Animal Spirits Podcast - Never Pay Off Your Mortgage (EP. 436)

Episode Date: October 29, 2025

On episode 436 of Animal Spirits, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ben Carlson⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ discuss how behavior drives bull markets, how many companies outperform the S&P 500, bubble predictions, 5x ETFs, $20 lunches, surviving the AI capex boom, we need lower housing prices, why private credit is an easy sale to make, Halloween decorations and more. This episode is sponsored by Nuveen and Invesco. Invest like the future is watching. Visit https://www.nuveen.com/future to learn more. Visit https://www.invesco.com/ to learn more about their comprehensive fixed income solutions and how they can help strengthen your portfolio's foundation. 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 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

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Visit nubene.com slash future to learn more. Investing involved risk, principal loss is possible. Today's show is brought to you by Invesco. Now might be a good time for some stability. Investco's fixed income solutions are designed to help you find some. With the Fed's policy shifts creating both challenges and opportunities across the yield curve, having experienced fixed income managers in your corner has never been more important. Investco's team of 182 fixed income investment professionals managed 500,

$18 billion in assets, giving them the scale and expertise to navigate any market conditions. Whether you're looking to add investment-grade bonds or municipal bonds to your portfolio, Invesco's fixed-income strategies are designed to help find the stability you may need. Visit Invesco.com to learn more about their comprehensive fixed-income solutions and how they can help strengthen your portfolio's foundation. Invesco, let's rethink possibility. 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 Spirits with Michael and Ben. Michael, one of my all-time favorite stock charts. I think JP Morgan is the first one that did this. It shows the annual stock market returns along with the intra-year drawdown to get there. And it typically shows even when there's gains, there is a drawdown in the way there. This year is a perfect

encapsulation of that. This isn't just the drawdown. This is the year-to-date returns as of April 8, 2025. The S&P was down 15%, NASDAQ was down 19. Russell 2000 was down 20. This is a year-to-date returns, okay? EFO is down 4 and the emerging markets were down 8. Holy snikis. Now the S&P is up 18, NASDAQ up 23, Russell up 14, EFA up 28, and emerging markets are up almost 35%. The Russell was down 21 and now it's up 14. Yeah.

I mean, the NASDAX is the biggest one down 19 now of 23. Unbelievable. Really? Huh. Wow. Staying the course worked again. It usually does. 60% of the time.

Usually. That's a good caveat, usually. It works every time. But I think if your default is staying in the course works and then one time it blows up in your face or three times over the course of your career blows up in your face, I think that's okay. And then you still stay the course, right? Yeah. We talk a lot on the show about like these D-tricky stats that are internal market indicators. And you know, I'm a sucker for these.

whenever there's a washout and sentiment is in the toilet and then you get this I guess in this case this wide breadth thrust you know it's funny because a lot of these indicators were flashing green

coming out of the April downturn and we were like are we sure we believe most people are we sure we can believe these hang on I'm a I think go back to the tape I'm no no you were a believer I'm saying a lot of people

were skeptical like okay sure that was then this is a new environment now there's a lot of people saying that yes that's true because we, oh, we haven't even seen the impact of the tariffs. And you're going to say that was the bottom? Yeah, no, that was fair.

But we don't often, in fact, I think we usually don't revisit these data points. So the at cycles fan brought it back up. Reminder, the breath thrust was triggered back on April 24th. Six months have passed since the signal. And the S&P 500 has gained 24%. makes it the fourth best in history. And if you look at this from 1950 to today, six months and one year later, green 100% of the time. Now I'm eyeballing it. There's, I don't know, 15 times. And what this is measuring, I don't know the exact quantitative metrics. It's really

not that important. It's when you've got a significant washout, whether it's measured by percentage of stocks under the X moving, whatever it is. It's a quantitative metric. And then when that condition exists, and there's no more sellers, and everybody says, oh, shit, back in the boat, usually that back in the boat moment happens for a very, for a reason that matters. And this is just, this is the technical analysis that I'm a fan of, because this is quantitatively measuring human behavior. So if we had the washout and you didn't get this big thrust of buyers coming in, then it would have been like, okay, this is something to continue to worry about.

Yeah, yeah, for sure. Rob Anderson, who does great work at Ned Davis Research, posted Tech's 66% gain off the April low was the best six-month return for the sector outside of 1983, 1993, and 2009, and 2000. Look at this. So he has a chart that shows six-month rate of change, three-year rate of change, and ten-year rate of change. And, yeah, six-month, wow, just... I mean, that's like the gain we saw off of the 2009 bottom.

over this amount of time. You know, it is a good, it's a good thing. Hmm, I'm thinking of this as I'm about to say it. Yeah, let it fly. It's a good thing that liberation. You can argue with yourself later. Yeah, I'm thinking about it. It's a good thing that liberation day,

the liberatory disruption happened in the stock market. We talked about this at the time. We're like, is it possible that that kept us from? But obviously it hasn't, though. But who's to say? Well, I was about to argue with myself because who's to say in an alternate universe where this didn't happen? It could have just been a slow,

steady grind higher. It didn't have to be an explosive move. Who knows? But it is possible that absent that, no hiccups whatsoever, that the NASDA is up 40% year-to-date, and now we're really talking about it up, like, oh, shit. Yeah, right. We just kind of pushed it back for like three or four months, and then it kept going. Ben, you had Chart Kid make this very good-looking chart that shows the number of companies in the index that outperforms. on a calendar year basis. And the immediate thing, well, two things stand out. Number one, the number of stocks beating the market the last two years, almost off

the chart's low. We saw this in 98 and 99, done, dun, done, with narrow leadership and of course, all the money is being sucked up by the hypers. But when I see this chart, I sort of go, like, I think, be careful what you wish for, for people that are wishing that it was more stocks and a rally broadening out. Because the most stocks that outperform the index happen in crappy markets. We've spoken. 2022.

Look at it was almost 300 stocks. Look at 2001. 340. You want that? Great. 346 stocks outperforming the index. In the mid-2000s, when the bull market really took off, 2013, 14, 15 was a bad year. 16 and 17, a decent number of stocks took off.

That wasn't that bad. But here's the thing I took out of this. This, I thought the number would be way lower because you hear about- Longer than 152? How much lower could it be? I'm saying the average. The average is roughly half of all, so call it 45% or so of stocks outperform in a given year.

I thought the number would be lower because if you look over the long term, the number is tiny, right? So I guess here's my biggest takeaway. More actively managed, more active managers should outperform in a given year than do. True. But here's the thing. If they just bought and hold, if they just bought 150 stocks at the beginning of the year, how many ever they hold, and didn't make a single trade over the course of the year,

they would have a better chance of outperforming than they currently do. Two things. Gross of fees, manager's track record is way better than what is reported. Number two is, and I've said this a million times, the best in bidder study is real, it is in the data, and it, rightly makes a case for index funds. And also, it overstates it a little bit because it is acting as if people buy the IPO and hold forever. And it's ignoring the fact that, listen, sometimes there are opportunities to buy and sell stocks at different points in the cycle.

So a stock can fall 80% and be a dog should company go to zero. A stock can be down 80% to be up 400% in the next year and provide potential opportunities for alpha. So both things can be true. Right. You could have bought Peloton and held it until the beginning of 2021. I made a ton of money and sold before it crashed. Right. And you made money. Right. And that's a, here's my thing, though.

And this is not groundbreaking. I think picking the stock pickers that I'll perform is way harder than picking the stocks that outperform. That's my takeaway here. Well, I mean, I guess it depends. If you're trying to pick a stock picker that could, if you're doing it every January 1st, yeah, I mean, that's impossible. How many stock pickers have we had in the last 20 years that you can point to that?

You go, that person's going down in legendary status. They used to have those all the time. They don't happen anymore, really. Yeah, too hard. It's more thematic than anything. It's too hard. Okay. This has been the rally and cry of people who don't want to believe that stocks might be in a bubble.

It's like a warm security blanket. Well, it can't be a bubble if everybody thinks it's a bubble. It just can't be. Oh, really? Why not? So, I listened to, by the way, we were, Ben and I stumbled a little bit on the ad read. I joked, reading is hard. Reading is hard.

