How Much is $1 Trillion? (EP. 469)

16:04Michael Batnick:Well. No, that's all this chart is showing. It's the top quintile versus the bottom quintile. And in the top is all the AI names.

16:12Ben Carlson:Yeah, AI is creating losers and winners.

16:13Michael Batnick:So that's what I think. But again, sorry, the losers are software. Right. It's software versus AI. That's the entirety of this chart. Right.

16:21Ben Carlson:That's why it doesn't worry me that much. And it's funny. I think it's good to see it broadening out. and it's not just the hyperscalers that are winning. Even if this is all one big AI trade. So it's funny because value is whipping growth this year. I can't remember who showed me this, but Vanguard value, which is VTV, is beating Vanguard growth, VUG, by I think 7 or 8 % this year. Now people go, wait a minute, that's because of the memory stocks because they're so cheap. But I guess I'm just sick of people trying to do the yeah buts, but caveats this. So what? These stocks are still cheap on their earnings value.

16:53Ben Carlson:So it makes them value stocks. What do you want? first it was value stocks stink because they have no fundamentals. Now it's, no, no, no, no. These stocks have fundamentals, but it's all because of AI. People keep changing the narrative. Yes.

17:08Michael Batnick:What do you want? I think the reality is that Micron is the biggest weight in this index. I think it's like 5%. The second biggest is like 2%. So yes, it's fair that Micron and Intel - It's 4%. It's 4%. Okay. But to your point, to your point, guess what? The S &P 493 are outperforming the Mac 7 by a lot. Right. So it's not just, yeah, the story is changing. It's not just the hyperscalers. It's more things

17:42Ben Carlson:that work. And this is a global thing, obviously. Meb at the Idea Farm had these slides from Schroeder's, which is really good. They had this whole global investment deck. It was like 100 slides. I thought it was really good. So it says, 2026 equity gains are all about earnings. EM equities are up 26 % year to date. This is through the end of May. And it's showing the earnings, the income, and the valuations. Like what in that, remember last year when international outperformers were like, well, that's because of the dollar. And this year, look at the earnings for emerging markets. It's kind of crazy.

18:11Ben Carlson:It's just dwarfing everything else, obviously. And they have all these charts that show the earnings for emerging markets are just blowing everything out of the water. Even for the U.S., even for Japan, even for all these other, in China. This is a crazy one to me. Wait, you know what's funny about that?

18:26Michael Batnick:Because back to your point about people making excuses or whatever, like, oh, if LeBron wasn't on the Cavs, they wouldn't win. If Jalen wasn't, well, yeah, but that's what happens. Of course. So if SK Hynix and Samsung weren't in EM, the fundamentals were way different. But they are. What does that even mean if this wasn't then that? They are. It is. It is. Right.

18:52Ben Carlson:And the whole point was emerging markets are just left for dead because they don't have a tech sector. And now they do. You're like, well, that's part of the edge, right? This one kind of shocked me. So in 2021, not that long ago, China was almost 40 % of the EM index. Korea and Taiwan were 12 % to 15%. Korea and Taiwan are now bigger than China. China has essentially got cut in half in the index. And Korea and Taiwan have picked up the slack. This, to me, is the beauty of diversification. That you don't know where these winners are going to come from. in any of these, in value stocks, in emerging markets, in the US, any of this stuff.

19:26Ben Carlson:This is the beauty. You talked about Peter Bernstein before. He said something along the lines of, and I'm paraphrasing, diversification, yes, it's a risk management strategy, but it's also an aggressive strategy because sometimes you don't know where those big winners are going to come from. That's the point. If you cast a wide enough net, you get these winners and they're unexpected often. No one expected this to happen. No one. No one was saying emerging markets, that's the big winner of AI. No one said that. when ChatGPT came out, the question is, okay, fine. You're worried this is all one big trade, right?

20:01Ben Carlson:It's just one big, huge pot. Everything's in this pot. What do you do if you're worried about it?

20:06Michael Batnick:So last week, we were talking about some of the low volatility stocks that are very underweight tech. Jason Zawagrode wrote a piece about this in the journal, and he quoted Yuri and Timmer asking about this question, like, if you want to reduce your exposure, to the one big trade, which is fair. Urien Timmer from Fidelity said, European stocks may not shoot the lights out, but if the S &P 500 goes down, they will probably go down less because there's less price buildup that would get undone. They can be a port in the storm. So outside of ASML, the Dutch semiconductor equipment company, they are severely severely underway tech yeah they are all it's a backhanded compliment at europe

20:55Ben Carlson:it's an old economy stock market right and that that's diversification that europe could be the one that because europe had a good year last year and they have it kind of a not as good a year this year but you're right that that makes sense to me find those places where it's hard to find them places now but if you're worried that's that's it all right i want to talk about oil because markets were right again. And I think this has been a big theme this entire decade that we've been talking about. So oil is back down to$80 a gallon or$80 a barrel because it sounds like for the 56th time we have a deal with Iran.

21:30Ben Carlson:This time it's going to stick. This is the real deal this time. And oil crashed again, and it's back down to$80. And the energy analysts were ripping their hair out for weeks, saying the Strait of Hormuz is closed. This is disrupting the supply chain in significant ways. Oil should be$150 a barrel,$175,$200 a barrel. It never got close to there. And I'm sure if you're an energy analyst, I'm sure it was really hard because you're looking at all of the correct metrics and going, the markets don't make sense. Why are they not following these metrics? These metrics show oil prices should be higher.

22:08Ben Carlson:And the market said, we know this is not going to last very long. So we're not going to go to those levels. What's the point? And the markets were right again about oil. It's pretty impressive that markets are now, markets are like their own form of AI. The intelligence for markets are growing over time. Think about how many things we've looked past this decade where the markets were right in the end that they never would have looked past in the previous, I don't know, 20 years ago or something.

