Higher for Longer (EP.331)

24:27I think there's a lot, there's a lot going on. Um, I was actually thinking about this at the Giants game of the weekend, which I'll get back to in a second, but I think social media is at the center of this in so many different ways. Number one, it is just virality. It's all about going viral. And the way you go viral is to dunk on other people, to make other people look bad. Look what an idiot that group is making us feel smarter. And then, so it's social media doing that. And then it's the media competing with social media, right? The media wants your attention for, for the media wants your eyeballs.

25:02And so the way that they do that to compete with social media is write more and more ridiculous, ridiculous headlines where the truth will be buried in the ninth paragraph. For example, there was an article and we're going to talk about this, uh, about like 60 day delinquency for subprime auto borrowers. Yes. I saw this. A lot of people were going crazy about that one. And then buried in the ninth paragraph is like, but it's still below 2019 levels or something, something like that. It's like, well, you should leave with that. Like, so anyway, uh, the other part of it is, um, outrage is a business these days.

25:38Yeah. So anyway, and then, and then there's definitely, listen, there, there is the inflation component, like the pandemic component, breaking a lot of people's behavior. So when I was at, it's funny. Cause I actually, I think the pandemic actually made it more mainstream just to complain about everything. thing. I think complaining now is like, and just distrust is at an all time high. It's the way that people like come together is like through complaints. Totally. So I was, so I actually had this in the doc last week. I just forgot to, I just forgot to get to this. Uh, I saw a video. I don't have a San Francisco, wherever it was about a fight in the NFL stands.

26:13And I was thinking like, what the hell happened to NFL games where it just became a thing? Like, do people go there with the intention of like, I'm going to get into it with somebody, with a stranger today. I'm going to get into it with the opposing team. So it's just bizarre. I was in... I've never understood the fighting thing. Like the amount of stuff that can go bad versus the amount of stuff that can go good. Look, I don't see the upside in fighting. I was in the second row behind the end zone. It's my friend's tickets that he's had for like, his dad's had for like 50 years or something. And side note, live events are great, but it is impossible.

26:50very difficult at least from the seats that i was in to follow the flow of the game it's like saquon got hurt i wasn't really sure what was happening you can't really tell where the lines are it's just it's such a better experience at home watching football isn't it though like it's so it's so much better to follow the game so anyway there was people in my in my stands that were getting into it almost close to throwing fisticuffs and i was just thinking about this on the on the walk out like what happened when when did this happen is this a post i know there's always fights but this is a post pandemic thing where it's it's it's ubiquitous There's just a lot more anger.

27:21Yeah, I don't know. And so, but I think that, but that's the same with like flights on the airplane. It's just something is wrong. Something is very, very wrong, even though things are like objectively pretty decent, at least just quantitatively. But you can't discount how people feel. You could like point, you could get to the root of it, but people feel how they feel. People are pissed off. Yes. And it does get down to something of like, I'm fine, but everyone else is in a shitty position. I think that's part of it too. So I sent this to you. The story last week came out, the Federal Reserve does a survey of consumer finances.

27:51And they do this every three years. And they look at the well-being of households on a number of different perspectives. So I dove into this big time. And there was a 37 % jump from 2019 to 2022. And these are inflation-adjusted median numbers. Say that one more time. So inflation-adjusted and median numbers. So I did median, not average. Median means middle. If you've never taken a stat class, median is the middle number. And net worth. And net worth is not income. So if me, you, and Bill Gates are in a room, the average net worth is billions of dollars. The median net worth is not. Right? So we got that out of the way.

28:27So I did a post about this. And again, 37%, I looked at it. So I dug through all these numbers. A 37 % change. So a 37 % change in three years in net worth, which is crazy. We talked about 2020, this is through 2022, which was the worst year ever, one of the worst years ever for a stock and bond portfolio. And net worth was still up 37%. And so I looked at it and it was by far the greatest three-year change in net worth and they've done this going back to 1989 the previous one was through 2007 it was an 18 change and actually through 2019 it was 18 as well and i put this out on twitter i wrote a blog post about it and i told you look through the replies yeah because sometimes i think you don't believe me about the doomers and and these people were out like savages coming to get me saying well it's only the top one percent i said no these are media numbers and then they said well it's all inflation and i said no these are inflation so i went actually usually I don't, I usually just block those people because I don't want them in my life.

29:20But this time I actually engaged and I just said the answer. This is median. This is inflation adjusted. People don't want to believe that this was an unequivocally great report. And people said, well, it's all, it's all housing prices. And I thought it was too. Until you realize renters experienced a bigger gain in net worth than homeowners. Renters saw their net worth increase by 43 % versus homeowners were 34%, which there's still a way bigger net worth for homeowners, but still that was surprising as well. Household debt grew less than 4 % while net worth grew 37%. Like I just, these numbers to me is like unbelievably good considering what we've been through really high inflation, the pandemic, and you can put all the caveats you want on it.

30:03I just think it's okay to say like, gosh, considering everything we went through, the fact that we saw the, one of the biggest increases in net worth for households ever is kind of something to celebrate. And like, that's amazing. I agree. I think one of the reasons why people attacked you is because they're putting thoughts in your mouth. Like, oh, so everything's fine, Ben? Yeah, that's the thing. People want to read into what you're saying instead of just saying, these are the facts. Like, these are the actual facts. Well, here's another fact. I don't think people's happiness is really correlated kind of at all to net worth.

30:34Now, I do believe. And that was the best rebuttal that people said is like, well, money's not everything. And I - No, no, no, no, no, no, no. No, no, no, no. Money is important. I think people are concerned about their real income. Absolutely. But I think your net worth doesn't really impact how you think about your financial situation. Yes. It's not like, oh, I've got - Even though it should. Well, I guess. But if somebody's like, well, I've got$70 ,000 in this IRA. It was only 47 last year. It's like, yeah, but things are still kind of shitty. Yeah. And like, yeah, I have more money because my student loans were on hold, but they're coming back and like things are still kind of not great.

