Animal Spirits Podcast - The End of V-Shaped Recoveries (EP.256)

Episode Date: May 11, 2022

On today's Animal Spirits we discuss the growth stock crash getting worse, the speed of market declines, building wealth slowly, how long bear markets last for, Liam Neeson 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 like the economic data on Y charts. I do this a lot. I like putting two sets of data on there, seeing how the trend is. So I got one here. U.S. job openings, total non-farm. What do you think the farm payroll numbers are? How can we ever hear those?

It's always non-farm. How about this? Can we just say total payrolls and we all just understand that there's no farming stuff in here? I don't even understand. What is the origin of this? How many farm jobs are there? This has to go back to a long time ago and people look at a farm. Okay, so total job openings, total non-farm, 11.6 million, call it.

That's how many job openings are on the country right now. Total unemployed persons in the U.S., 5.9 million. The gap here is just ridiculous, how big it is. Now, we're going to talk today on the show about, could this be a recession as the Fed trying to push us there, making us walk the plank here? I know that these two numbers could diverge in a hurry or come back together in a hurry,

where job openings just fall off a cliff. But if this happens, this is going to be the weirdest recession ever. If we go into some sort of minor recession, and I think if you take off the table some weird, exogenous shock, if we go into recession, it'll be a pretty minor one. That's my look at the things. This is going to be a really bizarre recession. Yes, not good.

If it happens, anyway, you want to check out some of the economic data on Y charts, go to them, tell them that animal spirits are the compound sent, do 20% off your new 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 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. Welcome to Animal Spirits with Michael and Ben. This market sucks. Do you agree? It's bad. Here's the one thing I was telling you the other day. I kind of... It's too early to go glass half full. I'm not going glass half full. I just respect the fact that it feels like in the last few years we've just said, you know, if we're going to have a correction,

we're just going to rip the band it off and do it. It's like, we'll take our time a little bit here and then it's just like a whoosh lower. We don't like mess around anymore. It's like down 3% day, down 3% day, down 6% day. The market just says, all right, if we're going to do this, let's do it. I was looking at the average change for the NASDAQ 100, like the average stock over the last three days. The average stock is down 10%. Jeez. All right, so Bespoke had this chart, an amazing chart.

I've never seen a chart like this before. What it's showing is the number of days over the last using 100-day rolling total, the number of days where the S&P 500 was both positive, and negative on the day. I don't know if there's a good analogy, but it's like showing the number of score changes in a basketball game. Oh, where it flips, okay. There's been 12 lead changes this game.

Exactly, exactly. And we are at the highest levels that we've been in, in not surprisingly, quite a long time. Basically, investors can't make their mind up until they do. Here's one for you that I got through yesterday because I looked at this.

We've had eight daily losses of the NASAC 100 of 3% or worse this year. Wow, that's a lot. 2% or worse. out of the total for this year, it's like one out of every four days in the NASDAQ is a 2% loss or worse this year, the NASDAQ 100.

Wow. Fun times. So through Monday, S&P was down 16%, Russell 2000, 21%, and NASDAQ 100 more than 25% on the year, like year to date. That's not drawdown.

That's just year-to-date returns. And to make matters worse, up until like yesterday, bonds aren't catching a bid, which is pretty worrisome that rates are still going up, that there's no flight to safety. So I guess people are just going to cash. So this is from Danny Kirsch, who is a good follow on Twitter.

He showed a scatter plot of the daily returns of long bonds and the S&P 500. And this was when did he tweet this? I don't know, sometime last week. He said the moving TLT and SPY today, SPY down 3.3% TLT down 3.6%. TLT is the most sensitive bond holding, aside from I guess zero coupons, meaning that typically when the SEP is down 3%, TLT is up 2%, 3%, not down 3%. So there's a scatter plot. And that's one of the reasons that you hold long-term bonds because right now they should be

like rocketing up. So he said the two dots further left were in March of 2020 as COVID shutdowns were starting. Basically a lot of pain out there. So talk about bonds catching a bid. like bonds like at a slight little doing a little better the last couple days but like i honestly think the fed could probably put an end to this with one sentence i think jerome paul could say one sentence and this correction could bottom which is that's where we are basically just here's my problem with my fellow members of the fed so neil cash carrie had a piece yesterday

he wrote a bloomberg outfit if the supply stuff doesn't get any worse we're probably going to have to. So he said, we will likely have to push long-term rates to a contradictory stance to bring supply and demand into balance, basically saying, we're going to have to push this into a recession if the supply chain stuff doesn't get better. I think the Fed's missing a golden opportunity to be like, listen, this is not our fault. We don't have anything to do with supply chain stuff. And remember, I don't know how long ago was it? A year ago, they basically said, we're going to let inflation run hot for once and see what happens. And they've already thrown that out the window. I feel like the Fed is overreacting. I feel they could say, listen, we're going to raise rates and we're going to stop these bond purchases because, like, what's the point anymore? The housing market is fine. But I think they could say, like, we're not going to send this into recession, though. The fact that they're saying, we're going to send this into recession after one year of inflation and supply chain problems to me is just the height of stupidity. I think it doesn't make any sense. They have an excuse to say this isn't our fault. All right. So they could say one thing. What could they say, we're going to reassess. We're going to pause. We're going to raise rates. We're going to do our best to

send the country into recession. You really think that the market would be like, oh, okay. I think they could say, like, if it looks like we're contracting, we're going to stop this. We're not going to raise anymore. I think that's what they need to say. Obviously, that's threading the needle between we're going to try to bring inflation down and not go into recession.

You know, the meme from, was it the Marvel show? I'm drawn a blank. Whereas she's like this. Oh, yeah. What was the name of that show? Yes. Wanda. Wanda.

Yeah. Okay. If they said, we're going to raise rates, but we're going to do it carefully. And don't worry, we're not going to set the market into recess. Yeah, I don't think that would do it, Ben. I'm just saying it seems like all the Fed people are now saying that, like, we're probably going to have to send this into a recession. It's like your best player in the playoffs blows out their knee.