22:37Michael Batnick:So is this saying the same thing? Because you've been saying this for a while and I think you've been right. Right. If the average investor is getting smarter, is that the same thing as saying the market is getting smarter? Is the average investor impacting the market? Yes.

22:47Ben Carlson:Bingo. Hmm. There's less panic for headline events than there was in the past. Because markets move so much quicker, and it just digests them faster. And I think it's something you really have to consider about how markets function now. And that if there ever is this AI blowup, It's going to happen in the blink of an eye. We're going to get, I think if there is like an AI whatever, it's going to be like down 20, 25 % in like three weeks. I really think the market's going to say, all right, you know what? Let's just take our medicine. Rip the bandaid off. Do it now. That's what's going to happen.

23:29Michael Batnick:There's nothing you could say to remove me off of this fact that at some point, and this is not a prediction or a hot take or whatever, we will have a four-year bear market. Like it's not just going to be up only for the rest of our entire lives.

23:42Ben Carlson:Like there'll be a financial crisis at some point. The millennial generation will cause some sort of financial crisis.

23:48Michael Batnick:There will be, I don't know if you know, lost decade, who knows, but there will be a multi-year bear market. The fact that I even have to like say this as if I'm going out on a limb tells you all you need to know about where we are. This is a bull market. It's a long bull market.

24:00Ben Carlson:We haven't had a recession. We haven't had a financial crisis.

24:03Michael Batnick:Allow me to be so brave as to suggest that there will be a bear market again. Right. Listen, we're due for a pullback.

24:09Ben Carlson:Yeah, of course. We're always due for a pullback.

24:13Michael Batnick:All right, so let's talk about what SpaceX is doing to the market. Todd Sohn has a chart showing the rolling 65-day sum of money into thematic ETFs. And of course, Cathie Wood and the ARK Complex in 2020, the ARK Mania. We might never see anything like that again. Maybe we will, maybe we won't. That's amazing. It's a monster outlier.

24:39Ben Carlson:Especially when you consider the flows into everything these past few years. The fact that the ARC, whatever, mania, dwarfs that is pretty impressive.

24:47Michael Batnick:Yeah. So anyway, it's back. And Todd says, you know, it's space or nuclear, another theme, whatever it is. The thematic theme is absolutely surging. So we keep talking about this.

25:01Ben Carlson:ARC is still in a 50 % drawdown from those highs.

25:03Michael Batnick:Yeah, we'll get them in a second. We keep talking about all of the potential distractions and things that want to like bump you off the horse, right? If you think about this bull market as you're riding a buck and bronco, it's really hard to stay on because there's been so many reasons to sell along the way. Have you ever been on a horse in your life? I've never been on a horse.

25:29Ben Carlson:No offense. I can't see you being a horse person. I've never been on a horse. Okay. Not up in your cabin up north? There's no horse? There's horses, but— We did a horse thing a couple years ago with the kids, just to ride around a big field and streams,

25:42Michael Batnick:and it's kind of fun. So one of the buck and bronco features of this market is, oh my god, it's a bubble. Look at all this ridiculous behavior. Right. Right, all the D-gens. You have to tune them out. They're never leaving. So I say that because—

26:02Ben Carlson:And that was a mini bubble in 2021.

26:03Michael Batnick:It really was. Yeah, but they never left. But it was self-contained. They never left. Right. So the SpaceX on the launch day, I think it might have been the next day. I don't know. Levered, there's levered shares for SpaceX, both long and short. And the levered long on 615. All right, so that was yesterday. On Monday, the levered long traded$282 million worth of shares. And the leveraged short, I don't know who is doing this, $219 million worth of shares. By far, by far, by far the largest one-day volume of trading.

26:47Ben Carlson:So these leveraged ETFs for SpaceX are going to have$5 billion in like the blink of an eye.

26:51Michael Batnick:Yeah.

26:52Ben Carlson:Right? They're going to have so much money rolling.

26:55Michael Batnick:All right. So ARK. SpaceX is the, she owns $325 million worth of SpaceX in ARKK alone. I believe she owns them in all the other vehicles as well, but this is the biggest position. I don't know how this works. I don't know if she got them at the IPO price. I don't know if she bought them at the open at 150 or 160 or whatever traded. I just don't know what her cost basis is.

27:21Ben Carlson:You don't think that they got some sort of allocation to the private? I have no idea.

27:24Michael Batnick:I don't know if ETFs get an allocation. I don't know how it works like that. They can, yes. They can? Okay. Over the last five years, ARK has returned negative 30%. The Qs are up 124%.

27:47Ben Carlson:Okay, actually, these stories are all saying that, yes, ARK bought SpaceX shares on the IPO. So maybe they didn't have the private shares.

27:55Michael Batnick:The level of underperformance now, it's been much better in recent years. So, you know, this is skewed way lower by the results of 2021, where all those COVID bubble names like DocuSign and T-Doc and whatever blew up.

28:08Ben Carlson:They've had a little bit of a comeback, but you're right. It's done much better. The fact that it funded this bad in this environment would be shocking to people who were so into this for the innovation story.

28:19Michael Batnick:So I hate, like, blaming whatever, because there's plenty of blame to the extent that there's blame at all to go around. If you piled into ARK in 2021, hopefully that was a learning experience. I'm sure it was. I think if there's any blame on Cathie Wood, and obviously she's doing the best she can, she's not, you know, she's trying to, she's trying to get it right. Missing the AI, you know, for an innovation fund, missing the AI trade is -

28:46Ben Carlson:She set some very unreasonable expectations.

28:49Michael Batnick:Yeah, that was tough.

28:50Ben Carlson:You're right. The thing is, if you would have seen these numbers from ARK, you would have gone, oh, well, tech blew up, right? That's what happened. Tech finally blew up. And that's why ARK is down so much. You wouldn't say, no, we had the biggest technological innovation of this century and they missed it. That's the surprising part.

