Animal Spirits Podcast - Tech Stocks Are Back (EP.309)

Episode Date: May 24, 2023

On today's show, Michael Batnick and Ben Carlson discuss the now-available Animal Spirits x Tropical Bros shirts, a great year for stocks (so far), Japan and Germany making new decade highs, US Government interest payments at all time highs, a postmortem on iBuyers, the end of the Cable bundle, AirBnb for cars, and much more! Thanks to YCharts for sponsoring this episode! Be sure to register for the webinar with RWM COO Nick Maggiulli on May 24th at 12:30pm ET. Visit https://go.ycharts.com/animal-spirits-referral for more information.  Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. 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. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. 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. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by our friends at Y-Charts. One more reminder. Register for Y-charts webinar discussing scenario tools with a big emphasis on how it works as streamline the financial planning process with our C-O-O. Nick Maj Julie, May 24th, $1.24th, $12.30 p.m. Eastern. Be there. Sign up on our website. Wait. This comes out on May 24th. Same day.

So let's just remind you, if you're a morning listener and you want to learn about the scenario tools. We have a lot of early morning listeners. All right. One more thing from one. charts. I pulled it up. Comp tables. This year, S&P 500, number of stocks up in the S&P out of five hundred four names. Well, it's 500 names. Don't do this. There's 504 names because different share classes. All right, there's 500 stocks. There's 500 companies. Okay, technically 504 share classes. It's 500 companies. All right, how many are up? Well, I was told five, so I'm going to go with five. 270 are up. Because everyone says it's only...

Right. I was told there's just five companies. 234 are down. 150 stocks this year up 10% or more. 99 down 10% or worse. Not as bad as people make it out to be saying it's only these stocks, right? They haven't. Just saying, if you want to check out the comp table, scenario analysis, all that stuff, check out the webinar, the day this is releasing. Whitecharts.com, tell them Animal Spirits sent you 20% off your initial subscription. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching.

All opinions expressed by Michael and Ben are solely their own opinion. and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. We're going to start with a little bit of housekeeping. Ridholt's wealth management is coming to Austin. We've finally have an office there.

I've been there a million times. Wait, was it a million or was it $900? No, we've been there a bunch. Lovely. Are you going on the trip on? No. Okay. You and I have been traveling too much.

Yeah, I'm probably not going, but I might. I might. But if you want to talk to us about learning about what we actually do for a living, helping people manage their money, if you want to talk to us about potentially joining us as an advisor, if you are in the Austin area, you can email us info, at ridholtswalth.com. All right, that's plug number one.

We've got two plugs. Second plug, Ben, you want to take this one? Which one? You look good. This is more of an announcement than a plug. Yeah, it's an announcement. Okay, first of all, we are doing this podcast together again. We do this once in a month.

It seems like we get together now. And we are at the Wealth Management Edge slash Inside ETS slash wealth stack slash. Is that it? Is there another slash? I think you nailed it. It's a big conference in Fort Lauderdale, Florida, Hollywood, Florida, technically.

Hollywood, Hollywood. And we thought there wasn't a better time to break it out than in Florida. We have the new Animal Spirits, Tropical Brothers. Look at that. Animal Spirits, it says it right on the sleeve there. We have the new whale design, palm trees. I mean, we have like the little wooden looking buttons here. It's fabulous.

The Tropical Bros people did better than I could have imagined in designing us a shirt. This is on sale now. You can get it at Tropical Brothers. If you go to Tropical Brothers.com, it's Tropical Bros.com. rose.com. Under collaborations, it says Natty Light, like USA and Animal Spirits. Wait, but USA? Like the USA? There's like a USA-Rah, Olympics kind of thing. So you go under collaborations, it's there. If not, we're going to have, I'm going to share it on social media. It's on the blogs, but it's Animal Spirits, Hawaiian shirts. Here's the best part.

Besides looking really cool and being comfortable in the summer, 10% of all sales, which would have gone to us, but not to brag. We're foregoing all sales here. It's going to No Kid Hungry, which we've helped out in the past. No KidHungry.org. So 10% of all sales will go to them. So feel good, look good, do good. Yep, according to their latest estimates, 9 million children live food food, live food, live a healthy life. No Kid Hungry, which we've worked for for a few years. They've always been great to work with. Very happy with that relationship. We're giving 10% of all proceeds to them to help children in need who need some more food. So again, Tropical Bros.com, look for collaborations, Animal Spirits.

This is the hottest shirt of the summer. I'm sorry. You have to have one of these for summer break. It's comfortable, it's breathable, and it looks just fantastic. The colors, we're walking around a conference, and we have people in business casual. The women are in dresses, the men are in suit coats and business casual, and they look at us. And we're in shorts and a Hawaiian shirt, and everyone's just, look at these guys. These guys have it all figured out, right?

I think so too All right Ben we're in we're in Florida And I've got a few Bones to pick Maybe observations Actually no bones That's not true Well I have one bone

You won't believe what I saw Before you got to the conference this morning So there's an exhibit hall back there And you know behind the exhibitors There's like a banner Right with their company Yeah Logo name whatever

I saw a dude Steaming I swear to God With a steamer I would have told him Listen, dude, they don't work. And I went up to him and he goes Steving his clothes or the banner?

No, the banner. I said something. He goes, does this do anything? And I said, Thank you, Funny you should mention it. We just, you know, I've got, we have a podcast. And I, uh, he doesn't know who we are, which is totally cool.

