The Compound and Friends - Bitcoin Thirstmonsters

Episode Date: June 11, 2021

Welcome to the second episode of The Compound & Friends, a new podcast from your favorite financial and investing commentators. This week, Michael Batnick, Sam Ro, and Downtown Josh Brown discuss: Bitcoin Miami, circuit breakers, when stocks become unrate-able, rising wages, Chipotle price hike, May CPI, newspapers, and more! Follow Michael's blog at theirrelevantinvestor.com Follow Sam at axios.com/signup/markets Follow Josh's blog at thereformedbroker.com 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/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

I don't know why, but they should close banana down. I don't really understand who that's for. Like who, who's the target audience for that? I don't know. I buy t-shirts on Instagram. So it's probably not you. You shop at Barstool exclusively. It's probably not you.

Uh, Sam, big banana Republic guy. Uh, in high school. Yes. That's where I got my church clothes. When you were trying to look like, when you were trying to look like a big boy in high school. that's where I got my yeah I got my church clothes yeah when you were trying to look like when you were trying to look like a big boy in high school

yep yeah if you were looking for like clothing with elephant prints on it like that was pretty much the go-to I feel like you had five or six other choices the t-shirts with the

yeah like you were on safari I like to feel like I'm on safari all right we're gonna I think we're gonna start the show. Welcome to the Compound and Friends. All opinions expressed by me, Michael Batnick, and our castmates are solely our own opinions and do not reflect the opinion of Ritholtz Wealth

Management. This podcast is for informational purposes only and should not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. This is Showbiz. All right, Sam Rowe is in the house. Sam, you probably know his stuff from Business Insider and more recently from Yahoo Finance.

And Sam is now in a new role that we're going to talk about briefly in a minute. We won't make him go too much into that, but it's pretty cool to me at least. Michael Batnick's in the house as usual. Michael, say hello. What's up, guys? All right.

Can I say something? Yeah. Sam is my only window into TikTok. The only. Oh, shit. We totally have to. We totally have to go there, too. Yeah.

I forgot about that. Yeah. But you're doing something. You're smuggling TikToks into Instagram. I don't even want to know your trick. You're like David Copperfield. Like, don't tell me. Well, you know, the trick isn't actually that good because, you know, you download.

Yeah, it's just it's just downloading and uploading. But, you know, you can only I mean, they have to give you like the user who creates the video has to give permission to download. And they only like a quarter of them, you know, give you those permissions. So it's like what you're seeing is just scratching the surface. So you can make TikToks that only can live on TikTok and people can't take them and repurpose them on another app. Honestly, I don't need the other 75%. I'm good with what I see from you. It's plenty, right?

Yeah, it's good. I don't feel like we have a shortage. Okay. Duncan is here. Duncan. We gave Duncan a microphone this time because I feel it's inevitable that we end up dragging him into our bullshit slowly but surely. Hey, guys. Duncan, how are you feeling?

That's it? That's what you got? Big time energy. John Grayson is here. We're live in the studio. This is the second time we're doing this, and we're so happy to have Sam in the house. We don't have an applause button or anything like that yet, do we?

All right. Don't start Google searching for MP3s. We'll do that next time. Sam, how are you feeling? I'm feeling pretty good. I don't know why you guys picked me of all people. I never do anything in public, but I'm glad to be here. We love that you're here and you crack us both up.

And you're like, when we were, Michael and I were thinking about who are the people we love to read and interact with that we haven't seen in a long time. I swear you were like one of the first three people that we came up with. No exaggeration. So I appreciate it. Yeah. Yeah. We, we think, uh, we think you're the man besides your Tik TOK, which is like a whole new development. Um, how, how long have you been writing about, uh, finance and economics and all the stuff you cover? Uh, 15 years. Okay. Uh, I started, uh, about 2006. Okay. about 2006 okay um i was uh i guess an analyst for a forbes investment newsletter okay um and have been writing ever since and then you made

your way to bi where i met you yep okay and you were part of that original wrecking crew with weisenthal lynette yep julia and both julia Who else? We're all these people. There's a ton of folks. Yeah. Yeah. Simone Foxman. She's at Bloomberg now. Miles.

Miles. Mom to Bodkar and Eric Platt. They like run markets for the FT now. Yeah. Charlie Dow. Of course. What? Henry Blodgett.

Where is he now? Still there. Still there. All right. So you're now going to do, you're going to bring your own innovative brand of financial coverage to Axios.

Can I ask you a question? Sure. I love Axios. What the hell is Axios? Axios was, is a company started by folks who were at Politico initially, Mike Allen and Jim Vandere. And the idea, their big slogan over there is smart brevity. So the idea is just to be really quick, concise with information because people don't have time. That's why I like it.

I get it through Google News where I get all my news. And the Axios article pops up and then I find myself scrolling like six at a time. But that takes 10 minutes. That's what it should be. Yeah. I mean, we were just talking about TikTok, right? It's like 15-second videos that you just keep going through some stuff you don't like, some stuff you like. And before you know it, yeah, you're on there for a couple of minutes.

That's sort of the irony of all that stuff, right? Like if it's really good, you know, pretty high quality short form, you'll spend hours on there. So you're going to build that skill now of like taking what you normally would have written in 200 words and writing it in 90 words or a hundred words. Yeah. Something like that. I mean, you know, I think 250 words would probably still work. Um, and so, yeah, I think that's one of the sort of appeals of the format for me is that, you know, I, I like that, you know, not having to, I mean, yeah, I think it's great to be able to go like really deep on some topics, like, you know, spend 800 words on something. But, you know, sometimes people just want information.

So, right. A lot of the, like, let's say you want to read something about the Federal Reserve or interest rates or whatever. When you read a piece at the Journal or New York Times business section or whatever, not that they're not good. But most of that article is not, quote, going deep. Most of it is rehashing stuff that you've already read. And they almost feel like it's obligatory to repeat. Like you read an article about bonds in the wall street journal, and there will always be a paragraph saying that yields move conversely to the price. And there's always a paragraph about

Bob Smith investor in Minnesota who sold his bonds. Who gives a shit? Yeah, I don't even understand why that's still the way they're doing that. Every time. Yeah, you know, I don't really know either. I mean, I think, you know, with some of the stuff, you know, there will be sort of that explanatory line. But, you know, the way that they break up their articles, you know, you sort of understand that, okay, the news is on the top. There might be some background here that you can

skip over and you know, here's the expert commentary and here's the analysis. Or a link. We wrote more about this last week. Right. Click this. It's like, if you want to go deep, here's where you do that or move on to the next article. Yep. I honestly, these days, I don't know if it's just me. I'd rather read about 25 different things in an hour than five different things in an hour. five different things in an hour. Yeah. So same thing. And then if there's something I'm really interested in, that's different.

All right. Let's what are we here to do? This Bitcoin thing pissed me off. I don't know why. What do you mean? I don't I'm like pro Bitcoin. You didn't like Max Kaiser ripping up dollars. This whole Bitcoin Miami shit show.

It's like $10, you know, gimmick. Right. like ten dollar you know gimmick right i mean you know yes ten dollars is a lot of money and ripping it up but it's like it's just like such an incredibly cheap gimmick for to convey this message about how shout out to max kaiser he's always entertaining you should have blown up a briefcase exactly sam if you want to make a statement do what the joker did yeah exactly i mean this was more like you know a scene from the office where michael scott like crumples up a dollar and then puts it right back in his pocket right got a lot of attention for it though sure so if that's what he was trying to do um just the whole spectacle to me i like first of all i have been to bitcoin conferences and i will go to them again i actually hosted hosted Consensus at the Marriott Marquis two years in a row.

So I'm not a hater of there being a Bitcoin conference. Something about this thing that went down in Miami though. Which part? Skeeved me out. A lot, all right. Hold on, gather your thoughts. Let me just say one thing. There was only 12,000 people there.

That's not a lot of people. It felt like it was a million people based on the volume of news. 12,000. That's it? That's it. That's kind of a lot. Not really. Dude, no, it's not. Madison Square people. It felt like it was a million people based on the volume of news. 12,000. That's it. That's it. That's a kind of a lot. Not really,

dude. No, it's not. Madison square garden holds what? 19. It's not 12,000 people's a lot. You don't think so? No.

Okay. It's not too bad. You know, watching a conference, it's pretty big. Yeah, I think so. Given the amount of attention we give to Bitcoin,

it doesn't seem like a lot of people. I mean, you know how many people, I mean, I know they always sell out, you know, no they don't so i i agreed to host that thing i by the way shout to like um coindesk consensus whatever but this was in 2019 the last time i did it honestly there were like 50 people in the sessions and bitcoin was probably 4 000 or or six. Like it was, it was just like, it was after the, right after the crash and people were just like done with it. So what about this bothered you?

