Animal Spirits Podcast - The Roaring Twenties (EP.353)

Episode Date: March 27, 2024

On episode 353 of Animal Spirits, Michael Batnick and Ben Carlson discuss: why the elements are in place for a boom-time decade, why household allocations to stocks were so low in the past, how to lie with statistics, who keeps buying Treasury bonds, picking the AI winners in the stock market, some good news for homebuyers, and much more! This episode is brought to you by TBIL and the US Benchmark Series. To learn more, visit: https://www.ustreasuryetf.com/ Sign up for The Compound newsletter and never miss out: https://www.thecompoundnews.com/subscribe 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. The Compound Media, Incorporated, 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/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by T-Bill in the U.S. Benchmark Series ETF that invest in three-month T-bills surpassed $3 billion in assets recently. Just launched in August 2022. People love that yield, obviously. Three-month yields still over 5%. Probably longer than I would have thought, actually. So this is the higher-for-longer thing. If you think the Fed's going to keep rates higher for longer, this makes a lot of sense.

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C. Why am I? We have a lot of content we produce here. It's hard to keep up with it all. But this is a nice summation of everything. I'm sure we miss some stuff, personally. They also have stuff from I don't shop.com. I think last week they highlighted Ben doesn't drink coffee mug. Still don't do it.

You know, I've been shopping lately. Send you text messages. What do we do here? I need to get you a personal shot. You need like your own shopping broker or something. I don't know what you're doing. because you just go to the most expensive places. I'm not versed in shopping.

I guess not. Yeah, I got to send you some brands. You send me like the most expensive stuff imaginable. Like you sent me a shirt like this. What's this called a Henley? And it was like $170. I said to you, what the hell is going out of this world? I haven't shopped in five years.

I come back to the stores and everything's $170. This is madness. No one goes to the stores. Find some online places. Then you'll get a deal everywhere. week. All right. You'll be my, you'll be my short broker. I'll give you a 5% commission. The compound news.com slash subscribe for the newsletter. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick

and Ben 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 Redholz wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Bridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben.

Michael, four years ago, March 2020, at the height of, I guess we'd call it the height of the uncertainty of the pandemic, I wrote a piece called what it took to get to the original Roaring 20s. And I was in pandemic mode and reading about this, reading about the first Spanish flu back then,

And so in the 1910s to 1920s, you had World War I, and at the end of World War I, you had the Spanish flu, and then you had a depression at the beginning of the 2020s, and then you had this boom takeoff of, like, kind of like a release boom, and it was innovation, a wave of innovation, a wave of entrepreneurship, and a wave of consumer spending and sentiment, unlike the which we hadn't seen in maybe ever, right, in the roaring 20s. still talk about it. Today, of course, it ended with the Great Depression, but we don't have to talk about the end. And so the whole point was, like, sometimes you have to wade through all this crap, and then at the end, good stuff comes out of it. And I'm here to make the case that we kind of are living through our own Roaring 20s now, even if the sentiment doesn't match the actions of people. Okay? Let me make my case, and you can see what you think. Walter Bloomberg, airline passenger travel will set a record in March and April up 6% over 2020. pre-levels. Travel is booming. Yeah. Restaurant spending we've been talking about is booming. People

are spending money. U.S. retail sales is so far off of the pre-pandemic trend, you can barely even see it. Right? So people are spending money. They're traveling. We're going through an AI boom right now. You obviously watched a little bit of the NVIDIA analyst day, whatever it was called last week. We're going through an AI boom. And whether those stocks are in a bubble or not, the AI boom is going to come regardless, right? Oh, it will end in a massive, it will end in a massive bubble. It will, but the end game is going to be, we're going to have robots and AI tutors and AI personal assistants and all this stuff. It's going to be like an AI boom is coming. So we've been talking. Sorry to jump in, but I'm at the Future Proof Retreat in Colorado Springs.

We're studying at a beautiful hotel called the Broadmoor. And I just left a presentation and the guy was talking about how, like, sentient AI is inevitable, and he was talking about, I don't know if it's robots or if it's a computer avatar, you know, I don't know what formula will take, but where it will be like an emotional, uh, crutch, where it will know your emotions. When you cry, it will cry, it will sympathize, it will empathize, it will be there for you. And that was kind of like the movie, uh, Megan. You ever see the movie, Megan? I did not. Great movie. I thought that was like a horror movie. Yeah. Great movie. Uh, Alison Will Williams is in it. And the girl becomes attached to the robot because the robot is her emotional

support robot. Yeah, there's going to be a lot of weirdness on that end. A lot of weirdness. Anyway, sorry, back to you. And AI therapists and that sort of thing, it's going to be a lot of that. So we've been talking for weeks, obviously, net worth is at all-time highs, stock market all-time highs, housing prices all-time highs, economic activity all-time highs, 5% on your cash. Unemployment rate has been below 4% for two years now. And we're having this innovation boom.

What else would we need? What other precursors would need to be checked off for a roaring 20s to happen? It seems like if you went down the checklist. More mudrooms. Everyone needs mudroom. But what else do it? I'm throwing it out there that like the roaring 20s,

we're living through it. This is it. The sentiment doesn't match at all, but this is it. Well, GDP is not roaring. I mean, the economy is, the economy is not the focus. Last year was the highest real GDPs we've had in a long, long time, ex-pendemic.

Maybe I'm picking this. The economy, I wouldn't say the economy's on fire, would you? No, but it's pretty darn good. It's pretty darn good. But listen, I love the positivity. There's enough negativity out there in the world. If we could sprint some positive thinking, I'm all for it. Let's do it.

