Animal Spirits Podcast - The High Beta Crash (EP.232)

Episode Date: November 24, 2021

On today's show we discuss why the stock market doesn't care about inflation (yet), the growth stock massacre, how corporations are taking advantage of inflation, the new frontiers in crypto, some career advice for The Rock 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. Last week's show, we talked about how retail sales continue to be otherworldly, up like 15%. And a lot of people said, okay, that's fine. What about inflation? Boom. Now show inflation after inflation. Pre-1980, pre-1980. Now show after inflation is the new now show Japan.

So YCharts actually has U.S. real retail sales, real meaning after inflation. They actually have it on a year-over-year basis. So you take out the high and the low from the pandemic, which you had this huge crater, and then you had this huge spike. So those sort of offset each other. The prints are still coming in hot. So after inflation, U.S. retail sales were still up over 8%. That's the highest level, again, after inflation since 1999, which is the highest level it's been pre-pendemic before. So I get it. Inflation is running hot, and that's skewing a lot of numbers. But people are still spending a ton of money right now. over and above the rate of inflation. Anyway, I like the fact that you can kind of search through this stuff. Myth bust some people potentially. Whitecharts has it all. Go to whitecharts.com.

Tell them Animal Spirits sent you and get 20% off your initial 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 Batnick 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 Ritthold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben.

Michael, last week's show, we spent a lot of time talking about inflation. We didn't really get into it that much from a market's perspective. I know we've been kind of talking about this topic for a while. know. The stock market and the bond market still don't care at all. If you are a market observer, such as yours truly, you would understand that actually maybe it does care. Do you know what's going on right now with growth stocks? You're saying growth stocks are getting hammered, so that means the stock market does care. I'm saying growth stocks are getting annihilated right now. Some of them are. Not the important ones that move the market, I guess. Not the important ones, but I'm looking at

square. Holy shit. I'm looking at Uber and Lyft. Yuck. Oh, ooh. Lift, gross. I'm I'm looking at Airbnb, close the gap after last week's earnings report. A lot of the higher beta Zoom, oh my God. Ooh, it's ugly out there. A lot of these high beta names from 2020 are getting thrash. I don't know, Arc, by the way, disgusting. I don't know if this is only an inflation story. Did we shift the narrative then from it was only low interest rates for helping growth stocks to now know that is actually low inflation to be changed?

Because before it was, if rates rise, these gross stocks are going to get crushed. Now it's, oh, wait, inflation, that's the big deal. Am I conflating the two? I'm saying a lot of other people were saying it's rates. And actually, I've written pieces in the past saying, why did value die, quote unquote? And the reason is because value tends to do better when inflation is running higher and growth stocks do worse. So maybe that was, maybe the whole interest rate thing was the wrong path that people were taking back then. But anyway, a lot of these high growth stocks are getting seriously, seriously slaughtered.

why? I don't know, but I feel like inflation is a decent boogeyman. Their returns in 2020 were otherworldly, and it was, people were looking for a reason to sell. That doesn't do it for me. Sorry. So let's do your little X, Y, scatter plot chart where you show 2020 return versus 20 or 21 return. We'll have to do that. Okay, I will do this. That's a blog post for you. 2020 return with 2021 current drawdown.

Yes, and I bet that there's a pretty high correlation between high return in 2020, huge drawdown on 2021. Sometimes it's not, I mean, the macro factors come into play here, but sometimes it's just the fact that, oh, wait, these stocks were up a lot. Here's an interesting one. So you're talking about markets don't care. Well, there's a lot of different markets out there. The U.S. dollar. How about the currency market? Look at the U.S. dollar. This is multi-year highs, I believe. Multi-year highs. Absolutely scorching hot today, highest level since early 2020. But be that as a May, inflation is high. Why is the dollar so strong? I don't know. I was told in like 2012 the dollar was going to crash and not be the reserve currency of the world anymore. So I'm still waiting for

that to happen. But inflation eats away the value of a dollar. Yes, but obviously. Think about things on a relative basis. It's to the rest of the world. So, but the U.S. dollar is measured against other currencies. Yes. That's the problem. All right, enough about inflation. What else we're talking about? Here's one of the more unfair aspects of inflation. Okay. So Rick Palacios posted this. He's a great following Twitter for all things, housing related. He posted the gross margin by year and then the trailing 12 months of what of housing stocks home builders and these things since q2 2020 are up in a straight line so they've gone from i don't know 20 percent to almost 25 percent now this is the bad part about the stock market where these corporations have all come out they've just

made out like bandits on this whole thing because they basically got bailed out by the fed and the government giving a much of money and then when higher prices come and supply chain problems happen they go we don't need this. Let's just pass it along the consumer. We'll just take it to margins. So this is the dirty part. This is the part about capitalism that piss people off in big corporations. This chart sucks. This chart really sucks. These corporations complaining about paying higher wages, they're all doing fine. Their margins are either staying where they were or they've gone up in some cases. Like, they can't complain about any of this labor shortest stuff. They should be paying people more in some cases.

I feel like this is now the fourth or fifth time we've spoken about this. But remember when lumber spiked and the CEO of Pulte and I forget some other home builders, They all said, we're going to take it to margin after Lumberhead crashed. The prices are not coming back down. And as a result, you have things like this. Not cool. And if you want to hear a little bit more talk on us on inflation in the economy, last week we had our Super Bowl.

This was your term. We've talked about him since the podcast started Derek Thompson to the Atlantic. I cringed it a little bit. I feel like I was a little too thirsty with the sports analogies. It was good. All right. Thank you. So he had a new podcast at the ringer called Plain English.

And Michael and I were on it through an economic roundtable. I think we handled ourselves pretty well. It was an animal spirits Derek Thompson collaboration, long time in the making, and it was fun. One of the things that I said on that podcast was the media gaslighting people about inflation, which I don't love blaming the media for shit like this because there was inflation, but certain places are making it worse. So, for example, Market Watch tweeted this hot garbage dog shit tweet, which was subsequently deleted, by the way. I went to look for this weekend. I could have found it. It was deleted.