Um, all these 60 year old thirst monsters that I know from like traditional wall street, like running around there and making tech talks, like just like, like Devin O'Hairy, I'm not naming names and i don't dislike these people in real life but just the whole thirst the thirstiness of it all kind of was like a little stomach turning how's how's this how's this for a line from aaron griffith the new york times for a few days the city was a raging fireball of finance technology and joyful anarchy of unfathomable wealth and desperate striving. Yeah. See, I just threw up in my mouth. You know what that is? It's, this is like a multi-level

marketing, you know, event like a herbal. Well, I sold knives. I sold knives for Cutco. I sold part of that recruiting and it's like, you know, and those, you know, the whole operation and the whole, like, you know, you know, raising raising like getting people to be part of this has nothing to do with knives. Right. It's like, you know, or Bitcoin. Yeah. Or Bitcoin. Right.

I don't know if you know this. You can own Bitcoin without being a full on evangelist. Yes. You can just own it. Well, I like Bitcoin and dollars. I can both. Yeah. Joe.

I like dollars more. But Joe Weisendorf tweets about Fiat Fest. Pretty funny. He's planning a conference for dollars. I think that's really happening. I can't tell if it's total shtick or not, but either way, I love it. I mean, to your point, you watch something like this, and it makes it really hard to take Bitcoin seriously.

So the big announcement that came out of this was that El Salvador is going to convert from their incredibly safe and stable global reserve currency, whatever it is. US dollars. What is it actually? Do we know? I think their primary currency is the US dollar. Yeah, serious. So they're going to move over to Bitcoin, which is kind of cool. It'll be like the first test case of a sovereign country having, I guess, if it works, everybody buying and selling with Bitcoin and paying each other.

Well, it's not going to be the only currency, but one of like. They said it's their official currency. But you could still use dollars. Oh, so then what is this? It's like you have to accept it. you have to accept it as a vendor. Vendors and merchants need to be. So I think it's kind of neat in theory that you could pay your taxes in Bitcoin. I don't know why you would want to, but.

I would want to pay my taxes in Bitcoin and then root for Bitcoin to crash right after I finish paying them. Yeah, I think this is sort of besides the point. El Salvador is tiny. Ben and I were talking about this yesterday. The GDP of El Salvador, again, I understand the psychological significance and symbolism of this maybe being a big deal, but El Salvador is a $27 billion GDP.

The GDP of Maryland is $460 billion. I think it's actually smaller than every state in the US. Would you be surprised, though, if they did this conference a year from now and a much bigger country did the same thing? Well, that's the point.S. Would you be surprised, though, if they did this conference a year from now and a much bigger company did the same, a much bigger country? Well, that's the point. Yeah, yeah. That's the point. I wouldn't be surprised. No, I don't think so either. I mean, you know, this is like something you learn in, you know, emerging markets and investing in emerging markets, right? It's like every different country is going to have a different kind of government regime and some of

them are going to be more volatile than others. And so you know you would expect i mean i don't know the the sanity of every leader of every major economy but you know someone else is gonna yeah i i don't see if it works right so that's the thing if it works like you already have a caribbean country that's got its own cryptocurrency um elizabeth warren is down with the possibility of a US dollar digital version And Sean Hannity is now tweeting pictures of himself with laser eyes Within 24 hours, Ewar and Hannity are both on the same side of this issue Which is, we should experiment But she hates Bitcoin, she was going after it big time yesterday

No, but she likes the idea of a US dollar But those are totally antithetical to each other. But digital currencies. Tim Dillon. Oh, Tim Dillon. The last thing I want to say about this. I thought he crushed it. It's a super awkward situation.

He was on stage with the Winklevii and Jake Paul. And Jake Paul's not actually... I thought he was supposed to be funny. I don't follow his YouTube. I guess my kids do. I thought he was funny. He wasn't unfunny. He just wasn't funny funny. I think there's an audience. I guess my kids do. I thought like he was funny. He wasn't unfunny. He just wasn't funny, funny.

I think there's an audience that finds him funny. Okay. I don't know that he was trying to be funny on stage because he didn't make any jokes. He wasn't. No, he was like trying to come off as like a serious like. Yeah, he was fairly serious. So a lot of this is insufferable, obviously.

And I believe in parts of Bitcoin. And one of the reasons I was talking to Josh about this, maybe I shouldn't say this out loud, but for me, it's an emotional hedge as one of the reasons why I own it. It's like the opposite of schadenfreude because if I don't own any Bitcoin and it goes to $100,000, I might die of rage.

Like you would, what's the meme? You would like become a corncob or whatever. I would just shrivel up and try to raise them. I wouldn't be able to live with myself. I agree with that. I would just be engulfed with myself. I agree with that. I would just be engulfed in rage. I agree with that. What was it, Cameron or Tyler said, you know, if you own one, you're a millionaire.

That's their price target, each Bitcoin, $1 million. Half a million is there. It's very reasonable. I can't even be shocked anymore. If that happened tomorrow, I'd be like, yeah, it makes sense. I really can't be, especially by cryptocurrency prices. MicroStrategy, which is now effectively a publicly traded crypto fund. You guys know the scene in The Wedding Singer when, oh my God, what's his name?

He's behind the curtain. He's losing his mind and I'm reaping all the benefits. What's that dude's name? John Lovitz. John Lovitz. He's the band leader. Yeah, that his mind and I'm reaping all the benefits. What's that dude's name? John Lovitz. John Lovitz. He's the band leader. Yeah, that's what I feel like watching Michael Saylor. Like this is madness.

Well, he, so he's doing secondary stock offerings or debt offerings and taking the cash and buying Bitcoin. But the craziest thing about this whole story is that it's six and an eighth percent. Who the hell is doing that? Who is lending him money at six percent? I mean, that to me is the craziest part. Right, right, right.

With, you know, the millions. Ben and I were talking about like, why would anybody own this? Just buy Bitcoin. And I had three emails to me today saying the same exact thing. Right. I own MicroStrategy in my IRA because I want exposure to Bitcoin. And that's the best way to get it. And I thought, okay, that kind of makes sense.

Is it the best way if you could buy GBTC now at a 20% discount to NAV? Is MicroStrategy better? Well, there's no 2% fee. You don't know that the discount is going to get maybe even more discounted. What if this lunatic comes out and says, I sold all my Bitcoin and now I'm in Dogecoin? What do you mean that's not happening? If you owned the stock two years ago, you couldn't have predicted that he was going to buy Bitcoin. Well, that's true, but he seems fairly committed. Anyway, I guess that's why you would own this. I would not. Why the debt holders are owning it.

I mean, that's a different story. All right. What are we doing next? Oh, Jay Woods wrote this thing about circuit breakers. I wanted to get your guys' take on this. So there's a level one circuit breaker. It kicks in once the S&P drops 7% from the prior day. Level two is a 13%.

Level three. By the way, before I get to level three, Jay said before the 2020 sell-off, the last time it was used, and it was only one time, was in October of 97, the Asian financial crisis. We had four circuit breaker halt trading on four days in March. Level three is triggered by a 20% drop.

Obviously, there was only one day where that happened, 1987. Are we ever going to see a 20% drop. Obviously, there was only one day where that happened, 1987. Are we ever going to see a level three drop? There was no circuit breaker in 87. Correct. Are we ever going to see that? Again, another thing that really would shock me. Yeah, I don't think it would shock me either.

I mean, you know, we saw that Dow flash crash a couple of years ago. Remember your reaction where, I forget, this was like probably six years ago when you're watching, was it the Olympics? And you're like, you were eating food. You're like, that's a nice goal. Oh, yeah, yeah. It was the World Cup. It was the World Cup. You were totally deadpan.

That would be your reaction watching the stock market fall 20% in a day. Yeah, I mean, you know, it's like the audience that, you know, I think I'm writing for, you know, is this going to hold through this thing? And unless it's down 20% the next day and the day after that, it's like, all right, maybe we have some of the boys out. I just remember Circuit Breaker Twitter also being insufferable. All of a sudden, people would come out of the woodwork with all the rules and debate what counts as a trigger. And I don't know. I feel like the commentary around it should be hysterical. Like we should not have a stock market that drops 7% in a day unless something really bad is happening. What about like just like the idea of circuit breakers?

