Animal Spirits Podcast - The Most Crowded Trade on Wall Street (EP.339)

Episode Date: December 20, 2023

On episode 339 of Animal Spirits, Michael Batnick and Ben Carlson discuss: mission accomplished from the Fed, what comes after a soft landing, new highs in the stock market, small caps breaking out, the best thing we've built in America, more people own stocks than ever, the economic chart of the year, the best movie of the 2020s (so far), and much more! Thanks to AllianceBernstein and the College for Financial Planning—a Kaplan Company—for sponsoring this episode! To learn more about the AllianceBernstein Conservative Buffer ETF, visit: https://www.alliancebernstein.com/us/en-us/investments/etfs.html For more on the College for Financial Planning's Accredited Behavioral Finance Professional (ABFP) program visit: https://www.kaplanfinancial.com/wealth-management/abfp Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Investing in securities involves risk and there is no guarantee of principal. Investors should consider the investment objectives, risks, charges, and expenses of the Fund/Portfolio carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.alliancebernstein.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing. Buffered ETF Risk: There can be no guarantee that the Fund will be successful in its strategy to buffer against Underlying ETF price declines. A Buffered ETF must be held for the entire buffer period in order to realize the full benefit of the upside/downside caps.BUFC is distributed by Foreside Fund Services, LLC. Foreside is not affiliated with AB. Learn more about your ad choices. Visit megaphone.fm/adchoices

Many investors have seen that diversifying across stocks and bonds alone may not be enough to help safeguard assets. The Alliance Bernstein conservative buffer ETF ticker BUFC seeks to tackle that problem. BUFC is designed to help manage downside risk more precisely, which may help investors mitigate the pain of selloffs without giving up the opportunity to grow your investment when markets rally. Visit abfunds.com slash go slash ETFs to learn more. That's abfunds.com slash go slash east. Today's Animal Spirits is also brought to you by the College for Financial Planning. Michael, Emotions investing go hand in hand. For advisors especially, advisors especially know this.

I'm steady, Eddie. I don't get too excited. Just kidding. Yeah, only in your paper account. So I did this post this week about how if you stayed the course, good on you. Kudos for staying the course because of all the stuff that we've been through. The pandemic and a bubble and a crash and a bare market. and the 60, 40, and all this stuff.

You know the shack? You know the shack? Yeah. There's a lot of stuff we went through. And I think, especially, I think advisors especially understand that a lot of that helping people state the course is managing those emotions. So according to college for financial planning, there was a study done that said 40% of the value an advisor provides for their clients is emotional, feelings of confidence,

for their portfolio, satisfaction. I always say the number one question people need answered for financial advisors is, am I going to be okay? Right? I think that's what a lot of people are looking for. College for Financial Planning, a Kaplan company, offers an accredited behavioral financial professional designation. This stuff didn't exist when I was coming up. I always say that if I was to redo college again, I would get at least a minor in psychology, maybe a major, just to understand

how people work. There's seven modules to this course, behavioral finance, emotions in financial markets, emotions in investing, risk detection, behavioral biases, investor bias mitigation, and puzzles and frontier in behavioral finance. One of the 11 designations of College for Financial planning has to help gain specialized knowledge. I like it. You think there's anybody that has all the 11th? Michael Kitsis, maybe. He's probably close, right? They also have a Master of Science and Personal Financial Planning with Client Psychology and Communication Pathway. See, this, again, this is the stuff that I didn't get. To learn more, check out the links in our show notes for both the Behavioral Finance Program and the Masters program.

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. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael, I think social media has made it hard to gauge sentiment correctly because you're dealing with extremes

in how people feel and how they put out their opinions and analysis, especially when it comes to the market. But sometimes I feel like Twitter still is a good gauge of this when it comes to the market. And last week on Fed Day, which was what, Thursday, I guess, when Jerome Powell spoke, it felt like a mission accomplished type of day. And you could feel it in sentiment on social media, too. I feel like this is a real thing. There was a... a relief like, okay, we've done it. And again, it could just be that we've, we're on the layover still when we landed that first leg of the soft landing. But it really felt like, all right, this is it. And I don't know if it was the bond market that forced the Fed's hand because

the Fed, at this point, you can't really listen to what they say. You have to kind of interpret, like, they're not going to tell you, we're going to cut rates in March, right? They're going to wait. They don't want people to get ahead of themselves. So the Fed says something and then the next three days, they spent backtracking it. So you have to get ahead of it a little bit. But this was a change in tone, and this felt like spiking the ball a little bit for them. Like, hey, we did this.

We made it. You know, it's, well, the market spike, the market spike the football. The Fed. Jerome Powell did not. You're right. He's never going to be like, right? He's never going to be like, we did it. Congrats to us. Leasman asked him about

potential rate cuts in the future. And this is what he said. This is a quote from Powell during the, during the press conference. We are seeing, you know, a strong growth that appears to be moderating. We're seeing a labor market that is coming back into balance by so many measures. And we're seeing inflation making real progress. These are the things we've been wanted to see. We still have a ways to go. No one is declaring victory. That would be premature and we can't be guaranteed of this progress or moving carefully. And then he, you know, talks about other, other risks. And the market just, you know, stop. I don't, I'm not even listening anymore. We're just,

doing the thing. Yields are going to crash. Stocks are going to rip. I don't care what you say about not declaring victory. We're declaring victory. It's over. This is also why I think as much as I like those pattern recognition market history stuff, like 12 months after this, this happened. And I feel like with the Fed, you can't do that anymore because they talk so much more than they did in the past. In the past, they used to not tell the market when they raised their lowered interest rates. You just have to learn about it like a month later. Now the Fed, I think they talk too much, right like Powell says something and then another Fed chair comes up the next day and says here's what Powell actually meant and then another person says no no no here's what they actually

meant the other thing is this is from September 2020 which is pretty much the near the bottom of the bear market but the Fed at that point was not even coming close to us off landing so Powell said we're never going to say that too many people are working but the real point is inflation what we hear from people when we meet them is that they're really suffering from inflation if we want to set ourselves up to really like the way to another period of very labor market, we've got to get inflation behind us. I wish there were a painless way to do that. There isn't. I remember that. I guess I had blocked it out of my memory, but people were, there was a lot of articles. The Fed wants you to lose their job. And social media took that and ran

with it. And people were pissed. And I don't know if I said this out loud. I probably did. If you were one of those people who in the bull market was saying, don't fight the Fed, Well, it would probably be prudent to also heed that message on the reverse side. The Fed wants to slow the economy. They're telling you they want to solve the economy. You probably should listen to them. This is almost why you have to give a lot of people a pass for the recession call. The Fed was telling you they wanted to put you into a recession.

Right? So it's easy to dunk on people in the folly of forecasting and saying, oh, all these people who called a recession are idiots. But the Fed was telling people, we're going to have a recession. This time, in late 2020, I give everybody a pass for thinking that the Fed was going to be able to do what they said they were trying to do, right? Like, being cautious in late 2020 about the economy made a whole lot of sense. It didn't turn out that way, but nobody deserves to be dunked on. So we got a question from a listener who said, okay, fine, the economy has been more resilient than anyone thought possible. if things are holding up, why does the Fed need to cut rates potentially if the economy is in such good shape?

And my answer to that is, since inflation is falling, and I think the Fed even said this, that means real rates are rising. If you kept interest rates the same and inflation is falling, real rates are rising, that's essentially being more restrictive. And them coming down with inflation means they're keeping real rates more constant. And so it's not like they're really easing. they're lowering with inflation to lower real rates. They're getting less restrictive. Yes, they're getting less restrictive. Because, yeah, if they kept rates where they are and inflation kept falling, then real

rates, the rate above inflation is rising, which is essentially a restrictive policy. Well, because also, they can say, listen, they're not going to say mission accomplished, but inflation is falling in a lot of the right places, not every metric. And the economy is doing its thing. So why not back off? Why not back off the break? Just ease up on the break a little bit. That's all.

