Everything is Outperforming the S&P 500 This Year (EP. 470)

14:00Ben Carlson:Yeah, you're right. This is like a new level. But look at the next one. This is kind of hilarious. It shows a semiconductor trailing 12-month net profit margin. In this, it was, I don't know, a low of 25 % as recently as 2024. It's projected to be 49 % in 2027.

14:18Michael Batnick:We spoke to Dr. Ankur Crawford for a talker book episode that came in on Monday. And she's one of the best voices, in my opinion, on what's happening in the semi-space across all areas of the supply chain. And it's really easy to look at the price and say bubble. And I'm guilty of that too sometimes where I say, oh boy, don't like this. and you can have that opinion, but you really need to have an understanding, a little bit of an understanding of what is causing the margins and the earnings to skyrocket. And of course the stocks following suit.

14:56Ben Carlson:Well, the question is, what is this incentivized? If other competitors see a 49 % net profit margin, what does that do? I don't understand this industry enough, obviously.

15:05Michael Batnick:Nothing. My limited understanding is Taiwan Semi is not the type of company that you could just spin up. this is the most high tech, you know, like, um, you know, the scene, you probably didn't see the new Jurassic world where they walk into the,

15:22Ben Carlson:it was awful.

15:22Michael Batnick:Okay. It was terrible where they, in the, in the opening scene where they walk into the T-Rex, the, the, what do they call that thing? The Dominguez, the Dominus, I don't know, whatever it was, the fake, the alien T-Rex where they walk in with those hazmat suits and everything is like, like a, a Snickers wrapper got in there and destroy the, the integrity of the unit. that's what these fabs are like, where they manufacture these semiconductors. The amount of technology in these places is to an extreme level that there's a reason why there's only one Taiwan Semi. You can't just bring supply to the market.

15:59Michael Batnick:And that is why there is a bottleneck at almost every area of the chain. There is just a shortage. And this is not, I'm not saying anything that's not very obvious and potentially in the price of these stocks. But you can't just bring supply to the market. You can't just snap your fingers and fix the issue.

16:18Ben Carlson:It is interesting in what feels like we live in a world of abundance now when it comes to technology, that there still are bottlenecks.

16:24Michael Batnick:Great point.

16:24Ben Carlson:You'd think that they wouldn't exist anymore. It's kind of like, how is the street of Hormuz still a bottleneck for energy? But it is. There's still these points that make things difficult to expand as much as we want to.

16:35Michael Batnick:Ben, one of my favorite categories in our doc is the investor behavior section. And I know we're on this beat a lot, but I'm going to keep doing it because I think it's important. There's so many different sources of investor behavior and different pieces of data that you could point to and say, see, X, Y, Z.

16:55Ben Carlson:Yeah, back to your shoeshine thing from last week.

16:59Michael Batnick:Whatever narrative you want to spin about the market, you could find it in various sources of investor behavior data. So for example, according to Citadel Securities, Frank Chaparro tweeted this, the day of SpaceX's Blockbuster IPO marked the largest single day of net retail stock buying ever, recorded by the firm, which handles roughly 35 % of US retail trading volume. And in fact, nine of the 10 largest trading days ever observed on our platform have occurred in just the last month, including seven during the first half of June alone. Okay, so factually, factually, there is a mania around the SpaceX IPO.

17:37Retail traders are having a moment of euphoria.

17:43Michael Batnick:They are trading a lot, a lot, a lot, a lot. Now, is it all bullish trades? I don't know. I don't know how much money went into the 2x SpaceX leveraged ETF, the inverse, which by the way, was down 43 % in two days, I think. So bullish bears, they're trading their asses off. And then I'm on the daily chart book this morning and I see equity positioning. Now this says consolidated equity positioning. It's a weighted average of Z scores for positioning indicators. And they're looking at, this is from Deutsche Bank asset allocation. Okay. So I think they have like a pretty good view on whatever pool of investors they're looking at.

18:23Michael Batnick:And if you're looking at this, you see nothing. Equity positioning sits in the 42nd percentile, still far from crowded and leaving plenty of room for further upside. So you see this, you go, huh, how do you square this with what I just said? And then I see another one, discretionary. So again, from Deutsche Bank, they break down discretionary versus systematic stock equity positioning. And again, nothing there. Discretionary investor is 41st percentile. Systematic is 40th percentile exposure to equities in terms of like how allocated you are. And you say, you scratch your head, you're like, wait, I don't get this.

19:01Michael Batnick:Make it make sense. All right. Well, there's another chart from Bloomberg that shows speculators are getting shorter in equities. This shows the net positioning of the S &P, the NASDAQ, the Dow, and the mid-cap futures as a percent of open interest, and it's getting more negative. Huh? They're getting more short in the market. And then you say, okay, okay, well, this makes sense. We're looking at the prime book, so hedge fund exposure, gross and net to semiconductors. And it is parabolic. It has gone from 8 % at the beginning of the year to 22 % today. So hedge funds are all in on semiconductors.

19:40Michael Batnick:And then you see retail piling to semi-stocks, flows for all US semi-ETFs listed on Bloomberg. Completely insane. All right. So there's just so many different sources in here. So you see, yeah, everybody, everybody is overweight semis.

19:56Ben Carlson:The DRAM ETF, as it went for, we said 10 billion last week, now 20 billion.

20:00Michael Batnick:Okay. So clearly, clearly, clearly everyone and their mother is all in on semis. Rightly or wrongly, is it going to fall 30%, 40 %? Is it going to double from here? Who knows? But there's a lot of, there is a lot of optimism, perhaps beyond optimism with retail behavior and professional behavior in semiconductor stocks. But everything else, at least according to the charts that I just shared,

20:25Ben Carlson:and I'm sure there's others. Well, Kevin Gordon had one from Vanditrack. He said, retail single stock net buying is falling to the lowest since COVID. Make it make sense. I don't know if they just moved all to the ETFs or what.

