Animal Spirits Podcast - Time to Get Bearish? (EP.401)

Episode Date: February 26, 2025

On episode 401 of Animal Spirits, Michael Batnick and Ben Carlson discuss: the potential for an economic slowdown, Steve Cohen gets bearish, the labor market is slowing, giving the US economy the benefit of the doubt, the top 10% owns everything, rich people are everywhere these days, Berkshire Hathaway pays a lot of taxes, Robinhood is a casino and much more. This episode is sponsored by Betterment. Grow your RIA your way: https://www.betterment.com/advisors Sign up for The Compound newsletter and never miss out: thecompoundnews.com/subscribe Find complete show notes on our blogs: Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

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opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. The podcast last week feels like a year ago. It does. I agree. Time is moving in weird places these days.

Got a million emails from people. The support and the feedback was amazing. I still can't believe how like how willing people were to share their stories with me and everything else that they're going through. I saw it firsthand, Ben. I was at, uh, we did an event in Naples last week with Belski and we walked into the theater and everybody came up to me or everybody who did come up to me said something to pass along their condolences to you.

Yeah, it was a very nice bright spot for me in a tough time and so many people offered advice and some people said I know I've gone through something like this and nothing I can say it'll help and that was good to hear but I thought there was some good quotes from people one of them that a lot of people said was like love survives death and that like grief is just showing how much love there was

in the first place that was pretty good this is what I've ever heard before sometimes when you're in a dark place you think you've been buried but you've actually been planted pretty good I thought the best analogy that people shared was just that grief is like a wave or like the ocean and the tides that are constantly coming in

And the other one I never heard of was someone said, you know, it's going to be weird once the adrenaline runs off. And I never thought of it that way. You wouldn't necessarily think to call it adrenaline when something really bad happens to you, but you do get this crazy internal feeling of something. And yeah, when that wears off, it's almost like a cum down, not a drug guy, but it feels like something like that where you come off of it and you, when it wears off, you're kind of like, oh, you're just like exhausted or so you. Yeah, all of that. But, yeah, all the love and support from everyone was very, very helpful for me. So I really appreciate it. Ben, it feels like yesterday, air quote, everyone got cautious on the economy and the market.

Yes. There's a lot of people just tapping the brakes, at least. Yeah. And it's interesting because we're going to talk a lot about what's causing this reaction. And I'm really happy to say that it's not necessarily the stock market. we're starting to see cracks in the market that might be reflections of what we're going to talk about. But it's not as if there's a scenario where the market fell 12 percent or we're like searching for reasons to be cautious. You know what I mean? That's true. If something goes wrong from

here, people are going to know the reasons. Yeah, which is kind of, which is, I don't know, maybe the way it should be. The S&P is 2.5% off its size. The VIX is at 19. So like credit spreads are, you know, fine. So it's not like there's panic in the market. And not that there's panic anywhere, but people are starting to flag some cautionary signs. So we'll start with Neil Duda, economist at Renmac. Neil, for those of who don't know who he is, Neil was one of the few, maybe the only economists going into 23 that said, actually, there's not going to be a recession. When there was a 100% chance, Neil stood against the tide and said, I don't think so.

And now he's turning cautious. So these are his words. Much of what we see in the financial press, tariffs, uncertainty is a red herring. an ex post-rationalization for an economic slowdown that was already in motion. I thought that's pretty interesting. He says, we remain of the view that a passive tightening of monetary policy

is the dominant risk, and that is important implications for financial market investors. I would anticipate a decline in longer-term interest rates and a sell-off inequity prices as a risk appetite wanes. For the economy, expect conditions to deteriorate in the job's market.

And then his partner, I'm assuming this is Jeff. Well, of course, it's Jeff, not Neil. So on their Twitter account, RenMAC, Renaissance MacResearch at RenMAC LLC, Jeff has a chart showing industrials and industrials relative to the S&P. And industrials are the most economically sensitive sector in the S&P 500 in the market. Jeff says industrial's flagging weakness for months, global growth sluggish for months, hiring quits rates near the lowest for the month, housing impaired for months, blame tariffs, all you want, but that's a tempest and a teapot.

real issues have been brewing for a while. Is this just a case of things have been really good for a while and they couldn't keep getting better? I'm so glad you said that because that was going to be my angle on this whole thing. I love this. I want to say this. In the context of being a markets person where you have the S&P up 20-something percent to 20-203, up 20-something percent to 24, expectations through the roof.

the stock market can't go up forever in a straight line. And absent a wall of worry, you get things like this. And so you need fear, you need doubt. And I think that if the economy muddles through at 1.5% to stiff, 2.5% if the market is flatted down in the context of the secular bull market that we are in, this is how I would prefer it. We're due for a healthy correction. And we haven't got.

We haven't even got one yet. We haven't even got one. So here's another one from Kevin Gordon from Scherner. Schwab using a bespoke chart on a 12-month average basis, housing starts have completely rolled over from their peak nearly three years ago, falling from $1.67 million to $1.37 million now. Recessions have always followed a roll over in housing starts. And the only question is timing. Now, always be aware of a single variable analysis, but there are multiple signs that

the economy is slowing down. And again, no reason, like this is not, we're not a, no reason for panic or anything like that, but just some context, and if we should get a sell-off or a correction or a pullback or even, God forbid, a bare market, it's okay. We're going to be okay. Yeah, things have been going pretty well. Steve Cohen, someone tweeted this all yesterday. I don't know where he was talking with someone.

Was it a Mets thing or something? I don't know. He had a Mets hat on. I guess he just wears that all the time now. I never asked you. Are you a Mets or Yankees guy? You're a Yankees person? grew up a Yankees fan.

