Animal Spirits Podcast - Volatility Hits Main Street (EP.265)

Episode Date: July 13, 2022

On today's show we discuss stocks for the long run, Elon's Twitter debacle, the labor market vs. inflation, the number of cycles we've experienced since the pandemic, peak inflation 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 you by Masterworks. It is 7-Eleven. That's a day. Monday, July 11th, 145 in the afternoon. The S&P 500 is down 55 basis points on the day, off the lows, still down 18.6% year-to-date. You know, it's not down 18.6% year-to-date, not to brag, my portfolio of art. I've got contemporary, I've got some other categories that I'm not even quite familiar with. You know why?

I don't have to be the greatest art picker in the world. I outsource that to Mass Works. It doesn't have to be an art picker's market for you, is what you're saying. There is something to be said for that liquidity where... You don't need to look for the needle in the haystack, just own the haystack. Yeah. That was Jack Bogle. My diversification plan with art has been put some money in over time.

I'm not trying to pick the radar. I'm putting it in sporadically over time, dollar cost averaging, just like I would with any other sort of portfolio. It's easier that way. So if you would like to diversify with Ben, myself, where do you go? I'll tell you. Masterworks.com slash animal. And please see important disclosures at masterworks.com slash CD. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Mattnick 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 Rit 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 Spears with Michael and Ben. Michael, I'm going to start off today with a little contact. All right. I feel like the bear market right now was in kind of boring territory. We hit that bear market territory.

Let's call it 18 or 19 percent. It's kind of when it starts, I think. It's gotten a little stale, you mean? We scream down certain days. We scream back up to other days. We've kind of been just chopping, and it feels like we're waiting to see what that next level off is,

where it's down or up. Friend of the show, Jeremy Schwartz, posted these weekend. Before the context, let me just ask you. What are the charts telling you? We're either going to go up or down. That's as good as I can give you right now. Are we at, what are we?

Lower highs or higher lows or resistance or support? You know what it is. You know what it is. It's a bare market. We got lower highs. Okay. That means nothing to me, but I'm sure it means something to some people. Jeremy Schwartz, in updated charts for stocks for the long run, he says the sixth edition is coming in September from Jeremy Siegel.

And Jeremy Schwartz actually has done a lot of research for this. He posted these using Jeremy Siegel's data going back to 1802. I don't know how much you can trust the data going back that. far, but it is what it is. I think the numbers, the probability probably bear it out. I don't know if it is what it is. Maybe it's not. The numbers are pretty similar going back to 1929 or 1960 or whatever as they are in here, I think. I think that part of it, the risk reward thing with stocks going back that far is probably pretty similar because people are people. Okay. Risk is risk. Stocks are stocks. All right. Fine. Fair enough. Let's go. What do we got?

He also did it to 1871. We're moving up a little bit too. These percentage of periods by holding period that stocks outperform bonds and stocks outperform T bills, which T bills is just cash. You can see over a one year period, it's not that great. It's like 60%, 63% for outperforming bonds and cash. That's not that great of a hit rate. Then they go out to two, three, five, 10 years. Once you get to 10 years, it's, call it 75% close for outperforming bonds and cash. 20 years, it's really close. It's closer to 95 to 99% for bonds and cash. And then you get out 30 years and we're talking 100% of the time, stocks have outperform cash and 99.3 times. I'm trying to put some stuff into context here because during a bare market, you always kind of feel like cash feels more safe. I want to be more

safe and defensive. I think it's good to look at the long term stuff. Look at this next chart. The maximum minimum real holding period returns. Again, these are real returns after inflation. Look at that top box in the right. So again, this goes over different periods and it kind of shows the maximum return, the minimum return, and then kind of like where it fits in an average. So you're just saying, stock returns get much more predictable, the longer out you go. Yes, but also look at- the variance shrinks. Look at cash. Cash has a greater downside than it does upside on the real return basis

because of inflation. Everyone's worried about inflation right now, and I think for a lot of people, for some reason, it seems like cash is the right holding because, well, stocks are getting killed and bonds are getting killed. But look at this. Over the long term, your best bet that being inflation is still the stock market. These are, again, real returns. There's not a counterpoint. It's just however, however, you have to be able to survive the short and medium term in order to get to the long term. And I think that's what a bear market is all about. You got to survive. You got to be in the game. It doesn't mean you have to be 140% in stocks, but you can't bail. I do think that there's something to that. When we're

in a bull market, everyone talks about alpha and outperformance and look at what I'm doing and how much money I'm making, but really, whatever a full market cycle is, whether it's bull to bear it to bull or peak or trough to trough, whatever it is, there is something to be said just for, I mean, think about how many companies are either teetering around the edge of, or have gone out of business, how many investment funds have blown up, just in the last, I don't know, nine to 12 months, just surviving is a thing. That's true. I can't remember who made this point. Maybe Mb Faber wrote a piece about survival a few years ago. He talked about how, how many of the blogs, when he started blogging, I think he's been doing it since like 2005 or six, how many

the blogs that were around back then are just gone now. People would start writing and then all of a sudden just stop. If you had to invest in $10,000 in Meb Faber in 2005, forget about it. How about $10,000 and irrelevant investor in 2014? When did you start yours? 2015? About 2014. We talked about my tumbler? Fun story on that one. One of my favorites. Do you want to do a little story time? Sure. Well, let's tell a story. Let's tell a little story. Okay. All right, friend Phil Perlman convinced me and others to start writing for Yahoo Finance slash Tumblr in 2014, I guess. After Yahoo Finance bought Tumblr. Okay. And so it was this really neat thing where if you put in like the cash tag, you would go on like the homepage or if you put in hashtag AAPL, your blog would be on Yahoo

finance with people search for Apple, which was a big deal. That was like a big deal. I remember for the first time I was on the home page of Yahoo, it was not an insignificant moment for me. All right. So I did that for a couple of months. And Yahoo totally butcher that one. Just they could have really owned that space and they didn't. They had a group of some of the biggest financial bloggers writing for them all for free. For free.