20:40Michael Batnick:So anyway, I guess my point is, I love these charts as much as the next guy, but I think they're really noisy. and I think you should just consider the source, not in terms of like the underlying data, but who is showing you the data and what narrative are they trying to spin? Because it's very easy to make any case based on any of these charts.

21:00Ben Carlson:Yeah, what was the Munger quote from a few years ago? If you're not confused, you're not paying attention, something like that. How about this one? I've got a theory in it. So Citadel had this really good report that they put up monthly. And they said, household cash as a percentage of total financial assets is now 8%. That's higher than it's been at any time since 1990. Okay? What's your theory for why household cash as a percentage of total assets is so much higher than it's been in the last... Since 1990 is 20 years ago, right? Yeah. Okay. In my mind, 1990 is always 20 years ago.

21:31Michael Batnick:No, 1990. That was 13 years ago. Yeah, 20 years ago. Okay. The only thing that I can think of without having thought about this prior to the last 10 seconds is people are putting money aside to save for a house.

21:45Ben Carlson:i didn't think of that one i'm gonna say no here's my thought okay here's my i have two theories i put this out on twitter and i asked because this is another one of those you go how could you how could you have a speculative mania when people have more cash than ever and i think there's two things going on here one is just we lived through a period that was so long with like financial repression and no rates and now finally you can get three to four percent in cash people are okay with that i think this is just baby boomers deciding and people trading down from fixed income going i got nailed in bonds when bought when the interest rates rose i'm gonna keep more money in cash and i'm retiring so i need some money in cash so i think i think this is mostly a baby boomer phenomenon yeah that'd be my theory i subscribe to that theory that's good that's better than mine it's a it's another surprising thing though right you go wait this is a speculative mania and people are holding more cash than ever this is the episode of surprises i guess by the way, SpaceX, I believe, debuted at 150 when it first opened.

22:39Ben Carlson:Is that correct? Ish? I think it opened. Yeah, something like that. Yep. It's back down there at pre-market today. So it round tripped. So who is the bag holder in that scenario then? No, because the index funds, it didn't really, it's still getting there, right? So who cons is the bag holder now?

22:57Michael Batnick:I guess people that bought at the top and are still holding on. I don't know.

22:59Ben Carlson:All right.

23:01Michael Batnick:Anyway, that was kind of fun. But the amount of trading that happened in SpaceX. Yeah, the volume was crazy. There's just so much volume. So, I mean, is anybody holding the bag? I don't know. Everybody's trading their ass off. Some people made money. Some people lost money. Okay.

23:16Ben Carlson:Did you put this survey in here? 8 % of investors believe there isn't a bubble in AI-related stocks.

23:22Michael Batnick:Oh, okay. This is interesting. So, sort of getting back to what we spoke with Dr. Crawford about and something that I take – and I want to be careful saying this, a little bit of worse, there's still early, early might be the wrong word here. I, I think what I'm trying to say, Ben is I love that there is still so much doubt. Now, just because, just because everybody thinks that this is a bubble, that doesn't mean it's not. Okay. So I'm gonna be very careful. It doesn't mean just because everybody thinks that doesn't mean everybody's wrong, but it does mean that there is a lot of doubt. There are still a lot of people that are non-believers that these things aren't going to come crashing down.

24:04Michael Batnick:So the AAII sentiment survey, they asked, is there a bubble in AI-related stocks? And no, there isn't a bubble, only 8%. Now, to be fair, I don't think that I would say that because I think that you could credibly make the case that there is a bubble in some areas of the AI industrial complex. Yeah.

24:28Ben Carlson:This is also the way that this survey is worded. It says 51 % of people said some, but not all AI-related stocks are too expensively valued.

24:35Michael Batnick:Yeah, that's probably where I would fall. Anyway, whatever.

24:39Ben Carlson:The fact that there has been people who have been calling for a bubble for 12 years in a row, just because those people continue to call a bubble doesn't mean there's not going to be a bubble at some point. Right? You can't use that as a disqualifier. Like, hey, this person's still calling a bubble. That means it can't be. You can't use that as a disqualifier.

24:56Michael Batnick:If somebody worded this better than I'm going to be, But they said, usually, and again, not disqualifying what we just spoke about, usually tops happen because everybody's looking to buy. Right? Like there is when there is nobody left to buy, there will be a top. Yeah. But there's still so many people that are just saying like, this can't continue.

25:21Ben Carlson:But to your point about there being so many different investors, there is no like everyone in the boat anymore. It's not going to happen. happen. There's too many diverse set of investors today.

25:29Michael Batnick:There is no everyone. All right, let's talk about spending. Mike Sicardi tweeted this from Bank of America. Consumer spending momentum is remarkably robust with total card spending rising 5.1 % year over year in May, the strongest growth in nearly four years. Now, of course, there are some reasons for this, gasoline being one of them, but strongest growth in nearly four years.

25:51Ben Carlson:I got a question. Whatever you want to say,

25:53Michael Batnick:people are spending.

25:54Ben Carlson:We've talked about this before. I need someone to explain this to me. So the average credit card rate is somewhere in the range of 20 to 25%, depending on who you ask, right? It's really, really high. They pay out the rewards. I know you spend the 2 % to 3 % at the vendors. But I keep getting these. I think I sent you a picture of one. I keep getting these things for, hey, 0 % rate for 21 months or something. How do we live in a world where the credit cards can charge 25%, but also 0 % for 21 months? Because the 25 pay for the zero. That is insane to me that that. So we had, we did like a 0 % financing for our flooring we did last year.

