Animal Spirits Podcast - The Craziest Housing Market Ever (EP.245)

Episode Date: February 23, 2022

On today's Animal Spirits, we discuss the growth stock sell-off getting real, differences between now and the end of the dot-com bubble, why savings account yields aren't going up yet, inequality in the housing market, the best 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 Ground Floor, the wealth tech platform that allows everyone to build wealth through real estate. Ben and I talk to Ground Floor CEO a couple of times now about how they generate interest through their real estate debt loans. But since then, they've also created a new app called Stairs. Ben, you're using Stairs. I'm a Stairs holder where you can get 4 to 6% interest and withdraw at any time without any fees. Check them out at groundfloor.com or download the stairs app for iOS or Android. 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 Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions in the securities discussed in this podcast. Michael, I had an epiphany over the weekend a little bit. Oh, yeah?

It just kind of a, oh, wow, like this whole growth stock sell-off in the stock market is really starting to feel very real for how long it's gone on for. And I was just the length, right, the length. of time. Oh, it's real. So I was writing a piece in kind of trying to compare it. You know, I think everyone compares everything now to that dot-com period for tech stocks because everything got so crazy and people wanted to be like that. We're not there from, in terms of like the rise up never got there. So I looked, the NASDAQ from 95 to 99 was up 41% per year. It's like almost 500% in total. But from 2017 to 2021,

25% per year for the NASDAQ. So it wasn't there. The analogy I made, it wasn't in the ballpark, but it was in the parking lot, right? It was pretty close. And I think that this crash, it's not as bad as the crash was back then. And obviously it still could go further, but it's closed. Like, this is not 2018, like, 2018 when stocks fell off. And of course, even in 2020, tech stocks got dinged, but most of them now have bigger drawdowns than they did back then. And so, I don't know. I, I, Someone sent me a tweet that I did in like mid-February, 2021, which is basically the peak of it. And I said, like showing how much the stocks are up from the bottom, like the NASDAQ 100% percent from the bottom at that point. And it's like, this is why everyone feels like a genius right now, which was kind of a top for those markets.

But even though everyone, and I say everyone in quotes kind of said, like this is going to end badly, we know, like everyone kind of thought this could happen, I don't think it's necessarily played out like I would have thought it would. with the market still holding up relatively well in all these brand name growth stocks getting just taken to the woodshed. It started with the Zooms of the world, the biggest darlings during the pandemic, which really f*** everything up, by the way. Yes. Like for so many lives, obviously, but I'm just talking about for investments. Just really, like, why is PayPal getting killed so badly?

I really don't know. I added this up. So Facebook, Netflix, Shopify, PayPal. Zoom and Square. Six pretty big stocks. Facebook is the only one that was really in that top echelon. These are like the next level stocks. They've lost more than $1 trillion in market cap in the last year. If you go from their peaks in 2021, in a little less than a year, these companies have just gotten to my, I mean, PayPal, it's totally round-tripped. One of the charts of the year was ExxonMobil, briefly being surpassed by Zoom. Zoom is now a tenth of the size, which makes a lot more

sense. But if you look at, there's like, there's so many fun charts that you can do with this. But Zoom, for example, comparing it to Hilton. So Hilton, as you know, is a hotel and hotels, their traffic basically went to zero and their stocks got destroyed during the pandemic. It's now round trip that since the start of the pandemic, Hilton is outperforming Zoom. So you have this chart here. How? Is that from the bottom, basically? No.

No, no, no, no, no. If it was started from the bottom, it would look way better. This is pre-pandemic. Oh, pre-pandemic. Okay. So including Hilton. in getting knee-capped and including Zoom's run-up. Okay, so it's funny.

So this is pre-pandemic. They're both up 40% in total. But at one point, you were up 450% in Zoom. This is so funny. This is why investing is so path-dependent. Because you could say, listen, you could invest in both of these, and I'll give you a 40% return two years later, which one did you choose? And you say, well, it doesn't matter.

I'm up 40% either way. But no one in the right mind would choose that Zoom ride if you're a binahold investor and say, I was up 450% at one point. Now I'm up 40% of my holdings. Did you see somebody tweet the list of stocks that are down like 70% or more? It's a big list. There's so many of them. This is a weird thing.

Based on trailing PE, which is just one metric, but it's an important one, Amazon has a lower PE than Walmart for the first time, probably ever. Connor Sen did this tweet, and he looked at the EV to EBIT dot multiples, which I guess is just a way, if you want to look smarter and say this is how private investors would value these things, It's just another evaluation metric. But he's showing that, like, Facebook, Amazon, Apple, Netflix, these are, like, comparable or lower now than Walmart and Procter and Gamble and Coke in Home Depot and IBM. It's wild.

So a lot of those names, the second group, are the ones. So you look at the S&P and you think, like, how is it off 9%? How? It doesn't make sense. Seemingly, every name is getting killed. Every name is not getting killed. That's the thing. Names 10 through 20 in the market cap weighted index.

