Animal Spirits Podcast - The Worst Chart in Finance (EP.301)

Episode Date: March 29, 2023

On today's show we discuss why investing is so hard, the time between all-time highs in a bear market, why the Fed is in such a tough spot, ramifications from the banking crisis, low supply in the housing market, why people think their children will be worse off, the psychology behind the AI boom and much more.   Find complete shownotes on our blogs...  Ben Carlson’s A Wealth of Common Sense  Michael Batnick’s The Irrelevant Investor  Like us on Facebook  And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.      (Wealthcast Media, an affiliate of Ritholtz Wealth Management, received compensation from the sponsor of this advertisement. 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. 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.)  Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's show is sponsored by Index IQ, a New York Life Investments company. Ben, when you think of a growth company, although I don't know if I should ask you being at your CD investor, but when you think of a growth company, what enters your brain? Fast growing revenues and earnings and, yes, high growth rates in financial statement analysis stuff. How's that sound? I couldn't have said it better myself. One area that might be overlooked is what's fueling their growth. Research and development is a key factor of that. What is research and development? It's exactly what it sounds like. Companies that are reinvesting their earnings into the frontiers of new ideas, better products, better services, better software, better platforms, whatever the companies may be.

So index IQ has a suite of ETFs from large cap stocks to global stocks to midcap stocks that uses research and development as a pillar for constructing their portfolio. Right. Companies that are reinvesting their operating cash flows back into the business. So a lot of the growth rates that people look at, whether it be revenue or earnings is backwards looking, research and development is an indicator of what the company might be doing in the future. So if you want to learn more, visit New York Life Investments.com slash index IQ. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Batnick and Ben Carlson work for Ritt Holt's wealth management.

All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Rithold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael, it seems like the past one or two months. We've been spending a lot of time talking about the economy,

not much about the markets. I don't really have any hot takes about the markets at the moment. They actually seem relatively boring in terms of like the stock market. The bond market seems a little more exciting than the stock market. And the economy seems a little more, I don't know, exciting than the stock market. But I was thinking. So January 3rd, 2022 was the peak, the last all-time high that we saw. So it's now been almost 450 days. I wanted to do a little something before we got into the show. Okay. Respect the doc. I mean, it's in the dock. Okay. I mean, this is stuff we could get to later, but... No, no, no.

We're going to have Duncan do a stopwatch for the video, and every time, the first time that you interrupt me, there's no way you ever make it past 90 seconds. I feel like you interrupted doc. All right. It is in bold red letters, so I don't know how I missed it. Okay. This is Animal Spirits episode, only counting the Wednesday episodes. It's our 300 first episode, meaning last week, was 300 and we just blew right by. I totally forgot. But I feel like that's when like

when you're dating a girl in high school and you've like, our first date was six weeks ago. Let's celebrate. If we wait to 500, that's four more years. We've done other episodes too. This is my math right? Yeah. Come on. I'm waiting four more years. I'm going to be an old man. We can't thank the audience. Yes, thank the audience. Yep. And pat ourselves in the back. I feel like we just did this though, where we said like, oh, it's a special episode because this is. Sorry, I want to thank the audience. We're approaching 20 million downloads. And there's people that have been with us since day one. Incredible. Yes. I do like it when we get an email from someone saying, I listened since the very first

episode. That's great. Now, new listeners are no less special, although maybe a little, but we just wanted to thank the audience for staying with us. Listen, as somebody who consumes a lot of podcasts, there's a lot of choice. And I appreciate that people spend their Wednesday mornings with us. So even though Ben doesn't want to say thank you, I did. I also want to say, I thought you were trying to just do it out to brag and pay herself on the back. No, I wanted to thank the audience. Come on, man. And I also, for those of you who are watching this on YouTube, wanted to tease what we've got. We've got a very special Saturday episode that I'm quite excited for. For those of you who are only listening, I'm wearing a t-shirt, Callahan Auto Parts, maybe you've heard of them, and that's all we're going to say. I'll give one more tease. We've been talking about this person's Twitter account for a while on the show, using their stats. And we got them on the, yeah, so before I was interrupted, I'm used to it. So it's been 450 days since the S&P had a new all-time high, first trading day of last year.

And because the markets are up a little and we're off the lows, it feels we're kind of in no man's line between, yes, we're technically still in a drawdown in a bear market. So I wanted to see, well, how long, I've done something similar like this before, but I wanted to see where do we stand history. So we went back to 1950, all of the bear market. So there's been 10 before this one. How long peaked to trough, top to bottom, but then how long peak to new all-time high? How many days does it take from the time that you hit the all-time high, then you go down and

come back up. You go to the valley, run all the way back up. So like 07 to 13, for example. Yeah. So it's longer than you think. So the average number of days is it's like almost 1,200 days. Now, this isn't trading days. This is actual calendar days.

So you can see, I put the chart in here. And I'm a trading day truther, although I appreciate both. I still feel the bare markets on the weekends. I can't shut it off. Sorry. I can't turn those emotions off. And off hours. So the 2020 situation was completely just its own 181 days.

Hang on. Hang on. I do have to interrupt over time. I do have to run over time. Are you buying CDs right now? Oh, like at the bank? No, I'm not buying CDs. That gives you some relief on the weekends.

And you did say that it was your first investment ever. That's true. I don't think I've bought a CD since then. Maybe I should be. Do you know what the duration of your first CD was? It was 12 or 24 months. I bought it so it would coincide with me going away to college. So I can remember if it was my junior or senior year. So something like that.

Incredible foresight. That's planning. So besides 2020, the 2013 one was almost 2,000 days. Like you said, I think it peaked in 2000. The new high was in 07. My point is it can take a long time. And I think as an investor, we've talked about the stats before where I think it's 5% of all trading days going back to like the 1920s have been an all-time high. I think you just have to get used to being in a state of drawdown as an investor. Yeah. Whether it's bare market, or just a regular market, you're going to be in a state of drought on more often than not. Well, I feel like coincidentally, I asked Nick to make me a chart of bare market in duration. So it sounds like we're about to drop a similar post.

