Animal Spirits Podcast - There's No Crying in Crypto (EP.229)

Episode Date: November 3, 2021

On today's show we discuss the impact of rising rates on the stock market, Shibu Inu, the different levels of FOMO, parallels to the tech bubble, why everything we learned in business school is now worthless and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to by Masterworks. Once you realize what's happened in the past week, the only thing that you could say is holy shit. Someone made $8 billion buying Shiba Inuk coins. Tesla surpassed $1 trillion in market cap. And board of reality, Mr. Mark Zuckerberg went all in on the Metaverse. Quality chaos keeps things interesting. But when it comes to your financial well-being, less is more.

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multi-million dollar paintings investable like a company stock. With over $250 million in AUM, Masterworks is off to the races. Ben and I have invested in 13 of their offerings and will be allocating more soon. Hey, we will. I guess we will. Join legendary investors like Nick Majuli, Meb Faber at Paggy McCormick on Masterworks by visiting Masterworks.com.I.O. slash Animal to skip their waitlist today. 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 Battenick 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 Ritt Holt's Wealth Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. clients of Ritthold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Bill Ackman wants higher rates. He tweeted out this week. Who doesn't? As we have previously disclosed, we have put our money where our mouth is in hedging our exposure to an upward movement in rates as we believe that a rise in rates could negatively impact our long-only equity portfolio.

And it's kind of funny because he's saying he's put his money where his mouth is. He also went to the actual Fed and presented why they need to raise rates. meaning a. He put on hedges, and then he went to the Fed and said, raise rates. I guess you can't blame it. You can't be outraged at Bill Ackman and also okay with Jerome Powell trading his targeted funds. He shared what the presentation that he gave to the New York Fed, and there was one slide that kind of goes over at all. So he basically said the economy has made progress. He thinks we're going to have another boost when the pandemic slowly goes away and employment inflation figures will get better. We've had an unparalleled monoeconomic stimulus. Fed funds rate remains a historic lows. This is all nothing we don't know. He said, But wait-and-see approach to rising rates creates significant risks given the substantial progress to date on employment and inflation combined with the unprecedented economic backdrop.

I get it. My one question is... Here we go. No, if the Fed raises rates from zero to 25 basis points or 50 basis points today, is that really going to help the economy at all? Like, is that going to help supply chain bottlenecks? Is that really going to do anything to the economy? No. So it's interesting now that the Fed's moves are thought more about speculation in the markets than they are.

about the actual economy. Interesting. That's a good point. Don't you think that it's more about tamping down speculation than it is about helping the economy? Although, I wonder if, and this is probably small, but there are undoubtedly people that are speculating who otherwise would be at work. Probably.

Who no longer need to work ever again. Yeah, there's got to be some of that. But what's interesting is, here's my take on all this. Why is the Fed's foot still on the gas pedal? Well, what they said when this started is last time we took our foot off the pedal, way too soon. And this time, we're going to keep our foot on the pedal for as long as we possibly can until we get to full employment. That's what they have said. I understand the people that say, why do you still need to buy mortgage-back bonds? And that stuff does seem to not making

sense to me. At this point, that's no longer helping the real economy. They've done an amazing job. They prevented an absolute depression, but their combination is no longer necessary or appropriate, in my opinion. Maybe he's right, but Ackman thinks that rising rates will have a negative effect on his stock portfolio. And that could be the case because we're coming off of these generational low levels. But if you look historically, rising rates have not dinged the equity markets. You and I've looked at this. I've looked at this in the past. I went back to 1950 and looked at any time the 10-year treasury rose 1% or more. And there was only two times out of 14 instances, and this is through the end of 2018, that stocks actually fell when rates rose. The average rise

was like 11% when rates rolls 1% or more. Do you agree that there's a big difference? between going from five to six than from going from zero to one. I think that's what a lot of people are betting on, that that could be the case. My opinion, that historical data is pretty much useless because I think going from zero to one is like exponential growth. I think that's like, I can be talked out of this, but my knee-jerk reaction is like going from zero to one, it's like going from five to nine. It's not like going from five to six. It is also just funny, though, how people get freaked out when the tenure goes from like

1.3 to 1.6. I know everything is relative these days. Like, I looked at a piece for last week. From 1972 to 1985, the 10-year averaged 9.6%. It's a different metaverse. Totally different metaverse. Here's the other thing, though. So, Ackman's worried about things like inflation and growth getting too hot and all these things. I think that you've probably never had a better time for households to be prepared for either

higher rates or higher inflation. Like whichever one you want. Go on. Go on. Well, okay, so this is from Chris Marsh, who writes that money inside and out, substack. He said, during the pandemic, U.S. household wealth increased by the largest amount since records began in the 1950s, taking household net worth about six times GDP for the first time. Whereas the great financial crisis of the destruction of household net worth of about 70%

of GDP in three years through mid-2009 laying the groundwork for liquidity, trap-like conditions, the great pandemic has seen household net worth increase to about 120% of GDP in about half the time. So people are doing so much better this time. He said over the first, over the five quarters since 2020 Q1, so at the beginning, right when the pandemic started, net worth of U.S. households is increased by an average of 29% of 2019 GDP each quarter. So, like, we're doing so much better off than we were before. So I think either one you're worried about, the Fed keeping their foot in the gas and inflation increasing or the Fed raising rates and pulling out of all this stuff. And I think either way, the consumer is better position than they've ever been. Fair?