They deleted it. They posted a correction. They must have gotten slaughtered because... What did they say, Ben? The original tweet said average Americans are paying as much as $100 to $200 for a single concert ticket, $90 for a bottle of wine and $5 a gallon for gas. Delete your account. Then they said they... By the way, if Twitter was on the blockchain, they would have given up all of their tokens for this nonsense.

Here's the problem. Inflation is high as it is. You don't need to make it sound even higher than it is. This is like the scare tactic stuff. All right. For clicks. I wanted to show this one too. I posted this on Twitter. this is like me having fun with context and numbers. So gas prices, retail gas, like the average in across the country is like $3.50 a gallon. On that podcast with Derek, he made the point that

the reason people feel gas prices as inflation is because those numbers are so big. And it was- I don't buy that, by the way. I don't buy that. I kind of do buy it. I love Derek. It's a good theory. I don't buy it at not for a second. Dude, prices are 50% of the last year. 60% of the last year. Okay, so you don't need to see the big numbers in order to feel it. But I feel like when I see my tank at $70. I know. we talk about gas prices so often because it's just staring you in the face every time you drive down the street. Here's the thing. Yes, gas prices are up 60% over the past year. Positive spin zone. Positive spin zone. Since 2008, gas prices are down 16%. And if you did that

on an inflation adjusted basis, gas prices are probably down 50% from 2008. This is fun with numbers. You're measuring from the peak. Yeah. And you're measuring from the bottom. That's the thing. I'm not having fun with numbers. Guess what? Guess what? Guess what? Yeah. I was living in the bottom. Yeah, I was living in 2008. So changes from 14 years ago do not hold the same water as changes from 12 months ago. It's so psychological. Here's another one. Another fun with numbers.

Okay, we basically... Not having fun. We basically almost had deflation in 2020. No, listen. So what do you think the two-year inflation rate is? If you mash up 2021 and 2020, what's the two-year inflation rate? 3.5. It's like 3.6, 3.7%.

I'm just saying, where you start these comparisons, Of course, of course. Yes, but the media gaslighting people, that's when the pitchforks come out. I'm just saying, you say, of course, but this is not everyone thinks this way. No, I'm talking to you. I tweeted, this was very funny. Somebody put a sticker of Joe Biden at the gas pump. I was that yesterday.

I said, I did that or something. All right. I'm not going to lie, I did it. Okay. No, I saw it in Michigan, too. No, I put the sticker on. Okay. You probably did.

Just kidding. Let's talk about shadow stats. This is amazing. This is fantastic. You don't have to make up stuff about inflation. So this was from full stack economics. We talked about a couple weeks ago about about real estate. And they did this whole piece about Shadow Stats is this thing that this, I don't know, who is it?

Is it a person as a group? It's an economist. And honestly, the name probably has kept it going. It's fantastic. I think it's probably the name of it. It's probably kept it going more than anything. But apparently someone finally dug under the hood to say, why is ShadowSat saying that inflation is so much higher than it actually is? And they figured out that if you would have used pre-1980 inflation calculations, inflation would be much higher.

And the difference from the study was it would have been a 5% difference. But Shadow Stats, and this is a 5% in total from like 1980 to 2011 or whatever. So using pre-1980 methodology, the change up the methodology, the difference over that 30-year period or whatever it is, is more than 30 years, is a 5% cumulative difference. And what did this person do? Shadow Stats used it as a 5% annual difference. They just basically added it on every year to show that weight inflation has actually been 11% here or whatever it is. So they're showing, according to Shadow Stats, they claim that inflation has averaged 9% of the last 21 years, which means that prices would have risen sixfold. I forget who is the author of this wonderful substack, but they gave some numbers because they were actually very much, they weren't a child like I was 21 years ago.

Actually, yeah, I was a child 21 years ago. He said, when I entered the University of Minnesota as a freshman in 1998, tuition was $4,500 per year. If that price had inflated at 9% annually over the last 23 years, tuition would be 32,000 today. It's actually 15,000. In 2000, a chicken burrito at Chipotle cost a little more than $5. If inflation was 9% annually, it would cost $30 today. Actually, a chicken burrito, this person is $8.50. Lastly, in 2001, I bought a plane ticket to visit my sister in Dallas for $261.

If that price had inflated at 9% annually, a similar ticket would cost $1,400 today. In fact, it cost $260. So he gave these numbers to the economists. Which one? My daughter loves Home Alone. So we watch it every year on Christmas. We got it there a little early this year. She sprained her ankle this weekend.

I told you the whole story. We thought it was broken. Turned out it wasn't, but she was laid up all weekend. She played in some soccer with friends. So we watched Home Alone. And they get like 10 pizzas at the beginning of the movie. It was like $120 plus tip. That's in 1991.

Pizas don't come up in price. Pizza is like a huge inflation protected asset, right? Like the best deal ever, if you're a parent and you're in a hurry. Do you guys have Little Caesars in New York? No, we don't. But you're saying pizza is an inflation hedge? I'm saying it's a huge hedge. because it never goes up in price.

So it's the opposite of a hedge? No, that is a hedge. Oh, from the buyer's point of view. I thought you meant as an investment, like buy pizza. So $5.55 out the door for a little Caesar's hot and ready. You don't have to order it. You walk in. You say, I want a cheese or a pepperoni, and it's ready to go, hot 550.

It's beautiful. Can I tell you that this morning I was listening to Ransom, which is one of the best movie theater experiences I had as a child, and I hate even saying anything related to Mel Gibson given his racist and anti-Semitic tendencies. Good movie, though. But man, that guy could make some good films. So in that movie, they called him a multi-millionaire. Today, he'd be a billionaire.

The ransom was $2 million. Guess what? Today, that price would be up six-fault. That would easily be up. Well, the ransom would be in crypto, right? So Shadow Stats was right in ransom. One more thing about Home Alone. Disney Plus made a new Home Alone movie called Home Sweet Home Alone.

