Animal Spirits Podcast - Ready to Pop (EP.295)

Episode Date: February 8, 2023

On today's show we discuss the psychology behind big gains and losses, why retail traders are buying again, entertainment vs. advice with Jim Cramer, new bull market vs. bear market rally, value vs. growth. vs. rates, the strongest labor market of our lifetimes, tales from Miami 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.   (Wealthcast Media, an affiliate of Ritholtz Wealth Management, received compensation from the sponsor of this advertisement. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information.) Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by our friends at Y Charts. Michael, one of my other favorite charts from Y Charts. U.S. unemployment rate looking at a lot this year. One thing I like about Y Charts, you can add the min, max, an average in the recession, so I like to add a lot of features to the graph that aren't in there originally. Oh, look at this. We are at the low unemployment rate since 1969. Nice. Very nice.

That was during wartime as well to show how crazy. We're going to talk a lot about the labor market today, what that means for the economy, the Fed. I mean, the spike obviously is crazy, but we're talking the whole of the 1970s, 1980s, 1990s, 2000s, 2010s, we never had unemployment this low before. I think if you want to know why the economy continues to be so resilient, it's probably this, if you wanted to boil it down to one thing, the strength of the labor market. If you want to check it out some of these charts, white charts, go to them, tell them Animal Spirit sent you 20% off when you sign up for your first subscription. Welcome to Animal Spirits, a show about markets, life, and investment. Thank you. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Rithold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast.

Welcome to Animal Spirits with Michael and Ben. It is Monday afternoon. The market closed. Ben and I are in a hotel room in Miami. And I got to say, Ben, from this angle, you kind of look like Tony Roma. Okay. Is that good or bad? I don't know.

The way that the lights hitting your hair, your hair looks darker than normal. I don't know, Michael. I don't know what's going to happen. We've done this on location a few times, but we're going to be doing a live animal spirits here at the exchange conference in Miami. I've never been to Miami before. This is a nice place. You know what they make good here? Miami Vice, right?

I haven't had one yet for the record, but Ben did. Ben had one earlier. So if he says anything foolish, blame to Miami Vice. Too much rum. Any quick travel tidbits before we get into it to the show? Got anything? Actually, I do. I wasn't going to say this, but since he asked, I signed up for Clear.

I had deactivated my account probably, I guess, during the pandemic. And I re-activated my account, and I just got to say, what a delight. What an absolute delight. But you only get that affair in New York or Los Angeles or something, right? Well, they expanded. There are a lot of locations now. Two years ago or three years ago, they weren't in many places, but now it's just terrific. $190 for 12 months. So if you travel, it's worth it. And you walk right through. It's just phenomenal. You got anything? The only thing that surprised me was I flight Delta a lot and there was free Wi-Fi. Brought to you by T-Mobile or something. You go to sign up for a Sky Miles thing, but I already have that account because I fly Delta all the time.

I'm Team Delta now. I'm Team Delta now. I'm Team JetBlue, but now I'm Team Delta. So you've got to get the Delta credit card so you can have your first two bags check for free. Actually, I did. I just got the Amex Delta. Yeah, that's what I have. Although I got booed it, I was sort of embarrassing. I tried to get into the Delta Sky Miles Club. Apparently, you need the platinum card for that.

Yeah, you're not there yet. Sorry, but. Oh, while we're talking about credit cards, do you know how much a Sapphire reserve card is up to now? Fee? Yeah. What is it, like $6.95 or something? Not quite that, see. But $5.50, which I was going through my statement.

That's a lot. However, you get $300 in travel credit. But still, $5.50, that's not inexpensive. Well, they might not pay for your clear, but they pay for the global entry system, whatever for the TSA precheck. What do you mean? If you do TSA pre-check, they pay for it. That's part of your take it out of that too.

All right. Wall Street Journal had a pretty good article this week, The Retreat of the Amateur Investor. And they start out, here's the lead, as they say. Why do they call it lead, L-E-D-E? I don't know. There's got to be a reason for that. Someone let us know.

Amateur trader, Omar Gios, says he amassed roughly $1.5 million a stock surge during the early part of the pandemic, gripped by a speculative fever that cascaded across all markets, as this gainswelled, so did his spending on everything from sports betting to bars and luxury cars. He says he also borrowed heavily to amplify his positions. When the party ended, his fortune evaporated thanks to some wrong way bets and his excessive spending to support himself. He says he now works at a deli in Las Vegas. He pays him roughly $14 an hour plus tips and sells area timeshares.

He says he no longer has any money invested in the stock market. I'm starting from zero. He's 25 years old. It says he racked up 300 grand in American Express Platinum card. Hopefully he got some points for that. According to snapshots of his account viewed by the journal, says his nest egg had climbed to $1.5 million was gone. I lost it all.

Do you think anyone in their 20s, maybe even 30s, has the ability to cash out when you have gains of that size? Because I don't know that the human mind has the ability to say, you know what, I'm taking it off the table. I got a little lucky. This thing was crazy because most people probably think, if I had $1.5 million in a year, if I just do that every year, I'm set.

You probably start saying to yourself, All right, I'm going to get out at $3 million. You have like a number what you say if I just get to there. But that's a good point. I'm a gambler, so I've been there. And it's very difficult, very difficult when you're on a hot streak to say, you know, my work here is done. Your work here is never done. It's one of those things where you move the goalposts too, where your number probably keeps going higher and higher and higher.

