Never Pay Off Your Mortgage | Animal Spirits 436

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On episode 436 of Animal Spirits, Michael Batnick and Ben Carlson discuss: how behavior drives bull markets, how many …

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This message is brought to you by New. What does it mean to invest like the future is watching? As one of the largest global investment leaders managing $1.3 trillion in public and private assets, New is uniquely positioned to take on tomorrow today. Combining over 125 years of deep expertise across income with innovative alternative solutions, Naveen adapts to the needs of investors as they change, offering reliability, access, and foresight to its clients, communities, and the global economy. All in the pursuit of lasting performance. Naveen. Invest like the future is watching. Visit noven.com/future to learn more. Investing involves risk. Principal loss is possible. Welcome to Animal Spirits with Michael and Ben. Michael, one of my all-time favorite stock charts. I think JP Morgan is the first one that did this. It shows the annual stock market returns [music] along with the intraear draw down to get there. >> And it it typically shows even when there's gains, there is a draw down on the way there. This year is a perfect encapsulation of that. This isn't even just the draw down. This is the year-to- date returns as of April 8th, 2025. The S&P was down 15%, NASDAQ was down 19, Russell 2000 was down 20. This is year-to- date returns. Okay. EO was down four, and the emerging markets were down eight. Holy Nikes. >> Now the S&P is up 18, NASDAQ up 23, Russell up 14, EA up 28, and emerging markets are up almost 35%. >> So the Russell spread >> the Russell was down 21 and now it's up 14. >> Yeah. >> I mean, the NASDAQ's the biggest one down 19 now up 23. Unbelievable. Really? Huh? Wow. >> Staying the course worked again. >> It usually does >> 60% of the time. >> Usually that that's a good caveat. Usually >> it works every time. >> But I I think if your default is staying the course works and then one time it blows up in your face or three times over the course of your career blows up in your face, I think that's okay. And then you still stay the course, right? >> Yeah. Um, we talk a lot on the show about like um these driy stats uh that are in internal market indicators like and you know I'm a sucker for these whenever there's a wash out and sentiment is is in the toilet and then you get this I guess in this case this wide bread thrust. >> You know, it's funny because a lot of these indicators were flashing green coming out of the April downturn. >> Yeah. And we were like, "Are we sure we believe?" Most people are sure we can believe these. >> Hang on. I'm a I I think Go back to the tape. >> No, no, you were a believer. I'm saying a lot of people were skeptical like, "Okay, sure. That was then. This is a new environment now." There's a lot of people saying that. >> Yes, that's true. Because we Oh, we haven't even seen the impact of the tariffs and you're going to say that was the bottom. Yeah. No, that was that was fair. Um, but we uh we don't often in fact I think we usually don't revisit these data points. So the at@ cycles fan brought it back up. Reminder, uh the the breath thrust was triggered back on April 24th. 6 months have passed since the signal and the S&P 500 has gained 24%. Makes it the fourth best in history. And if you look at this from 1950 to today, 6 months and one year later, green 100% of the time. Uh now I'm eyeballing it. is I don't know 15 times. And what this me is measuring um I don't know the exact quantitative metrics. It's really not that important. It's when you've got a significant wash out whether it's measured by percentage of stocks under the X moving whatever it is it's it's a quantitative metric and then when that condition exists and there's no more sellers and everybody says oh [ __ ] back in the boat usually that back in the boat moment happens for a very for a reason that's matters and this is just this is the technical analysis that I'm a fan of because this is quantitatively measuring human behavior here. >> So, if we had the wash out and you didn't get this big thrust of buyers coming in, then it would have been like, okay, this is something to continue to worry about. >> Yeah. Yeah, for sure. Um Rob Anderson, who does great work at Net Divas Research, posted tech 66% gain off the April low was the best six-month return for the sector outside of 1983, 1999, and 2000. Look at this. So he he he has a a chart that shows six-month rate of change, threeear rate of change, and 10 year rate of change. Um, and yeah, six month. Wow. Just uh >> I mean, that's like the gain we saw off of the 2009 bottom over this amount of this this amount of time. >> You know, it is a good it's a good thing. I'm thinking of this as I'm about to say it. Let it fly. It's a good thing that liberation >> You can argue with yourself later. >> Yeah, I'm thinking about it. Uh, it's a good thing that liberation day, the liberated disruption happened in the stock market. >> Well, we talked about this at the time like is it possible that that kept us from But obviously it hasn't though. >> But who's to say? Well, I was about to argue with myself cuz who's to say in an alternate universe where this didn't happen. It could have just been a slow steady grind higher. It didn't have to be an explosive move. Uh, who know who knows? But it is it is possible that absent that no hiccups whatsoever that the NASDAQ is up 40% year to date and now we're really talking about a bubble like oh [ __ ] >> Yeah. Right. We just we just kind of pushed it back for like three or four months and then it kept going. >> Ben, you had chart make uh this very good-looking chart that shows the number of companies in the index that outperform on a calendar year basis. And the immediate thing, well, two things stand out. Number one, the number of stocks beating the market the last two years almost off the charts low. We saw this in 98 and 99 with narrow leadership and of course all the money is being sucked up by the hyperscalers. But when I see this chart, I sort of go like I think be careful what you wish for. For people that are wishing that it was more stocks and a rally broadening out and because the most stocks that outperform the index happen in crappy markets and we've spoken >> 2022 was almost 300 stocks. >> Look at 2001 340. You want that? Great. 346 stocks outperformed the index. Uh >> in the in the mid 2000s when the bull market really took off 2013 14 15 was a bad year. 16 and 17, a decent number of stocks took off. That wasn't that bad. Um, but here's the thing I took out of this this I thought the number would be way lower because you hear about >> lower than 152. How much lower could it be? >> I'm saying the average the average is roughly half of all. So, call it 45% or so of stocks outperform in a given year. I thought the number would be lower because if you look over the long term, >> the number is is tiny, right? So, I guess here's here's my biggest takeaway. more actively managed more active managers should outperform in a given year than do >> true. But here's the thing. If they just bought and hold their if they just bought 150 stocks at the beginning of the year, how many ever they they hold and held and didn't make a single trade over the course of the year, they would have a better chance of outperforming than they currently do. >> Two things. Gross of fees manager track record is way better than what is reported. Number two, I think you just muted yourself. Number two is um and I've said this a million times, the best and bidder study is real. It is in the data and it rightly makes a case for index funds and also it overstates it a little bit because it is acting as if people buy the IPO and hold forever and it's ignoring the fact that they listen sometimes there there are opportunities to buy and sell stocks at different points in the cycle. So a stock can fall 80% and be a dog ship company go to zero. A stock can be down 80% to be up 400% in the next year and provide potential opportunities for alpha. So both things can be true, >> right? You could have bought Pelaton and held it until the beginning of 2021 and made a ton of money and sold before it crashed, >> right? >> You made money. And that's a >> um here's my thing though, and this is not groundbreaking. I think picking the stock pickers that outperform is way harder than picking the stocks that outperform. That's my takeaway here. >> Well, I mean, I guess it depends if you're trying to pick a stock picker that could if you're if you're doing it every January 1st. Yeah. I mean, that's impossible. >> How many How many stock pickers have we had in the last 20 years that you can point to that you go, "That person's going down in legendary status." They used to have those all the time. They don't happen anymore, really. >> Yeah. Too hard. >> It's more It's more thematic than anything. >> It's too hard. Okay. Um, this has been the rallying cry of people who don't want to believe that stocks might be in a bubble. It's like a warm security blanket. Well, it can't be a it can't be a bubble if everybody thinks it's a bubble. It just can't be. Oh, really? Why not? So, um, I listened to, by the way, we were Ben and I stumbled a little bit on the ad read. Uh, and I joked, "Reading is hard." Reading is hard. I listened to Aaron Sorcin's uh, nope. Andrew Ross Orkins 1929, which I really appreciate that he read that. Could I can't believe I can't imagine how difficult that is. It's a very long book, too. And he's a he's a good reader. Here's the thing. So, my publisher asked if I would like to read my book. And at first, I said, "No, I don't want to." But then I thought, "Wait, I probably should read my own book, but I it's going to be so hard. I'm not a I I'll I'll trip up a million times. I can't read out