Fair. And I said, listen, I want to clarify. Steemers will not get out a bad wrinkle. So, yeah, if you, if you crumble, uh, if you crumble a suit coat and you put into your briefcase, you've got lines out the ass. No, steamers not going to do. You need an iron. But for just a t-shirt to just get a quick wrinkle out, steamers are sufficient. But if you're traveling somewhere, you're going to have wrinkles. I agree. Steamers are not ideal for travelers. I agree. Yes. Okay. So my other conference observation, most finance conferences

are dominated by men. There's not a lot of diversity in this industry. I think it's getting better, but it's notoriously but not very diverse. I would say 15% of all attendees at any finance conference are bald. Right? One out of seven and a half or so? It's pretty close. There's a lot of balds at finance conferences. What's a bald?

Do you mean like a me bald or like a dude who's balding? Both. Yeah. Yeah, I think that's fair. Okay. All right. Wait, whoa, whoa, whoa. I got two more things.

Two more things. This happened to me two times in a row. It's not a coincidence. Fool me once, shame on me. Twice can't get fooled again. Last night, I went to the Miami Heat game. Actually, let's talk about that now real quick. Alone?

Alone. See, I would like Duncan to do a poll to see what's weirder. Going to movies alone or going to a professional sports game alone? Oh, definitely a sports game, for sure. I mean, so it was just like... Because going to a sports game is a social event. Now, here's a few things that I... People around you are in groups and you're just by yourself.

Here's a few things I will say. I grew up hating the heat organization. Still do because of Pat Riley. but I respect the shit out of this team so much that I actually bet on, I did a parlay, I told you. I took the Nuggets and the Heat to make the finals plus $7.90, no big deal not to break. I didn't think the Heat were actually going to beat the Celtics, but they were like plus $4.50 or whatever. It made no sense. The odds made no sense.

So two things. We had a podcast with Ramit Sadie, which was amazing. And Ramit's whole deal is spend extravagantly on things that are important to you. And cut back mercilessly on the things that aren't. Which also, podcast come out Saturday with him, YouTube on Monday. We talked about his new Netflix show, and it was a fantastic conversation. So I am a lifelong, gigantic basketball fan. Probably the first thing that I ever remember, like, my early memories are, like, the Knicks.

So you're setting me up to tell me you spent a lot of money in this ticket. I can see where this is going. So, all right. So I spent a lot of men in this ticket, and I'll reveal. And I felt no qualms about spending this money. because this is what money is for. Like, literally, I will never forget going to game three where the heat destroyed the Celtics.

Can I guess? Sure. So, do you want to know where I sat? You sent me a picture. Okay, so that was my second ticket, and here's where the bone that I have to pick is. But it was in the lower bowl. Why do you have two tickets?

I'll explain in a second. What do you think I spent? Playoff game, home game for Miami. Eastern Conference Finals. 950. Okay, not quite that much. my first ticket was like $470, $600 with taxes. So it's like $600.

So I'm getting ready to go to the game and it's like 5 o'clock and my ticket's still not delivered. So I call up Stubhub, who you know how I feel about Stubhub with their 30% fees or whatever it is. And I said, my ticket hasn't been delivered. What's going on? And they're like, oh, the seller didn't deliver the ticket. We were just about to email you or something like.

I'm like, the game starts in three hours. What do you mean you were just about to email me? Like, I ordered my ticket like this morning. I don't know. Was it on May should I've called them sooner? But in any event. So now there's no decent seats that I wanted for the same price. So you had a better seat.

No, I didn't. I had a slightly worse seat and it ended up costing me like $740. So you had to plan more because they mess up the first one. So I called them and I explained the situation. I'm like, listen, I don't think I'm being unreasonable. I just want you to credit me the difference between my worst. seat and the better seat that I would have had, because you guys just never

let me know that the ticket was... And they laughed in your face. No, the customer service guy was very nice. He said, let me check with my team. He said, what if I can give you... There's no way they're going to give you the refund, obviously. I get it. What about if we just give you, like, a coupon, like a $140 dollar voucher?

And I said, that would be great. Thank you. What do you think they did? Sorry, sir, we can't help you. It's not on our policy. I'm like, you know what? Okay. Okay. I will never use step-hop again. I don't understand why it's so bad, the whole everything, the whole ticketing process.

Well, how come someone hasn't come in to figure it out and make it a better? So there's another service. I think it's called, let me see if I'm doing this right, tick-pick. Yeah. So, yeah, it's tick-pick. I'm done with Stubh. It was just annoyed me.

All right. Let's talk markets. Wait, one last thing. Okay, you got a lot to talk about it. Sorry, last thing. So last night I went to dinner. Obviously, by myself. This is before or after the game?

Before. And they included a 20% gratuity. That's a great scene in forgetting Sarah Marshall, where Jonah Hill is the host, and Jason Siegel goes to... One guy, by himself, sitting for dinner. And Sarah and Russell Brantor eating... I love that movie.

So they put a 20% gratuity, and I guess I don't even know what I was thinking, but I tipped on top of it, because I just wasn't really paying attention. But then you and I got a fantastic Miami Vice when in Rome at the bar, and it was, again, 20% gratuity. I'm thinking like, why are they doing that? So I've seen, they include 20% gratuity, which, by the way, I don't have a problem with 20%. Tell you.

