they're such big holders in these stocks, they'd be selling more. I threw up this chart that if you look at Arc's peak like 300 days later versus the top of the NASDAQ bubble, after 30 days, Arc is down 70,

the NASDAQ was down 60 at that time. This is a massive, massive blowup. of epic proportions. Is this just a case of people not wanting to believe it? The old, I'll just wait until I get back to even, then I'll sell it kind of thing. Like, I am really shocked that people aren't running to the exits in this fund for how bad it's bad.

I don't know. I really don't know. I think to the extent of this is people doubling down, nobody was, I don't know, nobody. I would venture to say that very few people, very few arc investors were all in. It's a piece of their portfolio. So maybe they have the fortitude to take it from 10 down to 4%

back up to 10%. is it rebalancing? How much of it is new money versus existing? This thing was down like 37% in the crash in March 2020, and it's down 70% now. I think that's the craziest thing about all the tech stuff is that it's gotten wrecked so much worse now. And in a lot of cases, these tech stocks are down worse than they were in 2008. Here's a potential, I don't want to say nightmare scenario, but we're potentially sounding pretty bearish right now. The market is not acting very well. If we get, which we had, by the way, if Arc had this a couple of weeks ago, I think we were talking about this. We're talking with Nick Holder's if this rolls over.

So Arc bounced 40% to give it back. The market, at some point in the very near future, you would think that all sellers have been exhausted. So I'm not like making a big call that we're going to have a bounce. Of course we have a bounce. Everyone knows we're going to have bounce. If we get a 10% balance that rolls over again, like the more of those we have, the more demoralizing, I guess. Because that's the thing. I get sick of the people saying, young investors have never experienced a bare market. And these are the people who have an average of, I guess it was

$4,000 at Robin Hood. Now it's probably $2,000. Ben, the people saying that have been in cash for 10 years. Give me a break. Yes. But I'm saying, unless you live through 2008, no one has experienced one that lasts very long. And guess what? That one was 18 months of pain. Congratulations. You live through a bare market. What do you like some sort of expert?

Are you a market time in God because you experienced a bare market? My point is, and I'm not trying to be one of those people, I'm saying those lengthy ones are just the word you use was perfect it's demoralizing. You just feel like things will never get better at a certain point and as much of a genius as you felt

like during the bull market, now you feel like an idiot during the bear market when both of those things are probably not 100% accurate. You weren't as smart as you thought you were when things are going up and you're not as dumb as you are on things are going down. Joe Taranova, let me find this chart. He did this post, I'm going to write about this, where he looked at the recovery.

And back in the day, there were actual bare markets that lasted more than a minute. The recovery time that we've seen has been under 200 days for the one, two, three, four, five, six last corrections. The recoveries have been phenomenally fast. That's like great. By the way, though, don't you think we get like two down inflation prints? We get back to like a, I don't know, five or six percent level. Don't anything the Fed put is back on the table immediately? At some point. I know people keep saying the Fed, it's going to come back I'm sorry, but it is.

It's not like it's gone forever. It's gone temporary. The Fed put is transitory. How's that? I totally agree. Oh, they're coming back. They might scare us, but they're coming back. Let's say the S&P fell out of bed from here and we're down 25, 30%.

I'm sorry, the Fed is lowering rates. It is. What's their line of the sand? I'm going to say their line in the sand is S&P 3500. That's their Fibonacci retracement. You don't think J. Powell's watching the fibs? Come on. Okay. Here's some good news for inflation, potentially. Look at the personal saving you're going to pull this up from Y charts. I saw some people sharing this on Twitter.

Oh, oh, oh, oh, oh. I want to give a plug. I'm doing a Y charts webinar. We're talking mega caps. It's May 12th. By the way, did you sell in May? Just asking. Yeah, May 1st every year I sell everything. It's May 12th. At 2 o'clock. See you there. Eastern. We'll put a link in the show notes.

All right, sorry, Ben. Go ahead. All right. By the way, let's just do away with time zones. Everything should be Eastern. I'm trying to coordinate calls and stuff. Yeah, no offense to people on the West Coast. I'm sorry.

