Animal Spirits Podcast - More Sellers Than Buyers (EP.247)

Episode Date: March 9, 2022

On this week's show we discuss a bear market brewing in the stock market, the stock market now vs. 1900, the impact of higher gas prices on consumer sentiment, crazy commodities prices, energy stocks, housing prices and more.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Learn more about your ad choices. Visit megaphone.fm/adchoices

Ben, first of all, it's good to see you. As always. Here's a quote from a famous economist, making money is art, not Ben Bernanke. Old Port Quigman, did you know, Ben, that Andy Warhol was an economist, like in real life? Really? An economist slash painter. One of our favorite investment platforms, Masterworks, has taken this idea that making money is art, and they leveled it up. They just sold their third painting for a 33% of,

net IRR. Since 2017, they've sold three offerings for an annualized gain of over 30%. Pretty good. Obviously, past performance, et cetera, et cetera, but three for three, not bad. If you want to invest in Warhol, Picasso, like I did, head on over to masterworks.io slash animal. That's masterworks.com.i.o slash animal. And please see important reg A disclosures at masterworks. ios slash disclaimer 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 writ holt's wealth management all opinions expressed by michael and ben or any podcast guests are solely their own opinions and do not reflect the opinion of writ holds wealth management

this podcast is for informational purposes only and should not be relied upon for investment decisions clients of Rittholds wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael, as of this recording, it's late Monday afternoon. Tell people, there it is, Monday afternoon. Monday afternoon. I've got the S&P 500 from all-time highs, which were, I think, the first day of trading this year, down 12%. When you say from all-time highs, is that closing?

Because when I say all-time highs, I mean all-time highs. Like actual all-time highs. If you're going to use closing basis. I'm not using like 4 a.m. pajama traders as an all-time high. I'm using closing all-time highs. Be up front, okay. Closing. Agreed to discreys.

The S&P is down 12%. The NASP is down 12% the NASDAQ is roughly 20% off all-time highs, as is the Russell 2000. At this point, caveats supply, because I don't know this better than anyone else, I would almost be more surprised if we didn't go into a bear market. What do you think? Yeah. Well, you know, it's finally losing it. Google, down 4%.

these names that were the last ones on, oh, Amazon smoked five and a half percent. They're finally getting the big dogs. And so this is probably what you want to see. I mean, nobody likes to see this. But the sooner that we can get it over with, the sooner it could end. That's what I'm trying to say. I guess this is the kind of thing where things were already pretty bad. And then you have this other exogenous shock that hits the system.

And you're seeing oil prices just skyrocketing. All the commodities is going crazy. I'm not ready to say yet that this is like the U.S. is going into a recession, but would you be shocked if Europe went into recession because of this, because of how reliant they are on Russia for their energy prices? No, I would not. I would not be. Why don't we get into some of the data, some of the news? So what's going on with some of these Russian ETFs? So all sorts of weird shit going on. So this was last week, but Eric Beltuna's had a tweet that said, more people have placed buy orders for RSX, which is the Vanac, Russia ETF than Microsoft today on Fidelity's brokerage platform. There's been three buy orders for every sell order. So retail is like, wait, hold on. Hang on. No, this is important. This is important. What? Literally more buyers and sellers. Yes. Retail was rushing in to buy the Vanek

Russia ETF, which maybe I'm going to sell the Canadian here, but how is this thing not a zero? How does it not effectively worthless? No offense to anyone, but this reminds me of that seen in law rats, you dumb bastard. It's not a scooter. It's a sailboat. But seriously, I mean, people are diving in to buy this thing. I could never see those things. If you looked the picture within a picture, I could never get them. Same. I thought it was a scam. Same. That brings me back to simpler times. Yes. Like, that was what kept this busy, was trying to find the images within the image. Right. So I guess the idea, remember when Hertz went into bankruptcy last year, two years ago whenever it was and people rushed into buying it like went crazy, parabolic. Is that like the hope here?

People are thinking they're going to buy, but I'm sorry, these Russian stocks are worth nothing right now. They're gone. Well, you see all those charts about the difference between nav and price? I don't think I've ever seen a gap like this, where the nav is, I'm making this up, a buck, and the ETF is at seven. Yes. So it's being popped up because their stock market isn't open right now. That's the only reason it's bizarre. So Jeffrey Kleintop had this thing that showed percentage of ownership by people who live in those countries, how much they own of those stocks. Russian investors, he said, have 95% of their stock portfolios invested in Russian stocks, which at this point, if you look at this chart, it's like this everywhere, which is kind of