Yeah. And this is complicated and nuance. And we've been debating this for weeks. What about people on the bottom and they can't stomach rising prices. I guess to the flip side, which we'll get to later in the show, is they've seen significant wage gains. Yes. Unfortunately, whatever you do here, someone's going to get dinged. And I guess the line for most people would be, well, raise rates and if asset prices fall, then you're only hurting the rich. But I don't know, raising rates also hurts people who are low income and have to borrow money because they're paying higher rates to borrow. And so it's always tradeoffs and there's never any good solution here. All right, quick plug, I guess, for iBonds, only because an email came in. I want to share this. I didn't know about

iBonds until your podcast. Now that I'm investigating them, I thought you and your listeners might also like to know the following if you don't already know. I didn't know where to purchase them either. Investors can buy up to $10,000 worth of iBonds annually through government Treasury Direct website, Treasury Direct. You can purchase another $5,000 with your tax refund using the annual total total purchase amount of series iBonds to $50,000 per person. I think that pays what, 7%? For six months, it's 7% annualized. By the way, some people did write to us and say you can buy them for your kids. Okay, cool.

I think we had that wrong before. So we just had the best month since November 2020. I don't think that's possible. Rich Dad, Poor Dad told me the stock market was going to crash in October. He didn't tell you which October. Are you sure about this? You want to check this again? He didn't tell you which October.

He might have met 2022. The S&P 500 had its best October in 60 years, but this guy, Kawasaki fellow is still out there tweeting his bullshit. What do you mean? What do you mean? He's still tweeting nonsense. You lost me. The stock market did not crash like he predicted.

No, Guy Kawasaki. You got the name all wrong here. What did I say? You're sub-tweeting the wrong guy. Where am I? Robert Kiyosaki. Yeah. Why did I say, guy?

I don't know. Who's guy? Did you watch that movie? Who? Guy. Guy Kawasaki is an American author. I'm sorry. Yeah, you'd be lost there.

I'm sorry. Well, who's Richard I point out? Is it Robert Kiyosaki? Yes. And you totally spelled his name wrong, too. You use Kawasaki like the jet ski. Oh, my God. I completely butcher that.

I apologize. I said Guy Kawasaki. It's Robert Kiyosaki. You use Kawasaki like a Kawasaki jet ski. All right, whatever. I apologize to Guy Kawasaki. Robert Kiyosaki is still out there doing his thing. I'm sorry.

All right. This is a good one that you sent me from Sparkline Capital, which is a really cool long piece on brand in the influencer world. And it talks about how. millennial spending power recently surpassed that of boomers, and it shows where this is going. So now millennials spend more than boomers, and it's continuing to rise. What are the implications here? This post was freaking awesome. So I highly suggest everybody, at the very least skim, it's a long one.

But Kai broke down, like spending habits and influence. Like, he looked at brands on social media, basically, to see what they were doing, back into who their audience is. And this is a big deal. What's the exact stat? Millennial spending power? I'm not sure how he's measuring that, but this is a big deal. Okay. So this gets back into my Bitcoin being the new gold. Millennials now have more spending power to buy Bitcoin over gold. It's inevitable. You doubling down? No, I don't know. But I like the, so he quoted Seth Godin in this piece, said, people do not buy goods and services. They buy relations, stories, and magic. I guess this is the bull case for the

metaverse, right? Yeah. Let me give you the bear case. Okay. This is the upside of the downside. I guess the downside of the upside. Somebody tweeted to me, Sheba. I said nothing to almost $20 billion in under five months. Sheba is a joke on a joke because it was a derivative of those coin. Crypto is the fastest wealth creation of all time. And somebody tweeted to me, I put $2,000 into a similar meme coin, Akita. I guess there's like a dozen dog coins.

Back in January, I ended up selling in three tranches, ended up netting $210,000. This is insane. This dude put 2K, it grew into 210, and he's not the only one. A lot of people are doing this. If I had just held it would have been worth $3.5 million at its peak, can you believe this? The best trade in my life makes me sick to think about. That is so fascinating. That is such a mind-fitting the best trade of this guy's entire life, turning two grand

and $210,000 makes him sick to think about because it could have been $3 million. That's nuts, right? I mean, that is absolutely nuts. Like, think about that. The best trade ever, he can't sleep. This is like having FOMO for your own trades. It's horrible. This sounds horrible.

Honestly, you think like, oh, boo-hoo, you end up making $210,000. Put yourself in those shoes. Yeah, but would this person really have held all the way up to $3.5 million? Probably not. Almost certainly not. That's the thing. But still. If you do it five times, then a 10 times and 100 times and you go, oh, man, if it is held on for a thousand times,

see, this is why I think the current level of FOMO is going to screw. with people. So I'm coming up with my like different levels of FOMO. So in the past, you've seen the blog post in the past when we first started blogging. People would blog about the best stock in history returns wise is like Philip Morris, the cigarette one where I think it was like 19,000 percent if he reinvested the dividends over 60 years or whatever. And that's the kind of thing like, oh man, that would have been nice to go back in time and put my money into that. Then you have, you increase it a little bit now. And the next FOMO is IPO for Amazon. If I would have only invested in the IPO for Amazon, then I would have multiple tens of