But I broke up with baseball on like 2007 maybe. Maybe a little bit later than that. That's not a surprise. I don't get how people end up being Jets and Mets fans. In terms of what? Just the punishment? Or literally how it happens? Yes.

It just seems like severe punishment. So Steve Cohen was on a, and it was a two-minute clip that was shared on Twitter yesterday. And he just said, listen, I'm actually pretty negative for the first time in a while. And he said tariffs, if they're enacted, that's a tax. Slowing immigration means the labor force won't grow as much. And the Doge thing, it's austerity. And it's funny. I haven't heard anyone say that yet.

But one of the reasons that Europe lagged so far behind the United States coming out of the 2010s out of the great financial crisis is because they implemented austerity and they slowed government spending. And so whatever you feel about government spending and our deficit and the debts and all this stuff, if we're slashing government spending left and right, that is a form of austerity. And he was saying, I'm not predicting that there's going to be some big calamity. I'm just saying for the next year or so, I'm feeling a little bearish and that these things could be ahead. and maybe the best is behind us. But I'm a midwit meme guy. I'm the guy on, well, that's not sure. In some ways, unfortunately, I am the idiot in the middle.

But in this case, I'm the genius at the one end and the dumbass on the other end who share the same views, which is that good news is goodness for the market, right? Even if the market sells off on good economic data. And a weakened economy, bad economic news is bad for the market. I try not to get too cute. So you have interest rates falling pretty sharply, at least at the longer end of the curve. The 10-year, which had that one hilarious, in hindsight, spike two weeks ago, is down from a peak of 4-8 down to 4-3, pretty big move. And it's weakening, in my view, because the economic outlook is weakening, as it should be, right?

Weakening economy, falling interest rates. Now, you could say, I'm not going to, but you could, well, aren't lower anything. interest rates are going to be good for growth stocks, good for the market. I'm not going there. Bad news is bad news. So you're saying it depends why rates are falling. Yeah. Right. Now, all of this, all of this could be a moot point by Wednesday evening when NVIDIA reports. I do think that a lot rests on the reports of NVIDIA. The market is kind of hanging on by a threat. A lot of the back seven names, particularly Microsoft, like look like shit. And if invidia crushes it, knocks it out of the park, reaffirms the story, and it's up 12%.

All of this is in the rearview mirror. But if they do the opposite and they fall 12%, it's on in a bad way. That could be, yeah, that makes sense to me. That could get things rolling. I also will say that any time a hedge fund manager has turned bearish in the past whatever 10, 12 years, they've been wrong. So it's worth pointing that out. And I still think you give the U.S. economy the benefit that out. But yeah, you're right. People are, it's like, the beginning of the end of the beginning, or however you say that, right? And allow me to,

people are searching for ways to say that things are slowing, I think. Allow me to preach for a moment, if you will, then. If you are one of these people, and there are lots of them who have been either collecting, you could say hoarding cash, or have more of their money in fixed income than they otherwise would have, and I've been waiting for a sell-off. If we get it,

if we do get it, put some money to work. You know, that's not like, not a market call. But if you've been waiting and looking for an excuse, you might get it next week or this week. Speaking of market timing, we were at a soccer tournament this past weekend. And I heard two of this. I was, we were waiting to get in. You know what the worst part about the game is?

There's a game before you. And then you're waiting for the other teams to leave, the parents to get out of their spot. So you can come take their spot, right? But the parents take forever to leave their spot. And your horn is broken. So what do you do in this situation? Yes. Exactly. So they don't let the, no, I'm talking about on the sidelines.

You're standing there. There's a game before you, right? The parents, they line the field. Okay. You need to sit down, right? But they are taking their time conversing and socializing and talking to their kids. The post-game schmooze? Yes, the post-game schmooze. Way too long for a lot of parents. You have to be, you have to be, have enough self-awareness to go, you know what? We're going to do the schmooze over in the parking lot away from whatever's going on right now. We can't stand here and take up these spots for these other parents trying to get their good spots. for the next game. That's rude.

Anyway, so I heard these two dads talking, and they're both talking about market timing, which is kind of funny. And I just caught, I know I'm kind of listening, doing one of these, and one of the dad says, six months ago, man, I rolled over an IRA, I get the money, it's in cash, I decided not to put it back to work, and I sit down in cash, and I sit on it, and the market keeps going up, and I sit on it, the market keeps going up, then I get FOMO, and I just rush all in, and I put it in, and either dad's saying, I did the same thing with an IRA and just market timing is not it's not good for you not good for the psyche they're he was talking about like all the emotions that it brings about it's awful and just he just go i'm never

doing that again i'm just going to put it to work and not think about it i must be like yes yes i think we we all we all do we've all done it except for ben um so if anything i'm pointing the finger at me not you but yeah no it's it's it's hard especially especially like when for the IRA situation i totally get that yes that's the problem with that is you get the money speaking of market Mark it, Tommy. I love this tweet. I'm skipping head a little bit, but, um, loom dart tweeted. It's amazing. Come here. The newest member of the family.

Is this the cutest? You know, I was, I was afraid to get another dog just because my life works. My two kids are busy. I travel a lot. And I'm so in love. I didn't. realize how much I needed her. Like my, my daughter, Bianca died in April and my heart has been empty and now it's full again. I said the first time that you, um, have the dog like lay by you or lay its head on you. That's when you know, right? Oh, pure love. Okay. So Lundar tweeted, it's amazing how much money people can make by idly allocating into stuff. It's even more amazing how much money people lose by trying to actively trade stuff. And it's even more amazing how heavily people shit on the first while they fail at the second.

