Animal Spirits Podcast - Tesla is the Next Tesla (EP.186)

Episode Date: January 13, 2021

On this week's show we discuss the outsized role tech companies play in our democracy, why aggression is highly contagious, why the stock market is creating bubbles, the battle between fiscal and monetary policy, bitcoin whales and much more.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to by MasterWorks. The Fed has committed to keeping interest rates low for the foreseeable future. That means that bond yields already at record lows will continue to stay near 0%. So where should you put your harder in income? Well, according to a new report from city private bank, contemporary Art returned 13.6% per year over the last 25 years compared to 8.9% for the S&P 500. Art also had a lower loss rate than gold with almost no correlation to the stock market. Masterworks.io is the first and only platform that lets you invest in. and blue chip art from artists like Baskiat and Monet.

Recently, Masterworks.io sold their first Banksy masterpiece for a 32% return net of fees to investors. To learn more, head to masterworks.io today to join over 100,000 art investors like Ben and I. Tell them Animal Spirit sent you to skip their 15,000 person wait list. See important information at Masterworks.io slash disclaimer. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's Wealth Management.

All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of 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. Watching everything in the last week or so play out on social media, it's stuff that you know is going to be in the history book someday. I don't know how history is going to work in the future.

It's such a bizarre experience, and I'm not sure my brain has quite figured out how to process it yet. This weekend, 50% of my stream on Twitter was the NFL playoffs, which I was watching. 50% of my stream was videos and pictures of an insurrection at the Capitol building. My head doesn't know how to deal with this. It is weird living through this because is this a type of thing where obviously we're never going to forget this? This is one of those flashbulb moments. But is it the type of thing where we move on in a week? In other words, will we forget in a week but we'll remember in 50 years?

I don't mean that we'll forget in a week. We'll move on to the next thing. But this is like a permanent thing in the history book, right? Yes, it has to be. It is weird. Is this a pivotal moment where we go one way and thinks just, okay, this is it? we're moving on from this or things get worse from here. I have no idea, but it's almost like you're watching a movie when you see it play out on social media. And I just don't think

that we're ready for understanding events that way. At least I'm not. Yeah, the whole thing is hard to process and really obviously embarrassing and sad and horrific and all those sort of things. And Kevin Roos tweeted, so as everybody knows, Donald Trump was suspended from Twitter. Then he put out a video and then he was later permanently suspended. But after the video that he put out, Kevin Ruse tweeted, the moral of this video is that Mark Zuckerberg and Jack Dorsey are the most powerful people in America and it's not particularly close. Hyperbole or no? I mean, it's bizarre to think if you look at just the stock chart, you'd think Twitter is this middling whatever company, at least for the past decade or so, it's maybe one of the

most important companies in the world. For sure. Right. It helped to get the person elected. Yes, it's certainly. To communicate throughout the entire term, here's where I don't know where we go from here. I'm not good at predicting this stuff. But in the future, are we going to have 30 different platforms like that where they're all going to be these microsocial platforms where groups get together and they can have their own confirmation bias and innate rules with each other?

Or is it just Twitter is going to be the big one and other people are going to be just off to the side? I don't know, obviously, but especially Facebook is so big at this point. Twitter is not nearly the same size. There's actually some data that someone posted on here. So this is from 2019 from Pew Research. This is percentage of U.S. adults who say they ever use the following. online platforms or messaging apps on their cell phone. YouTube is at 73 percent, Facebook 69 percent. Twitter's only 22 percent. So as important as it has been for some people and some

groups, maybe for the country for the past four years, it still doesn't have wide adoption. Instagram for comparison's sake is at 37 percent. Snapchat is even higher than Twitter at 24 percent. The whole thing that people say Twitter is not real life, I don't know, take it for what it's worth, but I can't tell if this is a line-in-the-sand moment, like you said, or this is just things continue to go on as they have. It does show these tech platforms have an immense amount of power if they can turn the light switch off on someone. The whole thing is very complicated. One of the things that people were talking about, and this is not a market story, markets are like the last thing that most people are concerned about, but we'd be remiss if we

didn't mention that the stock market, the Dow Jones Industrial Average, hit an all-time high on the same day that these terrorists were storming the capital. Josh Brown had, I thought, one of the better takes on this on his compound podcast last week. The title of it was perfect. He said the stock market is heartless. It doesn't care about this stuff. I mean, you could go through 30 different instances in the past nine months. Well, yeah. You could go through history if you wanted to, but even just in the past nine months of the stock market not caring about what's going on in the rest of the world. People say Twitter is

not real life. Maybe how about this? The stock market is not real life either. So there was a paper by Luke Burgess, and he shared a research paper by a Chinese research team and showed a chart, I guess, for lack of a better word, that showed how emotion spread on Twitter. And he said aggression is highly contagious, and it is most contagious when people have weak ties between them, when they are isolated, when they are alone. Yeah, the line here, aggression is highly contagious. The thing is for us, social media has been, by far a net benefit to us, I think, personally and career-wise. You know, you can find the right people to follow. I use Twitter as a filter as a way for news, as a way to understand what's going on in the markets in the world. I think I've set a pretty good filter on there in terms of

following the right stuff. But that whole positive network affects for us that has been a net positive because it works to amplify this aggression and sadness and anger, it works just the other way for people who are either looking for trouble or just lost in their way. Like you shared that Kevin Rousse, you mentioned him, his podcast from New York Times about people going down the rabbit hole of YouTube and basically being radicalized on both far right and the far left, how scary that could be for someone who I guess doesn't know what they're looking for in this stuff and is just meandering and trying to find a way. Unfortunately, these platforms are so powerful in how they can get people to do stuff maybe that they normally wouldn't have done.