East Coast is, that's the Bitcoin standard. The East Coast is the thing. I don't know why I just thought of this. I got Chipotle before we started recording. By the way. Yeah, me too. 1165 for chicken, not bad. You know what I saw?

I thought of the wind of the Pumim. Chicken on the top. Polio Wasato. the bottom. Polos. Come on. Chicken is chicken. Sorry. I can't say poeo.

I have to say polo. I can't. You say polo? Don't tell me you say polo. If I say it the other way, I sound like an idiot. I sound like an idiot either way. You literally say Polo Asada.

I don't believe you. Pollo. I sound like an idiot either way. It's very simple. No, it's P-O-L-L-O. No, I know. I'm right. That's how you say it.

Here's another thing. Why don't we make words that look like they sound? I'm down for that. So dumb. All right. Good news. Why charts? Personal savings rates spiked 30% in the pandemic. I think if you want to know why inflation has been so high, one of the reasons, we just had so much money. It's now back to below pre-pandemic levels, 6.6%, basically. I think people were using their savings to make up

for inflation. So unless we now just, everyone goes into debt, I think that's going to slow down. I really think that the inflation peaking, if it trends up for a couple more months, maybe because of the war and stuff, but the consumer side of things has to be slowing. Consumer spending? I think it's coming in. Hasn't yet. We're going to see it in the data. I'm saying that the savings part of thing has completely round-tripped.

And it looks like the unemployment rate, basically. Oh, well, Lizent Saunders tweeted, confirmation that the savings boom was over. You just spoke about this. Not good. Yes. Duncan, we need a new t-shirt. Just not good. I mixed up my links.

You were looking for this two-year yield one. Nah, I deleted it. We didn't need to talk about it. Yields are high. Or high-ish. Higher. All right. There was an article in the journal over the weekend talking about home equity.

And- Yeah, it's the New York Times. What did I say? Close enough. Journal? My bad. The most important point in here was data point from a company called Black Knight, a company that tracks a mortgage market.

They estimate that the average homeowner with a mortgage has gained $67,000,000. thousand in tapable equity in the last two years. That's actual cash households could access while still keeping 20% of the equity in their homes. That's a lot of money. Listen, I have sympathy for the people who are buying a house right now for the first time. They've gotten screwed. And I think, I don't know if this is a media thing, but everyone looks at the housing market going up as this has to be a bad thing for future generations, and it probably is. But I also think there are thousands and thousands of middle class people whose only financial asset is their house who have a huge windfall because of this house.

Like, there is some good news from this housing home, even though it hurt. Two-thirds of the country owns a home. Now, wait. Yeah, American-owned homes have gained more than $6 trillion in housing wealth. There's a butt. There's a butt. There's a butt. There's a butt.

I wonder what percentage of people can't actually tap their home equity for, like, credit reasons or whatever. I know a few people who work in the lending space, and they've already told me that like layoffs are already starting. What do you mean? All they've been doing is refinancing for last two years. Oh, God, everyone already did? Yeah, yeah.

And so they have nothing else to do. Refinancing has to be down to zero. Who's refinancing? Somebody that bought a home in 1984 and fell asleep? It would have to be, yes. By the way, that sounds like a good rom-com. Brendan Frazier fell asleep for 20 years. His interest rate is still 11.2% in that mortgage.

So look at this. San Jose, California. Capable equity is $230,000 increase. I mean, all these are in California, the highest ones. Seattle's like 160. Austin is 130. Boise City, Idaho. massive, yeah, 114,000 increase in capable equity. All right, right now, everyone is saying

this is the worst time to buy a house. And it probably is because housing prices are up, by the way, through the end of March, I think it was up 20.9% again. Bill McBride posts this morning. Damn. So mortgage rates up to 5%. Housing prices are up. I want to make the case for still buying a house today. I'm going to put it out there. This is likely one of the worst times ever to buy house. Let me make the case for still buying. One, you're fixing your payment. You have the ability to grow into it over time. That's always a good reason I think to buy a house is that you know what your payment is going to be. It's locked. Number two, rents are going up. That's not going to slow down because especially in places where there is

high demand, places like the Rust Belt, probably on the coasts where people are coming back. And number three, you're going to be able to refinance someday. Let's say you're paying a high mortgage rate for three years. That really has to be painful. I'm sorry, you're going to be able to refinance again for three or four percent. It's going to happen. That's not the greatest case in the world. That's a case. I just think that at this point we're getting to a point where it's like, hey, buddy, I can't buy a house. I don't have a down payment. Yes. Okay. So what people are doing now is buying. I have an idea. Take home equity out of your parents' house for a down payment. That sounds good. Adjustable rate mortgage demand doubles as interest rates at highest since 2009.

