Animal Spirits Podcast - Living Paycheck-to-Paycheck (EP.367)

Episode Date: July 3, 2024

On episode 367 of Animal Spirits, Michael Batnick and Ben Carlson discuss: U.S. domination of the world stock market, how credit spreads work, how the 401k revolution changed the stock market, Americans are rich, an economic slowdown is here, the U.S. labor force is huge, everyone wants to travel, the $5 meal deal inflation indicator, and much more! This episode is sponsored by YCharts and CME Group. Get 20% off your initial YCharts Professional subscription when you start your free YCharts trial through Animal Spirits (new customers only). Sign up at: https://go.ycharts.com/animal-spirits Access CME Group's valuable educational materials and trading tools and learn more about what adding futures can do for you at cmegroup.com/animalspirits Sign up for The Compound newsletter and never miss out: thecompoundnews.com/subscribe Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by our friends at Whitecharts. Michael, financial advisors, people in wealth management world, very busy. You have stuff you have to do all day operationally. You have to tax stuff. You have insurance stuff. State planning. Golf. You got the portfolios.

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You know what I use on Y charts every single day? Dial it right up. I've got my own dashboard. Now, I'm not going to share what's on it because it's proprietary to me, but I've got one. This, that, the other thing, you have your dashboard? It's not proprietary to you. I'm pretty sure they created the same one with both of us. No, no, no, no, no.

Proprietary to us. No, to me, you don't have my dashboard. They have the out of the box, whatever their standard dashboards are. I made my own. Oh, okay. You probably use the generic dashboard. What do you have in your dashboard? Is it 64 a target date for me?

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First subscription, 20% off. Link in the show notes. Balance your trading strategy by adding futures. CME group helps you manage risk and capture opportunities in all market environments. Capitalize on around the client. access to highly liquid global futures and options markets across all major asset classes. And with CME Group's e-mini and micro-sized futures and options, you can diversify your portfolio and manage your exposure and equity indices, interest rates, crypto, metals, FX, and

energy. These smaller-sized contracts offer access to the same transparency and liquidity of the benchmark contracts with less upfront financial commitment. Access valuable education materials and trading tools and learn more about what adding features can do for you at CMEAgroup.com slash Animal Spirits. Derivatives are not suitable for all investors and involve the risk of losing more than the amount originally deposited and any profit you might have made. This communication is not a recommendation or offer to buy, sell, or retain any specific investment or service. 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. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spurits with Michael and Ben. You know what's coming up? just falls around the corner. And that means future proof.

We just announced the fintech demo. This is an opportunity for seven companies. How much time do they get? Enough. Seven minutes? Seven companies to demo in front of an audience of real buyers. There's no better place in the world to showcase your stuff. If you have a piece of software or a service that you want to,

get in front of financial advisors, hit the link in the show notes, description, et cetera, et cetera. Look forward to seeing you there. It's very cool. I ran into an old friend from high school this week. We had a boys weekend and haven't seen this person in 20 years probably. And in the RIA business, and he said, so I was talking to my partner, they were in a small lifestyle kind of practice. And he said, we go to one event a year.

And my partner pitched me this event in California on the beach. And I said, oh, I know this event. We help throw this event. And I gave him a quick five minute, you know, spiel about it and in. Right. It doesn't take much to get people. Yes, it really is.

And we announced a musical act too for Future Proof. Somebody, who was he talking to the other day? Somebody goes, dude, you guys got three blind eyes. It's awesome. Close. We got third eye blind. Third eye blind. I've had semi-charmed kind of life in my head ever since.

I've been playing the hits. We've been huge on 90s nostalgia lately, and that is going to hit. Everyone's going to know all those songs. Yeah, yeah. At least in our middle-aged demo. Yeah. That'll be fun. Okay.

Good piece from the economist, Mike Bird. American stocks are consuming the rest of the world. Some stats for you. By 2008, America had ended a recession and its financial crisis were underway. The country's stocks accounted for less than 40% of the world's total market capitalization. It now stands at 61%. And he said, that's pretty astonishing, considering that we make up 25% of GDP. It's just kind of crazy when you think about that.

He did say, though, in the 1950s and 60s, it was closer to 70% for the U.S. So these things are cyclical in Japan by 1989 and kind of 40%. Well, whoa, whoa. However, what percentage of corporate profits do we have? That's a good question. Definitely higher than that. Here's an interesting one to me, though. He talked about Japan's bubble.

in 1989, the four largest companies by market cap were all Japanese banks, which is just insane to think about. I mean, ours are tech stocks, and that almost makes sense. But think about four banks being the biggest stocks in the world. Hmm. Different world. Okay. So everyone's ready to give up on U.S. markets. This is interesting. J.P. Morgan guided the markets. I was perusing through this recently. I think they updated on a daily basis sometimes. They also have the quarterly ones. But they looked at year-to-date returns, and they looked at U.S. and X. U.S. and IFA and Europe and all these places. And check out the AQUI World X-U-S in local currency versus USD for 2024. Now, it kind of reversed a little bit from 2023, but it's 11% in local

currency. So if you're an international investor in foreign stocks, you're earning over 10% this year. But if you're a U.S. investor in international stocks, it's 6%. So that difference comes from the dollar being strong this year. So last week I talked about a bunch of problems in Europe, but we went through all those charts. And I think my conclusion after thinking about the show was basically maybe that was a contrarian signal to just buy Europe because everyone just hates it. But isn't the simple explanation for the international stocks eventually outperforming just the dollar weekends finally? That's one of them. Sure. That's like that's the simple one. I guess especially for U.S. investors. Another one. Josh and I are going to talk about this

on what are your thoughts. Drew Dixon had a post showing that actually international growth stocks don't trade really at a big discount to U.S. growth stocks. And I saw a chart floating around this morning from Goldman Sachs showing that the granola stocks in Europe, which is Glaxo Smith-Kline, Roche, ASML, Nestle, Nestle, Nessle, Nevardis, why do you call them the granola stocks? That's what they're called. Keep up. Oh. That's their, that's their max.

