Animal Spirits Podcast - Peak Pessimism (EP.262)

Episode Date: June 22, 2022

On today's show we discuss how wild and crazy the past 3 years have been in the markets, why the Fed is in such a precarious position, the number of stocks getting hammered, the Warren Buffett of crypto, the most re-watchable movie of all-time and much more.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by our friends at Y-Charts. Michael, last week at the Fed press conference, Jerome Powell said, if you're a home buyer or a young person looking to buy a home, you need a bit of a reset. We need to get back to a place where supplying demand are back together where inflation is down low. And mortgages, mortgage rates are low again. He needs a reset. It's possible. He said, we do are working a way that housing market settles in a new place and housing

availability and credit availability at appropriate levels. All right. So one of my favorite tools on Y charts, you can break down economic data by category. and one of them is housing, and they have all these different housing charts that you can look at. This one is very telling to me because it goes back to the 1960s. U.S. housing starts. This is basically how many new homes are started to be built in the U.S. And you can see every time there's a cycle, I think you call this a higher low, right?

Michael, if you're doing technical analysis on this. No, I think you're looking at lower highs. Sorry, lower highs, not higher low. You're right. Sorry. I'm not a technical analysis. An analyst. But so every time it seems like the peak is moving a little lower and lower.

think we probably just hit the peak of this cycle. You can see it already look at the drop down from the last month. It was down 14% month over month. I got to imagine we've hit the peak of the cycle with rates being so high and people backing off a little bit. I don't think that's a good thing. So yes, this may bring some price reductions and prices down, but I don't see how this helps the supply shortage of new homes. It's hard to see this turning around quickly where home builders are all of a sudden going to go back online and start building more houses, even if inflation comes down in short order. So I think we could be looking at this situation where The housing market from this is maybe better off in the short run in terms of housing prices

aren't just going to keep going parabolic, but way worse off in the long run because we're probably going to get fewer new houses being built because of this. You know, it's performing awfully, home builders. Are they? Yeah. Markets pretty bright green today, and home builders are up very little. Okay. Not great.

You want to check out the real estate data from our friends at YCharts, go to YCharts.com. Maybe they'll even send you a T-shirt like Michael has. Nope, that's only for podcasters. 40% off the highs, by the way. Wow. And you can get 20% off the highs if you sign up for Y charts using Animal Spirits as your reference. Tell them we sent you. That was very effective, Ben.

Kudos to you. I think on my feet. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holtz Wealth Management, All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment

decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Anmospheres with Michael and Ben. I just want to start up today, Michael, just we got a bunch of stats we're going to go through about how crazy things have been the last week. Can we just take a step back real quick and just talk about how crazy this like two and a half year run for the markets has been. I mean, we talk about this stuff every week, but just

thinking about what's been going on. I mean, you have companies that were down 40 or 50% in early 2020, and then they went up like five to six times. And now they're down 70 to 90% or something. It seems like week after week, there's something crazy going on in the markets. So I think it's worth just taking a step back and recognizing this is a very wild time in the markets. Can we talk about the Fed real quick? I think something that has gotten lost in all of the madness. And this is step back territory. Okay. We're zooming out. All of what we're experiencing right now is because of the coronavirus. Yes. If the coronavirus doesn't happen and we're on a different timeline, we have our sliding doors thing where that doesn't happen. It's hard to say,

would we have gone, I don't know, 50 or 60 years without seeing inflation this high? I mean, It is. Who the heck knows? But all of this that we saw with the meme stock mania and the growth stock craziness, now we were trending towards that. Not the memes, growth VC was trending hot. Crypto was trending hot, obviously. But the stimmies, the easy money put it way over the edge.

And now we're on the other side of this. And all because of the pandemic. And I was thinking about the weight of the world on Powell's shoulders. Now, we manage money for our clients and feel an. enormous amount of responsibility for their assets and making sure that we get them to their desired destination. That's what they entrust us to do. I can't imagine the immense amount of pressure that Jerome Powell feels. How does he turn it off? How does he go home and talk to his family as if I just can't imagine the pressure that he feels on a daily basis?

He can't trade stocks anymore because the Fed is not allowed to. I agree with you that the Fed is overreacting. Not that interest rate rises, increases aren't appropriate. Of course they are. But they under did it, and it seems to me now that they're overdoing and maybe help bent on putting the economy to a recession is not good. So what you said about Powell having all this pressure on him. So Larry Summer yesterday, there was a story in Bloomberg, and he said the U.S. jobless rate needs arrive above 5% per stained period in order of curb inflation. See, he said we need five years of unemployment above 5%. Where does that number come from? I don't know where he came up. Or we need two years of 7.5% or five years of 6% or one year of 10% unemployment. I don't know where he

gets these from. I'm doing the Gallifanacus thing. But the balancing out of this of a balancing act of millions and millions of people are mad about inflation. But then you talk about, well, hundreds of millions. Hundreds of millions. Sorry. But then you look at this in terms of human toll it takes from, you could hate inflation. But if you lost your job, you'd probably say, I would take inflation back in a heartbeat, as opposed to losing my job if I can't find another one. So doing that balancing act, which is their dual mandate, price stability and employment, trying to balance those two right now seems pretty tricky to be. Yeah, it's a job that I wouldn't want to have. I've been kind of critical of them lately, but I would not want to have to