It's well said. I like it. Chef's kiss. No, no. It's well done. All right. So Tors and Slocke has this thing about the Doge-related job cuts. And so he says total employment, so they're talking about there's 300,000 federal

job cuts. And a lot of people are making a big deal out of this. And he says total employment in the United States is about 160 million with 7 million unemployed right now. Five million people change jobs every month. I don't think people realize how dynamic the U.S. economy is. that five million people are changing. That means they're not unemployed. They're getting new jobs or leaving old jobs. In that context, 300,000 federal employees' loss is not that much. That's obviously

to those individuals that stinks. To the statistics wise, it's not as big of a deal. He says also for every fair employee, there are two contractors. As a result, layups could potentially be closer to one million. So it could be a lot of people. So people are wondering if this is something to worry about. I mentioned last week that my brother was a federal employee, and he would always talk about how they had all these consultants that worked for them. Deloitte, I think, was a big one. And he actually decided at one point, I'm sick of working for the government. I want to work for the contractors. They seem to have it better. So we went and got a job at Deloitte and realized they make you work like 80 or 90 hours a week and said, no, no, I'm going

back to the government. It's not worth it. But there is a lot of that to it where all these consultants come in and work. And I wonder if getting rid of that is something. But you're not necessarily firing that person. It's just not another job for that consulting firm. So I I guess what I'm trying to say is this really stinks to those federal employees. I don't know if this is like a huge, huge thing for the labor market. What do you think? You know what? I'm going to think a pass on this one.

I just don't know enough to have an opinion. It's hard. I guess it's hard to say. I do think it's hard to worry about the consumer yet and I continue to give the economy the benefit it out. So this is from our friends, Ryan and Sony about the Facts versus Feelings podcast, who always give us nice shoutouts. Great guys. At Carson Wealth.

So they look at the, they look at all these different consumer. credit charts. They show delinquencies are very low relative to incomes, and they've been going up a little bit, but, you know, since this century, about as low as they've been. They show credit utilization. And so credit cards on home equity, like how much are we using the pre-pendemic average were way below for home equity? Like, people have a lot of room to run there. And I've been mentioning this, that if people want to take on credit, they can. Maybe they're not using it because rates are so much higher. Debt service, so this is household debt service payments. percentage of disposable income is rising.

It's still well below average. It's rising. That's pretty sharp. Yes. And then credit card debt as a percentage of disposable income is still way, way lower than it was in the 2000s before the 2008 crisis. Yeah, but that doesn't matter. It's the direction.

So these things are rising. I still think, but if you put all these together, the consumer's still in a pretty good place. So the Wall Street Journal had the... Wait, hold on. You're just, you're right about that. I think you're absolutely right. The economy deserves the benefit of the doubt, and the consumer deserves a benefit

of the doubt. That doesn't mean we can't have the stock market sell off. Oh, totally. Yes. The stock market, as gains have been so good, that it won't take much to freak out the stock market. I agree. So the Wall Street Journal had, I think, the story of the week and the stat of the week. So they said the U.S. economy depends more than ever on rich people.

And so they show that the top 10% of wealth accounts for 50% of consumption. That's up from 36% three decades ago. That surprised me. A lot of these numbers surprised me. Yes. I was, I don't know what I would have put it at. 50% seems high. And so you can see it, it's changed where the top 10% of earners now account for half of all spending.

It's a huge, huge number. So they said between September 2023 and September 2024, the highest earners increase their spending by 12%. Spending by working class and middle class households, meanwhile, dropped over the same period. So this is the thing that's keeping this going is wealthier people. So they also said, taken together, well-off people have increased their spending far beyond inflation while everyone else hasn't. The bottom 80% of earners spent 25% more than they did four years ago. That's pretty close to the inflation over that time. Top 10% spent 58% more.

Wow. Wow. This is, these numbers are bananas, right? And so what stops this train? Because you could say, well, this is the wealth effect. We just need a bear market. We had a bear market in 2022. did this slow people down from spending money? Because I think you could say the people who are best position.

But 2020, we were still coming out of the pandemic a little bit. Yeah, I guess so this is a little further along than the recovery. I just think another thing is people will say, well, the next time we have financial crisis, that'll fix this inequality thing. But. No one. Will it? No one.

I don't know what changes this. And I don't see certainly the rest of this decade, this inequality thing getting even better. I think it gets worse. Well, also, I agree with you, unfortunately, but the top 10% of earners are probably supporters of the administration, and what's going to get them to slow down their spending? I don't know. So look at this other, I had chart could put this together for us. So it's, again, the top 10% makes up 50% of all consumption for consumers.

They also hold two-thirds of all wealth in this country, 87% of the stocks, 84% of the private businesses and 44% of real estate. The top 10% essentially drives almost all the economy. So you say what's going to slow the economy or what's going to slow consumption? Because consumers make up 70% of the economy, what's going to slow the top 10%? I guess you have to say, to your point, maybe it is just a nasty bear market and a slowdown in the stock market and housing prices stop rising. I don't know. I'm, you tell, because we had that couple of year period where the labor market was kind of wonky and people on the lower end got huge raises

and actually for a little bit we had wealth inequality that at least income inequality that changed a little bit. The labor market has no negotiating power anymore because the labor market is slowing. That was a quick moment in time. We spoke a lot about that during the pandemic

but that is long behind us. I don't see what stops this train. Josh had a really good piece a couple weeks ago about how there's rich people everywhere and he says... He said this, I'll let you read in a set but he said this in the TCAF episode with Robert Frank. And it was one of those things that was like,

why don't I ever think of that? Like so spot on. Yes. The whole point was like when you grew up, everyone had that like one kid in their class who was really rich. But no one really cared that much because it's like, oh, he's the one really rich kid. And Josh's point is that rich kids are everywhere now.

