Animal Spirits Podcast - The 24/7 Stock Market (EP.226)

Episode Date: October 13, 2021

On today's show we talk about supply chain issues, why millennials don't drive minivans, what constitutes being rich, net worth by age, my favorite Tom Hanks movie, the difference between housing affordability and the right time to buy a house and much more.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's animal spirits is brought to you by our friends at Y charts. Michael, I use Y charts for a lot of different things. I use it for research. I use it for charts to post on things like Twitter and blogs and Instagram. Today, I'm using Y charts to defend my honor. Okay? Because my honor was called into question last week by frankly a lot of YouTube commenters who aren't very nice, but that I was out of touch, which is hard because I live in the flyover states. But I was out of touch because I made the claim that I didn't think housing was too unaffordable for some people. So I'm going to use whitecharts data. If you go into white charts, one of the cool features is you can do a search drop down by different economic indicators. And so you go to economic indicators, you can

sort by labor, government, different countries, different reports, commodities. And then there's one for households and then housing and construction. So you click on house sales and they have U.S. existing home sales. Here are U.S. existing home sales by year. 2010, 4. 1.3 million, 2011, 4.4 million, 2012, 4.9 million, 2,013, 4.9 million, 5 million in 2014, 5.5 million in 2015. Can we fast forward? Yeah, 6.6 million in 2020. By far the most out of the last 11, 12 years. How does that defend your honor? When we talked with Logan Motishami on our spaces last week, I said...

He's not biased. We posed the housing question. Is housing becoming too unaffordable? And he said, listen, if housing was unaffordable, why would we have record home? sales over the past decade, which is a fair question. Anyway, put a pin in this. I'm going to talk about it on the show today. I just want to plant the seat here that there are now more houses being bought and sold than ever. There's also more people being left behind than ever. Both things can be true. Okay, just put a pin in this. I have data. A lot of people hit me with anecdotes. I am unemotional. I come with data. I don't come with anecdotes. So if you would like to use Y charts to defend your

honor, go to Y charts. Tell them Animal Spirit sent you to get 20% off if you sign up for a subscription. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt 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 Ritt Holt'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 of Michael and

Ben. I want to start the show with a listener question. This came into my Twitter DMs, I believe. Michael, you still have your Twitter DMs blocked or not? They will never open up. See, you have Twitter DMs blocked and people are calling me an elitist. I am a man of the people. I have my Twitter DMs open. All right, we haven't talked much about the debt ceiling stuff. Here's a question. They claim the U.S. default due to GOP blocking, raising the debt ceiling, will have grave consequences. Wouldn't the top 1% suffer the most as they have the most money at stake. I thought they were the real bosses of those senators care to explain. So when your wife watches Good Morning America, have you seen the stories yet? I've seen it on the today show with my wife

and they say, if the U.S. defaults and its debt, your credit card rates will rise, your mortgage rates will rise. They're saying all these things like scare tactics. And I'm thinking, isn't this the most manufactured crisis of all time? Yeah, it's such nonsense. Don't pay attention. The politicians do this because it makes them sound important. Yes. The debt ceiling thing is so, it doesn't make any sense. The fact that we still have it. Who gets hurt in the event of a government shut down? There was one, by the way. This isn't the first time. Government employees are the ones that get hurt. Exactly. And these are regular government employees. So it's not, I don't think it's the rich people that get hurt. It's people that actually rely on the government.

No, yeah, rich people with financial assets will be fine pretty much no matter what. They'll be fine. This is one of those stories that is in my personal ever grand pile. I know you have an ever grand pile. This is my ever grand pile. I don't pay this any attention. This is all political theater. That's the thing that really irks me about it is it's a manufactured crisis to make people feel like heroes at the end when they finally solve it. And then we have to do it again 18, 24, 36 months later. It is tiring. Your boy, Derek Thompson. By the way, let's give a shout. It's been a while. Derek was on Bill Simmons podcast a few weeks ago. And Bill Simmons and the other guest, I can't remember who it was. Both made a comment saying that like Derek was the one person that they latched

on to for all of their COVID news to get them through. Same for me. I think he's the only author. Actually, I know he is. He's the only person I read consistently on what was happening in America over the last 20 months. He was one of the first people to say, listen, wiping down surfaces and doing all this stuff and cleaning stuff every night, it makes you feel better, but it doesn't really do anything because it's an airborne virus. He made me feel better about doing more activities outside early on in the pandemic when it seemed scary and you didn't really know what was what. The $10,000 that you put into Derek's stock in 2014, what's that worth now? It's pretty good.

It's like my Amazon IPO. All right. So Derek wrote a post in the Atlantic. America is running out of everything. I just want to read the opening. He said, is it just me or does it feel like America is running out of everything? I visited CVS last week to pick up some at home COVID-19 tests. They've been sold out for a week and employee told me.