of millions of dollars. But that was still sort of a long time horizon that you had to go on. Now, we have overnight FOMO, where if I would have invested in this shit coin a month ago, I could be a billionaire. This one guy said on TikTok, if I would have held, it would have been worth a billion. That's why this is so much harder now, because you're seeing it happen in such a short amount of time. Overnight FOMO. This guy I know is texting me about his, all of these shit coin trains. I'm like, dude, please stop. You're going to make me do something. stupid and I don't want to do it. You know the Shaq Giff where he's like blocking away. I just feel like if you're an investor now, all you're trying to do is block away foma,

block away phoma, block away phoma. So there was one person who about $8,000 and it's worth like $6 billion or whatever the number is. It's ridiculous. It's so funny too because people are like, well, there's no way that person could actually get $8 billion because of liquidity. They would crash the market. It's like, okay, fine. Eyes roll into the back of my head. He could only pull out $300 million. Yeah, like, oh, yeah, for investing in a, Nick's right. So Nick tweeted this. He said, fake regrets on fake money. This guy in 99.99% of you would have sold way before the 2K to get to a billion dollars. I mean, no kidding. What sort of sociopath can watch $2,000 turn into a billion? Are you kidding me? Honestly, my personality, $2,000. Maybe I could ride it to $10,000, maybe. But don't you think that the people who can ride it are the ones who are already wealthy who have all this crypto money and they're just like, whatever, it's Monopoly money to me, I don't care. But so this is how it starts.

So Shiba Inu has a larger market cap than Deutsche Bank. Hilarious. So Morning Brew alerted that $8,000 wallet that now is worth $6 billion. So Peter Thiel was the first outside investor in Facebook when Facebook was worth $4.9 million. It's 17 years later. It's 17 years later. Facebook is one of the greatest money creators of all time. If Peter Thiel put $8,000 into Facebook, it would be worth $1.5 billion $17 years later.

This $8,000 at the Shiba Inu coin is worth, what's the number? $6 billion in 400 days. Here's how it starts. And this is why I think this can go on for a long time. Because there's so much money inside of crypto, locked inside of crypto, that's not coming out. And so if somebody has $11 million in Bitcoin and Ethereum and they want to drop $600,000 into one of these shit coins to like light the fuse, and then get everybody's FOMO going. You know, like Wackamol, why can't these FOMO, these things just pop and die and pop and die?

But like everybody knows, even if you know it's going to end poorly, maybe it lasts seven days, maybe it lasts seven hours. It doesn't matter. It's just greater fool all the way down. My brain is having a hard time comprehending this, dealing with a cognitive dissonance here, because on the one hand, I have read all the history of speculation and how this stuff typically tends end badly. And we have these manias like this and how this stuff can't laugh. It never does. It always has the big crash. On the other hand, I'm an optimistic person and I see a lot of cool things happening in the technology space. And I think software has changed a lot of the game. And so I'm having a hard time reconciling the fact that, yes, a lot of this stuff probably should be wiped off the face of the earth eventually in fall 95% or whatever. But on the other side, I think to myself, why can't this run for another five, seven, ten years? There's nothing stopping it. So I'm having a really hard time for these competing ideas in my head. trying to figure out where I land on this.

Bitcoin going from $64,000 down to $35 would definitely slow this down. Sure. That's it. But it did, and then it came back. So that's the other problem is like... That's the other thing. It's like, we just saw that. Bitcoin did just go from 64 to 35.

Guess what? A lot of these shit coins weren't rallying. Well, the thing is so... Bitcoin came back to life and then these followed along. So the historical analogy everyone keeps making is, yes, we got everything the internet that was promised to us and more, but we had to go through that tech bug. in 2000, which was an 80, 85 percent crash in the NASDAQ. Bitcoin already had that after 2017. Obviously, it could happen again, but that's why the historical analogies here are so much

harder. And 2020. Right. Yes. Remember, Bitcoin's down 50 percent in two days in the midst of the pandemic. Lee Drogan tweeted this. This to me is so fascinating. He said, good luck keeping business schools attention for asset pricing theory class. Might as well just rip up the textbooks. What if you're one of Michael Mubeson students, which sounds amazing? And you're listening to talk about like discounted cash flow. And obviously Michael's talking about stuff that is like very much relevant today. He's not a dinosaur. But just the whole idea of asset pricing theory, discounted like all of that stuff. If you're in business school today, are you not trading crypto? Do you think it's probably easier to get into a value investing class for Ben Graham these days than it ever was?

It has to be right. How many business school students are just deep down the rabbit hole? If they're not, they're jealous that they're not, I guess. Somebody tweeted, heard that a large portion of students at top MBAs aren't interested in banking or consulting or even PE. It's all startups and VC. This is indubitably the clearest sign that this is the top. I don't know about that. That's the problem. People keep looking for signs of the top. Out of all the, this is definitely the top. This is not even in the top thousand that I've seen in the last 10 years. Remember when Mike Tyson started a, was it a crypto brokerage? He said some sort of trading platform. That was like three years ago, wasn't it? Five years ago maybe. The thing is