United Health, for example, a lot of these names you just mentioned, they're like doing just fine. It's stocks that aren't in the headline. That's the problem. Even Berkshire Hathaway with Warren Buffett is doing just fine. It's not a stock that's going to make headlines for people. Exactly. By the way, speaking of headlines, it is Monday afternoon. The NASDAQ is careening lower. It's almost down 2% on the day. It's so weird. I'm watching crypto probably too closely, but crypto seems to, at least right now, it's just a risk-on, risk-off asset. It is moving exactly in line with the S&P or with futures, with risk-on, risk-off. Bianco did a tweet, right?

We're going to talk about it later. Any predictions? Any predictions? Where does the market open tomorrow? Okay. So you're looking at the futures market? I was going to say the market is closed today, but you're just looking at the futures market. Yeah.

What is that weird? No, I just wanted to make sure you weren't looking at the market from Friday and thinking that it's filled. I'll teen you up there. So you talk about stuff getting killed. So the NASDAQ composite I looked at is down 15%. 15%. 28% of the stocks in that are down 60% or worse.

60. 60% or worse. 35% are down 50% or worse. Over one third of stocks are down 50% or worse. So you talk about this whole thing about, I really do think it's just we got so enamored with these name brand stocks and seeing them get killed that it almost doesn't make sense. Is it controversial to say,

I think this is a bare market. It's a bare market for some people. If you're not purely passive, if you're picking stocks outside of the Coca-Cola's of the world, which is not what most people are picking, this is a bare market. And for basically everyone in 2021, this is a brutal bare market. How about this? Dude, if the names that you're trading, you've done 70%. That's not a bare market.

That's annihilation. That's not a bare market. For growth investors especially. It's the depression. Yes. So think about it. If you're a person who went all tech, and I can't remember, we mentioned. this, but we had question after question from people saying, should I go all in on growth?

And someone emailed me a few weeks ago and said, by the way, just so, you know, I went all on on growth stocks for the down payment for my house, and I don't know what I'm going to do now. So this is the thing, like, let's say, I mean, I'm sure how many tech people do you think have 100% of their portfolio in tech stocks and crypto? Yeah. For them it is, it's a huge crack, because the S&P is down, I think, 9.3%. Yeah, forget the S&P. For a lot of people, this is not a fair market. It's way worse. You know who's sitting pretty? Target day fund investors? No, boomers holding dividend stocks. They've been ridiculed for years. But I mean, how many investors stayed with that type of strategy over the past few years when you saw all these growth names just

going bonkers? I'm guessing so many investors have shifted to that stance. It's tough. Did you see somebody had that tweet of, I think it was labeled by the invasion. I don't know what this person was intending to say. Obviously, that sounds insensitive. But the point that they were making was that oftentimes stock sell off. It's like a sell-the-news type of event, but in reverse that stock sell off. And then, did you see that chart? No, no, no, I missed it. Explain it to me. It was basically showing that on the actual day of the invasion, going back to Iraq and a few other wars. I got you. I've written some about this. This is one of those things where, like, if you're trying to use your geopolitical stature to guess what's going on the market?

market. I don't mean to like sound insensitive, but what are ways that this could actually impact the markets beyond like a psychological toll of, okay, this is war, this is bad? Because trying to guess, like is it just energy markets and oil, I guess? Like that's the thing that could really royal the markets. Someone tweeted this too that the Texas GDP is bigger than Russian GDP. And I'm like, is that doesn't, is that really true? The GDP of Texas. That doesn't matter. No, I'm just saying so the GDP of Texas is $2 trillion. The GDP of Russia is 1.7. I'm just saying is Russia, do they still have as much of an impact as they once did? Like, are we still holding like Russia high as like this huge global power like they once were when they just aren't anymore? Well, I can't speak to that,

but what we can speak to is the fact that the market is already wobbly. And so it doesn't take much to really knock it over. Maybe this is the straw that breaks the camel's back because investors sentiment is already pretty negative. Or maybe not. Maybe this is where stock's bottom. Who the hell knows? Do you think the fact that the market isn't down more? It's down 9%, which is still below what the average intra-year peak to trough down is going back many decades. Do you think that is a good sign or a bad sign right now? Because the bad sign is, well, the generals get shot last and those big names are going to get crushed.

And then watch out, that's the next leg lower. Yes. Here's what I will say. Every time we've been in this area where we've had the generals is the last one standing, and it was never to this degree. Over the last 10 years, we've never seen anything to this degree of the darlings getting beaten down this bad. But I still think that you have to give the secular bull market the benefit of the doubt.

And I can be proven wrong in three days. But until they get them, I think that this is a win for the bulls. But again, I'm not going to say that the Apple is in Microsoft and Google can't fall out of bed and drag the rest of the market down with it, the index levels. We'll say. If this is a bare market, as you say, and this is the way it happens, and the S&P falls 10 or 15%, but hypergrowth stocks fall. 50 to 60. Isn't that best case scenario? Well, the SMEs already down 10. But that's what I'm saying. Like, if you're just a person who follows the overall stock market, that's best case scenario for you. We shook out all of the excess and all the speculation and the SPACs and the IPOs. They all got

crushed. And the stock market still had a correction, but it's fine. Like that, I think for long-term bull market pieces, that's a very good sign, I would say. A correction only looks healthy in other people's stocks is something that I've said before. And that's certainly the case here. But if, not even if, even if the S&P does enter a bare market, this is healthy, not that you would remember. I wrote a post, I think in December 2020 called This is Not the Way, talking about all this stuff. And we've both been in multiple articles and so is everybody else about how this cannot continue. The Zoom's going up every single day. Like it's so easy. That was not healthy. I agree. I understand that this is painful for a lot of people. So it might not feel healthy.