You can get lower rates on arms. I think it went from 2% to 4%. So it's saying, oh, everyone's going you into a just rate mortgage is going to still a very small number. But I don't know, kind of makes sense to me. I think you can still get one of those for 4% right now, basically. Not bad. Maybe that's what you have to do. Maybe because there's no more refinancing, the bank will actually look at your application now and give you a mortgage for 5% down payment. Also, bring a spreadsheet to your negotiations. Show them discounted cash flow analysis. When the discount rate goes from 3% to 5%, your housing price should fall. That has to work. Yeah, what's the commercial when you're something says no, champion says yes?

I don't know. I don't have to do with anything. Is that a mortgage commercial? Okay. Is it when your bank says no? I can't be. Hold on. I'm Googling it.

Okay. Oh, it is. It's champion mortgage. Champion says yes. I nailed it. When your bank says no, champion says yes. Okay. I have a story to tell.

So yesterday I'm coming out of my office. I work in an office complex where there's probably 20 offices on each floor, is three floors. and I walked down to go grab my mail or go to the bathroom or something and I hear just water gushing out of a door down the hall from me on the other side of the building. A hot water heater had broken on the second floor

and they estimated 82 gallons of water poured into the hallway. There was like three inches of water on the hallway for probably about a 40 foot. It looked like a pond in the hallway. This is on the second floor. Water is dripping down into the first floor everywhere. And what floor are you on?

Luckily, other side of the office from mine. I'm on the second floor, but it's on the other side from me. So it's kind of two wings, and I'm on the other wing. People are frantically calling plumbers and water is just gushing out of this thing. The whole floor is ruined. So now what? 82 gallons of water. 82 gallons doesn't sound like that much water.

How many gallons does a bathtub hold? I don't know, a couple gallons maybe? I'd say 50. It might be way off. It's like 40 bathtub. But my first thought is, this is why it sucks to be a landlord. because you have to deal with this kind of stuff. Yeah.

Emergency plumbers, people, they had fans on, they're sucking up the water. Okay, a standard bathtub holds 42 gallons when filled to just below the overflow. Their estimate must have been low because this was huge. Sounds like there was 820 gallons.

Okay, maybe that was it. Wait, 42 gallons? That sounds like a lot. 42 gallons in a bathtub? I mean, dude, a gallon is not that much. A gallon, like think about a gallon of water. It's just a little jug. Filt of capacity.

Standard bathtub holds 42 gallons. Are you Google checking by Google check? I'm sorry. Yeah, I don't believe. that. Okay, maybe that's right. Okay, maybe it was 820. It was a lot of water. Enough to it was dripping down. Maybe it was 420.69 gallons. Moving on. By the way, not much on the Twitter, Elon Musk's Saga this week. Unbelievable. All right. It's going to be a while, right, until it goes through. All right. We're going to

get to great quarter guys. By the way, check out the quarter app, Q-U-A-R-T-R. I had a busy week listening to Ernest Calls. I did not listen to the Microsoft one, though. I will admit. I did not listen to it. Also, quarter has some awesome new features coming out soon. That's called a teaser. Nice teaser, nice teaser. All right. So their cloud is still grown ridiculously of 42% quarter over quarter, revenue up 18% year over year. Oh, last week was the most important week ever for the market. Was it not? As we discussed. That's what you said. Let's see. LinkedIn is still growing somehow. I don't really know how that's happening. But what I want to get to, oh, Google, same story. sales up to 23% year over year. Cloud sales up 43%. Everyone's talking about TikTok. They're talking, Facebook's talking about, I mean, they can't not. It's sucking out all the attention in terms of what they're doing to their competitors. People lost the ability to be wowed by these companies. The fact that they're still growing 20% year or year when all these are trillion-dollar companies now, that still is mind-boggling for me that they're still to grow this much at the size that they're at. Google announced a $70 billion buyback. Yeah, they're still growing like crazy. So,

You don't often get the chance to buy these companies 30% off the highs. I mean, it happens. This is not the first time, but that's where we are. All right. Talk about TikTok. See up Google said their shorts now have 30 billion daily views. 30 billion. Double the amount of views over the private.