All right. So with that, we're going to pivot to what we normally talk about here, what we like talking about here, which is the stock market. Let's start with Jeremy Grantham's piece, waiting for the last dance. Is this sort of a cop-out? He said, I will also tell you my definition of success for a bare market call. It is simply that sooner or later, there will come a time when an investor is pleased to have been out of the market. That is to say, he will have saved money by being out and also have reduced risk or volatility on the round trip. This definition of success absolutely does not include precise timing. With all due respect to Grantham, the guy is a legend, and his pieces are always very thoughtful. He's had some of the best timed calls of the past,

I don't know, 25, 35 years in the business. His calls of late reminds me, the quote, like, to every man of the hammer, every problem looks like a nail. You put these in your piece, some of the headlines that he's talked about in the past. 2010, he said half cash, wait for stocks to fall. In 2011, he sees the global equities as ranging from unattractive to very unattractive. 2013, he warned it could be a dangerous year for stocks. He's been, pounding the table on this for a long, long time. I don't know, just because he's been right in the past, I have a hard time seeing, it seems like he's stuck in this path of calling bubbles, and now he has to call bubbles. That's like his schick. Is that too

disrespectful? I don't think so, because he wrote a piece in Barron's where he said that he was, I don't want to say trapped, I forget the words that he said, but that he tends to see bubbles because this is how he made his money. This is how his career came from. I give him a lot of kudos for writing that piece. I'm sure that wasn't easy. This part, in the new one I really loved. He wrote, I am doubling down because his prices move further away from trend at accelerating speed and with growing speculative fervor. Of course, my confidence as a market historian increases that this is indeed the late stage of a bubble, a bubble that is beginning to look like a real humdinger. And I just wanted to say humdinger. That's something that you can't say unless you're

over the age of 55, right? I mean, in this piece, he evokes the South Sea bubble in 1929 and 2000 and the Japan bubble. I mean, those are all timers right there. And you wrote, a follow-up piece, you wrote a couple pieces on this, you're trying to work through this. You and I don't agree on everything. I tend to agree with you on this, that there are pockets of exuberance all over the place right now, in irrationality. I don't think that necessarily means we're in an everything bubble, as some people would like it to be. They want to just lump everything together and say, this is it, this is a bubble. Maybe I'm wrong. I don't necessarily see that either, even though there can be pockets of bubbles and certainly crashes within the market.

So this is what I was thinking about yesterday. As I was driving and I was thinking about this, How long can we see these pockets of bubbles? So, for example, this Signal advance, I don't know what this company does, but it's certainly not what Elon Musk was referring to. So Elon Musk tweeted, use Signal, which is, I think, a messaging app. And this Signal advanced, ticker SIGL, it was a $6 million market cap. Gained 500% in the next day, 90% in the next day. This is on Wednesday.

Today it's up 325% because, of course, why not? This doesn't make any sense. There's bubble behavior like this all over the place. And obviously, Tesla, Tesla added a $165 billion in market cap over the first five days of 2020. There are only 44 companies that are bigger than $165 billion. That has a lot of money. So I was thinking, how long can we hold out? You know the scene in The Matrix where I forget the name of the people that jump into their skin and like crawl out of their face and they just take over the body?

You know, I was never a big Matrix guy. I'm not saying I didn't like it. I didn't rewatch it a ton. You were like such a contrarian. I'm not saying I didn't like, this is not in the Star Wars category for me. I'm just saying I didn't rewatch the Matrix a ton of times. For whatever reason, I just didn't get it. All right. Maybe this is why I was not an early adopter of crypto because I didn't really get the Matrix. Can I confess? Yeah. Matrix is not my top 10 either. The first one was an unbelievable movie. I did like it.

The second two were not great. All right. Anyway, so then I was like, wait a minute, maybe it's backwards. maybe the S&P 500, which I'm referring to as, no, the market's not in a bubble, maybe the S&P 500 is causing bubbles elsewhere. And what I mean is the top four stocks, Amazon, Microsoft, Google, and Facebook are worth $6 trillion. Okay. Now that is a lot of money. $6 trillion. So what if people are taking money out of Google and putting it into whatever, into SPACs?

into crypto or gains are coming out of crypto and into something else. And when I say this, it makes it sound like the whole thing is a house of cards. That's not what I'm trying to say. But I think that in a weird roundabout way, the S&P 500 can be causing bubbles elsewhere. When you rolled this theory out to me this weekend, it took me a minute to figure it out. But I think I might be on the same page as you. So for the longest time, the only thing anyone thought was the fang stocks are in a bubble. They have to be. They're so huge. I think that has been more or less debunked. Those companies grew into their prices, more or less, fundamentally.