But for the overall market, you need to get rid of some of the excess sometimes. The other difference between this and the 99.com blowup was we're going to get to this in our great quarter section today. But a lot of these companies are still reporting fantastic results. Back then, most of the companies did not have actual businesses. A lot of them got vaporized and just were gone forever. Obviously, some of them made it, but not many. The ones that made it, we still talk about Amazon and Cisco and stuff, that's like survivorship.

There's a lot of them that didn't make it. these companies today are still posting fantastic results. It's just that expectations were so far out of whack. And I don't know that we've seen a market like this. I mean, nifty 50 stocks back in the set, like current investors have ever experienced something like this where you have such a wide range of outcomes. No, I was talking to Josh about this. If you just scanned a hundred charts, pull up your favorite charts without the indexes, you would say, 40, 45. Yeah, exactly. you would say, holy shit, the market must be down 30, 40%.

Yes. So maybe we get there, or maybe this was the washout and then they come back. We'll see. But hopefully most of our listeners that we've talked about over the years, we've said, listen, these people have Robin Hood accounts that they're trading in, but they also have their 401ks and IRAs and all this stuff, and they have more of the normal stuff in there. Maybe this is a good lesson, because I have the Robin Hood account too.

So do you. I'm getting crushed right along with these people. I sized it correctly for my personality and my risk profile and all stuff. Not to brag. I took two stabs at Robin Hood on the way down and I've been pretty clean ever since. I haven't really stepped in. I mean not like Robin Hood, the stock Robin Hood and account. No, I know what you mean.

But yes. I'm not getting killed on. I don't own growth names. Okay. Crypto. Same thing. Same thing. You're right.

By the way, I'll stop in. I'll buy some of these names when they stop crashing. Okay. See, I'm just a psycho and I just hold the crashing stocks because I don't know what to stop losses. I guess. Did we talk about Robin Hood raising their margin? an account interest rates. I don't think we did actually. No, I got an email about it too. So what it goes from 2 to 3% basically? Yeah. So not a big deal, but here's the point. Of course they did.

I don't blame them, right? They're running a business. But if you look at this. I can hear when you move your mic like that. Okay, sorry. There's this beautiful chart. By the way, now the shoes on the other foot because you're a Mr. Mike mover. That's true. There's this beautiful chart from Bloomberg showing the two-year treasury yield and Marcus, which is a prox, well, Marcus is the high field savings account. I'm sure they all look the same. So there was a time where Marcus was willing to subsidize and take a loss on this as they were building up deposits. Now, they're smart. They know, good luck. You're not going anywhere for an extra 20 basis points. You're just not leaving. Maybe you leave, but everybody's not leaving. So now the two year has spiked. And Marcus ain't budging.

They're just not budging. This to me is like gas prices and mortgage rates. It's like a negative convexity. So when oil prices rise, gas prices go up immediately. And they go up a lot. When an older place fall, it takes a while for gas prices. The 10 year is up. It's not up much, but mortgage rates have gone from like 2-8 to 4, like in a heartbeat. And how about the 2-year yield? Look at the 2-year yield. Raise our interest rates.

If my kid wasn't sleeping in the room next door, I would be screaming right now. Yes, that's the thing. Like, this stuff happens. The banks are taking advantage and they're going to charge 4% of mortgage rates now, and they went up way faster than any of the other yields did, especially like the longer term. Because guess what? A 30-year mortgage rate is not tied to the 2-year bond.

You know what fixes this? What's that? Crypta. By the way, how great was our talk with Lee? Yes. Lee Drogan manages a crypto hedge fund called Star Killer Capital. And he said, and I quote, I think the Fed does a great job. Yes.

It's one of the few ultra-uber bullish. Like, Lee has gone all in on crypto, his career, his fund, his money. He's gone all in. But he is not a Fed hater. He doesn't think that, like, there's hyperinflation. He doesn't say few. Yes, he doesn't do the GM thing. He doesn't think that we need this like permissionless, decentralized world.

because blah, blah, blah, he's a libertarian. He is just bullish on crypto for what it can potentially do. And his whole thesis for it, I think, is very well worth listening to it. So we talked to him it came out on Saturday. I think it's worth the listen, especially the whole idea of running a 24-7 hedge fund to me and with all the custody behind that and the defy and the stable coins and staking all this stuff. It's very interesting. Okay, so someone shared this chart from Goldman. I think I've talked about this before. They show the difference in net worth an asset allocation basically between the bottom 50% and the top 1% of households. So the bottom 50% has 55% in real estate and 4% in equities. The top 1% has 60% in equities, 11% in real

estate, much lower. And we've spent years going over the fact that this is driving wealth inequality. We need more people to be in financial assets. I actually think because of the way the housing market is working now, this is going to actually make things even worse because So right now, again, housing is for the bottom 50%. That is their retirement portfolio in a lot of ways. That's their savings. They don't have a whole lot of other financial assets. Their primary residence is their financial asset.