crazy. In Bangladesh, they have like 98%. Like all these countries, it's really high home country bias. Now, because the U.S. is 55% of the overall market or 60% or whatever it is, I don't think this really hurts U.S. investors as much as it does people in other countries. Russian investors are just, they're cleaned out at this point. Yes. Their currency is crashed. Their stock market is probably not opening in for a long time. I've been a proponent of this one for a while. The credit Swiss equity or investment returns yearbook. It just came out a week and a half ago, two weeks ago. Someone finally alerted me to this. I must have missed it when it first came out. But they have this chart every year. And it's really good because it shows the relative

size of stock markets by country starting in 1899 through the start of 2022. And so USA, 1900 made up 15% of equity markets. The UK was 24%. Russia was 6% at that time. I guess effectively now you could round them down to a zero. The U.S. is now 60%. The UK is down to 4%. I mean, it was all what, real-world companies back then probably. Yeah, I'm sure it wasn't much and everything is so much more diversified now, but this chart is amazing. Well, they also have the sector one. Oh, that's right. How sectors change over time? Yeah. And what are these railroads, basically? Railroads, leather company, I don't know, nail manufacturers. Yes, but things change, I guess.

Okay, gas prices. I've got to update this. So this weekend, I put the average gas prices in the dock from AAA, and that number's already stale because this was as of March 6th, it was $4 a gallon. I saw a tweet this morning that the price went up like 41 cents in the last day or seven days I can't remember, but it was the largest spike since Katrina. My negative convexity on gas prices is such a real theory. I can't prove it, but it's true.

Oil goes up and gas prices go up more. Oil goes down, gas prices go down less. You cannot convince me otherwise of this. 100% true. We were on with Derek Thompson a couple months ago on his podcast, and I went and found this one, this quote of his, and he was saying gas prices have an outside impact psychologically on consumers because they're in like a million font.

when you drive down the road. You see gas prices and you see them change. If we had prices that said how much have a gallon of water cost or whatever, people would pay more attention to the price of water. You've probably heard people doing small talk talking about the price of gas. You don't have small talk about prices of other stuff like you do with gas. And obviously gas is more volatile than most prices, but there's a psychological component to gas prices that just doesn't exist elsewhere. They show gas prices on the news. You don't see that with other prices of things. As far as consumers are concerned, gas prices are so important. People will drive across the town to save three cents on a gallon of gas. You wouldn't do that for something else. Like, you wouldn't do that for a carton

of strawberries or something. It is getting truly expensive. People are not paying a hundred bucks to fill up their tank. I told you this morning. I was driving my way to work and I had a quarter tank and I thought, you know what? I could probably wait a couple more days, but I'm going to fill up today because I'm guessing prices are going to be higher tomorrow than they are today. This is the psychological component about inflation, I guess. And, I mean, what are we going to see for inflation? Could we get 8% inflation, not 10%. Yeah, sure we could.

Isn't that on the table? Look at this chart from Jeff Wanager. UN Food and Agriculture Organization Food Price Index in real terms. This is beyond no joke. This is some scary shit. We're basically approaching the all-time highs from the 1970s. Teddy Fuse tweeted, wheat futures in Chicago, this is morning. Weep futures in Chicago jumped by the daily limit for the sixth straight

session, rising 7% to 1294, a bushel, and building on a massive surge of 41% last week the most in records going back more than six decades. Hey, Michael, you know my hedges here? No carbs. Glutin free. My wheat hedge is no carbs. How's that? Oh, keto is alpha.

Keto is alpha. Keto is the key here. Michael McDonough tweeted this morning, just a chart of commodities price change since Friday, just since Friday. You've got natural gas up 40%. So you're talking about Europe going into a recession. The price in Europe for natural gas, I think somebody said it's like basically if oil here was $600 a barrel. I mean, this stuff obviously is hitting our shores, but not nearly as much as it is in Europe because they're so reliant on Russia for natural gas and oil.

This is going to have massive implications. And I don't see how this just stops. No. Even if there was like some sort of peace announcement before this drops, God willing, and a lot of these prices, the spike reverses, were still past the point of no return, I think. Yes, it's short-term pain. That pain is going to last at least a number of months.

You could say, like, let's look past this and try to put the positive spin, is that this is going to hopefully change how people think about energy and who we're reliant on and the push to greener energy is probably going to come from this, but that's years in years down the line, the short-term stuff. And so I was looking at up the Bureau of Labor Statistics has how much of household budget goes to things like gas and energy. And if you include gas and then heating and all these things, if you put them all together, it could be like 20% of a household budget. Gas itself for your car is honestly not that much of your budget. But if you include utilities and stuff like that,

it's actually a meaningful number for many houses. So that's why I understand Derek's theory and I generally ascribed to that because gas, the font, is so huge and it's in your face. but this is way past that at this point. This is making an actual impact in people's lives, like not just psychological. It's both psychological and now a real cost for a lot of people. I mean, the crazy thing is oil prices got to like $150 a barrel in 2008. So we're not there yet on an inflation adjusted basis. I think if you inflation adjusted at the high-end gas prices.