29:06Michael Batnick:That's really hard. One of the features of this bull run is that every time, really every time the market falls a little, fear comes back so fast. It comes back so fast. Like people get bared up so fast, which is wonderful. Because that's, you know, that's fuel. Like there is still a lot of disbelief. We were talking to Encore yesterday, Ankur Crawford for a Talk Your Book episode. And in conversations that she's having, and I would agree with you, like it's more, when is this going to end? Not what should I buy? Yeah, yeah, you're right. So Jason Gebfert from Sentiment Trader tweeted, man, tiny option traders really got spooked last week.

29:50Michael Batnick:One of the highest proportions of hedging activity in 25 years. And the market barely fell. But to the point that we opened the show with or spoke about with Savita taking profits, that caused a pretty fast sell-off. Micron, I don't know how much it fell from its high and whatever, it was only a three-day sell-off. Did it fall 18%, 20 %? I don't know. But anytime there's a little dip, people just have one foot out the door.

30:15Ben Carlson:Yeah, which like you said, the bigger the gain, the quicker the trigger on these things, right? I mean, there have to be a number of people who have just set stop losses, right? I'm up 500%. I'm going to set a stop loss 20 % lower. or 10 % lower or whatever it is.

30:29Michael Batnick:Well, people that have wrote the gains of Micron and Sandisk and Western Dig and all these names, I give them a lot of credit. Like, it's hard.

30:37Ben Carlson:Micron was down 20 % in like three days.

30:39Michael Batnick:Was it? Okay. And again, I know I've said this on the show now five times, but I'm going to keep saying it because it did happen. Micron fell 30 % in like three weeks in March after I blow out earnings number. And we just like, all of these declines, we just pretend they never happened.

30:54Ben Carlson:So your idea about people changing their minds really quickly, I think that is going to be one of the problems with this new AI trading. So Robinhood put out a tweet this week. Agentic trading is live for all customers. Connect any AI agent through the Robinhood MCP server. Fund a dedicated agentic account. Let it research, trade, and rebalance on your term. So I watched the, they had a little video that showed how it works. And I watched it. And it looked pretty cool. It was like, pick 10 stocks that are somehow related to the biggest private companies. And then, oh, if a stock is down 10%, sell it.

31:28Ben Carlson:Or it was talking about rebalancing. And it's showing these prompts, putting in the, and what happens is you set the rules for AI, but then you have to sign off on it too, right? It doesn't, I think it can do it automatically for you, but a lot of times there is checks and balances. So AI is not just running rampant. And I think this is very cool. It just, you know, at the end of the day, this kind of just takes back testing. to the next level. It's not really like something brand new. Backtesting has existed forever. Formula Lake trading has existed forever. Am I interrupting something? Sorry.

32:02Ben Carlson:Actually, yes. Talking to Knicks fans? Okay. But I think the problem with this, it's really cool. I'm sure there's gonna be a lot of people who can make their own rules up and it's gonna be very helpful for them. But I think people are gonna be constantly tinkering and changing their own rules. And the whole point of a backtest is in the back test, you don't go and change it every time it doesn't work. You stick with it no matter what. So true. So, so, so true. So I just, I think that's going to be hard for people to like fingers off the keyboard. I'm not changing something, even if it's not working right now.

32:38Ben Carlson:That's going to happen all the time. That's what's going to happen with this.

32:41Michael Batnick:Yeah.

32:41Ben Carlson:Is the changes are going to be constant.

32:43Michael Batnick:Yeah.

32:43Ben Carlson:And AI is going to go, oh, great idea. Really? All right. You used to buy small cap growth stocks? Now you don't want to work? Good, good for you.

32:52Michael Batnick:The market is open. Let's see what SpaceX is up to.

33:01Michael Batnick:Oh my God. $212 a share. So it's going to pass Amazon and market cap maybe today. Again, the numbers are sort of phony baloney, but, you know, this is something.

33:16Ben Carlson:I guess if it ends up having a huge pop and then it just comes back down to earth a little bit and settles in where it was the IPO, it's like, was the small float really worth it? I'm not saying that's going to happen. Worth it for the company, I don't know.

33:33Michael Batnick:Well, I think part of the reason why they did this this way is because, I don't have the details in front of me, there are escalations and triggers about if the shares are up X percent, then they are allowed to unlock more shares and sell them to it. So, I mean, that's the whole, like, that's, you know, that's part of the reason why people are upset. It's like, you're gaming the system so that you can dump more liquidity on us.

33:56Ben Carlson:But yeah, but people are buying it. So you can't, you know, I don't know. It is what it is, right? And a lot of it is retail. Eyes wide open.

34:03Michael Batnick:Everybody, you know, they've been very transparent. You might not like it, but they've laid out the rules. All right, Ben, last week I spoke about how incredibly resilient the economy has. And I started, I think, with tariffs. Like, I didn't even go back to COVID, right? But Jonathan Gray had a quote that I pulled from the transcript. And he actually said the exact same thing. He went back a little bit further. So COVID, of course. And that was, you know, the government helped us get through that. And part of the reason, I guess, why the consumer is still, to a certain extent, spending. But there was the Russia-Ukraine invasion.

34:44Michael Batnick:which impacted us, I guess, just, you know, gas prices.

34:47Ben Carlson:Gas prices went up, oil prices went up, inflation went up even more because of that.

34:51Michael Batnick:The Silicon Valley bank shock. Yep. Like that was, you know, contained. But like, there's just been, there's just been so much. Liberation day, all that, yeah. So I know we do this a lot, what I'm about to do. And I'm going to keep doing it until it no longer, until it's no longer the truth. because it bears repeating because it is the truth. Capital One CEO. I would say if we didn't read any news and all we did was just really look at the data that we see in the economy and the data that we see on our portfolio, we have a really quite positive view. I think the consumer is really the strong shoulders the economy stands on.

