Animal Spirits Podcast - Prices Only Go Up (EP.214)

Episode Date: July 21, 2021

On this week's show we discuss the difference between a trip and a vacation, what it means to be rich, the inflation conundrum, why it's easier to raise prices than lower them, why Roth IRAs won't get taxed again, the best show no one talks about 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. Y Charts has been helpful to Michael and I, not just through the data they provide, but also through their research. They have a really crack research staff, and they sent us a new report that they created right up our alley called Comparing Portfolio Rebalance Strategies, which is optimal for advisors and their clients. And they looked at these different rebalancing strategies, and one of them was just you don't rebalance, you just let it go. Another one was, you have a 10% threshold, you have a 5% threshold. they looked at all these different strategies for rebalancing, and they also had quarter of the rebalance or a month of rebalance or an annual rebalance. And there certainly were some differences. I guess the never rebalance portfolio probably does the best because stocks have done so well.

They looked at this over the past 25 years, or a 10% drift out of your weights was one of the better ones. But I liked how they said, basically the six portfolios that they used all produced either positive or negative returns uniformly in each of the 25 years. And rebalancing either caused nor prevented a significant performance difference in a given calendar year. So there were differences over the long term, but basically this is the kind of thing where perfect is the enemy of good and it's more or less you pick a strategy and you stick with it. We've been about this in the past. Listen, there's going to be luck involved, obviously. It doesn't matter when you rebalance. It just matters that you do rebalance. And this is more of a risk mitigation thing than anything,

like in terms of optimizing returns. Yeah. And the whole never rebalancing thing doesn't make sense because the whole point of setting the asset allocation is that you go back to those weights because that was your risk profile to begin with. So we'll have a link to this report in our show now. It's go to whitecharts.com. To get more of this, tell them Animal Spirits, then you can get 20% off your initial subscription. 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 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 Annal Spirits with Michael and Ben. After this show is over, we're done recording this. I'm heading home to help my wife pack up the car for a family trip. Now, I say trip because this is not a vacation. We have kids, seven and under. You're kind of in the same boat as me, young kids. When you take kids on a trip, that is not a vacation.

This is the kind of thing where you almost need a vacation when you get back from the family trip. But I'm doing Clark Griswold style. Car top carrier, we have. Who's Clark Riswald? Just kidding. If you try to give me a hot take that National Ampoon isn't any good, we're going to have to end our friendship here. Car top carrier, I hooked up, I successfully, I think. Wait, whoa, what did you just call?

Car top carrier? Oh, okay. You know those things? You put on top of the car to pack? Wait, wait, wait, hold on. Let me ask you a question. What is that thing? It looks like a, I don't know, like a box on top of a car.

Is that like extra luggage? Yeah, so you can fit. Yes, according to the one we got on Amazon, you can fit four luggagees up there. Okay. I don't know. We'll see. I'm Googling car top carrier. Okay, I see, I see.

I successfully put on a bike rack because biking is a new thing in our family that we like to do all the time, hoping it doesn't fall off on a three-hour trip to Northern Michigan. Wait, so you've got luggage on the top, bicycles in the back? Yes. If both of them make it, I will consider it a successful trip. How far is this? How far drive are we talking here? Two and a half hours. That's manageable. I hope. I can picture myself picking up a bike tire on the side of the road at some point. But when you're a parent, you don't go on vacations unless you leave the kids at home. Correct. That's a trip. And we're going. There'll be six kids under the age of seven there. Should be chaotic. So I got a little perspective from

an old woman I've never met before this weekend. So my little guy, four years old, himself to ride his bike like a week ago. He just got on his bike. I don't know. He's like a physical freak. Wait, training wheels or no training wheels? No training wheels. He's always used the strider bike. So he liked that. And then he just said, I wanted the pedals and he did it. So we've been going on bike rides all the time. So that's our big thing. And my kids have always been fairly well behaved at night. Like we lucked out. We have three kids who are very good sleepers. We don't have like wake up in the middle of the night kind of stuff. But my four-year-old daughter woke up this weekend on Friday night and was up for like three hours. Just couldn't

go back to sleep. We were in our house. We were up north. And she just couldn't find it. And so we had a terrible night sleeping. And you wake up in the morning. You feel like you're hung over just because you didn't sleep very much. And so kids were restless and all right, fine, get on the bike. So we go for a bike ride. Wait, what time was this? This is nine in the morning. Okay. I thought you were talking like three at night. You can't sleep. Yeah, we powered through. And so I'm a little cranky at this point. I don't do this often, but I was a little cranky and a little annoyed at the kids at this point. They were screaming and yelling and whatever. So we had going to a bike ride. And while I'm feeling down to myself for having a bad night, we're riding our bikes, and it's me and my three kids.

So I got one on the bike trail behind me. My little guy next to me in his mini little four-year-old bike and my seven-year-old daughter. And this old woman, as we're riding over this bridge, she kind of looks at me and she goes, you, sir, are a very rich man. Oh, beautiful. And just put me back in my place with a hashtag perspective. Wait, how'd she see your portfolio? She knows I went short this week because the S&Ps down 3%. So it's funny how a stranger can put you back in your place after having a bad night. That's great. I love it. You are all over the microphone. What's going on? Am I? I don't know. This, this? I'm just, I'm very fidgety, Michael.

Let me ask you a question. Okay. When you went to Marco Island, did you bring the kids or was that just you and your wife? That was a vacation, no kids. Okay. Because my wife and I are discussing the idea of maybe going away for the first time with our kids. We haven't done it yet. and Marco Island came up as a place that's kid-friendly. You stayed at the Marriott, right? It is kid-friendly. They have a nice little pool for the kids and stuff.

