Is the Housing Correction Over? (EP.315)

24:58The guys go up to the concert, and Meat Loaf is the valet. It's the bouncer. Do you remember that? I'm going to have to rewatch it because you quote it all the time, and I don't remember any of the lines from it. and so it's been 20 years since I watched it probably. So Meatloaf opens the door and they ask who's playing and I can't remember the first name but they said, and the shitty Beatles. And Wayne goes, the shitty Beatles, are they any good? And Meatloaf said, no, they suck. And then Wayne said, so it's not just a clever name. Okay. So Durable Goods, there you go. Perfect name, perfectly named.

25:30All right, main new home sales, 763 ,000, 675 expected, consumer confidence, is jumping. I don't know. Not that I don't know what the bear case, but I don't even know what the bears would say at this point. It's just, it's got to be just wait, which I guess is like fair-ish. I don't know. I think the goalposts have been moved to just wait. Monetary policy acts on a lag. That's what we're holding on to at this point. Which is true, but it's like, we're approaching bear who cried wolf territory. I'll give him another six months. Isn't it always that though? Doesn't the bear always cry? Yeah. Yeah, Renaissance Macro Research.

26:11Quote, I think this is from Neil Duda. You cannot talk about late cycle dynamics with housing turning up and inventories likely to follow. There will be no recession in the next six months and it's increasingly likely that we're not seeing one in the next year either. Wow. Wow. The housing stuff, I've been thinking about this. I feel like there's so much home equity locked right now because rates are at 7 % and so the cash out refinances have stopped, the HELOCs have stopped. People have always said, like, it's going to be a mild recession if we have one. And there hasn't been a really good explanation for it.

26:43I think it's just like, well, there's no big system-wide thing that's going to bring us down. But I think housing is the thing that is going to carry us through the next recession and make it, if and when it happens, it'll be ultra short. Because if mortgage rates come down from 7 to 4 or 5, you're going to see a home equity line of credit and cash out refi boom unlike we've ever seen before. People are going to be yanking because the housing market hasn't fallen like people thought and the equities stayed relatively similar. I think we're going to see a massive refi boom when mortgage rates come down in the next recession.

27:16Like that's going to be the wave for the next to hold people through when the stuff hits the fan. But didn't we just have a massive refi boom? It didn't get as big as there wasn't enough time really. Okay. It wasn't nearly as big as what happened in the 2000s. I think because of the increase in equity and the money just sitting there for people, I think it's going to be the next wave. It's going to happen. All right. This may be a little worried, I guess. This is from the Wall Street Journal. You have a single-family housing construction that has rebounded recently thanks to historical low numbers of houses for sale.

27:51Talking about the things people refinanced during the pandemic and locked in low mortgage rates, and so they don't. And then this Tom Barkin, who's the Fed Bank Chair of Richmond. which is another like, when did they set up these bank chairs? The locations of them always kind of are - It was in, you ever read the book, America's Bank by Roger Lowenstein? I did read that. Okay, good point. I should, okay. Tom Barkin says, I didn't fully anticipate how much the move in interest rates would convince people not to put their houses on the market. That's kind of got me a little worried that the Fed didn't realize like, oh, if we let mortgage rates go to 7%, maybe people won't want to move because housing is unaffordable.

28:24Yeah, maybe keep that to yourself, dude. Yes. All right. Good news of the week. labor market. Ethan Mollick tweeted this. The good old days were much harder. In 1865, the average British worker worked 124 ,000 hours over their life, kind of like the US and Japan. In 1980, only 69 ,000 hours. Nice. Don't do it. Despite living longer. Since then, it has dropped by 6%. We went from spending 50 % of our lives working to 20%. pretty amazing i think one of the reasons that we have so much that people complain about much more minor details in their lives i think that people probably did way back in the day back in the day people didn't have any time to sit around and think about stuff and complain because they just worked all the time and they died young i read a book on this fair oh called the comfort crisis comfort crisis which was exactly about what you just spoke about and quality of life is up a billion X, but it's made us soft because there are less real threats to us.

