The Compound and Friends - Long warehouses, short office buildings, What Are Your Thoughts with Michael Batnick, Hot Dogs and Jetskis

Episode Date: July 3, 2020

On this episode of The Compound Show, Josh talks about the 4.8 million jobs added back in June, the wild dispersion within the Real Estate sector of the stock market, warehouses vs office buildings, and some plans for July 4th weekend. Michael Batnick joins for another round of What Are Your Thoughts to answer the question "Why would anyone invest right now?" Subscribe to the podcast and make sure to leave us a rating and review on iTunes, Spotify or Google. Ratings help a lot! Thank you! Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, guys, it's JB. We got so much to do today. I won't waste any time. Let's play the music. Welcome to the Compound Show with downtown Josh Brown. Josh is the CEO of Ritholtz Wealth Management. All opinions expressed by Josh or any podcast guest are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Okay. All right. Welcome back to the one and only Compound Show. I'm downtown Josh Brown. We have a lot of stuff to go over today. It's Thursday, right before the holiday break. So

happy July 4th, everyone. If you want to know what I'll be doing, probably a lot of hot dogs, a lot of hamburgers, watching the fireworks at Jones Beach. I'll be screwing around on my jet ski all weekend, probably end up killing myself in a lagoon somewhere. Some tequila, the usual. And I'll have three days to do it. So wish me luck. Anyway, later in the show, Michael Batten, it comes back. We played another round of what are your thoughts. Michael talks about answering this question. If the economy is so bad and the stock market is so high, why would anyone invest right now?

And that's a real question that lots of people are either asking of themselves or calling their advisors and asking. So I think that's like maybe the biggest question on a lot of people's minds right now. So stay tuned for that. We'll do that later in the show. This morning, we got the June unemployment numbers. And I just want to go through this very quickly because I think it's important. This comes from my friend, Peter Bukvar, who does a really terrific job at dissecting all the economic data almost immediately as it comes out. So this morning,

Peter was saying, according to BLS, 4.8 million jobs were added back in June. And that was much higher than the estimate of 3.2 million jobs. But Peter notes that the range of estimates was just ridiculous. At the high end, people were talking about 9 million jobs coming back, and the lowball estimate was like 500,000. So it tells you a lot about how impossible, I mean, even in normal times, economists have a lot of trouble getting this number right. But in this particular period of time, with all the cross currents, and all the exceptions and aberrations, it's almost impossible to actually nail that number. But so we came in way higher. And Peter notes that half of the jobs we got back 2.1 million of those jobs were in the leisure and hospitality sector. And then another 740,000 were in retail. So here's what's difficult about

that. The market knows that a lot of that number came from early June before the resurgence of the virus became obvious, which really only started happening in the last week or so. So the question is like, if we got all those jobs back in June, how much of that was front-end loaded? And how much of that do we then lose again? Because obviously, a lot of states are rolling back their reopenings. I saw a statistic from the Wall Street Journal that 40% of the US population currently lives in a state or an area, I guess, where the reopening is actually being rolled back. Like an example is Texas saying, okay, we were just kidding about the bars. Don't go to a bar anymore. So that'll be interesting to see. We won't know anything about that, obviously, until the first week of August when we get July numbers. But the market wanted to celebrate this

number. One thing I would note is that we lost 22 million jobs in March and April. So now if you look at May and June, we gained back seven and a half million of those 22 million jobs. It's a good start, but I think that highlights how long we have to go to get back to even close to what we've lost. Headline unemployment is now 11.1%. So better than what it was. And we certainly want to take stock of the fact that there's better news. But if we start rolling back these reopenings, we're going to take another step back again. And, you know, then the next thing I wanted to just mention is we are going to get into this weird in-between time in July because a lot of the

benefits, the extraordinary benefits coming from the government, in particular, the $600 extra for unemployment insurance, those are going to sunset unless they're replaced by Congress. And maybe they will be. But what if Congress says, OK, it's $300 or what if they don't do anything at all? So that'll be a hit to consumer spending. And everyone's going to feel that. I don't care if you're Apple or the highest flying tech stock. Everyone's going to feel that if the consumer ends up retrenching again and the recovery becomes more like a stutter step. So I just think everyone should kind of be thinking about that. about that. The other thing is with the PPP loans, a lot of the firms that took those loans have now gotten through what's called the forgiveness period of eight weeks from when they get the loan. And if you're a business owner that took the loan and then applied for forgiveness, and you're through that process, well, now you've kept all these employees, are you still going to keep them? Because unless you're

getting a new loan, if you have a business that's closed down, you're probably going to have to lay some of those people off. So we don't know yet to what extent the payroll protection program has helped people keep workers. We don't know how many of those small businesses ended up applying for forgiveness. And we don't know what those employers will do once the forgiveness period is over. So they might say, all right, I kept everybody for two months. I get to keep the money that I was advanced from my bank. And now, you know what? I have 20% too many people, my stores, my restaurants, they're not even open yet. And I have to let some people go after all.

