Americans Love Borrowing Money (EP.326)

25:19He's making like a short-term call. And I think this is the edge you have as a long-term investor, getting back to our first point here. You can have the ability to invest in bonds that have 5 % rates and maybe rates go a little higher here and you can sit on those short-term losses and be fine with the knowledge that you're locking in higher long-term rates. But a hedge fund manager might not be able to sit through that in, well, for three to six months, maybe that's going to underperform. So I think that's like the edge you have as a smaller investor is the ability to not have to think like a hedge fund manager.

25:51Totally agree. All right. So this seems to me to be rational behavior. Draw from Bank of America. Money market funds on course for a record$1.5 trillion inflow in 2023. So it shows inflows, outflows from 2007 to today. And then it recreated the same chart with treasuries. And 2022 and 2023 for treasuries, people are rightfully piling into those higher yields, even as the principal, at least from 2022, is probably still underwater. It is kind of wild, though, how big the inflows to treasuries were in 2022, right? Treasuries got crushed last year, and there was a ton of money that went into them.

26:36I guess people trying to catch a bottom there. Good color coding on this chart too. A lot of color here. Yeah, it looks good. All right, Franklin, one of our advisors through this on our channel, had a great chart. So a lot of people are rushing into money market funds as, I don't know, as they should, is the right way to phrase it. It's rational, right? It's rational. The S &P 500 is up what year to date? 15, 16 %? Something like that. As money piled into money market funds. So Franklin is making the case that whether it's money market funds or CDs, they're using CDs. So the peak CD rate, where people have the mentality of, why would I take risk?

27:18I'm just going to buy. I'm just going to lock it up, lock up this guaranteed return. They show 1984, 1989, 1995, 2000, 06, and 2019. And then they show one year forward return after the CD rate peaked. They show the following returns of short-term bonds, municipal bonds, core bonds, and investment-grade corporate bonds. And this shouldn't be surprising. I mean, it's almost by definition. Once rates peak, they do what? They either go sideways or come down. So it's not totally surprising that bonds would outperform. But I think more people are inclined at this point to buy CDs or money market funds over bonds because there's no volatility in the former.

28:00However, the Fed is probably done. It depends. Maybe. Here's my take with this chart, though. I would say if you're going to, every allocation decision is timing the market. So the whole like never time the market thing is a little too much here. But if you're going to time the market based on rates, obviously you don't know when the rates are going to peak. So good luck trying to figure out when that happens. but it's better to time the market within an asset class than between asset classes so if you're trying to time the market by taking all your money out of stocks and then putting it into cds or treasuries or t-bills that that could be a risky proposition because then you're you're trying to catch a bottom in stocks you're trying to catch a correction and if if rates have peaked and they fall and then the stock market takes off you're screwed but if you're trying to time within fixed income it's not going to be as much of a problem for you i don't think because you can you You understand the yield better and the dynamics there.

28:55And if you miss out on some gains in fixed income because yields fall, I don't think that's as big as a deal as missing out on a massive stock market rally. Yeah, I agree with that. All right. So on the one hand, you've got money market funds taking in$7 trillion year to date. This is ETFs and mutual funds. Bonds have taken in$9 trillion. U.S. equity outflows of$14 trillion. Hey, wait a minute, Ben. I thought that, hey, wait, actually, I'm confused here. It says mutual fund and ETF inflows and outflows. Oh, no, I'm sorry. This is the size of the market. I apologize, right? So the US equity market is$14 trillion?

29:33No, it's bigger than that. Oh, maybe the US fund and ETF market is$14 trillion. Okay, that makes sense. And there's been$17 billion of outflows. Excuse me. That's the right way to read this. There's been$17 billion worth of outflows. So the S &P is up, Yeah, 17 % this year. All right, so money's been coming out. So money's been coming out and piling into the safety. So you've got that dynamic playing out, rational behavior. And then on the other side of the spectrum, you've got gambling. I don't know what else to call it. The Wall Street Journal wrote a piece. I continue to believe that the flow situation is going to be screwed up if we're talking especially individual retail investors by the boomers because they have so much of the money that it makes so much more sense for them to put money, take money out of stocks and, and put it in, and have that glide path and go more into money markets and bonds and CDs and those sorts of things as they're retiring.

30:23I agree with you. I think if you broke this down by age cohort, it would tell its story. So that's a good point. Um, all right. Uh, amateurs pile into 24 hour, 24 hour options. It's just gambling. Ben and I spoke about the zero days to expiration phenomenon last week on the show and the fact that it's actually Amateur just sounds mean, doesn't it? When you call someone an amateur. Yeah. I prefer civilians. Okay. Individual investors made up 27 % of all activity and options as of June, up from 23 % at the start of 2020. I wonder what this was a decade ago. I'm going to guess it was under 10%. So average daily volume of options is through the roof.