my whole thesis now is follow the money. Oh, you have a thesis, do you? Well, I mean, just for everything. The whole flows thing, like, if there's a lot of money going into something, people assume, well, this must be the end because all the money's rushing in. And maybe in the past that was a useful signal. Now, it seems like that is the contra signal to be like, oh, no, the money's flowing in, you invest. Yes. Guess what? The money moves things. There's so much money these days. We do have to say the other side of the Shibuino thing that someone did, I think, DM to me or something the other day, that there's a squid game meme coin. And it was up 230,000 percent in a week. It went from like pennies on the dollar to $2,800 a coin, and then it got

rugged, and it lost 100 percent of its value, basically. In like a couple weeks, that's the thing of this stuff is, yes, the Shibu you knew and Dogecoin is cool to hear about. How many of these other ones are going to be just worthless in the matter of months without ever knowing and people lose their money? And that's the other side of this. It sounds so easy, like, oh, if I would have just put $1,000 into this, I'd be a billionaire. Well, there's all those of these ones that are going to go to zero, too. Last night, I was at the nick game, terrible loss, and I saw it's NFT week here in New York City. I don't know why that makes me laugh, because it sounds like you're talking about fashion week. Oh, it's fashion week. Oh, it's NFT week. I don't mean this in a mean-spirited way

at all. This is non-judgmental. I would just say that the group of people in the NFT looked more or less how you would expect them to look in real life. Like they're all sitting together at the game? Just kind of nerdy looking, which is fine. I mean, they're having a lot of fun. The nerds rule the world right now. They have all the money. Nerds rule the world. Yeah, totally.

They've got all the money, all the internet cloud, so they're on top. But I was looking at one of them, they were all sporting their NFT stuff. And this one guy had like a cool cat's shirt on. And I was looking at him, and he turns to me and he goes, you like the cats? Sure. All right. Very funny. Last week, not surprisingly, Coinbase was the number one downloaded app in the app store.

And it says, like Coinbase, trade BTC, ETH, and SHI-Base, Sheba Coin. They're pushing it. That's the place you can buy it, basically. Now, if Sheba Coins crashes and you lose a lot of money, it's hard to have sympathy for that person. I don't want it to happen. But come on, use your noodle. If you're going to gamble with the hopes of turning $1,000 to a billion, if you lose 99% of your money... Are you saying the Fed shouldn't bail them out?

If you lose money in a shit coin, the Fed's not going to come to help you? There's no crying in crypto. All right. There's no crying in crypto. By the way, Tom Hanks was on smart list this week. Very good. Well worth a listen. I will listen.

All right, last thing on crypto. Baltun is tweeted. Advisors have $23 trillion in assets in the U.S. So just a 5% allocation is $1 trillion. All right, here's the thing. The only reason why I bring this up is because I've been using the number of like $13, $14 trillion for advisors. And I kind of forgot that like, oh yeah, idiot.

The market's up like so much. I got to update my number. So there you go, $23 trillion. That's my new high watermark. I'm going to say $23 trillion. Kind of a lot of money. All right. I got an email yesterday for my daycare provider.

I don't think we've gone a single year without our daycare costs going up year over year. Usually it's like a 2 to 3% increase. There's inflation in my daycare every year since we've been doing it. And we started daycare seven years ago. We finally have one more year left for my twins. And then it's off the books for good. And then we're in public schools forever. this time they said expect a increase of 5 to 10% a little bit higher but the thing is still

transitory are the costs could come back down next year here's the reason though they're like we're trying to offer better more like 401k and health care options for our employees and be able to pay them better are the cost could come down next year of course not i don't think you really get what transitory means though transitory doesn't mean inflation and then deflation you're just making it up no i'm not as you go yes you are no one ever said no one ever said we're going to have inflation and then deflation. You're going to have inflation and then disinflation. That's what transitory means. Fine, but nobody knows that. The average person who hears the word transitory doesn't know what that means. It sounds like temporary. It's not temporary. You're being the average person and

you're making it up. We're going to have disinflation from the peak. Just watch. It's going to happen. My point is, saying it's transitory, even if it is, doesn't really help anybody. It better be transitory, right? If it keeps going up, we're all in trouble. But you keep saying that the prices aren't going to fall, but the wages aren't going to fall either. That's true. No one's wages are going to fall. It's all the same thing. Rising and then spiraling and then Weimar, Germany, don't even... Okay. Wheelbarrels all the way down.

No, no, no. Dude, I am firmly in the camp that, yeah, the rate of inflation will slow down. I firmly believe that. God, I hope I'm not wrong. You're in a new inflation camp every week, though. No. No, I'm with you. You just pack up and put a new camp every week. No, no, I'm... No, I'm with you. I think the rate of inflation will slow down. I mean, I really do. I just think, all right, you know what I think. Oh, I want to talk really quickly about

So my lease is coming up for my car. I spoke those spaces. I called my car broker, not to brag. And I told him that my lease is coming due in February. Can he help me out? And I said, by the way, how's business been? Is it been like, is this really good for you or really, really, really bad for you? He was like, Michael, I used to sell 300 cars a month.

Now it's like 20. It's got to be awful. That's all they want to do is sell cars. They don't have any, right? It's awful. So I feel bad for that guy. I am going to buy my car. I save a little bit of money a month.

You're basically buying it at a discount, right? Because you don't have to pay market value. Yeah, I was nervous that they were going to say, like, no, we're not honoring your contract. Because a few people told me after I said I traded our car in, they said, what you should do is buy it from the lease and then sell it and get the gain, which you could do. But I think your strategy of waiting is probably not a bad idea. Well, because I spoke to him about what the cost would be, and it's up like 25%. I'm not doing that. No way.

