Never Pay Off Your Mortgage (EP. 436)

26:44Oh, wait a minute. Hang on. You read this whole piece. I did too. You didn't come away thinking, okay, this is a bubble. When you look at all these charts, a CapEx bubble, there's no way you could read this piece and not come away thinking, yeah, this is a CapEx bubble. Come on, what are we doing here? Of course it is. It's different this time. No, it is a CapEx bubble. Yeah, they're spending a lot of money. It is a CapEx bubble. That's a great grand up at its head, though, right? CapEx bubble. Yeah, no, it's not a price bubble. What? No. All right, so he looked at the CapEx as a percentage of GDP for railroads, internet, and AI.

27:21And this has been done before. But what Kai did that is so interesting is he depreciation adjusted it. So these data centers, they go. Like they need constant maintenance. They depreciate it. It's hardware. Right. You put the railroad tracks down. They're there for a long time. Right. Right. Exactly. So when you depreciation adjust it, you get one of these. I don't make it a cringe face for people that are listening. Yeah. No, it's high. It's a lot. And the thing, so he did point out, which I love, that these companies, the Mag 7, are so much better than everything else. And I know we all know that.

28:04Nobody's disagreeing with that. That's why Nvidia's$4 trillion and Apple's$4 trillion. These are literally the best companies that we've ever seen, ever. All right, but he breaks it down like this. Return on invested capital, which is like the metric of metrics, right? How much money do you make per incremental dollar of spending on all of your investments within the business? That's it. That's it. And the MAG-7 are at 22.5%. I don't think there's ever been anything like this in the history of business at this size. Because it was all capital intensive before. The S &P 493 is at 6%. Return on equity, 30 versus 13.

28:45Free cash flow margin, 16 versus 9. Now, Kai says, again, justified. These were incredible asset light, high margin, wide moats, all the things. But now - Hang on, before we get to this. So he says, since 2015, the MAG7 is up 27.5 % per year, creating over$23 trillion of wealth for their shareholders. Unreal. Guess what? The fundamentals were pretty good. But now they are transitioning from asset light to asset heavy. And Kai looked at the history of these asset heavy versus asset light companies across time, within every sector. Right. Now they're investing in data centers. And these are real physical things, not just software.

29:29And companies that spend a ton do not perform nearly as well as their counterparts. And he did, of course, use one comparison to 2000 as you got to do it. He showed, is this Cisco or something else? What is this? Are these telecom stocks? Let's call it telecom stocks. So the thing is, they did grow. The promise was there. The fundamental growth. So their sales increased. at the peak from 2000, 1 ,030 % over the next 20 years. 1 ,030 % sales growth. The problem is the multiples contracted 85 % because the multiples were so insane that you got a total return of 16 % over that 20-year period with obviously a dramatic fall in between.

30:15I don't remember the exact numbers, but Microsoft and Balmer took over. He took over in like 2000 and Gates got out right at the right time. And the earnings growth for Microsoft was like massive. I think it was 15%. and the stock got crushed his whole tenure because of where it started. Now, the companies today do not have nearly the same insane multiples, okay? NVIDIA trading at whatever it is. I don't know if it's 35 times forward. It's not insane, okay? Now, if the multiple goes down to 26, yeah, you're going to feel it, but you're jumping out of the third story of a building instead of the 10th story like these stocks were back in the day.

30:49Yeah, so just some broken ankles. You'll be fine. That's it. The thing is, he puts the quotes in here from Zuckerberg and Larry Page about like, we're willing to go bankrupt rather than lose this race. What do these tech CEOs care if it's a bubble, if they're trying to create AGI or whatever? Like, why would they care? So what? I guess what's different, and I wasn't around during 2000, I don't know what the CEOs were saying, but they're being very clear about what they're going to do, what their plans are, and investors are saying, we're riding with you. Right. And how long, that's the thing. Now the question is, waiting for investors to say how long.

31:28And we're getting an earnings call. We get them all reporting this week. I'm sure at some point, maybe it's this one, maybe it's five years now, who knows. At some point, investors will say, buddy, you've been saying this for nine quarters. Show me the damn cash flow. All right, so good segue here. So did you listen to this part? I think this is the podcast of the year so far. I listened to this. I gotta be honest. I had never heard of this guy before. I listened to it. but it's so, Dwarkesh is the podcast. Did you listen to any of this? Did you put it in Chad TPT at least? No. Okay, it's a two and a half hour podcast, all about AI.

32:03And this Andre Karpathy, Karpathy, I don't know how to say his name. He was one of the founders of OpenAI. He led Tesla's AI division. Now he does some other educational AI thing. I've got to be honest, I didn't understand 65 % of what he was saying, but the stuff I did understand kind of blew my mind and it was fascinating. I gobbled this thing up in a two and a half hour podcast in one day. here's a few of the things I pulled out here, okay? Now, this is really good. So his whole point is AI isn't going to supercharge GDP growth. It'll just keep us on the same trajectory. He's like, listen, just like the internet and email and all these things that came about and automation kept this long-term 2 % trend line, that's what AI is going to do.

