The Compound and Friends - People Hate Inflation, but Unemployment Is Worse

Episode Date: November 23, 2022

Happy Thanksgiving Compound Nation! You asked for WAYT as a podcast (in addition to the YouTube livestream), so we're giving it a try! Let us know what you think. Join Downtown Josh Brown and Michael Batnick for another round of What Are Your Thoughts and see what they have to say about the biggest topics in investing and finance, including: Bob Iger, Tesla's drawdown, commodities, the Misery Index, the crypto fallout, Icahn's GameStop short, and much more! This episode is sponsored by Public. To learn more, visit: https://public.com/compound and see disclosures at: https://public.com/disclosures Get the latest in financial blogger fashion: https://idontshop.com/ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees.Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. 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

Hi, Compound. It's me, downtown Josh Brown. I'm here with Duncan. Say hi, Duncan. Hey, everyone. So we get all these requests that people want to hear what are your thoughts, which is the live YouTube show that Michael and I and Duncan do each week on Tuesdays. But we get a lot of requests where people are like, why can't this also be an audio podcast? like, why can't this also be an audio podcast? And I think historically, we've held back from doing that because we want as many people to be there for the live stream, for the live taping as possible. And if they know that they can listen to it the next day, maybe it dilutes the audience a little bit. But today, we're going to give you that audio in lieu of having no compound

and friend show this week because of Thanksgiving. Duncan, what do you think? I'm excited to see the response. We get people all the time saying, Hey, I'd like to be able to listen on my commute. It's not easy to play it on YouTube. I'm a subway, that kind of thing. So are there things, are there things that you will only watch on YouTube and that you will only listen to as a podcast? Or do you tend to go back and forth if there's two options? I go back and forth. But if it's something with a lot of visuals, I typically will do YouTube.

You'll wait for the YouTube or you'll only, yeah. So I think What Are Your Thoughts has some visuals, but no more than the compound and friends does. And you know, a lot of people download that podcast as audio only. So, all right. So here's what we're going to do. This Tuesday night show is a great show. We're going to let you listen to that now as an audio only.

And Duncan is going to work on this pretty much up until the moment it's Thanksgiving at midnight. So hope everybody appreciates it. And we want to let you guys know how much we appreciate you. Happy Thanksgiving. Thanks for being part of the compound all year. We love you back and today's show. Hey, yo. Good evening to the mighty, mighty pound. I'm just checking the messages. You guys are on time. Everyone's early today.

Sean is here. Cliff is here. John Carlo. Dave Airy. There's a dude in the chat named Fond of the Bonds. And he says, guys, isn't life crazy? I mean, how did we all get here? What is the meaning of life?

How I ponder these things. Somebody's going to hit. Yeah. No weed before the show. This is a family program. I see the beehive is lit up. Duncan is here tonight. Nicole's in the chat.

John's in the background. We have a huge show. Let's get right to our tonight. Nicole's in the chat. John's in the background. We have a huge show. Let's get right to our sponsor. Who's sponsoring the show tonight, Michael? We've got a new one. Today's show is sponsored by Public. Okay. Public is, who are they? I'll tell you.

They're an investing platform. You can invest in stocks, ETFs, crypto. Just kidding, but seriously, you can if you want. Art, collectibles, and more all in one place. Public is a modern trading platform. They make investing easy. It's a fully digital experience, Josh. Nothing like some of the clunky trading platforms of yesteryear.

You can automate your investments, get financial reports and filings and all that sort of stuff. Now, I have to say, the show is for informational purposes only. Nothing should be reliant on for observance decisions. Nothing. Even my stock tip. Nothing should be reliant on first residence decisions. Nothing. Even my stock tip, nothing at all. For more information, go to public.com slash compound. We have to do this whole like double disclaimer now because of the new SEC marketing rule. So it's not our idea to keep disclaiming things into the stone age. This is what's needed right now. And I actually think on balance, everyone will get used to it.

Did you know that investing involves a loss of risk? No, investing involves the possibility of risk. Close. By the way, CEO of Public Life, Abraham, did you meet him at Future Proof? Okay, I interviewed him on stage. He actually sent me a text about the show. He said, random note, put more of the podcast content up on TikTok. Sitting in an airport right now, swiping TikTok, stumbled over the latest video and wanted to see more. But then the most recent videos were from

over a week ago. Nicole, what are we doing on TikTok? Get with life's people. Let's figure something out. Does TikTok involve the risk of addiction? All right, let's figure something out involves a lot the risk of addiction all right let's get started tick tock involves the risk of a loss of your uh time and uh not time well spent okay so bob i wait you done you done are you good no you're you're first i'm the captain bob eiger is back this is big news bob eiger was the ceo of dis many years. Yeah. I don't know, 15. Saw them through a lot of things. Marvel, Star Wars, Shepard of the Mitude, the digital, the direct-to-consumer age with Disney Plus. And the stock, which has been terrible, the stock reacted okay, but probably not as good as Bulls would have hoped.

It popped like 10% of the open, closed near the lows. John, chart on, please. Some of these nice little candlesticks here. And today it was up – actually, it was down today. Let's see. No, today it gave up some of the Iger pop. That black is not a pretty – the second to the right on the 21st. The stock is going lower. It's not really what you want to see.