We might as well be. We might as well be. Especially because the problem is the other psychological component is we're looking back at 2020, which doesn't feel like that long ago. and gas prices were, didn't they get below $2 a gallon? The other side of this coin happened not that long ago, and then oil was negative for that one crazy day. I wonder if part of this decision from Putin was given where we are with our own supply chain

issues going into this and the inflation that we were experiencing going into us, if he's like now is the perfect time to really up. Yes. If he did this in May of 2020, none of us would have noticed because no one was driving. and prices were low, it wouldn't have had the same impact as it does now. So yes, looking for maximum pain. If that's what he's looking for, he got it. When you say this, obviously, you just mean like oil prices. We're not talking about the monstrosities that he's committing on the human front. Yes, I'm saying if there was a greater thing here, as far as the markets go

with this, there's no way anyone is positioned for this. So I looked, I wrote a piece the day after oil went negative. It was like April 21st, 2020 or something. And I wrote like, what happened to the energy sector. In 2008, when oil got to $150 a barrel, roughly, the energy sector made up almost 17% of the S&P 500. You had this huge boom in the 2000s because everyone in China was buying up all these commodities, and you had this huge commodities, the emerging markets boom. And then by April 2020, the energy sector went from 17%. And it was like 30% in 1980, down to 17% in 2008 after that boom, under 3% by April 2020. It's still after energy stocks have doubled since the beginning of 2021, more than doubled, of 110% or something. It's still only

less than 4% of the index. So just by the way, the collective market holds stocks, no one is positioned for this energy stock rebound. So this is year-to-date returns, year-to-date. XLE, the energy sector ETF, is up 37%. XLK, technology sector ETF, is down 17%. Talk about a spread in terms of like how cyclical this stuff. Look at this ratio chart going back to pre.com of XLK divided by XLE. Look at this. Yes. Just a massive crash.

I cherry picked some of the numbers here, but if you went like 2000 to 2007, energy stocks crushed tech stocks because tech was down 50% or so for that time period following the tech bubble bust. Then from 2008 to 2020, we had this huge bull market and energy stocks from 2008 to 2020 were down 30 some percent over like a decade and a half long period almost. I don't think investors in my lifetime sounds a big. bit dramatic. But since the GFC, I don't think investors have had to deal with so many different cross currents and good reasons to be nervous between the Fed normalizing and raising interest rates,

between inflation, which is at this point, let's call it what it is, spiraling out of control between the geopolitical mess. It's all bad. And I think going back probably 15 years, we've never had so much to deal with. And the thing is, during a crisis, so like the economy, it's a much different scenario in March 2020 and then in 2008 because when the economy is getting kicked in the teeth like that, it's easy for policymakers to know what to do. You throw the kitchen sink at it and you throw a bunch of money and you lower rates. Like, that's the easiest scenario. This one is different because the crazy thing to me is inflation is going higher because of this. It's going to stay elevated. Like take this out of the equation. Like maybe inflation would have come down

gradually and maybe we'll still have some base effects there. But the 10-year bond fell by a quarter of a percent in the last week or so. Traumatic, because that's the hedge. When shit goes wrong, people buy U.S. treasuries, that's just what it is. But it's interesting to see that tug of war between inflation should be pulling rates higher. In theory, that makes sense for interest rates to be higher if inflation is rising.

But then you have a crisis in here, and that's making rates go lower. So you're seeing this even bigger divergence between inflation going up and rates going down, and it doesn't seem to make any sense when you think about it from an economic relationship perspective. Morgan always talks about the fact. that it's easy to say I will be greedy when others are fearful. Everybody thinks that they're going to be the ones to take advantage of a sell-off, 20%, 30%, that they're going to be greedy when everyone's fearful without considering that there is always legitimate reasons, frightening, scary reasons why

stocks fall 20 to 30%. It doesn't happen in a vacuum. It's not everything is good except for stock prices are 30% lower. No, it's war. It's inflation. Things are really, really scary. Yes, people sell for a reason. If things were just humming along, great. By the way, remember the Roaring 20s? Remember that? We had like a two-month window for that. It was going to be glorious.

Oh, we were bullish, right? Oh, you know what? All right. So we were a little early. No, I'm not saying for us, I'm saying like the world was set up for the roaring 20s. Had we not had two other pandemic-related COVID strains and then a war and all the... Well, I mean, we got the job report last week.