But, no, they do that if it's like a party of 10. Yeah, true. Party of one? I do think, unfortunately, like, I've been, since the pandemic started and you feel for people out there working and doing stuff and making, keeping the world moving. My tipping has definitely increased a lot. Like, the pandemic made me realize, like, oh, like, these people that are, in our food service,

preparing it and moving, like, I've been tipping better. But I feel like the, the tipping thing is getting to a point where they're really making people mad now. Like, they pushed it a little too far almost. There's a lot of people getting angry with, like, the constant essence of everything. I spend my entire adolescent life in the service industry. Busboy, waiter, valet parker. Cabanboy, Caddy, one time, was not for me.

So I'm a tipper, but yeah, there's a time and a place and a way to do it. I can't see asking you for golf tips, no offense. No, but you should have seen me, Cabanamo, I was, that was, I was special. I was elite. I was speaking of elite, last thing, and that I'll move past us. Robin goes, he's like, you know, I heard you talking about how you're a great grocery food shopper. And I was like, how? Because she doesn't listen to the podcast.

She goes, I saw it on Instagram. She goes, let me just tell you something. and tell you listen to something, you never get what I asked you to get. I'm like, okay, if I shoot 96%, if I forget blueberries one time, I maintain I am an elite grocery shopper. Okay, so she called you on it. She called me on it, but I am, I just am. That's fair.

If you had to describe the financial market macro news cycle in 2023, what are some adjectives that will come to mind? Adjectives. Not like, it's not good. Just the general mood sentiment. Sour? Right. On edge?

Boring? How about great for the stock market? Oh, how about great? How about it? NASDAQ 100 this year. But wait, but that's facts. I'm talking about mood. Yeah, we're talking about mood.

The vibes have not felt great this year again. It's a continuation of last year. NASDAQ 100 this year, up 27% year to date. That much? S&P 500 up 10% year to date. Does it feel that, like, like that. I think the Russell 2000 is not up as much. It's the vibes don't match the returns. And obviously, some people would say, well, last year the NASDAQ was down 30 whatever percent,

that SPU was down 20 whatever percent. Still, they're nowhere close to matching the fact that this has been a pretty great year five months in in the stock market, right? Yes. But what happens when this happens? And that happens. And the recession is coming and the Fed. I get team butt. I totally get team butt. I have no problem with I'm not going to touch that one. I have a problem when... Can I get a sip your Diet Coke? Here's my one problem with this conference.

There's no Coke zeros. Where? I thought I had water. I'm thirsty. All right, go on. I'm not sure my Diet Coke with you. Do you want some? No Coke. You can have it now. I'm like, germs with you.

So I would say that the vibes have still been way off compared to the market, and the market is saying we don't care, we're climbing the wall of worry again, whatever it is, but I think a lot of people would be shocked at how well the stock market is doing this year. Yeah. Right? Yeah. Okay. Here's a bone to pick with you.

We had it out in Slack this morning. And you know what the best performing stock in the S&P this year is when I was looking at my little comp table? I do. Facebook. Facebook's probably cool. It's mostly tech stocks, though. Tech stocks are doing phenomenally.

What is the Fed down with interest rates this year? Raise them a lot. They're higher. Yeah. Tech stocks are up and rates are up. Yes. How does this possible? Because I was told the only tech stocks can go up if rates go down.

The only, no, that's not what you were told. I'm moving the go post. Last year, I was told. That's not what you were told. Rates went up, so tech stocks went down. So it has to be that. No, it doesn't. This is not, the inverse does not have to be true.

See, this is where you're wrong. I'm saying I don't believe this. But this is, I feel like a lot of people thought last year that, okay, we have an inverse correlation, and that's what's going to happen. Yeah, that's what happened. There was a historic, there was an interest rate shock, and tech stocks, which were reliant on hopes and high multiples, got destroyed. This is not narrative. This is fact. Got destroyed by that.

Did they not? And I'm not saying that rates didn't have something to do with that. They obviously did. And then inflation made those cash flows less value. valuable, future cash-fellists, so they got destroyed. My point is a lot of people did think, okay, tech stocks were only a rate story, and that's it, and that was not the case, obviously. If rates are higher and tech stocks are higher this year, tech stocks are way higher this year.

Hold on, but we're talking about different things. So part of the run-up to tech stocks was obviously a low-rate story, not all of it, because their earnings. Like, obviously, Apple, Google, they exceeded lofty expectations, just fundamentally they did. That's my point. It was not all a rate story. I think some people were saying that it was all low rates. But the tech stock is not one, it's not one tech stock.

There's the sofas and carvanas of the world, right? Like, so, but anyway, my point, so my point is those stocks got killed because interest rates went up as quickly as they did. Primarily, I'm not saying the only reason, primarily. And now, how could they be up when rates are still high? Well, it's simple. Number one, they got oversold. I know it's like a lame excuse, but first. Facebook was down 70 plus percent, but more importantly, it's fundamentals.

These companies and their management teams got the memo very, very quickly, or pretty damn quickly, in the first quarter of 2022, was that one? No, in the first quarter of 2021, things started to, that's when all of these companies crash. When Dicosan went down 80%. What do you think? How much less would Facebook have gone down if they didn't make the switch to Metaverse, to meta? A lot less.

Right? A lot less. But anyway, the point is this, that. The CEO of Uber, Dara, was, I think, the first major company to come out and tell this company that it's different now. Wall Street has certain expectations, and they all cut their losses and move to efficiency. So I think that is the reason why we've had so much great success for these companies. And of course, with Nvidia specifically, that's all AI. But I think the Google's in the world...