They weren't paying us anything. And think about who worked at Yahoo at the time. Santoli, Phil, Mackey, and Task. Not a bad group. All right. So I get back to my desk. and I've got a lot of notifications. I've got my DMs are blowing up.

I'm not a DM type of a person. I don't just DM with everyone. So to see that was highly unusual. And my first thought was it was not like, oh, this is awesome. Like I won the lottery, you know, it's always what's going on. And what was going on was this.

My Tumblr was hacked by a porn bot. And they kept on posting on my Tumblr with the cash tags. And so Home Depot, for example, if you went to the Home Depot, was nothing but my blog and amateur porn, like not class, like disgusting. Absolutely the most vile thing that you would ever want to see. I think you called me and said, go to my Tumblr page right now. And it was just top to bottom, just porn.

Yeah, so anyway, I got an email from like the CLO at Yahoo. Just take this down as if it was me. Oh, yeah, this is my great idea. And that's lost forever. Yeah, now it's gone to the dustbin of history. All right, back to business. Bespoke tweeted two quotes, one from the CEO of Netflix, that's Reed Hastings, and one from the CEO of Facebook, that's Mark Zuckerberg.

Reed Hastings said, if you'd find it hard to support our content breath, Netflix may not be the best place for you. I think these are talking to the employees. Mark Zuckerberg said, realistically, there are probably a bunch of people at the company who shouldn't be here. And then bespoke tweeted the charts and said, was it the stock price? And that's just how it works. This is why the stock market is not the economy, but it certainly can influence it because

the stock market is a company's currency and it affects all decisions from the top on down. That's the kind of thing you say when you want someone to break up with you. You don't want to break up with them. They're trying to get people to leave the firm and break up. and I'm sure that they're hearing a lot of complaints from employees right now in terms of stock options. This is short-sighted, but how many employees now are going to say, I would rather not have my bonus be paid in stock options anymore.

I want cash. They should start offering IOUs a la dumb and dumber. I'm sure that's what it feels like for a lot of startups these days. But yeah, that's a pretty good chart. Ben Gilbert, who does a podcast called The Quarry, which is quite good, tweeted this magnificent table. Amazon's e-commerce revenue is 50% larger than the next nine companies combined. So in that next nine, you've got Walmart, eBay, Apple, Best Buy, Target, Home Depot, Kroger, and Wayfair. 50% larger. So Amazon's looks like it's, what, $37 billion-ish.

What do you buy in for Prime Day? It's this week, right? Oh, I'm sorry. I'm sorry. Hang on, hang, Hang, hang on, $367 billion. Walmart is 64. Walmart's number two. I'm not a prime day shopper. I haven't really been either, but I mentioned I'm in the market for stuff. Right now, I'm William Wallaceing all of this stuff to my wife.

I'm hold, hold, hold, hold. What does that mean? Oh, like don't buy? Yeah, because I think prices are going to continue to come down on retail. Oh. We're in the market for some outdoor furniture. Nice little couch, chairs, coffee, things like outside. Robbins told me that we need to.

couch outdoors. Come on. In this economy? I mean, you're probably thinking if you don't want to like spend a lot of money, like go to like Wayfair or Overstock, but the prices on this stuff, the longer you wait, if you wait till the end of the season, the prices on this stuff are going to get slashed precipitously. Just wait. Okay, wait till mid to late August. The prices on this stuff are coming down. You know what's depressing? Yeah, no, you're right. I feel like summer's like halfway over. It's basically over after July 4th, if we're being realistic. It is sad, isn't it? No more tropical bro's shirts. What are we going to do? We can extend. We can extend. send it a little because our conference festival, whatever we want to call it,

in California, that's what, mid-September? I'm definitely wearing a shirt there. We can call that summer still. Yeah, of course. All right. Was there anything more predictable than Elon Musk trying to back out of the Twitter deal? Unreal. I had to shock absolutely no one.

I, for one, am shocked that he's not staying with it because he was going to solve the free speech issue on social media. I was sure of it. I just can't believe it. So Brett Taylor is on the Twitter board. So the Twitter board is committed to closing the transaction on the price and terms agreed upon of Mr. Musk and plans to pursue legal action to enforce a merger agreement, we are confident we will prevail on the Delaware Court of Chancery. Boy, that sounds like a made-up

thing, doesn't it? The Delaware Court of Chancery. All right, the current market cap is $20,000. That's like kind of like ironic, no? That's true. So what is the current market cap of Twitter? As of this weekend, it was like $28 billion. I'm sure it's lower today. His buyout price is $44. Now, there's a lot of people who are putting out. So there's a few theories. One is Elon Musk did this as a whole ruse to sell Tesla shares, which I think sounds very interesting. I love the spirit of this theory. That sounds highly reasonable. On the one hand, yes. On the other hand, why would he sign an agreement to buy them when he could have just said, I'm thinking about buying Twitter, so I'm going to sell some shares? Why would he go through this whole ruse of

having the billion dollar breakup fee? I think that's giving him way too much credit. If he says I'm selling all of these Tesla shares because I'm thinking about buying something, that's not really believable. That sounds like total horse. His accolades will. They believe everything he says, though. Elon Musk fanboys believe everything he said, okay. I'm kind of bored of the story. Let's go. Here's the thing. What's your theory? Timing the market is hard. He made the most ill-timed takeover for a tech and history. This is the worst timed takeover for tech ever. Counterpoint. It was not a time takeover. It was the time sale. It was the best timed sale of all time. Okay. If Twitter can go through and again, they're going to maybe make some money off him in the courts. If all of this was to sneak out

the backdoor for some of his Tesla stock, it was one of the best time sales of all time. Let's be honest. He never thought this through. He's the biggest charlatan genius in history. And it's hard to believe. Okay, let's say you're a merger arb fund. How do you play this? Why do you have to play? How about that? Why do you have to play? Can you just be like this is not an our playbook? We're just going to sit this one out? No, but let's say your bread and butter is merger arb. So you make your money off of these divergences. If your LPs are paying you as a merger Arb hedge fund to do something and make some, this is a huge divergence between the stated price and the current valuation. So let's say you just can't sit this out. It would be like you in

2009 with like three times levered bank shorts ETFs. You have to play it. So how would you play this? Like could you do a pairs trade between Twitter and Tesla or something? Do you short Tesla and go long Twitter if you think some of the deal is going to go through at a lower price? Not being a legal expert here. I have no idea what they can actually prove in the court of chancery, but it sounds to me like Twitter is going to win some money from him. They could prove that he signed documents to buy the stock. And what's his defense? There are bots?

