Animal Spirits Podcast - Powell Wants You to Lose Your Job (EP.276)

Episode Date: September 28, 2022

On today's show we discuss is the Fed making a huge mistake, why it's so difficult to predict the economy, why it's so easy to be bearish right now, breaking the housing market, why we've turned on Jerome Powell, the bullish case for a 60/40 portfolio 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, a few weeks ago, we discussed some conflicting stats. Either we had to have a recession to bring inflation down or the stock market had retraced more than 50% of its gains and that's never happened before where it's gone back to a new low. So it's kind of like something has to give here. Well, something did give very quickly because the stock market just turned right around and now as of the close on Monday was down 23.8%. And I got the drawdown chart on white charts here.

I like how you can draw the minimum level. You can do the lows and the highs and the average. So I put the low in here. 23.8% is the new current largest drawdown in this bear market cycle. It took out the June lows just by a smidge. And we're there. It happened very quickly. Thoughts.

I agree with everything you said. Well, I didn't really say anything spectacular. I just gave us the data. I agree with the data. It speaks for itself. I mean, yeah, come on. Same my thoughts for the show. We'll have some thoughts on this show.

Anyway, if you want to try to do another drawdown chart like us on Y charts, go to Y charts, tell them Animal Spirits sent you, and that could be 20% off that initial subscription when you sign up. 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 Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritthold's wealth management. This podcast is for

informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael, Jerome Powell wants you to... Wait, what? We got a timestamp this. I feel like we don't do a good job time stamping the shows because people don't know when we record. So it is Tuesday, 1148 Eastern Time. The market opened up higher this morning and we're now at the lows of the day. Okay, pursued. Thanks for that piece of news there. You're welcome. 24 hours stale by the time this goes out. All right. Jerome Powell wants people to lose their jobs. This is from his quotes last week when he talked, you know, we're never

going to say that there are too many people working, but the real point is inflation and you can, whatever the rest he said, but he's basically saying, we're not saying we want you to lose your job, but we're not not saying it. And then someone asked, well, Hong isn't going to take for this pain. He said how long it really depends for how long it takes wages and more than that. Prices for inflation to come down. He's still putting his foot on the brakes or the gas pedal, one of the other. Depends which way you're looking here. Here's my problem.

Hang on. Hang on. Hang on. No, it doesn't. He's putting his front of the brakes. Yeah, the brakes, right. So here's my problem with the way that Powell and the Fed are acting right now. People have called me a Fed apologist in the past. The last few months I've been dissenting. At this point, I think the Fed is nuts. So gas prices are down. Commodity prices are down.

stocks are crashing, bonds are crashing. Housing market is broken. We're going to get into that later. Mortgage rates have more than doubled. Do you think maybe we pause for a minute and just see what happens here instead of just breaking the economy's neck? It's like you're standing on the top of a cliff and you see these stairs over here and you go, we could take the stairs to the bottom. I might take a while, but we'll do it. Instead, the Fed is just pushing you off of a cliff for the EU's economy and saying, sorry, we're not going to wait. We don't want to wait for you to take those stairs. We're going to push you off. I mean, the fact that they're just, they want people to lose their jobs and wages to go down just seems insane to me. It's like they don't even want to see what a soft landing

looks like. I think from their point of view, I don't think Jerome Powell would ever say this out loud, but he's a human being, just like the two of us. And it appears that he's overcorrecting for the mistake that he made, assume that inflation was transitory, which we made that mistake as well, but guess what? We're not running the central bank. So there was not. Here's a thing. Like, we're covering from what? What? Who? I was trying. Can I finish my my point? Okay. Can I finish? Can I? Yes. Or that one, Dana Carvey did a Ross Perrault back in the day? Yeah. Might have it before your time. No, no, no. I do remember Danny Carvey very well. Okay. So overcorrecting. Overcorrecting for a past mistake is number one. Number two,

I think that they are talking deadly serious about the fact that they want to bring inflation down. I don't know at all costs, but at least at most costs. And they are willing to trade broken markets, pain in the economy for bringing down inflation. I think that they think that that is the worst of two evils. At least that's how they're talking. That's how they're talking. It is. But I think there's a difference between recovering from a bare market and stocks or bonds.

That to me, that's fine. Those things will recover eventually. But the fact that they want millions of people to potentially lose their job just seems insane. Well, that's what a recession is. They're trying to destroy demands. So that's what they're doing. Listen, a recession, that's a natural part of our system. But I don't know why you wouldn't want to remove one of those.

could help it. Like, I don't know why you do that. Look at the wage growth numbers. What they're saying is that we can't bring down inflation without destroying demand. It's very simple. It's the people on the lowest end of the wage scale are making the most money now, or they're seeing the biggest increase in wages. I don't see why that happens for 18 months and you decide we have to just get rid of it. So here's Colin Roche. He's been writing really good on this lately. On the one hand, I understand that they want to be certain this is in the 1970s. On the other hand, I don't think this is very similar to 70s and that they're now creating a lot more downside economic risk than they think. That's what I think, too. Mortgage rates are at 7%. Listen, again, financial markets

have already crashed. Why not just say, we've already done a lot? We've probably had the biggest increase in interest rates from the Fed cycle in the quickest amount of time ever. Why don't we just pause? Because here's the thing. They have this dual mandate of price stability and employment. So after 2020 and 2021, they said employment is the only thing we're focusing on. Now they say inflation is the only thing we're focusing on. Maybe just be a little more balanced is my problem with what the Fed is doing instead of just going from one extreme to the other and making things just like the cycles are just it's just like water sloshing around in a bathtub in both directions yeah so i don't disagree with anything that you're saying i think this was the week that everyone agreed that whoa what are you

doing and we'll get to that in a second but if i'm just putting my j pal hat on which has much more hair than i do i would say that he's thinking i can't say that ben because if i say that the market will scream and all the work that we're trying to do will be undone in 30 days or less. Because the last time I spoke even relatively easy, and that wasn't even easy, the market totally misinterpreted me. And I think that a part of him probably would like to do that. I think what he's afraid of is backing off. And then all of the hard work that they've done gets unwound. Do you think that might be what he's thinking? Because I agree with you. What are they doing? But I think that's what he's thinking. So you see this chart from Kathy Jones from Charles Schwab about

the change in fed fund rates per cycle, don't you think that them doing this and being so tough instead of like having a little humility, they're going to have to cut rates in like six to 12 months. I think that's a non-zero chance right now. Look at the next chart. So that's a phenomenal chart. We're looking at the pace of rate hikes. So BlackRock created this too. The BlackRock chart includes 1980. The previous one doesn't. So 1980. So we're seeing for people that aren't watching on YouTube, and actually maybe for people that aren't watching on YouTube, maybe that's a good time test. What are we doing today, Ben? What are we doing today? Nice. We'll get to it. Okay. So, 1980 was the steepest increase in interest rates. Paul Volcker broke the economy