29:31And so everything is relative. And so I'm not saying that I want to go back or that humanity was, you know, things were better in the 1910s. It just is, right? Yes. We have more leisure, more luxury, less threats, more time to complain. Right. There's fewer diseases or fewer ways to be impaled and die. Have you ever read any of the books about how they made the buildings and the bridges back in the day and how there's just dead bodies in these big cement pillars when they made the bridges and stuff because working conditions were so much unsafe. Anyway, good news of the week. All right, is the housing correction already over?

30:12This is from finance. Home prices grew for the third straight month in April, potentially cementing a recovery in values and reflecting a housing market that is sorely undersupplied. Case-Shiller was up 0.5%. I showed the drawdown here on YCharts. So it got to as low as 2.85 % for Case-Shiller National Home Price Index. It's now, I'm using two decimal points here, 1.78%. It's coming up, meaning housing prices are going up. Is that it? Could be. If we see a 3 % correction, I suppose if we want to add inflation, it's been a little higher than that, a lower than that. that, I mean, I don't know. That's another brain breaker, right?

30:51Mortgage rates go to 7 % from 3 % in the housing market and the housing prices go up 50 % and then they fall three. I think people are so desperate for housing market crash. It's probably not coming. Did you see this viral Airbnb tweet? I did. He talked about how the Airbnb collapse is real. Revenues are down by 50 % in cities like Phoenix and Austin. Watch out for a wave of force selling from Airbnb owners later this year in the areas hit hardest by the revenue collapse. And that got like a million views. It's got 17 million views. The last time I saw it and in thousands of retweets and people thought, oh, this is it.

31:25This is this is the thing. And then some other guy wrote back and said, this viral tweet, I'm going to fact check it and know the average trend is down three percent, not 40 or 50 percent. I think because the thing. So Logan Motoshami and his Housing Warrior podcast talked about this. They asked him about it. They said, is this Airbnb collapse thing real? He's like, listen, I'm not an Airbnb expert, but if this was real, you would see it in the supply of houses for sale. There'd be a wave of housing on the market. And instead, we're seeing the lowest supply of houses for sale in history. Can I just ask a question?

31:59Has anybody fact-checked the fact-checker? I don't know. I'm just gonna go ahead and say that like the, it's impossible that you could lose that much money on these when everything has been going so long, people are spending so much money. I know I've not seen a fact check of the fact checker, but I'm So the original guy is saying that all of the people that loaded up at homes, the Airbnb hoarders They're screwed and they're going to have to sell because they're losing money. Just come on. And as two Airbnb shareholders we're, this is not I don't even think, this is not even necessarily like a stock Well, I guess it would impact the stock if it was right, but it's more just like, this guy's not talking about the stock.

32:41He's talking about much bigger things. He's talking about the housing market. But my point is - And there's just no way. There's just no way. No. But people wanted so badly for this to be true because I think some people just want, and I get it. If you missed out on it, I totally get wanting the housing market to crash so you can buy it lower. But - Hey, guess what? If all the people that bought multiple homes in the last two years sold them on Airbnb, you know what would happen? They would get bought. That's what would happen. Yes. Right. And you'd see an increase in the supply of homes being sold or button.

33:10Unfortunately, for people who are looking at it, it hasn't happened. All right, Ben. Financial Times. In New York, buildings are selling for less than the value of the land that they sit on. We are seeing prices lower than they have in 20 years in absolute dollar terms. It comes from Will Silverman. He is a managing director at a real estate investment bank. They show US commercial real estate foreclosure by property type. Of course, office is way higher. There's been almost 30. The next is apartments, which is like six. So it's all, it's all in, uh, in, in office real estate, specifically within the commercial real estate category.

33:46How hard is it to turn these offices into apartments? If they're really selling for less than the value of the land they sit on, why couldn't these be turned into condos or apartments? It's not that simple. There's a whole like, uh, zoning type of thing. That's not like they could just flip a switch. But anyway, my point is this, this is definitely, I promise this is a not to brag thing. I'm up 50 % or so. the SL Green stock that I bought. I don't know. You've been bragging about it a little bit lately. A little bit. No, I haven't. A little bit. I got the receipts on Slack. No, but let's... Yeah, but I can brag on Slack.