So I asked about paper towels. We're out of those two, he said. Try Walgreens. I drove to a Walgreens out of paper towels, but when I asked a pharmacist to fill some very common prescriptions. He told me the store had run out. Try the target up the road, he suggested. Target's pharmacy had the meds, but its front area was alarmingly barren, like the canned food section of a grocery store one hour before a hurricane makes landfall. And the, I don't know if irony is the right word, but the shitty part about all of this is, again, to quote Derek,

he said, these stops along the supply chain are slowing down at the very moment when Americans are demanding that they work in overdrive. Positive spin here. Here's my spin zone on this. Is it possible, all of these supply constraints that are probably holding down economic growth. And a lot of these, I've seen a lot of economic estimates come down for growth going forward. Are they stopping the economy from overheating even more than it would have? Is this actually allowing us to catch our breath? What do you think? Okay. Okay. Testing it out. It's preheating at 350. Hey, let me ask you a question. As an employee, if the Fed can print money, why can't they print paper towels? If there's a shortage. That's a good question. Remember when a few years ago people were

talking about how like all the robots and self-driving cars are going to put truckers out of business. And you had all this stuff about robots are taking all of our jobs. This is from Thompson's piece. The Minnesota Trucking Association estimates that the country has a shortage of about 60,000 drivers due to long-time recruitment issues, early retirements, and COVID-canceled driving school classes. It's crazy to me how the narratives of a few years ago, remember, people from other countries are coming to steal your job. And now we can't find people to do any of these jobs. It is remarkable. How quickly that switches. right? So there's an article in the journal saying, talking about shortages for building materials and

high demand and all that sort of stuff that we've been talking about. More than 90% of builders reported shortages of appliances framing lumber and a type of engineer. How is it not 100% of builders? How are there 10% of there's 10% of builders that are so good that they don't have any shortages? I don't believe it. They're part of the Illuminati. This is a bullshit survey. That number seems high to me. It seems low to me. It's got to be 100%. Every single builder has to be dealing with shortage issues. I don't buy it. Don't you think some builders have adjusted, though, and just started ordering stuff earlier in the process and lengthening the time it takes for someone to build a home? In the past, let's say it would have taken a home seven to eight months to build. Now it takes nine to 12 months to build. And it's just not as much of a flexible process. Just throwing it out there. Is it possible, though, this is the peak of this stuff? I've been seeing this in the news all the time that you're going to have people saying, how was the stock market hitting all time highs when we have all these supply constraints and bottlenecks? And then in three months, we go, oh, that was the peak of it.

The stock market was looking ahead. It would be poetic, Ben, if we entered the category, what's the category? Supply chain. If we entered supply chain into our Google Docs at the top, and it appears like we might have top-ticked it, we might have. So, my worst supply chain, sorry, 10 and a half weeks to get my car back from the shop because they couldn't find enough parts. 10 weeks.

I was driving. Driving what? First a Chevy Silverado for about five or six weeks. And then the last- Pickup truck. Yeah, so the last five weeks or so has been a Chevy Malibu where I'm pretty sure someone was murdered in the back seat based on the smell and the stains. Just stains everywhere.

Just full of stains. Yeah, not a great experience. I'm very happy to have my car back. And by the way, I made this joke on Twitter, but I'll do it again here. Every single rental car in the world has the same exact smell. It's like a really strong car deodorant and then cigarette smoke and then like X body spray or something. It's just disgusting. What did your car in high school smell like? I was just driving with a windows down everywhere.

My car smelled like Oseum. You probably don't know what that is. But did you have like the little pine tree in your debt? Yes, that's what I'm saying? Yes. Well, what did you have? What did your car smell like in high school? Oh, in high school? Actually, we've never spoke about this. What did you drive in high school? Did you have a car in high school? My very first car was a 1989 Honda cord with a stick shift. Okay. Yeah, manual drive. I must have sold it out 12 times with driving to high school the first time. I barely know how to drive a stick. My first car must have been in 1997, I guess.

Buick Regal. It was gold, and it looked very much like an old person's car because it was. That makes sense. I drove a Buick at one point, too. I just thought of a funny story about my car, but it's definitely not for the show. All right. Speaking of top ticking this market, the financial times had a story. The price to ship a 40-foot container from trying to Los Angeles coming off the highs.

Did we top-tick this, Ben? So it says shipping costs have finally slumped. Okay, I hope so. It would be nice. Just in time for Christmas. Did you take action for the holiday? I'm not. My wife started ordering a few bigger gifts that she was worried about that they wouldn't come.

And of course, they still came in like a week or so. So it wasn't that bad. Over-hite. All right. Let's pivot. Last weekend, I think it's something with people in New York City where you just don't follow. Here we go again. No, because you don't have any teams, you don't really follow college sports as much.

Pro sports mean more to you than college sports. For me, Not a college sports fan. Growing up in the Midwest, college sports have always dominated professional sports. Maybe that's because of the teams in the state here. You think maybe? Like the Wolverines versus the Lions?

Yeah. So I think college football is the ultimate sport. That's my favorite sport to watch. So I must have put in 10 to 12 hours on Saturday, in and out playing with the kids. We put a TV outside because it's been so nice. And you start to notice after a while when you're watching these games, they start playing the same commercials over and over again.

You notice this if you watch NFL on Sunday. They had this. Just so the audience is clear, I do not watch commercials on Sunday. I watch Red Zone. Okay, so I don't have that. I don't have Red Zone. Sorry. So I have the commercials on the background. They're showing this new Jeep Grand Wagonier. They used to have that back in the day. Remember like the panel of the one on Harry and the Hendersons? This thing is massive. Oh, great reference. Harry and the Henderson's. Throwback. With John Lithgow. Holy shit. This is 90 grand. So I'm looking at this and I keep saying it over and over again and I keep saying to my wife and my brother