That's their acronym? Yeah. Okay. They're responsible for like... I thought you were talking about, like, hippie stocks or something. ESG, maybe, okay. No. They're also responsible for like 70 to 80% of the returns overseas.

So anyway, the point is that Europe has way more value. The index is way more value oriented. The capital index is way more value oriented. Which makes sense why international stocks have underperformed then. It's a second thing. It's not that complicated. So the whole thing about big stocks being so concentrated, this was another interesting one from the guide to the markets.

They looked at the number of S&P stocks that ended the year down 5% or more every year since 1994. So on average, 151 stocks finish the year down 5% or worse, regardless of how the market's doing. And obviously, in the bad years, 2008, 2018, 2022, there's way more stocks. But even last year, it was almost 130 stocks. In a year, though, the S&P was up 26%, 130 stocks were down 5% or more. I guess this gets to the point of why many portfolio managers

would be tooting the bearish horn. more often because if they're picking stocks and not tracking the index exactly. It seems to be, it's not fair. In the first half of the year, the S&P was up 14.5%. InVIDIA contributed 4.4% of that. So if you just take out,

if you take out Nvidia, Microsoft, Google, Amazon, and meta, the other 495 stocks had a 5.7% return, which actually is not bad. For the first half of the year, So the index was up 14.5%. If you take out these five windows, it was up 5.7%. That's not so bad.

It's just that if you're trying to keep up with the index, it's terrible. It is kind of crazy that the case for indexing has only become stronger over the years. It hasn't weakened at all. There hasn't been a period over the past, I don't know, call it 15 to 20 years

where you could have said like, ah, indexing, what's going on? Because you have the period of the 70s where active management actually worked, did much better. We haven't had that in a long, long time. Yeah.

Stock Pickers market is coming. Just wait. It's, yeah, it's not, it's not fun anymore. I just, I feel bad. Genuinely. Eating the market is hard. That's my, no, but, but it's, but yeah, it's always hard, but now it's impossible. It's, it's, it's impossible.

You cannot beat the market with Nvidia doing this. You just can't. There's no way. Yeah. There's no way to do it. It's true. So, I still, I'm still, I feel like everyone has given up on everything else besides tech or market.

cap. There's going to be a time where anything other than market cap is going to work. Yeah. Yeah, everything has its day. Ben, we got an email. What's happening with mega brands? I was wondering what you guys make of all the big-name stocks getting crushed these days, such as Starbucks, CVS, Walgreens, Disney, Nike. Maybe I'm cherry picking, but it seems all these stocks that have had a bid for years based off never making a wrong move and having a premium attached to the brand. My thinking is now that there have been execution missteps. He goes on, yeah, I think that's it.

I think, I think COVID shook the world up. And a lot of these companies were cruising off the backs of inflation, right? It was just very easy to raise prices and stuff. And now we're on the side of that. And there's, there has been missteps. Nike famously completely missed the, somehow with the running revolution. The other brands, right, on cloud. Is it Hokka, hooka, hookah, hoca.

Starbucks disaster just continued to. to raise prices. It is interesting, though. I suppose it's, is it too simple to say complacency? There's some leadership changes. Obviously, the Disney thing. I think Disney had the right idea and the wrong execution. But remember how excited people were when they had so many subs sign up for Disney Plus. I don't think Disney Plus hurt the stock. I think it's just the, the quality of the content just fell off the cliff. Spending and they over did it. They just completely overdued. did it with the Marvel cinematic universe and Star Wars. I mean, that was it. It wasn't that

Disney Plus didn't work. It's obviously the cable component of it is hurting big time. Maybe this is maybe the positive spin here is that this is a good thing. It seems like the tech stocks are untouchable, but a lot of these huge big names have shown that they can't have missteps and there's room for competition. Yeah. No, it is interesting though. I was thinking the same thing that like big, big, big consumer brand retail. names that are household, right? Disney, Nike, just getting demolished. I suppose a lot of these companies, too, it's just much harder to run as efficiently as a tech company. I guess that just shows the built-in advantage a lot of the tech companies have, that these places have more

physical locations. They have more products to make. They're more to do than they do at tech companies. Is that fair? It can't scale as well. Yeah, yeah. Nike's just not growing. The company was, uh, they grew 1% in the latest quarter. And the, we're doing our part of the Carlson household. We're still a Nike family. Same. But the earnings call was really, it was just, it was just sentences of buzzwords and it was just complete corporate speak. Like you could tell that it was like polished up by their, you know, the PR comms. So you didn't wear the middle age dad shoes when you did your run through Central Park, the hoka or on-called? No, I wore, I wore a pair of ASICs that I bought.

at least 10 years ago. Okay. I think, yeah. Remember like the Sockony? I don't know if I'm saying it right. Yeah. I think that still exists. Okay.

Some will send us an email saying I mispronounce it because we get a lot of mispronunciation emails, which, hey. Oh, the tarot one, tarot card. Apparently it's tarot. I've never said the word tarot out loud in my life. No. We got some good ripping out that one, which was fair. All right, here's another email.