34:20I mean... Okay, fair. To your credit, credit to you, you've bottom-fished like five stocks in the last 12 months. And we always say it's impossible to nail the bottom. You kind of nailed the bottom like four or five times. It's closer to 10. But no, but it's not credit to me. It's credit to the market. I said with Josh, yes, I have gotten lucky. Some cult skill. Listen, I'll call it luck. But it only works in a bull market. Like if you're trying to catch bottoms in bear markets, you're a f**k. Like obviously. Okay, but anyway, my point is this. With LCL Green, this is how markets work. The news is bad and it's not getting better.

35:01And the stock is up 50 % off the lows. And if you contrast this with Netflix, which we spoke about last week, Netflix is flat over the last five years, and it won. If your thesis in 2018 was that – and we spoke with this. That guy, Bucco Capital, tweeted this. If your thesis was Netflix is going to win streaming, you were right, and you made no money. Conversely, this piece of shit, the news is bad and getting worse, but the stock is up 50 % from lows. It's all expectations. Netflix had such high expectations built into it. So that's how the market works. Yes. All right, let's - Do you even know what SL Green does?

35:38Is it just commercial real estate? They own a lot of - New York real estate? Like AAA luxury buildings in Manhattan. So this is a trade for you then, because obviously the fundamentals long-term are horrible. Yeah, I mean, I am probably going to be a seller soon. Yeah, I'm not looking to like get married here. Lordstown Motors. Remember that one, Ben? What was that one again? Was that an EV player or something else? Which was the one where the dude rolled the truck down the hill? Oh, no, that was... Was that Nicola? Yes. Well, Lordstown Motors came and went. Rest in peace in peace. I don't really remember what they did, to be honest.

36:20Shouldn't this be the way to... Wasn't this the case with when automobiles first came out in the early 1900s? There was like 130 different manufacturers. and four of them survived. Isn't that, I mean, there's not that many electric vehicles, but isn't that going to be kind of the same thing that happens here? Could be. You would expect a lot of these to go out of business and not work. It's a hard, hard business. Yeah, no kidding. Obviously. I was hoping my next car would be an electric vehicle and it's not, they're not cheap enough yet for me, I think. I think they're going to be. Tesla keeps lowering prices.

36:52I was surprised though. Our guy, car dealership guy, tweeted a few weeks ago, hey, here's where you're finding deals. And he listed Ford on there. And I drive a Ford Explorer and I call them up and I said, hey, I got like 10 more months on my lease. Sounds like you guys having some deals. What's the story? And my monthly payment only went up, I was, because I, you know, interest rates went from three to eight in auto loans too, maybe nine or 10. I thought my monthly payment would be higher. It was 7 % higher than I paid three years ago. CPI in that time is up 15%. Yeah, not bad. My negotiating skills allowed me to hedge inflation.

37:29It's all relative. You're a good negotiator in Grand Rapids. Trust me, you get crushed in New York. Hey, you use a car broker. You don't even negotiate. You just have someone out there for you. Yeah, because I can't. I got destroyed. Speaking of cars, when I was in California last week, I sent you a picture of me and Chris. We used a company called Turo, which is like Airbnb for cars, which is awesome. You learned about that one from your idea you had, right? Huh? You asked, you said, I've got this great idea. Oh, that's right. And so someone told us about that company. So you used it. And your middle-aged transformation was complete.

38:05You were driving a convertible with a Hawaiian shirt on. And middle-aged is here. Wonderful service. It was like probably cheaper than Hertz and a much wider selection. And you don't have to wait at the airport. Yeah, it was really good. But it was all like higher end cars? No, not at all. Oh, oh, not at all. Okay. You could spend, I don't want, I don't know how low it goes, but no, it's not high end at all. It's all over the place. Yeah, car rentals is the kind of business where I don't think you ever have a really good experience at one of the chain places. Oh, okay. I was about to say, I had a great experience.

38:37It's T-U-R-O if you're traveling. All right. I got, just before we started, I got an email from Rocket Money saying that my subscription increase for Amazon Kindle Unlimited. Guess what? I didn't even know that I paid for Amazon Kindle Unlimited. How about that? So it went up. Hi, Michael, you just charged$11.99 by Amazon Kindle Unlimited. This is a price increase of$2. Well, good to know. I'm going to cancel this because I don't read and I definitely don't read on the Kindle. How much of a bear market is your reading in these days? Like all the way. I actually got a book. The author is Jack Carr and it's like an ex-Navy SEAL writing a fiction book.

