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So we always love to hear from people.

1:24

Welcome to Animal Spirits, a show about markets, life, and investing.

1:26

Join Michael Batnick and Ben Carlson as they

1:29

talk about what they're reading, writing, and watching. All

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opinions expressed by Michael and Ben are solely their

1:34

own opinion and do not reflect

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the opinion of Ritholtz Wealth Management. This

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not be relied upon for any investment decisions. Clients

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of Ritholtz Wealth Management may maintain positions

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in the securities discussed in this podcast. Welcome

1:49

to Animal Spirits with Michael and Ben, speaking of

1:51

loving to hear from people actually put a put in

1:53

that.

1:54

Is this not the best time to start working on a good script? Can

1:57

we do a master?

1:59

Best time of the year.

2:01

How so? Football season? Well,

2:04

just back to school, back to

2:07

life, back to reality. As much as I love

2:09

the summer, I'm done. It's enough.

2:12

I'm ready for the kids to be back at school. Although I still

2:14

got Logan for another week, which is annoying, don't

2:16

get me started. We've got football

2:18

right on the corner. Pretty excited about

2:20

that. It's just, this is my type of year. The 90

2:23

degrees is fading, I'm not into that. I

2:25

love it. I won't give you best time of the year because I

2:27

do love the summer, but I was taught, we

2:29

had our Labor Day fill from Friday to Monday, being

2:32

outside all the

2:32

time, being on the water. And we

2:35

kind of said, all right, we've squeezed this dry for the

2:37

summer. I hate winter

2:39

with, I just hate it. Besides Christmas, I just hate

2:42

winter. But I think sometimes you need the seasons to give

2:44

yourself a break. And then something to look

2:46

forward to. I love seasons, I'm a big

2:48

season guy. I just like that

2:50

there's always something to look forward to, right? I look forward

2:52

to the fall football. I look forward to the

2:54

winter for various reasons. And then once you're done

2:56

with the winter, we got spring thawing out, and then boom, you're

2:59

into summer.

3:00

And then you start it all over again.

3:02

All right. And then when you reach middle-aged, you talk

3:04

about the seasons more. And can you believe how fast summer

3:06

went?

3:07

But I really feel like that's an obligatory thing

3:09

this time of the year, but has this not been the fastest summer?

3:11

How do we quantify that?

3:13

Was this literally the shortest summer? No, they're all the same amount of

3:15

days. I don't get it. Seems to be speeding up. All right,

3:18

last week, Mia Culpa here, hand up.

3:21

Last week, I was talking about

3:24

an order that went awry. That

3:27

I was not too pleased with. My favorite stories of the year,

3:29

when you sent the follow-up to this, can

3:32

I just set the picture here, and then you can give

3:34

the- Sure, go ahead. You complained because

3:37

your hex-clad pots

3:39

and pans got sent to some Brian

3:42

guy in California, and you were

3:44

saying, hey- Wait, just back up.

3:46

Just setting the stage. So I'm

3:48

still rolling with the pans from my wedding,

3:50

which coming up on 10 years.

3:52

And then I decided to like cheap out

3:55

and go the Amazon basics

3:58

route.

3:58

And sometimes-

3:59

you get what you pay for. So I said, you know what, time

4:02

to step up, put my big boy pants on and get some real

4:05

pants. Back to you, Ben.

4:07

And then you were like, what's going on here? They sent it to the wrong

4:09

address. I don't know what, I'm

4:11

talking to customer service. And then

4:14

you send an email after the show last week

4:16

and fill us in on what the emails, I,

4:19

this, it's kind of unbelievable. What,

4:21

that, the person who got the pants

4:24

is a listener of the show.

4:25

Yeah, well, it's not just a coincidence. So

4:28

the person, Brian, who got

4:30

the pants, I'm thinking like, how did this happen?

4:34

So Brian got the pants,

4:36

guys have managed, told me to send the return label

4:38

home, he'll take care of it, he'll mail it back. Then

4:41

on

4:42

Friday, I get

4:44

a call from- Say

4:46

why Brian got the pants. I'm going

4:49

to.

4:50

On Friday, I get a call from

4:52

Hexclad customer service. And

4:55

I said,

4:56

did you happen to hear about us on the podcast?

4:58

And he said, yes, our CEO did actually catch

5:00

wind of that. So I said, let me ask you

5:02

a question. What merchant do you use to send this out? Is it

5:05

like, like a plant or a

5:07

square?

5:09

Who processes this payment? Shopify.

5:12

And immediately, ah, light bulb.

5:16

So Brian, in

5:17

December, 2021,

5:22

I sent Brian something from

5:24

the store. I don't know if it was a- We did a free

5:26

tea- A share, whatever. Yeah, okay. Whatever

5:28

we gave Brian. So I guess that was the last

5:31

time that I used

5:32

something on Shopify.

5:34

Maybe less than only.

5:36

So Brian's address was,

5:38

I guess, like stored as the default.

5:41

And so that explains how Brian

5:43

has my pants. Now, the

5:46

fine people at Hexclad

5:47

were such menches, which I don't know if you could use the

5:50

plural. I feel like you can't pluralize

5:52

mensch. But anyhow,

5:53

they said, you know what?

5:55

Tell Brian to keep the

5:57

pants and we're

5:59

going to send you new ones.

6:00

So, all's well that ends well. Hacksled,

6:04

hand up, I'm sorry. I was not

6:06

hacked. There's no nefarious activity.

6:09

Although

6:09

I do think, maybe this is, I do think

6:12

that

6:14

if your billing address does

6:16

not match your shipping address, there

6:18

should be a pop-up.

6:20

Not on Hacksled, I'm like Google or whoever. There should

6:22

be a pop-up, are you sure? Maybe AI

6:24

can help here. But that is pretty funny that

6:26

that was your your

6:28

default address from that long ago.

6:31

So, not only does Brian get a free

6:33

t-shirt, he gets a free couple of Hacksled pants. So,

6:38

I'll be back with the proper review. Because

6:41

I'm excited to use, I'm

6:43

excited to get some new pants up

6:45

in here. Yeah, I

6:48

just think it's hilarious, the people that reached out to you for this.

6:51

All right, I want to talk about the year-to-date

6:53

returns in the NASDAQ 100.

6:55

All right, so tech has been on

6:57

fire obviously since like, I don't know, 20,

6:59

like early to mid 2010s. Technology

7:03

has been the thing, right, the sector. The

7:05

NASDAQ 100 has been like the best way to, I

7:08

think, have that idea of tech.

7:10

What was the, maybe it was you who

7:13

gave this stat that like there were zero growth

7:15

managers that beat the NASDAQ over the whatever period?

7:18

Was that you? I think that was Jeffrey

7:19

Patek. Okay,

7:20

whatever, the NASDAQ 100 has been hard to beat because

7:23

it's market cap waiting on steroids. This

7:26

year, through, this is through, I guess,

7:28

Friday or Monday. We're

7:30

taping this Tuesday morning,

7:32

September 5th. Market

7:34

to so often. Great to be back. Great to be back. The

7:36

NASDAQ is up 42.2% coming into the day today. Jeez,

7:40

I'm right. I look back on white charts at the,

7:42

they show the previous 10 years returns, right?

7:45

So, this goes back to 2013.

7:47

This is the second best

7:49

calendar year. If the year were to stop now, and

7:52

the best one was actually 2020, which is hilarious, because

7:55

the NASDAQ fell like 35% that year. It was up

7:57

almost 50%. Read the returns from 2019.

7:59

But all those great years, so 2019 was up 39%, 2020 was up 49%, 2021 was up 27%,

8:02

last year down 33%, and then now up 42%.

8:10

And obviously, part

8:11

of the reason it's up so much this year is because it was down so much last

8:13

year. But

8:14

it's for as good as the returns have been in the

8:16

NASDAQ 100 in the last decade or so,

8:18

this is the second best year.

8:20

And it's a year, I keep kind

8:23

of harping on this point, but it's a year when the Fed has

8:25

continued to raise rates. Rates are above 5%, inflation

8:29

is high, falling but high. And

8:31

I just don't think anyone had

8:34

this pegged as

8:36

like, oh, this is going to happen. The NASDAQ is going to go bonkers

8:38

again in

8:39

a year with such high rates.

8:41

Can this continue?

8:42

I mean, we're going to be talking about this for

8:44

the next five years. Oh, at 2024, the NASDAQ was up 30%, and then down 10, and

8:46

then up 25%.

8:50

Yeah, anyway, just kind of a crazy

8:52

one. Good one from the Carson

8:54

Group here. We talked about this a little bit about

8:56

how things are looking up for bond

8:58

investors and diversified 60-40 investors,

9:01

more because of the bond side of the portfolio than the stock

9:04

side, right? And we've

9:06

talked about this in the past, but I like this chart that they use.

