Animal Spirits Podcast - The Fed is Making a Mistake (EP.252)

Episode Date: April 13, 2022

On today's show we discuss the crazy move higher in interest rates, the wealth effect in stocks, recessions vs. inflation, wage growth for lower income levels, Elon Musk's Twitter escapades, owning individual bonds vs. bond funds 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

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I was using Y charts this morning. They have these pre-made charts you can. click on. They have these templates made. And one of them is a template for the treasury yield curve. And you can see rates have all come up across the board, mostly in the low end. Ten year treasury is now at like 2.8%. Here's the thing. The inflation rate went above the 30-year treasury in April of last year. And for months, you and I were saying, why is it taking so long for interest rates to rise? Why aren't they going anywhere? We had all these theories and ideas. The Fed was buying and bond people were buying. And now it's the opposite way. Now they're catching up really quick.

why did it take so long for rates to rise? And now why are they doing it so quickly when it seemed like for months and months, it was obvious inflation was here and it was high? Is the simplest answer, the right answer, that the Fed is buying less bonds than they were two months ago, three months ago? Do you really think that's what it is? What do you think? I don't know.

That seems like the anti-Fed. I hate the markets kind of thing. It's just surprising me that the bond market is so huge with trillions of- But the Fed was actively buying tons of bonds and now they're buying less. What if it's that simple? Or you think it's not enough? I think that's not enough. Maybe someone can school me if they have like data on that, but I'm just saying,

well, how about this? It seems like the bond market is supposed to be so smart. And why did it take so long for rates to catch up? When the Fed said they were going to start purchasing ETFs and bonds, that buoyed the market before they even really did anything. So if that was able to steady the market on the way up, maybe it's the same thing in the reverse. Just the fact that they're going to be doing less, even if they're going to be doing less, even if it's the drop in the bucket, maybe signaling is everything.

Maybe it is, yeah, psychologically, it could be. And I think that's part of the whole thing with the Fed is a lot of it really is psychological. Anyway, if you want to check out the yield curve chart here that we did at Y charts, go to Ycharts.com, tell them Animal Spirits sent you and get 20% off your initial subscription. And again, through the end of this month, 50 people can sign up and get a free test run of the service. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what their 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 Rit 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. Michael, I'm starting to diverge from my colleagues at the Fed. I think we're bordering on a Fed mistake here.

I think they went from too much gas pedal to too much break. Whenever the next vote is, I'm abstaining. I'm going to be a nay. No, no, no. You're dissenting. You're dissenting. So Bill Dudley, who's the former New York Fed chair, put out a Bloomberg got bad piece last week.

And I think this piece alone almost caused like a mini correction in the market last week. That's come through to this week, too. So he said, in contrast to many other countries, the U.S. economy doesn't respond directly to the level of short-term interest rates. Most home borrowers aren't affected because they have long-term fixed-rate mortgages. And again, in contrast to other countries, many U.S. households do hold a significant amount of wealth and equities. As a result, they're sensitive to financial conditions. Equity prices influence how wealthy they feel and how willing they are to spend rather than save.

Do you agree with this statement that stock prices going up makes people feel better, therefore they spend more? In aggregate, does that make sense to you? I don't necessarily agree with that. Yes. Yes. Yes. I mean. Let's invert. Do stock prices falling may people spend less? Yes. See, I don't know if that's. See, here's the thing. Because stocks fall. Hold on. I think that there is. Stocks fall during a recession. Okay. And stocks rise when things are going well. So I don't know that it's necessarily only stocks going up cause people to spend more money. But stocks go up when

things are going well. And so people spend money when things are going well. I do think the wealth effect thing. I don't know what the percentage is. I think I stole this from someone on Twitter. So excuse me if I'm stealing this take from someone. It's the, top 25 or 20% of people have so much wealth now that they will complain about inflation on Twitter, but then they'll go spend anyway and they'll go on a vacation even if it's more expensive and they'll spend money wherever. So I think that there is a wealthy part of this country that has so much wealth built up that they're willing to spend no matter if inflation keeps going up and up and up because they have the means to do so. What's your point? So 50% of the population

owns stocks. So I feel like the Fed saying this and saying we're going to crush the wealth effect and we're going to send the country into recession is going to hurt the bottom 50% more than the top 50% because those ones will still be able to sit it through. Recessions always hurt people on the bottom more. That's what I'm saying. So this says investors should pay close attention to what Powell said. Financial conditions need to tighten. If this doesn't happen on its own, which seems unlikely, the Fed will have to shock markets

to achieve the desired response. This would mean hiking the federal funds rate to considerably higher than anticipated. One way or another, to get inflation under control, the Fed will need to push bond yield higher and stock prices lower. So this is obviously what the market is doing. this is why bond yields, I guess, are rising so much. I don't know. The current situation seems like a way better environment to me than a recession. Call me crazy, but my controversial take is I'm anti-recession if we can handle it. If we can make it happen, I would rather not go