And the numbers were great. Heather Long tweeted, the U.S. economy added back 678,000 jobs in February. greatly exceeding expectations and a sign that jobs recovery was on track, at least before Russian invaded Ukraine. Unemployment rate was 3.8%. Wage growth was 5.1%. Over 90% of jobs lost in the pandemic have returned. So things were, despite the supply chain stuff like in inflation, things were kind of humming along. Here's what's going to happen. The U.S. consumer is in such good shape right now that I think if you think the psychological component of inflation is going to ruin things and people are going to be cutting back, I don't think that's,

that's going to happen. If I know the U.S. consumer like I think I do, they're just going to spend down their savings and keep spending. Everyone's going to complain like they have been because inflation sucks and you're paying higher prices and you're complaining about it. But people are going to go into more debt and they're going to spend down their savings as opposed to cutting back because that's what we do. We consume. If I had to guess what's going to happen and I don't believe this, but I'm just, if I had to guess, I would say that again, God willing, soon we get some sort of resolution. Any sort of glimmer of hope, the market will absolutely. Absolutely scream higher.

We're going to get a four or five percent update at some point in the next however long, a month or two. It's going to happen. Hopefully in the next week. And then we'll see. I would guess that those gains won't hold and that this could be a little bit tougher sledding than the recoveries that we're used to where it's V down, V up. Obviously, I don't have a crystal ball, so we'll see. But where am I going with this?

It's been a while. It's been a while since like the big names have gotten sold to this degree where Facebook is now is showing up in value screens. And so... Well, you send me a chart today, Facebook is down 50% from highs? Yeah. Jeez. It never feels good in real time, but we have to remind people that long-term investors,

at least people that are certainly contributing and buying in a vacuum, this is horrible shit that's going on, but in a vacuum, this is on balance a good thing. The fact that you could contribute to your retirement, which for many of us is literally decades away, you don't want to be buying all-time highs every two weeks. That is not what you want to see. You know what my secret is? I'd never look at my balances when it's actually going down. Never, ever.

When they're going down, I don't look at the values because it's a temporary thing. And it's going to come back and I'm buying while it's going down. So that's a good thing. Here's who is not freaking out yet. And people could say like, oh, just wait until they do. Vanguard. This is from Bloomberg. They never do.

They never do. Of the record, $900 billion that poured into U.S. ETF industry in 2021, roughly one in every $3 went into Vanguard's, mostly passive, dirt cheap products. So far this year, it's more than one in two. In January, as rate fears drove an equity sell off, the firm lured $22 billion, dragging the entire ETF industry to net inflows of $17 billion. I know everyone likes to talk about speculators and dogecoin and Robin Hood. Vanguard, they're close to taking over BlackRock as the biggest ETF provider, which,

I don't know, is John Bogle rolling over in his grave since he hated ETF so much, but that money is still flowing into Vanguard like crazy. Can I also make one more prediction? Let's see it. We get a bare market. it doesn't get too, too bad. When I say it doesn't get too too bad, I mean like 20 to 25% down. I don't want to ever say there's a floor. I don't see it going much past 25.30. Guess what? Every bare market in my lifetime is a buying opportunity.

100%. That's what I say. It's always a buying opportunity. I cannot agree more, Ben. So, all right, here's interesting. Balchunas. Arc has now had four straight weeks of inflows. Four straight weeks. That's impressive. And guess what? There was a big bounce. Like a pretty big bounce. I'm guessing just eyeballing at 15, 20%. Rolled off. over. All gone. I said energy stocks are up 37% this year. Arc is down 37% this year. It's the first week of March. I'm torn. On the one head, you do want to see people throwing the towel. Traditional bottoms. You want to see real fear. You want to see real panic. But it doesn't have to

be that way. Edward says, oh, it's too easy. It's not how markets bottom. Who the hell knows on market's bottom? Maybe you don't get the absolute bloodbath panic that people are hoping for. What if this is just the way that everyone, like there is a certain part of the population now that just Has it on autopilot, autopilot, auto buying, whatever, and they're not going to throw the towel in. And it's going to take a lot longer for that to happen. So what's going on with some of these sanctions? This is from the Financial Times. They looked at it and they talked about how just the whole fact that it's all digital now,

changes the whole FX reserves type of thing. And it's talking about how like Russia owns them, but Western issuers and computerized holders of these assets control access to them. So they talk about how like freezing and unfreezing assets and they have like 388 billion of Russian as it's frozen, which they just basically can't touch even though they thought they had it. I guess my point is, like, does he care? Are he sanctioned enough to make him care? Does he even care about his own people enough to, like, make this matter to him? I had a buddy one time who married a woman who already had some older kids, and he was telling us all his friends from college how he was having a hard time dealing with it, because one of the teenagers, whenever they would

take away his iPad or his video games or his phone or whatever, he said, any sort of punishment we give him, nothing works. He goes to his room and he says, all right, fine. There's no incentive that will make him do something because for whatever punishments just roll off of me, doesn't care. What makes this guy care? If you look at it just in dollar terms, the Russian economy has, I think someone said today, it's basically fallen by 50% in a week and a half in like dollar to rule terms. Their economy is getting crushed. Just like, does he care? Or like, what will it take for him to care? I wish I had an answer for you. Somebody tweeted, the state of Kentucky's teacher retirement system was the second largest shareholder for Spur Bank of Russia, which is the

largest bank there. Their position dropped by 95% from $13 million to $770,000. I'm assuming this is zero at this point. Who is managing their money? All right. I want to be the context guy for this one. I saw this one too. This tweet went viral. Do you know a bigger pension plan is? Two billion. It's like $23 billion. So a position of that size is like five basis points and the whole fund. Okay, fine. Fair enough. But. They probably have an emerging markets. I know. Yes, you're right.