We'll see who does it first, probably you. But wait, one more thing I just want to say, we've written this post a million times about on average, even during great decades, on any given day on average, you're 11% away from the all-time high. It's not as close as you'd think. Yeah, investing sucks for a long period of time. That's why you get paid. Yes.

That's the point that at the worst spot, we were down 25%, a little more than 25%. Now it's 15 or 16, I think, if you include dividends, but we're still a good ways away from getting about tall-com highs if that's what people are anchoring to. I was doing this this morning, and I did it kind of my hand through Excel. I've got all these spreadsheets that I use, and I calculated, this took me, I don't know, 20 minutes. But I thought, yeah, if I had an AI assistant in my ear, I'd say, Scarlett Johansson, please do this for me. That's my AI use case. Well, what were you doing? Maybe AI could already do it for you? What were you asking? What were you trying to do? Oh, this thing?

Yeah, just the number of days between the one high to the next. I kind of just did it eyeballing it through my spreadsheet. I thought, hey, AI could do this. I wonder if you could ask chat, GBT, give me all of the bull market all-time highs. Probably not, because there's a lot of rules in there. It might be close. So last week, the Fed raised rates, they're getting crushed by a lot of people. On the one hand, I think it's only 25 basis points in the grand scheme of things. It probably doesn't mean all that much. They've already raised so much. is 25 extra basis points really going to mean that much? On the other hand, exactly. Are they going to look really, really dumb, though? Is this going to be Bernacki's subprimist-contained moment where the Fed was raising into a banking crisis that led to a recession? 25 basis points was not going to be the thing that took down inflation. You know when you were screwing in the IKEA? All right. So with IKEA, you've got the nail that goes in,

then you've got the round thing that you put over it. You turn. it 180 degrees, but if you turn it too much, it breaks it, and then you're, because there's no extra pieces. I was putting together some furniture last week, and it's like... So you know what I'm talking about. A million pieces and an Allen wrench, and you're kind of like, what? It's like the Game of Thrones gift where, like, the guy standing there with a sword and all these horses are coming after him.

That's what I feel like when I open an IKEA box. I've gotten a good at IKEA furniture, not to brag. But anyway, Ben, you're exactly right. 25 base points, all that did was signal to people that... The Fed is probably not using a lot of common sense here. I don't know. I thought Powell handled the pandemic masterfully. And now he's just the guy dropping stuff all over the place trying to wash his car.

Him and Yellen saying different things about deposits. And I'm really surprised that they don't have a good message on this yet. That one day deposits are safe. The next day they're not safe. And the law says this, but we say this. I'm really surprised by how much they've bungled this, even if it turns out to be maybe what they did will be enough for everyone to just get over this anyway and we're not going to have more bank runs.

I was writing this last night. Their intentions are to break things. And I guess first and foremost, it's inflation. But it seems like didn't they do that with the banks and it's not enough? This is a bigger point. Why is your only strategy to fix inflation to break things? That's been my whole problem this whole time is, why don't we try something else besides breaking things just to see if it works?

Yes, you broke things in the 80s because inflation. was around for 10 or 12 years. But I don't think you need to automatically say that's the only thing that can fix this. It's just, well, we have to break things. Ben, last week, who tweeted this? One big takeaway is that a banking crisis is easier to fix an inflation. Did I get that right? What was the quote? Jesse Livermore. Yeah, it's easier to fix a banking crisis than to fix inflation. So your own blockland on Twitter, I don't know if I pronounce his first name right, or last name for that matter. He said, a duration crisis is much easier to solve than a credit crisis, which I think is probably obvious, but also true.

Yeah, that's a little more in the weeds than most people are used to, but yes. The Fed could just say, hey, you know what? Like if the banking thing gets out of hand, then I'm not the suggestion that it's going to, but they could just say, okay, we're going to take yields from 475 down to 275, boom, problem fixed, bonds are whole. Banks are solving. It is true, and it's kind of happened a little bit with rates falling. I kind of feel like the banking crisis is over.

I sure hope so. There still are going to be ramifications from this, like tighter lending standards potentially and that sort of stuff in consolidation. But I think the crisis part of it, I think that's over. So there's been a lot of talk about the credit tightening and loan slowing and what that's going to do to the economy. And hard to think that doesn't happen. But Mark Dow made a very good point. He said, everyone's sure this recent banking turbulence is going to cause a significant contraction and credit. It's likely to cause a contraction and credit. But there's no way we know how much. guessing people are more likely to overestimated than underestimated. Don't we overestimate everything,

though? Isn't that just the way that we're, I was thinking about this as I've been diving more into the AI stuff? Actually, that's not always true. I feel like myself included and probably most people, except for Ben Hunt and a few others, underestimated the severity of the pandemic early on. Okay, that's fair. But in financial markets, point taken, we mostly over extrapolate. I've also been thinking about this in terms of AI, and it does seem like We're going to get there. Oh, by the way, we have a whole new topic. I did it.

I don't know if you saw it. I did it. I put AI as its own category in the dock. Okay. I'll save it for then. Do you take Umdridge? No, no. I'm just saying, I think as a species, we prefer to look forward to what can be rather

than what is. We would rather think about the future and what is going to happen in the future than, like, what is happening right now? We've been doing that for years with technology. And I think it's just more fun that way to think, like, what if this happens and what if this and everyone's going to have this and everyone's going to have this, as opposed to like dealing with the problems that we have in the present. This thing is going to solve all these problems without giving how things are going to work now.

I just think that that's just how we think as a species. And that's why we get bubbles from technology because we all think that way of like, oh, what if this happens and what if that happens? And then we let our minds race. Yes, you're definitely right on that. Getting back to the credit thing, there's a chart from Bank of America showing the percent of banks reporting tighter standards for C&L loans. And I'm not embarrassed to say, I don't know what that means. What is C&L? Is that commercial and lending? Is that camels and llamas? I have no idea what C&L stands for.

