Animal Spirits Podcast - It Wasn't Transitory (EP.227)

Episode Date: October 20, 2021

On this week's show we discuss the new bitcoin ETF, higher than expected inflation, a positive spin on the supply chain issues, a record number of people quitting their job, the boom in consumer spending and more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by VinoVest. To learn more about investing in wine, go to vinovest.com. Ben, on today's show, we discuss us hand up, taking an L, maybe taking an L on inflation. Potentially. Potentially. There's inflation as long as you don't buy. Not if you don't buy anything. If you don't buy anything, there's not inflation.

But if you go to the grocery store, bacon, you notice price of bacon? A little higher, correct? A little higher. price of value, it's a little higher. You know it is a very good hedge against inflation? Wine. There you go. All right.

It's called the layup. This is true. We've talked about investing in wine before and why did it hedge against inflation because there's a limited amount of supply, right? Right. So it's literally, I guess, wait a minute, now I'm confused. The supply of wine is deflationary and therefore it's a good hedge. It's an inflationary hedge.

Well, think about it this way. One of the reasons we are having inflation in the economy right now is, because there is more demand and then there's supply to meet that man, right? And that's the same thing in the wine industry. There's only a specific number of bottles they can make, depending on the amount of grape trees they have each year. There could only ever be 21 million bottles of wine. Exactly. So to learn more about investing in wine, go to vinovest.com. 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 Ritt Holt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. The Bitcoin ETF was not priced in, Michael.

Repeat, the Bitcoin ETF was not priced in. I was on the train coming back from the city, whatever time in the evening it was. I'm going to guess it was 9.30 or something like that. I was sitting with Josh and Chris and the news broke. And no, it was not priced in. Price shut up exactly at the same time of the announce. But Ben, who's to say? Could have been anything.

Could have been anything. Maybe the price just wanted to move. Don't you think that crypto is the one market where it seems like nothing is ever priced in? News can always move crypto. Well, how about this? When futures were announced in 2017, I think that was coincidentally exactly at the peak of Bitcoin. Do you remember that? Right.

You know how we have this tendency to remember certain anecdotes and not others? We remember certain magazine cover indicators and not others, like the Facebook one from Barron's and all of the other ones that looked really top at the time we just kind of forget about. I'm going to guess six to eight weeks ago, we were on the podcast. and I was talking about my stepmother, my stepfather, both incredibly far away from technology, finance, and crypto as you possibly can be, were asking me about Bitcoin. The price was maybe in the low 40s, mid-40s, and normally I would raise antennas. Now it's back to almost all-time highs.

This thing in late July was under 30,000, Bitcoin was. Now it's 62-ish, almost. The fact that you just can't kill this has to be the most, if I was one of these people who is, oh, Bitcoin is worth zero and it's useless. The fact that it always comes back from the dead, I don't know how you could still be in that camp. Do we know why pro shares got the nod? They're not the only one to file for a futures-based ETF, and that's what's happening, by the way. Maybe they were the first one, I don't know. Okay, I don't know about that. The SEC makes zero sense to me. Why do they keep just letting

products go that are suboptimal? So everything from all of our fund people that we follow, Eric Belchunist wrote about this, Dave Nadeg wrote about this. So it sounds like the fee for this is going to be 95 basis points, which is lower than, like, great scale. Reasonable? I don't think that's terrible. More going to come out, and there's going to be a fee war here. I wouldn't doubt it if within 12 to 15 months we have like a 20 basis point Bitcoin ETF, if all these other ones come out.

The fee war is going to be very quick here. That's my prediction. But from all the sounds of it, a futures fund for this makes no sense in terms of giving people what they want because you have these role problems with futures. It just sounds suboptimely. Why would the SEC do this? It's a regulatory thing. This gives them greater oversight.

Now the CFTC is overseeing this. This gets a regulatory oversight. That's all. It seems dumb to me, though. The reason that these fund companies are doing these types of suboptional products is because they know that this will be allowed by the SEC first. But why don't they just do a regular fund? It makes no sense.

It's so dumb. But I keep telling you why. It's a regulatory. It's an oversight thing. Why can't they oversee an ETF? They're going to eventually. Why not just do it? Rip the bandit off and do it.

Yeah, you would think they're going to do this. So this is, according to Bell Tunis, once this launch, the ticker is BITO, it will have the highest daily correlation with the spot price of Bitcoin. He says it's basically perfect, 0.991, which is basically perfect. But the problem that might happen with this Bitcoin product is that there's a role feature from one futurist curve to the next. And we'll link to people that know much more about this part of the industry than we do. Dave Nadeg wrote a really, really good piece about the mechanics of futures products.

And all of that is news to me, frankly. The two of us still can't remember backwardation versus contango. Come on. I got it now. So the curve is going to be upward sloping, and that's called contango, so that from one futures contract to the next, there will be some slippage in price. Estimates are 5% a year, but honestly, who the hell knows? Who knows what the futures are going to deal with the advent of these products?

Are these products going to have an influence on the way that hedging is done and the demand for future contracts? I would suspect the answer is yes, and there will be unsurprising ways that this plays out. And I do think that a Bitcoin ETF is a big deal because a lot of people just say, well, why don't you just buy it yourself? You can go to Coinbase or Blockfire, Robin Hood, buy it there yourself. But a lot of people in the wealth management industry want the ability to do it in a tax advantaged account or have their advisor do it for them. I still think a physical Bitcoin ETF, if such a thing exists, is going to be a big deal if and when it happens.