So these are things that I think we should all keep on our radar. On a similar topic, I just want to look at a couple of things on real estate investment trusts. Sometimes markets are really complicated, but sometimes they're not. And I think right now is one of those periods of time where it's not complicated. It's very straightforward. I would want to be short office space real estate, and I would want to be long warehouses. And let me get into this for a second. There's an article in the Wall Street Journal about a hedge fund manager named Jonathan

Litt. He's got a fund called Land and Buildings Investment Management. So he was basically interviewed, and he was talking about the New York office real estate market, how it's very unrealistic that that market will return to health anytime soon. I was in Manhattan on Monday morning and I would tell you that it is a wasteland. There's like nobody on the streets and anyone that is on the streets is like a UPS or delivery person or somebody dressed for office work but with a mask on their face, literally darting back and forth between their apartment and their office. People aren't lingering. They're not strolling.

All the stores are boarded up around Bryant Park. They're not shopping. And, you know, even having spent five hours in the office or six hours in the office on Monday, it was great to be back. It's great to see some of the people that I work with, but like, I'm not running back. And, you know, I've been talking to people that work for huge companies. They work in offices in the city, but people that work for Verizon and, you know, they're all planning to not be back anytime this year. Like they're talking in January. So when you look at the price of New York City office REITs,

what has happened to the price of those stocks in the market? I think it's straightforward. I think it makes perfect sense. I don't think there's some sort of mean reversion trade or opportunity there. I think these are going to be impaired businesses for a long time. This is what Jonathan Litt is saying. And I think he was a real estate analyst at Smith Barney prior to launching his fund or something like that. So he says, quote, the New York office market is facing an existential hurricane. So he says, quote, the New York office market is facing an existential hurricane.

He's talking about Empire State Realty Trust in particular, which is the company that owns the Empire State Building. He's saying they're poised to bear the full brunt of this storm. And elsewhere, there are short positions mentioned in things like Vornado Realty Trust, SL Green Realty. These are the companies that own millions and millions of square feet in Manhattan and other cities. They own some of the biggest office buildings in the city. And these buildings are going to stand mostly empty for a really long time. I think almost no matter what, unless you tell me there's a vaccine coming tonight and there's enough batches for everyone in America a week later, I really I don't see what these companies do, how they recover in terms of share price.

So that's half the trade. The long side of that trade is long warehouses. I think it's pretty obvious that we've pulled forward probably two or three years worth of e-commerce penetration in terms of consumer spending. We've gone from 15% to 25% in two or three years worth of e-commerce penetration in terms of like consumer spending. We've gone from like 15% to 25% in two or three months. I don't think that goes back. Like even when things reopen and even when there's better treatment, there's a vaccine, I genuinely believe that having been forced to use so many online services to get goods and things delivered, I just feel like that's going to become the new baseline. So maybe we back off from 25% of all commerce being online back to 22% or something.

But I just don't think we're going to go back to 15%, which is where we were prior to the pandemic. To me, it's like a secular change in behavior that was coming anyway, and we've pulled it forward dramatically. So I got two warehouse reads to mention. The first is AmeriCold Realty Trust. Ticker on that is cold, C-O-L-D. This is like the logistics and shipping company for supermarkets. So they're moving food.

The other one is Prologis, which is the third largest publicly traded wheat in the country. PLD is the ticker. Full disclosure, I own this personally. Prologis is, the best way to explain it is they're Amazon's landlord. best way to explain it is they're Amazon's landlord. So this is the company that owns a billion square feet worth of warehouse and shipping and logistics space on four continents. And their top customers are like Best Buy, Home Depot, Walmart, Amazon, DHL. And they estimate that they move $2.1 trillion worth of goods through Prologis facilities on an annual basis, which is equivalent to 2.5% of global GDP. And Prologis has been around since like the 80s.