Just a complete and utter debacle. They basically tried to remake the movie. Only the kid wasn't as likable and it wasn't really even thieves. It was very bad. Interesting. Oh, speaking of Disney. This morning, we were watching Aladdin before I put the boys on the bus, and there's a scene early on where they put Aladdin in jail, and one of the big goons tells Jasmine, his fate

has already been decided, death by beheading. And I'm like, what the f***ing? How old were we when that movie? I mean, that movie was like seven-year-olds. Death by beheading. Literally every Disney movie has a parent die in the first 10 minutes, pretty much. That's like how kids learn about death, I guess. That's rough.

All right. So anyway, this was great. The other one I've found that's great is ShadowSat says that inflation is 9% per year. Colin Roche always post this. They've been charging the same for their subscription program for like 20 years. They've never raised their own prices. Just perfect. Can I tell you what I did this weekend?

What's that? I bought a TV. To replace your one of the line on it? Nope. Okay. You're still sticking with the line. I'm sticking with the line. I bought a 55-inch TV to replace my office TV,

which is right on that wall. The volume is basically gone. This TV I got in 2010, I'm pretty sure it was over $3,000. Okay. Guess what I got a 55-inch TV today for? That's about an inch and a half thick. Probably not even. Probably not even. 500 to $500 to $1,000, somewhere in that range. $800.00. You can get a pretty nice TV for that. Plus, with the smart stuff built in, it's a great deal. And if you want a line, it only costs an extra $10. Here's a deflationary piece for me. We have the little pendant lights that hang out over the island. pendant lights over your island in the kitchen like to hang down yeah and they have a little glass tube around them looks nice whatever my four-year-old son has broken two of those glass things he threw a ball

or something crack whole thing broke shattered had to get a new one replaced it and he just did it again recently I went through and I found our change order when we bought the house in 2017 it still had the light on and I was going to order it from the lighting place we got just this little local place and it was like a hundred dollars back then I was like all right you know what I'm going to, instead of going through them again, since they probably charge too much, I'm going to look at Amazon. Amazon had the same light for $68. Boom. This is why, like, the big companies are going to win, because they can do that and still win where, like, the local mom and pop shop that charges $100 can't compete. As you're saying that, I've got, like, the lights over the

on end, too. I'm just thinking, I have no idea what they look like. I know I see them every single day, but if you ask me to describe them, I have no idea. That doesn't surprise me, though. Couldn't even Pick it to have a lineup. I probably could. But all right. So crypto.com bought the Staples center. I didn't even know. So crypto.com, I guess is it like Coinbase? I downloaded it a while ago on my phone. You can't get in New York. So I've never really been on it. But they've got a token because of course they do. And the token's going bananas. But wait, this is the one who has like Matt Damon as their advertising now, right? Oh, is that it? I wouldn't know because unlike you, I actually DVR stuff. I don't believe in science.

of tops anymore, even though it's like very temp. But come on, this is a sign. You had one piece this week. This is a sign. Well, hopefully I don't call it the crypto.com center. They should just call it the crypto coliseum or something like that. They call it crypto. com.

It doesn't really roll off. Arena. So you wrote a piece about technology unicorns or something this weekend. What do you say? There's a thousand unicorns now in startup lane. Remember when the show Silicon Valley came out and that was supposed to be the top? I looked. Yes.

It was 2014. 2014. Yeah. That was supposed to be a sign of the top. Honestly, if you were one. of those people that are like, hmm, that was definitely one of those moments where you're like antennas up type thing. They literally made a show called Silicon Valley in 2014 when that was probably after Instagram was bought by a billion dollars, which also was supposed to be started

at the top. And the crazy thing is so much of the stuff that's happened since that show went off the air is 10 times crazier than anything that happened on the show. By the way, Russ Hanigan in Red Notice. What did you think of Red Notice? Let me save it from recommendations. I've got to take on the rock. Okay. So Doug Colquitt, had a good tweet thread on what's going on in crypto. And I'll skip to the end. He said, frontiers have always been unique places, places with the best and worst of humanity on extreme display, places where anyone can redefine themselves, places overflown with

the type of dreamers and builders and weirdos that you might otherwise be lucky to meet once in a lifetime. Crypto is probably the only frontier our generation will ever get to experience, which is a bold statement, but maybe. But like all frontiers, it won't be one. forever. I don't want to like split hairs here, but I don't think anything in our lifetime is going to come along that's bigger than the internet as far as like new and exciting. I know the web three people want to be like, hey, world jocamil just like the internet. No, hang on, hang on. Dude, if you're

20 years old, you weren't alive for the birth of the internet. Okay. So you're saying for young people, for this new generation. And me too. I was 14 in 1999. Okay. I mean, yes, it came into my life and stuff, but I wasn't like reading articles about it. That's fair. I just think the internet had to come first for this stuff to all happen. So I don't think anything in our lifetime is ever going to be bigger than the internet. That's that to me. You're obviously not paying attention to crypto. Okay. Sorry. Just kidding. All right. Dave Nadig did a post called tokenize everything basically. And he said it is simultaneously that the most interesting financial innovations in nearly a century are happening right now. And at the same time, some wild scams, malfeasance and generalized stupidity

are going to keep making headlines based on precisely the same underlying technologies. This is why it's so hard for certain people, depending on which way you want to look. And this is why most traditional finance people hate crypto, because they look at all the bad stuff and say, see, look. And then the people who are into crypto look at the, and say, wait, look at all this smart people in here. These geniuses are putting all of their time and energy and their life's work into this stuff. And that's why you can have these diverging opinions. Somebody emailed us, this is the dumbest shit ever. I have been an investor in markets as 2012, basically index funds, reading your content since 2014. I have never. seen anything like crypto gains. I bought some bullshit coin, having no idea what it is or why simply on the fact that it lists on Coinbase. I'm up close to 50% of my little gamble. And the only thought I have now is why didn't I buy more when I was 90% sure it will go up like crazy. How does this market not turn everyone involved into gamblers and breaks everyone's

expectations about future returns? You could do that for some people. But I think, do you think most people understand that like when the dumb shit coins go up, that it's like, this is just insane. And like, I think most people are kind of in on it, in on the joke. There are these true believers, I guess, but I think most people understand this isn't the real stuff that's coming out of this. These gains are just crazy and whatever. It is what it is. I don't think this is going to change people's view about this is changing investing forever. I think most people, like 98% of the average person's exposure to this new frontier is total lunacy and degeneracy. I could see that.