I thought it was C&I. It's construction and industrial. Josh wrote a post on this. Okay. So he's saying that it's a multi-trillion dollar business. And if these are tightening, I wonder how they actually gauge this. I'm sure it's a survey. This is a pretty compelling chart because every time lending standards tighten, it's around the recession. doesn't it seem like consumers would tighten their own lending right now too just because of how high rates are we're going to get both sides maybe the banks tighten their credit standards do you mean consumers slow down their borrowing? Yeah, that's what I mean. Consumers are going to tighten lending themselves by not borrowing as much because rates are so much higher.

I can't imagine going to a car dealership right now and borrowing at eight or nine percent. I've got a story for you. We're going to save that for Saturday. I'm going to bear. I'm going to be fully transparent. No spoilers. All right, you spoke about a rich session. Would you get a new audio or something?

Maybe. Speaking of a rich session. The phrase that you stole from the Wall Street Journal. Great minds think alike. The Wall Street Journal had a post, welcome to the super prime banking crisis. Here's, I don't if this is the lead, but I grabbed this from the post. Yeah, I think it's the lead. Banking's last crisis featured some prime borrowers, specifically people with troubled credit

who were given mortgages by bankers who ignored the risk that the borrowers wouldn't realistically be able to afford them. Banks that got into trouble were ones that churned out such loans or gorged on them in securitized form. The current emerging turmoil is so far featuring the opposite. Banks such as Silicon Valley Bank and Signature Bank that cater to some of the wealthiest, most credit-worthy clients, those with Super Prime credit scores are the ones running into the biggest problems. How the tables have turned. I've never heard Super Prime before. It's good. You can steal that too? I like it. Did you see this tweet from Fed Woj? Yes. This is nuts. They were doing kind of a post-mortem.

Someone did a FDIC chair, explained like everything that happened in a speech, and then they had his speech laid out. And he said, the 10 largest deposit accounts at SBB held $13.3 billion in aggregate. Holy crap. Okay, we've talked about how there were regular normal people with payrolls getting hurt here. But this really does seem like a case. I think 90% of this whole ordeal is rich people in a room, in a crowded room, shouting fire, then throwing a Molotov cocktail on their way out, starting the fire, and then right

as they're out the door calling the fire department. It really does feel like that. To make that, put some more meat on that, this guy, Krishna Mamani, quote, tweeted that tweet from Roj and said, with Circle at 3.3 billion and Roku at 0.5 billion, that leaves a lot of unaccounted for large deposits. A public company would have to disclose it. So it has to be private companies, but more likely, the VCs themselves and personal accounts. Who has that much money? No, like the rich guys. Why would they have that much money in a checking account?

How dumb are these people? I'm guessing because they were given special, extra, extra, extra special treatment by SVB from leaving so much money there. Billions of dollars. I can't. Why aren't those in CDs? Those should be in CDs, am I right? Because it can't be venture funds because they call capital and then they deploy.

They don't, like, sit on a bunch of cash and wait. So this, it has to be businesses or individuals. If these people are super prime, what is the credit worthiness of the Fed? Ultra Prime? Because guess what? What if the Fed has to bail themselves out? I mean, not what if. They're going to cut.

They're going to have to bail themselves out. Look at their latest projections. And at this point, I feel like you can wad these up and throw them in the trash because they're predicting the unemployment rate at 4.5% in 2023, 4.6% in 2024 and 4. and 4.6% in 2025. Their inflation numbers are like three. I feel like they don't even believe these numbers themselves. Why are they even doing this?

I feel like Powell should just plead the fifth from now on at all his press conferences because I think they're probably doing more harm than good when they talk now. I think they should just shut up and let things happen. Yeah, that'll happen. I don't think that they're helping anything by community. I know, but I don't think their communications are helping anything. I think they're hurting things. Every time Powell talks after the press conference, stocks rally into the headline.

And then when he gets on stage, they puke into the close. It's happened like nine. Because he's trying to thread the needle by saying just enough, but not too much, but then worrying about what this word means and that word. And I feel like it's doing more harm than good at this point. All right. The market has been kind of boring lately. Resilient, I think, but boring.

Apple and Microsoft, this from Carl Kintanaia, currently account for 13.3% of the S&P 500. The most on record, not since AT&T and IBM in the late 70s have two stocks been so dominant. Kind of crazy. I mean, and they're a big reason why. Actually, all the big techs is the reason why the S&P is holding up so well. So Microsoft, Google, Amazon, Apple, and Facebook are up 19% year-to-date. The remaining 495 companies without them are flat. The S&P 500 is up 3%.

So the entirety of the rally this year, I don't think he's called a rally. The entirety of the 3% gain is attributed to those five stocks, which just does. So we had like a one-year bear market in Fang stocks, and now it's over? It was pretty bad. I don't know if it's over. I mean, a lot of these stocks are still in super, super deep drawdowns. You still holding on to Facebook? I bought and sold Google.

I did the Homer Simpson in and out because I just feel like even though the chat, GBT stuff perhaps is overblown, that headwind of how far behind they are is probably not going away. And guess what? It's not exactly like advertising is like the place to be right now either. And I'm already in Facebook. So I bought Google, I sold Google. I'm out. No harm, no foul.

Nice trade. I want to talk about the worst chart in all of finance. This is a dollars worth purchasing power of the U.S. dollar. Now, I'm not trying to hate on the company that made this. This chart is factually accurate. It just shows how inflation is eaten into the value of a dollar over time. But I feel like there's two ways to look at this kind of chart. The one way is to say that inflation does eat away at your purchasing power over time

and you need to be able to invest and take some risk to beat inflation over time. If you bury your money in the backyard, guess what? in 30 years, it's not going to be worth as much. That's the way the world works. Can I just add to that? That's what makes this country so beautiful, is the dynamism of capitalism. You should be penalized for holding cash forever. Invest it.