It makes up the bulk of financial assets for the bottom 50%. Because people with better consumer balance sheets and better credit scores and more money are able to now buy housing, I think this is just going to make things even worse where the lower 50% is going to be priced out of housing and stocks going forward. Why price out of stocks? Oh, because they just don't own stocks in general? They just own in stocks in general, and they haven't. But I'm saying over the course of this next decade, if my housing theory plays out and housing prices keep going up a little more each year, I think the bottom 50% is going to start

being left out of the housing market as well, and that this is going to drive even larger gap between the haves and the have-nots. Could be. This is a big and complicated topic. If you're a person who already owns a home, you're doing very well right now, right? you've been able to borrow at lower rates or refinance. Your housing price has gone up. But I'm saying for the people coming in, that next rung down who are trying to buy and now housing prices are up so high. So you saw this Redfin report, right, about housing markets? Yeah. So there's just not

enough houses. So Bill McBride did this thing on housing inventory. Compared to 2020, inventory is down 65%. So this is nuts, by the way. We're going to talk about this Redfin data. It is another stock. So all of these stocks, Ben, I did a post over the weekend. There's so many stocks that were literally down 70%. This Redfin is down 76% going into earnings. Oh, okay. And then fell 20% on the day that they reported. Redfin's another one. Redfin opened door, Zillow, in the best housing market ever, these stocks are getting annihilated. That's like the data. It seems so dumb like, of course, the math is obvious, but going from a 60% loss to a 75% loss is not 15%

it's 40%. And that's happening these days. That's like, yeah, it's common. So, all right, for the four weeks ending February 13th, a record, 57% of homes that went under contract did so within two weeks of being listed. 44% of homes were accepted offers within one week. That's insane. Homes that were sold were on the.

market for a median 29 days. I don't see what all the sudden makes this get better. Like, I feel like this is going to take potentially years to happen to get better. But it's not like you can just, especially since building a house right now is so difficult and supplies and labor is so hard. It's not like they're able to just pump out houses as fast as they can. This is going to be a multi-year thing where this gets better. Especially if you are looking to buy a house, you're just going to keep getting more and more antsy about it. And you're not going to wait longer. Ben, you still think homes are too cheap? Relative to the demand, I think they are. The best time to buy a house is always five to seven years ago, pretty much in this country, just about. And I think that you're going to look

at the end of the decade and go, where housing price is cheap in 2022, compared to 2030, I think you're going to say yes. The median home sales price was up 15% year over year, up 30% from the same time in 2020. money. The median mortgage payment. I mean, it's just, these numbers are crazy. Here's a good analogy from Taylor Marr, the chief economist, I think at Redfin, if you think of the housing market, like a bathtub, water, which is a supply of homes for sale, is flowing down the drain because buyers are sucking up supply faster than new water, which is new listings, is coming in through the faucet. Rising mortgage rates may slow the drain down a bit as record high monthly payments take a toll on the buyer's budget. But the bottom line is that without a flood of new listings,

will be sitting in a very shallow bath for a while. I think that's spot on. Where do these new listings come from? There are just more people that want a house than there are people willing to sell a house. I was talking to my wife this weekend. We were at my parents' house and talking my dad about it too. I don't think you could give me a high enough premium in my house right now to force me to go through the buying process in this market. It would be so stressful and I feel so bad for people going through it because you could pay me 50% more than my house is worth today. And I'd probably say, no, because there's nothing else on the market for me to buy. if I have to buy it, it's going to be hard to get it. I'm probably going to have to make some

concessions. And I already have a 3% mortgage rate. And they have this other one, the monthly mortgage payment, the median asking price rose to an ultimate high of right around $2,000 for monthly mortgage payment. It's up 27% from a year earlier because rates are a little higher. And of course, prices are going up. I think this is going to drive the inequality thing because the people who have the money are going to be the ones able to buy the house because they're going to say, we're going to get help from our parents for a down payment. or we have enough means to do it. And the people who aren't are kind of screwed. So this was another one from Bloomberg. Holmes Valley at a million dollars or higher are now the norm in 481 cities in the

US, more than double the number just five years earlier. Basically, that's like how much you have to pay for house a medium. But it's not just San Francisco, New York anymore. They're saying that in like all these places in Montana, in Idaho, in Tennessee, average housing prices are now up like 30 to 40% over the last year to a million dollars in some of these places that people are going to. here's another one. So did you listen to our friend Logan Motishami on the New Bazaar with Cardiff Garcia? It's worth a listen. And he gives some other reasons. We've talked about the fact that they didn't build enough houses after 2008 because the builders were all scarred. But he also says people are just wanting to live in the houses longer. So he said from 1985 to 2007,

the average 10 year in someone's home was like five years. You lived in a house for five years on average. From 2008 to 2022, it's now 10 years, and of course, much higher in some places. He's saying that's because houses are getting bigger and better. So the average new home in 1975 was like 1,500 square feet. Today, it's more like 2,500 square feet. And so people don't want or need to move as much. Plus, you actually had more people on average living in the houses back than they need to do now. I wrote this one a couple years ago. Credit to me for being so far ahead of the curve here. I wrote this in 2016, has there ever been a better time to be a home buyer. And it was using data. And I wasn't even saying like the price call, but how many houses did you