Is anybody against or for like really bullish on circuit breakers? The libertarians hate the circuit breakers. But this is an interesting experiment that we're going through with Bitcoin. That it could drop 20% in 20 minutes, all the leverage gets flushed immediately, and then we go from there. So I don't know that I necessarily want to see it in the stock market. In fact, I go on record I don't. But I do think the juxtaposition between that and this is kind of interesting to watch.

Circuit breakers are a good example of centralization being a good thing. I agree. People would lose their f***ing mind if there's no circuit breakers. In a time of crisis. What People would lose their mind if there's no circuit breakers. In a time of crisis. What would have happened during COVID if there's no circuit breaker? In a time of crisis, somebody has to be in charge. And you could say, well, I think these rules and these levels from the New York Stock Exchange are preventing people from profiting, you know, and I think that's like such a minority

opinion. I think most people like to know in a crisis that there is a rule that stops the endless losses and that somebody is in charge. Or at least this gives people a break. Right. Like just to like take a breath. Like, I mean, you know, if we put it, we already have circuit breakers built in. Right. Like 4 p.m.

The market closes. It opens back up 930. So you have a really shitty day. You know, the market's down 3 percent, 4 or 5, whatever. It., the market closes. It opens back up 9.30. So you have a really shitty day. The market's down 3%, 4%, 5%, whatever. It's like that sucks. But at least the day ends at 4 o'clock. And I'm going to have dinner with my family. I'm going to think about this.

I took a breath. I took a walk. Botnik says I need to DCA into this thing. I'm buying. There we go. Well, right. You need a cool-off period, which you don't have in crypto.

Although it does cool off because people are asleep, but it doesn't stop trading. So there seem to be patterns during the day where it's more active than others and maybe those will flatten out over time.

But before there was a Fed and before there were circuit breakers on the exchange, there was J. Pierpont Morgan. And he was like a human circuit breaker. Like he would very deliberately show up on Wall Street and broad in his, you know, in his horse drawn coach and like his mere presence. I think people like calm down and waited to see what he would say. Right. So like we've had versions of circuit breakers even before we've had electronics,

which I think is good. How would you do a Bitcoin circuit breaker? Could we have a smart contract that stops all the miners and all the activity, or that would be impossible? I have no idea. I mean, would the Bitcoin people even want that? No.

No. I mean, I think one of the things about circuit breakers, right, like you buy stocks, you're in the market, but you understand that this thing, this mechanism exists. Like if nobody told you that these circuit breakers were going to happen after these certain levels, then, you know, this is an unexpected surprise. Whereas with Bitcoin, you know, that's just the Wild West. They don't want anybody, you know, with their hands in anything. So, well, you know, that's just the wild west. They don't want anybody, you know, with their hands in anything. So. Well, it is a commodity. Like there was no circuit breaker for oil as oil went to zero last, was that in April, middle of April or something? Why aren't there, there's no circuit breakers on the way up. I think there's less of a chance of seeing a market go up 20 in a day than down 20

well i i complete the i don't think markets will ever go up 20 in a day i can't imagine a scenario where that would happen but like what about for individual stocks to curb the mania uh the meme stocks for example should they be halted on the way up oh individual stocks no nobody would be for that because like that's like the dream come true for investors is they own a stock that's up 20 on the day right there's not one stock that's up 20% of the day. There's not one person that would be in favor of that. Short sellers would be in favor of that, but short sellers don't have enough influence

to get that done. We're going to talk about, why are we talking about Bed Bath & Beyond? Because the analysts, I don't know what bank this was at, said, basically said, I'm out. I'm not playing Bitcoin, Bed Bath & Beyond and all these meme stocks.

They're no longer trading on fundamentals. So actually, here's the quote. As a result, we moved to no rating as we believe shares of Bed Bath & Beyond

are no longer trading on fundamentals. Investors should no longer rely upon our previous investment opinion or price objective. What firm is this? This looks like

Bank of America, Merrill Lynch. Sam, you do analysts, right? You know, I think it's kind of odd. Isn't the whole idea of having a price target that's not, you know, the market price like the case for saying that it's not trading off fundamentals? Yeah, it's a cop-out. B of A, yeah, B of A too. Also, like, I'm pretty sure that they're one of the firms

that you know when they do issue a price target it's a you know quote unquote 12 month price objective so you know are they saying that like you know we think this is going to continue for 12 12 months like i don't really oh so right if they said, ignore our price target in the short term, but by year end, we expect the stock to be trading closer to whatever. What if they said in the short term, the market is a voting machine? Sam, you read a lot of,

or you cover a lot of sell-side research, right? Yeah. Have you ever seen something like this? Yeah. There was, you know, last year there were a handful of strategists that actually just, you know, pulled their price targets on the S&P 500. I remember that. And that was just like super odd to me.

But no, this is not really that usual. It's kind of like a bold statement. Like I think part of this is like trying to draw attention to the analysts so that, you know, when they do come back out with their price target, you know, everyone's going to cover it, right? Maybe this is someone who has the rationale for them saying, forget our S&P 500 year end price. Isn't that when you need their opinions most? They should resign. I think if like if they can't say something constructive in that moment and their approach to like thinking about markets is to say, forget everything, like nothing we say matters.

I mean, this is, this is the job of an analyst, right? I mean, you know, to ignore the noise you do, you do, you do all the fundamental, no, no, not to ignore the numbers. No, the noise ignore the noise and say that the reason why we apply fundamental analysis to this thing is because this is what we think it's worth. And over time, we think this will eventually trade at that. With these meme stocks, I feel like supply and demand are the new fundamentals. And Ashley Gensler was talking yesterday about looking into some of this stuff. I don't know what regulars could possibly do here. I think one of the links to one of these stories actually goes to a guy who says,

B of A probably needs a technical analysis department. So I was thinking that, the analysts are trained to analyze the business, but right now you need a stock analyst. You need somebody that understands- Or market structure. Market structure, short positions, sentiment. If you're not doing that like at a minimum what the

hell are you talking about right the private value of this business off the market if it didn't trade nobody needs that information like we need stock analysts they need market internal information gamestop has four analysts left covering the stock there were nine in january i'm surprised there were even nine in jan. This was a tiny, basically worthless business, but whatever. They've lost half their analysts with the same rationale. I think this is Bloomberg. Telsey Advisory Group was the latest firm to walk away from the stock, discontinuing coverage of GameStop earlier this week. Analyst Joe Feldman said the firm is always reevaluating what it makes sense to cover, given which stocks are attracting interest from its clients.

Oh, come on, Joel Feldman. Your clients aren't interested in GameStop now because it trades 90 billion shares a day. So who is interested in this stock? The whole world. Yeah, everyone. So what are you talking about? So we have a lot of you know this sort of like um you know quote page activity data yahoo finance and yeah i mean the the traffic to to to tickers like amc and gme and the meme stocks it's just it's unbelievable it's you know eight times you know what people are going to see one that like eight times the number of traffic that you get on like the Tesla ticker.

Let's stipulate that that's all retail, right? And most pros are looking at a Bloomberg terminal. Yes. Let's, okay, fine. You're going to tell me trades going off of 50,000 contracts at a clip that's retail? Bullshit. No, I saw a data point. Nobody has that firepower.

I saw a data point last week that 11% of the orders were odd lots for one of these stocks. So the most of the money, so obviously retail lit the spark and hedge funds, et cetera, are dumping gasoline on the fire. Melvin Capital and somebody else, I just saw a report that they have combined, they had combined $6 billion worth of losses in January. I see options guys on TV just openly being like, we're trading this. They don't have a fundamental opinion. They're in on the action. It's the action.

It's the only game in town. Anything else on GameStop, Bed Bath & Beyond? I still like the store. Yeah, it's a great store. By the way, that one should take, why doesn't Best Buy acquire them and just plug it into their business? That rally's not so-

Best Buy and Beyond. That rally's not so weird to me, the Bed Bath and Beyond rally, because it has a lot of short interest, but it's also the right sector. People are like fetishizing their houses. And I saw Restoration Hardware's earnings, the spike in the stock today,

I think it's up 15% as we're talking or something like that. How did Wendy's become a meme stock? Was that short interest? I didn't see the story there. It's super weird because the short interest is low

and the more they push that stock up, the more money they make for Nelson Peltz, who's a billionaire who owns most of it. So that one's- I was a big junior bacon cheeseburger guy

in high school. What, Wendy's? Yeah. Oh, I'll f*** up some Wendy's right now. It's been a minute, but... And I still think they have better spicy chicken sandwiches than Chick-fil-A. Yeah, it's the best

spicy chicken sandwich. We don't need to spend much time there. I think we all agree. Bow down to Wendy's. Spicy chicken. All the listeners agree, too. I'm literally getting Wendy's in like an hour. Alright, this is a wild story. Talking about rising wages from the New York Times. The share of postings that say, quote, no experience necessary is up two thirds over 2019 levels.

