Animal Spirits Podcast - Why Retail is Outperforming (EP. 432)

Episode Date: October 1, 2025

On episode 432 of Animal Spirits, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ben Carlson⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ discuss the thing that matters most to for the stock market, why AI is a bubble, inequality in the stock market, emerging markets are finally outperforming, why investor behavior has improved, economic growth remains strong, rich people are powering the economy, the private equity dry spell, airport lounges and more. This episode is sponsored by YCharts and Fabric by Gerber Life. Download your copy of YCharts’ new Fed Rate Cut Deck and get 20% off your initial YCharts Professional subscription when you start your free YCharts trial through Animal Spirits (new customers only). Join the thousands of parents who trust Fabric to help protect their family. Apply today in just minutes at: https://meetfabric.com/SPIRITS 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

Today's Animal Spirits is brought to you by Y charts. The Fed recently cut rates for the first time in over a year. Unemployment's taking up. Bond yields are sliding. And those big cash payouts everyone loved, they're already starting to shrink. Advisors, your clients are going to have questions about what this all means. Whitechart's new Fed rate cut deck helps you answer them with intuitive charts and context. You'll see how lower rates filtered through to mortgages, credit cards and household budgets,

where bondholders are benefiting as yields fall, and what history shows about stocks when the cutting cycle begins. This is just one of Y charts as many. free resources designed to help. Save you prep time and keep you ahead of client questions. Download your copy today using the link in the show notes and get 20% off your initial

Y-Tarts professional subscription when you start your free wide-charge trial through animal spirits. Of course, that's the new customers only. Today's animal spirits is brought to you by Fabric by Gerber Life. Running a household is a lot, especially with kids, Michael,

we know this to be true. Maybe you have a plan for the daily chaos, but a lot of people don't have a plan how to protect their family and their financial future. If not, Fabric can help. That's right, Ben. Fabric by Gerbera Life is term life insurance you can get done today.

Made for busy parents like you. All online, on your schedule, right from your couch. You can be covered in under 10 minutes with no health exam required. If you've got kids, and especially if you're young and healthy, the time to lock in low rates is now. Over 1,900 5-star reviews on Trust Pilot with a rating of excellent. I tried it out. I tried the app.

It's very easy. It's very intuitive. It's simple. It's quick. Join the thousands of parents who trust Fabric to help protect their family applying just minutes today at meetfabric.com slash spirits. That's meetfabric.com slash spirits, M-E-E-T, Fabric.com slash Spirits, policies issued by Western Southern Life Assurance Company, not available in certain states, prices subject to underwriting

and health questions. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion, and do not reflect the opinion of Riddholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Riddholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Ben, how are you? Thank you for bearing with us.

This took a minute. Yeah, a little technical difficulty, but we're here to go. Ready to go. Let's do it. All right. Before we start the show, I'm excited to announce, that we're in Charlotte, okay? We have seven people, eight people there, but we want to go bigger. We were there last week to scope out some new office space, and we found a sweet unit. Is that the right term?

Unit? I don't think so. Space. In the south end, I got to tell you, that city is on fire. I feel like every city that I go to, there's cranes everywhere. Especially in the south.

So how many more people can fit into the new office space then? Well, it depends. It depends. We want to hear from you. If you are in Charlotte, in and or around Charlotte, and you want to join the team, whether you're a financial advisor or an ops or something else, we want to hear from you. And we're trying to figure out how much space we need. So don't be shy.

If you want to join one of the best teams in America, great people in Charlotte, growing rapidly, great people. Did I mention we have great people? Reach out to us directly at Animal Spirits at thecompanmed News.com. or actually, and maybe, hiring at ridholtswalt.com. All right. Are we talking about where you are right now, or we're going to say that for later?

Go ahead. Okay. You go ahead. You're somewhere else. So I'm in Boston. Not to be confused with Austin, a la Road Trip, a good night of this movie.

And I finally got to see the chart room. What's the chart room? The chart room is where Mr. Johnson of Fidelity you used to print out every day different charts, whether it's whatever it is. Bond stuff, economic stuff, market stuff, and very famous. I've been hearing about it for years

and in front of they got to say it. So they have a 15-foot wall with the history of the Dow. And then they've got another chart that shows like the same type of thing except covers of barons and the economists and different landmarks across the way. And then they've got your quilt that you love

and just giant pieces of paper. Really awesome. Lots of fun. All right. So when we buy new office space somewhere, we need a chart room. We need a chart room. It's cool.

Yeah, that sounds awesome. That's even better than a mudroom. Ben, there, this might be early in the show for this, but just real quick, you're very observant about your travel episodes. You're always picking out different people. I got a this guy of the week award. Travel is great for watching people.

This does happen on every flight, but it happened to me today where the guy was directly next to me, the person who is boom on a phone call as soon as you land. And there can only be one conversation going, right? Because it's a very tight space. So if you're not first, you can't be the second person to be on a phone call. But I was reminded of the curb episode where Larry's at a restaurant and the guy next him was on a call on Bluetooth and Larry just starts talking to himself, this guy is just talking.

But right, it's, it is. No, that should be, that should be rules of etiquette. Like, you don't ever take a, on a call on a flight unless it's an emergency. Like, there's always a business people. This was not an emergency. Yeah, it never is. The people, there's like the business people who take a call right up until the takes off. Like, you have, you never have a phone call that important.

You can just text or email. It'll be just fine. I agree. Okay. Back in April, a lot of people were roasting us saying, hey, for years, you guys have been telling me that politics don't matter. Well, look at this. Politics just caused a 20% decline in the stock market. the economy of teetering, all this stuff that was going on of Liberation Day.