YouTube's TikTok competitor. I'm sorry. No, wait, I'm sorry. Eliminate what I just said. Ben, you're right. So what does TikTok have? A trillion? Okay.

Not good. Not good. Definitely not good. But Google shorts is growing. All right. Let's move out to Spotify, all time low. All time low. I held this stock for a while.

I think I sold at break-even a couple months ago. I think it's down 40% from I sold from. But this is another one of those companies, I think kind of like Netflix, where you go, well, if it was worth $100 billion, and now it's worth $20 billion, I don't know which one makes more sense. Well, you know that one didn't.

Just like Netflix's at 300 versus 100. I don't know. How do you know? Now you know, you find out after the fact, I did listen to this one. They were asked by the Netflix comparison, like, are you seeing similarities in your business versus their business? They're slowing down. Are you slowing down? They said, no, obviously. They were asked about the investment of the podcast not paying off yet. I think that's what it is. Investors are not willing to subsidize any money losing stocks in any money losing businesses, for that matter. It's over. Money costs something. Sorry. You had your chance. Venture capitalists were subsidizing all of us for a while. That's why Uber's were so low and all this stuff. This is back to my point about the 2010s being this glorious period that everyone hated. We had all this.

stuff that the VCs were subsidizing for us for so cheap. This was like five years ago. It's over. Before we met Audiograph, there was a podcast company that we spoke to, and we joked. It wasn't a joke, but we were like, what's your business model? And she said, we don't have one. And I remember saying, like, I love Silicon Valley. And that was like five years ago.

You had your chance. That's right. We both laughed, and she didn't find it funny because she's like, no, it's true. We don't have a business model. We don't need one. We just raised money. What do you need a business model for? Now you need a business model.

It's over. And that's the thing. Inflation, I mean, I don't know if we underestimate it, but it matters. The cost of capital matters. People are much more forgiving. So you mentioned to me, I can remember if it was on the show or off the show, you said, like, if I'm dumpster diving in a lot of these growth tech names, why wouldn't you just buy Amazon down 30% instead of trying to fish through these other companies down 70% or 80%? I'm not diving in yet. If I was going to buy one of these companies, I'd bet on Daniel Eck or Rich Barden, like the Zillow or Spotify's of the world with strong management teams that you believe and have the ability to potentially turn these things around. going on with Spotify, there's 4 million podcasts on the platform, which sounds a lot. It's just, I guess just hard to monetize still. I guess podcasts are probably still smaller than we, we probably overestimate the power that podcasts have. Not everyone to listen to them.

FM radio probably still just dwarfs podcasting. Does it? I mean, I know advertising it does. Yeah, it probably does. It probably does. But who listens to the radio? Radio. Dumb and dumber. Okay. I got you. Tripoli, real quick. Chipotle revenue up 16%. Same store sales up 9%. Oh, here's another one, the Winnie the Pumim, quarter, sequentially. Oh, nice.

You hear a lot of sequentials. All right, in restaurant sales increased 32%, which is a good news. The pandemic is behind us. Digital sales are now 42% of a food and beverage restaurant. They opened 51 new restaurants during the first quarter with 42 locations, including Chipotle. You ever been to one with a Chipotle?