So you, I started this tweet out here to say, like, people don't like good news, but this is the Roaring 20s, and it got, picked up and went a little viral, and you said that you went through the replies and said, Twitter is not real life. This is why you're, you not reading the comments or reading your, what do you call it? Your notifications is such a good idea because your Twitter is so depressing. It's so depressing. So yeah, I called you and I said, dude, this is just not, this is not the real world. It's just not. The people in your mentions, because it looked dystopic. Like all of the comments were uniformly negative. It was unbelievable. And I called you and I said, dude,

this is just not the real world. Like, if you were to take that tweet and read it to 20 strangers on the street, they would not elicit the same type of reaction. They'd be like, huh, or, but everybody's yeah, but on Twitter. It's just, it's just an absolute hellhole. It really is depressing. Yeah, I really think that that rabbit hole of negativity is really hard to get out of. And by the way, I'm still a power user of Twitter, like for, you know, all the news and all the tweets and all that sort of stuff. But the replies, that's a whole different ball of wax, and it's not good. So I did, like, sometimes I'll give those replies and, like, I'll be willing to look at the other side. So I did a blog post that shows how wealth inequality still is bad.

So the top 10% controls 67% of the net worth, right? The top 10% controls two-thirds of the wealth. That's obviously not good. And, but the funny thing is, is if you look at inequality in the 1920, It's probably the worst that it's ever been in history. So we had this roaring 20s where people were, you know, you look back at the videos and the movies and how happy people were. Is that one of the best times ever, though, in terms of if you look back in a movie for

like nostalgia and you see the people dancing in the 20s and drinking champagne and great Gadspie style things, like it just, every time they depict the 20s, it looks like the most fun decade ever. Yeah, I just think people smelled back then. That's what I can't get. How was the hygiene back then? That's true. Yeah, didn't quite have penicillian yet.

Everyone had to stink. Yeah, B.O. had to be really bad. Yeah, everybody's walking around in the pursuit, and they must have stunk. 10% of people probably brushed their teeth. You're right. It probably is over-glamorized for what it was. But this is from the BLS. 60% of families in the 1920s made less than $2,000 a year,

which was like the minimum acceptable level of being able to survive. And the top 1%. Wait, wait, so those numbers one more time. So 60% of families in the 1920s made $2,000 or less. And $2,000 was the cutoff for like... That's not inflation adjusted, is it? No, no, no. This is just that the actual absolute loss.

But they also said the top 1% controlled almost, made almost 25% of the wages in the 1920s. It was like the, it was inequality on steroids back then. But people were happier because innovation and anyway, just interesting. No, no, no, no. We don't know if people were happy in the 20s. How do we know? You weren't there. It's called the roaring 20s.

but they didn't have social media. I'm convinced I'm convinced if social media... Was it called the boring 20s at the time? I don't know if that came later or not. But all the books I've read on the 20s do make it sound like it was this period that's just orgy of excess.

And I think part of it was not just... Infant mortality back then. I don't believe that everybody was happy in the 20s. Things were... Yeah, but remember it's... If you got a cold, you died. Yeah, but it's not good or bad. It's better or worse.

So things were getting a little better. And remember, they just lived through World War II and the Spanish flu. So anything that was better than that was for World War I. So anyway, just throwing it out there. Okay, that's my case of Roaring 20. I'm throwing it out there that we're living through the Roaring 20s. All right, this is interesting too.

S&PF100 is up 10% this year already. Double-digit gain so far. Apple, down 10%. Remember the big worry. The biggest stocks, when they fall, watch out. The biggest stock in the market is down 10% and the stock market itself is up 10%. I don't know if that means they kick Apple out of the Magnificent 7, but other stuff is lifting up the market.

You can say, well, it's all Nvidia now, but I don't know, this is the worry that when the biggest stocks fall, it's going to take the market down with it and it's not happening. Well, if the AI trade or the enthusiasm reverses, I mean, that's what a lot of the, that's what a lot of the enthusiasm is based off of. So it's not just one stock, but it's definitely the theme for sure. Yes, fair. But you're right. it's going to be a bubble and there's going to be a bus, but then AI is going to be coming out of the other side of that. You're still going to get all the technology that comes from it.

So Goldman Sachs put out a chart showing households, financial asset allocation. And what clearly jumps out here, to me anyway, is the equity component. It's right back to the peak levels as the dot-com. was cresting. Did I use that word properly? Or should I've said peaking? What's the crust? I'm not a, I'm not a, I'm not a seller.

Crest is when it's going to roll over, right? Is crest a nautical term? It's a surfing term, isn't it? I think so. Anyway, I think to me the big takeaway is not that like this necessarily like actionable or anything or insightful information, but it's the, it's the 401K. now? Yeah. Isn't the other takeaway that people were way underinvested in stocks in the past? If it was 15% throughout much of the 80s and 90s, that I think we've been playing catch-up for

a couple decades, and it should be higher. But that makes sense to me, no? Like the 80s, the household financial asset allocation to equities was, I don't know, 10 to 20%. Right now we're at 48% for comparison. People had way more money in cash. I guess, right? reflecting much higher rates and just a really, really lousy stock market. People hated the stocks to come out of the 70s, and they probably didn't believe the 1980s bull market. But I'm just saying equities being where they are now makes way more sense. Ben, to your point about it being more than just one stock, bespoke tweeted, yesterday

saw a new high in new highs. That's called the bull market. Yesterday, our reading on stocks making new 52-week highs in the S&P 500 broke out above the prior high from last year. So it looks like around 20% of S&P stocks are at new 52-week highs. Renaissance macro research posted something similar in which they said 52-week highs on the S&P 500 hit 23%, which is the highs in three years. Rarely do we see internal highs peak with prices. They usually lead. So when you get a broadening out of a rally, it's probably not time to, that's probably not a great time to get bearish. Probably should remind people, though,

that the inevitable correction when it comes, like, is going to be, I think the stock market is up 28% or something from the lows in October in a very short period of time. Like, we've had a crazy run here. Yeah. Yes. So just remember this one, the inevitable correction does happen, that this has been an insane run. This is a chart. Makes you think.

We're looking at, and this is Bank of America. it's the tech sector versus the S&P 500. And it is two standard deviations above the historical, and this goes back to 1926. And it's the discrepancy or the ratio between this and the S&P is higher even than it was during the dot-com bubble. What do we make of this? It makes sense.