39:18And I thought to myself, you know what? Maybe this is the gateway. Maybe this is how I get back into reading. Because - Fiction. It's fiction. When I start, the first book that I read on my reading journey, it was 2008. And I remember, because I remember where I was. And I was in an airport and I picked up The Pelican Brief, John Grisham. And I had so much fun reading that book. And I said, you know what? I should do more of this. So maybe, and then that led to a multi-year bull market in my reading. I used to trade books all the time. I only read fiction now. I did get an early copy. William Bernstein has a new edition of The Four Pillars of Investing coming out.

40:03I got an early copy of it. And I'm excited about that because he's my all-time favorite finance writer. So I've had this book on my desk for a long time. Price of Time? The Price of Time by Edward Chancellor. He wrote Devil Takes the Hindmost. Oh, that's the interest rate book, right? It's about the real story of interest. And I really want to read it. Like, I really want to, but how? When do I read this? It's 300 pages on interest rates. I did too many podcasts to read. Yeah. Anyway, just my point is, I don't even pay for Rocket Money, but it's a hell of a service. So it was nice to get the...

40:39I have to sign up for it. They emailed me about this. And they said they're going to give me a free shot at Rocket Money, and I haven't done it yet. Give me a free shot. Oh, wait a minute. Oh, because you still use a spreadsheet like an absolute clown? I mentioned I use Excel still, and Rocket Money reached out and said, hey, give us a try. We'll give you a free try at it. I don't even understand what you mean. When you say you use a spreadsheet, you're talking about big stuff. You don't track your subscriptions, obviously, right? No, but yeah, all my big monthly recurring bills, I have them in there.

41:08And I have a system. Don't worry about it. All right. Last week we talked, you just mentioned Netflix. A good one from Lucas Shaw at Bloomberg. He's the guy who's always on Matt Bellany's podcast, The Town. They're great. So he shows Netflix versus Paramount, Disney and Fox and then Warner Brothers. And he said net income at the largest U.S. entertainment company has declined by more than 60 percent over the last decade. Basically, these companies trying to chase Netflix and get that Netflix multiple that was never going to happen. they've just decimated themselves. Like the profits they're making in 2013 and obviously a lot of it is the movie industry has changed a lot.

41:43I think, I mean, movies really are dead. I was predicting this throughout the pandemic. I think movies are just like top gun. Movies are not dead. Movies are not dead. Movies are not dead. Movies are so, the movie theater is dead, man. It's not dead. It's not doing good. It's on life support. I would say it's in critical condition. Maybe stabilizing. You're like personally trying to keep it going, but it's, no one went inside. Indiana Jones, I think, bombed this week. It's at$60 million. I think that's great. Oh, and speaking of, so this is one of my investments that has not worked out. Disney, which I asked a few weeks ago, is this just a value trap?

42:18Me too. Guess what I did? Guess what I did? I bought more. I told you I bought more. Double down? I feel like, because this is like multi-year support right here. But here's the other thing. If it breaks, I don't even know if I'm going to sell. I feel like it's too late to sell. doesn't someone have to come buy them eventually i don't know i'm not banking on that i don't know about that if i wanted to feel like i wanted to sound really smart i'd say if we did some of the parts valuation here i don't know what that means i don't i wouldn't actually i don't know how to do that but if i did it sounds intelligent listen this is this is like maybe keeping it too simple just not overthinking it disney has a lot of problems right like everyone they're well documented.

42:58You're starting to see analysts downgrades. The stock is in a 60 % drawdown. Do you not think we know? And sorry, if I could buy one of the best brands of all time here, you know, it's just a complete washout. So getting back to the expectations thing. Yeah. Josh sent us last week on Slack, one of the analysts said we're downgrading Disney and upgrading Netflix. Yeah. Oh, great. Thanks. Thanks now. But I think that's the thing is like the expectations that are built into Disney are so, so low right now, that's your upside. Yeah. Yeah. They're in trouble. I know. You would hope. I know in the market knows.