35:36Michael Batnick:Unemployment continues to be very strong. Now, I promise, as soon as this turns, as soon as the CEOs of these gigantic financial companies that serve everyone, not talking about Amex, talking about Capital One, as soon as they start to say that the consumer is weakening, that spending is pulling back, I promise, I'm not cherry picking. I will share it. But the economy continues to push through.

36:04Ben Carlson:It is interesting that this company is still in like a 23 % drawdown. And the CEO is not trying to like blame inflation or gas prices for the reason their stock price is down. They're still saying, no, things are looking good still. It wasn't too long ago, Ben, that we were worried about it. The company did go crazy. What did? The stock went crazy. And so it's in a 20 % drawdown, but it was up a lot.

36:32So last week, last week we got CPI data.

36:39Michael Batnick:Man, the market is moving so fast. So we had the, you know what? Let's not forget because, you know, we've bounced since. But Friday, two Fridays ago, was the worst day of the year by far. Small cap tax fell 6%. And then the next week, we got CPI data on Wednesday. Yeah, it was not great, Bob. And the market opened down, rallied intraday, and got slammed into the close. I think it fell 1%. And this was after three consecutive days of selling. And I said to him, Shark Kid, Matt, and Sean, I was in the office with them. I think the S &P was down 1 % that day, maybe more. I said, guys, imagine if inflation came in hotter than expected.

37:34Michael Batnick:Because it was actually, like I said, inflation numbers came out at 8.30. The market popped. It was not as bad as we feared. And then nothing but selling for the rest of the afternoon and closing the lows of the day. And I said to them, what if inflation was hot today? And we all looked at each other and said, would the S &P have been down 3 %? My point is, that was a week ago. And we're up, we're 4 % higher than we were there. The narratives change so fast.

38:01Ben Carlson:So here's the thing. So inflation went from 2.4 % in February to 4.2 % by the end of May. And I think this, it is surprising to me that the market didn't freak out. But I think this is another case of the market going, all right, just like oil markets, We're not going to freak out because we know that this is oil prices. Hopefully, this will come back down and not completely reverse itself. But it is kind of crazy. I was thinking about this. We talked about this for years after mortgage rates went from sub 3 % to 8 % and now have settled in at 6 % for a long, long time. What is the reason for the consumer being so strong?

38:38Ben Carlson:One of the big reasons is because 35 % of all household budgets is spending on your housing. Okay? It's the biggest part of everyone's household budget in aggregate. And so many people locked in not only low interest rates, but low home prices, right? So they locked in a low monthly stipend for their housing, right? That's what gave them all this disposable income for years and years and years. Because it's like you're giving yourself a raise every year that you're not paying more in housing. Now, you took that raise off the table. You bought a new house, right? You traded in for a new mortgage payment.

39:14Ben Carlson:but think about this. I was thinking about this. The inflation rate at 4.2%. That's, I'm borrowing for free for my house at 3 % on a real basis right now. It's kind of insane when you think about it that way. That it, that's still, we talked about this for a long time, I think, but I'm just, it's coming back to me like, oh yes, of course. And there have been, there's been people who have traded up like you, right? Who went from three to five or six or whatever and moved on. and there aren't nearly as many people with 3 % mortgages. But that's a big piece of this. Huge. It can't be overstated.

39:49Michael Batnick:If everybody who's locked in at 3 % was at 5.5%, it 100%, 1 million % would impact consumer spending.

39:58Ben Carlson:Think about it if you had to right-size your mortgage payment for the current housing prices right now.

40:03Michael Batnick:Right.

40:04Ben Carlson:That's what I'm saying. How many people couldn't afford their own house? A lot of them. I did have an inflation moment, And I said when inflation hit 9 % in 2022, people like you and me, we don't get to complain about inflation. There are people who are hurting for inflation. Don't get to complain. This is not a complaint. This is just an eye-opener. Filled up my boat for the first time this week. And it was a lot. Way more than I have ever done before, right? I'm not a boat guy, but I'm like, what did I pay last year? Oh, it's way more money. And I asked the girl, you know, they have the people who come and fill your tank up for you.

40:37Ben Carlson:She said that there's been a lot of complaints. I'm like, how have people been dealing with, because if, you know, I have a pontoon, I don't know, a 30-gallon tank or something, and it cost me 220 bucks or something to fill up. It was a lot. But there's enormous boats, right, that take I don't know how many gallons to fill up. And she said, yeah, there's been a lot of people complaining. It's like, I think gas prices for boats went up even more than regular gas.

41:00Michael Batnick:And not slowing down spending one iota.

41:03Ben Carlson:No. Yeah, right. Is that going to change my behavior? Absolutely not. Kid's got a tube. All right. We might as well mention your outfit. And then I think we're going to have a moratorium on Knicks conversations for the next month. Is that fair? I promise.

41:17Michael Batnick:I will not say anything until next season.

41:19Ben Carlson:I give you— Listen, you had a once-in-a-lifetime experience. You were at the game in San Antonio, right, which had to be awesome. I told my kids with 10 minutes left in the game that Spurs are still up by 12. I said, the Knicks are going to win this game. Either the Spurs are going to win by 10 or the Knicks are going to win a close one. And that's how it went. So you got to celebrate the championship in San Antonio, which is probably a good thing because New York may have burned down to the ground if it happened in the city, correct?

41:46Michael Batnick:So let me just say a few things. And of course, I could speak for 19 hours about the wrong we just went on. This is not a next podcast. I know most people don't give a shit, so I will spare you.

41:58Michael Batnick:You know, we talk about being wrong all the time in the market, just like all the time. That's just the nature of predicting anything. It doesn't matter if you're trying to predict what the box office is going to do or the weather or the stock market or sports. We're always wrong at predicting or the dot plots. I was the number one. And I was the number one this team will never win with Jalen Brunson and Carl Anthony Towns. And I'm only talking about from the defensive point of view. Jalen at the top, Carl underneath. I never thought that we could win with them on defense. And I am the biggest Jalen fan.