26:28Ben Carlson:Of course I'm going to take it. They gave me 0 % for 18 months. When that runs up, I found a 0 % for 21. I'm going to roll some of it over to that and just keep having the 0 % go. Like why? And slowly paid off. Why wouldn't I do that? I can't, I just can't believe that that's actually an option. That they give you 0%.

26:44Michael Batnick:This is like the reverse Robin Hood. Stealing from the poor to give to the rich.

26:48Ben Carlson:It kind of is. And obviously you're, you're, when you apply, they don't give you a huge limit. And also your limit, I'm sure, is determined by your credit score. Not to brag, got a good credit score, of course. But I can't believe that these things exist in today's day and age. That's all I'm saying.

27:04Michael Batnick:Now, you could say that like, and I'm sensitive to this argument, that these rates are punitive. There is a reason why subprime borrowers have to be charged a high rate. It's because they're risky to loan money to. I know that sounds cold, but like, come on. It's completely unsecured debt. Right. There's no recourse. Right. All right. More decent economic news from Bespoke Retail Sales. Breadth in this month's report was remarkably strong, with just two sectors showing negative growth. So it's not just gasoline. Following these results, our diffusion index, which measures the six-month average net number of sectors expanding, ticked up to the high end of its recent range.

27:44Michael Batnick:Good news. All right. Wait.

27:49Ben Carlson:The diffusion thing got me. I don't know. That's just a lot of terminology. Don't worry about it. Don't worry about it.

27:55Michael Batnick:it's very technical. You want to understand.

27:56Ben Carlson:But if you look at one, if you look at that chart of retail sales, that just had the one, it sprung up from COVID. And obviously part of that is inflation. It's not everything. But that was another thing that is on a completely new level. Like the trend was broken forever. And we just spend more and everyone has just moved on. It didn't come back. All right, hold on.

28:14Michael Batnick:The market is open. Let's see. NVIDIA. Ooh, NVIDIA is down 3.4%. Let's take a look at the. The NASDAQ is down 2.5%.

28:24Ben Carlson:probably finishes green by the end of the day.

28:26Michael Batnick:To the point that we were making earlier about everyone in semis. I mean, everyone in semis. Yeah, there's going to be bigger air pockets. So Micron is down 11%. Sandus is down 11%. I think Micron reports after the bail. Guess what? Micron could fall. Micron can and probably, probably, whether I know. Micron could fall 30%. Matter of fact, I keep, I know I said this every episode. It just did in March. Micron could fall 30 % in a week and still being an incredibly strong uptrend. Like the shakeouts are probably going to be just as fast as the rise. So no pain, no gain, as I said.

29:02Ben Carlson:Yeah, exactly. All right, cool one from Stripe Epiconomics here. They look at new business applications. I think this is one of the things I think -

29:09Michael Batnick:Wait, why did you skip that? Rich people complain of the worst. I think it's a good topic. Oh, you want to do that? Okay. Yeah, I am, these are the absolute worst.

29:18Ben Carlson:Yeah, so this is from the Wall Street Journal. Okay. America's economic anxiety is rising up the income ladder. And they ask people a set of questions. Do you think America's political and economic systems are stacked against people like me? And the upper middle class people in 2017 said 29 % said yes. In 2026, 65 % of people said yes. And also, do you lack confidence that their life will be better for your children than it is for theirs? In 2019, it was 64 % said yes. 2026, 86 % said they lack confidence that their children would have a better life than theirs.

29:49Michael Batnick:Stacked against is give me a f***ing break.

29:51Ben Carlson:Yes.

29:52Michael Batnick:Now, I know that it's hard to live in expensive areas, Long Island being one of them. I am sympathetic to that. But stacked against you? Come on. There are people who actually have, the system is stacked against certain people. Yes, we are not one of them.

30:09Ben Carlson:If you're in the upper middle class, yes. Rich people, this is such a big pet peeve of mine. Rich people who pretend or say they're middle class or complain about their lives when there's other people who have actual complaints that are worth telling. I hate it. All right, this is what makes America great. New business applications. This is something we never could have possibly foreseen. Remember all the conversations we had, like what is COVID going to do? Like what is the thing that it's going to change forever? And we had all the, and there was a lot of wrong predictions. There was some right.

30:39Ben Carlson:This is something no one ever would have predicted, that you'd see this huge increase in business applications. There's a reason for it back then. So Ernie Tedeschi and team at Stripe wrote about this. They said the PPP program, there was a small business loan program that required an EIN and a little else for eligibility. So you got like these loans and it was like, hey, guess what? If we make it easier for people to start businesses, they're going to start businesses. And you saw this huge rise in business formation. But then it stuck. And now you're seeing another acceleration. And the team at Stripe is saying, there is no program now that's causing this.

31:11Ben Carlson:What's causing it? AI. And so they break it down by saying it's easier for people to start businesses now because of AI. And I think this is actually a very good, this is a great thing that's happening. And look at the numbers from 2005 to 2018 or so. These numbers were stuck. They didn't move much at all. And now we've essentially seen more than a doubling of business applications of people starting their own businesses because it's easier. Yeah. There is a lot to celebrate about what's happening in

31:39Michael Batnick:the country. It's very, very easy to lose sight of that given all of the negativity. And a lot of the negativity is genuine. I'm not trying to sweep the negativity under the rug. There's a lot of shitty, terrible things happening to a lot of people, but there's so much good stuff happening too.