I think this is going to be a big deal. I think that this is going to get to quarter million dollars in assets in two weeks. $250,000? Did I say quarter million? Going out of him here. I'm sorry. I'm at a quarter trillion. No, no, no, quarter billion. This will get $250 million in assets in short order. And yeah, listen, for people that are saying that why don't you just buy Bitcoin, not everybody can just buy Bitcoin. I know it's not that difficult, but not everybody is that tech savvy to do this. A lot of people that want Bitcoin don't even know who Coinbase is. One of your points you've been making a lot lately is the NFT stuff is so small because look at

OpenC, it's only a million people or whatever it is. That's because a lot of people just don't know how to do it. Can you imagine trying to show your parents how to buy crypto? My parents still say www. dot before they say a website. Okay, so you download Coinbase, you get a two-factor authenticator, you log into Coinbase, you open up your app on your phone, you get the pass code, you send it back to CoinB, come on, they're not doing that. If they were going to do it, they would have.

And RIAs control, I don't know what the estimates are, $15 trillion in assets, if point and insert 11 zeros with a 1% of assets go into this thing, there's going to be real money here. Yes, I think people underestimate the potential for wealth management to come into this space really hard in the coming years. And being two people in the wealth management industry, I think we know firsthand. There is a desire from this, not from everyone, but from some people there surely is. And the higher the price of crypto goes, the more demand there's going to be. That's just the way that this thing is going to work. So let's work this out in our head.

A client comes to you and says, I want a two or three percent allocation. Is this the thing where you just have to rip the bandit and go and live with the volatility? Or do you say we're going to wait for pullbacks because we know they're going to come? Well, definitely. That's tricky because what if you tell a client that, listen, it's at an ultimate high. This thing is volatile. It has a tendency to fall 20% while you're going to get a better entry. What if you don't get a better entry? That you probably will, but what if you don't? The crash is coming just from what level? Right. So I think with this specifically, if you're going to invest in for a client, I think you probably have to lay out some sort of game plan. And I think probably the best thing is just listen. If you want to buy it, just buy it. For most people, I think too. The FOMO risk is real here. If it went from 60 to 75 in a week or whatever, Yeah, if you say, listen, we're going to invest over two quarters or we're going to buy here, here and here, and then the price just rips from 60 to 80, then what? Yeah. So I think you just buy this.

But obviously, in a size, that's not going to blow you up if it drops 20% while you're sleeping. But here's the thing I don't want advisors to say anymore. Don't put in any more money than you think can go to zero because that train has left the station. Saying that made you sound smart a couple years ago, I don't think you can say that anymore. Here's another thing I was thinking about. Are the 70%, 80% crashes, I think of the past? because I think that there is so much money lining up to buy the dips that I don't know that the dip gets that much.

50 is the new 70 to 80 maybe? I think 50 for sure. You can never take 50 off the table of any asset class. Well, we already had it this year. It already dropped 50% this year. But I feel like there is pre-ETF, post-ETF. Those are two different worlds in my opinion. And I think we're going into the post world.

So it'll be like BC AD. Yes. So I think that there is a floor. Now the floor, 50% that still hurts. But I don't think that you're going to see an. 80% wipe out. That's probably right. I think, yeah, the more institutionalized this gets, I agree. That adds a little bit of a floor somewhere in there. All right. So, this was the week, Ben. I think this was the week that not transitory with inflation sort of

became consensus. At least that's for my part. That's just anecdotal. Morgan Stanley's CEO Gorman says that it's not transitory. Some Fed officials, James Bullitt is saying that. We got some data. This is from Heather Long. We'll link to this on Twitter. This is a really worrying inflation story for low-income Americans. Gas is up. Pretty much every kind of protein is up. Bacon up 19 percent. Beef, pork, eggs, TVs, kids' shoes. A lot of things are up. This is one where I would not want to throw my hat in either side of the ring right now. Shocking. Shocking. You're not going to take a side. Hey, I've been taking sides in the housing market the last two weeks in the beginning. One's bit twice shy? Is that what's going out here?

Yeah. Fool me once. Shame on, wait a minute. But I'm just saying it still wouldn't surprise me if this was transitory because I would say everything is transitory until we see wage growth really stick for good. It seems like workers have never had more power. I think we're going to get to that in a little bit, but that's the one thing. If wage growth really isn't sticky here, I still think like a lot of this stuff could be transitory when we work out the supply chain issues. That's kind of where I would fall on us. Agreed, but you and I both know that wage growth is sticky. It doesn't go back the other way. Potentially. I think wage growth is the stickiest part of inflation. You see that I have a I have a sweatshirt on.

Jackie Churin Productions. I don't know if you could see it. So Big Lobowski? Yeah. That's another Instagram purchase. Of course. I just threw this on because I was wearing a t-shirt. It's freezing in my house.

I don't have the heat on yet. It's like 64 degrees in here. It's cold. Suck it up. Winter's coming. It's a segue, Ben. All right. It's going to cost more to heat your home.

That's where I was going with this. Okay. What do you keep your thermostat at? What's your dad level? In the winter. My wife likes it cold. So she could go 68 at night. I prefer 69.

I keep it at 69 as well. And I have nothing to add further after saying that number because I can't. Well, so during the winter, I'm going to be home alone. How high do I jack it up? I like to be pretty toasty. I'm like a 71 guy in the winter. Our probably ranges between high 60s, low 70s, depending. Okay. So according to the Energy Information Administration, nearly half of U.S. households that warm their homes with mainly natural gas can expect to spend an average of 30% more on their bills this year than last year. You have anything to say about that one? When I was a broke person coming out of college and lived on my own an apartment, I'd keep it

at like 61. That was like me and my fire days, even though I wasn't really practicing fire. I could go really low on my own. So, yes, costs are going up. I would love to see a comparison here. Maybe someone can do this for us. Broken out by income level, inflation versus income increases. I truly want to know how much of this, especially at the low end, how much of this

inflation is being helped by people who's making more money. what's the offset? I got you covered. Actually, Matthew Klein has you covered. So he wrote a piece about inflation in the labor market and he's got this great chart that we will show. And he says, if a lot of the pandemic related supply chain stuff comes down or gets fixed, which I think it will, then CPI is going to be back in the two to two and a half percent range. But in terms of wages, Ben, average hourly pay for production and non-supervisory employees has been rising at a yearly rate of more than 6%, which is the fastest pace since the early 1980s. So, boom, shakalaka. Pretty good. So wages are rising 6%. Inflation is rising 6%. It's basically an offset,