Yeah. It's almost like after that, now I think maybe people, I mean, they still performed unbelievably in 2020. But to your point, I think people move on and they say, okay, we've wrung out as much gains as we're going to do from these huge trillion dollar companies. These are probably like blue chips now. Now we have to go somewhere else to find that. So we're moving down into these smaller tech companies or other places and that's where

these pockets move. And it's just like these little teams that move from pocket to pocket. Exactly. Especially with the retail crowd moving so quickly, representing 20% of the market, hurting everywhere together. I think that there's something to this and I don't know what stops it. From the overall market perspective, I guess, I mean, think about like, what was it, 2015 probably, we had this huge crash in energy stocks that didn't really take down the whole market. Now, tech stocks are a way bigger portion of the market than energy stocks now. So if we did have a whole big tech wreck, I think that would almost certainly take down the market.

That would take down everything. I agree. But you're right. But could we have a few of these stocks that have just had enormous gains fall back and not spill over into the rest of the market? I think it's possible. I think you could see the high flyers. You're seeing Bitcoin go down, whatever, 20% today. What if you see this spillover into the Tesla's, I guess Tesla's a giant company, but CrowdStrike, Zoom, all the big winners, Palaton, DocuSign, snowflake, whatever. I think the most bullish thing in the world would be if we get a wreck. in all of the high momentum 2020 winners and the market doesn't blink. Yeah, and people move on to the next thing that's going up. In a way, the market has been shifting because small caps and value have done much better since September, I guess. So there has been a shift. I've looked at all the historical bubbles and I've studied them and I wrote a book about

them and I read everything I can on these things. And for some reason, this doesn't feel like that, even though pockets of it do in some ways, if that makes sense. I was talking about in the post, like the S&P 500 is not going vertical. It's just not. Look at the chart. Now, obviously, there are tons of things that are going vertical, but the overall market, which was my point, the overall stock market, in my opinion, is not in a bubble.

Phrase is thrown on way too often. If you say something as a bubble, that means it's going to pop and it's going to lose 80%. 70%, 80%. Sure, it could have happened, but to pound the table there, look at behavior. And again, speculation is, as I said, it's running rampant in a lot of places, but not in the overall market. So then you look at the fundamentals and you look at things like the Buffett indicator, US market cap to GDP, 100th percentile, meaning it's never been higher, enterprise value to sales,

never been higher, enterprise value to EBITDA, never been higher. The CAPE ratio, 92nd percentile. But this is going back in history and things have changed dramatically. The composition of the market has changed dramatically. So I'm not saying that valuations don't matter. I definitely think they do, but maybe we're looking at the wrong thing. Did I say this last week on Pi because I feel like I'm having DeJVo about this intrinsic investor, this ensemble capital? Yeah, you mentioned this last week.

Okay. Maybe we're just looking at the wrong thing. The free cash flow yields is the thing to look at. And that is telling a different story. This piece from visual capitalist that shows tangible versus intangible assets. I don't know how you could ignore this in terms of the way the market structure. And also in 1975, 17% of the assets in the SP 500 were intangible. Today, it's 90%.

The bulk of the assets in the market were buildings and equipment, cash, inventory, land, physical things. Yeah, so guess what? In that time period, you could use a Tobin's cue to value the stock market, and it probably helped you. Today, a measurement like that is useless comparing these two markets because they're completely different. The way that the market is structured is different. And I think that's what a lot of maybe older investors have a lot of time with. And to be fair, older investors have been screaming about it in everything bubbles since 20, 2011, maybe, and they've been wrong. Isn't it crazy that younger investors have kind of won this

cycle? Carry on. Everything's fine, right? When was Claremont in the journal talking about this? Was that 2010? 2010. One of the best investors of all time. I don't want to put words in his mouth. We'll link to it in the show notes. I would think there's a higher probability of very low to sideways markets for a while, an extended period of time than like an 80% crash like you're saying something people want. Because I looked at this last week. the S&P 500 is up 16 out of 18 years. One of those down years is 2008 when it was down like 37%. Then the only other down year was down 4% in 2018.

16 out of 18 years, it's up. That's a pretty strong run, obviously. Can the stock market go up every year? No. I don't think so. Right. That's probably a better bet for mean reversion than a complete end of the system in 80% crash.

And how about two other things that we absolutely cannot ignore? The effect of interest rates on stock market valuations. I know Meb did a piece recently trying to debunk this. I think that there's something there. I think there's more than theoretical. How about this? I'm not saying low rates means that stocks will go up forever. That's definitely not what I'm saying. But I think low rates are certainly a big part of how we got to where we are today. I don't think you could say otherwise. Yes. The other side of that would be certain investors pretending like low rates will be here forever. And I think that's like the biggest fight in the years of head is what is going to matter more fiscal policy or monetary policy. So if we stayed in the same way we've been since 2009 and we had this slow growth, low inflation, low rate environment, the current market could probably continue as it is in growth stocks crush value and tech stocks do well. That could just keep going. If we stayed in that mind frame, that's why the prospect of so much more fiscal stimulus, I think, could totally change the market because if fiscal stimulus is more important than monetary