decide what is right and what is wrong here and how to thread that needle. Jim Bianco was on the bankless podcast talking about all things macro. I highly recommend it. And talking about why sentiment is so far in the gutter. This is an interesting, obvious observation that I hadn't thought of. I hadn't framed it this way. Actually, yeah, last week we said that everybody is affected by inflation. 100% of adults in this country know that prices are rising. The reason why this is so much worse in terms of sentiment than a normal recession is because a normal recession, what do you see employment go up to? Six percent, eight percent, 10 percent, and really, really bad ones. So it affects one out of 15, one out of 20 people directly in terms of people that

are impacted by losing their job. 100 percent of the population is being affected now by prices rising. Which again is why it's tough. I guess the one thing I would say is they obviously have a very short leash. How much patience would have been involved to say let's just give this a couple more months to see? Maybe we reached that point already and it's past that in saying we don't want it to spiral out of control. Did they just capitulate? It's possible. You talk about capitulation. You did a piece, I guess, last week, 40% of stocks in the S&P are at a 52 week low. Your line was investors are panic selling, but it doesn't mean a bottom is imminent. Last week was pretty bad, wasn't it? Last two weeks. two weeks in the market. This Jason Gepford's stat just kind of blew an eye. More than 90% of

stocks. This was on June 16th. What was this Thursday? More than 90% of stocks in the S&P declined today. It's a fifth time in the past seven days. Since 1928, there have been exactly zero precedence. This is the most overwhelming display of selling in history. And I think this gets back to our point that we've talked about a lot about markets happening faster. It's almost like we know this is coming. And it's almost like, get it over with. And I feel like me too. It's almost like, if we're going to have a recession, let's just do it. Maybe that's just because I feel like we've been talking about it for months and months. It's like rip the bandit off and going.

I feel like that's what the market is doing, regardless of if we have a recession or not, the market is saying, we're going to price it in anyway. And we're going to make it happen really fast. And it seems, I don't know if it's the free flow of information or algorithms or whatever, but the market seems to just say, when we're going to go down, screw it. We're all going down together. And we don't even care anymore. That seems to be the market's way of doing things now.

The point that I was making last week about pessimism peaking before the market's bottom, a good example of that happening was November 2008. So you saw the percentage of stocks at a 52-week low peak in November 2008. Now, as you know, the market didn't bottom for another, I don't know, five months or something like that. The market bottomed in March, and it was 25% lower. So, it's obviously possible that last week was the capitulation law that people were looking for, but it's not guaranteed as the point that I was making.

The one thing I remember from that, too, I think it was either November or December of that year, 2008. Emerging markets bottomed in, like, December. They shot up and they came back down a little bit in March, but they never, like, they bottomed before the rest of the stock market was, and it's like the risky stuff, maybe bottoms first. But your point about pessimism, bottoming before the stock market does, it's also true that No, peaking, peaking, peaking, peaking. Yeah, peaking. The stock market is going to bottom way before the economy does. And I don't know when that happens, but that's going to be the thing that catches people off sides again. Well, the big question is, can the stock market bottom while the Fed is still tightening?

Here's my other thing. Do you think the stock market is going to be smart enough to sniff out inflation, the peak of inflation? Is the stock market going to rise before that happens? Is it going to come after a good print? Because it's been so long, you wonder if it's like, you know when you go out to play basketball and you haven't played it? in like months and months or years and years, and your jump shot just feels, isn't that the stock worker with inflation? It doesn't feel right until it gets some reps in. There are no reps for this. I wonder if the market is saying, you know what,

guilty until proven innocent, where normally the market is forward looking, but maybe it's going to be in a wait-and-see mode. I tend to think the market will sniff this out, but we'll say, to your point about a lot of stocks, obviously doing horribly, bespoke had this great stat.

54% of stocks in the S&P 500 are below their pretext. COVID highs. So that would be like beginning of 2020 end of 2019? February 2020, I think. Wow. The last two weeks, the S&P 500 was down 5%. Back to back down 5% weeks. That's happened one, two, three, four, five. That's happened seven times going back to post-World War II. It happened in 1974, 1987, 98, during L2CM, I guess. It happened in 2002 and then twice in 08 and in the pandemic crash. So again, those are back to back five percent weekly. declines. Now, but it's a little too gloomy here. Let's get glass half old, Ben. If you go out

performance one year later, it was only negative. The only time it was negative a year later was 97. Positive spin zone? Positive spin zone. One year later, it was positive. Every time I try to get positive, you tell me to back off. So I thought you were too soon. I think now, now we're seeing capitulation. I'm a value investor. I'm always early. Bill Gross had that great quote about every investor has a different like internal alarm clock. Some people panic early. Yes. He's been panic. I personally, you know, I always buy early, and I'm okay with that. I know I'm never going to hit the bottom, but I'm honestly buying early and buying at the bottom and buying after the bottom.

So, like, that's okay. I was early and wrong. Two weeks ago, I bought T-Ark, and now, now you're seeing the higher low that I was looking for, whether or not that, you know, we see file through it, we'll see. You're going to get back into it? Nah, fool me once. Okay. Did you see this Bank of America bull and bear indicator?

It's down to 0.0 from 0.2? 0.0. Can this go negative? Honestly, it makes sense given your talk about sentiment. It kind of does make sense. It makes total sense. This year is awful.

The economic data has yet to turn. Rates are spiking. Inflation is super off. Of course it makes sense. Another step in B spoke. So on a given year, I think, or over a long period of time, the market is up like 51% of all days. It's a slight, slightly positive.