I listened to Aaron Sorkins, nope, Andrew Ross Sorkin's, 1929, which I really appreciate that he read that. I can't believe, I can't imagine how difficult that is. It's a very long book, too. And he's a good reader. Here's the thing. So my publisher asked if I would like to read my book. And at first I said, no, I don't want to. But then I thought, wait, I probably should read my own book.

But it's going to be so hard. I'm not a, I'll trip up a million times. I can't read out loud for too long because there's something in my face, my, my gland. I just, I produce excess of life. I can't do it. I can't even read books to my kids from one of the 10 minutes. There's certain words that always trip me up. And I can't get it, whatever they are, I can't say them correctly.

So anyway, in, in Sorkin's book, which was tremendous, phenomenal. Kudos to him. There were people that said, wait a minute, the Fed has to raise rates. This is crazy. How are you allowing this speculation to continue? It's going to end badly. Okay, that was in 1929 when we knew very little about the securities market. Modest proposal tweeted, I'm begging people to go back and read the contemporaneous reporting

of the housing market from the spring of 05 to mid-06. It was meticulously documented by the mainstream press. how insane consumer behavior was, and how prices subsequently began rapidly declining. So people are like pretending that... There was like Time Magazine cover stories about people going nuts to their houses. Yeah, and you don't think in the late 90s that people had any inkling that things were a little bit of a miss. I mean, there's just plenty of people.

Yeah. The thing is, like, you could say the 90s, the overwhelming number of people were on one side of the boat saying like, oh, this is great. Things are going to be great forever. But there was plenty of other contrarians who were saying, no, no, no, no. Yeah. So anyway, if you're using this as like blinders to say that, oh, it can't, listen, everybody knows who it's a bubble, can't be a bubble. Not true.

And I'm not saying it's a bubble. So don't mishear me. But I'm just saying that argument, to me, is hogwash. It falls on deaf ears. It's not credible. And the other thing is, I think you get into this rut where you go, well, listen, in 2022, everyone said we're going to have a recession. Everyone, 100% chance. Didn't happen.

Didn't happen. So this time is the same. Yes, guess what? Bubbles can and will happen. And this probably, you say, I can't say yet. Let's be honest. This is probably a bubble. Then why do you own stocks?

Because why do you sell stocks in a bubble? I'm George Soros saying this. No, that's why I'm diversified. Yeah, good point. No, but here's the other thing about like, oh, people are talking so much about the B word. Yeah, because nobody wants to look like an asshole. Anybody who talks in front of a mic,

our self-included, with this guy just throwing out the Grand Rapids Hedge 10 seconds ago, I don't want people to, nobody wants that feeling that you complete, how could you be so oblivious? How could you guys not know? Invidia at $4 trillion? How could you not know that Acklo, this made up, this company that had nothing at $20 billion? How could you have missed it?

Right? Nobody wants egg on their face. And so people are being extra precautious or extra cautious about not looking like an A-hole. Yes, that's what everyone has to say. Like, this is a bubble, but I'm going to keep riding it as the melt-up happens. No, it's a bubble, but it's totally justified.

So speaking of the 1929 book, someone on Twitter asked us, watching you and Michael talk about the trillions of inflows and index funds came from. What about credit? We were asking, like, where's the money coming from? Okay, part of the story. Are people buying on a margin? And he said, yes, I've been reading 1929 as well.

If you look at the, this is from your Denny research, I pulled. If you look at margin debt versus the stock market, it's going up in a straight line just like the market. And you go, oh, my gosh, yes, people are borrowing tons of money. However, if you look at margin debt as a percentage of the stock market, it's actually dropping. You see this one? The second chart? This is the one that always gets people. Yeah, yeah. Great stuff. Great stuff.

The margin. So it's not, people aren't going nuts. And they did at the 2000. People aren't going nuts. And I guess just to, uh, just to broken arrow this belabor the point. To me, a bubble is an 80% decline with no recovery. That's the, that's the aftermath of a bubble. No, not no recovery. Fine, a modest recovery. A 15 year, a 20 year recovery. Okay. And that's what happened to tech stocks after the dot com. It took them, I think it took the NASAC 13 years to recover. It was an 80% washout.

Okay. And it took, and it took stocks from 19. 80% is a big line. I think 50 is okay enough for me to call a bubble. No way. No way. Even Japanese. Dude, what are you talking about?

These stocks fell 50% in 2022. Japanese stocks, no. Dude, Amazon, Amazon, Amazon, Amazon, Amazon, Google, Meta and Nvidia fall 75%. Amazon and Google fell 50. Meta and Vidae fall 75%. 75. 75. They didn't have the second.

part of your thing, though. They recovered immediately almost. They recovered within two years. Falling 50% proves nothing. Pull up a chart of Amazon and Apple. Look at how many 50% the clients they've had. That proves nothing. Listen.

I think the recovery is apart. 1929 to 1954. That is a bubble, a bubble that burst and took. Listen, Japanese stocks fell 60% until they didn't fall 80. Fine. And it took them 90 years. That's what I'm saying. It's the second part.

This is by 2022. The washout happened. Yes. But those stocks recovered very quickly. All right. Cisco, it took 25 years to recover. The financials, a lot of the financials took 15 years to recover after. So if Nvidia falls and takes 15 years to recover, then it would have shown to be a bubble.

But if it falls 50% and then it captures and then it bounces 30%. That's not a bubble. That's the weird part of this, though, is that? That happens all the time. And a bubble, sorry, thinking about like, so the scary part of this, bubbles bursting, there has to be an element of a complete loss of faith in the system. And that shows itself in credit and the lack thereof, people unwilling to loan money. That is what is so dangerous about the debt and the debt that we're talking about

is that when the faith of that of lenders goes away, then you get some nasty shit. But the equity getting falling 40%, that tells you nothing. No, the only way this is a true bubble is if AI is like, for, it takes 10 or 15 years for it to actually come to fruition. Because you could say this is, my grander up its head here is this is a cap-x bubble. Okay? But the thing is, even if there's a washout in the stock prices, the amount of

cap-ax that they're putting into this, it's going to work eventually, it sounds like. Let's say it's on a five-to-seven-year lag at the worst. Then these stocks are still going to be, it's not, they're not going to languish forever. Yeah, cap-x bubble. That's fair. That sounds right. It definitely feels like there's definitely some shit. What's this five X-ETFs?

Okay, Business Insider did a story on this, and they interviewed someone from Morningstar. I can't remember who it said. So they're talking about the five-times ETFs. 55% of leverage ETFs that have launched have closed already. Of the couple hundred that have launched, 17% have lost or 98% of their value. So sometimes these things are okay. Most of the time, they're completely horrible for you. Which makes sense.

And I don't think most people are getting into five-time leverage ETFs thinking that they have anyone to blame it themselves. if something goes wrong. Yeah. And I think at this point, if you don't know, shame on you. I think people know.

Yes. But they just, the people who use them love them, I'm sure. Yeah. Good. Which is okay. All right.

A chart from Augur Infinity shows soft data versus hard data. And it shows that the soft data is rolling over again pretty dramatically. I don't really want to spend

more than 10 seconds on this because I'm just happy that we sort of this went away for about 12 months. months we haven't spoken about it. Maybe it's back. Maybe it's not. But, uh, I'm of the, I'm still of the opinion that vibes are broken forever. And sentiment readings are nearly impossible to take any signal from the noise. Okay. Well, then what do you say about the recovery? Was that broken too?

Look, just look at the swings in these things. People, the mood swings are manic. They, they don't mind they're on the downside. When people say that they're depressed at, don't worry about it. But look at how quickly people went crazy and euphoric and just, January 2025, and then it crashed immediately. I think that the swings are way too wide. Something happened around there to make people feel upset. Okay. Here's the new story of the week, I think, from the economy.

This is from the Wall Street Journal. More big companies bet they can still grow without hiring. And I found this, and they talked about how JP Morgan said they don't need as many people. Golden Sachs sent a memo. Walmart. There was a start with Amazon yesterday, getting rid of a bunch of white-collar employees, like Airbnb CEOs says this.