Was that a drive-thru? No, that sounds awesome. My local Chick-fil-A, I put it in the Slack this week. They just opened a mobile ordering only. So you don't get stuck behind the people in a minivan making 36 orders. You're big on that. I do it at Chipotle too. You order with your mobile app and then you just say, hey, here's an order for Ben,

right up to the thing and get it. So now they have a mobile only and a new whale only for people who didn't order ahead. Here's the other thing. We're thinking about these companies. I'm zooming by you people. There is going to be, we're going to look back in a few years some amazing opportunities. Oh, I can't believe I did it by Spotify when I had the chance to it or Shopify or whatever it is. A lot of the companies in three years and five years, I know this is obvious, but I think

it's worth saying, are going to look very different than they do today. For example, Chipotle's mobile ordering is now 41% of the business. That wasn't a thing like two years ago. Think about what Netflix looks like today, maybe a bad example. But compared to all these companies, they change. But in five or ten years, you're not going to hear about the companies that don't come out of it either. You're only going to hear about the survivorship bias of you could have bought this company

for 80% down. You're an idiot for not buying it. it. But then you're not going to hear about the companies that were down 80%, but never really came back and got to those old highs. There are a lot of companies that February 2021 is going to be their all-time high, like maybe of all-time. Oh, Zoom will never be a $300 billion market cap ever again. Oh, timestamp. You're probably right. That's a pretty good call. It was a 300? I think so. Here's the thing. It's almost like trying to picture your favorite player in the NFL or NBA being traded. I just wish that there were more mergers when companies are

down 78%. How come no one's about Palestine yet? How come no one's about Zoom? How come no one's about Teledoc. Zoom was 160. 300 is ludicrous. So it was 160. I want some more mergers. I want some stuff to be happening here. Well, we might be getting them.

All right, Amazon. So here's the thing. All of these numbers I'm giving you, just assume that they're already reflected in the price of the stock. The market doesn't care about what happened. It cares about what it thinks is going to happen. Okay, be that as a May. Amazon, revenue up 7% year over year, which Sean says is the slowest in 20 years.

Not good. Not good. 3% year-over-year drop in online sales segment. That's interesting. They took a giant write down on Rivian. All right. AWS, revenue of 37%. I tweeted this yesterday.

They're at a, what I tweet, $74 billion annual run rate for revenue. That's as big as general electric and bigger than Disney. As a person who knows nothing about stock picking, isn't the idea of buying Amazon down 35% just the unlock of value if AWS ever gets spun out? Yes. Isn't that like the reason to buy Amazon right now? Sure. Yeah.

It's one of them. If I was a hedge fund guy, that would have sounded way smarter. If due to some of the parts here. Coca-Cola, $40 billion. Nike 47, Netflix 30, Starbucks 30, Amazon Web Services, $74 billion, and growing 47% of year. You can't sell the stock. Who's selling the stock right now? Everyone's scared. People with margin calls. There's babies in bathwater right now being thrown out. All right, Walter Mossberg on Apple. If Apple's latest 90-day revenues announced yesterday

were annual revenues. Again, if Apple's quarterly revenues were annual, they'd be roughly number 27 on the 2021-4-500 list, bigger than Citigroup, the 90-day revenue for the iPhone alone would be around number 63 bigger than Merck. Their quarterly revenue, is Apple the most impressive stock of all time? Yes, easily. It has to be. I did listen to their quarterly call, and they said their wearables business would be a Fortune 100 company. Airpos and watchers. They were a little worse than the market in 2008, but I know in like the late 90s they had the thing where they almost were done as a company, but they haven't had like the 70, 80% ones that a lot these other companies have.

Well, they're up 39% per year since 2003. 39% per year. They have three big drawdowns. All right. Do you think Robin Hood's done? Wait, hold on. Before we get to that last thing, on the Apple thing, what was I going to say? Oh, I can't remember what they said.

It was talking about the iPad, like the amount of new customer. They're still growing. They're still growing very fast. Do I think Robin Hood's done? Whatever that means. I listen to the, well, this is nuts. We were talking to Sammy from Quarter. He put this on my radar.

The market cap is $9 billion. They have $6 billion in cash. So, assuming there would be a premium for a buyout, but talking about M&A. So their enterprise value is $2.2.2 billion. Okay, fine. Would shareholders agree to a three billion? Well, I'm guessing the founders of all the voting shares. Yeah, and they just gave him $800 million in stock grants for last year.

Did you see that? Was that real? Stop. No, no, no. No, I don't believe it. I literally don't believe it. Someone tweeted that they granted him $794 million of stock for last year. Okay.

