Animal Spirits Podcast - Lifestyle Creep (EP.210)

Episode Date: June 23, 2021

On today's show we discuss inflation, why bond yields are falling, getting wrecked in DeFi, fintech's customer service problem, taking a family loan to buy a house, managing the economic boom and much more.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by our friends at Y Charts. Checking out the trailing 12-month inflation rate on Y-charts. Typed it in their U.S. inflation rate. They have chapwood on Y-charts? The government inflation rate, probably manipulated, 4.99% over the last year, which is the highest. It briefly touched above 5% in 2008 right before the crash. I think that was basically oil going to $150 a barrel. But before then, the highest it's been since, like, 1991.

when it hit 6%. So inflation is much higher. And then, okay, I have the new Star Wars meme. I'm trying to stay hip here. Inflation is the high. The high has been over a decade. And Natalie of the Portland says, so Bono's a rising, right? Wait, Bono's rising, right? No, it's not. So I typed in... Is this the new meme format? Because this movie's got to be 20 years old. Yeah, I know. And they're all pretty bad, too, right? The prequels. Anyway, so I like to look at the... Obviously, it's not just one interest rate you look at. So on white charts, you can type in the 30 year, the 20 year, the 10 year, 752, 1. And I put in all those ones and that gives you the yield curve. So I love this chart because it shows how different rates change over time. They're not always moving in concert

with one another. But 30 year treasury rate is now under 2%. The 20 years has been there to the 10 year is under 1.5%. All of these interest rates are rolling over again, even though inflation is 5%. Just something for everyone here. And short term interest rates obviously are not budging so. We've got a flattening of the curve, as they say. Yes. So I love creating this chart here where you look at the different positioning of the yield curve. Pretty easy to do on wide charts. Go to white charts. If you haven't signed up yet, tell them Animal Spirits sign you need a 20% off your first subscription. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing,

and watching. Michael Battenick and Ben Carlson work for Ritt Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritthold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. I had a thought this morning. I've been riding the Peloton, not to brag, for about a year and a half, maybe. I've been more active over the past year and a half than I was over the last 10 years combined. And I was out for a walk this morning.

I said, you know what? I'm going to run. See how the old legs are doing. My muscles should be, I don't know. When's the last time you went for a jog? A jog. Eighth grade. Okay.

So I tried, man. I really tried. I tried to push through the pain. Guess how far I got. Run the block a couple times? 0.7 miles. Okay. Got to start somewhere.

Yeah, you're right. Got to start somewhere. But I... Here's the thing, though. So it's- Can I get a refund to my Peloton? What the hell is? No, no, no. It's totally different muscles. And I think working out outside versus inside is different. So I run a few times a week. And me going from being a jogger probably helps. But the first few times I rode the Peloton, I didn't feel like I was in shape right up because it's different muscles. And it's a different

way of working out. So I think that it's two different things. Okay, fair enough. Also, my best 30 minute time, not to pat myself in the back too hard, it's better than yours in terms of my output. So maybe it's just, maybe I just, I have to train my most. So says one of our coworkers. I think those results are disputed. But if you want to take that one, I'll give it to you. So on the one hand, I was kind of disappointed. But to your point, listen, I'm a glass half-fold type of guy. You got to start somewhere. Point seven, not terrible. Yes. So the next time you try to make it a mile. There we go. Baby steps. All right, inflation. Where are we going with this? So this is from bespoke. And they had inflation expectations. This is kind of cool.

I don't know where they get this survey results from. So they break it up by people over 60. And their inflation expectations are like 5%. People 40 to 60, and that's more like 4%. And then people under 40, it's like 3%. I just think this is a very interesting way of looking at so many different aspects of investing in the markets and how people view things based on their experiences with the markets. Yes. A few weeks ago, I was saying on the compound difference, I was saying to Josh and Sam, I'm not disputing that there's inflation. I'm not blind. I see the house prices we've spoken about. Obviously, I know what's going on. But in a vacuum just through the lens of my spending habits, I have not really noticed inflation. And I went

on to my Sapphire Reserve card and you could export your groceries. I was thinking maybe I'm not noticing a 30 cents rise in egg prices. Maybe I'm not. So I exported that. I looked at a cumulative 30-day rolling number. And if you looked at just my grocery spending, I have not noticed inflation until this weekend. So Doug Bonaparte got me the chemex, the coffee thing. So I've been using it. Thank you, Doug. I've been using it on a daily basis. I used to be a daily Starbucks person. But since the pandemic, I've been home. I go to Starbucks here and there, but I don't go every day the way I used to. So this weekend, Robin said, get a Starbucks. I put in her order, which is just a medium iced coffee. Put in my order, which is a medium hot coffee. And I said,

Whoa, whoa, whoa. I think I'm going to make my coffee at home. It was $6.41. I know you're not a coffee drinker, but does that sound expensive? It sounded expensive to me. Yeah, paying anything for coffee sounds expensive to me because I don't buy it. All right, fine, fair enough. But it is kind of funny how I'm irrationally cheap in some ways.