Maybe I'm arguing with a strong man here, but... Is what I'm saying fair? Yes, it is. But I'm also just saying, I think there were certain people who thought, like, oh, this is easy. I haven't figured out. It's rates. That's it. That's not it. That was it. It was. Well, rates plus speculation plus huge gain. Yeah. All right. Carl Icon, did you read this FT story about him? Lost some money. I actually spent some time on this last week. Okay. Carl Icon made a bet that the market would crash and it cost him $9 billion over six years.

How much money did he manage if he lost $9 billion? It's like all his. But how much was he worth? So did you see the, who did the, Hindenberg? Did the report on IEP? And I'm... It's pretty rough. Yeah. But I remember, I remember in 2015 when I was a young whippersnapper.

Carl Icon was on CNBC talk calling H.I.G and J&K a powder keg. I remember that. Remember he had the cartoon of Aishairs Larry Fink driving a bus over a cliff. Yeah. And so I wrote a blog post. Very respectfully, I wasn't, like, dunking on Carl Icon by any stretch of the imagination. I would never do that. And I do remember a particular comment.

But anyway, that's not the point. The point is that Carl Icon, credit to him, came out and said that he's been... He at least admitted it. He said, like, I've always told people there's nobody who can pick the market on a short-term basis. Maybe I made the mistake of not adhering to my own advice. Good for him. Good for him. But he also said, and this is...

I mean, this is just a layup if you're a fun manager and are performing. I obviously believe the market was in for great trouble. but the Fed injected trillions of dollars into the market to fight COVID. And the old saying is, don't fight the Fed. So he did blame the Fed a little bit, which I feel like you just kind of, even if you're admitting a mistake, you have to blame the Fed because that's what you do if you're underperform. Yeah. Right?

Anyway, my point of the stock market being up this year is just that most of the time the stock market goes up. Sure. A lot of people, I feel like a lot of people in their brains can't come to this conclusion, though, because everything always has to be bad. And if you bet against the stock market for six years in a row, guess what? Probability says you're probably going to be wrong because the stock market goes up most of the time, even though sometimes it goes down. Why just survive back to school when you can thrive by creating a space that does it all for you, no matter the size. Whether you're taking over your parents' basement or moving to campus, IKEA has hundreds of design ideas and affordable options to complement any budget.

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And it's good for your eyes too. Because with regular comprehensive eye exams at Specsavers, you'll know just how healthy they are. Visit specksavers.cavers.ca to book your next eye exam. I exams provided by independent optometrists. People are, so I saw, I just fled this. I didn't read it at all. So Mike Green, Professor Plum, quote, tweeted,

Breaking White House says if U.S. defaults, the stock market is expected to decline by more than 45%. I haven't had time. I mean, I have time. I did not see the report. I didn't read into this. But so Mike Green said, the quote let it burn quote tweets and comments

tell you everything you need to know everyone is comfortably numb to the consequences again I didn't see all of the quote tweets but I did see this one response that I want to flag because it was pertinent to what you just said Ben you believe the market over politicians though like the I would trust listen just listen just wait for the coup de grace

so somebody replied sending the S&P down 45% would be more than enough to atone for the sins of 15 years of insane QE and Zurp takes us back just below pre-pendemic levels. Inflation would probably, inflation problem would evaporate overnight. Yes, it would be an ugly recession, but we'd return to a real economy.

There's a lot of people. A lot of people that feel that QE is somehow, not somehow, I understand their point of view. They think it's, you know, exacerbating wealth inequality because rich people only, and the world needs to burn. Yeah, but anyway, but they really do. They think that it's like a moral problem of QA.

and I don't share this person's point of view, but I understand where they're coming from, even if I don't agree. I don't. I think 2008 broke people's brains in 2020 shattered them into a million pieces. And I think some people just, they assume the world be better

if we had like a great depression level resetting. I'm sorry. That is not better than... That's not, no. Well, that I definitely... I do not agree that that is better. How about a win for the now-show Japan crowd or a loss? I don't even know if it's a winner or loss, but bespoke tweet.

Did you see this, Ben? Nope. The Nika 2225 broke out to a new multi-decade high this week, hitting its highest level since 1990. Wow. That's impressive. How about that? Here's another one.

Greatest bubble of all time. I think so. As far as my money goes. I think so. Here's another one, Ben. The Dax, that's the German, that's the index index. Germany, stock market index in Germany, new all-time highs. That is one of the most confounding things. That is surprising. Eurostocks, what? What's this Eurostocks one? Hi, look. Me and Ben are

recording a podcast right now. Look at my shirt. Look at it. Hi, Steve. Hi. Bye. Bye. So, yeah, there you go. And Walter Bloomberg tweeted, Eurostocks volatility index is at its lowest level since February 2020. Wow. Just wait. I honestly have no, I don't know anything about, like, the German stock market. I can't tell you why it's doing what it's doing, but there you have it. All right.

So Tony Welsh had a great tweet. He said, I know only a few stocks driving returns. Narratives sounds scary, but according to empirical research, there really isn't much to read into Ford Returns when Trilling Performance has been concentrated in the top of the market. So he looked at what happens. This is so great. It is.

I've never seen this. I haven't either. So he shows what happens. I was told that narrowing leadership is super bearish, which. It intuitively makes sense. Right. And the returns have been fine when it's concentrated performance. Walk me through this.

So people, well, people always say, if it's just the top stocks leading the way, just wait. When those stopped working, watch out below. And he broke it into lowest concentration versus high-end's concentration and showed the, what is it, the six-month returns following that. So prior six months, things were high, and I think the ensuing six months in what happened. and it's not bad. It's not the end of the world at all. All right. So this shows large cap stock six-month-vote returns

by deciles of the share of market returns explained by the top five companies. So from lowest concentration to highest concentration. And look at the one from 1926 on. It was, so it's been a little worse lately since 1990, but still pretty darn good. All right, you ready for? Yeah, yeah.