I would love to hear why and how badnik uses credit spreads. I've heard him say if he could only use one indicator, he would use that. Is that true? Is that your desert island indicator? Credit spreads? Yeah. What I meant by that was if I could only see one indicator to tell me like the health of the economy and the markets, I would use credit spreads.

Is that fair? As far as I think that is fair. So we. Because I think, I guess like the stock market can often be disconnected like in a big way from the overall economy. I think that the stock market for the last year and a half, certainly right now is outperforming the economy.

Is that fair? I mean, the stock market is, the stock markets growed at, what, 18% annualized with the last three years? I mean, some sort of crazy number. It's way outpaced in the economy. And credit spreads is just different. So all the other signals

that people were looking at to try to figure out if there was a recession, credit spreads never blinked. So I guess if you say that, if you follow credit spreads, And credit spreads only this time, yeah, you were, it made sense. It did not blow out. So for people that are unfamiliar, a credit spread is just the difference in interest rates

that bonds trade at of various companies versus risk-free bonds. And that's it. Those are the hips. Those are the hips that don't lie. Credit spreads. And we had a good talk your book with Ben Centinelli from pulling capital about this. It's going to come out next week. That was, I think, pretty instructive on this and how they use it as fixed income managers.

Anyway, a timely question because sentiment trader tweeted, watch credit spreads. The spread between the weakest and strongest investment grade credits bottom nearly two months ago. Credit concerns are rising, even as stocks hit record highs. This is unusual and was last seen in late 2011. So again, a divergence between the stock market and credit spreads. Now, they're coming off ridiculously low levels. So maybe it's nothing, but maybe it's something. Ben, you saw Atlanta Fed GDP took their forecast.

down pretty dramatically on GDP? Everything has to start somewhere, right? I'm going to get this later, but the unemployment rate, if you look at the chart of unemployment rate, every time it started to go up in history, it doesn't just stop going up. There's never been an instance where in the last 100 years or so where unemployment rate starts going up and then just stops and flattens out, that it's almost always led to a recession. Now, you could have said the same thing. I did a chart that was similar a couple years ago saying we've never had inflation over five percent that hasn't been the way that you get it down is through a recession. So that was a never happened before and it didn't. So maybe unemployment is the same thing, but that's

never happened before when employment starts going up and doesn't stop. Did you just call for a recession? Nope, but I guess things are slowing. Yeah. I think that's fair to say. And yet, and yet, Powell's speaking right now. And I saw a quote, because we keep arguing like, why is he not, why is he not cutting rates. If the economy is in fact slowing, if inflation is cooling, what is he waiting for? And the quote was something like, oh, damn, what was a quote? The TLDR was like, they don't want to be too early. Yeah. I guess they'd rather be late. Which seems to be their MO most of the time for almost everything. So I listened to your podcast with the two Jeremy's Siegel and Schwartz last week, and he was railing in the Fed. But there was, the interesting thing that

you guys talked about, I thought, was the 70s. And he was saying how crazy it was that stocks in the U.S. got down to like seven or eight times earnings, like the overall market. And it makes sense in lieu of not only inflation, but rates getting so high. Right? You could earn 12% in money markets, whatever it was, or bonds. But I think another reason is we didn't have the structure in place that we have today. So the Wall Street Journal had this piece about saving rates for 401Ks. And I think the advent of the 401Ks, and I think the advent of the 401K IRA in the late 70s, early 80s, was a huge sea change in stock market valuations. You never say never with these things, but I don't see how with the amount of automation we have that we

could ever get back to levels of valuations like that. So they looked at, they say now nearly a third of companies that use automatic 401k enrollment, now start workers that saving 6% of their salaries are higher, about double the share of organizations that did so a decade ago to according to Vanguard. And they look at, I guess for some reason, 3% used to be the number. If we're going to automatically enroll you 3% is your savings rate, that has decreased from 50% to 40%. The plans that use 6% of their paycheck or more have gone from 15% to 30%. So it's just saying that they're figuring out this automation stuff, and it's like, why don't we bump people up higher? And also put them in target date funds and all this stuff.

And they're saying 60% of companies automatically enroll new hires and participation rates are over 80%. Last year, Vanguard people in 401Ks, which is like 5 billion participants. saved 12% of their pay almost, 91% of Verizon's 68,000 participants are saving 6% or more and received a full match up from 78% in 2020 before the switch. So these companies are saying, you know, we're not forcing people to save, but we're going to make them turn it off. And so I just think this type of sea change that we've seen with automatic investment and constant money coming in from 401K and IRAs, which is, I don't know, I think the combined

for 401k and IRAs is $20 trillion now or something, that is a lot. had to change the way valuations work in the stock market. Oh, it changed everything. Change everything. Absolutely. It accelerated. Well, yeah, it changed everything. Yeah.

I really, it doesn't mean it props up the stock market forever and valuations can't decline, but I do think that's a big difference between now in the 70s is that there wasn't this, this level of automation and professionalization in the stock market. Well, but just permanent buying. It's not the only thing that's responsible for higher valuation, structurally, higher evaluations, but it's certainly a big, a big factor. All right, back to your recession thing. I pulled a bunch of charts here that I saw this week.

What do you mean? What do you mean my recession thing? Well, just the recession thing that we brought up. And I pulled a bunch of charts here. Some of them we've talked about before. Some of them we haven't. And just wanted to run through these real quick and then get your take on this. So torts and slock, this one that's pretty similar to Ned Davis a couple weeks ago.