32:42It's just going to keep us on. It's a step of that automation in the same direction. So he's like, it's not this leap forward, this huge leap higher. it's just going to keep us on the same trajectory. Now, without AI, maybe that trajectory flattens out. But with it, that's his expectation. He said, listen, I can't predict the future, but that's my sense. So he says, with AI, we're going to see the exact same thing. It's just more automation. It allows us to write different kinds of programs that we couldn't before, but AI is still fundamentally a program. It's a new kind of computer and a new kind of computing system, but it has all these problems.

33:15It's going to diffuse over time and it's still going to add up to the same exponential. We're going to have the same exponential that's going to go extremely vertical. It's going to be very foreign to live in that kind of environment. He also, he was like pouring some cold water on this, but also saying like, this is going to be amazing. It's just not going to happen as, and the way he explained LLM's AI was really interesting. He said like, we would love to be able to create an AI that's like an animal. Like a zebra comes out of the womb or a horse and it can walk immediately. Because, and he's like, we can't recreate that.

33:42And LLM is like a ghost is how he explained it. Like that's how they view it when they're trying to like build these things. and he says AGI, which he thinks is like a decade away, which is kind of funny. People were kind of like, oh, really? A decade away? That seems way too long. It's like you're creating like, some people say God in a box. Like, oh no, we have to wait 10 years for it. But he says, he put a little cold water on that too. He said, some people feel like this assumption, we have God in a box and now it can do everything and it just won't look like that. It's gonna be able to do some of the things.

34:13It's gonna fail at some of the things. It's going to be gradually put into society and we'll end up with the same pattern. That is my prediction. This assumption of suddenly having a completely intelligent, fully flexible, fully general human in a box, and we can dispense it at arbitrary problems in society, I don't think that we will have this discrete change. I think we'll arrive at the same kind of gradual diffusion across the industry. Now, so this stuff all sounds like he's pouring cold water, right? But he's still saying like the stuff that's going to happen is going to be amazing. It's just not like, it's not world changing.

34:42Like people think it's going to be this total step up in everything is completely different. He says we're on the same trajectory. Thoughts? You got to listen to this. It was, it's really well done. I don't believe him. We already have self-driving cars. The robots are coming. The world is going to change. Now, if you're looking at a line of GDP growth and saying, did the world change? I don't know. I would suspect that you're going to see something, but maybe you don't. That's the thing. The internet did not change the trajectory of GDP. Okay. So maybe, so yeah, maybe, maybe, maybe, uh, maybe so.

35:20But I think that, I think that this is going to have radical transformations for our daily life for the way that we do a lot of things. I don't, I don't, by the way, I would say, I would assume that he would say that too. Yes. Yes. I just thought that it was a very balanced. It was one of the more balanced looks I've heard from a guy. Again, I'd never heard of before I listened to this podcast. So take that for what you will. but I thought it was just the way that he explained how AI works. And he's like, listen, we're just, we're pulling this stuff from the internet. It's not like, it's not magic, right?

35:51The information where it's, you know, garbage in, garbage out in a lot of ways. It's amazing that we can do some of these things, but he just said like people need to temper their expectations a little bit and it's still going to be amazing. And that's why, again, I think like we could see the, some sort of washout and it'd be a wonderful buying opportunity because this stuff happens later. Is this a Silicon Valley hedge? Like, what do you, what do you call, how do you describe what he was just saying? Yes. I think sometimes in Silicon Valley, the, the euphoria and the, can you imagine what the future is going to be like, gets a little too ahead of itself.

36:23And so I think that you're right. That was a little bit of like, just everyone pump your brakes just a little bit. Well, he wasn't saying certainly you could say like, Hey, listen, private investors, maybe don't give this unproven company with no revenue an$8 billion market cap. Like, sure, yeah, I would agree. So anyway, it's worth your time to listen. All right, speaking of AI, so Stitch Fix, I'm still a client of. I don't think anyone else is because the stock, gosh, it crashed like 90%. I'm so glad. I bought this thing in the meme stock mania after the CEO was on Patrick's podcast. And I don't know, I made some money in it.

37:03And then she quit. And that was enough for me. Like, okay, the CEO quit. It was her vision. I'm out. And then the stock crashed like 90%. It's a typical meme stock. But I still use it. So once every two months, they send me a box of clothing or shoes or jackets. Do they like recycle the brands? Or like, are you familiar with the brands that they use? A lot of them have been newer brands to me. And I'll say, I'll write a note. Hey, and probably it is AI at this point, but I'll write a note and say, hey, I'd love a new jacket. I'd love some new joggers. It's fall. I want a hooded sweatshirt. and then I pick and choose what I want and then I send back the rest.

37:35And it's gotten me a lot of new clothing I never would have gotten before. Wait, do you not shop on Instagram? Not really, no. I don't go to Instagram that much for whatever reason. I probably should. It's probably better for me than Twitter. But anyway, they have this new AI thing, Stitch Fix, where you upload a picture of your face and a picture of your body. And then it allows you to see what clothes would look like on you. So I uploaded the pictures of what they put of me in here. Are these both fake or is the one that left you? No, they're actually not me. Come on. I've got a better build than that.

38:04It looks like I skipped leg day. The one on the left does look like you. I mean, the one on the right looks like you too, but. It kind of, well, again, I uploaded a picture of my actual body, so they had something to go off of. The one on the right is obviously not me. But yeah, you're right. The one on the left, it kind of looks like me. I mean, dude, it looks just like you. Ray-Ban has this feature too, where you can, you can like, they hold the camera up to your face and you could like put the glasses on and you can look around. It's pretty cool. Right. So anyway, I thought it was kind of – I did this in 10 seconds.