It's kind of like, if I could just make X amount of money, I'm going to be set for life, I'll be fine. I'm not going to ever want again. And then you get there and you want to make more. Duncan says, lead originated in the newsroom. sometimes between the 1950s and 70s created to avoid confusion between the lead paragraph in an article and the metal lead

pronounce lead which was used in the printing presses. Okay. How many people do we think fit this mold where you go from zero to over a million bucks and then you lose it all? Well, we were talking about this

at lunch today because we're talking about crypto. I just don't know how you recover psychologically from having a high watermark like that that quickly and then now it could take him years decades maybe to hit that mark again. I don't know how you recover from that psychologically, knowing that you had this and now you have to work even harder to get there

when you kind of did it the easy way and lucked out. I don't know how you are able to move past that. One of the things that I was saying in 2021, there are many facets and both sides, and on the one hand on the other in terms of, was the meme retail mania good for investors? On the one hand, you could make the argument that it's terrible, because it's teaching them all the wrong lessons and the wrong lessons are being reinforced by

the market continuing to rise. Obviously, we're on the other side of it now. I also see the argument of, well, listen, the more people you have in the market, the better, because these people will learn the right lessons eventually. They will learn about savings and responsible investing. But I was saying that it's very hard to teach people how to not gamble. This is a broad brush. Once you start gambling, it's very hard to lose that, I guess. Well, this guy in the article said, I know what I was doing, doing. I was gambling. It was gambling because he went from trading stocks to gambling on sports, and it's essentially the same thing. Now, try to get that guy to go from what he was doing

to putting away 15% of his paycheck into a 401k in a target date fund. You're never going to make that leap. It's difficult. That's a tough transition. So anyhow, the reason why I mentioned that it's hard to deprogram people from the mindset is we just saw, Carl Kintanita tweeted this is from Bloomberg, a chart from JPMorgan. Wow, that was three attributions in one. citation the retail market or listen i'm a big attribution guy i don't take charts as they're my own i'm a full attribution guy so retail trading orders as a percentage of volume past the 2021 meme mania peak so we saw bed bet beth and beyond for reasons that are unknown to me not staring the screen today was up 100% today based on whatever the reasons are but how is this possible so you saw a call option

volume, I think, hit a new all-time high last week. Again, retail market order as a percentage of market volume. Now it crashed, of course, but it just hit an all-time high. How? I have no explanation for this, honestly. Is it just mothed to a flame? And when things start going up again, people jump back in? So the people that created a robin an account, they went dormant. Their activity was hibernating as the market crashed. And boom, as soon as you see some sort of upward movement in style, so they just write back. This kind of goes against my theory that people becoming better behaved as investors, I suppose. Again, to get back to how much of this is actually people doing all their money with

or I don't know, but I'm surprised with that. I wish I had a good explanation for it. I really don't. Short squeeze. It's a short squeeze and a junk stock rally. I'm sticking with that for a while here. All right. William Cohen had a piece on...

I actually bent to that point. We took a poll last week because we keep saying, like, is the market wrong? Is the market getting ahead of itself? I forgot to make this trial. I'll do it for next week. What's going on to the market? We did a poll. Is it a bare market rally or a new bull market?

60-40. in favor of bear market rally. Is that kind of a fool me once, I'm not going to fool me again kind of thing? Ben, after the show last week, we sort of were talking about, I think that I was hedging too much about it as a market getting ahead of itself. And I don't really want to make like a hard declaration. I'm not that confident in this assertion. But, man, the market just looks good.

Even despite this short-term pollback that we've gotten, it just looks like it doesn't want to go down. Because things in the economy are brightening up. We'll get that in a minute. William Cohen wrote a piece in The Spectator about Jim Kramer, and they talked about this Kramer tracker guy, who apparently is some random guy in Michigan, decided to start tracking Jim Kramer's stock picks and created like this inverse thing, and there's a few things in here. And they said, this guy decided to analyze the performance of stocks Kramer recommended

between 2017 and 2021, over 12,000 individual calls and compare them to the performance of the S&P. It says they underperform by 6%. I have questions here about this analysis. Is he assuming that Kramer is recommending a stock and then holding it forever? That's a good question. How do you know when he could sell? Yeah, because there's plenty of times where Kramer will like a stock and then change his mind. It's going to be hard to stand up to reality because you're right. What's the exit? The analysis also showed that the volume in the stocks Kramer recommended increased some 25% the day after. People were following his advice and problem losing money. What is clear, again, I don't know how this analysis was conducted, is that Kramer still has massive, massive influence.

By the right, confessions of a street act, not a good book, a great book. It's actually very good about how he lived in his car while he was studying to be a trader. My take on this is, I think it's easy to make him a punching bag and say, see, look, look, but if you're talking about 12,000 different companies, I mean, I think there's a big difference between entertainment and advice. And maybe his biggest thing is that he's not going out and saying, listen, this is entertainment. The fact that I know as much as I do about this many stocks, how many stocks could you name? Could I name?

Just their name. Yeah, exactly. I mean, there's 12,000 here. I do think that it's not obvious. I think that Kramer's trying his best. I do believe that he's up at 4 in the morning, like reading the reports and putting an earnest effort into being the best that he could possibly be. But I think the overall point is 12,564 stocks, that's a lot of stocks.

How can somebody possibly know that much about all those stocks? But here's my biggest take on this. of all, is that the difference between entertainment and advice is you should not be taking advice on your own portfolio from anyone that you see in TV or in print because they don't know you, they don't know your circumstances. And it's kind of like if you wanted to take some of their analysis and then create your own opinion and do your own homework, that's fine. But just because someone says, buy because I bought or sell because I sold, like the Michael Berry thing where he just tweeted sell, don't listen to the buy people or the sell people, do your own homework.

You're not wrong. So I don't want to say, yeah, but I would just say that. It's so hard because if Kramer is bullish on a stock that I like, it makes me feel better. I know it's ridiculous and we know better, but when you see somebody who agrees with your point of view, you get a little warm and fuzzy inside. It's just how we're wired. Confirmation bias is a hell of a drug. All right. This is an interesting part of the market this year so far.

So I looked at this last week, so these numbers aren't completely up to date. But I looked at the boring sectors from last year, consumer staples, utilities, healthcare. They all basically were flat or up. Utilities were up. Consumer staples were down less than 1%. Healthcare was down about 2% last year. This year, this is through basically the first week of February. They're all down as the market's ripping.