All right. What do you think? Should I do it? Kids on a plane? Kids on a plane. It's tough. I mean, the titter miss. I think you just have to pencil in at least one screaming outburst from either you or your significant other, right?

Actually, I have a quick funny story. We were at a public pool this weekend, and Kobe and I were playing. I was flipping him, like flipping him. like flipping him backwards and he was like more more again again and one time the old we flip too hard water down the tube coughing i know where this is here i'm like oh god pat him on the back starts vomiting in the pool a lot on my shoulder so i'm looking at the life card like uh and all the out of here. Pools closed. There's like a hundred people in the pool. Everybody out.

Was everyone staring at you? Like, thanks a lot, jerk. Well, a good Samaritan came over. It gave me a cold bottle of water. It goes, I've been here, pal. I thought that was very nice. That's kind of thing where if you're a parent, you see that happen, you are just happy that it's not your kid. So for you to happen, that's like a nightmare. So I come back and like Kobe's head is on my shoulder. I'm sort of got this look in my face around. It's like, what did you do? Spin zone. At least he didn't crap in the pool.

It could have been worse. That's true. First time vomiting, by the way. He's four years old. Never had that before. We haven't had much of that either. That's not bad. Speaking of vomiting.

The markets? Kind of. No, I mean, this S&P is off 3%. I'm infatuated with this inflation stuff of late. So I put this chart in here that I created. It shows the last five years. What does vomiting have to do with inflation? I don't know.

People. Oh. All the takes. I don't know. I got nothing. So it shows the last five year of U.S. inflation rate over trailing 12 months and the 10-year treasury rate. So they basically track each other.

for four plus years. Why do you only go back five years? Because don't they, I mean, they always pretty much track each other now? Yeah, I'm sure I could have gone back further. But just in recent months, and I think this morning, it sounds like, because we're having this awful sell-off in the S&P of 3%, Treasury yields hit like 1.2%. And so... Hang on a sec.

Just because the S&P 500 is only down 3%, that doesn't mean that the markets, parts of the stock market aren't getting annihilated. I don't like that whole market's only down 3% talk. Okay. Hit me with the market bread. thing. Some stocks are getting clobbered. You know, people own individual stocks. Do you know that? Yeah, but I'm looking at it from an overall index perspective. The averages are fine. Not everybody owns the S&P 500. Okay, so it's not a stock pickers market right now. Is that what you're saying?

Okay. Anyway, inflation screamed higher. So it hit 5.4 percent, highest since 2008. And of course, in 2008, when it hit that level, it immediately fell back down to Earth and went into deflationary territory from the financial crisis. But this divergence here is interesting from a number of perspectives. Like, market-wise, I think it's interesting because I did this piece where I wrote, like, let's say before the year began, it gave you this number. Inflation is going to hit 5.4% over the 12 months. What would you do? Short bonds. That'd be the easiest buy gold, that sort of stuff. That stuff's not working. Like, you could have had the headlines ahead of time, and it wouldn't have helped you at all. Bitcoin's down 50% when it was supposed to be this inflation hedge. Obviously,

you could say, well, it was up 300% before that, whatever. This is from Axios. How concerned are you about increased costs and household expenses. Very concerned 46%, somewhat concerned 41%, not at all concerned 14%. So this is 87% of people surveyed are at least somewhat concerned about inflation. Do you think that could always be the case though? That's not just right now. You don't think so? No. You think this is rising. Dude. It's on Good Morning America. Yeah, I saw it on the Today Show with my wife. It was like the lead story. This is not really inflation, but yesterday, Robin took Kobita like a monster truck thing. at MetLife Stadium with kind of fun.

You had to sit down that one out? Well, they didn't have tickets for the baby, whatever. So I was home with Logan. You were in the penalty box because you let him puke in the pool. I was home with Logan and I needed dinner. And I opened up my DoorDash app and I wanted to get, I was going to get Thai food. A dish was $17, which is already like kind of expensive to begin with for whatever. And then with tip fee, I know we've been through this a million times, but it was 25 bucks.

I'm not spending $25 for dinner at home. And I just don't understand how the hell this model works ever. Who the hell is going to pay a 40, 50% premium for takeout? It doesn't make sense. It's absurd. Yeah. I mean, I guess it's the convenience thing if there's enough people who want to pay for convenience. But I agree it.

The current model. Yeah, but you can't pay for that. It's too expensive. This is the kind of call where we're going to either look really smart or really dumb with no in between. No, no, no, because it can change. The business model can change, obviously. But today, right now it doesn't make sense. So I had frozen dinner, which was not great, but it's better than spending 25 bucks.

Okay. Get in your car and go pick it up somewhere. No? I thought about that, but. All right. I had log with me. I didn't want to bring them inside, whatever, whatever. Here's the other part of the inflation as a villain thing.

Andrew Ross Sorkner wrote about this at the New York Times. He said inflation has long been seen as an economic villain. That view is changing. He points to like this study about how this study of developed economies found that as inflation rose income inequality tended to shrink. inflation could be as high as 13% of the research bond and still act as an equalizer, shifting the benefits of economic growth toward lower income individuals. I don't buy this, really. I have this study open. I want to read it. But it's fairly controversial. I mean,

higher inflation is better for income inequality. But the thing is, I can see that being, like, that's legitimate, but I don't think that would make people any happier. I think people would still be upset with higher inflation. We've spoken about this, how people's, if your wages are outpacing inflation, like you feel inflation more than your wage increases. Right. But the weird thing about this. This is from Heather Long. She wrote about the year-over-year changes in inflation and broken by components. Car rentals, 88%. Use cars, 45%, gas, 45%, laundry machines 29%, airfare 25%, moving 17%, moving 17%, hotel's 16 or 17%. It's like, if you don't use those things, and a lot of people don't, how is inflation in your life any higher? It's so segmented to these one

places, Ben Castleman says, whoa, whoa, hold on, who doesn't, I mean, everybody uses gas. Okay, sorry, gas. But if you're not in the market for a used car or a laundry machine or airfare right now, the 5.4% inflation means nothing to you. So Ben Casman said, used car charts are up 45% from a year ago, 10.5% from the last month. Car prices account for a full 30% of the total increase in consumer prices from the pandemic. So since February 2020, put another way, overall prices are up 4.7% since the start of the pandemic, but prices for everything except cars are up 3.5%. Who is, I mean, I know you hear this stuff about the rental car agencies that sold all their fleet and then they had to scramble to buy them back. But who else is buying so many used cars?