38:34Yeah, I don't know. And then it took – I don't know if this will change the GDP, but it's pretty cool. All right. JP Morgan plans to allow institutional clients to use their holdings of Bitcoin and Ether as collateral for loans by the end of the year and a significant deepening of Wall Street's crypto integration. That's a report from Bloomberg. This is the stuff that got crypto in trouble a few years ago, right? Obviously, the borrowing against. No, no, no. Hold on. That was investors borrowing against and loaning and all that sort of stuff. I think that this is maybe less for that cowboy shit and maybe more for less insane margin.

39:15Yeah, like a portfolio marginal, like a typical one. But yeah, that's what I'm saying. That's a step in the right direction versus the cowboy stuff. This surprised me in the story. Morgan Stanley plans to allow customers on its E-Trade retail platform to access popular cryptocurrencies beginning in the first half of next year. They're still not... If you're a Morgan Stanley client on E-Trade, you can't buy crypto. I got to be honest. I didn't know E-Trade still existed. Yeah, Morgan bought it. But I didn't know they still even... I thought they just kind of consumed it. I didn't know that people actually still used it.

39:47So it's just Morgan Stanley customers, obviously. That is a little surprising. Well, I guess... No, I don't know. I honestly don't know what they're talking about because I think if you are an E-Trade customer, technically you are a Morgan Stanley customer because they own the product. But I don't know exactly what they're referring to, how they break it down. But anyway, Vanguard is coming too. There's some whispers that Vanguard's going to allow it on the platform. We'll see. All right. And an ETF or no? In the ETF, I believe. No, and are they going to do a Vanguard ETF? Oh, hell, I mean, I would be shocked.

40:20No, you know what? No. All right. On the crazy side of things, Punk9059 tweeted, remember, we spoke about this company a couple of months ago, ETHZilla. And we said that this is crazy. If you think, and I don't know if ETHZilla is this company, but there were companies that were reinventing themselves as crypto treasury companies where they're trying to transform a non-existing or shitty business into these treasury companies and that was going to work. Well, obviously, it's not working. Look at this chart of ETH Zilla. Shot up to like$100 on the announcement. Now it's down to$20. But the trouble is that they sold$40 million worth of ETH to fund stock buybacks.

41:05So yeah, it's not working. I have an update on MicroStrategy that I asked ChartKit to do a couple of weeks ago, but haven't gotten around to sharing the show. We'll do it next week. Let's just say that MicroStrategy... The stock is basically flat on the year. It's interesting. Flat on the year. So I think, I mean, I think there was a SPAC prior to, so I don't know what it was like in the beginning of the year. No, I'm talking about micro strategy. Oh. So Bitcoin's up 25 % or something, and micro strategy is up 2%. But if you look at micro strategy divided by BTC, it is at multi-year lows. So the spread is...

41:39It's not working. And I'm curious to listen to their earnings call and see what he has to say. All right. We are not seeing a pickup in activity in the real estate market, residential real estate. Neil Dutta said, despite the decline in mortgage rates, we've yet to see a pickup and purchase demand. Mortgage purchase application slid 3%. See, Neil Dutta's on Team Ben Carlson. Like last week, I said, because if you think about it, mortgage rates topped out at 8%. Now they're back down to 6%, and you're still not seeing a huge uptick in activity. I think it's got to be lower. I think that this reverses.

42:13Like, yes, I think that you are right. clearly it's not it's not showing the data that lower rates are having an impact yet um so i don't know if it takes rates breaking six percent on if there's a psychological number there but i do suspect that if rates go down a little bit more that you're going to see i honestly think we need i think we need lower housing prices i think that's the thing that's going to be more meaningful than lower mortgage rates maybe i'm wrong uh lance lambert had this thing where he looked at housing markets where the home prices are falling. And he said, among the 300 largest metro area housing markets, 105 markets saw home prices fall year over year between September 2024 and 2025.

42:55To me, this is a correction for ants. So the worst one is Punta Gorda, Florida, which my grandparents used to live there, actually. Nice little area. Anglewood Beach, very nice. Yeah. So there's two housing markets, both in Florida, where they're double digits. It's 12 and 10%. But you look at these other places, you're seeing home prices fall 3%, 4%, 5%, 6%. That's nothing, especially if you zoom out. It's nothing compared to the gains. So how about this? What if more activity, one of the reasons that we're not in all activity is because the price point is being held up. What if more activity actually led to a housing price decline?

43:34If there was more activity, then you'd see the true price of these that people are willing to buy at, and it's lower. Could be. What if more housing activity didn't lead to higher prices, but lower. Could they? Is that too galaxy brain? I think that's possible that it's the price thing. People are hung up on the prices. I don't know. That sounds too cute, but maybe. Maybe. All right. Let's talk about private markets. Ben, we spoke with Shonali Bassak last week from iCapital, had a very good, clean, spirited debate about what's going on in private markets. One of the stories that we didn't really get to was an article from the journal, Wall Street is pushing private assets into 401ks.

