Animal Spirits Podcast - Probably Not The Next Lehman (EP.223)

Episode Date: September 22, 2021

On this week's show we discuss the newest market crisis du jour, what's holding down bond yields, the crypto narrative that doesn't hold water, America's day care system is broken 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 BlockFi. Ben, have you been using your BlockFi credit card? I have. I have already gotten over $250 in Bitcoin paid to my name. Really? Yes, from the first three months of using my BlockFi card. Pretty good, huh? How? It's a lot of Bitcoin. I'm earning 3.5% on my credit card charges, and I use my credit card for everything. You switched all your regular purchases to BlockFi? Yes, especially for the first three months when I'm getting the three and a half percent back. I'm earning Bitcoin, and now I'm buying it. Are you then taking your Bitcoin and then moving it to earn?

Yes. So every time I buy something, I'm buying the dip in Bitcoin with my credit card. Are you buying now and paying later? Do you have to pay it in 30 days? It's just like a regular credit card. It's a Bitcoin credit card, but you pay it off, yes, every 30 days. No, let me ask you this. Is your Bitcoin credit card linked to your bank account or can you use stable coins to

pay it off? I'm paying it off with a bank account. There is some traditional finance involved here. But yes, if you sign up for the Bitcoin card, X New York from BlockFi, you get to earn for the first three months, three and a half percent back, paid in Bitcoin. That goes into your account. I have a TradFi story, but let's save it for the show. Okay. If you want to check out more about the BlockFi credit card, go to BlockFi.com backslash Animal Spirit CC for more. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about but they're reading, writing, and watching.

Michael Batnik 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 Rit Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rit Holt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Do I really have to care about this China real estate story?

this ever grand. This is a company I have not heard of until five days ago. I honestly thought when they first were talking about the story, this was the container ship that got caught in the Suez Canal. Do I really have to macro this much for this thing? You don't have to care about this, but this cares about you. Come on. Do you care? Did you buy an NFT of this company yet or something? Well, what are we trying to say exactly? I mean, this is a big story. Is it? Is it though? It is. It is. Are the risks being overblown, potentially? But it's the second largest property development company in the second largest economy in the world. And they can't pay their bills. So, Ben, if you're too cool for school on this story, if this isn't a story, what is? I'm not saying you have to read the financials, but this is one of the downsides of the information age is that we're being force fed the fact that we have to care about every macro story there is. And this is a especially true probably since 2008. Remember the Cyprus banking crisis that for like a weekend, like a three-day weekend we all had to pay attention to in like 2010, like it was really going to be

this is a domino. This is a canary in the coal mine. Dude, there's a difference between Cyprus and the second biggest property company in China. Okay. Cyprus has a population of what, 40,000. I am making that up. And China has a bigger checkbook than anyone. If they want to make this go away, they can make it go away. What if they don't want it to go away? Maybe they don't. But I am sick of the, every time a big company gets in trouble, they go, kind of feels like layman to me. I'm just saying, this is like Lehman Brothers. I'm not trying to completely poo-poo this. I just don't have enough bandwidth for this. Fine, fair enough. I just hope that take doesn't age really badly. I hope we're not replaying that clip six months from that. That's fine. If this was a canary in the coal mine, I'm willing to

bet that because every one of these is not the canary in the coal mine. That's my stance to take on this stuff. So the S&P 500 is now down what? Ben, that's a great stance. Here's a thing. Whenever I decide to retire, and I look at my pile of retirement savings, am I ever going to go, I wish I would have played that Evergrand story a little better back in the day, like from a macro perspective, because I would be doing so much better if that was the case. Of course not. Listen, you're Bob the World's Worst Market Timber guy. You buy it the top and you just, I get it. I get it. The S&P 500 is now down 4.9%. In 96% of all years since going back to 90 years or something, however far back I have this data, there's been a 5%

correction from peak to trough. We haven't had that yet. This is about time. We haven't even had a 5% correction this year. Not funny. I agree. I just wrote this today. Sometimes the market is just looking for a reason to sell. And this is as good an excuse as any. And I just feel like maybe on the one hand, I wrote like the market is not omniscient, meaning that you can't judge the future based on the stock market. Certainly not one day's returns because it could get a lot worse from here. But if the market was really worried that this was an ex-leiman, don't you think stocks would be down a lot more than 2.6% and down more than 5% from the highs. Yeah. And the Chinese stock market has already been getting crushed of late. And the U.S. Sack market hasn't cared.

Here's a secret. You want to know why the market's really falling? The Tobin's Q ratio finally got way too stretched. And investors said, enough. Remember Tobin's Q? Of course. Did we throw that one out the window yet? That's like tangible as. Anyway, okay, that one fell flat. That was not your best dad joke. The VIX is at 27. I don't know. Listen, we'll see. We'll see where we go from here. All right. I'm just, I don't have the bandwidth for it. No, I'm sorry. I can't make myself care about another macro story like this that in three months. People are going to go, hey, remember that story? When the market is out of high. As somebody who is going to buy global stocks in about 10 days, selfishly, I hope they go a little bit lower. I'm looking for a deal. Yes, everybody. Most people should that are continued to save. I don't know. Throw this in my face that I'm wrong. I think. I don't want to. All right. Let's put it out there. If you'd like to go make some hedging trades right now, I'm fine. We can stop the show. Who's making hedge in trades?

We agree. All right. I just think you don't have to act like it. I think a lot of investors, because it's so easy to pay attention these days, pretend that they have to act like a hedge fund manager when managing risks and like hedge every little risk. And I don't think that's ever a good way to manage your money. Come on. I'll push back.

You think anybody's doing anything right now? You think the average person is doing anything with these headlines? I don't think so. Okay. Someone's selling. Markets down. So someone's doing something. Not me.