and crushed inflation. And in hindsight, is viewed as a hero for doing what he did. I don't think the market will, even with the benefit of hindsight, view Powell. No, he's going to break the housing market and he's going to be viewed as a villain, I think from now and then in the future, too, because here's the thing. 1980, we had been dealing with inflation for like 15 years above average inflation. We've now been dealing with it for 18 months. And the circumstances this time are completely different from what they were in the 70s. There was no pandemic back then. There was no supply chain issues. There was none of that stuff going on. So I don't know. I think there's probably two-inch information too. So if you look at the Fed's projections, I pulled these up. And so this is

from September 2020. They predicted that by 2023, the unemployment rate would be at 4%, which at the time job recoveries in the past have been very slow. So even that was a pretty fast job recovery. They were saying we're going to go from like 7.6% at the end of 2020 to 4% by 2023. We were back under 4% by December 2021. So they were just a bit off. So now let's leap forward to June 2021, not that long ago. Their prediction for the Fed fund rate that they literally set themselves, these people set the interest rate themselves. They can't even predict the interest rate that they're going to set. They predicted it would be 0.6% by 2023. They've raised by 75 basis points last two meetings. So they've now raised more than they thought it would be

next year. So it's already at three and a quarter. They predicted it would stay 0.1% or 0 through 2022. This is in 2021 they predicted this. This is a really good teachable moment. If you are listening to us and don't understand that forecasting the economy is absolutely not worth spending 30 seconds on. I don't know what's going on. They have how many PhDs in the building? I mean, several hundred and they have no idea. And anchorman, Brian. and Fantana says, maybe she's just stop talking for a while, Rick. Maybe just say, listen, this is an unprecedented economic environment. Why are we even putting these forecasts out anymore? Why don't we just take it as it comes and see what happens? And let's just be a little

more humble, like, because them putting these forecasts out because now the new forecast is going to be, well, longer run, the Fed funds rates can be back to two and a half percent. So they're already saying they're going to cut at some point anyway. And that eventually, the stock market, you're right, they're worried about the stock market thinking, well, the Fed's going to cut eventually. that's because if things get worse, they are going to have to cut. So why not just stay at like a 3% for a while and see what happens instead of going all the way to 4 and a half and then back to two? They're talking about two more 75s for the rest of the year, which would take us to what's their rate, year end, 4, 6 or something like that? Okay, that second 75 basis point is never going to happen. They'll be cut before they do that, I think. I think that's how bad it's going to be if they let mortgage rates get to 7%, basically. Well, mortgage rates are at seven, basically.

So I don't know if we could play this, but if we can. I want to play Jeremy Siegel absolutely going nuts on TV. I watched this live. I have three screens in front of me on my desk, not to brag. And I have CNBC on one of them most days and unmute. I'll hit the unmute if I hear something coming on. And I watched Jeremy Siegel, like, flailing his hands in the air. And I didn't disagree with anything that he said.

So, all right, the New York Times tweeted, U.S. manufacturers have now added enough jobs to regain all that they shed during the pandemic and then some. Comedian, I'm a fan of his comedy, Rob Delaney, quote tweeted, not so fast, and he quoted the Fed. So this, for whatever reason, for whatever reason, this was the week that hating the Fed went mainstream. Cullen Roche tweeted the U.S. is going to have a 7% mortgage rate soon. At record high prices, the math doesn't work on a 5% rate for most people. At 7% the housing market comes to a screeching halt. So I don't know if we're at 6, 8, or we're right there. So our friend economic retweeted that and said, fun fact, for the Fed to make housing more

affordable at 7% versus 2.5%. Home prices would need to drop more than 40%. And Jake said, it's amazing how quickly my view on Powell has turned. He is in a bad situation, no doubt, but he is seemingly intentionally going to break stuff that really should not intentionally be broken. Cullen said same. I thought he handled COVID as well as he could have. But this rate stance at this moment strikes me as super reckless. I am increasingly convinced he'll have to emergency cut at some point soon, and then he should promptly fire himself. So this was the week that consensus was this guy's doing an awful job. I agree with both of our finance Twitter friends here. I agree with both of them. I give him a lot of credit for dealing with a tough situation in COVID.

They obviously overstayed their welcome. And a lot of the problems that were created were not they're doing. But I think especially the housing market thing to me, letting mortgage rates get that high that fast, I think people are going to look back in decades ahead and go, what the hell were they thinking? This is ludicrous. So I don't know that you can hang your hat on this. But to me, there's two potential bullish catalysts. One, the Fed blinks. And let's be honest, for them to blink, things are going to have to get much worse than they currently are. So I don't think that you could say the Fed is going to blink anytime soon.

Number two is an inflation print coming in cooler than expected or less hot than expected. Outside of that, the Fed has changed their mind a million times in last three years. I think that's kind of what I would bank on is the fact that they can't even predict how they're going to feel in three months, let alone what the economy is going to do. Right. Do you see them saying, all right, we've done enough damage? I, unfortunately, I think things would have to get materially worse. I don't think it's going to take much more for things to start breaking in the financial system, unfortunately. Well, when you say breaking, because that's the thing that pundits are saying, and I guess I'm going to lump you in with that. What do you mean

things break? What does that mean for in plain English? I think if they let mortgage rates get to 8%, the housing market is all but broken. I think there's literally going to be the construction industry is going to be done for. I think there's going to be no inventory on the market. People who have to buy houses are going to be just in a position. I think if you break the housing market, you break the U.S. economy. And I think that is, luckily, we're in a very good situation with the people who own their houses. So unfortunately, it's a lot for people who are not in that situation. That's what makes it tougher. But I think bringing the housing market to basically a standstill and then trying to restart it again at some point, I think is

going to have like reverberations for years to come. And I think it's a very, very, very, very bad idea. I think that's the logical place where things, quote, break is the housing market. I think you're absolutely right. Connorsent tweeted a few weeks back. We spoke about this. This was on August 12th during the, what we know is now, in fact, a bare market rally. And people were saying, well, never had a bear market rally bounce this hard.

He said, so it's fun that we can now say something that's never happened before is going to happen. Either we get inflation down from elevated levels without a recession or a 50% plus retracement of a major bear market selloff goes on to make new lows. so you have to decide which it is. And I feel like both of us picked the latter. I can't quite remember. Maybe you can go check the tape if you're really curious.

We said that sell off in the stock market is probably more, would be a higher probability then. I don't think it happened this fast. Just to re-explain what happened. We had a bear market that bottom was at June 16th or July 16th. There was June 16th. And then from there, the market had a very nice rally, and more than half of those losses were made up in the rally.