Obviously, if you don't know anything about crypto or defy, like you're not reading what's being built. Last week, when you talked about getting scammed, we had, I think in the comments and emails, we had probably three different responses. One of the responses was, thank you, Michael, for sharing. I appreciate it. There was a lot of people that said, I feel for you, but I appreciate that you shared. One of them was, see, I told you something like this could happen, blah, blah, blah. That was a small minority, but there was still.

You know what? Because there's no phishing scams in traditional finance. Nobody ever lost money with a credit card or a bank account, never. Yes. And the other one. What was the third? I'm an asshole. A few people were, come on, Ben, get your hands dirty like Michael. You're missing out here. Missing out. I'm missing out and getting scammed, man. You too could get rugged. Yes. But I will say, especially from between now and like 18 to 24 months ago,

if you would have told me 24 months how much of exposure I have to crypto in my life and work and portfolio, I would have said you're nuts. And so you and I have both made two probably private investments in the crypto space, and we've both invested in a fund run by someone we know, two funds now, I guess, by someone we know that is investing in this stuff. I'm more than happy to just be a passive investor in this stuff and allow other people. You've been trying to walk me through doing something on a metamask wallet for the past 72 hours, basically. If I based my thoughts on crypto exclusively on my workings with it using metamask wallets and all this other stuff, I would say this is a joke is never going to work.

I wouldn't say that because I know eventually they're going to figure it out just like back in the day, ESPN.com took 24 seconds to load. So I know they're going to figure this out, but I'm fine not participating on the ground floor on that stuff. I know you use it as like a learning technique. You're using it to learn and understand these different things. I'm fine being more of a passive player here. Makes sense.

And I'm totally sympathetic to the idea that somebody who doesn't like do this as much as we do and thinks about as much as we do would try and get involved and say this is the dumbest thing ever, it's impossible. I don't get it. That's like most people's understandable reaction without going to the second level, like, well, yeah, it does suck a lot right now. It's going to get better. Most people just leave with what it is today. And again, my light ball moment stuff is when this interacts with wealth management in the wealth management space. And that's going to be our next week, talk your book with index coop, which I think is going to be really fascinating conversation. Can't wait. All right. So let's talk about Ken Griffin, the biggest troll on the

internet, besides for Elon Musk. Corey Hofstein tweeted what happened perfectly. Corey said nothing captures the current wealth disparity in this country, quite like a decentralized organization raising $40 million from, quote, we the people to buy the Constitution only to get outbid by a billionaire. So we spoke about this last week. There was a decentralized autonomous organization that spun up together, raised $40 million, was good to buy the Constitution, which was only supposed to suffer 20.

and Ken Griffin said, fuck me, fuck you. Basically, the Robin Hood crowd, the red of crowd, that got in his case. I'm sorry.

This, to me, the whole thing is hilarious because this is a Logan Roy move. This could have happened on succession. This is just a total, I don't care. I'm doing this. I'm sure he said,

I'll go up to 100 million to this. I don't care. There was no number. Whatever the number was, he would have got a million dollars higher. So there was an article in the Wall Street Journal talking about this. And Ben,

they do it every time. time. How do they find the people? I mean, I guess in this case, it wasn't that difficult. But here's the quote. We've referenced this in the show a million times. There was always like a one random quote. It's from Avi Flombbaum, a 37-year-old base in Brooklyn, New York, who was an executive at a technology talent development company. Avi said, it's sad. Oh, that was the whole quote. The whole quote was it's sad. I was expecting more. Avi said it's sad. Yeah. You really know. That's it. Yep. Avi said it's sad. It is sad. My first reaction, I was on the phone with you when I found

this out. I said, what a... I don't know. I thought it was funny. It made me laugh. It pissed me off. I will be honest. You know that he's been hearing from this Robin Hood crowd for like six, nine months saying Citadel is the devil. Yes. I don't know. I just think that is the definition of F you money. So Elon Musk is still a troll. Of course. J.B. Morgan is suing Elon Musk or Tesla. They're suing somebody. I guess I'm

assuming Tesla. So J.B. Morgan said, we have provided Tesla multiple opportunities. opportunities to fulfill its contractual obligations. So it is unfortunate that they have forced this issue into litigation. So Elon Musk said, if JPM doesn't withdraw their lawsuit, I will give them a one-star review on Yelp. Elon said this in response to the Wall Street Journal. Quote, this is my final warning. See, this is what happens when you get people so rich. Nothing matters at all. At $200 billion. What are you going to do? He's Teflon, which makes me wonder, Does he eventually get to the point where he is so detached from reality that he just does something that's so crazy where everyone goes, whoa, okay.

How far over the line is he going to go? Oh, where he does something that's like, okay, got it. Where people are like, wait, this isn't funny anymore. Yeah. We have to step in. It's sad. Yeah. I can't tell.

Like, how do you have any self-awareness at all if you're that rich? About anything? Well, apparently you don't. All right. Time for great quarter, guys. Let's get into it. By the way, quarter is the app that we use furnace. calls, blah, blah, blah. We first talked about a million times at this point.

All right, 82% of S&P 500 companies, Ben, have beaten EPS estimates so far. That's not bad because we thought that the comps were what got some of these companies, right? And I guess it's happening to growth stocks. I mentioned earlier, Airbnb, massive quarter, massive stock increase. It was 178, ran all the way up to 210, filled the gap, as gaps do, they get filled, coming back in. What do you mean when you say that? So it goes up a lot and comes back down? A gap fill means, let's say that going into earnings, the closing price was 178.