44:13We asked whether anyone wants them. I hear this a lot from people. When we talk about private investments on any of our stuff, a lot of advisors will say, none of my clients are asking for this. Yeah, I've said this. I've told the story multiple times. When we were at Future Proof last year in Colorado, I was hosting a talk and I said, show of hands, how many people are being asked about private marks from their clients? and everyone looked around and not a hand went up. Now, and I said like, is the private market, are we being gaslit by these asset managers? Now the answer is no, because the flows are there.

44:54Blackstone reported record flows. It's not not happening. I just think that it's coming more from the wires than the independents. That makes sense. And I think the independents that do have people who want it, it's the ultra high net worth. Yeah. It's people with call it 20 million and above or it's, it's, it's much higher level. Yeah. So it's definitely, again, it's definitely not nothing, but I think that the asset managers are maybe overestimating demand from the REAs. We'll see. But anyway, to this, to this, uh, survey, um, nearly 40 % of respondents reported never having heard of private credit funds.

45:28That actually sounds low. Like who has heard of private credit funds and like what normal people have. Yeah, that's true. Yes. If I asked my mom and dad or my in-laws, like how many of them would know what private credit fund is? Not, no, probably not. Yeah. They would say, what are you talking about? All right. So 45 % of respondents said, I am satisfied and have enough offerings. Another 45 % said, I am satisfied, but would like more mutual fund offerings and ETFs. And then 10 % said, I am dissatisfied with my 401k options. and what more. I'm surprised that number is not higher because there are a lot of crappy 401k plans out there.

46:04I haven't spent as much time here in that side of the business as I used to but we used to see a lot of shockingly shitty options. It's like, throw a target date fund in there or why is a target date fund 115 basis points? What's happening here? Yeah, I guess a lot of that stuff has been wrung out but there are still these tiny 401k plans that aren't that great but anyway, whether or not people are asking for it it's coming. All right. So here's... Yeah, but if people don't ask for it, it's coming, how... Who buys it? Is there only way in the backdoor through targeting funds? It's targeting funds.

46:42Yeah. I think the adoption is going to be slower than you think. Why are you putting dollars in my mouth? I didn't say anything about the adoption. I feel like you've been relatively paper bullish on this. Oh, I think it's... I'm bullish. It's coming. But I'm saying if the consumer pushes back and the RIA pushes back, you need an end investment. I don't – Just because it's offered doesn't mean it's going to be huge. Oh, yeah, yeah, no, no. Hold on. I'm not – I don't know that I'm super bullish on demand, but I think that if it gets its way into target date funds, then boom, game over. I don't think that you're going to have like individual investors be like, oh, where's my private credit?

47:17I don't see my private credit in this lineup. Like I don't think that's going to happen. Right. I wonder what that looks like. I guess if it's a 10 % allocation and the fees are really high, it's not going to push the total fees that they fund that much higher. I think that part of the good thing about them coming into this sacred world that nobody wants them to be in, and I'll say I don't think that they need to be there, but they are, and it's not my decision. I think more transparency is better, and it's going to bring down fees. Yeah, I agree. If it works, fees are going to come down. and it's going to bring out much more transparency with the underlying companies as well.

47:57Like you said, there was the two bankruptcies in private credit, and everyone was talking about them. You would have never heard of these companies otherwise. There's going to be more demand for information about these companies that they're investing in as well. Yeah, hopefully. So listen, do I want it? No, but am I hemming and hawing and saying that people aren't going to be able to retire because they were fed 10 % of private credit in their 401k? Come on. Yeah, but the thing is, baby boomers, so I guess to counter myself, I'm pulling a Michael right now. I'm arguing myself. Baby boomers who are retiring, who want to de-risk a little bit.

48:30Private credit is the easiest sale of any private asset class, bar none. It's way easier to sell than private equity, venture capital, infrastructure, whatever, hedge funds, because it's just yield and it's like a fixed, you just say, hey, listen, it's a bond fund that you can't get out of, but the yield is 10%. You think retiring baby boomers aren't going to sign up for that? That's the kind of thing. that maybe that's the end user. That's, that's where the biggest bang for your buck is. Of course, put 20 % of my portfolio in that 20 % in liquid bond funds, 60 in stocks. I'm good. Yeah. That's going to be a thing.

49:05Yeah. Okay. So I've been, um, I don't have harsh is too strong a word, but I've, I've called out the FT and other journalists that so desperately want there to be multiple cockroaches because it's juicy. It's salacious. And listen, I'm not, I mean, I get it. Um, however, I want to call out a report, uh, an article, what's up with private credit ratings by Toby Nagle from the FT. This is, uh, this is great work. And reading this article definitely makes you go, Hmm, wait a minute. So there was a thing that's happening in the private asset world where a lot of these giants are buying up insurance companies who are buying a hell of a lot of private credit.

49:48and you talk about the circular dealing that you see with OpenAI and all that sort of stuff, you're seeing a lot of that here. Now, I don't know that Asset Manager X is buying insurance company Y and insurance company Y is eating the private credits from Asset Manager X. I would imagine that there's some sort of Chinese wall there. This is not my universe, so I don't know, but I would imagine that's a faux pas. Okay. Anyway, insurance companies are buying a lot of private credit, especially in the US and Canada. Now, private credit is not all bad. There's a lot of different types of private credit.