Contribute to society, and there are marvelous gains to be had. I didn't realize you were a penalized guy instead of penalized. I think I'm penalized. Yeah, yeah, I am. It actually sounds smarter than penalized. It sounds like it's something a British person would say. I feel like penalized is the British way of saying it. So put a top hat on you.

I don't even know that I've ever heard anyone say penalized. But maybe it's a Midwest thing. By the way, speaking of Midwest, there was not heated debate after the show, but you don't even know, because we got a few emailers talking to us about Drake's, which makes my favorite things yodels. And I was very confused. I was like, wait, ding-dongs or ringdings or what is it? I guess I should take the L. Drake's are probably the knockoff to hostess, no? Because a bunch of people send me that.

I've literally never seen Drake. Is it an East Coast thing? We don't have those here. So, Drake's makes yodels and Hostess makes Ho-Hos. And I have to say, ho-hoes are pretty damn good. I think, like, the cream is a little bit, has more sugar, which I like. And one of them makes ding-dongs and the other makes ring-dings. So I grew up on Hostess and Little Debbie snacks.

I've never had Drake's before. I didn't know Drake's existed. Isn't Little Debbie's the Will Ferrell bit on SNL? That's our oatmeal cream pies we were talking about last week. This is a true story. It happened right here in my time. One night, 17 kids woke up, got out of bed, walked into the dark, and they never came back. I'm the director of Barbarian.

A lot of people die in a lot of weird ways. We're not going to find it in the news because the police covered everything all up. On August days. This is where the story really starts. Weapons. All right, back to the worst chart in finance. But yes, there's a lot of Drake's fans. I didn't know Drake's existed. The second kind of person looks at this chart and says, hyperinflation, end of fiat system, we need to go back on gold

or Bitcoin is going to save us. That is just the wrong way of thinking about this, because I look at this, $100 in three-month T-bills going back to 1928, grew to more than $2,200 by 2022. Even if you adjust inflation, $100 would be $117 in three-month T-bills, which are effectively a savings account, the least amount of risk you can take, and it's backed by the guy. government. So to your point about dynamism and being penalized, if everyone was just paid money on their dollar bills that they held, you wouldn't have to take as much risk or there wouldn't be as much risk taking. If the government paid you money for holding a dollar bill, why would they do that? That doesn't make any sense. I think this is one of the worst charts in finance based on the

way people take it. Pretty awful. All right, we had another good retirement profile in the Wall Street Journal. I think a couple months ago they did people who retire on a million dollars. Here's what retirement with less than a million dollars looks like, and I read this piece, and I cringed for one of these couples. It's an older couple. They live in Maine. Annual spending is 50 grand a year, and it says, Mr. Jones' retirement account took a hit in 2008 and never recovered. Spooked by the S&P, 38% decline in 2008. He sold his stocks and invested in a stable value fund that earned about 1% a year, said the couple's son-in-law. A doctor was managed the portfolio since 2018. the Sunday law moved 35% of the balance into a low-cost index fund and the rest into treasury fund.

So they basically sold out at the bottom after 2008 and never got back in and put in a stable value fund. It pains me when something like that happens because that happened to way more than one part. We've heard multiple stories of that, people who for 10 years could not get back in. And I just can't imagine scrapping and saving your whole life and then making one decision like that and selling out after you've lost 50% of your money and never making it back. We were hearing from people, I think probably through 2013, 2014, that we're still sitting in cash from 0809. And at that point in time, we were making new highs. The GFC wasn't that far in the rear of your mirror. It's not like the economy was like on fire, but the stock market was.

Awful. Really, really last situation. So they talked to all these people and they said they spend $50,000 a year. They get $2,500 a month from Social Security. So that's $30,000 a year. for the couple. So that's 60% of their spending coming from Social Security. I've heard some politicians say we should cut Social Security. I think that's insane. I think probably 50 to 60% of people who are retired would be in a very hard spot right now if we didn't have Social Security for them.

And if we cut it, it would make it harder for them to retire. Because I think this one mistake, this guy and his wife made, and it screwed their whole retirement, basically. You know what's not in the doc? You know what categories in the... the dock are empty this week? What? Inflation. I told you. It's kind of over. I was a story. And layoffs. No layoffs this week? Just saying. Disney started their layoffs. But the headlines, soft landing back on the table? I don't know. After we talked about a banking run leading to recession, I feel like it would have

easy to have a hard line one way or the other like a month ago being like, I think the economy is overheating and we're going to have a recession because the economy is overheating and inflation is going to stay higher. I think it would be so much harder to have that type of certainty right now with the economy and where things stand. I don't think we're going to know for months what the impact of this banking stuff is going to be. I think it's hard to be bullish on the economy. I think what you can maybe say, and this might be getting too cute, is things aren't going to be as bad as most people think, which, I don't know. Maybe we muddle through the no landing scenario. All right. This is from Will Clemental or Clemente. Fastest,

growth in Bitcoin addresses with more than zero Bitcoin since early 2021. Whatever the reason, I think it's pretty obvious, the recent banking process motivated people to buy Bitcoin. Rightly or wrongly, that's what happened. It is interesting that Bitcoin continues to have that brand awareness. There's all these other coins that have come along and said we can do this and we can do this better and we can do more of this stuff. But Bitcoin, I just think it really is going to be millennial Gen Z gold.

It's going to be hard to get that off of it. I don't know what that means for returns, but I think that's what it's going to be. Furthermore, money came out of stable coins and went into Bitcoin. So I guess these are people that are already in the crypto universe that are already messing around with this stuff. That's that. Do they have stable coin CDs yet? I'm not quite as attractive when CDs give you 4%. Here's a quote.