Last year, technology, communications, consumer discretionary all got wrecked. Communications was down 38% last year. Now, that's, I think, 40% of that is Facebook and Google. Facebook and Google. And technology and consumer discretionary all ripping this year. It's funny because the thing people said was, just because we turn the page in the calendar does not mean that the stock market is all of a sudden going to change. And that's exactly what happened. I know some of this started before then,

but I agree with you. I don't care what anyone says. There was a mental reset in January. There just says. There was. And for whatever reason, it doesn't make any sense why there should be because, oh, we changed to a new year and new month. Wait, wait, wait, but it also did coincide with improving economic data. Yes. Decreasing interest rates, which turned out back on the rise again, these companies doing massive layoffs. The market did like all those things for fundamental reasons. So had those things not transpired, had earnings not come in, in certain cases a little bit less bad than expected, these stocks could be falling more. But I think so it's not just a calendar thing. I wrote a blog post on this about Facebook specifically because it was down like 76%. Now it's up 100% and it's still down 50%.

And the thing is, I just think you're wasting your energy to think about these sectors or stocks that you wish you would have bought because more than likely you probably would have bought them too early and bought them as they still crashed as opposed to like nailing. the bottom. No one is going to nail the bottom exactly in these things. Don't tell me you did. I did literally buy the bottom in Facebook. I think I bought it on November 4th. Is that right? Was that the bottom? Well, anyway. Pretty close. I mean, sometimes you get, listen, yeah, that was. That was the first of my entire life, quite literally that I bought the bottom. Sometimes you get lucky. My whole point is that there's always going to be something crashing or something going crazy and to think that you could nail the top or bottom and all of them is wasted mental energy. I'm pretty sure I've tried to buy the bottom 99 times and it worked out once. All right.

Jeff Wenninger tweeted an interesting chart. He's showing the S&P 500 value divided by S&P 500 growth. He's also showing the 10-year treasury yield. So he said value versus growth has stopped caring about interest rates. Last year, quote, if rates are going higher, I want to own value, not growth. Once rates start falling again, growth will start working again. But rates are now falling and growth is still not working. It's a value cycle. I think people probably took the interest rate thing too far. I think the correlation causation thing there is these kind of shifts and interest rates can cause a huge pivot, but then I don't think it's just going to be a one-to-one correlation thing where it's automatically going to track. That was my take.

I think there was causation. I think interest rates rising, cash flow becoming more valuable in the short term. I think that absolutely tilted the deck in favor of value against growth. I absolutely believe that. But now that trend in reverse and rates start to fall, I think that like the momentum impact of value. I think investors started repositioning, and it was not necessarily, it started out as an interest rate story, but now there's more dynamics involved. Takes? Yes.

I don't know when this chart goes through, but growth is working this year. All right. Here's a quote from Evercore via Jonathan Farrow. The market, rightly in our view, faded the hawkish jawboning, focused on the Fed's recognition that disinflation is underway, and perceived that there is a path to a pause after one more 25 basis point hike in March. So last week, Jerome Powell got on stage. Also, good word, jawboning.

I was saying for months that, like, the Fed's tough talk, I like jawboning better. Yeah, the market looked right past it because he wasn't dovish by any stretch of the imagination, right? He still said we have work to do. But clearly, I don't know if what they're doing. I don't know how much of raising interest rates is responsible for inflation coming down. You know, we'll see. Heather Long tweeted this. Powell said in his talk last week, I continue to think there is a path to getting inflation back down to 2%.

without a really significant economic decline or significant increase in unemployment, this is not like the other business cycles in so many ways. And I'm having a hard time figuring out whether, again, the Fed was talking so tough, and now they're changing their mind because they were trying to get the unemployment rate to rise and it wasn't happening. So do you think the Fed is finally relenting a little bit? Because it felt like to me his talk last week was a total sea change in what they've been saying. Listen, unemployment is at an all-time low, literally in an all-time low.

Well, not all-time low. It got a little lower in the 50s, but that was wartime. But it's in the second percentile or something. And wage pressures, remember the wage spiral? Wage increases are coming down dramatically. So I don't expect him to spike the football, right? And it caused like a stock market bubble again. But this is setting up for a soft landing.

Look at the wage growth chart from the New York Times. So they're showing the consumer price index and wages both rolling over at the same time. One of the weird things that happened was the last few days in the markets, Friday especially because we got a really good jobs number, the interest rates shot up. I think I texted you, like, was this jobs report too good where the market might take it negatively? But it's almost like it's a positive for the economy, though. So the weird thing is, if you would have said before the year started, the Fed is not going to cut, they're going to hold rates higher or increase them, you would have thought they're doing this because of inflation.

And for part of the year, they were. Now I think the Fed could keep rates higher or continue to raise them because the economy is stronger and the labor market is stronger than they thought not just inflation. So it's almost like it's moved to the economy. I think we could get like a really strong GDP number in the first quarter of the year. So I think that's what the market is saying because on Thursday the tenure got as low as 3.3. Now it's up to almost 3.7. So interest rates are up a lot. Maybe anticipating actually the Fed would not have reason to cut and maybe the market can digest these rates. What a bizarre situation that we find ourselves in where people were worried about stagflation, and now it's the opposite where inflation is falling, and growth is rising.

What's the opposite of stagflation? The opposite of stagflation? Growth? I don't know, Goldilocks. How money is this chart, by the way? Got a lot of compliments. Pretty nice. Got a lot of compliments here. Thank you, tropical bros. We don't want to spoil anything, but did you see we got some renderings of a potential animal spirits? Sure, it's coming. We'll see. All right. So one of the things that was interesting about the Fed report is they've removed references to COVID-19 and pandemic and supply chain backups from the statement. All the supply chain shenanigans is behind us. And I have a story for that.

So my partner, Chris, who lives two towns over for me, he's in the market for a jet ski so he could join me and have fun on the water. His jet ski is 30% lower than what I paid for it. Oh, really? So Chris showed me the price. I go, is that for the same model that I have? He goes, yeah. I said, wait, what?