All right. So let's talk about wages. Nick Bunker, great follow on Twitter. He's an economist at Inde. Wait, there's your transitory. Car prices are going to fall. Use car prices are going to fall. Oh, you know what?

That's a good blog post for you. Because there are some things that will, prices will come back. It's not going to be everything, but some stuff will. What if car prices don't come back? They have to. No, they don't. Because remember the CEO of Lenar that we were talking about? Well, you can't have used car prices trade for more than a new one.

That's true. But remember when Lenar raised prices due to lumber and then lumber prices crashed? And then the analyst asked him, are you going to lower prices? And he said, nope, we're going to lower prices. to take it to margin? Here's a question. I know it's mostly about brand, but why are car dealerships still on every commercial that you see? Why do they keep even advertising if there's not enough cars to sell? Doesn't that seem like a waste of money? Why wouldn't they cut back on advertising spending now when they can't sell enough cars? I wouldn't know. This is one for the McKinsey

consultants to look at, I guess. Yeah, I don't watch TV commercials, but you are a TV commercial watcher. You really are a boomer. Well, my wife has the news on every morning as I'm making breakfast and helping get kids ready and stuff. I see him then. Okay, so wages and salaries grew by 1.5% over the quarter in Q3. He said, yes, inflation is higher than it has been in recent memory, but inflation adjusted wages for private sector workers are up since the fourth quarter of 2019. That's important. Inflation adjusted wages for private sector workers are up since Q4 2019. So wages are outpacing inflation, which is obviously incredibly important for... Not what came for you in. I don't know where I am.

All right. So the Wall Street Journal had one of We've talked about this a little bit about how COVID pushed a lot of people to retire. They said the Dallas Fed calculates 1.5 million people retired more than would have based on the trend. You can see it's like this graph. It shoots up higher. And they're basically saying we need more of these retirees to come back to help in the workforce. You can see it's like in 2000, it was 15% or 16% of the population that's retired. Now we're going to 20. Obviously, this is going to continue to rise. But they're saying they actually think some of these people will eventually come back. And maybe the higher wages or. maybe some of that spending that they've been doing or that saving they were able to do is going to get used and they're going to have to come back. There are so many things like this. I mean, I know we say this a million times. I know this is not profound, but COVID threw a monkey wrench in everything. A lot of things.

Everything. Man. Another one. There was a truck driver who wrote this piece on Medium. Very well written piece. And the TLDR is unfortunately, government is kind of not good at fixing the problems. we know this. He said there's no cavalry coming. So, I don't know. So I read this one, and my thought was how could these places not get ahead of this and fix it eventually?

Like, are you telling me Walmart and Amazon are just going to sit there, sit on their hands and not try to fix this supply chain stuff? Like, there's nothing they can do, like that they won't eventually try to break some of these bottlenecks. I think a lot of these bottlenecks are government problems like regulation and all that sort of nonsense and union stuff. And remember that guy that did that tweet thread about the ports of Los Angeles? it's that sort of shit. I get that. A few years ago, you and I talked about, I remember, I can't remember if it was on the potter. A few years ago.

Yeah, this is a while. Well, Scott Galloway had that book come out about the four big technology companies and how it's displacing things. And he was saying that there's like three million truck drivers in the country and there's three million cashiers. And he was saying, what if technology comes and takes their jobs? What are we going to do? And now we basically need technology to come take these people's jobs.

This is not me like dunking on Galloway. Because at the time, you and I were agreed to this, that people were, we're talking about, well, we need universal basic income for these people because technology and robots going to come take their jobs. And now we see like, oh, wait a minute, if you actually give these people money in a lot of cases, they don't want to work. They would rather not work if they don't have to. And maybe we need self-driving trucks at this point. And maybe this stuff will come faster now. But it's crazy to me that a few years ago we were having these conversations about we need UBI because people's jobs are going to be displaced by technology. And now,

wait a minute, no one wants some of these jobs. We need technology to come in and help. So Sam Rove wrote this post where he showed the market manufacturing PMI, the supplier delivery times, and you know exactly what's going on with this chart. It's awful. But Sam says this is actually a good problem, a laud the Ben Carson playbook. He looks at personal consumption expenditures, basically how much we're spending. It's through the roof. And Sam is saying, would you rather have too much demand or too little demand? We have too much demand. But this used car vehicle index is bananas. This will come down. I agree with you. Getting back to Lee's point about. taking business school classes, I feel like everything that I learned in business school is now pretty much just useless. Because everything about like manufacturing or supply chains you learned about was like the Japanese style of business where you do just in time and you get rid of your inventory and you make stuff right away. That stuff is coming under fire now because it's like, okay, none of these companies had any inventory. And when they try to do it just in time and there's a bottleneck in the supply chain, you're screwed and your inventory is basically gone. It doesn't