depending on what categories you're spending on. Managers and supervisors have seen their pay raise about 1.5%. So people on the lower end are disproportionately benefiting for the first time, maybe in ever slash a long time. It's just this old trope that you say, inflation is going to hurt the low-income people the most. But they're the ones who are experiencing the highest wage growth right now. Let me just give Matthew Klein the final word on this. He said from Q4 2020 to Q1 2021, the bottom 80% of Americans by income boosted their holdings of liquid savings by $370 billion. And this is the coup de grace that I think people just conveniently leave out when they're getting up in arms about inflation. Klein says, personally, I think it's a good thing for

more people to have greater financial security, especially if it gives them the confidence to try new things that might ultimately make them happier and richer. So this is talking about like the great resignation about how there's so many job openings and stuff. Businesses used to employing workers who live in constant fear about whether they can pay their bills might not appreciate the new regime. But there's a good case to be made that the shift will end up making all of society better off in the long run. More risk taking more investment, more creative destruction are likely our best answers to the challenges that face us. And that includes inflation. You could make the case that inflation could be worse right now. People are spending a ton of money. It could be worse. So

Bloomberg has this chart on the U.S. stock of pandemic savings. And it's continued to grow each months. It hasn't shrunk at all. So it's now at $2.7 trillion. And in March of 2020, this is like excess savings of the pre-pendemic using February 2020 as a start date. So $2.7 trillion additional dollars of savings for people. If that money started working its way back and maybe because of inflation, it won't really go into the right places and people will be using the savings to make up for it. But people still have a lot of cash that they're hoarding still. So think about if all that money came back into the market, how inflation could be worse, right? It's a good thing for NFTs sucking up some of that juice. In August, a seasonally adjusted

4.3 million resignations were handed in. That is the highest figure since the BLS started tracking it in 2000. U.S. workers left their jobs nearly 20 million times between April and this year, 60% higher than during the same period last year. Obviously, last year was, forget last year, 12% above the spring and summer of 2019 when the job marker was at its hottest in almost 50 years. So this chart I made on Y charts, it shows U.S. unemployed persons versus U.S. job openings. And of course, unemployed people spike to, what, 20 million, 19 million at the worst of the pandemic. Now it's down to seven and a half million-ish. And job openings went from 5 million to nearly 11 million. And obviously there's this mismatch going on and there's a lot of reasons for

this. I don't see how you could look at this and think this is a bad thing. This shows that U.S. employers have a high confidence in their businesses right now, right? There's double the amount of job openings now than there were 18 months ago. They want to fill these positions because they think things are getting better in the future. I think this is a good thing. But the flip side of that is they can't fill positions today. Okay. Here's another pivot. You said before Bitcoin ETF after Bitcoin ETF. So I've been to a number of places in the last few weeks where the service is noticeably worse. I feel bad for the people. The Starbucks drive-thru line took forever yesterday, picking up a coffee for my wife. I still don't drink coffee, obviously. Not to brag. So you feel

bad for the people that are still there, and they're probably getting crap because their service is slow and they're short-handed right now, right? Is this going to be looked at as the period where after this, we're going to see a ton of new innovation in robot technology that is going to be serving you. So you pull up to the robot Starbucks lane and you have four options and you hit it and it fills up your cup for you that you've purchased in advance, something like that where if you don't want the high-end service model, you can pay up for that. But if you want just the low-end service model, like these companies are going to have to put those in, right? That's going to happen. So this isn't good or bad. It's good and bad. It's bad for local businesses

that can't fill jobs, right? That's why there's so many job openings. But it's great for people that have a cushion who can afford to find something better, that they want to do something better with their lives. So Matthew Klein said that $380 billion, whatever I referenced, that's the equivalent to four months pay. So people are reevaluating their lives, and that is a good thing. So it's not great for some employers, but it's pretty good for employees that are looking for something better to do. There's been a lot of people who have, what do they call it when you take a time, a year off between high school and college? It's escaping me. You kind of took it when you just quit college, I guess. I didn't quit. They let me. They let me.

You got fired. But it's almost like people had this buffer time in some ways to figure their life out. You know what I'll say? Maybe this has to do with my lack of taking education seriously. I don't have a good vocabulary. You just asked me to retrieve a word. Couldn't do it. This happens to me too.

It's in there somewhere, but there's too much other stuff than that. One less thing on this. In its latest hiring announcement, Amazon says it's offering a signing bonus up to $3,000 and hourly wages of $21 an hour depending on shifts in many locations. And they're about to hire $150,000. seasonal workers. Ben, inflation is the wage inflation. I think it's here. Okay. I guess this is the tide that lifts all boats, right? How do you compete with Amazon if you're a manufacturer? So great for employees, but really, really horrible for local businesses. This is a thing. There is never

an equilibrium. So I mentioned to you last week for the last 10 years pre-pendemic, the trope was we have low inflation, but wage growth sucks. Now it's like, okay, wage growth is here, but we have high inflation. And in both cases, someone's going to be angry. And this other one, you say, Amazon, this is great because if you're a person who doesn't have a high education and you want to earn a decent living, you can do that at Amazon now, potentially. I don't know how appealing that work is to some people, but obviously for some people, it's not a bad living. Then it hurts mom and pop. So the point here is there's never an equilibrium where everyone is happy, unfortunately. There's always going to be a problem. So we got a email. Since you were talking about

shipping these days, I thought I would tell you a quick anecdote. Three months ago, I moved from a Southeast Asian country to the D.C. area, the shipping company initially quoted $13,000 for half a container. I had been told prior to the shipping crisis, it would be 5K. We contacted them. Two months what by with all our household items sitting in their storage as they tried to get our things on a boat. They came back to us a few weeks ago with a new quote of $29,000. Of course, with this kind of price increase, you question the value of what you own, but then land in your sentimentality of how much you love your Christmas tree ornaments and children's little memories. Wow. That's tough. That's like a