It's just kind of funny to me. Whenever you're in these cycles, it feels like they are going to last forever. And I pulled up a story from 2021. 4.3 million workers are missing. Where did they go? Many economists expect that labor shortage to last years, and some think it could be permanent.

Okay? That was four years ago. Economists think this labor shortage could be permanent. Now it's, we don't need labor anymore. We're done with them. I just want to, there's going to be overreactions here. And here's, I tweeted this out this morning. Here's something I believe.

I think three things can be true. One, AI is going to disrupt many jobs, and many of them we don't even know right now. Two, companies are going to use AI as an excuse to lay off staff that they're going to lay off anyway. It's a great scapegoat. Who do you blame for AI? Technology? Like, who do you yell at? Right.

Sorry, AI. And three, I think there's going to be many companies that take this way too far in realize, oh shit, we did not mean to let go that many people. We need to bring them back. There's going to be stories in the years ahead of rehiring because AI didn't do what they thought it was going to do. How's that? Yeah, I agree. Good takes. I think that's the cycle we're on here. It's going to be like, there's no way you can pinpoint the exact number of people that AI is going to help. Excuse me, help replace. Right? It's, it's important. There's going to be tons of back and forth on this.

Yeah. In tech companies that overhired, listen, a lot of places overhired in 2021, 2021, 2020. in 2022 and 23. Yeah. Because people were worried that they couldn't hire anyone, right? There was all those job openings.

And now I think it's like, this is the other side of that. Like, let's get rid of them, just blame it on AI. This is going to be, this is going to be the dominant economic story of the next couple of years. This is going to be all we talk about,

unfortunately. Yes. And when there is a recession, people are going to worry, well, are they not going to rehire me coming out of the recession? Am I never going to get rehired? Because AI, like,

these are going to be the stories we're talking about for years and years. Yeah. All right. This is interesting. You, you, I feel like you talk about with inflation, like the price of restaurant orders, right? Saying like, remember we talked like, what are the things about inflation that really still get you? And you said paying $20 for a salad or something.

People, people don't get over that. They're still not over it. Who, who, who's like, yeah, a salad with grilled chicken costs $24 and I'm cool with it? The thing is, I think no one is cool with it, but everyone still just like, ah, whatever. So this is, what are you going to do, not eat? What do you mean? So this is, this is a story. for market. Well, you could brown bag it. This is story from Market Watch. Why are we normalizing

$20? Have you been to the grocery store, Benjamin? Why are we normalizing $20s? Uh, so this is from a survey, so take it for its worth, but it says Americans are spending $108 each week on their Monday through Friday lunches. That's up from $88 a year ago. Obviously that, like, take these of the grant. But that number doesn't sound shocking to me. If you go up to eat every single day and you spend $100 in a week, that number probably would have been shocking 10 years ago. Today, it's not shocking at all. Well, it depends what you. you eat. I mean, Tripoli is 1250 in New York City. That's your bellwether, it's Tripoli.

I mean, that's not bad. It used to be 14, I think. 1250? So look at this next chart here. I pulled this from the U.S. Department of something. I can't remember. And it shows U.S. food expenditures, and it shows food away from home, eating out, obviously, and food at home. And you can see in the past 10 years or so, food away from home has taken the league. They used to be rid on the same trend line. Food away from home is skyrocketed over food at home. Are you going to say that food away from home used to be underpriced?

Oh, no. I'm saying people have just changed their habits so much that we, everyone complains about the price of stuff, but we still, it's, you still would rather pay for convenience. Oh, wait a minute. Then change your habits. This doesn't show like the price of food at home versus the price of this shows how much people are spending at home. How much people are spending?

So people are spending. And obviously you could say, well, a lot of that is the price. But people are obviously willing to pay higher prices to eat away from home because of the convenience. You complain about it, but then people don't change their behavior. Right. I think that's what we've learned about inflation. Yeah. And that's why I think the next recession is going to be so fascinating because are people actually going to change their behavior in slow spending or are they just going to borrow a bunch of money?

Because I don't think we have the ability to change our behavior as consumers. I just don't think we have it in us. That's where I've fallen on this. we're going to spend the certain amount of money regardless. Hey, cars are 50 grand. I don't care. I'll take it an 84 month long. Same monthly payment.

It depends. I mean, what you're saying sounds crazy, but it's not that crazy because you're right. People don't change. It depends on the depth and the duration. Listen, if there's, God forbid, a recession in the last seven years and it's painful, yeah, people are going to change your behavior. If it's a two-year relatively mild recession where unemployment goes to 6%, then probably you're not going to see much. That would be my base case, is that if we get an AI-led CAP-X recession,

hey, Mark Zuckerberg spent $400 billion too much, it's going to lead to the slowdown. To me, that's a mild recession. Yeah. Right? All right. Try from Goldman. Tariff effects seen so far implied that U.S. consumers will eventually absorb 55% of the tariff costs. All right, that's a projection. For right now, it's 37%. businesses are eating 51% of tariffs. I am not an economist, but I feel like the argument against tariffs were pretty cut and dried. It's like this, and this is a tax on consumers.

Like, this is not, this is a thing. And were we all wrong? Like, is it not a thing? How is it? I'm sort of over the just wait, it'll show up in the data type of thing. I mean, it's been five months. And yeah, no, it's not, it's not there. it's 37, we're, we're bearing 37% of the brunt, but it hasn't seemed to really make a big

dent. Now, listen, are there businesses across the country that are getting destroyed? Yes. It sounds like small businesses are taking the brunt of this as opposed to consumers. Yeah, so maybe it's just not showing up in giant American earnings. We didn't, we didn't get $4,000 iPhones like people thought. Yeah. Right. I trained my kids how to build an iPhone in the backyard in our factory, and that was a waste of time. So here's the thing. In the next recession, if we get one in the next couple of years, guess what? Tariff's gone. That's the stimulus. That's one of the pieces of, right? Tariff, yeah, take it away the tariffs is like when your kids graduate from nursery school.

Not nursery school. What the hell do? What's pre-nour? Daycare. Daycare. Yeah. Yeah. Like, boom, an extra dollar, a few dollars in my pocket. Oh, my gosh. I had three kids in daycare for two years when that. It was huge. It was huge. stimulus to the Carlson House. But yeah, you're right. Don't you think in next recession, the tariff, all right, hey, guess what? We're taking off the tariffs. You're thinking they're going to be too, like, entrenched at that point. I don't know. I don't know. All right. Kai Wu is, in my estimation, the, one of the best research reporters out there, he's not a reporter, but research writers, he's an investor. Can I make an analogy here? Sure.

Kai Wu is the millennial Michael Movison. Yeah, that's great. Well done. Nailed it. Okay. So, Kai is one of those people, and it's a very short list. I would say it's like, it's Kai ensemble an ensembleist for me, where it's like, paper out, I read it.

He has a way of turning the story inside out and creating charts that you just don't see anywhere else. So he wrote a piece. Oh, wait a minute. Hang on. You read this whole piece. I did too. You didn't come away thinking, okay.

this is a bubble. When you look at all these charts, a KAPX bubble, there's no way you could read this piece and not come away of thinking, yeah, this is a KAPX bubble. Come on, what are you doing here? Of course it is. It's different this time.

No, it is a Kappex bubble. Yeah, they're spending a lot of money. It is a Kappex bubble. That's a great grander of its hedge, though, right? CapEx bubble. Yeah, no, it's not a price bubble. What? No.

All right, so he looked at the Kappex as a percentage of GDP for railroads, internet, and AI. And this has been done before. But what Kai did, that is so interesting, is he depreciation adjusted it. So these data centers, they go. Like, they need constant maintenance. They depreciate it.

It's hardware. Right. You put the railroad tracks down. They're there for a long time. Right. Right. Exactly. So when you depreciation adjust it, you get one of these.

I don't make it a cringe phase for people that are listening. Yeah, no, it's high. It's a lot. And the thing, the thing, so he did point out, which I love, that these companies, the Mag 7, are so much better than everything else. And I know we all know that. Nobody's disagreeing with that. That's why, that's why Nvidia's 4 trillion and Apple's 4 trillion. These are literally the best companies that we've ever seen, ever.