loud for too long because there's something in my face, my my gland. I just I produce excess saliva. I can't do it. I can't even read books to my kids for one to 10 minutes. >> There's certain words that always trip me up and I can't get whatever they are. I can't say them correctly. >> So anyway, in in in Sorcin's book, which was tremendous, phenomenal. Kudos to him. Um there were people that said, "Wait a minute, the Fed has to raise rates. This is crazy. How are you allowing this speculation to continue? It's going to end badly. Okay, that was in 1929 when we knew very little about the securities market. Modest proposal tweeted, uh, I'm begging people to go back and read the contemporaneous reporting of the housing market from the spring of '05 to mid '06. It was meticulously documented by the mainstream press how insane consumer behavior was and how prices subsequently began rapidly declining. So people are like pretending that >> there was a there was like Time magazine cover stories about people going nuts for their houses. >> Yeah. And you don't you don't think in the late 90s that people had any inkling that things were a little bit of a miss. I mean >> there was plenty of people >> Yeah. >> The thing is like you could you could say the '9s the overwhelming number of people were on one side of the boat saying like, "Oh, this is great. Things are going to be great forever." But there was plenty of other contrarians who were saying, "No, no, no." >> Yeah. So So anyway, if you're using this as like blinders to say that, "Oh, it can't listen. And everybody who knows it's a bubble can't be a bubble. Not true. And I'm not saying it's a bubble. So don't misar me. But I'm just saying that argument to me is hogwash. It falls on deaf ears. It's not credible. >> And the other thing is I think you get into this rut where you go, "Well, listen. In 2022, everyone said we're going to have a recession." Everyone 100% chance didn't happen. So this time is the same. >> Now to the guess what bubbles can and will happen and this probably I you say I don't can't say yet. >> Let's let's be honest. This is probably a bubble. Um, then why do you want stocks? >> Because why why would you sell stocks in a bubble? I'm George Sorosing this. No, that's why I'm diversifying. >> Yeah, good point. Um, no, but here's here's the other thing about like, oh, people are talking so much about the b- word. Yeah, because nobody wants to look like an [ __ ] Anybody who talks in front of a mic, ourself included, with this guy just throwing out the Grand Rapids hedge 10 seconds ago. I don't want people to Nobody wants that feeling that you complete. How could you be so oblivious? How could you guys not know Nvidia at 4 trillion? How could you not know that Ollo, this made up, this company that had that had nothing at 20 billion? How could you have missed it, right? Nobody wants egg on their face. And so people are being extra precautious or e extra cautious about not looking like an a-hole. >> Yes. That's what everyone has to say. Like this is a bubble, but I'm going to keep riding it, >> right? >> As the meltup happens. >> No, it's a bubble, but it's totally justified. So, speaking of the 1929 book, uh, someone on Twitter asked us, "Watching you and Michael talk about the trillions of inflows in index funds came from, what about credit?" We were asking like, "Where's the money coming from?" >> Okay. Part of the story, >> are people buying on margin? And he said, "Yes, I've been reading 1929 as well." >> Yeah. >> Um, if you look at the, this is from your Denny research I pulled. If you look at margin debt versus the stock market, uh, it's going up in a straight line just like the market, you go, "Oh my gosh, yes, people are borrowing tons of money." However, if you look at margin debt as a percentage of the stock market, it's actually dropping. You see this one, the second chart, this is the one that always Yeah. Yeah. Great stuff. Great stuff. >> But margin, so it's not people aren't going nuts. And they did the 2000. >> People aren't going nuts. And I guess just to uh just to arrow this, belabor the point, >> to me, a bubble is an 80% decline with no recovery. That's the That's the aftermath of a bubble. >> No, not no recovery. >> Fine. A modest recovery. A 15 year a 20-year recovery. >> Okay. And that's what happened to tech stocks after the dot bubble. It took them I think it took the NASDAQ 13 years to recover. It was an 80% wash out. >> Okay. And it took and it took stocks from 19 >> 80% is a big line. I I think 50 is okay enough for me to call a bubble. >> No way. No way, dude. What are you talking about? These stocks fell 50% in 2022. Japanese Amazon and dude Amazon Amazon, Google, Meta, and Nvidia. Amazon and Google fell 50. Meta Nvidia fall 75%. 75. 75. >> They didn't have the second part of your thing though. They they recovered immediately. Almost. >> Falling. Falling 50% proves nothing. Pull up a chart of Amazon and Apple. Look how many 50% of the clients they've had. That proves nothing. Listen, >> I think the recovery is a part >> 1929 to 1954. That is a bubble. a bubble that burst and took >> listen Japanese stocks fell 60% in to they didn't fall 80 >> fine and it took them 90 years >> that's what I'm saying it's like 2022 the wash out happened yes but those stocks recovered very quickly >> Cisco it took 25 years to recover the financials >> a lot of the financials took 15 years to recover after so if if Nvidia falls and takes 15 years to recover then it would have shown to be a bubble but if It falls 50% and then it captures and then it bounces 30%. What? That's not a bubble. >> That's the weird part. >> That's an overpriced stock. That happens all the time. >> And and a bubble. Sorry. Thinking about like this. So the the scary part of this bubbles bursting. There has to be an element of a complete loss of faith in the system. And that shows itself in credit and the lack thereof. People unwilling to loan money. That is what is so dangerous about the debt and the debt that we're talking about is that when that when the faith of that of lenders goes away, then you get some nasty [ __ ] But the equity get the equity getting getting falling 40% that tells you nothing. >> No, the the only way this is a true bubble is if AI is is like for it takes like 10 or 15 years for it to actually come to fruition because you could say this is my grandparents hedge here is this is a capex bubble. Okay. But the thing is, even if there's a wash out in the stock prices, the the amount of capex that they're putting into this, it's going to work eventually. It sounds like let let's say it's on a five to seven year lag at the worst. Then these stocks are still going to be it's not they're not going to languish forever. >> Yeah. Capex bubble. That's fair. That sounds right. It definitely feels like there's there's definitely some [ __ ] Um what's this? Uh 5x ETFs. >> Okay. Business Insider did a story on this and they interviewed someone from Morning Star. Can't remember who it said. So, um, they're talking about the five times ETFs. 55% of leverage ETFs that have launched have closed already. Um, of the couple hundred that have launched, 17% have lost over 98% of their value. So, sometimes these things are okay. Most of the time they're completely horrible for you, >> which makes sense. And I I I don't think most people are getting into five time leverage ETFs thinking that like they have anyone to blame themselves if something goes wrong. >> Yeah. I and I Yeah. But I think at this point, if you don't know, shame on you. I think people know. >> Yes. And they But they just the people who use them love them, I'm sure. >> Yeah. Good. >> Which is okay. >> Um All right. A chart from Augur Infinity shows uh soft data versus hard data. And it shows that the soft data is rolling over again pretty dramatically. Uh I don't really want to spend more than 10 seconds on this cuz I'm just happy that we we we sort of this went away for about 12 months. else. We haven't spoken about it. Maybe it's back, maybe it's not. But, uh, >> I'm of the I'm still of the opinion that vibes are broken forever and sentiment readings are nearly impossible to take any signal from the noise. >> Okay. Well, then what do you say about the recovery? Was that broken, too? >> Look, just look at the swings in these things. People, the mood swings are manic. >> They they don't mind they're on the downside. When people say that they're depressed, don't worry about it. But look at how quickly people went crazy and euphoric in January 2025. Then it crashed immediately. I think that the the swings are way too wide. >> Something happened around there to make people feel upset. >> Okay. Um here's the new story of the week. I think from the economy, this is from the Wall Street Journal. More big companies bet they can still grow without hiring. And I found this and they talked about how JP Morgan said they don't need as many people. Goldman Sachs sent a memo. Walmart. Uh there's a story with Amazon yesterday getting rid of a bunch of white collar employees. The Airbnb CEO says this. It's just kind of funny to me. Whenever you're in these cycles, it feels like they are going to last forever. And I pulled up a story from 2021. 