Only 43% of days for the first half of the year have been positive. The only years lower than that, again, post-Wolder 2 were 02, 84. I don't remember 84 being a bad year. Oh, that's because I wasn't even born yet. I'm an 85 baby. 1982, 73 and 74,

1970, and 1962. This is a really, really bad year. By the way, as someone who does this kind of data on regular basis, I can really appreciate this chart. That's a great chart. Yeah, it's a great chart. I've looked at the long term. I've never seen it year over year.

Okay, so positive spin zone time. I looked at like how long it takes. You actually asked me to do this. You gave me some work. You said, Josh was asking, okay, we've seen peak to trough before and then break even from the bottom, which I've done in the past. I think the average peak to trough since World War II is like 12 months. You did this last week.

You said, how long does it take from a peak to a bottom? Yeah. Peak to bottom is 12 months on average. What we said was, no, no, no. How long do stocks stay in a bare market? So once you've breached the 20% level, then how long do they stay in a bare market for? You had some great data here. Yeah, I looked at like the average number of days to go down 20% from the peak is like 236.

So whatever, eight months call it. Days from down 20% to the bottom is an average of 131 days. This is since World War II. And it's kind of funny. There was two of them in 1948, nine, and then 1957. It literally hit down 20%. Then that was the bottom. Let's clarify.

So we had conflicting data and I was saying, what's going on here? You are a calendar person. You gave me work to do us. You know, the worst thing is as a blogger who does this kind of data is you get someone who comes to you and says, actually. Something's wrong. And you go, oh, crap, what did I do? And you gave me work on a Sunday night.

I was getting ready to sit on and watch some TV. And you said, Ben, your data's wrong. And I looked it up and I... You don't work on Sunday nights? No, because I was doing something similar, but I am a trading session counter. Yeah, you use trading days and I use calendar days because you're actually living the calendar days. Anyway, I said, here's the other stat, though. So there's been 12 bear markets not counting the current one since World War II.

Seven out of the 12 have bottomed in 46 days or less once that 20% level was breached. That's very encouraging. That's encouraging. Obviously, the downside would be 1973, 74, 2000 to 2002, and then 2007 to 2009. Those ones were much longer. And someone were probably to be in saying, that's fine, but this is a combination of the 1970s in the dot-com bubble, so we're screwed. Could be.

by the way, more positive spin, 46 days, 46 calendar days, that's only like, what is that, 35 trading days? Probably less. But he's the other one, five out of the 12 or over in a month. I think that's the thing is you either you get into 20% and you get a whoosh down or you get one of the extended ones that just chops you up and kills you. But I do think your thing about V-shaped recoveries being over that still makes sense to me. It's still a non-zero chance, though, that if war is over, inflicts, you know, that if war is over,

Gets better that you see a swell of like short covering, buying. I think we're past the V. I think it's over. Okay, so more like this is a U. Even if we go to new highs in the next 100 days, I don't think that's a V. V is straight down, straight up. All right. I want to put a positive spin on 60-40 stuff.

Vanguard sent me this. They look at stock bond diversification. That was a bit of a name drop. I mean Vanguard sent you this. Every once in a while, someone from Vanguard, big listeners to the show, people in Vanguard, will send me some of their research and say, hey, I thought you might find this interesting. Sorry. Remember on a recent Twitter space is when Tom Leiden sent him a modern-day Jack Bogle? I took umbrage with that. You almost choke on your own spit. Okay, here's a good step.

During the previous three years, 2019 to 2021, a 60-40 portfolio delivered 14.3% annualized return. So even if we had a 12% loss in 2022, the four-year return would be like an annualized 7%, which is historically accurate. That's good. It's not bad. That's not bad. Come on people. Okay. Since 1976, investors have never encountered a three-year span of losses in both stocks and bonds. That's encouraging. Now, the counterpoint would be that since 1976, and rates went up really quick and then came down ever since then. We're in a new regime. But I think the whole thing of bonds and stocks being down the same year is scary. Bonds and stocks being down over a three, five-year period seems way more unlikely to me, both of them. I don't want to minimize anybody's

pain because another, thank you, Beastbook, by the way. We're like stealing all their work here, but they were great this week. They showed the six-month rolling return for a 60-40 portfolio, and this is about as bad as it's been ever. The only worst periods was 2008. This is absolutely brutal. It really is. Why did the aggregate bond index have to start in 1976? Why didn't it start in 1920? Come on, back that stuff up. Just fill it in with made-up data. That's how they do all of them. Great shot from Ramp Capital. He showed the Fed funds rate versus inflation. And needless to say, it's never looked like this. That's the thing. So this is the alligator teeth chart. The crazy thing is it feels like rates have

come up considerably. And yet, they're still way, way, way below inflation and not even close yet. I guess mortgage is the closest ones. But most government bond yields are still way below inflation. This is why right now is a difficult period, as are all periods, but especially now, because you could easily make the case to me that investors are too bearish that we already had a major washout, that 30 plus percent of the NASDAQ, 22, 3 percent of the S&P, and down 80 percent through all these names, we already got rid of the excess. You could make that case. You could also make the case that look how early we are in the tightening cycle. How could you possibly be bullish now? I think both of those things can be true. I think because people keep

waiting for the market to look past it, it's like, okay, we already know, again, getting like, let's go. I think that's what the market wants to do. Like, if we're going to do it, that's why, why doesn't the Fed just hike to 300 basis points now? Why wait? Let's just do it. No, no, no. You don't really mean that. I know. But I think because I don't think they want to get so high. I think they want to say they want to get that high, but they want to see the data come in so they never have to get to those lows. I honestly think that's what they want. Do we see a rate cut in 2023? Can we make a bet on Calchre? I would bet that we see a rate cut in 20203, depending on what the odds are. I would be more inclined to bet on 2024.