What are you kidding me? I feel bad for the employees of this firm because, I mean, they've probably gone from thinking he's going to buy the firm and then lay off 20% of us or I don't know. It's very bizarre. Plus, he's got to save for the 529 for all 16 of his kids he has now. I mean, how many sets of twins does he have? I have twins. It's hard. He has, what, 12 kids or something?

You want to hear a joke? No, he doesn't want to do another. I think we'll skip that one. This is from Nate Girassi. Vanguard S&P 500 ETF, VOO, has taken approximately $26 billion this year, more than the total assets of all but 13 ETF issuers. It's actually outpacing last year's haul of $47 billion, even though the S&P is down 20% versus up 29% in 2021.

Just a vacuum cleaner of money. Remember when the whole conspiracy theory was index funds were propping up the market. And the only reason the stock market is up is, other than the Fed, is index fund people buying. People are still buying index funds right now. Hasn't really helped that much. Exactly. Imagine how much the market would be down if it wasn't for index funds. There you go. I'm just throwing this out there. All right, it's bizarre to me how many people don't want to believe how healthy the labor market is right now because they see inflation. It's like you can't have two contrasting ideas in your head of yes, on the one hand,

inflation is bad and people hate it, hate it, hate it. On the other hand, the labor market is still doing pretty darn good. 1.6 million jobs added in Q1, 1.1 million jobs added in Q2, 6.3 million jobs added year every year, June to June. I put out a facetious tweet over on Friday after the jobs report and I said, how'd that go? Not great in the comments. I said, this is the only recession in history where we just keep adding jobs. I was being facetious, obviously. Some people were have bonded very seriously. The funniest response from people was, well, that's only because people have to get two jobs now to make up for all the money to leave into inflation.

Yeah, that's it. Yep. Nailed it. Nailed it. Here's from Bill McBride. At the beginning of the pandemic, leisure and hospitality jobs lost 8.2 million jobs. And now down to... It's all the jobs.

So it says they've added... There's like still 1.3 million jobs less than that space since February 20. Sure. Fewer. Oh, sorry. Don't be one of those guys. So it's now added back 84% of the jobs. I mean, that, obviously, if you think about it, like, well, we put it on hold and it was a fake thing because of the pandemic and now it's still amazing. Construction employment is 46,000 people above pre-pendemic levels. Manufacturing has 12,000 more people above pre-pendemic levels. We've talked about this a few times. The speed of this recovery is just insane. Obviously, the speed of the fall was similarly different, but there's no precedent. this in history. The fact that the labor market is so hot. This is Eddie Alfenbine. 524,000 fewer jobs than we did at the peak of just before COVID. We're almost back to where we were. The New York Times had a great headline. U.S. economy added 372,000 jobs in June, defying slowdown fears. So, Kyla Scanlan had this thing a couple weeks ago on her substack that

said, it's a vibe session. Vibe is a cool word that all the hip young people say now. I can't really get away with saying it, but I'll let her say it. It's a vibe It feels like a recession to people. The weird thing to me is that there's a lot of people, especially in finance, who are essentially rooting for a recession, either because they want to be proven right for calling the recession, because everyone has called it now. If you haven't called it a recession, I don't know what you're doing yourself. Some people just want to watch the world burn. Some people are just pessimistic by nature. But there's a lot of people who are like, let's just do this thing. And my standing position on this has always been, if we don't have to see millions of people lose their jobs, I'd rather not have that happen. Call me crazy. I'd be against that. Of course. I thought you were ranting. No, of course.

Of course. Look at this chart. Well, listen to you can't look, but listen. By the way, all these charts are talking about. They're in the show notes or watch on YouTube. This is from Nick Bunker. The layoff rate, the layoff rate, repeat for emphasis. By the way, that was a great Rundberg in the moment.

Did you see that Joe Biden? Repeat the line. Oh, okay. Did you see that video? Yeah, not bad. All right. The layoff rate is still below 1%. Historic lows.

Nobody is getting fired. So it says the layoff rate is below 1%. It never got below 1% before the pandemic. It's now been there for like 15 months, I think. Total quits is still at 4.3 million jobs, which is way higher than anything we saw in the pandemic. So layoffs are at an all-time low. Quits are almost at an all-time high,

meaning people are not worried about getting laid off right now because they're getting laid off at a historic rate, meaning they're not getting laid off to a historic rate, I guess I should say, and then they're quitting at historic rate as well. So people feel really good about their chances of finding a new job right now. This is from Daniel Zau. Workers who are part-time for economic reasons dropped by $707,000. This is as a latest job report, meaning many part-time workers who want full-time work are finding it because of the strong labor market.

As a share of total employment, this is the lowest level on record. So part-time work because of economic reasons is the lowest has ever been. layoff rate is the lowest ever been, quits at an all-time high. It's just a weird, weird place because the labor market is still looking good. And people are having a hard time wrapping around their head is that, yeah, but inflation is bad. It is very weird because we're going to get into this in a minute. There's so much volatility in the real world and in the stock market, but yet the labor market, which is basically the economy or the biggest part of the economy, is still rock solid. So I understand why people's brains are confused right now. We're going to get into

this later, but you're talking about real world economic volatility. Seeing the mortgage rate go from three to six and a half back down to five or whatever's done in that short of a period of time is trillions of dollars in the housing market. It's bizarre to think that rates should move that much that fast. Price instability is not good for public morale. All right. Another sign that we are not in a recession right now. Average daily total card spending per household based on aggregate Bank of America cards, okay? You're looking at a chart goes from January to December, 2019, so pre-pandemic, obviously.