People who's leases come up? All right. So NPR. Hang on. My car comes due in December. What am I going to do? You're not going to buy a new one? Of course I am.

I have no choice. My lease is up. But I'm saying like this thing from NPR and Marketplace said that there are 16 models of 2019 vehicles where the used one is more expensive than the new one now. This is just bananas. Well, it's got to be an availability thing. got to be way more use than new available. And it's because of the car chip stuff. And again, that'll sort of self out. This is an interesting lead in the journal. Chevy Silverado owner, Franco Docage, sorry, DOKAJ. That's an interesting game. Franco Docage stopped by his dealership recently

expecting to buy new formats. Instead, he walked away with a killer deal. The store offered to buy his one-year-old truck for $3,000 more than he originally paid for it. Remember when cars were a depreciating asset? Yes. Don't take a car loan out because it's a depreciating asset. Okay, Matthew Klein, who now writes at the overshoot, is planting his flag firmly in the transitory camp. He says outside of a few categories that are either experiencing significant idiosyncratic supply constraints or healthy price normalization due to reopening, prices rose about as much as could be expected. So he broke out. This is the thing that makes the zero hedge crowd really mad when you say, oh, of course, inflation isn't here if you take off these five things that are

rising. To some degree, I get that. But he's saying take out the pandemic stuff, the used cars, the reopening categories. And the underlying inflation is basically about the long-term average. So he's saying this is going to go back down. I think the weird spot for a lot of people, especially in the pundit crew, would be some people are say it's going to go right back to 2%. And other people are saying, no, it's going to stay at 5%. What if it just rose a little and it's like 3%. And that's not enough to to get the hyperinflation people happy. And it doesn't really go back to the long-term trend. It's a little higher than it was. That seems to me to be probably the path of least resistance, right? Like some of these prices just have to stick because wages are getting higher in certain places.

That's kind of the way that I fall, that it's, yeah, I don't know. So you've seen this chart before, right, from Mark Perry at AEI, and he breaks out, I mean, this is probably the best inflation chart there is. He shows since the year 2000, what's gotten more expensive and least expensive, he shows overall inflation has been 60% in that time. Consumer prices have risen that much. And then he shows how health care and college tuition and childcare and all this stuff is above it. And surprisingly, average hourly wages are above the rate of inflation. How many people, if you serve at them on the street, would say that this century, that wages are outpacing inflation. If you understand this. There you go. Never a big fan of that one, not going to lie. Sorry, I can't get behind it. I like it.

All right. You would. But new cars are basically flat, furniture's flat, clothing is down a little, cell phone is crashed, computers crashed, toys have crashed, and TVs have crashed. My TV crashed. I still got that line on my screen, not caving. What are you going to wait for? Are you going to wait for Black Friday and get a deal?

I haven't decided yet. Okay. Do you think we'll have good Black Friday deals this year? What with the inflation and all? I mean, Interesting. How am I supposed to buy my significant other, Alexis with a big huge bow on it, if car prices are so high? I wonder if I'm drowning here. The December to remember doesn't have a bow this year because like prices for bows are too high. Here's the craziest one though. Since January 2000, TVs are down 97%. What do you mean? Oh, wait. Inflation wise. Wow. So I'm sure that part of that is the quality stuff too. Think of how much better TVs are. My first flat screen TV was

like $2,700, and it's 32 inches. Yeah, so that's what mine was, like, 37 inches, and it was way more expensive than the 55-inch one I have now. So I guess the quality has improved everywhere, but you're 82-inch TV that has a line across it. Unbelievable. Lumber prices have crashed. We haven't spoken about that.

Big time. Like, so it was up, what, 165% as of a few months ago, and now it's negative on the year? Is it back to pre-pidemic levels, or is it still? See, I think this is a good use case for... By the way, yes, yes, it is. It is back to pre-pandemic levels. How about that?

Okay, so I think this is... Well, I should clarify. it's not back to pre-pandemic levels, but it's at like the 2018 high. But still, if you're buying a house, this is good news. But here's the thing, though, will the builders actually lower those prices? Or are they locking them in? Don't you think that's the kind of thing where these companies are going to be way quicker to raise prices than they are to cut them? This is great. Way longer. This is the case for stocks right here. Those from the journal, an analyst recently asked KB Home Chief Executive on a conference call for the big home builder would share lumber savings

with house hunters, lowering an average asking price that rose 13% during its second quarter or boost margins, which have climbed to the highest level since 2006. This was his answer. It will depend on the competitive landscape in each city, which is bullshit, because here's, this is part of matters. But our hope and expectation is that we'll take it to margin. Here's another one. Lenard basically said the same thing. Lenard too expects higher margins. So this is why you own stocks, because prices only come up. They never come down. And that's the part of it, that's not transitory. Obviously, well, I shouldn't say, obviously, some people do think the rate of inflation at 5% will remain. That's going to come down. We're not going to get 5%

inflation for the next three years. God, I hope not. But what's not transitory is these price increases are not coming back down. Well, hopefully this will be the kick in the pants to get these builders to build more homes because they were hesitant to build homes for all because the costs kept rising. So now if they've got a little more buffer in their margin, hopefully that means that they're starting to put their foot in the gas and build more homes. That would be the hope at least. All right. So labor has the upper hand for the first time in a long, long time. McDonald's is bumping at starting pay from $11 to $17 an hour.