Like usually, I mean, I've never not gotten coffee because of the price, but I don't know why this number like, it hit me that that's too much for a cup of coffee. Even though saving that $3 and $25 is not going to change my life, I drew the line, Ben. I said, I'm not going to do it. Okay, that makes sense. I can see having principles out of it. Can I offer some coffee content here, since I'm not a coffee drinker myself? My wife more than makes up for my coffee consumption. She loves coffee. She has, I don't know how many cups a day, but... You don't defend yourself. You're a Di Pepsi guy. Her mother's day and birthday fall around the same date, usually. This year was the same day. So I got her one of these coffee mugs that is an app. And you charge the coffee mug, and it's got a heater in it. So you can set the temperature on your app. So it keeps your coffee warm. Because she always is always putting it in the microwave because she likes to really savour. it. So that's for all my, I got it on Amazon. I can't remember what it's called, but I'll try to find that. That's my coffee content of the day. You can actually, through an app, put your coffee mug to the temperature you want it to keep it warm. That's good. I like that. In addition to

my anecdote about Starbucks, I did go to the grocery store this weekend, and I did notice inflation, but only because I bought like a ton of meat. So I spent $340 at the grocery store, and I'm usually like, I don't know, if I do like a big shop, I'm in like the 170 to 180. range, I went overboard this week. So I'm feeling inflation, but it's only, I bought a tomahawk steak. Okay. I wouldn't even know what that begins at. In New York, it's probably a 40% markup. It was $33. I don't know how much it was a pound, but anyhow. So what else is going on? Allison Trigger at Bloomberg had this piece about how hard it is to predict inflation. So I mean, obviously a lot of people make up inflation in their head, but even predicting the actual

number is almost impossible. So I think that like we, the royal we, rely on the bond. market a lot. We say the bond market is pricing in this and the bond market is a smart money, the bond market is doing this. But Allison said, even if bond traders did have a magic ability to predict the future, they don't entirely determine bond prices. In the first quarter of 2021, the Fed's expanding balance sheet accounted for more than 70 percent of the growth in outstanding government debt. So there's a lot of price insensitive buyers that are not doing the calculus of what they expect inflation to be. And we've spoken about in the past that the bond market usually doesn't get inflation right anyhow.

So it's interesting that we can come back to this heuristic of, oh, the bond market knows. Because rates are falling now, it must mean that the bond market knows inflation really is transitory and it's not coming. So the bond market wins again. And that could be the case, but we just, we don't know. So I did a piece last week. There was a piece from the Federal Reserve Bank of San Francisco. This is from like 2015, but they look at all these.

A piece within a piece. Yeah, a research piece. They looked at all these different ways of forecasting CPI. and it was using inflation expectations, the break-evens that we talk about. So that's like the difference between tips and regular treasuries. They used like five of these different variables. And one of them was just constant. So can I take a stab?

What? Elliot Wave. One of them was just no change or keep it constant. Like it's 2%. You keep it at two. And they looked at like the forecast errors for these. The forecast errors were all like one and a half to 2% over one and two year periods. Basically, if you're at 2% or 3% inflation...

in your margin of error is 2%. Guess what? You're not very good at predicting inflation. So none of these market factors could predict inflation. It's hard to do. This is why I expect a 9% return every year for the S&B 500. Every year. Just keep it constant, right?

Not too hot, not too cold. But I wrote about this, like just inflation. And aggregate numbers don't mean shit because everybody has their own experience with inflation. And that depends on, I guess, your age. your memories, your income, your geography, are you renting a house? Are you buying a house? Also, your psychology, because a lot of the stuff that's deflationary, you're not paying attention to, but the inflationary stuff you are, it's loss aversion. You pay attention more to the stuff that is going up in price, and you don't even think about all the stuff that is getting

more efficient in your life. 100%. I also think a lot of it has to do with the fact that the stuff that we want has in a lot of areas, like our wants and desires, have turned it into necessities for a lot of people. There are things that we buy now that we think are necessities that... Such as? Well, think about people who get a new iPhone every two years. Was that a necessity in the past? No. For a lot of people now, it is, though. It could be your computer basically for you and do all your email and work. And so I think there's stuff like that that in the past people look at it as a luxury that now has become a necessity for many. Just a thought. It's not just the bond market that's saying don't worry about inflation. The Daily Shot had this neat chart showing

that an inflation-sensitive portfolio. So I'm guessing this is materials, industrials, energy. Maybe energy. Maybe energy. These stocks are, relatively speaking, rolling over. A lot of the names that are on fire, Alcoa, for example, they're getting smacked around. So the stock market is also saying, don't worry about it. Okay. So we'll see who's right. So again, we don't know, but it's looking like, and people are already taking victory laps, by the way, too, saying, I told you, a lot of the macro people. I don't know. It would just be way too hard for me to ever put a stamp on this. Like, okay, the Fed one. Not to play word games, but I do think it matters. Like the transitory thing, prices are not going back to what

they were. We've spoken about wages. There's some commodities and stuff they are, but yeah, you're right. True. True. Some things, there's a new level that's been set. But the rate at which we're seeing inflation is transitory, which, again, games with words, but this is not going to persist. Like, we're not going to see. But that's true because we've always had inflation over time. It's just, are we having inflation or is going to be disinflation, meaning it's going to be a lower rate of growth before? If we're still seeing 5% inflation year over year, six, nine months from now, then it wasn't transitory, clearly. And if you predicted hyperinflation, and that doesn't come true, then just make up a new inflation figure to suit your narrative because you're not wrong. You were just using the wrong inflation gauge.

Naturally. So do you remember the Michael Lewis book that came out in, I don't know, early 2010s about the European debt crisis? Boomerang? Yes. So I recall at that time, we were having in like 2012, 2013-ish, maybe even before or after that, we were having calls with all of our portfolio managers about how much exposure do you have to Greece. Remember all the stories about the U.S. is going to be the next Greece and we're going to have a funding crisis and Greek debt. I have a weird suspicion that the same people saying that inflation is not transitory

were saying, watch out, we're the next grease. This is from the FT. Their five-year bond yields in 2014-ish, I guess, hit 60%. They're now negative. By the way, Corzine nailed it. He was early. He wasn't wrong. He was early.