As a fan, you have an excuse to be like, oh, well, our best player was hurt. That's what's going on with supply chains right now. They're still not fixed. I just was driving by the car dealerships last week, still like 10% full of cars. That's like the indicator there for supply chains for me is when will car dealerships be full again? I don't know. Did I tell my Jetsky story? I don't think I did.

I bought a Jetsky. I went into the dealership. I thought you bought one from a guy in Alabama last time or something. Well, I did, I did, but I gave that to my brother. So I went into a dealership on Long Island, and he said, like, all right, there's one left. I was like, well, what would have happened if I didn't come in today? He was like, well, then you'd have to wait until next season. So I bought it in, I don't know, March.

It's not going to be here until July. July, the season's almost over. C-DU? C-D. That's only kind, right? Maybe. I think so. You don't know what kind it is?

I'm pretty sure it's a C-Doo. Did you say, I'll take the green one or whatever it is? I said, what color is it? He goes, whatever color it is. I was like, no, fine, but just what color is it? Yellow, all right, I'll take it. Those are so much fun, by the way. I have a jet skate, too.

We're both Kenny Powers. Okay, do you remember when getting rich overnight was really easy for like, eh, 12 months there? This is from Jeffrey Patak at Morningstar. He says 2020's highest flying funds, funds that gained 100% or more that year are now down 57.8% on average. The average drawdown is almost 60% for those funds that gained 100% in 2020. Average year-to-date loss.

Year-to-date, these funds are down 47.5% as of yesterday. I'm looking at, so ARC is down 57% year-to-date. Wisdom Tree has a cloud computing ETF, down 44% year-to-date. We're not even halfway through the year. So if my math is inaccurate, does that mean that ARC is going to be down 114% by the end of the year? To annualize it. I remember writing this, and I wrote this blog post more for myself than anyone else at the time. So this is in, I wrote this in January 2020, and I said it's okay to build wealth slowly.

And I needed like a reminder to myself. But this is why like all the people who were trying to get rich overnight, this is the other side of that. Remember how easy? Every day you'd see a story of I put $10,000 into this and now I'm worth $13 million. We're at the part of the cycle where everybody's either quote tweeting what they said in 2020 or linking to their old blog post. I said, listen, I'm not above that. I'm not above that.

We don't do victory laps here. But that being said, I happen to write a post as well in December. in 2020 called This is Not in the Way. And I only bring this up because of the point that you just made about those people that were. So the lead to that post is this, Ben. Meet Brandon Smith, the 32-year-old who put everything he had in Tesla, became a millionaire. Those were the kind of stories you were hearing for months and months. I wonder how my plumber's doing, actually.

I kind of, you know what? He seemed pretty savvy. I'm going to give him the benefit of the doubt that he went to cash eight months ago. But I have to imagine a lot of people really did stay in a lot of those positions too. Oh. The positions that were up hundreds and hundred percent. If it sounds like we're dunking, we're not, I actually want to defend the new traders. All right, good.

This is a valuable lesson that we all have learned, and if you haven't, you're a liar. Do we have to do this every bare market, though? Like, these people have never lived through it before. Yeah, as if those people, as if experiencing a bare market makes you some sort of expert trader. You saw a movie before. The 53-year-old with a gold newsletter who's been sitting in Cash since 2008, it didn't help him going through that. So some jerk tweeted, oh, Anthonynelly shared this with us. some jerk tweeted like suck up buttercup or it was so condescending very condescending gross yeah this asshole's

probably been in cash since 2011 but i also think young people are more used to volatility now and like saying how are they going to do this to their first time they're fine the average account balance at robin hood was two thousand dollars it's not life savings i think it ballooned to four thousand at the peak that's what i'm saying now it's back to but actually you could easily put a positive spin zone on this it's not like this bull market lasted from 1995 to 1999 where it was like four or five years of this. This is pretty quick. They learned pretty quick. I think you almost can separate the bull market into 2013 to 2017 and then 2019 to 2021. I think 2018 was a little reprieve. It all kind of runs together, but I think you can almost

by the way, stocks just look into those. Stocks just gave it all back. That's fun. It's Tuesday. We're record this. By the way, we're ripping the Band-Aid off. It's not as if the only people trading growth stocks were Gen Z people. There were a lot of 50 and 60-year-olds that were doing this too. So give me a break. Hedge fund managers. And by the way, so it's interesting how quickly this stuff shifts. So everyone keeps saying now that the Fed put is dead.

It's dead forever. I'm sorry, the Fed put is going to come back. Eventually, I've been saying this. If they create a recession, they're just going to lower rates anyway. But what I think is really dead for a while is fiscal policy during recession. Inflation has killed that dream. Let's circle back. We're going to do some circling.

Rewind like 16 to 18 months When we were like Is this what they're going to do Every time from now? Why not? You could just end the recession And they did And but there is no way

The political will be there To send out checks And I mean I'm sure some people will complain It's also funny to think Remember people were like The meme going around was Oh thanks for this $1,200 to get me Through the pandemic

Like it wasn't enough money All this stuff that was going around And obviously we know now That it was enough money Because there's no way Fiscal policy is dead As far as I'm concerned Because if we didn't, because I don't know how you could argue otherwise, that fiscal policy

stopped what could have been a deep, deep economic contraction. And if we didn't have the supply chain issues that we're having today, then fiscal policy might be the answer going forward if we didn't have like the supply chain and the inflation. What I'm saying, what it means is this is all going to fall on the Fed again because politicians are going to, no way I'm not touching that. I agree with you. We're not sending checks out again. It's going to all come back on the Fed again.

It's going to be up to them just like a one of the inflation is going. to be everything for midterm elections. And this is how it works. Democrats would get wrecked because of inflation and whatever. So I've been seeing a lot of people also, like the smart thing to say is that every other bear market in the last 10 years has been short, so this one's going to last longer. I'm in that camp. I wrote about that.