Household net worth has a percentage of disposable personal income, close to all-time highs and way higher than it was in the past. I feel like charts like this, like they're good, and I'm not hand waving them away. But when the top 1% control have such a large portion of the overall net worth, I kind of feel like you really need to dig inside of this. You know what I mean? That's fair, yes, which we've done before. Yeah. Jeremy Horpal did millennial wealth relative to Gen X and boomers.

So, and he did it by desile. And you can see the top 10% has way more than baby boomers have. or GenX, right? So they have 239% more. So this is like, how much more do they have than their predates? So if it's 122%, they have 22% more, makes sense? It was 100% even. So millennials are way richer than baby boomers were at the same time. Yes. And he did it across the desile to show. And yes, the richest millennials are way richer, but I mean, you know what people say that like our parents were able to buy a house on one salary and and pay for two cars. And I'm not saying, like, yeah, but we have iPhones, but we really do.

We have so much more shit than they did. We have so much more disposable income than they did, so many more luxuries than our parents did. Yes. And a lot of those luxuries have become necessities, unfortunately. And I think that's part of the problem, is that you just... How many, like, just so many more vacations than our parents did. I never took a airplane vacation Well, we went to see my parents, my grandparents in Florida. But we never, like, went to the Bahamas. Like, that wasn't a thing that we did growing up. Like, our parents just didn't have money for that.

And I think that, like, that's, yeah, there was kids with whose parents did have a lot of money. But that was, like, sort of not the outlier, but you really had to have money to go to take care of a family of four on a vacation. You know, money money? Something we did that doesn't happen anymore is we would drive to Florida, from Michigan to Florida. We're talking like 22-hour drive or something, depending where you're going. And we would literally sleep on the floor in like a miniband.

And if a listener's like, oh, well, it's still, it's only rich people going on vacation now. Just not true. Kyla tweeted this. Hang on. I got this in surveys. All right. Oh, there it is. Yeah.

So I put this in surveys. And I don't know if I can trust this survey fully, but it said this vacation place did a survey. And they said, an impressive 82% of adults in the United States, more than 212 million people are planning to travel this summer. Among these travelers, 42% plan to embark on multiple trips. Which part do you not believe? Do you not believe it because of the source? No, that just seems like an insane.

I know people are richer than ever these days, but do we really think that 212 million people that many people can afford to go on trips? Look at what the cruises are saying, what the airlines are saying. They're all saying records. It's not only rich people. Yeah, I guess that is just an insanely high number. I agree. I don't know if 82% is the right number.

That sounds high, but whatever. It's high. It's high. It's record numbers, all-time highs. Okay, so my question to you for all this, the, all the wealth stuff we've been talking about, the problem is it doesn't necessarily stop us from having a recession. To your point, if all that wealth is concentrated in the hands of the top 10% or top 20% or whatever it is, it's not like that money can stop things if we get an AI bubble that takes us to access

and the economy starts slowing, or even if it's something else. So that wealth doesn't necessarily stop us from having a recession. True. And this can continue sort of in the face of recession. Probably not to this extent. Obviously, the economy will slow down by definition. But we don't have to have a catastrophic recession. I think every time we talk about this, you think like stocks fall 50% and unemployment goes to 10%. It doesn't have to be that way. It doesn't have to be that way. You can have a recession where unemployment gets to, you know, five and a half, six percent. Stocks fall because that's what they do. But it doesn't have to, it doesn't have to be the end of the world. It doesn't have to be a crisis. Yeah. And like the 2001 recession is a perfect example of it. It was a tiny, tiny recession. The problem is the stock market was so overvalued. It almost had to crash. And it did so whether the recession hit or not, probably. It was going to happen regardless. All right. Good run of charts here from the American Worker or the Economic Innovation Group. They did this whole history of American worker. I wanted to run through some of these with you. The U.S. Labor Force was 60 million people. in 1950, it's now close to 170 million. And they show the majority of that increase is from women. So the labor force, prime age labor force participation ratio, which is 25 to 54, for women in the 1950s was 45%. Now it's close to 80%. Men is closer to 90%. That is an insane run-up. And if you look at the next one, a lot of people say, well, it's because you need two

income of households to afford all the luxuries we were talking about. But really, but really it's because wages are so much higher that it is, it is induced women to enter the workforce because they're being paid to. But look at this. Well, both things are true. It is, it is, it is very difficult to raise a family on one household. To have all of these luxuries that we're talking about on one household is pretty rare. Yes. But, but I think the reasoning that a lot of women have entered the workforce is not just because they needed to it, because wages have got them off the sideline, essentially. But look at this next one.

So they looked at real wages from the post-World War II era to now. And post-World War II was a huge boom in wages. But then from 1970 to 1995-ish, real wages went nowhere. And a lot of that is because inflation was so high. But it's kind of crazy that we look at the 1980s and 1990s as this period of just like jubilation and everything was great and the economy was booming. real wages literally went nowhere for 20 years.

And now from the mid-1990s to now, you've seen boom times again in wages. But you don't ever think about the 70s. There's obviously people have really bad memories, but the 80s and 90s, you wouldn't think this, would you? Is that surprising to you? It was surprising to me to see it charted out like this. Yes, very surprising.

You don't hear pieces of economic reporting in the 1980s and 1990s of people being so miserable because their wages were going nowhere. Maybe it's just because the 70s were over and they were happy with that period being gone. Well, also the stock market was booming. Yeah, that's true. But now we have stock market boom and wages booming. People are still miserable. Well, wages aren't booming.

Yeah, but on a relative basis compared to then, they are now. You know, yeah, you're right. Fair. All right. One more from J.P. Morgan. Do you remember when, was it Meredith Whitney who said all the municipalities are going to go out of business? Yes. I think Michael Lewis had a chapter in one of his books about this. That was, yeah, that was a tough call. So they did this, I've never seen this chart before. It's state and local and federal net debt as a percentage of GDP since 1930. So obviously federal net debt as a percentage of GDP is about as high as it was in World War II. But look at state and local debt.