Because I still owe a lot more money than the new one is worth, which I knew that I was buying on top it's funds. So you bought one-ticked Facebook and you top-tick Jetskis. Fair, fair, I'll take it. He goes, why is it so much cheaper? Because there's Jetskis now. Not only, so when I got mine, there was one model left. They could charge what they wanted.

There was not one model. There was one Jetsky. That was it. It was one Jetsky, take her to leave it. Now, he could design his own. What colors do you want? Whatever. So you could design your own Jetsky now, which is a far place from where we were in.

whenever we were. All right, there was a chart. Who did this? This is from Semaphore. The title of the chart is called More with Less. It's showing workers needed at S&P 500 companies to generate $1 million in revenue. And I did the version of this a long time ago. This is like trying to make the case for why maybe stocks are trading at a higher multiple today. Yes, why valuations have crept up over time. And one of the things that I wrote was, think about the first billion dollar corporation was U.S. Steel. And they needed 500,000 workers to generate a billion dollars in revenue. I'm making the numbers, but they're directionally right.

And Facebook is doing that with one 300th. This chart right here is why you remain bullish on humanity. I've gotten a few questions in the last couple months of people in our inbox saying, why do stocks need to continue to go up in the future? Why couldn't there be this permanent plateau where stocks stop going up? And this chart is a really good single explanation to explain. People keep innovating. They keep getting more efficient.

This chart doesn't go back that far either. It's only like the 80s, right? Right? Yes. Long term bullish. So here's one person who's going against the grain on the Fed. So Jeremy Siegel, this is before Friday's labor report. I don't know if that will change his mind at all.

Heath says I don't think rates are going to remain higher. I think they're going to go down dramatically in the second half of the year because of a weakening economy and the control over inflation. He said, I think that's what the market is looking forward to. So he says there still could be a slowdown in a mild recession and then the Fed is still going to have to cut. Yeah, for sure. Definitely commit.

But it's funny that the reason that we wouldn't get that to happen. is because the economy is strong, not because inflation is staying higher. I tweeted the other day about the fact that this is the strongest labor market we're ever going to see in our lifetimes. And it's hard to argue that we could see anything stronger than this. It's just defied expectations and economic logic. And I think a lot of the textbook definitions of what's supposed to happen in the economy. Someone wrote to me, I'm a supply chain professional. I've never seen the labor market so desperate for workers. So many people in and out of it tolls quickly as well. I don't see this ending soon either. I think this gets back to that labor hoarding thing we talked

about where it's really tough to tell employers to fire a bunch of people if they just spent two years trying to get back up to fully staffed or having a hard time bringing people in. I mean, a lot of people will say, listen, every time the unemployment rate is this low, it's only got one way to go. It's going to go back up. This could signal the end of something. I do understand that line of thinking, so it's hard to know how long this can continue, but it's already gone on longer than a lot of people ever thought they could. Interesting chart from Colin Roche, incredible collapse in M2 money supply growth. people were very concerned this would cause hyperinflation back in 2020. This is a staggering

chart. It really is. And again, too early to spike the football. But the fact that the Fed was able to do this and again, how much credit they deserve, we could debate about that. I think that you need to give more credit to the fiscal spending than the Fed for this, though. That's not what I'm talking about. You're right. This is not necessarily. So you're saying the fact that they brought it way back. The thing is, this chart doesn't go back to the 70s. But the fact that we can remove this much money from the system and not have an absolute total collapse in everything is pretty remarkable. So this chart does not go back to the 70s, but I did a piece looking at a lot of people thought this is going to be the 70s all over again with inflation. Money supply grew in the

70s like basically the entire decade. And the fact that we've already, we're on a negative trajectory here, which going back 40 plus years, we've never had the year-over-year change be this low is pretty remarkable. We did not have that in the 70s. They kept the punch bowl in for way too long. Jeffrey Kleintop tweets, green shoots, question mark. I'm Rodenberg. IMF upgrades global growth outlook for 2023. Biggest upward revision among major economies seen in Germany and China. Ben, your macro thoughts?

All right, moving right along. No, I... You're the king of moving right along. You don't look at the things on YouTube every week. So Ben and I are in the same room with Duncan goes, try not to talk over each other too much for... I think, if anything, people thought, The U.S. is going to remain the cleanest shirt and the dirty hamper.

Europe is definitely going into recession. I'm sorry. That line was retired in 2016. I'm sorry. I can't use it anymore? Nope. Okay. I think that was a Bill Gross one maybe.

But people thought for sure China, if they're locked down, they're going to be slow. Europe for sure is going to be locked down because they're going to have to burn their houses down to stay warm in the winter. And another surprising outcome, obviously. So car prices are shooting up again. Carl Kintanilla, again, U.S. auto sales at 20-month high from Morgan Stanley. U.S. January sales. What slowdown? U.S. seasonally annual adjusted rate is the highest in 20 months, EV shares over 8%.

What the hell is going on? There's some weird dynamics. That doesn't mean that prices are higher, though. That just means that more sales are happening. No, prices are rising. Car dealership guy has been tweeting about it. Okay. Connorson, this is a good chart.

We're looking at car prices divided by CPI. So he says a lot of talk about how new vehicle prices have surged over the past couple of years. Here's new vehicle prices as measured by the CPI divided by average hourly earnings. not sure we get lucky like we did from 95 to 2020 again. So actually, even though car prices are absurd, it looks like adjusted for wages and inflation, they've just gone straight down so cars have become much more affordable. That's pretty surprising. And you also think how much more efficient they've gotten and how much more technology you get with a car? And if you adjust for the size of the car, this chart crashes. Super cheap. The Tahoe is actually

a bargain. If you adjusted this for retirement savings, you would see people aren't saving enough for retirement because they're spending more on their cars and trucks. This show is brought to by Carl Kentonio. Here's another chart in here. Again from Morgan Stanley. Demand for services, especially travel, held up well last year, but we think consumers and companies will tighten their belts as we progress through 2023. So trip bookings are falling.