It makes way more sense now than it did back then. And the tech stocks make up a bigger portion of the stock market, right? I feel like whenever you see charts where there's red circles that had crashes after them, right? You just know what's coming next. So the two prior circles are 1996 and 2000. I have a hard time with ratio charts like this. There's a lot of times where people use these for stocks versus bonds and stocks versus commodities. I just don't know that this time it tells you very much

just because tech is such a bigger part of the market now than it ever was. Well, I guess, yeah, to your point, like, why should this series be mean reverting, right? Yeah, if the tech system now makes up. So this shows two standard deviations above its mean, but like, including the 1920s in this, I don't think really helps anything.

Yeah, text, guess what? If you look at the earnings pie, I mean, it's, you know, it's enough of this. We talk about this all the time. It's enough. Let's move on. All right. So I think one of the most important finance books ever written It was called How to Laiwa Statistics.

I can never say that word. Statistics. Who was that? Who read that? I wrote that. It was in like the 60s or 70s. Darrell Huff is a guy's name. And it still holds up today.

It's the kind of book that probably could be like re-uped every 10 years or so and updated. And because you see a lot of this on especially, so last week on, with it on one of your thoughts, you and Josh talked about commercial real estate. And he was having the same conversation we've had, too, about like, how was this not? this train wreck everyone saw coming, how is it not more of a train wreck? And so did you listen to the odd lots about kicking the can on Porsche real estate? It was a pretty good episode. And so Rich Hill is a big real estate guy at Conan Sears. And he was talking about how he's like, you see these big scary numbers and people say that 45% of all commercial loans are going to be

coming due within the next three years. He's like, that sounds pretty scary, right, considering how bad everything is. He's like, listen, these are seven-year loans. loans, that means 15% of them come do every year. So over three years, 45% of them are going to come due literally every three years, because that's how these loans work. And so he said the other scary number was there's a trillion dollars in debt that needs to be rolled over this year. And he said, that sounds pretty scary, right? And they said, yeah. But he said, usually it's $600, $600 billion every year has to be rolled over. But the banks pushed off $400 billion last year, so that makes it a trillion. Because the

banks don't want them to sell these distress prices or they don't want to take over the real estate. So that trillion dollar number sounds scary until they realize, like, it's actually kind of normal. And the whole point of this is that, like, yeah, there's going to be some pain, but the banks are going to do everything in their power to kick the can down the road as much as they can. They don't want this to turn into a distress situation. And the whole thing is like the stats sounds scary, but it's not as bad as you think. All right. Here's another scary. tactic people have been using for a while, like, okay, we have way more debt now. Who's going to buy these bonds? And I think sometimes people forget that the U.S. debt is actually,

the debt of the United States is actually an asset to someone else. Foreign buyers, individuals, pension plans, insurance companies. Did you see this Wall Street Journal article about this? $27 trillion treasury market is only getting bigger. Was the word unsustainable used? Well, they kind of put it into context a little bit, and they show the gross issuance of U.S. treasuries. And it huge spike in COVID, obviously. And then it came back down. Now it's back to where the COVID line was. So the treasury market itself is up 60% to $27 trillion since the end of 2019. It's sixfold larger than before the 2008 financial crisis, which is a big number, obviously. But then they show the net purchasers of U.S. treasuries since 2000. And foreign investors has

dropped off a little bit. But now you can see the Fed obviously stepped in. Yeah, it's in its money market funds, it's households. People are actually stepping in because rates are higher, which is one of the things that we said for a while is when rates get higher, all these retirees are going to be clamoring for this, this debt because they want to have the yield. It actually makes sense. So that supply has actually been, people have vacuumed it up. Yeah.

So it's those things where you think like. Makes you think. You want to finish that thought? Yeah. Anyway, that whole thing It's like it's a big scary thing Like who's going to buy But that debt is also an asset for someone

Right? And now that rates are higher It's a more attractive asset I don't know Maybe maybe maybe it would be a Dave reckoning sometime Well, you think in terms of scare tactics The federal deficit or the debt level, whatever Has to be right near the top

When you say the numbers out loud, It does seem scary I still think there's a few simple things that the government can do to kind of fix it, but that's going to, I think that's going to be something that's always going to sound scary to people when you're talking that big of numbers. If you look through the archives of the newspapers, you could find people worried about the debt like literally every single decade. I remember reading Snowball, the Buffett biography, and he's talking about in the 30s how his father

was, like, this is unsustainable. The country can't handle a amount of debt. Maybe at some point, it doesn't seem like it's yet. Jason Zweig had a good article at the Wall Street Journal as well about AI picking the winners, picking the winners in the stock market for AI. So he said there are 17 ETFs that specialize in AI and related disruptive technology and only three of outperforming the S&P over the last year. Question, though. Are these companies that are investing in AI or are they machine-driven sector rotator stock pickers? No, like they're the ones who are saying like, we're going. going to ride the wave of AI. Not the crest, the wave.

So, all right. So these are companies that are, so these vehicles are buying the invidians of the world. Yes. And Jason's point was, well, the bulk of the return came from Nvidia and Amazon and Facebook and Microsoft. And so a lot of them are actually more diversified than they should have been and didn't ride the winners. But that number is really small. Isn't it right? Three out of 17 outperform the S&P? Not even the NASDAQ 100, just the S&P. For what time frame? That sounds hard to believe. Over the past year, which is when all the gains have come.

I'm sorry. If you're an AI fund, how do you underperform? I don't know. That's the whole point, though, is that picking the winners in this stuff is really hard. Hmm. You don't want to know why? Because what everyone says, don't invest in the gold, invest in the picks and shovels. That's the other smart thing.

We should start a list of smart things to go on CNBC with. You're one last week about, well, season alley was a big one. What else did you say last week? Oh, a correction over time? Correction through time, yeah. Alection through time. Big fan of that one. Listen, just invest in the picks and shovels.

That always sounds smart when you say it. You know what paper really ruined investing for me? The agony and the ecstasy of stock picking. You've read that piece from JPMorgan. They updated it up for a few years. Highlighted it multiple times. So they talk about how difficult that is down from me. piece?