2024? I'd say first rate cut up 2024, not 2023. I don't know. Don't you think in that case, if the Fed hikes, hikes, hikes, and then immediately lowers rates again, don't look like clowns in that instance?

Maybe that's what they want to do. Well, they did that in 2018, no. They started raising rates and they started cutting them again. It's true. It would be crazy if the Fed is doing 75 basis point hikes and inflation has already peaked and it's behind us. Wouldn't that be just perfect?

Well, talk about clowns show. What if that's the case? If inflation peaked and now the economy is already slowing and they just jam our head into the toilet of a recession. Yeah, well, then we get recession and lower rates again and zero percentage tries forever again.

Back to normal. All right. So last week, we were driving up north, going up for a wedding. My wife asked me, I don't know how it came up. She was worried about rates rising and all this stuff

and seeing it on the news. She said, what is a recession? What actually is, like, the definition of a recession? And to talk to a civilian about that, it's not an easy thing to define. You know, like it's, well, it's two,

quarterly GDP prints that are negative. Isn't that an easy thing to define? Really? I think it kind of is. Okay, your wife asks you, what's your answer? I said it's GDP contracting for two quarters, but it's like, okay, what does that mean? Well, no, I just think it's a general services produced by the... I think you're overcomplicating.

I think it's just a general slowdown in business activity. So you get unemployment picks up, GDP comes down. Okay, I'm just saying there's not an easy elevator answer for this. I disagree. I just gave you one. It's a general slowdown in business activity. That's a pretty squishy answer. What, your wife was looking for metrics?

I don't know. I should have pulled out some charts from white charts, I guess. I don't know. So Steve Matthews tweeted last week, PSA, we are not in a recession, not close to one. An average of 488,000 jobs, an extremely high number, has been added each month this year. Jobs contracted in a recession. We are still in a boom. In the 2020 recession, 22 million jobs were lost.

I feel like that's just a pretty simple answer to what's a recession. It's when people lose their jobs. That's it. Is that not it? Yeah. Unemployment is at 3.6% right now. What's the floor that it could go to, or the ceiling, I guess? We have a recession, but unemployment barely budges.

It goes to like four and a half or five. What's the lowest unemployment? I don't know. Things are weird. Why not? What's the lowest unemployment? Pull up Y charts. What's the lowest unemployment has ever been during a recession?

I got this. I'm going to guess like six or seven. And like the 1990 recession. What was that? In the aftermath. Okay, hang on. I got it. See, the great thing about white charts here is...

They pull up those gray charts for you, no? Yeah. I used to have to create these gray bars myself. Same. All right. So the early 1950s was the lowest that unemployment has ever been. It was like 2.5%. In a recession?

No, you mean generally. Generally. And that went up to 5.7 at the height. That's the ideal. That's what we're comparing ourselves against. 2.3 to 5.7. So 5.7. percent unemployment is the lowest we've ever gone to after a recession. So could we beat that

this time and go below 5.7? I think that would be interesting. I think so. That'd be interesting if that happened. Maybe that's why Larry Summer says it'd have to be above 5% because it's never not gone above 5 and then seen inflation fall. Okay, we were speaking of interest rates a minute ago. You produced this U.S. yield curve and it was today versus one year ago. And honestly, some of these lower rates. So this is the one month, three month, all the way out to the 30-year U.S. Treasury. Like the two years? Oh, my God. So it went from 0.16% to 3.4% in a year. Just a huge move. If you're a bond person and you don't say this is the belly of the curve, you're not doing your job. You wait your whole life to talk about the belly of the curve moving like this,

right? It even looks like a belly. You can't not say it. Belly of the curve. It's moved substantially. yet the 30 year, 20 year, they're up, but not nearly as much. Speaking of belly, I feel like I'm getting weight and I'm not happy about it. You still seeing the trainer? Yeah, so now I'm like overdoing. I'm like, oh, well, I'm working out twice a week. I'm lifting weight twice a week now. I can eat whatever I want.

Maybe I told this. I caught myself in a mirror. I didn't like what I saw. So it's almost time for me to reengage with this whole 30, which I'm not excited about. I was an awesome this weekend. You need to lower your own interest rates. Big time. The belly of my curve is not looking good.

We went to Lamberts. We've been there a few times. Oh, yeah, yeah. with the boar ribs. The barbecue place, yeah. And I had this casso with burnt ends. Oof, that sounds awesome. It was ridiculous.

So I feel like I went out with the bang. It's way, way harder to eat good in the summer. I mean, you could say well over the holidays, maybe, but I think in the summer you're, especially going out in about more often. Who am I kidding? I have dinner plans on Thursday. Anyway, so this is the quickest tournament

I've ever done in my life. We had a 7.30 flight on Saturday morning and a 7.30 flight on Sunday morning, because we had a wedding Saturday night and I had to be home for Father's Day. Here's what I did in Austin. I scootered. It was so much fun.

So we did that when we were there a couple years ago. I love scooting around there. So I don't know what's going on with flights, but they said at least 14,000 domestic flights were canceled or delayed this holiday weekend. I think it's a combination of there was like some weather, inclement weather. There was staff shortages.