2020, you see that insane drop where basically goes not quite to zero, but you know what I mean. Big, big, big pickup at 2021. And guess what? And even bigger pickup in 2022. too. Now, you can make the case that this spending, this elevated spending is partially because of rising prices and eventually that will hurt the consumer and the corporation and we will get a recession and job market will slow down. You can make that case. I think that's reasonable. Yeah. If you're a perma bear, you'd say people are spending more on their credit cards because

they're getting behind. The point is people are spending more now. If you look at these numbers compared to like the pre-pendemic levels, that's not just inflation. That's just people still spending a lot of money. True. Did you see this article in Barron's this weekend? Car repos are exploding. No, I was too busy reading the Barron's article that I was mentioned in. Sorry, I didn't get to this one. Nice flex. Was that the cover story? It was a story about withdrawals and retirement and sequence of return risk. Just some really compelling stuff. Anyway, I didn't read the car repo. We got a chart here showing the forecast market price for a used car versus the listing price. And you know what's happening here, the spread is obscene. So from the article, subprime repos have nearly doubled since

2020 to around 11% on average. But the bigger red flag is in prime repos, meaning people with good credit, I know what the line is, usually about 2% of prime loans end up repossessed. Now it's 4%. And one place where this is starting to show up, and I don't want to get a article because, come on. But they're talking about on banks balance sheets. Says that banks were giving auto loans with an LTV of around 140 are now getting around 70 at auction, meaning they are losing substantial money. All right, we'll see. But this does make sense to me that people that were stretching for used cars because they had to and because they were feeling richer than ever are now on the other side of richness. And because the prices

are ridiculous. I would love to hear an explanation. What's going on? Why the car lots are all still empty. This is my one economic data track that I've been looking for a long time. The 28th Street is the busiest street in Grand Rapids. My office is right over here. I drive by these car dealerships all the time. They're still all 15% full of cars, maybe. What's taking so long? Why? I don't know.

Can someone explain this to me? I can't. I mean, that's got to be like our biggest piece of deflation coming if ever happens, and it just, it's not happening. All right, sticking with deflation. By the way, anytime the word subprime appears in a financial market context, which I don't know why else it would appear, people get really scared. There's still some scars there.

Gas prices fell for a 27th straight day. Is that right? National average down 13 cents from a week ago. Americans today are likely to spend at least $142 million less on gasoline than 27 days ago. That sounds like a big number. But look at this chart from Liz Ann Saunders at the national average gasoline, the price. This sort of volatility in the gasoline market is not great. All right.

So let's say in 20 years, Michael and Ben are still doing animal spirits. And we're looking back on the inflation rate from this time period. Over the last, call it, go three years into the future. If, this is a big if, inflation peaked in whenever, June, May, whatever the month is. If we assume inflation has peaked, we hit the highest level, it's whatever. I think the number comes out this week. Let's say it's higher than it was the last time. And this number is the peak.

And then we slowly go back down. If you're looking at a chart, and the first time that inflation rose above the long-term average, 3% was in April 2021. So we go from April 2021 to call it June 2022. Then now it goes back down and let's say it gets to 3 or 4%. In 20 years from now, is that going to look

transitory to you? I'm just asking. I'm not saying it is. I'm asking. Asking the question. If we go from deflation to 8.8% back down to 3. That ship sailed. That ship sailed. That wasn't transitory. I'm just throwing it out there.

X war. I think you could say that's transitory. All right. I'm just throwing it out there if. Here's a fact. I'm just asking. 116,641 convenience stores selling fuel in the U.S. That's how many there are. This weekend, I was at one of the better ones of those. I went to Wawa. Do you know Wawa? I think that's an East Coast thing. I've heard about it, but I've never, we don't have those here. Wawa is phenomenal. You get it, at least I get it, when I'm coming back from Atlantic City. So on a hungover morning, I stopped there. They've got a touchscreen place where you can could order a breakfast sandwich, a lunch sandwich, customize it, boom, boom, boom,

touchscreen, it's phenomenal. And then they just bring it out to you? You hand them the slip, you get your goods, and you go. I mean, it's tremendous. All right, so that number, 116,000-some-od convenience stores that sell gas, half of them, actually slightly more than half, are independently operated. How about that? Sure.

Sounds right. Let's plus some myths here. This is from an article in Barron's. I'm sorry, the Washington Journal, by gas station owners getting blamed, which is obviously horseshoot. When wholesale prices go up, gas station owners tend to raise the price at their pump slowly so as not to discourage customers from stepping inside their convenience stores, which is where they generate most of their cash. You understand? They're like movie theaters.

They charge more for popcorn and stuff. That's where they make their money. The popcorn and the soda and all that stuff. That's exactly right. Listen to Lonnie McQuartor. He is the owner of 36 Lynn Refuel Station, Ben. that's an independent guest station store in Minneapolis. And here's what he said.

We really want to have and market a really aggressive price on the street. So not only are gas station owners independent and otherwise, not jacking up the prices, it's the exact opposite. They want to be competitive from the gas station across the street, which by the way, they always are across the street or right next to each other adjacent, because they want people inside the store. So here's the deal. We were saying, like, how come it seems that price is really?

rise immediately and falsely. It's not really true, but the reason is, quote it from the article here, when wholesale prices go down, the owners also tend to lower prices more slowly because they have to recoup what they have already paid to fill the tanks. It's not like they're getting gas deliveries on a nightly basis. They fill up their tanks and they deplete them. So how fast they are able to sell their stock depends on an array of factors, including, okay, whatever. Oh, here's one, another person that they're quoting. You could have 100 days of supply in the tank. So that's why.

Headline prices are going to be more volatile than what you see at the pump. Because again, if gas prices rose and they filled at a higher price and then they came down, they've got to break even. By the way, you know what my inflation hedge for gasoline prices is? If there's a long line, I'm getting behind a car that I know is going to use premium, them, and I'm pulling right behind them, and their premium gas is still in the hose. You're using the same hose. So if you use, I'm getting at least a hose full of premium gas when I'm using my own

leaded regular, right? It's kind of like, okay, listen to this. That's a great hack. How do you know who's got the premium? You can just tell? I stole that from a Sebastian Miniskalko bit. Okay. By the way, grateful disclosure there.