31:13Now I'm definitely not saying everything's not great. And I know you're not saying everything's not great either. Um, I'm sorry. I was just, I don't think everything's bad. I don't think everything's good. I think the volatility of prices and perceived economic stability is, is just not great. Maybe that's what we've learned. Economic volatility. People do not like that at all. No, no. But, but again, no one was really happy in the 2010s either. I'm not saying like, listen, idiots, you should all be happy. It's just like, I'm saying there's more nuance than everything is awful right now. I also think, and I know we're, we are repeating ourselves because we talk about this all the time.

31:50I think asking people how they feel like just yield some really wild results. I think people can, people can live their life, go about their business and be as unhappy or as happy as people were in the seventies or the fifties. Generally speaking, people are people and the environment around us is always changing, but I think surveys are just skewed to show you that everything's really bad. I, yes, I agree with that. And I don't, like when you, when you go out to, I don't know, the pumpkin patch or whatever, like do you, is everybody like walking around, like all grumpy and shit? And like, no.

32:25And I don't, I don't think this stuff, these surveys are ever going to get better. Now that the internet's with us, I think there's going to be a line of demarcation in the future where they go, why did everyone say they were so unhappy after the 1990s? And it's like, oh, okay. The internet, social media. I think that's going to be a thing. It's online people. If you ask your friends that don't spend time on social media, like, you know, how do you think things are going? They'd be like, do you think it would be like unanimously? Not unanimously. The majority would be like, kind of shitty actually.

32:50Yeah. Most of them will be like, I'm fine. Yes. Depending on their situation, obviously. Nick also did a post on this. He showed the real median net worth by year. And yeah, again, it's at an all-time high. Real median net worth by year for households under 35. Rock it up to all-time highs. But I just, I don't think real net worth really matters to how people feel. That's another surprising one though, that I think the, the increase for under 35 was like 140 something percent on a real basis. Again, inflation adjusted median numbers, but the people were saying me like, Oh great, it's coming off of a low base.

33:21So it's like, you can't win. But I think that's, that's amazing. Young people saw a huge, and these are young people who for the most part, probably many of them didn't own houses and didn't get that tailwind. So, yeah. And I also think that people are just bracing for impact, right? A lot of people might feel like a recession is coming. Yes. Everyone's been in this position for like 18 months, like just waiting. So Matthew Miskin tweeted, make that 15 months of negative year-over-year readings for the conference board leading economic indicators. The longest stretch of year-over-year negative readings before a recession was 17 months from August of 6th to January 2008.

33:55So we're getting there. And then - The pandemic broke economic data. I'm still sticking to that. It did. It did. Here's an email that we got. Peace delegates here attacked by U.S. activists on Russian policies. Electricity bills due to rise. The White House urges delay on Russian trade. Food ferry to Egyptians. Oil curb spread worries Europe. Israelis see ceasefire only after Palestinian defeat. Jets flown by North Koreans are reported and clashed with Israelis over Mideast. Bank funds in sovereigns. Saudis cut oil output to 10%. Value of dollar change. Arms aids to Israel may cost$14 billion.

34:2850 million bushels of oats listed as disaster reserve. You get the point. I mean, I'm almost done. but I'm like, f*** enough. Is this really all happening? It's too much. And then the kicker is, this is a New York Times headline from the week of October 1973. Oh, I love these kind of things. That's great. It hurt to read this. I was like, dude, it's enough. Stop. So I don't think his point was like, everything's fine or ignore all the horrible things that are going around in the world. This is the world. Yes. Unfortunately, this, yes, this is the world. Here's some good news about higher rates though.

35:05So I looked at this the last week I looked at this and it was 8 % mortgage rates and 4.9 % treasury yields. Are you about to spend 8 % mortgage rates into a positive? You might want to take a beat. Here's my Ben positive spin for the next downturn that I feel like a lot of people are, people always say the Fed is pushing on a string. Monetary policy is going to be very effective for the next downturn. Monetary policy? So for a while there, because rates were at a zero bound, monetary policy was not doing much at all. And now that rates are higher, when the Fed lowers rates, if mortgage rates go from eight to five, and there's going to be a huge amount of activity in the housing market.

35:46That's what I'm saying. If the Fed does raise rates, if we get a downturn, and they go from 5 % to three or whatever, and mortgage rates go from eight to five, I think that monetary policy is going to be very effective. Well, there's two economies. There's those that are affected by interest rates and those that aren't. And the average effective debt for the S &P 500 is under 4%, which is kind of wild. We've spoken about this a lot, right? About how much debt is long-term fixed. But there are, this is from Torsen Slack, there are 33 million small businesses. You know how much it costs them to borrow money?

36:1810%. 10%. Maybe the next recession is when you go hand over fist into small caps. because the large caps have benefited because they locked in low rates and they did fine throughout this whole period of rising rates. And the next period is going to be better for consumers in small caps. How's that? Should there be higher penalties for people that get into fights at football games? Like, what do we do about this? Ban them for life? Sure, absolutely. Yeah. This kind of affected you, didn't it? I do agree. I took my daughter to a Michigan game like a month ago, her first time ever at the big house, and just swarms and swarms.

36:53There's 110 ,000 people or whatever. And it certainly was on my mind, like, is my daughter going to see some crazy stuff here? And luckily nothing happened and it was a good game and it was fun, but I didn't think about that. But why is it football games? Like, it's not like, and by the way, they cut off beer at halftime. So I'm going to the Nickham on Wednesday. I'm sure I won't see a fight there. I've never seen a fight at the garden. That's actually kind of surprising. Football is just more testosterone, I don't know. Well, people tailgating. Yeah. So more drunk people. True. All right. So I mentioned the monetary policy thing.