I don't know if it's flight or workers or whatever. When we flew a couple weeks going to, we went to Florida, we got to the gate, and they said, sorry, there's no gate agents here to open the door for us. There's no one here to receive us. We had to wait for like 30 minutes until someone came, and I think it was staffing shortages again. Being stuck in an airport is incredibly frustrating and stressful. Yeah, that's no fun. Listen, I don't want to read your tweets about it, but I get it. It's very stressful. That's fair. There were some NFT people in my flight on the way back. What do you mean, NFT people? It's NFT week in New York City. Okay. So I saw some

gear. I mean, they're wearing their own merch, the NFT merch? Yep. They're still doing NFT week, even given the circumstances. Some NFTs are actually holding in there. Now, the denominator is down 70%. Right. But anyway, so inflation is a global thing, as we know. Look at this chart about German producer prices. Up 33% you over here. Okay. What's the story here? I mean, I guess it's just they're way more dependent on energy. I think it's an energy story. I think that this is the only thing that investors care about right now. And I think that bad economic news will be cheered by investors because it will be a sign that we're one step closer to the Fed bringing down inflation. Disagree or agree? Yeah. And the economy slows, demand for energy, potentially slows,

maybe that holds down the price of oil and natural gas and these things. I agree. I think that if we get some bad numbers, the market will cheer. By the way, people did not like my geopolitical analysis last week, or at least a handful of people didn't, saying that we should go try to stop Russia from killing innocent people in Ukraine. Sorry, people don't like that. But let's say the war comes to an end. What part do they not like? Do they not like you being a hawk? You were advocating for war. I think that was the problem. People said I was advocating for war. I'm sorry, I'm just throwing it out there that like maybe putting an end of the war would be good because we stop the killing of innocent people and maybe it slows inflation down. But let's just say the war,

for whatever reason, does come to an end. How much of a relief rally is there in the market? that point. Good question. How much of that is priced into this everything? Like, does oil drop 20% overnight? Or does that not work that way? Yeah, feasible. Did you see what happened to energy stocks? I didn't even realize how quickly they went into a bare market. Did you see that? Very quick, which I guess I don't understand. Is that pricing things in? Why did that happen? I honestly don't know. Okay. Profit taking? That seems to be the question of the last three years, though, is, well, wait, this doesn't make any sense. Why did that happen? But stuff just happens. We keep talking about when are we going to see the data turn? When are we going to see unemployment take

up? What are we going to see consumer changing their habits? By the way, gas is below $5 a gallon nationally. Okay. That's a good thing. Can hang our hat on that? Sure, $4.99 probably. I paid $4.99 today. It's a psychological round number. I guess. From Delta 1. Kroger said that the typical basket size continues to decline and customers are aggressively swapping to store brands. What do you mean the basket size declines? Like the amount of people checking out, stuff is going down? The number of things that they were buying, I suppose. The other day in CVS, maybe a month or two ago, what did I buy?

I bought the store brand CVS. Maybe it was NyQuil? Or DayQuil, I can't remember. I looked at the, is it VIX? I looked at the brand name. I looked at the CVS store brand. I read the ingredients and CVS is getting smart. I think it's set on the package, like same exact thing, same exact ingredients.

So I did this, I did this, held them together. Exact same thing and 60% of the price. While we do not go with the name brand, the store brand. I always do. Exactly. You're a value shopper. Yes. All right.

This is from Bloomberg. Credit card rates are just ridiculous. So they talked about the headline from this Bloomberg article is credit card rates at 20%, mortgage is near 6%. The Fed's hikes are already having an impact. Look at how quickly credit card rates jumped up. I'm sorry, but you can see. What the hell?

What the absolute hell? By the way, this is a weird chart. Where are the months? Where are the years? It starts in 2000 and they don't have any other years on it for some reason. But you can see. As rates were falling this entire time, credit card rates were rising. And then they kind of stalled out.

And then they all of a sudden, just from this thing, went from 16 to over 20. I'm sorry, but this is bullshit. This is the banks just taking advantage because interest rates are up a little bit. And this is when, potentially, in a recession, you start to see people less and less able to pay their bills on time. This is the absolute definition of horseshit what's going on right now with credit card rates. I mean, the bank, they raise credit card rates 5%, and then they raise your savings. account 10 basis points. It's like they don't even care anymore. Like they're not even trying with the optics of showing that like we're trying. They're not doing anything. Not even trying.

What is our Marcus account now? It's a buck and a quarter maybe. Is it over 100 basis points yet? Yeah. No, it's not. It's 85 basis points still. Really? Are you kidding me? What's the Fed? 85? They have not, man. And they're saying that's four times the national average. Yeah, get lost. Get lost. This is the survey of the week. How much money do you believe your absolutely ideal life? This is a research report i'm not looking at the data i want to guess okay the answer question how much money what how much money do you need to lead your absolutely ideal life we're talking about income or net worth net worth a million 10 million bucks shut up and americans say they need 100 million we i don't know who they asked here there's a joke when asked what their ideal lottery prize would be a lottery prize

okay come on okay you know what my idea a lot of reprise is a billion dollars why would you go less I missed the lottery thing. But people also said 100 billion. The majority of people in U.S. had 100 million or more to live an ideal life. Maybe it's just because of the way they answered this, but it was just funny that the U.S. was by far, I need way more money for this. Of course. We're consumers. Spenders. All right. Speaking of spending, this was interesting. So I think you could bucket our audience into different groups by YouTube audience skews younger, podcast audience skews Gen X, and then blog audience has a lot more retirees that read. I get Once a month, someone asking me, how can I print your blog out so I can read it on paper?