It's essentially unchanged over the past, I don't know, 80 years and it's only gone down in recent years. I guess if you were to zoom in on like the, on when she made the call, it was definitely the peak of it, maybe? It's gone down since she made the call. It was going the wrong direction. Yeah. Anyway, another surprising chart.

All right, Duncan threw a survey or a vote in our YouTube channel. Where have you noticed inflation the most in your life? recreation, energy, cars, and trucks, and food and beverage. And the number one item was food and beverage. And I would... By far. I would also vote for food and beverage. But I think one of the reasons why we do vote for food and beverage is because you eat and you drink several times a day.

Probably the most frequent purchase that you have, right? Yeah, the funny thing is the actual inflation rate is probably way higher for cars and trucks and recreation. Oh, I don't know about that. Than food. You don't think so? Entertainment and... Food inflation is up a lot. lot? No, if you look at it, it's pretty close to CPI. Is it? Okay. All right. I mean,

restaurants are higher, but food at home is, it's higher. Either way, I was telling this to, on teacaf. I got two slices of pizza and two sodas. And it was $17. And that's just hard to, like, get used to. I'm not sure what I think it should be. Like, two slices should be, what should two slices be? I feel like this is turning into a weekly Michael Battenick segment of here's six things I bought. Here's how much, here's how much is They cost. Two slices should be, let's say, $4 each. Is that fair?

Are we talking big New York slices? I mean, but it's like, we're down in the city. I was with my kids. So let's say $4 and $3. So $8.14 taxi. I guess it makes sense. All right. It didn't feel good.

The thing about inflation, though, and so much of the food thing is the psychological component because, like, you're saying you see it all the time. So you've seen this McDonald's meal deal making its way around. Pretty good deal actually. So $5. It says limited time offer, but you get a McDouble or McChicken, a four-piece nugget, a small fry, and a small soft drink. Pretty good deal. It's funny to me that people would, and this totally makes sense. People don't want to look at the inflation data. They want to see stuff like this. They want to see a psychological moment like this where it's like, yes, this is it. We broke inflation's back. I had my kids chicken nuggets last night. Logan only eats a few. Man, they're so good. I don't know.

I mean, they're so good that, like, you just know that they're so dangerous. You know what I mean? Like, food should not taste that good. What, you mean, you mean, chicken's not actually shaped in a little rectangle like that? Just the coating of fried whatever. It's just, it's so delicious. I was at a bar the other day, and some of the old people were, like, laughing and complaining about McDonald's.

They said, you take a. family of four, and it's $80. That's, I mean, that's obviously not true. Right. That's not even close to true. But nevertheless, it's direction. I think McDonald's relative, I mean, if you get the, but for the stuff my kids eat, it's still relatively inexpensive.

My kids get like a plain hamburger. You know? A plain hamburger? Plain. Well, ketchup, I guess. Okay. They don't even like the little little mini onions from McDonald's, which I contend are pretty good onions.

I love those mini onions. I love everything about McDonald's. Yeah, McDonald's is great. All right, here's another anecdote from an email. Hey, guys, love the show. I'm a police officer in SoCal so we eat out a lot, which I didn't know if that insinuation that police officers get all. I guess it makes sense. They're patrolling. Over the last month or two, nobody is in the drive-thru it in and out. I sat alone inside of Chipotle the other day, which has never happened. The $20 minimum wage in Calais has increased prices to ridiculous amount.

It's forced a lot of people to brown bag it to work. I'm curious how this plays out for stocks like Chipotle and saying people are cutting back. And I think California probably is in its own little world on this, but it does make sense that these places have pushed to the Starbucks point pushed enough. So this is interesting to me, though. I looked at Chipotle. That stock trades for 61 times earnings. The price of sales went from two times in 2018 to eight now. How is this stock still such an insane being priced as such an insane growth stock? I doubt their growth has accelerated. Has it? I don't know. I don't know, unless it's just all from price changes. That just seems, I'd be willing to take that as a paper short. How's that? I mean, you stopped eating

them. I actually had it recently. And I got to be honest, it was delicious. It was really good. It's still pretty good. I was really good. I got this is a heavy, this is a heavy, this is a holiday week. It's a heavy email week. But wait. Yeah, Chipotle in California, what do you think it costs? 16 bucks for a bowl? No fucking way. Absolutely not. Yeah. It's the Jeremy Irons thing. Willing buyers at a willing price. My wife is home for the summer.

I hear her, she's a guidance counselor, so she's off for the summer. And I just hear the TV on downstairs. A lot of TV for her. A lot of bitching. She's mad. So my wife is very lenient with me. She's an incredibly understanding, very forgivable wife. So I usually don't get in trouble.

I'm in the dog house this week. Any reason? Oh, yeah, this is a reason. No, I'll share. I shaved Kobe's head. bed. Like a buzz? Yeah, without telling her. Oh, okay. He had like long

hair too, right? I just made the decision because he has so much hair and it's like hot and he's always sweaty and so I told him that I would buy him. Okay, you deserve to be an adult. My wife would kill me if I did that. Oh, we came that stairs and she's so how does he look? Did it turn out okay? You just wanted

him to be like you. You wanted to see what shoulder him he's going to look like when he's older. I think he looks cute, but I'm I'm biased to protect myself from admitting that he might not look that good. Oh, no. It looks pretty good. As I'm doing it, he goes, mom, he's going to be so bad at you. At least he didn't care.