On average, yeah, that's an average, but still, that's much better. Did they say that they're going to start, like, offering other incentives, like student loan repayment, or am I making that up? I feel like I read that somewhere. Tuition. They're going to offer tuition help, potentially. You know, the other thing you get, so have you been to Fast Food Place lately? My kids still love McDonald's.

They like the cheeseburger's there. We went to one this weekend at a drive-thru, and there was a sign. on there, and I think I've seen people post these on social media. It was like, hey, we are understaffed. Please be patient with us in this time while we try when we don't know of people here and stop yelling at our employees. If you're in one of those jobs, that's like the quit thing is at all the time high. That's got to be part of it too. People say, like, I'm not going to put up with this. These people yelling at me all the time for bad service. You would have hoped that people would have thought, like, okay, these are the frontline employees throughout the whole pandemic.

Let's cut them a little slack. And now people are yelling at them and with their burger faster. Job openings. Well, Ben, stop yelling at McDonald's employees. No, in the drive-door, I'm yelling at my kids to be quiet so I can put my order in for my chicken sandwiches. You get chicken sandwiches at McDonald's? They got their new chicken sandwich that they tried to copy Chick-fil-A's. It's probably 60% as good. Okay, so we've got 9 million job openings, most ever. Obviously, small businesses with hard-to-fill job openings as a survey is at an all-time high.

What's interesting is that they also show this chart of the percent of small businesses that are raising prices. it's 45% raising workers' compensation, only around 30%. Interesting. So they're quicker to raise prices than they are quicker to raise wages. So most of the time, these lines track each other, but not always. I'm not quite sure why, but the raising prices got ahead of raising worker comp in the mid-2000s. Okay. So maybe we'll play some catch-up there.

They're going to have to, right? You would think. All right. This is from Goldman. Maybe this is a good thing on our Robert Gordon book we always talk about, the rise and fall of American growth. Since the crisis began, annualized growth and output per hour has risen 3.1% compared with 1.4% in the previous business cycle. Goldman's economists say stronger productivity growth has been one of the civil lines of the pandemic. By the way, how often do you hear people say this?

Listen, they preface it with, I know the pandemic has been bad and it's hurt a lot of people and killed people. I do that. You have to. I know. But I think we know that at this point. Anyway. Too soon. You still have to say that. All right. So they say those gains are most visible in sectors that can take advantage of virtual meetings. They say the big thing is people not having to commute. Like, that's a big productivity thing. Don't you think the other part is just there's way less bullshitting with your coworkers?

Yeah. People aren't coming into your office all the time. There's no nonsense. Yes. Yeah, you don't have as many. And whatever, I'm sure some people enjoy that banter and the before meeting stuff and after meeting stuff. Let's take a walk on the way to the meeting and talk about stuff you don't care about. As someone who is anti-small talk, I hated that stuff.

Always hated it. You're worse at small talk than I am. Compared to you, I'm like chatty Kathy. It's just never been my thing. So I work in an office alone and I never have to talk anyone for the whole day if I don't want to, except you. But that's a phone call. That's not like a chit-chatty small talk like, hey, so what did you do this weekend? That sort of thing.

Somebody tracks the New York City Turnstiles charts. They are still so depressed. I really don't think that's ever coming back. Like to maybe 80% tops. So I think the James Altiture New York is dead thing was like a total troll job. And then you see so people on social media. Wait, are you saying that he just wanted to get a reaction out of people? Can you imagine the crypto guy with Bitcoin eyes?

But obviously, no one ever really thought big cities were dead. But saying that like big cities are impaired and in for a rough time from what they were pre-pendemic is still like, that's an okay take to have. I think some of the stuff in New York City is permanently impaired. It's a different world now. Rents are basically all the way back. Are they? Yeah.

Okay. So you had a chance as a young person for a while there. So, all right, pandemic relief is coming to an end. The eviction moratorium ends on July 31st. Every time I post a piece about, or we talk about real estate, someone throws that in my face and say, just wait until this happens. Then the real estate market is going to crash. Well, all right.

Come on. Mortgage forbearance. September. Student loans, probably September. Don't you think savings for everyone is so well-stocked at this point? It probably won't matter for a while for any of this stuff? I think it's going to matter. Like overall, economy-wise or just certain households? I don't know that we're going to see it in the data. Actually, no, I do think we're going to see it in the data. I think this is going to matter. Extended unemployment is coming to an end. But there was an article in the journal showing that half of all states have opted out of the extended unemployment. And nearly all of the states that have opted out are led by Republican governors. The only state led by a Democratic governor actually that opted out as Louis. Louisiana. And the data, it's early, but June unemployment rates tended to be lower in states

that have opted out early, which probably isn't that big of a shock. You end unemployment benefits, people get back to work or people have more urgency to get back to work. Which makes sense. So all those unfilled jobs, hopefully will get filled soon. Yeah. So that 9.2 million number that we're seeing, I think that's going to pull back significantly. Again, this whole experiment that we've run here is going to have such interesting economic research stuff because you can see like this program ends on this date. You can see what happened when it was instituted, then it would stop. Like, that's going to be fascinated to look at like how that changes people's behavior. Somebody sent this to us.