into recession. I sent you this the other day, Waffle House, now hiring, maintenance tech, $18 to $25 an hour. I put this one on Twitter yesterday. By the way, I get a lot of requests from people because I'm originally from Northern Michigan. They say, hey, I'm traveling to Northern Michigan this summer. Where should I go? Hoplot brewing company. I was there this weekend, where I visited my parents. It's an awesome outdoor bar in Sutton's Bay, Michigan. Just beautiful place. Everything is outdoor. In the winter, they even have it outdoor because they have the igloos and stuff. It's gorgeous. You do the QR code. They just bring you your beer right to you. It's awesome. Now hiring, compensation up to $30 an hour for the summer with base and bonuses. I'm guessing

they're going to give you a bonus if you worked out the whole summer or something. This story made the rounds last week. Walmart is going to pay its starting salary for truck drivers between $95,000 and $110,000 a year, up from an average starting salary of 87,000. All you need is a 12-week course. And someone made the joke on Twitter that you now can become a Walmart truck driver and earn just as much as a person starting out at Goldman as an investment banker. I don't know. To me, this situation of people in these jobs now being able to earn this much money seems like way better with a little bit of higher inflation than let's stop it all right now and cause a recession. Because we've had 12 months of inflation. I don't know why there can't be some middle ground. That's what I'm saying.

That's where my dissent comes from. Yeah, it's a fair point. I really don't even like want to offer an opinion because I don't have the data, but my feeling would be that it's great that people on the low end are able to do this, but inflation really, really crushes the middle class. Walmart can afford to pay $30 an hour. Like 95% of America that is like whatever, the small mid-sized business owners cannot afford to do this. Okay, here's the weird thing to me though in the economy.

People feel worse for companies than they feel bad. for people. So it's like people feel more sorry for companies because they're having a hard time who feels bad for companies? That's just crazy to me because you just said it. You feel bad for small businesses. When you say companies, I think corporations. I'm talking about small businesses that run America. Oh, guys, maybe small businesses don't run America. We've been saying for 30 years, though, that people on the low end have had stagnant wages and inflation has been low and it sucks because the rich are getting richer. Now that we have wages rising and inflation is higher, people say, all right, let's put an end to it now. Yeah, no, I hear you. I don't. I don't.

after 12 months of this. It's not just wages that are rising. It's prices across a board and they're going up very quickly. Here's my thread of the needle. So I'm not saying like the Fed has to keep their foot on the gas pedal. Obviously the government isn't sending out checks to anyone anymore. I'm just saying let's let this breathe a little more and hopefully maybe these supply shocks will slow because people aren't spending as much. Maybe that's wishful thinking. So we've said that the Fed is really What if we don't? What if we don't? And what if in six months we haven't done anything. Inflation is still at six, seven percent. Then what would you say? Maybe it will be anyway. But let's say the Fed instead of saying, all right, we're going to hit the brakes now and slam on the parking

break and we're throwing it into recession. Instead of saying that, after 12 months of this, let's say, you know what, 2% inflation right now seems like a target that is just ridiculous. It's not going to happen. They're not saying that they're going to force the economy to a recession. Bill Dudley said that. Jerome Powell's not saying that. Rates are still at 50 basis points. You don't think Bill Dudley has some connections at the Fed where he knows what's going on. That seems like a signal to me that from the Fed being like, get ready. We're coming for you. I think Bill Dolly's like Woge and Powell's leaking some news to him. Hugh the Omar is coming gift from the wire.

I just think what if the Fed said we're going to allow three to four percent inflation? That's going to be our new target instead of 2%. Two percent seems ridiculous in this current environment because of the pandemic and everything went crazy. I think the market would appreciate that. And we could say like, all right, we're going to try to bring it in a little, but we know we're not going to like totally curb stop it. Maybe this is the Goldilocks situation that's probably impossible now.

I just think it feels to me like the Fed. is going to try to throw us in a recession. And I think that's a mistake. Also, don't you think, though, that is like a 20% bare market, let's say we got there in the S&P in like high yield spreads blow out a little bit? You think at that point the Fed goes, oh, all right, we're reversing course. And then we're immediately lowering rates again. If they get like one lower inflation print and they go, all right, you force your hand, we're going to lower rates. And they completely back away from it. But it's already too late and they've caused a slowdown. I don't know. They're not in an enviable position.

This is true. I just think, like, I feel like there's a lot of, maybe it's more pundits than the Fed are saying, like, the only situation here is a recession because otherwise we're going into the 70s. I don't think it has to be the extreme of the 70s on one end and the 20, 20 boom on the other. I think maybe we can try to, like, search for some middle ground there. That's all I'm saying. And also, again, credit to me, I'm anti-recession, okay?