There's a lot of pensions and plants that are a lot bigger than Kentucky. The second biggest holder? If you told me California, I would say, all right, round the hour. They obviously have some sort of emerging markets actively managed fund that went in on this company for whatever reason. I have suspicions. I won't name names. Okay.

I think I know you're talking about. You mentioned things going well. This is the time in the market where, like, it doesn't matter what good news is. we've seen this with certain stocks. You'll see a stock that actually reports good news that beats expectations and it rises 7% after earnings and the next day it falls 10% because of what's going on in the market. This chart, I've seen iterations of this. This is a Bill McBride special. Yes, like the labor market recovery. It is the fastest one we've ever seen ever. And I know because it happened so fast where like 20 million jobs were lost in a month and a half or

something. There's another scenario where this thing plots along for months and months or years and years. It takes forever to come back. And now it's almost all the way back already. I'm thinking about like this long-term secular marker that we've been in for years now. I feel like it's got to be innocent until proven guilty. And allow me to talk out of both sides of my mouth, please. Like something like this, this is what ends it. It's exogenous shocks. It's crises. And it is possible that this turns into one of those things. That's the thing. That was the biggest difference between now in the 1970s. Like the 1970s, there's a bunch of different reasons for it, but the energy shock was one of the biggest reasons

for that nasty decade that they had. We could be getting that. And if this is prolonged, you're right. The probability of a recession is much higher now than it was two weeks ago. I think you have to say that. And whatever, like 10% inflation in one of these quarters potentially, that is on the table. And the things like wheat price is just going parabolic, like making it harder for certain countries to feed their people. And like, that's the kind of stuff where stuff goes off the rails and like really bad potentially. What could send stocks to all-time highs this year? Well, an immediate ceasefire. And then countries around the globe say we're going to put aid into Ukraine and Russia. The Russian economy is going to need some help too. They're

screwed. I don't know. How do we beat inflation? You can't send out checks to people saying, hey, here's some more money since inflation is so bad. That doesn't help anything. I guess the glimmer of hope for the U.S. economy especially is just, like I said, that consumer balance sheets have never been more prepared to handle something like this. That's true. If people just say, I hate higher prices, but screw it, I'm going to keep spending anyway, that's the silver lining like for the economy. We don't stop spending. Do the markets care about that? We don't stop spending. Here's a little hack. I was telling you about this morning, not to brag, but I have some stakes in my freezer from November. And I looked at the price,

a good 30 to 40% lower than where they are today. That's what you call the free lunch. arbitrage. Have you ever tried the butcher box thing? Butcher box. No, I have not. Okay, this is not a plug for them or anything, but I can't remember who I heard talking about this. You sign up and it's like a monthly meat plan and you pay a hundred bucks a month or something and they send you a whole box of meat. And I got one of them. Yeah, it's probably going to hire now. I'm guessing they raise their prices. Or the portions are much. Hey, now's a good time to bring this up. What was your reaction? So we've spoken in the past about you run in the Silver Dome. Actually, the last time you were running the Silver Dome was probably during

the LTCM collapse, no, 98? Oh, 99. I played there twice. Yeah, 99. It was the last one. A listener sent in a video of me, which I didn't know existed. In 1998, my junior year of high school, we played in the state championship game, and it's on YouTube, which I think my mom might have had a VHS tape of it. And so I thought it was lost forever. But someone sent it, and then you posted it on Twitter. And a lot of people thought it was fake. Hearing the announcer. Hold on, I have this quote. It was so funny. Josh and I went to car on the way home watching this. Here's a direct quote from the announcer. He's very shifty. Nice open field runner, Ben Carlson. Can we play like Glory Days from Springsteen now? I peaked back then. I peaked in 1998. Well, listen, I never peaked. So I'm jealous. All right. Yes. Whoever sent that to us, I sent it to my dad. Like, the fact is on YouTube was pretty cool. Oh, oh, can we turn it into an NFT? And if so, can we talk about what we're doing with NFTs or something?

it's still too early? We can talk about it a little bit. We can do another tease. So what's our idea? We're going to sell some NFTs. We're not selling out, so we're going to give all the money to charity. So here's what we're doing. We're going to mint some NFTs, all animal spirit stuff.