we're watching the game with, I go, we're going to start seeing these things that soccer practices and soccer games in the future, because you know this will happen. So I looked it up. This thing, MSRP starting at $87,590. Almost $90,000 for an SUV. I looked at us up. I couldn't take it. So if you have a five-year car loan at 3%. Don't do it. Don't. You're going back to this well. No, no, no, no. Yes, I have to. I cannot help it. That's almost $1,600 a month for a car payment at a five-year loan for 3%. The median home price in the United States is 360. $67,000. Listen, I've got a good point to make here. The median home price is $367,000. If you put a 10% down payment on that and a 30-year fixed rate mortgage at 3%, the payment on that is $1,400 a month. You'd be paying more for this Jeep grand wagoneer. Obviously, you're paying the mortgage off longer, but your monthly payment for a Jeep grand wagoner would be more than the median monthly payment for a house in the United States. What's your point? I can't believe the number of people who drive these SUVs that are 60, 70, 80, 80, $90,000 on the road. I always want to ask these people, do you have retirement savings? Are you saving

for a $529 for your child? These are the things I think about. So here's what I want you to do that. I wanted you to do that one time when somebody punched you right in the nose. Excuse me, sir. But here's my thing. I think millennial parents are much different than Boomer parents. And so I think many millennials still want to hold onto their youth and pretend like they're still pretty cool. So you're not going to see as many millennials driving minivans as you did in the past. Millennials want to drive SUVs, right? I actually do want to drive a minivan. My wife won't love me. Okay, so minivans are probably a third of the cost of this grand wagon. We actually did drive a minivan for, you had one. You had one. We had a minivan for two or three years. We traded up to an SUV because we needed a little more room. I didn't mind the minivan at all. So we might come back with it. I have to call BS. Why? You traded from a van to my wife drove it, not me. So you traded from a van to a Jeep because the aesthetics. Because I know and you know that a van, a minivan has the most room out of any vehicle. Well, it's not really. that. No. So we went from a Honda Odyssey to a Honda pilot. And the pilot was a little bigger than a

band. It was basically a little bit larger. So I'm being here. I tracked my accusation. But I am just saying, I think there's something to this with millennial parents. So have you noticed how growing up for us it was when you see someone else's parents, it was Mr. and Mrs. Smith, Mr. and Mrs. Carlson, Mr. and Mrs. Bannick, whatever. Millennial parents want to be called by their first name because they're the cool parents. So it's Mr. Ben, Mr. Michael, right? Ms. Robin and Ms. Nobody will ever call me Mr. Michael. What are you talking about? This is how it works now. This is what the kids call us now. They use your first name. Yes.

So I think there's something to... I'm not privy to that, but I will say, this is a nice car. It's basically what? This is trying to be like the big GMs and the Chevys. Yeah, but I'm just saying... It's a lot of money. It's a ton of money is what I'm saying. And if you think housing is unaffordable, imagine driving around an $80,000 SUV

and complaining about housing costs. This is what I'm getting at. Maybe it's just because I'm not a car person. So I was driving a Chevy Malibu for five weeks. And besides the smell and the blood stains in the back, it didn't really bother. me. I'm more of a point A to point B guy. So maybe that's part of it for them. But I just think young people, because they have some optics and because millennial parents still want to remain attached to their youth and look cool still, I think that they're going to spend more

on vehicles than their parents' generation did and it's going to hurt their finances. How's that? I do think I agree with you. All right, let's stick with budgets. Somebody emailed us, how would you explain this picture to one of your clients' kids, who's, I guess, 25 to 30 years old. I was surprised to see this graphic. All right, whatever. The graphic is wealth level by net worth. And this is pretty gross. It calls people poor who have a zero to $500,000 net worth. Middle class is $500,000 to $2 million. Upper middle is $2 to $4.00. Comfortable is $4 million to $10 million. And you know what? I'm going to stop right there. I don't want to give this any more credence. Can I let you on a secret? You got God on this one. Hold on.

That was the point I was about to make. The only reason why this table exists is to trigger the internet and mission accomplished. The source at the bottom says, how to get rich by Felix Dennis. And I go, wait a minute. I read that book last year. Oh, that was a good book. Oh, listen, this guy's a gazillionaire. No, but look, this is the actual numbers from his book.

So whoever did this made it up. No. So he says, 100 to 400,000 is the comfortably poor. 400 to a million is the comfortably off. one to two million is comfortably wealthy. Whoever did this thing, they made up the values. They totally did not take his table for what it is. He is much nicer on his actual book.

They sourced him and they made up the numbers, yes. Some serious bullshit. They used him as a source and then changed his words. Scroll down. Scroll down on the thing right below it. Okay, there it is. All right, much better. So Felix Dennis is not alive.

He's not alive to defend himself. But let's get to some real news. So Peter Malook tweeted the median net worth according to the Federal Reserve. this sounds more right to me. 18 to 24, 8,800, 25 to 29, 7,500, 30 to 34, 35,000, 40 to 44, 127,000. And Ben, you just missed the cutoff for Gen X. I'm an X annual, is that what they call it? How old is the old is Xer? Probably like 45 or 49. I don't even know. I don't know. It works. So look at this. The median net worth for someone's 65 to 69, which is retirement age, 271,000. That's not that bad. If that's true, that's actually pretty good.

Is it? For the median? That's pretty darn low. Take 4% of that and try to make it last 30 or 40 years and tell me what the annual income off of that portfolio was. It's not very much. That's why you use Dogecoin. No, but including Social Security. I mean, it's not high, but it's not like $35,000. Well, yeah, of course, but 4% is 10 grand. And what's Social Security? $11,000. That's $900 a month. What's Social Security? is going to end up being the bulk of it. That's why Social Security is such an important program that's never going to get cut because people need to supplement their retirement

savings that they don't have with Social Security income. Why just survive back to school when you can thrive by creating a space that does it all for you, no matter the size. Whether you're taking over your parents' basement or moving to campus, IKEA has hundreds of design ideas and affordable options to complement any budget. After all, you're in your small space era. It's time to own shop now at ikea.ca. So GenX is the forgotten generation, but there was an article in Bloomberg. Their wealth has gone up 50%. This was interesting.