31:57Ben Carlson:Just think about how delusional you have to be to start your own business though. It's really, really hard. It's pretty psychotic. But so many people do it in this country because like there's this idea that, yes, these surveys talk about things getting worse, but you don't start a business if you don't think that it's going to work or that you're not somehow optimistic. I think that's -

32:16Michael Batnick:All right, let's pivot to the dark. It's enough positivity for one day, am I right? Okay. So Tim Ferriss wrote a post describing that his books sales are crashing now tim ferris is probably the modern day king of the self the self-help like the the wait this is not dark i think i'm gonna go on record and say this is a good thing you know i'm i'll tell you like that no i totally agree i'm just saying the transition to ai doomerism i think this is a great thing but he's all like the the the the self-help hacker book right like the four-hour work week before our body before this that he He basically said that -

32:53Ben Carlson:There's still a stuff that he talked about in the four-hour body that I do today still. There's some workout stuff in there that he laid out that it's a really big book and most of it was useless to me, but there was some stuff that I still use to this day from his book, from that four-hour body book.

33:08Michael Batnick:So his catalog will sell roughly 80 % fewer print copies in 2026 than it did in 2022. And of course, the self-help books are being displaced by Claude because you could ask it anything. And I think that's great. But Ben, what's your take on this?

33:22Ben Carlson:No, the self-help genre, I think it's useless to 95 % of people. I think you read one of these self-help books and you go, yes, I'm going to change my life. And then you don't do anything. It just gives you this initial pop. And so - I have very mixed thoughts on this. Are we sure though that this is all AI related? Is this too much of a causation thing? Or is this - What if this is just a Tim Ferriss thing?

33:48Michael Batnick:No, let's just say it's 80 % AI. Maybe Tim Ferriss has run his course. His book's been out for a long, long time. Yeah, that's the thing. This is pretty...

33:58Ben Carlson:I wouldn't have thought this, but it does make sense. I think self-help is sort of like how some people feel about religion.

34:07Michael Batnick:Some people say religion is bad for reasons X, Y, and Z. And it's nonsense. Okay, fine. You might feel that way. But there are genuinely people that get a lot out of it.

34:20Ben Carlson:Yeah, you're right. It gives people hope.

34:21Michael Batnick:Right.

34:22Ben Carlson:Okay. So I think self-help is the same. That's true. But when you read your first self-help book, you are sort of energized and charged and like, I'm going to change the world or change myself at least. Most of the time it doesn't happen. I think the number I read in a -

34:34Michael Batnick:So I think people are mad at the self-help creators. Not mad, but it's like, oh, that person's a Charlotte, right? They're getting rich by telling people what to do. I think that's generally the complaint.

34:43Ben Carlson:There shouldn't need to be more self-help books. But it's true that sometimes the way the message is crafted just needs to be changed.

34:49Michael Batnick:And sometimes people find comfort in that stuff. So I don't want to be too big of a hater.

34:53Ben Carlson:No, no, no. Listen, there was someone who said like, hey, Ben, there's nothing new in your new book. And I felt like, well, yeah, someone told me a long time ago. Someone told me a long time ago, hey, listen, no one goes to church on Sunday expecting to hear an 11th commandment. Sometimes you just need - Boom, love it. Sometimes you just need to be reinforced. Yes. So that's why self-help books will always, But I got to say, this is not one of those outcomes I would have predicted. It's pretty interesting that this is happening.

35:24Michael Batnick:Yeah. So add this to the mile-long list, I think.

35:27Ben Carlson:Sorry, one more thing. Don't you think podcasts are also part of it, too? I think podcasts have replaced books for— People always say, like, oh, my gosh, no one's reading anymore. I think podcasts have replaced books for a wide— for a big segment of the population. Of course. Why would I want to read Tim Ferriss' books when I could listen to his podcast? I'm sure that's part of it, too.

35:44Michael Batnick:Yeah, it's easier. All right, so add this to the mile-long list of things that we might look back on and say, what in the world? How was this not more clear that X was going to happen? Here's a tweet from Sharish. They are putting data centers in the ocean now. Pantalasa, a startup from Portland, just raised$140 million. They build floating platforms that sit out at sea and run AI. No power grid needed. The ocean's waves make all the electricity. The seawater keeps the chips cool. big floating balls bob up and down the waves that motion makes power the power runs the AI chips inside backed by Teal company now worth almost a billion dollars alright why not I mean what do I know sure

36:25Ben Carlson:it looks like a scene the picture looks like a scene from a Star Wars movie sure why not it is funny because there's obviously roadblocks to data centers and now that that's a lot of municipalities and cities are saying no we don't want them here obviously it's so important for these hyperscalers to get this stuff out that they're going to put them wherever they can they keep talking about putting them in space and in the ocean And it is kind of insane.

36:46Michael Batnick:So I guess part of the push and pull that we keep talking about is we're looking at the prices of semiconductors. We're looking at the valuation of SpaceX. And it feels how it feels. Let's be honest. We all feel in a certain way, right? Like this feels like 99. What time is it? Who knows? And I'm reminding myself of what Gavin Baker said. where he's like, think about all the shortage of compute that we keep talking about and just think about the fact that literally less than 3 % of the world, maybe even less than that, is actually even using AI. And so like, all right, well, that's one end of the spectrum versus the other.

37:28Michael Batnick:And how do you think about investing through those two prisms? And it's hard.