43:31We all know. We all know. Tough business. All right. Real quick. There was a, I don't know where I saw this, but number of annual US pedestrian fatalities. This is the United States. Pretty horrifying. It is at the highest level it's been since 1980. It went from 8 ,000 to 4 ,000 and back to 8 ,000. Look at the next chart. U.S. pedestrian fatalities, deaths of people walking surged 19 % in just three years. Is this people on their cell phones? Well, but here's - On their cars? Yeah, but here, so they show you like states where it's most common and - Michigan just put a new law in that went in, Michigan has a new law this week that went into effect that you can't look at your phone while you're driving.

44:09Good. It's a$200 ticket if you get, exactly. But, but, but, so that was the most common response, but they compared it with other countries and were way higher than everyone else. And guess what? it. There's not just cell phones in the United States. So I don't know what's going on, but I've become, since I saw this, I'm much more cognizant of it because I looked at my phone all the time when I'm walking and it's dangerous, especially in New York. Yeah. That's a New York thing. I don't know how people don't get hit more in New York with the way that people just fly through those intersections and the cabs and sticking out.

44:37And you know what I did this weekend? I did my annual power washing routine. And I got to tell you something. I love... Power washing is a great dad experience. Yeah, it's so much fun. I love an activity where it requires your full dedication. So for example, I wouldn't say I love doing the dishes, that makes no sense, but I like doing the dishes and cutting vegetables only because you're not on your phone. Sure, I listen to a podcast, but you're not doing a million things, you're doing two things. With a power washer, you can only do one thing. It's too loud, so you can't listen to music. You have a task.

45:16You get the shit off your house, off the fences. I love it. It gives me a ton of joy. The other great thing about power washing is that you see the start and the end. I did one of those college painting crews in the summer when I was in college for a couple of years. And the greatest thing about - Wait, wait, wait, wait, wait. A what? A house painter. You've seen those college pro house painters. It's a bunch of college kids who run their own business, and they charge way less because they're probably bad at it. So it was me and a bunch of college buddies that were on a painting crew, and we painted the outside of houses all summer.

45:47And the best thing about that, yeah, I learned how to paint, actually. The best thing about that was is, like, you see your progress. It's right there for you to know how much you've got done, and it's, like, at the end of the day, you see how much you've done, and, like, it kind of is, like, fulfilling. Incredibly fulfilling. That's what I like about it. All right, I've got a fireworks take. So the fireworks were going, we're recording this on Monday morning because we're not going to record it on 4th of July. What are we, maniacs? And people are starting to light off fireworks already last night.

46:12I've done the whole spiel before about how I hate fireworks because it wakes my kids up and it's bad for dogs and all this thing. Here's my other fireworks take. A fireworks show, you know, the towns and municipalities and stuff put on? Those are the same. Those fireworks have not improved for like 30 years. I feel like it's literally the same show every year. And so if you've seen one, you've seen them all. But the firework improvement for regular people, the dumbass who lives down the street or next door to you, those are up like 10 times bigger and better. so we've given idiots the ability to do huge firework shows out of their driveway and like shoot off these like it's like a war zone but the regular ones they're still the same is there a crypto etf analogy coming i don't i just i don't maybe i don't get like i just don't get fireworks i feel like if you've seen one show you've seen them all and i just don't the the downside of lighting off these huge mortar shells versus the upside is just, it's the worst investment opportunity there is.

47:13Well, I agree with you. I agree with you. I don't know that I would be - I'm sounding like an old man here. I don't care. But I do enjoy, I'm on the complete other side of, as far as, I love fireworks. I enjoy it. I like seeing the kids' eyes light up. I like seeing my eyes light up. I just love it. I think they're pretty and festive. They're too loud. They're too loud. Ah, man, you are sounding very old man-y. My dog hates him, and I feel bad for her. We need to. Duncan's with me. Duncan's with me. It's just, it sounds like you're in a war zone. The ones that they sell to people for their house now.

47:42All right, we get it. You don't like fireworks. You don't like fireworks. All right. Overrated. I watched, what did I watch? I didn't see anything good on the airplane. In fact, I think I saw something really bad. Oh, I rewatched Blood Diamond. Not rewatchable. I rewatched it too. It was on the rewatchables. And I saw Blood Diamond in the theater. What year did that come out? and I just feel like I liked that movie oh I loved it oh 2006 no I really liked that movie a lot it's just one of those movies that's so it's just such a it gives you such a visceral reaction I don't need to rewatch it I remembered it vividly a lot of downer movies it's hard to read they're not rewatchable yeah I remembered it vividly that's why comedies are so much more rewatchable so The Mule movie stunk is that the Clint Eastwood one?