So look at Prologis, look at AmeriCold. Prologis is up 10% on the year and AmeriCold is up 6.28% on the year. Now let's look at the two large office REITs. Vernado is down 40% this year, VNO, and SL Green, SLG is the ticker, down 44% on the year. That is dramatic dispersion within the REIT space. I don't know that there has ever been a scenario where this sector of the market has had such a wide disparity. But I guess what I'm basically trying to say is that it actually makes sense. And I don't think that there is some major opportunity in the near term for that dispersion to close. If anything, I think you're going to see

more of the outperformance of the warehouse REITs and more of the underperformance of the office REITs, given what's going on right now. And there's something interesting that I came across, just to button this up. We talk about how technology is eating everything and technology stocks are dominating the indices. The S&P is 25% in the top five tech and communication stocks. That phenomenon is playing out within the REIT space. So Vanguard has an index ETF for real estate. It's VNQ is the ticker. So this is like a regular market cap weighted index

of all of the publicly traded REITs. The top six companies in that index by weighting are all technology companies, it turns out. So let me reiterate, this is the REIT sector being dominated by six technology companies. They make up a third of the index by market cap. So what are those companies? Well, Prologis is in there.

I'm basically saying it's technology because e-commerce fulfillment is really why that stock is performing. And it's a huge part of their business. The only two bigger than Prologis are American Tower, which is 9% of VNQ. American Tower is wireless cell towers. Crown Castle is the second largest. It's almost 6% of the index, also cell towers. Then Prologis, which is e-commerce logistics and fulfillment. The fourth largest is Equinix, which is a REIT that houses cloud storage and data centers. So that's tech. And then Digital Realty Trust is the next one. It's about 3% of the index. That, I think, speaks for itself. It's also the cloud. It's server storage,

data center, et cetera. And then the last one is SBA Communications, which is also in service to the wireless and data industries. So those are the six largest publicly traded real estate investment trusts, and they're all involved in technology. So not only is tech eating the S&P, not only are technology stocks dominating every other sector in the market. They're also now the top six of them are comprising a third of the market cap weighting of the largest REIT index. So I just thought that was interesting. And I think when people buy into a REIT index, they probably traditionally associate office buildings or shopping malls or even like hospitals and medical facilities. It turns out if you buy the REIT index right now, you are de facto making a tech bet too. So that's probably something that not a lot of people have thought much about. I was surprised

to see how dominant technology related REITs were in that industry. So what else did I want to get into? Oh, I wanted to just give a shout out to Tadis Visconta. Tadis works with me. He's the director of investor education at Ritholtz Wealth. He's put together an online email subscription product for advisors. It's free, but you subscribe if you're a financial advisor. I know I have a lot of financial advisors who listen to this. You subscribe if you're a financial advisor. I know I have a lot of financial advisors who listen to this. Basically, Tadis is doing Five for Friday.

It's the five best links for people who work in wealth management to receive in their inbox. And he is the best curator in all of finance. He reads everything. There's nothing good that he will miss. So if you're somebody that finds that you're overwhelmed by all the information coming out, you don't know what to read first, you don't know what to pay attention to, what to ignore, let people like Tadis do the curating for you. So you can go to abnormalreturns.com. You can find a link to subscribe to his Five for Friday advisor email. You'll start getting it next Friday if you do it now. I think you'll love it it he does a really great job with it and i try not to read that much about the industry day to day there's like too

much going on so that's perfect for somebody like me so shout to toddis i wanted to make sure that everybody was aware that that was a thing that was up okay let's get into uh what are your thoughts we'll take a look at some of the biggest topics of the market this week. Michael and I have a good back and forth on a number of things, including why would anyone invest right now? So stick around. I think you're going to love it. Hey, guys, it's downtown Josh Brown back with an all new edition of What Are Your Thoughts? Michael doesn't know what I'm going to ask him about, and I don't know what he's going to ask me about.

Stick around. It's our favorite game. Play along with us in the comments below. We will be right back. Okay, Michael, good to see you again. We spent the whole day yesterday together. It was nice, right? It was good to hang out?