So there's somebody in Twitter, Gas Buddy, who tweeted the national average price. Gas buddy used to be based in Grand Rapids of Michigan. Oh, yeah? Mm-hmm. Where is he based? I don't know. Got too big and I had to move to Chicago or something, I think.

Okay. People love learning about gas prices. The national average price of gasoline now stands at 3 or 4, the lowest since 2000, June 2021. 30 states have average prices of $2.99 or less. I saw, I'm pretty sure I saw $2.99 at the gas pump, and I was, uh, oh, not bad. I got two, I got $2.75 this weekend. Not bad. Also, middle age talk here, talking about gas prices. I, Connorson had to take yesterday on Twitter, and he said, I'm too lazy to look it up, but this has to be the first

time of my lifetime, where stocks are at 52-week highs, gas prices are at 52-week lows, and the unemployment rate is below 4%. that is about as goldilocks as you could imagine for an economy. It's not bad. New York Times. Prices are falling in places for some goods. This season, toys 3% cheaper than last Christmas. Sports equipment is down 2% washing machines 12% less than a year ago.

Eggs are down 22% from a year ago. Or have some deflation. I want to see if there's a subcategory for dog food. Are you paying a lot for dog food? Dude, I went to PetSmart the other day and I couldn't believe it. A bag of dog food was... You have to get those giant ones because you have a big dog? Well, my wife feeds her every single time she comes in.

My dog has been trained. My dog trained my wife. That every single time my wife walks through the door, she gives her another scoop. So we're going through it pretty fast. So you get the cousin Eddie bags from Christmas vacation. It's giant. By the way, Christmas vacation was just on rewatchables. I can't wait.

Yeah, I watch it every year. It's by far the best Christmas week. And Bill Simmons had the best point of the diehard thing that we've ever had. Because obviously people argue about that every year, the diehard Christmas movie. I never realized that Die Hard came out in July. DiHard was released in July. I think that kind of trumps all the Christmas talk. It has to be a non-Christmas movie if we didn't come out in Christmas.

Anyway, $85 for that bag of dog food. I'm pretty positive. I used to pay $60. We've talked in the past about how vet bills keep going up and they're so expensive. I think the pet industry just knows that pet owners will pay whatever you charge them. And so they could jack up prices. It's like Disney. Having a pet is like Disney.

And the pet industry knows this. So they keep jacking up prices because they know people will just pay because they love their animals. Well, what are you supposed to do? Not take your dog to the doctor? I know. All right. Another good sign. This is from the Treasury.

They looked at since 2019 across. developed countries, U.S., Canada, France, Japan, UK, Germany, and Italy, real wage growth. In all of these other countries besides Canada, it was down. Italy is down 9%, Germany, it's down 7%. Again, this is real wage growth from pre-pendemic till now. The U.S. has by far the biggest real wage growth of almost 3%. Canada is slightly positive of 0.2%. The other five developing countries have negative wage growth for this time.

This gets back to my other point of it could have been way, way, worse. And I guess it, how do you, what is the vibes check like in Europe? They had, they didn't get the stock bull market like we had. They had negative rates for a while. That was fun. But now they have all these adjustable rate mortgages. Their real wage growth has been falling. Their economies aren't growing as fast. I don't know. We have a lot of international listeners. So if somebody wants to hear, I, I would like to hear you a vibe check from people in Europe because things there are objectively worse than they are in the United States. And it's not even close, I don't think. All right. One more from Matt Darling. When people talk about how real wages have

kept up with pre-pendemic trend, it's worth noting that the last 10 years is a period of unusually fast wage growth. Median wages were fairly flat from 1998 through 2013. So look at this chart here. You can see they kind of went nowhere for a while. This is real wage growth. Obviously, the 80s part of it was high inflation. This is the one surprising thing to me about the wage growth piece and having a strong labor market that it seems to have made people mad. And obviously, the inflation piece is the big part of it. But I feel like for years and years, we were talking about how wages have been stagnant forever. Now that we finally got this boost in wage growth, I don't think people liked the ramifications of it. It's like, whoa, whoa, we wanted the wages to grow.

We don't have this other stuff that goes with it. Remember a big topic in the 2010s was comparing wages of CEOs to the average worker? Ah, yes. That was a big portion. And the reason why was to this person's point, median real wages didn't go anywhere for 15 years. Right? Like there was a book. I read a book with the CEO pay gap that's, again, here I go, just making up titles. But there was a book, a whole book dedicated to that. And this was like a big part of the discourse in the 2010s that we just don't talk about

anymore, which is wonderful. Yeah. I guess it's always something. But yes, this is, this is. And people say, well, real wage is only up 3% in the last three years. That's actually a lot compared to the last 30 or 40 years. So James McIntosh wrote in the Wall Street Journal, an article that he called Beware the Most Crowded Trade on Wall Street.

And there's a chart in here. The market implied probability of a rate cut by March. And this started to rise in November. And then last week, on the day, that you mentioned, Ben, it went parabolic. Now there's a 90% or thereabouts, 80-something percent market applied probability of a rate hike in March. And so on Thursday and since then, do you think it's more likely that the bond market got ahead of itself in pricing in rate cuts or the stock market? That's a good question. Bill Gross sent a tweet about how I think

4% is the line in the sand in the 10 year, and I sent that to you, thinking about how far could things go? The strange thing about bonds is bonds really overdid it to the upside. And I do think that the bond market, in some way, forced the Fed's hand. When the bond market went to 5%, that was the Fed, because the Fed kept saying, we might raise again, wink, wink, wink, you know, sorry, I can't wink very good. They were, Paul kept saying, like, we might still raise again. And then the bond rates went to 5%. And I think that's when the Fed said, okay, all right, we got to chill with this rhetoric because I know we're just talking, follow what we do, not what we say, but we need to maybe change the way we talk because we can't have the bond

market getting like this. And so I think the bond market overdid it at the upside. Will it overdo it to the downside as well? And so are investors? Positing got really crowded in the higher for longer trade. And so that unwound big time. My take for this whole period has been that the stock market has been smarter than the bond market. That hasn't always been the case, but it seems like for the past few years, the bond market was way off sides at the depths of the pandemic when every single maturity in government bonds was below 1% for a period. The stock market foresaw the vaccine coming and the pent-up demand and the economy. I think the stock market rightly fell in 2022 when rates were rising and got ahead of the Fed cutting then. And the stock market has

been ahead of this potential rate cut in soft landing this year. So I think the stock market has been more right than the bond market. So the 10 year is now at 3.9. You would expect that they're still going to be, not so, that the curve will continue to disinvert, right, as the Fed, if the Fed does cut in March, where are they now? They're five to five and a quarter. So where are they ultimately going to land? Of course, nobody knows. But for the 10 year to be, under 4% right now, seems a bit overdone. Wouldn't that suggest that the Fed needs to cut to something along the lines of 3% by the time they're done?

I think that's what their dot plots or whatever show. But yeah, you're right. The bond market isn't waiting for that. The curve was disinverting really from July. And now it's inverting even further still. The 10 years falling faster than the two year. This is my point about the past relationships. But a lot of that might be positioning.

I know it's a cop-out, but seriously. Yes, but that's my point about the relationships of the past. In the past, bond markets' interest rates peaked when the Fed said or did this. And now the market does not wait. And it's not going to be a lag anymore. It just happens. Totally. All right, so back to the stock market.

So last week, I think it was last week or two weeks ago, you said the Dow on a total return basis is back to break-even. I looked at this is as of last week and as of this morning as well the NASDAQ 100, the S&P 500 and the Dow have all broken even and we're like a hair away from on the price. I think the NASDAQ

did it today, that S&P is 1% away. We've broken even. I'm not going to call it all-time highs yet. We did for the Dow but we've broken even from the bare market on a total return basis including dividends. Wow. Let's celebrate that. The small cap one is still below. The rest of 2017 is 17. Don't close over that. It's time for celebration. It's the holiday season. And we've been through a lot. We've been through a lot as investors.