As of June, GenX held 28% in the nation's wealth, up 4% of 4% of 4% of the first quarter of 2020, which is quite a bit. There's 34.6 million GenX households. They added $13 trillion in assets over 15 months, which is more than Boomers added, which is 7.7 million more households. And I think Gen X really got screwed, probably graduating college in the late 90s, coming into the dot-com bubble, getting on their feet again, getting hit with the great financial crisis. They really got a raw deal. I had a conversation with a few Gen Xers. I remember after the financial crisis saying, I started working in 2000, and now it's 2010.

And the value of my portfolio is less the money I put in for 10 years. No, what I told them at the time, personal finance guy here, I said, that is a good. good thing. You just had 10 years of buying at lower prices. So, and guess what? Now they're playing catch up because they put money in at lower prices for so long. True. Austin Reeve tweeted $2 trillion of wealth flows from baby boomers to millennials per year through inheritance. Holy moly. Two trillion. That's according to Fundstraud estimates. I feel like we hear that every financial conference I've been to of the last 10 years has talked about that, like how there's going to be $30 trillion of wealth transferred. Isn't it just all

going from rich parents to rich kids for the most part? though. For the most part, for the most part. Yeah, no doubt, for the most part. But this is the type of thing where, like, let's call it 80% of that pie is going to mega wealthy families. But there's still millions of kids that are going to inherit money. Yeah. See, some millennials are going to be fine. Now they can afford homes. Over the next 20 years, millennials will inherit $76 trillion from previous generations. Sounds like a lot of money. Here's the thing, though. Baby boomers are living longer. True. I think you're going to get that money way later in life now if you're banking on an inheritance, correct? Yeah. We actually got an email from somebody saying that they're going to get this ex-inheritance in 25 to 30 years, which is a weird thing to think about. That's hard to plan for your financial plan, right? Unless you just say, well, I'm not going to say for a tournament at all. I don't know. That's hard to think about. Let's talk about daycare. One more time. Okay. Bring on the hate mail. This is from the New York Times and they talk about how much government spend on child care for toddlers in different countries. And they showed Norway and Iceland and Finland and Denmark and Germany and Sweden and then like the average for developed countries. And these other countries are paying. paying, for the most part, at least five figures a year for child care. I'm going to guess that the people that send this hate mail probably don't care for the New York Times either.

True. Good point. So they talk about typical two-year-olds in Denmark attend child care during the day where they are guaranteed a spot and their parents pay no more than 25% of the cost. That guaranteed spot will remain until the children are after-school care at age 10. If the parents choose to stay at home or hire a nanny, the government helps pay for that too. That's not a bad deal. The funny thing is... I mean, listen, government is not the answer for everything. Obviously, We're capitalists. We think that business generally does a much, much, much better job allocating resources than the government does.

But in this particular industry, it is not viable. It doesn't work. We've discussed it multiple times. Millennials have to pay for daycare and a grand wagoneer. How is that possible? Can't do it. The United States spends 500 bucks per child annually on childcare. Compared to other developed countries on this list, it is basically zero.

It is basically zero. Yes. We rest our case, Your Honor. There we go. Interesting. Let's talk about the markets. We got a listener question on paraphrasing. He was basically like, why do investors stand for such poor performance from hedge funds at such egregiously high fees? And you could speak on this better than I can. But in an interesting, I guess, timely announcement, the public school employees retirement system of Pennsylvania is slashing their hedge fund holdings from 8% down. down to zero. And I think a lot of people think that hedge funds are for rich people and certainly that is the case sometimes, but it's also public employees. So for example, this pension provides pension benefits to 250,000, 250,000 former teachers and other retired school workers. It sends them

$6 billion a year. And because of shitty returns, these people have had to either contribute more money to the plan or the taxpayers have had to kick in more money. Here's how things work in the institutional world. So Harvard and Yale get into hedge funds in the 90s. Returns are great even in the early 2000s. Then finally all these other pensions want to get in as well. And then it takes them five or six years of committee meetings and different meetings with managers to finally put it in their portfolio. And then after all this planning and years of work, they put the hedge funds in the portfolio and hedge fund returns stink. You can't admit you're wrong at that point and say, all right, you're right. Let's get out of

hedge funds now. So you hold on to them and you go, well, what happens if the market collapses and we sell these hedge funds were to the top? So people don't want to admit they're wrong. So it's mostly career risk of it takes so long to make a decision for these institutional funds that by the time they make one, it's really hard to reverse course because you've already spent so much time and energy and committee meetings. So this gets back to the point that we spoke about a few weeks ago, you can't be wrong twice. Hedge funds have generally speaking, this is a gross generalization because there's been obviously a ton of hedge funds that have delivered wonderful returns to their investors.

But when's the last time you heard of one, though, that wasn't just like some outlandish huge 300% return? Like, you don't hear much about hedge fund returns anymore like you did 10 or 12 years ago. You definitely don't. But if you've been pounding on the table and defending them and then you bail and then they show up right when you need them most, that's the worst of both worlds. So I understand people's inclination to dig in. Like I probably would do the same.

But the irony is that they're talking about now. developing a Vanguard-like approach that relies heavily on indexing. And this is Pennsylvania. It's the backyard of Vanguard. It was right there the whole time. So sticking with Vanguard, they had, I think this is from Joe Davis, unlike some forecasts that come out on a seven-year period that don't show how wrong they've been for the prior decade, what I really like about this is that it shows their estimated returns for equities for a 6040 portfolio. It shows their returns, their confidence, and the range of outcomes and how wrong or right they've been.