9:08

They use the Bloomberg

9:09

US aggregate bond index,

9:12

which I think is now called the Barclays one. Do they go back and forth?

9:15

Which one is it? Bloomberg Barclays? It's the

9:17

Bloomberg Barclays. I don't know. Is it? I don't know.

9:20

So they show the eight-year rolling returns, and then

9:22

they yield to worst at the start of the period.

9:24

And you can see the correlation here is

9:27

about as close as you can get

9:29

for basically the starting yield

9:31

is your best predictor of eight-year returns

9:34

going out. And so

9:36

I think, obviously, the yields are not as

9:38

high as they were in the 70s and 80s or even 90s, but

9:40

starting at, you're looking at, I

9:42

think, almost like 5% now for the ag or

9:44

something. It's not bad. Check

9:47

this out. I'm dropping this in the dock. Look at the scatter

9:49

plot. Starting

9:52

yield on bonds. I think this is a 10-year. Enfo

9:54

or 10-year returns. It's not quite one for one,

9:56

but it's about as close as

9:58

a mathematical relationship in the entire-

9:59

higher

10:02

investing universe than you get, as

10:04

you get. We've been talking in recent

10:06

weeks about how

10:08

like a simple diversified portfolio of 60, 40 is

10:10

in a much better place today, not so much because

10:13

of the stock side of things, but because of

10:14

bonds and bond yields being much

10:16

higher. I think I looked last week, the yield to,

10:19

the average yield of maturity on the Barclays

10:22

AG is like 5% now, which

10:24

is higher than it's been in a long, long time. And

10:27

Carson Group has a really good chart here showing

10:30

eight year rolling returns with the

10:32

starting yield to worst at the start of the period.

10:34

So starting eight years prior.

10:36

And you see the correlation here. I've done this historically.

10:38

It's like 0.9, 0.95, something like that. It's really,

10:40

really close. Basically, your starting

10:42

yield

10:43

will give you, if we're talking,

10:46

I don't know, seven to 10 years in the future, 95% of the

10:49

return. It's the starting yield is the thing

10:51

that matters most. Corey Hofstein did this a while ago. I wrote

10:53

a piece about it saying, what

10:55

was the, how do you do return attribution from the

10:57

bonds in the 1980s? You remember this

10:59

one? He wrote it in like 2017.

11:01

And like 75% of the

11:03

return came from the starting yield. 25% was

11:06

from lower, like a lot of people assume,

11:08

bonds did so well because rates fell. And that

11:10

did help a lot. But it was mostly

11:12

because the yields, starting yields were so high.

11:14

I made a scatter plot

11:16

showing the starting yield on 10

11:18

year bonds in the forward 10 year return.

11:21

And this is about as tight

11:23

a relationship as you get in all of investing

11:26

is bonds in

11:28

the starting yield. It tells you

11:30

more than all that you need to know.

11:33

So that's the point for diversified investor. Like

11:35

you don't need stocks to carry the day

11:38

anymore. You can have much lower returns on stocks. If

11:40

you have a diversified portfolio, bonds are

11:42

bringing up the rear and helping out with a much higher

11:44

yield.

11:45

This is a good thing for investors.

11:47

It's a great thing. Right? Should

11:50

be. Ryan Dietrich tweeted, it really

11:52

is amazing how this works. NAIM,

11:57

official exposure index. What

12:00

does that stand for? North America Association

12:03

of Invest Managers? That's

12:06

pretty good actually. You pulled that right out of your rear end and I think

12:08

you might be right. Sounds good. Was

12:10

above 100 in late July the

12:12

highest level since late 22.

12:14

Now after a 5% minor pullback it is

12:16

at the lowest level this year.

12:18

And I guess what this is showing is just how

12:21

quickly the pendulum of sentiment

12:23

swings.

12:25

The vibes change faster than the allocations

12:27

though

12:28

is always the case. Vibes

12:29

move way before

12:32

anything else. I'm sure if you

12:34

looked at a sentiment indicator

12:37

versus actual asset allocations

12:40

that relationship is way worse than what

12:42

bonds would show.

12:43

People become more bearish or bullish

12:46

than their portfolios would show.

12:47

Totally.

12:49

Most portfolios don't change all that much

12:51

for most investors.

12:53

Yeah so we had that garden variety correction. We

12:57

had a nice little rally.

12:59

I don't know.

13:00

Someone did tell us what garden variety means.

13:02

It was basically like in

13:04

a garden there are certain things

13:07

that you, okay when a gardener plants a garden there

13:09

are basic plants that always get planted.

13:11

Tomatoes, peppers, beans, etc. That's why it's

13:13

called garden variety. Right?

13:15

Isn't that what you have in your garden?

13:17

Simple stuff like that.

13:18

Keep it simple.

13:20

Might have made us have bloom not to brag.

13:22

Okay. Last week on the show

13:24

we spoke about September and

13:26

here we are. It's been historically the worst

13:30

month of the year for the stock market. In fact it's

13:33

like a

13:34

big outlier. So bespoke

13:36

has this chart showing the average

13:38

monthly change for the Dow going back a hundred

13:40

years. It's the only

13:43

month that's been down on average over

13:45

the last hundred years and it's been down on average

13:47

over the last hundred years, over the last 50 years

13:50

and over the last 20 years. Now

13:52

you just mentioned like people's

13:54

emotions maybe changing facts on their portfolio. I would

13:57

say that this should be a data point that has no

13:59

correlation. please do not do anything with your portfolio

14:01

based on this.

14:03

And in fact, in fact, why is it

14:05

selling Mayan go away and not sell in August? And

14:07

cause it doesn't rhyme.

14:09

Yeah. I mean, you only, only investing,

14:11

I only invest in things that rhyme.

14:12

So Ed Clisold from Ned

14:15

Davis research has a great,

14:17

like a all contrary type of

14:19

thing going on. All right. So the S&P 500

14:21

fell in August, as we know, 1.8% garden variety after surging 19.5%

14:23

year to date

14:25

through

14:28

July.

14:28

The 13 previous times

14:31

that the S&P 500 was up 10% through July

14:34

and then down in August, it

14:37

rose every time September through December.

14:39

So every time through the rest of the year, by an

14:41

average of 9.9%. Now, Ben, I see you smirking

14:44

and I love these sort of stats because

14:46

it's repeatable and it's not, it's not complete

14:48

nonsense. Like there's, there's data here. And

14:50

all that it's saying is, listen, when the stock

14:53

market is up more than 10% January through July and

14:55

falls in August, 13 times

14:57

the market's been higher through the rest, the rest of the year,

15:00

every time. I'm smirking because

15:02

this is the kind of stuff where every rule

15:05

of thumb, like can be disproven. I

15:07

feel like everything in the markets can be disproven if you

15:09

want to find something.

15:11

That's like, that's like one of the, the

15:12

best and worst parts about the markets is you can torture

15:15

the data any way you want. And I'm not saying this is data torturing,

15:17

but I'm saying that if you look hard enough and,

15:20

and like have enough rules, you can, you can

15:22

like,

15:22

you can change the way that these

15:25

data points look. And I think it's, that's one of the

15:27

maddening things about the markets for some people. Totally.

15:30

So maybe people want there to be rule, ironclad rules that

15:32

like, if this happens, then this happens

15:34

and that don't take everything at face value, take

15:36

everything with the grain of sand.

15:39

No, but this is, but this data point is not like when

15:41

the S and P is up this and the

15:43

sky is green and there's wildfires in Canada,

15:46

like, no, this is pretty, this is basic shit. When

15:48

the market's up a lot in the first half of the year

15:51

falls, it continues to rise to the end of the year.

15:53

Historically, that's just, those

15:55

are just the facts. I'm sticking with my 20% gain

15:57

is way more likely than finishing the year down, which I.

15:59

a while ago just because 20% gains

16:02

happen a lot. Yeah, good call. All

16:05

right, here's a face blower for you. Retail,

16:08

this chart comes courtesy of Daily Chartbook, which

16:10

again,

16:11

worth subscribing to if you're a chart lover. Okay,

16:14

retail investor flows have reached new record

16:16

highs over the last month.

16:18

So

16:20

this chart shows retail

16:23

investor flows

16:24

like a three-week average and then there was a

16:26

huge breakout

16:28

during the pandemic. The pandemic changed

16:30

investor behavior, maybe not forever,

16:33

but

16:33

maybe forever. And then there was a huge jump that

16:35

it went sideways for a couple of years and now it's re-accelerating.

16:38

So you would think, wait, didn't all the people,

16:40

all the Robin type people, all the Reddit

16:42

type people, didn't they all get washed

16:45

out in the bear market from 21 to 22? Actually,

16:49

no.