But even in 2016, they were up to, they crashed, they went back to like 40%, and now are negative. Looks like the meme stocks a little bit. It does. I just don't. You told someone back then this is going to happen, they wouldn't have believed you. I guess that seems to be the markets in a lot of ways these days, like things that have never happened happen all the time. But I would have expected the U.S. to have negative interest rates before Greece, correct?

I can't talk to the dynamics of how the hell this happens. I just, I don't know what's going on here. I guess I don't either, but it's surprising. Okay, Cuban Missile Crisis. Last week, we talked about Mark Cuban being open and honest about his experience with Defi. I was like, come on, you got to give this guy credit. And maybe you still do because he was open and honest about it. But apparently him talking about some of these small crypto products,

these defy tokens that he's funding, caused this one defy token to go to like $60 a token, which was like $2 billion in value from nothing. He was like the guy who he basically funded this thing. It was just him. He was doing some weird pairs trade. I still don't quite get this how it works. But it went from like $5.

to $60 in a week, and then from 60 to zero in about a day. So Mark Cuban basically got wrecked. Bloomberg did a series of articles on this. Cuban wrote in to kind of defend himself or ask for more regulation here. I guess there's a few... Tough scene. It's a tough scene. I guess good for him for being...

By the way, between this and them canning Donnie Nelson Jr. He had a tough week. It was a tough week. I mean, it's a good reminder, though, that you a few weeks ago talked about, like, how do you learn about this stuff? And people say, well, you just learn by doing. Guess what? Sometimes learning by doing means you get wrecked. And I guess that's a good reminder that anyone, even a lot of money, can get wrecked in trades, but especially in this kind of stuff, this defy stuff where you're being a liquidity provider. Let's also put this into context. This is not like

archaegos. I'm going to guess he lost a few hundred grand. I think he said he put 75,000. Yeah. For him, it's a drop in the bucket. It's nothing. It's probably a much bigger hit to his ego than it is to his pocketbook. That he said, I'm funding this. And to his credit. He said he was learning, and he at least gave a statement. I think he changes it two days before he's talking about the banking industry should be shaking in its boots. And then two days later, he's saying, actually, we need more regulation here. Come on. Nobody's perfect.

Here's a new blood question about this DFI stuff. Do prices have to be ever rising for this stuff to work? I don't think so. Because doesn't it seem like if we have one of these crashes like this, doesn't it just work like a bank run in like the early 1900s? where you need a J.P. Morgan kind of guy to bail out the system. And crypto doesn't really have that. Like, I don't know. I don't know. I get a new well question. Well, I mean, listen, I'm completely making this up. I have no idea. But when crypto crashed in 2020, BlockFi's interest did not go down. So, I mean, that is not predicated, I guess, on high rising prices. That's not defy. The defy stuff I'm talking about is where you have these people staking their tokens for liquidity and they're providing it. And if the value of their tokens, they're are going down and the token stuff. I don't know. It just seems to me like...

True. I guess BlockFi is TradFi. Kind of for crypto. But yeah, I don't know. Just throwing it out there. Well, meanwhile, we spoke about the email. And listen, this guy with the Coinbase, he felt victim to a fishing scam. So that's not necessarily on Coinbase.

But it's kind of weird that there's no customer service. I mean, Nodig tweeted about this, that he's trying to get a hold to them and good luck. Yeah, Dave Nodig said he's been locked out of Coinbase for four days. He's got no response to emails. no phone number you can call, no ability to interact with anyone in any way. He said at least Schwab has a phone number. And obviously, the regular finance companies aren't always the greatest when it comes to customer service, but a lot of them do at least have a 1-800 number. It's not always the greatest. You could be waiting for a while. But I think that is a whole in a lot of

these fintech platforms that a lot of them just have completely just done away with customer service. It's not even really an option, except for a help at whatever email. And especially when problems start to mount, I think this is a problem for a lot of these places. Especially for Coinbase wanting to be a platform that is more mainstream, I think that this is the kind of thing that they have. Like, that was always my thing with Vanguard, that that was going to be one of their biggest potential risks as they got so huge is that their customer service just suffered because of it. So I think that's a huge problem for them. It is interesting. I was looking today, actually, from their high in the first day of the IPO, Coinbase is down 50%.

Bitcoin is also down 50% from that day. Remember we talked, the day of the Coinbase IPO We did a video on YouTube, and we said, isn't it going to be the case that when Bitcoin goes crazy and volatile, Coinbase is actually going to do better because volatility is good for them in exchange? Or what is the correlation going to be between Coinbase and Bitcoin? I think we have our answer. Not good. Not too soon. Too soon. They're both down 50% from the very first day. Coincidence. These things happen. Coincidence? How is that a coincidence? Okay. All right. You're doing the correlation causation thing with me? I usually don't pull that card. Usually I'm all about the correlation causation.

All right. I'm just, I think this one's going to be a little more correlated, even that I kind of bought into the idea that they're in exchange and it shouldn't matter to them as long as there's volatility. I think there's going to be some correlation here where Bitcoin's doing good, Coinbase is doing good and vice versa. I'll say this. Listen, if Bitcoin balances and so does Coinbase, well, they were both oversold.

So I've learned the ground works now. All right. We talked about inflation. There was a piece in New York Times by Mike Conzall and J.W. Mason. and they're a couple economists, and they looked at, listen, every time there's a boom, why do we always have to look at ways of slowing it down? And their whole thing was, after the war, the best thing we did is, like, they managed the boom. They didn't try to fight it.