I don't want to take full credit for that. But so there's a new Tommy's car wash that opened up by us. The first week, they said, we're giving free car washes. And as they're giving free car washes, they give you this slip up. paper with a QR code on it and it says, Oh, that's a good joke. It's front of bad. Scan so you can get the monthly car wash.

You pay $19.99 a month. You get unlimited car washes. They're trying to get you for free. They have their four choices. And I know your wife doesn't believe this. I finally, for once, got the premium car wash where it's wax and undercarriage and wheels and all this stuff. So I got the premium car wash.

You want to know what? It looked exactly the same as the basic. Come on. This is the biggest scam in the country right now. Where is Alex Jones on this one? This is the biggest scam ever. Come on. You're not wrong.

We've been talking about commodity prices. Can commodity stocks signal portend? You know that word? Portend? I mean, it sounded right to me. A decline in inflation or peaking prices. Peking commodity prices. A sign or warning that something is likely to happen.

Nailed it. All right. You got ExxonMobil in a bare market. About 20% off the highs. Newmont mining down 31%. Freeport down 48. Alcoa down 54. Remember when these were like meme stocks a couple months ago? You've got the rolling 20-day trading change in the Bloomberg Commodity Index, experience its third largest decline in

90 years. By the way, so there was some macro commodity people on some podcasts in recent months making the case that basically these commodity companies are screaming buys still after they're up like 300%. And it sounded like such a compelling, like on odd lots in some of these podcasts, it sounded so compelling to me that like the price of aluminum is going to be in a shortage for the next 15 years. Obviously, these are short term moves. But I guess that should have been a sign that things were getting a little frothy in that space for how much those things had run up. I forgot to say, full disclosure, I own 11 gas stations. That was a Duncan joke in the comments. All right. You also have the rolling 20 day change in commodity index. It's like the third

largest loss in 90 years or something. I want to get back to your thing about volatility. I suggest you listen to me. Sorry, I'm playing off of this. I was totally listening. We're dealing with some of the shortest cycles in history now. So we went through a depression at the start of the pandemic for two months. We had depression-level economic data.

Then we went into, here come the roaring 20s, and that was like three months. Then we have the dot-com boom and bubble. That lasted, I don't know, 12 months. Now I feel like for the last nine months or so, we're in the 1970s. It seems like that's coming to an end. Yeah, now that's coming to an end. I don't know what the next cycle is going to be, but we've done every single cycle it feels like in the last 28 months call it.

I got a prediction. Movies are back. Movies are dead. Okay. And two months we're talking about movies are dead. We'll save that for later. But it seems like all these cycles are just compressed and compressed and we get to live through them and say this one's going to last for 15 years now and then it's over.

Here's another one. from Brian Chapada, U.S. mortgage rates plunged to 5.3% and biggest drop since 2008. That's what I'm saying. The fact that a multi-trillion dollar industry is seeing interest rates move so much, I know it's tied to corporate bonds, but doesn't it seem bizarre that it moved, or not corporate bonds, the U.S. Treasury. Whatever. Bond yields, yeah, treasuries. It's bizarre to me that it moves this much. Something is important as a mortgage rate. The market has been whipsong. A few weeks ago, we had the fifth largest week

increase in rates. This week, we have the eighth largest weekly declines since 1971. This, all of this sort of stuff, it's not good. It's not good for business. You understand what I'm saying? But I'm saying mortgage rates change faster than gas prices at the pump. Like they're talking about how they slowly lower their gas prices and slowly raise them. Mortgage rates can rise or fall off a cliff like nothing like a snap of a finger. It's not good. It's very bizarre. All right. We've got some data about home prices. Finally, we're getting a reprieve. All right. From Bill McBrose. Good, looking at Southern Nevada through its multiple listing service. All right, I got to say, I read this one, and this one kind of made me laugh.

I'm going to let you read it, and then I'm going to talk about it. First of all, I didn't know there was such thing as Southern Nevada. I never heard anyone say Southern Nevada before. Well, by the way, I put this in the dock ironically, because the median price fell to $480,000, which it was the first time that home prices fell since April 2020. The funny part is that it fell to 480 from 482. So not much of a decline. The median price is still up 21.5%.

I just love it how it was like in Southern Nevada on blocks that aren't named after trees, prices fell by $38. That's what I mean. It was pretty specific. You've got same thing in the rental market. The rental market, I don't know, prices aren't going down, but the rate of increases is going down. 0.7% increase in rentals was the lowest pace in a while, but it's still awful.

They included this from Redfin, which by the way, the stock, it looks like it's going to go negative at some point. The top 10 metro areas with fastest rising rents year over year, Cincinnati, up 39%. Seattle 33, Austin 32, Nashville 31, Nassau County. That's where I live, 27. New Brunswick, Newark, 27, 27. I mean, just disgusting. Redfin stock is down 91% from the highs. Jeez.

Okay, this one is from John Burns Real Estate Consulting. Rate locks for second homes is down 50% year or year. This is where you're really seeing the interest rates make a big dent. Is that the people who were saying, if I'm going to buy a new home and I have my other home at 3% and I can buy a new one for 3% mortgage as well, why wouldn't it keep the old one and rent it out? That ballgame is gone now that you have 5% or 6% rate. which makes sense.

So I'd say that's like one of the good things coming from this rate rise from the Fed. It's totally slowed that market. Rick Palacios Jr. We got Home Builder sentiment and service are in. Top themes. You know what? Let's skip the themes. Let's just go to some market commentary.

And you could decide for yourself what the themes are. Atlanta builder, quote, someone turned out the lights on our sales in June. Austin, sales have fallen off a cliff. We're seeing one third of what we sold in March in April. trades are more willing to negotiate pricing since market has adjusted significantly past six days. Birmingham. Sales have fallen 75% the last two months in a further out community.

Boise. Sales have slowed tremendously. Builders are dropping prices and halting new starts. Charlotte, this recession is looking like and feeling like a big long five-year depression. I'm going to stop there. I think we get it. Pretty similar across the board. There's a great happens one in here.