42:33Michael Batnick:I was never. now I didn't know how good he was, but as soon as he got here, as soon as he got here, I never thought that we could not win a championship with him. He is that guy and watching him every night for the last four years. I'm not surprised. I know the rest of the world might be, but I think Knicks fans knew that he was that guy. So I've never, like, I wanted to trade Carl for Giannis recently. I've never been, and now there was a, something happened in this defense. I don't, I don't know what happened. Something changed and I've never, ever, ever been more happy, obviously, to be more wrong.

43:08I'm just feeling the streak of gratefulness

43:12Michael Batnick:that I'm feeling has continued. Winning is really hard. Like winning a championship is really hard. And eating shit for so many years. Like I went through, I was on NBA Reference the other day.

43:25Ben Carlson:I will give you credit because there's a lot of bandwagon Knicks fans, obviously. You took me to a Charlotte game like two seasons ago. and it was a meaningless regular season game. And like, you're an actual fan. You're not one of these fair weather people who just jumped on the bandwagon. So I'll give you credit there.

43:38Michael Batnick:I never stopped. Like I never stopped through, when it started with Don Chaney after Van Gundy left, through Derek Fisher and Fizdale and Hornacek and D 'Antoni and Isaiah Thomas and Larry Brown. And I'm sure I'm missing a coach or two. Kurt Rambis, Herb Williams. Oh my God. I never stopped. And it was so bad. Like, it was so, so, so dark. So to be eating this fruit tastes really sweet. And I'm happy for this team and the players and the organization and the fans. And I don't, listen, the bandwagon fans, whatever. Like, it's cool. It unites the city. I don't know.

44:15Ben Carlson:I think New York was by far the better story for the win. Like, it was so cool to see. For me, not having any carry, whoever won, New York was by far the better story.

44:24Michael Batnick:I'm not one of those like, oh, they're not a real fan. I mean, it's great. It's the more the merrier. Like, the more the merrier. And what Jalen did, so since he came to the Knicks four years ago, this is where he ranks in the playoffs. Second in wins. Second in points per game. First in 30-point games. First in 35-point games. First in 40-point games. I can't believe that—I never thought that anybody would replace Eli as my favorite athlete of all time. But Jalen did.

44:56Ben Carlson:He's a very likable guy. Doesn't seem to have ego or talk to the refs all the time. Yes. I'm almost done.

45:02Michael Batnick:I'm almost done.

45:02Ben Carlson:Okay. But I think for real sports fans that understand how much of your life, your time, your energy,

45:10Michael Batnick:your emotions you give to your team, like it's very special to win because it's just, it's nothing but misery, right? There's only one team that wins every year. And most years you're not close, but some of the years you're close. It's just, it's nothing but misery punctuated hopefully by a few brief moments of euphoria, which I am currently living through. So I'm happy for the city. It's obviously been like some pretty dark years for Manhattan. Obviously, I hate some of the stuff that has happened with Spurs fans getting beat up and burning the buses. And it's really shitty that this happens.

45:46Michael Batnick:Listen, Manhattan is a gigantic city. There's millions of people there. There's assholes everywhere. And I hate that this happens. So that makes me sad. I'm exhausted. I'm happy it's over. like game five was weirdly in San Antonio. By the way, the San Antonio fans were, fans were great for the most part. Although when you said to me, like, were you interrupting something? So my friend was texting me that a father and son, like a father got hurt really bad, like brain, brain bleeding on the river walk. I think I might be done going to traveling for the Knicks. It's just like not worth it. I don't want to get, I had a, I had a close call, which I won't really share, but no fault of my own.

46:27Ben Carlson:you probably got to feel a little nervous wearing the enemy's colors in you know and next year like the target

46:34Michael Batnick:you know people don't like New York to begin with so I think I might be good there anyway anyway the whole thing the whole it's been two months it's so exhausting just so exhausting mentally and emotionally I can't even imagine what it's like to be

46:52Ben Carlson:a player or their family

46:55Michael Batnick:So anyway, I'll leave it here. I am taking Robin and the boys to the parade on Thursday. And man, it's been special. And actually, I will end it here, here. I really do appreciate all the emails and all the texts. And I know it's not easy to root for a New York sports team. Any team that's not your own, especially one from New York, you know, we're obnoxious, we're loud. But people that reached out and there was like an outpouring, like so, so, so many texts and emails.

47:23Ben Carlson:I thought it was a likable team.

47:25Michael Batnick:I feel the love. So thank you. Thank you, everybody.

47:29Ben Carlson:Yeah. And every fan base has annoying fans. Like no one, everyone has people like that. They're everywhere. And if anyone does, you're exhausted, but if anyone deserves a vacation, it's your wife, not you. She's been something else. All right. So Nicole had an idea for us. She said, hey, the last one the Knicks won is 1973, correct? I guess they called it the top in the market because there was a big bear market after that. She said, let's do an inflation thing for this. And it's funny. They put it in Knicks colors for me. I had Claude Wembeñana do this for me, my little assistant, Claude. So this is prices.

48:00Ben Carlson:They do nominal and real, okay? So inflation is up six times since 1973, which is kind of crazy to think about. That's just compounding, right? It's 3, 3.5%. Homes are up 15 times in that time. New cars are up 12 times. The cost of college is up 24 times. Health insurance is up 50 times. And groceries are up four times. It's kind of crazy. Groceries actually are the only big thing that has grown less than the rate of inflation since the 1970s. Hmm. I guess I should have Claude do wages too.

48:29Michael Batnick:I wonder what the tickets were back then.

48:32Ben Carlson:Oh, that's a good, $5 probably,$10. It had to be really, really low. Because no one cared about the NBA as much either.

48:39Michael Batnick:I actually have my finals tickets from 1999. I didn't bring them out. He sent me a picture of a playoff game. Oh, okay, round one. Yeah, I was like, what? Round one. So, section 119, row D. Oh, it was row D's back then. So, fourth row. It was, where's the price? $96 in 2004.