let her to spin this, Ben. By the way, did you see Powell, they got, they caught Powell's hand in the cookie jar. He was trading stocks last year. Was he really? Not individual stocks, but his, his records are being released. And, uh, what are you doing? That's bad. I mean, it's all index funds, but nevertheless, just here's my positive spin on the supply shortage. There's a million different reasons for this. You'll set all the podcast, read all the stories about trains and boats and planes and why this stuff is behind and automobiles yeah everything so dude that was a john candy joke oh okay sorry i missed that one i don't know sometimes you with 80 movies is kind of touching go whether we've seen them or like them so i don't know if you like that classic or not

overrated oh man i've turned that into a thanksgiving tradition i think that movie is a holiday underrated classic so the wall street journal has consumer spending u.s retail and food service sales this thing is just rocketing higher you saw like a little dip and it came back the biggest reason that we're having this supply chain shortage if you wanted to put down to one thing? Demand. People demand too many goods right now. Oh, so you're blaming the consumers? No, I'm just saying,

isn't this another good problem to have? Where the opposite is what you don't want after the financial crisis and no one wants to buy anything. Right now, people want to buy more stuff than there is supply. If you're an economist, which problem would you rather deal with

if you're a policymaker? Demand, you want the demand. So hopefully if we fix the supply stuff, the demand stuff will stay here. we have all these savings. In two years, the roaring 20s continues. This is a legitimately good spend. You could work your way through supply crunches. I don't know how you spur demand. I guess lower interest rates. We've already tried that. Well, we can spur demand at giving people money, obviously. That helps. Right. Man, this chart. This is something else, right?

What's a bear case right now? Other than valuation and maybe complacency. And I guess the point is the risk, you know, you never see the risk coming, blah, blah, blah, blah, blah. But it's hard to be too bearish right now, given how good of shape the consumers in, which basically drives the economy. I'm still thinking Roaring 20s is we've certainly hit a little hookup there. I think it's still on the table. Yeah, but does that mean that we're going to get the depression in the 30s? Well, that's like retirement age for us. No, no, no, I've talked to my fellow Fed peers, and they've assure me depression is no longer on the table. All right. I appreciate that. All right. The baby boomers win again here. This is another Wall Street. Journal one,

the cost of living adjustment or cola this year for Social Security 5.9 percent to meet with inflation. So the increase, this will translate into additional $92 to retirees average monthly benefit. So the average amount is almost 1,700 now, 1657. That's monthly? Yes. That's not bad. No. That's not a ton of money, but what did we say the median retirement balance was? Last week, I said 4% on that median number would give you $900. So Social Security is almost double that. Okay. So that's around $2,600 a month. Yeah. In retirement. I mean, it's not a ton of money, but it's not that awful. People poo poo Social Security quite a bit. There are very few annuities that would give you this type of one-for-one match with the inflation rate. I still think Social Security is by far the best

annuity ever created. And I know people say, well, if you just gave me the money and I put it into stocks, it would do so much better. But there are so many people that if they had that money, it wouldn't go into anything. And they wouldn't save it. They'd probably spend it. And this thing has been huge for people. I'm sure this helps a lot for people. One more thing. And our advisors at Riddle 12 kind of put us on to this one. I bonds, which are inflation-backed bonds, they were trading at a three and a half percent. It must be some sort of inflation plus. I don't know exactly how these things work, but now the new inflation-adjusted variable rate

goes to 7.1%. You can only put $10,000 in. Per social security number. Per spouse, right? So you couldn't do it for your kids. Right. So if you're a married family, you could put $20,000 into these. Stop hitting your desk.

I know you're passionate about COLA adjustments, but... I am pounding the table on these eye bonds. Like anyone wants to invest in iBonds right now, but still, if you have savings and you're doing the down payment thing and you can do 20 grand in something that's paying you 7.1% annualized for six months before it resets. Can we just take the L on inflation? You think so? I'm not ready to go there yet. I didn't even see it getting as high as it did. So why not just be like, all right, I was wrong. Big deal. Okay. Here's where I get the W on this one. I said what if inflation rises, but interest rates don't. I said that three months into the pandemic. Victory lap.

Well, I appreciate you moving the goalposts. The mental gymnastics are impressive. All right, here's the thing. All this worrisome stuff we're talking about here, the stock market doesn't give a shit about it. The stock market is now 1% off all time highs, 2%. Yeah, but come on, that's a non-sequitur because how many people own stocks? Half the country doesn't own stocks. That half the country is the one that's feeling that bacon up 14%. I'm a man of the people.

No, you're calling me in the middle of the road guy. What? I'm taking a side. You know, you're taking the other side every time on this stuff. Well, just because you live in the Midwest, doesn't mean that you're automatically a man of the people. This show is about money in investing. The stock market has the best track record of any indicator for the past 18 to 24 months in all of this.

Besides for rich, dead, poor dead guy. He's always wrong. He was close. Yes. He just predicted a second pandemic for mosquitoes. By the way, how were we not going to comment on that video? What video? The CNBC video.

Oh, okay. There is a technical trader on CNBC. Wait, wait. Do you know how much money this guy charges for a monthly rate for his stock trading subscription? Whatever it is. It's not enough. A month. Guess.

Someone shared it this morning on Twitter. 500 bucks? $9.99 a month. Well, listen, small price to pay for Alpha. Okay. Tyler Matheson asked him, he was talking about Upstart, and the host said, what do they do? And the guy just completely froze like a deer in the headlights. And listen, I know Monday morning quarterback is easy, and I know being on TV in real time is difficult.

He should have just said, listen, I'm a technical analyst. I follow a price. I don't care what the company does. I follow stocks, not companies. Yeah, it's not relevant. And he said, excuse me, I have a family emergency. I got to go, you're breaking up. You're breaking up. And apparently he's doubling down and lashy out on Twitter. Anyway, that was, listen, it was, it was funny, but he could have just said I'm a technical analyst, which is the truth.