16:49

So can we say that the speculative

16:52

excess and behavior that happened in

16:54

late 2020 and early 2021 was a

16:56

good thing for

16:57

the markets because a lot of people stuck around

16:59

and continued to pour money into the markets? Is that

17:01

fair? Is it a good thing? I think it's

17:04

complicated. What I said at the time

17:06

was

17:07

people don't get unaddicted to gambling.

17:09

Now I'm not saying that all of these people are like junkies.

17:12

I don't mean to say it like that,

17:13

but the market can be an

17:15

addictive substance.

17:17

But you're right that all of these crypto

17:20

fell 80% and a lot of these speculative stocks

17:22

fell 80% or 90% in some cases. No, they moved

17:24

on.

17:25

And if that stuff didn't get people completely out

17:27

of the market and people are still putting money in

17:30

and I think it's a net positive. All

17:32

right. I'm going to quote myself on a tweet here and

17:35

I got a bunch of feedback on this one. I

17:37

said in 2010, people who wanted the system to fail,

17:40

the financial system should fail. They blamed the Fed.

17:42

If it wasn't for the Fed, the financial system would have

17:44

failed.

17:45

Now in the 2020s,

17:47

people are saying, well, I blame fiscal policy

17:49

for not allowing the system to fail. The system would have failed. It

17:51

wasn't for fiscal policy. And I said, call me crazy,

17:53

but

17:54

most elected officials and Fed

17:56

people and treasury people,

17:57

they don't want the financial system to fail.

17:59

So if you keep looking for reasons for this

18:02

whole system to fail,

18:03

I'm sorry, most of the time it's probably not gonna happen.

18:06

That someone's just gonna, oh,

18:08

system's going down, let's let it happen. Right?

18:11

You would think that's fairly intuitive. And of course,

18:13

I got a lot of the crazies in my mentions about this, but I got a

18:15

few people who are like not

18:18

all the way perma-bear, but close enough.

18:20

And some people said, well, listen, I just want to see

18:22

lower housing prices and

18:24

starting valuations like they were in the 80s

18:26

for my kids. I want my kids to have better

18:28

access to

18:29

lower stock prices and lower housing prices, which

18:32

sounds great in theory, right? That

18:34

sounds amazing. But guess what

18:36

you have to have for really lower housing prices

18:39

in really lower valuations, like an awful

18:41

economic period where your kid probably

18:43

doesn't have a job and people are out of work

18:45

and their wages aren't rising and

18:47

that's unfortunately the

18:50

rub here is that like the

18:52

thing you want to bring things back in balance

18:54

and I think that there's more to the housing price

18:56

thing than stock. Like you can't just create more

18:59

stocks. Like we could,

19:00

there's stuff we could do policy-wise to make

19:03

it housing more affordable.

19:05

We could make it way easier to build houses.

19:07

And I don't think that would necessarily have to mean housing prices crash,

19:09

but they just don't go up as much anymore.

19:11

You can't do that for the stock market, obviously, right?

19:13

You need 20%

19:14

interest rates to see eight times price

19:16

earnings ratios.

19:18

And I don't know what situation makes it happen. But

19:20

anyway, I just think that that whole mindset

19:23

of the financial system collapsing is

19:26

I don't know. Good luck. And then there's a... Wait, hang

19:28

on, hang on, hang on. That mindset that you're

19:30

describing is a pretty fringe group. Like

19:32

that's not, that's not, I mean, those

19:34

people are loud maybe on Twitter,

19:36

but the people that want to see the world burn

19:38

is such a small group of people that it's probably

19:40

not even worth giving them the time of day.

19:43

Maybe it is just like the Twitter thing, but the

19:45

number of people who are Fed haters

19:48

and financial system haters that are constantly

19:50

just spamming my messages

19:52

on Twitter.

19:53

Anytime it goes, I have something that goes

19:55

a little bit, you know, outside of my

19:57

usual finn twit group. This

20:00

is definitely a case of Twitter is not the real world But

20:03

you're definitely over indexed on Twitter the

20:05

tweets in the last couple weeks about people saying that like

20:08

if you index for inflation Things were better in the Great

20:10

Depression than they are now

20:11

do you and I know a lot of this is just outrage

20:13

bait and stuff like that, but

20:15

I think there's enough it's Enough

20:17

of a non fringe

20:18

that people believe this kind of stuff

20:20

and think like if the financial system just fails everything

20:22

look better I mean, that's right.

20:25

It's not it's

20:26

that's true But yeah,

20:28

so this this Ethan Malek tweeted

20:31

this this

20:32

cynical genius illusion We talked about this in the past

20:34

how like pessimism just seems more

20:36

just more intelligent than optimism

20:39

It's a worldwide survey of 200,000 people finds

20:41

it cynical people are thought of as smarter But that

20:43

in reality cynics test lower on cognitive and

20:45

competency tests Stephen Colbert

20:48

said cynicism masks masquerades as

20:50

wisdom, but it is a furthest thing from it. I

20:52

Totally true if you like

20:55

want to sound smart you can by being

20:57

Pessimistic and if you're if you're bullish

20:59

you just sound naive. It's like well, you don't see the

21:02

risks. What are you an idiot? Don't

21:04

you see? How things can go

21:06

wrong? But this is the whole thing about like

21:08

listen, I would have been right if not for a B

21:11

and C true So it might it's the same thing by

21:13

the way, Michael Barry's How much do you spend

21:15

on this puts 1.6 trillion dollars or

21:18

is it 10 trillion? I can't remember

21:20

This puts around the wall hit what's up?

21:22

Oh, oh, so it's not not working

21:25

Does I mean you're looking at the market? I

21:27

don't when they expire but there are

21:29

It's taking a bath

21:30

does Michael Barry count as retail inflows or to silver

21:33

hedge one

21:34

Maybe he's propping up retail inflows. It's

21:36

all Michael Barry

21:37

Alright US personal consumption

21:40

expenditures. Look at this right back

21:42

on trend. This is real consumption

21:45

race is higher even with higher inflation I

21:47

Think

21:49

The higher inflation piece is impressive But I think

21:52

even more impressive is just the drop in the pandemic

21:54

and then the this just the reacceleration to trend

21:57

Again, this is a this is consumption adjusted

21:59

for inflation is still on

22:01

trend, basically since, like

22:04

look at, if you did your R2 on that

22:06

one or whatever, R2D2 thing. R

22:09

squared.

22:10

I'm taking away your CFA designation. By

22:12

the way, I got an email this morning, hi CFA.

22:15

You know those dumb ass emails that just, it's like hi first

22:17

name and then it's just sometimes just. Not even

22:19

trying.

22:20

All right, Joey Politano. Rapidly

22:23

rising interest rates have sent direct costs

22:25

to service the national debt up dramatically. Look at this chart

22:27

here. Federal interest payments are soaring.

22:30

And

22:31

this is one of the reasons that I thought that rates

22:34

just couldn't get too high. Because I thought politically

22:36

someone eventually is gonna jump on this and go, hey

22:39

listen, the Fed is jacking up the national

22:41

debt because we're having to pay so much for interest costs.

22:44

I'm waiting for a politician to jump on this. That's

22:47

coming. And make this a political issue. That's coming. Don't

22:49

you think? If rates were to say higher

22:51

and say Jerome Powell is adding to the national

22:53

debt. Yeah, I'm surprised we have, well,

22:55

the election's coming up, so just wait. So there's

22:58

a chart from, where

23:00

did I grab this? I think this is Apollo.

23:02

US net interest payments

23:05

as a percentage of the federal government receipts.

23:09

When does this, and obviously it's breaking

23:11

out.

23:12

When does this start to matter? And if so,

23:14

what are the implications for this?

23:16

I mean, it depends who's in the leadership role of the

23:18

government, obviously. But is it possible that 2020 just

23:21

kind of broke the, it's like the Stephanie

23:23

Kelton thing of the debt doesn't

23:25

really matter if some people think that, and

23:29

then it doesn't matter until you say it does, I

23:31

guess. I don't know.

23:33

That it's like, well, just keep spending money. We'll be fine.

23:36

Has anything bad happened from us spending so much money

23:38

yet?

23:39

No, okay. I know, I'm not asking rhetorically.

23:41

I have no idea. I don't know. I'm saying

23:43

that, but I'm saying if that's, I think

23:45

it's all political will until there's

23:47

a really big crisis. And obviously the inflation

23:50

was like

23:52

our first

23:53

dealing with this.

23:55

So I don't know, maybe if we have this soft landing from

23:57

such high inflation, it's a bad

23:59

thing. bad thing because people just kind of go,

24:02

yeah, we made it through that, not too bad. It was pretty quick. Let's

24:04

just keep spending.

24:05

Yeah, I don't look at this chart and think we're all gonna die, but

24:08

I don't know. Doesn't this,

24:10

can't this lead to a really bad outcome?