It's almost like, I guess since the 90s, we haven't really had a boom to speak of that didn't get completely out of control. So I guess the point was, they're saying that, like, after World War II, you had this supply problem, that you had this huge uptick in demand, but it was met with this huge uptick in production and supply. And maybe instead of trying to like slow this thing down and raise rates too early to slow things down, why don't we try to invest in the infrastructure of getting that supply chain back on board and actually like letting this thing run a little bit instead of trying to

just cut it off before it gets too crazy. Like let's actually manage a good economic outcome and let it run for a little while. Shouldn't we root for the economy to heat up after years of, 2% nominal GDP growth? Yeah, that's the point. Can we do a little better? And I wonder, back to our inflation expectations thing about people in certain age groups, you wonder if just a lot of the people who are policymakers now, who are a little older

and been around for a while, that's what they've grown up with. You shut off the spigot, you take the punch bowl or whatever. That's what they are accustomed to. That's their only thing in their playbook that they go to. I don't know. This is a good line. Speaking of that, so Colin kept emailing us. to listen to this Mark Cuban,

Collins, an emailer, or a listener, I should say. He listened to this Barry Weiss interview with Mark Cuban, and I listened to it today. And Mark said that his dad always said, you don't live in the world you were born in. True. That was a good line. So to all of these people that are worried about the 70s,

and I'm not saying there's reasons not to worry, but maybe people are too anchored to a different economic period. And again, with this experiment we've been running, no one really knows what's going to happen. So why not try to massage it in a good way, instead of a bad way. So here's the good side of what's happening right now. And let's be clear, I don't think inflation is happening today because wages are rising. Inflation is happening because it's more of a supply thing. We'll see where we go from here. But there's an article in the journal,

tight labor market returns the upper hand to American workers. Wow, it's been a minute. Here's something to smile about. Pay for those with only high school diplomas is rising fast enough for college graduates. When's the last time that happened? And you see where pay is rising, it's in leisure and hospitality. It's in retail. And it's been forever, forever since labor had the upper hand, or even any hand, frankly. So there's a great chart showing the employee compensation as a share of national income. Wages and benefits average 72% of national income from 1970 to 1995 and then steadily declined fall into 66% to 2014. Here's where we potentially get into trouble. Power is shifting to labor, which is.

great, but then it may be simultaneously shifting to big corporations who could swallow the price increases at the expense of small business owners. I do think people are overlooking the unemployment benefits are part of it, obviously, and people have more money because of the checks and their finances are better. But I do think people are overlooking the fact that you just have more negotiating power, and maybe a lot of people just don't want to do those jobs anymore. I think that there's a lot to do with it. Well, yeah.

So this just dropped from Washington Post. 649,000 employees gave notice in April, I think this is a retail workers, which is the sector's largest one-month exodus in over 20 years. Listen to this quote, Ben, to your point. This is a 23-year-old from Tennessee who left her $11 an hour job as an aquatic specialist at a national pet chain. She said it was a really dismal time and it made me realize this isn't worth it. My life isn't worth a dead end job. This is a positive. When people are quitting their jobs. That's a sign of positivity and people are optimistic about their prospects for a better job or higher pay. You could say like it's a net positive while also being sensitive to the fact that

there are people who can't find workers. It's hurting more people than it's hurting on balance, but there are people that are being really impacted. I get you looking at both sides here, but couldn't you say if you made your business by paying people a below living wage, then maybe your business wasn't sustainable in the first place? I think you could make that case, even if it's a small business. If you were paying below living wages, then your business wasn't made to last anyway. Okay. Point taken. You know, this is complicated. But I think in general, people on the lower end trying to make more money and making more money is a good thing. All right. Let's get into housing. We got a bunch of stuff on housing this week. All right. There's just been a deluge of content in

housing, which I love. I heard a bad anecdote this week. And there's another house in my neighborhood that came on the market, they're asking $800,000, and the house has nothing going for it. It's got nothing going for it. It's probably 2,000 square feet. The backyard is junk. I mean, quite literally, every single room looks like it needs to be redone. And I'm not talking about, like, the house has not been renovated since it looks like the 80s. So I don't know that they're going to get it, but the fact that it's even being listed for $800,000 is mind-boggling.

And I know we talk all the time about, and we're going to talk about it right now, about the credit quality of buyers is super strong. So people aren't sucking out the equity and buying multiple houses and flipping. And again, just an anecdote, but somebody I know who does not have a great credit score, has bad credit score, in fact, does not have a high income, was approved for a $200,000 house. So you're saying it's starting to maybe trickle down a little bit? I don't know. It's just anecdotal. But when I found that out, I raise an eyebrow. We're in the total one-upsmanship of housing anecdotes. It's like, you tell a story about a crazy housing thing and someone else has got another one. Oh, yeah? Guess what I heard. Yeah. We got a lot of that. I'm not going to try to one-up you, though.

This is from the Wall Street Journal. For many homebuyers, a 5% down payment isn't enough. I've never really seen the stats on this. This was interesting to me. Half of existing homebuyers who used mortgages put at least 20% down, according to a National Association Realtor's survey in the 10 years of record keeping that percentage has hit or exceeded 50% three times in all have been since last fall. A quarter of existing homebuyers has paid cash. That means 75% are putting down 20% or paying cash. That's a huge number. So they're basically saying if you put a low percentage down, you're out of luck.