31:06and the share of all options volume that expires in five or fewer days. Also, it's almost 50 % of all options, which is wild. What do you think has a bigger loss rate? Trading short-term options or parlays for FanDuel? Because on Ask the Compound last week, someone asked us, should I take money out of my retirement account and put it into my sports book? Because I think I can beat the system. I have to imagine you're probably better off on options than you are on parlays. Well, I bet my butt off. I bet my butt off. By the way, can I just give a shout for Sunday Ticket on YouTube? It is overstimulation at its finest.

31:50Between that and betting, that's my idea of fun. So you know what I got for the first time? I'm way, way past the fact that the expiration date and I said, I haven't done this before. I'm probably the last person on earth, but AT &T, my cable provider, which I negotiate with every year and get a lower deal. You know what they said? You know what they said to me this year? I think they're trying to keep people around for some reason. Hey, listen, just because you're a valued customer, here's NFL Red Zone for free this year. We didn't have the NFL Red Zone. So I had it for the first time. It's amazing.

32:24Because there are so many damn commercials when you watch a football game. I feel like it's getting worse. Scott Hansen is a national treasure. Anyway, getting back to the point of parlays versus options. I bet they have a similar loss rate, although not to brag, I hit a few over the weekend. No big deal. Oh, I did take it on the chin week one. Freaking Vikings. Unbelievable. Okay. A study by finance experts at the London Business School estimated that most individual traders options, excuse me, most individual options trader lose money. Yeah, no shit. Between November 2019 and June 2021, such investors notched losses of some$2.1 billion with the hits concentrated in shorter dated trades.

33:04All right, they got quotes from this guy, an Oregon entrepreneur. He said, quote, I've been addicted to this option stuff for quite some time. You get hooked. But however, he does most of his options trading on Robinhood in what he considers his, quote, gambling account. You now have the power to gamble in your pocket. But he said his long-term investments are with another brokerage. sorry, I'm okay with this. Yeah. As long as you look at it as a form of entertainment and gambling, that's then, sure, you've got your head on the right path there. Yeah, I think that's absolutely fine. If you want to have fun and gamble and spin the wheel and lose some money and it's entertaining.

33:46Hopefully that's most people. I really think it is. I think most people are not YOLOing their life savings. I've never traded an option in my life. You haven't lived. Are there people that are trying to get rich and be irresponsible? Yeah, of course there are. But is that the majority of these like drunken fools? I just don't think that's the case. The drunken fools lose their money pretty quickly and they're gone. Yeah. Right? Yeah. All right. Defiance ETFs is launching a fund on Thursday that sells ultra short dated options on the NASDAQ 100. How about that? The product will be the first in the market to utilize zero days to expiration contracts.

34:23The fund will write puts to generate income. The ticker is QQQY. What's the point here? Will they get a decent amount of income because there's so much volatility? I think they're trying to generate more income because they're selling more contracts. I don't know. Okay. But the income has to be lower on these though than longer dated options because of volatility, right? Hand up options noob here, but that makes sense intuitively, right? The income would have to be a little lower. Yeah, there's more juice. I would think there's more juice. This is like the T-bill of call options. I mean, when do we take the CFA exam?

34:57It's been a while. Give us a break. But this is the T-bill of call option selling, if that's a thing. Sure. Someone can explain this to us. Okay. The three-month 10-year treasury curve has been inverted for a record 212 days. That was from Bloomberg. This chart's from Callie at eToro. Who we saw at Future Proof. Callie Cox. Callie Bost. Callie Cox. That's her handle. No, her, although I'm confusing it. Her name says Callie Cox, but her at, no, her at is Callie Cox, but her name is Callie Bost. She got married and now it's Cox. We cracked the code. All right. Well, she puts out great stuff regardless of what her actual name is.

35:43The spread between the two-year and 10-year yield, the classic recession indicator, has been negative for 313 straight trading days. All right, here's what I'd like to see. I'd like to see credit spreads mixed with inverted yield curves. I don't know if I, I'm sure someone has done this. Because credit spreads are still very tight, right? They haven't, they've not blown out. I want to see, because people always say, well, this stuff acts with a lag because it's when a yield curve inverts 15 months later, that's when the recession hits. And that, that, that is like the average, like 15 to 18 months.

36:12But I want to see when does the credit spread stuff start blowing out? I feel like that's your, your key here, right? You know what? This is the opposite. This is the opposite of transitory, right? Inflation was transitory. Well, no, it wasn't. Well, now this is the opposite. It's like, well, this acts on a leg. It's coming. It's coming. Oh, yeah, when? Maybe it is. Maybe it's here, but it's been a while. This is the biggest goalpost move that the doomers have made in recent years is, listen, we're already in a recession. This is like 2022. We're already in a recession. People just don't know it yet.