50:27There's direct lending, which is, I think, the thing that most people are talking about. But there's commercial real estate lending. There are residential mortgages. There's asset-backed finance. There's infrastructure. So it's not like all, all, all direct lending. Okay. But this is the part. So from the article, As the IMF wrote in last week's Global Financial Stability Report, most insurers' exposure to private credit is classified as investment grade. But investment grade, according to who? Now, these insurance companies, even if they're owned by these asset managers, so highly regulated as they need to be.

51:00So investment grade, according to who? Mostly, it turns out, not according to Moody's, S &P, or Fitch. So check this chart out. the number of securities that Moody's, S &P, and Fitch collectively rated stayed pretty much flat between 2020 and 2023. But the total number of privately rated securities ballooned over that period. And it was the little guys that scooped up this business. Now, you might say, Michael, who gives a shit about the big three? Like, what did they do to protect investors in 2006? All right, fair. Fair, I suppose. Okay, back to the IMF. I'm sorry, back to the FT. Okay, this part is from the IMF.

51:42So insurers' search for private credit exposure, classified as investment grade, has changed the rating landscape of the United States. misclassification of below investment grade instruments into the investment grade bucket may result in default losses significantly exceeding those expected during an economic shock, leading to the erosion of insurers' capital and potentially causing liquidity gaps because of insufficient cash flow from the defaulted entities. Now, if there is like a systemic risk, a holy shit type of risk, where there's like a liquidity drain and like selling of illiquid stuff that can't be sold, I would say that maybe this is the part to keep your eye on.

52:22This is like a little, this definitely, there's smoke here. Now, I'm not saying there's a fire, but this definitely makes you go like, wait a minute. How about this? A lot of people are concerned about the circular nature of much of what's going on in the world right now. Like all the technology companies are investing in each other. Yeah, you hold my bag, I'll hold your bag. Let me your bag, I'll give it back to you. All the private equity managers and private credit managers are investing in these things. But to me, I think that's actually the right way to do it. Instead of going on an island and doing these things by yourself, if everyone is involved and it's a systemic risk, guess what?

52:53Someone's getting bailed out. I said this on TCAF the other day. That's what's going to happen. If these things all get big enough and they're all part of it, no one is going to let this stuff all go down. They're all too big. They'll shore each other up if there's one, right? Yeah, top me off. I'll get you on the next one. All right, but here's the last one. And look at this chart from the FDA. Seriously, credit to them. This is a great report. So they break it down. Obviously, not every insurance company has the same allocation. so they show the top 10 holders of private letter-rated bonds. So Global Atlantic, the insurer, 100 % owned by private equity group KKR, leads the pack with a quarter of its$100 billion portfolio carrying private letter ratings.

53:36Mass Mutual holds more than$50 billion. Other insurers like New York Life, now New York Life is not owned by one of these companies, New York Life had a measly 6.7 % of their bond book privately rated. This is good reporting. Okay, good stuff. I just think the biggest firms have realized, if we're all in this together, just like the tech firms, if one goes, we all go, and we'll be fine. I think that's actually the way. It sounds like a systemic risk, and it probably is, but I think it's actually good business. Okay. I think it makes sense. So we had a great question, and I apologize because I forgot to really give this too much thought.

54:16But it was this. If you were on a deserted island, which three earnings calls would you want to hear to help gauge how the US economy slash stock market was performing? Wait, yours would be Visa, MasterCard, and American Express. You love the credit card company. I mean, well, yeah, they do tell you about the consumer. Now, okay, this is a really good question. And I would say, like, I can nitpick and say, like, well, tell me where, like, are you talking about, like, in a normal time, in a period of like distress? What would I want to look to for like a leading indicator? Things getting better.

54:46So if you want to get, can I do mine first? Because if you want to get really broad and have everything covered, I would say JP Morgan for the finance side of things, Walmart for the consumer, Apple for high-end consumer. Yeah, not bad. That's a good list. So for the - That's the boring list. Well, it should be. For finances, I would have said Bank of America because they serve more of a main street. I mean, they serve everyone. uh jp mortgages a little bit of a higher clientele but splitting hairs um i also would have said amazon as opposed to walmart uh because they they touch more of the economy and then the third um you got to pick one of your credit card companies that's your favorite do you well i already got a financial bank of america i already got a financial um yeah i mean delta no no no so you know what's interesting about delta i was thinking about this.

55:40This is not a deep and this is not a hot take. It's just so obvious. One of the reasons why people are able to travel more with their families and Delta is doing what it's doing. I would love to know what percentage of family vacation flights are paid for with reward points. So we just booked our flights to Disney and they were whatever they cost a couple thousand dollars. Guess what? Paying with points is obviously a meaningful decision for almost every family that decides whether or not to take a trip. It's a huge amount of money. It does make it easier. Yeah, I have three kids. We're buying five tickets every time we fly.

56:32It's expensive. yeah i agree all right so what's the third company yeah i don't know i guess i guess well apple's no apple's like not really representative of the economy oh but it is for the stocker stock market oklo no we're good we're good tony all right uh a bunch of people sent us this there's a you gov study about horror movies uh saying uh horror movies have the small share of people who collectively like or love it as well as a large share of people who like or hate it so hate or dislike it. So I think the chart just shows that people, you either love horror movies or you hate them. It's a very extreme, everything else is kind of more down the middle.