You guys were wrong. Can I just say one caveat to that? Uh-huh. I think that politics definitely can matter to the market and the economy over both the short and the long term. But I believe what we were saying is that politics shouldn't influence your investing. Yes, exactly. So if you are, like that was, and that's a very not subtle detail. Yes.

But I also think that it, honestly, it wouldn't have mattered what Biden did or what Trump did. This AI boom is the only thing that has mattered for the past since November of 2022. Right? Yeah. It doesn't matter to the stock market of the economy, what their policies were because it's just varying degrees of what was already happening. And there was good or bad right or wrong. Whatever they did, it was the AI boom that mattered the most out of anything. Yeah.

Right? And so this, I've used this one before, but John Bogle in his book, Don't Count on it, did this thing where he looked at the fundamental changes in the stock market by decade. And Eric Belchunis DM'd me this week, and he said, hey, can you update this chart for me? Someone had mentioned it or something. And look at the earnings growth in the past two decades. Almost 11% earnings growth in the 2010s, 9% in the 2020s. And now, of course, the whole thing is in the 2010s, well, it's just the Fed printing money

and the Fed kept rate slow. And this decade, well, it's the government spending money. it's always something, but it really is the reason that we've been in such a strong bull market is because earnings have been so strong. Yeah. That's it, right? I think that's all you need to know. So whole kit and caboodle, Ben.

Did I put the simplest thing in here or did you? I did. Okay. Because this is the thing I pulled out too. He had a new piece out on he called AI the blob, which I guess he's kind of in the same, like it's the only thing that matters. It's it. Michael said, I think this is well understood, but just to reinforce the point.

AI-related stocks have accounted for 75% of the SP-500 returns, 80% of earnings growth, and 90% of capital spending growth since ChatsyPT launched in November 2022. That's why this is such a hard bubble to handicap. And I think I said it last week. I'm totally comfortable calling this a bubble based on history. I don't know what... You think it's a bubble today? I think the excess spending levels and the actions taken by the tech companies are a bubble. I don't know how you could define it any other.

way, based on market history. Just the sheer amount of money pouring into this one sector, if you ever at any market history, you know this is exactly what happens. When new innovation happens and all this excess spending happens, I don't know how you could call it anything else besides a bubble. I don't think that means the outcome is easy to predict or that it's easy a handicap, but let's say this is a bubble, and I'm right, the fact that the companies who are doing it are having such high fundamental earnings growth, I don't, it's almost like, okay, well, it makes

sense it's the bubble then, because these companies are so strong and big and dominant and this is not, but that's, so I agree with you. The way that this is trending, it obviously feels like a bubble is inevitable. But when you say bubble, that this is a bubble. I'm not talking about the market. I'm talking about the, their excess spending levels. You can't Grand Rapids hedge a bubble. It either is or it isn't. Fair. Because the other, the other, ones that people keep pointing to with a railway bubble and the dot-com bubble, and guess what? The stocks got crushed in both of those situations. Charles Darwin lost 60% of his net worth in the railroad bubble of the 1800s.

It certainly feels like this is trending towards a bubble. But if you think about valuation, to me, like a bubble is like, there's no world in which this doesn't burst. There's no world in which these numbers make sense. But with like Nvidia, let's just say the poster child of this. it's trading at, I don't know, what is it trading at, 35 times forward earnings? If you look out to 20, 29, and of course nobody knows the 2029 earnings is it going to actually be, but is it like 22 times?

I don't know what it is. I'm making it up. You know, someone had a point to me last week on Twitter because I was tweeting about this. What is a worst scenario? This is a bubble. It pops in the stock market gets hammered hard. Or this isn't a bubble. And all the money that they're spending an AI immediately,

leads to a return on investment, and that puts a bunch of people out of work. The paths forward, don't see, if those are the two paths forward, which one is preferable? What's the third path? I don't, because if AI works and there is no bubble, then this is going to be really bad for a lot of people, right? Yeah. What's the third, the third path is the muddle through, I guess, where these companies say, hey, we're going to pull back on an investment because we don't have a big return on it yet it's a few years down the line and we're just going to focus on our profitable divisions and we're going to write this off for a while or something. Maybe that is not a huge, maybe that's the middle ground. I was just, I just did a podcast with Josh and the head of

quantitative strategy here at Fidelity. Oh, she was great, by the way, Denise Chisholm. And we were talking about the backdrop. And given that the Fed is cutting, the economy seems to be Okay, labor market, Google, cooling. We all know the story. But the hypers are going to compound their cap expense at 30% annualized. Coupled with what Michael Sembler said, one and a half trillion dollars in annual defined benefit and to find contribution payments into the stock market every year,

annual basis, one and a half trillion dollars. Well, that's what the number is now? Holy cow. What is the bear case? Well, the bear case is the bubble popping. That's it. I know, but it's so obvious. And maybe it does, maybe it does, but I'm just like, that's what I'm having trouble grappling

with is the fact that the whole this is a bubble thing seems way too obvious and the markets are never that easy. Yeah, but if they're going to grow their spending by 30% a year, now eventually the Burm Walker will end, duh. I mean, that's not a very profound thing to say, but like today, I don't know. Yeah, I guess if this is a bubble, it still has a long ways to go. That would be, like, in terms of what they can actually do. Great, great segue to a tweet from Yer.

from Fidelity, the great Urian Timmer. Urien said, it's worth remembering that while the top-heavy concentration during the late 1990s was quickly reversed in the early 2000s, during the 1950s and 1960s, the market remained top-heavy for many years before excessive valuations finally took their toll. In other words, this could take some time. So Urian's chart shows the top 50 versus the bottom 450. And what is that? Oh, percent of market cap.

Okay, that's what it's showing. That would be way easy to understand if it was a pie chart. Yeah, no, look how beautiful this chart is. That's a very good chart, yeah. But look at the 60, look at the 60s and 70s. It took forever. Yeah. Yeah, you're right.