37:22I'll skip this inflation. Skana Amarnath wrote, as heretical as it might be to say, there's a growing risk that the Fed rate hikes risk stoking higher rent inflation in 2025, 2026, 2027. How? The Fed's actions are currently reducing building permits for multifamily rental supply, exasperate structural housing shortage. So we had the biggest build ever, I think, for apartments, multifamily, that sort of stuff, and to meet demand. That's one of the reasons rents have been falling lately. And now with 10 % construction loans or whatever, 12 % construction loans, those are falling precipitously. So there's going to be some unintended consequences of this period where I think the housing market is going to be even more broken in the future than it is now, potentially.

38:08I'm just preparing people for that. Great. Oh, wait. Do I see another DoorDash in here? I said I wasn't going to do it. Oh, boy. All right. Hit me with it. All right, here's Indian food. You, whoever sent us the Grubhub thing for Amazon Prime, I've been using that. Why aren't you using it anymore? Use the Grubhub. It's the Grubhub Prime. I signed up for it. You gave us the link. All right. What are you doing? So Robin was out. This is your own fault. I wanted to get Indian food. Here's what I was getting. One of the chicken dishes, it could have been chicken butter or butter chicken or it could have been chicken tikka masala.

38:44I don't even know what chicken it was, but it was chicken that I wanted. And I also got naan. So it was$30, which is like, I don't know. I guess it's what food costs now. Seems kind of expensive to me, but fine. It's good food. The delivery fee,$4.50. And I thought that I had free DoorDash because my chase card, but whatever. Delivery fee,$4.50. Fees and estimated taxes,$7. Tip,$5.50. Total,$47. Yeah, f***ing right. Wait,$47 for takeout Indian food? Your fault. Why aren't you using the Grubhub Plus that someone gave us? I'm saving money on that every time I do it. Now, mind you, I did not order this.

39:27There's no way in the world. Oh, you stopped yourself? Absolutely not. $47 for takeout Indian food? That is pretty nuts. For one person. For one person. That's crazy. All right. Someone sent me this piece from Slate, John Hussman. I would be remiss not to tell you that the stock market will probably crash. Henry Blodgett wrote this piece. John Hussman thinks there's a good chance the stock market will crash soon, 40 % to 50%. And even if the market doesn't crash, Hussman thinks stocks are priced to produce returns of only a couple percentage points per year over the next decade, far below the 7 % inflation-adjusted long-term returns that everyone is used to in the double-digit returns of the last few years.

40:11This is the coup de grace from Blodgett. If you want to feel comfortable and happy, go ahead and ridicule John Hussman with everyone else. If you want to prepare yourself for what seems like a possible stock market future, however, read on. That's him writing? Henry Blodgett writing. Henry Blodgett. Oh, really, Henry Blodgett? Give me a f***ing break. I was in the airport on my honeymoon in 2013 reading this nonsense. Yes, this is the punchline. Remember when Henry Blodgett stopped reinvesting his dividends? what a courageous call. No, but that's the thing for the listener. This was written in 2013.

40:45I'm taking the bait. I'm taking the bait. Shame on me. The S &P 500 is up almost 12 % per year since this was written. I just want to point this kind of stuff out when you hear people continue to call for a crash. This post is from 2013? Yes. So it's been 10 years. So he said, in 10 years, you're going to see a couple percentage points. This was written in 2013. Someone sent this to me. Oh, I thought it was a reflection. Okay. As like a reflection, like, hey, it's been 10 years since he wrote this. And so he was saying the Dow was going to crash from 15 ,000 to 7 ,500. The Dow is now at what, 30 ,000 something?

41:17So like you'd have to crash 50 % from here and then 50 % from there just to get to the original crash call. What do you say to somebody that listened to you 10 years ago about this crash call? I'm sorry. Well, I hope you didn't listen to me. I think there's confirmation bias and people just continue to want to hear it. I don't know. But I just want to point that out. When you hear someone say this, like, this is the kind of stuff people are always saying. The 2008 crash is going to look like child's play compared to the next one. Right? This is the stuff why we're not like – Bad things happen.

41:52Yes. Bad things happen in the world and in the stock market. And that's why risk assets pay you to bear that risk. It's very simple. Yes, but – You're paid to – in the time the times the bad stuff does happen the the people shouting about it are not going to be the ones who help you out okay ben are you a buyer of uh target date etfs uh 529 plans for my kids i'm in target date funds yes uh there's a targeted etf so blackrock is launching them it says that they they did because i was thinking i feel like they had these already they did in 2014 they launched okay you mentioned that before and i thought like why is he talking about this i I didn't think about it, but there are no target date ETFs, are there?

42:33Well, so BlackRock launched one in 2014, never took, but they just launched one again. I don't see target date ETFs gaining popularity. I don't either because it's mostly a 401k, 403b kind of thing. That's where they make sense. That's where they probably belong. I'm not saying they can't make sense in an ETF. I just think people are prone to invest that way in a retirement account, not a brokerage account. Okay. What's the outcome? Oh, this is interesting. biggest outflow from money market funds on record last week. I bet it's all going into bonds. Yeah. I wonder if this is like skewed by like a gigantic sovereign wealth fund or.

43:13No, but don't, don't you think it makes sense now? If bond yields are matching money market yields that you can lock it in for longer, that money would go out of money markets and that's cash on the sidelines for bonds. I think that makes sense. Oh yeah. Yeah. Oh yeah. I think, I think that absolutely. Here's another one. More likely, 4 % rates, 6 % rates. On what? The Fed funds? 10-year.