57:09Well, yeah, nobody's like, yeah, I could take it or leave it. What do you mean? Horror is polarizing. You either love it or you hate it. Yeah, so a lot of people said, this is Ben and Michael. So that actually does make sense to me. But most people that don't like horror, like don't like it because it's too scary. The fact that you don't like it because it doesn't do anything, you don't feel anything, that's kind of psycho. You're kind of nuts. You know, this happens in my life sometimes. I feel like I blame investing. Like the whole point of it, everyone has been telling you to take your emotions.

57:37My wife always says like, why don't you show more emotion about this? Like show more enthusiasm or, and I'm just like a, I'm always, yeah. I don't know. I think that's the same thing with horror movies. It doesn't, the emotions I've stamped them out. I was thinking about back to my horror movie. I'm the tin man basically. Yeah, you are. Back to my horror movie list. So Kobe is turning nine. in February. I can't believe my dad took me to see In the Mouth of Madness when I was nine years old. That is so insane. Kobe watches... I've never heard of this movie. He only watches How to Train Your Dragon and whatever.

58:16In the Mouth of Madness? Dad, what are you, insane? I think you're going to take George to see Howard Boyd someday. He got into Beetlejuice this week because for some reason that came up after Tremors. and boy did he love Beetlejuice he already is watching the second one which just came out a couple years ago which was not very good so he's going to be big time into it he can't wait to watch horror movies there's a scene in the Mouth of Madness where Sam Neill is dreaming and he's on the couch and he looks over and there's like a guy with a monster looking face I don't know a dilapidated face and like he wakes up out of the dream and it's scary like that dream sequence is scary he snaps out of it he's sweating and then he looks over again and the guy's there again and it was a dream within a dream.

59:02Could you? I was nine.

59:07Anyway. No, I'm fine. It's totally fine. No big deal. All right. Last week, we were talking about like car repossessions and maybe making a little bit light of it. Like if you zoom out to 2019, it's where we were. Yeah, I want to take the other side of that. I mean, giving up your car, like you're having your car repossess. That's the last thing that you stop paying. Yeah, I agree. So it's increased quite a bit, but we're back to 2019 levels there again too, which was high historically. But who can't, but it's still pretty elevated and compared to a couple of years ago, like it's just, and also if you think about, all right, I know we throw around numbers a lot and it's like they lose context because they're so big.

59:491.73 million cars that people had to let go. How many cars are on the road? Doesn't matter. I'm zooming in. Oh, you're zooming in. Okay. No, I'm just saying that's crazy. So there's 300 million registered cars. So that's what? 0.4 % of the total? I'm just zooming in. I'm just saying like on a human level, that's insane. I agree. All right, Ben, this guy said like, Ben, you think you're good with credit card rewards? holding my beer. Okay. Tell me if Ben could do better than this. My family just grew with our second baby last month. They traded in a RAV4 Prime for a used 2023 Honda Odyssey. Good choice.

1:00:38After trading, it cost 22K. I paid 5K using my Robinhood card for 3 % cash back and finance the rest. You with them so far? All right. Yep. Here's the twist. I opened a regular auto loan at 5.29 % APR. I'm opening a Wells Fargo reflect car with 0 % APR for 21 months and a 5 % fee for balance transfer. I will pay off the auto loan. I'll pay the minimum each month while putting what I would have paid toward the car loan into Marcus CDs around 4%. I'll close them before the 21 month period, then pay off the balance. I roll part into another 0 % offer. This is like the Zach Galifianakis meme. Even without a car purchase, all right, whatever.

1:01:20How much money is this person saving? Is there any juice here? Probably not a lot. But honestly, for people who do this, go down this rabbit hole for them, it's more the game within the game than it is like, because it'll probably be like, I don't know. With the interest that they're making over 21 months and the interest they're saving, it'll probably be$500. All right. Well, guess what? It's a personality type. My uncle was a huge coupon guy. I can't throw shade. I would have done something like this. Would physically take coupons. I'm sure he still does to the grocery store. And he was just like, oh, this guy.

1:01:51He was at this guy at the grocery store. Like everybody knew him. And so it's a personality type. So that helps explain this tweet that went viral over the weekend. Somebody tweeted, the only good mortgage is a paid off one. Our biggest monthly expense is gone. And they showed, and I'm sure that they knew that this is going to kick the hornet's nest. The rate was 2.625%. Now, objectively, this is a bad or this is a subpar financial decision, objectively. I mean, if nothing else, there's a spread between what you get in risk-free bonds versus 2.6, 2.5%. However, and people got all up in arms. It's like, guys, we know.

1:02:31He knows. He understands what he's doing. He understands that there are better uses of money. But it doesn't matter because there are people who are debt averse regardless of the interest rate. And can't you understand their point of view, even if you disagree with it? This person feels good about not carrying a mortgage, not about having his biggest monthly expense gone. And I'm sure he's fine. Otherwise, I'm sure he's got plenty of assets. So this is not a, this is not a financial decision. It's a personal finance decision. Listen, I'm of the opinion that there is no black and white personal finance.