Okay? It opened up the next day at 201. So between 178 and 201, if you look at candlestick charts, there's a giant gap on the screen where no transaction took place in between those prices. And when the gap gets filled, it fills that gap, obviously. So now it fell down to 176. So the gap has been filled. Anyhow, it wasn't fun, Ben.

I got to be honest, it was not fun selling Zillow or Peloton down, what did I lose on those trades, 25, 30 percent on each investment, which, by the way, I was with Robin's friend yesterday. She asked me for some stock tips, and I said, hold on. I told him about Zillow, I told about Pelotan. So I said, but I'm happy to give you stock tips. What do you want to talk about? What do you like? So, okay, so it wasn't fun.

It's never fun selling down because on the one hand, you're like, well, whatever. You know, it's not fun to sound down to the 30%. I don't need to get into psychology why. However, since I sold, because you're afraid that you sell, it's going to mark the bottom, so you're afraid of making one thing even worse. Since I sold, Zillow is down 17%. And since I sold, Peloton is down 21%. Then what was interesting about Peloton was, they announced a $1 billion equity offering and the stock was up 14%.

But I was thinking, now you need to raise cash? Now, well, the stock is down 60%. These stocks are both down 73% from all-time highs. All-time highs were reached this year. Look at like Square, Uber, Lyft. All of these names are getting just blown up. Zoom. So, by the way, Zoom has earnings tonight.

It's down 60% going into earnings. So you would think, as I did with these other names, listen, down 60% going into earnings. I think everybody knows it's bad. Well, actually, we'll say. This is the year that the stock market took it personally. This is the Michael Jordan and I took a personally meme. Last year, everyone thought stock picking is way too easy.

You just pick the stocks that everyone's heard of and they're growing like gangbusters and you crush the market. Just pick the best names. And then this is the year where that comes back to hurt you. Meanwhile, Robin Hood got crushed after earnings. I tried to get cute. I tried to buy. I took a very small haircut on that one.

No harm, no foul. Lesson learned. But Roberton is down 20% after earnings. Look at that stock, all-time lows. By the way, the stock is, Roberton has now got a $23 billion market cap. I think they were talking about 80 prior to the IP. Do you say Robin was going to be bigger than Coinbase? I can't remember. And I'm not trolling. Or was it the other way around? No, I did. And it was for like 12 hours.

Okay. So, all right. So you nailed it. This was like meme stock high. That stocks down 60%. And that's since August, I guess. I mean, we're seeing stocks get just annihilated. So the only thing propping up the market then, I guess, if you wanted to be one of these people, is some value stocks and the huge behemones. Well, look at Apple. Look at Apple all time high. Microsoft is at an all time high. Google is at an all time high right there. Facebook is not. Let's see, Berkshire, but it's the big giant names. Oh, Invidia, which we're going to talk about in a second. Let's circle back to Zillow for a second. So Zillow, they're just whacking all of their houses. They're just blowing out of them like they're like penny stocks. A quote is, we intend to sell our remaining inventory, which represents less than three-tenths of one percent of all U.S. homes sold this year. Right. It's nothing. By the way, a lot of people said that the takeaway from Zillow was, you see, Al Gore's, cannot help you pick houses. The story in the Wall Street Journal last week was Zillow was making money on this when they were listening to their algorithms. It was when they trumped their algorithms. Oh, really? I miss that. And said, no, no, no, we need to buy way more. They got away

from it. And when humans got involved in the process, that's when things went crazy and haywire for them. They said, no, we need to keep buying more and more homes. And they trumped the algorithms and basically fudge the numbers so they would buy more homes. They didn't listen to their rules that they set in place at the outset. I'm still scrolling through charts. Things look really ugly in a lot of these names. Look at IPO. Look at SPAC. Look at Moon.

Roku. Oh, my God, Teledoc. Teledoc was 310 of the high. It's now 109. Okay, anyway, this guy, Mike Delprete. He's an I buyer expert. This is why I own index funds. I have a fun account where I buy some stocks.

It's 10% of my portfolio, probably. And then I own a bunch of index funds. Seriously, this is icky shit. So he did a chart that shows Zillow iByer Purchase Act. and the ramp up, there was too much. Yes, exactly. And then he has this other great chart showing their purchase price. And he compares Zillow, Open Door, Offer, Offer, Pats.

So Open Door and Offer Pat to other ibuyers came down. Zillow kept going, kept paying Top Dollar. So this week, we had Home Depot, we had Target, we had Walmart. And I thought, I think a lot of us thought that comps, meaning numbers year over year, obviously were very easy when you're comparing the depths of the pandemic to a year out. But we thought by this point it would be much tougher, especially with same store sales. I guess not. Home Depot, same store sales were up 6.1%.

Target was up 12.7%. Walmart, 9.6%. So when I say same store sales, these aren't new stores. These are stores that were around a year ago. Home Depot, we had positive comps every week, despite unprecedented compares last year, and grew sales by $3.3 billion in the third quarter. So just what's going on, insatiable demand? I wonder how many people decided we're just going to do projects at our house.

Like, buying a house right now is way too hard. We're going to do projects. This was an interesting one of that. They talked about lumber. They did say when lumber prices were like three and four times near-term levels, which they were not that long ago, they said they clearly saw units drop off, which then led to projects dropping off across the store.

They did see lumber impact a few areas here, where when the prices got too high, people pulled back. And it's interesting because that price elasticity, like, when does that hit things like use cars? Is that just because it's like you really need a car? Like when you need a car, you need a car. Can't live without it. As we see inflation hitting places, you just wonder when eventually people say, all right, I'm tapping out for a while.

I'm not going to buy more of this stuff for a while. When do we reach that point? A lot higher prices, I guess. I don't know. So I was looking at the transcripts for how often they said inflation. This was interesting. I don't know what to make of this, Ben. Inflation was mentioned 25 times on the Walmart call.

because they said fighting inflation is in our DNA. Obviously, Walmart, like, is a low price provider. On Home Depot, they said it eight times and zero times on target, which threw me for loop because I was Googling like cost, rising pressure. So they used words like cost pressure and things like this, but never once did they say inflation. Are they trying to trick the algos? I guess so.