It's possible. It does seem like some people think like this bear market is just going to last forever. Well, come on. No, my point is that the V-shaped recoveries are dead. Without the Fed having our back, that's over. It doesn't mean that we're never going to see new. Highs again? Of course we will. Let me ask you this. When do we see new highs? Are you 2023 camp? What camp are you in? Historically, let's look at history. The average bear

market since 1950. And I use some 19% and changed drawdowns here. I'm sure you can say intraday they were 20%. I rounded up. The average bear market is a decline of 30% since 1950 from peak to trough. It lasts 338 days on average. Now that average just pulled up a little bit because there's some really long ones. The break even to go from where you were at the peak trough back to peak is like one and a half years, a little over one and a half years. That's average. Give me the outliers, because 0-7 to 2013, that was a long time. Well, actually, the outliers, the outliers are the long ones. Okay. Interesting. There's three times that it's lasted more than four years. Every other time, it's done in under a year and a half. So 2007 to 2009, 2000 to 2002,

in 1973, 1974, this is going back to 1950. Those are the only outliers. Every other one, you've broken even in less than a year and a half. So if this is not a end of the world type crash, it's probably going to be pretty quick. I don't think this is an end of the world type crash, but can I just say something in terms of like time dilation? So now that I'm an exerciser, I know a little something about how time could feel different when you're in pain. So for example, what am I talking about?

I do these 90-second intervals of push-ups, et cetera, and 90 seconds can feel like a long time when you're in discomfort. Ben, a year and a half feels like an eternity in a bare market. I agree, context is important. But we say right now a year and a half, a year and a half feels like forever.

Yeah, when I used to go to the gym, you'd always see people put towels over the treadmill so they couldn't see the time. Because you're right, it feels like the earth is standing still when you're trying to get to a certain point. So yeah, I agree. That seems like it's forever

for people that just want to get right back up. All right, so we both wrote something about like thinking long term, which is so cliche, but it is the only thing to hang your hat on. What are you supposed to do? Day trade your way out of this? Miss the top, miss the...

I mean, come on. So what's this chart that we're looking at from you? So this is back to 1928. I looked at, I'm sure I've used this before, like the probability of a gain in the S&P 500. And on a daily basis, it's not much better than coin. 56% of the time stocks are positive. Go out a year at 75%,

five years, 88%, 10 years, 95%, and then there's never been a 20th or 40-year period where stocks have been down. Especially if we're talking retirement funds and young people. And you said, well, if it takes a year and a half, that's forever. If you're saving money, if you're putting money in at lower prices than you would have at the peak, just five months ago, four months ago. Are you getting text messages from your friends yet? What do I do? We had dinner with some friends this weekend. I had one person say, like,

kind of asking, what's going on here? This seems kind of crazy. The worst advice, but also the best advice, is do something else. Stop paying attention. Nobody's like, oh, thanks. It's a great idea. Well, yeah, we went to dinner this past weekend for my wife's birthday. And I was just thinking, people are drinking and having fun and I'm thinking none of these people care about the stock market right now. None of them do. That is probably the best line of thinking is. Well, it's a huge edge. I don't care. I thought about that too when I was at like a teabble game, whatever, after a really bad market day, nobody cares. And it is a blessing for people that are oblivious to what's going on the day to day because they are so much better off mentally, emotionally, financially.

I would say that most people are not freaking out. No. Although you are freaking out if you put all your money into some of these growth stocks. That's different. Different. But some people did that, though. If you went all in on just growth, hypergrowth, and crypto, right now, you're down, I don't know, 60, 70%, depending on what you're, maybe 80%. That is no laughing matter. That is like a life-changing type of loss. Because not only is it- That's paying your tuition to the market gods. That's bad. Because that, it's tough to have like a big learning lesson from that. because that might mess you up forever where you just live with fear

in the back of your mind as you invest. That's also why you need to avoid these big mistakes. That's the point where you, if your number one lesson there is not, I should be an index fund, then you didn't lend your lesson. That's when you know you need to have more diversification. Well, the other big lesson is

not to like hawk financial advisors is like maybe I shouldn't be doing this. Potentially. Potentially. No, I'm saying for people who, like if you're a young person and you still have decades and decades ahead of you and you lost a good chunk of money,

that really stinks, but your biggest asset is still time in human capital. And you do have the time to make it up, but now you understand the problem with concentration. And it felt really good on the way up. It feels ten times worse on the way down. Long-bendy Twizzlers candy keeps the fun going. Keep the fun going. So I wrote about this yesterday, about like value, outperforming growth.

If you saw the list of growth stocks down 60, 70, 80, 90%, literally, you would think it's absolutely inconceivable that value stocks would be doing well enough to have the S&P, quote, only down 17%. I looked at it yesterday. The names are boring. It's Johnson & Johnson, United Health, Berkshire Hathaway. Who trades United Health? It's these really boring names that are holding it up.

In the tech stocks, so I looked at the biggest tech stocks, it's Tesla, Facebook, Apple, Amazon, Google, did I miss one, Microsoft? Their average decline is down 40%. Yeah, the average decline for those stocks. The only one holding it up is Apple. The average decline is like 25 or 30% for those stocks. I want to share a tweet from Jenny Harrington. She said, scared, not me, not at all.

I'll tell you why. This correction is mathematical. Valuations are rationalizing and meme reverting for transparent reasons. this isn't a pandemic where we have no idea what will happen, nor are 100-year-old banks collapsing normal part of the cycle. I completely, completely agree. This is an excellent take. This is not even a pushback. I would just say that the scary part of it, the unknown part of it for me, is with interest rates normalizing with inflation, it might not be a fundamental contraction, but we don't know where valuations are going to go. Like, what if Apple goes to 14 times earnings,

which I think is gravity for the rest of the market. Now, that will provide amazing opportunities, obviously, but we just don't know. This is the hardest part about you could build the most beautiful discounted cash flow model in the world, but you don't know what people are going to be willing to pay based because if you look back historically, I've done the research on this, higher inflation periods typically have lower valuation. That's how the market got to like eight times earnings in 1981 because inflation was running hot for so long.