There's not much to see here. Huh. Yeah. Although, wait, wait, wait, hold on, I just will say. When there is more broad participation, returns are better. Yeah. But, yeah, it's not at the end of the world just because it's so concentrated. All right.

How about some, how about some optimism here? That was a, like, moment there. What do you mean? From old school. When he's working on the car. Which part is I meant? Oh, yeah. Mike.

Yeah. All right. Steve Cohen. By the way, the reference of somebody just, Ben and I are in a glass booth for those of you listening. Yeah, we're in a podcast. And I just gave it. And if you listen to the podcast, this is the week that you should check out YouTube at the compound so you can see the shirts.

Yes. You have to see them. They're going to be linked to on our blogs and a wealth of common sense and relevant investor. Do you sell a blog? Barely. Okay. You don't blog much anymore. I, no, you know what?

You know what? I'm too busy. Too much podcasting. I have, I have too. Yeah, I'm done with time. Yeah. We were really busy today. Drinks by the pool.

It was tough. All right. Steve Cohen. I'm making a prognostication. We're going up. talking about AI, I'm actually pretty bullish. He thinks there's a big way of opportunities coming from AI, and he says, like, good luck standing in the way of this freight train.

Now, if AI does what everyone now says it's going to do, is that the next bull market or the next bubble or both? It has to be a bubble, right? Yeah, we're not there yet. If it does 50% of what people think it's going to do, then it's almost guaranteed to be a bubble, right? Well, and then by definition, it will be able to market, right? Which will lead to a bubble.

Yeah, we're on TCAF. We've got somebody this week who knows way more about this stuff than we do. I'm excited to talk about it. But yeah, it's early. Speaking of people who don't blog anymore, remember when Jesse Livermore used to blog at Philosophical Economics? Yes. I mean, we're talking.

I'm actually happy he doesn't blog anymore because as incredible as his blogs were. It was like, all right, block off three hours. I think the, call it 2012 to 2015-ish range, as far as I'm concerned, was like, you know, the golden age. That was the golden age of financial blogging, I think. And he was a big part of it. Yeah, he had some, he had some real faceblowers. Like, there were some stuff that I read from him where I was like, I couldn't believe the quality of the work that he was putting out.

And I learned me, I learned, I don't want to say more from him than anyone else, but I learned a lot from that guy. So he still occasionally tweets some numbers and stuff. He broke all of this great chart here, breaking down all sorts of different valuation ratios. And you can look at it if you want in the tweet. But he said his investing model for 2020's decade, international over domestic, value overgrowth, small over large. He looked at all these different P.E ratios and capes and small and all this stuff. And it's interesting because that would be pretty much the exact opposite of last decade. And

I mean, this is fundamentally based alone So it's impossible to gauge Where people put their money But it kind of makes sense It does make sense And I wouldn't be surprised If it doesn't pan out Yeah, it's almost like

Is it too easy? Well, did you see Granthams? Not Granthams, Monti is Mia Coppa? I give them a lot of credit. I put it in here. Okay. Because So GMO, as everyone knows,

has been bearish for... I'm not sure I liked his his explanation, though. Honestly, he's... So we talked about this a couple weeks ago. We said, why was a place like GMO so wrong about margins having to come back down to the historical averages? Yeah, we just did talk about that.

Anyway, honestly, so his answer, the TLDR, but he gave it full me a copa, and then basically said it was the fiscal deficit. He said it was government spending, which... Yeah, and I honestly, I'm not smart enough to say whether or not that's accurate or not. But the government spending didn't happen until 2020. That's my problem. No, no, no, no. He said even prior, even prior, he said it was...

was it, I don't know if the numbers are right, but I don't know if it was 6% of GDP or 6% of 1. He gave a long-term average. I didn't love, his explanation I thought missed the technology piece. I just think it's text stocks. Yeah, I don't think it's that complicated. I think these, you've never seen companies this big with moats and margins this large where they could just create new categories out of thin air. Um, so I think that's the fundamental difference. I'm sure that there's, I don't want to throw what he said in the garbage, but that I think that's the simplest explanation. Speaking of moats and margins, look you see what I did there. They had a big profile of J.P. Morgan on Wall Street Journal this week, talking about how much bigger they're becoming.

The bank has opened branches in 25 new states plus D.C. since 2018. 4,800 locations in every state in the lower 48th. Achievement, it alone is unlocked. I back at J.P. Morgan, do you? Yes. Added another 93 this month when it bought First Republic. 13% of the nation's deposit, 21% of all credit card spending. Bigger share than in each than any other bank. investment bankers, this is surprising me, bringing more revenue than all their Wall Street,

where I was including Goldman and Morgan Stanley. Look at their deposits since 2020. Yeah, that's a lot. I mean, part of that is people holding more cash, but J.P. Morgan is essentially, I mean, he's like the Treasury Secretary as it is right now, and they, it feels like they're like part of the government now. They're bulletproof, correct?

Does that mean, like, something has to go wrong with them? I don't, they seem like they're another arm of the government, essentially. I mean, they're one of the most important companies in the world, obviously. I mean, biggest back in the United States. But what happens if when Jamie Diamond retires? Or does he work until he's like Bob Eiger until he's like 80 or something? How old is he? 60s?