4.3 million workers are missing. Where do they go? Many economists expect the labor shortage to last years and some think it could be permanent. Okay, that was four years ago. Economists think this labor shortage could be permanent. Now, it's we don't need labor anymore. We're done with them. I just I just want to There's going to be overreactions here. And here's I tweeted this out this morning. Here's something I believe. I think three things can be true. One, AI is going to disrupt many jobs. And many of them we don't even know right now. Two, companies are going to use AI as an excuse to lay off staff that they're going to lay off anyway. It's a it's a great scapegoat. Who do you blame for AI? Technology. Like, who do you yell at, right? Sorry, AI. And three, I think there's going to be many companies that take this way too far and realize, "Oh [ __ ] we did not mean to let go that many people. We need to bring them back." There's going to be stories in the years ahead of rehiring because AI didn't do what they thought it was going to do. Yeah. How's that? >> Yeah, I agree. Good takes. >> I think that's the that's the cycle we're on here. It's going to like there's no way you can pinpoint the exact number of people that AI is going to help, excuse me, help replace, right? It's it's impos there's going to be tons of back and forth on this. >> Yeah. in tech companies that overhired. Listen, a lot of places overhired in 2021, 2022, and 2023. Yeah. Because people were worried that they couldn't hire anyone, right? There was all those job openings and now I think it's like this is the other side of that. Like, let's get rid of them. Just blame it on AI. >> This is going to be this is going to be the dominant economic story of the next couple years. This is going to be all we talk about, unfortunately. >> Yes. And when there is a recession, people are going to worry, well, are they not going to rehire me coming out of the recession? Am I never going to get rehired because AI? Like the these are going to be the stories we're talking about for years and years. >> Yeah. >> All right. Uh this is interesting. You you I feel like you talk about with inflation like the price of restaurant orders, right? Saying like remember we talked like what are the things about inflation that really still get you and you said paying $20 for a salad or something, >> right? Or some >> people people don't get over that. They're still not over it. who who's like, "Yeah, a salad with grilled chicken cost $24, and I'm cool with it." >> The thing is, I think no one is cool with it, but everyone still just like, "Ah, whatever." So, this is >> what are you going to do? Not eat? What do you mean? >> So, this is this is a story from Well, you could brown bag it. This is a story from Market Watch. Why are we normal? >> Have you been to the grocery store, Benjamin? >> Why are we normalizing $20 lunches? Uh, so this is from a survey, so take it for it worth, but it says Americans are spending $18 each week on their Monday through Friday lunches. That's up from $88 a year ago. Obviously, that like take these with a grain, but that number doesn't sound shocking to me. If you go out to eat every single day and you spend $100 in a week, that number probably would have been shocking 10 years ago. Today, it's not shocking at all. >> Okay. Um, well, it depends what you eat. I mean, Chipotle is 1250 in New York City. >> That's That's your bell weather is Chipotle. >> I mean, that's that's not bad. It used to be 14, I think. >> 1250. So look, so look at this next chart here. I pulled this from the US Department of I can't remember. [laughter] Uh and it shows US food expenditures and it shows food away from home eating out obviously and food at home. And you can see in the past 10 years or so, food away from home has taken the lead. It they used to be right on the same trend line. Food away from home has skyrocketed over food at home and is now almost food that that food away from home used to be underpriced. Oh, no. I'm saying people have just changed their habits so much that we everyone complains about the price of stuff, but we still it's you still would rather pay for convenience. Oh, wait a minute. Change your >> habits. This doesn't show like the price of food at home versus the price of this shows how much people are spending at home. >> How much people are spending. So, people are spending and obviously you could say a lot of that is the price, but people are obviously willing to pay higher prices to eat away from home because of the convenience. It's you complain about it, but then you what do you people don't change their behavior, >> right? >> I think that's what we've learned about inflation. >> Yeah. >> And that's why I think the next recession is going to be so fascinating because are people actually going to change their behavior and slow spending or they just going to borrow a bunch of money because I don't think we have the ability to change our behavior as consumers. I just don't think we have it in us. That's where I've fallen on this. We're going to spend the certain amount of money regardless. Hey, cars are 50 grand. I don't care. I'll take out an 84month loan. same same uh same monthly payment. >> It it it depends. I mean, what you're saying sounds crazy, but it's not that crazy because you're right, people don't change. It depends on the depth and the duration. Listen, if there's, god forbid, a recession the last seven years and it's painful, yeah, people are going to change their behavior. If it's a 2-year relatively mild recession where unemployment goes to 6%. Then probably you're not going to see much. That would be my base case is that if we get an AIEL capex recession, hey, Mark Zuckerberg spent $400 billion too much, it's going to lead to a slowdown. To me, that's a mild recession. >> Yeah. >> Right. >> Uh, all right. Try from Goldman. Tariff effects seen so far imply that US consumers will eventually absorb 55% of the tariff costs. All right, that's a projection. For right now, it's 37%. businesses are eating 51% of tariffs. Um, I am not an economist, but I feel like the argument against tariffs were pretty cut and dried. It's like, listen, this is a tax on consumers. Like, this is not this is a thing. And were we all wrong? Like, is it not a thing? How is it? I'm I'm sort of over the just wait, it'll show up in the data type of thing. I mean, it's been 5 months and yeah, no, it's not it's not not there. It's 30 some We're we're we're bearing 30 some% of the brunt, but it hasn't seemed to really made a make a big dent. Now, listen, are there businesses across the country that are getting destroyed? >> That's the thing. It sounds like small business as opposed to consumers. >> Yeah. So, maybe it's just not showing up in giant American earnings. >> We we didn't we didn't get $4,000 iPhones like people thought. Yeah. >> Right. Um, I I I trained my kids how to build an iPhone in the backyard in our factory, and that was a waste of time. >> Yeah. >> Uh, so here's the thing. In the next recession, if we get one in the next couple years, guess what? Tariff's gone. That's the stimulus. >> That's one of the pieces of Right. >> tariff. Yeah. Take it away. The tariffs is like uh is like when your kids graduate from from nursery school. Not nursery school. What the hell you do? What's preary? Daycare. There you go. Yeah. >> Yes. >> Like boom, an extra dollar, a few dollars in my pocket. >> Oh my gosh. I had three kids in daycare for two years when it was [snorts] huge stimulus to the Carlson household. But yeah, you're right. I don't you think in next recession the tariff All right. Hey, guess what? We're taking off the tariffs. Or you think they're going to be too like entrenched at that point? >> I don't know. I don't know. Um >> All right. >> Kyoo is in my estimation. The what? One of the best research reporters out there. He's not a reporter, but research writers. He's an investor. Can I make Can I make an analogy here? >> Sure. >> Kai Woo is the millennial Michael Moeson. >> Yeah, it's great. Well done. Nailed it. Okay. So So Kai is one of those people and it's a very short list. I would say it's like it's Kai andsembbleist for me where it's like paper out. I read it. >> He has a way of turning the story inside out and creating charts that you just don't see anywhere else. So he wrote a piece. >> Oh, wait a minute. Hang on. You read this whole piece. I did, too. You didn't come away thinking, "Okay, this is a bubble." >> When you when you look at all these charts, a capex bubble. There's no way you could read this piece and not come away thinking, "Yeah, this is a capex bubble. Come on. What are we doing here?" >> It's different. It's different this time. No, it is a capex bubble. Yeah, they're spending they're spending uh they're spending a lot of money. It is capex bubble. >> Um >> that's a great grand hedge though, right? Capex bubble. >> Yeah. No, it's not a price bubble. What? No, it's uh All right. So he looked at the capex as a percentage of GDP for railroads, internet and AI. And this has been done before, but what Kai did that is so interesting is he depreciation adjusted it. So these data centers, they go like they they need constant maintenance. They depreciate it. It's hardware. >> Right. You put the railroad tracks down, they're there for a long time. >> Right. Right. Exactly. So, when you depreciation adjust it, you get one of these. Yeah, I'm making a cringe face for people that are that are listening. Um, yeah. No, it's it's high. It's a lot. And and the the thing the thing So, he did point out, which I love, that these companies, the Mag 7 are so much better than everything else. And I know we all know that. Nobody's disagreeing with that. That's why that's why Nvidia is 4 trillion and Apple's 4 trillion. >> These are literally the best companies that we've ever seen ever. >> So, all right. So, he but he breaks it down like this. Return on invested capital, which is like the metric of metrics, right? How much money do you make per incremental dollar of spending on all of your investments within the business? That's it. That's it. And the Mag 7 are at 22.5%. I don't think there's ever been anything like this in the history of of business at this size. >> It was all capital intensive before. >> Um the S&P is at the S&P 493 is at 6%. Return on equity 30 versus 13 free cash flow margin 16 versus 9. Um now Kai says again justified these were incredible asset light high margin wide modes all the things. But now, >> yeah, before we get to this, so he says since 2015, the Mag 7 is up 25 27.5% per year, creating over 23 trillion of wealth for their shareholders. >> Unreal. >> Guess what? The fundamentals uh worked pretty good. >> Yeah. But but now they are transitioning from asset light to asset heavy. And Kai looked at the history of these asset heavy versus assetike companies across time within every sector. right now they're investing in data centers and these are real physical things not just software >> right and and companies that spend a ton do not perform nearly as well as our counterparts um and he did of course use one comparison to 2000 is you got to do it he showed is this Cisco or something else what is this are these telecom stocks let's say called telecom stocks um so the thing is they did grow the promise was there their fundamental growth. So, their sales increased at the peak from 2000 um 1,030% over the next 20 over the next 20 years. 