And the share of those promising a starting bonus has doubled. What are you reading about this? Like the demand for workers and how often this is coming up in S&P 500 earnings conference calls. This is the real thing right now. Yeah. I mean, anecdotally, and all the data confirms it too,

that people are asking for more money. People are going to other companies for better opportunities or different opportunities. I mean, I'm literally changing jobs right now. I'm going to be in next month's JILTS report. Josh, I forgot to tell you. You were in the quits. I'm in the quits, and I'm also in jobs right now. I'm going to be in next month's JILTS report. Josh, I forgot to tell you. You were in the quits. I'm in the quits and I'm also in the hires.

And now you're going to be in the hires. Yeah. Look at that. You're creating the data that you're reporting on. I'm going to Deutsche Bank. Have fun with that. But I mean, you know, like, you know, we were talking, you know, before we were taping, you know, just all the circumstances are making everyone reevaluate everything in their lives, right? Whether it's, you know, maybe they want to spend less time at home.

Maybe they want to spend more time at home. Maybe there are certain things that they prioritize. But, yeah, I mean, you know, all this turnover is definitely pressure for employers. And all this turnover is definitely pressure for employers. So it's sad for small business owners that aren't corporations that can't swallow these hikes. It's hard to feel bad for Chipotle, which we're going to talk about. But small businesses, there's not a lot of margin there. So on the one hand, you've got to jump for joy for people on the lower end that are finally getting a living wage in some cases. Right.

While also feeling not sorry for the corporations, but sorry for the small business owners that have to swallow this. Let me ask you this. Do you know what the reservation wages? That's a new one to me. Yeah. Explain. So it's not totally clear to me. And I'm, I'm, I was sort of surprised to see the number of that low, but it's this idea that that's sort of like the bare minimum that you can be paid before you decide there's no work for me anywhere. It's like the market implied minimum wage? I think that's

kind of what it is. Wait, who gives you that? I don't think it's legal. Economists. Hello? Yeah. It's a survey. I think it's like a Economists. Yeah, it's a survey. I think it's like a Fed survey. Here's a number. So the reservation wage as economists call the minimum compensation workers would require was 19% higher for those without a college degree in March than in November 2019. A jump of nearly $10,000 a year.

That is, that's awesome. Dude, and that's the people, that's Trump country. Like those are the people that really, like the whole narrative that they've been left behind, they've been left behind. They don't have advanced degrees. They don't live in metropolitan cities. So that's a massive win.

It's not a win for small business owners that have to employ those people. But on balance, that's a win. Here's what's crazy. So the Fed is basically like, we're going to let inflation run hot until we get back to whatever they think is the right employment rate.

It was under 4% going into the pandemic, which probably is unnaturally low, right? It's not realistic that that should be the target, but now it's 5.8%. Apparently that's still not good enough. They say there were 7 million people still not having gotten their jobs back from pre-pandemic. Okay. While that's going on, there are 9.29 million open jobs as of April,

which is up a million from the 8.29 million job openings in March. This is from BookVar. We've never seen this much availability after the previous record, which was in March. This is from BookVar. We've never seen this much availability after the previous record, which was in March of this year. Sam, you're like the chief investment officer of Jolt's Twitter, I feel like. Yeah, I click around a little bit. Is it just a giant mismatch that we have 9 million open jobs and 7 million people haven't gotten their jobs back? I think it's a big mismatch. There was an interesting thing from Datatrack yesterday,

Nick Colas and those guys. And his analyst had a note about how job openings was actually defined by the Federal Reserve or whoever collects the data. And it's pretty loosely defined, but part of it is going out there and marketing the job. And so they're arguing that it's actually probably a little bit more inflated than historically because it's that much cheaper and easier to market a job. You just have to put up

something on LinkedIn as opposed to... You tweet it. We just tweet it. Right. So there you go. That's your job opening as opposed to calling the newspaper, sending them some copy, and then paying them whatever to show up in tomorrow's newspaper. It just feels like finally labor has a little bit of power for the first time in ever. Yeah. Power. And I wonder how much of the mismatch is not even about skills. It's about geography. Like maybe the jobs are in places that people aren't moving too fast enough.

There's got to be some element to that. I don't like, I haven't seen it, but I can only imagine that's a big factor. And it's hard to get people to do that. I think that, you know, the other thing that Colas mentioned was that a lot of, a lot of the, the, the, the job openings as well as as the folks who are out of work, are, I mean, New York and L.A. are really big. But even on a proportionality basis, it's largely in those big cities. So do we think, like, how many open jobs can we go to? I mean, I think we're at a record.

But this could keep going. It's a long time before you turn something like this around, I think we're at a record, but this could keep going. It's a long time before you turn something like this around, I think. And if people are still spending at an increasing rate. Yeah, and one other thing that I was thinking is like, how many of these people just never become workers again because of this new entrepreneurialism that's running wild right now, which is a great thing. But how many of these people just,

you think they're in the labor force waiting to get a job back, but they're actually repairing bicycles in their backyard and they're happy. Like, I think that's gotta be a big element to it too. You want to do Chipotle? I had Chipotle today. This is the most hilarious thing I read always. Dude, hold on. Before we get to this, I couldn't believe it. I went out to chipotle.com to order downstairs and it's like brand new. And it's a quesadilla. They invented a quesadilla. Oh my God. This is wild. Oh my God.

It was very tasty, but I'm going to stick with the burrito because they had like three sides and you had to use the fork for the sides. It wasn't a great eating experience, but the quesadilla tasted pretty good. All right. So they want to get 20 cents more a burrito or something. Big deal. 4%. It's 40 cents on a burrito. I don't care. I don't think anybody cares. But what people found hilarious was that they felt the need to say, this is because we're giving people wage hikes.

And then I threw this in the dock. I looked it up. Brian Nickel, the CEO, God bless him, by the way, created a lot of shareholder value, I suppose. He made $38 million last year. How long has he been there? I don't know, 10 minutes. Yeah made $38 million last year. How long has he been there? I don't know, 10 minutes? Yeah, like

two or three years. Maybe two years. Steph Curry made $40 million last year. Remember Diarrhea Gate? Oh, yeah, yeah, yeah, right. It was called BC, Boston College. The Boston College kids were getting sick over

Chipotle. That's before this guy. So this, this guy, this guy, I think came in and fixed it. So he probably, he probably is worth the money to shareholders, but just the optics of like, we have to charge college students 40 cents more on their meal so that we can pay our employees more money. And then you look at like shareholders made 65% in calendar 2020. But so here's the type of thing that I'm talking about. I'm very happy to subsidize increased

wages at places like this, right? Okay. My burrito costs 40 cents more. Big freaking deal. I think everybody agrees. The problem is not corporate America, right? Like employers for small and mid-sized businesses can't really offset it that easily. Right. It's going to be harder to compete for labor because it's more difficult to put through price increases. So one thing that's, and this is like, you know, separate from, you know, national wage increases and stuff,

but so Brian Nichols copped the $38 million. If you go into the proxy statement that was published like two months ago, there's a section explaining what exactly happened there. And there's a, like how it got so big, how it got so big. This is why it's great to have a journalist on the show with us. Right. So we don't read that. We don't read that.

So there's a section that was like, you know, COVID-19 special adjustment. And, you know, as with any kind of CEO, you know, COVID-19 special adjustment. And, you know, as with any kind of CEO, you know, the annual bonus and the stock awards are all tied to performance metrics, right? You know, same sort of sales, profit margin, cash flow, net earnings, that kind of thing. There's a note in there that said the board contacted like five of Chipotle's largest shareholders

that amounted, that accounted for like 34% of the outstanding shares. BlackRock, Vanguard, State Street. They called the ETF. Yeah, Joe Chipotle. Yeah, and so they got approval to make a tweak to how he would be able to earn his 2020 compensation. And so they were able to make, they greenlit adjustments that said, all right, so you had

a comp store sales target for 2020. Just this one time, we're going to exclude March, April, and May from those comps. You know, it's non-GAAP number. We're going to exclude March, April, May from the cash flow target. And any COVID-related expenses, we're going to exclude that from the cash flow target. And there was actually a third sort of hilarious sort of your, your, uh, annual bonus to, you know, 275% of what your target is as opposed to 300%.