Apple just had its best March quarter ever. We spoke about that last week. borrowing a big recession, which I don't think we're going to have, Apple, the company should do fine, should continue to still grow 5% quarter of a quarter, whatever it is. But if investors feel like, yeah, so we just don't know. That's the hardest part is like you could do all the fundamental research. You could nail, I'm going to predict what the GDP is going to be. I'm going to know what the unemployment rate's going to be, all this stuff. You could even guess inflation, but it doesn't matter. We're going to get into crypto in a little bit. But the fact that so many tech people were

heavy into tech and crypto. I think if you have the spillover effects, if Apple is your last line in the sand, like you're holding on to Apple and then you eventually have to sell that too for some reason, that's when if you get into like the reasons for people are selling, that's when it, who knows? To Jenny's point, remember like business cycles and market cycles? Like, it's been a while and this is what it is. But here's the other part of this is it was like a manmade recession in 2020 from the pandemic, obviously. And if the Fed pushes us into a recession, now, it's going to be another man-made one. And so I think that's what screws people up is that it speeds up the cyclical part of it. Because, I don't know, the Fed's saying we're going to let

inflation run hot. We're going to let this thing run for a while. Maybe people taking on a lot of risk in that scenario when the Fed's like, we're going to keep a foot in the gas pedal. Maybe they were right to do that at that time. And then the Fed says, well, whoa, whoa, we're hitting the breaks now. And now people are right to overreact the other way. Oh, I forgot to plug this early on the show. Again, I am doing a webinar with Y-charts on Thursday afternoon. We'll drop a link in the show notes, talking about mega cap tech names. So that should be a good one. All right, I don't think I've ever seen sell in May and go away quantified quite like

this. And by the way, is this ironic that we're finally seeing a really lousy stock market in May? And I'm not seeing selling May headlines. I think we're actually focused on the declining market. I'm not really seeing much of that. Did we finally move past that? So this year was sell in January. So anyway, this chart quantifies the sell in May and go away type of thing.

This is showing the average six-month return for the S&P 500, November to October, October to March, et cetera. Made through October is statistically by far, I don't know why, maybe there's some funky in this going on in here, but by far the worst month. I wonder if October 1987 has brought down the average significantly. Either way, it is by far the worst statistical month, six-month return for stocks. Come on, this is data mining. Okay. I'm just saying this is for financial bloggers and no one else. Why? If this is the worst six month of the year.

What good does this day to do for us? Well, it gives us content for the show. That's what it does. All right. It's not good. J.P. Morgan had a post about bonds, and they're showing, like, what if the tenure rises, and their base case is for 2.5% on the tenure, which would actually provide a nice return. I don't think anybody's thinking about lengthening their duration because interest rates are going to stop rising. Oh, so they're saying, here's your base case for. return if rates go up, if they go down in the middle.

If we get a recession and the tenure goes to 75 bibs, U.S. bonds are going to go up 15%. So this is over the next 12 months. But if you're looking over the next 5 to 10 years, your base case should always be what is the starting yield now is 3%, which is you're not able to live off the interest on that, but it's better than it was 12, 18 months ago. So it's not just U.S. bonds. World government bond, worst year-over-year performance basically ever. Okay, I talked about this yesterday.

We were on Twitter Spaces with Tom Lide and Todd Rosenbluth. What was that for again? ETP Trends. I shared that the worst return for the Barclays aggregate going back to 1976 is 2.9% calendar year and it's down 10% this year. Man. All right. This is on a lag, but CrunchBase did a report on global funding and private markets. Seed funding fell month over month, but it's still up 14% year over year.

So they're saying the decline is in, is starting? Late stage, flat month over month, down 19% new over year. I mean, this is going to get worse, obviously. How much do you think people's personal portfolios comes into play here, where they go, my tech-heavy portfolio is down to 40%. I'm pumping the brakes and I'm not giving you your check, Mr. Startup Guy. Does that happen? I don't know, but I think these numbers work on a leg, obviously.

It takes a while to work its way down to the system from public, IPO. It makes sense, though. Yeah. It makes sense. So wait. So you got this chart here on gasoline prices. Gasoline prices are rising, and they're back to like 440 for me. Oil is still at 106 a barrel.

What's going on here? Can someone explain this to me? Gasoline prices make zero sense to me ever. And people always say, no, it makes sense. It goes up really fast, but it comes down in a lag. It doesn't make any sense. The movement of gasoline prices to me makes no sense. Please explain it to me.

I paid 461. I would love an explanation. I don't understand. Okay, so the Wall Street Journal has a daily podcast. I think it's just called The Journal, kind of like the New York Times Daily one. I listen to every once in a while when there's something that's interesting. And they said that inflation is causing Americans to unretire. Now, they gave some stats in here

that the labor force for people over 55 is rising again. And it is slightly. But they had these people on there. It was the anecdote people. You know that Wall Street Journal people like that. Glenn Smith. Now it's only 9,500 boomers are retiring right there. But these people had just retired 12 months ago and now they're going back to work. That sucks. But I think part of that is you didn't have enough money to retire in the first place then. I think that's just a lot of people who haven't thought through what it means. And these people you could tell just didn't plan for it at all.

What about boredom? Maybe people that retired before they thought they were going to for whatever reason are like, you know what? Not fun. Honestly, what would you do?

I don't know what I would do. I can't say what I would do. I'm 37 years old. I don't know what head skip days I'm going to be in at 20 years. But yeah, if I didn't have a job, I don't know. One of your NFTs goes to like

25 million eth. By the way, how are your NFTs doing? Not to brag. Are they through the floor? Not to brag. My on-chain monkeys are holding firm. Very firm.

a bloodbath out there in NFT land, but not my project. Okay, here's another one. 2.4 million additional Americans retired in the 18 months of the pandemic than expected, and then they said 1.5 million retirees have re-entered the labor force the past year. So it's getting back to where it was, basically. You know what we don't hear about it anymore? What's the last time you read an article or saw a headline in the fire movement?