feel like I was in school that long ago. It was a long time ago. To me, it feels. But pretty much everything I learned is useless at this point in business school. Just throw it out the window. None of the textbooks up I learned is useful at all at this point. See, you had the right idea with Indiana getting kicked out. Twice. You knew this day was coming. I'm a forward-thinking guy. I said, I don't need this shit. I'll just get kicked out. I'll figure it out. All right, this is hilarious. Let me set this up. So, Ben, I guess last week on the show, we were talking about, you were talking about Canadian real estate. So somebody tweeted to you, is Toronto the craziest housing market on the planet. What took you so long to get this? So what I did was, I said,

hold on, sir. Let me come to Ben's defense. Ben has been writing about Canadian real estate for a while. So I googled Ben Carlson, Toronto. And what came up is, apparently there's an actor, a Canadian actor. Hey, that's not fair. You can't pull up old tweets? No, I'm coming to your defense. Oh, okay. All right, all right. But when I Googled Ben Carlson, what came up is Ben Carlson. He's primarily associated with stage roles at the Stratford Festival. He won a Canadian Screen Award for Best Actor in a television. film as Petruchio? What's Petruchio? Whatever. Anyway, did you know there was a Ben Carlson actor in Canada? I feel like you've sent it this to me before. But you pulled one of my old tweets, though,

from 2017 saying that, like, I was just saying how crazy it was back then even. That's me coming to your defense. This person tweeted to you, what took you so long to get this? And actually, Cy Pranith. You do have my back. Okay, I see it. I got you now. Ben's been on this beat for years. In 2017, he tweeted about this. You tweeted that Toronto housing market is fascinating, new generations always having to learn old lessons for themselves. Although you were a little bit early to this. Not wrong, but early. A little early. Here's the thing. I don't want to do round five or four of our housing affordability thing, but I was thinking about this. So there's a part of Grand Rapids where I live in the middle of the city is called East Grand Rapids. It's like this, you know the American

Pie movies? Of course. Okay. The guys who wrote the American Pie movies, that high school is based on East Grand Rapids. It's this beautiful little town, higher taxes, really nice homes on a lake. In the middle of Grand Rapids. It's very affluent. It's nice. And it's always been a place that you wanted to kind of go and raise a family, but it was a little more expensive than most other places in town. But it was always kind of older homes and these really old homes from like the turn of the century, like the other previous century. But now I was driving through there, took my kids to a park. One of our things on the weekends is we go to a different park on the weekends if we can. Kids like to go to different school parks, which is a great way to do it because no one is ever playing at the school parks.

You don't go to the public ones. It's a great activity. You go to the school. My kids love going to the park. driving through there now, it's all these old homes have been demolished around the lake and all these new giant manches been put up. And this reminds me, I think we're going to have a bunch of these mini Toronto's across the U.S. where if you live in a more desirable place, you're going to have, and I've heard anecdotes from people in Grand Rapids saying, I moved here from New York or Chicago or wherever. Like, if you have that money from somewhere else, even a more

desirable place in a state is going to become way more overpriced than you can even imagine, I think, in the next 10 years. I think some of these places where you're you live in a desirable area, you're just going to keep seeing more and more of that where, like, oh, wait, I thought this place was expensive 10 years ago. Now look at it. I think that's coming for a lot of places in the United States. The stuff you think is expensive now, just wait. That's kind of where I'm falling on this. If you don't want to be outpriced in one of these places or outbid, you're probably going to have to find a place that is a little more off the beaten path. Well, there was an article in the journal. There was an article in the journal about Michigan.

Yes. Wine country in Traverse City, where I'm from in northern Michigan, people are moving to be closer to the wineries. By the way, let's give that guy a plug that wine that we drank this weekend, you and I. Full hearty winery. We talked about it last week. Very good. Excellent, right? The 2016 vintage?

Yes. The cat. Not a wine guy, but it's delicious. Very good. Thank you, John. It was very good, yes. All right, Len, was this Len Kiefer? I think there was a Len Kiefer.

I can't remember who tweeted this. I believe so. Talking about refi trends. With house prices up, more homeowners are tapping equity via cash out refi, but much less in 2006. In 2006, refinance borrowers cash out 22% of their property value doing a cash out. In 2021, only 13.8%, which is the lowest ratio in data going back to 1998. That's surprising that more money's not coming out.

Why do you think that is? People have so much money from everything else? It must be. So cash out refies, it was $84,000 on average in 2006, but only $56,000 in 2021, inflation adjusted. After three months of back and forth, I finally close. on my refi this week. I'm sure some places have this. Why are we not doing docu-sign for this stuff? We went into the title company, like 20 minutes from our house, signed her name like 12 times and left and had this huge stack of paper that was an inch high. Why do we need that inch-high

stack of paper anymore? Just do it all electronically, right? Yes. Scan my eyeballs or something. Yes, yes. I don't know. So we both know not huge on small talk. Yeah, you either, probably, a little bit. Oh, I hate it. I hate it. Some of the go-toes that people have, are things like weather, that's always the easy go-to. Politics in some ways these days is not that great. I'd rather not talk about weather, because if you're talking to somebody, if you're just, how about this weather, you both know that you have nothing in common. Yes.

I'd rather say nothing. Certain people love to talk about gas prices. And this is probably more of a boomer thing than a young person thing. Baby boomers love to talk about gas prices. When our kids are older, do you think talking about gas prices is not going to be a thing anymore because they're probably just going to have all electric vehicles, aren't they? Gas prices for them aren't going to matter. Yeah.