Dave Ramsey posted this on Instagram, how to invest your money. And there's two buckets. Invest in. Don't invest in. And there's some that's to pick. Like, for example, I thought this is kind of interesting. he says invest in mutual funds spread equally in four categories, growth, growth and income, aggressive growth, and international. All right, I don't want to spend too much time

there. You could form your own opinions. But this part really stood out. And I'm not exactly sure what he's going for here. The don't invest in single stocks, Bitcoin or any cryptocurrency, whole life insurance policies, annuities, bonds, micro investing. And the last one is where my eyebrow really is raised. Reets, ETS, ETFs, and CDs, and particularly the ETFs one has caught my attention. Why would you make a blanket statement, don't invest in ETF? If I had to guess, I would say he's saying because you have the propensity to trade too frequently. What else could it be? Here's the thing. When you become a huge influencer like this, you can't have the same advice as everyone else. You have to stand out from the crowd and get people mad every once in a while

because your devotees are not going to care what you say. They're going to do whatever you tell them to do. I'm sure that's all of Dave Ramsey a troll. He doesn't strike me as a troll. I just think you have to have something that will make you stand out to make people mad. Oh, definitely a troll. Really? So is Susie Orman. Yeah, they know what they're doing here. You think Dave Ramsey doesn't know what he's doing when he puts something like this out because he's basically chopping off, don't go to a place like I Shares or Vanguard or something. Invest with us. I guess I'd go the other way. If they use ETFs. If you have such a big audience, why troll? Because what else are you going to do? Or I should say if you have such a devoted audience. Every influencer in the world is a troll.

Dave Portnoy, huge troll. Elon Musk, one of the richest men alive, enormous troll. That's what people do these days. They troll. If you get big enough audience, you start poking things. Sorry, every big influencer in the world is a troll. I wasn't trolling with the Tomorrow War. I was being honest.

I don't know which is worse. Okay, speaking of... Is Harry Dent a troll? I honestly don't know. So this is from ThinkAdvisor. And they call him the Contrarians Contrarians. He says the ever-building market bubble is likely to blow at the end of this month, if not September. He's never said that before, right? That stocks were about to crash.

Stocks have no place in investors' portfolio, he argues, forecasting that most equities will pull them by 80% and by autumn. Most stocks can fall by 80%. And if the index was down 10%, you'd say, see, index is only down 10%. All right. This is the biggest crash for our lifetime, yada, yada, yada, yada. This guy is- Wait, don't yada yada. I want to hear what he has to say. Okay. I'm only kidding. Yeah. Okay. So here's, I did this Harry Dent post a while ago. Wait, oh shit, oh shit, Ben. The worst year for the stock market in our lifetime is likely to be around the end of 2022. Yes.

But the funny thing is, they asked him, they said, hey, you predicted a crash nine months ago. You gave us the date. And he said, well, it would have happened if it wasn't for the Fed. This is what happens. But I looked through his old books. He got the first one right and he's been living off of that sense. So he wrote The Great Boom Ahead in 1994. Good call.

Nailed it. All right. 1999, the roaring 2000s. The 2000s were arguably the worst decade. ever for the stock market. We had two 50% crashes, and you lost 3% of year in the SP 500. Then he wrote the next great bubble boom, how to profit from the greatest boom in history, 2006, 2010. Whoops. Then in 2009, basically at the bottom, he wrote this in January, two or three months before the bottom, the Great Depression Head, How to Prosper in the Crash Following the Greatest Movement in History.

Then doubled down in 2011, the Great Crash Ahead Strategies for a World Turned Upside Down. He was predicting a 2012 to 2015 depression. Roll it back one more time. You think he just writes the same books and changes the dates? The sale of a lifetime, how the great bubble burst of 2017 to 2019 can make you rich. And finally, this one is, this is your coup de grace, stealing a lecobatic term. March 19, 2020, this came out. What to do in the bubble pops, personal and business strategies for the coming economic winter, basically bottom tick the pandemic crash by four days. He's a little early. I mean, he's probably sold millions of books. Most of these books have four and five stars

Hundreds of reviews They were all ridiculously wrong I forget who said this Oh was Jason's why He said like tell the truth that you can make a living Blah blah blah blah blah blah blah Lied to people who want to be lied to and you can be rich I guess that's it

I'm sure he's made a ton of And it is one of those things like It's not a lie if you believe it Does you really believe it? Four star reviews wow I mean I don't know I guess follow him at your Oh geez

I don't what to say about this kind of thing He should be blackballed from the industry after one of these books. I would like to, for a lot of people like this, just hit him with some truth serum, like a dose of truth serum. Yes. Do you believe this? Yeah. Come on. And what's worse?

I guess it's not having close. If you believe it, okay, fine. No, this is our type one, type two charlatan. But if you're deliberately misleading people, that's like 40,000 times worse. Yeah, I can't tell. I mean, I don't know. Anyway, so what are you doing to protect yourself? From the 80% crash that's coming?

I got nothing, man. Okay. I'm buying T-shirts on Instagram like you. Those are going to hold their value. All right. I don't know we pivot away from this, but we got to listen to question. In episode 212, you guys briefly covered Social Security. By the way, $212.

Holy cow. I think we're coming close to $300, actually. So this is a while ago. Okay. We are the living embodiment of the show must go on. We started this show in November 2017. How many shows have we missed? I think we missed one very early on.

No. Did we miss zero? Okay. Did we miss one? All right. If we missed one, I've been telling myself we've never missed a show. Maybe we missed one. I don't think we did. The first two or three months into the show, we missed one. I went to Disney World or something and we couldn't get the recording equipment to work. All right, fine. But in three years, we haven't missed one. Keep betting yourself in the back. Yes. All right, anyhow, you guys briefly covered Social Security, it being 17% of the national budget, how hard it would be if Congress has cut it, etc. What about an opt-out, whereby individuals can forego their Social Security benefit in exchange for, all right, Let's just, I don't even want to continue reading because I think this is such a bad idea, not to be too harsh to the listener. Thank you for the comment, but only because think about how some people like are anti-social security today. Imagine what that would do to the us versus them and like the welfare state and rich versus point. I think it would be horrific if people could opt out.