Yeah. And obviously this is a metaphor that there's so many more rich people now everywhere. And it is so true. and what gets them to stop spending money? I don't know. I was thinking about some of the cars in my neighborhood today versus when I grew up. And what were even the nice cars when we grew up? It was like a Lexus, maybe.

BMW was a big thing for, I remember if you drove a Beamer, that was a big thing. Yeah, that's true. That's true. I do remember one person's dad that drove a Beamer, but there was like a handful, not a maybe more than that, but it was like a spattering, you know? Now every mob drives it. I know. Yes. Everyone drove a minivan. Every parent drove a minivan when we were growing up. It was actually kind of a luxury to see someone driving an SUV. True. Remember the QX4? That was like the first, like, cool SUV. And then the, you know, maybe that was a Jeep Grand Chalky came before that. But there's a lot, there's a lot more money than there was when we were growing up.

So this is one of the reasons that being rich, it's harder than ever to be happy because there are so many other rich people. Oh, yeah. Yeah. Wow. Right. Yes, exactly. Yeah. Tough. Shut up, asshole.

Nobody cares. Okay. Berkshire Hathaway annual letter. Wait, wait. I hate to be... What do you got? All right. We don't have to read, Josh.

We just went over, but yeah. Okay, yeah. I put it, but yeah, it was very good. So I hate to be more, but I guess that's the mood I'm in lately. There's probably not many of these letters left. How old is he, 95? It's pretty impressed that he's still doing it at his age. and still going, has any 95 years old?

Something like that, yeah. And so you pull out something that I was actually going to pull out too, that Birchshare Hathlete pays a lot of money. So he says... Also, he's one of us. He did the, if you stretch the money type of thing. Oh, did he? But I thought this is great.

So he said, to be precise, Birchshare last year made four payments to the IRS that totaled $26.8 billion. That's 5% of all corporate America paid in taxes, which is just insane to me, that they could count for 5% But I guess if you, what size are they of the stock market? 3% or something?

Yeah. 2%. Anyway, so he talks about all of this. But at the end, he doesn't bitch and complain. I wrote a blog post about this three or four months ago. And I said, here's some things that I never want to be when I grew up. And one of them I don't want to be when I grew up is a rich guy who complains about taxes. That's just the tackiest look that you can have.

If you're a rich guy, ultra rich guy, and your whole thing is, did you see how much I paid in taxes last year? Listen, I agree. Just shut up. You complain to your account. and you shut up. I said to Bill. Anything I could do for taxes? He said, move to Florida.

I said, am I moving to Florida? Anything else? You complain to your accountant and you shut up. Yes. So Buffett says, thank you, Uncle Sam. Someday your nieces and nephews at Berkshire hope to send you even larger payments that we did in 2024, spend it wisely, take care of the many who, for no fault of their own, get the short straws in life.

They deserve better and never forget that we need you to maintain a stable currency and that result requires both wisdom and vigilance on your part. So he's saying, like, yeah, it stinks we pay so much of taxes, but we, look at this as like, this is a privilege. Is there anything lame than being a Buffett hitter? He hasn't even beat the mark of the last 15 years. I don't, his, his legacy, to me, has only grown stronger in recent years. When you see how many rich and powerful people have just, like, degraded themselves and

just look like bad people, the fact that Buffett remains a pretty darn good guy, he's not perfect. If you read his biography, he's not the perfect guy, not the perfect family man. The personal stuff was weird. But even like, yeah, we know he's a shark. We know he's not necessarily the jolly person that he portrayed. But come on. Like, you could count on one hand that people, the number of investors that have done more for the average investor just in terms of learning and communication and being steadfast and long term and all that sort of stuff and not being an asshole about paying taxes.

I think he's been a pretty good role model, even if, of course, like everybody else imperfect. Now also, I guess you could say like the people that like worship Buffett are maybe just as odd as the people that trash him. but, so they paid, as you mentioned, Ben, $26 billion, $27 billion in taxes. And he said, just to conceptualize because money is sort of hard to think about at that level, if Berkshire had sent the Treasury a $1 million check every 20 minutes throughout all of 2024, so visualize 366 days and nights because 2024 was a leap year, we still would have owed the federal government a significant sum at year end. That's a $27 billion.

A million dollars every 20 minutes and then some. So how much could you save on taxes if moved to Florida? What are we talking here? Me? I don't know. I'm not taxed out. I don't even know what's New York State taxes, 8%. I would find it very hard to let taxes. Bill, our tax eye, Bill always says this.

Like, don't let the tax tail wag the rest of your decision dog, right? I agree, but we're like normal people. I would say that for, if you sell a business for $60 million, and you could move to Florida or you could give the government $7 million. I'm making that number up. At that level, I get, I do get it. Now, counterpoint is like, who gives a shit

if you have, what, you know what I mean? Like, if you have so much money, who even cares? But to each they're on, I do understand. Even if I think probably not what I would do, but maybe one day, who knows? Just think about how many people live in California in New York, where taxes are very, very high.

Yeah. Right? Yeah. All right, so let's talk about the stock market. So even though I mentioned, like, the S&P is only 2.5% off that's all-time highs, that, of course, never tells a full story. And looking inside the market, as I do, Ben, you don't. I do.

There is, it's not a stock market. It's a market of stocks. There is reason to be concerned and concerned. It's all relative. I'm not bearish, but there are yellow signs flashing. So, for example, bespoke tweeted, while growth of momentum stocks were in the doghouse this week. So like Reddit, crushed, Palantir, crushed, Rigatoni, all of those, all of those quantum computing stocks, like, Rigatoni just makes me laugh.

It's a pasta. All of the, all of the momentum stocks, not all. A lot of the momentum stocks really got hammered in the past week or two. So, but on the other side, you have consumer stable stocks ripping. So last week, Hershey up 9.5%. Constellation brands up 8.8%. James, Mucker, Kraft Heinz, Mitz, Mavich, Dr. Pepper, Pepsi, Clorox, or All ripping.