24:13

Like the end of the financial system?

24:16

No, I don't know. It's just like, I don't know,

24:18

something bad. I know the

24:20

government is not a household and it shouldn't be treated as such, but

24:22

I don't know. But don't you think that

24:24

the only, I mean, the

24:27

bad thing would be if higher

24:28

debt costs just

24:30

push, like

24:32

if it's a pie that's not growing and higher

24:35

debt costs make it so other stuff is not being

24:37

spent on, right? That's a bad thing.

24:39

Other government services are being left by the wayside,

24:42

but it's just, is an inflation the biggest risk always from

24:44

something like this?

24:46

What do you mean? It's just

24:47

like substantially higher, like government spending being

24:50

so high just means that I think

24:52

the biggest risk is always going to be higher than average

24:54

inflation.

24:55

But I don't think this is government spending. It's

24:57

just like what

24:59

it costs to borrow, what it costs to service all

25:02

of our debt,

25:03

government debt.

25:04

That's what I mean, but then we just print more money to pay off the

25:06

debt.

25:07

It's like a,

25:09

some people would call it a Ponzi scheme. It's not,

25:11

but that's what. All

25:13

right, something else back to trend. Jason

25:15

Furman was tweeting about how

25:17

real average hourly earnings are kind of coming back down

25:19

and he did the trend through like 2018 and

25:22

it was below trend, but then he said, well, let's look at 20, going

25:24

through 2007.

25:25

So you have

25:27

a more cycles, you have a

25:28

couple of recessions

25:29

and it's 0.6% below trend. This is

25:32

real average hourly earnings, but basically

25:34

kind of back on trend. We had a huge spike,

25:36

then we had the below and now we're back.

25:38

And so the whole people falling behind thing

25:41

has happened for the last 18

25:43

months or whatever,

25:44

but it was short-lived and we're just kind of back on trend. And

25:47

if you look here,

25:48

this is kind of the way things go. Above trend, below trend,

25:50

this is how cycles happen.

25:53

It's not bad. Like,

25:55

look at this next one. I did inflation rate,

25:58

US quits and US job.

25:59

openings. Okay. So

26:02

they all kind of follow the same track. And

26:04

I did it on different, you can do it on different

26:06

pains here in white charts. You know, I don't want to be accused

26:09

of doing a,

26:10

an, an access chart crime. Right.

26:13

I'm very

26:16

aware of the chart crime. So inflation's

26:18

coming down.

26:20

So they all kind of rose at the same time. They're all falling

26:22

at the same. So

26:23

is it possible for things to just go back to normal?

26:25

Like Matthew Boeser tweeted that, uh, the

26:28

quits thing was, was insane

26:30

during the pandemic.

26:31

Right. That was the fastest way to get a raise was to quit your

26:33

job and get a new one. Yes. But

26:36

that's all I guess the hard part is like,

26:38

how do you distinguish between

26:40

things getting back to normal and things overshooting

26:43

and leading to

26:45

bad outcomes?

26:47

You just, I mean, obviously you just don't know. Well, you just

26:49

wait and see. Yes.

26:53

All right. Let's talk about crypto a little bit.

26:55

So

26:57

gray scale

26:58

won their case against the SEC.

27:02

Now the balls in the SEC is court, but they still did.

27:04

They still did delay the decisions on the ETFs

27:08

for another. I think it was 45 days, more days

27:10

kicking the cam, the gray

27:13

scale, the GBTC discount

27:16

shrank rapidly. Last

27:18

reading was it was at a 90% discount

27:21

to nav. And this is like the whole crux of the issue is

27:24

that the GBC, the GBTC

27:27

closed and fund does not have the

27:29

arbitrage mechanism that ETFs do. So it could trade

27:32

at a wide premium as it did in

27:34

the first couple of years of its life, which led

27:36

to a lot of the nonsense. Now it's had a severe

27:38

discount. And if, and when a bit,

27:40

the, they're able to convert to an ETF that

27:43

will shrink ostensibly overnight. And

27:45

so GBTC, GBTC

27:48

is up 123% in the year as this discount is narrowed.

27:52

More than twice as much as the 55% year

27:54

to date return on Bitcoin.

27:59

up 285% or the last

28:01

five years, Grayscale is up 94%. Oof,

28:04

big oof. But even with

28:06

the fill, I don't wanna steal a take here, but I think it

28:08

was yours,

28:09

but you basically, was it you who said like,

28:12

I don't think Grayscale wants us to convert

28:14

to an ETF because they're just earning 2% per

28:17

year on this or something. They're not gonna be able to charge

28:19

the same amount of fees

28:20

on this as they would if it didn't convert to

28:22

an ETF.

28:23

So I think when they would do all the hand wringing a

28:26

couple of years ago, that I

28:28

have no evidence of this. I'm just speculating that it was sort

28:30

of a charade.

28:32

Like let us convert, you know, but I think

28:34

now they need to.

28:36

Well yeah, there's no other choice because an ETF is coming

28:38

one way or another. Right.

28:40

When this thing converts, how much money is just immediately gonna

28:42

leave? That was just

28:46

waiting for this discount premium to, or

28:48

this discount to close. Why would it leave? You mean people that came

28:50

in late?

28:51

And they're just waiting for a pound? People that were using it as like a arbitrage

28:53

opportunity.

28:54

So, well I don't know, you think people are gonna

28:56

pay taxes just to get into

28:58

a cheaper vehicle? Or money that's just

29:01

been stuck there for years. People saying,

29:03

why would I sell this asset that is trading

29:05

at a discount?

29:06

And then once that discount closes, and

29:08

it's back to where it was, it can't even really leave?

29:11

I don't think so. I think

29:13

so because there's gonna be a price war. All right, so let's

29:15

say there's $16 billion in the thing. I mean, how much for

29:17

the leaves? A billion? I

29:20

think like a third of it could leave. No way. I

29:23

would hardcore take the on there and I'll bet you

29:25

a sushi dinner. I don't need sushi.

29:28

But you don't want to put it on. Neither do I. All

29:30

right, so they get an ETF. Within six months,

29:33

they're down a third in assets.

29:34

No way. Time stamp it. Okay.

29:38

That money's going to iShares or something else that

29:40

has a lower fee. Nah, nah.

29:45

So anyway, the pop,

29:47

poof,

29:48

evaporated. There was a big fat pop, and then

29:50

Bitcoin traded from like 25 to 28 or something. Now

29:53

it's back down to wherever it was pre-announcement.

29:56

So even despite the 55% year-to-date,

29:59

turn on Bitcoin. It just seems nobody cares.

30:02

Nobody's interested. Tom Duntley tweeted

30:04

almost $300 million in digital asset outflows

30:06

over the past seven weeks. Centralized

30:09

exchange volumes at 2020 levels reaching peak

30:11

bearishness apathy slash

30:13

apathy. Of course, we don't know where

30:15

the peak is, but or peak in apathy,

30:18

bottom in price. But

30:19

yeah, nobody cares. It's hard to see the ETF

30:22

being the savior to the industry. Why?

30:26

Oh, I'm saying it's not like the ETF

30:28

has raised interest in it so far. You think the ETF

30:30

is going to be a savior to the crypto industry? No, probably

30:32

not. I mean, remember when

30:36

they launched Futures are going to be traded at the CMA. Matter of fact,

30:39

I think that was the top in 20, whatever

30:41

it was, 19. I don't remember.

30:45

This morning though, so we always talk about the use

30:47

case, the use case. Where's the use case?

30:50

This morning, from

30:52

Visa, actually the head of crypto at Visa tweeted,

30:54

Visa expands stable coin settlement

30:56

capabilities to merchant choirs. Now I read

30:59

the tweet that I'm going to be honest. I don't understand most

31:01

of this, but

31:02

I mean, Visa blockchain.

31:05

Say

31:07

no more. Hello, Visa blockchain.

31:10

So

31:12

I don't know. Maybe, maybe, I mean, that's just been a speculation

31:14

all along is that TratFi uses

31:17

blockchains to bring efficiencies

31:20

to

31:21

their ways of doing business. Yeah, it's behind the scenes

31:23

for the financial system. We spoke to Fidelity

31:27

last week.

31:28

When's the podcast dropping on that?

31:30

Next Monday. Next Monday. Okay.

31:32

All about Fidelity digital assets and what they're doing

31:34

over there. So that's coming on Monday.

31:38

All right. I want to talk about idiosyncratic risk and real

31:40

estate, which

31:41

man, that's just a word I love saying, idiosyncratic.

31:43

It is a good word. That's the word that makes you in

31:45

the finance world. It makes you sound a lot smarter.

31:48

Right? Yeah, I like it. It's a good call.