So prior to literally today, there had never been a market rally where we had 50% of the gain of the losses recouped and then made new lows and we just had that. You know what else? Actually, a few incredible retracements. So all of the gains from pre-pandemic in the Dow Jones Industrial Average have been ripped away from us, all of them. Price basis. Kind of makes sense.

Can we just say like, all right, pandemic never happened. The decline, the recovery, the Fed-induced, Congress-induced recovery. never happened. Let's just shake the edge of sketch and go back to where we were before all of this began. So, yeah, if you look at the S&P, it's still up 18% or so since the end of 2019. I think small caps are below. They probably are. The NASDAQ is probably still above a little bit, but it's close. Okay, so you're in Timmer said people are not throwing the towel yet. And I think that's a lot of people are waiting for is like some capitulation moment. And they want to see like this massive amount of selling, I think. So what is he saying that like

actual flows have not been that negative? I think Eric Beltune has just tweeted this week. about it. Bond flows are actually worse than stock flows this year. There's more money that's flowed out of mutual funds and ETFs from bonds than from stocks, which actually kind of makes sense to me. Behaviorally, it makes sense from an investment rationale. It makes literally no sense. So here's a thing. By making it sound really terrible right now and the Fed is breaking stuff, the longer this goes on, the more long-term bullish I'm getting. Because here's the thing. So there's everyone dancing on the grave of a 60-40 portfolio right now because a traditional mix of stocks and bonds is getting hammered this year. It's one of the worst years ever for it.

it's probably going to go down as like top five worst year ever for a 6040 portfolio in the last hundred years. Here's the thing. You can get 4% in like short term safe bonds right now. So from just a year ago, that is an expected return basis. That's almost like a 1.8% increase in your expected return because if you take 40% of that 4%, it's like one and a half to 2% basically you're getting and a year ago those short term bonds were trading basically at 0%. So your expected returns have gone up almost 2% in the last year in bonds. You had to get some pain to get there. That's a sunk cost. There's nothing you can do about those losses now. I'm getting more long-term bullish the further this stuff goes on. And I think the fact that you can finally get some safe yield in your

portfolio that you couldn't for years and decades over a decade pretty much that short-term rates have been as high, I think if you think that's a bad thing, then you're not paying attention as an investor. This is a good thing. I think I said last week that I started to get constructive and I'm pretty sure, at least I hope it says this, I'm pretty sure I said I'm not calling a bottom because, but, oh, here's another potential catalyst. If Q3 earnings come in better than expect, that's another potential catalyst. But yes, Ben, you're right. If stocks falled another 15% from here, I will be outright giddy. Now, I understand that it's not going to be fun, especially for people that no longer have income that are in retirement. It's really, really no

fun. But to your point, finally, finally, finally, for the last how many years, Ben, has the Fed been punishing savers? You can earn more money in. It's a real conundrum. Short-term government bonds, corporates, high yield now, eye bonds, getting a cash account a little bit. You can get way more money than you ever could. And immunity, so you get five to six percent tax equivalent. So you could actually generate income to satisfy your needs if you're in retirement, which is a wonderful, wonderful thing. I don't think people are going to capitulate. There obviously is a point at which, you know, Yes, people probably will throw in the towel. But I don't know if that's down 35%, if it's down 40%.

Everyone has a pain point where they say, I can't take it anymore. But absent like a really violent sell-off, and I'm almost afraid to say this out loud, but Ben, you've been talking about this over the past years. I do think investors understand that stocks go down sometimes a lot, but ultimately they do recover. And the recovery might not happen as quickly as you like. there's no set schedule, but if you do hold on long enough, you will be made whole. I can't tell if this is really bullish or really bear. So that's to be one of the two and I don't

know which one. Over the last year, the S&P is down like 17%. And this is with the Fed raising rates and then the Fed now basically cheering the stock market to fall. So the fact that it is only over the last year down 70%. I've said this before. It feels like it should be worse. And I can't tell if that's a good thing or a bad thing because people aren't throwing in the towel and capitulating is that a good thing because people are having more steady hands and they think the Fed is probably bluffing? Or is it a bad thing that there's more pain ahead? I honestly don't know. But again, the further this is prolonged because this is a downturn of our own making. This is not like we have some financial calamity. Like the system is messed up and we're having like a reckoning here. A lot of this is we've done

this to ourselves. Let me ask you this. Do we get new highs in the S&P 500 in 2020? That's tough. Because you're counting on like the Fed cutting rates or, but are they cutting race because they put through us into recession, my forecasting abilities right now are nil. How about that? Because of where we are. All right, listen, well, I'll take a, I'll say no. I would say no new highs in 20, 23. Obviously, we'd love to be wrong. If that happens, if you're a net saver, you want this thing to be prolonged. You want to continue saving at lower prices and having more volatility. That's a good thing. That's the other part of it. I'm glad you said that. For those of us not in retirement, that are contributing every two weeks to your 401K and maybe even to a brokerage

account it aside. This is a beautiful thing. I know it doesn't feel that way, but lower for longer is better for your future self. I think that's pretty incontrovertible. And one other thing for young people, what's the number one question we've received animal spirits over the last five years? Where do I put my cash when I'm saving for a down payment? You finally have somewhere to put that because everyone would always say, this is terrible. I'm saving for a down payment and I have nowhere to put the money to earn any yield. Now you can. Unfortunately, your down payment is going to be five times higher because Josh just wrote about this. What is a better investing environment for people that have a time horizon beyond three weeks? Is it today or is it 2021 when there was just massive

euphoria stocks went up every day? Interest rates were less than 1%. I mean, it's not even close. This is the pain before. This is what you want. Zero coupon bonds, Ben, got cut in a half. Jeez. So we spoke about things breaking. TLT, which has the longer track. I look at this. So leading up to March 2020, zero. coupon bonds in the previous 12 months, the trailing 12 months through March 2020 were up 65%. Yeah, it was a meme. It was a mean bond. They were flying. It's in both directions now, yeah. So TLT's been around since 2003. That's 20 year plus long-term bonds. It's down 37 and a half percent from its high. Jim Bianco shows a crazy chart looking at the global aggregate bond index.

This is off the charts. We've never seen anything like this. And I think part of the fear is that you don't want to see disorderlyness. I know that's not a word in the bond market. Now, to the Instead that there is good news in here, and maybe I'm grasping, companies gorge themselves on debt in 2020 and 21. I don't remember how much carnival raised. Was it a billion dollars? But companies absolutely have a runway. Depending on how bad things get for how long, we'll see.

But companies have a lot of cash on their balance sheet. So it's not like everybody is refinancing at these current rates. Now, of course, some companies do not have the luxury of being able to tap the public markets and are not able to get multiple years worth of bonds. They do have rolling credit facilities. So those companies are going to be certainly in some pain. Ben, the average target date fund return year-to-date. Jeffrey Patak just showed it doesn't matter whether you're 2030 or 2080 or whatever.