Bloomberg had this story that now they're going to be, offering automakers $7,500 for these EV credits for like General Motors and Ford. Also, though, if you buy them specifically from one of these Detroit automakers, $4,500 tax credit above that, you could get $12,000 off of one of those new Ford, what's it called, the Lightning 150 or whatever. That's insane, right? Yeah. It seems like this stuff is coming in a big way. So speaking of things that used to be or that won't be in the future, I thought about doing a shit post on Twitter where I went to the ATM. I put in this. magical card, I didn't have to go into the vault and out of the machine, out of this magical

machine came like these crisp $100 bills. I didn't do it. But that is kind of, at one point of time, that was very much a mind-blowing invention. And arguably, the ATM machine is one of the biggest, most important inventions in the history of finance. Before you sent hate mail, Michael just said ATM machine. What do I call it? Well, ATM includes machine in the... You know this because he used to be a teller. Well, I remember my mom, my mother telling me a story about how in college her brother ended up in jail and they needed to go bail them out on the weekend. They couldn't because no one had any money because the banks weren't open to get money out and they didn't have ATMs. You know what?

It's funny you called me out for that because my entire life I've probably been calling it. Now that I've said this that often, but to me it's an ATM machine. Which is fine. But you know someone is going to crack you on that. It's like rest and piece and piece. Yeah. That's not really safe. All right.

Okay. Ben, I'm thinking about bailing on my Zilla trade. Listen, I should have taken my own advice. This is why you don't buy stocks that are going down. I'm down 8%. So it's not so, so bad. But here's the deal. Zillow has listed a staggering 93% of the hundreds of Phoenix homes it owns at a loss.

Yesterday, Walter Bloomberg at Delta 1 tweeted Zillow selling 7,000 homes for $2.8 billion after flipping halt. Obviously, the market is not taking kindly to this. They report earnings. Actually, after the bell. Do I want to stick around? Until I can, I'm going to listen to it. I'm going to listen to the call on quarter before making my decision here. Do I want to roll the dice and wait?

But here's the thing, I don't want to wait for a turnaround story. I don't have patience for that. What's the point? What's the point is that in 10 years, someone's going to go, remember when you could buy that stock for 50% off? Like they do for every other big winner? These are the times. That's true. I'm not a 10-year guy.

I'm not trying to get married to Zilla. You're using the FOMO of Shibu. I'm dating. Positive spin zone. If Zillow would buy every house in the country and sell it at. a loss, homes would be more affordable for millennials. I'm just throwing it out there. I'm down 8% going into earnings. Probably 9% or 10% of this point. Should I let it ride? Yeah, probably. I don't know. I'm going to be a long-term holder. I'm going to see what happens.

I'm a long-term believer in real estate over the next decade at least. And I think this could be one of those things where you look back. And remember when Zilla tried to get into flipping houses? That was dumb. And then they got out of it and they, I don't know. Don't take my advice on any of this because I'm not good at this stuff. We're just talking to throw out. I mean, the truth matters, I have $5,000 and it's not going to make a break me. But, well, so here, I got a DM today. Someone said, he sent me a picture of all the houses in Southwest Denver. He said, Zillow is out here crushing late seller's souls.

With their dumping of parcels this week, it's going to tank some deals as comps will deflate. I think that will really happen. I don't know. But here's the interesting thing, getting back to the stock. All right. So the stock is at 86 bucks. It was at a high of $208. Now, of course, it came from a much lower level.

So it was as low as, I guess, $43 in 2019. Whatever. Be it that as it may. The stock is down from 208 to 86. Don't you think that maybe just maybe most of the bad news is in the name? Now, that being said, that doesn't mean that just because most of the bad news is in the name that all of a sudden it's going to stop going down and just immediately start going up. Like, this is probably going to take a while unless tonight the news is much less worse than expected. I feel like the scene in the Princess Bride where the guy is talking about which wine cup it is. Yes. You're going in circle. I like to look at these more in terms of market cap than price sometimes. So this went from a market cap of close to $50 billion at the high to about $20 billion now. That's just a ton of – and obviously, like, they had a spike early in the year that was just made no sense and was speculative in nature. But that's a lot of market value taken off in nine months or so. What do you say the market cap is now?

21 billion, 22, and it was as high as 48, 49. Even Peloton, which is small, is like 20. The Zillow Small and the Peloton? All right. Real quick, before we get to some questions and recommendations. Last week, we talked about our Future Proof Festival next September. We do have a code if you want to get 50% off. So you go to futureproof.advisor circle.com.

Use code animal spirits, one word, and you get 50% off. I think we got 250 of those to give away. So once they're gone, they're gone. But you get 50% off your tickets if you sign up. I think we've got a week for this thing. Got it? Remember live animal spirits. We're going to be there.

All right. Here's a follow from someone we talked to a few months. ago, Michael and Bam gave me some career advice a few months back when I was trying to decide between two jobs between the Federal Reserve and Coinbase. In all fairness, that was a pretty easy decision. I took their advice, and it was one of the best decisions I made. They went to Coinbase. Oh, wait.