These are the type of, like, that is the true flight to safety, which is probably not when you want to see in a bull market. But Spock also tweeted, the homebuilders have had their worst four-month performance relative to the broad market since the housing financial crisis in the late 2000. So they showed the S&P 500 performance relative to the home builders, and that's blowing out in the wrong way. It makes sense that home builders eventually had to, with mortgage rates continuing to say higher for longer, they had to roll over eventually.

And again, for me, all of this. is building the wall of the way that you love to see. Now, I don't like to see anybody lose money. Never feels good to lose money. But we need this. Here's another sign that there's really not a lot of investor behavior change, at least according to this metric. So our Fred Toddson, excuse me.

Excuse me. You're okay, Ben? You look disgusted. No. Has anyone ever been happy with someone else's story? sneeze before? No, of course not. Nobody's ever said, that's a great sneeze, man.

Great sneeze. Really love your style of sneeze. Nobody looks good sneezing, not even George Clooney. Okay. He has a chart showing levered long versus inverse ETFs, AUM. And levered long is still going straight up to the right. And there's a little bit, a little bit of money coming into the inverse one.

So Todd says a reversion to the mean for levered long and inverse assets would go a long way to easing excess in the market. agree with him. It is interesting how they, they, they really close the gap during bear markets. Yeah. People really hop into those inverse. Probably at the wrong time, though, don't you think? People, they peak right at the bottom, basically. Yep. Which you don't know in advance. Oh, all right, good one on Robin Hood. I saw the other day. So, this is not a novel take, but Robin Hood is essentially a casino now. So this is, Robin Hood posted this from their latest quarterly call. I'm a little behind here, but I just

and catching up on stuff. Credit to Robin Hood, I go through a lot of quarterly calls, not to brag, and they easily, easily have one of the cleanest, prettiest decks that tell the best story.

Like, there's not a lot of footnotes what's going on here. It's just, boom, it's very self-explanatory credit to them. So they looked at

their transaction-based revenues, and it was up 200% year-over-year to a record in Q4. So they knocked it out of the park. But they break it out by equities, options, crypto, and other.

And equities are less than 10%. They make less than 10%, of their transaction-based revenue on equities. It's almost all crypto, so, you know, 40% or so is crypto, or 50% more than 50% is crypto, and then, I don't know, looks like the other 40% or so, 30% is options. They make all of their money on crypto and options. Yep.

Not much on stocks. I mean, credit to them for, for, like, leaning into the degenerate economy or whatever you want to call it, but they started out being a stock market, like stock market trading app, right? right? And they are not that anymore. At all. So what do they make, do they just have really widespreads on the crypto trades? Is that it? I know, I think I did notice that when I sold my Bitcoin, that the, the spread was very wide.

Oh, yeah. Oh, yeah. I still can't get my crypto out of Robin and, by the way. So I know I, I know I whipped out and just sold half of my Bitcoin. So Bitcoin's under 90,000. I don't know, it's 88,000 or something. that's had a pretty good plunge with almost 20% downturn. Do I have to wait until it gets like 75 to claim victory for selling or not? Or do I have to wait longer? I want to just know when does the victory lap get to take place for me for selling at $100,000? Well, it depends what the future holds. Because if it goes back to $150, is that lap negated?

It depends if I buy anymore. All right, let's talk about crypto for a second. So these are the tailwinds for crypto at the moment. The SEC just dropped their case against Coinbase. Same thing with Robinode. There's more deregulation coming. There's the potential, I don't know if this is nonsense or not, but the potential for the Bitcoin Reserve. But did the SEC case against Coinbase matter, though?

Just in deregulation. I mean, they would have paid a fine. I don't, did it really? Not specifically. Just the whole mosaic, the whole, the tailwinds for crypto. You have crazy inflows, right? Crazy inflows. And yet.

And yet. And yet. Bitcoin is 18% off the highs. You had Sam Bankman-free tweeting weird shit. last night about Doge. I don't know what's happening there. And I say this not to dunk, not as a hater. How does he post from Twitter? I have no idea. I have no idea. I have a healthy Bitcoin allocation. So this is definitely not a dunk. But I will say this. If you are one of these people who over the last couple of months felt FOMO and didn't own any Bitcoin and you're

not buying now, never buy Bitcoin. Yeah. Don't be one of those people. who asks, why didn't I buy it at 100, but now you won't buy it when it's back in the 80s. Like I said, if you wanted to buy and you felt like you missed it and you're not buying now, do not buy at higher prices because Bitcoin is on sale. And whether it goes low from here, who the hell knows? But I would say that, again, given the bullish backdrop on news and the fact that the price is breaking down, if you're a Bitcoin bowl, not what you want to say. Not what you want to say. All right, I want to talk about AI for a second.

Tyler Cohen at Marginal Revolution had a really good piece about why he thinks the AI takeoff is relatively slow. Because people keep saying it's amazing how great these models are. Why aren't more people using them yet? And he says, this is when I thought was good. Human bottlenecks become more important the more productive AI is. Let's say AI increases the rate of good pharma ideas by 10 times. Well, until the FDA gets stacked together,

the relevant constraint is the rate of drug approval, not the rate of drug discovery. And I do think humans are going to be the, like, will people start adopting these and using? I think that human bottleneck is interesting. So I've started using I Amor. I found my favorite use case so far. And I use it occasionally. So I don't know if I told you this.

I've been working on a book for like a year. And I needed to give myself a time constraint to start finishing. How is that possible that you've been working on a book for you and you never told me? I told you this. What's called? I'm still, I don't have a, I don't have a, I don't have a, title yet. What's it about? Bitcoin? Yeah, it's a book on a long term. I want to, I'm thinking about calling it the big long, but I don't know if that's too cute. We'll see what people think.