43:40You've been talking about how we missed the bond yield rise and saying like once they hit 3%, people are going to buy. Doesn't 5 % kind of feel like a kind of a line in the sand? I can't say that. I would say 4 over 6, but I've been wrong about this for who knows how long. I would say 4 over 6, too. So I kind of – I don't shudder to think about either situation, right? Like what would have to happen for either of those things to transpire? That's a good question. The economy would have to be really, really strong to get to six. Would you rather see rates at four or six? I think four would make people a lot happier if it happened because of falling inflation.

44:22I think that's the better scenario. But what if it happens because the economy is slowing? Would you rather 4 % because the economy is slowing when we're in a recession or 6 % because the economy just won't stop growing? Six. Give me six every day. If the economy is strong enough to push us up to 6 % rates and people are making more money, sign me up for that. I think so too, but I don't know. So last week I talked about the efficient market hypothesis of Bitcoin. Why doesn't it just stay at 30 or whatever because we know the ETF's coming? So maybe Bitcoin did continue to price an ETF. So in the last month, Bitcoin has gone from 26 to 35.

44:58I think it hit 35 overnight. I don't know what's at right now. It's up 110 % this year. Just a wild, crazy asset. Just saying, one of my predictions for 2023 was Bitcoin going up 100%. It seemed pretty ridiculous at the time. Did you really? Yeah. That was one of your 10 surprise predictions. What are you quoting? Let me allow myself to quote myself. What did I say? Now, I'm sure I got a ton wrong in here, obviously. But all right. Crypto doubles in 2023. It's hard to make the bull case for an asset class that feels like it comes with career risk. With all the negativity surrounding the space right now, I'm amazed that Bitcoin isn't below 10 ,000.

45:41And maybe that's what the bulls can hang their hat on. Bulls will say that we've been here before. Look at the drawdown chart. Yeah, prices have seen these types of decline before. but in every other decline, crypto is just a fringe asset. I'm not going to read the whole thing. That was a good prediction. Read us one of your terrible predictions. Okay, let's see. Oh, the market avoids a recession and stocks gain double digits. Pretty good. Looking pretty good. What was bad? The housing market doesn't crash. Check. Gold makes a new all-time high. Getting close there. All right. Oh, IPM market remains frozen.

46:18That was pretty easy to say. Oh, here's my bad call. Okay. Value outperforms growth again. There we go. Yep. That's a horrible, not even close. You know, it's another one that I'm glad didn't pan out. Tech continues its layoffs. Not really true. Oh, that is true. And that's actually such a great reminder of what we spoke about earlier in the show. When layoffs were happening, that's all that was being reported on. I understand. Rightfully so. You're going to report on Salesforce and meta layoffs, of course. Why wouldn't you? Right. But there's no reports when there's no layoffs. Yeah, so there's no headline thing.

46:47There's no like... No one got laid off today. There's no headline. Oh, remember all those layoffs? Well, that stopped. That's probably a good thing, right? Google just hired another 3 ,000 people this week. No one talks about that. I didn't hear about it. All right. No, I made that up. Oh, great chart from Goldman showing the distribution of rates on outstanding mortgages. And there's so many mortgages. Actually, the highest bar is like under 3%. Looks like almost 15 % of mortgages are at like the two and seven eighths level, would you say? Is that about what I'm looking at? I'm sure there's a future value you could do with interest rates and stuff, but like how much would you say your 3 % mortgage rate is worth to you as a financial asset?

47:27Everything. It's worth so much money, right? If you tried to like do the math behind how much it's worth to you versus having an 8 % mortgage right now. If I was in the market for a house right now, I'd be very, very upset. Stressed out? Stressed out is the right word. All right. So mortgage purchase applications index is at the lowest level since 1995. Housing market is effectively frozen. The home builders were able to subsidize a lot of these, give buyers a lot of points, but with rates at 8%, I don't think they can do it anymore. Chen Zhao is the economics research lead at Redfin, estimated that total existing home sales in 2023 would be 4.1 million, which marked the smallest number of sales since about 2008.

48:10It is crazy that we're back to like housing crash levels without a housing crash. Look at the chart from the Wall Street Journal showing the amount of homes that are sold and the median median price. Now, the median price is still basically near. This is like one of those things pre-pandemic. You tell someone the number of sales are back to 2008 levels. Housing prices are at all time highs. What made that happen? I don't think you could you could come up with an explanation. Like what would what would cause this? to happen without knowing what happened. You're so right. There's no way that you could be like interest rates skyrocketed and made people trapped in their homes.

48:51You would never come up with that conclusion. But when you lay it out like that - It makes sense. It makes total sense. People can't afford to move. There's no supply. There's still buyers. Prices are still high. So on the odd lots, they had the guy from Morgan Stanley, that's it Jim Egan, something Egan. And he talked about this last time, but it's worth repeating. He said for years, 25 % of homes in the U.S. are owned by people over 65. Now it's up to 33%. And a lot of those owners own their house free and clear with no mortgage, no import to sell. So even if we see recession and a rising layoff, there's a large swath of the housing stock that won't be affected by macroeconomic conditions.

49:25The boomers are like, in a lot of ways, they're insulated from a lot of the economy. That's why they're spending and why they're not impacting the housing market. Right? They're like, boomers are in a pretty darn good position. They can earn interest and yield on their savings now. Boomers are in a good place. There was a ton of hullabaloo about the median, about what somebody must earn to buy a house. Yes. The number one, it says, Bloomberg reported buyers must earn a whopping, they use the term whopping, that's their words, not mine, a whopping$114 ,000 a year to afford a typical US home. Well, Matt Klein, average household of income of an American in the 35 to 44 age bracket was 170K last year.