stimulus, you can't have both. You can't have a scenario where fiscal stimulus is working and you keep interest rates low. Something has to give in that situation. Said that one more time? I'm saying you can't have a situation where we get a ton of fiscal stimulus and it works and interest rates are kept low and inflation is kept low. That doesn't work. If fiscal stimulus provides some economic growth, then eventually it's going to be fiscal versus monetary and the fiscal is going to win, I think. I think that makes sense. Morgan Housel wrote, in 1930, Treasury Secretary Andrew Mellon said, liquidate labor, liquidate stocks, liquidate real estate, purged the rottenness out of the system. In 2020, Treasury Secretary Steve Mnuchin said,

we have a lot of money. We need to get that money in American hands. And this, fiscal response fundamentally changes things. I'm not saying all for the better and that there won't be potential repercussions, but it's different. Things have changed. So Grantham is predicting a bubble. The other side of that is Chamath on CNBC basically said, I don't know how for the next, especially 18 to 24 months, you couldn't be long assets. He's looking at like this huge jump in consumer savings as rocket fuel for assets. He's saying people are going to be purchasing cars, vacation, stocks, houses, whatever. He said, you have to be long. Everybody's who's trying to understand why you shouldn't be long is, I think, going to regret it for at least the next 18 to 24 months.

If we have an 18 to 24 month period where things are just great, the economy's booming, stocks do fine, is any bubble call right now pointless at that point? It's always impossible to say what's going to knock us off course. Who could tell? By the way, speaking of nonsensical behavior, so last week, one of Tramoth's IPOE announced that it's going to have a reverse merger with SOFI, which is a big freaking deal. And then two of his other shell specs with nothing, they also rocketed just because anticipation of him delivering. It's not surprising to see that behavior, but that's certainly

speculative. We are seeing like the golden touch thing, that him and Elon Musk, it seems like everything they do is working now. So if they say something or talk about or have another product, those are the echo bowls, basically. Right. One thing that people are concerned about, especially with monetary policy, certainly with fiscal policy, is the onslaught or the coming of inflation. Jim Bianco shared that the inflation break-even rate is rising rapidly, and he compared another chart showing commodities and interest rates diverging. This doesn't look like a chart crime to me. Am I giving this the benefit of the death too quickly? No, this looks okay to me. I'm always dubious when I see one line and another line in two different axes. I'm always just a

little like, this seems too good to be true. I know, but commodities and interest rates, there's an economic reason why those should track. Yes. That totally. Totally makes sense. So back to the tips break-even thing. That is one of the things that makes total sense to me in terms of, okay, this is trying to predict inflation. The other side of this, George Perks tweeted out, just a reminder that the tips market is completely useless at predicting inflation. He shows a chart overlaid of the average 10-year break-even yield, which is trying to predict inflation, and then the forward 10-year CPI, which is the actual inflation. And these two lines look nothing alike. They don't go in the same direction. They're not overlaid with one another. It's not like bonds and interest rates where you're starting yield can tell you what's going to happen. And so I guess the way to frame this is the market is not very good at predicting inflation. Nobody is. We talked about inflation last week. And of course, we got a bunch of the inflation truthers telling us we were wrong. And have you seen the price of my own house or whatever?

Colin Roche was on the We Study Billioners podcast this week. Did you listen to that? No. The majority of it was on inflation. And his point was really like, first of all, no one knows what causes inflation. The Fed doesn't know. Economists don't know. If it was money supplied, then we would have seen inflation already.

That's the thing. So he's saying that's the one thing to know is that it's worth a listen. If you didn't believe us about the inflation stuff, listen to Colin. I've probably learned more from him than just about anyone and how the economic machine actually works. So that's worth a listen. Let me just read this from my friend Justin Paterno just did a really excellent post about this. And by the way, people are getting left behind.

Income inequality is real and it's beyond terrible. But I don't think that that's the same thing as inflation. Am I misreading the situation? No, not at all. And of course, this situation, the pandemic has made it worse. We've been talking about it for a while now. Inflation is very specifically the price that you pay for things. And honestly, Colin made this point on the podcast. If inflation does get out of control, that's bad for everyone. That's not just bad for people on the lower end of income skills. It's bad for all people, basically.

So anyway, Justin Paterno wrote, the U.S. dollar regime is probably the most valuable strategic asset to the United States and its citizens, as well as the largest driver of world peace and prosperity. even if you aren't the most ardent supporter of MMT, the fact that we have been able to essentially print our way through the COVID crisis without massive financial market instability and runaway inflation should be seen as a major achievement, a technological breakthrough in its own right. Getting to a vaccine in eight to nine months was amazing, but so is our ability to get money into the places in the economy that needed it most and avoiding economic catastrophe. Isn't that kind of summing up the last year or so, basically? There has been so much good that has come out of this and so much bad. All at the extremes, the scientific breakthrough

we've seen, the response to this has been probably changed the fiscal way we're going to look at this for the next few decades. There's been a lot of good that's come to this. And then so much other bad that we've seen come out of this. It's hard to square those two ideas. So we could have inflation. By the way, speaking of inflation in gold, last week was a weird one. When we had the terrorists in the capital, inflation break-evens going up, real rates diving, all of the ingredients for what you would think would be the perfect storm for gold, gold got demolished on that day. That was surprising.

Maybe it was a one-day thing. But, man, if gold can't rally then. Yeah. I don't know. Throw out all the back to us, I guess. So getting back to this inflation thing, at least I'll speak for myself. I won't put words in your mouth. Then I think inflation is on the table for 2021 and 2022.