37:31Ben Carlson:I do think it's helpful to read both finance people and tech people right now to keep yourself balanced. I feel like if you just focus on one, not the other, you're not seeing both sides of this and you're not having a more balanced view, right? Because again, we've talked about the finance people tend to lean more bearish on this stuff. The tech people more bullish. This is a generalization, but I think it's important to read both accounts. All right, I'm gonna keep it positive here. I'll give a Talking Wealth plug again. So Talking Wealth is our YouTube channel and podcast for financial advisors.

38:00Ben Carlson:We talk about everything, all things wealth management. Last week, you had Jason Wank on the show from Altruist talking about their new AI platform called Hazel.

38:07Michael Batnick:We're putting out good stuff.

38:09Ben Carlson:Yeah, it's really, I was thinking though, like ChatGPT, calling it ChatGPT was like one of the biggest fumbles in history. The fact that they didn't call it a name, like a verb or a noun or name, that there has to be a rebrand at some point to call it something. Because every new AI system now is a name, right? It's kind of a cutesy name, right? You have to make it something people will latch onto. How about this?

38:30Michael Batnick:Just drop the GPT.

38:32Ben Carlson:Just chat? Yeah, you're right.

38:34Michael Batnick:Where's Justin Timberlake when you need him?

38:36Ben Carlson:So I talked to David Lau this week, and that's going to come out on Thursday, I believe. And he is in the insurance industry. And I asked him, like, hey, AI has to somehow have an impact on the insurance industry, right? Like, because it's quantitatively based. It's numbers based, actuaries, these types of things. And what he told me is that, okay, so we have a financial advisor group come to us, and they have thousands of clients. And within those clients, there might be 200 to 300 different insurance policies. and they could be, what are they called? Why am I blanking on the term? When you receive monthly income, annuities.

39:11Ben Carlson:Thank you, my brain. So you have 300 annuities and there's all these different legalese terms. And he said, now we could just, he said in the past, we would have kind of given a blanket statement on these things. Now we just upload statements for two or 300 of these annuities and we can give perfect analysis. Like, hey, you should probably trade that one in for a new one. And he's like, we're doing work we couldn't do in the past.

39:29Michael Batnick:So sick. Like, you know, this reminds me of my annuity days or my insurance days in which I never sold a single policy to anybody outside my family. But there was like people whose literal job it was to run the numbers. I mean, obviously, but of course it was a job.

39:45Ben Carlson:See ya. But he's saying, he's saying the thing is, we keep talking about AI, like what task is AI gonna replace? And you know, that's fine. But what task is AI gonna allow you to do that you couldn't do before? He's like, listen, we never could have done this before. We couldn't have looked at that many policies and that much data and that many prospectuses. He's like, AI can do it for us now in the blink of an eye. And that's a cool thing, I think, that we're not thinking enough of. What are the things we can do that we didn't do before? Speaking of which, MidJourney. I knew MidJourney as this company where, I think you started doing this first, where you could type in a prompt and it would give you a picture.

40:22Ben Carlson:And this is before it was easier to do on all the LLMs, right?

40:24Michael Batnick:My kids love this. Make a picture of Venom fighting Darth Vader.

40:28Ben Carlson:Yeah, so I had a MidJourney account. I think I paid for it at first. Now I don't need to anymore because I'm paying for all the other stuff. Last week, Mid Journey decided that they came out with this full medical body scan that you could do a full, and remember, didn't you just do this or something? You did a full body workup of something.

40:43Michael Batnick:I did blood work.

40:45Ben Carlson:Now, I remember we got a few people who said, hey, Michael, you might not be, a few medical people reached out and said, hey, Michael, you're not be covering everything by doing this full blood work, blah, blah, blah, blah, blah. And I think a bunch of people said this too. I just think it's kind of cool that we can have something like this, that the future is going to be crazy is all I'm saying. Like stuff is coming. And I think it's really cool to see this. Even if this is not a foolproof, because there's a lot of medical people. No, wait, wait, wait. All right, one more piece of good news. Are you, I can't imagine you're into the World Cup at all.

41:13Ben Carlson:Are you a World Cup guy? Not at all. Okay, you were under the NBA. I kind of got into it a little. My kids are enjoying it. It's funny because my kids get a lot of their sports takes from YouTube, right? They watch YouTube Kids. and my son, his NBA takes are just all kind of broke because whoever YouTube, he follows on YouTube, you know, he's telling me like, this person is the GOAT. James Harden is so much better

41:36Michael Batnick:than Jalen Brunson.

41:37Ben Carlson:Yeah, so I have to like, so he's like, oh, Ronaldo is the GOAT, not Messi. And I'm like, no, no, no, you don't realize. Messi's like, he's the best player ever. You don't get it. You're listening to the wrong YouTube person. So Messi had like five goals. Anyway, there's all these stories going in. ABC News had this story about how people from Europe are coming in and they're going viral because they're talking about, I'm sure you've seen some of this stuff on Twitter. The people in Europe going viral talking about the normal things we have in America. And so here's something from ABC News. Many, many visitors have expressed surprise that conveniences Americans often take for granted, including free ice, refill stations, 24 hour retail operations, and the overall friendliness of the consumer.

42:11Ben Carlson:And they interviewed this person. He said, what Americans consider ordinary is often extraordinary to visitors. And obviously there's some of this when Americans go to Europe too, right? There's things that they have that we don't. But I think, I think it's just a great thing that it's funny. They said travel researchers have long found that tourists do not simply consume landmarks. They consume daily life. And it's like the people, not the, not the places that matter anymore. And I just think that there's this, this thing on social media that we should all hate each other. Right. And, uh, it's so cool to see people have like positive experiences.

42:43Ben Carlson:Right. And it's like, we hit the Europeans and they hit us. And the European mind can't comprehend. It's like, no, no, no. When they come here, like they're, they're optimistic and positive. Kind of the way we are. We go over there. I think it's just, it's really cool to see.