There's pain, pain, pain, pain, pain. Counterpoint, these are retirement vehicles. People are saving every two weeks, every four weeks, every week. Money's going in at lower prices. If you're a target date investor and it's in your 401k and you have decades ahead of you, keep on money in there. Ben, I said something on the podcast two weeks ago that was not. English. I think I said, or was not logical. I think I said that U.S. small cap stocks are less

lever to the U.S. economy than large cash, which is, did you say in Spanish? Which is factually incorrect. What I meant was the stock prices are not as sensitive to the U.S. economy as you might think, even though the businesses certainly are. Stocks and businesses. I asked the question, shouldn't small caps do better when the dollar is being strong. Yes. Stocks and businesses, of course, are not always the same thing. So, friend of the show, Sam Roses from Bank of America, and the TLDR is mixed performance of small stocks versus large stocks during U.S. dollar strength. You would think U.S. dollar strength, which is bad for companies that have large portion of their sales from overseas, they have to convert

to the dollar, it obviously makes exports less attractive. It's not that clean. I guess the point would be when things are going bad, usually the dollar is doing good, and when things are going bad, small caps are going to do worse. That makes sense. Okay, it's a special day here on Animal Spirits. If you're not watching on YouTube, Michael and I are both wearing our Tropical Brothers shirts. Today's show is sponsored by Tropical Brothers. We did it, Michael. We wore them down. Bucketlist. Yes, I got to tell a story. So I don't know, I was in the mood for a new shirt, and I think Instagram might have gotten me. I can't remember where I found the ad a few years ago. By the way, is that a new shirt, is that a new tropical brochure that you're wearing?

Because, again, for people that are just listening, here's what's going on. You've got the material it's to die for. It's the most comfortable shirt I've ever worn in my life. Ben's shirt is it's a teal blue. There's pineapples on it and the pineapple is wearing sunglasses. Am I right? Is that pineapple wearing sunglasses? Yeah, with some flamingos on here. You're right. It's very comfy. So I got one of these shirts and I tried it out. And I think the first time I wore it was like a fourth of July parade. And I decided, you know what? We're celebrating America's birthday. I'm going to go out with a bang and I'm going to wear my flowered tropical brother's shirt. And I have never got more compliments for article clothing in my life as I did that day. I had

people stopping me going, I love that shirt. That is amazing. Men, women, people, everyone was saying, I love your shirt. We've been wearing them a little bit. I got you on this a little bit ago. And we wore them to Future Proof. And I don't know how many people at Future Proof came up to me and go, I wish I would have had one of those. It looks so comfortable. It's breathable. It's light. They also have polo shirts. It's great. And so what we're doing here for our listeners. Wait, wait. Can I tell one more story that totally echoes your experience? I think it's universal. It is a show stopper. It is a conversation starter. I can't start small talk. So I don't know if it was a summer.

It was not a 4th of July. It was a summer party at a person's house. I don't know. It's people in the neighbor that I don't really know anybody. And I wore one of these shirts. And Robin, my wife was like, you're not. No, no, no. You're not embarrassing me.

Take that shirt off right now. I said, absolutely not up for discussion. Not only am I wearing the shirt. Well, that's it. I did wear the shirt. But we walk in and immediately two people are like, I love that shirt. And Robin, like, she rolled her eyes. But listen, that's what it does.

It opens up doors. If you're not a good small talker, this shirt, does it talking for you. Yes, it does. I wore you down. I said, do you have to get them. You got it. You loved it.

So they have swimsuits. They have quarter zips. They have these buttoned down Hawaiian shirts. They have polos. Well, listen. Okay, so here's the deal. Obviously, depending on what part of the country you're in, if you're in California, you can rock this 12 months of the year.

Unfortunately, Northeasterners, Midwesterners, it's going to get cold. The winter is coming. You know what they have? They've got like long sleeve. Quarter zips. Yeah. Quarter zips. There we go.

But you want to stock up on your Hawaiian shirts now. Yeah, for next year, for the beach. They got a fall sale. Animal 20. You get 20% off anything. So you want to load up for your trip to Florida in December, January, we're going to Disney World or your spring break trip next year or your trip to Future Proof next year. We went to Future Proof. And I'd say a dozen people in the crowd were wearing Tropical or other shirts. There was a guy in the crowd wearing the same exact shirt as me. It was awesome. My closet is full of these things. Thank you to Tropica Bros. This is really our Super Bowl. Yes. It's a proud day here. All right. So where are we going next, Ben? Interest rates. What do you got to say? What were you wrong about? Okay. Here's something I was wrong about in terms of interest rates. Yahoo Finance had a piece that said a new analysis from the Committee for Responsible Federal Budget predicts that this week's rate hike alone led $2.1 trillion to government deficits over the next decade. And that's on top of the series of hikes we've already had this year. And so I think one of the things that I talked about, maybe we did in the show too, is we thought there would probably be a cap on interest rates at some point. because if you raised interest rates too high, we've added on all this debt, not only over the

decades, but just since the pandemic, we added so much debt. I assume there would be a cap on rates because the government would go, if we raise rates too high, it's going to eat up the majority of our budget for interest expense. And now they've blown through that. Maybe they think inflation eating that debt gives them some breathing room, but I probably underestimated how bad people would hate inflation. And we already know people hate government debt, but apparently people hate inflation even worse. I'm surprised interest rates have been able to get this high because eventually the government's going to go, this is unsustainable. We can't fund ourselves because interest rates are too high. Talk about people hating inflation. We're getting emails

from older listeners who think that we don't understand the psychological damage. And listen, okay, fair enough. We weren't alive in the 1970s. So I think maybe that's true. I also got debt wrong, interest rates wrong, but for a different reason, Ben. I thought, obviously, if you told me that inflation was going to be 9%, maybe I would have changed my mind. But I definitely thought that demographics and the demand for anything yielding above 2%. I thought there would just be puddles of money rushing in to buy a 3% 10 year. Turns out that I was exactly wrong. Because not only is money rushing to buy it, people are freaking out because they have not paper losses, they have real losses, but people are actually running the opposite direction. So I cannot have been

more wrong. So retirees, pensions, insurance companies, all these places that have wanted to yield for years, and they finally got it and now they're selling. I think, I don't know, maybe four or five percent will be the level that does it for them, but I was probably wrong on that one, too. It happens. Ben, you spoke earlier in the show about things breaking. Gavin Baker tweeted a chart from Morgan Stanley on the U.S. dollar year-over-year change. It says the U.S. dollar year-over-year changes at a level that usually leads to financial economic stress. So they look at the China devaluation and global recession. That was 2015. You probably remember that. Sovereign debt crisis does in 12, the GFC, the housing bubble. Now, I kind of wonder if dollar increases lead to global

stress or if dollar increases follow. In other words, when things get bad, do people flock to the safe haven that is the dollar? Maybe it's a combination of the two. It's a chicken or the egg. And maybe this, the Fed shouldn't care about the global economy, but I think they should, but because it's possible the Fed is also making things 10 times worse for these other countries. Like the UK, the pound crashed this week to levels not seen, I guess, since 1776 or something. I don't know. I was going to buy a house in the English countryside this week for 999 and a can of baked beans. But it seems like the Fed is potentially, again, this is not all the Fed's fault. This is these countries made some terrible moves. But it sounds like what the Fed is doing is having a reverberations

by making the dollar stronger, making these other countries' economies way weaker. And you could see things be way worse in Europe than they are here, too. The Fed could be breaking Europe as well. Okay, Ben, my line of the sand has been breached. This is a tweet from Exact underscore some, which is, I guess, the newsletter from Lit Capital. So I went to Chipotle last week. They've got this new steak. It is called garlic guajillo.