1,030% sales growth. The problem is the multiples contracted 85%. Because the multiples were so insane that you got a total return of 16% over that 20-year period with obviously a dramatic fall in between. >> I don't remember the exact numbers, but Microsoft when Balmer took over, he took over in like 2000 and Gates got out right at the right time. And the earnings grow for Microsoft was like massive during% >> and the stock got crushed his whole tenure because of where it started. >> Now the the companies today do not have nearly the same insane multiples. Okay. Nvidia trading at whatever it is. I don't know if it's 35 times forward. It's not insane. Okay. Now if the multiple goes down to 26, yeah, you're going to feel it, but you're jumping out of the third story of a wind of a of a building instead of the 10th story like like these stocks were back in the day. >> Yeah. So just some broken ankles. You'll be fine. That's it. Just >> the thing is he he puts the quotes in here from Zuckerberg and Larry Page about like we're willing to go bankrupt rather than lose this race. Um >> what do these tech CEOs care if it's a bubble if they're trying to create AGI or whatever? Like what do they why would they care? So what I guess what's what's different and I wasn't around during 2000. I don't know what the CEOs were saying, but they're being very clear about what they're going to do, what their plans are, and investors are saying, "We're riding with you," >> right? And how long that that's the thing for investors to say, "How long?" >> And we get we're getting an earnings call. We're getting we get them all reporting this week. I'm sure at some point, maybe it's this one, maybe it's 5 years now. Who knows? At some point, investors will say, "Buddy, you've been saying this for nine quarters. Show me the damn cash flow." >> All right, so good segue here. So, did you listen to this part? I think this is the podcast of the year so far. I listened to this. I got to be honest. I had never heard of this guy before. I listened to it. Um, and but it's so uh Dwar is the podcast. Did you listen any Did you put it in Chad TBT at least? >> No. >> Okay. Okay, it's a two and a half hour podcast all about AI and this Andre Karp Carpathy Carpathy I don't know how to say his name. Um he was one of the founders of Open AI. He led Tesla's AI division. Now he does some other educational AI thing. Um I've got to be honest, I didn't understand 65% of what he was saying, but the stuff I did understand kind of blew my mind and it was it was fascinating. I listen I gobbled this thing up in a two and a half hour podcast in one day. Here's a few of the things I pulled out here. Okay, now this is really good. So, um, his whole point is AI isn't going to supercharge GDP growth. It'll just keep us on the same trajectory. He's like, he's like, "Listen, just like the internet and email and all these things that came about and automation kept this long-term 2% trend line, that's what that's what AI is going to do. It's just going to keep us on it's it's it's a step of that automation in the same direction." So, he's like, it's not this leap forward, this huge leap higher. It's just going to keep us on the same trajectory. Now without AI maybe that trajectory flattens out but with it um that's his expectation. He said listen I I can't predict the future but that that's my sense. Um so he says with AI we're going to see the exact same thing. It's just more automation. It allows us to write different kinds of programs that we couldn't before. But AI is still fundamentally a program. It's a new kind of computer and a new kind of computing system. But it has all these problems. It's going to diffuse over time and it's still going to add up to the same exponential. We're going to have the same exponential that's going to that's going to go extremely vertical. it's going to be very foreign to live in that kind of environment. He also he was like pouring some cold water on this but also saying like this is going to be amazing. It's just not going to happen is the the way and the way he explained LLM's like AI was really interesting. He said like we would love to be able to create an AI that's like an animal like a zebra comes out of the womb or a horse and it can walk immediately because and he's like we can't recreate that. A an LLM is like a ghost is how he explained it. Like that's how they view it when they're trying to like build these things. Um, and he says AGI, which he thinks is like a decade away, which is which is kind of funny. People were kind of like, "Oh, really? A decade away? That seems way too long." It's like you're creating like some people say God in a box, like, "Oh, no. We have to wait 10 years for it." [laughter] Um, but he's he says, um, some he put a little cold water on that, too. He said some people feel like this assumption we have God in a box and now it can do everything and it just won't look like that. It's going to be able to do some of the things. It's going to fail at some of the things. is going to be gradually put into society and we'll end up with the same pattern. That is my prediction. This assumption of suddenly having a completely intelligent, fully flexible, fully general human in a box and we can dispense it at arbitrary problems in society. I don't think that we will have this discreet change. I think we'll arrive at the same kind of gradual diffusion across the industry. Now, so this stuff all sounds like he's pouring cold water, right? But he's he's still saying like the stuff that's going to happen is going to be amazing. It's just not like it's not world changing like people think it's going to be this total step up in everything is completely different. He says we're on the same trajectory thoughts. >> Um >> you got to listen to this. It was it was it >> I don't >> it's really well done. >> I don't believe him. >> We we already have self-driving cars. >> The robots are coming. The world is going to change. Now, if you're looking at a line of GDP growth and saying, "Did the world change?" I don't know. I I would suspect that you're going to see something, but maybe you don't. Um, >> that's the thing. The internet did not change the trajectory of GDP. >> Okay. So, maybe so yeah, May maybe maybe uh maybe so, but I think that I think that this is going to have radical transformations for our daily life, for the way that we do a lot of things. >> I I by the way, I would say I would assume that he would say that too. >> Yes. >> Okay. Yes. I I just thought that it was a very balanced it was one of the more balanced looks I've heard from a guy again I'd never heard of before I listened to this podcast. So take that for what you will. But I thought it was just the the way that he explained how AI works. And um he's like listen we're just we're pulling this stuff from the internet. It's not like it's not magic, >> right? The the information where it's, you know, garbage in, garbage out in a lot of ways. It's it's amazing that we can do some of these things, but he just said like people need to temper their expectations a little bit and it's still going to be amazing. And that's why again I think like we could see the some sort of wash out and it be a wonderful buying opportunity because this stuff happens. >> Is this a Silicon Valley hedge? Like what do you what do you call how do you describe what he was just saying? I >> I I Yes. I think sometimes in Silicon Valley the the euphoria and the can you imagine what the future's going to be like gets a little too ahead of itself. And so I I think that you're right that was a little bit of like just everyone pump your brakes just a little bit. Well, he wasn't saying >> certainly you could say like, "Hey, listen, private investors, maybe don't give this unproven company uh with no revenue an $8 billion market cap." Like, sure. Yeah, I would agree. >> So, anyway, it's worth your time to listen. All right. Um, speaking of AI, so Stitch Fix I'm still a uh a client of. I don't think anyone else is cuz the stock, gosh, it crashed like 90%. And I'm so glad I I bought this thing in the meme stock mania after the CEO was on Patrick's podcast and I I don't know I made some money in it and then she quit and that was enough for me like okay the CEO quit it was her vision I'm out and then the stock crashed like 90%. It's a typical meme stock but I still use it. So once every two months they send me a box of clothing or shoes or jackets. >> Do you do they do they like recycle the brands or like are you familiar with the brands that they use? It's a lot of them have been newer brands to me and I'll say I'll I'll write a note, hey, and probably it is AI at this point, but I'll write a note say, hey, I'd love a new jacket. I'd love some new joggers. I It's fall. I want a hooded sweatshirt and it and then I pick and choose what I want and then I send back the rest. And it's gotten me a lot of new clothing that I never would have got before. >> Wait, do you do you not shop on Instagram? >> Not really. No, I'm not. I don't I don't go to Instagram that much for