Let's get to some more charts before we get – Stop. Leave this up. let's let's stop stop leave this up this this stock had a one-day rally on the return of eiger and then resumed selling off the next day today near the lows it's not it's not pretty and the dow is up 400 points today yep this is not like in a in a bad tape disney's a dow stock no yeah of course it is yeah i'm telling you this is the stock i don't think i don't think we've seen the lows in this name all right so a few more charts and then some some commentary some opinions this is disney in uh purple uh netflix in blue versus the s&p 500 the significance of the starting point

is when bob chapek took over which was right before the pandemic. And then the next chart shows the year-to-date returns of all the streamers, which Wall Street couldn't get enough of the recurring revenue. And then, oh, wait a minute, interest rates, interest rates, and they couldn't sell the recurring losses fast enough. So Purple, we're looking at the S&P 500. You've got Disney and Paramount neck and neck year-to-date down, what is that, 30%? I the S&P 500. You've got Disney and Paramount neck and neck. You're to date down, what is that, 30%? I can't see any glasses. And Netflix and Warner Brothers just obliterated.

Yeah. So, chart off, a couple things about JPEG. Let's talk about it. Yeah. A couple things about JPEG. So, he was the parks manager before he got the big job. This is succession, by the way. Does this feel like succession?

Totally succession. But I was going to ask you. He was cousin Greg. Yeah. Could you think of a worse time to be handed over Disney with the theme parks than during the pandemic? Like, can you possibly think of a worse? Not that it was done on purpose.

Iger succession. Hang on. Hang on. That's pretty tough. Can we rewind two charts, John, please? Rewind two charts. Next chart. So Disney was a darling of the pandemic

because of Disney+. The growth was explosive. People were stuck at home. It was recurring. And it did incredibly well. He gets the benefit of that. The other criticism of him is that he's more of a manager.

Chart off. Chart off than a visionary him is that he's more of a manager. Chart off. Chart off than a visionary. He's a great manager, but he's not Eisner. He's not Iger or some of these incredibly transformative CEOs. And maybe the argument is Disney didn't need a manager right now. It needed somebody with a little bit more. The other thing is he got into these political scraps with the state of Florida florida which by the way i don't know how he would have avoided this one so on the one hand he's got the entire uh gay community demanding disney to take a stand

and and then on the other hand you've got the state of florida which is like, obviously politically it's red right now. And DeSantis is like a take no prisoners kind of guy. So I almost think there was nothing he could have done other than what he thought was the right thing to do. And unfortunately that landed him in political trouble. There's so many stories in here. One story is the stock market is not the economy, but it is the company's economy or the company's currency. So the stock market is very, very important. The other thing is just personality-wise, this was Iger's guy. He chose him and he was gone for- And then he disowned him a little bit though. And so there was some like real coup shit going on. There was at board meetings, there was all sorts of backdooring stuff. so a lot of drama in this um he immediately

came in and canned cream daniel who was the guy that was in charge of streaming who was chapix right hand man um i want to i want to talk over some of the charts from alex morris who's got a kick-ass sub stack the science of fitting we had alex on the pot on tcaf a couple months ago all right so this is showing uh the parks which we know are on fire 20 and 21 are just man you got it throw those out throw them in the pandemic left the den but but they're they're they're uh Showing the parks, which we know are on fire. 20 and 21 are just... Forget it. Throw those out. Throw those out. Man, the pandemic left a dent.

But their EBIT is up... This is a comeback. Their EBIT is up 17% versus 2019. So the parks are doing phenomenally well. Next chart, please. So linear and directed to consumers. So this is ESPN, ABC, the whole enchilada. Yeah.

I mean, that's not bad. It almost doubled over the last uh six years that's that's a pretty healthy kegger right there but the problem is of course there was a huge next chart there's a huge upfront investment to get all these all these subscribers how many subscribers do they have now damn it i should know this disney plus it's over 100 million subscribers yeah it's over 100 million. But again, the problem is the losses are – I don't know if they blindsided the street, but next chart. This shouldn't perhaps be negative. Think of these as losses.

Next chart, please, Sean. Last quarter, they lost $1.4 billion. Now, they say that's the peak of losses. I don't think – we don't have the chart up yet. Yeah, we don't have the chart. That's all right. Oh, we don't have – okay. No problem. So they lost $1.4 billion. think we don't have the chart. Yeah, we don't have the chart. That's all right. Oh, we don't have. OK, no. So they lost one point four billion. They've lost.

I think it is. They've lost eight billion dollars on this experiment. It's not an experiment. It's working. It's working. But it's costing it costs a lot of money. I read that they spent thirty billion dollars on film content last year. Does that sound possible? That's the number. Yeah. Between all the Marvel stuff. sure like the movies the tv shows maybe they throw sports in there but think about how josh think about how quickly this story turned that streaming was like was the thing well there's one reason for that once upon a time when interest rates were zero company share prices got rewarded for how boldly they were going after new wait till you hear tomorrow's revenue. Ben takes a zag. He tries to dismiss the interest rate story.