And like Ben said, we'll announce to charities before we do it so you guys know where the money is going. But 100% of the proceeds are going to be going to charity, which we're very excited about. And here's what the NFT buyer is going to get. They're going to get access to our Google Doc. Is that right? Google Black every week. So that's our show notes. And maybe even the archives of our show notes.

I think we're working on that. They're going to have the ability, if you want to, to listen in live once a month. We're going to watch and listen. We're going to do a live animal spirits for people who buy these. So there's a podcast like player called Riverside, where we record. You can actually let like an audience in. So you guys can listen, watch live if you so choose. What else we give me people?

We're going to do questions and answers straight to us. And we have a platform that's set up for all this where you're going to be able to buy it and access all this stuff. This is the user side of it. So anyone who's our audience who wants a little bit more animal spirits in their life, that's what we're going to get. And you're also going to be helping on a good cause. We're still working through the details. I think we're going to give some free NFTs to college students. I think that's a plan.

If you've got a dot edu address. Anyway, we're psyched about this. We've been working on it. It should be fun and for a good cause. Yep. All right. Conner send tweet. Home prices are going to go up another 50.

15% this year, and I don't think people have really absorbed that. I think he might be right. And this is kind of like energy and commodity prices where you have all this confluence of events happening and it's not anyone's fault really that it's happening, but it's something that's going to happen and it's going to make people angry. I think the double digit housing growth this year again is probably on the table. This is how the bull market could end. If these costs just keep spiraling, eventually the consumer is just going to be shit out of luck. Here's the other side of this, though. this is a wealth effect thing. Like, if you have a portfolio of financial assets and you own a home, guess what your best performing financial asset this year is? Your house, by far.

Did you hear that, Ben? That's the closing bell on the lows. Nasdaq down almost 4%. Okay. It's happening. See, this is the thing, though. If we do get a bare market, the fact that things reprised so fast, I think it's going to happen pretty quick. I think if we get it, we're just going to like take our medicine really quick and do it. The problem is, and there could be many, is that we're used to V-shaped recoveries. Yes. That'd be the problem. If it's more of a U-shape, that's where people feel some pain. I agree. So back to the housing thing. Let's say higher inflation creates a crisis, but that makes rates go lower and the Fed doesn't raise rates, so maybe mortgage rates stay lower. Like, what if this crisis actually makes housing prices stay higher? My head hurts. Okay. If the crisis overwhelms the Fed and the Fed says, we don't have to raise rates anymore, look at what we're dealing with, mortgage rates come back down, housing prices continue to rise, no supply comes on. Isn't housing the hedge for this type of scenario outside of commodities and you don't have any of the volatility of commodities. At a certain point, don't you think it's also possible that like some of these

commodities are going to fall like 20 or 30% on a single day? Oh, yeah. Absolutely. That's going to happen. Absolutely. The problem is there was an article in the journal a couple of weeks ago that the middle class is getting priced out of residential real estate. Here's a shitty study. At the end of last year, there was about 411,000 fewer homes on the market that were considered affordable for households earning between 75 and 100 grand. And I think that, unfortunately, it's just going to keep getting worse. That's like my worry that, like, the anger between the people who already own homes. And again, many of the people own homes are like middle class.

That's like their financial asset. A lot of normal people own homes. Here's a number. At the end of 2018, there was one available listing that was affordable for every 24 households in this income bracket. Now it's one for every 65. This is really, really bad. It is.

And the fact that, like, supply is. is just not coming on to the market again, and it's harder to build houses right now, even if we wanted to. I think this is another prolonged thing. The housing market is going to be a mess for years. And unfortunately, I think that means it's going to be harder and harder to buy one. Said differently, households earn in between 75 and 100 grand could afford to buy 51% of the active housing inventory in December, down from 58% in December 2019. That's a big drop. And we always joke about the people that are profiled somehow in the Wall Street Journal. They found a couple who live in Grand Rapids, Michigan.

Ah. Who earned about 100 grand last year, and 20 offers later, they're still house hunting. Courtney and Tim Hadsma. So there's a lot of Muzz in the Grand Rapids area because it's Dutch country. Oh, really? The names end it, yeah. That is definitely news to me. Hadsma is, okay.

All right. So the New York Times had a story this weekend about how, like we talked about last week, like the end of the five-day work week, people are looking for more flexibility. And they said that, like, they had a huge boom in people becoming realtors during the pandemic. And so they said in 2021, there are a record number of real estate agents in the United States. According to the National Association of Realtors, more than 156,000 people joined their ranks in 2020 and 2021 combined, nearly 60% more than did in the years prior. Because people want the flexibility, they don't want to go into an office. Here's the problem.