We're pivoting to AI now, a new topic. The development of AI is as fundamental as the creation of the microprocessor, the personal computer, the internet and the mobile phone. It will change the way people work, learn, travel, get health care, and communicate with each other. Entire industries will reorient around it. Businesses will distinguish themselves by how well they use it. Ben, I'm guessing you know who this quote is from, since I have the link on there, but do you know who wrote this? That's Bill Gates, right? That's Bill Gates. So I listened to Derek Thompson and Kevin Roos to talk about AI last week on plain English, and I'm coming around to the idea that even if AI hit some of these crazy

projections people are making, the downside is way bigger than the upside. I mean, the downside is Terminator 2. I'm not even talking about Terminator 2, like the end of the world. I'm talking about it's going to be so much easier to scam people. It's going to be so much easier to spread disinformation. Think about how easy it was to convince people on Facebook or Twitter or whatever of fake stuff. I feel like AI is going to make it so much easier to rile people up and spread disinformation. I'm not thinking about SkyNet yet. If that happens and we're all dead and an instant. I'm not going to feel it anyway. So, wait a minute. I'm not going to have John Connor this thing. You're already of the position that, because obviously there's tradeoffs with everything as there

is with social media and the internet. You think AI is going to be more bad than good. The bad is going to outweigh the good. Yes, definitely. Just like social media, it's going to be amazing at first. And then it's going to get worse and worse and worse. And bad actors are going to figure out how to use it against people. There's going to be more scams. There's going to be people to take advantage of. All right. That's a strong statement. You're in the definitely category. You said definitely not me. Those are your words, not mine. I think it's going to be really good for a certain subset of the economy. For people in knowledge jobs, I think it's going to be amazing. I think for most of society, the rest of society, it's going to cause upheaval in the labor market, and it's going

to cause people to get scammed and spread disinformation. So I think the good is going to be great, and the bad is going to be worse. That's kind of my initial stance on AI. All right, Paki had a really good post that I thought was worth reading. And it got me thinking about all the things that it can do For example, I was on the phone yesterday trying to get some information from a bank. How bad are the automated services? Press 1. Would you like to, like, and it's like, no, no, no, customer service. I said customer.

I just hit zero over and over again. But when it doesn't work, it's like endlessly frustrating. Think about how bad chatbots are when you're on somebody's website and you're trying to chat to the assistant. It's awful. Yes. Customer services, I would hope that's what this helps with. The initial easy layup here is customer service. Mike Conover, I found this in Ben Thompson's strategy block.

He copied and pasted a block of text from Ben Thompson and put it in GBT4 and said, who wrote this? The computer said, it is difficult to identify the specific author of this blog post without more context or linked to the source. However, the content and style seemed to resemble that of Ben Thompson, who is the author, blah, blah, blah, blah, blah. Ben, unfortunately, I tried it for you and I did not work. Oh, it didn't work?

Okay. We'll get him next time. Anyway, who knows where this goes? Like everything else, there will be incredible leaps forward, and there'll be a lot of shrapnel that gets deflected off to people. This is the fun part of the cycle, though. This is the fun part of the cycle when people say... It's like social in 2010.

Yes, in 10 years, everyone's going to have this AI bot and this AI and AI is going to do this for you, and people are just throwing stuff out and some of it's going to stick and some of it. I'm sure there's going to be some stuff that happens that people. people don't even, aren't even thinking about right now. When the internet started, we didn't know that social media was going to be like the big change that impacted everyone. And here we are. How about this? I saw somebody write, like, let's say that you want toastados for dinner and like you want to make it for you. And you say, make me the ingredients for this. And it just picks it up from stop and shop or whatever and it just brings it to you. Speaking of which,

I'm doubling down on Home Chef. So last night, I did make Tostatas and they were awesome. So home chef comes in like a bag. It's probably like Blue Apron, I guess. It comes in a bag and everything that we've had has been really good. Like really good. It's easy to cook and I like cooking. But I don't like buying all the things. It's just right to you. And guess, so I said to Robin, all right. How much is this? I'm expecting like a price that like upsets me. It was between 10 and 12 bucks a person. And I said, okay, okay. How much is shipping? $10. Okay. So how many meals do you get a week? We do three. I'm tired of getting this. Same shit. We do take out a lot because we both work. And it's just with the kids, it's just

the last thing you want to do is come home, prepare, shop, all that stuff. So this is opening up our things that you would never make for yourself. I had noodles with bok choy and beef. It was awesome. 12 bucks. If I get them from Thai, it's like $26. My only complaint was I thought it wasn't enough food. I thought the portions weren't big enough when I did it. Okay. So for the toastados, it was two each, which is plenty. I like Mexican. I made enchiladas last week. it was three each. So I was like, I didn't even need the third. So healthy portions. How about this? Get home chef and report back. I don't like the cook, so I won't do that, but I'll take your word for it.

Does Courtney cook? Yes, she's a very good cook. She could do it. Okay. So tell her to do it. All right. How did we get a home chef? Oh, we're talking about AI. Anyway, I don't know. It did seem like this week was like the explosion of content surrounding it. You know what I mean? Yeah, it feels like it's definitely been building up. But this is a leak that, like, everyone that I read is, like, going all out on the content. And I don't mind it. It's fun.

All right. From Redfin, daily average mortgage rates dropped from 7% to 6.5% over the weekend. Oh, wow. Senate Banking Committee holds hearings on SVB and signature bank failures. That was fast. It's on TV right now. Yeah. Remember him?

Oh, SVB. I thought you were talking to SBF. He was in the news again for bribing someone, apparently. I don't know. That guy's definitely going to be, like, running a company or a fund against him. Someone's going to give him a second chance if he ever gets out to jail, don't you think? Did the fire festival guy raise more money? Probably.

All right. So rates collapsed from 7% to 6.5%. And Redfin said that U.S. mortgage purchase applications increased to their highest level all year after that happened. So I think that there's just so much pent up demand. Pent up demand in housing. Look at this. 46% of pending sales are under contract within two weeks. So there's so little supply.