And so I'm writing the book, and then I talked to Seth Godin a few months ago, and he said, every chapter in my book that I wrote, I uploaded it into one of these large language models, and I asked for feedback. And he said, it was actually pretty helpful for me. It didn't, like, rewrite the whole book, but it gave me, it helped me fill the holes in. So I decided to do this. So I finished a chapter, and I upload it to chat, GP, or Claude or any of these. I've been using them all just to try it out. And the feedback is instantaneous. That's the craziest thing to me, is how quickly it happens. Here's this 2,500 words from a chapter, and here's instantaneous feedback. Your tone changes from this paragraph to this

paragraph. Your stories are really good here, but you need to add a little more meat to the bone, all this stuff, and like the feedback is actually relatively helpful. Now, here's what I noticed, though. I wonder if part of it is a parlor trick, because I did the first chapter and I was blown away. I could not believe how good the feedback was. I need to add more here. I need to have a better transition here. I need to have a better concluding thought here.

But then I uploaded another chapter, and it basically told me the same thing. And then I did another chapter, and it kind of told me the same thing again. And I wonder if it's kind of just a parlor trick. Well, what if your deficiencies were the same for each chapter? But the thing is, the way I look at it is, if it gives me two good pieces of feedback that, oh, you know, you're right,

I need to put, I need to have this transition be better, or I need to have a better title here, whatever it is, if I can get one or two little pieces from it, then it's worth it for me. And it's actually been very helpful. I've changed total, the way that chapter looks, I move this from the bottom to the top, and because of what the AI says.

So it's actually very helpful to get this feedback. My one thing is I'm thinking about the human bottlenecks. What are people going to do when the AI tells them something that they don't like or don't agree with? Meaning? What do you mean? Are they going to keep using it? I don't know.

If it just, if it offers opinions that, like, you can't take constructive criticism or whatever it is, are you still going to use those if it offers you stuff that you don't like to hear? So your main use case for now is editing? Yes. Are you doing that for blog post too or just for the book? I have not used it for blog posts yet. What are you doing with the book? You self-publishing? No, I signed with a publisher with Harriman House, Craig and the team there.

So I'm working on it. But, yeah, I needed to put it, I needed a deadline, so I actually forced myself to finish it. All right. So, yeah, I'm using anymore. All right. This is from Redfin. Real estate gains in 2024. This is interesting.

So they said the combined value of U.S. homes gained $2.5 trillion in 2024 to reach $49.7 trillion. I think you and I had talked a bunch of times during the last couple of years, like, what are housing gains going to be? So they said in 2024, housing was up 5.2%. Pretty good gain again, which no one would have believed if you would have told them in 2021, mortgage rates are going to be 7% like the whole year, and housing is still going to gain 5%. Right, right.

They also showed millennials now own more than 20% of the U.S. home market, with their generation's total home value rising 18.8% year over year to 9.7 trillion in the third quarter. So millennials are making up some ground very fast on these older generations. And so I know it seems like young people can't afford to buy anything these days, but young people are getting into the housing market at a very fast clip. and millennials will be the biggest homeowners in due time. I know that we've spoken about this before. What's the stat on how many,

what percent of millennials are getting assistance from their parents? Do we have that number? I don't remember exactly. Sounds like all right. I don't know how people buy a house right now without help. I don't either. Like where is somebody getting $250,000 down payment? That's high.

$150,000 down payment. and then seven grand a month. Yeah, the old budget thing was people are spending 30% of their money on housing and now it's probably 50% or 60%. I think that's part of it. Yeah, the math can't work. The math can't math forever. Everything is just going to that.

Well, one of the things that I do want, somebody said this. This is not my take, but like maybe we were thinking that Trump cares about the SEP 500, but what he really cares about is long-term interest rates? Okay. But the funny thing is, is mortgage rates haven't fallen that much. They're still 6.8% or something. Yeah. They fall in a little, not a lot.

Well, the spread hasn't. The spread has not come down at all. That's what I said in our Slack channel the other day, I think the Fed should be buying mortgage bonds. I've been saying this for a while now. And it sounds really stupid because the last time they did it, it really messed up the market. But what else do they need to do to get the spread to fall on those? I don't know what else can be done. What's a bigger threat that we continue to, the market continues to do?

what it's doing, which is nothing fast, or the Fed starts buying mortgage bonds. And I don't know enough about the mechanics to know, like, you know, cause effect, impact, all that sort of stuff. But let's just assume that it's that easy that they start buying mortgage bonds and spreads go from 150 basis points down to 70 or whatever. Is there a danger that the housing market would start to reheat and inflation would reaccelerate? I feel like the first scenario is more dangerous. Yeah, I agree that keeping it this high is difficult for a lot of people. And it slows future building, right?

It's going to make inflation worse than the future. Don't you think the Fed could get spreads to contract by simply saying, if these spreads don't come down soon, we're going to buy mortgage bonds? I think the spread would narrow immediately if they just said something. They don't even have to do it. So I subscribe to a substack, this guy, Scott Mendelston, who writes about the movie industry. And he was talking about Brave New World. Did you take George to see that?

Brave, that the Disney movie? That's the Captain America one. Oh, no. Okay. Supposed to be really bad. For some reason, he's not a big Avengers Marvel guy. Okay. You know what?