Also, I listened to some of the invidia call. So, Invidia was $100 billion in 2019. It's over 800 today. Aside from Tesla, has we ever seen a mega-cap growth stock add this much market cap in so short a period of time? This is one where people don't complain about it like Tesla. You know what people get like angry about Tesla going up? Some people do. And then you have the cheerleaders. Obviously, there's a lot of people who invested in Nvidia and talk about it, but it doesn't have the same fanfare for being such a huge company. It's what the sixth biggest company, fifth biggest company? Probably because in order to get the fanfare, you need the shorts, I think.

Yeah, that could be it. All right, so, NVIDIA, record revenue up 50% from a year earlier. Record data center revenue up 55% from a year earlier. Record gaming revenue up 42% from a year earlier. This is the, it really is different this time when these companies get so large and they're still able to grow at these numbers. Remember the past was like, how many companies can grow this high for this long and get this big?

Like, eventually it tails off. Mubeson's baseline thing. Yeah. These companies all just annihilated that baseline idea. I guess flipside is all the other growth names that are paying for their transgressions, as Walt Frazier would say. Okay, here's a quote. But one, Nvidia is now worth 25 of those other stocks, and that's why the market doesn't

matter because Nvidia is still doing fine. Our GTC event series, so that's like a technology conference, showcases the expanding universe of Nvidia accelerated computing. Last week's event was our most successful yet, highlighting diverse applications, including supply chain logistics, cybersecurity, natural language processing, quantum computing research, robotics, self-driving cars, climate science, and digital biology. And if that sounds like a lot of buzzwords, that's the point. Invidia is operating at the frontier of where all of the shit is happening and their chips are in everything. They also announced plans to build

Earth 2, which is an AI supercomputer dedicated to addressing the global climate change crisis. So, Nvidia is a levered bet on AI and robotics and all that sort of shit. A couple weeks ago, I said I had my take on like the metaverse and headsets and stuff and saying, like, I'm out on that stuff. That's me personally. I think this stuff is coming. I think where it's going to start is work from home companies are going to say, all right, you want to work from home. We're meeting in the Metaverse. And I'm going to send you a headset that's done by Facebook or Microsoft. I do think this stuff in our lifetime is going to happen. It's probably going to be a pretty immersive experience for some people where it feels like you're sitting in a boardroom or whatever. Even though I'm personally kind of anti this thing. I'm in. I'm in. I can't wait. It's going to be huge. Huge. I know that there's people who I'm kind of like this. Go outside and do something. meet with people in real life if you really want to. But there are introverted people who are going to just love this and they're going to spend their whole life on this thing. And it's coming.

It's going to happen. Hungry now. Now? What about now? Whenever it hits you, wherever you are, grab an O. Henry bar to satisfy your hunger. With its delicious combination of big, crunchy, salty peanuts, covered in creamy caramel and chewy,

Fudge with a chocolatey coating. Swing by a gas station and get an O'Henry today. Oh, hungry, oh Henry. So Jensen Wang, the CEO of NVIDIA, did this amazing YouTube video that Josh shared this with us. He turns himself into a cartoon character. And if you're watching this on video, we'll play that in a sec. But amazing. Anyway, can I just say, is earnings season almost over?

Think about it. You ready for a break? I need to call time out. All right. Have you up to two times speed yet? Oh, yeah. Okay. One more thing about the earning stuff.

Walmart was talking about how they, like, built their own fleet to, like, deal with the inflation stuff. It sounds like Home Depot had to something similar, right? Oh, Home Depot. They're like, we're going to get it. We're going to get our stuff. We're not relying on, like, the barges. We're going to get it. These companies that can do that.

Yeah, eventually they had to. All right, here's one good thing about the inflation slash labor shortage. So this is from Bloomberg. The John Deere union workers decided, okay, we have some power now. We're going to renegotiate. They did a deal with a six-year contract that increases wages by 10% in the first year, 5% in the third and fifth years, and a 3% bonus paid on even years, and each worker receives an $8,500 signing bonus.

So this is like the good part about this. Workers have the upper hand finally and can band together and say like, okay, you can finally start paying us now more. Especially if you have these margins that are just amazing, give some of it to us. This is your whole thing about, unfortunately, it's big corporations that can do this probably and not small businesses, but that's the way the world now, I suppose. I guess congratulations are in order. Jerome Powell, second term.

How do you feel? Were you nervous? I think that would have been a misstep if they would have taken him out. I'm shocked to hear you say that. I'm sorry. You can't be one of these people who said the Fed is behind the eight ball or they've painted themselves into a corner for so long. What they were able to do coming to like turn around the credit markets in the pandemic. If you look at some of those charts, I'm sorry.

They navigated that about as well as they could have. They bought fixed income ETFs. You got to love that, right? Right. Everyone loves that. Yeah. And they were trading their accounts. I'm sorry.

But people just hate the Fed now. Like, for some reason, Paul Volkler is seen as like this hero, even though at the time, remember? He was a villain. He was a villain at the time. Yeah. I have a visionous history. Okay. Could that be Powell in 20 years?

Maybe they look back and they say, holy cow, this guy literally stopped the depression in its tracks. Or, holy cow, this guy started runaway inflation. That could be a just kidding. All right. Cars are expensive. We've met this for a while now. This blew my mind. The average transaction price for a new car, top $40,000 in 2021.

average price? It's a lot of cash. Actually, is it though? $40,000 is worthless now. It's a lot of money. That's a lot of money. Average used car, 25K. Jeez. The New York Times had a story that was your deal. This is like the Michael Bagnick lease arbitrage. So they talked about the fact that with a lease, you have the term set in advance. And they have a buyout price that's set in advance that's based on like a depreciation schedule when you sign up. It doesn't change. It's not based on market values. And they're talking about this, what you did with your car, right? You bought it at a lower price. So they're saying that, like, for example, this Volkswagen, how do you say, even Tiguan? I don't know to say it. Could be $9,800 higher on market versus what you'd pay for

it. Even like a Nissan Versa could be like $4,300 more if you would have to buy in the open market versus the least. So saying that like, you could even potentially do what you did buy it and then sell it for a higher price if you wanted to. Of course, then you're buying for a higher price, but still. They said the average car may be worth 36% more than the value estimate at the beginning of the lease. So, Ben, you're right. I got my car in early 2019. I'm due. I could either pay 25% more with a new lease, no thanks, or I could pay 20% less by buying the car.