31:50

Yeah. Okay. So I got an email

31:52

last week on, I think Wednesday morning.

31:55

I'm in kind of an old school. We

31:57

were building where my office is.

31:59

It's just a bunch of little small businesses, doctor's

32:02

offices, and insurance companies. And

32:04

I just have a single office for me. It's just

32:06

me here. I'm holding down Redhold's Wealth, Grand

32:09

Rapids by myself.

32:10

I have an office. I've had it for seven or eight years.

32:13

I get an email from the building manager. And

32:15

they just bought this building like 18 months ago, probably.

32:18

And so whoever

32:20

sold made a good timing on

32:22

getting out

32:23

of commercial real estate. But said,

32:25

hey, a pipe burst on the third floor, there's three

32:27

floors, and water is rushing down. And

32:30

it happened at four in the morning.

32:31

So the fire...

32:32

I don't know how they got alerted to it.

32:34

The fire trucks came over at

32:37

like six or seven a.m. and shut it off. And

32:39

so water was running for three hours for a burst pipe.

32:42

And so I come to the office to

32:44

check to make sure all my computer podcast

32:46

gear is okay.

32:47

And I was...

32:50

There's three inches of water in the hallway. I

32:52

had to take my shoes off to walk through the hallway. Just

32:54

broken stuff everywhere.

32:56

And office on the left

32:58

side of me, office on the right side of me are flooded. Just

33:01

total flood. Again, three

33:03

inches of water. My office is completely fine.

33:06

I don't know how it happened. I got lucky. But

33:09

they had to have this crew come in, this

33:12

restoration crew. It was like seven

33:14

trucks. And they're ripping stuff up. And

33:16

they're putting these huge industrial fans down. And they're

33:18

turning stuff off. And they're spraying for mold.

33:22

It just got me thinking about...

33:24

That's

33:26

the thing you don't hear about in investing in real estate, is

33:29

the one-off things that can just screw you.

33:31

Obviously, I'm sure there's some insurance or they'll probably be

33:33

okay. But I can't imagine owning

33:36

a

33:36

building like that and suddenly this happened

33:39

and having to deal with the ramifications.

33:42

Your index fund is not going to call you in

33:44

the middle of the night and say a pipe burst.

33:47

Right?

33:48

I'm not saying like, don't invest in real estate. It

33:50

just made me think of that. There's

33:53

a lot more stuff that can go wrong

33:56

if you're not

33:57

diversified. More stuff can go right,

33:59

too. But

34:00

the the range of outcomes is just wider. I

34:02

was at the dinner with a friend of mine

34:04

the other night and he had a phone call

34:06

and it was probably 10 o'clock and

34:11

Now he's not he's not a

34:13

real estate investor

34:15

he's a general contractor and one

34:17

of his clients like had had three

34:19

inches of water in their apartment because I Don't

34:22

know whatever something thought a pipe or whatever

34:24

whatever. But yeah,

34:25

this should happens and

34:27

Not phone calls you want to get but it's phone calls that you will get

34:30

Right, that's a problem. All right.

34:33

Is this a chart crime? I

34:35

Want to talk about this a bunch of people tag me on this

34:37

someone posted on Twitter I mean it certainly is

34:39

believe it or not housing affordability hasn't changed in last 40

34:42

years The median new house today

34:44

is almost a thousand square foot bigger than 40 years ago

34:46

price per square foot inflation adjusted Basically

34:49

is unchanged since 19 the late 1970s.

34:51

Could we've rewind to the believe it or not part because I'm gonna go

34:53

with the or not

34:55

So here's the here's the problem

34:57

with this So I looked at

34:59

the actual source of this article that my first problem

35:01

with with it is it stops in 2020

35:04

right, so I

35:05

Think you could have made the argument through 2019 2020 that

35:10

and I did like adjusted for inflation and interest

35:12

rate You wrote a post on that.

35:13

Yeah, and it was like basically Two

35:16

years ago. Yeah, that that

35:18

held water In 2017

35:21

the price per square foot of a new home was only 4% more than in 1979

35:24

This is adjusted for inflation,

35:27

but it stops in 2020 luckily

35:29

our resident actually

35:31

guy on Twitter Jake economic

35:34

Took the data through 2023 now you can see it just

35:39

Right. It just takes off. Come on. Don't don't

35:42

don't tell me that buying a house is not expensive adjusted

35:45

for any affordability is

35:47

right now is the worst I'd say that it's ever

35:49

been and that's especially

35:51

when you

35:52

Mix in the fact that the supply is so low But the

35:54

thing that's the crazy thing is through the

35:57

2010s housing was still very

35:59

affordable

35:59

And then in the blink of an eye, it

36:02

became unaffordable. That's the

36:05

hard part.

36:06

Here's one for you.

36:07

Good luck buying a house in Miami.

36:10

Median home sales in Miami rose 17% from

36:12

a year earlier.

36:13

In the four weeks ending August 27th, the biggest increase,

36:16

the metro area scene since October 2022,

36:19

biggest increase of all 50 most populous US metro

36:21

areas. They

36:22

said the funny thing is,

36:24

unlike most

36:25

big places that had a huge influx of housing,

36:28

Miami never saw housing prices

36:30

drop.

36:31

So housing prices never dropped. And then now they're increasing

36:34

almost 20% again, which

36:36

is just kind of crazy. They also said

36:39

two out of every five buyers in Miami are paying

36:41

all cash. So it's just rich people coming in

36:43

and buying up Miami.

36:45

Median home sale price was up to 380,000

36:47

up 4.8% from a year earlier.

36:51

That's the biggest increase since October. I'm

36:54

still waiting for these monetary policy lags to hit

36:56

the housing market because that

36:58

should be the one that gets hit right away, right? I know

37:00

people keep saying, just wait, the lags are happening. They're coming. They're coming. Credit

37:03

to

37:03

Goldman. I was reading one of their notes this morning and

37:05

apparently they've been saying that they don't buy

37:08

the notion that

37:10

the lags will, that the

37:12

policy impact

37:15

lag thing. That doesn't make sense.

37:17

That's not in English, but you know what I'm saying? They don't buy

37:19

it. They're not

37:20

buying it. They say not only is the

37:22

impact not going to show up on a leg, it's not

37:25

going

37:25

to show up at all.

37:27

My retort would be

37:29

things happen so much faster now that you'd think that

37:32

policy would get priced in, that the financial system

37:34

moves way quicker than it did before.

37:36

The other thing would be it would just, if rates stayed

37:38

at this level, then eventually

37:39

there has to be something that happens.

37:42

Like it can't, but if inflation

37:44

is falling and the fed cuts rates over the next 18 months or so, then I don't know.

37:48

How can you call it lags at that

37:50

point? I don't know.

37:52

This does seem unsustainable, but

37:54

you know, the hell do we know?

37:55

So

37:56

they had, they also had the housing payments

37:58

are up 17, 28%.

37:59

year over year. We've shown this chart before,

38:02

but it's at an all-time high, again, almost $2,700. There

38:04

was a story in Fortune about this couple that

38:07

asked on their registry,

38:09

put for a down payment fund. So they

38:11

said, give us money for a down payment

38:14

as a wedding gift, which

38:15

I actually applaud them for. It's

38:17

kind of sad. It has to be that way. So then it

38:19

says they couldn't find anything, couldn't find anything. They

38:22

found, I think they were in Florida, they

38:24

found a 900 square foot one bedroom condo

38:27

listed for 300K, also 600K, 600 extra

38:30

of HOA fees. They had a 7% mortgage, $2,300. I don't know. That seems expensive

38:34

to me.

38:36

It's just crazy to me how much that 7% mortgage

38:40

just kills you. Also, our HOA fee

38:42

is the biggest scam in the world.

38:44

Like you hear about some of the

38:46

condo fees people have to pay. What is it? I don't

38:48

know what that stands for.

38:49

Homeowners Association?

38:51

Yeah. But like if you like, I mean, New

38:53

York is the most egregious example, but some of the

38:56

fees you have to pay to live in a condo building, there's no way

38:58

it costs that much for upkeep for these places.

39:00

So where does it go? Just to the coffer?

39:03

I don't know. That's what I'm wondering.

39:06

You know, we spoke earlier on the podcast about

39:08

Brian

39:09

who happened to be listening to the podcast last week and get

39:11

my pants,

39:12

the craziest story.

39:14

And I'm sure I told this at the time, this

39:17

was years ago.

39:18

You know, we've been doing this podcast for a long time. We

39:20

have over five years, right? Coming up, we

39:23

started in November 2017, I believe. That's

39:26

right. So I bought

39:28

an apartment, a co-op

39:31

in Park Slope in 2015. And they'll

39:36

never not sound like a ski city

39:38

to me. Why Brooklyn is called Park Slope. I don't

39:40

get it. It sounds like it should be a ski city in

39:43

Utah.