That's true. Have we talked about that the pandemic was going to kill it? But yeah, you don't hear about this as much anymore. Okay, this is crazy from Bill McBride. This has been my corner for a while. Light vehicle sales, autos and trucks. They show a percentage of autos and percentage of trucks in terms of the total vehicles.

I don't know if it's sold or on the road, but 80% of all vehicle sales now are trucks and SUV. 20% of them are cars. Basically, everything on the road now is a truck or SUV. I've got a bone to pick with people. These trucks are getting out of control where if you go into a parking lot and they always back in because if you drive a truck,

you have to back in because that's a cool thing to do. back soon. Okay, he's a back-in guy. Big back-and guy. It saved you so much time on the way out. So these trucks are getting so big these days that you can't get by them in the parking lot. They take up too much room. Their nose or their tail sticks out too far. Trucks need their own parking lots somewhere else, like a bigger parking lot. Like, you can't park in the small parking lots because your stupid truck is too big. By the way, easily the worst drivers on the road. Big trucks, they don't know how to use cruise control. Is that fair? Thinking about trucks remind me my Jets and interest rates. So obviously I'm financing the Jetsky because they're not cheap and I'm

putting down not too much. They're more expensive than you think, aren't they? They're expensive. I'm getting creamed by this interest. I didn't like, because you don't lack in interest rates. What was it? Five percent? I don't know. I didn't do it yet. Oh, okay. But I think you paid off over like two years, though. It's a really short loan. When I did mine, I think I financed it for 24 months. Okay. So the interest rate doesn't really matter that much. How about mortgages, though? Five and a half percent now? Dude, this chart is nuts so. Just the speed of it. So this has to cool off the housing market.

If you list your house and you see, okay, not as many people, don't you think people are going to start pulling their houses off the market? That's probably going to happen, right? It depends on motivated you are to sell. Right. Like, do you need to sell it or do you want to sell it because that's at a high price? I'm just staring at this chart. It's a real showstopper.

It's like gas prices to me still. Why are mortgage rates going up so much faster than everything else? They're way above the 10 year now. Ten years at 2.9 or 3? mortgage rates at five and a half, that's a pretty good spread. I feel like the banks are taking advantage of us and they're paying off 0.1% on their savings accounts.

Okay, so Canadian home prices are finally falling. Is this the thing, did you put this in here? Oh, Toronto home prices drop. You conveniently skipped over Bill and McBride on housing affordability or in affordability. Okay, what did I say? What is it? Hit me with it.

Hey, my whole housing thesis was always predicated on low interest rates. 37 markets. a third of the country are now the least affordable they've ever been. Of course. Prices rose 40%, and then so did interest rates. Of course they don't sound affordable. This is, I don't know, tragedy might be too strong of a word, but if you're like a young person and you're trying to buy a house and you just can't buy a house and you're trying

to start a family or whatever, move out of an apartment with kids, what the hell are you supposed to do? And if you're stuck not buying, rent is going up. So you're getting screwed in two ways. That's why I made the case last week of buying still. I suppose maybe a sensible option is, or maybe not, is just put down 5%. I'm saying cheaper housing in the Midwest. I think that's what it is.

You do a lower down payment. You just lever that thing. People said it was levered, not levered. What? That was a consensus. De lever? A couple of weeks, so we couldn't figure out who was de-lever or de-leverage. Things de-de-leverage.

De-leverage. So anyway, yeah, so Toronto home prices are coming down. I put out here that we've shown those graphs before about disposable income versus housing prices. And in Canada and the UK and Australia, it's way, way, way above where the U.S. is. And my point was like, what if our real estate just kept going to get to those astronomical levels? And people push back at me and say, no, people don't have to spend as much on health care or education or retirement in those countries because they have a bigger government backstop there. To which my point is, if that was the case, why would the stock

markets there not be just ripping it through the roof? If people have more disposable income because they're not spending on that stuff, why would it all go to? into housing and not into the stock market as well. Does that argument make any sense to you? The reason that housing prices are so much higher there is because people don't spend as much on health care and education. Where is this? In Canada, UK, Australia. I don't know. Why do their stock markets stink so bad? Energy. Well, actually, their stock market should be doing well now. Okay. I'm going to do some great quarter guys. Yeah. Did you listen to some earnings calls this week? I listened to the Airbnb one. I did not. It's one of those stocks. We were talking before we

got on here. Every stock at earnings is just getting slaughtered. Even if they, like, report better than expected numbers. They're just getting slaughtered. Everyone's getting slaughtered. But the Airbnb thing, I never really realized this. They said, again, long-term stays are accounting for like one-fifth of all bookings now, which is like double where it was in 2019. The CEO talked about their I'm flexible option. Have you heard this before? See, the thing is, I never really even looked at Airbnb's before the pandemic. And now I'm using it and looking at it way more than it did before. But they have this I'm flexible thing. By the way, where you basically say, the Toronto stock market is down 6% year-to-date. S&B is down 16. Oh, come on. Recency bias. Wait, Toronto stock market.

The TSX, whatever. What do you have recently? I just said, I said on the year. Look at how it was the previous tenure. That's because it's all energy stocks. I just said that. Okay, but the previous, whatever. So they have this I'm flexible thing where you basically say, I'm flexible and you say,

I want beachfront or I want pool or I want something eclectic or I want woods. And it gives you a house, these crazy houses all around the world and it gives you a date that is off peak. It's pretty cool. Love it. If I was a young person, I'd be using that all the time. I could never use enough because I have kids and you have to plan around this stuff and it's not feasible. What else do you learn?