36:40Then 2023, it's like, listen, the recession is coming any day now. Now it's like, of course we don't have a recession. Monetary policy acts on a leg. That's the goalpost move, right? Duh. Yes. I just got an email, Ben, with the subject. Everyone has a plan until they're punched in the face. Quote Mike Tyson. Wow. That just blew my mind. It's been a while, right? Yeah, I thought we gave up on that. All right. This is, so first of all, I put the US personal savings rate in here. It averages since like the 1940s, almost 9%. It's now 4.5%. Obviously that average was skewed because people used to save way more.

37:19But this is via, this is Neil Dutta via Sam Rowe and another person we saw at Future Proof. You know what I asked Sam? I said, Sam, how's the flooding in your apartment? Because he had videos of flooding in his apartment, so I could relate to that because I have a flood in my office. He said it wasn't fun. From the 1980s to the 2000s, there was a pretty neat and clean relationship. As net worth rose relative to income, household savings rate declined. This made sense as households saw rising asset values as a low-risk form of wealth creation. When you are loaded, you have less reason to save. And he's got this pretty chart here that kind of shows it.

37:56If my stock portfolio is rising and home prices are climbing, I don't feel like I need to save as much. He's saying that that relationship broke down a little bit in 2008 where people kind of started saving a little more. But this is, unfortunately, this is like the, it should be counter-cyclical where you should keep, I think you should keep saving the same percentage of your income regardless. list. I don't think you should save less just because you're doing better. Like I think that's the way you, you defeat lifestyle creep is you keep the similar percentage. So if you make more money, great, you're spending more, but you're also saving that same percentage, which is a higher actual nominal amount.

38:36That's how you defeat lifestyle creep is you, if you, if you save 15 % of your income and your income doubles because you got a sweet new job, keep saving 15 % of your income. Do you think more or less than 50 % of people spend more money as they make more money as a percentage of their overall income? Oh, definitely more. People spend more money as they make more. Oh, yes, for sure. But percentage, not just dollars. Right. Your savings, your percentage savings rate, I would guess, goes down as you make more money. Yes. Yes, that I agree with. And that's kind of the same thing he's showing here, just for economic cycles.

39:13All right. I kind of missed this one. Quantian on Twitter. We've talked a lot about why the vibes are so off and why people are miserable and inflation and all these other things. So he did this regression model, which looks at consumer sentiment with inflation and interest rates. And his takeaway was like, listen, this model I built, which I don't know if I could poke a hole in it or not because I'm not smart enough. He did the R squared here, right? The answer is that the three major things change. Consumers care a lot less about unemployment than they did, which was a big thing in following the great financial crisis.

39:48They prefer housing prices to fall rather than rise. And more than anything, they hate higher interest rates. This may surprise you, but it really shouldn't. Americans love borrowing money and hate being told they can't. So his whole thing about Senate is if you look at these things, I kind of like it, that if you're raising interest rates and not allowing me to borrow to finance my lifestyle or whatever, that's the thing that's making people so angry these days. which I could get. I can see how that could be a thing. Here's another one from Matt Darling on Twitter. And someone tweeted, you used to be able to reliably pull off on any highway in America and get yourself a hotel room at 2 a.m.

40:22Now with no one working, I have to stop long drives by 9 p.m. at the latest to make sure someone is at the desk. Little things like this keep adding up and getting worse. So this person is complaining. And Matt Darling says, again, one reason the vibes are off is that a lot of people prefer a world where people are desperate enough for jobs and willing to take anything they can get. And he's saying, listen, the unemployment rate being lower, most people prefer jobs that they don't have to work a hotel desk at 2 a.m. And they don't have to take a job just because it's the only thing available to them.

40:51You know the Frederick Lewis Allen guy? He's like one of my favorite financial historians. He wrote that book called The Big Change, and it was everything that happened from 1900 to 1950, which is probably, for consumers, the most innovation consumers have ever experienced in their lives. washing machines and refrigerators and new financial products and radios and tell all these things like the consumer had like probably the biggest leap forward they've ever gotten. And he was doing a consumer sentiment thing about people looking back from 1950 to 1900. And they were all complaining because they said in 1900, we could afford to have a huge house and have a bunch of servants.

41:26And now no one wants to be a servant anymore. anymore. And so it was like people got so happy, but then they had this, like they looked back fondly on this period where they could have servants because they couldn't have anymore, even though they had all this leap forward. I think people are going to look back at this time, especially our lifetime of going, going for having, you know, no internet, no nothing. And then the smartphone comes along. People are going to look back at this time and go that, that 40 year period or whatever, those people had some of the greatest technological change in history.

41:55And look at all these a-holes. They're all, they're still all just, they hated themselves. Why? That's what's going to happen in the future. They're going to look back and go, look at the leaps forward these people experienced. And they all were still miserable. Fair? Is this just the human condition? No, it's deep. It's deep, Ben. I don't know. I pause, knock on, knock on something to the center. I'm not sure I'm processing. I think it's, it's part of the human condition. And maybe this is why I'm continuing to make the bet on Warren Buffett going forward, the Warren Buffett long-term bet, because no one is ever happy.