50:11Which is shocking to me. Someone, and I looked at the comments, someone said, okay, what's median? Because that's what you do on Twitter. He said median is 100. So it's pretty close. So he's saying the group that is in their home buying years, 35 to 44 is pretty close to what you need to buy a typical US home. Yeah. It's not like it's, you can't compare it to the total. That's pretty good. All right. The Wall Street Journal had another one on rent versus buy saying there's never been a better time to rent and a worse time to buy. It's the premium discount of buying a home versus renting. It goes back to 1996 from CBRE.

50:44And here's my question. What causes this to mean revert? Because a lot of people say, I mean, the housing prices have to crash. A lot of the landlords have locked in 3 % mortgages too. So they can actually afford to charge cheaper rent. like rents don't have to. And the reason, again, I said rents are rising because they're building more apartments and more multifamily housing as opposed to single family housing. But I don't see what causes this to change. If you're a landlord sitting on a 3 % mortgage too, your costs are covered. You don't have to keep jacking up rents, even though you probably can a little.

51:19That's a good point. So what, what causes this to mean revert? There's not like a, a, a catalyst that's going to make this happen. And should, should, you might've said this, Shouldn't there be a premium for buying a house? I think there shouldn't be this big of a premium. But I think the fact that there was a discount after 2008 when the housing prices crashed, I think that was an aberration too. All right. Here's a quote from the attorney at the DOJ. There's no reason that home sellers should be forced to pay a buyer's agent. Hear, hear. That is one of those things that's like, why do we do that?

51:54Because we've always done it like that. Yeah, because that's how it works. But don't you think that if... I know a lot of people say like the 6 % real estate realtor commission is criminal and we should take it out. Like, don't you think that housing prices have kind of adjusted for that commission though? Like if it completely went away and everyone could just buy like for sale by owner, wouldn't housing prices adjust to account for that? Or do you think that the market is not that efficient? I don't know. I don't know. That's a good question. All right. There's an interesting chart from Carta.

52:25the highest number of shutdowns in the third quarter of 2023 for startups. This does not look like it's done. That makes sense. We talked to Samir last week about the state of the venture capital industry and talked about how it is interesting, though, how vibes and I don't want to say speculation, but interest rates don't matter as much to venture capital because they're not borrowing a ton of money. So it's more investor appetite for risk than it is anything. right? Like the private equity should be more impacted by higher rates. Which is tied to the cost of capital, but you're right. Yes. But venture doesn't have that, but it also makes sense that people's appetite for risk changes when rates change.

53:05But yeah, I guess this is not surprising considering the number of companies that were funded in the past couple of years. All right. Let's do a segment on some of the earnings reports that we got this week. All right. Here's a plug for quarter. As I mentioned earlier in the show, the The desktop page has gotten so, so good. It like, it kind of looks like an iPhone app. The funny thing is, is when, when we first saw quarter and they gave us a demo, must've been, I don't know, two years ago, two and a half years ago, they didn't even have a desktop app. No, it was just an app. And they, they, all the things that they've added, it is pretty.

53:43Well, when they started, there was no transcript. There was no, there was, there was nothing, right? It was just, it was just the call. So they have live calls now, but also they have live transcripts. So it transcribes AI. I don't know how they do it. And they're looking to expand into the United States. They're looking for a salesperson. So they're crushing it in the Nordics with analysts and sell side shops. And so if you want, if you're, if you're that person United States and you're like, I have a network and you want to reach out to them, just go to quarter.com and hit, get in touch. Okay.

54:24Netflix. I don't think I spoke about this. I did buy back Netflix. Wait, I didn't realize you ever sold it. I did sell it. Yeah. I sold it. I bought it back early in October. I thought there was going to be supported like the 200 day moving average. I just wanted to buy it. Uh, there wasn't, it broke pretty aggressively. but I have a Netflix ticket. I'm saving for my recommendations. Okay. But then they had a great earnings call. We now expect free cashflow of$6.5 billion for 23, up from our prior forecast of at least 5 billion. They repurchased$2.5 billion with the shares in Q3. They increased their buyback to$10 billion.

55:01That's interesting that no one ever talks about like Netflix becoming a company that's buying back shares. Yeah. Adoption of our ad plans continue to grow with ads plan membership up almost 70 % quarter over quarter. So the password sharing crackdown is working 30 % of signups in our ads countries are on average to our ads plans. They added, I think 11, what did it grow? 11%. Yeah. They grew their subscribers 11%. Alex Morris has this great chart showing the number of subscribers, which did flatline, right? Like a totally flatline. Hence we have to do something. Okay. Time to turn the lever on or pull the lever on the sharing crackdown.

55:39You know what's kind of nuts? Just like what Netflix is able to do with its content distribution. I never watched Suits. I know it was a popular show at the time, but they bought it from, I don't know who owns Suits. USA. It's like USA Network. So who owns that? Is that Paramount? Probably. And now they're buying shows from HBO. But now, but Suits is like, was the number one show in the world. Yeah. A show that's probably been off the air for 10 years. They're tastemakers. For sure. So UCAN, which is the United States and Canada, added 1.75 million net paid subs, its highest sequential gain in 18 quarters.

56:17Over the past six months, UCAN added 2.9 million paid subs. Wait, what's UCAN? United States and Canada. Oh. So they added 2.9 million paid subs over the last six months, which compares with 4.4 million over the previous three years. So the crackdown on passwords worked? Oh, yeah, it's working. And advertising their partnership with Microsoft seems to be going well. That's the thing. I know people jump in and jump out of these things. For me, once I sign up for a streaming service, I'm basically in it for life. Yeah. It's going to be hard to get me out of there. So it is interesting when you compare them versus like, I mean, Paramount still looks like horrendous.