I don't know what guajillo means, but I was intrigued. looked good. A $5 premium for that steak? Okay, it was $19. So I said, no way am I spending that. So I ended up getting a chicken bowl, a chicken over salad, because I'm trying to eat well. And it was $15. Now, I did add avocado or guac. But still, $15.15? In this economy? Chipotle? So you get free guac at kudoba, not at Chipotle yet, which is surprising to me. this is way higher than I pay for the start. I think my starting price for a chicken bowl is $9, maybe $8.50. So I think this is a lot of New York, too.

But still, the premium for that new steak, what is it? Some extra seasoning on the regular steak, that seems like that's a sales tactic. I don't like it. All right, full stock economics had a great post 14 charts that explained inflation. Also, I just want to be letting it known that you've given up on Chipotle like seven times for all this inflationary environment. That's not true. I threatened.

I threatened. Every time you say, I'm giving up on your line. The line in the sand keeps moving, though. That's why it's lined in sand, because you can cover it up. All right, so let's just go through a few trouts that I thought were really... This is from what, full-sack economics? Hold on. The word that I'm using for is escape my brain.

Informatory is not a word. It's not even close to a word. Informative? Informative. Informative. Informatory. Good grief. All right.

So what we're looking at is CPI, core CPI, and median CPI. And the reason why this median CPI stands out is because it's not just one or two things. Unfortunately, it is really everything. Okay, so that includes food and energy, or excludes food and energy, right? No, that's the red line. The median is just what you think it is. It's the median. Okay, but I'm saying if you exclude food and energy, it's at the same place.

Yeah. You can't just blame it on those things that are being affected by it. shelter or just gas or just food. It's everything. Unfortunately, I said earlier that maybe a catalyst could be lower inflation. However, they have this really nifty chart showing that official rent inflation stats lag behind private data. So they're looking at CPI and they're looking at apartment listings and Zillow pricing. And so what they're showing is that the blue euro of labor statistics who calculate CPI says rents rose by 6.8% over the last year. But private data from Zillow and apartment list show much higher figures 10 and 12% respectively. Zillow and apartment lists are

tracking how much you'd have to pay if you signed a new lease today. In contrast, the BLS tracks how much the average renter actually pays. And because most renters have year-long leases with fixed rents, it takes about a year for an increase in rent to be felt across the rental market. So today's high spot rent means that the official shelter inflation rate is very likely to remain high for at least another year. So what does that mean for CBO? P.I. Rent is approximately 7%. So it's not an insignificant percentage. Follow? Yeah. Remember, I explained this last week on last week's show. Okay. Well, so I wasn't there.

All right. Lastly, we've been talking or maybe the common narrative is that the Fed can't fix supply. It was supply chains. What they can do is go out to demand, which obviously interest rates are a blunt tool, but actually those look like a hammer. And it seems to be. be working, but they're showing a chart that showing that imports are up significantly since the pandemic. So the upshot is that, quote, if the high prices of 2021 were caused by supply chain problems, we'd expect to see 2021 imports below 2019 levels. But in reality, imports over the last two years have averaged about 18% above the pre-pandemic norm. This suggests that the root cause

of America's supply chain problems is that people have a lot. lot of money and our buying stuff at an unprecedented pace. Ben, your thoughts? We like to consume stuff. Is that it? People are still buying stuff? Again, I think that people were blaming supply, but it really was demand all along. And yes, there were supply chain issues, but it was called demand shocks, cause supply shocks. I agree with that. You did a piece about some of the substacks that you subscribed to a few weeks ago, maybe a few months ago. This full stock economics from Tim Lee, he just wrote this piece about how he's a professional dad who leaned out to support his wife's career. He was a journalist at a bunch of different

places and his wife is a doctor and she was working a lot. And he decided to take a step back and he wrote a whole piece about this. And the stuff that goes through it, it's an awesome piece. And I highly recommend full-stack economics, great substack. Agreed. Ben, I don't know if we spoke about this earlier, but lumber round-tripped along with the Dow and crude oil, which is now negative year of date. You remember the memes in 2020 when it would be like, take me on a date somewhere expensive and people would photocopy someone next to lumber at Home Depot? I do. So lumber Futures ended Monday at $410 per thousand board feet, which is down a third from a year ago and more than 70% from their peak. So I guess one of the things that's frustrating people

is that it appears, it appears that all of the real-time data that would indicate where inflation is going. It appears that the worst is behind us. Why doesn't the Fed see that? They're not dumb. I'm sure they do see that. Again, if I had to just guess, I think that they already done so much of the heavy lifting by destroying demand and bringing down prices, to stop when they're like on the five-yard line is something that they're probably risked. They don't want to be wrong like three times. You know what I mean? Yeah. I think my problem is not taking a little more middle ground here is that if and when they have to reverse course, if they go too far, then they're going to look like idiots again.

I get it. I got it. You're going to see them hiking 75 basis points when inflation peaked and everyone's going to go, it was obvious inflation was peaking. Just give it some more. time, and then they're going to look like idiots again. I think that's the problem everyone's having is that we're all seeing this economic data in real time. I don't envy the situation that they're in. What if Jay Powell said, you know what? Okay, listen, things are deteriorating fast. And then we thought, mission accomplished. It's having the intended purpose. So we are going to potentially pause here and we're going to give it a few months. What if he said that and the market just took off and credit spreads? They're not like blowing out. What if that collapsed?

And what if he's like, oh, she's, here's what they could say. We'll give it a couple months. And if things continue to stay hot for CPI, we're going to do our 75 or 100 basis point hike. And guess what? We care about employment and price is not the stock market. I know what the stock market is something they're gauging. The fact that they keep commenting on the stock market, I think that's the dumbest thing. I know that they've always probably looked at it.