42:29So people are constantly striving to get better and do more stuff because no one is ever happy. That's my bullish catalyst for the future. No one's ever content. How's that? Not happy. No one's ever content. That's the right word. Nobody's ever satisfied. That's different than nobody's ever happy. That's my biggest reason for having long-term options. I wrote about this once. I said it's sort of tragic for... All of us, tragic is too strong of a word, but it's that people don't find comfort even as they're – not comfort. People aren't satisfied even as they progress through life. But it's great for everyone because that's what drives – that's what makes things better is people's obsession of improving their circumstances.

43:13Even if they already have$10 million, people want more. Yes. um all right so on layoffs salesforce and meta well i wasn't sure so salesforce is bringing people back but i don't think meta is bringing people back as much as they are they're bringing back like i saw some headline they're bringing back like la croix and maybe ironing i don't know i thought of ironing i don't know if that's they don't provide ironing services but speaking of ironing services it's on my mind i have to hand up ben you were right i was wrong um steamers Is that where you're going here? Steamer suck? Yep. I was steaming one of my button ups and it was just too much work.

43:52My arm was getting tired. I said to Robin, I can't take this anymore. I'm buying an iron. I bought an iron. You don't have an iron? I don't have an iron. No dresser and no iron. You're living in the 1920s still. Mind you, I am not, I don't wear things that require an iron very often. You don't wear other Giants shirts? Exactly. But when you want an iron, when you need an iron, you're going to want an iron. Speaking of that, what Ben's referring to dressers, I gave a take in front of the audience. And listen, I was fairly sure how that was going to go. I was trying to entertain and mission accomplished.

44:27I made a joke about houses getting bigger over time. And when I was watching an old episode of Curb Your Enthusiasm, they had a dresser. Now, I don't have a dresser. Now, my kids have dressers, obviously. but I don't have a dresser in my bedroom because I have a big closet. So I said, show of hands, how many of you have a dresser? And I thought that probably like two thirds of hands would go every single hand in the audience went up. Credit to me, good joke. But I saw a tweet over the weekend, never seen a piece of furniture more obsolete than the Wood Entertainment Center. Can we all agree? Can we all agree that maybe dresses aren't obsolete but the Wood Entertainment Center is?

45:06Yes, remember they would come with a built-in like CD rack? You'd put your CDs on it and you'd be able to spin it. And oh, yeah. You know what I collected back in the day? They were huge. This might have surprised you. I actually think I still have it. I had a gigantic dresser, not dresser, shelf full of DVDs. I probably had like 500. I can see that. And then one day I transferred all of my DVDs to a gigantic CD book. I haven't watched a DVD in 15 years, but I can't get rid of them. It's like a family heirloom. I bet out of your 500 DVDs, I would have liked 15 % of them. I've got all the classics.

45:41Okay. Now listen, people say I have bad takes in movies. I happen to enjoy bad movies, but it's not as if I'm delusional and say, like I was watching Deep Blue Sea the other day. I know it's not a great movie, but I like it. So leave me alone. Yeah, it's like food. Some people like food, but I don't like. I also like good movies. I didn't like Once Upon a Time in Hollywood, but I like good movies. That's fair. You like The Whale. Love The Whale. Great film. Boy, did we get sidetracked. All right. So Redfin has these charts that show the mortgage payment on average for the median home asking price.

46:21And they show it by year from 2020. I love the weekly Redfin updates. They have great charts. So 2023, home buyer payments are up 14 % year over year. It's just wild. $2 ,600. bucks, the median payment, the median mortgage payment on a median asking price. In 2020, it was $1 ,500. I almost like, it just doesn't compute. Doesn't this matter? So I was thinking about this. So there's a little bungalow house right down the block or two over from my house. It's a tiny house and it's set for sale. So I looked it up. It's 1 ,100 square feet. It's got three bedrooms, one bath. Looks like they did some nice work to it.

47:06They totally refinished the kitchen. It looks nice. And it's going for$270 ,000, which is pretty rare. It's like you can't find anything for less than$300 ,000 anywhere. And so I looked at it, assuming 10 % down, 7.25 % mortgage, that's$1 ,660. Right? With 3 % mortgage rates, this$270 ,000 payment would have got you a$440 ,000 house a couple years ago. Wow. So if you were buying right now, would you go upstream to that$440 ,000 house and just pray to God that mortgage rates fall and you can refinance? Or would you settle for the smaller starter house and just try to go cheaper? That's like the calculus you have to play now.