All right, what else? Yeah, you deserve to be in the doghouse. Yeah. I live in the Quad Cities between Iowa and Illinois. And we have the HQ of John Deere. Oh, oh, this is an answer to what were we talking about last week? Why grocery prices are so much lower in the U.S. than the rest of the world? Right. Okay. So this is a great email. Here we go. Food prices are so phenomenally cheap here,

and we are able to eat things like beef when other countries can't afford it because of our incredibly well-placed food basket. The Mississippi River Basin is basically the largest navigable river basin by far, extremely long and extremely flat, no rapids. And that river basin sits on the largest contiguous stretch of arable farmland on the planet. It produces one-third of the entire world's corn and soybeans, which are the foods required to raise livestock. Hell yeah. And all of it is controlled deep within the USA and is half a planet away from any possible foreign adversary.

It's pretty great to be an American, I'd say. So there you go. Coming from a person in a farm family, I like that. That makes sense. Also, I looked it up. Could you name any of the Quad Cities? No disrespect, but, oh, a Quad City. Where does he say it lives?

No, the Quad City. It's like... Between... Wait, between... Illinois and Illinois. Let's see. Champagne? I've gotten to any of these.

Champagne? Rock Island and Moline and Illinois and Davenport and Bettendorf in Iowa. That's the Quad Cities. Okay. I haven't heard of one of them. But they sound lovely. And thank you for the... For the beef.

Kind of feels like... So that all makes sense. It's just that we have this abundance of natural resources here. So I... And in waterways and that makes sense. Oh, here's a going. We should have done this a minute ago. Oh, okay. I did see this. A bunch of people tagged us on this tweet.

There's a Wells Fargo analyst who ordered the same burrito bowl 75 times. Now, that's channel checking. Wow, credit to him. At eight different Chipotle's in New York City to prove the portion size and consistency. So this guy went around with a scale, a digital scale, do you think? Like a drug dealer? I guess so. Bowler. All right. So the bowl weight ranges from the median is around 22 ounces, but it goes all the way up to 27 ounces. I got to know which store that is. And all the way down to 14. That is quite inconsistent. I love how on the chart he put a three standard deviation event for the lowest one.

But you know what's interesting? If you are unlucky to get a ball of that size, you're not getting Chipotle ever again. No. Right? The person who does the little half. Yeah. And this is the power of consistencies. Starbrooks always taste the same. The McDonald's nuggets are always great. That's true. How has Chipotle not figured out how to just have all the portion sizes be the same regardless? us. Listen, they're trading at 61 times earnings. They're feeling themselves. They're getting complacent. All right. Hey, this is a first for a while, I think, for us. Nothing in the real estate section of the dock here today. Does it feel like there's nothing left to say at real estate? There's nothing to talk about.

There's nothing to talk about. Yeah. I mean, it feels like the whole worry for everyone is if rates fall, demand will come back in. If rates stay high, demand is going to be on the sidelines, for a while. Like, what causes that to break? There's got to be something that that changes the dynamic. Yeah, rates. I guess that's it. All right. Great chart from Apollo that I found in Michael Sidgemore's alt-go's mainstream substack. Looking at the chart is private equity funds closed by time spent in markets. So how quickly were these funds able to raise their money? And Michael says, in 2021, almost 20% of private equity funds. So 2021 was like, go, go, go. Go, go, go, go, go as fast as you can.

Almost 20% of private equity funds closed after less than six months in market fundraising. Funds closing in the first quarter of 2024 weren't so lucky. Around 5% of the funds closed were in market for six months or less. And only 10% of funds successfully raised in less than 12 months. So it's taking longer for people to give money, which makes sense. The IPO window is still pretty closed. M&A is coming back, but it's not what it was.

and a lot of the deals where a lot of people are still stuck in crappy vintages. So the people who do the sales for these private equity funds, I've had a lot of experience with these people, I guess you can't call the wholesalers, but it's funny how it works because they, because I still get emails from the people all the time for my endowment days when we place private equity funds, and they would basically live through like one of these cycles, and it's like sell this whole fund, and then I'm sure they get some sort of bonus depending on how quickly they sell it, and then they move on to another fund. And I still get constant emails of, hey, Ben, guess what?

It's been 24 months since we talked. I'm now at blah, blah, blah, fund, some Greek word or island or something. And we are raising a fund that is targeting IR, whatever. But these, the salespeople, and I'm sure there's cases where people just stay at the same firm all the time. But they have, it's like they, it's like get this one done and move on, almost like a realtor. But it's been tough for those people. Yeah, tough market. Okay.

tweet from Kevin Gordon. Consumers feel pretty bad about business conditions over the next six months. Worse in September 2011. I'm just reading that and say, what? Okay, whatever. We've been over this many, many, many times. I'm starting to default to the fact that just

no one answers these surveys anymore. That's kind of where I'm falling on them. Do you get like random text messages or emails about surveys? Do you ever say like, ah, I'm going to take my time out of my day to fill this out? I think there's some information in here, but certainly not as much as they used to be, for sure. But they feel pretty great about the stock market going up. Okay.

Yeah, well, I guess... Usually, these lines mirror each other, right? They're usually going in the same direction. Yeah. Odd. Odd, odd, odd. Okay. All right, Ben kicked the hornets nest, tweeting sarcastically, after my mortgage payment, 401K, 529, I rate contributions.

My annual six-week vacation to year, private school for the kids, second home in the Hantons. A handful of angel investments in country club membership. I basically live paycheck to paycheck. This economy is the worst. I think you're too online. I think you're too online. You're too online. Fair.

