The 3 Levels of Wealth (EP.302)

22:35Everything's going to be tokenized. Nevada Casino has won$1.2 billion in February, a new record for the month. Las Vegas Strip Properties won$712 million of that, 19 % more than last February. People want to go out and vacation so much and experience stuff, They're just giving money away to Vegas, I guess. I view that differently. You're paying for entertainment. Yeah. Oh, trust me. I get it. Okay. So on what's the Guy Raz podcast, how I built this a number of years ago. I still remember this. Stuart Butterfield, who is the founder of Slack. And I guess he also founded Flickr before that. Is he still working with Salesforce or did he kind of go away as Salesforce bought Slack?

23:11I don't know. I haven't seen his name in the news lately. So Guy Raz on that. I haven't listened to that show in a while, but he always asks people basically like, do you think you were lucky to get this place or was it hard work? and then he always asks me, what's it like to make a life-changing amount of money? Because this guy made a ton. I don't know if he's a billionaire, but he made a ton of money on Slack. He said, after a certain point, wealth can only give you so much. And he said, I look at it as three levels of wealth. So he said, level one, I'm not stressed out about debt. Level two, I don't care about what stuff costs in restaurants.

23:37And level three, I don't care what a vacation costs. This is very good. It's great. But my thinking, you and I have talked about the vacation stuff a lot lately, how packed Disney is and how packed planes are. And I'm on spring break right now and it's Same thing. Is everyone just rich now then? Since everyone can go on a vacation? Credit card points. Did you use points? You must have for the trip, for the flights. Oh yeah, I got a new credit card and I'm, yes. I mean, here's the thing. Everything feels more expensive. Flights are more expensive. Car rentals are more expensive. Hotels, Airbnbs are more expensive.

24:05Restaurants are more expensive. Drinks are more expensive. But the thing is, being on vacation, you get it. You get why people would want to do this. Going out and getting out and doing stuff is amazing. but I think the trade-off is if you want to go have those experiences and pay a lot on vacation, unless you're like insanely rich, then you can't have the$1 ,000 car payment and you can't have like the wonderful house that has a 7 % mortgage on it and you can't go to fine dining. And I think that's the rub for a lot of people. If you're going into debt to go on those vacations and you're not saving elsewhere, that's the problem.

24:36There have to be trade-offs somewhere unless you're just a really wealthy person. We always talk about spend shaming and like if part of your rich life is going on vacations and having experiences, I think you should do that. But then you can't have everything else if you're not able to save and put money aside and you can't complain. Everything is so expensive if all you're doing is spending money on expensive stuff. You can't have everything, I think. That's the point, right? You have to be selectively cheap about certain things if you want to spend money in some other area that's expensive.

25:03Well, I was battling... Well, not battling. I was thinking about this in my car payments, which we'll get to later on in the show. But you're absolutely right. You can't have it all. That's kind of the point. I understand why so many people are going on vacation. Like it's going on vacation is amazing, but it's also really expensive. And if you don't have the rest of your financial life in order, it can turn into like a stressful thing down the line. One other vacation thing. So we go to get ice cream with the kids, of course, on vacation. That's a thing people do along lines. Why is there not a place that serves ice cream and then frozen drinks for the parents?

25:33Ice cream is okay. I think I've mentioned this before. You know what my ice cream order is, right? If I go out and get an ice cream? No. I'm a diversified investor. What do you think it is? Oh, swirl. Yeah, swirl. I like the twist. 50-50, right down the middle. I'm a diversified investor. But how am I not able to get a Miami Vice while the kids are eating ice cream? There should be an ice cream parlor that has a bar in it as well. Kids get ice cream, parents get drinks. What could possibly go wrong? Let's do it. All right. That's all I got. Twice in two days this week, Ben, or on the weekend, people asked me if I was a cop.

26:07They seen if you're a narc? Why? Why? I've been called a gym teacher more than once. One time I was with you, remember, at the comedy store? Not the comedy store. Yes, if you were a high school gym teacher, that's right. One time was at the Audi dealership, and the other time I was getting blood drawn, which I hate. Hate, hate, hate. I'm not a big fan of needles either. I don't even care the needle. I don't know why. I was sweaty and nervous. I don't like it. Oh, I don't get that bad. But going into finance and working with numbers and spreadsheets and stuff is fine with me, but I could never work in a hospital.

26:38I would not be able to do it. Robin's watching, there's a show on Netflix, like New York City Emergency, and she is completely immune. She likes Dr. Pimple Popper and all that gross s***. I can't watch any of it. I'm like, so it says, I'm like, turn this off now. I cannot listen to it or see it. I'm going to hurl. Yeah, but you watch the gory stuff on horror movies. That's different. See, I can't watch like gory stuff in movies either. Okay, what's the Michael Burry thing? He retracted his sell statement, sell everything? So Michael Burry, everyone knows who he is, tweets all the time, and he always deletes them.