Yeah, it was good seeing you. Yeah, thanks for that. All right, let me get into my first topic. Do you know anybody that uses Mirror, like the fitness thing that goes on the wall? You're aware of it though, right? Correct. Okay. Lululemon is purchasing Mirror, which is like a workout from home screen that you put on

your wall and it does workouts. It's like somewhat similar to Peloton, but without the bike. They're buying it for half a billion dollars. And I think it's genius. I think it's going to be a great deal for them. Hey, wait a minute. I was about to say the same thing. You think this is the same thing? Because I saw the takes were uniformly negative. I feel like not knowing anything, that doesn't sound like a giant amount of money. And given that I think gyms are permanently altered, their business model, and completely making this up, I would say if they get back to 60% capacity, that would be a win for them.

And I think that the January crowd is never coming back ever, at least not for the next three, four years. So I know myself, obviously, I've been working out at home. I think that this trend is going to continue. And if this is a massive, if this is a zero, it's just not that much money. So mirror charge is $39 a month, which is not a lot of money. That's almost like a Netflix. I mean, it's obviously more, but I'm saying it's not so much that if you use it a few times a month, you'll probably keep it. You won't cancel it. When you say it's not a lot of money, I think you're right. $500 million,

they're going to do $100 million in sales this year. So you're paying 5X for a company that's growing really fast. And it's a subscription model. It's a subscription model, which is all the rage. And Lululemon gets to diversify away from apparel. Not that apparel is a bad business for them. But like- I also think that they can amplify the message. Think about how many customers Lulu has that is not necessarily aware of the mirror,

or it's not really peripherally aware, but not really on the radar. I think this is a good idea. And it goes both ways. Because what do you think the instructors in the mirror are going to be wearing? Whatever the latest, whatever the latest apparel from Lulu is. So I, I mean, I think it's a home run. Lulu obviously has the financial ability to do this. It's one of the best performing stocks, certainly in its category, but in the S and P overall in, in the stock market overall. So I don't see why they wouldn't take a shot on this. Yeah. And retail, like apparel is a tough area, generally speaking,

to stay on top, but they've done well for a really long time. And they've been under constant assault, I feel like, for the last years, they're always in the headlines, the risk to them. So the founder of Mirror is Bryn Putnam, who is a New York city ballet dancer. And this is the ultimate average up for Lulu. They put a million dollars into the company in I think 2018. And now they're averaging up. They're going to put another 500 million in at what I can only assume is a much higher valuation. But I think it'll work. What do you got? That's great. What do you say to people who look at the market and might say to you or themselves or anybody who's listening, why would you be invested right now? Don't you see the

risk? What would you say to somebody who says, don't you see the risk? How naive are you? Right. So then I think the question to those people is like, don't you think everyone sees the same risk you do? Like, what, what did you just turn around into a quote? Like, what do you think you're the only person that knows that there's coronavirus and, um, a lot of corporate debt that's iffy and earnings deteriorating? Like what do you think? You just figured that out. So I get that. So I get that this is not a differentiated view, but do you think that this makes sense? Like why would I be invested right now?

Well, so look, I can only draw back on experiences where people had the same feeling and they usually have... Look, I'm not saying like we're at a market bottom. We're closer to the top than almost ever before. But I would just... I guess that's what makes this particularly bizarre is that it's not like, don't you see the risk and we're down 40%? And you could say to that person, well, yeah, the market sees the risk. We're down 40%. Of course, I see the risk. Now, the market's down, what, 5% of the year? It's a

much different conversation. Yeah. Well, I think the question is like investing in the S&P 500 or investing in individual companies, because there are companies that are 30, 40% off their highs. And if our worst fears about the second half of this year are not realized, a lot of those stocks are going to work. So the question is like, what are you invested in? If you just are making a directional bet that the S&P is going to be 20% lower or higher, it's a different conversation than someone who's like investing in different parts of the market, right? Like it's not, it's not just because the market's close to a high doesn't mean every stock is. In fact, most stocks are not. I think you told me that only 30% of S&P 500 names are above their 200 day as of the end of last week.

And maybe that's gotten slightly better with the rally yesterday. But I just – I don't see that just because the S&P is at a certain level that we should think every investment is being priced for perfection. Most aren't. Most aren't. I wanted to ask you about small cap value. So Ben did this really kick ass letter to our investors last night. He pointed out something that a lot of people have pointed out in the past and the data is the data. So I'm not questioning that. But the fact that small cap value