Oh, he's losing his mind if he doesn't see that. I gently cut his head off. Yeah. Shout to Ben. I know I'll be listening. All right. So there's that component of it. But then I also think like all of the streamers are pulling back because like you have to

use your stock price as a signal sometimes. And the signal is telling them all you have to slow down what you're doing. You are not getting rewarded for that anymore. Like that. I think that's like I think that's like obvious, but maybe not to people that that have not sat in the chair. But like at a certain point, you have to listen to your stock price. I listen to Bill Simmons talk about this today. Did you hear that pod yet? in the chair. But at a certain point, you have to listen to your stock price. I listened to Bill Simmons talk about this today.

Did you hear that pod yet? Yes. Okay. So his take on it was like somebody like Bob Iger doesn't come back just to be a caretaker. He obviously has something big in mind that he wants to do. And they were talking about

will they merge with Netflix or something. Doesn't make sense. I don't think the FTC would even hear that. I i do i don't think they would care there's plenty of competition there's plenty of competition out there what's the market cap difference between these two stocks not that big almost not that big it'd be almost a merger of equals right not that big there's paramount there's there's peacock there's warner brothers what do you do do you give like we'd hate you give reed hastings the chair for anything filmed entertainment and you run the rest? Can we make rides out of some of the Netflix shows?

Disney is also getting punished by Wall Street because linear TV is in secular decline. And there's a lot of questions about what that's going to look like in the future. What do they do with ESPN? Well, Dan Loeb wants them to sell ESPN, or at least originally he did, which I think they've very strongly made the case that that would be a mistake. Even though linear TV is declining, that's still one of the biggest engines driving the story. And we don't know if ESPN Plus is going to be a big deal or not. The chart looks like absolute junk. I would be inclined to be a buyer rather than a seller.

Not that you need to buy it right here, but that the that there's been too much damage disney has support if you go back to that first chart uh this doesn't go back far enough disney has support basically in the low 90s and it already broke that but it broke below that and recovered very quickly this doesn't do it the next this doesn't the trick. The next time it breaks below, I think it stays below. To me, it's going to take a really long time for people to gain confidence that the ship has turned. And by the way, buying Disney going into a recession has never worked out for anyone, regardless of who the CEO is. The company is just too big and too reliant on three different major economies. Don't forget China, Europe, and the United States, not just the United States.

And if two out of three of those are in recession or going into a recession, it just makes it that much harder to pull off a turnaround. All right. So do you think that Iger leaves mission accomplished or does he leave it leave? And his legacy is torn. It said, no, it said that he's part of what he wants to do is groom a successor. So I guess he didn't already feel like he's already done that. I mean,

he's a young 70 or 70, whatever he is. Yeah. Yeah. Listen, it's, it reminds me of Brady a little bit. Like he's watching the stock price tank,

you know, he still owns a ton of stock and he's probably saying to himself i could fix this shit like i could still do this sounds like you and i bet you yeah it is me um and then i bet you he got some calls like i bet you it wasn't all his idea oh he did no he didn't get he did he literally got a call from the head of the board in december and they hadn't they hadn't spoken since his exit. So he did get a call. So there's more. All right. So that makes sense. All right. Let's move on. We're going to keep going here. Tesla is in a 50% drawdown, maybe a little bit worse by now.

Worse, worse. 57% drawdown. And Tesla's had big drawdowns historically, but I think the last one that went this deep was probably in 16. John, next chart, black one. Yeah, not like this. All right. So this is the worst Tesla drawdown in terms of lost market cap. They've lost 700 billion in market cap. Could you believe that Tesla was a trillion dollar company? Dude, I thought Elon was about to become the first human trillionaire.

Like he was on the way, right? Like if that trend had continued. I don't know how much of Tesla he owns. Well, less now. Less now, yeah. Somebody's calling that a chart crime. I'm not sure why. I'm okay with it. I'm okay with it.

It's not. All right. So maybe because it doesn't show any of the new highs along the way. So it could be misleading. Oh, it's just showing. Drawdowns. We got that. Whatever.

Here's Charlie Grant at the Wall Street Journal. Shares in Elon Musk's automaker were down 7% in afternoon trading. This is yesterday. That was the single worst performer in the S&P 500. The sell-off was merely the latest in a long string of down days for the stock. Shares are down 21% over the past month. Tesla has lost 52% so far in 2022, lagging the S&P 500 by about 35 percentage points. So it's a bad tape.

It's especially bad for tech stocks, but very, very bad for Tesla shareholders. Guess how much higher it is than its pre-pandemic high? From 2019? Yeah. Is it probably double? 165% higher. It had such a ludicrous- Show my triple.

It went up 750% in 2020. Did it? Yes, and then another 50% in 21. Yeah, so- That's the thing with this stock. This stock was one of the most shorted stocks in the market and it went up 750% in one year. And then the next year, another, which should not happen.

At the low. Another 50%. At the low in 2020, it was 25 bucks. It's 170 now. It was like, was it 400? It was, it got as high as like 250. So a 10X off the lows. But I don't know if this is ironic,

but it's interesting. The company's doing well. Like the company is doing well. Look at, throw up this chart, John, please. These purple lines. So we're looking at the revenue up top, looking at tons of free cash flow. They're selling cars as fast as they can make them.

Healthy margins. The company is doing very well. Dude, this is, right, this is not like they have lots filled with cars that no one wants. They can't make them fast enough. This is probably an interest rate thing, but it's as much a Twitter thing.