47:47And sometimes you don't have either option, I guess. But what would you do in that situation? Would you lock in the cheaper one now and just hope that the housing market supply gets better in a few years? or would you just move up and? It's just a matter of numbers. Can you afford it or can't you? If you can afford it, I would buy a bigger. I think starter houses are very expensive. I do too. My whole thesis for a while has been don't get a starter house, move up, and get in a house you're going to stay in for 10 years as opposed to trading up in three or four years. But I don't know if the numbers make sense anymore for that.

48:23I saw a house in my neighborhood that sold for$500 ,000 in 2013. So 10 years ago, sold for$500 ,000. And it's sort of like the house that I grew up in that I described. A standard, I guess, split level or high rent. I don't know what it is. Probably 2 ,200, 2 ,300 square feet, maybe 2 ,400. All right. So sold for 500 grand a decade ago. they listed it for sale for$8.69. Not nice. Way too high. Three weeks later, they cut it. And do you think this is like no work to it either since then? Oh, no. The house needs work. Okay. The house needs a lot of work. So they listed it for$8.69. Three weeks later, they cut it to$8.29.

49:11Three weeks after that, they cut it to$7.99. And it'll probably sell for around that, I'm guessing. But it's just wild. It's wild. $800 ,000 house at seven and a quarter percent. What does that cost you? It's a lot of money. And the house needs a lot of work. You're still a fraction guy for mortgage rates. What did I say? Seven and a quarter. All the habits die hard. All right. Barry sent me this one from The Atlantic about my whole thesis last week. Hang on, hang on, hang on. Sorry. Before you go, there's one more chart. This is also from Redfin. 60 ,000 home purchase agreements were canceled in August.

49:47uh that's the highest percentage since october 2022 almost 16 of homes that went under contract i get it i can i can see having cold feet and being like you know what screw this or if you like mistimed the mortgage rate market and you thought you're getting 675 or wait six and three quarters and you got seven and a half i can i can see backing out all right so barry sent me this this is from the atlantic beaches did not always hold the allure they do today two centuries ago that could be used as sites of trade, not leisure, and were clogged by vendors, shoppers, and fishermen. Real estate agents saw little value in them.

50:20Until 1898 in Connecticut, they were included for free with the purchase of any property nearby. Then all of a sudden, they sort of took off. So getting back to my point of people in the past did not think of real estate the same way as we do today.

50:38It's a good background noise. We play through. Do you want to do this loan assumption thing, or is it not worth talking about? No. Okay. Yeah, I don't think it's going to happen. Skip. Go to private markets. All right. So Instacart, their IPO is today. There's a great chart from the information showing various stages of their life cycle at the seed. Then there's Series A, B, start to really take off in C, D. They were founded in 2012, by the way. And then they had their Series I, which was effectively, which who was participating in that fidelity tiro a16z sequoia um and i guess that was just like a i don't know if that was looked at as a bridge just you know get in before the ipo pop i mean a series i so do you think 100 go ahead there's now been enough time where the anchoring feelings have been reduced a little bit where people were looking at those 2021 early days of these valuations are nuts look what we could have gotten has enough time passed where they're like you know know what just rip the bandit off do the ipo for whatever we can get and get out of here well yes and no i mean the ipo market is coming is opening up because they're back below their series f valuation what's it take i'm trying to see if it's trading at cart i mean the arm holdings etf uh the arm holdings ipo uh went decent i mean it's it's it's actually at the lowest since the ipo but not certainly not a disaster by any stretch let's see if cart is trading.

52:09C-A-R-T. Why is this taking, eh, it's not working. Either way. It's trading, yeah. Either way, I wonder if like these, I mean, a lot of these were crossover investors. A lot of this, not just not Instagram specifically, but in 21 and 22, a lot of it was hedge funds coming into venture, the crossover funds. And if you're a crossover fund, your public equities got killed too. So you could kind of say, listen, the private stuff got killed along with the public stuff, especially if you're in the tech space. So it made sense. What's the IPO ETF doing year-to-date? Let's take a look. It is 30%. Now, still very depressed, obviously, but the FT had a very interesting article about private equity.

52:54It doesn't sound great. Private equity firms have started to borrow against their funds. Whoa, look at how, I know the FT is in, look at how they spell maneuvers. I know, that threw me for a loop. You pulled, it's every vowel like six times. Manelu reviewers. It's very British. It's M-A-N-O-E-U-V-R-E-S. It's like hors d 'oeuvres, but maneuvers. So private equity funds have started to borrow against their funds to backstop overly indebted portfolio companies, a new financial engineering tactic meant to cope with higher interest rates and a slowdown in dealmaking. The maneuvers, which lenders have dubbed, quote, defending the portfolio, have cropped up, as many older private equity funds run low on cash, just as the companies they own struggle with their own debt loads.