I think having people lose their jobs and all this stuff because, like, the politics of inflation are bad. It seems like a bad idea to me. Fair enough. All right. Sam Rowe had a piece. I guess the recession and bear market calls are rolling in. Now, this is from Deutsche Bank. Can I call Deutsche Bank? Isn't that easier? Deutsche makes me sound kind of like... You call whatever you want. I mean, you call it Berkshire. You can mangle any name any way you want. What do they used to call Bezos, Bezos? One of them? I don't care. They're basically calling for a typical recession correction of 20% in late 2023. They give the usual strategist stuff. And then they talk about how in the past, the S&P 500 has made gains up until six months before the start

of a recession. Don't you think we can basically throw these types of stats out the window at this point because markets are moving so much faster. If we all know this, I showed some stats last week. Like the market, when a yield curve inverts, you typically have like 18 months until recession starts on average. And six months, stocks rise until a reset. Like, to me, that kind of stuff seems out the window where it's like, if people know this stuff now, it's all going to get front run. I don't see how those historical, and now watch. that actually happens this time. I mean, you do a lot of blog posts on that, just saying.

What do you mean? I know I do. Yes. And I think the historical stuff is interesting. And I'm also saying it's also confusing with the way that markets are like like, the moving rates right now is really, I think the Fed is at risk of like seeing some stuff break here. How have we not had any like levered up hedge funds go completely bust at this point?

Good point. I'm surprised we haven't seen any credit markets just completely blow out. Sam Rowe also tweeted a chart from bank from. America, nearly 20% of stocks in the S&P 500 are expected to see earnings accelerate every quarter in 2022. Now, obviously, take this with a gigantic grain of salt. This is analyst's expectation. So whatever. But I guess that I am interested, if I could like fast forward 12 months, I'd be very curious to see S&P earnings, like one year from now. By the way, credit to Sam Rowe, because he is responsible for probably 80% of my Wall Street research. I get from Sam Rowe.

I think the other 20% is probably from Josh. But he keeps me. keeps me attuned to what's going on with Goldman Sachs and Bank of America and charts and all that stuff. So good follow. 100% of my TikTok consumption also comes from Sambrough. Oh, because he puts on Instagram. He puts his TikTok on Instagram. By the way, we mentioned Sam Roe's Instagram and I mentioned his TikTok, I don't know, a year ago. And somebody emailed me, who is Sam Rose? I said Sam, bro. It's R.O. apostrophe, yes, not ROSA. Anyway. Yes. All right, Elon Musk, not on the board at Twitter. This is from the new CEO. at Twitter, which, I don't know, let's say we're doing a Kelshi bet on the current CEO of Twitter

over under six months. I might take the under. I feel like this guy's gone. Like through Elon Musk or something's going to have. I don't know. So last week he posted a tweet saying, we're so happy that Elon Musk is going to join the board. And today he said something about, and there's a background check thing, basically saying it's not going to happen. Did Elon not have a good credit score? I don't understand. Elon went through and deleted some tweets. I think I'm standing by by the way, I got a lot of people who's telling me, like, you're such a hater on Elon, come on. Here's the thing.

There's such cognitive dissonance on this guy. I don't know why it can't be. One, this guy is a genius. He has single-handedly pushed us forward for electric vehicles further than anyone ever could have. And the SpaceX stuff that he's doing is just unbelievable. He's a genius. And I know there's a lot of haters would be like,

no, he's not a genius. He was born on third base. Like, he's the richest person. Born on third base. But two, that was a take going on Twitter this week, that he was born. into a wealthy family. It's like, yeah, he's still created like two of the most successful companies all the time. Yes. That's what I'm saying. You have really bad takes in this guy. But the other one,

the people that defend him to the death, he's also a troll. There's no way you can get past the fact that he is a troll. So I think that's the cognitive dissonance of like being able to admit that Elon Musk is a genius and also a troll at the same time. I think it's hard for people because they want it to be one of the other. And I think it's both. And I think it's okay. It doesn't have to be just one of the other. I don't understand what Twitter is doing. I don't either. Nothing would surprise me at this point. He could sell his stay. or he could like take another 10% position and then they're really screwed. I honestly don't know what's going on here.

I think he honestly did not think this through at all. You think you realize like, wait a minute, adding an edit button probably is not going to fix Twitter as much as some people would want that. By the way, I'm anti-eddit button. Oh, it's horrible. I hate it. This is not the Bible. We're talking about Twitter.

If you have a typo, it's not a big deal. Yes. And it's also really funny and also annoying when someone does a viral tweet that hasn't an edit in it because you're happy that you got all the. tweets and likes, but you're like, ugh, I had a grammar error in there when you could have just deleted it and done it again. So anyway, the edit button is probably not going to add market cap to Twitter. No, the platform's not growing. They're not finding new users. And the revenue is growing at a decent clip, 21% last quarter, 37th the quarter before it. By the way, one more

thing about him being a troll. Did you see the thing he posted on Twitter this week for a poll? No. Do you think the W should be removed from the name of Twitter? And someone replied, this is a 50-year-old man. I mean, it's not even a good joke. It's not even a good. It's not even so bad. It's good. It's just bad.

I'm sorry, but when 69 and 420 jokes are your go-to, you do not have a good sense of humor. That was a sub-podcast of you. I know. Why doesn't Twitter just charge its power users? Exactly. Is that like the lowest of low-hanging fruit out there? Who says no?