56:54It's basically at a 52-week low. Disney popped on some of the news to divest its India operations, but Disney's not looking exactly great still on that as well. one or both discovery. I mean, there's got to be. There's got to be consolidation 2024. There has to be. Well, it doesn't have to be, but given debt loads. There should be. There should be. It's just will the egos allowed to happen. All right. So I listened to Tesla's call. Does Musk do these calls or not? Oh, yeah. Okay. Yeah, yeah. But it's interesting. Their operating margins are going down so bad. It was 18 % in 2022. And it looks like it's gone down for - Wasn't that because they've cut prices so quickly?

57:39They've really cut prices at Tesla. So they asked the CFO about it, and he gave sort of a garbage answer. But if you listen to the conference call, the actual results were not great. But if you listen to it, it was not really downbeat at all. It's not like the questions from the analysts were exactly pressing. And I think that's probably mostly the case. unless the company is just like a whatever company that nobody really cares about. Like nobody wants to step to Elon. Like nobody really held his feet to the fire at all. Yeah, but don't you think that's the way it is with most analysts? Do they really hold the...

58:11And especially, well, especially with Elon, they're not going to. And I was just thinking about the volatility of Tesla stock. So it was that, it fell 17 % in three sessions. And look how many times it's done that over the last five years. That's like nothing. Like it is just a wildly volatile stock. So here's a couple of quotes that I pulled from Elon. Also in the quarter app, you could highlight right in the app and then it keeps a notes section for you. It's just incredible. We will continue to invest significantly in AI development as this is really the massive game changer. And I mean success in this regard in the long term, I think, has the potential to make Tesla the most valuable company in the world by far.

58:49So he's said stuff like that before, but I didn't know that AI was going to make Tesla the most valuable company in the world. He did mention something about interest rates and how it was impacting the consumer. He said, talking about the Cybertruck, I think this is potentially our best product ever. And I think it is our best product ever. It is going to require immense work to reach volume production and be cash flow positive at a price that people can afford. Often, people do not understand what is truly hard. That's why I say prototypes are easy. Production is hard. I got him in credit. He is good on these calls.

59:21People think it's the idea or you make a prototype, you design a car. And as soon as you design a car, it's not just anyone can do it. It requires taste. It requires effort to design a prototype, but the difficulty of going from prototype to volume production is like 10 ,000 % harder to get to than to make the prototype in the first place. And then it's even harder to reach positive cash flow. That's why there have not been new car startups that have been successful for over 100 years apart from Tesla. So I just want to temper expectations on Cybertruck. It's a great product, but financially it will take, I don't know, a year to 18 months before it is a significant positive cash flow contributor.

59:55Guess what? There's no way. it's just based on the way that he's saying this, it's not going to be a year to 18 months. I would definitely take the, definitely take the over on that. So here's my, here's the cyber truck cycle. The tech bros will buy it for sure. All the Eon stands, but then some people will, cause it's a weird looking car. Whether you like it or not. I think it's heinous. I think it's heinous. Yeah, I think it is too. But I think some people, people are going to buy it ironically at first. And then unironically, that's how things work now. You like something ironically to show like, ah, I'm kind of hip.

1:00:23And then you just, it just somehow, At some point, it gets murky and you just like it unironically. That's what's going to happen with a Cybertruck. I was looking at Ally. And Ally is a great look through to the consumer. They've got a huge – they're a gigantic digital bank, but they've got a huge auto department. So auto delinquencies are going up, as we mentioned earlier in the show about the subprime number. So 1.03 % are, I think it says 65 days in delinquency. But if you look at the year-over-year change in 30-day delinquency, it's well off the highs. So that peaked in Q4. It was 1.4 % in Q4.

1:01:06Now it's down to 0.93%. This is where it makes sense for higher rates to have an impact is the auto market, right? Way more than the housing market. The higher rates can impact autos really quickly. So last week, we mentioned the Apple Buffett thing about like, would you rather$10 ,000 or never have an Apple product again? And somebody emailed us. He's like, actually, I was the one that got that thing going. And it was on CNBC. They said, here's what the actual quote was. If someone offered you$10 ,000 to never buy an iPhone or Apple product ever again, you wouldn't take it. If someone offered you$10 ,000 to never buy a Ford again, you'd take it and go buy a Chevy.

1:01:44That's a good take. Do you remember Cameo? Yeah, it's a thing where you pay someone to say happy birthday to your friends or whatever. So there was an article about Kami on the New York Times. The CEO, Mr. Galanis, he met with Masayoshi's son on Zoom in February 2021. And Masayoshi offered him$400 million in cash, four times the company's fundraising goal, and told him to spend$100 million of it at the Tokyo Olympics. He didn't take the$400 million. So I assume that company's crashed? It had to, right? So it's nearly 400 employees have shrunk to 33. Magic Johnson, who was paid for his role, left.

1:02:23Cameo's board after not fulfilling his obligations. Still, Mr. Galanis argued that Cameo was thriving and absolutely still on track to become the next Disney. Sure. Revenue has not grown year over year since June 2021. I mean, it's the kind of thing that maybe you'd do it once as a joke. Like, hey, this person from a 90s sitcom, here's their Cameo video. Like who it's a, yeah, it's not a business that's you use over and over again. Then I tried to send somebody who I don't follow or who doesn't follow me, who doesn't follow me. Yeah. I tried to send somebody who doesn't follow me a DM last night.

1:02:56I can't do it. Can't do it. It said, get verified to message this user. Only verified users can send direct message requests to people that don't follow them. Oh, okay. I paid the eight bucks. I, I, I was, I thought like I was going to get fewer ads, but no. and I thought and also I appreciate this is going to sound like a humble brag I get 10 messages a week in dms from people saying hey there's a bot of you I reported it to twitter and I say like thanks I appreciate it but I there's like 10 Ben Carlson bots I can't even imagine someone who's actually famous how many they get I get fake accounts for me all the time and I don't think they care about it what do you get for paying I mean I think you probably get boosted like I've seen a lot of people saying like, I have no, no engagement anymore.