I'm definitely not a, oh, my God, get your money out of dollars. The dollar is going to collapse. I never really thought it was a huge risk coming out of the 2009 thing. If you read and understood what the Fed was actually doing, that money supply is increasing doesn't mean that inflation is increasing. I'd be way more nervous about it this time because we've gotten such a much bigger fiscal bump. And I think we're going to have a huge demand resupply. The shock from demand when comes back when this stuff all opens up, I think is, again, guess what? That's a good thing. But then, again, people worry about overheating and that sort of stuff. Right. All right. So Gavin Baker tweeted,

most interesting macro chart I've seen in a while, ISM prices paid is going vertical, and it generally leads CPI by three months. Okay, this is another line over line chart. It does look like it fits, but yes, okay, I see. So inflation is coming. Again, we talked about this back when the whole pandemic broke out. I would rather be dealing with inflation than deflation from this. Fact. Could it be a problem? That means, again, we beat this thing. I think our point just for people that didn't listen last week is that I don't think inflation is really. at 10% a year. I think that if there was, there would be riots everywhere. I was going to write a little piece about this. So it's weird because we don't really know what the reaction would be. The scenarios

are near the end of this. Like, is it going to be trending upward for a while? Is it going to be an initial spike and then come back down? Inflation was relatively high for the 90s, three to four percent, but it was falling off of a higher base. So how do investors react if and when we have inflation rising from such a low base? Does that really freak people out? So that's the thing that is interesting to me. Like, how will investors react? And what will they deem too high? And of course, we can't talk about inflation without talking about Bitcoin. It finally happened. What is it, 20% in one day now? Although, although, big deal. One from 41 to 31. It's a big deal for a one day move. How long did it take to go from 31 to 41? A week, maybe? 10 days. My point is like, this thing was at

20,000, like two weeks, three weeks ago. If you're going to accept that upside volatility or get that upside volatility, you have to expect that there's going to be these air pockets eventually. For people that want to learn more about Bitcoin, I link to Matt Hogan. I forget the other person's name, did a pretty long piece in the CFA Institute. It explained it to you at least like your five. You know that meme explains me like I'm five. Without using like hyperbole, like a lot of other explainers do. It's very technical. And if you just read the first four or five pages, I think you get a better sense of it, if you don't understand it. Bitcoin has experienced, I think it was six different 70% crashes. So 40 to 30, I'm not impressed.

Wake me at 10. I knew that the concentration of Bitcoin holders, it was a very concentrated asset. I didn't realize it was this much. This is from Bloomberg. A few large holders commonly referred to as whales continue to own most Bitcoin. About 2% of the anonymous ownership accounts that can be tracked on the cryptocurrency's blockchain control 95% of the digital asset, according to researcher flipside crypto. More than 70% of Bitcoin addresses have less than 0.01 Bitcoin in them, according to BitInfocharts.

So this is inequality on steroids. So the stock market is 85% on the top 10% or whatever. This blows it out of the water that just everyone who got in, I think this is one of the reasons why when people say anyone could have become a millionaire in this, like how many people actually had the understanding of the technology and the ability to buy this? Because before like Coinbase came out, which was when, I don't know, 2015, 2016, maybe I'm wrong on that date. How would a normal person have ever been able to buy this when it was at 10% or a dollar,

or whatever. Personally, I probably wouldn't be able to figure out unless I knew someone who knew how. Is there a data on how many Bitcoin million errors there are? There's got to be so many. Well, I'm sure there are. Two percent of the owners hold 95 percent of the assets. If that's true, whoa. Can't you track that basically? Isn't that the idea of it? I wonder if like 0.0005 percent of owners own like 80 percent of it, because the really early people on like the Winklevine and stuff. If this thing really is going to democratize finance, aren't these people going to have to give it away? Where's the Robin Hood? Well, no, because what if the pie keeps growing? So before the crash, Bitcoin was a trillion dollar market cap. What if the

price keeps going up? And even if they own 95%, 5% of, I know it's not 10 trillion yet, but 5% of multi-trillions of dollars is still a gigantic, gigantic number. But my point is, I feel like every innovation we get in finance just makes inequality worse. The whole point is that we're going to democratize investing. And unfortunately, the majority of the time, it just makes things better for those who already have money. I don't know if that's true. Okay. What has happened in the last 20 or 30 years that has made it better for the person on the low end of the income scale and made their life better in the investing world? Robo advisors. I mean, Vanguard, maybe. But I'm saying every time you hear about something like this. Hello, I just gave you an answer. Robo advisors. Okay. What is there? $60 billion on

wealth front, betterment, and vanguard, those are people that otherwise would not have had access to financial help. That's a giant improvement. I'm just saying whenever these things are sold as it's going to make the common person richer, it typically just makes rich people richer. That's my whole point. I think you have to think about this further. I'm not sure that's true. I think that it's a drop in the bucket in terms of helping people that really need help, which is granted, to be fair, much harder to do than it sounds to get more people involved in investing and saving. And that's just my point. Is that, people put it out to be that way, but it never really is.