100% Twitter is playing a huge part. Number one, because of how much stock he's had to sell personally. And then number two, you can't say that Twitter is not a distraction while you're witnessing him tweet 15, 20, 25 times a day. Like you can't, if you're an Elon fan, you could just be like, listen, I wish he would stop and go back to Tesla. But you can't be like, oh no, he could do it all.

Because the market is telling you that that's not what's happening right now. Now, he could name a CEO of Twitter. It wouldn't even have to be a permanent CEO. That would probably be the most bullish thing he could do. He will name a CEO, I think. Yeah, I'm sure he will. It's still not cheap, conventionally cheap. It's an automaker.

Most automakers are selling like eight or nine times earnings. Tesla, this is Barron's, Tesla stock trades at about 31 times estimated 23 earnings. That's the lowest PE ratio since the depths of the pandemic. I feel like that's kind of a fair price for a company like this. But the S&P trades at 17 times estimated 2023 earnings. Should it not trade at a premium to the S&P? Of course it should. I think it should it should have not traded a premium to the s&p of course it should i think it i think it should and always will um but uh if it were to trade it 17 times like the s&p it'd be a hundred dollar stock could you imagine this stock at a hundred dollars uh yes i could you can of course yeah i feel like the whole stock market would have to get so much

worse for for that to happen. I could be wrong. I think this is its own beast right now. I'm not predicting it. Who knows? I want to talk about Twitter for a second. So this was – I don't even know what day this was, but new email from Elon to the engineering team. Anyone who can actually write software, please report to the 10th floor at 2 p.m. today.

Before doing so, please email me a bullet point summary of what your code commits have achieved in the past six months. So this is great for company morale. Wow. What is this? Like another mass firing? Dude, it just sounds like a disaster. It sounds like just worse than you could have imagined. Casey Newton wrote, the resignations went deeper than Musk and his team had anticipated. By Thursday, the company was left with critical gaps in the engineering org. The core services group, which includes teams responsible for user services and servicing tweets, went down to just one person, we're told. And I have noticed some change in the code, some shit's not working. For example, this could be a Slack thing, but I doubt it. When I see a tweet that I want to put into the doc, whether it's this doc or TCAF or

Animal Spirits or what have you, I hit the tweet, I hit send to Slack, and I send it to myself. That doesn't work anymore. I just get the spinning ball. And I have no doubt that that's an engineering thing at Twitter. It can't be Slack. Yeah. When you have all these connections to third-party apps and APIs, it's a full-time job making

sure that everything is always working the way it should because every time one company changes its code all of the other companies have to like get in line with that and that doesn't just happen magically it's not a force of nature so what's so funny i'll tell you after um okay are you um ready to come over to fin tusk i'm done with this shit did you know but you're not done with it uh so so they're holding off so elon tweeted yesterday holding off on relaunch of blue verified until there's a high confidence of stopping impersonation i mean it's just such a cluster i was looking at i don't know why what compelled me to do this but i clicked on one of

morgan's tweets um just uh i was like oh people say there's a lot of bots let me just check it out dude john if you please hold on so this is just it's just a tweet about nothing real I was like, oh, people say there's a lot of bots. Let me just check it out. Dude, John, if you please. Hold on. So this is just – it's just a tweet about nothing really. There's no Bitcoin in here. There's nothing. This is all nonsense.

Can I be honest with you though? Instagram looks just as bad if not worse. That's fine. That's fine. I can post a picture. I can post a picture of my family and the next 15 tweets before any human that I'm friends with sees it is like, wealth with Maria, wealth with Sheila. Wealth with Sheila is legit. That's the one you like? Instagram has been that way.

This is brand new for Twitter. It was not always like this. In fact, it was not like this two months ago or whenever it was before he purchased this. Yeah. Come to Fintosk. What are you talking about? What is Fintosk to Fintosk. What are you talking about? What is Fintosk? Fintosk.

Is this Mastodon? Yes. Instead of Fintwit, it's Mastodon's version is Fintosk. And you should be with us on Fintosk where we're like apologetic to each other. We're like sharing our feelings. It's like a whole different world.

All right. Next topic. We're going to talk about commodities. We're going to talk about commodities. Hashtag Fintosk. Hashtag finance. Hashtag a whole different world. All right. Next topic. We're going to talk about FinTOS. Hashtag FinTOS. Hashtag finance. Hashtag f*** off. Commodities. We're going to look at DBC, which is like the broad basket, and then DBA, which is the agricultural one.

Wait, part-time Larry says a better name would be fistadon. I don't think that's going to take off, Larry, but I like it. But I like it. So DBC. Wait, what set me up again? What is this now? We're talking commodities. DBC, this is year to date,

was up 47% through the beginning of the summer. The ag one was up 16%. The ag one gave back all the gains. DBC, the gain's been cut in half. It's still hanging in there. But let's look at some of the agriculture commodities. How much of DBC is oil gains have been cut in half. It's still hanging in there. But let's look at some of the agriculture commodities. 1M1LM2E2C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C3C The spike, I'm doing my Midwest thing. The spike is when Russia invaded Ukraine. We're looking at the black is wheat, which is now below those invasion levels. Same thing with corn and same

thing with crude oil, believe it or not. Funny thing about commodities, price spikes have a really interesting way of bringing on new supply and bringing out new sellers to come meet that demand. I know it's crazy, but it's just the thing that ends up happening very, very often. Fine. Smart, Alec. If somebody told you in April, whenever that was, that the war would still be going on six months later and prices would be below where they are today, you wouldn't believe them. I wouldn't. Depends on which price. We'd probably not. We'd probably not. WTI, I'd probably say the United States will pick up the slack for whatever Russia's not sending out. Because the truth is we don't get supplied by the Russian oil market. So it's like we're actually a net exporter.