It's because there's no supply. So the people that really want to buy houses are jumping. I went on Zolo two days ago to check in my town. No inventory. Like nothing. There's nothing here either. That's the problem. Who's listening to their house today?

Yeah, there's so few sellers and so few buyers. You're only listing to your house if you have to move. And you're only buying if you have to move or you don't have a house. Yeah. What if it's a contrarian play to list your house now? It's probably going to sell quick if you're in the right spot. There's so few buyers and sellers, they're going to jump on it. Pretty wild.

What's this two housing market? think. So the Wall Street Journal had, I feel like we talk about like the housing market as if it's one thing. There's no index fund of housing markets. Your housing market is you basically own like a microcap stock, maybe even like a pink sheet. That's the housing market to the majority of people. So they said it's a tale of two housing markets and all the 12 major markets west of Texas plus Austin, home prices fell in January on an annual basis. In the 37 biggest metro areas east of Colorado, except Austin, home prices rose year over year. So, they're saying, look at this chart. In the west, home prices are falling. Seattle down, San Francisco

down, San Jose down, Orlando up, Miami up, Buffalo up. So in the southeast and in the northeast and the Midwest, prices are rising. In the west and the southwest, prices are falling. And it probably has something to do with the prices rose quicker there than they did, but there's no like one housing market right now. If there's a bare market in housing, it's going to be in like specific locations, Austin and San Francisco and San Jose in Seattle, as opposed to the whole country. The new data came out today from Case Schiller and housing prices are now down 3% from the highs. Overall, total. Take some time for this data to catch up.

This tweet from Mike Zucardi is showing the 30-year fixed rate mortgage is 320 basis points above the 10-year. The historical spread is 195. I think that a lot of that has to do with demand for mortgages. But shouldn't demand for mortgages bring the rates down? Right. But remember we talk about the low demand for mortgage bonds, too, if no one's paying them back. I would imagine that spread. If mortgage rates fell to 5%, that spread would fall because you'd see more refinancing and more activity. That spread would probably collapse, too.

That's interesting. You're right. There's be a ton of people refinancing at 5%. Yeah. Okay. So this is from Ryan Lundquist. He looked at just in the West Coast. The percentage of multiple offers over the past two weeks, Sacramento, 60%, 67%, all these other places in California, saying that it's almost 60% higher than normal for the time of year, but not 2021 or a 75% higher. Just the fact that there's still multiple offers on these because the supply is so low. It's crazy.

This one, let's see, where was this from? The author sent it to me. Oh, from the long run, it's a newsletter. The rise in all cash offers from the last year, coupled with the 40-year low in first-time homebuyers, only 26% of homes purchased in 2022 or by first-time homebuyers, down from 34% in 2021. one, more homes were purchased with all cash than first-time homebuyers last year.

So this is the pent-up demand. Wait, seven more time? More people bought a house last year using all cash than were a first-time home buyer. That's pretty nuts. What does that mean? What does that signal? I think it signals that rising mortgage rates meant people with money could still buy because if they have all cash, they don't need to worry about rates.

And the people who need lower rates are people who were buying their first houses and they were on the sidelines. That's the pent-up demand. We had a crash last year in first-time homebuyers. Young people lose again. That's always the case. Unfortunately, yes. It seems like this.

All right. Survey of the week from the Wall Street Journal. The overwhelming share of Americans aren't confident their children's lives will be better than their own, according to Wall Street Journal poll, shows a growing skepticism of the value of a college degree and record low levels of overall happiness. So they ask people which best describes your financial situation? Better than expected, worse than expected, about where I expected. 44% say worse than expected, I would assume it's almost always like that. How many people

expect their finances to be crappy someday? Doesn't everyone kind of assume like I'm going to be rich, I'm going to be fine? Maybe some people have grounded expectations. Most people probably are unhappy with where their finances are based on compared to expectations. This is the crazy one to me though. So do you feel confident that your children's generation would better off than your own. Almost 80% do not feel confident and about 20% do feel confident. It used to be in 2000, it was basically 50-50. Now it's 80-20. This chart is weird. Why was there a spike in 2017 for feeling confident? I wonder if a lot of this is politically driven. But I think it's just easier to be pessimistic these days. There's too much noise. People have access to too much.

Yeah, the smartest people in the world can pay attention to every bad news story there is today. whatever, 50 years ago, you couldn't. You couldn't possibly know all the bad things that were happening. I think people just know too much. I agree. Yeah, there's a lot of scary shit out there. People have too much access to it. This was interesting on the personal finance front.

So this is from New York Times. There's some millionaire mansion tax that's going into effect in Los Angeles. And they're going to use the money to help with a homeless problem there, which sounds great. So there's a 4% tax on property sales above $5 million, 5.5% tax on properties above $10 million. and the tax must be paid by the seller. It goes into effect on April 1st. And I guess what they're saying is people are trying to sell really quick before this happens. And they were interviewing a realtor. Did I say it right this time? Realtor. Okay. In the area who was saying, this is kind of funny. But the inflated Los Angeles housing market, a $5 million home is not necessarily owned by millionaires. Five million dollars isn't a mansion in Los Angeles, just like it is in a mansion in New York City. It's a 4,000 square foot modern house in West. us Hollywood. I just think it's hilarious that someone would honestly think owning a $5 million home does not make you a millionaire. Well, this isn't any realtor, Ben. It says Mr. Alden.

I'm guessing that's the dude. There's two brothers from the show. Robin watches this in Los Angeles. Some bravo show. Million dollar listing, it says. Oh, a million dollar listing, yeah. So, okay, a 4,000 square foot home, well, is that a mansion? It is a big house. That is a big house. Four thousand square feet is for 98% of the population, that's a huge house. It's a very big house. That's ridiculous. Although, I will go on record. Not a mansion.