53:38Hey, what happened to all the dry powder? Well, doesn't it make sense that they would invest in their old companies instead of taking on new debt to invest in new companies? It does, it does. Buyout firm, but there's a catch. Buyout firms have turned to so-called net asset value loans, which use a fund's investments as collateral. They're deploying the proceeds to help pay down the debts of individual companies held by the fund. But they carry rates of five to seven percentage points over short-term rates. So like 10 to 12 and a half percent, which is, that's a lot. All right, here's a quote. Everyone is talking about it.

54:09Said a senior banker who advises large US private equity firms, it is easier to borrow at the fund level with all the NAV financing available than it is at the portfolio company level for certain companies facing distress. Now that makes sense, a lot of sense, but I don't know, probably, I don't know if alarm bells should go off, but you know, spidey senses should tingle a little bit here. Private equity funds should not be out raising new funds right now, probably. That's going to be a hard sell. in the current environment. I mean, private equity funds, if you think about it, they started in the 80s basically with LBOs.

54:39They've never been in a rising rate environment like this before. Well, that's the point. They rely on cheap debt. And when debt's not cheap, things become difficult. Kelly Evans had a good piece. She wrote, the characteristics of many private equity portfolios are similar to owning small cap US stocks. The average deal size for a target company last year was$964 million, according to Bain, almost identical to the median market cap of a company in the Russell 2000 of$922 million. So you should probably ask yourself, private equity is a very popular category of investing, what you're getting yourself into?

55:14And is it worth, is the illiquidity worth it? Right. Okay. New one for me. Have you heard of this Hauser's Law before? Did you say new one from me? This is a new one for me. I've never heard of this before. Okay. So Hauser's Law is this idea that since World War II, tax revenues have been roughly equal to like 19 % in change of GDP regardless of the marginal tax rate. So this person tweeted, I think about this chart at least every few weeks, which is I guess like the Roman Empire or something. What's happening with the Roman Empire? My wife asked me. I've never thought about the Roman Empire. I don't care about it.

55:52But why is it bubbling up? I see people tweeting about it. What's going on? It just became a meme and it took on a life of its own. I honestly don't get it. All right, since 1946, even though the top individual income tax rate has been anywhere from 28 % to 92%, total tax collections have averaged 16.8 % of GDP with a standard deviation of 1.2%. So look at the bottom there. That's wild. Tax collections as a percentage of it. So basically the government's going to get their money one way or another. So the tax rates change all the time. One way or another, as a percentage of GDP, the government is going to get its money.

56:25which is, it's, it's kind of fascinating. Like they can chain, pull these levers and change these dials for certain individuals or groups, but somehow, some way they're getting their money. That's a really good chart. That's a, that's Hauser's law folks. Ben, what would you do if you won a$997 million? T-bills probably money market funds, maybe. I don't know. So Edwin Cash, the guy who won the Powerball. So that was$2 billion. He took a lump sum of$997 million. So he got a billion. But he had to pay taxes on that. I mean, it's not even worth it at that point. I mean, what are you going to do with$400 million?

57:03So he's having a good time.

57:08He bought... All right, from the New York Post. A lucky lot of player has already purchased at least two other California mansions since coming to the money last year, and now he has splurged yet again, this time on a$47 million compound in Bel Air. The first property he purchased was$25 million. My thought process when seeing these, I can understand why people buy luxury real estate. Buying a cool house is, even if it's not as good an investment as putting money in an index fund or whatever, it's just like the psychic income is so big. But can you imagine the upkeep on a$30 million house? How much you'd have to spend every year?

57:41They also said he paid for 24-7 security to follow him around. Imagine being his neighbor. These are all probably the leader of the cap here that lives next door. A new neighbor coming in. Who is it? Is that Eva Longoria? No, it's the guy that won the Powerball. So my favorite stat on this, and this is written a few years ago, so I don't know if it's still true. I'm guessing it is. Every year, Americans spend more money on the lottery than they do on movie tickets, music, professional sporting events, video games, and books combined. Wow. If that says anything about our mentality. All right. This is a good one.

58:15But I can understand buying luxury real estate. I totally get it. Like, if you had that much money, he's probably going to blow through it all. Let's be honest, but I get it. Where would you buy? I don't, yeah, I guess I don't know. Not on the coast, because it's going to fall into the ocean. I think I would buy, you got to go to the Midwest, right? No, I mean, you could buy a place on the coast and afford it, I suppose. Between 1975 and 2022, the number of products in the average US supermarket has increased more than threefold from 8 ,900 to a whopping 31 ,500, much of it due to globalization.

58:54We have so much choice in our lives, right? I love going to the grocery store and seeing every couple of months there's a new flavor of Oreos. I feel like Oreos, there's just a whole shelf of them. Cookie dough and pistachio and pumpkin and whatever. Tapioca. Just doesn't end. I love it. Big Oreo guy. Love Oreos. I'm not eating Oreos these days. I don't know if you can tell, but I'm trying to lose some LBs. All right. But I'm going out. I have dinner plans Wednesday, Thursday, and Friday. So go figure. You can go out to dinner and sleep healthy, you know. Oh, I plan on that. It's very hard to do.