So, yeah, you're right. I could sell the car for 25% higher, but then how's my wife going to get to work? Eat it, personal finance dorks. They're all these ones telling us the lease in a car is a bad deal. Yeah. There we go. Oh, man. shoving them in the locker. Nice, Ben. Take that. Have we peaked with the supply chain problems?

I think so. I think so. Los Angeles Port Chief said that bottlenecks have declined. The number of containers sitting at the docks, the port are down 29%. The Wall Street Journal also had a piece saying supply chain problems seem to have eased. They're saying that shipping and retail executives say they expect U.S. port backlogs to clear in early 2020 after the holiday shopping season. Makes sense to me. It sounds like it's still bad. It's worse, obviously, than it was, but it's getting better.

people are figuring it out or demand is slowing or one to the other. But people are going to have their head stuck on this one for a while, even when things kind of normalized. I was just reminded, I just took a sip of my delicious Starbucks coffee. So coffee has gone up a lot. Wait, so how much more for a Starbucks? Like a lot. My wife, this weekend, she said she was sick of paying $6 for Starbucks. She bought some, I don't know what this contractual. Six dollars. What was she drinking like a latte or whatever? Yeah. Okay. She bought all these different espresso machines. and she's making lotteys at home now. Okay.

Yeah. So I'm going to retire in like three years now that she's not paying for a coffee anymore. But let me just say, I've accumulated so many Starbucks rewards. So even though my coffee is up 25%, 50 stars, Ben. Ah, it's worth even more, huh? No, 50 stars is still 50 stars. That's what I'm saying. So you have, that's an inflation hedge.

Exactly. My stars are insulating me from rising coffee costs. That's not bad. I had a thought for you. I was at soccer with Logan and there's leaves everywhere, right? There's like piles of leaves and the kids are getting distracted. They just want to play with the leaves. And I was thinking, this is like the tweet where it's like, takes giant bong hit.

Where do leaves go? Why isn't the world covered in leaves? Because they fall to the ground. Obviously, you take them out of your backyard, but just all over the place in parks. They fall to the ground. We get snow. They're covered in snow. The snow melts.

The leaves are gone. Well, don't they eventually disintegrate and then they kind of act as mulch for the grass? Is that it works? Are you a scientist? I don't know. Maybe they burn them all. Even in spots where people don't rake them. And it doesn't snow everywhere.

By the way, I have a house without a lot of trees around it. Every year, I'm so thankful for that because I see my neighbors spending their entire Saturday garbage bags. I mean, that's not good for my back. I don't think I could survive that. You don't have a lot of leaves either, do you? You don't have trees by your house. Not a ton of you have to rake or anything.

But like, you see houses with these huge beautiful trees and it's like, oh, that's gorgeous. And then you see them out there for the entire Saturday raking them up. I'm fine having no trees. So here's like an iron law. Once a company gets to a million subscribers, and I'm talking about like a content producing company, once they get to a million subscribers, they typically see 20% of their audience cancel each year.

We're talking about The Athletic, who currently has 1.2 million subscribers, they're having a tough time growing, and they're looking for a sale. 20%. That's pretty good turnover. It's a lot, right? They're they saying that's average? And that's average.

I'm not saying that that's what the Athletics is experiencing. That's average. So the athletic is a company that does sports content. They do sports content. I've done, like, the free trial, pay a dollar for a month for three months once or twice. I'm a subscriber. I never read it, but I want to support the community. Geez, look at you.

Good Samaritan. There we go. They raised $140 million from investors. They are looking to sell, but for between $600 to $800 million. Apparently the Times looked at them and said, eh, they're worth $500 million. But they did $41 million in revenue in 2020 on Pace to do 77 in 2021. So it's not like a garbage business, but they're struggling with growth. Content is so hard.

content marketing, digital, like... Here's the thing that I can't figure out. Like, you're seeing these insane valuations paid for takeovers in all sorts of industries and fields right now. Like these huge numbers ago, I can't believe that company is worth that much money. What are these companies doing that buy them? Is it just to get competition out of the way? Because you can't, like, if a company is just being paid for this huge multiple of

whatever you want to put on it. So what happens with the companies that are overpaying for these businesses? Is that what you're saying? Yeah. Is it just that we're getting rid of competition and it's fine? It doesn't matter if we have to write it down? I think a lot of the companies that are being. bought or being bought by other private companies. That could be it. You see some of the numbers and

you go, how is that ever going to work mathematically that they're going to get a good return in the capital from that acquisition? All right. I want to do one question here? Sure. Here's a quick one. How do you two think about rebalancing versus holding things like crypto? For example, I put 2% the amount I was willing to lose overall portfolio into crypto and now it's almost 10%. The Bitcoin I want to hold forever, but what about the others? I entered this speculation clear eyed about the fact that it could go to zero, but not as clear about how to exit as it rose. or maybe even being more honest, I plan to hold Solana forever too, but now I'm considering trimming some of it back.

Here's my answer. You have to have rules before you go into this. Yes. You could change them, but you could break them if you want to, but at least you have to have to have some something because right now you can't think clear out about this anymore. Once you went from 2% to 10%, I think there's different kinds of buy and hold. There's buy hold and rebalance. There's buy and hold until something better comes along.

And then there's like buy hold, my narrative changed or buy and forget. I think when I bought Bitcoin, and I put a tiny amount of money into it, like back in 2017, for me, I'm like, I'm going to buy and forget this. I'm never going to touch it. But I had that going in. I think you have to understand, because you're right, when it gets too high or too big and you go, I'm going to kick myself if I don't sell someone, take some profits in it, and it crashes 70% from here, whatever it is. We've said ourselves, like, in the past, oh, I'm selling at 75,000. I mean, it's not easy. And every time it goes up, we like increase our ceiling a little, don't we? Right, right, right. It's not easy. There's no perfect answer behind this.