So basically you can still earn three X what we're hoping for you to get. Right. Um, and that accounted for like 20, I forgot what the exact number was, but it was like 26 million of his cop was, was thanks to like these non gapgap compensation metrics that he was being held to.

When they're doing these sort of stock awards and bonus structures, why don't they ever compare it to their peer group or at least the S&P 500? They do. They do compare it to the peer group. That's the game, though. There's five consulting firms that are setting the comps for 500 companies, and they're all in a race to get the business. And they know the quickest way to get that consulting contract is to be looked at as, oh, these guys will hook us up. Right. You understand that?

No. Who do you think is paying the compensation consultant, if you had to guess? The company is. Right. So what that? No. Who do you think is paying the compensation consultant? If you had to guess. The company is. Right. So what's your point? So my point is the people who make the decision are, it's the same as the ratings agencies. The bond issuers are looking for favorable ratings, obviously. This is no different.

So when you bring in a consultant who's going to set comp, you don't want somebody that's going to come in with a knife and start chopping your potential comp. So it's an arms race amongst all the companies. Yeah, so one thing to make this a little bit more intuitive is to actually look at Chipotle's competitors and what you might think are the comparable companies to Chipotle. Like the Vicks? Is that one of the competitors?

Domino's Pizza. Yeah. Wendy's. So what you do is, in the proxy, they'll actually list the companies that Chipotle's execs comp is going to be. Benchmarked. Exactly. But if you go through each of those companies and go through their proxies and see who their peer groups are, they're all going to be mismatched. It's all going to be different.

mismatched, it's all going to be different. Because, you know, I don't think they said it explicitly in the Chipotle proxy, but what usually happens is you have this peer group because, you know, you eventually present this case to the board and the shareholders to say, you know, Brian Nickel, $38 million. But that's like, you know, in the median, that's like the 50th percentile of these 20 companies, or maybe it's the 75th percentile of these 20 companies. But you have to pay him or else, you know. He's going to go to Papa John's. He's going to go to Papa John's. He's going to go to Domino's where they're going to pay him slightly more.

Right. I think the shareholders have made so much money in Chipotle over the last, let's say, three to five years since the turnaround. Yeah. They're not going to question it. They're not going to question it. It doesn't matter. Nobody sees it as money coming from them because most shareholders don't own enough that it matters.

And the biggest shareholders are index funds and they care the least, arguably. What is the biggest source of inflation in your lives that you've noticed? Like, holy shit, that was expensive. Trying to comp against Brian Nickel, pretty much. It's been pretty difficult for me. So I've listed that as my comp, and it's not working out.

It's not working out very well. You should hire a really good comp consultant. So for me, it's booking travel. Everything's off the fucking wall. It doesn't matter where. It doesn't matter when. Hotels, flights, there's just no way to do it and feel good about it after you hit enter on whatever you book i traveled in uh april and more may it wasn't that expensive try booking something

now yeah i so i i traveled late april and i started looking at prices like late march a round trip ticket in march to to miami like you could fly first class for like $90. Yeah. A month later, it goes up to like six, $800. Yeah. It's out of control. It's insane. I just booked California. See my brother and his, and his family live in LA going at the end of August. You would think who the hell wants to go to Southern California at the end of August? Wrong. Like all of the hotels, all, and they're not, there's nobody to negotiate with like and rental cars i threw this did i throw this in the dock i did look at this rental car chart you guys have it yeah this is this this looks this looks sustainable um now clearly the issue here is just

like the fleets and they just weren't ready for the influx. And this won't stay this way. But to me, this is emblematic of why of just inflation like in real life. So we ended up we have to rent a car. I can't take Ubers everywhere with two kids and eight luggages. It's just not realistic. So we did not get the deal of the century. I don't think anyone else is either.

May CPI came out this morning, 5%, which if you do the math from 2019, it works out to two and a half percent per year over the full two year period. So like, if you want to get rid of the base effects from 2020, it's still hot. I thought it was 2.5% over 2019 prices. No, it's 5% over 2019 prices, which equates to 2.5% annual growth over two years. Let's agree to disagree. Because the quote that I pulled was, compared with two years ago,

overall prices rose a more muted 2.5% in May. Yes. We're saying the same exact thing. No, you're not. No, you're not. No, we're not. You're saying it rose 5% from two years ago. I'm saying if you average out the growth over the last two years,

it works out to 2.5% per year. I don't think it's per year. Sam, what do you think? He's going to like, he's going to like be like. Sam, play consultant. Guys, shut the fuck up. I think, I mean, either either way, though, right? Either way, it's hot.

Yeah, and then, like, the whole, like, two-year stack thing, especially with prices, when, you know, there's still 7 million people not working to provide that extra capacity, you know, you can expect prices to be inflated. But you know what's interesting? We all thought, I think that inflation was going to come from demand, pent up demand, too much money flooding the economy. I agree. And it came from the other side, supply constraints, which is the irony. So

used cars and trucks were up 7.3% from the previous month and they were already up a ton, but that drove one third of the overall rise in prices. But isn't the source of that the same thing, which is the treasury and the Fed giving people enough money that they don't have to work? Isn't that the source of the supply constraints? No, because it's chip shortages. It's all of these rental car companies

selling them off and then needing to buy them back. So, but if you're not renting a car and if you're not triathletic, and I know this sounds're not renting a car and if you're not triathlete, and I know this sounds X everything, but seriously, if you're not doing these few things, I'm not noticing inflation like in my daily life. Right.

No, if anything, things are cheaper. What's cheaper. By the way, I, yes, I am a consultant for the federal reserve.

Wait, what's, what's cheaper right now? Well, I mean, you know, this is like super extreme local anecdote, but rent is cheaper. Okay. It should be. I know rent is like, you know, this is like super extreme local anecdote, but rent is cheaper.

It should be. I know rent is like, you know, up in many places and, you know, whatever homes or whatever, but like at least in Manhattan, it's still cheaper. Like it's not as cheap as it was a couple months ago where people were just handing out apartments, you know, three months free rent and all that stuff. But Josh, you wrote a good point that it can't be transitory because the wage increases are not going back. That's right. Right? The chip shortage is going to get fixed. The supply is going to get fixed.

But the wages, which is really what drives inflation, I think, that's not going to go back. Right. But isn't like stimulus checks and all that? Stimulus checks is transitory. Correct. Emergency unemployment benefits, that's transitory. That's all over by September and half the states, like the red states, are not even playing ball with that extraordinary unemployment.

So GM, Mary Barra, I guess their last update to shareholders, they, you know, they guided higher than expectations. And they're basically making trucks now without the chips and letting them sit in the lot until the chips show up. But the trucks are built. So that shortage is not a permanent – that's the part that's transitory to me. I signed the lease last month, maybe the shittiest lease deal I've ever signed. They explained that the reason why it's such a terrible lease is because obviously nearly unlimited demand, but there's no factory rebates. The factories normally kick in money to move these things so they can make the next truck.

They don't have to do that now because they have no trucks. So you've got no factory rebates whatsoever. The dealers are happy for you to say no, because they'll just sell the truck to another dealer if they have it that has a buyer willing to say yes. And that part that is transitory, but I don't think you can pay somebody a higher wage in 2021. And then when the economy quote unquote normalizes, be like, okay, we're going to take back 10%. You can never do it. So that part I think steps. But so if the rate, if the wages are going to take back 10%. You can never do it. So that part, I think, sticks. But so if the wages are going to stick, and they are, why are companies, why is Chipotle then going to lower prices? Chipotle's not going to lower prices.

Nope. Never. They'll run promotions, but they'll never lower base prices. So here's a crazy stat. Some 48% of small businesses indicated that they raised average selling prices in May the highest since 1981. Wait, say that again? 48% of small businesses raised prices. In what? In one month?

Just overall, just they raised prices. Right. 48%, the highest since 1981. Yeah. That's meaningful. In June, there's a Fed meeting. Sam, I assume you'll be covering it and reading everybody's commentary. Yep. Do you think that's the moment june there's a fed meeting you'll be you'll sam i assume you'll be covering it and uh reading

everybody's commentary do you think that do you think that's the moment that uh they start saying taper out loud um they'll probably you know i think they'll probably stop saying that they're thinking about thinking about it um they're just now thinking about it right but you know it's like they can still i mean they can still talk, you know, all these transitory items. Right. You know, unemployment benefits, you know, school reopening, you know, vaccines still have to get out. You know, I think a lot of the analysts were responding even to today's CPI report and last week's jobs report. And they're just still saying, you know, listen, it's the data is still extremely noisy and they still have time. We have a 10-year treasury under 1.5% on the same day that we get a 5% year-over-year CPI rating for the month of May.