It was a long cycle. That would, I would put my money on that as opposed to this reversing immediately. Here's another great one from Yuri. And I don't know how he does. This guy's a wizard. It's the Mag 7. And overlaid is the trailing earnings per share, as well as the dividends and buybacks in, is that hundreds of billions?

Wait, could it be hundreds of billions? Yeah, I guess so. And it's just, it's being supported by fundamentals. And of course, predicting when that peaks is good luck. But that's why I hesitate to say that this is a bubble because it's being supported by fundamentals. And it's not only a multiple expansion and, and. hope and promise and hype and we'll get there. There's a really good corollary here to the economy where the top 10% are totally

powering the economy now and the MAG 7 are powering the stock market, which is also powering the economy. And it's a whole circular thing here, right? The top 10% own the stocks. The stocks that are doing well are big and make a ton of money. And it is like one of those things where what hits this off its access. All right. So here's what it is.

It's leverage. Or here's one possible obvious answer. It's leverage. So Oracle, for example, look at simple as chart of the debt-to-equity ratio. Oracle is now going to be levered the heck up. Apple is more leveraged than I thought. I'm not sure how they're measuring this, but that's probably, that is one obvious potential candidate for what makes this end.

So Bloomberg has an article in the U.S. public bond markets alone, tech companies have raised about $157 billion this year, up 70% from what they issued in the same period last year. But so what? Like, is there this idea that, like, these companies won't be able to service their debt or roll it over? Now, I guess, there's a tipping point, I guess, maybe. I don't know. Much like U.S. consumers still have a lot of borrowing capacity.

These companies, if they really wanted to put their front of the gas, have a huge capacity to take on more debt if they wanted to. So, again, from that article, Oracle was able to boost its jumbo bond sale this week to $18 billion from about $15 billion on the back of strong demand. The software company also drew about $88 billion in peak orders with final demand of about, about $82 billion. Some of the debt isn't due for 40 years. So there's a lot of demand for the bonds as well. And why not? It makes sense.

All right. So Bloomberg also had this piece about talking about a bubble. They say it's very pricey. I don't think they quite use bubble. There's a picture of a bubble in the article. So I think take that for what's worth. This was interesting to me. They talked about how the rest of the market hasn't really come along yet.

but look at the four PEs for Walmart and Costco. How do you explain this, that their PEs and the whole 2010s were sub-20, sub-30. Now they're both 50 or 60 times earnings. Is this an inflation thing? I don't understand why all of a sudden that we just, this decade, we repriced these two companies so drastically. I don't know, but I'm going to guess it's not because investors are dumb. Like, there's got to be some sort of reason. Maybe it's the underlying fundamentals of the business.

are changing. Maybe it's margin expansion. I don't think it's, I don't think Costco and sort of Walmart has reinvented themselves a lot with what they're doing. I don't think it's like an apples to apples comparison. Nevertheless, the article kind of tried to figure out what it is and they didn't really have a good answer. Nevertheless, I don't want to hand wave this away. This doesn't, this doesn't make sense to me either. I don't know. So on the other end, I pulled up the like the 20 worst performing stocks in the S&P this year. And a lot of names that you know, Lulu Lemon is down 50. 53%. CarMax is down 45. Moderna, which almost doesn't seem fair that Moderna developed the vaccine and the stock has just gotten drilled ever since. Chipotle's on there. And then Target is

down 33% this year. So Walmart. I went to Chipotle recently. Yeah. It was busy. And the bowl was only like was under was like $12.50. I might be back. Okay. You're back. All right. But so I pulled up, so Target is down 33% this year. So I pulled up Target, Walmart and Costco over the last five years. Now, maybe this is just an inflation story, but Walmart and Costco have been phenomenal stocks for this decade. Target has gotten smoked. Why would that just be an inflation story? Because there's like a trade down element to people going to Costco and Walmart as opposed to Target. I don't believe that. I think it's like, I think it's execution. I think targets management does not done a good job. Okay. It's just interesting that it would be like this,

because you'd think that how far off of their business is really. But obviously, yeah, because you use the target pickup thing all the time, right? All the time. All the time. All the time. Anectodally. But I've been using the Walmart online and stuff way more because it's way cheaper than Amazon. So during however long we've been recording, I'm sure some portion of the audience is like, geez, guys.

Like, could you be, could you sound any more topy? And I get it. But I want to point out that. The market is responding to all of these events to the upside. And it's not narrowing, despite all the talk about the top X percent. So Grant Hawkevich has a chart showing that global new highs, global new highs are accelerating. And in fact, out of all the countries around the world, the U.S. is not in the top half. I don't think of stock markets this year.

He said... Sorry, go ahead. Finish. 73 days of more new highs than new lows, consecutive. The longest run since May 2020, 21. This is an isolated strength. And grants talked about the all-country world index. So this year, this is one of the most surprising things to me.

The best performing asset class, if you looked at, U.S. stocks developed world stocks and emerging markets are by far emerging markets. They're up almost 30% this year. That could be a dollar story, but who would have pegged in an AI bubble? that we're calling this, that emerging markets would be outperforming. Chinese internet stocks with the AI trader are helping that a lot. But yes, you're right. I don't think anybody would have.

I didn't. All right. There are, you know, we mentioned this this week, but there are obvious pockets of crazy behavior. The quantum computing stocks, for example. And I says this with Josh will say with you. I don't think it's crazy to make money. I don't think you're dumb if you're making money.

If these stocks are up 1,000% and you're making money, to me that's smart. Call me crazy. It's smart to make money. Now, if the bear's thesis comes to fruition on these stocks fall 90%, well, then obviously the people that are making money now are not going to look so smart in hindsight. We'll see. You feel like a smarter person if you're mocking those people, though. Yeah, which is kind of...