whatever reason. I probably should. It's probably better for me than Twitter. But anyway, they have this new AI thing in StitchFix where you upload a picture of your face and a picture of your body and then it allows you to see what clothes would look like on you. So I I uploaded the pictures of what they put of me in here. >> Are these both fake or is the one on the left you? >> No, they're actually not me. Come on. I've got a better build than that. Uh [laughter] >> it looks like I skipped leg day. And >> the one on the left the one on the left does look like you. I mean the one on the right looks like you too, but >> it kind of does. Well, again, I uploaded a picture of my actual body, so they had something to go off of. The one on the right is obviously not me. Uh but yeah, you're right. The one on the left, it kind of looks like me. >> So Ray Rayban has this feature, too, where you can >> you can like they they hold the camera up to your face and you could like put the glasses on and you can look around. It's pretty cool, >> right? So anyway, it it's I thought it was kind of I I did this in 10 seconds and it took >> I don't know if this will change the GDP. >> Uh but it's pretty cool. All right. Um JP Morgan plans to allow institutional clients to use their holdings of Bitcoin and Ether as collateral for loans by the end of the year in a significant deepening of Wall Street's crypto integration. That's a report from from uh from Bloomberg. >> So I guess just having this is the stuff that got crypto in trouble a few years ago, right? Obviously the borrowing against um >> hold on that was that was investors borrowing against and loaning and all that sort of stuff. I think that this is um I think that this is maybe less for like that cowboy [ __ ] >> and maybe more for like uh less insane margin. >> Yeah, like a portfolio marginal typical one. But yeah, that's what I'm saying. That's a step in the right direction versus the cowboy stuff. >> Um this surprised me in the story. Um, uh, Morgan Stanley plans to allow customers on its Erade retail platform to access popular cryptocurrencies beginning in the first half of next year. They're still not. If you're a Morgan Stanley client on Erade, you can't buy crypto. I got to be honest, I didn't know Erade still existed. >> Yeah, Morgan bought it. >> I I didn't know they still even I thought they just kind of consumed it. I didn't know that people actually still used it. So, it's just Morgan saying the customers, obviously. Um, >> that is a little surprising. >> Well, I guess no, I I don't I don't know. I honestly don't know what the the what they're talking about because I think if you are an Erade customer, technically you are a Morgan Stanley customer because they own the product, but I don't know exactly what they're referring to, how they break it down. But anyway, Vanguard is coming to uh there's some whispers that Vanguard's going to allow it on the platform. We'll see. Um, all right. On the on the >> and an ETF or No, >> in the ETF, I believe. >> No, no. And are they going to do a Vanguard ETF? Oh, hell. I mean, I would be shocked. No, you know what? No. >> Um, all right. Uh, on the crazy side of things, Punk959 tweeted, remember we spoke about this company a couple of months ago, uh, ETHZilla, and we said that this is crazy. If you think, and I don't know if ETHZilla is this company, but they were companies that are like reinventing themselves as crypto treasury companies where they're trying to like transform a non-existing or shitty business into these treasury companies, and that was going to work. Well, obviously, it's not working. Look at this chart of of ETZilla. Shot up to like a hundred bucks on the announcement. Now, it's down to 20 bucks. But the trouble is that they sold $40 million worth of ETH to fund stock buybacks. So yeah, it's not working. I uh I have a an update on Micro Strategy that I asked Chart Kid to do a couple of weeks ago, but haven't got around to sharing on the show. We'll do it next week. Let's just say that Micros the the stock is basically flat on the year. It's interesting. >> Flat on the year. So I think I think I mean I don't I think there's a spike prior to so I don't I don't know what it was like in the beginning of the year. >> No, I'm talking about Micro Strategy. Oh, so Bitcoin's up 25% or something and Micro Strategy is up two. But if you look at Micro Strategy divided by by BTC, it is at multi-year lows. >> So the spread is it's not it's not working. Uh and I'm I'm >> curious uh to listen to their earnings call and see what he has to say. >> All right. Uh we are not seeing a pickup in activity in the real estate market, residential real estate. Neil Da said, "Despite the decline in mortgage rates, we've yet to see a pickup in purchase demand. Mortgage purchase applications slid 3%." Uh, >> see Neil Dut is on team Ben Carlson. Like last week I said because if you think about it, mortgage rates topped out at eight, now they're back down to six and you're still not seeing a huge uptick in activity. I think >> it's got to be lower. >> I uh I think that this reverses like yes, I think I think that you are right. Clearly, it's [snorts] not it's not sh showing in the data that lower rates are having an impact yet. Um, so I don't know if it takes rates breaking 6%. I don't know if there's a psychological number there, but I do suspect that if rates go down a little bit more that you're going to see >> I I honestly think we need I think we need lower housing prices. I think that's the thing that's going to be more meaningful than lower mortgage rates. Maybe I'm wrong. Uh Lance Lambert had this thing where he looked at housing markets where the home prices are falling. and he said, "Among the 300 largest metro area housing markets, 105 markets saw home prices fall year-over-year between September 2024 and 2025. To me, this is a correction for ants." So, the big the worst one is Punta Gorda, Florida, which my grandparents used to live there, actually. Nice little area. Anglewood Beach, very nice. Yeah. >> Uh, so there's there's two housing markets, both in Florida, where they're double digits. It's 12 and 10%. But you look at these other places, you're seeing home prices fall 3%, 4%, 5%, um 6%. >> That's nothing, especially if you zoom out. >> It's it's nothing compared to the the gain. So, how about this? What if more activity, one of the reasons that we're not activity is because the price point is being held up. What if more activity actually led to a housing price decline? If there was more activity, then you'd see the true price of these that people are willing to buy at and it's lower. >> Could be. What if more housing activity didn't lead to higher prices but lower? >> Could be. >> Is that too galaxy brain? I think that's possible that it's the price thing. People are hung up on the prices. >> I I don't know. That sounds too cute. But maybe. Maybe. All right, let's talk about private markets. Ben, we spoke with Shanali Basac last week from my Capital. Had a very good, clean, spirited debate about what's going on in in private markets. One of the stories that we didn't really get to was uh an article from the journal, Wall Street is pushing private assets into 401ks. We asked whether anyone wants them. Uh >> I hear this a lot from people when when we talk about private investments on any of our stuff. A lot of a lot of adviserss will say, "None of my clients are asking for this." >> Yeah, I've said this. Uh I've told the story multiple times when we were at Future Proof last year in Colorado. Um I was hosting a talk and I said show of hands like how many people are asking being asked about private marks from their clients and everyone looked around and uh not a hand went up now and I said like is the private mark are we being gaslit by these asset managers? Now the answer is no because the flows are there. Blackstone reported record flows. It's not not happening. I just think that it's coming more from the wires than the independents. >> That makes sense. And I think the independents that do have people who want it, it's the ultra high net worth. Yeah. >> It's people with call it 20 million and above or it's it's it's much higher level. >> Yeah. So it's definitely again it's definitely not nothing but I think that the asset managers are maybe overestimating demand from the RAS. We'll see. But anyway, to this to this uh survey, um nearly 40% of respondents reported never having heard of private credit funds. That actually sounds low. Like who has heard of private credit funds? And like what normal people have? Um >> yeah, that's true. Yes. If if I asked my mom and dad or my in-laws, like how many of them would know what a private credit fund is? Not No, probably not. >> Yeah. They would say, "What are you talking about?" All right. Um so 45% of respondents said I am satisfied and have enough offerings. Another 45% said I am satisfied but would like more mutual fund offerings and ETFs. And then 10% said I am dissatisfied with my 401k options. Um and >> I'm surprised that number is not higher. There are a lot of crappy 401k plans out there. >> Well, I'm I haven't spent uh as much time here in that side of the business as I used to. Um but we used to see a lot of shockingly shitty options. It's like throw a target date fund in there or why is this target date fund 115 basis points? What's happening here? >> Yeah, I guess that a lot of that stuff has been rung out, but there are still these tiny 401k plans that aren't that great. But >> um anyway, whether or not people are asking for it, um it's coming. All right. So, here's >> Yeah, but but if people don't ask for it, it's it's coming. How who buys it? Is is there only way in the back door targeting funds? >> Yeah, >> I think the adoption is going to be slower than you think. >> Why are you putting uh dollars in my mouth? I didn't say anything about the adoption. >> I feel like you've been