42:54Michael Batnick:I agree. Very cool. Love it. Yeah. All right. All right. Let's do some stuff on prediction markets. So Schwab is getting in the game. Prediction markets are not going away. They are going to be a lot bigger in the future than they are today. I don't know how big. Can you really see Schwab customers using them? Yeah. Just for some binary bets. Like, is it going to be a big part of their business? No, I don't think so. But will the S &P 500 be up on Fed Day? I think there is an appetite for this.

43:27Ben Carlson:I just feel like the degenerate economy stays to the original degenerate places. I feel like if Vanguard and Schwab try to get into this stuff, it's not going to work.

43:35Michael Batnick:You know what? Maybe I'm wrong. What's the harm in turning it on? Fair. Right? They're not going all in. Whatever. They're going to offer it where appropriate. They're not going to let you do sports parlays or anything like that.

43:47Ben Carlson:But that's the thing. As we've seen, that's what it's used mostly for is sports parlays.

43:51Michael Batnick:It's still like 90 plus percent sports. Right? All right, I did like this. I've been critical of some of the stuff that's happening, but I do like this. So credit where credit is due. CalShield plans to require users disclose where they work to make certain trades. This is from the Wall Street Journal. CalShield plans to require that participants in some prediction markets disclose the identity of their employers after an advisory committee recommended tighter security measures to combat potential insider trading and market manipulation. Duh. I mean, who says no? Who says no to this? It's pretty easy.

44:23Michael Batnick:This happened. Accounts belonging to military spouses on Calci made accurate bets on when former Venezuela President Nicolas Maduro would be ousted just days before he was seized by U.S. officials in January. At least one of those accounts was referred to federal investigators with this. I mean, what the f***? No. Straight to jail. You can't do this.

44:45Ben Carlson:That's almost like traitors. Can you imagine someone betting on when D-Day's going to happen back in the 40s or something? Gross. It is very gross.

44:52Michael Batnick:I did miss this one. A Google employee was charged with insider trading on Polymarket. This person made more than a million dollars using non-public information to bet on who would be the most searched people of 2025. Gosh. Oh, here's a tweet from Ryan Churn speaking about what people are actually using it for. This is the primary source of prediction market nihilism. Two years ago, prediction market volume was over 90 % politics and economics. Today, these same categories are under 6 % of total volume. So it's basically, it's all sports and parlays. and sports parties.

45:24Ben Carlson:The idea was, yeah, you're going to be, because sometimes the market doesn't react to the headlines very well, the data. But it's like, no, you don't have to worry about that over or underreaction by the market. You can actually bet on the actual outcomes, but no one wants to use it for that.

45:37Michael Batnick:Poly market got busted. There was an investigative report done by the Wall Street Journal. They looked like they were getting rich on poly market, but none of it was real. That's a headline. Basically, they, hey, let me just read it. In his videos, George Makihara appears to have a lucrative side hustle making bets on Polymarket. In January, the college student posted a video that showed him winning$100 ,000 on a wager that President Trump would publicly say the word McDonald's that month. The bet was one of 145 that Makihara appeared to place on Polymarket's website between January and mid-May.

46:15Michael Batnick:Based on his videos, bets adding up to almost$410 ,000. But none of those bets were real. according to a Wall Street Journal investigation. So apparently they paid a lot of influencers to post fake trades and fake wins and not awesome.

46:32Ben Carlson:Oh, I thought this guy was faking, but Polymarket was trying to show... They paid a bunch of influencers to post fake shit.

46:42Michael Batnick:The journal reviewed 1 ,105 videos posted by 10 creators endorsed by Polymarket's contractor between December 2025 and mid-May. 70 % of the videos that creators placed a bet. Clues in the videos showed that none of the bets, $1.9 million in total, were real. Oof. These 118 videos depicted creators winning almost$900 ,000. In reality, those bets would have lost more than$166 ,000. Not awesome. Not awesome.

47:12Ben Carlson:Yeah, that's, oof. Not good. Yeah, that sort of stuff is from the pond. So the fact that this is all sports betting, what if just another better platform for sports betting comes along? What moat do these companies have at all? Because they just stole from DraftKings and FanDuel. If you're not going to use it for politics and economics, and obviously when the presidential election comes around, it'll be more politics-based, but I don't see what kind of moat these firms have. It's regulatory. But that's not a moat. If regulations can...

47:47Michael Batnick:Oh, yes, it is. Yes, it is. These companies spend tens of millions of dollars on legal and lobbyists and all that sort of stuff. It's definitely a moat. All right.

47:57Ben Carlson:Well, yes, obviously it helps when the president's son is on the board or something. But what happens if there's a change in office? At that point, these companies are hugely under pressure. I don't know. All right. Let's talk about crypto. I want to talk about Ethereum because look at the price of this thing. It's essentially back to almost the 2017 highs, which was like 1400-ish. Okay? I remember this piece. Paki McCormick wrote this in 2021 called Own the Internet, the Bullcase for Ethereum. He talked about Patrick O'Shaughnessy and Justin Drake on business breakdowns to discuss Ethereum. James Wang wrote a great post on Ethereum's Q1 up results.

48:34Ben Carlson:Bloomberg's Joe Weisenshall wrote about a post about finance normally is getting ETH pilled. Generally, a lot of the smartest people I know are getting very excited about Ethereum. And the idea was, remember, it's like, hey, if you could invest in the HTT or HTML or whatever, that's like what Ethereum is, right? It's smart contracts. It's like the smart way to instead of Bitcoin. What happened? What happened to this thing? It just seems to be nothing happening with it. Why was everyone so wrong about this?