59:35You can't eat health. No, no, it's not possible. You cannot eat healthy, but you can avoid. I don't need to eat bread. I'm not going to eat the rolls. I'm not going to eat carbs. Protein and veggies. I get a, you know, exactly. Get a steak and some asparagus. All right. So we had our first broken bone in the Carlton household for one of my kids. My daughter Libby, a freak accident. She was running to a car during my other daughter's soccer game. Didn't see a step on the curb, tripped, fell, came back, holding her arm all weird. She goes, I broke something. And she's crying and I broke something.

1:00:08But your immediate reaction as a parent is always to think like, Like, it's not that kids are liars, but kids exaggerate about everything. If they get hurt, you know, like, sometimes it's very hard to tell. Kids are the big, like, you mentioned that, I think, was it you or Robin didn't believe Kobe when he broke his leg? Robin didn't. I feel like I've heard that story from so many parents. Like, yeah, they said they broke their bone. I didn't believe them because kids exaggerate. It's the boy that cried wolf all the time. And I heard that story from so many people. And she, like, was insistent, like, no, I broke something.

1:00:37I can tell. She broke her wrist. She's got a little cast on. Did you believe it? I kept telling her, well, it wasn't swollen or anything. It was just weird. And so I said, just move it. Let me see you move around. And she couldn't. And she was in pain for like 20 minutes. I'm like, all right, something's wrong, obviously. So I took her and she's, anyway. But kids are liars, for lack of a better word. When Kobe broke his leg, he had probably just turned fives. He was like really little. And he said, I broke my leg. I'm like, how do you even know what that means? Like he was screaming, crying, I broke my leg.

1:01:06And sure enough, that sucks. Yeah. Four weeks in a cast, though. Not too bad. It could have been worse. So she was bummed for a day, and now we're moving on. But I saw something this week that you don't see every day. In fact, I don't know the last time I saw this. Rob and I were at Trader Joe's, and I'm in the car with the boys in the back, which is a detail you didn't need. And I see two 70-year-old, 75-year-old identical twins walk by. Now, that is true. You don't see that a lot. You don't, right? And I mean, they looked exactly like it was really, it was really, it caught my attention in a meaningful way.

1:01:46And when Robbie came to the car, she said, did you see those two guys? I said, yeah, that was, that was really something. My, my wife has uncles who are identical twins. Oh, so you see it. So you do see it every day or not every, not literally every day. I've seen it before. But I've got a$10 billion idea. Okay. I'd like to hear you came up with an estimate for the TAM, but let's hear it. I want to, you know what? That sounds light. This is, the TAM is way bigger than 10 billion. Let's be conservative here because the IPO market, while open, is a little shaky. You ever go into, you ever open, and I know the answer is yes.

1:02:22You know when you open your refrigerator door and you smell something? You never know what it is. There should be some sort of a, I don't know if it's a wand or some way to identify. maybe AI could solve this. Boom. It's the cucumber that's in the bottom drawer that's rotting. I mean, fridges aren't that big. So finding what the source of the smell is, is typically not that hard. So out there, is that a no, is that a no from you? If we're on shark tank, I'm going to say that's a no for me. Okay. But, uh, I appreciate it. All right. Let me try one more time. I'll, I'm looking to sell you 20 % of the company for$50.

1:03:03Okay. Sold. Thank you. All right. Recommendations. I broke my bear market. I don't know if this is a bottom. Well, it's a bottom. I don't know if it's the bottom in my reading. I read this book on the airplane number go up by Zeke Fox. Now, I knew a lot of the story. Is it crypto history or what? We follow the crypto stuff pretty closely. It was just all about like Tether was the main character. and then it was all about like the shady characters in crypto. And it was a fun read. Zeke's a great writer. I'm not going to lie. I still don't know what Tether is. No clue. It's a stable coin. It's the biggest stable coin in the world.

1:03:39Did you listen to Peter Brown was in on an interview with the Goldman Sachs podcast? I didn't know Goldman had a podcast. Now you know. He said - What's it called the Vampire Squid? Take this from the source, but he said, I'd like to see that Peter Brown is the CEO of Renaissance Technologies. He said, I'd like to see round the clock trading and all types of instruments. I'd like to see more securitization, tokenization, more digital contracts. Although I think FTX set that back a while. I'm still bullish on digitalization token rails. Like I am. Yeah. Sorry, I'm out. I was never in. You wrote here your favorite TC movie ever.