And in 2018, they probably cut rates because the stock market was in a bare market. But the fact that they're letting the stock market drive the narrative, I think they brought this on themselves. by saying we want the stock market to go down. They should say we care about employment and prices. That's our job, not caring what the stock market does. Someone sent this today, my local credit union, Lake Michigan Credit Union, where I actually have my mortgage, 30-year fixed.

This is as of September 26th, they're quoting 7.46%. Now, they're always a little high. They're always about 25 to 50 basis points high, which seems crazy for a credit union. They're at 7.5%. How many mortgages could they be? Their loan department, they have to have like tumbleweeds going through it at this point. I can't even imagine. This is really tough.

Here's one thing that I'm hoping to change my mind on. As interest rates were rising, had been rising. Remember, didn't Ben Miller from Fundrise say like 7% would be, what was his line in the sand? I think he might as 7. Did he say 7? Did he say 7%? How do we get to 7%? That was like six months ago.

Yeah. Way back when when interest rates were at 5%, my opinion was that there was a relatively high floor for how much home prices could drop, given, again, the demographic trend of just millennials needing to get into a house. And so, yes, housing prices were going to have to come down to reflect interest rates. But that was what I was saying at 5%. At 7%, I don't agree with myself from six months ago, because the math, to Cullen's point, the math just doesn't work. Housing prices at 7% are going to need to come down materially, not like 5%, but like materially. maybe the silver lining. I've talked in the past how we anchor to the highs and the lows. Maybe

if rates, if mortgage rates somehow do go back down from seven to five, that five will seem way juicier now, whereas it seemed pretty high compared to three. That's true. So Lance Lambert tweeted 6.7 mortgage rates plus these frothy home prices are a lot like 30% mortgage rates in the early 80s that the boomers talk about. Hey, I paid 13%. Yeah, prices were a lot lower back then. So I feel like this is that nasty. Seven and a half percent mortgage rates with houses up 50% in the last three years. That's the equivalent of like 15% mortgage rates. Yeah, it's brutal. It doesn't work. It just doesn't work. And I feel big time for people that are in this unenviable situation. Mike Simonson has these charts, the percent of properties with recent price reductions. And yes, we are higher.

Now, these charts are very seasonal. We are higher than we have been at any point since 2016 at this part of the year. So 41% of all listed houses have had a price cut. I feel like that number is going to go significantly higher through the end of the year. The problem is that's a percentage of a smaller amount of houses for sale. That's what the problem is is that the number of houses that are for sale is so much smaller than it was in the past, that even if you're getting price reductions, there's still not enough houses for people to get out and buy if they wanted to, unfortunately. The inventory's levels are still so low.

The New York Times had this piece about the death of the starter home, which we've talked about before. It was interesting, and they talked about how only 8% of new single-family homes today are 1,400 square feet or less. In the 1940s, it was nearly 70%. And they show, we've talked about this, like the typical home is gone from, the average has gone from like 1,200 square feet to 2,200, and the number of people there. Like, the average used to be like four people per household. Now it's two and a half or something. And they make the case in this article that a lot of it is because there's so many rules and regulations for development that it's not worth it for them to make a starter home anymore. A lot of these builders in the piece were quoted as saying,

we would build a starter home if we could. It's not economically feasible for us. I also wonder, though, how many people just want bigger houses these days? How much is the demand of starters homes? Don't you think that's part of it, too, that people don't want a smaller house anymore? Or am I making that up? No, I don't think you're making that up. Moving stinks. Okay. We had a John Paulson citing this week. Credit to John Paulson. So I just wrote a quick post about this, that it's a very short list of people that got a big call very right and then didn't like stick with that, particularly where they made their money. They typically go back to the scene of the crime. John Paulson was asked about the U.S. housing market and he said this time is

different. Now, Ben, how easy would it be for John Paulson to hit the road and say, you know what this is? This is the big short 2.0. How many billions of dollars could he raise to put to work, scaring people. But he basically said that, actually, let me just quote him. He said the financial market, the banking system and the housing market are much different today than in 06 and 07. The underlying quality of the mortgages today is far superior. You don't even have some prime mortgages in the market. And the FICO scores are very, very high. The average is like 760. Then he went to talk about the banks. He said, today, the average bank is probably 9% equity. The systemically important banks are 11 to 12%, almost between three and four times as much equity as before. So we're not at risk

of a collapse today in the financial system like we were before. Yeah, it's true. Housing may be a little frothy, but so I made this chart looking at the amount of mortgage originations in dollars as a percent of the total pie for people that have credit scores below 660. In 2007, that peaked at 26 percent. It's 5 percent today. Much better. And maybe that, again, that's part of the reason the Fed is probably saying, hey, we've got some slack here. We can go to town. But I just, I don't know why you want to rock the boat if things are going well in some of these places. just because you think you have a little margin of safety. They're trying to crash the boat.

I know. All right. I don't know what I was looking for, some old blog post last week, and I found a piece of life advice from a viewer of our show in October 2020. They're talking about Howard Marks and Ray Dalio and understanding the cycles, and this person was saying that his fiancé was getting tired of waiting, and she was demanding a better housing situation. He wanted to keep renting.

She wanted to buy. And he was saying, I've read all the Howard Marks, I've read the Ray Dalio, I know that economics are working cycles. I'm waiting for a huge down cycle. and then I'm going to buy out. I think national housing prices are up like 40% since this email came in. And it was just bizarre to read this with a couple of years of knowing what happened. Obviously, at the time, who the hell knew housing prices were going to do what they did? But I think this is one of the reasons that you just, you don't take financial advice from billionaires. As intelligent as they sound, did you listen to Ray Dalio with Ryan Rosillo on his podcast? Not yet. He's very bearish on America at this point. And I was reading it. And he said, sounded very intelligent. His reasons made sense. And I wrote a piece three weeks ago saying,

well, I'm still bullish on America. I think at a certain point, I think he can become too smart as a person with too much success. And I think listening to those people as a normal person is not helpful. Can we also make the obvious point, maybe not obvious to the listeners, but it's obvious to us. It takes very little skill to scare people. To recite all of the reasons to be bearish, it's not impressive. We know. No. It's very easy right now to sight bearish reasons. And that's the thing. The people who are very negative and who have been negative for the last six to 12 months, those people are never going to tell you when to get back in. They're going to be the ones who are going to be beating the drama on. No, no, no, inflation's really

higher. When things do get better and they will get better, those people are not going to get you back in. Guess how black things are going to look at the bottom. Sentiment-wise, news-wise, technicals, like things are going to look like they're going to zero before the bottom. Well, just go back to the first 15 minutes of this podcast. Everything, we said sounded awful. And that's the kind of stuff that you almost want to hear to be a little more optimistic about the future without knowing what's going to happen in the next few months, I guess. So it is now 1236 and we are at the lows of the day. Stock market rolled over. What do they call that in technical analysis terms? This chart looks like crap. Is that what it's called?