So, all right, so he, but he breaks it down like this, return on invested capital, which is like, the metric. of metrics, right? How much money do you make per incremental dollar of spending on all of your investments within the business? That's it. That's it. And the Mag 7 are at 22.5%. I don't think there's ever been anything like this in the history of business at this size. It was all capital intensive before. The S&P is at, the SEP 493 is at 6%. Return on equity, 30 versus 13. Free cash flow margin, 16 versus 9. Now, Kai says, again, justified these were incredible asset light, high margin, wide modes, all the things.

But now... Hey, before we get to this. So he says, since 2015, the Mag 7 is up 27.5% per year, creating over $23 trillion of wealth of their shareholders. Unreal. Guess what? The fundamentals were pretty good. Yeah.

But now, they are transitioning from asset light to... to asset heavy. And Kai looked at the history of these asset heavy versus asset like companies across time within every sector. Right. Now they're investing in data centers. And these are real physical things, not just software. Right.

And companies that spend a ton do not perform nearly as well as their counterparts. And he did, of course, use one comparison to 2000 as you got to do it. He showed, is this Cisco or something else? What is this? Are these telecom stocks? Let's call telecom stocks. So the thing is, they did grow. The promise was there.

The fundamental growth, so their sales increased at the peak from 2000, 1,030% over the next 20 years. 1,030% sales growth. The problem is the multiples contracted 85% because the multiples were so insane that you got a total return of 16% over that 20 year period with obviously a dramatic fall in between. I don't remember the exact number. but Microsoft and Balmer took over. He took over in like 2000 and Gates got out right at the right time. And the earnings girl for Microsoft was like massive.

I think it was 15%. And the stock got crushed his whole tenure because of where it started. Now the companies today do not have nearly the same insane multiples, okay? Invidia trading at whatever it is. I don't know if it's 35 times forward. It's not insane. Okay. Now, if the multiple goes down to 26, yeah, you're going to feel it.

But you're jumping out of the third story of a window of a building instead of the 10th story. like these stocks were back in the day. Yeah, so just some broken ankles. That's it. The thing is, he puts the quotes in here from Zuckerberg and Larry Page about, like, we're willing to go bankrupt rather than lose this race. What do these tech CEOs care if it's a bubble if they're trying to create AGI or whatever? Like, why would they care?

So what? I guess what's different, and I wasn't around during 2000. I don't know what the CEOs were saying. But they're being very clear about what. what they're going to do, what their plans are, and investors are saying, we're riding with you. Right. And how long? That's the thing. Now, the question is, waiting for investors to say how long? And we get, we're getting an earnings called, we get them all reporting this week. I'm sure at some point, maybe it's this one,

maybe it's five years now. Who knows? At some point, investors will say, buddy, you've been saying this for nine quarters. Show me the damn cash flow. All right. So good segue here. So did you listen to this part. I think this is the podcast of the year so far. I listened to this. I've got to be honest. I'd never heard of this guy before. I listened to it. But it's so, uh, Dwar Keshe is the podcast. Did you listen to any of this? Did you put it in Chad TPT at least? No. Okay, it's a two and a half hour podcast. All about AI. And this Andre Carpathie, Carpathie, I don't know what's his name. He was one of the founders of Open AI. He led Tesla's AI division. Now he does some other educational AI thing. Um, I've got to be honest, I didn't understand 65% of where he's

was saying, but the stuff I did understand kind of blew mine, and it was fascinating. I gabbled this thing up in a two-and-a-half-hour podcast in one day. Here's a few of the things I pulled out here, okay? Now, this is really good. So his whole point is AI isn't going to supercharge GDP growth. It'll just keep us on the same trajectory. He's like, he's like, listen, just like the internet and email and all these things that came about in automation kept this long-term 2% trend line, that's what that's what AI is going to do. It's just going to keep us on. It's a step of that automation in the same direction. So he's like, it's not this leap forward, this huge leap higher, it's just going to keep us on the same trajectory. Now, without AI, maybe that trajectory

flattens out. But with it, that's his expectation. He said, listen, I can't predict the future, but that's my sense. So he says, with AI, we're going to see the exact same thing. It's just more automation. It allows us to write different kinds of programs that we couldn't before, but AI is still fundamentally a program. It's a new kind of computer and a new kind of computing system, but it has all these problems that's going to diffuse over time, and it's still going to add up to the same exponential. We're going to have the same exponential that's going to go extreme vertical. It's going to be very foreign to live in that kind of environment. He also, he was pouring some cold water on this, but also saying, like, this is going to be amazing. It's just

not going to happen as, the way, and the way he explained LLM's, like, an AI was really interesting. He said, like, we would love to be able to create an AI that's like an animal. Like, a zebra comes out of the womb or a horse, and it can walk immediately. And he's like, we can't recreate that. And LLM is like a ghost, is how he explained it. Like, that's how they view it when they're trying to, like, build these things. And he says, AGI, which he thinks is like a decade away, which is, which is kind of funny. People were kind of like, oh, really a decade away? That seems way too long. It's like, you're creating, like, some people say God in a box, like, oh, no, we have to wait 10 years for it. But he says, he put a little cold water on that, too. He said,

some people feel like this assumption, we have God in a box and now it can do everything. and it just won't look like that. It's going to be able to do some of the things. It's going to fail at some of the things. It's going to be gradually put into society and will end up with the same pattern. That is my prediction. This assumption of suddenly having a completely intelligent,

fully flexible, fully general human in a box, and we can dispense it at arbitrary problems in society. I don't think that we will have this discrete change. I think we'll arrive at the same kind of gradual diffusion across the industry. Now, so this stuff all sounds like he's pouring cold water, right? But he's still saying, like, the stuff that's going to happen is going to be amazing.

It's just not, like, it's not world-changing, like, people think it's going to be this total step-up in everything is completely different. He says we're on the same trajectory. Thoughts. You got to listen to this. It was, it's really well done. I don't believe him. We already have self-driving cars. The robots are coming.

The world is going to change. Now, if you're looking at a line of GDP growth and saying, did the world change? I don't know, I would suspect that you're going to see something but maybe you don't. That's the thing. The internet did not change the trajectory of GDP.

Okay. So maybe so, yeah, maybe, maybe so. But I think that this is going to have radical transformations for our deadly life for the way that we do a lot of things. I don't, by the way,

I would assume that he would say that too. Yes. Okay. Yes. I just thought that it was a very balanced, it was one of the more balanced looks I've heard from a guy again I'd never heard of

before I listened to this podcast so take that for what you will but I thought it was just the way that he explained how AI works and he's like listen we're just we're pulling this stuff from the internet

it's not like it's not magic right the information where it's you know garbage in garbage out in a lot of ways it's amazing that we can do some of these things but he just said like

people need to temper their expectations a little bit and it's still going to be amazing and that's why again I think like we could see some sort of washout and it'd be a wonderful buying opportunity because this stuff happens later.

Is this a Silicon Valley hedge? Like, what do you, what do you call, how do you describe what he was just saying? Yes, I think sometimes in Silicon Valley, the, the euphoria and the, can you imagine what the future is going to be like, gets a little too ahead of itself? And so I think that, you're right. That was a little bit of like just everyone pump your brakes just a little bit. Well, certainly you could say like, hey, listen, private investors, maybe don't give this unproven company. with no revenue, an $8 billion market cap. Like, sure, yeah, I would agree.

So anyway, it's worth your time to listen. All right. Speaking of AI, so Stitch Fix, well, I'm still a client of. I don't think anyone else is because the stock, gosh, it crashed like 90%. I'm so glad. I bought this thing in the meme stock mania after the CEO was on Patrick's podcast, and I don't know, I made some money in it. And then she quit.

And that was enough for me. Like, okay, the CEO quit. It was her vision. I'm out, and then the stock crashed 90%. It's a typical meme stock. But I still use it. So once every two months, they send me a box of clothing or shoes or jackets. Do they, like, recycle the brands or are you familiar with the brands that they use?