39:44

Well,

39:45

there's a park, Prospect

39:48

Park.

39:49

And you know, the

39:51

city slopes downward, I guess.

39:53

Anywho, there was no money in

39:55

the bank for this building. There's only like five

39:57

or six units.

39:59

And in the bylaws,

40:02

there's a flip tax.

40:05

Cause there's, you know, it's a very small building. They don't want anybody

40:07

buying and selling.

40:09

And the flip tax was in place for four

40:11

years, which is a long time, right?

40:13

Four years is not a flip.

40:15

And so I sold my hat, my, my

40:18

unit

40:19

with like three years, six

40:21

months, three years, eight months, whatever it was. And

40:24

these jerks in my building wouldn't let

40:26

it go.

40:27

I had to pay like a 2% tax or

40:29

whatever it was 2% of the purchase price. Why

40:31

do they care if people buy and sell?

40:34

Well, cause I don't, cause it's a family. It's, you know, it's families

40:36

there and they don't want a lot of turnover.

40:38

Okay. But four years that's excessive.

40:41

So anyway, so they said no,

40:43

they hit me with a flip tax. And then,

40:46

so I probably complained about it on the podcast and

40:49

some, I got an email,

40:51

the person who sold me the apartment.

40:55

So the person that I bought from the person

40:57

that they bought from

41:00

is a listener. So basically

41:02

my grand, my grandparents, my grandpa of the apartment,

41:05

he was the one who put the flip

41:08

tax in place. So

41:13

he apologized for me, but what a small world. What

41:16

if you get someone who buys into the building that you don't want to be there?

41:18

You want them to get out.

41:20

That's a great point. You're holding him in there. That's

41:23

a great point. All right, we've looked at

41:25

this before.

41:28

This is from the economist, real

41:30

housing prices since 2000. It shows Canada,

41:32

Britain, Italy, US, France, Germany, Japan. Canada

41:35

is just off the charts.

41:37

I wrote a piece in, I think 2017. I

41:39

wrote a piece in 2017 saying the Canadian housing market

41:41

is a crazy, crazy bubble.

41:44

It didn't really matter.

41:46

Yeah, should've, should've, that's the Stanley Druckenmiller.

41:49

George so- When you see a bubble forming, you go

41:51

in to write a blog post.

41:53

Britain is way higher, France is way higher. The

41:55

US still doesn't look, Italy is falling,

41:57

I guess, if you want to place on Lake Como with George Clooney.

41:59

that's the place to buy.

42:02

I keep coming back to the idea of, I

42:04

don't know, just what if

42:07

US housing prices are, if we don't

42:10

ever, if we don't have some

42:12

government policy that forces

42:15

builders or incentivizes builders to build more homes,

42:18

I think US housing prices are still gonna be undervalued

42:21

for like a long, long term. Hey, maybe

42:23

the guy who did that tweet was right.

42:24

Maybe it's not a chart card. Maybe US home prices are cheap.

42:27

Certainly not cheap, but I mean, are we really gonna look

42:29

back in 30 years

42:31

and see

42:32

like housing prices not go up most of the time?

42:35

Even if it's not as, I don't know.

42:38

We got an email. Hi guys, as you know, housing

42:40

in Canada is bankers. Now three of the five,

42:42

big five banks have disclosed that 20% of their mortgages

42:45

are negative amortization, which means

42:47

the monthly payments aren't enough to pay

42:49

the interest. What?

42:53

And the remaining interest is getting added back

42:55

to the principle, oh boy.

42:57

Okay, I just learned about this. Do you know how

42:59

Canadian mortgages work? I know they're

43:01

like very short term, right? They're flowing. Let

43:03

me explain this to you real quickly, so I can get to the rest. I learned about this.

43:06

Someone sent a story about this.

43:08

So they're fixed payments,

43:09

but the interest is a variable. So all

43:12

it does is if rates go from 3% to 7%,

43:15

it extends the life of your mortgage or

43:18

less money goes to your principle

43:20

and more goes to interest.

43:22

So the payment stays

43:23

the same. It's not like they're jacking up payments,

43:26

but the amortization thing they're talking about here is basically

43:29

instead of

43:30

whatever, 60% of your payment going to principle,

43:32

now 20% is or something. Wait, let me ask you a dumb question.

43:34

You're paying more interest. Is that a better system

43:37

than what we have?

43:39

No, because eventually if you're underwater,

43:41

like they're saying,

43:43

they're gonna have to either extend the loan, you're paying

43:45

more, or

43:47

certainly not a better system.

43:49

It's not a good thing. We're

43:52

lucky that we have things the way they are.

43:55

Well, actually, you know what?

43:57

Because yeah, because how

43:59

many...

43:59

How many people are actually impacted by

44:02

rising interest rates? What

44:04

is it? Two thirds of people? How many

44:06

people

44:08

have a fixed rate mortgage

44:10

below 5%? Like 90% on their six?

44:12

Anyway. The other thing is, people in Canada,

44:15

they benefited when rates were falling. They did amazing

44:17

when rates were falling having a variable rate mortgage. So

44:19

everyone benefited on the way down and everyone's getting hurt

44:22

on the way out.

44:23

So

44:23

better for inequality maybe.

44:26

All right. This

44:28

is possible because in Canada, okay,

44:30

we already discussed this. Yeah, pretty wild. But wait, it

44:32

says, and their new amortizations get reset to a maximum

44:34

of 25 years. What

44:37

if you've got like five years left

44:39

and then all of a sudden rates go up and then you get, you're

44:41

like, sorry, you've got another seven years. So

44:44

that's what I don't know. Maybe people in Canada

44:46

can let us know. I don't know if that means you have to make like a big

44:48

principal pay down to get it more in line.

44:51

Like if that's

44:53

the 25 year thing, like they can't give you a 50 year

44:56

loan.

44:57

The banks aren't going to do that.

44:58

Do you have to like just do a principal pay down?

45:01

All right. Another email, random bank in Dallas

45:04

bought my mortgage 3.07% with 17 years left. How

45:07

is this a good move on their part? What am I missing? I

45:10

couldn't care less. But for them, isn't that like buying a 17

45:12

year bond at 3.07% maybe they'll package it

45:15

with other mortgage and sell it. Okay.

45:18

No,

45:18

this is not like buying a 17 year bond at 3.07% because even

45:20

though that's your mortgage

45:23

rate,

45:25

the prices on these bonds have adjusted

45:27

so

45:28

that instead of them, they're not getting

45:30

a 3% coupon. They're probably getting closer

45:32

to, I

45:33

don't know, whatever six, 70%.

45:35

Well, no, they're buying the bond at a discount. Yeah, they're

45:37

buying the bonds at a discount, which raises a good point. But

45:40

trading for 80 cents in the dollar or whatever it is because

45:42

of the change. We were asking

45:44

about, we were wondering why are

45:46

spreads so wide

45:49

on

45:50

mortgage rates versus the 10 year?

45:54

And I think we got, actually we had a long email about this is because

45:56

prepayment risk. Right.

45:58

Bond buyers are like, no. Sorry,

46:01

I know that as soon as rates go

46:03

down all these bonds you get refinanced

46:06

And so I'm buying them at 8% but they're

46:08

not really gonna give me 8% of maturity so

46:12

Whatever the number actually ends up being obviously nobody knows

46:14

the path of interest rates But that's a

46:16

big reason why the spread between

46:18

mortgage rates and the tenure is where

46:21

it is because everybody knows That

46:23

there's a ton of refinancing risk when it's

46:25

also better Bonds and prepayment

46:27

has been extended now too because a

46:29

lot of the bonds that are at 3% are not getting

46:32

prepaid And so they know the duration is even longer

46:34

in the past You would assume a mortgage bond is gonna pay off

46:37

in like I don't know an average of seven or eight years

46:39

If that duration gets extended to 12

46:41

to 15 years, that's a whole different kind of bond.