It's kind of ironic. The people that are not involved that are just chirping from the sideline are, like, think that they have intellectual superiority than the people that are actually making money. And listen, I believe me, I get it. That's one of the main reasons people become perma bearers because it gives you intellectual superiority. So anyway, Bespoke tweeted the four biggest speculative quantum stocks. Ionic, Rgetti, quantum, I don't know what the do.

What's QU, B, T, QBTS, whatever. They're both quantum something. Came into today up an average of 2,750% year over year. Analyst estimates combined 2025 revenues for these companies will be about $124 million. They have a combined market cap of $46 billion. That's $3701 times revenue for the group. Now, this to me feels like a bubble.

Again, like maybe I feel I shouldn't comment on what a bubble is and isn't because I don't know these names. And maybe the $124 million in three years from now is $5 billion. I have no idea. But this seems pretty optimistic. Okay. Just being up 3,000% in a year, yeah, it seems like a lot. Well, being up 3,000% in a year and training at 3,000% in a year

in trading at 370 times revenue, yeah, that seems, that seems, that seems, that seems, that seems optimistic. Now, um, one of the, one of the parts that I didn't, uh, mention earlier, that's really important to like, well, what's the bear case? There's still a wall of worry. It's not like there's investor euphoria. You know, the quantum name's notwithstanding. We talk about like S-taxes report from Schwab. Um, uh, Bank of America has a chart showing that, uh, retail institutional. and Hedgefuck clients were all sellers last week. And if you look at the four-week average,

they're barely in. People aren't, like, piling into the market. It is weird. Okay, here's the opposite side. I feel like we could do this back and forth thing. So this is from Gungent on Twitter. She says the number of leverage ETS has doubled over the last three years. And assets under management,

him almost tripled since 2022 alone. But to me, this is not proof of anything. other than people like to speculate. And it's a lot easier for them to do so. Now, it is obviously true that risk appetite increases in a bare market, and in a bull market, fucking obviously. But this in and of itself, okay. This is why it's harder to handicap now because there's so many degenerates out there.

Howard Linden calls this like the degenerate economy now. People who have taken the sports betting, event betting thing to the stock market and they're just trading their faces off with leverage ETFs and options and single stock, ETFs and all this stuff. And that's just kind of part of the game now. All right. So Jason Zawag wrote a good piece about Jonathan Clements, just a review and talked about his, their working relationship and their friendship and all this stuff. And I thought this was an interesting point Jason made on how things have changed and why behavior is better. And I think why we can separate the fact that there are still some degenerate people from the fact that most people are

way more well behaved. So he says, he's talking about how different things were in the 90s and 2000s. He said in today's investing landscape where you can own the entire stock market for three basis points and total annual costs. It seems incredible that investors used to be told. Index funds are for losers. Mutual funds sold by brokers charging commissions of at least 5% outperform funds that don't charge commissions at all. Investments with high annual expenses outperform those with low costs. Newsletters and market timing services can beat the market. You always need more insurance coverage no matter who you are. High cost annuities are the key to a safe retirement. Paying commissions for financial advice is better than paying an annual or hourly

fee. Individual investors are the dumb money. And he said, Jonathan, when he started for the journal, like, those were treated as gospel. And I totally remember coming up in the business and people saying that index funds are for losers. Who wants to be average? Right. And I think just the fact that people now know that this is all garbage, most investors recognize the fact that this stuff, like that is, if you just take away that stuff, that whole gospel that people can actually, because the problem is people in the past couldn't really look this stuff up. It was like, hey, I got a guy. He's got a name on the door. He's telling me this is gospel, so it's gospel to me. Now people can look this stuff up and know. That's part of the reason that behavior is so

much better. This is the era of retail investors dominance. And it's not going to last forever. But so long as their favorite names keep going up, party. Well, and the fact that so many people now just decided I'm going to buy index funds in ETS. I'm not going to try to... Some people still are, obviously, and a lot of those people are beating it, but most people have said, I'm excusing myself from the game. I'm done. I'm not going to pay fees. I'm not going to try the time to market. It depends by age cohort, because the young people are not saying that. Yeah, but they're saying it with 80% of their money, right? And then 20% there. If you look at just the flows alone, think about it. The most popular

ETF is VLO, the Vanguard S&B 500 ETF. It's bringing in more money than any ETF in history. Yep. Right? If you look just at the flows, it's not Robin Hood. It's Vanguard. It's both, but point taken. All right, so this is floating around... Van Gogh has $7 trillion in assets. Robin Hood has what? It's both.

I don't know what. I'm going to guess $200 billion. I mean, there are some... Hundreds of billions, yeah. All right, so I saw this floating around Twitter over the weekend. Shil Mano tweeted, there was a woman in San Francisco who charges $30,000 to name your baby. She started at $100, but she was going to dinner with VCs and a friend told her to charge more and nobody blinked.

The Bay Area might be the best place in the world for this kind of business. So, I saw this floating around Twitter, not just, not just from Shield, but other people were sharing it as well. So I wanted to read the story to find out what's going on here. And I couldn't read the story because I was locked out of an article. So I Googled it. And it turns out, Ben. No, no, no, no.

You put it in the chat GPT. So he summarized this for me. It'll do it. Oh, even if there's payroll? Sometimes, sometimes, but then it'll go, if it's still paywall, they'll look for it elsewhere. Okay, good stuff. That's what I... All right.

Anyway, Ben, it turns out so people are like, top, top, how is the Fed cutting rates? This is stop? Guess what? I googled it. Here's what came up.

Wack your world of baby names. Guess how much mine costs? Taylor Humphrey can find your baby. Okay. For $30,000. This story first came out in October 20203. Ah, okay. So people are reusing the rage bait.