So they actually are holding themselves accountable, which is refreshing. It's nice to say. It shows U.S. returns have been way higher than they predicted. XUS returns have been way lower than predicted. Yeah. That's probably for most people. Actually, the return for a 6040 portfolio has been pretty close. I think I first wrote about preparing for lower returns in 2015, which seemed reasonable

at the time. A lot of people were. I was too, probably. So do you think this 7-11 of stock market trading is going to happen where it's just open all the time? No, I think this is dead on arrival. I can't imagine the SEC passing this. I hope it's dead on arrival. Given Gensler's cracked on and everything else, Josh was saying that he thinks it's going to pass. I don't see it. I don't want it. I mean, at some point, at some point is it coming? Sure. I also don't think that I don't want it, but I also kind of think it's probably inevitable and also like how much traction is this going to gain? Does it even really matter? Like, who gives a crap? Yeah, I guess if it's just like before or after I was trading, I do think there's something

too. Like if the stock market was trading 24-7 during March 2020, I think it probably could have gone down way more. Allow me to backtrack on what I just said. In a bare market, I just want to go to sleep. You want to have the market close. Well, now somebody said, well, hello, idiot, futures. Futures don't close. Futures markets are open overnight. All right, fair enough.

That is a pretty fair rebuttal. But not nearly as many people trading them as when markets are open. And they close on the weekend. So there's that. Like, if the market closes on Friday in a bare market, I don't want to be glued to my phone all weekend. Yeah, I want nothing to do with that. Don't sign me up.

They should shorten the hours of trading, right? Market should be open for one day a month. Thank you, Mr. Buffett. That would be like squid game, kind of. Bank of America is bumping its minimum hourly wage to $21, taking another step toward a goal of paying $25 per hour by 2025. We've said all along, at least I have, that the one inflationary input that I would pay most attention to, aside from supply, demand, shocks, whatever, is wages.

wages. These don't go the other way. These never come down. You could be a bank teller, at Bank of America, making $25 an hour. I think when I was a bank teller, I might have been in college. I was making $7.50 an hour. I could have been a bank teller. I even like the whole team's body language. I liked everything they had going on. The branch manager did I think I was cut for it. By the way, worst job I've ever had. Why? Easily. Because you're counting money all day and people are busy and they want you to, I mean, I was in college, I knew nothing. You're on your feet all day. You can't sit down.

It was not fun. People only notice you if you mess up. I was going to say, is that where you developed your love for Fiat? But it sounds like the opposite happened. Although I did get to use one of those cash machines that counts the money like you see in the bankruptcy movies. That was kind of cool. Oh, over the weekend, we were upstate.

We went to an ice cream place. They only accepted cash. I had to go to the, I told Kobe, we need to go get money. And he said to me, where does money come from? And I wanted to like pause the entire universe. What did you say? And I was like, oh, we should probably call Uncle Ben and ask him where buddy comes from. That's a weird.

It's funny to try to explain a lot of things to your kids. Well, son, it's actually the full faith and credit of the U.S. government. There's military backing it. So it's all sorts of things you probably wouldn't understand. Like my daughter asking me, like, what is America? And I'm like, well, we live in a city and that city is in a state and that state is in a country. That means nothing to a child. It's kind of like, oh, okay, cool.

Pretty much, you realize quickly trying to explain to a child that you don't understand anything yourself. Right. So wait, hold on. We went to the ATM, and he was like so, his mind was blown. It's like a money tree. That money just fell out of a machine. Can't do that on the blockchain. Did you explain crypto to him then? Not yet. He's a little young. There's still going to be $21 million by the time you're 21 years old.

All right. So I think that there's a huge difference between best and favorite. I think that's the problem of many internet arguments. 100%. If you just eliminated best and just said favorite. It's not his best movie. One of my favorite movies from Tom Hanks's money pit. You were seeing this? I never heard of it. You've never heard of money pit before, him and Shelley Long? It's a classic 80s one.

It's probably one that you, it's 1986. You'd probably watch it now and go, oh, that's dumb. But there's a scene in there where I think it's Tom Hanks' finest acting. They buy a house, and it's a money pit, and they have to fix it up. And there's a hole in the floor, and he falls in in a rug, holds him up. So he's on the second floor, and he's in a hole, and he's up to his neck. And his wife come home, and she says, where are you? He says, I'm in the den.

I've been stuck here for hours. And she says, no, you're not. I'm in here. He goes, I'm right here. And she says, no, you're not. Stop playing. He goes, I'm right here. We'll put a clip in the show.

It's some of Tom Hanks' finest acting. So anyway, I don't know how much, it's this huge mansion and they have to fix it up. He borrows $200,000 for this house. Now, I don't know if that's for the down payment or the fixing up or the actual cost of the house. But it got me thinking. So in 1986, 200K, what if you just increased that by inflation to today? So just took the actual inflation rate, $200,000 in 1986. What would that be today?