There have never been fewer homes for sale than there right now, and there's never been more realtors. Now is not the time to become a realtor unless you have some connections and family and friends who are going to list their house with you. These people are never going to make any money. This is an awful time to become a realtor unless you have a book of business that you can go and people come to you because there's just little to no housing supply. All right. Do you believe this one? Crypto? This was in Bloomberg. They say that Russians own more than 16.5 trillion rubles, which is $214 billion, which maybe is a stale number at this point. They say but one Bitcoin is still one Bitcoin, remember. That figure is a equivalent about 12% of the total value of global holdings, or a third of the market capitalization of Russia's benchmark stock index.

Does that surprise you that 12% of the world's crypto is owned by people in Russia? Is that real? Do you believe these statistics like this? That seems really high to me. But I'm in no way trying to be humorous here. Isn't that verifiable? Can they see that? The article said it's kind of verifiable. It's kind of hard. They looked at both sides of this. What is Russia of the world's population? It's not 12%. How much? It's not 12%. I don't know. But I believe it. I do believe it. Okay. Speaking of, Benedict Evans tweeted this really freaking horrifying tweet about the Russian app store now versus last month.

And last month, it was Zoom, Telegram, WhatsApp, TikTok, like the normal shit. Right now, it's all privacy stuff. VPN, proxy, VPN, I mean, all these companies I've never heard of. Oh, because people are worried about, or they have nothing else to do, basically. Everything else has been shut off? I guess. I mean, pretty horrifying. Hundreds of millions of innocent people are getting dragged into this. All right. I wanted to talk about a crazy speculation stock. I think one that we might have bought for a while and then sold. I can't remember if I lost. So this is Snowflake, which this is, I tweeted about this.

Oh, I bought it sold. So someone asked, like, what does this company do if you had to guess? But I don't know, something with software. They IPOed in the fall of 2020. This is after the bottom in March. You can explain it? Well, I got to Google right here. I didn't know this, but this will put some more meat on it.

It's a cloud computing based data warehousing company. Okay. So let me run you through the numbers here. IPOed in the fall of 2020. And that time the share price has gone from 260, which was like the IPO first day price, to 390, so that was a 50% gain. Actually, Snowflake was sort of the poster child

for crazy valuation stocks in IPO in 2020. The price of sales ratio was like 300 or something totally outrageous. I think those valuations are right. So this is, again, since the fall of 2020. And Berkshire bought, Berkshire bought Snufflake before the IPO. Oh, that's right. Yeah, I forgot about that.

He must have bought an angelist, probably. Went from 260 to 390, so it's a 50% gain. then it crashed to 188, which is a 50% loss, then went back to 400, which is 110% gain. Now, today, it's back to 192, so it's back to 52% loss from there. So plus 50, minus 50, plus 110, minus 52, and now it's below the IPO price, but I know people want to blame index funds for the loss of price discovery. Snowflake is an IPO stock. It's not in any of the indexes.

This is actively managed people, active managers, pushing this thing around. correct? This has nothing to do with index funds. Yeah. Duncan just let us know that Russian's population is 1.87% of the world's total. Yeah, they own 12% of crypto? I believe it. What if it's all bots? It's all bots buying it. I don't buy it. You ever see GoldenEye? I remember the video game. You never saw the movie? Sure, I saw the movie, but I'm saying the video game when I was in high school was way bigger. Remember the crazy bad guy? One of the crazy Russian dudes, the computer nerd? That was actually Vitalik's dad. I mean, Russia is the best movie villains of all time, though, right? Besides the Nazis? Drago. From the 80s, like for our

childhood, Russians were always the bad guys, right? Yes. I guess they are again. All right, should we do a question here? Sure. Okay, this is good for today. A theme that constantly comes up in your discussion is this idea that if you stay in the markets long enough with proper diversification, that you'll be all right investing for the future. The returns may vary, but overall, if you have a 20-year plus time frame, you should be fine. While I am bullish on America and mankind in general, given where demographics said in the next two to three decades, I can't help to think of a situation where U.S. stock returns are closer to what we saw in the 60s, 70s and 2000s, rather than what we saw in the 80s, 90s, and 2010s. How do I reconcile this notion

with my long-term investing, but not to react to this thesis? So basically saying 60s, 70s, weren't that great. In 2000s, we had a lost decade. The 70s were technically lost decade if you include inflation. 80s and 90s were a boom. 2010s were a boom. Listen, do you really not want to be exposed to progress? That's just the bottom line. Things are really lousy right now and really scary, they always are. But what did Josh Wolf say about the arc of progress or the arc of time? It's always sloping upwards. That's it. And it doesn't mean that the market, that stocks will always reward you for taking risk every month or every year or even every decade. We know that it doesn't work that way. But give it enough time. That's Warren Buffett's superpower. Was he a good business