Everyone with over 100,000 followers, there's a progressive rate that you have to pay. You pay $10 a month. Right. And if you want to keep posting, exactly. I don't understand that either. Ben, we're about to get busy. We've got a chart of S&P 500 companies reporting frequency by day.

Our great quarter guys is about to ramp up. Look at this. What's the technical analysis on this look like? What do we call this? I don't know. What's your Fibonacci line here? You don't get to make technical analysis jokes. Okay.

So the next three weeks are going to be full of companies, company reporting. All right. Let's do it. How about this? Here's one we can look at. Carnival Cruise line. this is kind of with Delta a couple weeks ago, recorded its biggest booking week in company history last week as demand for luxury cruises continues to skyrocket.

Who are these crazy people going back on cruises? I can't believe that this thing didn't kill cruises. People love cruises, I guess. I don't know. I'm not going on cruises. By the way, I'm not a cruise hater. I've been on like three cruises in my life. It actually is kind of fun.

I'm just not angry to do that. I've never done it. Again, people are spending money. Why do we want to cut this off right now? This is what I'm saying to my fellow Fed. colleagues. Ben, this weekend, I went to the mall. Zero signs of a rate hike anywhere. It was pretty jammed. I haven't been to Roosevelt Field in a long time, long, long time. I tell you what, I used to love going to the mall. That was like, that was our place we hung out in like middle school

and high school. Food court, Manchu walk. I think that was an early Chinese place. Nah. I mean, at this age, come on. If I never stepped foot another mall in my life, I'd probably wouldn't mind it. But with kids, I'm sure I will. Colby ran into Buildabar. I said, no. Nope, nope. We're not doing that. Come out. Got a Lego instead. How expensive do you think that is now? It's a great question. The stuffing inflation, forget about it. All right.

I forget who tweeted this. This looks like J.P. Morgan, Chase Consumer Card Spending Tracker from 2019. Change from pre-Croved. What is this saying? I'm having trouble reading this. What's the pre-Crovert trend? What's the orange line and blue line? I don't know why I put this in here.

What is this showing? It looks like someone's doing some technical analysis here showing that people are starting a solar spending. But what's the blue line of the... This is also a seven-day moving average. Right. I think it's showing the pre-COVID trend. Isn't pre-COVID in 2019 the same thing?

Yes. All right, I have no idea what we're looking at. I think it's trying to say spending is slow-in. Okay, fine. All right, moving on. All right. Moving on. Are we finally getting some competition on yields here?

This is some soul fight. It says, did you hear we just raised the rate on our checking and savings accounts? You can all yield 1.25%. That's 41 times the national average. Get up to $300 when you sign up with direct deposit. And I looked at this and I thought, Well, when they say up to 1.25, there's got to be a catch there. Surprisingly, there was no catch. Over $5,000. It's 70 basis points if you sign up. And then I think it's if you have direct deposit. So are we finally going to see this from some places that because they're going to be able to invest in three-year treasury bills and one-year treasury bonds to get higher rates, aren't they? Shouldn't this be coming?

What did Marcus? Is Marcus still pinned at 50? I think so. Maybe some CD rates that we finally have some money on. Like CD rates should be going through the roof right now, too. Should they not? Not through the roof, but off the floor at least. another thing we say differently. Say what you just said. What do I say CD rates? Yeah. I say what, through the roof. We pronounce a C and the D differently. I say CD. I emphasize the day. Okay. Just saying. Yes, that's, you're from Long Island. I say in Long Island. You say on Long Island. Right. That's where we've taken up. Okay. So I pulled one more stat for my, what is it called? Die with Zero book by Bill Perkins. So we talked about this a couple weeks ago about the fact that people worry about the left tail where I'm going to retire and markets are going to suck. and I'm going to end up broke. That's obviously your biggest risk for everyone.

You run out of money before you die. Longevity risk is a real thing. He put this in here. It's basically saying this is a overblown worry for far too many people. A 2018 study from the Employee Benefit Research Institute looked at older Americans' wealth and they're spending to see how much their assets changed during the first 20 years of retirement. At the high end, retirees who had $500,000 or more right before retirement, spent down a median of just 11.8% of their money after 20 years.

So they had more than 88% left over after 20 years, which means a person starting at $65 with half a million dollars still has more than $440,000 at $85. Same thing at the lower end. $200,000 saved this group, only spent down a quarter of their assets after 18 years of retirement. One third of all retirees actually increased their assets after retirement. Instead of slowly or quickly accumulating, they continue to accumulate wealth during retirement. And I got a couple DMs from older retirees from this saying, you don't realize how scary it is to have this money and have no more income coming in. And I totally get that, basically saying most people probably could spend more if they wanted to. I totally get that mentality.