buy? 11. I wish. So in 1973, 49% of new homes had no air conditioning. 40% of new homes had one and a half bathrooms or fewer by 2015. That number is 4%. In 1973, 23% of new houses at four bedrooms or more. Today, it's 47% with comes with four bedrooms or more. The average size of U.S. household in 1973 was three people, it's not down to two and a half people on average. So we have bigger houses, better houses, more amenities, fewer people living in them. So people aren't going to be looking to move out of them as much. I don't know. I just feel like we're going to look back on this period, like a 10 to 15 year period from call it like 2006 to, okay, maybe it's more like 20 years, like 2006 to 2026 or whatever is going to be like the craziest

housing period we've ever seen. People are going to look at that crash and then the springback in prices. But it's just bizarre to me how much luck is involved in the process. When did you buy your home like 2018? I got super lucky. Good time. Like we built in 2017 and the only reason we did it is because we were having twins. We could have made our other house work, I guess, but the setup of the house didn't work. We had to move because we unexpectedly were going to have twins and we built a new house. And the crazy thing is the day we moved in, that house is brand spanking new. It's clean, untouched. And is now worth 40 or 50% more, even though we've lived in it for five or six years. We take care of it as much as we can, but kids live there. It's not like it's in as good as shape as it was back then.

It's such a bizarre concept that housing prices, it's not like a car where you drive off the lot and it depreciates or whatever. Ben, we got an email. This person purchased a home, new construction, new development. There's 100 homes built in the neighborhood. Going through the mortgage underwriting and when I receive the numbers, what do I find? Title insurance. $1,400. That way ask you. Why do I have to pay for title insurance for a home that is brand new and being built in a new development that already has roughly 100 homes in it? That's a great question. It would be nice if you're just on principled.

It's like, you know what? I'm not going to pay it. I'm fighting this. Someone should do that. So you see this thing that Disney is going to be making their own neighborhoods, residential neighborhoods. I'm sure with all the crazy Disney people that have reached out over the last couple weeks that people will buy, they're going to do it in California surrounding this like 24

acre lagoon. I don't know what a Disney. It's called a store. When I hear the word lagoon, I think water? Is it a cave? What's a lagoon? I think a lagoon is a pond with a good PR person. I don't really know the difference.

But they're going to call this like story living by Disney. And they're going to design the, I mean, what? But the people are going to buy these. I don't know what if Disney characters walk around the neighborhood. I mean, my layup joke here is that like I try to come up with some good ideas for this. Like, if you're a single male living with your parents right now, like you're going to live in the Star Wars community. All single males should just move there. I don't know what this is going to be. Oh, man. All right, let's move on to bad quarter guys. Oh, my goodness. Airbnb.

The first one wasn't bad. I listen to this one. I mean, they're a tech company in name only, I guess, but they're one of these companies that I think is going to be better because of the pandemic. We talked about some of these companies that, like, are much worse off. Before the pandemic, I never really looked at Airbnb. I would say, why wouldn't I just stay in a hotel if I'm going to go somewhere? Now, maybe it's because of my place in life because I have a family. But if we're going to travel somewhere, I'm going to look at an Airbnb before a hotel even. Well, also, and the work from home, like that's a secular tailwind now.

That didn't exist. So I listened to the Airbnb call. They said that they did a lot of comparisons of 2019 pre-pandemic to now. And they said every single length of stay has gotten longer and people are staying for a month longer. But the only one that has shortened is a one-night stay. And they think that's because that was all business. travelers back in the day. And they don't have as many business travel. But that whole thing of renting a place for a week or two with your family and being able to work, you and I can do that.

Not everyone has that luxury, but a lot of people can where they can go and they can have a work vacation. Is there a name for this yet? A workcation, something dumb like this, I'm sure. The numbers at Airbnb were so good that the stock only felt 23% on the day after reported. What are the stock there? They're surprisingly holding up okay. I think they're in like a 20% drawdown. They haven't gotten completely crushed, they've done okay. I bought this right around the IPO. I think I bought it the day of the IPO. And they might be up a little bit since then. They're up 20% since the IPO. That's a win. That's a win. So what are the numbers? Revenue's up 78% year over year.

This is a long runway. Yes. Their numbers were really good. And I just think like if you're looking for a good story for something that the pandemic has changed in a big way, they were basically saying our biggest thing we need to do is get more supply. We have more demand than supply. They have like four and a half million homes that people are willing to rent out. They need to find more ways to get homes, basically. Good luck with that. Well, I think part of it could be if you're going to go for a month to stay somewhere for working and taking a vacation, where do those people go? I'm saying to pay for that, you rent out your house. They're going to have to figure out more ways of doing this. I just think if nobody could find a home. I don't know if this

is part of the same story or totally different, but how do they find more inventory? So do you think that they would ever get into the business like fund rise of building their own rentals. Good question. I mean, obviously, that's a more capital intensive business. Did you listen to Shopify? I did listen to Shopify. If you did not look at the share price of this company and just listened to the quarterly earnings call, you would think this stock has probably up 100% this year.

So that's a great point you make. I was reading through it. And I'm thinking, like, obviously, I don't know what the consensus was, which was the issue, but looks pretty good to me. It looks pretty good to me. Their president, Harley Finkenstein, wrote a piece just a summary of Shopify 2121 versus 2019. Annual revenue tripled to $4.6 billion.