How's the stock reacting? I'm guessing terribly. Well, the stock, it had a good day when it reported earnings and now it's gotten crushed ever since because everything's getting crushed. I still think that's a company that is at the intersection of like three or four different huge trends that are good for them. Airbnb's at an all-time low, obviously. I think it's right around the IPO price or below it.

Yeah, it's below. Yeah, I'm bullish on Airbnb. I'm bullish that company long term. I want to share some charts from, this is not a substack that I subscribe to. So what do I call this? Do I call this a blog? A newsletter? Yeah, sure.

The Science of Hitting puts out some great work, and he writes deep dives. He's a former equity analyst on companies that we talk about, Spotify, Microsoft, et cetera. So we're going to share these charts on the YouTube show. Look at this Microsoft Cloud. We spoke about this last week. I think I spoke about Amazon being at a $74 billion run rate. Microsoft is at a $94 billion run rate. It's hard to see charts like this and get too bearish on the overall stock market.

And I know we don't know what the valuation is going to be. but there's still a ton of growth out there in the biggest areas in the market. Look at LinkedIn. I have no idea how they're doing this. That's what makes this tech wreck even more impressive is that these are real businesses with real numbers now and back in the dot-com bubble,

none of them had this stuff. None of them had any numbers that looked anything approaching this. It almost makes it more impressive this time that they're following so much on these companies. I did listen to the Lyft earnings call and it started with this. Here's how it started. Q1 was better than we expected

and ride share ride volumes reached a new COVID high. This is Logan Greed, who is the co-founder and CEO. They also said our Q1 results meaningfully exceeded our outlook. This outperformance was driven by increased demand and resilient driver levels. Yeah, the stock was down 27%. I would love it if for once the CEO just goes, man, our stock is getting crushed after hours. Like, just be honest about it.

Obviously, people didn't like this. They lowered guidance, but they lost $196 million for the quarter, better than the $427 million lost last time. But that's over. When I say it's over, I just mean the endless flow of tolerance and cash for investors to subsidize its losses, they don't want to do it anymore, clearly.

When are these companies going to start making money? Well, Spotify's in a similar situation. So here's a chart of the Spotify monthly active users who listen to podcasts. It's tiny, dude. 113 million people on Spotify listen to podcasts. That's it. That's it.

A hundred million. There's more people buying NFTs. Yeah, that is pretty small when you think about it. So one of the problems was, look at this next chart of trailing 12-month gross margins. It's going up barely, but the ad-supported margins suck. And basically, investors are like, yo, you've been telling us a path to profitability and higher margins for years. How much time do you need?

It does seem like profitability is going to be cool again? Is that what's going to happen? Well, the Uber CEO was talking about. that he went on like a road show. I was talking to investors and they want cash flow. Are you going to start taking cabs again in New York? Do you think it's like good on the CEO

or on leadership just in general? And I don't really have a strong opinion. I'm just asking the question. Is it good for the leader of a public company to be like, all right, we're going to tighten up because investors are now paying attention to different metrics?

Or should you say, screw all that, we're going to want our business the way that we think is best for the long-term vision of this company? And I know it's like, it's easier for me to say. What is the right thing to do? So Bezos is the alone

who said screw the, analysts, we're doing what we want. No one else has the guts to do that. That's the kind of way I look at it. I'm not going to kill the CEO for. Especially if your stock is down 70% or whatever, I think you kind of have to. So if you invested $10,000 in Peloton last year at the peak. Oh my word. You'd have $1,000. No, you have $6007. Is it that low? I don't think I've seen in a long, long time, a stock fall 93%. Holy crap. So this was a $49.3 billion company in January, January 2021. It's now worth less than four. I mean, Apple could buy them with their pocket change right now. I guess maybe they wouldn't want to, but geez, this thing really is the

epitome of a pandemic stock. Is this a bad luck for the invest in what you know theme or style of investing? Is this a black guy for that? Peterlin's a tough look for him. He goes in and out of style. Oh, man. So what did they say? They said they're going to start selling to third parties now or something. The balance sheet challenge has been managing inventory. We have too much for the current run rate of the business. And that inventory has consumed an enormous amount of cash more than we expected. Hey, we found the supply chain is not broken anymore for Peloton. They have an inventory. He said the good news is that the obsolescence risk is negligible. And we believe the inventory will sell eventually. So there's primarily a cash flow timing issue.

It kind of reminds me of, remember when TVs started getting good and everyone would buy a new TV and then they'd make a little minor change to try to get you to get a new one. You're like, why do I need a new TV? I just got one three years ago. That's what they need to do. And they get a giant line in your TV and you have to replace it. Remember when 3D TV was going to be a thing to wear the glasses and watch 3D TV? That never took off. But that's what I'm saying is like once you buy one of these, the people who have bought one are, that's your audience. I don't know who else at this point is going to buy one. A pelotod. That's the problem, I guess. All right. So we got an email about Robin Hood. This is someone from Robin Hood. I thought this

was fair. We've been kind of hard. I think sometimes our opinions are a romantic base as well, just like the market, but they said, Robin Hood is not dead. How did IBKR, E-Trade, et cetera, get to where they are, not overnight? He said, we had the best quarter we may ever have, but scoff at 21 million users and act like we are dead is a bit short-sighted. That's fair. He said the comp for the CEO is highly tied to stock performance. It needs a trade-up super high for him to realize that $800 million. He says, the dude created the company, have no problem with him being paid whatsoever. He isn't a problem. That's kind of surprising. That stills a lot of money. Finally, he said it's free. I get a little disheartened in Flummox when I hear all the shit talk and disrespect

about the app. It's free. Not saying you and Michael are talking shit, but to a free app, and we certainly know things could be improved. That's fair. I think a lot of people just blame Robin Hood for all the gambling and stuff that went on because their app was so easy to use. So, I don't know. These are fair points. Do they help people gamble? Yeah, obviously. But it's people being people. Would people figure out a way to gamble anyway? Yeah. I agree. And they still by far have the best user experience of any financial app that there is, bar none. It's not even a close second. I think there's no doubt. There's no doubt that taking commissions to zero removed a huge barrier to trading.