This is sort of the thing that we keep talking about. How long can the consumer remain strong? I know you can't go with anecdotal observations to figure out the economy, but I just went to our local pizza place, Vitalis. Great pizza place in Grand Rapids, been around for a while. They've got a new restaurant in the last couple of years by our house. I could go there for pizza. I went just to pick up the pizza because I said last week, I'm not going to get it delivered

because I don't want to do that. I'm going to door dash shame you because you're the problem with inflation when you keep getting your door dash. And I went to go pick it up and I literally could not find a parking spot. It was so busy. There was line out the door for takeout. The restaurant was bumping. There was no spots left in the huge, huge parking lot that they have.

People are still spending money. Airport was still pretty busy for me too. you. It wasn't that packed, not compared to last time. This is from the Wall Street Journal. Wait, did I just get bearish? So they said state governments are entering 2023 with record high reserves, which could help the overall economy weather recession this year. The rapid recovery from the pandemic combined with an influx of federal stimulus money has filled public coffers allowing governance to squirrel away funds for emergencies. Remember when, who was the 2008 person? Oh, Meredith Whitney, how municipal bonds are going to crash. Look at this chart

of how much their rainy day funds went up. State and local governments together make up 11% of total spending in the U.S. economy. I don't know what I would have thought the number is, but it's high. They account for about 13% of total payrolls more than manufacturing, construction, retail, or leisure, and hospitality. Wait, what does that mean? State and local governments make up 11% of total spending? That's a huge number, right? They account for 13% of total payrolls, more than manufacturing, construction, retail, or leisure or hospitality? Huh? That's massive. So I had this theory last summer that I've never seen so much construction going on in our area before. And I think the reason for it is because

these states are so flush with money, they have to spend it. And now they're pulling forward all these construction things that they should have been doing during the pandemic when no one was driving as much. But it's hard to believe that it took a pandemic and all these states are in a much better position. Samarrow, the average price of a dozen acts is down more than 40% from its highs. Boom. Nice. Here's a thing. I know we as a society love to complain. I like to complain. Sometimes it's just cathartic to complain. But people complain about stuff going bad and prices going up. They never talk about when prices go down. People complain about gas prices on the way up, not a peep when it comes down.

Right. Nobody's like, did you see how much we're saving in gas? This is awesome. Yes, exactly. So I'm just saying people complain on the way up and not on the way down and then they give credit on the way down. Skip this Whole Foods thing. Splunk cut 4% of the workforce. Impossible foods, 20%. There's just last week. Workday, 3%. PayPal, 7%, HubSpot, 7%, net up 8%. PayPal is laying off 2,000 employees. Kronos 24, the biggest dedicated online marketplace for luxury watches cut about 30% of its workforce, 65 jobs. Did not know that there's a company called Splunk. You never heard of Splunk?

Sorry. So, Justin Wolfer's tweeted, for every headline you read about the surge in layoffs, it's worth turning to nationally representative data to get some context. Here's the latest numbers. Some monthly layoffs has a share of employment. There's nothing here. In fact, it's all, it's low. It's coming off all-time low.

I do think it's headline porn where if you post that, you know it's going to get some action. Oh, another company is laying some people off. it's bad. Charlie Munger does not like crypto. This is a very weird op-ed. It was like very short and he was like very into what China's doing again. Listen, he, is he 99 years old? I'm sorry, but if I'm 99 years old and I'm still putting out op-eds to the Wall Street Journal just with flaming hot takes, I kind of respect it. I mean, okay, that's a take. He said such wretched excess has gone on because there is a gap in regulation. A cryptocurrency is not a currency, not a commodity,

and not a security instead. It's a gambling contract with nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity. Obviously, the U.S. should now enact a federal law that prevents this from happening. I've never heard that. Lanolyn? I don't know. I'm just saying, if you're a crypto person, should you care what Charlie Munger thinks? He's 99 years old. Does it really matter? Of course not. Probably not. But again, I respect the fact that he's 99 years old and still just whipping out hot takes. Don't hit it. I don't love it, but, all right, whatever.

Arc is out with a 2030 Bitcoin price prediction. The base case. Oh, jeez. Come on. I just read it. The base case is $682,000. What would that put the market cap at? All the trillions?

We talked about your 10 predictions that you made. You've got to up your game a little bit because you are nowhere near predictions like Arc is. Because here's the thing, you put out a lot of these numbers. Every year they put these numbers out that EV is going to be 95. percent of the market in four years and Tesla's going to be worth $9 trillion. If you put some of these out and eventually one of them hits, you're a genius and the ones that you said that didn't come to fruition that people soup out of the rug. So the base case is a 60% compounded annual growth rate from here.

It seems reasonable. Here's the bear case. This is what gets people. The bear case, again, bear. For new listeners or non-financial people, bear means bad. The bad case, the bear case, $258,500. So the bear case is a 40% compound annual growth rate. How is that a bear case?

How about a bear case is like, I don't know, $5. That's my bear case, five bucks. I explained the bull and the bear to my daughter the other day. She saw the animal spirits thing on something and I explained, you know what it's called that, right? Bull and bear. A bear hits down with its paw and a bull gores up. I don't think that's right.

No? No. That's what I always heard. No. It was something from like old England. Yeah, that's not right. That's a good explanation though. The bear swings down. The bull goes up with its horns. Okay. That's simple. I like it. Let's move out to real estate. Lance Lambert. We're in a bifurcated housing market. San Francisco was down 10.5% from its peak. Chicago is down just 0.1%. So these are prices. Thoughts, Ben? I guess it makes sense that it's kind of like the economy or the certain parts of the economy that are doing better or worse than others. Tech is one of the places in Chicago didn't go crazy like some of the places in California did in the upswing.

This makes sense. That's probably what's going to happen with the economy. But look at this. It looks like New York. Is that an all-time high? Pretty close to it. Look at the spike you saw in Seattle, Los Angeles, and San Francisco. It makes sense that those ones fell the most, and they're still well above the trend

from the other places. John Burns. This is interesting. New homes priced below 200K are now 0% of the market. They were 40% of the market one decade ago. homes for 500K plus have grown from 17% of the market to 38% of the market. Expect both of these trends to reverse this year. I'll take the other side of this.