Graham Rapids. Read that, Ben. Believe we're on the edge of cost reductions, making every effort to refuse further cost increases and pushing for decreases in all areas that have seen significant two-year run-up. Builders had their window. See, this is the compressed cycle thing again. The problem, like, if you were a builder, you had this amazing period of demand, and I'm sure that their margins, you talked about it, like their margins were just fine, but they had problems getting workers, they had problems getting supplies so they couldn't build the homes fast enough. I guess you could probably say that considering the amount of demand that they had, builders probably had about the worst possible outcome they could have asked for given that window of demand because the window was for four months there's a couple of huge tracks of land in grand rapids where they whatever was there before they knocked it down like these old farms they bought the farm they knocked it down they're going to put 40 houses up and it's been sitting there for two or three years and I think they didn't build on it because they didn't have like the labor or the materials and stuff to get it ramped up they weren't a big enough builder to do it and now they're probably thinking we're screwed we missed our window. Unbelievable. Well, we're going to hear from the banks this week. We've got the earning

season coming up. And I am very, very intrigued, maybe more so than ever before, to hear from companies. Tell us what's happening. Tell us what they're saying. We're going to lean on quarter, QU, AR, TR. They've got new features. Ben, have you seen them yet? Well, the one that I'm most excited about, which we ask, not to brag, we kind of ask for. Did we ask for that? The search function. Oh. So quarter just rolled out this function where you can- Great function.

Search by word to see how often it was used in any transcript from an earnings call. So at the end of the quarter, we can look at all the earnings calls and say, how often did people mention inflation? How often was the word recession mentioned? How often was this phrase mentioned? And you can kind of get a general sense of the trends over time from what these CEOs and CFOs are saying to their investors on their calls. You can get a good look at a T-Bone.

come on it's two weeks in a row yeah but we're going straight to the butcher all right sent him a trader haven't shouted him out in a while this is interesting we're looking at small trader so i guess these are small dollar amounts of options small trader small trader call premium might as put premium and the spread obviously went all the way to the upside people were buying way more calls and puts and it has gone as negative as it has over the last two decades. Small traders are buying puts. Come on, people, the market just fell 20%. What are you doing? Use your noodle. This chart, it's at pandemic levels. Basically, the market falls, people buy puts. The market rises, people by calls, kind of after the fact.

Tale is oldest time. This is the mom and pop. Okay, here's a good question. I feel like I've gotten a few of these similar ones, but I thought this was good. It's taken me 25 years, but I finally come to the realization that I suck. Capital letters suck at picking individual stock, sector's markets. Started investing in 18 and 45 now. Can't believe it's taking me this long. Between positions in Baba, K-Web, Peloton, etc. The last year has been an eye-opener for me that I have no business trying to beat the market. Luckily, I've kept this portion of my portfolio to about third percent of the total, so it's not done any damage that I can't recover from. Question for you is this. With everything being down right now, is it a good time to sell my

losers once and for all, put those investments into my target date index funds? Basically, coming to this realization, I'm having a hard time actually selling some of these stocks where my position is down over 50 percent. Is there ever a good or bad time to make this type of move or does it really come down to just needing to bite the bullet? I understand this sentiment here because you think I own stocks that are down 50, 60, maybe 70 percent. When the market does come back and it will come back eventually, these stocks are going to scream even higher? So if I'm selling now, am I selling down, like are they going to outperform when the market goes up because they've underperformed on the way down? Of course you'll think that. So let's say this is a taxable account

so you can take taxes and do account too that. You could sell some of these and use the losses to maybe offset gains elsewhere if there is such a thing this year. But do you think that there's ever a better time to do this? Because the problem is when stocks are doing great, you're not going to want to sell them because you're going to think I'm leaving money on the table. It's not easy. The answer is don't wait until stocks are down 80%. I know it's too late. I know. But I guess that's the thing. Is some of those stocks just like Peloton, that just might never come back. It's sure not going to come back to where it was at the height. I could pretty confidently say that. Here's why you just do it. Forget about the numbers for a second. Do you really

want to check the prices of these stocks every single day for the next 475 days until it's the right time to pull the trigger. Don't you place value on mental energy, time, all that sort of stuff. Just let it go. And I know it's going to be painful if they rally 40% from here, but all right, just move on. Just do it. I want to give a personal anecdote here. By the way, just so you guys know. This show is on a podcast, but also on YouTube. I check the comment sometimes. I know you won't do it. Well, because every time I do it, it's horrible. Sometimes the comments are horrible. But if I see someone bashing us and it's, sometimes they'll be funny. Sometimes they're bad. Someone bashed us last week for talking about our own personal finances

because I said that I had a capital gains from a real estate transaction. And he said, I'm sick of here when you guys talk about this. And I don't want to hear what Michael talking about. Wait, what does you not want to hear from me? Let's hear it. That you bought your home in 2019 and timed it perfectly. What? When do I say? Call me crazy. I think sharing personal anecdotes is very helpful as opposed to just sharing platitudes. But I'm saying, if you come at us in the comments, I will come back at you. By the way, this is what I don't want to do comments. I mean, how dumb is that? I know. Okay. Anyway, so I told you I had some gains. I have some stock picks that are absolute

dogs. And I sold a couple of- Wait, would this person prefer we tell anecdotes from other people's personal finances? Exactly. See, I got a little salt about this one too. But, so I had a gain from selling a house. And our handy tax expert, Bill Sweet, who's my personal financial advisor, said, hey, if you have any losses elsewhere, sell some of those to take off the gain. And I tell you what, selling a down position in a stock, you do worry, well, geez, I'm leaving some money on the table because it could come back. You talk about not having to see it every day. Having it be out of sight and out of mind when you sell it from your brokerage account was such a freeing feeling. Of course. I did it because it was like, I'm taking some losses to offset some gains. And that was in my head, the good reason,

but also just not having to look at a losing position anymore was really, really nice. And then it's like, I'm going to wash my hands of this and never look at it again. So yes, that's kind of the thought process there. Anyway, okay, this is, I talked about my William Wallace. I'm going to hold to buy stuff. This is another one from Wall Street Journal. A glut of goods at Target Walmart is a boon for liquidator. So they have these off-chain places.