So I would have told you no problem. Lastly, let's look at a chart of gasoline. This is a welcome thing. Thank God. That is a welcome thing. Thank God. It's a welcome thing. I don't know what percentage of inflation all of this stuff is responsible for, but it's a big one. It's a big piece. Well, you know what's interesting? Look at the uptick in gasoline usage that started around January 2021, which not coincidentally is when the vaccines came around. And then you see by spring,

we're back over the pre-pandemic January 2020 level. And then it just doesn't stop from there. So this is not a Russia story. Russia probably just made it a little bit worse temporarily, but gasoline prices were going up as soon as people felt like they're ready to go back to work and ready to start moving around. It poured gas on the fire.

Get it? No, it went vertical after the invasion. No, right. The invasion happened long after the price was already rallying. That's all I'm saying. And that was also like one of those canaries in the coal mine. Like retail gasoline prices were one of the first things that told us there was like a real inflation. And we all said transitory, but like that was early to the story.

Let's keep it moving because I've got parent-teacher conferences tonight. Oh, good luck with that. Thank you. Shari did all those today. All right. Inflation versus unemployment. This is a quick one. I would have thought the opposite, that people hate inflation more than anything

because of how negative all the polls are about the environment, the economy, Biden, whatever. Not more than unemployment. I guess not. So in a 2001 paper, a professor and his co-authors studied surveys covering 300,000 people living in the US and 12 European countries. Covering 300,000 people living in the U.S. and 12 European countries. And the question they studied was taken all together. How would you say things are these days? Would you say that you are very happy, pretty happy, or not too happy?

This is from the journal. They don't ask about the economy at all. But the authors found happiness fell significantly when inflation was rising and unemployment was climbing. But importantly, the two factors didn't necessarily carry the same weight. The misery index takes those two factors and equal weights them. And the author's point is that we actually should be weighting unemployment much more than we weight inflation given how much of a factor it is in people's happiness. Another paper from 2014 implied the weighting on unemployment should be even higher. Estimating one point of employment hurt well-being five times as much as a one-point increase in inflation. People are sanguine about inflation. The evidence that it reduces

people's satisfaction is clear. It's just that one extra point of inflation does not hit as hard as an extra percentage point of unemployment. John, you have the charts from this? So you can see the light pink is unemployment. This is how the misery index is currently calculated. And they add the two things up to get to that whole number. That's in dark red. Let's go to the next one. And then this is some of the modified versions where they're overweighting unemployment.

So the bottom line is when people see that their neighbor lost their job or they hear about a family member who lost their job. Starts to get anxious. lost their job or they hear about a family member who lost their job get anxious they well they will be much more unhappy than when they go to the grocery store and they see that eggs are up you know of course yeah that makes sense okay um let's let's keep it going uh all right this is a mess uh where do you want to begin crypto i call crypto the bond that keeps detonating. This is your topic, but I think the big news today is that the – I'm sure there's more important than this, but the U.S. Attorney General's office in the Southern District of New York was already investigating FTX and other offshore exchanges. But I think – no, they weren't investigating because it was a Ponzi. I think they were trying to catch people laundering money or not paying taxes. That would be my guess. All right. So somebody tweeted a year ago, so right now, shut up please for a sec, John.

Let me just set the stage. The big story in crypto today and over the last few days is centering around Genesis, who is owned by Digital Currency Group, which is owned by this guy, Barry Silbert. Digital Currency Group owns Grayscale, the GBTC Trust. They own CoinDesk. They own the biggest mining company. I mean, they are absolutely critical to the functioning of the crypto economy. And Genesis got caught with their pants down. They loaned three hours capital, $2.6 billion. They were making loans to the parent company as well. And it's just not looking very good. You know what centralization does? It stops the six biggest crypto companies in the world from all giving a margin loan to the same bullshit hedge fund. That's one benefit of centralization.

If there's some sort of centralized repository of data- What do you mean? These companies were centralized. These are CeFi companies. benefit of centralization, if there's some sort of centralized repository of data on who's borrowing what from whom- Mad Fientist These companies were centralized. These are CeFi companies. Andrew Merrill No, no, no. A centralized system, not the companies themselves. There's a reason why every hedge fund is registered with the SEC and why every asset manager every 90 days has to report their holdings and how concentrated

their holdings are. We have this one hedge fund being responsible for taking down six out of the 10 largest crypto companies inside of a six-month window. And what they all have in common is they all lent this company money, it seems, endlessly and without a care in the world. If it were known amongst all of these crypto firms because the data were somewhere blockchain or whatever that oh wait they borrow two billion from you how much they borrow from this firm