relatively paper bullish on this. >> Oh, I think it's I'm bullish. It's coming. >> But I'm saying if the consumer pushes back and the RA pushes back, you need an end investment. >> Just because it's offered doesn't mean it's going to be >> Oh, yeah. No, hold on. I'm not I don't know that I'm super bullish on demand, but I think that if it gets its way into target date funds, then boom, game over. I don't think that you're going to have like individual investors be like, "Oh, where's my private credit? I don't see my private credit in this lineup." Like, I don't think that's going to happen, >> right? I I wonder what that looks like. I guess it's it's a if it's a 10% allocation and the fees are really high, it's not going to push the total fees fund. I think I think that part of the good thing about them coming into this sacred world that nobody wants them to be in and I'll say like I don't think that they need to be there but they are and it's not my decision. I think more transparency is better and it's going to bring down fees. >> Yeah, I agree. >> If it works, fees are going to come down >> and it's going to it's going to bring out much more transparency with the underlying companies as well. Like you said, there was the two bankruptcies and private credit and everyone was talking about them. Um, you would have never heard of these companies otherwise. Like there's going to be more demand for information about these companies that they're investing in as well. >> Yeah. Hopefully. So, listen. Do I want it? No. But I am Am I heming and honging and saying that people aren't going to be able to retire because they were fed 10% of private credit in their 401k? Come on. Um, all right. So, >> yeah, but the thing is baby boomers. So, I guess to counter myself, I'm doing a you I'm pulling at Michael right now. I'm arguing myself. baby boomers who are retiring who want to derisk a little bit. There private credit is the easiest sale of any private asset class bar none. It's way easier to sell than private equity, venture capital, infrastructure, whatever, hedge funds because it's just yield and it's like a fixed. You just say, "Hey, listen, it's a bond fund that you can't get out of, but the yield is 10%." You think retiring baby boomers aren't going to sign up for that? Like >> that that's the kind of thing that maybe that's the end user. That's That's where the biggest bang for your buck is. >> Of course. Put 20% of my portfolio in that, 20% in liquid bond funds, 60 in stocks. I'm good. >> Yeah, >> that's going to be a thing. >> Yeah. >> Um Okay. So, I've been um I don't know if harsh is too strong a word, but I've I've called out the FT and other journalists that so desperately want there to be multiple cockroaches because it's juicy. It's salacious. And listen, I'm not I mean, I get it. Um, however, I want to call out a report uh an article, what's up with private credit ratings by Toby Na Nangle from the FT. This is uh this is great work and reading this article definitely makes you go h wait a minute. So, there is a thing that's happening in the private asset world where a lot of these giants are buying up insurance companies who are buying a hell of a lot of private credit. And you talk about the circular dealing that you see in uh with with open AAI and all that sort of stuff. You're seeing a lot of that here. Now, I don't know that asset manager X is buying insurance company Y and insurance company Y is eating the private credits from asset manager X. I would imagine that there's some sort of Chinese wall there. I this is not my universe, so I don't know, but I would imagine that's a phobia. Okay. Anyway, insurance companies are buying a lot of private credit, especially in the US and Canada. Now, private credit is not all bad. There's a lot of different types of private credit. There's direct lending, which which is, I think, the thing that most people are talking about, but there's commercial real estate lending. There are residential mortgages. There's assetbacked finance. There's infrastructure. So, it's not like all all direct lending. Okay, but this is the part. So from the article as the IMF wrote in last week's global financial stability report most insurers exposure to private credit is classified as investment grade but investment grade according to who? Now these insurance companies even if they are owned by these asset managers so highly regulated as they need to be um so investment grade according to who? Mostly it turns out not according to Moody's S&P or Fitch. So, check this chart out. The number of securities that Moody's, S&P, and Fitch collectively rated stayed pretty much flat between 2020 and 2023, but the total number of privately rated securities ballooned over that period. And it was the little guys that scooped up the this business. Now, you might say, Michael, who gives a [ __ ] about the big three? Like, what do they do to protect investors in 2006? All right, fair. Fair, I suppose. Um, okay. Back to the IMF. I'm sorry, back to uh back to the FT. Okay, this part is from the IMF. So, insurers search for private credit exposure classified as investment grade has changed the rating landscape of the United States. Mclassification of below investment grade instruments into the investment grade bucket may result in default losses significantly exceeding those those expected during an economic shock leading to the erosion of insurers capital and potentially causing liquidity gaps because of insufficient cash flow from the defaulted entities. Now, if there is like a a systemic risk, a holy [ __ ] type of risk where there's like a liquidity drain and like selling that of of illquid stuff that can't be sold, I would say that maybe this is the part to keep to keep your eye on. This is like a little this this definitely there's smoke here. Now, I'm not saying there's a fire, but this definitely makes you go like, wait a minute. >> How about this? A lot of people are concerned about the circular nature of much of what's going on in the world right now. Like all the technology companies, >> you hold my bag. I'll hold your bag. Let me your bag. I'll give it back to you. all the all the private equity managers and private credit managers are investing in these things and but to me I think that's actually the the right way to do it instead of going on an island and being doing these things by yourself if everyone is involved and it's it's a systemic risk. Guess what? >> Someone's getting bailed out. I said this on TCA the other day. That's what's going to happen if these things all get big enough and they're all part of it. They're no one is going to let this stuff all go down. Yeah. >> They're all too big. They'll shore each other up. Yeah. >> If there's one right. >> Yeah. Top me off. I'll get you on the next one. All right, but here here's here's here's the last one and this is look at this look at this chart from the FDA. Seriously, credit to them. This is a great report. Um, so they break it down. Obviously, not every insurance company has the same allocation. Uh, so they show the top 10 holders of private letter rated bonds. So, Global Atlantic, the insurer, 100% owned by private equity group KKR, leads the pack with a quarter of its 100 billion portfolio carrying private letter ratings. Mass Mutual uh holds more than 50 billion. Um other insurers like New York Life, now New York Life is not owned by one of these companies. New York Life had a measly 6.7% of their bond book privately rated. This is this is good reporting. >> Okay, good stuff. I I just think the biggest firms have realized if we're all in this together, just like the tech firms, like if one goes, we all go and we'll be fine. I think that's actually the right it sounds like a systemic risk and it probably is, but I think it's actually good business. >> Okay. Um >> I think it makes sense. >> So, we got a great question and um I I apologize because I forgot to really give this too much thought. Uh um but it was this. If you were on a deserted island, which three earnings calls would you want to hear to help gauge how the US economy/stock market was performing? Um >> wait, yours would be Visa, Mastercard, and American Express? [laughter] >> You [snorts] love the credit card companies. >> I mean, well, yeah, they do tell you about the consumer. Now, okay, this is a really good question and I would say like I could nitpick and say like, well, tell me where like are you talking about like in a normal time in a period of like uh distress, what would I want to look to for like a leading indicator? I think it's getting better. >> So, if you want to get can I do mine first? >> Sure. >> If you want to get really broad and have everything covered, I would say JP Morgan for the finance side of things, Walmart for the consumer, Apple for high-end consumer. >> Yeah, not bad. That's a good list. Um, so for the >> it's the boring list. >> Well, it should be. Uh, for for finances, I would have said Bank of America because they serve more of a main street. I mean, they serve everyone. Uh, JP Morgan is a little bit of a higher clientele, but splitting hairs. Um, I also would have said Amazon as opposed to Walmart, uh, because they they they touch more of the economy. And then the third, um, >> h, >> you got to pick one of your credit card companies. That's your favorite. Or do you think >> Well, I already got a financial American. I already got a financial um >> yeah I mean >> Delta >> no no no no so you know what's interesting about Delta I was thinking about this uh this is not a a deep and this is not a hot take it's just so obvious one of the reasons why people are able to travel more with their families and Delta is doing what it's doing I want I would love to know what percentage of family vacation flights are paid for with reward points. So, we just booked our flights to Disney and they were whatever they cost, a couple thousand dollar. Guess