I've been offline for the whole week almost this week. See, I got the Tropical Bros. I'm in vacation mode. You know why? So I'm not online this week. Let me ask you a question. In your real life, do you have, have you ever seen anybody, heard anybody come close to speaking this way? No, no, the point is, so there was a...

Answer, answer the question, in the real life, in the real world. Of course not. That's why this was meant for an online world, because people online were arguing about someone had made some point like this online about living paycheck to paycheck, but they talked about how they did their... And so, obviously, I was, this was satire about people who make these complaints online. And, yeah, and I had to mute this one because, boy, it kind of took off. And do you think the views on Twitter are legit?

because it says this one was kind of a banger. It went, it went pretty viral, but it says two million views. How would you know? I don't know. It just seems like a made-up number to me. I feel like it's, yeah. There's no way it's real.

We got a bunch of emails. There is a car called. Let me just play this. What's this called? Behind me is the Ineos Grenadier. Okay, the Ineos Grenadier. It's a car. I'm guessing this is a European car.

It's got a toad horn. It's got a toad horn. Did you watch this video? No. So there's the horn where it's like, hey, asshole, move. And then there's the, excuse me, the light is green. Or, they say it for bikers. So the toot is, it's a toot.

It's a light version of the horn. I like that. So we were on to something. There's your midlife crisis car. Yeah, that's a good one. We had a phenomenal comment on, I don't know where this comment came from. One of the, one of the, uh, this is from, I think this is a, this is a review on iTunes. Okay.

In every partnership, there is a person who stacks the dishwasher like a Scandinavian architect and a person who stacks the dishwasher like a raccoon on meth. And Ben is a Scandinavian architect. In fact, uh, you sent me a picture, uh, bragging about how it's done. And I got to say, that's a great looking load. You have, that was a great looking load. That's what she said. I just want it to be known that I didn't I didn't like prepare for that dishwasher.

I'd open my dishwasher and it was full and I decided to snap a picture for you. So it's not like I was like going all out. That's how I met my dishwasher usually looks. Okay. All right. This is an unusually heavy email show. So I don't know if you like it if you don't, but personal emails, personal responses. Here's another email.

I just wanted to add my voice to what I'm sure will be plenty of hopefully good natured ribbing around you guys pronouncing tarot like carrot. delightful. With each new utterance, I giggle with glee, I even rewound to listen to it again. I am generally opposed to ha-ha, you misspoke sorts of commentary, but for some reason this one brought me a great joy. I hope I'm not alone. I hope this message does not violate any of Michael's particular electronic email communication protocols. But if it does, please accept my humble apology. No, this is, this is perfect. I think I've never, honestly, never heard anyone to use the word before in conversation. No, if you did, you know how to say it properly.

One last one. This was a flyer, a traveler who was gone from Edinburgh to JFK, had an unusual airplane experience. This is an etiquette, no, no, for sure. This one is not debatable. This is not a recliner one. I arrived in my seat to find a person in front of me had draped their coat over the back of their seat on from the front of mine. By the way, this happened to encourage your enthusiasm this year. Oh, yeah, you're right. Completely unacceptable. Yeah, very, yes. To the point where the entire seat including the tray table and the little tablet were completely covered by the coat. Are you kidding me?

I can't watch a crappy movie because you need to put your coat there? No way. As I only had three hours of sleep from the night before, I had no patience for this and politely asked a person if the jack was theirs. And when getting a positive reply, I handed it to them and asked them to kind of keep it with them in their seat. The person aggressively reclined their seat as soon as we had finished taking off. what's the show stands on Drape and Clothes with the backseat? How could anybody be pro Drape? I think this person handled it

right too. Because there's some people that would just throw it on them probably. But I think this person handled it right by it. Is this yours? Please move it. Yeah. That's pretty bad. All right. Recommendations. I got a few. Inside Out 2. Went to see it with my kids the other day. First time I've been to a movie theater in a while. And a delightful movie. Very good. Very original.

It was not only a good movie with a good message, like very, just very clever premise. It was really good. Did you fall asleep? I may fall in sleep for 10 minutes. My daughter was like, Dad's asleep. I fell asleep for 10 minutes too. We're turning into our fathers. It's just inevitable. But here's the thing. In my more creative days early in the blog, so for those who don't know

the premise, it's all of the emotions in your head. So there's joy and embarrassment and sadness and anxiety. and they kind of fight for who has control over your brain. And they should make a stock market version of this. Someone should, right? There should be a stock market inside out. What would it be? Fear, greed, NB, all these, right?

Anyway. Oh, that is a very, very cheesy blog post that you definitely would have done back in the day. Fair. So anyway, I really liked Inside Out, too. I think it might have been better than the first one. My kids loved it, too. And the funny thing is my 10-year-old totally got the

understands it. And she is a little bit an anxious kid at times. She's like the safety officer. She's like, this is too risky. We can't do this. And I always tell her like, hey, listen, let Joy take the steering wheel

instead of anxiety for a while. Oh, that's cute. Right? Was the theater full? We went on like a Tuesday evening. So it was, yeah, not, no one really. How about you? I find myself falling asleep

more often than I used to during. That's great. That's because they have a reclining chairs now. It's the recliners that make you, want to take a nap. Yeah. Also, like even during Game of Thrones, but I watch it in bed. I can't see, I don't watch TV in bed. It's the only thing I watch in bed and it's just on Sunday at 10 o'clock whatever. I'm tired. That makes sense. All right, I, this was on the rewatchables a few weeks ago. I, for some reason, I've just never seen it. It just missed my window, like a lot of these older