So for my first house we bought, we were... Sorry, can I just say one thing? We talk a lot about like people empathizing with people that are getting shut out. And again, I feel horrible for those people that are looking at 20 houses and just don't have the money. It's also wild that 75% of people are in good enough financial shape to put down 20% or more. So could you say that people are doing quite well? very well? Yes, a lot more people than in the past, obviously. That's shocking to me that that many people have even a 20%. So the first house we bought in late 2007, early 2008, we didn't have enough

money saved up. We were just married a year, basically. And all we could afford was a 5% down payment on a house. And the bank let us do that. If it would have been 20%, we would have been out of luck and wouldn't be able to make it. Did you have to use a target date fund us collateral? Ew. But they talked to a few people in here about this, back in 2014, it was, 10% lower or something, but they were saying, this is from a mortgage broker in there who was saying at least 50% of his first time homebuyers are getting gifts right now from family to help out with that lump sum. So I guess this is unfortunately, you talk about people being in a better place. Some of it is also people, the inequality thing rearing its ugly head as well,

which that's whatever. That's never going to go away. So we got an email about this actually, 33 year old looking to purchase his first home. Same for down payment. Income is cash. So he doesn't qualify for a traditional mortgage. However, his mom is about to retire and was talking with her a bad retirement fund. The idea popped in my head. What if she buys a house in cash and mortgages him at 4%. She gets a guaranteed 4% return on her investment, beats a hell out of bonds. He gets a mortgage. The money I paying an interest ultimately comes back to me an inheritance someday. I guess my question is, am I missing something here? This seems too good to be true. Is there some potential risk or tax burden that I don't know of?

So I asked our tax guys. We have a new tax guy at the firm. Bill, we have two bills now that are tax specialist at Ritoltable Management. I asked both of them, are there any tax implications? They said as long as it's a loan with interest, there's no gift tax issues. But if it's forgiven or default on it becomes a taxable gift for her. I think I don't see really a problem with this. Here's another solution. Let's say this person's parents own a home. Maybe it's paid off if they have enough cash. What if they took out a home equity line of credit on theirs, whatever, $100,000. And that is the down payment to make it so you get your 20%. And then you pay that off for them. I think this person doesn't qualify for a mortgage. Oh, even a mortgage? Okay, that makes sense. Okay, I see no problem with this.

Again, this is kind of a good situation to be in because obviously a lot of people don't have parents who could do this. But I guess unless there is some sort of disturbance down the line because you're fighting over finances with your parents where either you can't pay or they hold it against you for some reason, that's the downside. But other than that, I don't see a problem with this. All right, 46 million homeowners hold a total of $7.3 trillion in equity to tap, the largest amount ever recorded, let's see, in the first quarter, the amount of home equity cashed out was to $50 billion at the highest level since 2007. Len Kiefer, Chief Economist from Freddie Mac said, although cash out volume is the highest has been in nearly 15 years, it's pretty modest considering the

amount of equity homeowners are sitting on. That's what was happening in the last bubble is people were taking out home at the lines of credit and buying boats or debt skis and going on vacations, and that's really not the case this time. And the other way that this time is different is this great chart from Bloomberg, shows home flips represented the lowest share of sale since at least 2000. So it's people earnestly looking for homes. It's not speculators that are getting there. So it was 9% of housing purchases in 2006. That's the peak of the market was flips. Now, this almost looks like it was pandemic induced. This looks weird. Could be. But I'm surprised that more people aren't doing this right now to try to cash in to flip a house and sell it for really

quickly. Doesn't this seems... Maybe we learned our lesson? Again, I think to your point, though, a lot of that demand is just coming from people who really want a house, and they're not, like, jumping in here to maybe that comes later, but it's surprising. So all we do is talk about homebuyers, but it sounds like rent is about to go up in a big way, potentially. There's an article in Washington Post talking about this, that at the end of this month, the national eviction moratorium expires, and obviously many landlords are eager to bump up rent. So this might be a story. story in a few weeks to pay attention to. Part of me thinks it kind of makes sense that rents

should go up to play catch up. The other part of me thinks, if you own one of these rental places, your equity has gone up a lot. And do you really even need to? But it's not the same as missed income. True. For the people who had the moratorium and didn't get paid, I can see that. That makes sense to me. Yeah. And that's roughly again, we've talked with this. The homeownership rate is like two-thirds of the country, basically. So one-third is dealing with rents. A lot of it obviously depends on where you live, what your situation is. Okay, they had this story in ESPN about a San Francisco 49ers rookie, Ambrie Thomas, who was a Michigan guy. And they basically had to put these rookies through a class because living in the Bay Area,

they were like, listen, there's a huge sticker shock here for housing costs. And they're like, yeah, whatever. And they're like, no, no, no, really. And they talked about how like the coaches are like, even for an NFL player, living in the Bay area is almost too expensive. And so they compared, so Trey Lance is the guy who got picked who's the quarterback who's going to pay for the 49ers. And they compared the house in his small Minnesota town where he's from in Marshall, Minnesota, to Green Bay, if he would have went there to Santa Clara, which is where the 49ers facilities are. And like an average price in Minnesota is like 200 grand. Green Bay is like 230. And then Santa Clara, it's at $1.8 million. It's interesting that like even these NFL players and coaches who make millions of dollars a year are like, yeah, the housing costs here are just unfathomable.

I've been thinking about this a lot. like the Silicon Valley thing, they've been making these applications for us for years about how you can use this technology to do anything from anywhere. And it took the pandemic for them to realize, oh, maybe we should be able to work from anywhere and not have to live here and pay these obscene values for housing. Even them, it took that to make it happen anyway. They did say, too, that the 49ers have these week-long classes that look at budgeting and business. They put them together with these companies like Apple and Tesla and Google to meet executives and, like, do internships and job shadows and stuff.

It's actually kind of cool. Like, they're trying to help these guys get better at this stuff. Stop. Do you know how fast you were going? I'm going to have to write you a ticket to my new movie, The Naked Gun. Liam Nissan. Buy your tickets now. And get a free Tilly Dog.