Those are boomers, right? I'm not judging. I'm just saying. But someone said last week, I would love for you guys talk more about, like, what to do in retirement. You know, we had that podcast about the 4% rule a couple months ago with Wade Fow. And that was actually people who seemed like that. It was pretty popular. This show is spending in retirement by households who have $1 to $3 million in investable assets.

They're fully retired. How much they spend by age bracket? So it's 60 to 64, 65 to 69, and then up. Nice. I know you're going to do it. And you can see when you're 60, it starts out high, and it's like $100,000 a year. So that's, I don't know, if we're talking about a $2 million portfolio, it's like 5%. But it goes down every five years until it bottoms in 80 to 84.

You're spending like $25,000 less per year. And then it increases a little bit at the end because you're probably paying more in medical costs. I don't think people think like this. I think people think in a linear straight line or that I'm going to spend. more and it's going to go up by 3% a year, and it's going to slowly ramp up. I don't think people realize that your spending your retirement goes down over time, probably because you can't enjoy it as much when you're 85 as you can into your 60. You can't travel as much when you're that age. Anyway, interesting data. All right, quit talk housing stuff. Sure. Here's what I think the Fed needs to do.

So Jerome Powell said we need to reset. What if they said, we know 6% mortgage rates suck. We realize that. But once inflation is tamed, we can lower them again. I think if they just said that? I think people would feel better about this. I did the thing where you look at the monthly payment at 3%, which was the beginning of the year. It's not that long ago. Less than six months ago was 3% mortgage. Now last week we saw someone said 6.3. I looked at the difference going from a $300,000 house to $700,000 house. And it's like $500 more a month to $1,200 more a month. It's a pretty big interest increase. Mike Simonson says, even with that, the median price of a single family home in the U.S. last week was up to $454,000. He said he's kind of surprised that it's still moving

up, even though, like, in Bidding Wars haven't totally gone away, 22.7% of new listings went into contract immediately last week. So there's still some of that stuff going on. Maybe it's just a little residual. I wonder if those are cash offers. That's my point is, don't you think this just makes housing inequality even worse, where it's either rich people or people who are house rich are the only ones who can buy it now for a while? Because if you're house rich, yes, it would stink to trade up from your 3% mortgage, but you've got so much equity built into your house that you can say, eh, well, I'm going to be selling my other one for so much more than I paid for it anyway. Maybe I can hold my nose and buy, and then I'll refinance in three years or something.

But all these other first time people who aren't rich are shit a lock. That's why I think the Fed, I don't know. So this is from the Wall Street Journal. At low interest rates, people could afford the mortgage payment, but not necessarily the down payment. Now they can't afford either. Yes, exactly. This is the worst of both worlds, unfortunately. Now, you can say, well, it's going to stop prices going up, and it probably will, and it probably should, but... Oh, definitely will. Prices aren't going to drop enough to make it equal to what they were at 3%, which I guess you can say that was just an abnormal situation, whatever, but it is what it is. Okay, total U.S. home equity increased almost 20% in the first quarter to 27.8 trillion, a record high.

The amount of tapable equity increased by $1.2 trillion to more than $11 trillion, and that is, tapable means you have more than 20% in your home and you can take out because you can't go above that 20% loan to value ratio or whatever. close to 75% of it belongs to borrowers with mortgage rates below 4%. Wow. I mean, is that money just trapped forever or not? Because you're not going to see any more cash out refinances. Nope. I mean, is an adjustable rate helock a thing where you can take out an arm on a helock

where it's low for five years and then resets or something? Is that a thing? I don't think that's a thing. Could it become a thing? Because that money is just going to be sitting there. What is it going to do? People are going to want to use that for something. I guess maybe they plug their nose and they do it.

it, but I certainly don't feel sorry. Well, you can still take out of heat lock. It's not like 6% is like 14%. True. Yeah. You still do it. I guess you're right. It's harder.

And again, I don't feel bad for homeowners because they've done extremely well and they have a huge cushion in their houses already. So I found the worst chart of the week. We're pivoted to crypto now. Somebody tweeted, Bitcoin owners, everything you are feeling right now. Dot, dot, dot, dot is in here. And it's a chart. I can't really see.

This goes back to like $2,000. 11 when nobody owned Bitcoin or very few people or whatever this goes back to. And it's a logarithmic chart. And it basically makes the drop look like nothing. And FYI, it's not nothing. Is it 70% in Bitcoin? I know it was over 70 in ETH. I think it's 70 in Bitcoin too. At least 60. This chart is deplorable. Another crypto thing that I absolutely hate is people who show crypto returns from 2008 because it went from literally zero dollars or whatever it started out in showing how it's 326,000 percent. I'm sorry.

A lot of mental gymnastics going on. I don't know. By the way, how are we still not figure out who Satoshi is? Where are all my reporters? How has no one figured this out yet? No one's let it slip once? Over like a cocktail by a fire late night somehow? Like, I was there with Satoshi on week one.

No one? Yeah, it's like the skulls. You ever see that movie? Yeah. It's like a secret society. Decent 90s movie. For some reason. Paul Walker.