traditionally leads the market out of recessions. When I say leads, I don't mean it moves first. I mean, it gives you the biggest bang for your buck coming out of recessions. When I say leads, I don't mean it moves first. I mean, it gives you the biggest bang for your buck coming out of recessions into a recovery. And the worst bang going in. All right. So you definitely had that. We didn't even know we were going into recession and small cap value was already acting like we were. But if you look at 75 to 78, 83 to 86, 91 to 95, at 75 to 78, 83 to 86, 91 to 95, 03 to 06, 2010 to 2013, the smallest gain of those five recovery periods for small cap value was a double. And the biggest was a 283% return. And so we know the data going back 50 years is that if you think we're exiting recession at some point in the next six months to a year, you want to be overweight small value. But something tells

me that there are so many things that are different about this particular recession and this particular moment in the economy that this might be one of those times where it's worth saying, yeah, I get it, but I don't know. What do you think about that? I think that's always the case. I mean, yeah, you have valid points that this might truly be different because what is in the epicenter of this recession, some are calling it a depression, I guess in certain areas it is a depression, are small businesses. Right. So they are directly in the eye of the storm. I guess to your point earlier,

who doesn't know that already? And if you just look at the charts, like small value has been decimated. So maybe it has front run all of this. S&P is down 5% for the year. Small value is probably down 25% for the year. So I think there's always cases of me, like for every point, there's always a counterpoint always, especially with data and stories, but data especially. You can always make the case that this time is different and it might really be. And then it's like, which version do you want to personally believe in? You have the choice and you could make the case either way. Ben points out- I guess also with everything, not even specific to small value, but whatever decisions you're making, there's got to be an alternative. So, okay, fine. So it's different.

So now what? So what do we do about it? Yeah. So Ben makes that point. There's some recency bias going on here, probably with me. He's saying small cap stocks have outperformed the S&P 500 in 92% of all rolling 15-year periods since 1926. It just so happens we're currently living through the other 8% right now over the last 15 years. So I think part of that is like maybe why I'm leaning that way that this time will not be the same for small cap value leadership. The other thing is I just can't stop thinking about the industry mix. So I understand why small caps give you the best bang for your buck coming out of a recession because they're the most sensitive to changes in credit availability. And they're small enough so that small improvements

in the economy are felt the most powerfully for earnings growth for small companies. I understand logically that argument, but then I just think like, well, what percentage of small caps are industrials that are subject to a global cycle, not a US cycle? And what percentage are banks, which are – they're banks. So it's a harder pill for me to swallow now than maybe it would have been coming out of the last few recessions. Their dad research did a good piece on Japan. I love those guys. Their dad research did a good piece on Japan and what happened there. And Small Value is one of the best performers from 99 to, I guess, recently. And one of the points that they made, if I'm remembering correctly, is that earnings yield was everything in a low rate interest world. In other words, right now, the 10-year here is at 70 basis points. In Japan, rates have been on the floor for the last 20 years. One of the best predictors of forward returns was the earnings yield. And so if you believe that fundamentals matter,

you look at these companies and you say, yeah, these are shit companies. I would never want to go all in on any one of these or even go all in on a basket of these. And maybe that's the bigger point. So anyway, the earnings yield matters a lot. But just broadly speaking, this just goes to the point, it doesn't matter what data you have or how much of it, you have to position size yourself correctly. Right. So if you buy small value here, you're basically saying, well, I'm willing to take the risk that it will once again be one of the best places to be coming out of the recession. But how much of a risk do I want to take proportional to the rest of my portfolio?

And I think for most people looking at the last one year, three year, five year, seven year, 10 year, 15 year return history, they're going to say not a big risk at all. And maybe that will be the source of its outperformance that people arrive. How about the alternative? Okay. So you want to go all in on the S&P 500? Right. Which is barely down. Right. But I'm saying, but look at the performance of that over the last five, 10 years. Look at the valuations there. So anyway, it's all about trade-offs like everything else. Okay. I actually think that's a good segue into my next question. Is there a risk of reading too much market history, learning too much from the past that completely blinds you to

the possibilities of the future? I guess people that died in the world will value investors, worshipped at the altar of Graham and Dodd and Buffett and all those legends. Is it possible that... For instance, I guess the key example here is interest rates and stock yields or dividend yields, where anytime they converged, oh my God, that was a time that stocks were expensive. And obviously we know that that pattern broke and never looked back for 65 years and people were just stuck in the old ways. So is it possible, I guess, that learning too much could be a hindrance in terms of your education going forward? Well, I just think having one rule