1:03:03There's only gray. This is black or white. This is a, this is an insane decision. No, it's not insane. It's the inflation rate is 3 % right now. You can get 4 % in treasuries. I don't care how you feel about debt. This is an insane decision. No, it's not insane. It's not insane. It is a bad mathematical financial decision, but the psychological hurdle or benefit of not having to pay - Sometimes you have to take the behavioral stuff out of it. No, no, no. Listen, we all are in tune with behavioral psychology now. It's a big thing. Sometimes you have to take it out of the equation. Sometimes it's not worth the behavioral psychology, and you have to just eat your feelings.

1:03:39All right, how about this? How about this? Let's say that it's his mortgage is$3 ,000 a month. Okay? And this person, so you're saying, well, the spread between - What's safer? Having your mortgage paid off or having 200 grand in the bank? No, no, no, listen. Which one's safer? Hold on. But now you're talking extremes. If you're saying the mortgage payment is$36 ,000 a year, and you're saying that you could capture the spread between 2.625 and 3.75, 1 % on$36 ,000. Who gives a shit? It's effectively$0 for this person. But what's more, he's putting all of his money in this illiquid asset. What's safer, I'm saying, having that liquid cash or an illiquid asset?

1:04:21Oh, I get it. But I'm sure that this person has their finances in order and there are other liquid assets. Yeah, and it's still a bad decision. That's where I fall. For the general investor, for the average person, and somebody said to you, hey, listen, I've got this 2.625 % mortgage, and I know it's a good rate, but I just don't like paying the monthly rate. I'd rather pay it off. All else equal for everybody, you say, no, no, no, don't do that. Don't do that. Don't do that. Like, just don't do that. 100 % of the time, never pay it off. Yeah. Never. But for somebody whose handle is Barbell Financial, I'm sure they're making the right decision for them.

1:04:57And it's still a wrong decision. Okay. That's where I fall. All right. Last week on Netflix's earnings report, they said that the quote, so engagement remains healthy. We achieved record share of TV time in Q3 in both the US and the UK. Yes, sure. That is factually true. But if you look at the share of US streaming time, Netflix is getting smoked by YouTube. There's no other way to put it. honestly we asked this before when's the last time netflix had a good show a good show hard to come up when you say good do you mean like a hbo type good i mean they had adolescence this year people pointed to i didn't care for as much as other people but they haven't had like a show this in the last i'd say two years that it's been like whoa this is a water cooler show they haven't had anything have they ever i mean house of cards was but squid game.

1:05:56They've had a square game. That's true. That's true. Okay. You know, so this morning, my puppy woke up at five o 'clock and which she never does, but she was pawing at the door. So I let her out and went downstairs on the couch and I couldn't, I was, I was up. So I turned on Netflix and I see this number one movie and I had never heard of it. And the cover is an actor that I like. The movie is called House of Dynamite. House of Dynamite. So I Google it. Woo. Catherine Bigelow. Catherine Bigelow did Heart Locker, Zero Dog 30, Point Break. I said, holy shit. First of all, when did that drop? Did that drop yesterday?

1:06:40Friday, I think. Oh, Friday. Okay. Anyway, a lot of fun. Did you watch it? I didn't watch it yet. All right. You're into it? So it is a missile movie. Missiles are in the air and holy shit, what's happening? end. It's good. Didn't finish it, but it's good. Anyway. I heard the ending sucks. You heard the ending sucks? Yeah. Why would you hear the, how would you hear that? Why would you hear that? Why would you ruin it for me and the listeners? Maybe I'm lowering your expectations for the, maybe the ending will be better than you think. Wait a minute. How did you hear it sucks? You read spoilers?

1:07:17What's wrong with you? I raw dog everything. I just saw a bunch of people say, hey, watch House of Dynamite. Ending sucks. Okay. All right. Thank you. I saw multiple people say that. That's all. So this is a big deal, a big, big deal in the world of streaming. Taylor Sheridan of Yellowstone, Lioness. What else did he do? The Billy Bob one, Landman. Tulsa King, Landman, Mayor of Kingston. So the biggest TV show creator in the world is leaving Paramount. Now, this is a weird story because his deal with the studio, the movie deal, is up at the end of this year, but his TV deal goes through 2028. You know, he did Sicario too.

1:07:53He should go back to movies. And he did Wind River, I think, with Jeremy Renner that was going. But his deal with Paramount, the TV studio, is through 2028. And me, you and Josh were talking about this, and you guys have the right take. Credit to David Ellison for selling all the way at the top. I mean, by 2028, how much more juice is this guy going to have left? Right. He's got to run out of ideas eventually. So anyway. And NBCUniversal probably gave him a giant bag of money. You're paying a 50X caperation for Terrell Sheridan right now. Big mistake. All right. When did Halloween decorations become a thing?

1:08:30Because when I was growing up, sure, there were some decorations, but the Wall Street Journal has this thing. Pumpkin scapers are making a killing. As fervor for the season reaches new heights, families are paying north of$1 ,000 to create Instagram-perfect tableaus for porches and front yards. I feel like the Halloween decorations have gone crazy. And I have a take. I think it's all millennials. I think this is a millennial thing. I don't, there was some people who would decorate for Halloween, but now it's, it's, it's a, it's almost like Christmas levels. Do you do, you don't do it, do you? No, I mean, we have a couple of pumpkins.