Yes, he froze, obviously, but it was great television. It was really good to be. I felt bad for him until he started really acting inappropriately on Twitter. Anyway, it was good entertainment. All right, so the stock market doesn't care about inflation. I still think that's a non-securter. My point is that the market looked over the economic value. before? What if it's doing it again in six months? We go, oh, wait, the supply stuff has relieved a little bit, and the stock market was right again, and we're off to the races. Here's where I am today. I still do believe that it's transitory in the sense that it's not going to keep going up

5% forever. I don't know if that makes it any better. It probably doesn't, but I do think that future prints are going to settle back down into the 2, 2.5% range. The problem is that the damage might already be done, right? Transitory doesn't mean that the prices come back down. Yeah, but I think the difference between 3 to 4% and 2 to 3% is probably a decent amount, even though that doesn't sound like a lot. You're not arguing about 6% or 7% anymore, which some people would like, they want to have this hyperinflation and the Fed did all this. But if it goes from 2 to 3.5, that's still a big jump for a lot of people. By the way, somebody emailed us. I guess they're not a frequent listener of the show because we spoke about the fake Ben Carlson

Instagram account. Somebody said, is this the real Ben Carlson? And the message was, how long has it been since you had interest in the markets? That was the quote, As if Ben would DM a stranger. Here, I'm going to set the record straight. First of all, I might have to hire this guy because this fake IG Ben Carlson account has like 70,000 followers. I don't really use Instagram when I post some stuff on our animal spirits one every once in a while. I don't think we follow anyone. We just post content there.

I'm never going to DM you out of the blue. So let's just make that known. That's not going to happen. Six times a week I hear from someone going, hey, did you DM me asking about options trading? No, it wasn't me. Come on. I know. Give me a little credit here.

At least go back and have it back and forth with this guy. I realize it's a bot, or it's a scammer. All right. We haven't spoken about flows in a while. US equity mutual fund and ETF inflows are going to be the largest ever on record in 2021, which is probably not terribly surprising given that 2020 was the largest outflow ever. These numbers just keep getting bigger because the pie keeps getting bigger. And I guess this is also probably a result of stimulus money.

Any thoughts here? Or should we just move on? I don't know. Half the country doesn't own stock. So why are we even talking about this? Too shy. Sorry. That was a little rough.

All right. So Jason's Wag had a piece on using leverage in your portfolio. And I wanted to get your thought on this because I think this is something people are going to have to consider in the coming years, potentially. So this is the Wisdom Tree Fund that was actually started out of a conversation on Twitter between economic and the late non-related sense, where you basically borrow a little money. So you invest in a fund that is 90% stock, 60% bonds. And you're using futures on the bonds. So you're taking a little leverage. Well, hold on. It's 90 cents. stocks 60 cents in bonds. It's not 90% and 60%. Well, it works out to 150% on a gross basis called gross and net exposure. So then you invest. Wait, is this portable alpha? Basically.

Yeah, okay. I think Corey Hofstein calls it. Stacking returns. Stacking returns. So you invest 67 cents into this fund with leverage that essentially gives you a 6040 portfolio. Then you have 33 cents on the dollar that you can invest in other strategies that have correlation, alternative, whatever. I'm behind the strategy. So Corey was on with Jeremy Schwartz discussing this. And the big worry for everyone is you're levering up bonds essentially, which is a low volatility asset. But still, what if rates rise and volatility goes crazy in bonds? And his point was regardless if rates rise or fall, over the long term, you're going to get whatever the starting rate is, more or less. We've discussed this before. The best predictor of bond returns going forward for five or ten years is a

starting yield. So even if you have a little volatility along the way, you're going to get that return. essentially. So you know that. So you're adding leverage to an asset that is much less volatile than stocks and has pretty good expectations on your returns. I think there's something to this for people who understand how this works. I wonder if this is the type of thing that advisors can implement, if DIYers can implement, or if it's just maybe a little bit too complicated, even though the idea is simple. Like the execution of this is where I guess the rubber meets the road. I think it would have to be, for a DIY person, it would have to come from one of the robo probably that is set, just you turn a dial and say, I want to take it up to

120 percent or 150 percent, whatever the number is, and you don't have to do it yourself. Here's what I mean specifically. Let's say you say to somebody, okay, here's how this works. With 67 cents, you allocate to this strategy. If you're going to be a 6040 investor, if you have $100,000, you put $66 grand into this. What does that person then do with the other $34,000? That's potentially where this blows up, not because the fund is a bad idea, but because they do something really dumb with the other 34% potentially. Then you mince men of T's. You're golden.

All right. We got a few emails. Michael, hope you're well. Thank you. Enjoy today's podcast. Just want to let you know, I'm team batick on this one. Just yesterday we lost that on a house. We offered 12% over asking price and waived appraisal.

It's incredible just how hard is to buy a house. Unless you're making an all-cash offer, which I'd love to know how anyone my age has $500,000 in cash. This is another email. This point was really interesting. And I think, Ben, that we often, you in particular, miss this point. You picked out the emails that just said Team Batnik in the headline, but keep going. I didn't see any team Ben. Maybe that's selective.

I put it in here. Okay. The point has made a few times that housing is affordable because low down payments such as FHA at 3.5% are available. While these loans are available, they are not feasible if you are in an even marginally competitive market. Any buyer who submits an offer with an FHA loan or other download payment is going to get their ass kick by more attractive offers. You have any objection with that? I mean, that's a very, very, very fair kind of point. Here's the counterpoint. And I'm going to say, we're both right and we're both wrong about this.

But just let me read this. Ben is right about housing. It is affordable. It's not that people can't afford homes. There are many more people seeking to buy houses at these prices than there are homes to buy. It's a supply problem. If it were unaffordable, these homes would be sitting on the market without buyers until the prices came down. That is not happening.