1:03:41Like whatsoever. I honestly, I have not, if there's a difference I in paying versus not paying, I haven't noticed it. Yeah. So whatever I'm doing my part, I guess. All right. Uh, somebody, so we spoke about the survey last week about airplanes. I've here's an email that came in. I find airplanes seems to be very uncomfortable when in their fall of right position and far more comfortable and reclined, even just a little, uh, I'm a golden rule type of guy. So the way I would like to be treated is to not have people get mad at me when I recline. And as a result, I don't begrudge the person in front of me for reclining.

1:04:11That's an interesting spin. I never thought about it that way. Right? Because my golden rule is like, well, I wouldn't want it done to me. So that's why I don't do the person behind me. This person's like, well, I wouldn't mind if the person did it to me so long as I could do the person behind me. I get it. I get it. All right. Another survey. Zillow survey finds 35 % of prospective buyers would buy a haunted house if it costs less. less. Of course you would because haunted houses are not real.

1:04:40Okay. I'm all in on haunted house movies. We'll come back to that in the recommendations. But the people who say like there's a spirit living in my attic and it's like I heard something. Yeah, if you're going to discount that house for me, sure, I'll take it. After Sandy's haunted house, I will never live in a haunted house. In my parents' neighborhood, there was like a murder down the street and like trying to sell that house and went fine. Like, if someone is really murdered in a house and, like, there's a murder crew to come clean up, I think that should be a discount. Yeah. Not a haunted house.

1:05:11Wall Street Journal, too expensive to have fun. They looked at nearly 60 % of Americans say they cut back on spending on live entertainment because of rising costs. The average cost of a ticket went from a little less than$100 pre-pandemic to$120 now after dropping to$60 in the pandemic, of course. 37 % of respondents say they can't keep up with the rising price of events they want to attend. 20 % still they're willing to go on, take on debt to continue to be able to afford their favorite entertainment activities. See, Ben, this chart looks exactly like real net worth, but it's not real net worth.

1:05:40It's what shit costs. And therein lies the difference. True. But I think it makes sense though, that costs for live, live events should be going up. I actually think this makes a lot of sense because that's, everything is so online and screens these days that people are willing to pay up for an experience. And I think it makes sense. and these prices should be higher. How's that? Okay. Well, how about this? We went to Billy Joel on Friday night, which by the way, made me feel quite old because when he played River of Dreams, I was like, oh, his new song. Because I remember when that song came out.

1:06:15I think that song came out in like 1994. Billy Joel, he's like the king of Long Island. He is. Like, I feel like if you live in Long Island, like you have to go see Billy Joel like six times a year. So there's so many songs that it's just like the Pledge of Allegiance for Long Island. So anyway, yeah, his new song came out in 1993. And it did make me feel old. But anyway, at the concert, Robin got a Casamigos silver, just regular with club soda. She got a double. $47. That was my reaction. I just started laughing. Like, okay, that's just what we're doing now. Like, this is where it is. It's$47 for two ounces of tequila.

1:06:55It is true. Live entertainment, movie theaters, and airports. Like all sense of pricing decorum goes out the window. All right. Let's blow through some of these random stuff. Somebody says it's a great Winnie the Pooh thing. Equity bucket on top. Equity sleeve. That's a good one. I'm a big Winnie the Pooh fan. Yep. Ben, you have a new dog. No, I don't yet. You didn't get a new dog. We're trying. Oh, that's right. We had a little bit of a mishap, but yes, we're working on it. Let me ask you this. I know we're not doctors. How do dogs sleep under blankets? not every day, but a lot of mornings, my dog will come put her nose under the blanket and I lift it up and she'll like just plop her entire body.

1:07:32How do they breathe under their blanket? Our dog used to be under the blanket too. I don't know. That's a good question. Dogs have good lungs. There's still some air under there. Not much. Okay. I set up a call with us for somebody to come on and explain to us some of the bond myth that's going on. And he said, we'd be happy to do it as long as I don't end up getting shamed on next week's animal spirits for violating your scheduling procedures. See, you've laid it out there. Everyone's walking on eggshells around you for emailing. Don't mess with me. Listen, I'm sorry. Don't say that you can meet in 50 days.

1:08:07Just say no. Blow me off. Yeah. People are going to be scared to email you now. Do you have heat on in your house? Yes, in the last couple of weeks. Okay. Where do you draw the line? Because the other day it was like, I know people are like pretty insistent about holding out. Like I can't do it yet. I can't do it yet. When, when my house gets to 65, that's it. That's my line in the sand. That's pretty cold. No, my wife is a total wimp with temperatures. So she, she jacks it up right away. Okay. Same. Oh, there you go. I, when I, my first apartment by myself, uh, I would keep it at like 61. I like, I didn't care when I was like young and broke.

1:08:46I, I, I, and not have to pay utilities. But your nose, your nose gets cold. Doesn't your nose get cold? Your fingers start, stop working. Yeah. I grew up in a household where my dad was awful with a thermostat and like, I got used to it, I feel like. And yes. So Ben, the Taylor Swift movie, did you see it? You did, right? I saw it. We've, my daughter's gone to see it twice. She went once with us, once with friends. My son couldn't make it cause he was at a birthday party. He made my wife take him to go see it cause he was jealous. So we've, we've gone multiple times in my family now. Well, you're not alone.