Seven companies on Shopify IPOed. Their merchant base doubled with one million new businesses launched on Shopify. He's saying the growth in commerce is alive and well. This company is down 52% this year alone, just getting slaughtered. What was it down the day it came out, 20% almost, after earnings? I don't know what it did after earnings. So we spoke about Shopify a few weeks ago. We're like, holy cow, Shopify, this is a real.

amazing business growing super quick. And I think we said the problem was it was trading at 60 times, which was obviously a problem. I'm talking about sales. And now it was trading at 30 times, which is still not a bargain. Now it's trading at 18 times sales. The problem is like fundamentals don't matter on the way down. It's just these stocks are in free fall and Shopify might be the buy of the century right here. But it can also fall another 30%. Easily. Both of those things can be true. Yes. It could be the next Amazon, but Amazon had its own 95% Netflix fell 80%. Like it's not out of the ordinary for a company like this to cease a decline. And this is their biggest decline. I think they're down 60%. What did they say?

What they said was their growth rates are phenomenal right now. They're not going to be as big next year as they are this year. So 2020. Okay. I think that's kind of. All right. So Shopify beat on Q4 estimates but said revenue growth at 2022 will be lower than the current 57% growth due to the end of the pandemic e-commerce surge. So profits rose 41%. Sorry, we can't raise revenue 57% each year. I think it's basically that, yeah. Stop.

Do you know how fast you were going? I'm going to have to write you a ticket to my new movie, The Naked Gun. Liam Nissan. Buy your tickets now. I get a free Tilly Dog. Chili Dog, not included. The Naked Gun.

Tickets on sale now. August 1st. This is a great chart. They showed the share of U.S. retail e-commerce sales in 2021. They're second, only behind Amazon. They're head of Walmart, ahead of eBay, ahead of Apple. This is a tremendous, tremendous company obviously just got too expensive. Look at this Charle. Look at this revenue growth. It was up like 2,000 percent since its IPO in 2015 or something.

So obviously it already had a ton of growth. And it just, yeah. Oh, I didn't get to it. Damn it. I meant to get to Walmart. I didn't get to Walmart. Samro tweeted this. Supply chain costs were over $400 million higher than expected at the beginning of the quarter. But gross and operating margins expanded anyway. Okay. It's a good business. Yeah. So I don't get how, because a place like Walmart isn't raising prices too much. Their labor costs are going on. How does that happen? They absolutely are raising their prices. Okay. So even Walmart is raising prices a little bit. Dude, everyone's raising prices. Okay. And they actually did very well after their earnings report. Roblox is another one. I think it was down called 70% felt 20%. So what happened here? They did a direct listing a year ago

about gun to your head. Could you explain what Roblox does? Video games. Boom. I know. It's just a video game though, right? I'm not a Gen Zier. Okay.

I don't know. That's what I'm saying. I've heard of it. Dude, they do business. Come on. What else you need to know? They do business. I'm saying, could you pick this video game out of the lineup?

I couldn't. That's what I'm saying. Well, let's get dunked on. Let's keep talking about Roblox and show our ignorance here. It's not a $30 billion market cap even after falling. Roblox is not a video game. It's a video game company. Sorry.

I thought that they do a lot. of the video game graphic designing. Okay. Am I in the ballpark? I'm a video game boomer. I honestly have no idea. Whatever. I've heard of this company.

I have no idea what they do. Revenue, 560 million lower than expected. 604. There it is. They grew in the range of 64 to 66%. Which is, again, astronomical growth. Maybe these CEOs should just start blaming the analysts, saying this is your fault for setting the estimations wrong in the expectations.

Screw you guys. But the last report was 83%. So their growth is. accelerating. What else is going on here? Daily active users grew 33% to 50 million hours engaged through 28 billion. So the fundamentals of the business are more than sound. We're looking at a chart of this revenue. I mean, would you invest in this business not knowing anything? Yes. But what you do know is that everybody knows he's a great businesses and they got bid up to infinity and beyond. This is like a credit to us but also a non-credit to us because I think there

was a podcast a year or two ago, or a year and a half ago, where we said, listen, the post-pandemic trade is going to be way harder than that during pandemic trade. Because during the pandemic trade, it was easy because you could see which companies were going to benefit. But the problem is, like, the timing on these things, we said eventually those COVID comps are going to be really tough. But I'm sure that there was probably six months after we said that where these stocks kept going up anyway, and it didn't matter.

And now it matters, and you're seeing these comps. And just like the timing on this stuff is so bizarre how it all. it just happens at once. So Roku, similar story. Do you have a Roku TV? I don't. So I do. It's a beautiful system.

The remote you get has like five buttons on it. And it'll have like a Netflix button, a Hulu button. It doesn't have all the crazy buttons all these other remotes have. I don't understand how they make money, though. I guess it's content partnerships because it's just like an Amazon fire stick. How much is a hardware cost? It's cheap? I got a Roku TV and it was a $600 TV or something, a TCL.

whatever. It's pretty cheap. So, I mean, they have their own station and they'm sure they advertise and then they have partnerships with all the places that put their apps on, I guess. But I don't get how it makes so much money. And this stock got crushed. Crushed. There's another one down 70% fell 20%. All right. Last one. Draft Kings. Another one, down 70% going into earnings, fell 21% on the day. And investors. I'm sure they've been minting money too. No. Draft Kings? No, because. Oh, because they're trying to acquire customers. I think they said they're lose, don't quote me on this, $6 to $800 million this year. They basically needs to be some consolidation in the sports gambling space. Is that the problem?