Chilly Dog, not included. The Naked God. Tickets on sale now. August 1st. So I was looking, so Mark Andresen from A16Z, wrote his software's eating the world piece in 2011. He wrote his, why Bitcoin matters piece for the New York Times in 2014. Basically, if you would have taken his advice and bought software companies in 2011 and Bitcoin in 2014, move to the beach, you'd be doing

okay. There's no way he's going for three for three. So I'm fading whatever he says next. You wrote a piece. A16 has this new, what does he even call it, this new platform? The future. They're trying to write their own news, I guess. I don't know. It's optimistic takes. And he's talking about how technology basically saved us through the pandemic and all these different ways, and he talked about Moderna and the MRNA stuff, but then also how he thinks working from home is like this permanent civilization shift. He said it is perhaps the most important thing that's happened in my lifetime, a consequence of the internet that's maybe even more important than the internet. Permanently divorcing physical location for economic opportunity

gives us a real shot at radically expanding the number of jobs in the world, while also dramatically improving the quality of lives for millions or billions of people. Is it possible that we're just sick of talking about this stuff and we're underappreciating the changes this could bring about this whole work from home thing that we're just sick of asking people like, so when are you going back to the office? Oh, two days a week, really? Oh, cool. Yeah, me too. We're just sick of talking about this stuff and thinking through it where as the way he's talking about it makes me think like, I don't know. I think we could look back at this as like a really big pivotal moment that changes things for so many workers and families in how they live

their lives. Why don't these football players just work from home? Well, how do you live in San Francisco? What, just because you play there? He was on the podcast with, Vlad Tenna from Robin Hood. I've listened to a few of his podcasts. Not bad. They're okay. But Andreessen was on, and he said he thinks for a lot of people, the hybrid model is not going to work. Because the hybrid model, unless you're a certain person who just wants to work from home a few days a week, if you're still going to the office two or three days a week or how many other days it is,

that doesn't allow you the flexibility to move somewhere else and change your standard of living, how you'd want it. So he's saying, obviously, this is, it depends on the person and the job and their circumstances, but he thinks a lot of these companies are going to have to be truly remote and the hybrid thing is not going to work. Here's one thesis I got from this because I've been reading a lot of the stories about how Morgan Stanley and Goldman and all these finance places. By the way, this sounds serious.

Usually you just have like it, here's my take. You've got a thesis. Oh, sorry. I'm not hypothesis. So all the finance places are basically saying, screw you workers, come back now, get to the office in New York. We don't care. Doesn't this cement the whole idea that if you're a young person who's going to an Ivy League school and you have your run of the mill for internships or connections from your parents or alumni,

why wouldn't you go work in tech instead of finance? Doesn't this sort of cement the fact that all these young people are going to say, why would I want to work in finance when I can work in tech? I have all these perks. I can work remotely. I can still make as much money. I just don't see why you would choose finance over tech right now unless whatever. All your parents and your lacrosse were investment bankers, so you do it because of them. Be careful what you wish for, because we're going to look back in 20 years and we're going to say, we need more people in investment banking. though? Do we really? Do we need all those 300-page PowerPoint text? I know. I'm just saying.

So our colleague, Nick McGuliet, dollars and data, if you're not subscribed, check out Nick's blog. It's really good. He always has very thupber. He had a piece called Don't Win the Game Too Early. And he said a friend asked him, like, if he was given $10 million, what would you do? Would you quit your job, travel the world? And he talked about thinking about it that like he would pay off some debts, but then donate the money. His whole thing was, which sounds like such a humble brag, but if you know Nick, like... I actually believe him, yeah. I do believe him. But being

where I am in my... Like, if I was younger, I would have said he's nuts. I would take the money in a heartbeat, but being where I am now in my career, I think he's on to something. He's basically saying the journey of like making the money and building it up over time is way more important than just like easily winning the game right away

and then I think that kind of thing is the kind of thing that could ruin you at a young age in the wrong hands. And I think if you would have asked me in my 20s, would you rather have five million dollars right now or would you rather like build up and save your whole career and when you retire you have five million dollars like i would have said no give it to me now and then i'll whatever but i do think there's something and i have friends who have wealthy parents who have inherited

money or inherited a business and i'm like you're in that position like good for you that it's not you didn't choose to live in that situation so it is what it is but i can actually appreciate it a little more that like i kind of did my whole career path myself and obviously i had help like i came from a very fortunate situation with my family and stuff, but I was kind of on my own, as far as career stuff goes, I kind of appreciate it more. I feel like because it's done on my own. I think there is something to that journey instead of just having that money or whatever handed to you. Well, somebody who is pretty much unemployed and helpless before the age of 25, I would say that you enjoy success more if you experienced failure. And so, listen, I don't

I don't say that doing well early in life is a curse, but it can be. It certainly can be. Yeah, I think it can change you. Okay. Bunk survey of the week. Oh, last part, last part. Just, this isn't just like, well, it's not just all I think. There is data on this. And lottery winners, as an example, money won is not as sweet as money earned. I don't know if that's a phrase, but. I did a decent amount of research on lottery people for my book and talking about how if you make money at a young age, it can be a curse. And it was shocking how many stories I found out where the people were just miserable. And because people asking them for handouts and family members and fights that it

can cause, obviously people are going to call us nuts. But I think there's something to that where it can, that having that much money at a young age and not just sort of slowly but surely making it yourself. And I think that allows you to like become more accustomed to it. You wrote a piece about lifestyle creep last weekend, about something we've talked about the podcast. I think like as long as you escalate slowly enough in terms of making more money and saving over time. I think like that allows you to slow your lifestyle creep as well instead of just going up huge and taking a huge leap up. I think that can screw with your head. Well, so I wrote about the benefits of lifestyle creep. Like what is money for? Is it to be hoarded? No, of course you have to save responsibly.