Your silence is deafening here. I don't know. Duncan, put the crickets in here. All right. So Ramp interviewed this guy that turned not a lot of money into like $13 million at Tesla. I really can't imagine the mental ups and downs because as we're talking about Bitcoin, which is just the most fun thing ever to use like a five-year-old's description of it, it. I'm having emotional swings on the way up and the way down, and I barely own any. It's not a

large dollar meant. I cannot imagine having millions of dollars in Tesla. This guy, Jason DeBolt said, he tweeted this out. Today I'm retiring from the corporate world at age 39, not selling any shares for the foreseeable future in Tesla. And he's got like $12 million in Tesla. And he showed on one day, it was up 8%. He made $900,000. Ramp Capital interviewed him on his blog and answered some questions about it. And I wrote about this this week. You see stuff like this. And it would be impossible not to get a little tinge of jealousy looking at this and be like, wow, why didn't I do though I can't? For me, something like this is just not in my DNA. I could never make an extreme bet like this and put all of my money into one investment and hope that it pays off. I don't think most people could.

Right. I give credit. But I also want to tell people who look at this and try to do it on their own if they don't have that emotional makeup. This is why I think it's hard for people giving financial advice, especially in a forum like ours or on Twitter or whatever, in trying to tell someone that they have to own this. this asset or that stock or that whatever because everyone is different. Their personality is different. Their emotional makeup is different. Their risk profile is different. This kind of stuff is not in my DNA. Like even if I had the opportunity, I don't think I would ever be able to found like a hot tech startup. Even if I had the greatest idea in the world, I don't have the type A personality to work 90 hours a week to get it off the ground. I never would be able to do that. The same thing with holding like a Tesla. Personally, I would be rebalancing all the time and I'd be hedging my risk and I

never would be able to just let it ride. For some people, it's okay to say like, okay, that is not my strategy to building wealth, but that's okay. Yeah, but Ben, you've been doing this for like 20 years. Don't you think that you're thinking about this in a much more seasoned way than a young person who just wants to get rich? When I was 24, I put my money in a Target Day fund. That's true. No, I'm saying to the point, that's because that's my personality. I don't bemoan people who do this. Like, if that's your strategy, you want to do that, you want to pick the next crypto, whatever, and try to pick the next Cecil, like have at it, just going with your eyes wide open. I'm fine. If you're looking for ladder tickets and that's how you want to build

wealth, if that suits your personality, then it suits your personality. I think that's the point is like finding something that works for you. And that's one of the things that irks me about people who give financial advice online and go into it with the idea that there's one way to do this. And if you don't follow the way that I do it, you're wrong. There's a million different ways for people to do this, I think. And that's the point. You just have to find something that works for you. So the person on the ramp interview, it said Tesla is the next Tesla. The company is just getting started. If Tesla is the next Tesla, then wow, because Tesla's market cap just passed the entire S&P 500 energy sector. If Tesla is the next Tesla, it's going to be bigger than the S&P 500.

Okay, so Elon Musk is now the richest person in the world. He passed Bezos last week. He's $200 billion or something. People were saying this last week. So on a split-adjusted basis, Tesla passed $4,000 from what it was before it split. I found this video. In February of 2018, Kathy Wood from our capital said it was, I think, $300 at the time. She said she put a $4,000 price tag. And I think she said her timeline was like four or five years. Again, this is February 2018. It's funny, I watched the video.

The CNBC anchors were like, why is Tesla valued so high? Like, how come GM is not valued so high? Why don't they have a price to sales of whatever? It's up more than 1,000 percent since then. And do you remember this call was just mocked mercilessly then when she said it? And at the time, I was thinking, like, God, that number is so ridiculously high. it didn't even make, didn't even say like it was placed in reality. And she was right. I bet you you and I dunked on Twitter when that happened. Don't you think?

I've always kind of said Tesla's in my too hard pile from the beginning. I'm going to find your tweet. I'm sure you've dunked. I wrote a piece, I don't know, 2015, 2016, I said my two hard pile and Tesla was in there saying I don't want to make a bet on this one either way. We spoke about this that Kathy Wood deserves a lot of credit for sticking her neck out on the line. Now, I do understand people saying you don't get credit for calling a bubble. She got lucky. I understand that mentality, but come on, you got to give credit. And if you got to give her credit, even though Tesla has not yet changed the world,

is still tiny in its economic footprint compared to the other car companies. If you're going to give her credit, then you have to give the crypto people credit. You have to give the Bitcoin people credit. I think giving one credit, not the other is completely incongruous. Because when it crashed back to, what, under $4,000 from the last time it was down, whatever, 80%. If you would have jumped ship then, I don't think anyone would have begrudged you, right? That would have been, okay, we had a run, 2017. So yes, the fact that it's come back, that's why people are throwing around that Bitcoin this time is one of the biggest bubbles ever.

I don't know how you could say that when it just basically went through a bubble in 2017. I mean, again, it's its own total own beast, and it's every behavioral finance, behavioral psychology thing on steroids. You and I were talking before this. We said, this is by far the most fun asset in the world. I don't know how you could find it. Tesla is probably second. Just to track and watch and see what it does. I agree. People who stuck with it and held on good for them. But again, it's people who old it, probably had so much money even when it fell, right? Because they own 95% of it. So they don't even need it. I wish I shared this chart earlier. There's a chart. Somebody tweeted, which we'll link to it. The technology sector now is one trillion dollars of market cap with negative earnings. I don't know what's in here exactly. I would love to see these same companies in 10 years. So they compare this with 2000 and it's much higher now. I think back then it was eyeballing it around $700 billion.