So do you think the hard part is like coming up with a withdrawal plan is really difficult to do? Is that like a personal finance challenge we're looking at here? Well, because it's dependent on future returns and we just don't know what that's going to be. I think the 4% withdrawal thing is much easier. It's much easier with rates at 4%. But maybe if the Fed nukes the economy and rates go to 4%. There you go. Boom. Recession off, retirement on. Here's the thing with bond yields, though. If the Fed doesn't immediately lower rates back to where they were, if we have a slowdown in

some sort of recession, and let's say bond yields just stabilize. It's going to take you three or four years now to make up for the losses that we've seen this year in bond funds. Even though rates got back to three or four percent in some cases, it's going to take years now to make that back, unfortunately. Counterpoint, counterpoint. This is why I think the Fed is probably going to just lower rates again. No, your 60-40 portfolio did 13% a year for the last five years. And so you lost three years worth of returns on bonds. Okay. Not so bad. Ben, you've spoken about this in the past about how crazy housing prices are outside of the United States. I don't know if you called home prices in the U.S. cheap. Oh, speaking of that, so I've been talking about the fact that there's no

supply in my town. One decent house came on the market. They priced it right. And there was, I saw it my neighbor for the first time. There was like 15 couples in addition to Vanguard and Black Rocks and their representatives, there was a long line down the block. So they price it right and then they probably get way over what they asked for because of it? They didn't price it cheap, but it wasn't a ludicrous ask. Let's put it that way. But yes, it would definitely go over what they asked for. This is why I think it's going to take a while though for higher mortgage rates to have some fill through here, I think because I don't think people are all of a sudden just going to be able to shut it off and be like, okay, I was going to buy a house, but I'm not going to

know it. So I put this in here for Bill McBride. We had a back. and forth on Twitter about will hire mortgage rates derail the housing market. He said, I recently spoke with a mid-sized private builder. They spent a Saturday reviewing their financials of all their buyers under contract. Less than 3% wouldn't qualify at 5%. So they aren't too concerned about cancellations yet. And here's my take on this. This is going to make inequality worse because the people who have been buying homes for the last couple of years have really high credit scores and have the means to buy one and people are buying with cash and all these things. So the people who could now still afford at 5% what they could afford at 3%. It's just going to be richer people and more well-off

people that are buying homes. If you're getting into our house today at a four and a half, five percent rate, I mean, you probably know that you're going to refinance in two years, right? Yes. It has to be in the back of your mind. I'll just refinance in the next recession that the Fed is going to create. You were talking about this chart. We got off of it a little bit. If I was a bad joke person like Elon Musk, I would say U.S. real estate market, then Australia real estate market. Hold my beer. Right. It's ludicrous how crazy Australia, Canada, New Zealand, Sweden, UK, all these other places are. This is why if you want to make a the case for housing getting completely obnoxious. Look at these other countries. It can happen.

And it just might. Ben, did you tweet possible? This is from Connor Sten. You made a 69-4-20 reference to Elon before. Was this the joke? I might have missed it. Duncan just sent this to us. Elon tweeted 69.420 percent of statistics are false. Was that the joke? Yes. He makes those kind of jokes all the time. Yes. This is a 50-year-old man. I'm just saying. Oh, my gosh. By the way, I just looked this morning, all of the big homebuyers, KB homes, Lenar, D.R. Horton, Pulte. They're getting crushed. If you go back to the start of 2020, in the biggest housing market ever, the biggest housing boom ever, all of the biggest home builders are underperforming the S&P 500 since the start of 2020. By a decent clip, too.

So KB. Homes just approved a $300 million stock repurchase and declared a dividend. And Connorsen said Fed raises rates, investors sell housing stocks because the Fed is raising rates. Homebuilders decide a better use of cash as buybacks rather than building homes. They trade with interest rates. Because of the move higher in mortgage rates, this is the problem, though. The housing market is so broken right now that both higher rates and lower rates are bad for the housing market. If rates were to stay lower, people keep buying because they can afford the monthly payment.

Rates go higher, supply goes lower. Basically, things are so broken that anything that happens to rates is bad for the housing market right now. We didn't get some time to digest 3% rates, then 3.5, then 3.5, then wait, what's your 3 in 5?8s? Because people say that mortgage rates are still though. Yeah, they are. Bill McRide has this chart showing the 30-year fixed mortgage rate. It is still relatively low. But look at this next chart. The year-over-year percent change. To your point, Ben, we didn't have time to digest. This is the highest year-over-year change in 30-year mortgage rates since 1979. Not good. It happens so fast. My other step

from the other day was, here's one for your next dinner party, Michael. From 1970 to 2008, mortgage rates were never as low as they are today. And that means nothing to people. that are buying a house right now because housing prices have never been higher too. Just an interesting stat. So Rick Palacios had this thing. He has this chart saying it's the biggest spread since 2007 on the cost of owning a home versus renting nationally, meaning it's way more expensive right now to own rather than rent a single family home. And you can see here, this thing got way higher in 2006 at the height of the housing bubble. I think this chart doesn't make sense to me, though. I think this is a point in time chart that doesn't make sense because like you said, those people

who are buying 5% mortgages now and can probably refinance, you're locking in your payment or you can lower it over time, whereas rent can go up over time. So I don't think looking at this in a point of time makes sense. I think with rents going up, don't quote me on this. It's probably still cheaper to buy a house than rent if you look at the totality of it over the long term. Depends where you are. In New York City, rent is up like 35% year over year. It depends where you are. All right, Ben. Oh, I haven't checked in with you on this. Are you getting your crypto off Robinhood? No, I meant to talk about this. They keep saying that they finally rolled it out.