I guess people thought it was fresh. It's not fresh. Also, I am very good. I could do this for less than 30K. I could be a consultant at this. Here's what you do. There is baby name things where you can look at baby name trends by years.

So you type whatever name you're looking for and you try to find one that's not popular anymore that no one else has. That's how we chose those are. You would set the trend. Yeah, but you pick old names. That was our thesis. You picked old names.

I feel like Libby is a popular name, no? Well, yeah, I guess that one went against it. But yeah, George and Kate were the other ones that people don't use anymore. Like, if you want to go against a grain, you're doing Ashley or Jennifer or one of those, like, 90s names, and no one uses any of me.

Yes. You know, it didn't occur to me until just now, but George and Kate plus eight, remember that show? I'm sure you've got to that a lot. Actually, we haven't, but... Really? I think you're the first one, yeah. Okay.

All right, so Heather Long, we got some economic data last week. Wow, final read on Q2 GDP is 3.8%. Consumption was 2.5%, both goods and services spending was healthy. The U.S. consumer remained a lot stronger than many thought, even the miss of the stock market sell-off and a lot of trade uncertainty. I, for one, can't believe it.

I thought that there was going to be some sort of retrenching, and I'm talking at the aggregate level. I know at the lower level there certainly is. But I'm surprised that it didn't really seem to slow us down at all. And I wonder, Ben, did the Fed make a mistake? So we were on the case of the housing market is frozen. seems a little restrictive, let's loosen up, let's get the housing market activity going to the third of the economy. But I don't know. Maybe I'm second guessing myself. Like,

should we be cutting into a KAPX super cycle with inflation potentially re-accelerating? Like, is that the right move? I think the labor market is the thing that worries them the most. But to your point, I pull this up from Exhibit A was on today. The GDP now for the, this up in court is 3.9% again, which is, you're right, it's kind of insane that growth keeps coming in. And I don't know, I still think the, why should we punish the housing market because Mark Zuckerberg wants to spend a bunch of money on AI? I don't know if I think I'd, I'd take the housing market side over Zuckerberg in that scenario. All right. Well, you frame it that way. Here's a headline from Bloomberg. Rich people feel pretty good right now. And they showed the daily

consumer sentiment index, which we're going to talk about later. I've got questions. They broke it down my income level. And there's just a big gap between people that make over $100,000 and everybody else is really the deal of your. Makes sense, right? So I saw this other chart you put in here that shows how people making 100K or more, their sentiment essentially tracks the stock market.

That's a good chart. That's a very good chart. And that makes a lot of sense. So I updated this. I've done this before. The household and housing ownership. So 87%, the top 10% owns 87% of the stock market. And then the bottom 90% owns like 55% of the housing market.

So the middle class, housing is the thing. So the fact that housing is stuck right now and kind of prices, I know prices are still going up a little bit and all-time highs in housing prices, but it's certainly cooled off, obviously, and the stock market hasn't. So the fact that the lower and bottom tier housing is their big asset, but the top 10% stock market is their big asset, it makes sense why this is the case. And for sentiment reasons and financial reasons, right? This is why we're never going to fix inequality, though, in this country. It's a feature, not a bug of this system.

The fact that the stock market is so important and powerful now for so many more people, like think about it, 62% of people own stocks in this country, right? Like, I think the stock market is just so much, like, you couldn't have the Great Depression happen today because back then 2% of households owned stocks and it didn't really matter that much. We wouldn't allow it to happen today. We wouldn't let the stock market fall 80%. It would never happen. No, no, no, the, no, the, no, would not happen.

You know, looking back on the period of 2021, and there was a lot of finger pointing at Robert Hood, people were upset about game, turning the investing, which should be a long-term boring endeavor into addictive. Guess what? God bless Robinhood. I think that with the benefit of hindsight, where I landed is more people in the market, the more the better. Now, caveat's abound.

Obviously, people got wrecked and obviously people are irresponsible. But that's nothing with Robin. Yeah, but they bought millions of new investors into the stock market. Who learned that, oh, I can make money in the stock market. And again, short-term less is notwithstanding, like whatever. over the long term, owning stocks is a good thing. Getting people in the market is a good thing. Hard stop.

Yeah, that's true. But the fact that it's so much more important now just mean the rich will continue to get richer because they have a greater share of the stock market. So like, we're literally never going to solve wealth inequality. Let's be honest with ourselves. Yeah. All right.

So somebody emailed us a few weeks back. So we read a tweet that 40% of the mortgage, is a bank's holder adjustable rate. Somebody said, that's nonsense. He said, U.S. banks are the single largest entity of holders of mortgages and mortgage-backed securities, around $2 trillion worth. Of that amount that is not a fixed rate agency, MBS,

the rest is raw mortgage loans that the bank originated and decided to keep the raw loan on their balance sheet, quote, held for investment as opposed to selling that loan to Fannie and Freddie. So why is almost half of those raw loans held in arms? it's because an arm loan has about a zero interest rate duration risk for the bank. The bank gets to hold that loan with a yield of full of 5% and have a limited duration risk. It's a homeowner for the bank. So they're offloading the other mortgages and holding it under the arms,

and that's why it's such a big percentage from them. Correct. And other people own the other mortgages besides banks, where arms as a total are like 5% to 10% or something. So he also said side note, the people taking out arms today are the rich people. It's not the people that can't afford it. it's the people that say I'm good, I just need the house.