Not me. Okay. All right. This is a good one from Ed Yardinney. He's saying this is about bond flows. There's actually a very simple explanation for why the 10-year treasury bond peaked at 1.7% on March 31st of this year and fell to a low of 1.2% on August 4th. What's it at now, by the way? Are we getting inflate to safety on a day when the S&P is down 2%. Rates are dropping. Rates are dropping. On a 12-month basis, net inflows into bond of mutual funds and ETF stored from $572 billion during January to peak at a record of $1 trillion during a. April. Through July, $861 billion. Basically, this is the contra to everyone is piling into the stock market. And if you look at this chart from here, Denny, just in the last five or six months, bond flows have exploded in ETFs and mutual funds. This is one that hurts your brain a little to think

about. Because you see all the speculation in excess that the Evergrand story is going to take out of the market, I'm going to play the other side. So this is the clip where I say, this really is a big risk. So if you want to just delete the other part, this is a huge risk and all the excess and speculation is going to go out of the market. And the flight to safety in JPEGs is where you want to be, sorry. There's so much money going into bond funds that it hurts my brain a little to think about how much speculation and excess we've been seeing in the months from all these other corners of the market. I think this is actually a really good sign for things not being so out of hand. Yardinney had a great line. He said, contrary to there is no alternative, bonds are still viewed

by some investors as an alternative to stocks. Yes, even with ridiculously low interest rates. How much of this? I mean, the Fed bought bonds, but they're not buying all these bonds. But these are actually funds. This is not what the Fed is buying, right? This is actually funds and ETFs. They bought ETFs. It was a minor amount. But still small. It was small. Yes. Okay. Sticking with the interest rate thing. So this chart was going around from the Wall Street Journal. I think it's actually an older chart. And it shows building. a pension, like a lot of the pension funds have their expected returns at like 7.5%, call it 7 to 8%. And it's going by year. So it's 1995, 2005, 2015. What portfolio would have taken

to get these expected returns? And it's basically saying in 95, you could get a 7.5% return simply owning bonds. Standard deviations low, bond yields were that high. You could get it in high quality bonds. By 2005, it would drop to roughly half of your portfolio on bonds. And then by 2015 and now, Probably it's more like if you are using expected to earn for bonds, you're at like 10% in bonds and everything else has to be private equity in stocks and all this other stuff. And your standard deviations higher, obviously. This is a very cool chart and it says a lot. And I think a lot of people say this says a lot about today's market, but I think it really says a lot about yesterday's market back then. That is the anomaly. Yeah, I think so. You should have to take risk in order to

get reward. I think this idea that like bond investors are being robbed, I don't know. I mean, are they? Do you think that back in like the 80s and 90s, people knew how good they had it? We can invest in a treasury bond paying eight or nine percent. It's basically free money. Inflation was falling, not rising. Do you think anyone at the time sat there and goes, we should pinch ourselves. We're never going to see this again. No, I don't think that. They probably thought it was still pretty difficult to invest, right? I think most people, most bond investors are too busy living their life to get excited by bond returns. Okay.

You know a lot of bond investors? All right. I'm just saying, this is a very pretty chart that says a lot of things, but I think it says more about the past than it does the present or the future. There was a company that was in the news. Matt Levine wrote about them, don't buy the bad data. What was the name of this company? App Annie.

I never heard of them. This is interesting. So it's a company that aggregates user data on different mobile apps. I gather. They sold their data to hedge funds, and they got in trouble. They paid a fine. I can't remember the size, but I think it was pretty large. And I don't know if it was insider trading, but the reason why they sold the data is because they sold the data without getting user consent. They didn't tell the users that they were selling the data. I think people had the option to opt out and they sold their data anyway. Whatever, we'll link to the story

in the show notes. But I was thinking about user data and hedge funds. I took Tegas for a spin. Tegas is that company that Patrick O'Shaughnessy, it's a sponsor of their podcast. And I was looking for a particular piece of data that I couldn't find at a zip recruiter of finance. Oh, it's good. Yeah, right? Yeah. Oh, Mika's on podcasts.

Yes. And so I was thinking, so what Tegas is, is they provide users with transcripts between business executives and analysts. So if you wanted to learn about Peloton, affirm, whatever, you could read calls between an analyst and, say, the former CFO at one of these companies. And I was just thinking, like, it is amazing how much data. I don't know much about this company. Is Tegas hiring these people to do these interviews? Are these interviews being done elsewhere, and they're giving access to them? I don't know the business model. I think the way that it

works is that analysts who use Tegas give this to Tegas in exchange for access. I'm not really sure exactly. That's neither here nor there. The point is, that this is table stakes in terms of the data that hedgements have access to, and it's still supremely difficult for them to gain an edge because they all have access to all of the data. And so it's just funny thinking about regular people opening their app and competing with them, like, LOL, good luck, but LOL, they're winning. My first thought was like, oh, man, imagine competing against these people. people who have all of the data and everything. And then it's like, hey, wait a minute. People are

competing against them and people are winning. Because the simple way of looking at things for the last few years has been right. Yeah, this is an Occam's Razor Market and the razor is buy. Again, everything we've heard is don't chase yield and don't speculate and don't buy the- Terrible advice. Yeah, don't buy IPOs. Throw caution to the wind. Every piece of academic research you've heard, don't buy expensive stocks, has been thrown out the window. And everything you're hold not to do. I mean, basically, it's mostly been by what's going up and that has worked for you for a while. Is that like the Costanza? Like, do the opposite of everything you. Yes, the opposite of everything you've told. And everything that they learned. So these people all went to