1:09:01We carved pumpkins last night. I did pretty good last night. We had a whole toolkit of pumpkins. I'm like Billy the Butcher here pulling stuff out. I'm a horrible carver. Horrible carver. It's hard. My hands, I had like carpal tunnel today, but we did, what's the name of it for Christmas? We did a guy like that. Jack Skellington. Yeah, it was very hard it took forever looks good though good for you kids are happy alright so I got a lot of emails wait are you a Halloween decorator? Robin always always gets the same stuff like a bale of hay and some pumpkins but not like the giant skeletons and the blow up inflatables we're not weirdos no offense to anybody that does that actually you know what I'll take that back no I'll take it back how about that actually actually I appreciate I think it's odd but I do appreciate the people that do it because my kids love it.

1:09:47So if you are - Oh, my kids do too, but it's never going to be our house. If you are entertaining the community, you're not weird. You're a good citizen. Good for you. Okay. Oh, I got a lot of emails about my extenders. So apparently, my thing was all f***ed up. Verizon came in here and I was like not paying attention to when they were here. I think I was doing a podcast or whatever I was doing. I was on a call, who knows? And so we got, they came with Eros, okay? That wasn't working. then I bought the Verizon extenders and that definitely didn't work. And the whole reason why I had Geek Squad come the other day, my Eros weren't plugged in.

1:10:22Can you believe it? Is that on you or on them? So Verizon labeled, all right, so there was a Verizon 2.4G network, a Verizon 5G network, and a Verizon 4. Turns out the Verizon 4 was just the name that the Verizon dude gave to the Ero network. He labeled the Verizon 4 and I wasn't paying attention or I didn't let, I don't know. So I'm like, Why did he label it Eero? So I knew that it wasn't a Verizon network. Everything should be on the Eero. Except now I thought I had three networks. Anyway, we're good. I just have to plug it in and connect everything to the Verizon 4, which is not Verizon. That sounds like it's 90 % on you.

1:10:58Very frustrating. Probably was. All right. Okay. All right. I listened to American Prometheus. I didn't much care for Oppenheimer, the movie. And I think it was - I loved it. It was too long. I read the book after I saw the movie. Sorry. You read the book after you, oh, me too. So I think it was a combination of hand up. It was too long for me, and I might have taken more edibles than was appropriate. Okay? Three hour movie, edibles, you're an idiot. My bad. Yeah, you gotta really turn the crank up on Oppenheimer. Why would you not get an edible for Oppenheimer? Because somebody said, do you want an edible?

1:11:39And I said, yes. Simple as that. I wasn't planning on it. Just happened, Ben. All right. So the book was amazing. Not to be that guy, but the book was great. And it made me think about Dan Wang's breakneck analogy of engineers versus lawyers. The fact that Oppenheimer's life, he was ostracized and vilified and tormented and destroyed about him having ties or political affiliations or friends within the Communist Party is mental, right? Like he should have been the most celebrated or I know people have mixed feelings, obviously, understandably, but he was, and he wasn't vilified because like he created the bomb.

1:12:26It was like he was leaking information allegedly, which I think, I don't think he was. And if this was, you know, in China, he would have been a hero. The sad thing is, is that he was a scientist and he was building real things. and today he would work on Silicon Valley and work in software. Yeah. Right? Which is kind of sad when you think about it. Like that's, you go to where the money is and I understand that decision, but there aren't enough people who are building things in the physical world anymore. So I - That's the whole point of the Dan Wang book. I did rewatch Oppenheimer and it took me two and a half sittings because it is so long and I naturally enjoyed it much better the second time.

1:13:05Okay. No edibles held. I think Emily Blunt, I think Emily Blunt is fantastic in that movie too. But she has such a small role. So Kitty Oppenheimer was a big, big, big character in the book. Obviously, it's his wife. And she was, by the way, they like to drink. Wow. Yes. People, but I think there was just nothing else to do. So people just drank. All they did was drink martinis. Maybe that's so maybe the whole thing about young people not drinking as much today is not as much about being health conscious and such, because let's be honest, this whole country is not very health conscious. Maybe it's just there's more to do now.

1:13:33And back in the day, like what else were you going to do besides drink? Yeah. Right. Okay. we started watching Nobody Wants This season two that's the Adam Brody Kristen what's her name Kristen Bell show it's cute I don't watch it Robin watches it with that but it's cute it's not as good as the first season but it's still having a romantic comedy in my life that like I love the Jonah guy from Veep that's in it the tall dude I did catch the one scene in the first season where one of them is texting about how annoying the brother is or how dumb or whatever and it's like through the car play Yes, it reads back.

1:14:10Yes. The first season was better than the second season, but it's an entertaining turn-your-mind-off show that you can laugh about occasionally. And there's a succession reunion, too. What's Kendall's friend's name? Oh, I know that guy. Yeah. Okay. He's in it, and Will is in it, too. So anyway, not a bad show. We need another succession. That's never happening. It's like saying we need another Apple. There's not going to be another succession. Come on. Succession like show. Okay. Just like a great show that everybody is all in on. I think like two million people watched it every week. I know. But our audience was all in on it.

1:14:51True. All right. Animal Spirits at the compound news dot com. Thanks for listening. Emailing. What else we got? Anything? Blog? No. All right. See you next time.

1:15:08Good girl.