The market clearly believes the Fed or agrees. I mean, just my personal opinion, it looks like the market agrees that this is mostly transitory. So do I have that right? Is that what you're coming into contact with when you're reading all these notes? Yeah. I mean, maybe people have had enough time to really go into the research and the data and listen to what the economists are saying. Well, Ben Breitholtz from Arbor Data Science. Do you follow him, Sam? Sort of. I see him get shared a lot.

So he's got, he says, judged by the market reaction today, investors are more formerly in the transitory camp than ever. This is investors, not the Fed. Even financial media news trends have quickly shifted away from inflation as coming storyline. So this chart, I have to turn my head.

It's a ratio of inflation will rise, inflation will fall. And there we go. It's coming down this this is newspaper articles yes about rising inflation yes why did it just collapse because this is the ratio between the count of articles discussing inflation will rise versus inflation will fall so that peaked in may of 2020 is that do i have that right yeah i think people were inflation will fall. So would that peaked in May of 2020? Is that, do I have that right? Yeah. I think people were.

Right. Cause you have fed stimulus and you know, all the bailouts and whatever. No, it is funny because it did peak earlier than I would have thought it would. That doesn't make any sense. This is going to spike up. I wonder what the lag is.

I wonder when the last month is, are they looking at like March of 21 or are they looking at May? Well, these are rolling three months. So there is a lag. That's going to explode higher. I'm sorry. I don't think so. You really don't?

I don't think so. I could be dead wrong on that, obviously. So the economist for Barclays said, I'd say stronger service inflation right now is actually a good thing. No one ever wants to think higher prices are good. But in this case, I think it's reflective of healing. I think that's right. I think higher prices are okay. As long as case, I think it's reflective of healing. I think that's right. I think higher prices are okay,

as long as obviously the fear is that they're going to continue, and that's not good. But what we've seen to date, I think is okay. Yeah, and if you get double-digit inflation and used cars and airfares and hotels and all this stuff, that's fine, right? But if you have 5% CPI, but it's a lot more broad-based,

that's way worse. It's all going to commodities and not going to people. Gas prices are rising. Right, gas prices are rising. Rising to like 2017 levels, though. It's all in context. All right, let's move on to this Benedict Evans thing. He's at A16Z, right?

Yeah, so he did this piece, basically not a history of, but it's called 75 Years of Advertising. And he makes an interesting point that they say that if you're not paying, you are the product. But he said that that's what newspapers were. We think of that as Google or Facebook. That's what newspapers were. Basically, they were selling it for at cost and all their money was coming from advertising. And then he shows charts that we've seen before, the decline of newspapers,

but he puts it into context that I've never, I've never quite seen before. So we've got, okay, US newspaper, obviously it's been, it was going sideways in the late 90s and completely crashed after the GFC. Revenue. I'm sorry, revenue. Okay. So the New York Post was sold for a quarter for 10 years,

like from 2000 to 2010, it was 25 cents. They had no intention of making money. The product was the readers, to your point. What they wanted to do was have twice the amount of daily readers as the daily news to improve their ad rates. And that was the whole game. It was no different than Facebook giving away Instagram, not charging any of the users, and having the people be the product. Like that's an old game that we think the internet invented, but it didn't. So I guess what was interesting to me

was just the way that he framed it. So US newspaper ad spend, it just looking at this, just tells a lot different story than, so you see this and it looks like, oh, the rise of the internet, the fall of newspapers, radio collapsing, obviously. But if you normalize this and you compare it as a percentage of GDP and you compare it per capita, so this is showing circulation and circulation per capita.

So circulation per capita peaked in 1950. Oh, my God. Yeah. So these were in decline decades before they were in decline. Right. How much of this is just because people don't read? Or is it like maybe proliferation of TVs

and radios? Totally. But it's just showing a next chart shows that this has been in secular decline for a long, long time. So again, the red line of circulation, which they kept pumping it out, even though per capita circulation peaked in 1950, and the share of ad spend has been crashing really ever since. So this has been apparent pretty much to everybody. But like some of the biggest fortunes ever made in America were newspaper fortunes.

And like this is something Catherine Graham was worried about at Washington Post, and she was diversifying away from newspapers like in the 70s and 80s. So I feel like this has been just something that's been a long time coming. But now I think if you look at the handful of newspaper companies that are left, let's just say New York Times, like they're – in the last, let's say, five years, their subs have exploded. I don't know if it'll ever reach what their print circulation was at the peak, but that's one of the best businesses on the internet right now, like Washington Post, New York Times. So it's probably not as black and white as this whole industry-wide thing. Well, the thing about this article that was interesting is that a lot of these metrics are sort of messier than we think they are. a lot of these metrics are sort of messier than we think they are. So for example, Benedict Evans said $60 billion of consumer spending with his Shopify last year. It's safe to assume that those vendors spent money on advertising, but how many of them would have bought an ad in a local newspaper? So he talks about Facebook just being massively

deflationary to online advertising, but this was the coup de grace. He said, if Procter & Gamble pays a supermarket for placement in the store, that's categorized as marketing. But if it pays Amazon for placement in search results, that's categorized as advertising. And Amazon sold over $10 billion of that placement last year. So what does a chart of internet advertising really capture and what is it missing and what share exactly do Google and Facebook have? So he was basically saying that a lot of the charts that we see of the first chart of newspaper spend of internet, it's not really capturing the full story. Because it's just, it's the same amount of spending, but it migrated to another category

entirely. Yeah. Like you think about Etsy, which just joined the S&P 500 a few months ago, now a massive business, probably thanks to the pandemic. How many of the people that can create this stuff that's being sold, they would have had to advertise in a local newspaper. Or wouldn't have at all. Or not advertise at all.

Right. Yeah, eBay, same thing. Shopify. Shopify, same thing. Yeah, I think the charts in here are pretty cool. I got to go through these later. So we're going to move over to overbought oversold michael doesn't like this segment but we're gonna give it another we're gonna give

another shot anyway because kevin roos did this hilarious thing millennial maybe it's not hilarious to everybody millennial lifestyle subsidy did you read this yeah i i took a a skim of it so he's just saying that all this free stuff is going away. Dude, is Kevin Roos like the new Michael Lewis? Is that overstating it? Yes. I feel like every time I read a really big great story about tech trends, it's his.

You don't feel that way? No, I'm not disrespecting him, but... That's too much. Yeah, that's a bit much. A little too much. All right. Shout out to Kevin. So what's the upshot? This is from his piece. He writes in the first person a bit much. A little too much. All right. Shout out to Kevin. So what's the upshot? This is from his piece. He writes in the first person a lot too. He's like Mark Twain.

All right. Today, that might be too much also. Today, my Uber ride from Midtown to JFK cost me as much as my flight from JFK to SFO. Sonny Madra. Oh, that's not him. That's somebody he quoted. But it was a $250 ride to the airport. Somebody else said on Twitter, Airbnb got too much dip on the chip. Am I saying that right? No one is going to continue to pay $500 to stay in an apartment

for two days when they can pay 300 for a hotel. The average Uber and Lyft ride now costs 40% more than it did a year ago. Food delivery apps like DoorDash and Grubhub have been steadily increasing their fees. So what he's basically saying is that the spigot from Silicon Valley to fund these companies, which is subsidizing cheap shit for everybody is over. And now companies are starting to let the real prices show through, um, X being funded by essentially free money. Now that's happening before they even raise rates, which I think is interesting. But I think it's maybe a little bit overstated that everything was so cheap for so long. He seems to be saying that Silicon Valley was funding the

millennial lifestyle from 2012 to 2020, and it just suddenly ended. I don't know that it's quite that big of a factor in people's lives all this free stuff this is the second time i've seen this word i guess it's a brand balenciaga yeah that's hot shit what is it it's fashion uh they don't they don't sell that on instagram no it's uh i think it's like europe like really highbrow european fashion okay so i'm then now all like the Gen Z TikTokers. It's rapper shit though right now. I'm going to say no because, for example,

public, they don't sell payment for order flow. You could like pay them in smiles. I don't even know how. You tip them. You give them a tip if you want. Right. There's still plenty of these kind of things out there. How about the buy now, pay later companies? Yeah. Somebody, somebody is subsidizing that with

venture capital money for sure. So I still think that we're being, so thank you to Mark Andrews and Ben Horowitz. I still feel like we're living pretty good. We salute, we salute. Yeah. And you know, this is, this isn't really a, wasn't really a new phenomenon, right? Like how is this any different from, you know, getting a free phone, but a free phone but then you sign up for a two-year plan? Getting an AOL CD-ROM in the mail. Here's 90 hours of free internet. Somebody was funding that. You get a free Razor, but then you go back

and you got to buy the refills. I forget who I spoke to two years ago, and this is obviously very common. I said, oh, this is really interesting. What's the business model? And she was like, oh, we don't have one. Like, we'll worry about that. You know, we're still.