what? Paying with points is obviously a meaningful decision for almost every family that decides whether or not to take a trip. It's a huge amount of money. >> It does make it easier. Yeah. I I have three kids. We're buying five tickets every time we fly. It's expensive. Yeah, I I agree. >> All right. So, what's the third company? Yeah, I don't know. I guess I guess Well, Apple's No, Apple's like not really representative of the economy. >> Oh, but is it is for the stock stock market? Ollo. No, we're good. We're good, Tony. >> All right. Uh, a bunch of people sent us this. There's a yuggov study about horror movies. uh saying uh horror movies have the smallest share of people who collectively like or love it as well as the largest share of people who like or hate it. So dis hate or dislike it. So I think the the chart just shows that people you either love horror movies or you hate them. It's a very extreme. Everything else is kind of more down the middle. >> Well, yeah. No, nobody nobody's like, "Yeah, I could take it or leave it." What do you mean? Horror is polarizing. You either love it or you hate it. >> Yeah. So a lot of people said, "This is Ben and Michael." So that that actually does make sense to me. But most people that don't like horror like don't like it because it's too scary. The fact that you don't like it because it doesn't do any you don't feel anything. That's kind of psycho. You're kind of nuts. >> You know, this happens in my life sometimes. I feel like I blame investing. Like the whole point of everyone has been telling you to take your emotions all my wife always says like why don't you show more emotion about this? Like show more enthusiasm or and I I'm just like a I'm always Yeah. I don't know. I think that's the same thing with horror movies. doesn't the emotions I've I've stamped them out. >> I was thinking about back to my horror movie. >> I'm the 10 man basically. >> Yeah, you are. Back to my horror movie list. So Kobe is turning nine um in February. I can't believe my dad took me to see In the Mouth of Madness when I was 9 years old. That is so insane. Kobe watches >> I've never heard of this movie. >> He only watches like uh How to Train Your Dragon and whatever. like in the mouth of madness. Dad, what are you insane? >> I think so. I think you're going to take George to see how Boy Some He got into Beetlejuice this week cuz after for some reason that came up after Tremors. Um boy did he love Beetlejuice. He already is watching the second one which just came out a couple years ago which was not very good. Uh so he's going to be big time in he can't wait to watch horror movies. There's a scene in the Mouth of Madness where Sam Neil is dreaming and he's on the couch and he looks over and there's like a a guy with a monster looking face. I don't know, a dilapidated face and like he wakes up out of the dream and it's scary. Like that dream sequence is scary. He snaps out of it. He's sweating and then he looks over again and the guy's there again and it was a dream within a dream. >> Could you I was nine. [snorts] Anyway, >> scared back then, too. >> Uh, no, I'm fine. It's totally fine. Don't No big deal. All right. Last last week, we were talking about like car repossessions and maybe making a little bit light of it. Like, if you zoom out to 2019, it's where we were. Um, yeah, I want to take the other side of that. I mean, giving up your car, like your having your car repossess, that's the last thing that you stop paying. >> Yeah, I agree. So, it's it's it's increased quite a bit, but we're back to 2019 levels there again, too, which which was high historically, >> but who can't. But it's still it's still pretty elevated and compared to a couple years ago. Like, it's just And also, if you think about All right, I know we throw around numbers a lot and it's like they lose context because they're so big. >> 1.73 million cars that people had to let go. >> How many cars are on the road? >> Doesn't matter. I'm I'm zooming in. >> Oh, you're zooming in. Okay. No, >> I'm just saying that's that's that's crazy. >> So, there's 300 million registered cars. So, that's what 4% [clears throat] I'm just zooming in. I'm just saying like on a human level, that's insane. >> I agree. >> Um, all right, Ben. This guy uh this guy said like, "Ben, you think you're good with credit card rewards? Hold my beer." Um, okay. Tell me if Ben can do better than this. My family just grew with our second baby last month. They traded in a RAF 4 Prime for a used 2023 Honda Odyssey. >> Good choice. >> After trading, it cost 22K. I paid 5K using my Robin Hood card for 3% cash back and financed the rest. You with them so far? >> All right. Yep. >> Here's the twist. I opened a regular auto loan at 5.29% APR. I'm opening a Wells Fargo reflect car with 0% APR for 21 months and a 5% fee for balance transfer. I will pay off the auto loan. I'll pay the minimum each month while putting what I would have paid toward the car loan into market CDs around 4%. I'll close them before the 21month period, then pay off the balance or part into another 0% offer. This is like this the Zack Alphodakis meme. Uh even without a car purchase. Uh all right, whatever. Um how much money is this person saving? Is there any juice here? >> Probably not a lot. But honestly, for people who do this, go down this rabbit hole for them, it's more the game within the game than it is like because it'll probably like I don't know with the interest that they're making over 21 months and the interest or saving it'll probably be $500. >> All right. Well, guess what? It's a personality type. My uncle was a huge coupon guy. Would >> I can't throw shade. I would have done something like this. >> Would physically take coupons, I'm sure he still does, to the grocery store. And he was definitely like, "Oh, this guy." he was a this guy uh at the grocery store like everybody knew him. Um and so it should it's a personality type. So that helped explain this tweet that went viral over the weekend. Uh somebody tweeted, "The only good mortgage is a paid off one. Our biggest monthly expense is gone." And they showed and I'm sure that they knew that this is going to kick the hornets's nest. The rate was 2.625%. Now objectively this is a bad or this is a subpar financial decision. Objectively, I mean, if nothing else, there's a spread between what you get in risk-free bonds versus 2.625%. However, and people got all up in arms. It's like, guys, we know, he knows, he understands what he's doing. He understands that there are better uses of money, but it doesn't matter because there are people who are debt averse for regardless of the interest rate. And can't you understand their point of view even if you disagree with it? This person feels good about not carrying a mortgage, not about having his biggest monthly expense gone, and I'm sure he's fine otherwise. I'm sure he's got plenty of assets. So, this is not a this is not a financial decision. It's a personal finance decision. >> Listen, I am of the opinion that there is no black and white in personal finance. There's only gray. This is black or white. This is a this is an insane decision. >> No, it's not insane. It's the inflation rate is 3% right now. You can get 4% in treasuries. I don't care how you feel about debt. This is a insane decision. >> No, it's not. It's not. No, it's not insane. >> It's not insane. It is a it is a bad mathematical financial decision. >> But the psychological hurdle or benefit >> sometimes you have to take the behavioral stuff out of it. Listen, we all are in tune with behavioral psychology now. It's a big thing. Sometimes you have to take it out of the equation. Sometimes it's not worth the behavioral psychology and you have to just eat your feelings. >> All right. How about this? How about this? Let's say that it's his mortgage is $3,000 a month. Okay. And this person So you're saying, "Well, the spread between uh >> what's safer? Having your mortgage paid off or having 200 grand in the bank?" >> No, no, listen. >> Which one's safer? >> Hold on. But no, now you're talking extremes. If you're saying your the mortgage payment is $36,000 a year, and you're saying that you could capture the spread between 2.625 and 3.75, 1% on $36,000. Who gives a [ __ ] It's it's it's effectively $0 for this person now. >> But what's more but you're he's putting all of his money in this illquid asset. What's safer? I'm saying having that liquid cash or an illquid asset? >> Oh, I get it. But I'm I'm sure that this person has their finances um in order and there are other liquid assets. >> Yeah. And it's still a bad >> for the general investor, for the average person, somebody said to you, "Hey, listen. I've got this 2.625% mortgage and I know it's a good rate, but I just don't like paying the monthly rate. Uh, I'd rather pay it off. All else equal for everybody. You say, "No, no, no. Don't don't don't do that. Don't do that. Don't do that." Like, just Yes. Don't do that. >> 100% of the time. Never pay it off. Yeah. Never. >> But for somebody whose whose handle is Barbell Financial, I'm sure they're making the right decision for them. >> And it's still a wrong decision. >> Okay. Uh, >> that's where I fall. Um last week on Netflix's earnings report they said that the quote so engagement remains healthy. We achieved record share of TV time in Q3 in both the US and the UK. Um yes sure that is factually true but if you look at the share of US streaming time Netflix is uh getting smoked by YouTube. There's no other way to put it. Honestly, we asked this before. When's the last time Netflix had a good show? >> A good show? >> It's hard to come up. Netflix >> say good. Do you mean like a HBO type good? >> I mean, they had adolescence this year people pointed to. I didn't care for it as much as other people, but they haven't had like a show this in the last I'd say two years that it's been like, whoa, this is a water cooler show. They