1:04:17Take a guess. Jerry Maguire. Nailed it. Did we talk about this? No, I saw this in here and I just, I came up with a list in my head and I said, it's gotta be Jerry Maguire. It's on Peacock right now. I rewatched it like two weeks ago. So I haven't seen Jerry. Might be his best performance ever. Better than A Few Good Men? Probably. Ah, that's true. It's his most Tom Cruise performance ever. I rewatched it on the airplane. And what can I say? Just what an incredible movie. You know what my problem with that movie is? I said it to my wife. I didn't buy him and Renee Zellweger together. I just didn't buy it.

1:04:54Never did it for me. You know, I called somebody this week to explain something, and he said, Michael, you had me at hello. It's an iconic line, an iconic scene. I didn't buy those two together. I'm looking for my wife. All right, listen. Fine. If you're a young person and Jerry Maguire is before your time, make time for it. It's an amazing movie. An incredible movie. All right. I just want to say Aquaman 2 might be the worst trailer I've literally ever seen. Did you see it on Thursday Night Football? They put a trailer out? Is CGI getting worse? Like it was better for the James Cameron stuff, Avatar, but it's getting worse for everything else, I swear.

1:05:38My kids were watching Little Mermaid and I couldn't believe how bad the CGI was. It was awful. I still liked it. I agree with you. It's funny you mentioned that. I was thinking the same thing, but I still liked it. Great soundtrack. Not bad. All right. I saw an incredible movie. Now here, this is a recommendation. It's not just a bad movie that Michael likes. This is a recommendation. It's a genre movie that not everybody enjoys the genre. The genre is horror, kind of. It's not a slasher movie. But it's called Talk to Me. A24 distributed it. It was so good and so original and pretty frightening and just great.

1:06:16So the gist of the movie, it's sort of like monkey's paw type of deal where these kids find like a plastic hand or a ceramic hand or whatever it is. They shake the hand. They say, talk to me, and they see a spirit. Now, the problem is that if you go over 90 seconds, you know, shit goes off the rails. Then the spirit, the demon, stays with you. This sounds like a movie idea you come up with at 3 in the morning and you're high. Fine. Be that as it may, it was an incredible movie. And so it was scary. And I turned the movie off, pretty frightened. and at about 3 a.m. Robin said, Kobe's awake. Go see what's happening.

1:06:55He's sitting up in his bed. So I go into Kobe's room, and he's like shaking, and he says, I see something, I see something, and he's like pointing right, he's like, it's right there, it's right there, and I was like, ah! So I just, I grabbed him and ran into my bedroom, and I couldn't sleep. I was terrified. From a movie. From a movie. Okay. So I... Listen, I watched a ghost movie and then Kobe saw ghosts in my house. All right. This is why these movies work on you. I watched the movie Us, the Jordan Peele one. This is... Remember I was complaining about switching back and forth between Peacock and I was watching football on Peacock and I'm like, you know, I don't want to feel like switching back so I just went from Peacock and Us was a new movie that was on there.

1:07:37Very curious. It's not a new movie. No, it's new to Peacock. It's new to Peacock. And I'd never seen it and I wasn't going to buy it until it was on somewhere for free. It hasn't been on any of the streaming platforms. So I watched it. And there's three Jordan Peele movies. It's definitely third for me. I didn't like it at all. Didn't do it for me. It just, I thought the ending was kind of, eh, not bad, but it just, it didn't do anything for me. I didn't feel anything. You know, it's so funny you mentioned that. I felt the exact same way. So I saw it in the theaters and I very vividly remember being confused after I left as to how I felt about the movie.

1:08:12And I kind of had your reaction. I was like, did I like it? Did I hate it? I don't really feel much of anything. I thought it was okay. I was like entertained enough, but I oddly had no, I oddly had like very little reaction. And for all of my detective novel people, I know you're out there, people, The Last Kiss, The Last Good Kiss by James Crumley, this was a Andy Greenwald recommendation on, what's their podcast called? The Watch? Oh, The Watch, yeah. it's a good it's about it's like a 19 it's almost like a Raymond Chandler one but it was written by someone in the 2010s and it's like about this these two drunks that go on a expedition to find a lost girl and it's just great great dialogue great story uh here's my thought though they should have an IMDB trivia section for books and authors like on movies they always have the IMDB trivia I always go to like for ideas and how they came up with stuff and and how they they should to have that for books too.

1:09:10Like, I don't know how this guy came up with a story about a 1960s veteran who was a drunk, who was also a detective. I'd like to learn more about that. That's what I'm saying. Why do you need trivia associated with that? Am I missing something? I just want to hear, I want to hear about how they came up with the characters and stuff. Like how do you just, the whole fiction genre kind of boggles my mind that people can just creatively come up with characters and such. Agreed. I always wondered like how the, how the hell did George Lucas come up with the whole story of Star Wars. Exactly. All right.

1:09:43AnimalSpiritsPod at gmail.com. Thanks again to everyone who showed up at Future Proof. We loved meeting everyone. We loved all the Tropical Brothers shirts. And we'll see you next time.