I don't know if it's similar to David Kelly. But either way, they talk about the percentage of stocks and underperform over time, the fact that, like, 40% of all stocks have experienced a 70% decline from which they never recover, and it really, like, latched onto my brain. So I can't buy and hold Nvidia. I know too much. Ah, right. So I know how difficult stock picky is.

We've spoken to so many people, clients, prospects, whatever, who come in over the years that are up 400% in Nvidia, 900% in Apple. And this is not, I don't mean this disrespectfully at all, they're blissfully unaware. And hence, they've been able to ride monster returns. I know that for every Nvidia, there's a graveyard of other crappy stocks. So, like, if I were to buy a stock and I, like, double my money, I am thrilled, right? Thank you very much for the gains. I am out.

I would have never be able to get a 10-bagger, ever. That's true. Especially when you have to live through 60, 70% crashes to get there along the way. So my mentality, so, like, I think a lot of people's mentality with apples, I can't sell my Apple. Right? Like, they genuinely believe, and it served them very, very well. So, again, credit to them, that why would I sell this incredible company? Like, look, it's only going to do better, and it's been proven true.

Where with me, if I get a double, I'm petrified that I'm going to give it all back. Right. And to your point, that's a really hard conversation to have with people that in the back of their head, they know that they've already won the game and they should diversify. But it's like, but what if? What if it just keeps going? I had a family member in 2014 tell me the next apple is apple. And I went like, oh, you know, not actually, but in my head. And this MF was right.

That was a pretty good call. By gosh, Dolly. He was right. It was unbelievable. Did he hold on to it? Yeah. And he keeps, every time I see it, he says the same thing. But what's the next Apple now, though?

Apple! I don't know. I don't know. Not after you took your Vision Proglasses back. I haven't seen many viral videos of that stuff lately. Did people stop using it? It's just, yeah, listen, it's not practical. Yeah.

I think we also just move on really quickly from stuff. these days. It's like the it-it-it thing for a while when everyone is talking about it and posting videos and pictures and then it just kind of runs its course and move on to the next thing. No, no, it'll be back. Once it's smaller and cheaper, it's coming. Don't sleep. All right. We've been talking a lot about food spending on this show. Matt Iglesias posted this. This is interesting. So real personal food consumption expenditure. So this is with inflation adjustment, right? This is just spending on food. So it could be door dash. It could be eating out. It could be grocery store or whatever. Look at how much higher this is.

is then the pre-pendemic trend. This is inflation-adjusted. People are just spending way more money on food. It has to be eating out, right? We've been talking about that a lot, Lily, just more people eating out. People are spending more money on food, even if you adjust for inflation.

You know, I might have said this before in the pod, not to brag. I'm a world-class grocery shopper. Do you know about this? Have I told you about this? Are we sure we can give you world-class status? Last week, you had no idea how much anything cost when you're trying to build the tacos from scratch.

You're like, hey, this cost. I don't know. Yeah, peppers are six bucks. I don't know, give or take plus minutes. So you mean in terms of like speed of shopping? Speed. I am I am in and out in 11 minutes or less. Okay, but that's only if you do your grocery store.

Going to a visitor's grocery store is very difficult because it's like, it seems like every grocery store should be. Why isn't every grocery store stocked exactly the same? They pretty much are actually. You've got the produce on the outside and the meat on the outside. They are all the same. You know what? Don't act like you shop.

You don't grocery shop. You probably, you get delivery. Admit it. You don't step foot on a grocery store. You're a snub. I do do personal, but I'll get like five things. For our big ones, we do, yes, we get it delivered, but my wife also does a lot of Costco shopping for us.

Although I will be honest. I think that over the next six to 12 months, I think I'm going to retire from the grocery shopping game. I'm going to go out on top. It's not worth it. Why am I even doing it? You can just have to deliver it, no? Exactly.

It saves you so much time. Yeah. Okay. Good chart from Derek Thompson. I've been talking a lot about the 20s stuff. Let's fast forward a little bit to the 40s. America's most affluent metropolitan areas in 1949. A bunch of people tagged us on this.

Do you ever see that on Twitter? Because people tag me and you on stuff all the time. I feel like you don't ever see it. I see, no, I see sometimes when you favorite stuff. Okay. By the way, so Cleveland's on this list. We flew over Cleveland on the way out here. I didn't realize that the stadium is right on the water, on the Erie,

uh, is that the Erie River, Erie Lake. Yeah, Lake Erie. Like, you don't hear Great Lakes very well, huh? The Erie River. Erie Lake. That would. Yeah, you just totally, that was an, a coastal elitist trying to talk about the flyover states and just nothing. I can name, I can name the Great Lakes.

Butchered it. You're, wait, hold on. Iran, Ontario, Michigan, Erie. How do you pronounce that first one again? Huron, is it, how do you spell it? Yeah, you say, Uron. Yeah, you say, Uron. I said, Uron.

All right, the H is silent. Did I miss that? No, you say that, yeah. All right, Huron. What did you say, Huron, Erie? I think I said, Yeran. Yeah, you did. Ontario, Erie.

You missed one. Nailed it. Superior. Ah, that's a good one. Big Superior. I'm telling you, in 30 years, when the rest of the, when it's 120 degrees down south, everyone's going to be moving to the Great Lakes. That's going to be my number one financial asset over the long term is real estate in Michigan.

Mark it down now. But anyway, so he, median household income in the top metro areas were Detroit, Cleveland, Milwaukee, Chicago, Toledo, Dayton, Akron. A lot of those in, you know, San Francisco's way down the list. It's all Midwest. But it's also, look at, look at the. the numbers again. People always talk about, like, I remember when you get a candy bar for a nickel. Look at what the median, for the most affluent metropolitan area, the average wage was $3,600 a year.

This is the whole thing behind people thinking about stuff being cheaper in the past. It's because people, hang on, hang on. Is this inflation adjusted? Is this inflation adjusted? Why are we using that inflation adjusted numbers? It's just, how am I supposed to? The point of it is, the wages were so. I'm sorry. Yeah, no, the point of it is just wages were so small back. in the day. The way I asked if $3,600 a year was inflation adjusted. Yeah.