A lot of them have been newer brands to me. And I'll say, I'll worry to note, hey, and probably it is AI at this point, but I'll be ready to know, say, hey, I'd love a new jacket. I'd love some new joggers. It's fall I want. Let's hooded sweatshirt and it'll. And then I pick and choose what I want, and then I send back the rest. And it's gotten me a lot of new clothing.

I never would have got before. Wait, do you not shop on Instagram? Not really. No, I don't go to Instagram that much for whatever reason. I probably should. It's probably better for me than Twitter. But anyway, they have this new AI thing

and stitchfix where you upload a picture of your face and a picture of your body. And then it allows you to see what clothes would look like on you. So I uploaded the pictures of what they put of me in here. Are these both fake or is the one that left you? No, they're actually not me.

Come on, I've got a better bill than that. It looks like I skipped leg day. And the one on the left does look like you. I mean, the one of the right looks like you too, but. It kind of, well, again, I uploaded a picture of my actual body, so they had something to go off of. The one on the right is obviously not me. But yeah, you're right. The one on the left, it kind of looks like me.

I mean, dude, it looks just like you. Rayban has this feature, too, where you can, you can, like, they hold the camera up to your face and you could like put the glasses on and you can look around. It's pretty cool. Right. So, anyway, it's, I thought it was kind of, I did this in 10 seconds. Yeah, I don't know. And then it took. I don't know if this will change

the GDP. But it's pretty cool. All right. J.P. Morgan plans to allow institutional clients to use their holdings of Bitcoin and ether as collateral for loans by the end of the year in a significant deepening of Wall Street's crypto integration. That's a report from, from Bloomberg. This is the stuff that got crypto in trouble a few years ago, right? Obviously, the borrowing against. No, no, no. Hold on. That was that was investors borrowing against and loaning and all that sort of stuff. I think that this is, I think that this is maybe less for like that cowboy shit and maybe more for like, uh, less insane margin. Yeah, like a portfolio margin, like a typical. But yeah, that's what I'm saying. That's a step in

the right direction versus the cowboy stuff. Um, this surprised me in the story. Morgan Stanley plans to allow customers on its e-trade retail platform to access popular cryptocurrencies beginning in the first half of next year. They're still not, if you're, if you're a, The Morgan Stanley client on E-Trade, you can't buy crypto? I got to be honest. I didn't know E-Trade still existed. Yeah, Morgan bought it. But I didn't know they still even caught.

I thought they just kind of consumed it. I didn't know that people actually still used it. So it's just Morgan-Sandley customers, obviously. That is a little surprising. Well, I get, no, I don't, I don't know. I honestly don't know what they're talking about because I think if you are an E-Trade customer, technically you are a Morgan Stanley customer because they own the product. But I don't know exactly what they're referring to.

how they break it down. But anyway, Vanguard is coming to. There's some whispers that Vanguard's going to allow it on the platform, we'll see. All right, on the- And an ETF or no?

In the ETF, I believe. No, and are they going to do a Vanguard ETA? Oh, hell, I mean, I would be shocked. No, you know what, no. All right, on the crazy side of things, Punk 959 tweeted, remember, we spoke about this company a couple of months ago,

Eth Zilla, and we said that this is crazy. If you think, and I don't know if Eth Zillah is this company, but they were companies that were like reinventing themselves as crypto treasury companies where they're trying to like transform a non-existing or shitty business into these treasury companies and that was going to work. Well, obviously it's not working. Look at this chart of Eth Zilla. Shot up to like a hundred bucks on the announcement.

Now it's down to 20 bucks. But the trouble is that they sold 40,000. million worth of eth to fund stock buybacks. So, yeah, it's not working. I have an update on micro strategy that I asked Chartkit to do a couple of weeks ago, but haven't gotten around to share in the show. We'll do it next week. Let's just say that micro-starchs. The stock is basically flat on the year. It's interesting. Flat of the year. So I think, I mean, I think there's a SPAC prior to, so I don't know what it was like in the beginning of the year. No, I'm talking on micro strategy. Oh. So Bitcoin's up 25% or something.

I don't think of micro strategy is up to... But if you look at micro strategy divided by BTC, it is at multi-year lows. So the spread is... It's not working. And I'm curious to listen to their earnings call and see what he has to say. All right. We are not seeing a pickup in activity in the real estate market, residential real estate. Neil Duda said, despite the decline in mortgage rates, we've yet to see a pickup and

purchase demand. Mortgage purchase application slid 3%. See, Neil Dutta is on Team Ben Carlin. Carlson, like last week, I said, because if you think about it, mortgage rates topped out at eight. Now they're back down to six, and you're still not seeing it a huge upticking activity. I think it's got to be lower. I think that this reverses. Like, yes, I think that you are right.

Clearly, it's not showing the data that lower rates are having an impact yet. So I don't know if it takes rates breaking 6% on if there's a psychological number there. But I do suspect that if rates go down. a little bit more that you're going to see I honestly think we need lower housing prices. I think that's going to be more meaningful than lower mortgage rates. Maybe I'm wrong.

Lance Lambert had this thing where he looked at housing markets where the home prices are falling. And he said, among the 300 largest metro area housing markets, 105 markets saw home prices fall year over year between September 2024 and 2025. To me, this is a correction for ants. So the biggest one is Punta Gorda, Florida,

which my grandparents used to live there, actually. Nice little area. Anglewood Beach, very nice. Yeah. So there's two housing markets, both in Florida, where they're double digits. It's 12 and 10%. But you look at these other places, you're seeing home prices fall 3%, 4%, 5%, 6%. That's nothing, especially if you zoom out.

It's nothing compared to the gain. So how about this? What if more activity, one of the reasons that we're not in an activity is because the price point is being held up, What if more activity actually led to a housing price decline? If there was more activity, then you'd see the true price of these that people are willing to buy at, and it's lower. Could they? What if more housing activity didn't lead to higher prices, but lower? Could they?

Is that too galaxy brain? I think that's possible that it's the price thing. People are hung up by the prices. I don't know. That sounds too cute, but maybe. Maybe. All right, let's talk about private markets. Ben, we spoke with Chenali Bassack last week for my capital.

had a very good, clean, spirited debate about what's going on in private markets. One of the stories that we didn't really get to was an article from the journal, Wall Street is pushing private assets into 401Ks. We asked whether anyone wants them. I hear this a lot from people. When we talk about private investments on any of our stuff, a lot of advisors will say none of my clients are asking for this. Yeah.

I've said this. I've told the story multiple times. When we were at Future Proof last year in Colorado, I was hosting a talk and I said, show of hands. Like, how many people are asking, being asked about private marks from their clients and everyone looked around and not a hand went up. Now, and I said like, is a private market, are we being gaslit by these asset managers? Now, the answer is no, because the flows are there. Blackstone reported record flows. It's not not happening.

think that it's coming more from the wires than the independence. That makes sense. And I think the independence that do have people who want it, it's the ultra-high network. Yeah. It's people with call it 20 million and above. It's much higher level. Yeah. So it's definitely, again, it's definitely not nothing.

But I think that the asset managers are maybe overestimating demand from the RAs, we'll say. But anyway, to this survey, nearly 40% of respondents reported never having heard of private credit funds, that actually sounds low. Like, who has heard of private credit funds? Like, what normal people have? Yeah, that's true. Yes, if I ask my mom and dad or my in-laws, like, how many of them would know what

private credit fund is, not, no, probably not. Yeah, they would say, what are you talking about? All right. So, 45% of respondents that said, I am satisfied and have enough offerings. Another 45% said, I am satisfied, but would like more mutual fund offerings in ETFs. And then 10% said, I am dissatisfied. satisfied with my 401k options. I'm surprised that number is not higher,

because there are a lot of crappy 401K plans out there. I haven't spent as much time here in that side of the business as I used to. But we used to see a lot of shockingly shitty options. It's like, throw a target date fund in there. Or why is it target date fund 115 basis points? What's happening here? Yeah. I guess a lot of that stuff has been wrong out,

but there are still these tiny 401K plans that aren't that great. but um anyway whether or not people are asking for it um it's coming all right so here's yeah but but if people don't ask for it it's it's coming how who buys it is there only way in it's target it's targeting funds yeah i think the adoption is going to be slower than you think why are you putting dollars in my mouth i didn't say anything about the adoption i feel like You've been relatively paper bullish on this. Oh, I think it's, I'm bullish. It's coming.