as your overarching rule for how you decide what the market's fair value is, is probably ruinous. So it sounds good on paper. Like I live, I live my life by a code and I, you know, I have this golden rule and I never buy stocks when the dividend yield is below the interest rate. Like if you did that from 1900 to 1957, that was a very good rule to live by. You sold market tops, you bought market bottoms, and you never got caught at a peak. And then that switched over at some point in the late 50s, where permanently the yield on the treasury went above the yield on S&P dividend. It just became normal that bonds yield more than stocks. And the stock market had two of the best decades of all time in the 50s and 60s. And you missed a lot of that gain because of your stupid rule

that you thought was like this evergreen thing. So it's not that learning from market history is the problem. It's becoming doctrinaire about things that worked really well forever as though anything could ever work really well forever because nothing really does. I also think like you think about Buffett, his biggest holding is Apple. How many times earnings is Apple right now? Is it 27 times earnings? And I know he bought it at a much lower multiple and has ridden it up, but he's not selling it. So, you know – By the way, it's also not really he, but point taken.

I'm just saying like this idea that you never buy a stock above X multiple. Well, if average multiples have been trending higher anyway over the last 25 years, what do you do? Keep raising your hurdle and saying things are getting a little bit different? Or do you just say maybe this one metric that I've anchored my entire investment process to is not the right metric. And look, I think Dimensional Fund Advisors is like, I don't know, $600 billion asset management firm. And they built this amazing legacy on book to market.

And they just announced they're gonna come out with ETFs and buried somewhere in that release is announced they're going to come out with ETFs and buried somewhere in that release is that they're also looking at other ways to value markets beyond just book to market. Right? And they say that? No, no, that was- Who said that? That was a retraction. I think Ben Johnson posted that and then he said, no, nevermind. Oh, he said they said that. Well, whatever. We'll delete this part. No, we won't. Don't be surprised if that happens. Don't be surprised. Because even if you're

empirically based and you're doing academic research to come up with factors or rules to manage your portfolio, you don't stop doing research. The academic literature proceeds. There's no endpoint. So you say, okay, this is something that we've been doing and it's been working for decades. But now we think there's a better way to do it. And speaking of dimensional, didn't they add you become slavishly involved with something that becomes irrelevant or less relevant, it's almost like you're nailing yourself to the floor in place and you can't move forward. But then the counter to that is, so what?

So you just continually adapt to the current marketing conditions and just spin like a dreidel? It's not spin like a dreidel. I really don't know any other way. Look at Carl Icahn. He's like four decades, five decades deep now in the investing business. You know what he's done? Hold on. But so what? So how many people are there like that? I'm making a point about survival. The guy started as an options specialist. He was literally an options trader and options broker. Things moved on. He became an activist.

Then he got invested in technology companies. Dude, that's one of the best investors of all time. Forget about the average person. The average professional, the average really successful professional can't do that. Correct. But I think there are lessons that can be learned by everyone. How long has Druckenmiller, like everybody agrees, the best of all time been stuck in the way things used to work. Since 2010, he's been wrong.

I mean, this is not trashing him. He's literally probably the best investor of all time, but he's used to a world that doesn't work the way it used to. That's my point. I agree with you. But the idea that people can just evolve, there's no other way, that's almost impossible.

Well, I think it's easier to evolve than to try to undergo a revolution every two years and completely change everything. I think it's easier along the way to say, you know what? I used to think this, but I don't think it anymore. Or- It's very difficult. I think that's almost impossible. That's why some people are successful and most people aren't. It's not supposed to be. If we're easy, then everyone would do it. There'd be no conversation. Look, I do think that there's- I'm just saying to kill your old ideas is like,

it's a great mental model, but come on, we're all human. I agree. I agree. I guess my bottom line on this is like, all the people that you want to emulate, even if you can't be, you're obviously not going to be Carl Icahn. But like, I'm just saying every great investor throughout time, what they've had in common is whether explicitly or in a subtle way, they've adapted to new environments, and they've changed the way they've done things. They may not announce it, they may not even admit it to themselves. But I think that that's like a key feature of people who have survived long enough. And the alternative is assuming that nothing will change. And it's like it's childish.

Actually, Ben Graham killed the idea of value investing, I think, in the early 70s. On his deathbed. On his deathbed. The last interview Ben Graham gave, he said, the stuff I did will not work now. Straight up. It didn't make it into any of the books, but I think Jason Zweig published it as an article. Well, he also was an exception because he was a polymath in other interests. Like investing actually wasn't his entire universe.