All right. Why are we using non-inflation-adjusting numbers? This doesn't tell me anything. I don't know how much money this is. It does tell you something. It tells you that people used to not make very much money at all. That's why everything was so cheap because people didn't make as much money. People now make more money.

That's why self is more expensive. It goes hand in hand. Listen, I'm already sold. I don't want to go back to pre-deodorant days. I'm smelly enough. I don't want to go back. All right. Good one from Nick Majuli.

Some people said this was kind of fun with numbers, but I thought this was good. He said, do you want to know what the median credit card debt is among U.S. households? $0. Really? Which is a true. So I looked. So if you look at the credit card balance by all families, people who have credit card balances in households, it's like 45% of all households have credit card balances, meaning the median family in the United States does not have credit card balance. Does that mean that they don't have credit cards or does that mean that they pay them off?

I'm not sure what this means. I think that means that they pay them off. Like, I pay mine off every month, so I would not consider myself holding a credit card balance. Except for my zero percent credit cards. I don't pay those off. Life hacks with Ben. What percentage of credit card holders, spenders, pay off their balance every month? Do we have that information?

What would you guess? I would say it's probably 20 to 30 percent, and then another 20 percent doesn't utilize credit cards very often? I don't know. No, no, no. I'm asking you, of people that use credit cards, credit cards, what percentage pay off the monthly balance every month? That's what I'm saying.

If 50% of people carry a balance, another 30% probably pay them off every month, another 20% probably don't use credit cards. Is that fair? No, it's not fair. I'm saying, of the people that do use credit cards. Yeah, so I'm saying, let's say 80% of the population uses credit cards. Oh, so you're saying that 20% of people that have credit cards don't use them? Or just don't use credit cards very often?

But I'm explaining those people. Okay. I'm saying, take the total pie. 80% of people probably use credit cards. 30% of the total uses, pays them off for a month, 50% carries a balance. You know, I was in the butcher shop the other day, and I saw a gentleman pay with cash. Hmm. Those people still exist. Hard to believe, right?

I think that, I think cash definitely helps you to moderate your spending. There's no way that you're as liberal with your spending using cash as your at the credit card. It's way easier to spend money, yeah. It's harder to see it going out. Yeah. But a lot of people don't do that, obviously, because it's so much easier to spend your credit card

or spend with all your information stored on your computer. Yeah. The majority of my spending happens on a computer where my credit card is saved. I still want those numbers adjusted for inflation, by the way. Okay. Don't bring me nominal numbers from the 1920s. I can't contextualize it.

You sound like a comment guy right now, tell me to adjust for inflation. I mean, yeah, if you're using 1920s numbers? The whole point of it was to show how low wages were back then. It puts it in context of how much stuff costs back then. It doesn't put it in context. I need context. Inflation adjusted puts into context.

Anyway, what's next? Okay, so Chris Sims at the Walshut Journal wrote about AI. He said for the past two weeks, I've used cutting-edge artificial intelligence tools in every aspect of my day-to-day existence. For my job to my personal life, here's my verdict. The last time I had an experience this eye-opening and transformative was after I bought my first smartphone. For most of us, these tools will enhance our productivity

on tedious and time-consuming tasks. We'll be able to hand them off to generate an AI, then easily check for errors. Regardless of your profession, the sooner you gain experience with using AI, the better off you will be. There's an estimate from McKinsey. By 2030, tasks that represent up to 30% of all hours

currently worked in the U.S. could be automated by AI. Is the four-hour work we're coming? Like, are we just going to be super productive? No, people will find other stuff to do. Think about how much stuff, how much stuff that has been automated now that we could have, that people used to do in the past, that we just fill it with other stuff. Yeah, that's true. That's true.

I think you're right. We felt the time. If you think about it, take away your smartphone and email and Internet and all that stuff and people literally used to go to the office for eight hours a day, what did they do back then? If they didn't have email or internet or any of that stuff, Slack. What do they do?

Water cooler talk. They, you know, how's your family? That meetings and faxes and- Hey, Bill, how was your weekend? Yeah, there was a lot of that. Yeah, a lot of back patting. We fill the space. So you got me under the mid-journey thing for AI,

and it is kind of, it is still funny how some of the stuff you can create there is amazing, but how there's still minor holes that it hasn't figured out yet. Like I tried to do, I wrote a piece about real estate and I said, create a picture for me

of a realtor standing in front of a house with a for sale sign with, or a couple standing in front of a house in front of a first sale sign with more money in their pocket, right? And it could create the couple, but for whatever reason,

every iteration, it could not create a forced sale sign. Like the forced sale sign just, it didn't work. or wouldn't say for sale, no matter what I said, it could not create a for sale sign. That's interesting. It's like minor little, anyway, a little good ironed out.

It's pretty wild that you could do that. It's pretty cool. Talk to image or text to image? Yes, just, yes, create this for me, and then five seconds later, here's a crazy image. All right, I bid from Bouchinas. I bid an FBTC have now taken it in cash for 49 straight days. And I think it went up to 50.

Something only 30 other ETS have ever done, and none of them did it right out. of the gate. Pretty wild. I think people are like, well, what if the, what happens if and when the inflows slow down or heaven forbid reverse? Prices will go down. That's what will happen. If we get a crash in Bitcoin, because obviously there's going to be a crash at some point, will it be like index funds where there will actually be more money flooding in saying, okay, I was waiting for this to happen. I'm waiting for, I was going to put it in, but now took off, I'll wait for it to crash. Or do you think we'll actually see a decent exodus of

money from these things? it depends where the flows are coming from. If they're coming from advisors, and that's where I believe they're coming from, I think that they will gobble them up. I don't think that the advisors are going to panic sell their Bitcoin for their clients, do you?

They're not total donkeys. I hope not. That, it would be really nice to see, like, a breakdown of where this money is coming from. So, Bitcoin. Is it all RAs? Bitcoin had a pretty nice correction last week. Got back most of the gains,

but it got as low as, I don't know, $61,000. And micro strategy What a wild levered bet on Bitcoin this is Did you have to move some money around again To try to buy it again? No comment I had to move money from this account to that account You know, blockchain does solve that for you

So I forgot to update this chart But as of last week One of the Bitcoin ETF fell 15%. Micro Strategy fell 30%. Just wild Getting back to the point that that's, it really is a levered bet on Bitcoin. I still don't get it.