Without looking it up, what's your guess? don't look it up. No calculators. $200,000 in 1986. What would that equate to today? 1.2 million. Okay, 500 grand. All right. Way off. So it was like 2.6% inflation over that time. The reason why I always saw off in my defense, you're using government data and I'm using real data. Shadow stats. Okay. So it was like 2.6% inflation over that time. Housing grew at like 4.2%. So I'm just saying, I think a lot of the housing stuff, when people see the big numbers like this, they're anchoring them to pass prices. They don't take into account just simple inflation, even though it's bent. So, as I mentioned at the outset of the show, I was called out of touch

by the YouTube crowd because I said, I think housing still is affordable. I want to make my case real quick here. Make it. Make it. The one problem is I heard from a lot of people that they'd give me anecdotes. They live in a desirable place in the country. They live in somewhere in North Carolina or Tennessee or California or Seattle or whatever. They live in these very in Austin. And they're saying, listen, I live in this very desirable place. Why are housing prices rising? Well, guess what? If you live in a desirable place and people can now live and work from anywhere, you can't be shocked that housing prices are rising because they would say, you give this median average data, but I live in a undesirable place and it's rising higher. You can't live in a desirable place

and not expect people to want to come there. Okay, first-time home buyer for an FHA loan requires a 3.5% down payment. You don't need 20% to buy everywhere. You 3.5% down payment for an FHA for first-time homebuyers. Okay? I already gave my houses sold data that there's more houses sold in 2020 than any year since 2010 by far. I've used my inflation-adjusted monthly payment, so inflation-adjusted payments and adjusted for interest rates are now lower than they were in 1989, even after the rise. Bill McRide did something similar where he created this housing affordability index. He assumed a 15% down payment, 30-year fixed rate, and 2% of the purchase price to cover taxes and insurance and maintenance. This is probably about at the lowest it's been. It's probably in the

lowest 10% in terms of affordability. But he makes a good point. He says, just because something is affordable based on interest rates doesn't mean it's good time to buy. Housing was extremely unaffordable to buy in the early 1980s because rates were so high. But it was still a good time to buy because you could refinance the whole way down and housing prices rose from there. So even though it was unaffordable, there was a difference between unaffordable and a good time to buy. So now may not be a good time to buy, but that doesn't mean it's not affordable relative to history. That's my point. My beef is, and those are all. very fair points. My point is that it's hard to look at the aggregate data and make a general

statement that housing is X. As if the American housing market is homogenous. It's not because different areas are completely, you and other people are using anecdotes. I'm using data. So of course there's going to be anecdotes. People in California have been overpaying for housing for decades. But it's not just anecdotes because you could say that the facts, the data is what is on the aggregate level, while also acknowledging the suffering of millions of people that are priced out. Here, my other point is, you don't have to buy a house. No one forces you to buy a house. I know there's a ton of foam all right now, but there are so many other costs involved in housing. Like, you don't have to buy a house to get ahead financially. It's not a prerequisite

to get ahead financially to buy a home. And for a lot of people, if you're buying a home and staying in it for a few years, it's probably going to hurt you more that it's going to help you, even though housing prices are rising like crazy now. That's my whole point. And I also think, So this is from Bill McBride as well. Goldman Sachs says our model now projects that home prices will grow a further 16% by the end of 2022. And Ben Carson will still see, no problem. Yeah. If we grow 16, I think that's crazy.

Zillow said 12%. I think even 5% or 6% in 2020 or 2020 would be decent. I'm just saying, like, if you think it's bad now, housing prices are going to continue to go up. That's all I'm saying. All right. Let's talk about the I buyers. We got some interesting emails on that.

All right. And if you want to call me an elitist, it doesn't work. I'm in a flyover state. It doesn't work. Sorry. Anyway, people are saying I'm still too pithy by the Evergrand thing, too. Okay. Just wait, Ben.

Somebody wrote to us, I think we got two or three like this. The I buy is the lost leader to get all the other businesses fed at Zillow and the other companies. Because last week we were talking about all the anecdotes about Zillow buying a house for 275, putting in 15 grand and then relisting it for 265, which obviously the math doesn't work on that. and I buy transaction feeds title, ooh, gross, feeds lending, feeds brokerage and a bunch of other little services. So Zillow basically created a flywheel to feed other businesses they are trying

to grow. It is kind of genius and not appreciated yet. I know this because our company is vertically integrated and I know what our company generates per house and we are a small scale compared to Zillow. Right. This guy emailed us and said we basically do the same thing on a smaller scale and what they're doing once they get it going is going to be a great business model, which makes sense. They're going to handle all this other stuff now that's, like, done by middlemen. I buy it. The market is saying otherwise. All right.

This was a good question. You wrote a blog post about this. I'm a 34-year-old couple years ago. A friend of mine took an enormous financial risk betting his life savings on obscure crypto coins. I've never heard of these, Elrond and Phantom. Isn't Elrond the guy who created Scientology? Anyway, the bet paid off and he's managed to turn 30K into $6 million. Can you please help make sense to this?

I've always considered myself financial responsible, saving a large percentage every month for retirement. I'm concerned I'm being too responsible and need to incorporate more risk in my portfolio. My IRA 403B is invested by 100% in stock index funds, but I'm beginning to question whether I need to start allocating toward higher speculative risk investments, crypto, NFTs, individual stocks. It feels like everything we've been told not to do from our financial planning standpoint is paying off right now. So I can't help but wonder if I'm being a fool for following the old school device of slow and steady.

Do you think the future of financial planning incorporating higher degrees of speculative risk moving forward will happen? This is too real. I feel this person. We all do. We all do. I don't think you can take a lottery winner and compare yourself to them and go, I should do that, too. If I just buy a few more lottery tickets, could not agree more.

You're right. I also, boy, do I feel where this person is coming from? Because if you're not feeling a little bit of phoma, you're probably lying to yourself. You're not a human being. Yeah, you have to feel it. But the idea that you should take higher risk investments, I mean, you know you shouldn't. If you want to, to have fun with 2% of your portfolio. And also, we should be clear to say, like, what is high risk?