Being in a position to say, you know what? This is the way the world looks now. And I have a really good understanding of it. And I have some great rules that I use to keep me on the right side of the market. So whatever you say, but then having a caveat that, you know what, there's the possibility that this isn't going to work forever. So I always have an open mind about new ways of doing things. That's not the same as saying, today, I'm a day trader. Tomorrow, I'm a value investor. The next day, I'm a macro expert. That's a totally different thing. So I think there's room for

change. And you're probably dead if you can't do it. But it's very hard. It's very hard. Last thing I want to ask you about is the suburbs. So you and I talked about this on a previous show. The suburbs. So you and I talked about this on a previous show. It's this idea that like, are people really going to leave the cities? Are people really going to just leave their apartment and start buying houses? The data says yes. And I'm sure you've seen some of the articles. I just want to spotlight a couple of stats really quickly. Yeah, I was way wrong about this. I think my knee-jerk reaction was to take the other side of this. So suburban New Jersey homes headed for the biggest price increase since 2005, which was during the housing bubble. There's an article, families fleeing the city are pushing

up home prices at NBC News. And they're looking at some of the northern suburbs in Westchester and upstate New York. It seems to be centered around New Yorkers wanting to get the hell out of New York City for various reasons. The Wall Street Journal says the housing market around New York City is booming. What's going on in other cities around the country? I don't think it's probably as intense, but I wouldn't be surprised if there's some echo of what's happening in the New York suburbs. I know in my town, a lot of homes that would have sat on the market six months ago are going in two seconds. There are bidding wars. These bidding wars are happening over the phone. And it's almost always a family from Manhattan who's just, get me out. I don't care. I want to be out. And I don't know, that could continue

for another year. Yeah. I was wrong. And I think that obviously the data is what it is, but I think that's real. Right. So it's interesting to think about that in the context of Lululemon buying Mirror. It's like all one story. It's not work from home. It's work from anywhere, right? Like it's, you know what, if I can work from home, why can't I work out from home too? Of course I can. And I, the main thing is that I don't need to be in any major city, at least not right now. Like, I feel like that's the way a lot of suburban way a lot of families who are looking for a suburban lifestyle are thinking. I think once these types of trends get started, they don't reverse in a month. I think this could be like a bigger secular shift. I would want to be

long suburban real estate and I would want to be not long or short Manhattan real estate. And I said to you yesterday, I don't think this is complicated. I think it's very straightforward and it's going to be with us for a while. All right. Let us know what your thoughts are. Whoa, whoa, whoa, whoa, whoa. You got one more? I got one more. All right, go. We spoke briefly about this last week, but I just want to put it to you this way. I was really excited about the idea of watching movies at home. I watched The Invisible Man.

I thought that was awesome. Oh, I watched that. I took my daughter to that in the theater. Remember theaters? That was a fun movie. Yeah, she loved it. That was probably so much better in the theater though. Yeah.

But the experience of watching... So it's nice to have the option to watch a movie at home, but it's just not the same. Going to a dark theater, a giant screen, your phone is off. The movie has your undivided attention. It's just not the same. Go into a dark theater, a giant screen, your phone is off, the movie has your undivided attention. It's just not the same. I think movie theaters are something that you're going to get back. I don't think they're gone.

I don't believe that people will never go to the movies again. It might look different. It might be more expensive. They might space the seats out even more than they already are. Where you and I live, most of the theaters have converted to basically craftmatic adjustable beds at this point, which is great.

And they have really big armrests. So you are somewhat spaced out. I don't know. Can they pull some of those chairs out and give you even more space? Maybe. But I think you'll get the movie theater experience back. Don't you agree? Yeah.

So I think that this is one of the things that people could like early on. And I was in this camp like, oh, this is so great. I don't have to go to the movie theater experience back. Don't you, Gray? Yeah, so I think that this is one of the things that people could like early on, and I was in this camp, like, oh, this is so great. I don't have to go to the movie theater anymore. I could just watch at home for 20 bucks. I don't think that, I just don't think that watching at home is conducive to like the movie experience.

What phase are movie theaters? In New York State, probably the last, right? Probably with fitness clubs. All right, I think you'll get back. Let us know what you think about the topics that we've discussed we love your feedback go ahead and subscribe to the channel if you have not already um make sure you give us a like likes are very important on youtube and we appreciate that um and if you are listening to this on the podcast go ahead and leave us a rating leave us a review ratings and reviews for podcasts are extremely

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