So investors are no longer willing to subsidize these money losing businesses. That's it. Everyone knows what the story is with draft kings. It's expensive to acquire customers. And investors are saying, nope, not going to do it. All right. This was a good listener question on inflation. What is overpriced now that if we can just manage to wait 12 to 24 months could be 20% cheaper or more. As companies are rebuilding inventories, perhaps overestimating demand, just like the arc names did this time a year ago, what might be cheaper when disinflation kicks in? Obvious answer here is cars. What else? Mattresses and bedding, furniture. What definitely won't be cheaper? Yeah, what will and what? I mean, cars is the easy one. Prices aren't coming down.

Pretty sticky. Prices aren't coming down on anything. Yeah, I think it would be hard for corporations to maybe there will be more sales. There probably has to be the fewest number of sales right now ever for an item like where you get a discount. If a corporation can raise prices for a year and consumers don't completely revolt, I don't know what would make them lower prices in the future. No. They're not coming down. Cars. Quickly, J.P. Morgan says the Metaverse is a trillion dollar per your market opportunity. Sure, why not? What do you think that meeting was like? Guys, what do you think the Metaverse is worth? Billion? Let's go higher. Let's go with the trill. Here's a quote. We are well positioned to bring together global trade and commerce across

digital universes. All right, sure, why not? This was a really amazing, incredible, shitty headline. Sometimes, oftentimes the internet is just a terrible place of misinformation, which is unfortunate. The headline from a Fortune magazine, literally the headline was Warren Buffett just invested $1 billion in crypto. What actually happened was Berkshire bought shares of a company of Brazilian neobank called New Bank, which is basically like, imagine Berkshire buying shares in SoFi and the headlines saying Berkshire buys $1 billion worth of crypto. But them actually buying a billion dollars in crypto at the same time, Charlie Munger compared it to a venereal disease would have been perfect, though. It's too bad that didn't happen.

Who, with all due respect to Munger, who gives a shit what he thinks about crypto? I just love the fact that at 98 years old, he's still just firing away. But, yeah, Yes. Crypto people shouldn't care and neither should finance. Nobody should care. You should be insulted. But who cares? He's 98 years old.

Crypto is a thing for the 22nd century, perhaps. Yes. I agree. Real quick. Half of all new Chevys, Ford's and Toyotas and other major brands arriving on dealer lots in the next 90 days are already sold. This sucks. Here's a shitty quote from the CEO of Auto Nation. This tight inventory situation is going to be around certainly through the first half.

I'm hoping we do see some improvement in the second half, us too. That sucks. That really, really sucks. Do we have an update on the chips for these things, these semiconductors? Still nothing? I don't know. I haven't been following it closely. All right. This is like the perfect poll for the internet era. American satisfaction of their personal lives and the direction of the U.S. So the percentage of people satisfied with their own personal lives, the way things are going is 85%. The percentage of people satisfied the way things are going in the U.S. is 17%. So everyone thinks, my life is fine. The country is going to hell. If you look at this chart, it's relatively stable at around 80% for people that are satisfied

with the way of things are going in their life. And it actually does jump around a lot. In 2003, 70% of the country thought things were going well, which was just horrible timing because the next decade was just going to be awful for the country. But can you blame this on the internet? Is this just the way people think always? I think people are often optimistic with their own life and bearish on the rest of the world. I think so.

That seems to be like a stance that would make you feel better about yourself. Ben, somebody emailed us saying how he regrets basically all the time spent and wasted on speculation. Yes, I saw this. So I wrote a post about it, which you could read if you want, but somebody emailed me back. One of the things that I said was, I'll just read his email. He said, I am stunned reading Michael's missive today in which you stated, and this is a quote directly from me, would I trade stocks and buy NFTs if I wasn't sharing it on the show? Hard to say with certainty, but probably not. That's what I said.

and this guy who apparently knows me better than I know myself said, I'm sorry, that is complete hockey puck. Is that a phrase, by the way, hockey puck? This must be a Canadian. I don't know. I've never heard that before. You traded triple inverse of ETFs a decade ago and you think you have exorcised it out of your system. Of course you would be trading now. Clearly, you will have dialed down the exposure, but you would be making these trades. The market is your casino. This is not a negative take, just a recognition of who you are. You like the action. You know what? Good take. Good take. You agree? 100%. Okay. If anything, I'm more tempered, but that's not because of the podcast.

That's just because of the business that we're in. Like, I am much more responsible with my money now than I would be if I wasn't in the industry. That's obvious. It's a good way to put it. Like, in another life, you would have been gambling all your money, maybe, instead of having the majority of it on autopilot and invested in a more reasonable banner. This person's right. Guilty is charged. This person was right.

All right. Let's skip listener questions because we are getting late and we have something else to do. Recommendations. What do you got, Ben? I did a lot of movies this past week or so. All right. Let's hear it. I watched The Father with Anthony.