Columbia Business School and learned about the Ben Graham value investing course. What's the contra Ben Graham? Like, what's the growth investor course at Columbia are going to be? If Ben Graham was here, would you say, you idiots are still reading that book I wrote 75 years ago? Okay. I'm going to do a blog post out loud right now. So I'm getting to this in my recommendations Jesse Livermore. I'd never read the Boy Plunger book before, which is excellent, the Jesse Livermore biography. And they talked about how he made all his money in the, not the boiler rooms, what is it called? The bucket shops. Bucket shops, there you go. So it was in-depth in the bucket shops. But it talked about when he killed himself in 1940 and he tried to make his fortune

back after losing it five times or whatever, most of the stuff that he did in the past to make money had been regulated away, or it didn't work anymore. And I think a lot of people think, well, he just followed trends and he did that, but a lot of stuff he did was a little shadier than that. When Ben Graham died, remember, he said all the stuff I did in the 30s and 40s to make money, doesn't work anymore. When did he die? I feel like that was the late 70s, but when did he die?

That was a long time ago. He basically said all the stuff that I wrote about in my book, the formulas and everything, like, it doesn't work and right. He suggested to most people to just index funds. That was in the mid-70s when index funds were just coming out, Basically. He died in 1976. So he said this stopped working 50 years ago. Yes, which is kind of crazy that these two, maybe because they had so many good quotes, I mean, Jesse Livermore probably remains the most quotable trader ever. Not a great call on Ben Graham's part, to be honest, because value investing

worked for quite a while. He was a little early, probably. A few decades early. Yeah, when you're a value investor, you get in early. This is a true story. It happened right here in my town. One night, 17 kids woke up, got out of bed, walked into the dark, and they never came back. I'm the director of Barbarian. A lot of people die in a lot of weird ways. We're not going to find it in the news because the police covered everything all up. On August days. This is where the story really starts.

Weapons. All right. Robin Hood is going on a college tour to recruit new customers is the headline of the Wall Street journal app story. My first knee jerk reaction was like, this is not bullish. Like in other words, they've exhausted everybody that they could have gotten and they've got into already. What's next? High school. But did you ever have this at college before you got kicked out? Before you got kicked out, where you'd go to the quad thing when you first sign up for school and they have the orientation. Whatever you're about to ask. The answer is no, but go ahead. Okay. So they'd have these credit card companies at a table set up. And it would be like, sign up for a credit card here.

We'll give you a free t-shirt and $3,000 of credit. And they try to hook college kids in before they know what they're doing. That's what this reminds me of. Michael Antinelli put me on to this. Six bucks. Callahan Auto. Literally $6. They spelled Callahan wrong because he was paid $6 for it.

Did they? No, two L's. Not bad. Six bucks. You're a Tommy Boy fan, obviously. You're okay with that? I want to make sure you don't have a contrarian take on Tommy Boy, like you did the top. Oh, no, no.

Okay, no. I saw Tommy Boy when I was 11. It was perfect. One of the few movies I've ever watched in the theater twice. I went to see it twice in a theater. I liked it so much. I've never done that. That's probably one of the first.

few movies I've ever done that for. Good call. Good job about you. I was ahead of my time. All right. Cover story. Crypto. Crypto is a cover story in Bairns this weekend. Inside the new currency wars. Did you read this? No, but I feel like the only time we hear about Barons anymore is when there's a cover that people think is a sign of a top or a contrarian. So you spoke about more indexes than stocks. The number of cryptos has jumped almost 140% in the past two years. There's now 6,500 cryptocurrencies. Yeah, but they're all very scared. Why not? That's pretty impressive.

There's a huge drop in this chart. What was that? The first crash when we lost some? So there's nearly 7,000 different types of crypto. How is this possible? Because I guess, I don't know, it's with the forks and everything. It's super easy to... At this point, do you need to hire robots to go into all the Discord channels to pay attention?

Which, by the way, if you're doing research on crypto and you don't mention Discord, you get fired automatically, right? Like, you have to say I'm in the Discord chats. That's the new... In stocks, you say I'm a bottom. about fundamental analyst. In Crypto, you say, I'm on Discord learning about all these when no one else is. That's what everyone says. Okay, I listened to a podcast this weekend on Defi and Crypto. And here's a narrative that I'm totally over because I think... Which one? Give a plug. It sounds amazing. So this is Cam Harvey with Barry Riddholtz on Masters in Business.

No offense to Cam and Barry, but you listen to two boomers talking DeFi? Apparently, Cam was way ahead of the game and started a Bitcoin in his class in 2014. Oh, wow, good friend. By the way, I actually did read his book. Oh, here it is. Okay. What's the book called? It is called Defi and the Future of Finance.

So anyway, I think the first narrative that really made sense to me when I was trying to wrap my head around Bitcoin in 2016, 2017, was let's say you're in a third world country. The banking is pretty poor there. You want to get your money out. This is a way to do that where it's permissionless and decentralized and all these things. So people mention places like Venezuela and stuff. And Cam Harvey mentioned this. And I just, if this stuff is going to work, if Defi really is going to carve out a huge piece or potentially take over the finance system, I'm sorry, I'd be happy to be proved wrong here. It's not going to be from unbanked people. Think about you are a finance person with a ton of experience and know what you're doing and you have some money. You cannot figure out some of this Metamask wallet stuff in gas fees. Are we really supposed to expect people in the third world who don't have bank accounts already to figure this stuff? out too? No. I agree. I think this is a bit of a red herring. So listen, if defy is going to take over

the financial system, or it's going to just carve out a huge part of it somehow, it's going to happen because rich people decide it's going to. If rich people decide that, and it could be if it's older rich people, it's going to happen faster, and if it's younger rich people, it's probably going to have a little slower. But if rich people decide, yes, we like this because it gives us better rates in our loans and it gives us higher yields than our savings. And it works as a substitute for our credit cards or whatever it is, then it's going to happen. If rich people decide this is not going to happen, it's not going to happen. It's not because of people in the third world. No offense to them. If this stuff takes off and happens, it's going to be because