But listen, you work hard so that you could spend on things that you enjoy. And so I'm a disaster. I'm a mess. Ben, you've seen my desktop. Could you imagine what my closet looks like? I throw everything away. I don't even fall closed. I just stuff them in. So I'm thrilled to pay somebody, even though it sounds privilege. I'm thrilled to pay somebody to come in and do that. But here's the other side of lifestyle creep is that it's hard to go back because I was thinking, well, I could rationalize this right now because the kids are really young and they're such a handful. But as they get older, I'm sure like normal people, we will resume doing our laundry. But will I? Once I've tasted the berries, am I going to want to go back to before the berries? It's hard to undo lifestyle

Wildcreep is one of the dangers. That was my thing. I used to cut my own lawn pre-kids and didn't mind it. But then we had kids like, I don't want to spend an hour and a half every Saturday cutting along when I could be playing with the kids doing something else instead. And here's the flip side. I don't pay for haircuts. That's where I save my money.

Yes. No. Some bald people go to the barbers. But the other point is that like, I probably save $2,500 a year. Well, that sounds high. Whatever. Leave me a load. I don't go to the barber.

But the funny thing is, is that you debated even sharing that. And I said, no, share it. It's fine. Who cares? What, the laundry part? Yeah. Well, because, but it is funny. I am.

I feel so privileged saying that. I'm not breaking the bank. Listen, again, I know I'm fortunate to be able to say this, but it's $60 a week. It's also tradeoffs, too, of, you also didn't mention the other stuff that you don't spend a lot of time and money on, like, I know for a fact, you buy your shirts on Instagram. Like, you don't spend a lot of money on clothes. So you pay for your laundry, but you're not going out to the nicest stores in New York and buying the most expensive clothes either. It's all about balancing it out. Nobody has an unlimited amount of money, right? You have to pick and choose where you spend

your money. So I like spending money on Instagram clothes and having somebody put them away from me. All right, here's the bunk survey of the week from Business Insider. 60% of millennials earning over $100,000 a year, so they're living paycheck to paycheck. I've got to take on this. Go ahead. They say from this, living paycheck to paycheck sometimes carries connotations of barrier, scrape and buy-in of poverty. But the reality is of a paycheck to paycheck lifestyle in the United States, today is more complex in the current economic and everyone has made it even more complicated. And they say, these high earners are typically fall victim

to lifestyle creep when one increases the standard of living to match a rise in the income, but they prefer a comfortable and often expensive lifestyle that leaves them living to paycheck to paycheck. So this is by choice. Exactly. Exactly. So first of all, how many of these people are on the coasts where living is much more expensive? So obviously, we've got that to deal with. But put that aside, young people living paycheck to paycheck because they're like enjoying themselves, it's not a bad thing. Why would you? you feel the need to be frugal as a young person. Now, obviously, you have to develop a good foundation and saving habits, all that sort of thing. But good. People are enjoying themselves.

I don't view that as a bad thing. Now, I understand the sticker shock of the headline, like $100,000, the implications that people still can't save, people are scraping by up with $100,000. I don't think that's what's happening here. I'm not saying that $100,000 is enough to live the life of luxury. That's the thing. When I was a young person, I more or less live paycheck to paycheck. and the only thing I spent money on was, like, going out to bars. But, and so I'd spend money at the bar. Did you feel financially crimped? But I lived in a crappy apartment.

I paid off student loans. I had a car payment for the first time in my life. But, like, that was the tradeoff. That's the thing is, again, it's all about tradeoffs. This is a good one. Somebody tweeted, what are the inevitable trends in the next 10 years? And Connor Sen, quote, tweeted this with a good take. Millennials buying fractional ownership stakes in second vacation homes using some

sort of tech platform, definitely not time shares, basically pull out the baby boomer's 1990s playbook and figure out how millennials will reinvent it. Love that take. Okay, I can't remember what it's called. Someone sent this to me. I think it's like Picasso or something. And it was exactly this. It was like these four or five million dollars homes. And you buy like one sixth of it or one eighth of it or one tenth of it. And you get 30 or 40 days a week at this beautiful luxury home wherever in wine country. or wherever. I love it. And there's actual liquidity, like partial liquidity. Probably. I'm sure you could sell it to someone else. So it's this really nice home that has a cleaning service

and you own one-sixth of it and you pick your 40 days a year, kind of like a timeshare, but it's this luxury home. I could definitely seeing that be the case. The other side of it is just Airbnb does something like this too, where they give it to you, I guess. That makes sense. We're going to move on to listen to questions. Somebody emailed us. Come on, guys. And you know what? First of all, we're not farmers, so excuse me, sir. But I don't think that we were like, when we were talking about corn last week, the price of corn tumbling, I don't think that we projected that we thought that the price of corn was like what we necessarily eat. Did you? I've listened to that back. But somebody was like calling us out because the corn futures is not corn that you eat.