Ben, any update on your Zillow, on your Zillow trade? Oh, someone... By the way, that's an example. Zill is a great example. I think I made 70% on the stock and I sold it. I made a lot of money. It's good. I'm not looking to...

I'm not a 10-bagger guy. I'm in, I'm out. Someone sent me this. It says, so Nick L. Tawil is his name. Here's a more detailed taken while I think. Zillow loses based on the NAR battle. So he says 50% of Zillow's revenues come from selling leads to buyers' agents. Zillow is a public company.

You can verify this. Their buyer lead program is called Premier Agent. Premier agent, yeah, that's their business. Yeah, Zillow has been trying to capture listing leads to sell them to agents for years, but their listing leads are limited compared to buyer leads. People who think tech will replace real estate agents are missing this. Agents are tech's main source of income, not consumer. Specifically, buyer agents are the main source of income, not listing agents.

So I guess this is the assumption that Zillow is a change in model. Lower commissions, lower commissions, lower commissions, lower revisions. you for Zilla. Yes. So I actually heard from a bunch of realtors about this. We talked about this last week saying, like, we were asking questions. We didn't have any answers that because no one has any answers. And I heard from a, I got some really long emails from people saying, listen, you guys are idiots. You don't know what you're talking about. Nothing's going to change. No one was being forced to split commissions before. This is just the way things worked. Consumers could have negotiated before. That's fine. And I agree with that. No one is forcing you. But,

But now that consumers know they can negotiate and the genie's out of the bottle and there's going to be different few models, I think just that knowledge is going to change things. The fact that people know, like, wait, wait, we don't have to do it this way anymore. I think a lot of people thought they had to. They knew no other way. So that's the whole thing with me is that just the fact that people know, it's, I think that's going to be the impetus for change. Ben, speaking of us being idiots, so I get like an automated email.

mail from, I think it's from Charitable, and sometimes it includes, like, a few comments. So this one, this one made me, LOL. One Star, the title is Uneducated and Dangerous. Did you see this? Mm-mm. Could it get through two episodes? Can't believe the ratings here. Thanks for the review.

Oh, for us. Uneducated? Sir, I, excuse me, Queens College Graduate. Thank you very much. That's true. And dangerous. How are we dangerous? Just a couple of guys. You went to Indiana twice. Yeah, Queens College, Indiana, Indiana, NASA Community College.

Quite educated. Dangerous, please. Can't win them all. All right, here's some good, more good news for first-time homebuyers. Mike Simonson said 500,000 single-family homes on the market across the U.S., 21% more than last year. He says at this pace, we expect 40% more homes on the market in peak July than in 2023, unless mortgage rates fall soon. So the fact that rates have stayed higher has slowly but surely increased inventory. Now, it's coming off of a really, really low base. So it's nowhere close to what it was pre-pendemic, but it's heading in the right direction. So can we get some price declines?

That's the thing. Well, at least the gains are going to stall out. That's the very least. If prices decline off their peaks modestly, I don't think anybody loses. No. No, there's so much of a margin of safety built in for current homeowners. Yeah, I agree. All right, that would be wonderful.

Just in time for, you'll have it for four months, then order rates will fall. All right, can we do some private market stuff? Let's do it. So Logan Bartlett at Red Point Ventures put out a presentation on how the private market might be troughing. See, got that one right. All right, I'm going to talk over some slides. If you're on YouTube, you'll be able to see this. And if you want to check out the show notes to see these charts, you can do that too.

All right. So there are signs that we've bottomed out. This chart shows the software universe median net new ALR year-over-year growth. So we know that the price of these stocks got killed. We know that their multiples got compressed. Guess what? It was for good reason. They weren't growing as quickly as they did.

So in 2021, there was 37% year-over-year growth and it jumped to 71%, 51%, 57%, 455. And it kept going lower and lower and lower until the first quarter of 2021, I'm sorry, 23, you had negative 27% year-over-year growth. That has bottomed and is heading now higher in the right direction. There's another chart. These are private companies are talking about here. These are publicly traded companies, I believe. I can't see the disclosure on the bottom left because my eyes aren't great, but I'm pretty sure these are public stocks. This is private. So months since prior round. So in 2021, when rounds were happening. It's like, all right, cool, we did a B. Let's start preparing for our C. There was nine months in

between the B round and the C round, which is a record low. That's crazy. That's super, super fast. So that has grown to 22 months. So needless to say, the funding environment looks wildly different than it did in 2021 when money was abundant. Here's another chart that says it's also getting better for selling software. So there's a chart that shows the quota attainment by quarter for software sales rep. So, did sales reps hit their quota? In the fourth quarter of 2021, 53% were doing it, which is super high. That bottomed out at only 23%. So there's a total wipeout. So that bottomed in the Q4, the fourth quarter of 2022 is 23%. A year later is 29%. Year of date, it's 41%. So that's going in the right direction. As far as tech goes, like, you, you,

Usually the tech booms are bigger and the busts are bigger and last longer. This was a relatively short tech recession. That's what we're calling it. I don't know. It was what? Three years. It's 18 to 24 months? No, because it was November 2021 was when things peaked.

to the late 90s, and we've really never seen anything like this. It bottomed out at 7%. So 93% of rounds were at a higher valuation than previous one. So that's going up. It was 15% most recently, which is not even close to what previous... Because no one had to, barely anyone had to actually raise money. Because they all raised money. Well, because there was so much money.

Right. Right? Like the rounds were, the size of the rounds were ridiculous. so that they were overfunded. The yearly startup shutdowns with significant capital invested. So this is companies that had raised over $10 million. 40 shutdown in 2020, 33 and 21, 47, 22. Last year, boom, 122%.