49:07Ben Carlson:Okay, here's interesting. So, wages, according to Claude. So, inflation's up six times since 1933. Wages are up eight times.

49:16Ben Carlson:But, as we said, prices for a lot of stuff's up even more. All right, are we good with the Knicks? I'm good. Okay. Nice outfit, by the way. My son loves the chains. My son has a Michigan chain, a Lions chain. That's the thing. Oh, you have the championship chain.

49:31Michael Batnick:I mean, I bought this for the kids, obviously. I'm not a jersey guy. I've never worn really jerseys, but I bought two finals jerseys. I bought Josh and Jalen.

49:38Ben Carlson:Yeah, you look like a turtle from Entourage right now.

49:40Michael Batnick:And by the way, these hats are ridiculous. I feel like the biggest asshole wearing this. I'm never wearing this again. This is going to go on the shelf. But like my head just doesn't -

49:48Ben Carlson:That's a 12-gallon hat. It's huge. If I wore it, I would look like an idiot. My head doesn't fit in his head. It looks so silly. That is a huge head. All right, let's talk about the politics of AI. So Anthropic last week said, the U.S. government setting national security authorities has issued an export control directive to suspend all access to Fable 5 and Myths 5 by any foreign national, whether inside or outside the United States. So Anthropic is starting to get regulated. Now here's the thing. Whatever happens, whatever kind of regulation politicians put on AI, it's not going to be good probably.

50:18Ben Carlson:I don't think politicians understand this. whatever kind of regulation they do, it's not going to be helpful. But these AI companies deserve it because all they've been spouting off is about how crazy bad things are going to get. And we can't even release this because the damage it could do. And Dario said on a few podcasts, like, hey, listen, we need regulation. And they asked him, what should it be? I don't know. It's up to the government officials. The fact that they've not self-regulated at all, in many ways, they deserve whatever's coming to them. like they'll complain about it but whatever happens if you've been saying we're going to destroy 50 % of white collar jobs and like this could ruin the world because of biological weapons or something like you don't get to complain about whatever the government does because the government is not going to probably have the best regulations they're going to like but so what they've made their bed right now they have to lay in it

51:15Michael Batnick:let's talk about AI's impact on on the economy and the job market. So this is a pretty depressing email, but I'll share it anyway. Somebody said, the conversation on jobs has been binary. AI will add jobs or AI will take jobs. That's not the way this is working out. Every company I am working for is hiring developers and other staff to implement AI. They are hiring me to guide them. The goal is to be leaner, not have to hire, and to replace jobs eventually. They are worried that their competition is going to be leaner because they are using more AI. They are worried AI might take their entire business, so they want to be the ones using AI to take the industry over.

51:55Michael Batnick:There is a rush to implement. In the boardrooms, the conversation with everyone is about how many people can we replace? We are going to see growth of jobs, and then they will be dramatically gone. I think Ben might be right in that the next recession could be when it happens. I think my job has the same problem. I have a window. I have to maximize my income. This will go away. AI will take my job. Frankly, I use AI to do my entire job now. I am just better at it the most.

52:21Ben Carlson:Eek. I don't believe this. Sorry. I don't believe these doomer takes. Good. I don't believe them. Maybe in some tech firms, yes. I don't think this is the whole economy. I'm sorry. I don't believe it. Okay. That's not how the world works.

52:36Michael Batnick:I think I'm with you. The journal did a long post, the future of work and AI, and they asked economists, will AI, they asked us three questions. Will AI lead to net job losses or job growth across the economy?

52:53Michael Batnick:And it looks like most answered no change, which is a cop-out. I don't know how you could answer no change. Five answer net loss, two answer net growth. And they asked, based on what we are seeing now, is AI a technology more likely to replace workers or complement them? It was overwhelmingly compliment. It looks like it was about two to one. And then lastly, how much will AI change the way companies hire and develop talent over the next five years?

53:26Michael Batnick:Major impact and some impact were about neck and neck and minimal impact to it. Justin Wolfers with a hot take. Minimal impact. Okay. I pulled two quotes that I thought were very interesting. David Deming. David is the dean at Harvard College and professor at Harvard University. He said that depends on their outside option, I guess in terms of like job switching. Telephone switchboard operators were immediately displaced by mechanical switching technology. That job essentially disappeared overnight. But the young women who would have become telephone operators became stenographers, administrative assistants, and waitresses instead.

54:02Michael Batnick:This shows the importance of flexibility in education and training. This is the coup de grace. I could have just skipped to this quote. People are the ultimate general purpose technology. I like it. That's a good quote. One more from Joshua Gans. He's a professor at University of Toronto's Rotman School of Management. He said they will be reemployed in other things. It is only when technological change takes out an industry in a particular region and people don't move that we see major technological unemployment and wage reductions.

54:34Ben Carlson:Right. So that's like factories going overseas. Correct. This is the fun part about these type of innovative cycles, though, is that just no one knows. It's everyone is guessing and extrapolating and making expectations. And yes, no one knows.

54:47Michael Batnick:That's right. Ben, we got a decent report on the residential real estate market. It's been a while. Existing home sales in the U.S. accelerate to their fastest pace of the year in May, with contract closings rising to an annualized rate of 4.17 million. The median sales price of an existing home climbed 1.3 % from a year ago to$429 ,000. All right, here's one of the takeaways I have from this. So look at this median sale price from Redfin. Shows lines by year. We're at all-time highs. I am starting to get bullish on residential real estate stocks. It might be early. This might age horribly.

55:29Ben Carlson:Well, they've been bouncing considerably, right, the last month or so?

55:32Michael Batnick:So there's been, yeah, there's been a bounce. So it could be a dead cat bounce. and I might just be giving the stock market in the short term too much credit. But my thesis is this. I think that even though home affordability quantitatively hasn't changed, it's still horrific. I think there is - Yeah, mortgage rates have gone up this year. I think there is a realization that, and it's been gradual. It's been like a multi-year process that, that, okay, this is just what houses cost now. Yeah.