He was younger than, when he was running it, he was younger than like during 2008. Yeah, he strikes me as like a worker, but I don't know. I don't know. Is this good, the whole them being this important and big? I don't know. 67 years old. He's not young. The whole thing about how regional banks are the ones that are serving their local community

strikes me as something that people say that is true, right? I do genuinely believe that. Do you ever drive by a regional bank in your town and go like, I'm going to bank there? No. I don't. But you know it's funny? I was talking to Josh. Josh has mentioned that there's a bank near us.

I was like, huh, you know what? I'm very, here's one of my weaknesses. I'm very non-observant of my surroundings. fair so I don't notice things as I'm passing them and I somehow noticed like a citizens bank on the corner of like my street or something why would you use that over jp morgan I don't know they give you better rates or a better deal on business loan I can't see it if you're an individual if you're a company maybe I mean I've if you're credit worthy bank a bank will long to you I mean I have I've had accounts over the years at credit unions for loans car loans and house loans but

then and they make you open up a checking account but all I do is move money into there to pay the mortgage or the pay the car payment and that's all I use it for. I don't use it for anything else because... I just don't know that 3,000 banks instead of 7,000 or whatever it is, is that bad. And I don't know the ramifications. I just don't know enough to really have a strong opinion.

I don't think it's that big of the other. That would be my hunch, but I don't know. If you're one of these people who is worried about FTIC, whatever, and for whatever reason you're worried about that, J.P. Morgan is the answer, right? Yeah. This chart is pretty wild from Y charts. Yes, okay, so this, I put this as U.S. federal government interest payments now, and it's gone parabolic, right?

Yeah, you've got to normalize this for something, otherwise people are going to lose their minds. You normalize it to GDP? GDP, and it's not nearly as bad. But my whole point is this is why... Is that a trill? What? Is that a trillion? Is it about that a trillion? Yes. But, I mean, it's gone from $500 billion to a trillion like that. this is my whole thing of why I don't think rates can say higher for longer. Because the U.S. can't finance its debt. And even if you compare it to something else like GDP, and it's not as bad as it was historically, politicians are going to latch on to this and go, see, look at how much more we're spending

in interest. We cannot keep rates at 5%. I think this becomes a political issue at some point. Yeah, that's an interesting point. Are they going to cut rates not to juice the economy, but to make sure that we can roll our debt? It just seems like eventually that's a political problem. That's all I'm thinking. Why? Because

the deficit will just keep widening and widening. Yeah, because you'll say, why are we keeping rates at 5% just to pay all this money to I think it's a political issue eventually? Just a thought. From Cali Cox, the S&P 500 has been 10% and more below its record high for just over a year. The eighth longest streak in history. That's kind of wild. That is pretty good. Callie says, yes, this bearer sucked, but if you're a long-term investor, this has been a once-in-a-decade chance to buy consistently low prices. And to our listeners, I hope you've been taking advantage.

Here, Callie, see, an optimistic person, finally. I hope you've been taking advantage. Yes. All right. This was a good tweet from James Thorn, talking about the Fed wanting to get back there, 2%. They say we don't follow the inflation rate. We follow core PCE, which whatever, take this out, add this, I don't know. after the 1980s we had two recessions in the early 80s another one in 1990 core PCE did not reach

2% until 1996 so inflation hit 15% or whatever in 1988 or 80 we did not reach core PCE of 2% until 96 a decade and a half later wolker he said Volker claim victory of inflation was significantly above 2%. I'm just wondering at a certain point won't the fed kind of claim victory if prices just sort of stabilized. So Athwathamodran was on Morningstar, the Longview podcast last week. And he was talking about, listen, it's not inflation itself that's bad. It's the volatility in prices. So if you knew inflation was going to be 5% on a stable basis,

you can plan for that. That would be fine. But it's going from 2 to 7 to 3, and then you average 5. That's worse because people don't like all the ups and downs. So if we get to a stable 3 or 4%, at that point is the Fed going to say, okay, prices are stable, even though we're not as low as we wanted to be on inflation rate,

then can they claim victory if we don't get back to 2%. Just can't stop thinking about Stubhub. Okay. You know what else I don't like about Stubhub? So there was like a comment section. Like, you know, are you happy, are you not leave?

It was like 140 characters. I'm like typing it. Then it was like, wait. it was like one set they take your your piece of paper whatever you send it on and throw it away

your comments thanks for that right in the trash right in the recycle bin all right there's a there's a refi boom well there was uh

liberty street economics looked at wow the reef but so they looked at mortgage originations and how it spiked and came down the surprising thing to me though

this is refinancing and purchases the refinancing boom for billions of dollars, and this isn't a justice for inflation. It says balances are nominal dollars. It basically was the same thing as it was in the early 2000s. I don't think people took enough money out in refinancing. Guess what? Maybe we don't talk enough about how stimulative the refi boom was.

It was huge. People locked in their biggest monthly payment for a long, long time at a low rate. But also, how about the cash out refis? So one third of outstanding mortgage balances were refinanced during the seven quarters of the refinance boom, an additional 17%. of mortgage is outstanding were refreshed through purchases. No, but Ben, I'm saying how much money was pulled out? Oh, I don't think, I don't think, not as much as you would assume for rates being that low.

But out of the, out of the 700 billion or whatever it was, was it a quarter of a trillion? Right there. Home equity extraction. Look at the next chart. It wasn't as high as it was in the early 2000s. It never even got that high, which is, that's pretty surprising me since housing values are obviously up since then. As a percent. Okay. $430 billion. in home equity was extracted. How much? $430 billion.