another four billion how much they borrow from you this is this is it would have slowed down a little bit this is not a listen this happens happened in traditional finance too bill huang did the same how many but how many firms did he take down he took a big bite out of credit i think he took credit suites down yeah right so but the other firms knew because no they didn't it was they didn't know they didn't know they didn't know they did not know so why did goldman sachs get out of all their get out of all their leverage? Because they've got a good nose. They smelled the shit first. But it was Goldman, it was Morgan Stanley, it was Credit Suisse and somebody else. And the swaps that they were doing

was done for that exact purpose so that the counterparties couldn't know what was going on. No, I agree. I agree. So it's thievery. There's fraud. These guys were fraudsters. But to show you where we are today versus where we were a year ago, this guy tweeted a year ago, crypto Twitter. Oh, so now DCG is trying to raise money is where I was going with that. Where can I send a check? Yeah, exactly. A year ago, crypto Twitter raised $47 million in days to buy a copy of the constitution. Now we have Genesis, one of the largest crypto trading lended desks,

need a $500 million. And they can't, you know, they're having trouble getting it, clearly. Do you know why? Because, A, does anyone believe that they're profitably running a lending business? Well, how could you? Right. I mean, it's as simple as,

what is the Constitution going to cost you? It could drop in value relative to what someone else might want to pay for it. You're not going to get margin calls. But you're not going to have holes blown in the side of your balance sheet. So the saga continued today. So CZ from finance tweeted. So Coinbase just decides to throw this f***ing grenade.

So Coinbase custody holds 635K BTC for Grayscale. Four months ago, Coinbase, I assume exchange, has less than 600K BTC. Just stating news reports, not making any claims. Unbelievable, this guy. Why is he trying to sink himself at this point? I don't know what this guy's doing, but let me just finish the story because there's a resolution here. So Will Clemente tweeted, CZ now calling out Coinbase, stating that data doesn't sufficiently reflect the total Bitcoin GBTC claims to have, according to Glassnode CBS, 530K BTC, which is similar to what CZ said.

And then BlockWorks came out. Brian Armstrong said, listen, if you see FUD out there, our financials are public. We hold 2 million BTC, 39.9 billion worth as of 9.30. And then CZ said, Brian Armstrong just told me the numbers in the articles are wrong. Deleted the previous tweet. Let's work together to improve the transparency in this industry. Yeah, this is making everyone feel great. Yeah, let's work together to make it so transparent that everyone goes bankrupt at the same time. This is phenomenal. So you asked a good question here, Josh.

Wait, stupid, stupid question. Why would Coinbase publicly share the specific wallets that it's storing Bitcoin in for any customer? Isn't that just inviting somebody to try something bad? And isn't it likely that they're holding it in multiple wallets just because if one gets hacked, you don't lose the whole treasure trove of Bitcoins? Are these the right questions? Because I don't know about this stuff. I don't know enough about the security of this stuff. I don't think you could just hack somebody's address. For example, on Friday night when I called you, GBTC put out this weird tweet saying that we're not going to release, we're not going to show you our... And people are like,

excuse me? Yeah, but I was like, yeah, maybe don't. No, just based on the crypto's reaction, crypto Twitter's reaction, I'm inclined to say that that is not something that is... That is something that people willingly share. What about my second point? It's probably multiple wallets. Why would you store everything together? You'd have to be out of your mind. So you asked a good question, Josh.

Peter Brandt tweeted... What did Peter Brandt tweet? Charleon, please. Did I put this in here? It's a tweet from Peter Brandt. Maybe what did Peter Brandt tweet? Charlon, please. Did I put this in here? It's a tweet from Peter Brandt. Maybe we don't have this. Yeah. So Peter Brandt tweeted, he said-

Oh, these are the magazine covers. John, you have this? He said, this is the type of news that comes at or near major market bottoms. The economist crypto's downfall, fall of a crypto empire and ruins. Maybe, maybe not. We'll see. Time will tell. But my question to you is, why- That would be too easy.

No, man. Listen, maybe. Shout out to Peter, by the way. But how? How is Bitcoin not at 10,000? The only thing that I can come up with is- What if it's on the way? No, Kobe. Well, it's taken so long. It's been 24 hours a day. It's another 40% lower. So another shoe would have to drop. And listen, there might be a big fat Reebok to drop. Who knows? But it's hanging in there. What do you think happens at the end of the year if it doesn't recover and whatever institutions ended up adopting it? Like, do they stick with it or do they just wipe it off the books to start the next year fresh?

Because I could picture something like that too which part uh just people just i mean everyone has tax losses in every asset class but people just being like you know what get the shit out of here like if it's a half of one percent of your fund you're a hedge fund or or you're an asset management firm or whatever wouldn't you just be like enough enough, goodbye? I don't know. I could picture- I'd rather be buying than selling. I mean, what do I know?