Social security is like how housing is forced savings for people. That's forced savings. And a lot of people, that is their entire retirement nut. So yeah, I think. giving people the option of taking it out is probably not a if you or someone who has your finances in order and you say no I want to invest in stocks I'm sure it sounds great for the majority of the population not a good idea why just survive back to school when you can thrive by creating a space that does it all for you no matter the size whether you're taking over your parents basement or moving to campus ikea has hundreds of design ideas and affordable options to complement any budget after all you're in your small space era it's time to own it Shop now at IKEA.ca. This was an amazing listener comment.

You guys touch on some good stuff today on the podcast regarding kids and money. I have a 14 and 12 year old, so it's something I think about a lot. He said it's hard to now because nobody carries cash anymore, so it's hard to do it that way. He said, especially if you are a person of means, you have to create artificial scarcity. So don't buy unlimited data plans for their phones. force them to choose one to two streaming services, tell your kids know a lot and make it clear that it's not because you can't afford it, but because you choose not to spend your money that way. Teach them about making a quality purchase and avoiding junk. Don't buy things the first time

they ask if they're serious. So I love it, the idea of creating scarcity, being very specific about ways to do it. I thought this is great. So this weekend, a punishment for my son and daughter because they weren't listening very well. No ice cream for Saturday night. Guess who was punished the most out of that? Me. I didn't get any ice cream either. I should have gotten and ate it in front of them probably. So this is the Bitcoin approach, the scarcity approach, right? Listen, we only have $10,000 finite dollars in the bank. There will never be more dollars. I do like this idea. Okay, this child tax credit. I think this is being underreported. Hey. Same page. Same page. Same page. Same page. Maximum credit is $3,600 for each child under six,

$3,000 for each. So this is, guess what, this makes up a lot for the stuff rolling off. I think this only goes through the end of the year and they're trying to make it permanent. But so this is six months or so where you're getting, I mean, if you're, if you're you had three kids, you could be getting thousands of dollars a month. Think about how much money could be getting a group of young kids to pay child care, to pay whatever. This is a lot of money for a lot of people. I mean, it phases out above what 150 grand or 175 grand if you make combined, but this is a lot of money. This is a big deal. Speaking of being flushed with cash, private markets, so CB Insights has these great charts showing just what's going on in private

market. So, for example, there were 136 new unicorns born in the second quarter, up 491% year of year. It used to be like in the 30s, 40s. Now it was 136 in Q2. I think we need a new phrase for a unicorn. Like a billion dollars is not a lot of money anymore. Thanks to inflation. You and I have talked to a handful of fintech startups. And it seems, I mean, if you had an idea right now and you can't get funded, something is wrong with your idea because everything is getting funded. And people are just lining up at the door to throw money these places. Global funding startups, eye popping record. How about this? In Q2, 2019, it was $69 billion. $69 billion in 2019. In Q2, 2021, it was $156 billion. Median valuations

are at an all time high. And I think maybe this is, like a lot of people in Silicon Valley, I don't really have evidence for this. This is sort of anecdotal. They seem to be the inflation people. True. And I think one of it is like maybe, I don't know if it's their lifestyle or whatever, but they're seeing things like this. Like we used to be able to invest at a $10 million valuation and everything is getting more expensive. Well, they also live in the most expensive area of the country. Sure. That doesn't help. But the other part of this is some people see this as if you're a glasses have empty person, you say, okay, they're propping up these zombie companies that haven't done anything yet. The glasses have full thing says, these VC dollars are going to make a lot of

stuff happened because there's so much money sloshing around. They're going to give these startups a way longer runway to get off the ground and see if these ideas have legs. And there's going to be companies funded that maybe in the past we never would have made it. Yeah, I think this can last a lot longer, a lot, lot longer than people think. Like, let's say that you think that Top Shot is a dumb idea and it's going to, whatever, it's going to fizzle out. Hand up. Okay, fine. But how much money have they raised? What is a $4 billion company or $7, $8 billion? I can't remember. Like, I'm just going to guess that they've raised, I mean, we spoke with it. I can't remember the top of my head.

But they probably raised at this point hundreds of millions of dollars. You think they're going to go out of business tomorrow? Exactly. That's the thing. They have so much money to keep them afloat and try new stuff out for a while and on the VC tab. One out of every five venture dollars in Q2 went to FinTech. So I'm still going through my refi as I've been complaining about. I was on the phone with the banker last week, literally going over statements.

We're going to need a weekly update at this point. It's absurd. I wish that I went with it. Like there's better.com does this stuff figure. Did you have any brokers reach out to you? Because I had a few people reach out to me with contact details about people to use for refinancing going forward. A few people recommended better.com. But I'm too far.

I mean, I'm at the one-yard line. Problem is I've been there for four months. The seventh down at the one-yard line, though. When we spoke about us in the past, somebody sent this to me about cash offers, more than a half of home sales recorded this year in NASA and Suffolk, which is where I'm from, were cash, meaning, like, literally did not have a mortgage. When we say, like, No, it did not have a mortgage. Across the U.S., cash purchases accounted for 30% of home sales, which would be the highest since 2015. Some of this is also people who already have a house paid off, better than selling it and using that proceeds to buy another house.