Like, I don't, right? Right, yeah. Right, I don't need to pay my loan down. I don't care. He said this kind of borrow is about a less than 1% chance of default rate, so the banks love holding that rate. So anyway, this guy said,

he finished with Mike. We need more updates that you're selling and buying your house. How was it dealing with agents? Did you pay a buyer's agent fee? Any inspection stories go? Yeah, don't you have to like bring your own lawyer in

and you work to buy a house or something? yeah we don't do that here no lawyers no i've never i've never hired a lawyer for anything in my life not once what about the contract that's a real realtor's for why don't we need a lawyer realtors don't do contracts do they yeah they do and then the closing office i don't i don't have a lawyer for when i buy and sell house hey let before before i get to this so i have a decent story i suppose um what are the rules with all right i'm the new guy in the block How long does the window stay open of me introducing myself? Because eventually it's slammed shut.

I don't know where the line is, but in my old house, and I was there for six years, there's people that didn't say hi to for three months or six months, and then it's over. You can't introduce yourself somebody a year after you've been at the block. Yeah, no, you just, as you drive by him, you wave, that's it. So, big wave guy. Rob, it's like, oh, you're a big wave guy. Yeah, I want to increase yourself in the neighborhood. I do the wave every time, too.

You have to. yeah yeah of course um but no i i think you you put it off for as long as you can you don't you don't want to have those conversations unless it's like forced upon you no you got to introduce yourself nah never okay no if we did but it was mostly when we moved in people coming to us to say hi you know i got caught in one of these awkward situations i remember this vividly because it was just so uncomfortable so i remember in park slope uh i would i would strap cobb in my chest and take him to daycare. And there was a dad that we would get there at the same time every day. And like maybe I had felt like a six months a year into it. I don't know. It was a long time.

Way past the appropriate time of introducing yourself. So I had my Bose headphones on my noise cancelling headphone over the years once. And I took him off to introduce myself. And I think as soon as I did that, he like turned his body half a, half a turn. And so I like missed him. And then I just, I'm standing there with my headphones off and waiting to, but he, We missed each other, and interest was, I was very uncomfortable. That's a very good etiquette, though. Whenever you see talk to someone, take your headphones out of your ears. I see people talking with the, like, if I have some in, I'm listening to something in the store,

and I see something, I immediately take them out. Yeah, of course. It's very obnoxious not to. Okay. So what was your experience like buying and selling a house? I'm not to board listeners to death. On the buy side, nothing too dramatic. On the sell side, I only got.

got two offers, which was interesting because I had a nice house in my neighborhood, not to brag, and there's just not a lot on the market, but the problem is, like, interest rates just destroyed demand, as we know, obviously. The good news is I only needed one offer to accept, and I accepted it. Okay. So let's say your house sat in the market for two to four weeks, and it got like to crunch time where, like, would you have been willing to lower the price pretty aggressively to sell it? Yeah, I had to sell it. He's having a new house.

I'd sell it. All right, so here's maybe for the financial part of this audience, an interesting story. So originally, so I got very lucky that I sold my Long Beach house and my house at the same time. I was going to take all the proceeds and put it into the house and do an interest-only loan. Because if I put down, let's say half the value of the home, how much more equity I need in my house? Like, I just, you know, I was attracted by the low interest rate. The guy at Bank of America, who was phenomenal, by the way, if anybody... I feel like when you buy a new home and sell another one, that's when you realize that, like,

oh, this equity, it's good for a down payment for a new place. But other than that, why do I need so much in it? Right. That's the point. That's the same feeling I had when I... So I was going to get a 5% arm and he said, hey, listen, just want to throw this out there. because you're getting a jumbo loan for $900, you can do a rate modification, which is effectively a refinance.

The difference is I don't have to submit all of the documents, which is a huge pain in the A, right? Like documents for days. And I don't have to do any closing costs or any taxes. It's just $900. And every 25 basis points, I could do the rate modification as many times as I want. $900. So I said, huh, that does sound attractive.

So I'm like, all right, so what is the 30 year, what's the 30 year mortgage rate today? And every day, he's like, hey, it's still 6%. But what was moving every day was the closing cost credit they were going to give me. So he would say, all right, it's 6% with $4,000. Next day, 6% with 11,000. Next day, 6% with 7,000. So I said, hey, how do I, why are the closing costs moving around so much? Like, how do I get more of that?

He said, well, the maximum amount that we would give you is 2% of the value of the home. I said, holy shit, 2% of the value of the home. What do I have to do to get that? He said, you have to accept a higher interest rate. Okay, how much? 6.5%. So I said to him, let me ask you a stupid question. Can I do that and then still do the rate modification after my first mortgage payment?

He said, yes. I said, really? why would the bank allow that? It doesn't make any sense. Because rates are going to come down, right? He's like, yeah. So I said, so why would you do that? Why would the bank allow that?

He said, because in the last couple of years, a lot of people that did that, thinking rates were to come down, got stuck. So it's not like a guarantee that rates are going to come down. He goes, you're gambling. I think it's a smart gamble. I said, so do I.

So you're effectively a bond trader right now. I'm a bond trader. You're trading mortgage. And I might be the best mortgage-backed security trader of all time. because I got the 2% against my closing credits. And he called me last week. He said, he got good news for you. I was 6.5%.

Now, 5.375. Huge. Why did it drop so much? Interest rates came down. The tenure came down. Pretty good. It's a massive drop, though. You time to be good.

Yeah, so I got very lucky there. But anyway, I'm looking at the documents and the amortization schedule and how much principal I'm going to be paying. I'm sorry, how much interest going to be paying. Nobody actually makes money on a house. When you say, oh, I bought it for, my parents bought it for 125 and they sold it for 800, okay. Well, how much did they actually pay?