We spoke about this last week, like our ability to ascertain whether movies could be good or bad from the trailer. And I said, I don't watch trailers, which of course is not accurate because every time I'm in a theater, all you see is trailers. So, but here's, this is what I prefer. I saw, so I follow a Twitter feed called Bloody Disgusting. And they tweeted, Kevin Bacon stars in Prime Video's action horror series, The Bondsman, as a bounty hunter who gets a second chance at life by tracking down demons

who've escaped from hell. See, I could tell that's going to be trash. All I do is two sentences. Tracking down demons, Kevin Bacon, that's what he's doing, who've escaped from hell. sorry out yeah right i don't need to try that for that amount all the way out okay anyhow so so scott mendelson says before the summer of 2021 there had never been an mccu movie that dropped more than 62.2% in its second weekend so what they're looking at is a number of people that went for the first weekend versus the drop off for the second weekend he says a brave new

world is the eighth such movie in three and a half years joining black widow Eternals, Spider-Man, No Way Home, Dr. Strange in the Multiverse of Madness, Thor, Love and Thunder, Ant Man, and the Waspast Quantum Media, and the Marvel's. Holy shit, what a slate of bombs. Is Marvel-like cooked? Are we done? Isn't this, like, Josh's theory on Spax? Like, the thing that upended Spax is just so much supply hit the market.

It's the same thing with Marvel movies. So I think until we, like, get a new X-Men, like, these secondary and tertiary characters, done, no more. Please, it's enough. It's enough. Nobody wants it. This is a mirror market I'm fine with. Yeah, I'm fine.

Yeah. We got two emails like this. Michael's TV, read the Samsung logo on a Sony TV. If it's a QD OLED Sony TV, the panel inside is made by Samsung display. The image processing and power supplies are made by Sony. It's possible that if it froze, the panel could be in a weird mode that would show a Samsung logo. Thank you, Internet. Or a listener.

Listener hurts. So is kind of like how Alexis is basically a Toyota. Like Sony and Samsung are kind of the same thing. You know, like Alexis and a Toyota? That's basically the same thing. They just make it a little nicer. Yeah. Okay.

So that's the deal with your TV. So my car, I took the Jeep Wrangler to get the puppy. It was a three-hour drive and it was not a pleasant drive. I was thinking about what my next car is going to be. And I was thinking, like, should I just get a Toyota Corolla? But I needed an SUV. So. Because of the kids.

On the one hand, I'm tempted to, like, go all the way to the top end. But on the other hand, I think I'm just going to get a Toyota. Toyota what? And I'm not say just. Those are great cars. cars, Toyota SCV, I don't know. Okay. Something reliable, old reliable, know what I mean?

Makes sense to me. All right, Ben. I'm going to Memphis on Friday night to watch the Knicks play the Memphis Grizzlies. For our 40th birthdays, my friend said, let's go to the Knicks game. One of our friends is a hustler, not a swindler, but he's very good at. navigating, and he was able to somehow procure court side seats, like literally on the floor next to the scorers table. Oh.

So I'm going to be wearing my bright, my bright orange next hoity, so I'll be featured prominently on television. So you're going to eat barbecue and go to the Knicks game for your 40th. Yeah. I have to take a flight the next morning. Robbins like, you idiot. Kobe's birthday parties on Saturday. How many times do I have to tell you?

Why do you do this every year? you, so my flight was supposed to land at three o'clock. His party's at 3.30. So I sat there, does he really need me at the party? Just kidding. So I'm taking a flight the next morning at 7 o'clock, but I discovered, I didn't discover. It's Memphis's central time, and I got to be honest. I think this might surprise the listeners, especially Mr.

Truglodite. I'm actually pretty good at U.S. Jagfiel, okay? I'm pretty good. But I was surprised. I was surprised. Maybe I'm telling on myself to learn, re-learn. I forgot. It's been in Watson.

I looked at the U.S. mapmanship is from eight years old. Look how far west Tennessee is. It's central time. How are you, eastern time? People in New York always find it hard to believe that Michigan is still eastern. We're the furthest west you can go pretty much. You know, that John Denver is full of ship, man. That's what I think about Michigan.

You're not Midwest. You're mid-east. It is weird because you drive down to Chicago, which is not. that much further west than Grand Rapids, and it's in Central. It doesn't seem to make any sense. I always felt like Illinois and Indiana should be flip-flopped. Here's the thing I didn't realize, though. Some of these, like half of Nebraska is mountain and half of it Central.

I didn't know that you could break it up by state. I thought it would be the whole state. Oh, wow. So anyhow, I have to wake up at 3.30 central time, which is ready an hour earlier. In the morning? Well, my flight's at 7. Oh, my God. Skip the game, man.

Skip the game I was kidding This guy should skip his birthday party This is the only Don't go to bed This is the only time of my life I'll have the opportunity To sit courtside

Because the prices of Memphis Are significantly different Obviously than in New York Okay Story time Good So my big thing as a parent I might have mentioned this before

I tell my kids Because you cannot teach talent When it comes to youth sports Or any sports, right? Like you go to some games And you go This kid is bigger, faster, stronger than all the other kids

You can just tell It doesn't matter how much you practice. You're never going to be as good as that kid. Yep. So I just tell my kids that only two things I care about. I care about having fun and trying your best. If you don't try your best, then that's the only time I really get disappointed. So my daughter had a game last Thursday.

She hadn't had a game in a while. It had been like a little rust maybe, winter break. And just wasn't indoor soccer. Wasn't trying at all. And she's our littlest daughter. We always thought she'd be the, like the cheerleader, the princess. Because she first started playing soccer like age four. and she was one of those kids that was scared of the ball.

And after one year of her playing, she said, I'm done, I don't want to play soccer. And we said, fine, you don't seem to be that into it. But then she watched her older sister play, and I think she realized, like, oh, this is what soccer is. And then she came back, like, two years later and said, now I want to play. And she goes out there, and she's aggressive. And, like, the first game she's back, she scores, like, seven goals. And I'm not saying this, like, brag as a parent, but she, like, she, something, you know, switch flipped in her. So we go to her game the other day on Thursday night, I believe it is, and just the effort's not there.