Big ass house. Okay. That's pretty big. All right, this is from CNBC. More millennials are turning 40 and they're changing travel as we know it. You're counting on the days here, right? Nope. Just turn 38.

A couple more birthdays. I feel old and young. That's fair. That's middle age for you. There you go. You're reaching middle age. That's true. All right.

When it comes to nearly all travel behaviors, millennials are the generation most likely to engage and they often do so, 18% of millennials have taken three or more domestic flights in the past year to compare to 10% of Gen Xers and 6% of baby boomers. They're talking about, they think money worries are causing millennials to delay everything from home and car purchases to marriage, yet they still value vacations in traveling. And they say they're way out in front of other generations and deeming vacations to be very or extremely important to them according to research.

Can I say something to that? In my town, everyone goes on vacation. every vacation. I'm just kind of not trying to count anybody's money, but wow. Yes, you hear this. I hear at the school stuff, I hear like, hey, we were in Jackson Hole last week. We were skiing here. It's like, those are expensive trips. I think it must be credit card points is the only way that this is possible, even remotely possible. I was talking to my brother about this. I think that I'm over generalizing here. But the difference between baby boomers and millennials is I think millennials are going to spend most of their money.

boomers kind of have hoarded more of their money and have the old school mentality and maybe have a harder time spending it and I'm going to leave for inheritance for my kids where I think millennials are going to spend all of their money. I don't think millennials care. I don't hard disagree with you. I think right now that statement makes sense, but I do think that we all turn into our parents eventually. Probably. I think I have told this. I'm eating cottage cheese with fruit. What does that mean? You're saving money that way? No, my dad. Oh, because your dad does that. Yeah. I always used to them as the grossest thing ever. He would, like, go to the diner and get cantaloupe filled with cottage cheese, which is kind of weird. But I'm not quite doing that. I'm not going to get cottage cheese at a diner. I will never do that. If I ever do that, just shoot, it's over for me. But I will go to the supermarket and get some cottage cheese with fruit in it. Do I agree, though, and maybe this is just everyone. When it comes to, like, housing preferences

and trips and travel, like millennials have much higher taste than their parents. Well, I feel like when we were kids, I don't know if I ever went to. on an airplane to a vacation. I'm sure I must have. I never went to like Aruba, for example. I know, though there were people in my town that did that. But I went to see my grandparents in Florida, but mostly the trips that we did was like driving trips to like, I don't know, Boston or Philly or whatever. The idea that you would go on vacation, I don't think that was like a big thing. With us having multiple kids, it's expensive to fly multiple people on a plane, four or five people on a plane is so expensive, especially now, right?

Yeah, it's ludicrous. Look at this photo. So I know listeners can't see this, but if you want to go to the blog post and... So this guy, Andrew McCarthy, look at this, Ben. Friday I captured around 200,000 images of our sun. Take a look at this close crop. Okay, so it's a picture of the sun, which I've never seen the sun before of you. Look at that, like, thing that's coming out of it.

A hundred thousand miles high, that thing is, to give you an idea of the size of the sun. It looks like a little dot. How crazy is that? I don't mean to get all like dorm room philosophy on you, but thinking about the galaxy and how big it is and all the stuff that's out there makes your head hurt. It really does. Yeah, I was like, wait, how is that 100,000 miles high? Looks like it's the size of like a water tower or something. Ben, you told me that you had your Karen moment and I told you to save it for the show.

What happened? We're getting a TV hung. I paid for someone to hang a new TV. and it's this, like, third-party vendor. So they schedule a time for you, and you pick a time, and they say, okay, we'll be there. And then, like, an hour beforehand, they say, due to the last minute scheduling, Schnafu, we can't make it. Here's your new time.

So, like, two days later, I'm like, all right, fine. Two days later, the same exact thing happened. So I'm like, what's going on here? So I call this place, this, like, handy place. And I say, explain me how your business works because you keep canceling me at the last minute, and I'm waiting here. I'm coming home from work. And they're like, well, it works like Uber, where we put it out there, and a third party

you have to accept the thing and no one's accepting it in your area. And I'm like, well, how do I plan on this not happening in the future? And like, you can't. And I said, well, explain your business to me. They're like, well, so what if we move it to the next Tuesday and this happens again? They're like, yeah, that could happen. I would rather have someone cemented in there and make sure that they're going to come. And they're like, we can't do that?

And I said, all right, I'm canceling. I'm using someone else then. And then the guy was giving me the runner. And I said, can I talk to your manager please? There you go. I'd like to talk. You're not helping me. And he said, our managers are only.

here on Mondays. They'll call you on Monday. And of course they didn't. And I said, all right, just give me a refund. So what did you do? But is there going to be an AI manager in the future I don't have to talk to? Well, you had to speak to the manager. I got a new service. That's crazy talk. Yeah, I was like, wait, what? So I want to give one more plug and then I want to give an unplug. I want to plug. Have you ever used Rocket Money? No, I don't know what that is. So Rocket Money is, I guess it's like spending budgeting mint-ish. I don't pay for it. So I use a free version. They send you unusual transactions, large purchase detected. Big fan. I might upgrade. And I don't really use any sites like that,

but I'm a big fan. I still do it all in Excel. All my budget ink software is through Excel. Seriously? Excel ever goes down. I'm screwed. I've had a system for like 12 years. It's not Brooke. Why change it if it works? I want to unplug or de-plug stub hub. What a trash service that is. Are there any good ticket services? No. They're all horrible, aren't they? It's Ticketmaster and Stubbub. So when you list your tickets, they put like a 20% tax on. So if you sell your tickets for 200 bucks, the buy will pay $250, something like that. They're screwing the customers on both sides.

As the seller, I don't get $200. I get $160. So they're marking up both sides and not just like 3%. So it's a huge bit-esque spread. Huge. It's so egregious. But can't do anything. It is surprising there's like no new players that they've allowed to come into that

space. All right, a couple of months ago, so there's one podcast listener that I've become friendly with. He works at Amazon, and he is a big movie guy. So he texts about movies. He invited me to the premiere of a movie or a show, and I couldn't make it. I was out of town. And my friend texted me. I had two people text me the same day, hey, there's a new show on Daisy Jones and the 6th.