I'm of the opinion that the $200,000 homes are probably never coming back because no one builds those anymore. By the way, credit to John Burns' real estate consulting, this is a great chart. We're looking at new homes sold by sales price, percentage of total sales over the ruling 12 months. This is really well done. Wow, look at this 500K. That is wild.

We're talking about people who locked into 3% mortgages. Think about if you were a person who locked in a $200,000 house at a 3% mortgage in how low your mortgage payment is, unless you need more room, are you really going to want to sell that thing? But the thing is, go through an old neighborhood and look at how small some of the houses are that they've built back in the 1950s, maybe 60s. They don't build houses that small anymore. You never see new construction of tinier houses anymore.

Unfortunately, I think the home builders just aren't incentivized to do that. All right, here's an interesting one to me. This is New York time. Single women own and occupy more homes than single men in the United States, despite earning only 83 cents on every dollar that men earn according to a new study, report put up by Lending Tree, analyzed data from U.S. Census Bureau, and it found that 10.76 million U.S. homes were owned and occupied by single women, while 8.12 million were owned and occupied by single men. I have an idea for a new dating app. Single women who own a home. If you were a gentleman in the market for a new lady friend or a woman in the market for a new lady friend, would you not want to date

someone who owns their own home? How much of a head start do you have on life? For someone who already owns their own home? Now, obviously a lot of this could be widows. They mentioned that. And they said even though women on average earn less than men, a lot of in some other areas, the earnings are similar. And especially in like the bigger markets, I guess, women do better. But wouldn't you pay to sign up for that app? It's not a bad idea. People own home. I'm willing to find a mate who has their own home. Let's move on some private market stuff. There's a chart from pitch book showing the private market SaaS A-R, which is annually recurring revenue multiples.

This went from under 20 and 17 to 20 and 18 to 25 and 19 to 40 in 2020 to 20 to 120 to 110 in 2021. That's a little high. Gavin Baker tweeted, Stripe doing a clean downround is healthy for the ecosystem. I actually didn't see this. Oh, Stripe did a down round? I didn't see this. Many companies that raised at absurd multiples will need to raise again soon.

Majority will be downrions. How about this as a thesis? It's going to be hard for new entrepreneurs to raise money because so many VC and private funds are going to have to put money in to shore up their old holdings that they already have. I said less of a thesis and more just like an obvious statement of fact. Okay, okay. It's just not an it's just what's happening. That was a captain obvious?

All right. Oh, I changed it. Maybe this was the top. So we had the segment for Great Quarter Guys. It had been a decent quarter for about a year. I just changed it back. Great Quarter. Back to Great Quarter guys.

All right. So Facebook reported and the entire call, the entire call. And this is why Wall Street runs everything. Was it just an apology tour? It was just all about efficiency. That was absolutely the theme of the call. Talking about expenses, where they're putting money. Reality Labs is still losing gobs of money.

Good gobs. I think it was $13 billion in the last quarter. Whatever, is they trying to clean that up? He basically said, we're not going to go as crazy as we were going. They talked a lot about avatars. I noticed this. I've actually put this in the dock before they reported. You can now create your own AI avatar on Instagram.

Did you know that? What does that mean? Upload a picture yourself and it gives a rendering? A rendering. There we go. It's exactly right. Is that twice I've used that word in this? Top of mind.

So family of apps ad revenue was $31 billion, down 4%, up 2% on a constant currency basis. for a company that was supposedly in like massive trouble and at the heart of an advertising slowdown, up 2% year of a year after a record year, it's not so bad. The bad news had to be baked in. It was one of the biggest companies in the world and it was down 76%. They reached 2 billion Facebook Daily Active users for the first time, which is pretty nuts. You own this stock. Expense outlook came down.

Yeah, I own it. How long would you plan on owning it for? It's been a huge pop. It's doubled from the bottom. Are you still confident in this company long term? Long term, this is not a buy-end hold forever type of stock. I still think that I don't want to sell too early. I think it's got momentum behind it.

No one ever went broke taking a profit. I heard that once. That's true. I still think that like it's just underowned. I know that sounds ridiculous. I'm embarrassed having those words kind of out of my mouth. But they're turning it around. So they cut guidance in a good way on their expenses.

Things were not as bad as fured. I was on the competent friends with Jason Chu and Josh when Apple reported. I was surprised. I think the stock initially popped. I think it should be down because they missed. It wasn't a great report. And then on Friday, the stock was up huge. Not a short term, but.

Your reaction to stock earnings on The Compound and Friends is a perfect example of recency bias. It's funny to listen to it like the day after a couple days later. Yes. Because you think the initial pop or crash is like, oh, here we go. And then it's funny how often that just reverses and it means nothing because of this after. hour stuff. Totally. Actually, we were light on the dock this week for great quarter guys because I know whatever. Anyway, AWS is slowing. What's the stock doing? Let's say. Sorry, I'm lagging. My internet is slow. Is there any hotel that has fast internet? Is it possible? I understand because you have so

many people using it probably, but I don't know if I've ever gone to hotel or I've thought like, wow, this internet's actually pretty good. Yeah, so it looks like the stock's down like 10% in the last two days since it's reported. Google also a similar story. Was it YouTube growth that missed? Google and Amazon did not reprete. Neither to Apple, actually, for that matter. All right, that was weak. That was weak. We'll do better next time. My bad. That was on me. That was on me. I forgot to fill the dock. I'll take the all on that one. This is interesting. We're moving out to personal finance. Somebody tweeted 32% of workers make under $15 per hour. That means 32% of workers make less than $2,400 per month. The median price of rent is $1978 per month. This is unsustainable.