2022 is really painful for everybody. For some more than others. But there was nowhere to hide out in 2022. It really was rough. 34% crash in March of 2020. One of the worst months ever. Then we have a bull market to rival all. ball markets. It was a mini bubble, essentially, for 12 to 15 months. Then we had one of the worst years ever for a stock bond portfolio in 2022. We did have a 10% correction this year as well. And now, all-time highs, NASDAX's up 50% percent. S&Ps up 20%. The market doesn't, clock never goes to zero. So you can't say, all right, it's done. We're through it. It's over. Let's take a break. But I do think it's okay to celebrate every once in a while that if you made it through periods like this, that all right, I did it. I didn't panic sell at the lows.

I survived. Buy and hold is not a perfect strategy. I know some people get mad at proponents of stay the course investing as if there are other alternatives. And there are, of course there are. But it's a pretty damn good solution for most people because timing this thing as we've, as we discuss a no, I see it's, it's not easy. In fact, it's let's call what it is.

It's impossible. 90% of investors should buy and hold and stay the course. That's how I feel. 9. 100? I mean, you could say 100. I'm saying some people, egos will never allow them to do that.

But most people should. And it's painful and it's imperfect, of course. But I think it just comes back to a couple of things. People's motivation, especially in the United States, people's motivation to always move their personal goalposts, always make more money, companies in the United States especially, just being incredibly efficient at navigating challenging periods. And here we are. Profit margins dipped, earnings dipped, but it's not voodoo. It's not

anything other than earnings being back at all-time highs, margins going back to all-time highs in the stock market following suit. That's all it is. There's those cultural accounts on Twitter. It'll be like a picture of David, the statue, and it'll show a picture of the Roman Coliseum and be like, why don't we ever build stuff like this anymore? You know what we built? The greatest stock market in history. That's what we've built in this country. It's Teflon, basically. We've built some of the biggest best companies in the world, and that, I don't know,

maybe matters more than a building. You guys sounded pretty topy. It sounded pretty topy. I know. So, to the state, wait, the state of the, this is, this gets back to the state of course thing. Because you could wait forever, and then all of a sudden the stock market takes off. This is an amazing stat. So Russell 2000 made a 52-week high today after hitting a 52-week low 48 days ago.

It's the shortest turnaround in indexes history to go from a 52-week load to a 52-week high. I looked and small-caps had a bull market in seven weeks. They're up 22% from the October lows. I wrote about small-caps in valuations in like November 3rd or something. Okay, you don't like the valuations at large-cap, buy small-caps or international and stuff. And it just so happens that they're up 20% since then. And it just happens in a hurry. And like that's the state that course.

people always say if you took out the best three best days of the year or or just invested in that stuff is bunk but you know why the market doesn't the market doesn't let you back in it moves really fast and then you say oh i can't get back now just look at the look at the run can't get back and faster faster than ever now too so the equal weight that we've been talking about for so long again the nonsense that people have been spewing well it's not totally nonsense But what's behind the stat is that be careful when they go, the market's going to tank about Magnificent 7, while it's true that they've been responsible for a lot of the gains of the index, almost more so than ever.

Matter of fact, Callie Cox tweeted 71% of S&P constituents have underperformed the index. So factually, it's accurate. But this idea that it's a harbager of doom going forward, just bullshit. RSP is up 13% year to date. That's the equal weight, S&P 500. So if we look at since the start of 2022, which started of the bear market, the S&P is essentially flat now. And RSP, I don't understand the RSP ticker. Why wasn't it like EQL?

Sorry, Invesco just... What's the L? Equal. Oh, wow. Anyway, RSP is down 3%. So they're essentially in the same spot. Equal weight is underperforming a little bit over the last two years, but it's because it did so well last year that it underperformed a little this year. Here. Let me ask you this. We're now at the point, again, to the to the most crowded trade on Wall Street. Are we getting ahead of ourselves? If soft landing is now a consensus, what happens if we don't get the soft landing? Our stock's price to perfection. It's a fair question. It is. I think that's the thing no one has thought of. What happens after the soft landing? Because the soft landing seemed like it was so far out of the realm of possibilities. I don't

think anyone stopped to ask themselves, what happens in the cycle after the soft landing? What does that mean? I don't know. That's a good question. I haven't really thought about it. So, I'm just saying, for the sake of the stock market, we better land this thing softly. Like, if inflation re-accelerates, I think that. But isn't inflation re-accelerating a good thing because, or not, it's not a bad thing

because it means the economy is growing still? I think there's not, there's a not insignificant chance. I don't know where I would handicap this. I'm just throwing, making it up. I don't know, 20% 25% chance that the economy overheats in 2024, that the stock market booms, the housing market explodes with lower interest rates, M&A picks up, the IPO window opens, people start spending furiously. I don't think that, I think there's a chance that we get an overheating economy next year.

It's possible. That's why we never got a recession this time because nothing ever went too excessive. We need the excess. Mark Dow always says you can't commit suicide jumping off of a six-foot, six-inch ledge. Right?

So that's why you need those excesses for the economy to really roll over. I think that's what a lot of people miss. So I think we do need some sort of blow off to make it happen. Maybe it'll happen. I wrote this back in 2017. What to make of today's twice in history

S&P 500 evaluations. So this is a big thing in 2017. The Cape ratio, reached 30 for the second or third time in history, I guess. I would say from 2014 to 2019, that five-year window, the capri-scio, we spilled a lot of ink over that topic. And credit to us. Credit to us.

I think our takeaway, at least, my takeaway was that valuations matter over long term, period, hard stop. Right. But my point is maybe they don't always. So it was 1929 and 2000. one of the only times in history before. So Lawrence Hamptill tweeted this last week. Since the Cape first hit 30 in June 2017,

the S&P 500 has returned over 100% despite suffering two bare markets along the way and probably one that was close at the end of 2018. Valuation-based timing is hard. That was the biggest, like, insight that we had at the time was probably a better, not probably, a better way forward is to, and this is not easy, it's easy to say,

is to adjust your expectations. for stock market returns, don't try and get too cute with valuation, but the 10% that we've seen over the last 10 years probably isn't going to continue. I guess what? It did. It did continue. Which was great, which was great. Never been more happy to be wrong.

That's why the expectation thing is, you just never wanted to go too high. Because if you take your expectations low and returns are better than you thought, that's a bonus as opposed to, I think returns are going to be 15% per year. And no, they don't. do that very often, then you're screwed.

The most important thing for investors is just, like, never get too hot or too cold. And it's okay if in 2020 and 2021, you know, maybe you chased a few things and you did some things that you probably regret. Hand up. We're in that boat. We made some investments we wouldn't do now. Absolutely. And in 2022, if maybe you took down your stock exposure from 80 to 70 or 70 or

70 to 50 or whatever it is, that's, that's okay to do things like that, right? But like the, the extremes of I'm in, now I'm out, now I'm in, now I'm out. That's how you really, really, really fall behind. And you can't, you can't make up for a, if the market's up 20% this year and you miss it, how do you get, you can't get that back. And this is why the people we said at the time, do not try to time the stock market with T-bills. because there's a lot of people who probably said, I'm going to put money in T bills or money markets that are earning 5% at the beginning of the year,

and I don't want to deal with the stock market. I'll just clip my 5% on and I'll be fine. And now the stock market's up 20 plus percent. Now what do you do? You're right. My bigger point is it's okay to not be perfect, right? Like if you put 15% of your portfolio and earning 5%, it's fine, fine.