James Seifer tweeted, Eric Snyder, a bankruptcy lawyer for Wilk Auslander and who worked on the Madoff case just now on Bloomberg TV. Lawyers are billing at $2,000 an hour. We're looking at a burn rate of $10 million per month. Also says FTX customers are now looking at less than 10 cents on the dollar. This is a grade A disaster. Oh my God. What's this whales have been harpooned? Let's go through these. Oh, this is a good one. This is a good one. Again, Will Clemente. So the

black line is the price. The orange line is the number of wallets. What does that say? With the balance of more than 1000 Bitcoin. So the orange line crashed. Because people are selling their Bitcoin out of this big whale group? Yep. Yeah. That makes sense. If everyone has leverage and the margin calls are happening and they own shares and things that are blowing up, it makes sense that even the whales would be getting more conservative. Can I give you the coup de grace of the day? I want it. Kathy just came out. kathy what are you doing no she didn't

that's not a that's that's where where would she in what venue she was stood on a street corner and yelled this into traffic yeah uh no it was bloomberg did she feel compelled to be like rushed in front of a camera to say this at this moment? Or do you think it was an interview about something else and they just were like, hey, Bitcoin, a million? What could make somebody want to do that? Listen. Conviction. Last question. Which is worse?

Somebody who started one of these crypto exchanges that's blowing up and just looks shady as shit? exchanges that's blowing up and just look shady as shit or somebody who's like uh just looks dumb like like for having invested in this and and didn't uh do diligence or whatever then i look really oh you mean the venture capitalists yeah yeah like what's what's worse you're you're you're shady because you're involved that's where you're It's not stupid. It's not stupid. Listen, Dror- It's tricked. Dror Peleg had a very good take on this. Venture capitalists, the risk is not being wrong. They swing and miss all the time.

Is it 95% of their investments go to zero? The big risk is missing out on a grand slam. So I'm not excusing and saying that the due diligence, no, it's all good. It's all good. I'm just saying it is a risk profile that is not as if they're like picking stocks. Counterpoint. And they were defrauded. Counterpoint. We are at a juncture where some of the people that have a billion dollars in crypto and crypto related stuff,

they're going to have to choose either like, not uh not shady but like yeah i'm really smart and don't worry what i'm doing with this or shit i'm dumb and spf is trying this he's like oh i'm bad at math yeah like that is it's not that if you start an exchange and use customer funds i'm bad at math is not gonna work work. Like it's just a thief. There's no, he went to MIT. He grew up on the campus of Stanford and, and,

and worked at Jane street and he's bad at math. Oh, whoops. Whoops. I don't think so. I didn't read this article yet, but Sequoia, this is from the information.

Sequoia has only invested about 10% of the dedicated $600 million crypto fund that launched earlier this year. This means that it's over $500 million. Then this is actually a good thing. They could buy whatever they want now. They could buy Genesis. Right? If they only committed 10% and they have a crypto dedicated fund into the crypto Great Depression, theoretically, they'll be in the best position out of anyone. No?

Too simple? We will see. We will see. The story is still being written. All right. They should probably just buy value stocks with the money. All right. Last thing.

Icon, short GameStop, and not much of a reaction. So Reddit was pretty – let's put this up. GameStop price and percent off all-time high it's a terrible chart gamestop's in a in a 80 percent give or take uh drawdown um from its all-time high and reddit is pretty quiet it's a bloomberg article get this chart it's a sort of salt on my eyeballs sorry they counted the messages and they said about 250 messages on Reddit. That's it? Yeah.

I guess nobody really gets fired up about him because he's like, I don't know, 80. It's not about Icon. It's about GameStop. They've got to be washed up. You don't think it was like some young hotshot 38-year-old fund manager? Nope. He wouldn't be like drawing the the ire of the crowd who was the guy that got blown out of was it blaine or gabe or it was david blaine i don't know

the guy the hedge fund manager that got blown out of of gamestop uh two years ago he wasn't like a hot shot he was just a he was just a wall street guy no dude no. He was a huge deal. Not to the Reddit crowd. Oh, no, no, no. But this is a guy that got seeded by Stevie and Ken. Okay, and Carl's not a big deal. He's the whole deal. All right. Yeah, no.

So I guess my point is people aren't getting as worked up anymore about shorting these stops. They're gone. They're washed out. Hello? Oh, Rishi sent me a message because I said this on TV today. I'm like, where's all the Reddit? He said, actually, thanks, Rishi, AMC is still the most commented upon stock.

On stock twits? I guess on stock twits. So they're not all gone and they're not all washed out, but maybe they're gone from the GameStop story. I guess we'll never know. Okay. We're doing two things tonight. I'm going to do them quickly.

I'm making the case for a stock that I bought yesterday. Let's do that. What do you got? This is a trade. Ooh, I love this stock. Okay. Really? Yes, I do.

Go on. So this is Enphase Energy. It makes solar microverters or whatever the hell that is. I don't know. I'm not a scientist. You need to connect the solar cell to the electricity generation. This is the company that sits in the middle of it. Here's what I know. The stock is going up, next chart, and it's setting up for another break. And it's setting up for another breakout. The finit... Inverters?

Microverters. Hey, this is a good time to remind everyone, nothing you see or hear on this show should be considered a recommendation to buy or sell any security. I mean, listen, investing guarantees risk and loss. But look at some of these numbers. Okay. This is, it's right to left. It's a bit weird. But Q3 21, just look at this growth, $350 million in revenue, 530, 630,

it grew 20% quote over quote, I believe it's up 70% in Europe for reasons that are obvious. The next chart, please, John. So the stock has been on absolute fire and it's supported by the fundamentals. The business is on fire. Up top, you got revenue. You got gobs of free cash flow. You got healthy margins. Guidance for Q4 was great. But again- How come you didn't bring this up to Gregor McDonald on the pod Thursday? This would have been a perfect stock to talk about.