I thought you told them to go to the Fed. You could insider trade. You get a pension. I'm learning a lot about this emerging area of technology. However, there's another question regarding my 401K, the company offers. So the employer match is nominal, 50% up to 2% of compensation. And I'm disappointed with the investment options on a 401k plan. I wonder if these places just have everyone invest in crypto and they don't care about

their 401K. I wanted to know if it's better to take advantage of the match and set up a monthly distribution to my Roth IRA. My Roth has more investment options, including ETFs with better performance and more options. I think that's typically the idea. If your 401K has high fees or doesn't have a lot of investment selections, always, always, always get the match. But then if you want to go over and above that, yeah, go to your IRA to get better investment options. That makes sense to me. It's a little more complexity because you have more accounts and more funds, but yes, that makes more sense to me. All right. Let's move on to recommendations. I want to give a shout to, and definitely not investment advice, but I do want to give a shout to our friends at Simplify. They've got

a Pink, P-I-N-K, introducing Pink, Simplify Healthcare ETF. It's the first ETF committed to donating all net profits to the Susan G. Komen breast cancer organization. That's pretty cool. And we're seeing a lot more of this now, right? Where ESG is not just the type of investments you make, but some of these companies are saying we're taking the profits and we're going to invest or give away to good causes. Yeah, I love seeing that. So good on them. All right, Mark Zuckerberg's video, I've watched about 35 minutes. I want to finish the whole thing because I think it's important. But it literally felt like Silicon Valley. It looked like Richard Hendricks doing a goof. It really did. Right? I can't. I don't know. This is a thing, though, when people say Web 3 is going to reinvent the internet. Do you really think? I think these huge technology companies are going to let that just happen. Let them get, just like, see you later. We're going to start a new hole in or without you. They're not going to let that happen, right? I don't know. I don't want to speculate to the extent of their involvement. I mean, I don't know. I don't know. I don't have a strong opinion. I'm reading as much as I can to try and get educated. I know that there have always been companies that have missed like the next wave. I think these companies are just so huge and so such a part of our lives. It's going to be hard to completely strip them out and start a new internet without them. All right, I've got good news to report. all, October should have an estimated box office of $638 million from the United States. Highest for theatrical films since February 2020.

So despite you, Ben, movies are actually succeeding. IMAX released earnings this week. How about this? Do you think IMAX has raised their prices enough where inflation is accounting for a lot of this higher box office number? Ooh. I want to see this on a real return basis, Michael. All right. So gross margins at IMAX, 48% best since 2019.

Revenue up 52% over the third quarter. quarter in 2020. Let's see. What crushed it? Shang-Chi. Free guy, Black Widow, Dune. No Time to Die is obviously going to be up there for the next month. So maybe the box offer, maybe movies aren't dead, Ben, despite your best effort. Sorry. Your denominator blind is here. It's coming off of a low base. Maybe you didn't hear what I said. The take home in October is the highest since February 2020, right before the pandemic started. Okay. Eat it. Yeah, but these are all movies that they've been holding on to so you release all the best movies lately. Don't move the goalposts. Movies are not dead. I'm not saying they're dead. It's just, it's movie theaters are just

niche going, by the way, on smart list, Tom Hanks said, you know what, watching a movie on TV is not so bad. I'm going to echo that sentiment, even though I didn't like that I fell asleep during Dune multiple times. What I did like was, you know what? My bad. I fell asleep. I was on my phone, I was distracted. Being able to wake up the next morning and put it back on, that's pretty cool. Yes, exactly. And not having to miss a whole scene because you have to go to the bathroom, especially for like a two and a half hour long movie. There's no way I could make it through a two and a half hour movie, though getting up and go to the bathroom at least once. So, yeah, listen, you got to go with the bed. All right. Did you get this one yet? A Shot to Save the World by Greg Zuckerman?

I have not started it yet, but I got the book. How is it? He is the author of, what was the Jim Simon's book? He got it over there? Actually. I've got a right here. He wrote, what's the name of the Jim Simon's book? The Greatest Trade? No. Oh, wait, did Greg Zuckerman write the greatest trade, though? Yeah, he did. He did. The man who solved the markets. Ah, of course. Which was one of the better finance books of the last few years, I thought. Yes. So he wrote this book. So a shot to say, though, this is all about the vaccine. If you're one of those people who says, I'm going to do my research on the vaccine, read this book.

This book is amazing because I think this is the kind of book where people are going to read it in 50 years and go, how did they ever do this vaccine? You read this now, and I've read a lot of the profile. files on this stuff. I said this is the only kind of pandemic book I want to read about the vaccine. Reading this book, you kind of go through it thinking, like, how unlikely it was that they actually were able to do this. It's kind of mind-blowing that we're able to actually make this happen. I just want to say, like, I'm still, like, we sign my daughter Libby up, who's seven for the vaccine next week once they approve, the CDC approves it today. I can't wait for that. I'm still, I went to my doctor last week for my COVID. They checked my lungs, no long-haul

COVID stuff, but I still have trouble breathing. Like, I'm so thankful for the vaccine. because I think without it, I could have been in the hospital possibly. They had to give me an inhaler. I have to do an inhaler like once or twice a day now because I'm having trouble breathing still from COVID. Like, geez. I think without the vaccine, it could have been much, much worse. So this book, I think it's like highly optimistic.

He starts with like how they tried to make a vaccine for the AIDS virus when it came out and some of the problems with that. And I learned a ton from this book. It's very well done. I'm definitely going to read it. I love Greg. As a person and as an author. All right.

animal spiritspod at gmail.com. Thank you for listening and we will see you next time.