But that's why I think the exciting stuff in crypto from my perspective as a tradfai guy, but that sounds really bad to say, is that like the portfolio management tools for this stuff are coming where you can have it as part of a portfolio more easily and rebalance it and have it be part of everything else. That makes your life easier, so you don't have to think as much about this stuff. All right, recommendations. So I did watch Red Notice. Here's the thing. If Ryan Reynolds wasn't in it, I probably would have turned it off after a half hour. one who kind of made the movie. I'm a huge Ryan Reynolds fan. We know. Yeah, no, he was great. Here's my thing I came out at thinking, though. Because, I mean, it was like one of those

predictable movies where you're like, okay, I'm not worrying too much about the plot and what's going on here. I don't have to care about that that much. Yeah, it's just fun. Here's my question. Has the Rock ever made a really good movie? He's made some entertaining. I guess in 2019, he was the most... No, because how could he? He's an action guy. It was the most bankable star. He made the most money in 2019. The last time movies are normal. But has he ever made a movie ago? Oh, that movie was great. I got to watch The Rock's movie again. well fast five people love he doesn't need my advice

well what are you talking he's not going to make goodwill hunting he makes like a billion dollars a year here's my advice if I'm the rocks agent you need to do a movie that is with the Cohen brothers or Steven Soderberg guess what he could

I think he could I'm saying he should and even if it like it doesn't make a lot of money at the box office I think he should try to push himself a little bit and not say like this is the role I got the best shape of my life for

that's my career advice to the rock he makes a billion dollars a year I think he's going to be fine either way As far as action comedy goes, I thought that was a very fun movie. Yeah, I'm saying, if it was Kevin Hart or Jack Black, and then I said of Ryan Reynolds, it would have been 50% worse. Ryan Reynolds is great. Okay, one more.

Every year now for the last three or four years, on Thanksgiving, I watch planes, train, and automobiles. I like having those traditions now for rewatchable movies. This is one of those movies where every time you watch it, you pick up a new line. I only saw it once. I need to see it again, because I was underwhelmed because it was my first time, and I'm 36 years old. I mean, it has some of the cheesy 80s stuff in it,

but John Candy is so good. I watched it a few years ago with my parents when they were over for Thanksgiving, and I've never heard my dad laugh so hard is in that movie on the highway scene. So, anyway, those are my two suggestions for this week. I watched one episode of Dobsick, and it's on Hulu.

It's about the Sackler family and Purdue Farm and OxyContin, and it's got a hell of a cast. It's got the guy from Your Honor and Barrake Empire, you know that guy? Terrific actor. Yeah, he's good. Michael Stolver.

He's amazing. Michael Keaton's in it. He's one of the main guys. A lot of recognizable faces, Rosario-Dawson. I don't know if I can watch this just because of the story. It seems like it's going to be too depressing to me for what they did. I only saw in one episode, and it was super, super high quality. I can't watch Sunday TV anymore.

I'm too busy. Not to brag. Yeah, no, I got to catch up on the DVR afterwards. I didn't watch anything last night because I was doing other stuff watching the Knicks to lose against the Bulls. Succession a week ago was. One of the best episodes of TV I've seen in a long, long, long time with the board meeting stuff. It's pretty good. On stage, that entire production was insanely impressive.

That show continues to just knock out of the park. Is Logan Roy going to die this season? I feel like they have to shake it up a little bit. I don't want this to turn south, but the writing is so, so good that I feel like it doesn't have to. I listened to an interview with him, and he said that the last two episodes are about as shocking as anything that's ever happened on the show. We shall see. Did you watch The Jagged Doc with Alanis Morissette? I did not.

HBO Max? Yeah, the ringer did it. Shout to our ringer family. It's true. Part of the fan. Her episode on Curb to Yel Back was one of my favorites. I don't remember that. She told Larry who the song was about that she wrote.

I was nine when that album came out. Jeez. Because you were born in 1985. So says your shirt. Nostalgia overload with that moment. That was very good. And finally, for the first time in my life, I saw a river runs through it. I believe you mentioned that a year ago on this very show.

I love that movie. Very fine movie. Right? Very fine movie. Robert Redford directed it. How cool is Brad Pitt? He was awesome. He can play the cool guy so good.

He was so good. That was just a really good and painful movie. Very good movie. What happened to the dude who played Brad Pitt's brother? I've never seen him before. It's a good question. Because he was in the program as well, remember? He was the quarterback in the program.

Oh, was that? Who was the program? Was that Bruce Willis? No, the program was the college football one. I'm thinking of the last Boy Scout. I don't know what I'm thinking of the last Boy Scout. last boy scout the program okay anyway big recommend and finally ben you son of a gun box office receipts i'm holding i hope that i take the l look no look hold the i hope that movie theater dead you son of a bitch

hey i'm rooting for my take look at this chart here though there's a huge spike at the end of the year are there any good movies come out at the end of the year this year honestly you're rooting for your take that movie theaters are going to die shame on you shame on you selfishly i just want more movies to come out on HBO max every week they're going to Oh, did you watch King Richard? Any plans of watching it? No, I want to watch it. It's on my list. I know it's going to be good, but I don't really care to watch it. I'm going to. I'm definitely going to.

Because the guy has very good reviews. Even though he hasn't been in a good movie in a long, long time, I love Will Smith. He's the best. Okay. If you missed our talk your book from this week on Monday, we talked to the guys at Life Goal Investments about an ETF they created specifically for saving for a down payment. I thought the idea behind it was solid. I loved the way that they came about it. Check out that one. Next week, Index Curse, coop or maybe index co-op. We don't know. They said it could be both.

We're talking defy. We're talking dows? Metaverse? That's going to be a good one. Animal Spiritspod at gmail.com. And happy Thanksgiving, everyone. Happy Thanksgiving. Thank you.