haven't had anything. >> Have they ever? I mean, House of Cards was, but >> Squid Game, they they've had Squid Game. That's true. That's true. That's true. Okay. um you know this so this morning um my puppy woke up at five o'clock and which she never does but she was pawing at the door so I let her out and um went downstairs on the couch and I couldn't I I was I was up so I turned on Netflix and I see this number one movie and I had never heard of it and the cover is an actor that I like um uh the the movie is called um >> House of Dynamite I'm guessing >> House of Dynamite. So I I Google it. Woo! Kathern Bigalow. Uh Kathern Bigalow did um >> Hurt Locker. >> Hurt Locker. Uh um Zero Dog 30. Uh Point Break. I said, "Holy shit." First of all, I When did that drop? Did that drop yesterday? >> Friday, I think. Yeah. >> Oh, Friday. Okay. Hm. Um anyway, a lot of fun, you know. Did you watch it? >> Okay. I didn't watch it yet. All right. You're into it. >> So, it is um it is a uh a missile movie. Like Missiles are in the air and holy [ __ ] what's happening? And it's good. Didn't finish it, but but it's good. Uh, anyway. Yeah. >> You heard the ending sucks. >> You heard the ending sucks. >> Yeah. >> Why would you hear the >> How would you hear that? Why would you hear that? Why would you ruin it for me and the listeners? [laughter] >> Maybe I'm I'm lowering expectations for the maybe the ending will be better than you think. >> Wait a minute. How do you hear it sucks? You read spoilers. What's wrong with you? I raw dog everything. >> I just saw a bunch of people say, "Hey, watch House Dynamite. Ending sucks." >> Okay. All right. Thank you. I saw multiple people say that. That's all. >> So, this is a big deal. A big big deal in the world of streaming. Uh Taylor Sheridan of Yellowstone. Um uh Lioness. What else did he do? Uh um the Billy Bob one. Land Man. >> Tulsa King. Land Man, mayor of Kingston. >> So, the biggest the biggest uh TV show creator in the world is leaving Paramount. Now, this is a weird story because his deal with the studio, the movie deal is up at the end of this year, but his TV deal goes through 2028. >> You know, he did Sakario, too. should go back to movies. >> Uh and he did um uh Wind River I think with um >> Jeremy Runner that was going >> but he's but his deal with Paramount the the TV studios through 2028 and me and Josh are talking about this and you guys have have the right take. Credit to David Ellison for selling all the way at the top. I mean by 2028 how much more juice is this guy going to have left? >> Right. He he's got to run out of ideas eventually. >> So anyway you want to >> and NBC Universal gave probably gave him a giant bag of money. So, I think >> you're paying a 50x cape ratio for Teran right now. >> Yeah. Big big mistake. >> Um, all right. When did Halloween decorations become a thing? Because when I was growing up, they were sure there was some decorations, but the the Wall Street Journal has this thing. Pumpkin scapers are making a killing. As Fer for the season reaches new heights, families are paying north of $1,000 to create Instagram perfect tableau for porches and front yards. I feel like the Halloween decorations have gone crazy. And I have a take. I think it's all millennials. I think this is a millennial thing. I don't. There was some people who would decorate for Halloween, but now it's it's it's a it's almost like Christmas levels. >> Do you do you don't do that, do you? >> No. We have a couple pumpkins. We We carve pumpkins last night. I did pretty good last night. We had a whole tool kit of pumpkins. I'm like Billy the butcher here pulling stuff out. >> I'm a horrible carver. Horrible. >> It's hard. My hands I like carpal tunnel today. But we did what's the name before Christmas? We did a guy like that. >> Jack Skellington. >> Yeah, it was very hard. Took forever. Looks good though. >> Good for you. >> Kids are happy. >> All right. So, I got a lot of emails. Wait, are you a Halloween decorator? >> Robin always for always gets the same stuff like a bail of hay >> and some pumpkins and >> but not like the giant skeletons and the blow up inflatables. >> We're not weirdos. No offense uh to anybody that does that. >> Um actually, you know what? I'll take that back. Well, no, I take it back. How about that? I I actually actually I appreciate I think it's odd, but I do appreciate the people that do it because my kids love it. >> So, if you do, too, never going to be our house. you are entertaining the community. You're not weird. You're a good citizen. Good for you. Okay. Um Oh, I got a lot of emails about my extenders. So, apparently my thing was all up. I Verizon came in here and I was like not paying attention to when they were here. I think I was doing a podcast or whatever I was doing. I was on call. Who knows? Um and so we got they they they came with EOS. Okay. That wasn't working. Then I bought the Verizon extenders and that definitely didn't work. The whole reason why I had uh Geek Squad come the other day, my ears weren't plugged in. >> Can you believe it? That's >> Is that on you or on them? >> So Verizon labeled All right. So there was a Verizon 2.4G network, a Verizon 5G network, and a Verizon 4. Turns out the Verizon 4 was just the name that the Verizon dude gave to the Eero network. He labeled a Verizon 4. And I wasn't paying attention or I didn't I don't know. So I'm like, why did he label it? So, I knew that it wasn't a Verizon network. Everything should be on the Eero, except now I thought I I thought I had three networks. Anyway, we're good. I just had to plug it in and connect everything to the Verizon 4, which is not Verizon. >> That sound like it was 90% on you. >> Very frustrating. Uh, probably was. All right. Um, okay. Uh, all right. I listened to um American Prometheus. I didn't much care for Oppenheimer, the movie, and I think it was >> I loved it. It was too long. >> I I read the book after I saw the movie. Sorry. >> You read the book after you Oh, me too. So, I think it was it was a combination of Hand Up. It was too long for me and I might have taken more edibles than was appropriate. Okay. Three-hour movie edibles. You're an idiot. My bad. Um >> Yeah. You got to you got to really turn the crank up on Oppenheimer. [laughter] >> Why would you take an edible for Oppenheimer? >> Cuz somebody said, "Do you want an edible?" And I said, "Yes." Simple as that. I wasn't planning on it. Just happened. Um, all right. So, the the book was amazing. Not to be that guy, but the book was great. And it made me think about Dan Wang's break neck analogy of data of of engineers versus lawyers. The fact that Oppenheimer's life he was ostracized and vilified and tormented and destroyed about him having ties or political affiliations or friends within the Communist Party is mental, right? Like he should have been the most celebrated or I know people have mixed feelings obviously understandably, but he was um and he wasn't vilified because like he created the the bomb. It was like he was leaking information allegedly, which I I think I don't think he was. Uh and if this was uh you know in China, he would have been a hero. >> The sad thing is is that he was a scientist and he was building real things and today he would work in Silicon Valley and work in software. >> Yeah. >> Right. Which is kind of sad when you think about it. Like that's you go to where the money is and I understand that decision but there aren't enough people who are building things in the physical world anymore. So I >> that's the whole point of the Dan Wang book. >> I did rewatch Oppenheimer. Um and it took me two and a half sittings because it is so long and I naturally enjoyed it much better the second time. >> Okay. >> I think Emily Blunt I think Emily Blunt is fantastic in that movie too >> but she had such a small role. So Kitty Oppenheimer was a big big big character in the book. Obviously it's his wife and she was by the way they like they like to drink. Wow. >> Yes. People I think there was just nothing else to do so people just drank. >> All they did was drink martinis. Maybe that's so maybe the whole thing about young people not drinking as much today is not as much about being health conscious and such because let's be honest this whole country is not very health consscious. Maybe it's just there's more to do now and back in the day like what else were you going to do besides drink? >> Yeah, >> right. Um okay. Uh we started watching Nobody Wants This season 2. That's the Adam Brody uh Kristen what's her name? Kristen Bell show. >> It's cute. >> I I don't watch it. Robin watches it with me but it's cute. It's not as good as the first season like the first but is still having a romantic comedy in my life that like I I love the Jonah guy from VEP that's in it. The tall dude >> I did catch the one scene in the first in the first season where um that one of them is texting about how annoying the brother is or how dumb or whatever and it's like through the car play. >> Yes, it reads back. Yes, it's the the first season was better than the second season, but it's it's it's an entertaining turn your mind off show that you can laugh about occasionally and there's a succession reunion too. Um, what's Kendall's friend's name? The uh >> Oh, I know that guy. Yeah. >> Okay. He's in it and and Willa is in it, too. So, anyway, um, not a bad show. >> We need another Succession. >> That's never happening. That's like saying we need another Apple. There's not going to be another Succession. Come on. >> Succession leg show. Okay. >> Just like a just like a great show that everybody's all in on. I think like two two million people watched every week. Wasn't >> I know. I know. But our audience was all in on it. >> True. All right. Um animal spirits at the compoundnews.com. Thanks everyone for listening. Emailing. What's our uh what else we got? Anything to plug? No. >> All [music] right. See you next time. >> [music]