rich people want it to, and they move their money there and mass. I'll get off my soapbox here. No, you're right. I think you're right. I agree with you. Mark Rubinstein did a post this weekend about the unbanked. Damn it, I can't find that he gave a statistic. I just read it in my lunch hour. He gave a statistic about the number of people that were unbanked. I don't think it's a, it's not Nothing. It was 1.7 billion people, but he said they were all mostly in, yeah, I just read that piece today. I agree. That's a huge market. And kudos to anyone who's working to get that. I actually did some learning about that in an MBA class. And we took for a spin, like part of our class was using a company like Kiva. Have you heard of this before? You make loans to people in third world countries. And they found the majority of the best people to make loans to were women in these places because they way more than men were better at paying back. their loans and they were better at planning and looking ahead to the future. Interesting organization anyway. I still have some money there. There was insider trading in NFT land over the

weekend. I for one am shocked. Shocked. One of the people, I forget what he does at OpenC, but he basically was buying. He was like front running, right? He was buying projects before they got featured on the website. And obviously what he did was wrong. You was a co-founder and CEO, right? No, I don't think so. This story you put in here says on Tuesday, OpenC co-founder and CEO, Devin Finser, said that, oh, a different guy. Sorry. You're right. Yeah, no. Head of product. Sorry. But, boy, this guy got dragged so, so badly. I don't know if he's, like, excommunicated

from a community, but that was tough. Another one, there was a crypto Ponzi scheme busted over the weekend. By the way, as far as the OpenC guy goes, this was exposed because somebody, obviously this is all public on the blockchain. People could see other people's accounts. Somebody found out that he was a bad actor, exposed it. Nice. Did you find your lost crypto yet? Remember, you were going to do some pairs trading, you thought you lost some? On Unutaswap, I actually don't think it was gone. But what I did lose this weekend was my wallet again. I was at Stop and Shop or something. I was at a grocery store and the credit card machine was down. And my first thought was blockchain fixes this.

Never goes down. You know what really fixes this? What I can't wait for, I don't ever want to hold a wallet again. I want my driver's license to be on my wallet. And it can all be face scan to get into it. I want all my credit cards on there, put my library card on there, my Costco card, whatever, any card, just put it all on my phone and I just have to carry my phone and nothing else. No cards. Yes. Well, Apple Pay. I've never used Apple Pay before. Then you can't ask for anything. Stop. What do you mean? If you don't use Apple Pay, you have no right to ask for anything. Where can I use Apple Pay? Everywhere. You just said you want something on your phone. Apple Pay, let me just tell you what Apple Pay is because clearly you don't know.

Apple Pay, you put your credit card onto Apple Pay. And so when you go to the store, you just go, and you just click and you walk out. You're welcome. Okay. What's the difference between my credit card just tapping it on the machine? It's the same thing. You have to take your credit card out. Okay. Isn't that part of the nuisance? Yeah, sure. You're welcome. I've got my credit card loaded on my phone. I guess I've never really been to a place where I knew I could use it. You can use it everywhere. I'm a new. Hand up. Go to CVS and use it. All right. So anyway, so I'm in the Midwest. We probably don't have that here. Stop it. We're still listening to music from the 90s here. So I'm at Stop and Shop and Shop and I've got a full cart of groceries and I'm like, oh, great, the machine is down.

go home, get cash, blah, blah, blah. Turns out they had an ATM in the store. So I go to the ATM. Would you pay $5.50? Not bad. So I go to the ATM and I'm thinking like just as I'm thinking about solutions, I'm going to ideas, guys. I'm thinking about solutions. I go back to the line and I have my cash and I'm ready to pay. And I hear over the loudspeaker, Michael Batnick, please go to customer service. I left my debit card in the ATM machine. Oh, nice. Way to go. Usually, my ATM, it makes you pull your card up before it gives you the cash. That's like a nudge. This is an old school ATM.

Another thing that blockchain fixes, I'm not kidding, is I went to a doctor today because I hurt my back from sneezing. True story. And I had to fill out about seven pages. And a lot of them were duplicates, client information stuff. When I go to the doctor or the dentist and they hand me one of those, I never fill them out. You have to. You have my information.

No, no, no. I was a new patient, new patient. Oh, okay, gotcha. But why can't it just be like, here, this is my code, there's all my files. I agree. By the way, back to the wallet stuff. The greatest lost wallet scene of any movie in history, you know what it is? And dumb and dumber.

Oh, is Samsonite? The luggage? No, no, no. When Jeff Daniels tells Jim Carrey to only get the essentials because they have like $40 left to their name, and he walks away with the box of stuff of booze and the big hat on, and then he stops and gets a smut magazine on the side of this. Excuse me, little old lady? Is that that scene? Yes, and he drops his wallet in there, and then she steals, yes.

Speaking of re-watching Tommy Boy Toys, that's probably the movie I've seen most in my life, more than any other movie. Dumb and Dumber. I could probably still quote every single, yeah. I mean, what a great movie. All right. Fidelity met with the SEC to pitch them on the fact that nobody wants a Bitcoin futures ETF. I don't understand why Fidelity hasn't been doing this. Fidelity's crypto strategy makes no sense to me.

They started mining Bitcoin back in like 2017. It's regulatory. That's it. What do you mean there, crypto strategy? What would you do? Fidelity should have been the first one. They should have been custodying all this stuff for everyone. They should have been...

They are. They should have been laying out a Bitcoin ETF. They should have been the first one. The SEC would trust Fidelity with this. Don't you think over everyone else? They are custodying. It doesn't seem like they're... I don't know.