Okay, survey the week from friend of the show Ryan Dietrich. I feel like, I don't know. I don't pay attention to this stuff as much. Whoa, whoa, whoa, whoa, whoa, whoa, whoa. There's not the survey the week. I know technically is literally a survey, but we laugh at service. It's our survey for the week. Okay. From the AI bears is above 60% for only the fifth time in history. This is like the survey where they ask people, are you bullish or bearish? 60% for the fifth time in history. And he's showing this tends to happen when things are really bad in the market. Is that the idea? Yes. Which again, people probably, you should be bearish right now if you're looking around. That's not surprising that people are very bearish with how bad things are.

These are good signals for long term. Like over the next year, three years, these, obviously you want to be a buyer when people are very bearish. However, this is completely useless garbage in the short term. So both things can be true. Longer term, yes, when people are pessimistic, shorter term, like, I'm not saying that we're going to crash, but crashes do tend to happen when everyone is bearish, when everyone is on one side of the boat. That's fair. Could we go down, yes. Here's a thing. My point is like negative sentiment in a bare market does not get me excited in the short term. You know what I mean? This is not in 2008 by any means, but I don't have regrets about buying stocks in October of 2018 and stocks fell another 30 or 40 percent

from there. Like I look back on those purchases in the fall of 2008 and I'm still glad I made those even though they were way early. I think if you're trying to bottom fish for individual stocks, please use a stop loss unless you're like trying to invest for a multi-year time I'm paris and that's different. If you're trying to catch stocks for a trade, you have to use a stop. If you're trying to buy like index funds on the way down, keep doing that. You will be rewarded eventually. All right, tech IPOs. This is a chart. In 2021, we had 110 tech IPOs. They raised $73 billion. In 2022, there has been one. Whoops. Really? Okay. Did we speak about Florida layoffs? We must have.

They just announced the fresh run of the playoffs. Okay, less than a month after the CEO said that they were done cutting. Just kidding. I think in these kind of times, I remember, so I knew an advisor at Merrill Lynch in 2008. And he told us, listen, Merrill Lynch is an independent organization. We've been independent organization forever. And they were bought by Bank of America like 10 days later. He's like, we are not going anywhere. They're staying here. I think in a crisis, you don't make any concrete problem. to people. You always leave yourself a little bit of wiggle room just in case. That's why you never say, like, this is the beginning or the end, like, leave yourself some wiggle room, especially if you're laying off huge swaths of your staff. Ben, I don't know if this is just being blown out of proportion. I'm not a frequent Airbnb stayer, but apparently Airbnb is making you, like, do chores and clean up? Do you know about this? We stated at Airbnb, maybe it was a VRBO this summer. And there was like a binder saying, hey, here's all the stuff in the area. Here's

this. And then it was like a whole list of things. Like, when you leave, we want you to do this to the linens. We want to do the towels here. Like, there was a list of stuff they wanted you to do. So 55% of active listings charge a cleaning fee. On average, makes up less than 10% of the total. Well, 10% of the cost. That's so annoying. You don't want to clean up when you're done. That is the worst part is when you see the price of it, then you click and see what the actual price is. Yeah, it's annoying. So it's way higher. So here it is. The cleaning fee across all U.S. properties averaged $143 as of June 30th, a 44% increase from five years ago. That's a lot.

Wait, hang on. They charge $143 to clean. Well, you play for your cleaning service at home. That doesn't seem that egregious to me. I don't pay. When you go to a hotel, you don't make the bed when you go to a hotel. They should pay for it. Bake it in.

That should be baked in. Yeah, that's fair. Here's the coup de grace. I've been used that term in a while. So when Airbnb came public, it had a significantly larger market cap than Hyatt, Hilton, and Marriott combined. Okay. Needless to say that went the other way now. Interesting.

Airbnb is now around $65 billion, and Hyatt Hilton and the Marriott are roughly 80. I think if I'm betting on the future, I'm still taking Airbnb over those three places. Do you think that there's any differentiation between Hyatt Hilton and Marriott? Yeah, it's no cleaning fees. Okay. I still might lean towards Airbnb there. It's not like a slam dunk, but I might lean that way. No, for long-term stays, you're going Airbnb all day long. Yeah. All right. Let's see some recommendations. Before we do that, if I just asked a question, I was thinking about this.

So we spoke briefly last week about our kids playing sports. Do you use the Game Changer app? No, what's that? Okay. So the Game Changer app tells you where the games are. That's how parents communicate via text. there's a change or this or that. What do you do if there's a scheduling change or how do you communicate with the coaches? I go wherever my wife tells me to go. I don't know. I'm not. Okay. So your wife probably is your wife probably is a game change. My question is how did parents do it prior to a cell phone? Was it like, okay, so you called this person, this person, this person. I'll call that person, that person, that person, and she'll call that person, that person. Like,

how did everyone get on the same page? I kind of feel like nothing got canceled in the past. It was just we're setting this time in stone and it's not going to change no matter what plans didn't get canceled that's probably right that's probably right yeah I still haven't figured out how to do you talk about small talk at a party maybe I need to start wearing my tropical brother shirts to the games I can't do the small talk with the parents it's tough you know what happens I'm probably better than yeah but I'm not great here's the thing I hear this a lot of the soccer games parents complaining about how busy they are so Mondays that we have soccer practice Tuesdays is gymnastics Thursdays violin class and then they talk about how busy their weeks are with their kids. And I want to be

like, listen, we're all dealing with the same thing here. Our kids are busy too. Guess what? Who signed them up for that stuff? You did. No complaining aloud. Sorry. This is what you signed up for. All right. You've been talking about industry and I've been a little behind you. And I've heard a lot of my TV people say that industry is like one of the best shows in TV right now. I thought season two was good. I take umbrage with the fact that people are saying it's one of the best shows on TV. I thought season one was better than season two. I have a few Knits to Pick, and I'm only saying this because I hold it to a high standard. I liked the second season. No spoilers, no spoilers. No spoilers. My only thing is I liked the ending. I wasn't a fan

of the Duplas brother as a hedge fund manager. I thought he was completely unrealistic. I liked him in that transparent show. He played Bill Ackman. I agree. He wasn't great. That's a sort of a tricky part. Here's my question. Would you trade one character from industry for someone on Succession? If I was a general manager of a TV show, I would not trade one character from Succession in the top 10 for any character on industry. I think Harper is phenomenal. I think she is the most unlikable character on TV right now, and they did that on purpose. But like, here's this problem. There's no redeeming qualities, and that's the same thing in succession. None of those people are redeemable, but there's dark humor in succession, whereas industry has no humor. Yeah, that's

well, it's British. It's British. You're right. Industry's not funny. I like the show. I'm just picking nits. I'm giving the show a salad B and Successions in A plus. That's my scale here. I'm with you. I'm more of a B plus on industry, but yes, it's not succession. You're right. I don't know who created industry, but I'm guessing they're millennials because here's something I've learned about millennials. They like going for shock value in their television movies like Lina Dunham and girls would just put random nudity in there just to like shock you, like, ooh, look at how crazy I am. And I feel like they do that in industry a little bit.