It's not just that they have $800,000 in their checkbook, whatever. They actually are selling a house and using the cash proceeds to buy it. Does that count? I would guess, I mean, not everybody has hundreds of thousands of dollars lying around. So what else could it be? Yeah, it's just a shockingly high number to me. Like, that's why I don't see how you could be worried about the mortgage market itself, besides the fact that the price run just seems unsustainable, the fact that so many people

are buying houses with cash right now, I don't know, like how you could worry about this like you did the housing bubble, which was people who were just borrowing and had debt up to their eyeballs. This is a different, totally different scenario. So it does sound like, so Wall Street Journal had one that says the housing market is starting to slow down a little bit and not get as crazy like the frenzy and there's more houses listed for sale. And their higher price too. The number of new listings over a million dollars jumped almost 18% through June 19th. But unfortunately, new listings price under 350 were down 7.4%. So it's showing kind of a divergence there. But this one kind of got to me. This is why I think emotions are totally separate from interest rates. This Brooklyn couple who have their home in the North Fork, which what's that? Give me the lay of land on Long Island. In Long Island? It's like the other side of the Hamptons. The Hamptons are on the south shore. The North Fork is on the So they're saying that they for years had this cottage up there and it was like a two and a half million dollar purchase. That was a very nice. Can we call it a cottage? I mean, that's a beautiful house.

It was nice. But they said like, listen, we were kind of resigned to the fact that we're never selling this. And then they said a house a few blocks away sold in 72 hours for $2.5 million. And then they're like, oh, okay, this is way more money than we thought. What can we get for ours? That got our wheel spinning. And then they sold theirs and for whatever. So this is a thing. Interest rates were low before the pandemic hit. And these people could not sell their house. Pandemic hits, rates go a little lower, but not much lower. They're still pretty low. And then all of a sudden, boom, these people could sell their house. This is why, like, risk appetite and people just getting those wheels spinning is so much more important than the actual level of rates. Yes.

I know rates matter, but rates themselves cannot get people to move and change their emotions and how they feel about this stuff. I mean, they could derail it. They could cut it off. Yes, for sure. There's no fomo like real estate phoma. Like, if you're seeing friends and family get vacation homes. Yes.

Like that seed plants big time. It's true. And the same thing, like all the people listing on your block. I'm sure you always talk about your anecdotes of people listing on your block and all these houses. So much of that has to do with, wait, they're selling for what? Now we can sell. That's just the way the human brain works. Like, oh, gosh.

And you're just adding it up in your head about how much money it is. And hey, I can pull some of this money out. That person got X for their house. Our house is way nice than that house. Yes, exactly. Can you believe it? Have you seen their kitchen? Look at the countertops.

That's how much there's charging. So John Street Capital, who we've mentioned in the past great follow on Twitter, tweeted that Apple and Goldman, which by the way, that partnership, we've also spoken about this. Have you ever seen an Apple card in the wild? No, that's a good point. I have not. Which, by the way, I got my BlockFi Bitcoin card this past week. And? Have you used it yet? Have you used it yet? I haven't used it yet. Well, you should do it because I don't know if you notice, but crypto's on sale. Only $30,600. So I buy Bitcoin with the credit card to get those points. And then I get more Bitcoin on that. All right.

So Apple and Goldman are doing a Buy Now Pay Later service. Apple Pay Later. And I actually think this could be huge for them. Because if you could buy an Apple product, how much of the laptops? I don't know. They're expensive. Two grand, whatever it is. If you could buy that and pay it in 20 monthly installments, that can be huge.

I don't get how this is a viable business model, though. This is the thing that doesn't make sense to me. How, like, a firm in these companies. I mean, this is effectively layaway, but you get the product up front. My mom used to do layaway at Kmart back in the day, and you'd pay it off slowly. This is layaway, but you get it up front. I just don't see how the business model works. There's so much money out there.

Who cares about the business model? Explain it to me. Whoever selling it is paying some feed to them for doing it. Well, oftentimes merchants are paying the bank and or not everybody gets to buy now, pay later with zero percent interest. You have to have good credit, and that makes sense. Yeah, there are people who are paying higher interest. Okay, before we get to listener questions, someone asked a question a couple weeks ago,

like what happens if the government decides to tax Roths? And this person, they ran the numbers for us and said, actually, Roth IRAs, Congress loves them because you pay your taxes up front. So they say, oh, good point. They calculated that Roth IRAs, they make a ton more money than regular IRAs. So the revenue loss from Roth IRAs when you're taken out is like $47 billion, but traditional IRAs cost the government $90 billion. And so they're saying that, like, most of Congress loves that.

They want to, like, turn the 401k into a Roth, so they get the taxes up front instead of the back end. By the way, I hope I wasn't too harsh on the listener question about Social Security. I didn't mean to be rude. Okay. I feel like I came off a little bit rude. That's okay. You're a bigger man for admitting your mistake.

That's all right. All right. Let's do one because we're running late. Going back to work soon, won't be able to track the market as much as I am now. That's probably a good thing, actually. I bought some tech stocks during the recent pullback, but I realized the days of buying the dip and getting 50% return are over. That's a good realization.

The most reliable stocks I've had are some Vanguard ETFs that have just consistently moved up into the right with an incredible year-to-date return. As I've prepared to return to normal office life, what should I do with the money that I put into the market? Does it make sense to keep my money in individual stocks and relax, checking it every day, or does it actually make sense to move things into an ETF and set it and forget it? I guess the idea that you watching the market more and having your hand on the steering wheel is actually improving your performance is probably the problem here because that is a huge misnomer that like the more you're paying attention and the more you're watching stuff, the better your performance is going to be. Yeah, like you could like corral

your. That's an illusion of control. No one actually has control over what happens because you watch with. With individual stocks or ETFs, the less you pay attention, probably the better. So it really depends on what you're comfortable with holding as an investor. Here's my advice. Whatever we tell you is not going to be like a silver bullet to you. You will figure it out on your own and you will probably come to the conclusion. I don't know what conclusion you'll come to, but you will come to the conclusion on your own. You'll figure out what works for you after some trial and error. That's the thing. You have to figure out what works for you. That's the whole thing. I've got a bunch of recommendations, so let me start, if you don't mind. Go for it.