But of course, as a percentage of total market cap, it's much smaller now because the market is bigger. Well, and the difference is back then, they didn't have earnings because they didn't have business models. Today, most of those companies don't have earnings because they don't want them. Right. Because they're spending money to get recurring revenue. That's the big difference between now and then. All right. So I want to talk about SPACs for a second.

And SPACs raised $82 billion in 2020, a more than sixfold increase from the year before. And it figured greater than all of the money previously raised. This was from the Wall Street Journal. And last year, they showed a chart, the percentage of money raised in IPOs that came from SPACs, it was around 50%. So my point was when you see all of these IPOs popping and all these SPACs popping and you're like, where is all this money coming from? These are billions of dollars. And I'm telling you, maybe the bubble is coming from inside the closet. The bubble is coming from inside the S&P 500 because if Google's worth $2 trillion or whatever it is,

you just peel off a tiny bit of that and you put it into these things and there's your money right there. Yeah. You're going to look back on this because in the past, the majority of these SPACs have been frauds or in the real sense or just in the sense of not making it in anything. This is not that. But I'm saying you probably have some of that today, but you also have real things with people like Chimov putting... SoFi, open door. Yeah. So you have some things that today, I'm sure there's. some people that are going to say, these are all going to be frauds and they're not going to

make it. And this is just a bubble. But there are actual real companies. There's going to be real stuff that comes out of this. And there's going to be a much greater diversion between winners and losers from this time around. So this Tesla stuff, I mean, it is just unbelievable. Aside from Bitcoin, I've never seen anything like Tesla. So Balchun has tweeted, this was on, I guess, what was that Friday maybe? Tesla traded an unbelievable $62 billion worth of shares today. That's more than the next 10 most active stocks combined and double SPY. Wow. The fact that there's so much volume because just buying and holding this company, that's all you had to do, right? So the fact that there's so much volume in it and turnover, are these all just hedge funds day trading this? Why is there

so much volume in it? I think it's retail. Okay. We didn't get into the jobs report, but 3702,000 waiters and bartenders lost their jobs in December. Especially for, I mean, a place like New York and Michigan where we live when it gets colder, and they try to do some of the outdoor stuff. I guess that makes sense. The hope is by March and April, when things are a little better, that stuff opens right back up, right? And those jobs come back really quick. This sort of went under the radar last week. Amazon, J.P. Morgan, and Berkshire shut down their health venture. A lot of people said this just proves if these three companies can't do it, then I don't know who can. The only thing this proves to me is that Amazon is probably going to do it alone. They're going

to say, why do we need J.P. Morgan and Berkshire to do this. I just think Amazon is going to go ahead didn't do this on their own. I don't think this was that big of a deal. I think Amazon is going to do it on their own in seven years, five years. I bet my family has Amazon health insurance, Amazon Prime Health Insurance, timestamp. Speaking of that, so John Street Capital did a review of what's going on in FinTech. And they wrote, while the term insuretech, I guess FinTech for insurance, has been used over the past 10 years. It feels like this is another trend on the verge of inflection as a result of the convergence of embedded finance enabling incumbent vendor cooperation. The ability to buy homeowners insurance when obtaining a mortgage or renter's

insurance while applying for the lease or pay-as-you-go auto insurance, etc., should all become table stakes in the coming year. So there's just going to be more marketplaces for this stuff, basically? I hope so. Okay. I did too. Yeah, because it is kind of a pain. All right, let's move on to listen to questions. Wife and I are in the 30s have a five-month-old daughter, are living in one-bedroom apartment in the greater Boston area. Both have relatively good jobs, but our daughter is getting older. We're coming to the realization we need more space. This is what happens when people get older, right? The millennials are never going to move in homes, and then this happens. As we begin our journey as first-time homebuyers, there's a price differential between

homes in the Boston area in central Connecticut, where my wife's family is. Most millennials in similar situations wearing the pros and cons of where we should set down routes. Going to Connecticut means finding new daycare, the usual things are moving. In terms of career mobility down the road, there are far more jobs in the Boston area if I want to explore new opportunities. I know I can't have my cake needed to, getting the bigger, cheaper house in Connecticut and staying my current job. Am I overreacting to the career risk associated with moving to Connecticut since I'm only 32? So the idea is moving somewhere else for family but having some potential career risk.

Do you think family trumps in this one? That's my initial thought without thinking this through too much. Yeah, but I would also say that hasn't the relocation risk, career risk, drop dramatically, given that most things can be done on Zoom. Yes, the fact that things have been pushed remotely. I guess maybe it's harder to climb the ladder, not knowing too much about this person's situation. So 32 years old, probably still trying to work your way up a little bit. I could see that, but I think that you could probably make car rot yourself a more remote position

much easier these days. And maybe it's just the fact that you have that for a few years while you're trying to look for a new, I think it gives you more opportunity to hold on to another job while you're looking for something new in your new area. That wouldn't worry me as much as it would have in the past. All right, next question. You guys have been talking a lot about the gap between the real economy and Wall Street, but could you please discuss this gap presented in the chart below? How does GDP fill the gap? Are we in for dramatic correction? So it's a chart of World Bank GDP and the global market cap for stocks and bonds. So this is basically a chart showing that global market cap for stocks and bonds are vastly higher than world GDP. This is another instance of the simple answer is the markets are not the economy.