1:09:19It's done$130 million so far at the box office globally. Oh, no, domestic. That's domestic. Wow. So this weekend it did, this weekend it outpaced Killers of the Flower Moon, which I might see tonight, but oh my God, it's three and a half hours. That's really long. See, I would rather just them break that up into a miniseries and put it on Netflix or Apple. Make it like a four-part miniseries. Honestly, I'm having a hard time getting through the book. I'm not going to lie. Oh, I love the book. It's kind of a slog for me. It's interesting, but it's not as... I thought it was going to be like a page turner.

1:09:53It's not. Nah, okay. I don't remember. It's pretty slow. So this is interesting. 46 % of opening night moviegoers for Killers of Flower Moon were under 35. What do you make of that? Old people don't go to the movies anymore. Is that true? I don't know. Isn't it mostly young people go to the movies as it is? Isn't that the case? Matthew Ball tweeted, with 71 days left, the 2023 domestic box office has already passed 2022. Are we back? I don't know. From a low level, I guess. Not bad. All right. Recommendations. I'm going to start. Netflix actually had a pretty decent comedy. Old Dads with Bill Burr.

1:10:33I think he wrote it. And it's, this is a thing where like you're a 45-year-old dad has a kid. Like that's a thing that happens a lot lately. You see like a dad that's much older having kids. That didn't happen when we were younger, I feel like. And it's just about that experience. But there's a great scene at the beginning of having to discipline your children in front of parents and other parents, your friends. It's so awkward because if you go too hard, everyone's like, whoa, take it easy, psycho. But if you go too easy, everyone's like, geez, you went pretty easy on that kid. Just let him off.

1:11:05So there's no way to win disciplining your children in front of friends or other parents. But if you like Bill Burr's comedy, it feels like it kind of the movie feels like his stand-up in a way so if you like bill burr you'll like the movie it i was surprised i'd like there was multiple parts that i laughed out loud um i re-watched the forks episode of the bear i know you didn't care for the bear the episode where richie works in a high-class restaurant to learn how things work in like a really upscale restaurant and it has a taylor swift i forgot there's a taylor swift song like lead into the show that like paid off with the taylor swift song i think it's one of the best tv episodes of the past year or so.

1:11:41And I put the one. You rewatched a specific episode? Yes. I don't know why. I just, I put stuff on in the background when I'm writing your stuff at night. And it's just an amazing, I think it's one of the best episodes of TV in a while. I think the other ones were, what's the zombie show on HBO?

1:11:58The last of us. The last of us. Yeah. That episode where Ron Swanson was in the bunker one. That was good. You could probably put a few succession ones in there, but Forks for as far as I'm going, The Bear, one of the best episodes of TV I've seen in the past year. That's all I got. All right. I heard from a lot of people about VHS. I watched a bunch of them. They are scary. They really are. There's a lot of horror cycles out there. You got a lot of people who are defending your horror takes, saying Michael's been on a roll lately with horror takes. Well, I've got more. Somebody emailed us. Hey, check out Deadstream.

1:12:30I can't believe you haven't run out yet. You literally watch like three horror movies a week. Somebody said, check out Deadstream. And I said, I replied without even looking. I'm in. it's the opposite of live stream but it's the same type of thing as Chad gets the axe I'm not done with it yet but it's really scary quite scary what else did I watch oh I took I took Logan to Paw Patrol on Saturday it was raining so him and a few of his friends went to see Paw Patrol now I'm Logan already saw it I'm not watching Paw Patrol so you know what I did I downloaded a movie to my iPad. You sent me a picture of it.

1:13:08You were watching a movie on your iPad. Brought my noise-canceling headphones. The movie was called, and this is not a joke, and actually, now here's the thing. When I'm talking about these movies, so I watch a lot of movies that are just like garbage, like just horrendous, not even bad good, just bad, atrocious, like wouldn't even dare have somebody think it's a recommendation. All these movies that I'm talking about right now, while they are obviously selective, right? Like if you're not into horror, which is most of the audience, you don't care about this. But if you are into horror, I'm only mentioning these movies because I think they're high You don't have to clarify for me.

1:13:41I'm just saying. So that's a lot of throat clearing for what I'm about to say. Okay? So here's a movie that I watched at Paw Patrol. And it was a very interesting juxtaposition of a bunch of four-year-old boys watching Paw Patrol. And you know what I was watching? Hell House LLC. Now, Hell House LLC, much like Haunt and much like Deadstream, is about – it was So this was inspired by like Blair Witch. It's like found footage, like what really happened. And it was very effective and frightening as all get out. And guess what? I had to take my headphones off at some points because that's how scared I was.

1:14:19I was watching it with the volume off. I couldn't take it. It was too much. Okay. I can't believe you bring an iPad. They don't like look at you weird when you bring an iPad into the theater. It was like a kid at the box office. It was like a one o 'clock show. Now listen, Hell House LLC, 75 % from the critics. 72 from the audience. I'm surprised they went with the LLC instead of like a solo entrepreneurship. No, you can't put a haunted house in a C Corp. Everybody knows that. Okay. All right. Say our email address again so people don't forget it because I already forgot it. Oh, wait. One last thing.

1:14:50One last thing. I listened to the So I Married an Axe Murderer rewatchables. I did too. And I rewatched it again. I love that movie as a child. It's on HBO right now. I watched it again after I listened to the rewatchables. The first 20 minutes of that movie, when he plays the Scottish dad, are just the heed stuff. It just kills me every time. Yeah, heed. Kids definitely don't know about Mike Myers. Yes, Mike Myers, he had it going. He kind of fell off the map, but that's a great 90s movie too. It's not Wayne's World, but... All right, out of those spirits at thecompoundnews.com. Thank you for sticking with us.

1:15:30If you made it this far, I know we went long. Thank you to Duncan and the whole production team. We will see you next time.

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