Who are they custodying for? Institutional clients. I think it's a big business. I don't know. Fidelity should own this base is what I'm saying. It doesn't seem like they do. You can prove me wrong. They did some surveys.

33% of U.S. institutional investors are invested in digital assets today. 33%. Their preferred way to access digital assets is through an investment product. Make sense. They're not looking to do custody of fidelity. They want an investment product. 69% of U.S. institutional investors feel digital assets should be part of an investment portfolio going forward.

Nice. Does that sound high to you? Not high enough? All these surveys, you can't trust them. I don't know. Here's something that I never could have seen coming. After Coinbase CEO, Brian Armstrong, called the SEC Sketchy, today they canceled their land program. Stock is, well, the whole market's done. Stock's down 5%. Okay. Oh, this is a good email. I'm a mid-20s guy that works in construction, real estate development in July 2020. I decided to take my brokerage account portfolio and put it all in BTC. Good timing. I even added some salana after Zach Prince said on your show in April. I took 40K to over 250. Good job.

My dream career has been to operate a single family rental vacation portfolio. My girlfriend who I live with and have a cash flow to afford a second home comfortably. My struggle is whether to ride the crypto wave or go out and start my own business with the money. I'm struggling because I don't want to be the guy in 2035 who sold all his crypto and now it would be worth millions. However, I also couldn't bear to watch go to zero. And at the same time, my life goal isn't to be a holder, is to run my own real estate business. Okay, that's it. You just answer your own question.

This is very easy. You just said, I couldn't bear to watch it go to zero. It's probably not going to go to zero, but still, if you can't watch, I mean, and you said your life goal isn't to be a huddler, is to run your own real estate business. So you took your account from 40 to 250. Amazing. I'm not saying you need to sell all of it, but at least, if that's your goal in life, then live your goal.

If your goal's not to be a holder, then sell some Bitcoin and do your thing. You spend the majority of your life at your job. For most people, right, they spend a like between sleep and job. that's the majority of your life. If you're working most days out of the week, that's what's going to be on your mind. And if you're working a job that you don't like and you have this other dream, like your portfolio is not going to make you any happier. The thing is, too, let's say this guy is able to start a successful real estate business and he's making money. You can buy back into crypto. Or do you think, let's say that he does it and it works. He's like, you're not going to say

man, I wish I held crypto. But you're not going to say that. I mean, if it goes to a million, you probably well. But if you don't sell and you don't live your dream, and crypto goes to even down to 30 or 25, you're going to feel like an idiot. So why put yourself in that situation? If it continues to go up, well, so don't sell all of it. But I think, I feel like you just answered your own question. I also think the demand for someone in the construction business, I don't know exactly what he's doing. You're going to have millennials buying houses and fixing them up for years and years to come if that's what you're helping out with, where the demand for that business is going to be strong for a long time coming. This sounds like a good business to me. If this is a shark tank,

we're saying, yes, thumbs up. Ben, the market is now down almost 3%. Would you like to take it back? You got me. That extra 50 basis points. Put back on your macro hat. All right. My tin foil. All right. You're right. We were due. We've had three down two percent days this year. We haven't had a single down three percent day all year. Bring it. Let's do it. Come on. Cannot agree more. But, but, but, Right now, I'm acting very cavalier. Let's get a sell off. Let's get a sell off. I want to sell off, but not too much, not too much. All right. Can I do the headlines for today? Give me like 12 to 13. Go ahead. Dow tumbles 1,000 points as China real estate company. Ben, don't tempt the gods here. Don't tempt the gods. There's going to be a lot of headlines with tumbles and oils. The S&P 500 has been within 5% of its all time high for 22 days. The eighth longest streak since 1950. Things have been too good for too long. Let's shake it up a bit.

Over 100% from the bottom. If you watch the market go up 100% in a 3% down day is going to like shake your to core for investing, then come on. I guess that's where I disagree. I don't really think. I mean, yeah, obviously people are selling. But I think most people look at this and don't like say, holy cow, I need to go to cash. I actually think.

Obviously, most people don't do that. I'm planting my flag on the young people being better investors because they've been through things like crypto and meme stocks that are so volatile. I think if anyone's selling now, it's institutions and it's older investors who are more concerned because they have bigger portfolios. It's always institutions. Yes, because they control the most money, as do boomers. And I think if you're, we talked about this.

So we have a, if you missed our podcast on Monday with Rick Bookstabber, who is a former chief risk officer for a bunch of different Wall Street firms, if you have more money, so someone with a lot of money and some of the little money, a 10% drawdown is going to feel way worse to someone with a lot of money because on a dollar terms, it's going to dwarf anything with something. This is the reason why when you're young and you're building up your portfolio, the percentage of losses shouldn't matter at all to you because you're losing a little bit on a smaller balance for most people, for most normal people. And this is why we're seeing a trillion dollars going to bond funds because people don't want to see

the majority of their portfolio fall when the market hits her upbatch. I bring it all back, Michael. What did Mackline do on inflation? I miss this piece. Basically, he's saying team transitory is going to win. After you relented last week and said, all transitory, the day afterwards, inflation numbers came in a little bit. I feel like you're putting terms of my mouth. I said I'm open-minded. I read the tweet from the CEO of 3M. Sorry for saying that he might have his hands on the pulse of inflation more than you do. Okay, but here's a thing. The CEOs complaining about inflation are doing that so they can raise prices on their customers. They don't really care about inflation. They just want to raise prices and want to blame it on someone

else. So I'm sorry that you capitulated at the bottom and decided he's just saying that like the deceleration and inflation is coming from things like used cars and trucks and hotels and airfares and all this stuff. I don't know. It seems to be going that way. We're probably arguing now is inflation really going to be back to 2% or is it going to be 3% or 4%? Not 8% like some people wanted. How's that? Fair. You know how much my cost to fill my gas tank this weekend? How much? First time I broke out over 70. And, as long as I can remember. Do you know how much it costs to fill up a Chevy Silverado?