Okay, so you weren't perfect. That's the thing. Do it on the edge is don't do the whole, don't go to extremes. Right. Yeah, if you're going to go from 80, 20 to 60, 40. Okay, fine.

Guess what you still have the 60 that, yeah. Yeah, just don't go 80, 20 to a zero. Right. Yeah. And I think by and large, most people, most people pretty much know that at this point. Wall Street Journal had some good charts in here. It's a magnificent sevens market. The other stocks are just living in it.

They compare Facebook, Tesla, Google, Nvidia, Amazon, Microsoft, and Apple to different country stock markets and how big they are. One of us, I'm not naming names here, was on this about four months ago. I'm not going to take a Victor Lab here. The Wall Street Journal was a little slow to get to this one. I may have been on this, but Apple is nearly the size of Japan. Microsoft is bigger than China. Amazon is about the size of France, a little smaller.

This is what I'm talking about with the things that we build. Yeah, we don't have these churches from the 16th century, but we've built the biggest best companies in the world, and they impact way more people. We still know how to make stuff here. It's just the stuff we make is different. Okay, here, the combined weighting of the Magnificent Seven is larger than that of all stocks from Japan, France, China,

and the UK combined. Just a mind-boggling stat. Wow. So this is the thing about concentration. Like, I'm worried about these seven stocks. I don't know. Are you just as worried about the UK stock market as you are about one of the... So this is why the Magnificent Seven thing is never bothered.

me. I think it's a risk that people make up to try to scare people. I don't think it's an actual risk. I'm not going to lie. I've been scared about the size of these companies in the past. Like, when these companies first hit a trillion dollars back in 2019, I think it was 2019? It's like, oh my God, a trillion dollars? Like, a trillion dollars? How much bigger can they get? Guess what? Apple's $3 trillion. And guess what? It'll probably get to $4 trillion. Yeah. And if AI really is going to change the world, there's going to be three or four more stocks that are going to hit a trillion as well that we probably aren't even thinking of right now. And if one of these stocks falters, they're going to take their place. That's my Jerry Seinfeld way of looking at it. You never saw the episode where George always fell behind. Elaine was in the middle and Jerry came out ahead. George threw a $20 bill out the window and said, see if you can come back from now, Jerry.

And Jerry put an old coat on and found a 20 in there. That's the stock market. Seinfeld explains everything. Apple's trading at 30 times estimated forward earnings. Okay. Remember when it was at 12 or 10 a few years ago? I mean, it doesn't sound cheap, but that's okay. All right.

Another Wall Street Journal. More people own stocks than ever. So this is from the Fed survey. we've actually gone from 53% in 2019 to 58% now, the people that own stocks, highest on record. Kind of crazy, it was nearly 30% in 1989. The 1990s really supercharged this. But this is another, you know, feather in the cap of a bubble, I guess,

that it pulls people in. The whole Robin Hood effect and meme stocks and all that stuff are the 2020-21 phrase. That I have from this chart, which is a really good one. Number one, the percentage of U.S. households owning stocks in retirement accounts has gone sideways for the last 20 plus years. And there's no real reason why you would expect this to all of a sudden go up. But it did. It broke out in 2020-2020.

So the directly held stocks, which a lot of that is a Robin Hood effect, which is probably not necessarily what you want to see. However, it did some good because it motivated people to... Why else would there be a breakout in people owning stocks in their retirement accounts? Right, because they did a little bit of...

And again, it's not a number of people. So it has nothing to do with the labor market. It's the percentage... Right, it's a relative base. And it said the direct stock ownership, meaning if you own individual shares of stocks had its largest increase on record. So went from 15 to 21%.

You're right. That's kind of crazy. Yeah. So the fact that that was a bigger increase than we saw in the 90s when stock trading really took off. So how about this? Can we say that the gambling that happens inside of the Robin Hood app, which is, you know, not great? If it motivated people to get smart in their retirement accounts, can we say that that's at least net neutral, maybe even a net benefit? I think it's been a net positive, even if you don't agree with how it happened. It wasn't like some people read a book about personal finance and they decided, oh, the light bulb went off, I'm going to save and invest. It took this weird period to do it, but whatever, it worked.

Wait, is that, is that the Nick Majuli effect, I see? That just keep, I mean, just keep buying came out and then, and then that skyrocket. I'm just saying. Nick did it. Okay. Credit to Nick. All right. This is, this is kind of hilarious.

Goldman Strategist Lyft S&P 500 forecast a month after setting it. A blue, I go, listen, it's hard on an article from Bloomberg. Just one month after setting a 2024 target for the S&P 500, Goldman Sachs group. Strategists increase their forecasts as the year-end rally shows no signs of abating. Cost and noted, that's their chief strategist, that $1.4 trillion is poured into money market funds this year as interest rates climbed far higher than the $95 billion that fund into equity. As quote, as rates begin to fall, investors may rotate some of their cash holdings towards stocks. May. Yeah, may.

They may. We've had this conversation a million times. I just, I think money markets, that's cash. That's money from checking count into money markets. That's not... There should be a lock-in effect for these year-end targets. You can make one change. You get one mulligan a year.

That's it. Because what happens is, are these forecasts useful to anyone? No. But what happens is they set up at the beginning of the year. They're wrong. And then three months left in the year, they just move it a little closer to where the market actually is.

Remember a couple weeks ago we said, I think we just had a V-shaped rally. We did. So, listen, this... Momentum is very strong in the short term. You will never hear say it's all clear, green light, go all in. But through the end of the year, I probably want to want to step in front of this train. I was looking at...

You also never got an all clear from that correction either. People are going to look back and say, oh, the Fed talked about easing, and that's the reason the stock market came back. There was nothing in October that said, okay, the market's bottoming, coast is clear, get back in. We're going to have a 20% rally in seven weeks. weeks, it never happened. Stocks look bad. So I was looking at all of the posts later this week up on this, the percent change from the October lows for various stocks.

And listen, interest rates matter a lot, matter a lot. If you look at some of the interest rates sensitive areas, home builders, for example, real estate stocks, the five-week rally that these stocks had is. almost unparalleled. Look at home, like Home Depot, for example. I mean, there's a lot of them. The stock market, it doesn't let you. More than the NASAC 100 this year. They're up 57%. It doesn't let you back in. That's the problem with going to cash. There is never a good time to get back in. Never. You are so much more likely to buy higher. Part of this thing we do, someone actually emailed us last week.

I don't think you saw this one. I think I replied and deleted it. But what is it? personal emails, personal responses? That's taken off. Someone emailed and said... Our inbox is lighting up like a Christmas tree. Someone said, I don't want to simplify all that you guys do, but they said, and sorry for giving ourselves a pat at the back, but they said one of the things that you do that I really appreciate is you take conventional wisdom or headlines or narratives and show

why they may be wrong. And, or point out something that happened that was unexpected. Can you imagine saying mortgage rates are going to go to 8% this year and home builder stocks are going to be up almost 60%. I would have never believed you. If you would have told me, if you would give me that setup, right? What would be the world that would happen?

And then you reconstruct that narrative and realize, okay, here's the things that made that happen and why and new home sales were the only ones in town, blah, blah, blah, blah, blah. But that's another unexpected thing that you would have, the macro part of it

would never have led you to have that conclusion. Nobody has this all figured out. And one of the things that people dislike about financial commentators and talking heads is that it feels like they're talking down to the viewer, to the listener, as if these people have it all figured out just because they're in TV.

And so I think we do a good job just hopefully explaining that this shit is hard and nobody knows the future better than anybody else. All right. Barry Bannister is a macro strategist at Stiefel. Somebody emailed this to us. Ben, you were talking about how come nobody inflation adjusts the S&P 500? Boom. Inflation adjusted S&P 500, not particularly close to the,

2021 high. So if we look at it through this lens, the bold market, just getting started. We've got a ways to go to take out the inflation adjusted high from 2021. So if inflation goes up again, that means stocks are going to go up even more to catch up. There you go. All right. This was a really interesting chart from Gina Martin Adams at Bloomberg. She shows the annual change in the S&P 500 versus the estimates from the beginning of the year through the end of the year. So I'll read her to the tweet and then I'll explain this. Don't make the mistake of overemphasizing consensus estimates as particularly meaningful.