There you go. It's a lot of money. It's kind of crazy because when we refinanced, at least it took forever. Remember how buried they were? Yeah. The banks.

Yeah. And now it's, what's the, what's the thing that rolls through like in the movies in the Midwest? A tumbleweed? Yeah. That's the word I was looking for.

Midwest? West. West. Yeah. I was thinking, like, where was I looking for? I mean, that's the exact right way.

I was going to say something way off. You're still a thing left. Subhub, that's a problem. All right. Is there, are I buyers, so Andreessen has this theory, like, there's no such thing as a bad idea, there's only ideas that are too early or something like that. Eye buyers too early are just a horrible idea. So what I'm getting at is there's a chart from Mike Delpreet, open door month, and I apologize

of my not saying his name correctly, open door monthly purchases, and it peaked in July 2021 and just, you know, it went from around 6,000 units a month if I'm reading this right to 500. I think will this ever work? I think the housing market is as close to being undisruptible as an industry can be. I agree. I don't know how it hasn't been disrupted yet. If it's not, if it hasn't happened yet, I don't think it's ever going to. There's too many parties.

I think that it's too much of a local, you can't, I don't think you can make the housing market more efficient with technology. I don't think it's possible. The thing that I, the story that I remember the most about why the eye buyers weren't working is somebody emailed us that there's a house with a really bad dog in the backyard that won't stop barking and nobody would touch his house, right? It's on the market for a year and it's the dog. It's an annoying dog and eye buyers came in and immediately paid like 30% over ask. Yeah. And then they were stuck with it. This is interesting from Lance Lambert.

Talk about, so we talk about like the economy and how it's not homogenous. There are local areas of growth and stagnation and recession and whatever. He said, talk about a tale at two housing markets. Most of Connecticut sits at an all-time high while California remains well below the 2022 peak. Don't show this to Duncan. He's just uprooted and living in Connecticut looking at houses. Good thing. He's not listening to this.

Don't watch Duncan. That is interesting. Is a recession done? Mensions of recession and earnings calls be falling. no longer in vogue. Can I do a tweet in podcast form? 2021. Recession is imminent.

2022. We're already in a recession. It's obvious. 2023. Actually, recession is more like a 2024 story. Well, actually, actually, I was watching CNBC this morning. Neil Kashkari was on and he was saying how he's like, remember last year when we had two consecutive quarters of negative GDP and everyone thought we were in a session, recession? I kind of forgot about that.

Do you remember that? Yes, we pounded the table saying, no, we're not in a recession. I'm pretty sure we were on the right side of history with that. Yes, we pounded the table. It was not a recession. I also saw a chart of... It would be the first recession in history where no one lost their job, and the unemployment went down.

Boom, here it is. Thank you, Sean, for putting this in. Number of S&P 500 companies citing inflation coming way down. So Carl Kittania tweeted, Dear Excess, second quarter, saw the lowest level of production cost inflation, this is Q1. And then he said, probably not a quits. and so the number of companies mentioning inflation on earnings costs has fallen to the lowest level

since Q220-21. So no recession and we beat inflation. Is the landing soft? Is the landing soft? I miss this. When Powell had his speech two or three weeks ago, he said something, I'm looking for it here.

What? Here it is. It is still possible that the case of avoiding a recession is, in my view, more likely than not having a recession. You damn right he said that. I think if we do have a recession now, it's going to be all because of the Fed. If they don't learn to, like,

take their foot off the gas pedal or the brake or whichever analogy I'm looking for here, I think they're going to be the sole cause of it if it happens. All right. We only have this booth for another 10 minutes. We're going to keep this quick. Don't need to spend a lot of time here, but who could have seen this coming? Disney is shutting the Star Wars Star Cruiser Hotel,

which cost $2,000 a night after 18 months. I thought it was like $5,000 a night, wasn't it? Well, they said a cabin sleeping two gas costs 4,800. What are they going to do with it? Three guests. Well, listen, three guests was 5,200, whatever, whatever.

It's the price for a couple of sharing a room works out to $2,400 per person for a one night, two days stay. All right, here's what they said. This premium boutique experience gave us the opportunity to try new things on a smaller scale of 100 rooms. So there's only 100 rooms.

As we prepare for its final voyage, whatever. Whatever, whatever. That's it. Didn't last. You don't go to Disney to sit in your room and experience the room. You go to Disney to experience the parks. Yes.

All right. I could save them a lot of money if they would have just listened to me. Disney's counterpart, sort of. Netflix, uh, said that five million monthly active users

for its cheaper ad-supported option. I'm sorry, they said that they have five million monthly active users. 25% of new subscribers were signing up for the tier in areas where it's available. You know what this means?

That's interesting. They make more money on the ad tier. So what's that going to mean? Our subscription, no ad one is prices are going to go up. All these places are going to jack up the prices of the no-ad version because they make more money on ads. You know what the other thing is? I am getting very, very nervous about my cable bundle.

Well, you should. What did Disney say? ESPN is laying the groundwork to sell its channel directly to cable cord cutters at a subscription service in coming years. Here's the thing. ESPN helps subsidize other cable providers. they're going to jack up the price on my cable bundle now. I'm screwed.

How much is it? I pay, this is with Internet and cable, I think I pay $1.70 a month. That doesn't sound like that bad. With Internet, it gets me stars, HBO, Showtime. Yeah, that's not a lot. It's a great deal. Yeah. And 400 channels.