46:43

Yeah

46:45

Then you got a new car lease

46:47

Okay, I want to talk about this here, but we're

46:49

talking to car dealership guy

46:51

later today actually for a podcast It's gonna run. I

46:54

don't know next week Saturday. We said we were running. We're

46:56

running five days a week We're giving you an extra one for

46:58

free

46:59

on Saturday

47:03

And so I got a new lease and I was just shocked

47:05

at how I thought my car paint was

47:07

gonna go up

47:08

To the moon because auto rates like 9% now

47:11

to the health

47:12

and I was pleasantly surprised I

47:14

might have got lucky but I wanted I'm gonna talk about a car dealership

47:17

guy and save it for that Also new

47:19

car smell just on my kids the best

47:21

my kids are like like run out of the house and

47:23

go into the garage And open the door and smell my car and

47:26

come back And

47:27

I'm like, hey, hey, hey quit open the door. You're gonna you're

47:29

gonna use it all

47:30

Mike my new car smell and my Jeep is just about

47:32

gone. So enjoy

47:33

it while it lasts

47:35

Yeah, cuz you have the top coming down. All right, we talked about

47:37

this before I think a couple weeks ago We talked about how like

47:40

if you're married It's the same as having a hundred

47:42

K added to your salary if your divorce is like taking

47:44

subtracting 90 K Something like that to

47:46

which a bunch of people were replied

47:49

if you just

47:50

get married and divorced a bunch of times That's like an arbitrage

47:52

for 10k You're just Clipping

47:55

the coupon but the Atlantic

47:57

had a piece and they looked at America's happiness

47:59

from 1972 to 2018 and there's this huge drop off in 2000.

48:05

Now my initial thought would have been, oh internet,

48:08

that's gotta be it. Internet, social media, internet

48:10

is making people more unhappy.

48:12

This researcher,

48:14

after slicing a demographic data every which way,

48:16

income, education level, race, location and gender,

48:18

Heltsman found that this happiness dip is mainly

48:21

attributable to one thing, married people are happier

48:23

and Americans aren't getting married as much.

48:25

This number shocked me. In 1986, 6% of 40 year

48:28

olds had never been married today. It's 25% of 40 year olds.

48:32

And so he's saying, and they

48:34

even said in this article, listen, we haven't verified

48:36

and

48:37

dug through the data yet, but

48:39

his whole thing is, it's just fewer people

48:41

getting married means more people are unhappy

48:44

and he didn't really come

48:46

away with a reason though. Why are

48:49

married people

48:50

happier than people who aren't married?

48:53

Because you only have to do half the chores, boom. Dual

48:56

income households, I don't know. They

48:58

didn't give a good answer.

49:03

Maybe it's just that we need companionship. Is

49:05

that the simple answer?

49:07

Yeah, it's lonely being lonely.

49:09

I was gonna talk about this in recommendations. I watched

49:12

National Lampoon's Vacation, it was on rewatchables recently.

49:14

I think it's one of my favorite rewatchables of all time. It

49:17

was Van Lathan and Bill Simmons and Chris Ryan and

49:19

they were just dying the whole time. You could tell that these guys

49:21

had seen this movie like 20 or 30 times.

49:23

And I told you, if you watch it once, you're probably not gonna

49:25

laugh that much. I do need to rewatch it. I

49:28

did chuckle the first time a few times. But

49:30

it's the kind of movie where you kind of go, oh, that's funny, but then if

49:32

you watch that, I watched it, I watched

49:34

half of it by myself and my wife the next time, I'm like, hey, why

49:36

don't you watch the rest with me?

49:38

And it's the kind of thing you'll go, oh, here

49:40

comes the part with this. And it's just

49:43

better to watch it with someone else than it is to watch it by

49:45

yourself.

49:46

All right, last week we talked about disaster insurance

49:48

and how my hedge for climate change is living

49:50

in the Midwest.

49:52

This is from the Washington Post. At least five

49:54

large US property insurers, all

49:57

state American family nationwide, Erie insurance group Berkshire

49:59

Hathaway. Warren Buffett's getting on this early.

50:01

I've told regulators that extreme weather patterns caused by

50:03

climate change have led them to stop rating coverages in some

50:05

reasons. They say they will cut out damage

50:08

caused by hurricanes, wind and hail from

50:10

policies underwriting along the coastlines and

50:12

in wildfire country. So

50:15

people are just gonna be kind of on their own for this

50:17

kind of stuff, or they're just gonna pay

50:20

exorbitant rates

50:21

in the future.

50:23

But people are still moving to Miami. It's

50:26

a-

50:26

Remember last week we were talking about homeowners insurance?

50:29

Now, we did get to be honest on that.

50:31

A bank does require you when

50:33

you're getting a mortgage to have homeowners insurance. But-

50:36

That's what I thought. Was it, is

50:39

it two thirds of people that own a home don't

50:42

have a mortgage? What's the number? Is it one third? I

50:44

can't remember. It's close to 40% of

50:46

people do not have a mortgage anymore. House is completely

50:49

paid off. Okay, so those people, they're

50:51

playing with fire.

50:53

Yes. I

50:55

guess you rolled the dice. Although

50:58

I do, that's a good point. So

51:01

not only are they not raising prices, some of these companies,

51:03

they're just backing out. They're just like, we just can't underwrite

51:05

this. Speaking of that, underwrite.

51:08

That's hilarious when people say, instead

51:12

of investing, they say underwriting. It's

51:14

like, bro,

51:15

you bought four shares. What are you talking about? You're

51:18

not underwriting anything.

51:19

You're buying four shares that you're gonna probably sell in three weeks. By the

51:21

way, I'm talking about myself. Okay,

51:23

it does make you sound smarter. That's an idiosyncratic risk

51:26

kind of thing. You say it, it sounds smarter. All

51:29

right, okay, so R.I.P. to Jimmy Buffett.

51:31

I can't imagine you're a big Jimmy Buffett fan. Maybe you are.

51:34

Well, I like what he's about. He used to come to Long Beach,

51:36

not Long Beach, Jones Beach.

51:38

Every summer, most summers?

51:40

I went to a Jimmy Buffett concert outside of Chicago right

51:43

after I graduated college, and it was

51:45

one of the best pregame concerts

51:48

I've ever been to in my life. It was a huge open

51:50

field, but it was all baby boomers

51:53

in Hawaiian shirts. There were ice

51:55

lusages and tiki bars, and it was an amazing

51:58

time.

51:59

My dad got me into Jimmy Buffett

52:02

way back in the day. For me, it's the kind of music

52:04

in the summer or in the Caribbean, wherever you are in

52:06

Mexico,

52:07

with a Corona, that and Bob

52:09

Marley. To me, that kind of music in a certain...

52:12

That's yacht rock. At a certain time, it's never gonna go

52:14

out of style. It doesn't get better. I just listened to it.

52:16

So there was a story in the New York Times a few

52:18

years ago,

52:20

three or four years ago, how Jimmy Buffett

52:22

does not live the Jimmy Buffett lifestyle.

52:24

And it talked about how he doesn't really drink margaritas anymore

52:26

because he doesn't have sugar and he doesn't really eat cheeseburgers

52:28

because he has no carbs.

52:30

And he doesn't really smoke pot anymore. And

52:33

it says how he worked all the time. And he was

52:35

working on a Margaritaville

52:38

Broadway show or something. And it was like,

52:41

he did have this laid back... I read his

52:43

biography. He wrote a book at age 50.

52:46

And it was really good. He really lived that lifestyle. He'd

52:48

sleep on the beach, he'd live on a boat, he'd drink until

52:50

the sun came up, listening to music and learning

52:53

how to play guitar. He really did live that lifestyle.

52:56

But then in his older years, he became this entrepreneur

52:58

and

52:58

he's worth half a billion dollars and he's just

53:01

working all the time.

53:02

So the whole point of the article was he's not really Jimmy Buffett

53:04

anymore. He's like this businessman and he runs the show. And

53:06

he said, well, I'm more like a sale captain. I wanna

53:09

have my hands in everything.

53:10

And at first I thought it was a practice what you

53:12

preach thing.

53:14

Is this false advertising that he doesn't live in anymore?

53:16

But then the more I thought about it, the more I thought,

53:19

well, of course he couldn't keep that lifestyle up his whole life.

53:22

He wouldn't have made it. And I think

53:25

my whole takeaway was like,

53:27

your priorities change over time. You can't

53:29

just live like you did in your young forever.

53:34

Like you,

53:35

you go to bed at like 10 o'clock now, right?

53:37

And we're staying out late for you pretty much,

53:39

that kind of thing? Yeah, more or less.

53:42

I'm still hanging on to my youth.

53:44

Okay, well, kind of. Anyway,

53:47

it was like a, it made me

53:50

just,

53:50

the whole story pulled me in different directions. Like, wait a minute.

53:53

He does not practice when he preaches, but it's like, well, so

53:55

what your priorities change over time. But

53:57

anyway, RIP to a legend. Still love his music.

53:59

I'm excited to read this email. Michael, I've gotten so much

54:02

insight and entertainment out

54:04

of listening to the pod for the last two years. This

54:07

week's episode was enough to push me over the edge

54:09

and realize that I need to give something back. Unlike

54:11

Ben, I simply couldn't listen to the story

54:14

of a hungry bald who just wants some spicy noodles, sans

54:18

fees, and not do something about it. I

54:21

know you're an Amazon Prime member, so I went

54:23

ahead and launched an offer with Grubhub to

54:25

give you and any other Hungry Animal Spirits listener a

54:28

year of free Grubhub Plus.