I've never heard of some of these play liquidity services and excess limited in B-stock. They said, they are seeing a glut of kitchen appliances, televisions, outdoor furniture. See, outdoor furniture. They talk about your wife wanting to buy some of that. in apparel that major chains are trying to clear out. In many cases, the liquidators are picking up pallets at the ports or from a warehouse without the goods ever hitting store shelves and are selling the items to smaller retailers and individuals. I guess this is probably places like Marshalls and T.J. Max where the stuff can't sell so they sell it at a discount and they

make it up. So they're saying these items are so overstocked right now. They're not even going to the stores first to see if they can sell. They're going right to the liquidators to mark down. Big oof. I don't know why I thought about this, but do you remember what did we pay for our Pelotons at the time. 2000? Is that possible? Was it? 2,500?

I'm still paying for mine. I am too. It's like, it's 60 bucks a month. Last time you use it, because the last time I sell you using it, you were hanging clothes on it. Is that part of your exercise routine with your personal trainer now or not? I'm ready to get it back. I'm ready to get back on the Peloton.

All right. Build those calves. So look at the prices today. You know where else? There's a lot of volatility in my waistline. My weight is fluctuating way more than I'd like it to do. I'm at the heavier range of acceptableness. for myself.

You can blame the Fed because they made you buy all that stuff during the pandemic. And now they're making you do experiences and go out to eat all the time. Absolutely. So look at the prices of Pelotons now. You can get the basic bike with no shoes and all this other stuff for $11.95 now. I feel like that's way cheaper than we paid for it. If you take off the bottom things like where it goes on the floor, you could also take it outside. I like a bike.

If you're taking your younger children who can't ride a bike yet, do you have the little Excuse me, Kobe could ride a bike, not to brag. Okay, well, my son can't do. My daughter can't yet. My son George was riding a bike at three years old. That's very impressive. Also, not to brag. He taught himself, I didn't teach him.

He just taught himself how to ride a bike. Wait, George is an autodidact? Yeah. Oh, yeah. Whatever that means. But yeah. Sorry, that's the worst Twitter buyer. All right.

Where are we going? One more. I pulled up the Peloton prices and then I pulled up the pellet on stock. 95% draw down for that stock. I look today. It was down 10% today. It's like, that's just like salt. in the wound. That's just kicking people while they're down. Okay, what's your Instagram food hack

here? Oh my goodness. I'm looking at a long-term price to start of Peloton. Can you believe? What's the market cap? What do you think? Nine billion? It's still $3 billion company. Three billion? Honestly, at a 95% drawdown, is it weird that $3 billion still seems high for Peloton? Should we just have like Coinbase and Robin Hood and Peloton all just like form together, like a transformer and just, I don't know, we'll sell you crypto, free stocks and a bike. I don't know. No Instagram food hacks work. They all look good. They're all bullshit.

How many times have you seen the perfect way to cut a pineapple? You slice it this way, that way, and then then bloop, you just pop it off. Wait, wait, wait, wait. There is a pineapple cutter that you stick in the middle of it in like twist. My brother got it for my son George because he used it one time at Christmas. It works. There's an actual pine apple cutter you can get. But yes, I know what you're saying.

So, for example, I saw somebody make bacon and they were talking about how, the fatty part always is cooked at a different sort of texture than the crispy part. Never consistent. So me, I like to burn the shit out of my bacon. I like the whole thing crispy, not a chewy bacon guy. You? I look at a little chewy. I'm half and half.

A little crisp on the outside and chewy. So you like it 6040. I'm straight high octane bacon. This person said, well, you cook it in water, add a little bit of water, and boom, he held it up, did the turn. Total horseshit. I tried it. Cooking bacon and water.

Awful. Disgusting. Of course. It looked very compelling. I'm just saying, fool me once, can't get fooled again. I'm done. I am done. There was a trash bag one. You know how you put your trash bag in the trash can, but the bottom is still stuck together.

You try to whip it out and the bottom's always still stuck together so stuff doesn't go over to the bottom. So there was an Instagram hack where the guy takes a trash bag and he like puts it in a big line and puts it down and it goes in perfectly. And I told my wife, I saw this today. I tried it and it didn't work. Not even close. Okay. I forgot to mention this. A couple weeks ago in the show, I said that there are people who pronounce Nike as Nike. And you said, there's no way that's possible. I will never believe that. I heard from dozens of people in other countries, so Great Britain, for sure. And I can't remember which other countries said that. They pronounce it Nike. Okay. Well. In the UK, they pronounce it Nike. Not Nike. So they have a lot of other cool terms like Wanker and what do they call index funds there? Tracker funds. There's a lot of

a lot of other cool words that they have over there. Like they call Bruv, B-R-U-V. I could never pull that off. Wait, brov. You know heard brov before? What's brother? Brov. Hey, bruv. See, I can't do it. You can't do that an accent. There's a lot of other cool words they have there.

Nike, that's not one of them. All right. You always talk about Rotten Tomatoes. Did you see this graph? Yeah. Rotten Tomatoes is trash. This shows the average Rotten Tomatoes score started in the 90s, which I can't imagine how many people were actually on there

if they went back and did them or something. No, this chart. is trash. Who was on Rotten Tomatoes in 2000? Come on. But it's showing every year since 2004 is going up. But look at it since 2015. The score has gone up precipitously. And there's no way that movies have gotten better in the last five years. Well, no, of course not. The audience likes Marvel movies is really the TLDR of this chart. Take Marvel out of this. That's a good point. I feel like there's an irrational. Are they getting sick of those movies yet? They have to. I am. Every week does Guess what? I didn't watch the new Thor and as much as I love supporting the theaters,

I will not support MCU anymore. I think I'm done. I'm not seeing Thor. I'm sorry, but like, is there anything that can do anymore that would like shock you or surprise you in those? It just seems like it's so, it's all so formulaic. It's enough. Anyway, I don't get it. I've always been anti-marvel. All right. Speaking of Thor, love and Thor, Love and Thunder, $143 million. That's the third biggest opening of 2022. This is from Eric Davis. It's the 12th biggest MCU opening, which is whatever, I guess, neither here nor there.