Were you not involved in it yet? I bought it yesterday. Again, be that as it may, I'm here because the stock is going up and it looks like it's going to break out. If it breaks down, I will probably kick it to the can. Where's your stop? That I'm not sure. I'm really not sure. I would trail this hush puppy with a rising 50 day and check it every Friday. That's what I would do. But honestly, if it doesn't break out here, I might just be gone because it's at the point. Yeah. And a stock like this,

once it does disappoint for whatever reason, like there's so much hot money. By the way, it's trading at a ludicrous multiple. But it's interesting. What's the RSI? How overbought is it? It's not overbought. No, it's not. It's been going sideways. Okay.

But it's one of the few companies that has a nosebleed valuation that's kicking ass. It's at 100 times earning, something like that. Yeah, listen. It's growing like crazy. Utility scale electricity generation from solar is only going in one direction. And it gets in the market cap. It's big. What is it?

It's 40. 40 billion? Yeah. Okay. I think this is an IPO in the last five years or so. Yeah. Is that right? Yeah, I think so.

It's one of the few that really grew into its valuation and then some. It's been a huge winner. So I would love to just buy up here and sell higher. We will see. Probably sell lower. I'm doing a mystery chart. John, my mystery chart, please. You guys can play along with us.

I don't think anyone's going to get this because it's not an S&P 100 name, but I will tell you it is a stock, and it is in the food or restaurant industry. Does anyone want to take a crack at this? Michael, would you like to take a crack at this? Food or restaurant? Can you give me anything else? Well, no, because then you would be having it your way, and that's not how okay what do you got uh

wait have it was that burger king yes it's called uh restaurant brands international rbi yeah all right there's the chart so here's what i want to tell you this stock by the way don't do this shit who see i see i'm a man of people. I give people the opportunity to guess. You start off with, oh, you're not going to guess this. Well, then what's the fun in that? You did. You said Burger King. Well, because you gave me the slogan.

All right. So there are people in the chat saying McDonald's. They were wrong. There are people saying Tyson. You got it. Come on, make it fun. All right, what's up? What do we got?

Listen to me. Put that chart back up. You see this breakout? What's the ticker? QSR. You don't want to mess with this, do you? You don't want to get in the way of this thing, right? You see what's about to happen here, right?

Okay. Here's what's going on. This is Tim Hortons and Burger King and Popeyes and something called Firehouse Subs, which I guess is regional. I do like subs. I love subs. Anyways, Tim Horton is like Canadian Starbucks or Canadian Dunkin' Donuts.

But Burger King is really I think the biggest chain in here. Here's what's going on. This guy Patrick Doyle that took over Domino's in 2010 immediately remade the pizza and completely changed that company forever.

John, next chart. This is Domino's versus the S&P from the time Patrick Doyle took over as CEO. Oh, Doyle rules. Oh, Doyle absolutely ruled. No, but what he did was he built the app and he changed the recipe and he made a great pizza and he made it too easy to order.

And as a result, that stock went up 5,300% versus an S&P that went up like 2X. Can I ask you a question? He is the new CEO of Restaurant Brands International. And not only that, he put $30 million of his own money into the stock. And his compensation plan is really betting on himself. And I love when I see that. Go ahead. The Burger King on Merrick Road. Yeah, no one's ever there. A little sketchy nobody nobody ever goes there is that prime real estate you ever see mcdonald's but

mcdonald's is right next door and it's booming cars out into the street so that burger king how much money is that thing bleeding a month that's got to be a front no but so here's the thing that you have to understand. These are all franchise locations. No, no. These are all franchise locations. You know what these restaurant companies are really making the money on?

The franchise fee, like the upfront setup, and then a small royalty. Who's paying for it? That's right, my point. Well, I'm so glad you asked. The number of dominoes in America tripled

because he made the product sell itself via technology and having better recipes all of a sudden. 1. Justin Marchegiani Are you getting Whoppers delivered? I do like the sesame buns. They have sesame buns? I do like the sesame buns.

Are you getting Whoppers delivered? 2. Mark Fairhurst Are you saying that Uber Eats and Grubhub aren't delivering tons of fast food every day? 1. Justin Marchegiani Burger King? Mark Fairhurst Is that what we're saying here? 1.

Justin Marchegiani That's what I'm saying. That is prime real estate. Something's going on. Mark Fairhurst I'm going to tell you that I would bet with this guy. So here's the setup. Back to the original chart. It's very extended. It's extended. I think it's going to have a low volume pullback to where it broke out from, which is 62.

Yeah, you buy it. And if it holds 62 on that next pullback, that's where I'm going to get very interested. So anyway, that's my mystery chart. I know I wasn't supposed to make the case, but there I go making the case. It's a good setup. All right,

Michael's got a parent-teacher conference, so we're going to say goodbye tonight. Guys, thank you so much for joining us. Remember,

tomorrow is Wednesday, all new Animal Spirits. Don't forget to subscribe to the YouTube channel. Please leave a like if you enjoyed the show this evening. We love you guys

for coming on time, being part of it, and we'll see you next week. Happy Thanksgiving. Happy Thanksgiving.