54:31

You'll get free delivery fees on

54:34

orders over $12, exclusive deals

54:36

and promotions, and for folks like

54:39

Ben who are swimming in so

54:41

much time luxury that they can leave the house

54:43

for food 5% back on pickup orders. Head

54:46

to the link for the offer,

54:49

and maybe give our Amazon Basics pan another shot while you're out

54:51

there. Sorry, I'm not gonna do that, but thank you for the offer.

54:53

Who is this from? Someone at Amazon Prime? Yeah, can't

54:56

be ordering Grubhub every day and every night in this economy.

54:59

Well, this is a great email. What, okay,

55:01

what? Oh, with one of my credit

55:03

cards gives me free DoorDash Plus or whatever

55:06

it is. It's the Sapphire Reserve. That's

55:09

it, yes. Yeah. Okay, so I have

55:11

that. So we are going to link to this in the show notes.

55:14

Again, free Grubhub for a year, Grubhub Plus

55:16

for a year.

55:19

So thank you

55:21

to the people who are joining us for a year,

55:23

Grubhub Plus for a year. So thank you to

55:26

the gentleman at Amazon for the lovely

55:28

email.

55:29

No more complaints for you

55:31

then about it, right? Oh, I still complain. What

55:34

do you think the market cap of Taylor Swift is?

55:37

I mean, if she was a stock, she'd be outperforming Nvidia this

55:39

year, easily. If somebody

55:41

had

55:42

the opportunity to buy all of Taylor

55:44

Swift's future earnings potential

55:48

at

55:50

today's

55:51

value. I don't know, the amount of- Discount

55:53

it all back. My

55:56

oldest daughter is nine years old and is a-

56:00

self-described

56:01

Swifty, went to the concert, they said to

56:03

my

56:04

wife, we had to listen to it all summer long.

56:06

And like,

56:07

God bless her, Taylor Swift has a great catalog of music.

56:10

I can't take it anymore, I just, I can't.

56:13

It's too much, I need a break.

56:15

But here's the thing, her tour's

56:18

making $1.5 billion or something, maybe

56:20

it'll be two by the time,

56:21

but what's her price to sales ratio?

56:23

If she's making $2 billion on her concert. So

56:25

the smallest stock in the S&P 500 is a company

56:28

that I've never heard of.

56:30

It's called Fortria, although you know what? Not shaming

56:32

me, I don't know every stock in the S&P 500. Fortria

56:34

Holdings. Fortria is a global

56:37

contract research organization, okay?

56:39

That provides services with the goal

56:41

of advancing health.

56:42

All right, whatever.

56:43

That's $2.35 billion.

56:46

If Taylor Swift would publicly trade, would she

56:48

be in the S&P 500?

56:50

Yes. I think so too.

56:52

Right?

56:53

She can't produce $2 billion every year like she is, because

56:56

she's gonna die eventually if she has this

56:57

many tours.

56:59

But

57:01

yes. Gotta be.

57:03

How many stocks in the S&P 500 would you buy

57:06

instead of buying Taylor Swift from here?

57:09

Not that many for me. I'd rather put my money in Taylor

57:11

Swift than I would in most companies in the S&P right now.

57:14

Yeah,

57:15

for sure. All right, Ben, recommendations,

57:17

what do you got?

57:18

I already mentioned National Impun's vacation. Justified

57:22

City Primeval I finished, which I never realized

57:24

I'd written. What is that?

57:25

It's the Justified reboot

57:28

on FX. Justified was a show I mentioned a few

57:30

weeks ago. How, with Timothy Oliphant?

57:31

Yes. I never saw it. Worth watching?

57:34

The second season is amazing.

57:36

I mean, it's five seasons, so it's probably too much for

57:38

you to catch up now. They had

57:41

an amazing payoff from the original

57:43

show in the last 10 minutes. So

57:45

if you're an original Justified person, you have to watch this

57:47

new one, and the ending was just amazing.

57:50

They may be doing another one, I think. But I didn't

57:52

realize, City Primeval is an Elmore

57:54

Leonard novel from the 80s with a different

57:56

character. And Quentin Tarantino and Timothy

57:58

Oliphant

57:59

on... once upon a time in Hollywood said, what

58:01

if we took Raylan Gibbons from Justified and put him into

58:04

this novel and

58:06

updated it? And so it was Tarantino's idea to do this,

58:09

which is kind of cool. I

58:11

watched Lock, Stock, and Two Smoking Barrels last night. I think

58:13

I found it on Starz. Now this

58:15

is the one where back in the day,

58:17

Guy Ritchie became really famous besides

58:19

marrying Madonna when Snatch

58:22

came out, right? Brad Pitt was in it, it was a bunch of,

58:24

but

58:25

if you were a real Guy Ritchie stan, you would say, no,

58:27

no, no, no, Lock, Stock, and Two Smoking Barrels is actually

58:29

better than Snatch. If you were a real Guy Ritchie

58:31

stan, I believe you just referred to as Lock, Stock.

58:33

Sorry, it's a great name,

58:36

and I hadn't watched it in probably 15 years, and

58:38

it's just, the best word I could think of when

58:41

I was finished was, it's just a satisfying movie.

58:43

It's like heists and all

58:45

these storylines coming together at once, and when it all comes together,

58:48

it's a little over the top, obviously, but it's

58:50

just such a satisfying movie. I love movies

58:52

like that, it was so good. Did you

58:54

see Guy Ritchie's The Covenant?

58:57

I did not yet.

58:58

It's a very un-Guy Ritchie film, but

59:00

very good. Okay, that's

59:03

all I got. Me, on to me. All right, I watched Friday

59:05

the 13th, it's on HBO Max, or now, I'm

59:07

sorry, it's called Max. So

59:10

I remember watching Friday the 13th, the

59:12

only time I ever saw it, I was 13 years old, at

59:15

a sleepover on

59:17

Halloween,

59:19

and I was the only one, me and my friends

59:21

were sleeping in my friend's basement,

59:23

and I was the only one awake, and I was in my sleeping

59:25

bag, and I couldn't

59:27

look over the sleeping bag because I was so petrified.

59:30

Well, I gotta say, this movie is

59:32

not even borderline unwatchable, it's awful.

59:35

Didn't age well? It was horrendous,

59:37

just horrendous.

59:40

Your problem is you've probably seen too many horror

59:42

movies in the meantime that built on that.

59:44

Yeah, but, so,

59:45

first of all, Jace is not even in the movie, his

59:48

mom is a killer,

59:49

which, if you've seen Scream, you know that from Scream

59:52

Trivia. But

59:55

just terrible, and Friday the 13th

59:57

is like, it's in the pantheon,

59:59

it's... It's awful. I never watched

1:00:01

any of them. Awful. The horror stuff is

1:00:03

just... Awful. Okay. So

1:00:06

I'm in a bit of a show drought, which I don't mind at all,

1:00:09

not even a little. I dialed

1:00:11

up the season one episode

1:00:13

one of Curb

1:00:15

and

1:00:16

it's from October 2000. So

1:00:19

Robin comes by and she's like, why does this look so

1:00:21

old? Like Cheryl especially

1:00:23

looks like she's from a different era. Like Larry's

1:00:26

still, you know, he's still bald and everything. And

1:00:28

I said to her,

1:00:29

she's like, it's from 2000. I'm like, yeah, guess

1:00:31

what? That's 23 years ago. That

1:00:34

is kind of crazy that the show's been going on for that long.

1:00:37

And the first episode is hilarious.

1:00:40

It's exactly like it is today. Do you remember the pants tent?

1:00:42

No. Oh yes, okay, I do. He

1:00:46

couldn't get the part of his pants to go down. It's

1:00:50

just classic LD and he's still

1:00:52

doing it 23 years later. You sent

1:00:54

me a Curb clip this weekend. I

1:00:56

forgot to respond, but I didn't know the context.

1:00:59

Do you remember we did that? Oh,

1:01:01

that was hilarious. You texted me a Curb clip. It

1:01:03

was, yes, it was pretty good. You were just kind of thinking of Curb.

1:01:06

Yes. Okay, that's it for us. We

1:01:08

want to thank Big John Grayson

1:01:11

for producing this episode. Stepping

1:01:14

in for Duncan. If you are at Future Proof

1:01:16

next week, right?

1:01:18

Yes, next week we take off

1:01:20

Sunday. We will be doing Live Animal

1:01:22

Spirits on Monday. There

1:01:24

may be Miami Vice is available. We'll

1:01:27

see. It's going to be fun. Come say hi to us. Okay,

1:01:30

indeed. Thank you for listening. As always, we appreciate

1:01:33

the support. AnimalSpiritsPod

1:01:35

at gmail.com. We'll see you next

1:01:37

time.