I mean, alt coins is as high risk as high risk gets. And just the idea that you're going to take risk and then be rewarded because you took it probably ain't happening. You're probably going to take risk. The risk will manifest itself and you will probably lose all your money. There's an old Buffett quote that he said, like, they asked him why bubbles happen. He said, because people see neighbors dumber than they are getting rich. But here's the thing. Can you still be responsible and speculate a little bit?

Sure. I do. I do. I think I'm responsible. So do I. You could take 5, 10, 15% of your portfolio and set it aside and then leave the Sloan Steady alone because guess what? After years and decades, that's slow and steady, you're going to be doing just fine. It's still going to work. If you're a young person, it's still going to be fine. You're not going to get there as fast as you are. And guess what? There's a very high likelihood. This doesn't help anything. Your friend at 30 years old that turned 30K into 6 million, there's a good chance they're going to be screwed up. You can't become wealthy that fast and not be a little screwed up. I would say this is a good case of be careful what you wish for. Yes.

I know myself, if I turn 30 grand into 6 million, I would become insufferable. Not outwardly, but I would be obsessed with prices. I wouldn't be able to think about anything else. I would just be laser focused in on what is my portfolio worth today. And I don't want that. I mean, I know it sounds desirable and it's better than the alternative of having no money, but be careful what you wish for. So like budgeting, set yourself a speculative.

of budget and give it either a percentage of your portfolio or an amount per year. I'm going to take five grand a year, 10 grand a year, or one grand a year, whatever it is, whatever you're comfortable with, and I'm going to put it in a startup, I'm going to put it in crypto, whatever it is, and just have that be your budget. And if it goes up a lot, great. And if you lose all your money, then that's it. You walk away from the table like the casino. There's always going to be something where you feel like an idiot for not owning it. There's always going to be someone getting richer than you no matter what. It's just much easier to see it now than it was in the past. And it's interesting because like NFT mania, it feels so big, it's so small.

There's a chart from doing analytics showing the users of OpenC. I think there's a million people on the platform. It feels like it's ubiquitous. It is not. P.S. Devin Finzer was on, he's the CEO and founder of OpenC, he was on Patrick O'Shaughnessy's podcast that is worth listening to if you're curious into what's going on there. I want to just, oh, speaking of speculating, I put money.

So there's this thing, index coop, where. they have a two-time levered ETH product. I had some money in my wallet. When there was a washout, in Ethereum, I bought this. And I was up, it wasn't a lot of money, but I made like whatever percent I did in a short period of time. So I was like, oh, I'm going to go sell that. I've done this before.

But selling anything on Metamask is so damn annoying. Let's say that I have 0.2 of these tokens and the gas fees were what they were. You can't just take 0.19 or 0.18 and have the difference go to pay the gas fees. you need Ethereum on your Metamask wallet to actually pay the gas fees. And I forgot about that. So I went on Coinbase. I bought Ethereum. I transferred it.

I sold it. The whole thing, it's just, it's still too much. It's way too much. This is why this is a market for millionaire, crypto millionaires right now. And young people. It's for young people. Well, they have so much of this stuff. It doesn't matter to them as much.

And it's not a pain because they can just, it's pocket change to them. Yeah. We went on the email a week or two ago about this kid in Dallas. I got a job at Fidelity, I think. Somebody wrote to us, regarding the individual who asked a question on Fidelity and accepting the world in Dallas, would be happy to grab coffee or whatever with him virtually, had been with the firm for 10 plus years and finished a CFA charter back in 2014. We also, interestingly, got another email in Dallas, same exact offer for this person.

This is from a Vanguard employee. So I couldn't find this kid who emailed. The best way to network is by asking a question on your favorite podcast. Right. I couldn't find this kid's email. So if you want to email us again, and be connected to these two people, happy to make that introduction. Okay.

This was one of my favorite things we've got in inbox in a while. Question. Gentlemen, I drive an SUV that requires premium gas, not a big deal. In the owner's manual, the gas tank covering the dealership all clearly state the need for premium gas. I'm a rule follower, so I filled up with premium and it's getting expensive. I have friends and colleagues who say this is a complete scam and I'm an idiot. Please settle this debate.

Great question. About three hours later in our inbox. Gentlemen, I understand my colleague emailed you a question about paying premium gas for his SUV and whether or not this is a scam, just wanted to chime in here and say that my brother's mechanic and it says, well, it isn't a requirement. Certain engines run better with the premium gas, blah, blah, blah, blah. They're having an argument in our inbox here. I would say, I would think this is a scam, too, if I bought one of these cars. You've seen the Sebastian Manuscal where he says that his dad buys premium gas, and he's worried that the person before him

was using regular gas. So it's going to be the regular gas in the line still when he gets his premium, and he's going to get a little bit of regular in there. I don't know. I don't understand how pre, like, I get the difference between the low end and the high end. Who in the world buys the middle one? There's the low end. There's the high end. Who is the idiot who's buying the middle? Here's my thing.

This is kind of like car washes. I think premium is a scam too. I'm with our first emailer. It's a scam. If you are a renter, why would you pay more money for gas? If you own the car and you're trying to get your money who's worth, right? And lengthening the life cycle of the car, otherwise not. I'm not with this.