And it's funny because we talk about consensus a lot and what's priced in and how this impacts and influences things. She says estimates are not an indication of what's actually priced into stocks. S&P earnings results relative to beginning of year consensus and corresponding index price returns shown below. So as an example, in 2020, the earnings came in 20% lower than estimates at the beginning of the year. The market was up 20% that year. Estimates, actual earnings overshot to the downside in 2022, and stocks were down a lot.

But you sell the same thing in 2023. Actual earnings did not meet expectations and the market was up over 20%. In other words, there's no pattern here between where consensus is, estimates are for earnings in the beginning of the year versus the end of the year and corresponding stock price. I thought that was interesting. Right. Sometimes earnings fall and the stock market falls. Sometimes earnings fall and the stock market rips. But even relative to expectation. So you would think, you would just think that if earnings fall relative to what is estimated in the beginning of the year, the stock market

has to go down. Not even close to true. 2019 is another year. It's just completely random. So I've done this before where I looked at the percentage of years where the S&P 500 is up when earnings are down. When the earnings are down, the S&P 500 is up more in those years than it's down by a wide margin. It's very counterintuitive. Yeah. Because the market probably fell the year previously as it priced in falling earnings.

All right. That's a good fallback for moving your goalpost, though. If you're wrong, you go, the market's priced it. The market's forward-looking. Of course. Duh. Of course the market is going to rise because it's seeing that there's going to be

interest rate cuts. It's priced in is wrong 80% of the time. That's pretty, yeah. That's already in the stock. It's already baked into the pie. That's somebody who's missed the market, who's missed the rally.

One of my favorite things that financial commentators do is pull percentages out of their ass, though, like that. Like 99% of saving and investing is living on less. than you make. And I just love when people make up numbers like that because you can't refute them.

Well, of course. There's actually nuance into what I just said. But yes, you're right. When the market falls 25%, generally speaking, the bad news is priced in. So, but it's not true on the upside. Right. Like if there's like a skew, you could say, if the market's up 20%, you could say it's priced for perfection and it could still go up another 50%.

Usually doesn't happen to the downside. That's fair, because the downside stuff happens faster. Can you guys please talk a little bit about leverage index funds? I'm cringing as I'm reading this. I'm already investing in index funds like the QS and SPY and I'm in the long term. Should I consider investing in leverage funds like TQQQ or SPXL, which are 3x leverage for the NASDAQ and the S&P? Okay.

It's been a while. And boy, are we so back. in 2020, and really, I think, heading to 2021, we got this question a lot. Once or twice a week, probably? A lot. And the answer was, forget about the fact that these things have like a daily reset and they don't actually track 3X over any meaningful period of time. These are trading vehicles, not investing vehicles.

But, yeah, in a bull market, these things will beat the market, not by, three X, but they will beat the market. The problem is, in 2020, this thing fell 70%. I got this TQQQQ, which is the three times. It was down 80% last year. That's a great depression level crash. Yeah. So, no. It's up 200% this year. You cannot stick with these over the long term. If you want to say, hey, I hear you guys, I'll make it 2% of my account. Fine. Fine. but please for the love of God do not get crazy with these things do not make them a meaningful percentage of your portfolio

especially after a 20% run in the SP 500 the answer is no do not do this if you really want to be intelligent people always say listen I can stick with it they always say that and I don't know how many people did in 2020 yeah you probably can't if it's 2% of your portfolio you probably can stick with it but or make it 5% and then have some really

stringent rebalancing rules because it's going to be so much more volatile than everything else. So when it rips, you sell some and get back to your target weight. And when it falls, then you have to lean into the pain. That's the only way that's something this volatile can work. In this same vein, sentiment trader tweeted, retail traders are all in again. Dumb money confidence just jumped to the third hiatus reading in 25 years. Maybe they just never left.

This is no problem at all in 2021. other than that, very high confidence typically precedes modest gains at best until sentiment resets. And I think this is fair. Even though I said you probably don't want to step in front of the strain through the end of the year because chasing and catch up and all that sort of stuff, after a 14% move in 32 days or whatever we had, it's probably not going to happen to get over the next 32 days. So whether we correct through time, if we have a pullback, whatever, but not to be rude, I just, I get a little bit weary when we see questions like this after such a magnificent gain in the stock market. So, Ben, you mentioned earlier in the episode that we've got stocks at 52 week highs,

we've got gas at 52 week lows, unemployment at 4%, below 4%. Consumer confidence is on the end. wage growth, yeah. Great chart from Renaissance macro. Okay. This is my 2024 prediction. Just wait until political season ramps up. Sam Rose chart of the year.

This is kind of like the Goldman one you talked about. Forecast at Consensus, 2023, real GDP. It started out at 2.5% in January 2020. It got down to 0.3% in January, 2023, back to 2.4% by the end of the year. This is interesting because this, this basically matched the stock market perfect. I mean, it literally bottomed when the Mac 7 bottomed in December, so track them pretty closely. And it's also predicting essentially a economic slid on that never happened and quickly

revising up higher. That's a good chart. That's a good one. Ben, last week, we, and really for the past couple of weeks, we were talking about a lot about consumer sentiment and all that sort of stuff and the disconnected. And after that episode, I went in the car and I turned on the radio and was listening to Howard. And there was a commercial, like right as soon as we recorded. The world was getting worse and worse by the day.

It was a commercial for gold. It is funny. You never hear a gold commercial or silver commercial where they say, things are getting better. Buy gold and silver. They never take that tag. Demand for gold has never been higher because things are okay and people have excess money. last week we spoke about the heinous commercial from Coinbase, which basically was contributing to all of this pessimist,

piling on the pessimism. Credit to Bitwise, did you see their commercial yesterday? That's pretty good, the most interesting man in the world. Awesome. Credit to Matt Hogan and the team over there, whoever came up with that commercial, not trying to scare you. Matt Hogan, who knew? That was an awesome commercial.

They had the most interesting man in the world talking about, Bitcoin. Ben, this is a throwback. I don't know where, what year we're in. It gave me flashbacks to the supply chain issues, but I ordered something and it said, I get an email. We appreciate your extra patience as we navigate the obstacles affecting supply chains right now. Please be assured that we've received your order and is at our production. I'm like, wait a minute, you can't, it's 2023. Yeah, that's a, that's a, that's, I'm falling back on an excuse there. You can't buy supply chain stuff is over. I'm sorry. I'm sorry. You cannot talk about supply chains. By the way, we're coming to the end of the year.

You know, I'm a big email etiquette guy. What's, what's your protocol for happy holidays? Hope you're, hope you had a nice, hope you had a happy new year. One, one week, right? I try not to do it unless someone else does it first. Oh, okay. You don't even do it. You don't, you don't exchange pleasantries.

Actually, speaking of things you do or don't do, you want to tell us a story about you throwing a chair a ref over the weekend? That's right I slacked you. I coached third and fourth grade basketball. My daughter's oldest daughter basketball, I've coached her for a couple of years. And at that age, you could call a million things a game. But if it's close to a traveler or a double dribble, it's blatant, then you call it. So I feel bad for the refs that have to do this.

But we played a game this weekend and not to brag. It was our last game of the year. we're going for an undefeated season, right? Pretty good. And a lot of these girls are still learning how to play the game. But this other team had one girl in particular who was just blatantly following our girls to the point of like taking them down and bear hugging them.

And the rough wasn't calling everything. And it's one of those things where... How old is the rough? There was one older ref and one younger ref. Okay. And a few times... I usually just talk to the girls. I never talk to the refs.