It's like, this is like. Was that when you work? Like, I don't know. You guys watch It's Always Sunny in Philadelphia. Well, anyways, it's just like. Every episode for nine seasons. Absolutely. So you saw the one with Dave and Buster's and they try to like replicate.

So it's like they start with the great idea of like the promotion, right, for their bar. It's like we're going to give out all these like, you know, free Patty's bucks so that people can buy, you know, all this stuff free and we'll get all this business. But they only had half that plan. They didn't have a plan to convert these people into customers that would pay so that they could recoup all those losses right so i think that was the same season as rum ham just easily like i think the best the best always sunny of all time uh duncan you strike me as an always sunny guy is that right yeah yeah i watch casually yeah that's a good show i'm a little behind what you're first watching it now? I haven't caught up on the latest seasons.

I'm probably like two seasons behind. Was that Danny DeVito? You saw like Dayman, you saw like the classic shit. Yeah, I've seen the classics. Sam, Josh and I saw Danny DeVito at the screening for The Irishman. Yeah, we did. Oh, no way. We went to that theater. Oh, remember The Irishman? Yeah, we did. Oh, no way. Because we went to that theater.

Oh, remember The Irishman? What's that theater in the East Village? That was like the only place they were playing in New York. The one by the cellar. Whatever. But nobody was like, is that Danny DeVito? He's like the most recognizable man on the planet. He also, everyone was seated.

And then he like ran down the aisle to go to his seat up front right before the lights went out, which I think is strategic. I don't feel like he could just sit there out in the open at a Martin Scorsese premiere. I don't think he could do that. He's very oversold, by the way. Okay, so here's my overbought. That stocks are in a bubble.

Sam, do you know what the CAPE ratio is? You heard of that? So it's been a long time since people have been saying that stocks are in a bubble. A long, long time. I remember- My whole life. Like 2013 was a big year for bubble callers when stocks finally broke out of their 07 high.

Yeah. So anyhow, I think that's overblown. Howard Silverblatt had this great- That's Michael's dentist, Howard. Dr. Silverblatt, by the way. Had this great data point that made me happy. The S&P 500 quarterly cash flow has never reached $500 billion,

but Q1 2021 looks like we'll easily beat that mark and set a new record. How about that? Fundamentals. You also have a bubble in the fundamentals. Yeah. That's arguably? Fundamentals. You also have a bubble in the fundamentals. Yeah. That's arguably an even bigger problem. Things are way too good.

So you have a bubble in fundamentals and a bubble in prices. I mean, I just feel like... Wait, give people this context. At its worst, the 331 2020 quarter, the aggregate cash flow for all the S&P 500 companies was down to, is that $279 billion? Yeah. So we're going to double that in a year?

Yes. Just shy of a year? So I understand why people say there's bubbles because there are micro bubbles, certainly. All over the place. There are micro bubbles, certainly. Sure. All over the place. But if you look at, obviously, the aggregate data,

and you look at companies like Apple and the stocks that make up the index, come on. I mean, a bubble has to burst. And a bubble has to burst and fall by like 80%. Right. Yeah, when the fundamentals are as good as the stock market performance, it's very hard to say.

You could say stocks are expensive. Stocks are 100%. You should say that. And it's always fair to say stocks can get cut in half from here. They always can. Right. But it's not because we're in a bubble and they have to burst. Right.

Yeah. I think that's overbought pretty much at all times. Just that concept of stocks are above. It's too general. There are stock bubbles happening. All over the place. Always though. Yeah.

I think my favorite thing about the CAPE ratio. Is how useless it is? You had a great take. I have two favorite things about the CAPE ratio. I don't remember what take you're going to say. People don't even know what that is. Cyclically adjusted PE ratio, taking 10 years of earnings and putting a multiple on that to smooth out the business cycle right okay so the my first favorite thing that i like about it is you know

robert schiller a noble prize winning economist who made this thing he's always the guy when you see economist warns it's always schiller right yeah but he will also tell you that the signals at the CAPE might not work. The relationships between CAPE levels and stock market performance, that relationship can break down. He's the first person that will tell you that. It has broken down. Yeah, it doesn't work.

What's the second thing? The second thing I love about it is everyone's talking about this is three standard deviations above the average, or it's everyone's talking about this is like three standard deviations above the average or it's above average and all this stuff. 95th percentile of all time. It never trades at average. The stock market never trades at average.

It spends less than a quarter, less than a tenth of a time within a standard deviation. That's how the average gets formed by the ping pong back and forth. And then the average has been going up. Well, that's my favorite take of yours. And I've been writing about the average rising for years, but you said the longer the CAPE ratio remains above average, the higher the

average gets and the closer it is to average. So I'll tell you a funny Sam Rowe story. So back in 2010, I was about to get laid off from my first media job at Forbes. And in that process, I knew someone at J.P. Morgan who sort of had like a backdoor to introduce me to Tom Lee. So I'm like, oh my God, this is going to be great. We love Tom Lee. And so this is before I really knew anything about him.

But he had a job opening for an analyst. And I applied for the job. And as part of the follow-up, I wrote this entire huge gigantic paper about how the CAPE ratio and the signal it sends about the stock market has been breaking down because as you sort of narrow the time frame from where you calculate the average, you see the average CAPE continues to increase. And this is like a trend that goes over time. So it's like it's always a mistake to suggest that it should be at 15x or whatever.

You should have won the Nobel Prize. that it should be at 15x or whatever. You should have won the Nobel Prize. I didn't get that job, but yeah. It's ridiculous to suggest that just because there is an average that things are mean reverting. And how about this? In 2009 at the bottom, when we crashed, the CAPE ratio fell below its long-term average for a second.

For a second, literally for two months. It got to 15 for two months. And the Bears were even more bearish then, like at that lower valuation. That's when they were really bearish. Imagine watching the NBA right now and quoting like how many, the average three-pointers being made in 1980

as your baseline. Yeah, come on. And saying that the game will mean revert. It's almost childish. The game's changed. The game's changed. I think that's the big takeaway. Cyber attack, Sam, you have is oversold. I agree with you.

Why do you think that? I don't understand it. It's like there was this huge gigantic cyber attack on this beef processor. How about the pipeline? And the pipeline? Wait, you weren't worried about the beef processor? Yeah, the beef processor.

Like, no one's talking about this. Not the beef processor. Am I getting this wrong? No, you have it. JBS or something? Yeah, yeah. Yeah, yeah. It's like them too.

Wait, what do you mean nobody's talking about it? Well, I mean, you know, it's reported. Nobody's panicking. Nobody's panicking. Nobody's panicking. I agree with you. I mean, like, not that everyone should always panic about stuff, but this is crazy. Do you know the pipeline guy had to make the ransom payment the day after it happened? Or a quarter of the country literally would not like have heat or not that we need heat this time of year.

But like, it was that, it was that down to the wire. And the FBI like didn't even know what to tell the deal. That's a good point. We get overworked, we get worked up over everything and nothing simultaneously. Like I saw this head and I was like, oh, be fine.

I mean, well, even like yesterday when, I forget, I don't even remember the name of this company, but like they had some outage because some user, you know, was updating their software and then half the internet went out. Fastly. Yeah, fastly. It's like you start, you know, you read about these stories and you realize that actually there's like 50 different layers that are involved in, you know, having content appear on the internet. Do you think it's just bullshit fatigue? We're just exhausted by

everything. We just can't be bothered to get worked up. I think there might be fatigue, but you know, it's also a whole matter of like, you know, to what degree this is actually disrupting our lives. It's actually worse, though. It's actually worse than you think, because they think it's like actors that are like, I don't want to say sponsored by Russia and China. But it's like somewhat like approved by foreign governments. And we haven't figured out a way to really stop it. What they did say in The Times yesterday was that they can track the Bitcoin.

Like it's easier than you thought to see where the money's going and, and effectively stop the money from going, which is a whole other thing that's worth talking about. I have you come back tomorrow for, for another, for another session and we'll, we'll get into that. Let's do favorites before we get out of here.

This is where we ask, what did you read, watch, listen to over the last week that the listeners of The Compound and Friends should know about? And I saw Sam put something food-related in here, and then I couldn't help myself. I did too. Mike, let's see if you have any awareness of this at all.