But I'm saying if the consumer pushes back and the RIA pushes back, you need an invested investor. I don't, I don't, I don't, just because it's offered doesn't mean it's going to be huge. Oh, yeah, no, no, hold on. I'm not, I don't know that I'm super bullish on demand, but I think that if it gets its way into target date funds, then boom, game over. I don't think that you're going to have like individual investors, be like, oh, where's my private credit?

I don't see my private credit in this lineup. Like, I don't think that's going to happen. Right. I wonder what that looks like. I guess if it's a 10% allocation and the fees are really high, it's not going to push the total fees that they fund that would hire. I think that part of the good thing about them coming into this sacred world that nobody wants them to be in,

and I'll say, like, I don't think that they need to be there, but they are and it's not my decision. I think more transparency is better, and it's going to bring down fees. Yeah, I agree. If it works, fees are going to come down. And it's going to bring out much more transparency with the underlying companies as well. Like you said, there was the two bankruptcies and private credit and everyone was talking about them.

You would have never heard of these companies otherwise. Like, there's going to be more demand for information about these companies that they're investing in as well. Yeah, hopefully. So, listen, do I want it? No, but am I hemming and hoeing and saying that people aren't going to be able to retire because they were fed 10% of private credit in their 401. Come on. All right. Yeah, but the thing is, baby boomers.

So I guess to counter myself, I'm pulling a Michael right now, I'm arguing myself, baby boomers who are retiring who want to de-risk a little bit. Private credit is the easiest sale of any private asset class, bar none. It's way easier to sell than private equity, venture capital, infrastructure, whatever, hedge funds, because it's just yield and it's like a fixed. You just say, hey, listen, it's a bond fund that you can't get out of, but the yield is 10%. You think retiring baby boomers aren't going to sign up for that? Like, that's the kind of thing. That maybe that's the end user. That's where the biggest bang for your buck is.

Of course, put 20% of my portfolio in that, 20% in liquid bond funds, 60 in stocks, I'm good. Yeah. That's going to be a thing. Yeah. Okay. So I've been, I don't have harsh as too strong a word, but I've called out the FT and other journalists that so desperately want there to be multiple cockroaches because it's juicy, it's salacious. And listen, I'm not, I mean, I get it. However, I want to call out a report, an article,

What's Up with Private Credit Ratings by Toby Nangle from the FT. This is great work. And reading this article definitely makes you go, hmm, wait a minute. So there is a thing that's happening in the private asset world where a lot of these giants are buying up insurance companies who are buying a hell of a lot of private credit. And you talk about the circular dealing that you, you see, with OpenAI and all that sort of stuff.

You're seeing a lot of that here. Now, I don't know that Asset Manager X is buying insurance company Y, and insurance company Y is eating the private credits from Asset Manager X. I would imagine that there's some sort of Chinese wall there. This is not my universe, so I don't know, but I would imagine that's a faux pa. Okay. Anyway, insurance companies are buying a lot of private credit. especially in the U.S. and Canada.

Now, private credit is not all bad. There's a lot of different types of private credit. There's direct lending, which is, I think, the thing that most people are talking about, but there's commercial real estate lending. There are residential mortgages. There's asset-backed finance. There's infrastructure.

So it's not like all, all-all direct lending. Okay, but this is the part. So from the article, as the IMF wrote in last week's global financial stability report, most insurers' exposure to private credit is classified as investment grade, but investment grade according to who? Now, these insurance companies, even if they're owned by these asset managers, so highly regulated as they need to be.

So investment grade according to who? Mostly, it turns out, not according to Moody's, S&P, or Fitch. So check this chart out. The number of securities that Moody's S&P and Fitch collectively rated stayed pretty much flat between 2020 and 2023. but the total number of privately rated securities ballooned over that period. And it was the little guys that scooped up this business. Now, you might say, Michael, who gives a shit about the big three?

Like, what did they do to protect investors in 2006? All right, fair, fair, I suppose. Okay, back to the IMF. I'm sorry, back to the FT. Okay, this part is from the IMF. So insurers search for private credit exposure classified as investment grade has changed the rating landscape in the United States. Misclassification of below investment grade instruments into the investment grade bucket

may result in default losses significantly exceeding those expected during an economic shock, leading to the erosion of insurers, capital, and potentially causing liquidity gaps because of insufficient cash flow from the defaulted entities. Now, if there is like a systemic risk, a holy shit type of risk, where there's like a liquidity drain and like selling of illiquid stuff that can't be sold I would say that maybe this is the part

to keep your eye on this is like a little this definitely there's smoke here now I'm not saying there's a fire but this definitely makes you go like wait a minute how about this a lot of people are concerned

about the circular nature of much of what's going on in the world right now all the technology companies are investing in each other I'll hold your bag let me your bag I'll give it back to you

all the private equity managed and private credit managers are investing in these things but to me I think that's actually the right way to do it. Instead of going on an island and being doing these things by yourself, if everyone is involved and it's a systemic risk, guess what? Someone's getting bailed out. I said this on antique after the other day. That's what's going to happen. If these things all get big enough and they're all part of it, no one is going to let this stuff all go down.

They're all too big. They'll shore each other out. Yeah. If there's one, right? Yeah, top me off. I'll get you on the next one. All right, but here's here's the last one. And this is, look at this chart from the FD. Seriously, credit to them. This is a great report. So they break it down. Obviously, not every insurance company has the same allocation. So they show the top 10 holders of private letter rated bonds. So Global Atlantic, the insurer 100% owned by private equity group, KKR, leads the pack with a quarter of its $100 billion portfolio carrying private letter ratings.

Mass Mutual holds more than $50 billion. Other insurers like New York Life, now New York Life is not owned by one of these companies. life had a measly 6.7% of their bond book privately rated. This is, this is good reporting. Okay, good stuff. I just think the biggest firms have realized, if we're all in this together, just like the tech firms, like, if one goes, we all go and we'll be fine. I think that's actually the way, it sounds like a systemic risk and it probably is,

but I think it's actually good business. Okay. I think it makes sense. So we had a great question, and I apologize because I forgot to really, give this too much thought. But it was this. If you were on a deserted island, which three earnings calls would you want to hear to help gauge how the U.S. economy slash stock market was performing? Wait, yours would be Visa, MasterCard, America Express. You love the credit card company. I mean, well, yeah, they do tell you about the consumer. Now, okay, this is a really good

question. And I would say, like, I can nitpick and say, like, well, tell me where, like, are you talking about, like, in a normal time, in a period of, like, distress? What would I want to look to, like, a leading indicator, things getting better. So if you want to get, can I do mine first? Sure. I just want to get really broad and have everything covered. I would say J.P. Morgan for the finance side of things. Walmart for the consumer.

Apple for high-end consumer. Yeah, not bad. That's a good list. So for the- The boring list. Well, it should be. For finances, I would have said Bank of America because they serve more of a main street. I mean, they serve everyone.

JP Morgan is a little bit of a higher clientele. but splitting hairs. I also would have said Amazon as opposed to Walmart because they touch more of the economy. And then the third, hmm. You've got to pick one of your credit card companies. That's your favorite.

Well, I already got a financial. I already got a financial. Yeah, I mean... Delta? No, no, no. So, you know what's interesting about Delta? I was thinking about this.

This is not a deep, and this is not a hot take. It's just so obvious. One of the reasons why people are able to travel more with their families and Delta is doing what it's doing, I would love to know what percentage of family vacation flights are paid for with reward points. So we just booked our flights to Disney and they were whatever they cost,

a couple thousand dollars. Guess what? paying with points is obviously a meaningful decision for almost every family that decides whether or not to take a trip, it's a huge amount of money. It does make it easier. Yeah, I have three kids. We're buying five tickets every time we fly. It's expensive.