56:08Ben Carlson:Here's the thing, though. Look at the next chart I just put in here that shows U.S. existing home sales. And you can see the minor, minor upturn.

56:17Michael Batnick:Yeah, it's—

56:19Ben Carlson:It's still way, way low. And it's good that it's beating expectations. But let's be honest. This is still far below average and far below where you'd think things should be, given the amount of young people in the economy.

56:30Michael Batnick:Well, that's the thing. I mean, the demographic part of it. there is still, this is the largest cohort in the nation in terms of age, and they need to buy a house. True.

56:41Ben Carlson:All right. Real quickly, you talked last week about the rule of 55. The Wall Street Journal had an article this week, the retirement tax break that most people overlook. And they talk about the rule of 55, how you can, if you leave your employer, the year you turn 55 or older, you can pull money from a 401k with penalty free. And I said, no one knows about this. And they said, in a recent Wall Street Journal personal finance quiz, more than 80 % of readers got a question wrong about the earliest age you can make penalty-free 401k withdrawals. So yeah, no one knows about this. Which, the retirement system is so jacked up in this country.

57:14Ben Carlson:Because we have so many different accounts. We have IRAs, Roth IRAs, 401ks, Roth 401ks, 529s, HSAs, SEP IRAs, solo 401ks. It's too much. And some people get more ability to put money in than others, so they should just be one big pot of money. Everyone has the same limit. And it comes for everything. You're 529, you're HSA, you're retirement. It's all one bucket. That's what it should be. Is that going to happen? No. No.

57:43Michael Batnick:All right, Pat, I want to play something for the audience. I love this. We're in the studio. You were in the studio reading some, you were doing some promotion for the book, for your book, Risk and Reward. That's what you're doing.

57:57Ben Carlson:Yeah, the compound media team helped me make some social media clips that were promoting the book.

58:02Michael Batnick:And we got some bloopers that I thought were just adorable, so I want to play him. I love this. This would be a funny social of just Ben's outtakes.

58:11Ben Carlson:Take the financial media one out of that. I don't piss people off. Take two. The stock market. It's volatile. It's a roller coaster. Shut up. Cut that. Ben, breathe. Take three. I go into these details even more with my new book, Risk and Reward. Out now, wherever you find your books. No. You're overconfident.

58:32Michael Batnick:Out now everywhere. No, just say available where books are sold.

58:35Ben Carlson:I detail all this and more in my new book, Risk and Reward, out now, wherever you find your books. I was going to do the thing. Don't do out now. Just say in my new book. Okay. No, you have to say out now everywhere. No, available where books are sold. I detail this and more in my new book, Risk and Reward. It's available now anywhere you find books. I can't. All right. More on this and more and more and more on this. More on this in my new book, Risk and Reward, available now. You know what? I want to use that. I don't think... I don't like that one. Tons more charts. Nope. Way more charts in my book, Risk and Reward, available now.

59:18That was great.

59:19Ben Carlson:All right. If you read this book, you can earn more, spend more, save more. And that's a wrap. That was like in separate. My brain was like just in knots. And that's a wrap on Ben.

59:32Michael Batnick:Yay. All right. That was awesome.

59:35Ben Carlson:Good job by the compound team.

59:36Michael Batnick:It's really hard. I did some of that the other day for something that we're recording. It's really hard. It's harder than you think. It's so, it's awkward. It's difficult.

59:47Ben Carlson:That's why it's funny. When you hear a podcast, it's been so edited in many ways. And the ums and ahs are taken out. and you don't realize that no one talks as clean as people can be made to sound, right? Even this podcast. That's true.

1:00:01Michael Batnick:We're not that good. All right, Elon is the first trillionaire. Chartkin made a chart showing Larry Page, the combined net worth of Larry Page, Jeff Bezos, Mark Zuckerberg, Jensen Wang, Warren Buffett, and Rob Walton is that of Elon Musk. And the Wall Street Journal, bless them, they did this great post where Ben Cohen and Andrew Malika said, picture a line with$1 million on the left and$1 trillion on the right. Where would you place$1 billion? And credit to me, I was better than most, but still not even close. So it's basically all the way to the left. $1 million and$1 billion compared to$1 trillion are basically the same thing.

1:00:47Michael Batnick:So here's some context. And I know you scoff at this, Ben, but we need it. If we stack dollar bills, it goes to the moon. Here we go. All right. A million seconds ago was about two weeks ago. A billion seconds ago was in 1994 when Pulp Fiction was about to open in theaters. A trillion seconds was back in the Ice Age. Here's one more. A billion pennies. A billion pennies takes you from New York to Cape Canaveral in Florida. Okay. A trillion pennies takes you to the moon and back twice. So moon, back, moon, back. That's a trillion pennies.

1:01:34Ben Carlson:So Elon Musk, he can afford a house.

1:01:36Michael Batnick:So people, politicians in particular, are very upset.

1:01:44Ben Carlson:The good news is the discourse around this is very reasonable on both sides.

1:01:48Michael Batnick:So I will try and offer a reasonable take. Poverty is horrendous. And I think most reasonable people, if there was a way to snap your fingers and make the world a more fair place with less horrific hunger and problems, of course, everybody would like to do that. And so you vilify, the politicians vilify somebody with this amount of wealth. It's beyond the pale. Who needs this much wealth? Let's redistribute it. Let's tax him. Let's whatever, whatever, whatever. Of course, I understand the sentiment behind that. I don't agree with it economically. I don't think it's that simple. But I understand where it's coming from.

1:02:37Michael Batnick:It is mostly coming from a decent place. The part that is never discussed is that SpaceX, the IPO, it created so much wealth. Yes, the most of it went to the creator. That's the way the system works. A lot of it went to the investors for taking the risk. That's the way the system works. It created 4 ,400 millionaires, according to the New York Times. And I don't know a better way to lift as many boats as possible other than the capitalist system that we have? And are there maybe things that we can do? I don't know. That's not for me to figure out. But a lot of people, a lot of people benefited in life-changing ways.