I have two places I could move my crypto to. I could move it to Enramp. And I did move it once. I moved $3,000 of ETH to OnRamp. And then I tried again the very next day because they cap it at $3,000 and they won't let me do it. I tried this again last week. I tried to move it to OnRamp and to BlockFi. And it says these addresses are not compatible.

Robin Hood says they have a wallet and it sucks. You can't move money off of it. It's essentially useless. I think they wanted to say that they had a wallet. So I saw this. I think she works at Robin Hood at this person, super pumped to announce on the Bitcoin 22 stage that Robin Hood app has rolled out wallets access to the nearly 2 million people on the when wallets wait list. And then in her next tweet, she replies, now those in every state except Hawaii, New York, and Nevada. And I'm like, oh my God. So I'm never getting off Robin Hood.

Of course. But they will not let you get money off of it. I'm sure someone can tell me a different way to maybe I could send it to my metamask wall and then send it to another place, but trying to move it to BlockFi and to on ramp. So that's basically Gemini, did not work. They said, you cannot do this. Okay. Didn't work. Great.

Thanks, Robitors. All right. So there was a really interesting piece on the equity risk premium for CFA Institute. And it was an interview with Cliff Asness and Rob Barnat. Wait, jointly? Yes, it was like a roundtable with the two of them. And they've had their spats over the years. Yes.

Yes. Oh, interesting. So Rob Arnott is talking about like the idea about being right versus making money. And he said, my favorite example is Zimbabwe stock market during the hyperinflation the first six weeks of summer 2008, which I hadn't really know about. Suppose you saw this hyperinflation Zimbabwe said, get me out of here. In fact, I'm going to take a short position. I'm going to short Zimbabwean stocks, and I'll do it on a safe small portfolio, 2% of total. He said, in local currency terms, the Zimbabwe stock market rolls 500 fold in six weeks as the currency tumbled 10fold.

So in dollar terms, it went up 50fold, meaning that you just got wiped out. A 2% short position became 100% short position. Eight weeks later, the currency had fallen another 100 fold, and the market basically dropped to zero and stopped trading. So you would have been right, but you would have been bankrupt in the same time. That's a great anecdote. I don't know if it's actionable at all or anything, but I'd never heard that one before. And by the way, when people elicit hyperinflation, what is the percentage of people that say Weimar and then how many people who see Zimbabwe?

It's got to be, what, 95 to 5? I think Wymar is to go to. Like the people who want to say, like, this is coming to the U.S.? Yeah. That's true. Where we going next? Oh, this is a dumb survey. Oh, not a dumb survey.

Not a dumb survey at all. Okay, why? Read it, and I'll tell you. About how often do you think about rising prices these days? All the time, sometimes, occasionally, why is it done? Because these are all the same thing. Wait, you think about something like, oh, do I think about it all the time? No, sometimes.

Why is it dumb? You don't think about anything. 48% of people think about rising prices all the time, all the time, come on. I think what they're trying to say is, they're pissed. Yes, but no one thinks about rising prices all the time, like all day just thinking about, God, that milk price, ugh. No one has that.

I do agree. Like the phrasing of it all the time sometimes. Here's why we're anti-survey. People aren't good at estimating what happened. So someone posted this on Forbes yesterday. I thought it was interesting. So it says retailers in many countries believe the majority of people travel to their stores by car.

And it's saying study after study has shown this is largely incorrect. So they're talking about like bike paths and stuff. When quizzed, retailers often overstate the numbers they think drive to their store and understate how many show up by walking, cycling, in public transit. From a 2015 study in this neighborhood in Toronto, found that half of the local business owners estimated that 25% of their customers arrived by car. In fact, the answer was 4%. So, like, people don't even know their own business how it works. No one really knows what's going on in their own life even sometimes. This is why surveys are bunk because what you say

and what happens is in an actual reality. Hey, do my arms look bigger? Oh, you can't see me. I said, do my arms look bigger? Okay, I got to hear about this. You've been holding out on me. What is the story. You got a personal trainer? So, as with everything else in my life, I follow Pachey McCormick's lead. So Pachey wrote a post the other day, and I think this company was a sponsor for his called Workout, something like that. I think it's called Workout. Wait, do you think about Packing McCormick, 48% of the time? Close. So I said, you know what? I'm ready for this. I'm ready for a digital trainer. So I've never gone to the gym in my life consistently. I think I probably signed up for a membership once or twice, but I never actually went. So I don't know how to work out. All I know is that somebody