It's only the third time that two different films topped $100, I'm sorry, $100 million in consecutive weekends. So this is interesting. Total domestic box office is pacing 30% ahead of the same weekend in 2019, which included a Spider-Man movie. That's good. So it's not just MCU, although it's Jurassic Park, the Elvis movie Top Gun, Light Year, Minions. All right, go ahead.

But a pretty big movie. Every time one of these superhero movies comes out, and it's one of the guys who's really jacked, they show, like, this is how I got jacked for this movie role. And they show him working out and stuff, and he's the best shape he's ever been in his life. Just one time in men's health, I'd like to see him say, yeah, I worked out with a trainer like four hours a day. But I also took like eight cycles of roids. I just wanted one of them to admit it once. Yeah, I worked out a little bit, but I pretty much just did roids.

That's all. I did steroids. Yeah, that's what it is. Any recommendations this week? I did a few rewatches. A couple weeks ago, I rewerew. watch True Romance, which I've seen that movie a lot, but I haven't seen it in a long time. Start to finish. Is it on these streamers? I think I've only seen it once. I think I paid

four bucks for on Amazon. Amazon's prices, there must be an algorithm there because they know to get you the price of, I could rent it or I could just buy it. And most of it just end up buying it. If it's like $5.99. Oh. Okay, I always end up just buying it. Wait, you see buy options for $5.99 in Grand Rapids? In New York, it's like $20. Is that possible? I'm talking on Amazon. No. I'm kidding, but, okay. Some of them will be, but every once in a while I'll find an old one that's $5.99

and I'll go, I'll rewatch this again sometime and I just buy it. All right, listen to this run that Tarantino went on, back to back to back. He wrote True Romance. It was directed by Tony Scott. That was 93. In 94, he did Pulp Fiction and Natural Born Killers. I'll, you know, I'll just stop right there. Just back to back to, in 93 and 94, he did True Romance, Pulp Fiction, and Natural Born

Killers. Natural Born Killers was not great. Just throwing it out there. I thought that movie could have been better. It's not one you revisit. No, it was okay. The other one that I rewatched, I don't quite know why, was White Man Can Jump. Another movie that I've seen a billion times, but I haven't seen it in like 15 years. How did it? It's a five sports movie. Top five for me. Easy top five sports movie. Woody and Wesley Snipes are just phenomenal. It occurred to me. They played the exact same characters

in Money Train, basically. Yeah, that was a run-it-back situation. I was a hugely unapologetic was he Sniperman. All of his movies, they got pretty bad. A lot of his action movies, Murder at 1600, The Rangers won, Passenger 57, Drop Zone. I was there for all of them. Passenger 57 was probably my favorite of his action movies. Yeah, but White May Can't Jump. It was like part rom-com as well, just an all-timer. All right, I did finish up the boys. And you know what? It pains me to say this, but I'm kind of out on it. Like, it was okay. It was okay. But I don't really need season four. I'm good. I was good with season. Do you watch it? I watched the first season. I said I've been out.

on Marvel. Here's the thing. The best Marvel superhero movies are the origin stories. So the very first one of all of them. Yeah. Like when Spider-Man gets bit by the spider, those are the best ones. And the same thing with the boys, like the first one of they introduce everyone. And then it gets a little repetitive. And there's not much else you can do it. That's my feeling. I like Lastly, one more. Are you watching The Old Man? Yes. I was going to mention that. We caught up last night. How great was the last episode? Very good. I forgot. I never finished the book. I'm finishing the book and watching the show at the same time. Come on. That's too much. It is. The choices they've made on the show are way better than the book, though.

So I feel like the author got a mea culpa and decided to, like, do it over. If he's the one who's writing for the show. In episode five, Lithgow was throwing darts. Yeah. Did you listen to Jeff Bridges on Smartless? No, not yet. Here's crazy thing for your next dinner conversation that you have. Jeff Bridges claims that when he filmed Big Lobowski.

Wait, dinner conversation. I'm whatever. Just a general dinner? Yeah, just throw it out there. A anecdote. Jeff Bridges claims when he filmed the Big Lobowski, he did not smoke weed for the the entire shoot of the movie. And he said he was at one time a big pothead in his life.

Did it not seem like he was stoned as that character? Couldn't you see him using some? So he said it anyway, he just had story after story, very good interview. One of my favorite Lubowski stories is that those see-through slippers, like rubber slippers or whatever the hell they were, those were actually Jeff British shoes. The jellies or whatever? Yeah. Yeah.

Did you try the bear out on Hulu yet? No, not yet. Everyone's talking about it. No, I got to watch it. I get why everyone's talking about it. Like, it's one of those shows where the very first episode, it doesn't slowly get into it. The whole show is just like immediately goes. And it's just from start to finish, it just goes.

I think it's one of those ones that'll hook you in early. So I've been watching that and the old man. That's about it. I feel like TV has been good. We've had a good run. I agree. I'm fairly bearish on the second half of 2022 for movies. What's coming out even?

That Brad Pitt movie, the train, what's called? Oh, that's good. Bullet train? Is that right? I got to put minions on my list, too, for the kids. That's all I got. Did your kids ever get into the zombies movie on Disney Plus? My kids love any...

It's a TV movie. Zombies 3 is coming out Friday. This is a big deal on our household. All right, Kobe will love it. He's watching Monster House. Do you do Monster House? Oh, George watched it this weekend, I think. Yeah.

Put on Zombies form on Disney Plus. It's a movie. It's like a TV quality movie. All right, Ben, what do we say to the people? Animal Spiritspot.com. Be nice in the comments. Yeah, be nice in the comments. I'm lurking there, and so is Duncan, but Duncan's nicer than me.

Subscribe if you're on YouTube, review if you're on a podcast, Animal SpiritsPod at gmail.com, if you have any questions or comments, and we'll see you next week.