Wow. Well, anyway, $2.23 billion of enterprise value. Guess what? unironically, earnestly, that sounds very cheap. It also sounds scary to a lot of fintech companies that are raising money at silly valuations. Rob Woodhood's enterprise value is $2.2 billion. Are you sure you're worth $500?

Goldman or Fidelity should buy them. I don't know why they don't. Coinbase. Yeah, Coinbase probably makes more sense. By the way, I was watching the NBA games last night, and they'd go to NBA and TNT, the after show with Shaq and Charles Barkley and Kenny Smith, in huge letters on their thing, sponsored by Coinbase.

and I was thinking, eh, the bare market's probably not over until Coinbase stops advertising on the NBA. No. Is that to tell? I know, I'm just kidding. So I went through some of their stuff. Here's a slide.

Made it progress on our ambitious 20-22 roadmap. Completed the crypto wallet rollout. Did you get your money off crypto off the platform? It's garbage. It doesn't work. It's not in New York. I have to move to Coinbase, I guess. Tax advances retirement accounts remain on track.

What's taken so long? All right, so anyway, so let's run through some supplies real quick. Net cumulative funded accounts has gone sideways for four quarters, a surprise. Monthly active users, $16 million off the highs of $21 million. And this is the crude of grab-in. Average revenue per user peaked at 137. It's now at 53. That's brutal. Net revenues peaked at $565 down to $2.99. Not good, not good. If you had to guess, average Robin Hood account drawdown right now, 40%, 50? It's got to be high.

Flat spoke about that. Like, for most of our history of Robinette has operated a period of low interest rates, low inflation, and rising markets. Our customers are now experiencing all three of these trends going in the opposite direction, whatever, whatever. By the way, so they allow users to ask questions on the call. Somebody asked, and I'm pretty sure they were trolling, but I'm not positive. When are you to start paying a dividend? All right, tell me if this isn't like word salad. We are working to integrate quarter clips into here so you don't have to hear me say it. Somebody asked, what are management's plans to grow and or regain market cap? And this is Vlad's answer. So first, let me say that we all know this is a challenging time in the markets,

and our focus during this time is on building a great company for the long term. You've heard us talk about several large areas of investment throughout the beginning of this call, and we're going to continue to invest in new product areas. Our product momentum and velocity across both our core businesses and those new developments is going to continue to accelerate. You also heard we're going to be focused on operational discipline in getting to positive adjusted EBIT by the end of the year. I think throughout the course of this year, deepening the relationships with our customers, especially the most engaged customers that use Robin a lot, will lead to greater monetization over time, and will allow us to get a positive adjusted EBDA by the end of the

year. Over time, we believe, I mean, anyway, listen, what is he supposed to say? But it's like it's an answer or non-answer. It's just a word salad. We're going to try harder, and then we're going to do more, and then we're going to try harder. Let's go. So this stock is down, what, 80 some percent? So this is from Ben Zanga. Credit to you. Credit to you. Did you sell the top? Close to it? That's pretty, not bad. A couple days early. Robin Hood, Chief Executive, Vlad. 10 off took home $796 million in total compensation in 2021. He's going to be like the we work guy. He's going to be the next we work guy that makes off like a bandit and this company is going to go under maybe. $796 million. Are you kidding me? They're below their last

private round of financing. Unbelievable. By the way, if we go into a severe bear market from here, call it like S&P down 20 or 30 percent. He's gone within by the end of the year. As CEO, I think he's gone. I don't know what voting shares he has. He might have it all, him and his co-founder. Here's one from Twitter. Robin Hood was valued at $12 billion in the private market, now at less than nine. Coinbase was valued at $68 billion, now at $28. So far went public at $9 billion, now at $5 billion, now at less than $0.5 billion. Maybe it's time to revisit this fintech thing. Modest proposal said, looks like Pinterest share price now is below the series G and series H rounds, which were funded in 2015 and 2017. Also broke below the IPO press in 2019.

that private stocks are also stocks? Maybe, just maybe, the numbers that VCs are making up in the private markets aren't real. I throw it out there. Maybe they're just all making these numbers up. All right. Is that possible? We got a time crunch. Let's move on to recommendations.