So we're getting a lot of this, a lot of the stuff out of our system. And then, of course, there's a chart of showing total venture dollars invested, and that has come all the way down. Taurus are leaving the market. So there's a great chart that shows traditional venture investors and how much money they've raised. And that's a little bit off the highs. But non-traditional venture investors like the Tigers of the world, which were a huge player in the bubble of 2021. That is down, Ben, what does that say?

Is that negative 30% Kega over the last three years? 35, yeah. Okay. Down over third. Lastly, and this is a phenomenal chart. So Logan shows. Do you think a lot of those funds just went into public, just fully public stocks more or less? Well, yeah, if you can get a similar valuation between public and private companies, so

The public stocks are probably cheaper than the private stocks. Yes. So the spread between public and private markets have tightened. So he's showing public high growth software multiples, series B and C, and the difference. So in 2022, at the height of the nonsensical silliness, it was a 6x premium. That's absurd. 6x. In 2019, for example, it's just 2.1.

So now in 2024, we're back to 2.7. So this is good. The multiples in private markets were six times higher than public market multiples. So we got the washout. Reddit, for example, Reddit just IPOed. I think that their high watermark valuation in 21, I think it was $10 billion. And they came public at like a $3 billion valuation. And the markets had a phenomenal run.

So appetite is back. This is another good thing. This is a good thing, Ben. So Reddit, it's going to be just like the other meme stocks, right? People are going to meme it and then it's going to crash 80%. Too soon to tell. But if we're following that same pattern, it's probably going to happen. You're getting more headlines like this.

So this is from the information, hey, Jen, a three-year-old startup that uses artificial intelligence to generate avatars and voice for videos is raising $60 million at a pre-investment valuation of $440 million, six times higher than the startup's valuation four months ago. So things are moving fast there. But the business is moving fast. Listen to this. Hey, Jen is generating more than $20 million in annualized revenue, which is up from $3 million in July at a million dollars a year ago.

That's wild. You know, Jen or Jennifer's the name you don't hear much anymore. There's no new Jenys or Jennifer's. That was 80s and 90s. So many girls were named Jenny or Jennifer. Nothing anymore like that. So true. But hey, Jen is with a G.

True. I see that. It's G.E.N. It sounds to be like, hey, hey, John. Yeah. Oh, you don't see a lot of Richards anymore. It's true. There's a lot of names that. We did this one. Todd. You mentioned, remember you said Todd?

No Todd's. There's no Todd's anymore. Jeff probably is one. But there was actually a website for this. When we had our kids and we were looking for names, there's a website you can look where you type in a name and you see the popularity by year. And we were looking for, I was,

going against the grain, being a contrarian, I guess I'm a value investor at heart. We're looking for names that aren't popular today. That's why I use that tool to find it. Anyway. All right. Okay. Ben, you want to talk to me about Taylor's?

What's on your mind? Oh, okay. So one thing I forgot with my Italy thing last week, one of the things I noticed at the conference were every gentleman's suit at this conference fit perfectly. And if you know, if you go to a conference in the States, now most of our conferences, we're not wearing suits.

We're a little more laid back. But if you have a suit and a sport coat, most of the time you see guys with the sleeves are too long hanging down over their thumbs or something or the pants are all bunched up at the bottom. Guys, if you get past college age, find yourself a tailor. I go to Sue Alterations right down the street from me here.

They do good work. You can take a pair of pants for $15. Can I ask you an absurd question? If you're wearing a buttoned up shirt, Can you get the sleeves, the length of the sleeves altered? Of course. They can take it out for you. How do they do that?

How do they do that? I don't really know, but any, yeah, find yourself a good tailor if you want stuff to fit good. I mean, pants, pants, I get it, right? You fold it up, you sew, whatever. How do they shorten, how do they shorten sleeves? AI? That I don't know. But there's probably, I don't know, I guess you could say robots, but it's so, you have to be, you have to know where you're

doing so well to tailor stuff that that's the kind of business that's never going to go out, right? It's never going to be taken over by technology. So, Ben, you were just in Italy, as you mentioned, and I'm pretty sure I know the answer to this. When you're in a hotel, do you wear the robes and the slippers that they give? I actually did wear the slippers this time. I didn't wear the robe. Really? Yeah. Why? You don't think I'm a slipper guy? Tell me more. Why do you put it on the slippers? Because you don't want to walk around barefront? Yeah, you don't want to walk barefoot on the hotel. It's gross. You don't know what's been on that floor. I was, I'm not like a world traveler. I think this was my third time to Europe in my life. And one of the other times

it was also for business like this. But I was just blown away by the ability to get work done across another part of the world. It was so easy to stay connected. I even, I'm an idiot because I haven't traveled in while. I called my credit card company. I'm like, I'm traveling overseas just in case my credit card shows up. Like, sir, sir, no, you don't need to do that anymore. Like, oh, okay, I didn't know. They're like, if it's a travel card, trust me, you don't need to let us know anymore. Oh, okay, I'm a new here.

I don't know these things. But it just, it was so easy to stay connected through Slack and email and Wi-Fi and my phone. And the way back, I had an eight-hour flight, and I watched a lot of movies, but I also did, got work done on the Wi-Fi on the plane. And it's just, it's blows my mind how easy and seamless that was. When I was in college, we went to Europe, it was 2001, maybe 2002, and we would have to rent time at internet cafe to use a computer for internet. We'd pay by like 15-minute increments. And the only way I could get a hold of my parents was either email through that time or a prepaid

phone card. I'd call them on a pay phone. And I maybe talk to my parents once a week when I was gone for two months. And now you can text people all day. It doesn't feel like you're gone. Do you remember Traveler checks with the Q? Oh, yes. I had some of those. Yeah, that was a real thing. And I'll check with a QU instead of it, right? Yeah, yeah, yeah.

Ben, the reason why I asked about the robes is because Chris, my partner, was telling me that he's a, the least surprising thing ever. He's a huge robe guy. Well, I could see that. I could see that. Yeah, no, I don't do the, I don't find robes comfortable. Do you? Robs are strange.