sent me a workout video. I tried to do it and I hurt myself. So I said, all right, let's get somebody in here. Show me what's up. So I did my first session and nothing much to report other than what I already knew was confirmed. Wait, they came to your house, you went to the gym. I'm in very, very bad shape. No, neither. It was virtual. Oh, you did a virtual one. How did you find this person? I told you, Packy's blog. Oh, you used the actual person that he had. Okay. Yeah. Interesting. Packy linked to them. Okay. It was great. And so like, he was able to tell me to like move this way so I could see your form better, like spin around, blah, blah, blah. Anyway, it was great. Is it a Zoom call? It was a video call. The technology was not Zoom. It was a video

call. So anyway, I am going to sign up for a two day a week schedule. I feel like that's all I can fit in my schedule. Okay. As someone who is not a stranger to the gym, not to brag, I commend you on this because I do agree that like learning how to work out. So I had a friend in high school. I went into high school. I weighed like a buck 30 and I was like five. five foot nothing. And going into like playing varsity sports, I had a friend whose mom is a personal trainer. And he's like, I'm going to show you how to lift weights right. No one actually knows how to do this. And he took like a whole week to show me how to lift weights correctly and how to like build up. And you're right. If you just go in there and know what you're doing, like you could hurt yourself.

You could pulse, especially at our age right now, if you're just starting, you could hurt yourself. So not many people learn this stuff. So kudos to you. So I'm going to, I think it's one session. So who knows what the future is. But I feel like I need to pay somebody to keep me accountable. and he said, what are you trying to get out of this? I said, I want to not hurt my back sneezing or picking something up. That's what I want. And picking up your kids as they get older and all that stuff. Yeah, I hurt my bad workout you want.

Picking a kid out of the crib, but I don't want to do it anymore. All right, let's get to one listener question, and then we'll do recommendations and get out of here. This one is actually straight from our Discord. Actually, so Duncan, include this one in the video. So this one is straight from our NFT Discord. The Discord's pretty lit, wouldn't you say? Yes, it's crazy the amount of action on there. Yes, it's interesting.

I was popping in there on the weekend. And again, you and I, they don't even need us really. It's kind of nice for us to comment every once in a while, but it's got to live its own. Annal spirits, NFT, Discord. What are we up to now for how much ETH we've given away? Oh, I haven't checked a while. I know we passed 20th. Okay.

That's good. We're at 23.4 as of this, more than 250 owners. All right. Is there any advantage to selecting individual bonds versus using bond funds for our use case? You guys seem to me like there are low-cost funds that give you access to exposure. Would you guys be willing to talk to the pros and cons of individual? bond selection for clients versus using funds. Go ahead, Ben.

I've mentioned this before. I've written about this. There are people who have very strong feelings about this. I think if you're an individual or even like a wealth manager like us, buying individual bonds is probably more trouble than it's worth because bonds do not trade like stocks. There are widespread that you pay fees that you don't really understand. Like the huge bond funds that trade are trading in these huge, huge multi-million

dollar blocks and they're sometimes trading with each other off the exchange. And it's the bond market is a totally different animal than the stock. Now, you can go to like the treasury direct and buy U.S. treasuries from them. And maybe now some people would say that that sort of makes sense because one, two, and five year treasuries are paying yields finally. But I think the whole idea of trying to find diversification and the minimums required, buying individual bonds is probably way more of a pain in the butt than it's worth. What do you say to people who say like with individual bonds, I can hold my bonds to maturity? I think that's, a psychological reason, and maybe it makes sense from a psychological perspective. It can get you

to hold them because you say the yields are up and I'm down 10%, but I'm just going to hold this to maturity and I'll make it back. But a bond fund is literally a fund of individual bonds. It's the same thing. Those bonds within that fund are going to mature, they're going to be traded for bonds with higher yields. So it's effectively the same thing. It's just, I guess you could say like a ladder of bonds actually could provide a better protection against rising rates because you can reinvest those bonds that mature, but bonds and bond funds mature as well. So it's kind of the same thing, even though maybe there's a psychological component to owning those individual bonds and holding them to maturity. All right, Ben, recommendations. What do you got this week? But either way,

there's interest rate risk either way. All right. Did you watch anything on your plane ride? I did. I watched a little movie called Cliffhanger. Maybe you've heard of it. Do you ever see cliffhanger? Oh, yes. Yes, definitely. By the way, Sylvester Stallone as a rock climber is like maybe the worst casting in history, there's no way a guy that Jack is a rock climber. I will say this. This is going right up to the top of the list of my favorite good, bad movies. It's funny. It's exciting and entertaining, and it's terrible.

And John Lithgow's bad guy accent is incredible. I had to look up this actress because it's the worst acting of all time. Her name is, no offense. Janine Turner was cast alongside Subletious Delo. From Northern Exposure, right? From what? She was in Northern Exposure, maybe before your time. Yeah, never saw it.

Okay, so anyway, unironically, so Cliffhanger is on Netflix. I dialed it up. I haven't seen this since it came out in 1993. It's a great bad movie. So, classic one-liners that are just... The first opening scene sets the tone. Yeah, just terrible one-liners, music that didn't fit in. It was all over the place.