Is that your truck, your pickup truck? You're still driving that? Yes. What was the Chevy slogan, like a rock? Yes. Did Bob Seger's saying that? That was like the NBA on NBC days, like a rock. So we talked to the people at the carpool.

I just had a fender bender on the bumper, and it's now over two months since I've not had my car. They said they've had like BMW sitting on a lot for three or four months because they can't get parts from the manufacturers. And so I'm still driving a rental. Somebody emailed us about time inflation. He's like, what if maybe prices aren't going up, but I'm waiting eight months from my couch. Okay. So we also, this past week, went through the process of getting a new car. My wife's lease is up in December. And we've been getting emails from

Honda for months saying, time out, time out. Sorry, I have to interject. This is very much on brand for you and I, because my wife's car is also doing December. But obviously, we know who the responsible one is out of the two of us. I was worried we get to December and there's no cars available. So we started poking around and they basically said, listen, for what you, you owe on the lease versus what you can get for the car, you have like a $3,000 buffer. The funny thing is, we got the car, we did a 36-month lease. The value of the car now versus when we got it three years ago is almost the same because used car prices are up so much. We were shocked at how much we were able to get for this car, but it's kind of like selling

your house now to buy another one. You sell your house for hire, but then you go buy a new one. So we go to the Hyundai dealership. My wife wanted a Palisade because it's got a big third row seat for my kids. And usually you walk into a car dealership, and it's, full of cars that you can look at. They kind of have the nice spiffy ones all clean, looking good for you, you know? We walk into the dealership. There's literally zero cars in there. It's empty. It feels like a mall that had been just like emptied out and taking all the kiosks out. There's nothing in there. There's no cars. On the lot, the lot was maybe 20% full of cars, which is usually full. And they were like, listen, we have two of these. If you want one of the

two, pick one. Otherwise, it's going to be like six months to get another one because we don't have any more coming in. So it's like either basically take it or leave it. You want this one or that one? Yes. There's no negotiating because it's like, you don't have any choice here in the matter. You take what we have, basically. When I signed my lease with my wife's car, we were like thinking, do we do 36 months, 48 months. I got 36 months.

It's always fun to get a new car every three years. And so it turns out 48 months, that's where the alpha is. We should have gotten 48 months. We wouldn't be in this predicament. I got to get on that, by the way. Market timing. You know what we didn't mention, by the way? So stocks are having a rough day.

Cryptocurrencies are many things, Bitcoin specifically. You could call it a store of value. you can call it digital gold. You call it whatever you want. What it's not. It is not something that will hedge against stock market declines. Bitcoin's down 10 percent. Ethereum's down 12. Salon is down 14. Yes. Not a hedge. Yes. It's definitely a risk on risk off as. And it's been risk off. It's many things. It's not a hedge. I mean, this is the ninth crash for crypto in the last six months it feels like, basically. This one feels different. No, I'm just kidding. They all feel the same to me. All right. Let's do this kind of quick as we're running late.

the child care is broken. I feel like we've gone over this before. It's really breaking now when politicians are starting to notice. We're getting notes from our child care providers. My kids go to preschool. It's at the same daycare where they went to daycare

since they were babies. They're basically saying, we're shortening our hours in the day. So they used to go from 6 a.m. to 6 p.m. They're shortening it from like 7.30 to 5 because they can't find enough workers. And one of the problems is when I see what they're putting out there,

they don't pay enough. And so the Washington Post had one basically saying this child care services industry is down almost 130,000 workers more than 10% decline for pre-pacemic levels. The median pay in the industry, $25,460 a year. My original thought was because we pay a ton of money for child care. My original thought was, geez, the margins on these places must be huge. But part of the problem is, especially when they're younger, you have to have one teacher for every three or four kids

because especially if they're small and their babies and they're crawling around like you can't just have one teacher for 15 kids so the margins that's the opposite. I don't understand people always crap on us for this and send us hate mails but why are these daycare teachers not paid the same as regular teachers?

Why are they not having the same benefits? I guess because this should not be a private industry. One of the answers is contention. Correct. There should not be private industry. They have no formal training I don't think. You have to go to school to be a teacher. But the problem is so many of the people that work at our kids' daycare, went to college and have a college degree and are having trouble finding a teaching job, which I'm sure they're probably not anymore. That's why people

are leaving. Some more data points. Childcare labor costs can be as much as 50 to 60% of a daycare budget. This is from the Treasury. Restaurant labor costs tend to be about 30%. So the Washington Post had a story that said child care is struggling to find people to work more than restaurants right now. Restaurants are having an easier time getting people to work for them than daycare places. And I understand it's hard work. And you're exposed to COVID. and there's no benefits. You don't get paid anything. So on average, the average family with the child younger than five devotes 13% of its income on care. And this is a quote that seems obvious to me. Having a well-functioning child care sector is good for working families. It's good for

children and it's good for the rest of us. It's critical to a well-functioning economy. But part of the problem, as we've just discussed, is the average salary is $24,000. So more than 15% of these people are living below the poverty line in 41 states. Joe Manchin from West Virginia, does not agree. He basically said, like, it's not up to the government to provide for education at all levels. It kind of is. This is not suitable for a private industry given the regulatory guidelines at place. So I really do think this is a crisis. Like, this is a catastrophe. And this is potentially holding back the economy because there's people out there who can't work because they have to do child care because they can't afford daycare. More than 10,000 workers have

left the industry since June. Especially when you have more people who are educated in going to college and wanting to be in the field, this is tough for people. It's not the federal government's responsibility to educate all of our children. That was a direct quote. I don't know. It kind of is. I told you, as a parent for the amount of money I've spent on daycare, this is like putting

my kids through college without having the time to prepare to save for college. So in summation, it's very difficult for parents to pay and it's horrible for the employees. Yes. Parents pay too much and employees don't get paid enough. It's broken. Yeah, no one's making a lot of money, even though people are paying a lot. It's broken.