I want to read one more email. you guys mentioned giving back, which I think is incredible. I guess this was, I don't remember when we talked about that. I myself have had similar feelings about wanting to help others more, but since I'm young, I'm also trying to save and invest my money. One thing that I found that has helped bridge the gap for me was this great microloan website you probably know about called KIVA.org. I actually don't know about this. About two years ago, I set up automated monthly investments and purposely picked loans with very low term lengths. Anyway, it looks like this is a site where you can make small loans to like. So I use this. Yeah, I use this too. This is the one I mentioned. Oh, you do? Okay. Where I said you make the majority loans to women because they pay them back better. So what you can do for this young person, you make loans. You can help these people out with their business. If you wanted to, you could actually take your money out when it gets paid back. That's great. So it looks like their tagline is like loans that changed lives. Love it. Yeah. All right. I know there's been some pushback for Ted Lasso season two. I was one of those people that pushed back. There was a few episodes that left

me, they were a little head scratching. They turned it around. I liked it. They finished the season Strong. And I say Ted Lasso season two, thumbs up. It was a little deeper than the first season, but I liked it. I think I said I was going to mention I finished Squid Game. I mean, everyone's talking about it, so you don't need to hear from me, but I loved it. It was great, and I didn't want to love it. So I'm one of these people that didn't think so. I heard that from a few people saying, I don't want anything to do with this. I saw the preview. It looks crazy. I thought the same thing, and I still liked it. I've been sticking with my fiction thing. I started this a while ago, I picked it back up. Wise guy is the book that Goodfellows is based on.

I never realized it was based on a book until I heard an interview with Scorsese. There is stuff in the book that is basically word for word what they use in the movie, which shocked me. There's a lot of stuff. Oh, wow, that's got to be a trip. Yes, it's interesting. It's actually, but there's also, like, he could take a little paragraph and turn it into a whole scene. So it's interesting to see what they choose to pull from the book and not and what he changed

and what was the same. So if you're a good fellow's fan, that's good. How you doing, Hendry? Somehow I got pulled into a couple episodes of Succession, rewatching. It was on HBO, and I watched, I'm like, oh, from season two. I want to watch the finale before season two. I've never really done this before. I've basically watched half of the second season.

I'll probably watch the whole thing before the new one comes out. So good. I think that, so anytime you talk about like the best shows ever, it's always the wire, Breaking Bad, Sopranos, those are always named. I think Succession has a chance to get there. So do I. It probably needs three more good seasons, but I think it has a chance. It's the best cast show ever.

Every single character is perfect. Yes. And there were so many things that I probably missed the first time that cracked me up. I love that show. It's coming back soon. That's all I got. Did you watch the Chappelle special? Not yet. Can I tell you something? This is just kind of amazing that technology. So I watched it on my way up state. I had my Ways on. My Google Map weighs on. And in the bottom, I had the Chappelle stand up. You can do that on your car? You could do that on your phone. Oh, on your phone. Oh, okay. I got you. You could, like, minimize the Netflix screen. I could use the map and also watch, or in this case, listen, I don't need to watch this. So, wait, wait, you're Mr. I only go to the movie theater because I'm so cool. Don't even fucking go there. You're watching Netflix on your phone? No, no, I refuse to watch Netflix on a phone.

Dude, I'm not watching anything. This could have been a podcast. I'm listening to James Chappelle. I don't need to watch him. All right, I have standards, sir. Don't even go there. Nice try. Does your phone have a line across it?

No. By the way, I saw you. You posted a picture of your TV on our Instagram account. I saw the line. It's not that bad. It didn't look bad in that picture. Believe me, it's worse than it looked. But this was interesting. The critics gave it a 35% of Rotten Tomatoes. The audience gave it a 99. That sounds about right. There was a fagogy documentary. The critics gave it a 91. The audience gave it a four. So this is Chappelle's last special for a while. I can't really comment on the stuff that people are offended by because I'm not in the trans community, so I don't even want to go there. But it's art. I understand it's subjective. Some people like things.

Some people don't. I thought it was brilliant per usual. As always, less ha-ha, less like belly laughing and more just like, wow, this guy's a genius. Yeah, I can see that. He's like the George Carlin of our day. Yeah, I went to the theater last night. So get off my back and don't ever compare my viewing to yours. I'm just saying I've never watched a show on Netflix on my phone before.

I saw no time to die. The new Bond one? The new Bond one. So it's two hours and 45 minutes, which is at least 20 minutes too long. And you and I spoke about this, I think maybe during Ronan or Mission Impossible or one of the action movies, I know this sounds ridiculous because it's so lowbrow. I can't follow action movies, like the plot, which is almost secondary. The good thing is you don't need to usually. Yeah, in this particular case, honestly, I had no idea what was going on. I didn't love the last hour. I thought the Romney Malik character was like weird and I just didn't get it. I know Bond is huge culturally and it's been around for so long. For me personally, Mission Impossible is better. Mission impossible is better and the born movies are better to me. I have to revisit the Bourne movies.

Jason Bourne is my James Bond. All that criticism being said, it was fun. I didn't have a bad time. I had a good time. It was a good movie. And it's interesting because I don't want to give any spoilers because it's so brand new. But the reason for delay ostensibly was, and I'm sure it is, because people weren't

going to the theaters due to COVID. And this is going to be a monster box office movie, monster box office movie. I want that much Amazon has to do with this because they bought MGM. I bet it would have made more money if they would have just released it on streaming. last year. However, there is a COVID thread in this movie that also might have been the reason for the delay. People might not have been ready to see this. Okay. What are your feelings about that? I don't like seeing COVID in movies and shows. I'm done. No, no, no. Coincidence. Oh, okay. Gotcha. But I don't like it being incorporated. I don't want to see it anymore.

Personal preference. All right. Animal Spiritspod at gmail.com. We'll talk you next time. Thank you.