It was horrible, but also very, very enjoyable. And I would recommend that if you haven't seen it, you dial that up. What else did I watch? Oh, okay, I'm almost like humiliated to admit that I watch this because this is the most messed up movie I've ever seen in my entire life. I spoke about a movie called Possessor by Brandon Cronenberg, which was horribly demented. Bill Arseronian, our tax accountant, recommended this to me, and he told me that it makes Possessor look like a comedy.

And I think I agree with him. So this movie was like won like awards at the Cannes Film Festival. I don't even know what this was trying to say. It was a metaphor for something. I think I kind of get it. Definitely do not watch it. It was just horribly disturbing. Wait, what's the movie called?

It's not even worth mentioning, but it's called titan. It's French. I think it's called titan. It's T-I-T-A-N with an E at the end. It's on Hulu. If you like horribly messed up movies, check it out. Just read the description and then you tell me. I thought you spelled Titanic wrong in the dock here.

No. But, yeah, I'm good. Ben, there's not a you movie. Somebody, I don't know who it's for, but apparently the critics loved it. I was at somebody's house in the neighborhood with the kids. And this person asked me one of those questions that I wasn't really sure how to answer. Kind of put me on the spot. I'm not a great small talker.

And apparently there was silence and said, so what do you do for fun? And I answered, I go to the movies. Because I was like, uh, uh, then he pulled, uh, what's your favorite movie on me? And I was very taken aback. That's like someone saying like, do you like music? Yeah. I think people, they got worse at small talk. I was at a party this weekend, a birthday party.

And a guy said, does anyone want to talk about politics? Wow. I literally left the room. Yes. I made a joke. I said, why don't we start with a religion first? And then I left the room because I'm like, I'm good. That's a good joke. I mean, usually, no thank you. Politics gets brought up like sort of by accident, but that's bold. So anyway, but it did get me thinking. I don't want to not have an answer the next time I'm in the situation. So I think my favorite movie, but like such a ludicrous proposition. You can never answer that. I would need

like five days to come up. Yeah, right, fine. But I will throw out, I think maybe my favorite movie ever is Fargo. It's probably the movie that I've seen the most times. I absolutely love everything about that movie. I would need to do the Charlie Day thing where I have all the stuff on the wall and I have strings attached to them and I'm coming up with the computers. That's how I'd have to figure out my favorite movie because there's too many threads upon. Do I really like Fargo more than Pulp Fiction? No. I don't think I do. But it's Pulp Fiction my favorite movie? I don't know. I think Fargo might be. It's a silly question. Well, there's a difference between the best movie versus your favorite movie too. You have to figure out the definition there. It's a very silly question.

If I'm being honest with myself, I'm pretty sure Jurassic Park is my favorite movie. Hey, we had a friend in college who said her favorite movie of all time was enemy of the state was Will Smith and Gene Hackman. Is that not the most ludicrous answer you've ever heard? Good movie. For four years in college, we never let her live that down. Yes. Okay. I like Tom Seismore in that movie.

Good gangster role. Anyway, go on. Sorry. Jack Black, too. So my wife and I watched Jackass Forever this weekend. It's actually on Paramount Plus, which we still have. have for some reason. Wait, time out, time out. They actually have some. Is that the newest one?

Yes. Oh, my Lord. The opening scene. The opening scene? There are some scenes that are going to gross people out. So if you're easily offended by male private parts, don't watch it. But jackass can get me to laugh harder than anything. I had tears come down my eyes. I think there's watching people get hurt versus watching them get injured. Like, watching people get hurt, especially if they're doing it on purpose, is never not funny to me. And the scene where they lock the guys in the room and turn off all the lights and make them think there's a rattlesnake in there, I was on the floor. Like, there's some movie that you kind of go like, oh, that's pretty funny.

Jackass makes your stomach hurt and your face hurt from laughing so hard. There was some stuff in there that was a little over, a little crazy, but I laughed so hard at that. Also, the seven season finale, I thought was maybe one of the best episodes of television of the last couple of years. It was so good. There was such a big buildup on that show, and I thought the entire finale was so tense for the entire time. I wanted to last another hour. I thought it was awesome. They answered some questions. They put some new questions in there. This show got better every single week. And I think it's an amazing show. And if you're missing out on it, you're totally missing out on one of the best shows on TV right now. But do we really need a second

season? Thoughts? I agree. It was very well done. Now I do. They left it open. They have a good twist right in the beginning of the show. There's no satisfying conclusion to this show. What's the Here's the thing. I read an interview with Ben Stiller, and he said that the creator of the show has an ending in mind when he started it. So they have like a three-season arc, and they have a way to land the plan, they said. All right. All right. Yes.

Okay. I'm sorry. That finale was so good. I was like, oh, I wanted more immediately. So that was very good. All right. Animal Spiritspod at gmail.com. We will see you next time.

Thank you. Thank you.