Because it's not the sticker price. Right. The ancillary costs, all that stuff. Yes. I'm convinced no one actually has any idea what the return of their house is because no one keeps track of everything involved in buying and selling and you can't tell what you would pay for rent somewhere. And it's an impossible calculation.

make. No one knows. So this is, this is not a popular thing to say out loud. But I almost wonder if a lot of people that wanted to buy a house who otherwise invested it in the market and rented are actually in a much better position. I made this point to you like a month ago. You don't remember that? Yeah, great point. Now, the obvious caveat is that if you outgrew your apartment because you have two kids and you need to be in a house horrific, right? Like awful. It's a lifestyle choice for most people. That's the thing. Awful. Awful, awful, awful. But the people that are not in that situation who were going to buy a house just because they thought that that's like what you do, not only did they not touch a bullet, but maybe they, uh, benefited. Yeah, they could be a better

spot. I think so, too. All right. Uh, anything else from your home? You're good? Uh, no, I just want to let the listeners know that. Maybe there's some oversharing that I need to get edited out, but otherwise, otherwise. Otherwise, pretty good. Business Insider had this piece on NEPO homebuyers And this is really surprising me It's a share of buyers with financial help From their family or friends And it's been going down actually

I don't believe For first time home buyers too And all buyers, it's been going down For the past Five years or so And then they look at the down payment sales I'm like, hang on it Where's the data coming from?

How could you prove that somebody's getting out? National Association of Realtors Has a huge report they do on this But how do they get the data? It's survey obviously Yeah I think it's a pretty big survey they've been doing for 25 years. Well, if true, if true, wow.

It's surprising, right? I would have thought for sure this number would have been going way higher. It was higher coming out of the great financial crisis, which that makes more sense to me. So you know what this tells you? The people who are buying homes are, this is more wealth inequality at work, are doing fine financially and can afford it. Even though it's more expensive, they can afford it. So, like, the profile of the buyer is in a very good place right now. It is also weird.

I mentioned earlier, like, intellectual superiority, people saying, oh, you shouldn't buy this. There is a lot of moral superiority going on about this whole topic of conversation around the economy where it's like a race to say, how fast can you say that the bottom 10% are getting left behind? Right. Right. It is a weird sort of dynamic that's going on. Yes. And when have we ever been in an economic environment when the bottom 10% wasn't getting left behind? That's just, that's the way, like, this economy works right or wrong.

Now, I think, I think everybody would agree that there is a lot of effed up stuff in this country and in wealth inequality. And the fact that people go hungry is like, makes no sense at all. I think everybody would agree with that. But it's just this weird thing how, like, when discussing how things are pretty good, there's like these people that always feel they need to point out that inflation is hurting the bottom 10%. You also have to remember, though, that not everyone stays in the bottom 10, 20, 30, 50%, percent. People move up and down income, wealth, strata. It's not set in stone forever. It feels like it is, but it's not.

All right. Bloomberg had this big piece on private equity. Did you read this? Not yet. Here's the headline. Some PE firms doomed to fail as high-flying industry loses this way. Now, they're saying the fact that distributions have slowed so much is causing a real problem. So they said, at the current rate, it would take about nine years for customers to collect their money from more than 12,000 companies held by U.S.

buy-out funds, according to Pitchbook. That sounds like a weird data point. Well, it's just saying if the distributions continue at the current pace, it would take a very long time for them to get their money back. So that's saying that's making them very reluctant to give more to the firm. So they said private equity funds right now are seeking $3.3 trillion in new fund commitments. And so they're saying, how are they going to get these investors to commit to new funds when their old ones are paying them back so slow?

And this is, of course, why we're moving into RAs and the wealth channel and we don't, we don't like to solve the puzzle. Wealth matter. So here's the thing, though. They said at mid-year, the, so this is the reason why this is not a crisis or it won't develop like a crisis. It'll just be a slow-moving train. At mid-year, the industry was holding about $1.2 trillion for potential deals, almost a quarter of that pledge at least four years ago, making deployment even more urgent. Like, they're sitting on such a war chest of capital, like that they can keep shoring up these companies if they want. to keep them alive.

And how many distressed fonts have been raised that haven't been able to allocate? Right. Waiting for the distress to happen. These people that, like, fantasize everything burning to the ground, have you not learned anything? That's not how it works. No.

They changed the rules. Right. People are incentivized to keep things going. Yeah, that's not, it doesn't just... And that's what these companies do, too, though. What I realized when I was first investing in these things with my own endowment is if the investment period is seven years, they have this legalese in the fine print that says, hey, we can extend it to 10 years if you guys say yes. And guess what they do? They extend it.

Legally's a funny word. Right? It is. So you're right. That's the point. They've changed the rules or they have the rules in the fine print that no one reads. So yeah, it's not private equity. It's going to be lower returns, not some crisis that people, you're right, want to see the world burn. Yeah. So every time, I think we mentioned a couple weeks ago about people in America being so much richer than other countries. And every time we do it, someone says, well, it's okay if people in other countries aren't as rich as Americans because they get free health care and their education is much cheaper and all this other stuff. Well, here is a piece from the Telegraph in the UK. And it's called Why American Families are so much richer than us.

And so guess what? They're not, they don't care over there. And this is in the UK. Roughly four in 10 U.S. households had leftover earnings after tax of at least 70,000 pounds last year in the UK, just 10% of households are that that much. Do you know that for percent instead of using the little squiggly circles in the line, they say PC for percent in the UK? I did not. But wait, that's interesting.

It's way higher than I would have thought. Four in ten U.S. households had leftover earnings after tax of at least 70,000? Yes. So that's disposable income. And they say the top 10% of disposable income in the U.S. is 153,000 pounds and

71,000 pounds in the U.K. The top 5% by income in the UK is 120 grand. So we really are just so much richer than these other countries. Even if you factored in the healthcare, student loan, other stuff, the disposable income is so much higher in the U.S. and it is in other countries. Wow. But are we happier, Ben?