Because saying that housing is unaffordable would be like saying beer and liquor are so unaffordable every bar in town is packed. Think about that statement. But here's the thing. We're both right and we're both wrong because we're using anecdotes. But I'm 90% right. and you're 60% right. Okay, you're only saying this because you're in New York City.

I'm sorry. So I shared this chart the other day. Well, yeah, you keep using national data. That's my whole point. Because we live in a nation. No, we don't. We don't live in a nation. People live where they live.

Nobody lives on the average. Come on. Someone on our Twitter space has said, listen, we don't choose where we're born. And this person was from Toronto. And they said, it's crazy. So I actually posted this in 2017. And I said the Canadian housing market is bananas.

And it showed how they didn't really have a dip from the 2008 crisis. their housing just kept going up. So in 2017, I was saying Canadian housing prices are crazy. This is five years ago. Now, this is Toronto last year. Detached homes increased by 29% year over year. Some of detached homes increased by 21%. Townhouses increased by 36%. Condo apartments increased by 12% in Toronto last year. What's the story there? Do all Canadians on Bitcoin? I'm just saying, if you think it's unaffordable now, wait till five or 10 years. That's all I'm saying. So I shared this chart the other day. I gave the net worth of all Americans by age and it broke it out in the bottom 25% median top 25 and top 10. And I had so many people on Twitter comment saying,

well, I'm technically in the top 10, which is a humble brag, but I live in San Francisco and so it doesn't make me feel like I'm the top 10. Or I live in New York City, so it doesn't make me feel like in the top 10. It's like, of course, context and relativity matters here. Right. So you're not giving context. You wrote if housing is unaffordable, how are there multiple bids over asking for so many houses? Yes. That's a good point. That's a valid point. Oh, is that this person? Yeah. No, this person emailed us and said this. I'll tell you why. because yes, a lot of people have a lot of money. A lot of people in areas of concentrated wealth have a shit ton of money.

But guess what? A lot of people also just cannot compete. Okay, so I'm saying we're both right and we're both wrong here, though. You're trying to make it 100% Ben is wrong and 100, like it's both. There's context involved here. But I keep saying that so many people are getting priced out, you just keep pointing to the data. And I'm saying there's a lot more to it than that. Yeah, I'm sorry, but data is usually right over anecdotes.

That's my whole point. But I'm just saying, listen, you're right and I'm right. No, no, no. National housing data doesn't tell the full picture. Okay. I understand the whole world is full of trade-offs. If you live in the center of the universe in New York City and you get all these great things to do and there's all these people and it's vibrant and all this stuff. Bagels. Yeah, you get to pretend like you like bagels and pretend they're not gross because you put salmon on them or something. I'm just saying the world is full of trade-offs.

I just made the soccer coach Giff. You know that Giff? No, what's that one? Where goes like this. Listen, I live in Michigan. Housing is way more affordable here. I have to deal with horrible winters. You live in California, the weather's great, but an earthquake could detach it from the United States any day now. Like, everywhere you live is full of tradeoffs, right? That's the thing. You've got the lions, although I have the giants. I shouldn't talk. Yeah. Of course context matters and of course where you are matters. I'm just saying, if you live in a desirable

and you think it's going to get more affordable in the next five to ten years, you're nuts. It's going to get a bit less affordable. I don't think anybody thinks that. Okay. But if you're complaining now, and guess what? The biggest one to blame here is the government. They made it a point to build more houses in the 1950s, and they haven't done that since. So if you want to blame someone, blame all these rules and regulations behind building. It's the government's fault. It's not anyone else's fault. It's not by Carson's fault. Yeah. By the way, we've got to take a big L on Zillow here. Speaking of taking L's on this show, we talked about how it totally made sense. And maybe it still does, but this is from Bloomberg. Zillow will stop purchasing new homes as it works through a backlog of properties in its pipeline. They basically said they're operating. beyond capacity. So I don't know if that means they have a labor shortage right now. Full disclosure. I pride myself on transparency, Ben. My average cost is $94.88. Oh, so you're saying you own Zillow. Okay, I own some Zillow. I probably bought it higher. I probably bought it at like 110 originally. And it was down 10% today, I believe, on this news. You know what's interesting about this? All right, so here's what's happening. In the flip side,

not only is Zill and Michael and Ben taking you now, open door, getting big Ws. The stock was up bigly today. All right. So Zillow is, quote, beyond operational capacity now Zillow offers business and are not taking in additional contracts to purchase homes at this time. We continue to process the purchase of homes from sellers who are already under contract as quickly as possible. So they're just taking a pause. They're re-evaluating. Is this not viable? Is this part of the home building process just too labor intensive to be disrupted by machines. I did see a few people say real estate markets are local. They require context, right? Like we're saying. Don't tell me they require context. I'm telling you that.

I think this was the worst possible time to roll out this strategy. I think they just had horrible, horrible look. It's probably hard to find labor right now to make these work, to fix them up. It's never been easier to sell a house. Who needs? So I guess the whole idea of an I buyer is maybe you don't get as good of a price, but for the convenience of it, it's so much easy. you are to just use them, then hiring a broker or enlisting it and buy and all that sort of stuff where you'll pay a premium for them to just take it off your hands. But in this market, not only do you not need to do that, you could list your house at a huge premium and still get offers. If they would have rolled this out in 2012, for example, when housing was in the

doldrums, I think they would have done fantastic with it. Oh, by the way, this is why we need a 24-7 stock market. The news came out on Sunday. So what? You wanted to pounce? I wanted to buy the dip. I was looking for an opportunity. What's interesting, is that this stock has sucked ostensibly because the eye buying program has done really, really not well, obviously. So you would think that maybe them taking a pause would be bullish for the stock, but actually. Positive spin zone as shareholders. Remember when Netflix was going to do the thing where they separated out the streaming and DVDs? Dude, that was my personal big short. That was your big short. So that company got wrecked. I literally made like 2,000 percent.