But I finally, I kind of said like, hey, are you going to... You know, it's getting pretty bad. out there. And he did the, you know, when the ref has the blinders on, just stare straight ahead and won't look at the coach. I was like, oh, okay, I guess he's. And it was one of those things where the fouls kept happening. And if it, again, if it doesn't impact the play, the shot or the possession of the ball, I don't really care. Like, yeah,

let them play. But it was every time we were shooting, the girl was bear hugging. And they weren't calling. And you know, the parents like start, like, everyone's, someone will go like, hey, come on. And then after another bad one happens, everyone goes, hey, hey, hey, hey, you know one of those? It got to one of those, and I'm the coach. and so at the end of the quarter the girls sit down and one of the toughest girls on our team is crying because she got just

raked on the arm right and so I woke up to the other ref and I'm like hey come on can you call something please I got a girl and I when I see the if it was a boy I wouldn't have cared but it was a girl crying that I kind of see red you know and I may have raised my voice a little bit

and said can you please call something and she said you know what I'm on this side of the court it's kind of she's basically throwing the other ref under the bus. It's his fault. And she said, so I can't really see if there's a foul or not. And I said, I could see it from a mile away. So I did raise my voice. And guess what? After that, the game was called more fairly and we played and it was no problem. That's it. Even when you're mean, you're nice. That's all. Well, after the, I raise my voice. But after the game, I went up to her and I

apologize. And we, and I think she actually felt bad. Because she knew that like, okay, it's getting out of it. And plus, you're teaching the kids at that age, right? That, you know, But you can't, and once they, you tell the girl, like, hey, you can't play like that. And she didn't, and it was fine and moving on. There's have to be guardrails here. Good for you. All right. This is a little bit in the weeds.

But there's been a lot of talk about the cash-only thing in terms of the ETF for crypto. You've seen a lot of people tweeting about that. I see the ETF Twitter people talking about it. I don't get it. Well, there was a really good explanation. Again, it's probably too far in the weeds for, I don't know, 80% of our audience. But I think the other 20% will appreciate learning about this. So six-figure invest.

What's this person? They might want to give them credit. Vance Harwood. He tweeted, cash only means that the authorized participants, which are the entities that directly interact with the ETFs, will only be able to obtain more shares, aka share creations, of the ETF by bringing. the appropriate amount of cash to the table. For example, if the net asset value of the ETF is currently $15 a share and the fund requires creations to be 10,000 share blocks or

more, then the authorized participant needs to transfer $150,000 to the issuer. The issuer would then transfer 10,000 shares of the ETF to the authorized participant, who then uses those shares to cover short positions or sell to buyers. Some funds allow in-kind creations, too. And this is the big one, because a lot of, I think most funds follow the in-kind creation method. For in-kind creations, the AP brings the asset that the ETF tracks and exchanges it for the ETF shares. So, for example, if somebody was like an in-kind would be, if you have the 500 stocks of the SP-500, you could exchange that for a share of the ETF and vice versa. For in-kind creations, the AP brings the asset that the ETF tracks and exchanges for

ETFs. Apparently, the SEC is not keen on allowing this for spot Bitcoin ETFs. The SEC's position is understandable because it will make it clear where the ETF gets its underlying Bitcoin from the ETF will buy them, presumably from reputable exchanges, whereas if you allowed in-kind transfers, you wouldn't be able to know where the Bitcoin transferred came from. And this is, that's like the big thing. That makes sense to me. My whole takeaway from this is I'm just glad this stuff all happens behind the scenes and I don't have to worry about it. Yeah, that's a lot. He said finally, the impact of requiring cash only transfers looks minor to me. Yes. it adds two more transactions, but at the scale that these funds runs, the impact should be

small. So, thank you for that really good explanation. All right, Ben, let's talk about real estate. Okay, two out of every three purchases, two out of every three purchase mortgages over the last week were locked in below 7%. This is huge for affordability. This is a, who tweeted this? This is from, oh, the tweet was deleted. All right, well, we've still got the chart from John Burns. This is why the whole connemann anchoring thing is so important, because if you would have said high sixes for mortgage rates are good, 12 months ago, you would have said, you're insane. But now we have 8% to anchor to, the high sixes seem okay. This is what behavioral finance is actually a good thing for us, because it keeps the housing market humming along.

If people were just comparing to past rates, they would say, this is ridiculous. Rates are still almost 7%. Anchoring for the win. Anchoring for the win. All right, Mike Simons had tweeted. There's still a ton of speculation out there that falling mortgage rates in 2024 might lead to a flood of sellers.

The data is very clear. The opposite is true. Lower rates stimulates demand more than supply. Inventory falls with rates. This is how I illustrate the data in the chart below the green section. So we've got this chart in the show notes. But that's really good.

And I think, so yeah, he's like the data shows this. And I think lower rates are going to stimulate demand even more this time around. I think we're going to have more pent-up demand than before. And, yeah, people are saying, well, if rates fall, there'll be more supply coming and there'll be more supply to demand. I think this, I think it's going to be the opposite. I think demand is going to be even more. Look at this chart of, from Bloomberg via Alison Schrager. As millennials grow older, their home ownership rate is approaching that of previous generations. How about that? 50% of millennials own a home? Closing it on Gen X and boomers. People have been saying

that no one can buy a house, right? People are still figuring it out. The activity is way lower, but it's, yeah, this is just what happens. So here's the problem, here's the reason demand is so much higher. Axios wrote this piece. America is short on 3.2 million homes, a big reason why prices are still high. 2.5% of existing inventory, according to Heinz, a global real estate developer that came up with this. So you see, we were actually in a surplus in the 2000s, and that's part of the reason we had the bubble. And ever since the crash, we've had this huge deficit. I've seen the estimates be anywhere

from 2 to 5 million homes that were short in this country. So Josh had this idea. He talked to Logan Motashami last week on a podcast, and he said, why don't we give everyone the chance to have a 3% mortgage at least once in their life?

What would be the mechanism for that? It would have to be your first-time home buyer. Yeah, like the government would guarantee a 3% mortgage. So if you missed that window of 3% mortgages because you just weren't buying or whatever and you couldn't find a house, everyone who didn't get one, once in your life, you get to check that box for your first-time

homebuyer up to a certain level of mortgage. You get a 3% mortgage. I love it. I love that idea. It would make a lot of young people, it would probably, housing prices would probably skyrocket because so many people would rush out to get it. You know why? I know life's not fair, and that's just part of the deal. but for homebuyers in 2022 and 2023 versus homebuyers in 2021, it really, it's not fair. It's just not fair. When we spoke about how my mortgage is $3,500, but if I bought it now, it would be, I don't

know, $10,000, $1,000, that's f*** up. It's not fair. And so I love the idea. And I'm not like a government should save everything. But if we have the wherewithal to do something, to create a program like that, I'm all for it. Yeah. It would certainly make young people a lot happier. And they would be...

I could hear our older audience yelling about mortgage rates in the 1980s. I was my first mortgage in 1980 when I bought a house for 11 cents. So good, but good news from Bill McBride. Housing starts. We got that this morning. Look at that spike. Is that supplies coming to the market? So one unit structures, that's awesome.