48:28it stunk relative to what it could have been yeah it was bad wasn't Bradley Cooper in that too? So Bradley Cooper and Lawrence Fishburne are the cops tracking him down. Yeah, it's a bad movie. I don't know. It's just weird. It feels like there was some really bad editing done or the story was incomplete. It just doesn't feel like one of his movies. Yeah, it stunk. It was watchable, but it was not good. I mean, the guy's like 85 years old, isn't he? Yeah. Those are no excuses. All right. I don't remember what your feelings were on The Bear season one. Did you watch it? Like it? I don't remember.

48:56So I did not like - You weren't on board. I did not like season one. However, I'm like a huge outlier and whatever. It just didn't resonate with me, but I'm excited for season two because you and everyone else seems to really love it. So I will watch it. I was pounding the table on season one. I said it was the best new show of last year. And I thought like I thought it could have been a one season show. Like the way they ended it, it was like it was it was an amazing ending last. And I'm like, I don't know what they're going to do for a second season. It's going to be weird. And I think it like not hyperbole.

49:25I think it was one of the best seasons of television I've ever watched. Like the first two or three episodes were kind of the same as last year. And it's like, okay, they're sitting on the same beats. And then the second half of the season, they have a Christmas episode that was just a murderer's row of cameos. It's like, well, that person's in it. Holy crap. And that, that it was like an hour long episode. It could have been a movie. And then the next episode after that, that episode was just like on fire. It was amazing. The next episode after that was even better. The cousin Richie, I love, uh, he has a line.

49:55He's talking to his five-year-old daughter and he says, honey I love you I'll see you later he's dropping dropping her off at the mothers because they're divorced and he says honey I just want you to know I love Taylor Swift too but I just needed a break and I said that exact same line I swear to my daughters in the last weeks because they've just been on a Taylor Swift kick and it just I I don't want to like I don't want to oversell it because someone's going to watch and say oh what are you talking about but for me this this is my favorite show I've seen in a long long time and it kind of feels like it could have been a movie because it's just like these short, 300 episodes, but I'm pounding the table on this one.

50:29If you're a Ben recommendations person, I couldn't believe like this show went up another level that was just like, I don't know. It was awesome. So you liked it. I freaking love the last five episodes of the season were just on fire. It was all right. I will definitely watch. All right. And I don't know. I don't know if it's a Michael show, but the thing is the thing that you get out of thrillers like this is a very chaotic show, like the cooking stuff. I think the thing that you like out of the horror movies that like makes you feel uncomfortable, like this show has moments where it really makes you feel uncomfortable.

51:01And I kind of like that part of it. Okay. All right. By the time you're listening to this, you will have hopefully enjoyed a very nice 4th of July with all the great fireworks and other things that this country does so well. Hey, I'm fine with sparklers. We're going to do sparklers. But I don't need a bazooka in my backyard. Quick plug. Josh and I, when we were in St. Petersburg, did an episode with this incredible guy who was, I think he was a Navy SEAL or Green Beret, I can't remember, but he now owns a distillery. And the bourbon is called Horse Soldier Bourbon. And it's incredible. We did an interview with him and Cheryl Penny about just his experience and entrepreneurship.

51:49And it was exciting. That guy was amazing. So check that out. The people who have gone through those programs and have served, like those people blow me away. I think those people are 10 times more impressive than any CEO or entrepreneur. So they made a movie about this guy's battalion. And what's his name? Chris Helmsworth was the leading man. So these dudes literally, they took Afghanistan via horseback. Badass. Literally at horses. Yeah, totally. All right. Hey, wait, one more plug. Yep, please. Chris Hutchins, Talk Your Book. Oh, yeah, yeah. That was great. Up on Monday, too. All about credit cards and credit card awards.

52:28Michael learned what Google Flights was, which was great. I learned a ton in that. Yeah. So if you're a big life hack person, credit cards, Chris is very well educated in this and very well versed, and it was a good one, too. All right. AnimalSpiritsPod at gmail.com. Thank you for listening. Happy Fourth, and we'll see you next time.

52:51Don't go.