My wife loves that movie and it was on in the hotel room this weekend. It's why I mentioned it. I'm like, haven't you seen this movie like a million times? It's very, very 90s. Paul Walker, the dude from Dawson's Creek. Joshua Jackson. Yeah. All right, so there was some news over the weekend about BlockFi's balance sheet and what's

going on there and wasn't looking so hot. And this morning, we found out that FTX, what exactly happened? They extended them a $250 million cash injection. I don't know exactly what that means. Revolving credit facility, meaning you have access to that capital to tap it when you need it. So does this mean this is not an equity position, right? They're being paid like a bank to lend them money? As far as I'm concerned, a credit facility would be borrowing money. I'm guessing at a pretty high rate, I would imagine. So people were saying that FTX bailed out BlockFi

and somebody made a good count of points, like, wait a minute, this is not a bailout, a bailout, and I guess maybe this semantics here, a bailout is usually from the government. This is more like a Warren Buffett kind of. So Sam Bankman-Fried, he said BlockFi is financially strong. All operations are normal, as they always have been, and all assets are safe. I don't know. How is FTX, I asked you this morning, how are they the only ones who are willing and able to pounce right now? Were they smarter on the way up than everyone else?

I think my answer is they're not dealing with the lending like BlockFi, and they didn't expand their operations like Coinbase. FTC is an exchange custodian. and we were talking about this last week we got the compounded funds with Eric Jackson. I think they have 50 engineers or 50 employees. I can't remember what the exact number is. But Coinbase, as we've been talking about, they had 3,500 people.

So FTX, I don't know if they're making more money per trade or whatever, they were so much leaner than their competitors. I think this is a big deal because if BlockFi, and we've obviously had Zach on a bunch to talk about BlockFi. If BlockFi went down, that would be pretty scary, I think, for crypto in general. If any decentralized platforms, yeah. Unlike Celsius, which was offering, like 18% interest. BlockFi wasn't doing that. BlockFi was at, what was BlockFi out with Bitcoin?

Was it 7 or 8% something like that? So if they weren't able to sustain themselves, that would have been alarming. By the way, I become more and more impressed with Sam Bankman-Fried, just how he runs things. And I think it's because he comes to it from a more Wall Street background and he doesn't come from a psycho-crypto background. He doesn't talk like a true believer. He talks about it from the position of someone who's hedging and using financial markets. And I think that's probably why they've been so successful, but how do they not just own all of crypto after all this? I used this analogy before. It's Forrest Gump with the shrimp boat, and he comes back and all the other boats are wrecked from the hurricane, and he just cleans up. Doesn't that seem like what's

happening? Yeah, this seems like a big deal, the fact that they're stepping in and maybe stabilizing the market, obviously the story's being still written. We'll see what happens. He's the Warren Buffet of crypto. If you're looking for like signs of a potential headline indicator bottom, take this with a giant grain of salt, pro shares rolled out. The first, U.S. listed short Bitcoin futures ETF this week. This is ridiculous that this exists and there's still not a spot Bitcoin yet, ETF. It boggles the mind. I don't understand it. But you're right. If you're a headline person, this screams, the bottom is near. If you're an anecdote person like that.

Oh, one more thing I want to mention. The science of hitting has this great chart and great data I subscribe to that. Looking at the share of U.S. time spent streaming. And what are we looking at here were about 30%, which does that seem high or low to you? I feel like this is like the inevitable when ETFs crossover actively managed mutual funds. I feel like this is heading that direction. I think linear TV, is that what they call it? It's probably still more entrenched. It's going to take a while. I think there's still a lot of boomers who are not on board with the streaming. Like for my parents and my wife's parents, we have to twist their arm to watch something on streaming or we have to like enter in our password on their TV.

so they will watch it. I think that generation still kind of resists a lot of the streaming stuff. So it looks like pretty much everything is either going up or holding steady. Disney is actually down a little bit. We've been talking about the disappointment with Disney. Not great.

Not great. They went way too hard on the Star Wars stuff. You know what I watched this weekend? Speaking of streaming? I'm optimistic, cautiously optimistic about the show. They released two episodes of The Old Man. It's Jeff Bridges and John Lithgow.

Someone emailed us this week to our annual spirits and said, great show. Worth watching? Yeah. What's it on Hulu slash FX? So this Hulu slash FX does that be that it's on FX? It means it's on FX, then you can watch it on Hulu. But here's the thing. The crazy thing to be about streaming now, 20 years ago, Jeff Bridges does a show on network TV, and there's stories all over the place. Now it happens, and no one even mentions it. No one cares.

Well, it's just crazy how many movie stars have jumped over into streaming, and now it's just normal, where it is in the past. Yeah, yeah. A movie star slumming it on TV was. frowned upon. Well, TV stars was a thing where they couldn't cross over onto the big screen. Yeah, Clooney was like one of the first big ones. Okay, let's do a quick question from a listener. We haven't done in a while. Wife and I, Max, on our 401K and kids 529s with a four-month emergency fund.