And I don't think we said that. But be that as it may, the emailer did teach me something. So thank you, I guess, for sending you that email. Did you know that only 1% of corn planted in the United States is sweet corn, meaning edible corn. Ninety-nine percent of corn grown in Iowa, which is basically, I guess, where all the corn is grown, is field corn. And field corn is like the kind of ugly-looking, dented corn that you see. What's it used for to feed animals? Yes, pretty much. Okay. You're from the Midwest. You should know this. I've got an excuse. Okay. All right. Here's a question. Got my MBA and have now starting paying back student loans again. I'm getting hammered in monthly payments. I read Ramit Sadie's book and

understand. I need to find extra income, not just bringing a brown bag to lunch every day. In the process of picking up a weekend job for additional cash flow, ready to start my own company, but don't have the funding. I doubt I will have a shot at an SBA loan or any loans because of the high debt that I already have, or the high debt to income ratio I have. What are some avenues to obtain capital or loans for my business ventures? Can I just say that I'm now regretting that $2.65 that I saved on coffee and put into the Doge coin? That was a mistake. Damn it. That's a shame. That it finally crashed. That's too bad. I think, I don't know what exactly the business is here, but I think people probably assume

they need more stuff to get off the ground. I think Rameed actually talked about this in some of his old blog posts that people assume they need like a business card before they get started as opposed to just having a product or service and testing it out. So I think before you start to look for funding to start your own company, try to test some stuff out first to see if it actually works. And I think there's probably never been a better time to do that. But the other thing is I think you probably, if you can't get loans, you have to scrape by. You have to get friends and family and credit cards. And if it's something that you really want to do, you probably have to just sort of scrape by and piece me out together on your own, correct?

I don't know what the other alternative is. Sorry, you got distracted. Okay. Guys trying to fund his dream business and you're distracted. You're probably looking at Twitter. Guilty is charged. You just told me this morning you're not paying as much attention to Twitter yet. Here we are. Mid-show. I got distracted. Well, that's why I'm not paying as much attention, got distracted. You want to do one more or just go to recommendations? That's got recommendations. All right.

What do you got? I didn't love Loki, the character. I found it to be a nuisance, and I know that was sort of the point, but just could take it or leave it. Not a big Loki guy. However, Loki, the show. I knew you were going to love this one. Are you watching it?

I watched the first episode. Thoughts? It's pretty good. Watch the second. I'm interested enough to keep watching. So Tom Hiddleston, who plays Loki and Owen Wilson, just the, just the first. the dialogue between them, tip of the cap to Disney Marvel. Who the hell is writing this? It's maybe genius as a stretch, but...

You know what this show made me think, though? Owen Wilson could have been on like a true detective kind of show. He's so good. Sometimes I feel like the talent is being wasted on these Disney shows. No way, man. The quality of the show is so high. I watch the Wanda Vision when I'm watching this one. I'm going to keep watching it. I'm sure they'll tie it back to the Marvel universe, but it's only six episodes, which I love. Love that it's only six episodes. I got a new six episode show for you, too. Okay. And the first two episodes of Dave. Also, is he brilliant. Like, he really is brilliant. How did he do that first episode where he wrapped it all up? Well, I will caveat. This show is definitely not for everybody. Probably people my age will like it. If you're easily offended,

don't watch it. But I thought it picked up right where the last season left off. I was like, you never know of this stuff. If he could go off the rail to go weird. I thought, did he kind of just get lucky? How could they reproduce it? The first episode, the way that they came full circle at the end was like truly Larry David type stuff. I think the best part of the show is the dialogue with his two friends. The back and forth that they have is just great. And the fact that the guy went to jail and had to go back

in the military that part killed me. So good. Okay. Here's a new six episodes. Someone either emailed this to, I don't know. We get a lot of recommendations from people. Some good, some bad. This one was good. So someone recommended, they said the best show no one is watching is called Mr. In Between. You can watch it on Hulu. It's a six episode show.

Good. It's an Australian show. And my wife and I watch the for, it's six episodes, it's 28 minutes an episode. My wife and I watched the first half of the first season last night. It's about a guy who is a criminal, or he's a hitman, he's a criminal. He gets money back from people who owe money to his boss. And this guy is so believable in his role, but he also, not only a hitman, but he's divorced and he's dating and he has a young daughter. And so it's like the back and forth between the anti-hero of him being a hitman, but also like living his life and being vulnerable and having a daughter and having a

a brother that he has a relationship with. And the guy who plays the hitman is so good and believable in the role. Like the first episode, I'm like, okay, I'm totally in. And it's very good. So there's three seasons, I guess, already. I've never even heard of this show, but it's very good. Luca is the new one that came on in Disney Plus. Did your son try this this one out yet? Oh, not yet. Came out on Friday. Fridays are like the day off for my kids from daycare and activities and stuff. And my seven-year-old Libby was so excited for this, just because there was a new movie that came out. We're like, all right, how about Friday night? The whole family watches it together. She was so excited to watch it. She watched

the whole thing before we could watch together on her iPad. This got me thinking. She loved it. We watched it a few times this weekend. The kids did. We talk about movies potentially being dead for our generation. You and I grew up with movie theaters. I think for that next, next generation, our kids, movie theaters are going to be such a small part of their lives and it's such a niche because my daughter doesn't mind watching a whole movie on her iPad. For us, we talk about big TV. They are not going to care about movie theaters. Our kids age. How's this? Movie theaters or newspapers?

They might be. Like, my daughter was fine watching a brand new movie on her iPad. She does not care. For her, it's not even tedious. It's an iPad. So I think, like, we worry about movies for people like us that grew up on them and are still going to have that nostalgia part of it because we went to all the time. How about this?

Movie theaters and the next generation, they are done. iPad is going to kill the movie theater. Well, Luca's not exactly a big screen movie. Certainly wasn't a Pixar classic. But I'm just saying, I think the iPad is the movie theater killer. Mark it down. Boom. Time stamp this one for 20 years from now.

We'll revisit this. There's going to be a piece in the Atlantic by Derek Thompson's son saying the iPad kill the movie theater. Mark it down. All right. What do we got on Friday? Paul Kim from Simplify. Who has some of the most inventive ETFs of anyone in the game right now. This one's going to be fun.

All right. Animal Spirspot at gmail.com. We'll talk to them. Thank you.