Okay, what would you realistically, I mean, I guess what? You'll pay $250. I'll keep, yeah. But the thing is, if you, okay, I'm going to, I know a lot of people change the YouTube TV and Hulu TV. They jack the prices up on those, too. Plus, you have to pay for internet. So either way, you're screwed. I think the prices, that's what we know, the prices are going up for content.

That's the takeaway. I think Netflix ruined everything for everyone. They really did. Because everyone saw how great their stock was. This is how the stock market affects businesses in the economy. Everyone was like, oh shit, we need to get into streaming. Look at the multiple. NASDAQ dragged Disney down with them

Look at the multiple And then what everybody thought Was like green pastures turned out to be like a hell pit Right, so everyone followed It all crashed and burned Now the bundle's going away The bundles not going anywhere But the prices are going up

Yeah, the prices are going up All right, my car idea So just to be clear Here is my idea People were sending us shit Which by the way, I learned something new There's a company called T-U-R-O which is Airbnb, it's Airbnb for cars, and it is sweet.

So I think I'm going to California next month with Chris, and we are definitely going to use it. Do you know about this, Tora? Yeah, some people send it to us. My rebuttal to you was, you're a bald man who wears Hawaiian shirts and you're drawing a driver convertible. Welcome to your midlife crisis. Yeah. It's here. No, but wait, but again, just to be clear, here's what I want.

I want a subscription service for cars, not for, like fancy cars where you like can have access to. I'm talking about the cars that you drive around your neighborhood or whatever. So there should be tiers. If you want four cars, it's $1,000 a month. If you want six cars, it's $13 a month. If you want the upper end, it's $7,000 a month, whatever. Whatever, whatever, whatever. You want to pay a single lease fee, but you want to have six cars a year or something. Exactly. So I, I send this to a car dealership guy, and he goes, Fair did this, went bankrupt. So there was a company that, did this again, and it went bankrupt, so I would say

maybe they just didn't execute, because I think it's a solid idea. This sounds like a 2020 idea to me. It would have gotten a very high multiple, and it would be down 98% right now from the highs of it IPOed. All right, recommendations. I am super, super duper-sighted

for the Arnold Schwarzenegger is it a doc on Netflix. He might be the most interesting man of all time. Most accomplice. I mean, He's got an interesting story, yes. Did you see the trailer?

Yeah, looks good. Looks amazing. There's another trailer that I saw that blew my... Is he the most... Accomplished? No. Has anyone ever done more impressions of a person ever than Arnold? Oh, no.

Right? Okay. There's a trailer. It's called The Creator. And it's about AI. It's basically, it's like Terminator 2. So you're pretty late on recommendations if you're recommending two trailers. But wait, did you...

And the guy that the director did... It looks good. It's Denzel's son in it, right? It looks good. Is that who it is? It's called the creator. Oh, the, yeah. It looks good.

God, I'm so, so, so here for it. What did I watch on the airplane? All right, you want to... I don't think I'm watching anything. Because it's all, it's basketball. All right, I tried two things on the plane. The Fableman's. Oof, brutal.

Oh, I'm so mad. So I, so I, when that came out, I was so excited to see it. And then it just got... Stephen Spielberg is giving me so much joy in my life. Yeah. And it, did you watch it at all? I'm not going to it. It's cinema, right?

It's a film and, And the parents are Paul Dano and Michelle Williams. Amazing, amazing, yeah. Great actors, and their characters are horrible. They're annoying. It's a, like, I turned it off after a half hour. I couldn't do it. Here's a recommendation for you.

Silo on Apple TV. My wife and I knocked out three or four episodes over the weekend. A bunch of people, you know, Tim Robbins is in it. A bunch of people you've seen in other movies, and that you, like, five people in the show, you'd go, this person's in a, so here's the premise. and they give you the premise five minutes into the show. There is a huge silo that goes down like 140 floors into the earth.

You can only see outside from the top floor. Say no more. I'm literally in. The people who have been living there, it's a civilization of like 1,000 people. They've been living there for 140 years, but someone erased their history. They don't know why they're there. All they know is if they leave the silo, they die of poison. Wow. That's the premise.

That's my type of show. It might be a one-season show, but it's, yes. And finally, on Netflix, I felt kind of weird why. watching this last night before I flew this morning, but Flight with Denzel. Great movie. I forgot about it. That movie is awesome. It's a great movie. It's a great movie. John Goodman,

Don Cheeto, along with Denzel. It's a great movie. Here's the thing about Denzel. You know, I only saw the movie once. I don't feel like I need to revisit it. It's worth a rewatch. I only saw it once, too. Denzel is a guy and a guy who plays himself in every movie, but you buy the version of himself that he plays in every movie even it's a little different.

I think Denzel is my favorite actor of all time. I would have to, I would have to, like, seriously sit down and do a proper comparison, but I'm pretty sure he's my favorite actor of all time. He's so good. That's all I got. All right. Tropical Bros. In conclusion. Yes, tropicalbrose.com. Look for collaborations, animal spirits. That guy's got a sweet mustache.

That's your next midlife crisis. You that guy. Can't see him. All right. Remember, 10% of all proceeds go to No Kid Hungry, help kids who are malnourished, under eating here. What else do we got? Austin. Info at ridholtswalt.com, if you want to learn more.

Futureproof. Check out our show with Rameet about Netflix. This is a lot of promos. Got a lot going on here. These are the shirts of the summer. You have to get one. Animal Spiritspot.com. Thank you for listening.

We will see you next time.