49:02Michael Batnick:If you're asking me what happened to the Ethereum network and the prices, I don't know that I could give you a great answer.

49:07Ben Carlson:What happened to this thing being like, I'm going to own the internet. Ethereum is owning the internet. Smart contracts. A lot of people were saying this. I want to know what happened. Because I feel like a lot of this stuff, we have the hype. And then there's no explanation afterwards when the hype doesn't come true.

49:22Michael Batnick:Well, what's really interesting is that crypto is having a moment. It's just the blockchain and not the tokens. And I know that sounds like punch yourself in the face, asshole.

49:35Ben Carlson:But that was the funny meme.

49:36Michael Batnick:Like, I'm bullish on the blockchain, not Bitcoin. But I'm serious. Look at what's happening to all of the exchanges are getting destroyed. That's more of actually a Calci listing their perpetuals issue than a crypto thing. But look at Visa and MasterCard. These stocks are getting hurt pretty bad. Their multiples are coming down. And a lot of the chatter is because of stablecoin and the future of crypto and what's going to happen there. and just this week Andrew Cromo the former governor of New York will co-chair a joint venture between the owner of the New York Stock Exchange and the crypto exchange OKX the two companies the project will focus on taking New York Stock Exchange listed assets and tokenizing them or putting them into blockchain wrappers so there is stuff happening Visa's 12 % off the highs come on Visa is 12 % off the highs?

50:38Ben Carlson:Yeah. That's it? Yeah. I'm just saying, I want an explanation for what happened. Because there's a lot of people saying, like, this is it. These smart contracts, these are the things. Nothing happened with this stuff.

50:50Michael Batnick:All right, well, here's an explanation. They were wrong. I mean, what more do you need?

50:54Ben Carlson:All right. Fine. I just think it's good to remember that. I think people lost their minds in 2021. Remember this thing, people sold an NFT for$69 million? You remember this? This is one of my favorite posts from Drew Dixon. He posted this, Ethereum rock was selling for$2.2 million, and he put it against a house in Florida on the water that was also selling for$2.2 million. And he said, which one would you choose? I think people forget. People lost their goddamn minds in 2021. 2021 was the drunkest experience of investor euphoria

51:27Michael Batnick:that I've ever witnessed.

51:30Ben Carlson:It's kind of, I mean, I know that we had a lot of stocks that fell 50, 60, 70 % back then, and obviously Bitcoin had to crash. It is kind of crazy that it didn't really spill over to the rest of the market, which obviously wouldn't happen these days if AI really blew up. You wouldn't have that scenario where the market only falls 20 % or something. Yeah. Anyway, I just think it's a good reminder that people really lost their minds back then.

51:53Michael Batnick:Mm-hmm.

51:54Ben Carlson:I think that period was way more of a speculative mania than the current one. And I don't even think it's close.

52:03Michael Batnick:Oh, I agree. I totally agree. that was a speculative mania. This current environment is different. I'm not saying that it's not speculative. Of course, there was an element of that, no doubt, but it's being driven by real shit.

52:17Ben Carlson:Yes, there's way more real stuff.

52:19Michael Batnick:Like, I don't know, earnings and margins. Right.

52:23Ben Carlson:All right, this is a chart from Morgan Stanley. I don't know how many people would actually believe this. They look at affordability going back to 1991, and they break down affordability, basically showing the current levels it's fallen because I think incomes have risen. So this is monthly payment as a percentage of income. Now is the same as it was in 2007, 2004-ish, and then like 1994. How many people do you think would believe this if you show them this? That affordability is that? Not that many, right? I think one of the hard parts for this, like the affordability thing might be the same in terms of income because incomes have risen, but it's just the activity is so much lower.

53:03Ben Carlson:That's what makes it harder. Because yes, you can't, there's not enough houses to buy in most places. So even if you have the ability to buy, it's hard. Mike Simonson looked at this thing like, how is it going to, how is the, speaking of normal, that there being no such thing as normal, how long will it take to get back to a normal level of activity? And he's showing if rates are at 5.5 % or 6.5%, and he's looking at these different ranges, and he's saying it's probably somewhere like the early 2030s. And it's funny because getting back to the hold of... 2030s. There being no such thing as normal.

53:38Ben Carlson:There hasn't been a normal housing market this entire century, right? We went from a housing bubble in the early 2000s to a housing bust. I don't think you could even call the 2010s normal because people were still such shell shock.

53:49Michael Batnick:No.

53:49Ben Carlson:And they weren't building. And then 2020s, of course, is not normal. So I don't think you could plot a path out saying what's going to happen in a more normal environment because there's no such thing as normal in the housing market.

54:00Michael Batnick:I mentioned a few times on the show that I think housing might be turning a corner. We saw a jump in existing home sales. And I point to some of the stocks that are working a little bit. And then I look at Zillow and I say, well, maybe not. So Zillow stock is 66 % off its highs in the last three years. But it made an all-time high earlier. So it's 85 % off the all-time highs in 2021. during the mania. It had a$48 billion market cap. It is now under seven. Holy.

54:35Ben Carlson:I made the mistake of buying this company. It was down 40%. Then I think it dropped another 30 from there. I'm like, all right, fine. I'm out. This is shocking to me with how, how strong of a brand that they have.

54:47Michael Batnick:Yeah. You would think the Zillow brand alone is worth, I don't know, make up a number. 15 billion.

54:53Ben Carlson:It's shocking. So 48 to 7 billion. Holy cow. and still just getting hammered all the time.