And they pushed everyone in there. You still could have seen, given the conditions that were present in 2020, you still could have seen a gambling mania. I'm not saying you would have for sure because we don't know, but it's not impossible. So this is from Bloomberg. Nine months ago, the father-son duo that runs used car company Carvana had a combined personal fortune award than $32 billion. They've now shed almost 80% of that.

One of the biggest infest declines of any billionaire, family, or individual fortune in history. It's probably worse than that now. This stock is now down, this is almost like Peloton. This is another stock down 90%, which I'm surprised people aren't using it still because the car inventory is so low. I don't know nothing about the business, but wow. My parents bought a car from them, said the experience wasn't great. Here's another one, Redfin, and there's another company down 90% during the biggest housing boom ever. There's so many crazy charts with this.

Okay, crypto. Remember last week when I said it's surprising that the sell-off hasn't really hit crypto yet? That was basically right before the floor fell out under it. They were holding up relatively well, basically in line with the NASDAQ and given the carnage, you would have thought that the pain would have been, I don't know, two to three times worse than crypto. And it wasn't until recently. So there was a staple coin thing that fell apart. It's a little too in the weeds for me.

Explain it to me. So Terra, not Tether. UST is Terra, it's an algorithmic stable coin, which means that it is backed by an algorithm. And I can't explain to you the dynamics of burning and more money coming in and rewarding the buyers and sellers to keep it in line. But basically it was pegged or it was supposed to be pegged and it got deep pegged. It broke badly. I think it got as low as 65 cents on the dollar. And so Terra, which I'm sure I'm getting some of this wrong. So Google if you want, like the real story, but they bought like $1.4 billion worth of Bitcoin, I think, and they had to dump it

all to shore up liquidity. Anyway, it was a mess. And so Bitcoin crashed and Eath crashed and Terra, the company, they have a coin that crashed. A lot of crashing. A lot of crashing. You know what this is crashing? All the macro takes from crypto people. Look at the US dollar index for the past 10 years. This thing's up 30%. In the past two years, basically, the majority of that is up the last two years. I think that was probably one of the worst things about crypto is all the terrible macro takes. The dollar is going to collapse. People use the term fiat currency a lot, which is always like 75% chance you're a Charlton if used fiat currency. But I think that's one of the worst thing that happened is just that so many terrible macro takes that people

really thought the dollar is going to collapse and the global reserve currency is over. And look at this. Look at the dollar. I hate to say it, but I'm still, it's like interest rates. I'm still quite bullish on crypto being much, much, much bigger in the future than it is today. And I just think that with any new technology, you're going to get kicked in the absolute face. I bought some more yesterday, definitely not like a short-term bullish thing because it's in free fall, as you know. But here's what I did sell. I sold my Gemini stable coin. I sold GUSD.

Now, I did this either what day is today. I think I did this Monday morning. So before this started to come unwound. But this is a combination of smoke and fire, but more, more interest rates. So we have spoken over the years at what level in risk-free government bonds would you need to get in order to sell your stable coins? Now, for GUSD, which by the way, I believe that those are actually backed. I'm not saying that there's going to be one on GUSD or anything like that. But at 6.9%, which was a little bit less nice than the eight that I was getting, I took a look at New York state municipal bonds.

And you know, my tax equivalent yield, it's like over 5%. Wait, is there a fund for that? There's an ETA for that. Okay. So if I can get like five and change on tax equivalent basis or 6.9, I don't know. That's like a pretty easy decision. The spread needs to stay a little wider, right, for that risk you're taking. That makes sense to me.

Yeah, so this is more of an interest rate thing. Then put it this way, if rates were like still 2%, given the news that we saw yesterday in Tara, I would still be comfortable holding my money in GUS Day. I also think the fact that crypto's crashing makes a lot of sense when all the hypergrowth stocks are crashing because eventually some of those people are getting margin called. And a lot of those are the same exact holders. If you hold a lot of hypergrowth stocks, you hold a lot of crypto too. So those people are in a world of pain right now. This is your advantage. And it's not like specific advice to buy individual companies or buy cryptocurrencies because obviously nobody knows what's going to happen in the long term. These are especially crypto is like the most speculative thing. But if you have the ability to endorse. pain, you're probably going to be better off than somebody that's just hair on fire running around buying and selling like a maniac. Right. You bought a ton of stuff when it was going up and I were selling it now that it's down. That's the thing. It's just, it's so boring, but just understanding and

knowing your time horizon, the question I keep getting is what to do about stocks and bonds and now that they're both down. I don't know. The answer is nothing. Well, the answer is build into your expectations that things are going to go wrong. If you hold crypto or growth stocks, they're going to crash. If you hold the stock market, it's going to crash. Sometimes bonds are going to go down if interest rates go up. Build that into your expectations, have something very liquid if you need to spend the money. If you don't need to spend the money, for me, all of these stuff that I'm investing and I'm not spending it in the next 12, 24, 36 months, yeah, it stinks that my net worth has gone down or whatever, but it doesn't impact me now that if I needed the

money, I'd be freaking out, but I don't. So it's not that big of the deal. I was thinking about, here's the other thing. The psychological value of having cash, it allows you to survive and nobody wants to hold cash in a bull market, and especially with interest rates at 1.5%. Think about all the questions that we were getting about. What do I do with my cash? What do I do with my down payment money? What do I do with that? Here's another thing I want to warn people about. And you can listen to us if you want or not. Maybe you say, well, that's you guys. That's fine. But what about me? So Bill Hater has a show Barry. He's on the prestige TV podcast with Sean Fennessey

where we're talking about the episodes. And he was talking about as a storyteller on TV. His thing is he always wants to be posing a problem rather than solving a problem. And I feel like that difference between posing a problem and solving a problem, that is people helping you with your finances. So there's a lot of people out there who've been rooting for a systematic crash. They're the ones who are posing a problem now. So they're showing you scary charts. They're telling you why you need to get out of everything. You need to go into this or that or why the whole financial system is going to go under and crumble. And those people are constantly posing a problem. They're never solving one because they want to tell a story. And those are the people that

are never going to get you back in when things do turn around. And it will eventually. otherwise, why are you investing in the first place? I like the framing of that. If you're writing a TV show, you're posing a problem, if you're investing for someone, you're trying to solve a problem. So I binge watch Barry. It's definitely not for everyone.