valuationer and whatever? And did he use leverage and all? Yes, of course. His edge was never, ever, ever, except for 2020. Just kidding. Never ever selling. Is valuationer going on his resume now? He's a big valuationer. That's it. That's it. Don't overthink it. Here's the other thing. What is the alternative? What is the alternative? If you don't think things are going to get better in the future, then why would you invest anyway? What's the point of investing? And if you don't think that, fine, then where are you going to put your money? Cash? If you are not spending your portfolio down in the next 10 years, let's say you think you agree this thesis that like we're going to have a lost decade. The 2020 is going to be a lost decade. If that happens, are you spending all

your money in the next decade? Or are you saving? Because if you're spending your money in the next decade, then you probably shouldn't have it all in stocks anyway. And if you're saving, you should be on your hands and knees and praying for a lost decade because it gives you 10 years to put your money in at lower prices and higher yields. It's a good thing. It's a great thing. Won't feel like it, but it's a great thing. Problem solved. All right. Recommendations. What do you got? So we watched Ghostbusters Afterlife. Of course, I waited until it was rentable on streaming. And I got to say, I'm usually anti, let's remake a classic and just go for the nostalgia shot for people. But I actually kind of like this.

It's not like a great movie, but for what it's trying to do and the tone it set, I really like it. And Paul Rudd's in it. So I don't know how you can go wrong with Paul Rudd. But it was actually very good. The nostalgia was perfect. I loved Ghostbusters growing up as a kid. I was telling my wife, I used to have, like, for Halloween, one of the little backpacks, the plastic backpacks with the fake Ghostbusters gun. and then you had the catcher for them and you step on the pedal and it opened up. I had one of those.

If you're a Ghostbusters nostalgia freak, that's good. I was one beak behind on Euphoria. Did you ever get back into it this season or not? I watched the first episode and it's obviously a very high quality show. I just like, for whatever reason, I was just like, I'm done. Here's my zag on it. I want to start with like, it's very creative. It like looks nice. The actors are very well acted and all this stuff. It feels like a show that was created for the TikTok era. It goes from like five miles an hour. It goes from like five miles an hour to 90 miles an hour, and it's just so jumbled and all over the place, the way that I equate this as, when we were in college, once a year, we'd have a wine and cheese party at one of our houses, and everyone would get dressed up, the guys would wear like a suit and tie, the girls

would wear a nice dress, and we would get wine, and we'd have a nice, like, little cheese and crackers out, and we wanted to pretend like we were adults, but then everyone would just get shit-faced and get drunk, and it was just like a really like a college party, just you dressed it up a little. That's what the show feels like to me a little bit, like the acting is great, but like the plot itself is so scatterbrained and all over the place that I don't really care what happens of the characters. That's my zag. And people probably say you're a boomer, you're 40. That's fine. I mean, when I grew up, we had Dawson's Creek. And that was kind of a similar, like, they talk like they're 40 years old, but they're really teenagers. Every young generation has

a show like that where they're like, this is groundbreaking and it's amazing, but it's just a little too much for me. There are certain parts of the show that really pull you in, and I obviously liked it enough to finish watching it. I just don't think it's as groundbreaking as some people say it is. Yeah, I think I'm with you. Sorry, get off my lawn. Get off my lawn. Yeah, no, listen, you can say you get why people love it, just not for us. Yes.

All right. Severance is so clever. Yeah. It's very good, right? It feels kind of like Westworld a little bit, where you're just not really sure what the hell is going on. Hurt your head. And I will reserve the right for this to completely fall apart.

It's possible, yeah. I want them to land a plane. This could turn out to be awful. But for right now, I'm very intrigued and I'm enjoying it, and I hope it doesn't turn south. Speaking of turning south, I would. I watch super pumped and all I will say politely is do not bother. I'm out on, I feel like we're turning these things around way too fast.

So there's an Elizabeth Holmes one coming out too. I think there's probably like a we work one. You're following these stories as it's happening in the news and the Wall Street Journal and stuff. And then there's a book that comes out about it. Then you read the book. And then they have a documentary that comes out about it. And then they have a fictionalized version of it on TV. And it's almost like it's too much.

If I already have all the good background, like the real story itself, didn't need to be turned into a fictionalized series. I don't know why we need these shows right away. It's just too much. I did not get to see Batman this week. I'm bummed. We had plans Saturday night. I told my wife to cancel. I'm out. I got something to do. I will see it in three months when it's available to stream. Maybe I'll go tonight. All right. That's it for this week. We've got to go on for financial advisors on Monday. Pontera, formerly known as FIX. The TLDR is you can manage your clients held away assets. So that will be a good one. And if you missed our one on Saturday, we'd another bonus episode with Meow talking about earning yield on cash for advisors, institutions, crypto, that sort of thing.

All right. Animal Spiritspod at gmail.com. Thank you for listening. We will see you next time. Thank you.