All right. This is another good one about real estate. My wife and I are 22 and 24. We're going to be inheriting 500K. We're planning our selling our house in Arizona where we should make about 100K profits. So we'll have 600 to buy a new home. We're moving back to the East Coast, but would it be crazy to put all 600 into our house?

We pan out of paying cash so they don't have to pay for title insurance. see what we did there. We currently have about $100,000 invested in an index funds in crypto. We were homeless four years ago, and it seems like a lot of money to spend. For a young person, there at 22 and 24, it doesn't make sense to tie up all of that cash in a home given where interest rates are. I completely understand the desire to have a very, very low mortgage, but I just don't think it makes sense at all. I think this is pretty clear. I think holding some out, like if you, you can still put down a decent size down payment, but if you hold some out and keep it somewhere else, there's nothing that says you can't pay it off later. So it gives you flexibility to have some liquidity too because you can't spend your house.

Yeah, it's a lot easier to pay it back than just to take it out as exhibited by me and my refinancing that took seven months. Okay, so Bloomberg has a piece about how global housing markets are all becoming unaffordable for people. You know the Leo Giff? Yep, they heard me. We have an international audience here. So I heard it from people from Europe, from Canada, from Australia, and the resounding theme from all these people that emailed me, this is totally anecdotal, was people in Canada, people in Australia, people in France or wherever, we all think U.S. housing market is cheap on a relative

basis. They think it's crazy that people in the U.S. think it's a bubble because they all see the prices and they think that housing in the U.S. is cheap. I guess everything's settled. Yes, everything is relative. Basically saying in a lot of these countries, it's getting way, way worse. In the U.S., they looked at the price-to-income ratio since 1995, and in the U.S., it's basically unchanged.

In a lot of other countries, Sweden, the U.K., New Zealand, Norway, it's gotten way, way worse. So this lines up with my blog post from last week. Thank you very much. Nailed it. Boom. I was thinking about, I was in Staples the other day, paying sales tax. And I was thinking, man, sales tax is annoying. They tax everything.

It's not enough. and then I put my MMT hat on and no, no, no, the reason why we have taxes is why can't we just print money, it's to take money out of the system. That's not my idea. But that's what I leaned back on. If there was no sales tax, then there would definitely be permanent inflation. But not every state has sales tax. Well, most of them do. Yeah, but there's a lot of states without sales tax. Well, that's why there's hyperinflation in Florida, for example. All right, what do you got for Rex? We already did a few listener questions. What do you have for recommendations this week? I was in bed a bunch of this weekend.

I hurt my back. Last week, I went for a run. I did my hardest couch to 5K. I hadn't jogged in like five weeks. And I think I strained my back or whatever. You did couch to 5K back the couch. Pretty much. And so my back was like a little bit sore, moderate discomfort, no big deal. But then on Saturday morning, I'm right here. I'm at my desk and I feel a sneeze coming. And I didn't want to like do a full sneeze. I held it back to protect myself from the pain. And it had the adverse impact that I was hoping. Basically, all. of the pain. It all went to my back, and I think I messed up one of my discs. That's what the doctor says. So I was in bed a lot this weekend, that's what I'm getting at. So I watched more movies than I ordinarily would. I bet we're getting a lot of that because you don't want to be the person that sneezes in public these days and looks like you're spreading COVID everyone. So people are probably holding in more sneezes than usual. You know what happened? All right, if you sneeze and you cover your nose, you're going to like blow out your eardrums, that's basically what I did, but to my back. All right, with that said, before we get into what I did watch,

there's a sequel to twins coming out. And I heard about this when Arnold was on Howard Stern. Oh, wow, seriously? That's a real thing? Arnold Stern was on Howard a few years ago talking about how they tried to make a sequel to twins where Eddie Murphy was the third triplet. Really? That was the premise. So now I think it's really happening.

It's Tracy Morgan. He's going to be a triplet. And I love twins, one of the staples of my childhood. I'm very, very bearish on this. Very, very bearish. There's never been a. really great comedy that the sequel was really good. Doesn't happen.

I think that's right. Oh, we spoke about the new Christopher Null movie is going to be about the nuclear bomb. Oh, there's a new Adam McKay movie with Leo. Did you see the trailer for that one? Yes. It's a comedy on Netflix. Is it? I thought Comedy-ish. Adam McKay, new. It's called like Don't Look Up or something.

Yeah, it's satire. Yeah, it's got like an ESG bent to it. All right, so what did I watch this week while in bed? I turned on vacation friends. And as soon as they get to the hotel in the beginning, I'm thinking, wait a minute, that looks very, very familiar. But that's kind of my thing. Every time there's a tropical hotel, I feel like I stayed at that hotel. I did that with White Lotus, because all the hotels are kind of the same in Hawaii or whatever. But I was like, wait a minute, no, no, no, I really think this one.

I pressed pause. I googled where did they film this movie. I was there. Where was it? El Conquistador in Puerto Rico. Robin and I went there after we got engaged. Nice. Looks like a nice resort.

Just so you know. Beautiful resort. What did you think of vacation friends? Okay. I saw the first like 40 minutes. It was funny. I mean, it was funny. Yeah, a dumb, funny movie, right?