Again, 32% of workers make less than $2,400 per month. The median price of rent is $1978. So basically, it looks like 85% of income is going to rent. Now, somebody quote tweeted, and I'm not usually a fan of the quote tweet with a dunk, but this is just important. It's important to correct the narrative because it's narrative that everybody is falling behind that people are living hand to mouth. While there is definitely some truth in that, it's not all truth.

So this person retweeted and said, actually, I'm saying the actually, but they said, median weekly earnings for Americans working full-time is $1,084, or $4,300 every four weeks. A median earning couple would thus have around $9,000 of income every month, making median rent just 22% of their income. So the point is you can play with the averages, and some of those workers making under 15, they're working part-time, they're not working full-time, and it's not as clear-cut as you think. And the median price of rent, people who are making less money probably live.

in places where it's not as expensive to live. 32% number does surprise me because you would think a lot of those people would be trading up at the moment since there are $15 per hour jobs listed everywhere you go these days. But you know there's been a lot of talk about people just gorging on credit card debt? Yes. Well, there's a great chart that busts that myth. Credit card debt back on trend. This is from our Pete Gupta. That is a great chart. So there's credit card spending, which crashed, absolutely crashed during COVID, and it's now all the way back on trend. I'm having difficulty squaring in my mind what exactly happened in the pandemic, because the whole idea was, well, we sent out these stimulus checks and people just literally spent every dollar

they got. But that's obviously not true because the credit card debt plummeted. And we had the excess savings. So people paid off the credit card. They saved more money, but they also spent more. So, no, no, no. People were not spending during the pandemic. They were gambling. True. I guess the spending happened a little later, but it's surprising to me that people thought like all people did with that stimulus money was spend it. Not true. They paid down debt. Exactly. That's the point. If people have higher income, they're going to make fiscally responsible choices. And that's what happened here. And then the money stopped and they had to go with the debt again. It's not as simple as the government sent money and all of a sudden everyone just

spend every dollar. That's not what happened. Here's one from the Wall Street Journal. on 401ks. I'm having trouble with this one a little. Squeeze by higher prices and short on cash, more Americans are tapping their 401ks for financial emergencies, a record 2.8% of the 5 million people in Van Gogharts 401 tapped their retirement savings in 2022 to cope with hardships such as medical bills, evictions, or foreclosure. The company said that's up from 2.1% in 2021. Pre-pendemic average about 2%. They also said in this article, the increase in the number of people taking hardship withdrawals is partly driven by several government moves since 2018 that have loosened the rules for taking such distributions. And one of the rules, they said in the past,

I think you had to prove you have hardship, like prove to take it out. They did away with that. Like, you have to provide proof. Do you think it's just if they made it easier for people taking out money, it's not like inflation or the economy or layoffs, people just decided, eh, I don't really need this money in there anymore. Stocks are up. I'm just going to spend it. I don't know that this is necessarily an indicator of stress among people. We were talking about it earlier about, do people ever cash out? Boom, they're investors. True. Stock's got a little expensive, and they're just taking little chips on the table.

That's one of the great things about tax-deferred retirement plans. It's not easy to take the money out and probably shouldn't be. Ben, did I just say that I'm not selling Facebook because it's underowned? Yeah, I mean, it's one of the biggest companies in the world, so. Somebody tweeted to us, just a PSA. A few months back, you guys were trying to decipher the definition of gaslighting. The old woman who hit Michael in the parking lot is a textbook example of gas lighting. True.

There was a lot of people who did say Michael had kind of a weird. week last week. You got hit by the car. You got yelled at. I had a realization the other day. I left my house during the daytime, which I never do. If I'm working from home, I don't leave. I just stay put. But I know it's different for you because you don't work from home. But I had a realization, I don't know why. I never, ever, ever go out for lunch when I'm working from home. I never order in. I just eat whatever's in my fridge. Do you think it's normal or a little unusual? No, it's probably just easier. I do take out all the time because I work in an office, but I guess if you're home,

plus that way you can just keep going through your day. You don't have to break it up. Now, that makes sense. If you have decent leftovers and not bad food in there, it makes sense. A lot of people did, you said the lady was 20 clicks away, not knowing how far a click is. And a click is, what, one kilometer? I didn't know that either. Yeah, click is almost a mile.

It's something you hear in like Western movies, like, ah, we got to ride 20 clicks today. It's one kilometer. ChatGBT reaches 100 million active users in two months, the fastest grown consumer app in history. Ben is still not a buyer. I relented last week and I said I'm in. Did I not? So the transcript tweeted the fun take, approximate number of mentions of AI in earnings call in the latest earnings call, Google 62, meta 33, Microsoft 31, Apple 2, Amazon zero.

You know what my biggest problem with AI is? I want to put the penalty box for people who for the last four years said crypto is going to change the world, Web3 is going to change the world, the metaverse is going to change the world. If you said those three things and pounded the table, you cannot say AI is going to change the world, even if it does. That's all I'm saying. No, you're just over-cropping for previous bad takes. That's no, that's what I said. Originally, I said, it's just the people who are telling me, I'm sick of tech people telling me the world is going to change.

They say every year there's going to be this life-changing thing. It's kind of like the people who call for a bare market or crash every year. If you've been calling it for 10 years and it happens, you don't get to take a victory lap. That's my point. All right. Another good survey based on Michael's reading of his resume last week. Have you ever read, this is from the compound YouTube channel. Have you read Ben Graham?

And our YouTube channel skews younger. 56% said no. This is almost 1,000 votes. 44% said yes. That is surprising me. That's a lot of yes. You want to know why? You think it's a lot of yes?

44%. I'm sorry. When I was coming up, everyone either owned that book, Intelligent Investor, or said they read it. That was the thing you got. But here's the reason why, I think. When I came up, all we had was books. We did not have podcasts.

blogs were just starting, basically. We did not have YouTube shit, none of that stuff. But Ben, it's not like all of our viewers or financial professionals. It's a lot. But don't, if you're going to learn about investing, the number one, if you type in Best Investment Books, that was the one that came up for years and years and years, then it probably still does.