Yeah, I agree. All right, so what's the third company? Yeah, I don't know. I guess, I guess, well, Apple's, no, Apple's, like, not really representative of the economy. Oh, but it is for the stocker stock market. Aklow? No, we're good Tony. All right.

A bunch of people sent us this. There's a U.Gov study about horror movies, saying, uh, horror movies have the small share of people who collectively like or love it, as well as a large share of people who like or hate it. So, hate or dislike it.

So I think the, the chart just shows that people, you either love horror movies or you hate them. It's a very extreme. Everything else is kind of more down the middle. Well, yeah, nobody's, nobody's like, yeah, I could take it a little. what do you mean? Horror is polarizing. You either love it or you hate it. Yeah, so a lot of people

said this is Ben and Michael. So that actually does make sense to me. But most people that don't like horror, like don't like it because it's too scary, the fact that you don't like it because it doesn't do anything, you don't feel anything, that's kind of psycho. You're kind of nuts. You know, this happens in my life sometimes. I feel like I blame investing. Like the whole point of it, everyone has been telling you to take your emotions. My wife always says, like, why don't you show more emotion about this? Like show more enthusiasm or, and I'm just like a, I'm always, yeah, I don't know. I think that's the same thing with horror movies.

It doesn't, the emotions I've stamped them out. I was thinking about back to my horror movie. I'm the 10 man, basically. Yeah, you are. Back to my horror movie list. So Kobe is turning nine in February. I can't believe my dad took me to see in the mouth of madness when I was nine years old. That is so insane.

Kobe watches. I've never heard of this movie. You only watch his, like, how to train your dragon and whatever. Like, in the mouth of madness, Dad, what are you insane? I think, so I think you're going to take George to see Howard Boy some day. He got into Beetlejuice this week because after, for some reason, that came up after Tremors. Boy, did he love Beetlejuice. He already is watching the second one, which just came out a couple years ago, which was not very good.

So he's going to be big time into it. He can't wait to watch horror movies. There's a scene in the mouth of madness where Sam Neal is dreaming. and he's on the couch and he looks over and there's like a guy with a monster looking face I don't know

a dilapidated face and like he wakes up out of the dream and it's scary like that dream sequence is scary he snaps out of it he's sweating and then he looks over again and the guy's there again

and it was a dream within a dream could you I was nine I'm going to skirm back then too no I'm fine it's totally fine no big deal all right last last week we were talking about

like car repossessions and maybe making a little bit light of it. Like if you zoom out to 2019, it's where we were. Yeah, I want to take the other side of that. I mean, giving up your car, like, having your car repossess, that's the last thing that you stop paying. Yeah, I agree. So it's increased quite a bit. But we're back to 2019 levels there again, too, which was high historically.

But who can't, but it's still, it's still pretty elevated. And compared to a couple years ago, like, it's just. And also, if you think about, all right, I know we throw around numbers a lot and it's like they lose context because they're so big. 1.73 million cars that people had to let go. How many cars are on the road? Doesn't matter. I'm zooming in. Oh, you're zooming in.

Okay. No, I'm just saying that's, that's crazy. So there's 300 million registered cars. So that's, what, 0.4% of the total? assuming it. I'm just saying like on a human level. That's insane. I agree. Um, all right, Ben, this guy, uh, this guy said like, Ben, you think you're good with credit card rewards? Hold on my beer. Okay. Tell me if Ben can do better than this. My family just grew with our second baby last month. They traded in a Ravre four prime for a used 2023 Honda Odyssey. Good choice.

After traded and it costs 22K. I paid 5K using my robinson. card for 3% cash back and finance the rest. You're with them so far? All right. Here's the twist. I open a regular auto loan at 5.29% APR. I'm opening a Wells Faga reflect car with 0% APR for 21 months at a 5% fee for balance transfer. I will pay off the auto loan.

I'll pay the minimum each month while putting what I would have paid toward the car loan into market CDs around 4%. I'll close them before the 21 month period, then pay off the ballots. I roll part into another 0% offer. This is like the Zach Galfinacus meme. Even without a car purchase. All right, whatever. How much money is this person saving?

Is there any juice here? Probably not a lot. But honestly, for people who do this, go down this rabbit hole for them, it's more the game within the game than it is like, because it'll probably like, I don't know, with the interest that they're making over 21 months and the interests they're saving,

it'll probably be $500. All right. Well, guess what? It's a personality. My uncle was a huge coupon guy. I can't throw shade. I would have done something like this. Would physically take coupons.

I'm sure he still does to the grocery store. And he was definitely like, oh, this guy. He was at this guy at the grocery store. Like, everybody knew him. And so it's a personality type. So that helped explain this tweet that went viral over the weekend. Somebody tweeted, the only good mortgage is a paid off one. Our biggest monthly expense is gone.

And they showed, and I'm sure that they knew that this is going to kick the hornets nest. the rate was 2.625%. Now, objectively, this is a bad, or this is a subpar financial decision, objectively. I mean, if nothing else, there's a spread between what you get in risk-free bonds versus 2.6, 25%. However, and people got all up in arms, it's like, guys, we know. He knows. He understands what he's doing.

He understands that there are better uses of money, but it doesn't matter because there are people who are debt-averse for regardless of the interest rate. And can't you understand their point of view, even if you disagree with it? This person feels good about not carrying a mortgage, not about having his biggest monthly expense gone. And I'm sure he's fine otherwise. I'm sure he's got plenty of assets. So this is not a, this is not a financial decision. It's a personal finance decision. Listen, I'm of the opinion that there is no black and white and personal finances. There's only gray. This is black or white. This is a, this is an insane decision. No, it's not.

Insane. It's the inflation rate is 3% right now. You can get 4% in treasuries. I don't care how you feel about debt. This is an insane decision. No, it's not, it's not insane. It's not insane. It is a bad mathematical financial decision,

but the psychological hurdle or benefit of not having to take. Sometimes you have to take the behavioral stuff out of it. No, no, no. Listen, we all are in tune with behavioral psychology now. It's a big thing. Sometimes you have to take it out of the equation. Sometimes it's not worth the behavioral psychology. And you have to just eat your feelings.

All right. How about this? How about this? Let's say that it's his mortgage is $3,000 a month. Okay? And this person, so you're saying, well, the spread between... What's safer? It doesn't matter.

It doesn't matter. It doesn't matter. Which one's safer? Hold on. But now, you're talking extremes. If you're saying the mortgage payment is $36,000 a year, and you're saying that you could capture the spread between 2.625, and 3.75, 1% on $36,000. Who gives a shit? It's, it's effectively zero dollars for this person.

Now, what's more, but you're, he's putting all of his money in this illicit asset. What's safer, I'm saying, having that liquid cash or an illiquid asset. Oh, I get it. But I'm, I'm sure that this person has their finances, um, in order and there are other liquid assets. Yeah. And it's still a bad decision. That's right for the, for the general investor, for the average person, somebody said to you, hey, listen, I've got this 2.6, 25% mortgage. And I know it's a a good rate, but I just don't like paying the monthly rate. I'd rather pay it off. All else equal for everybody, you'd say, no, no, no, no, don't, don't, don't do that.

Don't do that. Don't do that. Like, just, don't do that. 100% of the time, never paid off. Yeah. Never. But for somebody who's, whose handle is barbell financial, I'm sure they're making the right decision for them.

And it's still a wrong decision. Okay. That's right. All right. Last week on Netflix's earnings report, they said that, at the quote, so engagement remains healthy. We achieved record share of TV time in Q3 in both the U.S. and the U.S. and the U.K. Yes, sure, that is factually true.

But if you look at the share of U.S. streaming time, whoof, Netflix is getting smoked by YouTube. There's no other way to put it. Honestly, we asked this before, when's the last time Netflix had a good show? A good show. It's hard to come up. When you say good, do you mean like an HBO type good? I mean, they had adolescence this year people pointed to.

I didn't care for as much as other people, but they haven't had like a show in the last, I'd say two years that it's been like, whoa, this is a water cooler show. They haven't had anything. Have they ever? I mean, House of Cards was. Squid game. They've had a squid game. That's sure.