I really like The White Lotus. Did you watch last night's episode? No, we just watched the first one, though. Okay. It's super quirky. It's a new show on HBO, and it's about these people that go on a beautiful vacation in Hawaii, juxtaposed with the staff. and there's no really sports to give away because I'm not even sure where they're going with the show, but I very much enjoy it. I like the music, like the scenery, like the acting.

It made you want to go to Hawaii, though. Oh, for sure. So it's dark comedy. That's the genre. Okay, Mr. In Between, it's over. That was a huge letdown for me. I had no idea that the show was ending and... You told me that it ended, but when it ended,

I felt I kind of missed an episode. I was like, wait, wait, wait. I was like, tap the... I was like, is this thing off? So we watched the last episode, and I said, that kind of felt finale-e to me. Because he gave a weird wink at the camera, kind of. Yeah, and I looked at my wife and I go, wait, was that it?

I was devastated. How about he went from like bald bald to like he let his hair grow? It made a difference, right? Huge difference. But you can add that one to your bald consultancy. That's not a great look, I don't think. No, it looked better, totally shaved. But I read a story about him saying, yeah, I'm going to go out on top.

I kind of ran out of ideas. I think I'm done with this character. I would have watched four more seasons of this show. Me too. That was, yeah, very bitter. Can I just say. I like this. the ending, though. I do think that this is going to be, I don't know how, but I think this

will be, like they said in the article, a word of mouth show. This is for me, the emailer who put us on to this said this, and I thank you for this, and I completely agree. He said, this is the best show that nobody talks about. Yes, by far. Easily the best show that nobody talks about. Okay, it was Patrick O'Shaughnessy. I can't remember. It was Patrick O'Shaughnessy who recommended Project Hail Mary. And this is a type of book that, like, I want to talk about with people because it was like just so much fun and I just, I loved that. Are you reading this? I'm a hundred pages in. I started it this weekend. We'll have a book report when this is all done. You and I can share some notes. I loved everything about it, especially at the end. I just thought it was great. And

I don't know how somebody can even write a science fiction book. Like, what type of genius can do that makes no sense to me? Well, and supposedly when he wrote The Martian, a lot of the stuff he was writing, even though it was a fiction book, he's using facts that actually line up with reality. Yes. This one seemed like it was very well presented and a lot of the data seemed like, okay, this seems legit. I realized something about myself. I think deep down I always knew, but, so I rewatched Arrival. I rewatch that one recently, too. That's a great movie. Because there was some similarity, I mean, a lot of similarities, I guess, between this book and that movie, especially the language part. And I liked Arrival much better the second time. I think because it was so

hyped, I was kind of let down by the spoiler. It just didn't match. But the second time, I mean, I liked it the first time, but I really like it. It's different once you know the ending, watching it back through. Right. So anyway, the arrival was done by this guy, Dennisville, and Nueva, who is going to be directing Dune, which looks like an amazing blockbuster. Did not read the book. So he also did Secario, which I loved, or Sicario, and prisoners with Jake Gyllenhaal. That was really good. But I realized something about myself. Aliens is my favorite genre. Yeah. I think especially when you make it seem like it could kind of happen. If it's not like too far out there, like I think if you make it feel like you're matching a little bit of reality with aliens. I think that, to me, is, I love that, too.

Okay, so I'm guessing that Prometheus is not one of those realistic ones, but I was watching Prometheus last night. I love Prometheus. Robert goes, you've seen this a hundred times. You know the scene where she's stapling her belly? Yeah, I like that movie. I love that. So, there it is. Aliens are my favorite genre. Okay. They could have improved Top Gun if they would have just some aliens. That's all needed. All right. All right. Sorry for hogging. No, recommendations. I Honestly, besides Mr. In Between, I don't have much. I've been doing too much outside stuff lately. Oh, I went to my first comedy show this weekend, and probably 2% of the jokes were COVID-related, and I was completely fine with that.

Like, I feel like when I'm being entertained now, I'm fine leaving the pandemic stuff completely out. TV shows, movies, like, I don't need them to incorporate that. I'm fine. If I'm being entertained, I want my mind turned off. I don't want to think about the pandemic at all. I don't need it. I did feel like the comedians were a little rusty. though. And they even mentioned, like, getting back into the swing of things, like, they're trying

out new material and such. Anybody you recognize? Not, I mean, this was in West Michigan, so we don't get the headliners. You know what I learned? Devin Booker, Grand Rapids. Yes. They remind us on the local news every night, I think. Okay. I am still winning money in the NBA playoffs. I've switched my allegiance to the bucks, and I've been betting on them lately. You've been perfectly hedged all the whole way through. You gave me a tip on Saturday and said, bet the bucks tonight. I said, you know what? I'm going to do that. It's interesting you mentioned that, because I really felt strongly that the bucks were going to win. And I usually don't get any sense.

And I was like, I really, really think they've got him. I really do. And so I almost called you to put a bet down for me. And then in the first quarter, so I was like thinking about intuition and how it's not a real thing and don't trust it. And in the first quarter, I was like, well, that's a good thing I didn't trust my gut. And then my brain played tricks on me. And then in the fourth quarter, I was so mad because I was like, I knew it. I knew it.

I knew they were going to win. And of course I did it, but anyway. Okay. Check up us again on Monday. And we're going to be back with Fundorizes Ben Miller to talk more about the real estate market. Animal Spiritspod at gmail.com.