Do you eat turkey? Do I eat turkey? Okay. All right. Boar's Head Oven Gold. I'm a honey maple turkey guy. All right. It's still a little pedestrian.

Wait till I put you onto this shit. Boar's Head. Let me say this right. Pitcraft. Do we have a picture of this? That looks good. Dude. Boar's Head Pitcraft craft, slow smoked turkey breast.

Let me read you. I was about to say, keep reading. I'm going to read this in like, in my OnlyFans voice. Turn British. Slow smoked with real mesquite wood chips to give it a real pit smoked flavor. Boar's head, bold, pit craft, slow smoked turkey breast is seasoned with an authentic dry rub that consists of paprika. I don't really know what that is. Sam does.

Brown sugar. Mexican chilies, including guajillo peppers. This is the best shit I have ever tasted. So here's how I discovered this. I went to the deli, the sandwich guy. He's like, what do you want? I'm like, turkey sandwich. You're going to make it with Boar's Head, right?

He goes, I'm going to make it with Pit Craft. I go, is that Boar's Head? He's like, yeah, wait, just wait. What sandwich place? Salpino's. That's my shit. I could honestly eat that two meals a day every day, I said to myself. So everybody go out.

If you have access to Boar's Head, where you live, I know they're not national. And I apologize to people in the South or the West Coast. I'm going to say this is not my taste bud type of thing. I'm not a smoky guy. Can you just try it one time? I'm not sure it tastes good. So one of the greatest innovations in food

was when someone in Herman Lay's laboratory, Herman Lay's, Lay's Potato Chips. Wait, hold on. Take that off the screen because after I get Wendy's, I'm going to have to get it. It's too much inspiration. Where are we going? We're going to Sam's. Oh, sweet.

Yeah, this is great. So, yeah, okay. Everybody's got to watch this. History Channel is great. Educational. You learn something. It's a podcast. You have to say what it is. Oh, okay. great, educational. You learn something. It's a podcast. You have to say what it is.

Okay, yeah, sorry. So on the History Channel, there's a series called The Food That Built America, and they go into the history of when Lay's potato chips became a thing, when Fritos became a thing, when the Oreo cookie became a thing. And this particular episode goes into how the Frito and the Lays potato chip came to be. And so this is a Great Depression era thing where everyone's broke. And this is colliding with the Dust Bowl. So everything vanishes except corn and potatoes are still growing.

Corn and potatoes, super cheap. And so, yeah, these two entrepreneurs decide. I mean, potato chips have been around. What year was this? Pre-Civil War? No, no, no. So both of these guys, you know, they didn't invent anything. Dust Bowl is the 30s.

Yeah, but these guys just came up with the marketing. They took the opportunity, the economic conditions made for these products to explode. But, yeah, corn chips were always a thing, but this guy said, I'm going to sell this to broke people because it's cheap. It's shelf stable. Uh, it's cheap form of calories and people need to eat the same thing with, with, with Herman Lay. Um, but, but yeah, the, your Turkey story reminds me of, uh, because, you know, potato chips were just sliced potatoes on they put salt in. But yeah, one of the first great innovations was someone in Herman Lay's chip lab

put paprika, brown sugar, and chilies on potato chips. Is that cold-aged Doritos? That's barbecue potato chips. I love potato chips. Imagine the first time somebody tried a potato chip. I had never had them before. You'd be like, what is this? So the story, so the legend of the a potato chip like i never had them before you're like listen so the story

so the the the legend of like the original potato chip uh came from i think like upstate new york and one of these you know vacation towns uh like maybe the late 1800s really like maybe 1910s or whatever and uh some guy was uh you know showed up to one of these restaurants and was asking for a sandwich and fries. And he said that the fries were cut too thick, and he sent them back. They redid it, came back out, and he said the fries were still too thick. And so the chef or the cook in the back of this restaurant was like—

Was it Ritholtz? Was it Barry? The cook was going to be like, I'm going to show this guy, and basically took a razor took like a razor. Shaved it. Shaved it, fried it. And it was just like the crunchy part. Sent it back out, and the guy loved it.

And then. All right. So I think I've seen an episode or two of that show. I'll check it out. I mean, I watch. What's the one I watch? It's not on history. The Guy Fieri show.

Diners. Do you watch that? Oh, yeah. Guy Fieri show. Diners. Do you watch that? Oh, yeah. I'm into that. I could live with him, but I like the places he goes. I like the history behind those places. Yeah, it's always like the same place, right? So wait, let's get into this really quickly.

You're cooking your ass off on Instagram. So are you going to keep going even after the reopen? No, I'm actually sort of over it now. You're done. I'm sick of it. But so all those things you've cooked, they live. Yeah. So people could check them out.

Yeah. What's the best one you did on your Instagram? The best one, I think it was a tie between two things. Chicken soup. Okay. Super old school chicken soup. Super easy, super basic. And Gordon Ramsay's shepherd's pie.

I don't think I saw that one. Shepherd's pie. It's all like pub food kind of stuff. Did you cook like 300 things, though? You were not screwing around. No, this was like my coping mechanism through the pandemic. And it's like, yeah, it's like pub food, like stuff that you get at a bar. But like you can't like you get it on Seam yeah, it's like pub food, like stuff that you get at a bar, but like you can't,

like you get it on seamless. It's disgusting. Yeah. Were your neighbors like, I can't wait to see what Sam's got for me next. Were people like fired up for this? Actually half of my floor was like vacated in like the first, like three months of the pandemic, which is a whole other story. Oh man. But yeah, no, it was, it was, it was a good way to kill some time and, and,

you know, get good at something. Nice. I, I enjoyed watching it. Mike, what do you got? I was going to say something I don't like,

but I want to be positive. Oh, cool. The odd lots podcast with, with Tracy, Allaway and Joe Weisenthal. I feel like one of the reasons why it's so great is because it's just so topical.

Like they're always hitting like whatever everyone is talking about that week, whether it's lumber or the housing shortage or chips or whatever it is. I just feel like it's just very topical. I like it. Tracy is in Hong Kong. Yeah.

And they, their like rapport with each other is like they're sitting next to each other I like the music I like the whole thing what is that like Hawaiian music it's like ukulele playing country oh no no it's a steel guitar that's what it is

why doesn't Joe play the music for his own podcast like Joe plays guitar maybe he's playing the music they're crazy smart. They have great taste in guests. They do the same topics that everyone else is doing, but they tend to find the most interesting, like they have,

they have a Bitcoin one up with Spencer. So like they, they tend to do a lot of the same topics that everyone else is doing, but I feel like they do it better. They had one, they had one, uh, after the whole ever given

or evergreen well i forgot what it was called the ship got stuck in in the suez and they brought in this uh logistics guy like the shipping logistics guy that nobody was talking to that nobody was talking to and it was like explaining how the entire business works it's just the most fascinating thing that's also peppered with all these like biking shipping terminology that, that, that's still used in the industry today. All right. Shout to, shout to that, uh, crazy finance hippie, Joe. Uh, I haven't seen Joe in years. He's he, I think he's like big timing me lately. He's on like, uh, on Bloomberg and he's, he's too busy for me, but in fairness, I'm not, I'm not, I don't have DMs on Twitter going with people anymore.

So I'll catch up with them. All right. I think we're going to wrap from here. Sam is going to do a recipe for us. We have the kitchen all set up. Sam's going to do a Salisbury steak for Michael. All right. What did we learn today?

You feel like we learned some new stuff? I had fun. I learned that Sam knew that the CAPE ratio was broken way before I did. Yeah. Oh, by the way, the funniest thing about the CAPE ratio that we didn't get to, you read these articles where Schiller's talking about how elevated valuations are. And then like in the last paragraph, the reporter asked him, so what are you doing about it?

He's like, nothing. I'm just buying Vanguard. Yeah, right. He's long. I don't give a shit. I stopped reinvesting my dividends. All right. So listen up.

If you are listening to this on a podcast, make sure to tell your friends about the show. The Compound and Friends is about friendship and karate. Right? Not unlike It's Always Sunny. So blast this out. put this on your social channels do your part and we're gonna build this thing really really big thanks to Sam Rowe for coming through shout out Duncan shout out John another great job and if you want to watch clips of us putting on the show go to the YouTube channel it's youtube.com slash the compound RWM.

We love our YouTube viewers. Shout out to YouTube viewers. And we will be back next Friday with another old new edition of the compounded friends. All right, take us out of here. I got to get something to eat. That's fun, guys. Let's go get a damn snack. Go to Wendy's right now.

Where is the nearest Wendy's? Rex Ryan.