It's a weird Since I yeah Doesn't do it for me Chris also wear smocks Which are robe like Okay They're kitchen robes That's true

All right Ben What do you got Okay I got a bunch of stuff Because first of all We watched anyone but you This weekend With Glenn Powell

And Sidney That's the new romcom I think it actually did really well at the theaters It felt like A 1990s romcom It was a throwback Because it was

it was over the top where it's like will they won't they will they won't they but it was very cheesy and corny at times but they almost leaned into the cheesiness and kind of wink wink and uh like the ending was just way over the top but i liked it it was like a throwback to the 90s and i'm i've always been a huge Glenn Powell fan he's he's just very good at playing the the a hole who had who also kind of smiles and and you get it and you like him still. I only know him from Top Gun. Well, the best, I think one of the most underrated

movies of the last 15 years is everybody wants some for a comedy. He was in that and he was fantastic in it. Never heard of it. It's the follow-up to Days and Confused. They made a follow-up? Yes, it's Richard Linklater did this. It's kind of like Days and Confused was high school. Everybody wants some

is college. It's a different set of people in actors, but it's essentially his story in both of those movies. What was this? Recently? No, probably like early 2010s, mid-2010s. Okay. I'm sure I've mentioned on here before.

Nope, I'm sure you haven't. All right, a few over, I'm going to just go through a few check-luck, because I watched a ton of movies on my flights. All right, let's go. Hit me. Okay. I re-watch the holdovers. Already?

It's a good movie. Here's my thing. So, Josh watched the holdovers. He said it was a, I think he said it was a 7.5 or 7. It's good. He said it was good, but. All right, so go ahead. Why did you re-watch it?

I liked the movie. There wasn't that many options on Delta. They don't have the greatest movie selection. And here's my thinking for the Oscars. Hold on. Don't you despatch my Delta. I'm a shareholder and a flyer. And my Delta flight had tons of movies.

Yeah, but they're just okay. So here's my thinking for the Oscars. Paul Giamatti, like Killian Murphy, he deserved the Oscar for Oppenheimer. Paul Giamatti, they should have medals like at the Olympics. Paul Giumati deserved a silver medal at the Oscars for his performance in the holdovers. they should do a gold, silver, bronze

for the best actor, best actress, best movie. They should rank him. He deserved a silver. Okay, I rewatched Michael Clayton finally stuck on the third time. I know everyone's thinking, a lot of people think this is a masterpiece

of a movie. It never clicked with me. I watched it, I finally get it. I don't think it's like the greatest thing in the world, but it's a seven. I mean, it's a very good movie. I don't think it's, nobody says there will be blood, but it's a very good movie.

And you, you pooed it, and now you saw the light. It's a good movie. I finally get it. The American, another Clooney one, I watched this because I was in a Clooney fix and he goes to a small town in Italy. One of his most underrated movies.

It's a slower burn, but he plays an assassin. And the greatest, this one always works for me. The assassin who falls in love with a normie who doesn't know they're an assassin. And they know they shouldn't do it, but they still do. Of course. Usual suspects. All right, if you could get a shot in your arm

and you would forget one movie, so you could experience it for the first time again. what would that movie be? Because usual suspects have to be up there. It's a totally different to watch me know what's going to happen.

There's a nostalgia element to what I'm about to say because I remember watching it in fifth grade or sixth grade. The Sixth Sense. Ah, yes. I had a friend ruined the ending for me. I didn't see in the theaters

and a friend ruined the ending for us. I was there day one and couldn't mind blown. The Sixth Sense is definitely up there. So I'd be watching the last couple years and it's a perfect movie. It's pretty good. Shawshank could be up there too for me.

Finally, I rewatch Pulp Fiction again. I probably watch it once a year. Yeah. Here's the thing. I feel like Travolta and Samuel Jackson get, like, street credit for doing Pulp Fiction. I feel like Bruce Willis doesn't get enough credit for doing Pulp Fiction. He was very good at it. It was, like, a street credit thing.

It feels old. Right? The last time I watched, I was like, it felt... It is old. It's 94. It does a little... It's very episodic. Here's my hot take on Pulp Fiction.

You could take out the first and the last scene at the breakfast place. Those are my least favorite parts of the movie I just want the middle No you cannot I don't like those parts It's my least favorite part of the movie Huh Okay

Personal preference Anything for you? Do you watch any movies on the flights? No Well yes and no I don't know why we took such an early flight Our flight was at 7.30. It's absurd I was up at 4.30

I don't know why we did that So I did we watch a did we watch uh beetle juice which i haven't seen in 30 years and i was sort of i was i was i was dozing in and out of consciousness it does hold up believe anyone coming out so to that point um michael keaton was on fly on the wall podcast a couple weeks ago and he was excellent i love that guy um i watched the the not the remake i guess is this is rhodas a sequel it's a remake What do we call that? It's a remake, yeah.

Okay. So I watched Roadhouse, horrendous, but also amazing. Like, it was a deliberate, it was a deliberate, it was, they know what they do. It's a terrible movie. But violence, fighting the Caribbean. Are you kidding? I'm all in. That being said, it was, it was not a good movie.

So I was thinking about it. A lot of 80s remakes. A lot of 80s. So there's a Beatles just coming out. All right, so they did it, right? They're doing Beetlejuice. They're making another Happy Gilmore, which I'm, I don't know how to feel about that. Happy Gilmore is a 90s movie, obviously.

Beverly Hills, Con. I don't think I'm going to watch the radio. Roadhouse. There's no way it's going to be good. Top Gun. So they're making movies for us. It's the nostalgia play. And I am definitely here for it.

Did you see, are you up to date on Curb? Yes. No, they watched the last one. Okay. it is so good it's very good credit to LD but anyway

just getting back to the airplane so that's that's my happy spot not at 7.30 in the morning but where would I like to be in the air watching movie it is a great feeling my wife is like man

that stinks you have to be in an airplane for so long and I thought you know what I'm going to watch so many movies it's going to be great I loved it yeah

yeah what else are you get a chance to rewatch those movies uh all right what else is on our mind that's about it.

The Roaring 20s is here until it's not. There we go. Animal Spirits at the Compound News, personal emails, personal responses. Thank you for listening. We'll see you next time.