Okay. Do yours look like I got to find something. Okay. Do your recommendations. To a blank screen? I need some feedback. Need some bank and fro. No.

What do you mean to blank screen? I thought you were leaving me. No, I'm looking for something. I watched a lot of TV this weekend. Watch some basketball. By the way, Yanos is Thanos. There's no answer. What did I watch?

Oh, I binge watched Ozark, six episodes. Do you have one left? No, there was only six episodes for the second half. So freaking good. I thought there was seven of them. It might be, maybe this recently buys, but it is one of my favorite shows of all time. It's in the top 10.

So we watched three of them. Here's the thing. I wish they would do it on a weekly basis to have the buildup. Like the buildup, when you know you're going to see the finale of a show coming up, that anticipation to me is totally worth. Well, you're 100% right. And unfortunately, actually, this is where it falls. short. This is where the binging fall short. I was expecting an eight episode second half,

Ben, and so on the series finale, the series finale, I didn't know it was over. I thought there was two more episodes. And then when I found out, I was so pissed. It was so anticlimatic. You know what I mean? Because I was expecting two more. It was great. But I just, I didn't know was the end. And I also finished Tokyo Vice, which I'm going to triple down on. Thank you to you for recommending it. I think a listener recommended that initially. I don't have finished yet. that show. Quality, quality, quality. And you know what? I'm in for season two for Tokyo Vice. That I want more of. All right. You're just a one season guy usually. All right. I did the Bogle effect. I took a plane ride last week for some business. Not to brag. I think I finished

it on one sitting. Eric Beltuna said this. Also not to brag, there may be a couple of quotes in here from yours truly. But this one was crazy. So he said that Vanguard has roughly 25% of all fund assets right now in the fund business but they make up just 5% of all fees earned it's kind of like a biography of Jack Bogle and also kind of like a tribute to him

the guy really was a saint just totally one of a kind excellent book totally recommend the Bogle effect who's the Jack Bogle of crypto there isn't one there'd never be one because people like money too much in crypto 90s movies

suicide kings I think it's on stars I may have recommended this before just Christopher walking as a mob boss It's a great title. I think it's kidnapped. Wait, how have I never heard of this? It's an excellent movie. It totally transports you back to the 90s because every actor.

I'm in. 34 from the critics, 74 for the audience. Let's go. Really good like double twist ending. And it's about four friends who kidnap a mob boss. Double twist. It transports you back to the 90s. I absolutely love this movie.

Where do you watch it? It's on stars. Stars. Who pays for stars? I have cable and I get stars for free in the bundle. Come on. Get back on my level in the bundle. All right, they did Austin Powers on the Rwatchables today.

I can't wait. I remember going and seeing that with like 15 of my friends in high school, packed movie theater, and we were just dying. That movie was so much fun to see the theater. Is the opening scene him peeing, or am I misremembering it? No, it starts in the 60s, and that's towards the beginning. Also, I have some nits to pick with Better Call Saul. I've quit this show like seven times,

and everyone last year was saying, you have to watch the next season, and it finally came out of Netflix, and I flew through it in the last week. this is a six-season show that should have been a six-episode miniseries. Nothing happens for 95% of it. It is so boring,

and there's finally stuff happening in the new season, but honestly, it makes me more mad than anything, and the character that they show on Breaking Bad is nothing like to build up to the character in this show. I hate watching it at this point.

Because I love Breaking Bad so much. And I love you for saying that, because I was thinking about getting back on the Better Call Saul bandwagon. It makes me mad by watching it. It's so slow. You just saved me like 50 hours. Thank you, Ben.

I stopped watching that. I saw people saying like it might be better than Breaking Bad. No, it's not, you morons. This show would not exist if Breaking Bad was not a thing. As animated as you get. So I'm going to take your word for it. I spent like 10 hours of my life watching this last week. And it was done and I'm like, oh, that's great.

There was like 2% of a good show here. Anyway, sorry. I'm a little animated about this. Oh, I love it. All right. Shoot us an email Animal Spiritspod at gmail.com. And we will see you next time. Thank you.