55:01Michael Batnick:Is there any takeover activity possible for a name like this? I mean, at some point, if it gets to$5 billion, I don't know.

55:11Ben Carlson:Who would be the buyer?

55:12Michael Batnick:No idea. Private equity? Yeah. All right.

55:17Ben Carlson:The latest Social Security report came out. They do this annual report every year, and they run the numbers based on the demographics and how much payouts have happened. and they look and they said between now and 2032 or 33, they can handle 100 % of the payouts from all the taxes coming in and the current Social Security fund. By 2034, it'll drop to 83%. That's a projection. By 21, the year 2100, still be 65 % based on, so in 2034, when it drops 17%, what happens? Do they cut Social Security benefits or does the government actually just decide, we're going to pay more?

55:57Michael Batnick:They'll pay more.

55:59Ben Carlson:Right, they'll just go into debt to pay it.

56:01Michael Batnick:All right, we have five minutes to wrap this up because Verizon is on their way to my house. All right, Toy Story 5. Monster, open with$160 million. According to Eric Davis, that is the biggest opening of 2026, the biggest opening for a Toy Story movie, the second biggest opening ever for an animated movie, and the second biggest opening ever for Pixar behind The Incredibles 2.

56:24Michael Batnick:I thought this was great I mean obviously it's Toy Story like they don't they don't miss it was wonderful it's a great movie

56:30Ben Carlson:you watched it already?

56:32Michael Batnick:did I fall asleep twice? yes I did but my kids loved it and it was good

56:36Ben Carlson:I agree with Tarantino this should have ended after the third one I know why they keep making these but I thought the way they wrapped the third one up I thought it was perfect the kids left and they didn't need to make more of these but I get why they're doing it

56:50Michael Batnick:alright All right. Widow's Bay. This show had a lot of hype. And I think like everybody else, when there's a lot of hype, you underreact. I think that probably is what happened to me. I like the show just fine. When you describe the premise of the show and the way that the show came out, it's a ridiculous premise. The island is haunted and blah, blah, blah. I mean, it's nonsense. And it was a serious show. They did a really good job with it. I just don't know that I loved watching it. And again, maybe it was because I thought like, maybe I was just infected by the hype machine. But what are your thoughts?

57:23Michael Batnick:Did you love it? Because I didn't love it. I liked it.

57:24Ben Carlson:See, I never got into the hype machine at all on this for some reason. I didn't listen to anything on it. I just, I heard about it. So I'm taking the other side of this. I liked it. I, you said, you said this is a one season show. I thought they left, they probably left way too much on the table in terms of like too open-ended at the end to want a season two. But I can't wait for season two. I like, I really, really liked this show. I thought it was very good. He was good. And it just, it made me kind of want more. I wish they would have done a little more with the finale. My wife was like, oh, that's it.

57:51Ben Carlson:That's the payoff. It wasn't much of a payoff at the end. It was a setup. I enjoyed it. Yes. And I'm excited for season two now. But so I stayed away from the hype machine. So maybe my expectations didn't get too inflated.

58:04Michael Batnick:Okay. I watched The Hand That Rocks a Cradle. They did on the rewatchables. It's on Netflix.

58:09Ben Carlson:I watched it too.

58:10Michael Batnick:I'm pretty sure I saw this movie in the 90s, but I can't quite remember.

58:14Ben Carlson:I watched it one time in the 90s on TNT or something.

58:16Michael Batnick:Okay. It's such a 90s movie. First of all, great title. Are you kidding me? The Hand of Oxidraddle?

58:23Ben Carlson:Yeah.

58:24Michael Batnick:And it's just a classic 90s thriller. Like, by the way, it's not rewatchable. Like, that is not... I guess it's only just like they did it for the rewatchable because it's hilarious. It's like 90s nostalgia. Right, that's a movie you watch once and don't need to revisit. Yeah, ever, ever, ever. But it did remind me. It's like they don't make thrillers like that anymore. Just like the slow burn thriller, which was a staple of the 90s. And matter of fact, Apple did revive it. Cape Fear. Cape Fear feels like a modern day thriller.

58:55Ben Carlson:The Apple TV show. Because it's a remake of a 90s movie.

58:57Michael Batnick:Yeah, they're doing a good job there.

58:59Ben Carlson:I know you got to learn. I got a quick story here for you. I got to tell. Two minutes, go. I have a good morning lady at my office. So I walk out of my office a couple weeks ago. and this lady, you know, walking in with like three purses and sunglasses on and coffee. And she goes, good morning. And I said, hey, and I don't know who this is. I said, hey, good morning. And she said, that's all I get. And I said, oh, come on. She's like, you're a man of few words. I'm like, okay. I'm like, I don't know you. Anyway, I walk out of my office this morning. I'm going to the bathroom. This woman is 10 feet behind me.

59:28Ben Carlson:She says, good morning. And I thought she's on the phone or something. And she said, excuse me, to me. And I'm walking to the bathroom. I said, are you talking to me? She said, yes, I said good morning to you. You could say it back. And I said, I'm sorry. I didn't realize you were talking to me. I'm 10 feet ahead of you. And she said, geez, you could have said, I'm like, I wanted to be like, hey, what's going on here? Sorry. I like it. We, you know, positivity in the world.

59:54Michael Batnick:I love it.

59:55Ben Carlson:That is funny. I guess. Yeah. She wants more than a good morning. And all right. Next gift. Just give her a hug next time. I guess so. What do you want from me, lady? Gosh.

1:00:03Michael Batnick:All right. Animal Spirits pod at the compound news.com. Where as confused as you are. about the stock market and where it goes from here. Interesting times. All right, we'll see you next time. Thank you for listening.

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