Yeah. All right, recommendations. What do you got? Pokerface on Peacock. They keep advertising that. So the guy who did Knives Out wrote and produced it. It's Natasha Leone. And it's kind of great because it almost

runs me one of my detective books where you kind of know the hits, but it's a different environment. The whole idea behind every episode is kind of the same. I like a good gimmick. So every episode starts with a murder. And you know what happens? Then it backs up and figure out she figures out what. It's a good premise. And she's a human lie detector. Like she can spot people lying. That's just like her gift as she knows people are lying. But every episode has a different cast of characters around her. They're all pretty decently well-known character actors on each show. And each show is its own story, even though it builds on each other. So I like it. I started reading on the plane, actually, 4,000 weeks.

Nobody cares. What else? Yeah, books are kind of done. This Oliver Bergman guy was on Derek Thompson's podcast last week, and someone had given me this book for my birthday last year, and I never read it because I'm... What's the book about? It's about time management. All the hustle time management gurus, like, how you've got to get more efficient, you have to do

this and you have to do this. It's a never-ending thing, and maybe it's okay to just cool it a little bit. One more. I watched a movie. I watched it before. It's called The Giant Mechanical Man. It's two down-and-the-luck people. I think it came out like 2012.

I never heard of this. You wouldn't like it. It's a Ben movie, not a Michael movie. It's a rom-com, but a lot of good character. Like, Jenna Fisher from the office is in it. I think her husband wrote it. It's a decent movie, good, not great. But the funny thing was to me, this is from 2012,

and I'm guessing the movie was made even before then. There was two finance bros in the movie talking about buying a plasma TV. And the guy says, how much did you spend? And he said, I spent $3,000 on a 50-inch plasma. First of all, do plasma TV still exist? No. My first TV was $2,500 in 2008.

But remember when that was a, that was an argument? Like, should I get a plasma or should I get a LCD or whatever? And people always said, like, if you leave your plasma on, the screen is going to get stuck on it. And plasma was like, that was the thing. And now, and of course, $3,000 for $50. And this laughable. Mine was a 37-inch Panasonic. Does Panasonic still exist?

That was mine, too, a 37-inch Panasonic. I had a 37-inch, Panasonic, black rim, silver. And it was heavy, right? Super heavy. Matter of fact, I think I recently just got rid of it. That TV held up better than the Samsung piece. a junk. With a line on it. But $2,500 for a 37-inch TV. Kids don't know how good they have it these days. Oh, speaking of kids, our friend of the show, Drew Dixon is hiring. Let's see what

he's hiring for. A junior analyst, a junior analyst reporting directly to Drew. Are we a jobs website, our jobs podcast now too? It's remote work. If you're a young person, you want to get into this. Drew is at Albert Bridge Cap. So go through his Twitter and you'll find out where to apply. All right, I went to the movies this weekend, Ben. So I saw a knock at the cabin, not by myself, brought a friend. Avatar was dethroned. This is from Eric Davis. Knock at the cabin Topps Weekend with $14.1 million, becoming first 2023 film to open number one at box office.

This is M. Night's seventh film to open number one. Jeez. I haven't watched the last three or four of his movies. The preview for this one I actually wanted to see. How was it? Okay. So the last movie that I saw old, I swore off M Night for good. because I was 70% entertained with old.

The ending was, in my opinion, just disaster. Just a total plane crash. Knock at the cabin, here's my take. Number one, Dave Batista, the former wrestler, was freaking awesome. He was good in the new Knives Out one as well. And I will say the first 80% of this movie, incredibly effective. So here's a premise. Two dads and their daughter are in a cabin in the woods,

and four people come right off the bad. and say, you have to make a choice. One of the three of you needs to sacrifice yourself or there will be the end of times. The apocalypse will happen. And you're kind of not sure if these four people are totally insane or if what they're saying is actually happening.

And it was very effective. Again, the ending fell a little bit flat, but overall, it was fine. It seems like the idea is probably better than the ending. It's hard to execute a good ending. The endings are always tough. But this was, in my opinion, I had a lot more fun watching this than old.

It was good. I still had a hard time finding a good movie to watch on the plane right down. It was good. Oh, the other day I was watching crawl on the couch. And Robben goes, what the hell is this? Are you serious? You're watching an alligator movie? And I said, do you not listen to the podcast?

This is like a staple. You rewatch? On a rewatch, I will say, Ben, your bag, Pepper Guy. Yeah, I didn't know he was still around. That's a very good animal disaster movie. I stand by that. So I watch, okay, this is on Hulu. David Kronenberg is demented.

Just straight up demented. And I mean that in the best way possible. His son, Brian, is it Brian Kronenberg? I don't know idea who you were talking about. David Kronenberg did The Fly and some other films that you've probably heard of. His son did a movie called Possessor, which is one of the toughest movies I've ever seen in my life. Sci-fi, just way out there. Anyway, I saw a movie.

Oh, Kronenberg did A History of Violence. Oh, okay. I like that one. Eastern Promises. You ever see Eastern Promises? Two Vigo Mortensen. Two Vigos. Another Vigo.

All right. Crimes of the Future is the movie. And this is not a recommendation because if you know it, you know. I'm not telling you anyone to go watch us. This movie was so out there, so, so, so out there. I can't imagine this movie coming out of this guy's brain. Just totally demented is the best word to describe it. But if you are a fan of these, what the f*** did I just watch movies?

Pretty effective. If you're a fan of bad movies like Michael, you might like this. This is not a bad movie. It's an insane movie. Can't believe you. We watched Crawl. That was like a punching bag for a long time. Let me give you the premise of crimes of the future.

Humans adapt to a synthetic environment with new transformations and mutations. It's a science fiction body horror drama film. Yeah, it's a body horror science fiction. It was messed up. All right, that's going on my do not watch list. Thank you. You're welcome. All right, listen, you know where to find us?

Animal Spiritspod at gmail.com. Thank you for listening. We'll see you next time. Thank you.