1:03:22Michael Batnick:And I think this should be celebrated, not torn down.

1:03:30Ben Carlson:Well, we're never going to solve this one. I don't think. Wealth inequality is never getting solved. and it seems like we just can't tax rich people more. So I think this is just something people are going to argue about forever.

1:03:40Michael Batnick:I think that's probably right.

1:03:42Ben Carlson:Okay, let's talk about some recommendations. All right, I have one for you. Have you watched Widow's Bay on Apple? Yes. Okay. So if you watched the first episode, so this is Matthew Rice, who you said, hey, not a great actor, was in the Claire Danes one on Netflix. I love this guy. I love The Americans. I think it's one of the most unheralded shows of this century. I loved it. I love that guy. And I watched the first episode and I'm like, what is this show? It's like kind of mysterious, but it's also kind of lighthearted. And then it takes a turn and it gets dark and it's kind of, I guess it's Stephen King, would you say, ish?

1:04:15Ben Carlson:Yeah, oh yeah, yeah, that's right, that's right, yep. It's kind of a Stephen King show. And usually, we talked about it. I'm not a horror person, not usually my thing. I really like this show. My wife, she's like you, she can't look. Like if there's a, she knows there's a jump scare coming, she looks away and says, tell me what's happening. She's like you. I, for me, like I said, it does nothing for me. So I just watch. I'm like, oh, it's a scary clown or whatever. It's a crazy old lady with long fingernails. But I really am enjoying this show. And I'm surprised that I am. Thoughts for you? Because you watch horror all the time.

1:04:43Ben Carlson:So is it too much for you?

1:04:46Michael Batnick:Too much? No, to me, this is, I understand it's a horror genre, but this is not a scary show, I don't think. It's not like. It's like a suspenseful show, right? Something like that. There's some scares, but I wouldn't say, you know, it's like lighthearted. It's comedy horror, for lack of a better way to describe it.

1:05:00Ben Carlson:Yes, you're right. It does have some lighthearted parts. Like, again, I think the first episode of the show, you'd never expect where it's going to go the next four or five. We're halfway through it or so.

1:05:08Michael Batnick:I know I said this about a lot of the shows that I enjoy. I really don't need a season two of this. I think they already agreed to one.

1:05:15Ben Carlson:Okay, I agree.

1:05:17Michael Batnick:You're right. It seems like a one, get it all out there. But yeah, no, I'm enjoying it. And Apple, man, Apple has found their groove. I'm watching Cape Fear with

1:05:29Ben Carlson:I didn't know if I wanted to watch it just because I've seen the movie I'm like do I really need it? I don't know It's good Okay

1:05:36Michael Batnick:It's ridiculous It's Amy Adams Patrick Wilson and Javier Bardem produced executive produced by Spielberg and Scorsese who famously swapped movies it was the Cape Fear for Schindler's List swap which man the alternate scenario of that is bizarre to think about

1:05:55Ben Carlson:I guess my whole thinking is I have a hard time watching movies where bad things just keep happening.

1:06:01Michael Batnick:Oh, this is ominous. Yeah, this is pretty dark, so maybe not for you. But, you know, I revel in the darkness.

1:06:10Michael Batnick:I watched on the flight. Is this thing on? So I watched the first 15 minutes, fell asleep, probably missed 40 minutes of it, which is, I don't think I've ever done this before, and I just watched the rest of it. And I don't know if I can comment on a movie in which I missed a 40-minute chunk, but it was okay.

1:06:35Ben Carlson:It took itself way too seriously. That's the problem. For a movie about a comedian, it took itself way too seriously. It definitely wasn't a comedy at all. But how can you have a show about a stand-up comedian that's not funny?

1:06:47Michael Batnick:Well, you know, I'm a sucker for movies. about divorce. So I thought it was okay.

1:06:55Ben Carlson:Okay.

1:06:56Michael Batnick:It's an airplane movie at best. Yeah.

1:06:59Ben Carlson:I think that's where I watch it. All right. I rewatched a classic that I haven't seen in a long time. And this is a movie that could never be made today in a million years because no one would believe it. It's called Dave with Kevin Kline, where he is a lookalike with the president. And then the president gets sick and he becomes the president. And I haven't seen it in forever. It's one of my favorite. I think the 90s has, the 90s is just the best in terms of White House stuff, right? Was that Sigourney Weaver? So it's Kevin, the cast, I couldn't believe how good the cast was. I forgot about it.

1:07:25Ben Carlson:Kevin Kline, Sigourney Weaver, Frank Langella, Ving Rhames, Ben Kingsley, Charles Grodin, Laura Linney, Bonnie Hunt.

1:07:33Michael Batnick:Whoa.

1:07:33Ben Carlson:It was just like a murderer's row of, oh my gosh, that person and that person and that person. And it's such a sweet look at like the White House and politics that could never be made today because you'd go, no, that is, but you could make that movie in the 90s because politics were different. And I just, I don't know what it is. That and the American president is like neck and neck for the best presidential movies ever made. They're both made in the 90s. Air Force One. I love both of them. Get off my plane. Anyway, I can't remember what's on Amazon or something, but I love that movie. Aged perfectly and horribly.

1:08:13All right.

1:08:14Ben Carlson:Congrats to you. Thanks for coming on the show today looking like a guy from the Bronx. Is that fair to say? Yeah, I feel completely—I mean, yes, I'm wearing this outfit ironically.

1:08:23Michael Batnick:I understand I look like a complete buffoon.

1:08:25Ben Carlson:No, you have to. You have to buy all the championship stuff. You're keeping everyone in business right now. Your next gear purchases. Your disposable income.

1:08:34Michael Batnick:All right. Animal Spirits at the compoundnews.com. Personal emails, personal responses. We'll see you next time.

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