I don't know enough about the housing starts and zoning and why there's a structural shortage, but you love to see this, no? I think because building a new house is one of the only games in town because all the builders are giving you the mortgage rate buy downs. Someone asked me, I'm going to talk about this and I asked the cap on this week,

but someone asked, Ben, if you were in the market right now for housing, you were forced to do it. You had to move because of family or a job or whatever. this really unhealthy housing market, what would you do? And my answer is, I would build. That's just me, I would find a way to work with a builder. Because those builders have to get stuff out there because they have the inventory. And they have the ability, because all their margins have risen through this period, because they had all the lumber prices go up and stuff and they raise their prices. And guess what? Those costs fell, and they kept their prices similar. So they

have huge margins. So you have the ability to negotiate with them. And a lot of it is them buying down rates to fours or five percent. That's what I would do if I was forced to be in the housing market right now, is I would build. Ben, you nailed it. I have a $500,000 house, $1 million in farm and land property, $800,000 in taxable investments, $1.2 million in a 401k, zero debt. So I'm with $3.5 million and yet I feel broke. I go to Crested Boutte, Colorado. Boutte. How do you pronounce that? I pretty sure it's Crested butt, right? Crested butt. Okay. I go to, it's probably B-U-T-T-E. It's called. We got to ask Sean. He's from Colorado. I go to Crested-But, Colorado, and see $5 million houses and feel like a failure. So yeah, I'm rich, but I feel poor and like a failure. Awful, isn't it?

I can't tell. Is there a little bit of sarcasm at the end? I honestly can't tell. A little bit. So we talked about this on this show a couple weeks ago, how there was a survey saying millionaires who feel upper middle class. I wrote a couple blog posts on this. And I received. dozens of responses from people saying you guys are describing me. So we all know the reasons why, right? It's relative in comparisons and there's richer people than me. My question is, we know it's human nature.

That's the reason for this, that these millionaires don't feel rich. What's the solution? Because a lot of them were, hey, listen, I live in California where houses cost a million bucks. And so, yeah. The solution, what, to fix human nature? There's no solution. What's the solution to make these millionaires feel a little bit better about their situation?

Is there a way to fix this, or do you think there's no way to fix it? No, it is what it is. Now, it's funny, I could hear another portion of our audience saying, oh, crime me a river. Yes, a lot of, yes. I don't necessarily think that these people are asking for pity or anything like that. But for people that don't have $3.5 million, certainly myself included, I think the more rational response to seeing this is like, wow. that's that's human nature and like to think that that wouldn't happen to you if you were so fortunate is probably naive right these people aren't dumb or broken like it's all relative so they hang out

with people with money i made the point that and i believe this there are people that don't have a lot of money but could be the quote richest in their friend group and feel like they're well off matter In fact, I saw this. So I worked at, I was a waiter at a restaurant for years. And none of these people were making any money. These are people that were supporting their families on this. But there was like one guy that sort of had like a little bit of a side gig or another person whose wife did, did well. And I say well, like modestly well.

And everyone looked up to them. And everyone looked up to them. And all of these people were lower income people. but relatively one or two of them felt very well off. So nobody compares themselves to the average American. It's who you hang out with. And so if you have $3.5 million, but you're hanging around people with 10, you're not going to feel too great.

I have two solutions. One is I heard from a lot of people in New York and California. Do you think people would be much happier if they moved out of New York and California with $5 million to a lower cost of living part in the Midwest or South or whatever? with that? No, because here's the, I mean, maybe. Here's the thing. This, it's your personality. Yeah. It's your personality. It doesn't have anything to do with money. It's your personality. Yeah, it's your emotional makeup. The other thing is, I heard from one person who was extremely frugal.

This guy, I don't know, he's probably worth $10 million. And he had a hard time spending it, but he said he gave himself little luxuries. When he hit $60 or something, he said every time he flew, he didn't care what the price was, he's flying first class. And I think if you can say, like, why don't I drive a Porsche or a Maserati or why don't I have this house on the lake or whatever? I think you can give yourself smaller luxuries when you have that much money that can make you feel, better about your situation. You just have to pick and choose them when to use them. It's an emotional makeup situation.

And I hope I don't get in trouble for saying this, but or people think of a certain way. I felt rich like five years ago. And if anybody who had money saw my income or my bank account, they would say, what the fuck are you talking about? Because you were comparing yourself to five years before that. I was comparing myself to myself.

Right. To where I was and where I thought I would be. Maybe that's a solution. As hard as that is to do, that's a solution. Not having to worry about money to me, for me, that made me feel wealthy, which might be comical to some people, but my point is, it's your emotional makeup. It's not like a dollar's thing. It's your personality.

True. And you're stuck with yourself. Credit to me. All right, this Netflix thing where they released all their data about how much people watch, how many hours, what the best shows are. And it's for the last six months, I think they did, right? But it's very interesting. Ted Sarandos was on the Matt Bellany podcast, the town, talking about it.

And this was an even bigger, we did it than the Fed this past week. Because Netflix basically said, we're going to open the kimono. People have been asking for this. Other streamers go ahead and do it, too, because we know that people aren't watching nearly as much as they, on your platform or they're on ours. Netflix just, this, this was their, they were already in the, this was the Rod Tidwell TD Celebration from Jeremy Gawyer. Netflix has, it's over.

These other streamers have to consolidate. I don't know, I don't see any other path forward for them. If they want to compete with Netflix. Ben Thompson did a post on this. just want to just want to say one more thing about me feeling rich just so there's no confusion five years ago when I felt rich I want to say I felt rich five years ago I felt good I had no assets and it's not like I had a giant income like you would have but and it's not like I don't even I'm not rich today I don't have millions of dollars I don't even have a million dollars

but I feel good I don't have to worry about money and again you were comparing yourself to a prior version of yourself and that's the thing I was comparing myself to the person that begged to be an external wholesaler in San Antonio. Yes. I look back at my own history and I think of I could not find a job out of college. I got turned down by probably seven employers of jobs that I thought I really, really wanted. And so, yeah, looking back at that and the starting salary I made out of college, which was just nothing, I can look back on that and go, that person would never have thought you would be where you are now.

I think that's the way to do it. Not to get too corny on that point, but I think people that didn't have to struggle. for their financial success. Like, it's understandable why they never appreciated it. I was 25 and unemployed with $0. And so anything above that was gravy. All right, enough about me. So Ben Thompson tweeted or wrote about this.

There is no country, this is we're talking about Netflix, the Netflix data dump. There's no country level data distinguishing between movies and TV shows, overall show level numbers, or whether or not a movie or TV show is a Netflix original. The data also only covers January through June, 2020, and it's not cumulative. In other words, it is awfully hard to pull out clear insights

from this data without doing massive amounts of grunt work. There was, however, one chart that I wanted to make immediately, and it turned out exactly as I expected. And the chart is a distribution. It's exactly what it looks like. All the watching is at the top 0.1% of titles, and it just completely flatlines. Power law.

That right there is a picture of the internet writ large, power laws rule everything. Have you ever heard of the Knight Agent before? That was the number one watched show in the last six months. Yes, I've never heard of it. We watched two episodes. I'm like, yeah, this is like typical Netflix junk. Okay, that's what I feel.

I wanted to know if I should watch it or not. You know what it is? It's Netflix's version of CSI. It's just like a background. That makes sense. Or SBO. It's just a background, whatever, whatever. So that makes sense why it's so big.

Because Netflix, in a lot of ways, is CBS or NBC now or ABC. Somebody tweeted that Did they? Okay Netflix is CBS I can't remember who This is in my inbox Max is now on YouTube Primetime, watch HBO original movies and more This is interesting

Man What's YouTube prime time? I don't know But this The whole, we don't have to rehash us This whole HBO situation was so mishandled Oh my God So I mean HBO anymore

It's Max, unbelievable Did you see Did you see the Hulu on Disney app? Yes. I've seen that. It shows up there. Now you can watch Hulu stuff. I already have Hulu, though.

I pay for Hulu and Disney. What's going on? Yeah, you pay for Hulu and Disney, but now you get it in one app. Okay. Pretty cool. There was an article in the Watched Journal. I think we spoke about this a couple years ago.

Title is movie nerd Nirvana. Ekram Dimbalaglu, Delta's managing director of in-flight entertainment and connectivity, oversees a team of five employees. Their job is to devise the best mix of entertainment options each month for as many flyers as possible. The airline features about 1,000 pieces of content on its flights, including 300 movies. It changes 20, 25% of the lineup every 30 days and parts of frequent flights don't get bored.