Dumb funny. Somebody recommended Ronan twice. They were like, hey, there's probably like 12 months ago. So I appreciate the extra nudge just to check in. Hey, I don't know if you saw Ronan yet. I did see Ronan this weekend. Classic 90s, guns, action, blazing, De Niro. I'm a huge car chase.

The car chases in Europe, I think, are better than the car chases than the United States. and I liked Ronan. That was a good 90s flick. Good 90s flick indeed. Oh, I saw a crank. Jason Statham. You ever see that one? Yeah, a little over the top. For about a million and one reasons that would never get made today. That seems like one you'd seen in the theater. It is pure adrenaline, literally. Jason Statham gets injected by one of his enemies with some virus that will kill you unless you keep your adrenaline up. It's as ridiculous as it sounds. So do you remember the Jason Statham story from my book about financial frauds? how this woman had got a Facebook message from Jason Stathen saying that he was between movie projects

and just needed like $125,000 to keep him afloat until he got his next paycheck for the movie. And this woman through Facebook Messenger sent this money to Jason Statham. Of course, it wasn't not quite him. It wasn't Jason, yeah, it wasn't Jason. Can you believe he's not asking people, random people on the internet for money? I wouldn't recommend either of those movies. Crank, vacation friends of Ronan. Crank was a good time, but I feel like that was a little bit too over the top to recommend.

It's been a while since I see Ronan, but I might have some nostalgia from the 90s for that. Here's another one that I won't recommend. There's, like, nothing redeeming about this movie, but it was an excellent movie. Hotel Mumbai with Dev Patel, who was a fantastic actor. I don't know if I ever saw it. True story, horrible story. It's about terrorists that go after a hotel, and you guessed it, Mumbai. And it was just a really, really, really good movie.

But there's like literally nothing about it that makes you feel like any sort of goodness. I think there's very few true. true stories, especially about tragedy movies that you watch again. Most movies that are based on true stories are, you watch it once and that's it. Correct. 100% correct. Very not rewatchable. I can't think of an example about a true story that I saw more than once with the exception of Jurassic Park. Nice. I finally got back on the train for some nonfiction this week. I started read. Oh, you're back. Well, hold on. Let's just revisit. If we could rewind like three or four episodes when you said I'm done with nonfiction. I did. It took Norm McDonald's passing for me to

want to read his biography because I saw some people writing about it. Talk about that chapter. Okay, it's called Based on a True Story, not a memoir. And I sent you this when I was reading it. He's talking about from the time he's growing up, he says, and he's saying from each chapter was a different age. And chapter five is like eight years old to 13 years old. And all he wrote for the chapter was, I forget.

And that was it. It's true to form for Norm McDonald's. It's a very weird book, but there's certain parts, especially if you're reading him in Norm's voice, that make you crack up. So I think if you're a comedy fan, you probably will like it. He talks a lot about the fact that he lost a bunch of money gambling. I also mentioned I read Jesse Livermore Boy Plunger, the man who sold America Short in 1929.

I never realized. Excellent book. He was in the top 10 richest people in the world after shorting the market of the Great Depression and lost it all. Basically, it was totally margined up all the time. I don't even understand how you could lose $100 million in 1930. I don't either. Just in the whole...

Actually, that's like Norm, where he's like, yes, I had $450,000. thousand dollars. I lost 400. Might as well to lose the other 50. Yes. The other crazy thing is they had a whole chapter in this book describing bucket shops. And they talked about how at the time they were being sold as a way for smaller investors. They were democratizing investments. It's crazy to see that. Did it literally say that? Yes. It was a quote. A democratized exchange where the common people could speculate. That sounds eerily similar to a few different companies today. I'm just saying. But the stuff on bucket shops was really, really interesting. It also shows that, like, we think, oh, the speculation is crazy now, but it's always been around.

Speculation is, to quote Jessica. Would you say it's as old as the hills? Old as the hills. There you go. All right. Anything else? What else? Sorry, I got a show.

We've been looking for shows. The North Water is on AMC Plus, which... Stop. Just stop. I guess everyone just decided, like, plus is the only thing you had. Animal Spirits Pod. No, no, no, come on. Okay.

What's it called? The North Water. It's a mini-series. It's only five episodes. We're two episodes in. Now you're talking. Colin Farrell is in it. It's one of these shows where it's about a bunch of whalers from the 1800s.

Ooh. But there's also a murder intrigue. This does sound good. Colin Farrell is amazing. He probably gained 40 pounds. Doesn't even look at him? He plays the bad guy in this, and he is amazing. That sounds good.

How do you find AMC Plus? It was on Amazon. You get the first episode free and then you get a seven-day trial to binge it and then cancel it before we have to pay any money. That's what we're doing. But here's the thing. So this is in the 1800s. How do you keep track of all your cancellations? Do you put a calendar reminder?

Yeah, I do that. I did my phone. Cancel this in a week. Cancel this in a month. But this is in the 1800s where they're going on whaling expeditions to kill whales, to take the whale blubber to use for oil. Blubber is a funny word. Yes, but it got me thinking, maybe besides the past 70 years, all of human existence has been an awful time to live. These guys were going through, like, this is kind of like the, what's the Antarctic book? Endurance?

Yes. It's kind of like that, like, just no technology. These people are stabbing whales in the Arctic. take the whale blubber back. People are dying on the ship from diseases that they don't even know what they are. Most of human existence has been a miserable time to live. I would say prior to the past 30 years, they invested toothpaste in 1988. Imagine being alive before that?

1988? Probably not. It's probably earlier than that. It actually was around like the, it was in a book of Great Depression. Anyway, yeah, Northwater, I'm signing off on that one. Animal Spiritspod at gmail.com. We will talk to you next time. Thank you.