That's really good. And I was like, wait, that show sounds familiar. Anyway, my friend, I guess he produced it, that's the premiere that I was invited to. So, Daisy Jones and the Six is a show on Amazon Prime about a 1970s rock band in Los Angeles, has like almost famous vibes. And I binge the shit out of it. I'm on episode eight. I love it.

Based on a book, you said to me you should watch this the same day someone else told me. I'm three episodes in. I'm all in. It's very good. There are some cliche parts, but it's the kind of show where you want those cliches. I love it. The two leads, the guy and the girl, are both. incredible actors. Do you know who she is? IRL. Elvis's granddaughter. She's Lisa Marie's daughter.

Oh, really? I didn't know that. Okay. I can see the resemblance. Excellent. I've seen the guy before in a bunch of stuff. It's a solid. It's the miniseriesies, too, so it's only one season, which I like. This is sort of a mind for me. So I've never seen Tootsie. I think I was always turned off by the cover. I don't know why. I've actually never seen that either. It's Dustin Hoffman, Swayze, and who else? So the cover is Dustin Hoffman in like a red dress. And I don't know. Anyway, it's been like I might to get to this forever because Dustin Hoffman's obviously one of the best acts of all time. And I was watching it on my birthday. There was a scene where somebody said to Dustin Hoffman, whose name is Michael, today's your birthday, Michael. And it was

sort of like a bit of a trip. Good movie or no? I don't know. I watched it. I was half sleeping and it was pretty slow. I don't know if I'm going to revisit it. Unless I get emails telling me that I have to. I'm probably going to skip it. All right. I watched, so the Cronenbergs, the dad David who did The Fly and some other whacked out shit crimes of the future, which I mentioned a couple weeks ago. Him and his son make these demented movies that I really enjoy and I'm kind of embarrassed to admit that I enjoy them because they're so whacked out.

They're like these just demented, gory, wacky movies that only the critics like and the audience can't stand them. So Infinity Pool, his son's newest one, 88% from the critics, 51% from the audience. Crimes of the future are same thing, 80% from the critics, 50% for the audience. The audience can hang. Guess what?

I can hang. So you're a horror movie critic. I can't hang with these movies. You kind of are at this point. These movies, I can't. Oh, you can't watch us. You can't watch us. This is not for you.

There's got to be somebody who's watching Infinity Pool. Send me an email. Tell me what you thought. Okay. There was a big article of the journal about studios going all in and horror movies. Look at this great chart. They have a chart called The Science of Scare, top 20 scariest movies based on heart rate.

How cool is that? So they show the average movie heart rate and then like the how high it got. Do you like any of these? So the only movies I like both The A Quiet Place and Paranormal Activity was pretty decent when I saw it. So scared. I saw it for not all the other six, but I liked that one.

Have you seen Herod of Terry? That's a Sean Russo, Top Ten. No, sorry. A lot of these I've never seen or heard of. I saw the ring in the theater. That was all right. The ring was super scary. Last one.

We got a release date for Killers of a Flower Moon, which is an excellent book. That's the Scorsese, Leo movie. Apple's making that. so Apple is making a big push into the theater you've read this book i read that book i don't when it came out 20 whatever i like the author fiction or nonfiction i know nothing about this nonfiction it's about basically i think it was the cherries i can't remember some indians got completely for their land obviously tales all this time and this is the story it's a western it's a western i think the movie's going to be incredible they're also making napoleon with walking phoenix

So I'm glad Apple's stepping up to make a lot of movies because someone's going to have to. There's so few good movies these days. It's really hard to find a good movie, isn't it? Hard to find a good movie? What in theaters? Anywhere. There's just nothing ever. Every weekend. It used to be you could find at least one or two good movies

that were released on a weekly basis. There's nothing these days. Nothing. Good thing TV's picking up with slack. All right. John Favro was on Smartless and was great. And they talked about his movie, chef, which I have not seen in a while. Is that Bradley Cooper? No, no, that's a different one. That's burnt.

All right. Chef is a little more lighthearted, but it's got an amazing supporting cast. He must have called in all his favors as a director. So, Sophia Vergara is in it. Robert Downey Jr. is in it. John Leuizamo, Bobby Canna Valley. It's a ton of good people that are character actors in the show. Robert Downey Jr. has like a cameo and was great. But you know some movies you watch and the scenery in the movie makes it a better movie? Like, if you watch a movie in Hawaii, it could be a pretty crappy movie. Of course.

And the scenery alone, like 50 first dates, I think it's a huge premium because it's in Hawaii. This movie, he runs a food truck and he makes the Cuban sandwiches. And the way that they use food as a form of scenery, I was getting hungry the whole movie. Everything they made in the movie looked like something that I would want to eat. So I think you can use food as a scenery in the movie. Totally. That's a good take. As a way to, like, help it.

All right. And finally, Jill on Money on the Component Friends last week. She was awesome. Was she incredible? I'm not a CBS watcher. I've maybe heard the name before. I was not familiar with her. She was amazing.

I thought she was so good. Most feedback we've ever gotten. She was incredible. Absolutely incredible. She was great. So I subscribed to her podcast now, and I thought she killed it on the show. Her storytelling, there is something.

I'll give you Northeastern folks credit. New Yorkers, when they tell old schools, especially like there's a certain boomer, New York people are amazing at telling stories. Is that fair? The way that they tell stories, I feel like there's a certain subset of people over there in New York, New Jersey, wherever,

in the Northeast that can tell very good stories. And she was like that. Amen. So listen to that if you haven't. All right. That's all I got. Adel Spiritspod at gmail.com. Remember we've got a special, Saturday special.

Thank you for listening. We'll see you next time. Thank you.