Hopkins. It's on stars maybe. Did that win an Oscar? He won the Oscar for Best Actor in This. Oh, he beat that was the Black Panther year, wasn't it? Where they just ended the Oscars with Anthony Hopkins winning and then it just ended? Yeah, so Anthony Hopkins won. It was a better performance than it was a movie. It was actually basically someone's father who was losing their brain and losing their mind. And so his performance in it, he was fantastic. Why'd you watch it? I heard it on a podcast somewhere saying that like he was awesome in it. And so I hadn't seen it, so I looked for it. I'd heard no one who'd seen this movie, basically. It was an okay movie. It was a better performance than it was a movie. Sean Fantasy saw that movie. By the way,

speaking of that, did you place any Oscar wagers? I did a ton of Oscar wagers on Kelsey. I listened to Sean Fantasy talk about it on his big picture pod. And I went and placed six or seven Oscar bets there. Did you take power of the dog or did you take an underdog? Yes. By the way, I tried to watch that. It's a brutal movie to watch. Okay. I saw it on Netflix. You know You have Netflix on the TV, and it's just scrolling along with, like, still mode. So it's just scrolling on what is on the platform. And it says, like, Power of the Dog, film, ominous, slow burn. And I'm like, all the things that I hate.

I thought about it for a second of watching it. I'm not watching that movie. I started watching it. It's like a very well done. It looks good. It's good acting, but it's like. I'm going to hate it. It's a film, not a movie.

Yeah, I'm so out. Here's the exact opposite of that. We watched I Want You Back this week. week on Amazon. What's that? It's a rom-com. And I haven't seen a rom-com in a while. Granted, this is graded on a curve because it is a rom-com. I really liked it. And if you go in knowing what a rom-com is, and like, if you don't like rom-coms, don't watch this. If you like rom-coms. So it's Charlie Day from Always Sunny and Jenny Slate. And I think Charlie Day, just like looking at him and hearing what he says, he makes me laugh. That guy makes

me laugh. He's so funny, just like his mannerisms and the way he talks. And it had all the dumb stuff that you get out of a rom-com, it's over the top, but it doesn't take itself too seriously, like a lot of rom-coms. So, wife and I like that one. Somehow I got sucked into when Harry met Sally this weekend for the first time in a while. Somehow. What a fine movie that is. It really is. It's so fucking good. Is Meg Ryan the rom-com goat? Think about that. Who else? Julia Roberts is on there, Hugh Grant and Matthew McConaughey. Those are my four. Noddy Hill is just... Hugh Grant might have a claim to the title. None of McConaughey's rom-coms are any good, but he has to be on there because he did so many.

but I think Meg Ryan might be, and you could make the case Top Gun was kind of a rom-com between her in Goose and Goose and Maverick. Notting Hills to stop what you're doing movie for me. Yeah, I like that one too. I like that a lot. Four weddings and a funeral also very good. I never saw that one. Oh, really?

Okay, put it on your list. I like that one. I also caught the Descendants again this week. I've watched that movie probably too many like three or four times and that's probably three or four times too many. It's not a great Clooney movie, but I feel like any movie set in Hawaii gets a premium for me. Oh, yeah? Just for being in Hawaii.

I saw the descendants on the air. plane home after my honeymoon from Hawaii, loved it. Okay. It had the honeymoon premium, the Hawaii premium, and the airplane premium. You know, I'm a big airplane movie watcher. If you watch it again, you go, oh, this movie's not that good, but I like it because you're in Hawaii. They should just make more movies in Hawaii is what I'm saying.

Yeah. Okay. That's it. All right. I pivoted from war to rom-coms. Okay. We're on the same wavelength here. I never seen, but you wrote about it, and this gave me the nudge.

I saw Midnight in Paris. Oh, yeah. What did you think? It was good. Owen Wilson is so awesome. I just like spending time with him, except for Bottle Rocket. It's a pretty original movie, too, right? Yeah, it was great. It was fantastic. When they first met the authors, I was like, wait, what's happening right now? Yes. The whole idea of nostalgia and how he thought this was the greatest time ever, but then she thought, no, no, no, the greatest time ever was actually 20 years before this. Yeah, it's very good. Also, I finally finished the trilogy. I watched before

midnight. Did you know that Ethan Hawke and her name is escaping me? Julie Delphi. Wrote the movie with Richard Licklater? Yeah, they did all three of them together, I think. Okay, I have to say... It's a tough watch, right? At the end? That is one of the best trilogies of all time. I haven't spent a lot of time thinking about this, but like top five? It's pretty good, yeah. I love those movies. The writing is just unbelievable, unbelievable. I've never seen movies like that. Like, I will pound the table on those movies. The husband and wife fighting, though, is very hard to watch, isn't it? Even though it's very well done.

It's tough. But you're right. Yeah, the whole series in succession is just very good. Incredible. All right. I got to say, I'm taking one from the team here. My back is killing me. I'm sitting on a freaking bed.

All right. Thanks for your service. Yeah, no problem. Listen, the show business, it must go on. What's the saying? It must go on. The show must go on. Holy moly, I'm getting old.

Send us an email, Animal Spearspot at gmail. I don't know.