Pick in the movies is the fun part. The hard part comes at the end of the month when technicians have to make sure they get on each plane. This is nuts. Manually. At Delta, that means boarding 840. planes with devices preloaded with the content usually overnight? What the hell?

This reminds me of that's in the Zoolander. The files are in the computer. I don't get it. What are these people doing to the screens? I guess they're their technology must be so far behind. I could do this job. So they said, I know what people like on airplanes. The real joy

comes from discovering the gems, lesser known films, and shows that passengers come to love. So for me, I would love this job. The dark and the wicked. Uh, speak no evil. You just scare the shit out of people. All right. Follow up from our talk about sentiment.

So why are people in the U.S. less happy than people in other countries? Uh, listener sent us this. Research supports this claim. In the U.S., 40% turned to social media for personal finance information, yet globally the average is 19%. So people are getting more negativity bias here because they're looking for it more on social media. There you go. Good data.

A lot of people last week, I heard from dozens of people say, Michael's take on the loving funerals was an all-timer. You know why? I was thinking about this. And this gets back to being appreciative because, you know, things were not looking good for me. There's nothing that makes you more appreciative of being alive than being in a funeral. And most people go about their day, go about their life, just completely oblivious or not appreciating how lucky we are just to be alive. And life is hard. Life hack, go to one funeral

a week. It'll be happier. Life is hard. I'm not going to call my wife, my wife, my mother's bless death a blessing. But that like really shocked me. And it made me in later years, like just dealing with tragedy makes you appreciative of being alive. You took it the right way. You looked for a positive out of a bad situation as opposed to the opposite. it. Yeah. So part of me at funeral is like as cathartic, because obviously I think of my mother, but it just makes me appreciative. Like all of the noise and being on social media four hours a day and just all this flood of just noise, noise, noise, noise, noise. It's the only thing that like completely blocks it out and just is like, you know what? Just happy to be here.

You know, speaking of your life goals and such, I got a bone to pick with you because my wife occasionally listens to the podcast. I don't have, what are my life goals? I'm not a goal-oriented person. No, last week you said, like, looking for the best in people, that people should look for the best in people more. And my wife listens to the podcast occasionally, and we have these 8 a.m. Saturday basketball games all the time,

and I'm not a morning person. So I, like, stay away from me for, like, the first hour when I wake up. I'm just not a morning person at all. I don't want to talk. I don't want to smile. I need my time, and then I'll move on and start with the day. and I think I was a little grouchy I can't remember what I said

because my wife is a morning person she said you know what you should take Michael's advice more about looking for the best in people as opposed to the worst that's my advice that's puppy's advice I don't look for the best of people that's a great way to live that's true if only you can do it all right this made me laugh out loud

this email I am sorry you had to find out Yoko Zuna was in fact not Japanese I hope this will not be too further demoralizing but Sergeant Slaughter was neither a military officer nor Audubon of Relief discharged. That was pretty good. We should do recommendations. We've been going for a while now.

Okay. Let's save some of this stuff for next time. All right. Recommendations, Ben, what do you got? All right. I flew through the Beckham doc on Netflix last week. I'm a little late to this. Is that a movie or is it a series?

It's a document. It's a four-part series. They're each like an hour long. I really liked it. I was never a soccer fan growing up. I knew David Beckham from magazine shoots and heard about him a little bit, I guess, but I'd never watched soccer growing up. And so there was a lot of the story that I didn't know.

And obviously, him and his wife were probably producers of the show, so they spun it to put him in positive light. But I came away liking him and his wife way more than I did before going into it. And by gosh, he was one of the most beautiful men alive. Very handsome. Holy cow. Very handsome. But I really, really like it.

Because it was pop culture and sports, and it was very good. Also, I don't know if we can, it's too early to start the best movies of the 2020. 20s yet, but I have a candidate for one of the better ones of it's called past lives. It's a Korean movie. I don't think it's a Michael Batnik movie, but you did like the whale, so it's hard to say. This, it's such a simple... I surprise you sometimes. That's what I'm saying. So I absolutely loved this movie. It's such a simple concept. It's girl family lives in Korea. They immigrate to America when she's young. She keeps a friendship with her best buddy who is a boy from Korea, and it's 24 years of their lives of them coming in and out of each other's lives,

and then they finally meet after 24 years in New York for one day. Oh, my God, are you kidding me? I love it. That sounds like a tearjerker, and you know I love to cry. There's a scene at the end in a bar where all it is is dialogue. Nothing else is happening but dialogue, and it was, I'm not a person. It was like a beautiful scene. This, I loved, and I keep thinking.

You're not a crier. No, I didn't, I didn't, you could get a little dusty. I don't think I cried, but it's a very, very good movie from such a, such a simple premise. Where do we watch it? I'm going to watch it. I rented it. I rented it on Amazon.

The run of Korean, Koreans make better drama than we do these days. Parasite. An amazing fried chicken. Pretty good. Parasite was, I think, one of the best movies of the past decade. Minari I liked.

Squid Game, obviously, was good. Pachinko and Apple was good. They make better dramas than we do now. We got an email. I was talking about, like, our foreign film was better after watching Godzilla Minus 1, which is still in my brain,

great movie. Somebody said, the films that make it hear, and you hear about are the best movies that the country is offering. You don't hear about the bad ones because they don't make it out

and film critics and snobs don't talk about them. They only talk about the good ones. All right. So, yes, it's a, you know, Survivor. I'm looking at all the best stuff Kree has to offer,

but it's been really good, I think, the past few years. But you can say the best that they have to offer, rivals is the best of what we have to offer. Yes. Minus talk to me and all the great horror movies

that we have. Mm-hmm. You should watch Talk to Me. Okay. You're talking about Godzilla. All we've been watching lately is for my son is King Kong versus Godzilla and this other Godzilla, and he's just going down the rabbit hole. He's going to like Godzilla minus one, I think.

No, no, no, no, no, no. That's not for him. Okay. No, Godzilla minus one is not, is, that was the real shit. Not like this Hollywood bastardized version that we do. All right. So, the New York Post wrote that Mark Zuckerberg is reportedly building a sprawling $100 million Hawaii compound, complete with an underground bunker in its own food

and energy sources, and a secret project suggesting the social media mogul is trying to conceal his doomsday preparations. There's no way in the zombie apocalypse he's going to make it there without getting killed first. Did you see, so all of this, the scariness is starting to see if it's a pop culture, and I don't know that I like it. We saw, we'll leave the world behind. Did you see the trailer for Civil War?

the 824 one that that very creepy but also pretty good scary as shit yes um it looks good but i spent i spent the week watching comedy on netflix i'm not quite sure why i went to the comedy seller a couple weeks ago i told my friend they gave him a plug uh mint comedy so mint comedy allows you to stream so you see the specials on netflix so this week i watch andrew santino did you see that one he's a guy who from Dave, the red-headed guy? You know, as much as I love comedy, I have a hard time watching the stand-ups anymore

because I feel like it's so much better live. It is so much better live. So Andrew Santina, how's it going? Pete Holmes, that's a good one, and the big dude Stavros had to go on. Anyway, mint comedy, you're able to stream live shows from the seller and other locations. So it's pretty cool.

So it's not like the headline specials. So you see, you know, you see the real deal. Not in person, but second best thing. Lots of the up-comers, huh? Yeah. All right. All right. We did go along, huh?

Hour 20 minutes. We're going to do our best to have episodes the next two weeks even during the holidays. We're going to make it happen. Compeller Highwater, the show must go on. Remember, personal emails, personal responses, animal spirits at the compound news.com. Thank you to Duncan and John and the rest of the team for editing this lengthy episode. Thank you for listening. Happy holidays.

Merry Christmas. Happy New Year. We'll see you next week. Okay