That's sure. Okay. You know, so this morning, my puppy woke up at 5 o'clock and which she never does, but she was pawing at the door, so I let her out and, Went downstairs on the couch and I couldn't, I was, I was up. So I turned on Netflix and I see this number one movie and I had never heard of it. And the cover is an actor that I like. The movie is called House of Dynamite, I guess.

House of Dynamite. So I, I Google it. Woo, Catherine Bigelow. Catherine Bigelow did, Heart Locker. Zero Doc 30. Point break. I said, holy shit. First of all, when did that drop?

Did that drop yesterday? Friday, I think, yeah. Oh, Friday, okay. Anyway, a lot of fun. Did you watch it? Okay. I didn't watch yet. All right.

You're into it? So it is a missile movie. Like missiles are in the air and holy shit what's happening and it's good. Didn't finish it, but it's good. Anyway, yeah. I heard the ending sucks. You heard the ending sucks? Yeah.

Why would you hear the... How would you hear the... that. Why would you hear that? Why would you ruin it from me? And the listeners? I'm lowering your expectations for the, maybe the ending will be better than you think. Wait a minute. How did you hear it sucks? Do you read spoilers? What's wrong with you? I have raw dog everything. I just saw a bunch of people say, hey, watch House Diamond. Ending sucks. Okay. All right. Thank you. I saw multiple people say that. That's all. So this is a big deal, a big big deal in the world of streaming. Taylor Sheridan of Yellowstone,

Lioness. What else did he do? The Billy Bob one. Landman. Tulsa King, Landman, Mayor of Kingston. So the biggest TV show creator in the world is leaving Paramount. Now, this is a weird story because his deal with the studio, the movie deal is up at the end of this year, but his TV deal goes through 2028. You know, he did Sicario, too. He should go back to movies.

And he did Wind River, I think, with Jeremy Renner that was going. But his deal with Paramount, the TV studios through 2028. And me and Josh were talking about this. and you guys have the right take. Credit to David Ellison for selling all the way at the top. I mean, by 2028, how much more juices this guy could have left? Right. He's got to run out of ideas eventually.

So anyway, you want to... An NBC Universal probably gave him a giant bag of money. So I think that they... You're paying a 50x capration for Terrible Sheridan right now. Yeah. Big mistake. All right. When did Halloween decorations become a thing? Because when I was growing up, they were sure there were some decorations,

but the Wall Street Journal has this thing. Pumpkin scapers are making a killing. As fervor for the season reaches New Heights, families are paying north of $1,000 to create Instagram, perfect tabloes for porches and front yards. I feel like the Halloween decorations have gone crazy. And I have a take. I think it's all millennials.

I think this is a millennial thing. There was some people who would decorate for Halloween, but now it's almost like Christmas levels. You don't do that, do you? No, I mean, we have a couple of pumpkins. We carved pumpkins last night. I did pretty good last night. We had a whole toolkit of pumpkins.

I'm like Billy the butcher here, pulling stuff out. I'm a horrible carver. It's hard. My hands, I had like carpal tunnel today. But we did, what's the name before Christmas? We did a guy like that. Jack Skellington. Yeah, it was very hard.

It took forever. Looks good, though. Good for you. All right, so I got a lot of emails. Wait, are you a Halloween decorator? Robin always gets the same stuff, like a bale of hay and some pumpkins. But not like the giant skeletons and the blow-up inflatables. We're not weirdos.

No offense to anybody that does that. Um, actually, you know what? I'll take that back. I don't take it back. How about that? I, I actually, actually, I appreciate, I think it's odd, but I do appreciate the people that do it because my kids love it. So if you are-

Oh, my kids do too, but it's never going to be our house. If you are entertaining the community, you're not weird. You're a good citizen. Good for you. Okay. Oh, I got a lot of emails about my extenders. So apparently, my thing was all fucked up. Verizon came in here, and I was like not paying attention to when they were here.

I think I was doing a podcast or whatever I was doing. I was on call, who knows. And so we got, they came with Eros, okay? That wasn't working. Then I bought the Verizon extenders, and that definitely didn't work. And the whole reason why I had Geek Squad come the other day, my Eros weren't plugged in. Can you believe it?

Is that on you or on them? So Verizon labeled, all right, so there was a Verizon 2.4G network, a Verizon 5G network, and a Verizon 4. Turns out the Verizon 4 was just the name. that the Verizon dude gave to the Eero network. He labeled the Verizon 4, and I wasn't paying attention right. I don't know.

So, I'm like, why did he label it Eero? So I knew that it wasn't a Verizon network. Everything should be on the Eero, except now I thought I had three networks. Anyway, we're good. I just have to plug it in and connect everything to the Verizon 4, which is not Verizon. That sounds like it's 90% on you.

Very frustrating. Probably was. All right. Okay. All right. I listened to American Prometheus. I didn't much care for Oppenheimer, the movie. And I think it was...

I loved it. It was too long... I read the book after I saw the movie. Sorry. You read the book after you... Oh, me too. So I think it was a combination of hand-up. It was too long for me, and I might have taken more edibles than was appropriate.

Okay? Three-hour movie, Edibles. You're an idiot. My bad. Yeah, you got to really turn the crank up on Oppenheimer. Why would you not get an edible for Oppenheimer? Because somebody said, do you want an edible? And I said, yes.

Simple as that. I wasn't planning on it. It just happened, Ben. All right. So the book was amazing. Not to be that guy, but the book was great. And it made me think about Dan Wang's breakneck analogy of data, of engineers versus lawyers. The fact that Oppenheimer's life, he was ostracized and vilified and torment.

and destroyed about him having ties or political affiliations or friends within the Communist Party is mental, right? Like he should have been the most celebrated or I know people have mixed feelings, obviously, understandably. But he was, and he wasn't vilified because, like, he created the bomb. It was like he was leaking information,

allegedly, which I don't think he was. And if this was, you know, in China, he would have been a hero. The sad thing is, is that he was a scientist and he was building real things. And today, he would work on Silicon Valley and work in software. Yeah. Right? Which is kind of sad when you think about it.

Like, that's, you go to where the money is and I understand that decision, but there aren't enough people who are building things in the physical world anymore. That's the whole point of the Dan Wayne book. I did rewatch Oppenheimer. And it took me two and a half sittings because it is so long. And I naturally enjoyed it much better the second time. Okay. I think Emily Blunt.

I think Emily Blunt is fantastic in that movie, too. But she had such a small role. So Kitty Oppenheimer was a big, big, big character in the book. Obviously, it's his wife. And she was... By the way, they like to drink. Wow. Yes.

People, but I think there was just nothing else to do. So people just drank... All they did was drink martinis. Maybe that. So maybe the whole thing about young people not drinking as much today is not as much about being health conscious and such. Because let's be honest, this whole country is not very health conscious. maybe it's just there's more to do now.

And back in the day, like what else were you going to do besides drink? Yeah. Right? Okay. We started watching Nobody Wants this season two. That's the Adam Brody, Kristen, what's your name?

Kristen Bell show. It's cute. I don't watch it. Robb watches it with me, but it's cute. It's not as good as the first season, but is still having a romantic comedy in my life that, like, I love the Jonah guy from Veep

that's in the tall dude. I did catch the one scene in the first season where one of them is texting about how annoying the brothers or how dumb or whatever and it's like through the car play. Yes, it reads back. The first season was better

than the second season, but it's an entertaining turn your mind off show that you can laugh about occasionally. And there's a succession reunion too. What's Kendall's friend's name? Oh, I don't like that. Yeah.

Okay, he's in it and Will is in it too. So anyway, not a bad show. We need another succession. That's never happening. It's like saying we need another apple. There's not going to be another succession. Come on. Succession, like show?

Okay. Just like a great show that everybody's all in on. I think like two people, two million people watch it every week. I know, I know, I know. But our audience was all in on it. True. All right. Animal Spirits at the compound news.com.

Thank you for listening. Emailing. What else we got? Anything? The blog? All right. See you next time.