We also have automated trades twice a month into our three-fund lazy portfolio in our brokerage account. But we've got a chunk of cash when we're waiting to invest when the market hits a bottom. At what point do you get back into this market and where do you put your money? Sorry, I tuned out. We got someone trying to buy. Bottom fish with some cast. They're already maxing everything out. The reprimanization thing is you put a little bit in once a week for the next six to eight weeks, 12 weeks, whatever it is. And you don't think about it. And you don't try to hit the bottom. There's no difference between catching a bottom or missing it by 10 or 15 percent over the long term. There's no difference. Now, psychologically, in the short term, I understand it matters. It can affect you tremendously. But it's not going to affect your life. So do what you got to do, but just get the money in there. All right. What's the most rewatchable movie for you of all time? I think I have my answer after. this weekend. I may have mentioned this before what I'm going to mention again. The most rewatchable

movie of all time is a ridiculous question. Sorry, I didn't give you a lot of time. Think about it. You go first. What's yours? The first half of Goodfellas. Dumb and Dumber was on Netflix. I watched it. I watched it. I haven't seen that movie in forever. Me neither. And honestly, it holds up so well. I think it's got to be the funniest movie of all time. I think it's most rewatchable. It had me thinking because, I mean, I still remembered all the quotes. I think movie Quotes, especially to young men in the 90s and early 2000s, were the memes of now. You look back and you go, God, we used to fully communicate just using movie quotes from comedies, and it sounds so dumb, but those were memes before memes existed. Somebody this weekend said to me where the beer

flows like wine, and I said, and the beautiful woman flocked like the side of Capistrata. Right? That's a dumb and dumber quote. Yeah, I just can't believe how well it holds up, but you did that, quoting stuff. Anyway, I put this in here. So the original memes. The quote memes. So Wayne's World, Dumb and Dumber, Zoolander, Ancerman, and Super Band. And of course, there's a million others. But you're 100% right.

So the most rewatched movies of all time, that's an interesting one. Shawshank is up there. Shawshank. The first half of Goodfellis is very rewatchable. There's a lot of movies that like that where it's the first half. The first half of Boogie Nights, second half is not good at all. Yeah, second half, tough to watch. So you know how I feel about watching movies on airplanes.

Absolutely one of my favorite activities. Why? zero distractions. So on the way down there, I watched a movie that was definitely would not pound the table on this. You ever hear of a movie

called The Last Night in Soho? Sounds familiar. It was actually pretty good. It's like a psychological thriller. And those movies are always very difficult to end. It's like the zebra in the front and the mule in the back.

Oh, it's with the same lead from Queen's Gambit. Yeah, yeah. Okay. Not worth it though? I love psychological. No, no, I thought it was pretty good. I thought it was pretty good.

It got an airplane premium. Got you. I think that's all I watched them. And on the way home, I watched, oh, I saw Don't Breathe in the theaters. Do you know that movie? They tried to break into a house. The homeowner is a blind Navy SEAL, and it's like a horror thriller movie.

Sounds like it's right up your alley. I'm not kidding. It was actually a very good movie for what it was. Okay. For what it was, it was very good. So Don't Breathe, too. I was out on that. Like, I knew it came out in the theaters.

I liked the first, but I had no interest to see in the second one. I watched a second one on the airplane I loved it I absolutely loved it as I got up and I went to the bathroom I thought to myself hey wait a minute

have I ever seen a movie in an airplane that I didn't like you know what I mean like am I being objective with myself because I just I love watching movies on airplanes and I think that might be true but then I came back to my seat

and I put on a movie the card counter with Oscar Isaacs or Isaacs whatever I heard it got bad reviews hated it Okay. And so that invalidated my whole theory about me liking every single movie.

So the reason why I didn't like that movie was I didn't like the tone of it. It just didn't do it for me. It was off. Okay. I didn't hate it. It just, it wasn't my cup of tea that said that. By the way, I have to ask, because I went to a wedding this weekend, too. I feel like you either love weddings or you hate them.

There's no in between. What are you? Are you a love or a hater of weddings? It's interesting you say that because I actually am pretty much in the middle. You are in the middle. Okay. If I had to choose, I would say I hate him. I figured you'd be a hater.

I love going to weddings. because it's an open bar, people are dressed up, everyone's in a good mood. It's just, I think it's hard to not have fun at a wedding. You should see me in the wedding. If you know at least a handful of people. I'm not in a great mood. Actually, that's a good point.

Because the wedding that I was at this week and I knew nobody. That hurts. But I didn't hate it. No, no, of course. I'm only teasing. All right, I want to end with this. If you are a financial advisor

and you happen to be listening to the show right now, the Animal Spirits Podcast, Ridholt's wealth management is always hiring financial advisors. We're always looking for great advisors. So if you are not thrilled with your current home, that to be clear, we're not hiring new advisors right now. We just did a few of those. But if you are an experienced advisor and you want a new home for your clients, hit us up at info at ridholtswelf.com. And boy, are we growing.

I went down to Chicago last week to visit with our operations team. It's huge. Seven times as big as when I joined, ish. We had our last firm-wide off-site in Austin, Texas. 20, what was that, 2018? 19, I think, wasn't it? I can't remember. Anyway, I'm told that there was more people at the operations off-site

than all of the entire off-site three years ago. Exponential growth and people. It's true. It's fun to see. We brought in a number of people from Animal Spirits that are listeners of the show. That's true. That's true. It's kind of fun.

Hit us up, Animal Spiritspot at g-gmail.com. Leave us a review. always asked on a podcast. We haven't asked it a while. Sure. That's got to help. Do you think it actually helps? It probably doesn't help, does it? No, it's got to help, no? Do it anyway. No, it helps because then you get recommended and the flywheel. Are we still saying flywheel in 2022? Are we still using that term? I think flywheel's dead. Sorry. Got chopped off. All right, thanks for listening. We'll see you next time. Thank you.