She's standing around, she's not running, and my wife and I are kind of elbowing each other, like, what's going on here? She's usually really aggressive, and she just is not playing hard. She's not trying. She's just a dud. And so after the game, I said, all right, this is a teaching moment. I said, did you do the two things that I always ask of you? Did you have fun? Did you try your best?

She said, well, I think so. And I thought, I'm thinking to myself, I'm being a good parent here because I'm teaching her a lesson. Every time we go on the field, we try our hardest. She didn't make any excuses. She got kind of mad that I even brought it up. whatever we get home she goes to bed because it was late um 10 minutes after going to bed she walks downstairs and says i threw up everywhere and it turns out she wasn't trying very hard because she was very sick so i felt about this small and it turns out the reason she goes you know

i did kind of have a stomachache during the game i said yeah obviously she she puked she proceeded to puke all night some sort of norovirus and i realized this is what parents every year say this like man something is going around huh this is what you say you're saying this is what you say It really is. So sheep threw up. This is one of those pukes where you just throw the comforter and the sheets in the trash. Yeah. There does not even try to.

And then the next night, my son got it. And then I got it. So that was a fun weekend. It just whipped through our house. You called me yesterday. You sounded dead. I haven't had one of those days since I first got COVID, which was like five years ago, where I had to spend all day in bed yesterday. I feel better today, but I needed a day.

and had that. Usually if I'm a little sick, I can, I'm fine. I can still continue to work. Yesterday, I had nobody. Yesterday at Kobe's basketball practice, one of the boys hit a shot and did one of these, the double middle finger. What? And I immediately texted Robin, Mike. How does it? How is, how could the, these boys are seven and eight? How is it possible that parents, a lot of parents, not unique to this person, Let's just like tolerate that behavior. Kids definitely these days have more,

bigger celebrations than they had in the past. Like I see kids all the time if they score, they like flex their muscles, you know, and they do a lot more of the celebrate. Like they thought all the cell body. But like the middle finger? That's pretty bad. I've never seen anyone do that in the NBA even.

They'd probably get fined, wouldn't they? All right, Ben, we were supposed to put together our top 10 list of TV shows. I assume you didn't do it. because of the neurovirus. I didn't do it either, giving you the courtesy? I did it.

Oh, you did? All right. Can we regroup for next week? All right, yes. I actually, yes, I did it. All right. My bad. I should have asked.

Tears. I had like the top tier, the maybe, and then trailed off and didn't make it. Okay. So I'm watching Zero Day on Netflix. It's a limited series, which that's right at my alley.

I prefer one series to, or one season to two for most shows. For example, The show Paradise on Hulu, I'm really enjoying it. And it's a really fun show. I don't need a second season. It got renewed. Yeah, I agree.

We watched a few episodes. It seems like it could be a one season kind of show. Yeah. So anyway, so the limited series, Zero Day. It's with Bobby D. It's with GLP1, Jesse Plymonds. Are you watching this at all? No.

He's super skinny. Oh, GLP1, Jesse Plum. Okay, got you. I was talking to my dad about it, and he said, Oh, I heard it was awful. I said, really? And then I went online and, yeah, reviews are pretty bad. I got to say, I don't get it.

It's not, it's a, it's a, it's an espionage, spy, hacker, attack, which is my type of show. And I'm enjoying it. Although, but now the bad reviews are in the back of my head. Like, am I enjoying it? No, I am enjoying it. I like it. 54% of Rotten Tomatoes? Okay.

Here's the thing, though, for our TV list. You can't have a miniseries count as a TV show, though. A miniseries is essentially a movie to me. Ooh, so you can't include Band of Brothers, your favorite show ever. No, can't include Chernobyl, nothing like that. You can't include a one-season show in the best TV shows of all time. Okay, fair enough. Anyway, so Zero Day.

I'm enjoying it. So you think it's okay. Okay, all right. Yeah, it's six episodes. It's Robert De Niro, you know? All right, I'll try it. And Court of Gold, another documentary. I guess it's six episodes, too, about the Olympics.

And not just the U.S. Like, it covers Serbia and France, and it was so good. Watch it with Kobe. He loved it. The last, I mean, the Serbian game was great, but the French game where Steph just went, nuclear was incredible. So much fun. Yeah, I'm watching those. I haven't watching a ton of new stuff.

I continue to watch White Lotus. And I just, the way that they, I don't know if you watched the new one yet, the three women, the way that they talk shit about each other behind their back is just so perfect. It's so good. It's so, that gets me. Someone emailed in and said, hey, I gave this movie to you and you never watched her. You never mentioned it. So I decided to try it last week and it was on Paramount.

It's called Together Together with Ed Helms. And I didn't recognize the female lead, but I thought she was pretty good. You love Ed Holmes. Who doesn't, but you really do? I do like Ed Helms. It's a movie about... Hold on. Hold on.

All right. A young loner, excuse me. A young loner becomes a surrogate mother for a single middle-aged man who wants a child. Their unexpected relationship soon challenges their perceptions of connection, boundaries, and the particulars of love. Yeah, that sounds like a bad movie. Definitely a bad movie. And it's kind of movie that could have been very cheesy and over the top, but it was very subtle and understated. And I didn't love the ending, but it was a good sort of touching movie.

Very well done. Okay. Not for me, or what do you think? No, not for you. Okay. That's about all I got. Okay. We good? Mm-hmm.

All right. Again, thank you, everybody, for the outpouring of support for Ben. It really was incredible. Very touching. Inbox a mile long. Animal Spirits at the compound news.com. We'll see you next time. You know what I'm going to be.