I bought weekly put options the night before that. news came out, and I thought I was going to retire in about seven days based on that trajectory. What if this is Zillow's Netflix moment? Well, we'll see. It still sounds like they want to do this. I just do think it's very ironic that one of the biggest name brands in real estate is getting crushed during a housing market boom. Yes, it is absolutely chef's kiss. Actually, speaking of a big short, Steve Eisman was short Zillow years ago. I don't know if he still is, is they? I don't know. I'm sure the headline says, man who predicted big short. I'm actually positive. if you and I cover that story on this here podcast, two or three years ago.

Sounds about right. All right. This is interesting. The creator economy is found to spread the wealth. There was an Axios report on Twitch. One percent of all streamers earn more than half of all revenue. While a handful of creators have made substantial money, the vast majority of earners on Twitch have made less than $120 this year.

Per the report, it's the same thing in podcasts. This is kind of hilarious super followers on Twitter. Only $6,000 in revenue in its first two weeks. Huge out. How is that even possible? Six grand? Do you see the need to pay anyone for Twitter follow at this point? No, and here's a statement.

You can't disrupt power laws. What do you think? That's fair. Yeah. The other thing is, this is why FOMO is so damaging to people because you only see the people who have succeeded in these power laws and you go, I wish I could do that. I want to be an influencer. I want to do this.

It's a very small percentage of the population who ever gets to that point and people think that they can do it. You've probably had friends who've decided, like, I'm going to dip my toe in the water of like being an Instagram influencer or try a mommy blog or whatever it is. And it kind of fails miserably and just peters out and never goes anywhere. It's hard to become one of these people. More than half a million people pay to subscribe to a substack writer. I said that that was a big number. That's actually tiny. Half a million people. But the top 10 now collectively make more than $20 million a year, which is great. I'm guessing the rest make pennies. Yes. Looks like it's like this

in podcast as well. Yes. Sounds great in theory. But all right, this was a chart. Moffin Nathanson. The number of original content episodes per quarter, it's Netflix and it's everything else. So Morning Brew tweeted, more people have finished Squid Game, 86 million, then subscribe to HBO Max or Peacock or Hulu or Paramount. By the way, I subscribe to Peacock this weekend to watch Halloween. And you know, I have a high tolerance for bullshit. I like the last Halloween very much.

I even like the Rob Zobby Halloween's. This sucked. It really sucked. What's interesting, though, because the. writing and the acting was terrible, but Danny McBride was on the writing team. And you would think he's a funny guy. And if anybody saw it, the Big John Little John part was definitely Danny McBride. But by and large, the acting sucked and the writing. It was terrible. I got to take here. HBO is Fangstocks. Very high quality. Netflix is index funds because they have so much

crap they throw against the wall and eventually you're going to hit a squid game. Like, when's the last time Netflix had a good original before Squid Game? Queen's Gambit, maybe. Tiger King. So they have so much stuff that eventually you're going to get the best stock. So Netflix is a market cap weighted index fund. HBO is Fang. That's a good take. Squid Game will generate $891 million in impact value for Netflix. I don't know how this calculated.

The show costs $21 million to produce. And by the way, you probably don't know this, but Netflix, the stock, has done incredibly well over the past four weeks. It was stuck in a sideways range for like a year and a half, just really not doing anything. is it a stretch to say that it's doing this because of a squid game? I don't think so. I don't know what else it would be because of. I'm sure that people are hoping this will translate into more subs, right? It would make sense. Yeah, look at the chart. All right, very quickly, I just want to touch on this. This is interesting. So there was an article in the FT talking about Apple's advertising business has more than tripled its market share in the six months after it introduced

privacy changes to the iPhone that obstructed rivals, Google and Facebook. Evercore said Apple is likely to earn $5 billion a year from its advertising business and $20 billion a year within three years. What they're doing is they're selling ads in the app store. So if you type in Snapchat, which I did, you look at this picture, you get TikTok first. Apple's an ad platform now. Just like when you type something to Google, the first thing that shows up is whoever paid an advertisement.

So $20 billion a year within three years, Apple just keeps finding ways to print money. I mean, is that wild? Yeah. For comparison, what do you think Netflix's revenue is? Are we going to do one of these things where Apple's cash pile is bigger than 490 of the other S&P 500 stock, something like that? Dude, this is a big story. I'm telling you Apple is a new business. No, I'm saying it is. It's just, it's like. No, but you're poo-pooing it. Apple is a new business line that is about to exist, that did not exist. I'm not poop-pooing it. I'm like dropping here. I don't know even know what to say. Netflix did $28 billion in the last 12 months.

You need to back off, dude. $28 billion. All right. That's a big, number. If you stacked $1 bills, like, how high would it go? Come on. Very high. That always makes a great point. By the way, can we do away with those stats? I agree. The stacking to the moon part, guilty. I use that in my book. I apologize. I apologize. I was like four years ago. Yeah, it worked back in the day. I retired it. We'll never go back to that well. You will never see me tweet that. Yes, I said that on one of my spaces. Four years ago, I would have totally done a squid game personal finance lessons. And credit to me, I did not do it this time. We're growing. That shows great personal growth. We got a lot of emails about the gas thing, and I don't really need to share all of them, but

there's one that I want to share. This guy bought an Audi A4 in 2009, drove it essentially until it died with 200,000 miles on it. It said that you had to put premium gas in it. And so for the first five years, all I did was put premium gas because it was the first nice car I had. But in 2014, when I paid the car off, I decided to start a game, a squid game, so to speak. I was going to start using regular gas, calculate the difference in price between, that and if I use Supreme and save the difference every month. He opened up an e-trade account,

use a Vanguard Target Day fund, and guess what? Five years later, $20,000 in that account. I have a confession to make. This email is from me, actually. This sounds like my doppelganger. It sounds like something I would do. This is the fake Ben Carlson on Instagram. So it's now worth $20,000? That's impressive. And guess what? If your car breaks down because you're using regular gas on a premium, now you get 20K to pay for the repairs. What's the long and the short of it? If you have like a Ferrari, yeah, use premium guess? Yeah, it sounds like for a mid, if you're just driving an audio or Beamer or Lexus, do you really need to use it? Probably not. Okay. Listen to questions. Is technical analysis

just astrology for men? That's a pretty good question. Funny question. It can be. And I think that technical analysis gets a really bad rap because there's a ton of bullshit out there. And there is less bullshit in fundamental analysis. There is obviously a lot of silliness, but I think a lot of lines on charts and pattern analysis and astrology, it really is out there. So I think that that part of it, pay that no mind. I think a lot of it is nonsense. However, I think the basic tenets of technical analysis when you boil them down have a ton of merit. It's the study, in my opinion, of supply and demand dynamics within the market. Buyers and sellers, that's it.