Plus, this is stocks and bonds. Think about how many bonds have been issued from governments in recent years. Sure. I wonder what happens when you strip out bonds. But even if you strip out bonds, I don't think it has to necessarily follow that line. The only time these two, this goes back to like the turn of the century, the only time these two things diverged was in the crash of 2008. Since then, the markets have been higher.

And again, so yeah, you're right. the bond thing is probably distorting because the bond market is enormous. I don't think people realize how much bigger it is than the actual stock market. But if we're just looking at the stock market, does it have to follow the economy over the long, long term? I mean, they have to be on the same general trajectory. Do they have to be in lockstep with one another? I say no. 2020 is a perfect example of why that's the case. And the stock market is not always the economy. What do you watch this week? So I read the price you pay for college by Ron Lieber, which I think is, when is it coming out?

He sent us some early copies. It's coming out maybe this week. I thought it was great. It's a long-ish book, but I think you can pick and choose the chapters if you don't want to read the whole thing. It answered a lot of questions I had about the whole college experience

and why tuition is higher and how these things work and how you pay for college. I think some of them I would probably revisit the chapters as my kids get a little older. There's also some great chapters on the psychology behind should you save for your child's college, how should you go about that process,

how to communicate with them. There's some examples of other things. families and how they've done it. I thought it was great. And honestly, a lot of the stuff about college tuition, you and I talk about this a lot, about student loans and why they're so high and why college tuition is rising. He answered a lot of questions in this book. And honestly, a lot of the answers were not what I anticipated. I really thought this was great. They had bridesmaids on the rewatchables. Rewatchables podcast has been great for me for giving me movies to watch. Did you watch the movie afterwards? I never watched the movies. To me, the rewatchables is like,

better. I'm good. No, see, I watch it after I listen to the podcast. I think Melissa McCarthy's character in that, Megan, is almost got to be in the same conversation as, like, socially awkward people from other, like Alan from the Hangover or Frank the Tank and old school. Like, it's one of those characters where everything they do and say makes you laugh. Even if it's not supposed to be funny, she is so good in that. The part where they're trying on the dresses and they all have the food poisoning is just unbelievable.

We started, we're probably halfway through the first season of industry on HBO. I'm a little late to this one. This one got mocked at first because Lena Dunham was tied up. on to direct a few episodes of this. It's an investment bank in London, and it's the first year employees for an investment bank and them going through. It's actually pretty good. There's a lot of inside baseball for finance people, and a lot of the stuff is just easy to mock for us probably because they're all trying to short the housing bubble again. It's like the big short mentality, but it's a little over the top of times, but I actually like it more than most people in finance,

I think. I think it's actually pretty decent. I was going to save this for next week, but I watched two episodes. I like it. Yeah, not bad, right? Yeah. It's definitely not great. It's definitely not great. It's not like succession, but it's not bad. Okay. All right. This might hurt some people's feelings, but I feel pretty strongly about this one. I watched the untouchables this week for the first time. I've actually never watched it.

Okay. Costner? It's not a good movie. Okay. You've been on a Costner kick lately from the 80s. Yeah. Well, No Way Out was much better. So he did this and No Way Out.

This is like his first two big movies in the same year. But it wasn't like De Niro in this too? Yeah. So Kevin Costner plays Elliot Ness. It's based in his memoir. Sean Conner is a sidekick. Sean Connery won an Oscar for Best Supporting Actor. Andy Garcia is in it.

Robert De Niro plays Al Capone. And some of the scenes, the music did not at all line up with what was happening in the scene. It felt so, I don't know if data is his right word, but it wasn't good, like even a little good. It was not good. Al Capone was in the movie for about seven minutes. I mean, it could have been so good, and it just wasn't. I was very confused watching because I know people really like this. Is that a Corsese movie?

No, it's Brian DePama, the guy he did Scarface. Oh, okay, okay. So I went to Roger Ebert's review, and he said, he made me feel better. He also panned it. He said, The Untouchables has great costumes, great sets, great cards, great guns, great locations, and a few shots that absolutely capture the Prohibition era. But it does not have a great script, great performance, or great direction. This was a big disappointment.

Where are you watching all your old movies on HBO Max? I feel like the average of your movie watching lately the year has been like in the 1970s or 80s. I might have bought this. It was like four bucks on Prime, I think. Yeah, that's not a bad way to do that. Another one that I watched on Prime that I very much enjoyed the last flag flying, which I don't think I've seen anybody talk about this before. It's with Brian Cranston, Steve Corral and Lawrence Fishburn. And it could have been a play. It could have just been like a play because it's all dialogue. It is all dialogue. This took place in 2003. The three of them are Vietnam buddies. It was fun and well-written and well-acted and it was not the most exciting movie, but it was a very good movie. So I give that a full endorse. Oh, okay. All right. Thoughts?

You're going to say something. No, I'm in. I think you would like it. Okay. All right. Oh, on Friday, we're talking to Funrise again. We had Funrise on in June, and we're having them back on to talk about more specific stuff in the real estate market. Thanks again to Masterworks.

See important information at Masterworks.com. We will see you next time.