I love so many things about Barry. But if you're dabbling, what I love about Barry is that you could watch, give it two episodes, give it 60 minutes, and you'll basically know whether it's your cup of tea or not. It's definitely your mileage by very type of thing. But the characters, the guy that plays Fuchs, who is a total that guy,

he's been in a million things, is incredible. Noho Hank, I don't know who that guy is, but he's amazing. Mr. Cousineau, you might know him as Henry Winkler, is amazing. I love that show. Very subtle humor, too. I laugh out loud. In the most recent episode, it's not a spoiler, but somebody says, we're going to draw straws. And he goes, what are you, Bruce Willis from Armageddon?

Yes, that was good. I thought the last episode was really funny. God, I love that show. There's just very subtle hints of humor. I think you have to have the right sense of humor to like this show because I could see people not liking it. I love it. I love it. Absolutely love it.

Speaking of which... Oh, wait, before we get into some more recommendations, I got one thing. I talked about the water heater last week. People said that I'm spatially inadequate because I thought that there were two gallons and a... Anyway, I was basing it off of them saying 82 gallons, but someone said that water heater probably had an 82 gallon capacity,

but water still flows through like an open faucet, so there was way more than 82 gallons. That was my problem. That's probably 8,000 gallons. Anyway, who knows? Lots of damage. Okay, any other recommendations besides bearing? I was thinking that...

This happened very quickly. There's now too many TV shows, too many quality TV shows. Yes, I made that comment to my wife the other night. We're way behind. Which is a good thing. So here are some of the shows that I've watched recently. Barry, Severance, and Ozark. Here are the shows that I haven't watched, but that I would like to get to.

I want to watch We Own the City. I'm probably to get to that. We've got a lot of recommendations for Slow Horses. I watched the first episode. People talk about Pichenko. They talk about Outer Range. I'm watching the staircase from my wife. It's too much.

It really is. There's a lot. But it's kind of nice to have a backlog, too, that you know, like, when the lull time hits because it will, you can catch up. I'm not complaining, but it's just a lot. Yeah. I got some Ozark finale thoughts.

Okay. I thought that the second half, so there was like two, seven episode blocks, I thought the second half of the final season wasn't as good as the first half, but I still thought that the way they ended this show, I've heard a lot of lukewarm takes from people. I loved it.

I really liked it. I thought the way that they did it, it made a lot of sense, and I love that show. I agree with you. That's like top 10, top 15 or two. from the all time. I loved that show. And these shows are so difficult. What could they have done to satisfy the people that were

disappointed? I thought the way that they did it was in line with the way the show has gone. I thought it made sense for the way the show has progressed. I agree. One of the recommendation for this week, Liam Neeson was on Smartless, and I feel like sometimes you can tell with a podcast guest. He was awesome, very humble, self-aware, kind of like a quieter guy, but had some great stories. He was telling all these stories about Anthony Hopkins, and he was calling him Tony, like him and Anthony Hopkins are friends, so he calls him Tony. Just like a delightful human being.

Liam Neeson was really blew me away. Love that guy. I love Liam Neeson as well. I love him so much that on the Palatown the other day, I started watching a movie called The Marksman, and it is one of the worst 30 minutes of movie watching I've ever experienced. But you know what? Just because I love Liam so much, I think I'm going to finish it. He leaned into the taken thing a little too hard. So this movie made $23 million at the box office.

So I'm thinking, he's obviously doing this for money. There's literally no other explanation. what is this to his lifestyle? Speaking of that money thing, so I was listening to Mike Myers was on smart list and they now have blocks of advertisements

that are like five minutes long where it's a lot you have to hit 30 seconds like seven or eight times and I'm not mad listen the show is free but it's produced by Wondry so it's not like Jason Bateman

is like making the decisions like we need to take all the money like I'm guessing that Wondry bought them now it's completely out of their hands they have to do what they're told they're cashing in yeah they're really going for it it always makes me laugh though when i think i mentioned this before but listening to like michael lewis doing ad read for his podcast every once in a while people will get on us for like doing ad read on this podcast like michael lewis does ad read

jason bateman does adry everyone does it this is part of the gig oh on saturday we've got to go on we're talking to jason barcena from halo on instruction notes if you're an advisor listen to that one we've actually been using their platform for our clients so that was a good one and on monday we've got Crane shares as an interesting one. What are we talking about? Clean energy type stuff. Yes, clean energy. By the way, the stock market was up

when we started the show. It's Tuesday. The stock market is down now. I think we're ripping the Band-Aid to the bear market. If, if... You talk about the V-shaped thing. If we do not get a recession from this... We're not getting a V-shaped thing, Ben.

Okay. If we do not go into recession, a V-shape is on the table still. If we do go into recession, this makes a lot more sense. No, no, no. Because to allow... I'm throwing it out there.

For the V to commence, you think that there's going be an all-clear. No recession. It's not going to be an event where we know there's no recession. Now, if we do get inflation slowing and maybe the Fed taking a pause, I could easily see the market ripping. To new highs, in the V-shaped fashion, I don't know. But we've had all these huge down days. If we get, I think the inflation data comes out on Wednesday, one of these inflation prints coming up, if it's a little lower than expected, the stock market's going to go up like four or five percent. Just watch. It's going to happen. That's all I'm saying. Come on, Michael. I'm glad

I'm always glassetteful. Animal Spiritspot at gmail.com. Thank you for listening. We will see you next time.