No, not at all. Look at this chart that shows the top 10%, adjusted for inflation in the U.S. versus the U.K. All right, so that's the stock market. Yeah, that's probably, you're probably right. So they say the average earner in the poorest state in America, which is Mississippi, is now substantially better off than their British counterpart. It's wild.

Wow. Oh, wait. Okay. Oh, you got something? I mean, I'm looking at the travel section. Is this true? Yeah, I was going to give a travel thing. So I flew back from Calgary last year, my trip at Banff.

And after we had the podcast, I went and explored, and I was sending you pictures and stuff. And it's one of those beautiful places I've ever seen, which it's funny because everyone, all the Canadians there are from Calgary and the surrounding area in Vancouver and such were saying like, it's fun. It's really nice to see someone who's never been here before to see it through their eyes because we kind of take it for granted. Like everything in life, right? They're like, I was completely blown away by the Canadian Rockies and Banff was probably one of those beautiful little towns I've ever seen. And they were like, yeah, we kind of take it for granted because we're just so used to it, which makes sense. So it's like an hour and a half trip from Banff to the Calgary Airport. So I got there way early, way earlier than I should have, just to give myself time, you know, getting my car.

So I had two hours to kill in the morning. And I looked up the sign and they had this brand new lounge and it said, if you have an American Express, whatever, platinum or gold or whatever when I have, you can get in here. So, all right, I don't like the food choices out here for breakfast. I'm going to go see what they got in there. And first time I've ever set foot in an airport lounge. And, uh, eh, I don't care. I'm not going to do it again. Not worth it.

I had a wait in line to get in there. the place was full of people. The food wasn't that good. It was, I would much rather find a corner of the airport away from all people, be by myself and sit in an airport lounge that's overflowing with people. Okay. Not a, not a surprising take. Not worth it.

Not surprising at all. It was nice. I'm sure people love the free food, but it was overrated experience. It's not worth waiting in the line for. All right. One more, one more plug in addition to, people from Charlotte hitting us up is we now have a

podcast for Talking Wealth which are episodes for advisors here to four it had only been on YouTube did I use that right? I think so, yep it had only been on YouTube we are now moving it to the podcast realm

which makes a lot of sense A lot of people ask for this Yeah, it's been a long time coming At least three people No, no there was four I'm kidding Yes I was also kidding Yeah, and we'll be doing more with this channel, I think,

and we've already ramped it up a lot, and so, yes, take a look. All right, recommendations. So did you read 112263, or did you listen to it? Okay, so I read 1120. I love that book. Love. Okay, you read it. Okay, so someone, we mentioned Stephen King a couple months ago,

and someone said, okay, instead of reading a horror-type movie, read 1122 63 that's a good entrance for ben into stephen king so i read it and i was i had a three and a half hour flight from detroit to calgary both ways i didn't watch one movie i read the book the whole way wow and i just think that the the time travel aspect if you gave people the ability i think this is on total recall you gave people the ability to like plug into an ai and time travel back to like the 50s or 60s or 80s or 90s how many millions of people would sign up for that today like the way that he describes what it would be what it was like going from, I think this book took place in 2011

and going back to the 1960s and his description of it, I thought was really good to think through, like, how that experience would be like and how it would shape you and the differences and it was just, it's really good and I thought, man, this would make a killer Netflix show. And I

looked it up, it was already a Hulu show. I had no idea with James Franco. Bombed. In like 2016. I had an 8.1 on IMDB. I'm going to try it out. I never heard that it came out even. Oh, me either. So, did you finished the book? I did. It's very good. I just finished it last night. Really good. I'm yeah, I didn't realize you, yeah, I'm, here's the thing. I'm not going to listen to

non-fiction on my audible. I'm only going to read, listen to nonfiction. That's, I, it's too weird to listen to someone do the voices and stuff, you know, I don't know. Okay. Friends with Kids. This is a movie from 2011. I must be in the 2011 phase. Not a great movie. It's the kind of movie they don't make anymore. I re-watched it this week on Amazon Prime. Here's the cast. Adam Scott. Jennifer Westfeld wrote and directed it. She's John Ham's ex-partner. Maya Rudolph, Chris O'Dowd, who's pretty funny. Chris and Weig, John Hamm. Really good cast. It's like a 2010's kind of movie they don't make anymore. Never heard of it. They kind of nail the whole dynamic of how your life changes when you have kids. And there's always the one couple who's super duper miserable and not happy with each other

remember because he had kids. I guess the dynamic of having kids, they really sort of nail them that movie. It's like a 6.5. Okay. Good airplane movie if they got it. I got nothing new. No movies.

How did you get to Boston? Well, the flight is 30 minutes, but I did work in the flight. The last movie I saw in the theater was weapons. I want to see the PTA movie. It's getting rave reviews. Here's the thing, though. I haven't seen it yet, obviously.

you can't trust film people anymore because every time it's universal i know but every time paul thomas anderson comes out on the new movie they say it's the greatest thing ever like liquor's pizza was stunk out loud that movie was terrible has anyone ever watched it more than once i would venture to guess no shot fantasy credit to me i haven't seen it once and i never will i'm sure because leonardo de caprio's in it i'm sure this new one will be good but you can't trust film critics anymore because they just say everything is amazing and there's no critical elements to it anymore. Out of

film critics are permables. That's not true. It's true. I'll see it when it comes out on streaming. Sorry. I'll wait for it. Okay. What else?

Anything else? Nope. Talking wealth. Email if you want to work with us in Charlotte. Have fun in Boston. Animal Spirits at the CompoundNews.com. Thanks to the production team, as always. They're with Michael in-house today. On the road. Yeah, we had more technical difficulties than ever because the whole production team was there. Thanks, guys. All right. See you next time.