Do you remember the part in succession in the season one where Tom had his bachelor party? Yes, I do what you were doing with it. And a female exchanged some fluids with him back to himself. I do remember that. They talk about it in succession. If that happened in industry, they would show it. Yes. Anyway, I liked it.

But I think it's a B instead of an A. All right. They did margin call on rewatchables last week, and I really listened to it. And it reminded me that we did, we used to do this. We did finance movie rewatchables. We totally ripped off the watchables. We called it a random watch down Wall Street. It's going to watch. We did margin call. And I think you should probably go listen to our version of it, too, because I think we did a pretty good job, much shorter too. But margin call to me is a way better movie than the big short or the wolf of Wall Street. I think margin call is one of the best finance movies ever made. I agree. I think the general audience would disagree. But I think for a finance person. For finance people, margin calls where it's at. They nail. I rewatched. It's on Netflix. It holds up really well still.

Easily the best movie about the financial crisis. I told you I read that Robert Evans book and he was good buddies with Jack Nicholson. So I'm working my way through Jack Nicholson. I watched Chinatown this week on HBO. That's always in the discussion for like top 100 movies of all time. What did you think? It's like way up the list. So here's what he said in his book.

He said, I got the script for Chinatown. Everyone was really excited because it's a really well-in-law writer. And I read through the script. and I had no idea what the hell was happening. So I read it again front to back. I still had no idea what the hell was happening. And then it came out and it was a huge hit. And he goes, I still don't really understand that one.

And that's kind of the way I felt. I think it's a better performance by a young Jack Nicholson than it is a movie, a good movie. It was very hard to follow, but it was very well done. It was like the way that they shot it. The music they used was really good. But the movie itself, I wouldn't go back and rewatch it. Nicholson was amazing in it.

Now, context, that movie is from 1974. And you see and hear that it's on the top, whatever, 100 American movies of all time. And you've got certain set of expectations that seeing it 50 years later, maybe fall short. I'm sure it was groundbreaking at the time. You can tell, like, some of the choice, but yeah. Well, because there's a bit of a shocking twist that just hits differently in 2022. You've seen that copied a million times. So I agree.

I saw, I'm probably not going to rewatch it. He was good. And my next one on my list is The Shining. I still never watched The Shining. I'm not a big horror guy like you. That aged well. I'll report back next week. I wouldn't say that The Shining is horror.

I guess I don't know what other genre you would put it in, but it's not like gruesome. That is a great movie. Yeah, that is a great movie. All right. Last week we watched on Friday night, brand new to theaters and to Peacock, which, by the way, did you know that Peacock has the Rotten Tomato scores if you hit pause? And it shows the Rotten Tomato score on the TV. Pretty cool.

I don't know if you're a peacock subscriber. They had this movie called Vengeance by B.J. Novak. He was Ryan on the office, which I don't think you ever watched still for some reason. No. Which is a huge hole in your TV repertoire. And he wrote and directed. So I always get a premium for writing, directing, starring in the same movie. I think that's just, I can't imagine how talented you have to do to that. He was in it. Ashton Coucher was in actually a good one. And it's not a Michael movie because it's a coming of age thing, but it's also a lot of social commentary. And it was pretty funny, and I liked it. That Boyd-Hulberg guy from Narcos was in it.

Pretty good movie. Like a 6-7. Did you listen to a two-part of rewatchables on Boogie Nights? Not yet. But I have a theory about Boogie Nights before listening. It's one of the best half movies ever made. Like there's some movies that only half movies is good? Three quarters. Okay.

Boogie Nights, Talented Mr. Ripley, and the Wedding Crashers are all good movies that are good for like 65% of them. And then they tail off at the end. I disagree with Talented Mr. Ripley. I love that. Wedding Crashers was 15 minutes too long. But wait, what were you talking about? I lost the plot. When we were talking about?

The one I saw on. Peacock. Oh, Boogie Nights. No, Boogie Nights. Okay. So, listen, can't take it away from PTA. As much as I don't like a lot of his other movies, Boogie Nights is easily in my top ten of all time.

Eh, close. Probably one of the greatest casts of all times as well. The cast in that movie is amazing. All right. Your turn. So I bailed on Lord of the Rings. How many episodes did you make it? I think I gave it three, and it's boring.

It's confusing. Nothing's really happening. And I'm just out. If I hear that it gets good, I'll pick it back up, but too many other good things going on. House of the Dragon, I'm really enjoying. What do you think about the skip ahead? I'm still, I'm going to trust them, but it's a little weird to happen in season. It didn't skip a beat from me.

Did you watch the recent episode? Yeah. Yeah, I was totally fine with it. Big John. It's already confusing enough, the characters and stuff. It's just adding another element of confusion, but I'm still on board. So for fans or what are your thoughts, chart on John gave me a recommendation. This movie is called The Raid.

And it is... It sounds like a Michael movie. Oh, you're not kidding. It is extreme action slash violence. And here's the movie. You know what this movie is? You ever see the platform on Netflix where they just descend lower and lower and lower? It's like social commentary.

This is the platform in reverse where they have to go, there's a gangster that they're trying to get and he's got all his henchmen and they're trying to go up the building to get him. And it's basically this guy working his way through all of the henchmen. It's really like a kung fu movie ultimately with extreme. violence. It is a violent kung fu movie. And did I like it? I loved it. No surprise there. The raid. All right. We're still going to talk about your Michael Batnik Networth thing here. We'll do that next week. We're already running long. Okay. No more recommendations.

No more recommendations. Thank you to Tropical Bros. Listen, everyone listening. Go buy a couple shirts because we're trying to talk them into doing an animal spirit shirt. I think we have to show them, show them the money first. We need everyone to go buy a shirt. We're trying to get a Miami Vice shirt made. Remember, it's Animal 20. You can get 20% off swimsuits, Hawaiian shirts. I love the poloes too.

Oh, wait a minute. That's interesting. Are we trying to do a Miami Vice shirt? I thought we were trying to do like Animal Spirits-ish, but maybe Miami Vice is a shirt. I would like a Miami Vice shirt for feature-proof next year. That's my goal. Oh, there should be. Yes, little Miami Vice drinks.

Of course. Of course. That's what I'm looking for. My Little Miami Vice drinks with the umbrella in it. Yeah, on a shirt. That's not even animal spirit specific. They should just have that in general. Exactly.

That's going to be a classic shirt. and people are going to be wearing that at future proof next year. So Animal 20, go to Tropicalbrothers.com, send us email, Animal Spiritspot at Gmail.com, and we will see you next time.