movies, Slapshot. Have you ever seen Slapshot? Nope. Okay. It was on Netflix. And it's kind of bizarre, because Paul Newman was one of my mom's favorite actor, so I'm surprised I've never seen it. If this movie came out in 1985, I probably would have been in my mom. I probably would have been in wheelhouse. And I don't want to, like, crush anyone's nostalgia for this movie. Because I always get mad at you for saying that all my 1980s movies are sucked, basically. But I have the nostalgia for him. So that's why I appreciate them. And you watching them now, you think like, oh, that movie's not that good. I kind of had that with Slapshot a little bit. Where it's like, 79, I think it came out. It was, it was a good movie. Paul Newman was amazing in it. But it was

kind of, it had these parts where I would go, oh, that's funny to myself instead of laughing. Well, guess what? But if I'd seen it when I was younger. Hoosiers, not a good movie. Whoa, okay. Really? See? That's where I draw the line.

But I'm sure there's people who Slapshot is literally their favorite sports movie of all time, but just because I missed it the first time, it was pretty good, but it wasn't as funny as I thought it would be. All right, one more.

Why is it that people who, in TV shows and movies, the women in Chicago will all work at art galleries. So I'm watching, Presumed Innocent with Jake Gyllen Hall. Excellent, right? Right?

I mean, it reminds me of the Hugh Grant, Nicole Kibden went a little bit because it's a little soap opery, but good. I love it. So the wife in that works at an art gallery. They live in Chicago. Dark Matter, Jennifer Connolly, Chicago Art Gallery.

That's two. Jennifer Aniston, the breakup, Chicago Art Gallery. Okay. Couldn't find a four. Three, that's a trend though. That's a trend, yeah, that's evidence. How many people work in art galleries in Chicago? It can't be that many.

How impressive was the finale of Dark Matter? Those shows are very difficult to end, especially a show like that. I told you, I went back and read the end of the book while I was watching the show because I couldn't remember how it ended. Did they follow the book? Yes, it was, were all the versions of Hivocan back. It was, yeah. You mentioned rewatchables. This week, they did Naked Gun, which is in my, like, absolute pantheon of comedies, one of my favorite movies.

one of my favorite movies of all time. See, and the thing is, the sequels are funny, too. They're great. They're really good. To me, they all kind of run together because I watched them so many times. The original, the second one, the third one. Was it 33 and a third?

Yeah. Yeah, they all kind of run together to me. I feel like they're almost one movie, but yes. Leslie Nielsen was a, yeah, he was awesome. The best. We watched, I showed Kobe and Logan, Little Giants, which was a favorite of mine growing up. Holds up wonderfully.

Kobe actually said that he liked it better than, or we're not done yet, but he said he likes it better than the sandlot. And I got to say, what the hell happened to Rick Moranis? I know we know what happened. He just went away,

but he was... He was another Daniel Stern guy who just walked away. He was so good. That doesn't happen today. I feel like that's the thing that could only, kind of thing that could only happen in the 90s.

No, he was so, so good. My dad, I just was reminded of this. my dad was over, they came back from a trip to Vienna and Austria and that part of Europe. And he was showing me like an instrument that Beethoven used to play, something that could help him here or whatever. And we were talking about Beethoven for a minute. And my dad goes, do you ever see a mortal beloved? And I said, yeah, with you.

You took me to the theater to see that. I'm looking up now. It was 1994. This was definitely not a movie from 9-year-old Michael. Can't ever saw that one. I vaguely remember it. It's with Gary Oldman. You saw it right after Field of Dreams.

I did see Field of Dreams in theater. Okay. All right. That's your story and you're sticking to it. When I was four years old, it does seem a bit outrageous, but I don't know. Listen, I have memories. Maybe they were inceptive to my brain, but I was there. Vienna is my favorite city and the whole planet.

Very nice. All right. Email heavy. We appreciate all the emails here. Yeah, thank you. Everyone have a nice 4th of July. What are you doing? Beach?

We'll be at the beach on the fourth and then over the weekend we're taking Kobe to see sleepaway camps. He's going next year. So that's what we're doing. Oh, I got one more anecdote before we go. Did a little, we're on vacation this week. Did a little horse riding yesterday with kids? Why did you just use air quotes? I did this.

Yeah, vacation. And we went horse riding with the kids. Like a little two hour horse ride, just slow walk through a trail in the woods. You ever ride a horse before? I'm sure I did when I was young. I couldn't really remember it because they asked me that. But it just got me thinking, I was on a horse for maybe an hour and 15 minutes, and I got off and I was sore.

Like, it is not comfortable to sit on a saddle. I was not made for, like, the old times. Like, I think we've talked about this before. You and I would not make it back in the, whatever, 1800s, Wild West. You'd make it longer than I would, let's be honest. People literally used to ride across the country on horses. I couldn't, I did it for an hour and I was sore. How did they do this for days and days on end?

They died. I guess so. I guess that's why people died at age 35 back then. But yeah, I, to your point about luxuries, things are a little simpler. I can't imagine riding a horse to get around places. No, thank you. What was the horse etiquette back in the day? Like with fellow travelers.

That's a thing. They wanted us to ride in a single file line, and my horse Elvis kept wanting to pass the horse in front of me. He's like, get out of my way. And they told me, no, no, you can't pass. And I'm like, he wants to pass. Unpass. Anyway, all right. Keep on those emails, Animal Spirits at the CompoundNews.com.

Thank you, everyone, for your views, your likes, your reviews. What else? The comments. We appreciate it. See you next time. Thank you.