Like most things, it can be taken too far. Here's the thing I missed out by not being a technical analyst. So you and Josh can look at a chart and go, oh, look at this beautiful chart. Look at the setup here. Or, oh, this chart is ugly. I don't have the ability to do that. Yes, you do. It's very simple.

All that I'm looking at is the stock going up or is the stock going down. No need to overcomplicate it. No three witches in a dome or whatever the hell it's called. I do feel like there are certain people who use technical analysis similar to the way that some people try to pump Bitcoin, where they're doing it to show. 100% certainty in something. And the way that they use it, it's not the fault of technical analysis. It's the people who are promoting it. 100%. And there's other people that use it very responsibly who lose it as a probabilistic exercise

and say the odds are in my favor when this happens. Nothing is 100%. So I think that simply technical analysis is a scam. No, I don't buy that for a second. In fact, you could say I'm a staunch defender, but it could definitely go too far, like anything else. All right. Any wrecks for the week? Well, do not watch Halloween. If you haven't watched it yet, you're definitely not going to. Isn't it kind of funny, though, how a network like Peacock, and I know Paramount Plus is doing this, too, where they're having their own movie releases on there? And you're like, wait a minute, these are actually pretty well-known actors in some cases, and they're just releasing a movie on Paramount Plus. It's very bizarre. I loved it. They're actually making another Halloween. I think I'm out. I mean, who am I kidding? I'll probably see it, but I think I'm out. I was going to do a double feature on Saturday night. If Halloween wasn't on Peacock, I was going to go see Halloween and then the last duel. I didn't get to the last duel on Saturday, but apparently neither did anybody else. You told me 4. 4.8 million dollars in its opening weekend. The film cost more than $100 million to produce. That hurts. This was Matt Damon and Ben Affleck wrote it. Ridley Scott directed it. Yep. Jody Comer, who is an up-accoming actress, was in it. Adam Driver. Adam Driver, I thought it looked like a good

movie, and it got nothing. I'm going tonight. I'm doing my part. I'm going tonight to see it. What are you doing? I'm sorry. Movie theaters are dead, man. You don't deserve movies. I'm calling it. It's over. I'm watching Dune on my couch this Friday. I love movie theater. I've been going to them all my life. They're dead. They're going to be a relic. They're going to be around, but they're going to be a relic. I hate to say it. It's true. That's such bad news. I think you're right. It's unfortunate, but I think it's true. I think it's inevitable. I watched both the Rock and Conner this week. And when I say I watched, I watched the first 40 minutes of the rock. That's like choosing your favorite child right there. No, it's not. I thought it was.

You have a favorite? Here's the difference. Conair kind of sucks. It's a lot of fun, but the writing is like atrociously bad, almost comically bad. I agree with you. Your first instinct is right. As a child, you don't know the difference. When you're 14, you don't know the Rock and Conner are the same movie. As a grown person, the writing in The Rock, not even Snooty. It's a stark contrast. The quality of the writing in The Rock versus Conner, it's night and day. Not even the same genre. The Rock is a film. It's an excellent movie. All kidding aside. I don't think Nick Cage is in many films, but... I was going to say, The Rock, barely for me. But I think it's still closed. Maybe it's been a while and stuff seen Conair. Just trust me. Rewatch the first 30 minutes

of The Rock. It's sensational. the plane lands on the Las Vegas strip at the end, that's a little over the top. And also, I stand by, I'm sorry, but John Cusack sucks. Oh, really? Okay. I mean, he did what he did. All right, we watched Free Guy this weekend. You can now rent that on Amazon.

Ryan Reynolds. Ryan Reynolds and Jody Comer is in that as well. And the guy from Stranger Things who's got the hair, Steve with the hair. I liked it. It was very creative. I won't say it's unique because it definitely had some elements of the Truman Show, but it was sillier because it was a video game. It was definitely like over the top and silly.

but I bought stock in Rhino Reynolds in 2001 when he was on two guys, a girl in a pizza place. I've been holding that one for a long time. I bought his IPO. Van Wilder? Yes. Waiting? Yes, waiting. That's a good one. I've been a stockholder for a long time myself. Can I just say, I feel like we've got this out of our system. We are no longer going to

debate every episode what's going out of the real estate market. I feel like we've got to have our system. All right. Yeah. We'll agree to disagree. That's what you think. And I finally, it took me a while. I don't know why. It took me while to watch Many Saints of Newark, the Sopranos one. I saw a lot of lukewarm reviews on that one. I liked it, too.

It didn't blow me away. It's not like a goodfellas, but as far as using elements of a movie and elements of the TV show, and I thought the guy who played Dickie Molesanto, would I say his name wrong? He didn't really do much for me. Oh, I liked him. I thought he was really good because he was kind of a different type of gangster where he was actually kind of a good guy, even though he was a bad guy. Ray Leota still has his fastball. Yeah, he's still pretty good.

I thought it was good. I thought it was really well done. I would sign up for another one of those if they did the next in the series or whatever. Agreed. That's all I got. All right. Animal Spiritspod at gmail.com. We will see you next time.