27:08There's never a feed. Sometimes he just tweets sell, just one word sell. And then on March 30th, he said I was wrong to say sell. I don't know. I don't really know what to do with this. Doesn't it kind of feel like the people who became heroes in 2008 and had movies made about them and books written about them, aren't they kind of like child actors in a way? Good take. People in finance shouldn't be that famous or that well-known. Was it Damon Rafalek on Bill Simmons a couple of weeks ago said, you stop maturing as a person or growing as a person when you become famous. I'm not saying Michael Burry is like that, but I do feel like it was probably not the greatest thing for a lot of people who became famous from that.

27:44And that's why I'm never going to call a bubble in my life because it's just not worth it. All right. You want some of this off landing back on or what is this? All right. Core PCE and inflation. This is from FedWoz. 4.6 % of the previous 12 months, 4.9 % were three months and 4.5 % over the previous six months annualized. I don't know. It's coming down. I feel like if we get into range, I know they say they want 2 % exactly or whatever, The narrative right now, which has changed 14 times this year, is yes, inflation is still trending in the right direction, but now there's going to be a recession.

28:16Okay. So Alison Schrager and her latest sub-stack said, okay, what if we have a mild recession and it's pretty mild and it doesn't bring inflation where the Fed wants it? And I guess I never thought about it that way, but it kind of makes sense. If the economy is this strong and the labor market is this strong and it's not really bending to the Fed's will, What if it happens and we do get a very minor, minor recession and inflation just goes to 3 % and the Fed says, ah, that's not enough or 4 % or whatever it is. And the Fed cuts rates because they're worried about the recession and then inflation takes off again.

28:48Not out of the realm of possibilities. I hadn't thought about that, but you're right. Could happen. By the way, you mentioned Fed Woj. We got an email. You guys keep talking about Fed Woj. We're talking about Nick Timoreos from the Wall Street Journal. He's the Fed whisperer. Yes. All right. Layoffs. Oh, again, Bob Elliott showing up. Okay. He's tweeted, layoff announcements are running pretty stable in the 50K range for the last six months, except for the big number in January. Also highlights some of the oddity of looking at these. Accenture said they would downsize over the next 18 months. It's included in here, even though it's not immediate.

29:17So it looks like layoffs are fairly steady. A lot of tech stocks, right? Yeah. It looks like all tech. All right. McDonald's, we already spoke about. Oh, this is early. This is just speculation, But Ben, what if, what if Carl Quintanilla tweeted for the Bank of America tech desk? They pulled a quote, a Jeff Bezos quote from 2016. And then they said, quote, I believe he can come back to Amazon in a prominent role for one reason, to ensure not just AI participation, but AI leadership. Feels like an important fork in the road is upon us. Maybe they can, because does it surprise you with like how well the AI rollout has gone for chat GPT that Siri and Alexa are just kind of awful sometimes still?

29:57Well, a lot of things aren't great. By the way, credit to me, it's early. For what? What do you mean for what? Jeff Bezos coming back to Amazon or credit to us. Credit to you for stealing my take. It was a mutual take. That'd be great. Okay. So I know, I think we might've spoken about this. So I've tried multiple services to like track spending. Excel. I know you use Excel. It doesn't make any sense to me. But a lot of the categories are either uncategorized or categorized incorrectly. I've been using this thing called Rocket Dollar. And I think I spoke about it. They send you emails if you have a large transaction, if something gets refunded.

30:36I don't even pay for it. I use the free service. 25 % of all your spending goes to Instagram t-shirts. But they categorize my daycare as, I think, travel or something. Here's what AI is going to do. I know this is a minor problem to solve. Oh, you're saying AI is going to be a good budgeting thing. AI is going to completely make sure that all of your spending is categorized so that you don't have to go in there and fix it. There are some tools where you have to train the model on all of your line item things, and then it could learn it. AI is going to completely fix that. It's going to instantly give you all your spending.

31:08You know the easiest way to track your spending? Just put it all on one credit card. Is that what you do? I basically spend everything on my credit card. There's occasionally, I mean, a check for something like the mortgage payment or something, but everything else is just, it's on a credit card. And for me, that's the easiest way to track stuff. I have multiple credit cards. I feel like a lot of people do. True. Wall Street bonuses fall by the most since 2008. The average bonus was $176 ,000 last year, down 26 % from 2021. I don't think$176 ,000 for a bonus is a lot of money. Just kidding. Just kidding.

31:42Not in New York City. Not in New York City. I'm only teasing. I'm only teasing. Oh, but I did say that I don't think 4 ,000 square feet is a mansion. Here's more context of what I was talking about there, because I think this is very important. And I don't know what the doc said, Ben, you can pull that up. Okay. It says, this was on our, from the compound, we had over 3 ,000 votes. Is 4 ,000 square feet a mansion? I said no. 54 % said no. 46 % said yes. What was the square feet that we said? 4 ,000. I think when we Googled it, didn't say 5 ,000 is considered a mansion? And that's what it said.

32:12So there are, in my town, I know there are homes that are more than 4 ,000 square feet. I don't know how many there are. Probably, I don't know, 20. I mean, there's not a ton of them. But the thing is, in my town, the houses are right on top of each other. So I'm looking out my window. My neighbor's house is literally 13 feet away. Another factor to consider in whether or not something's a mansion is property. Now, that's true. So if you have it like half an acre - Yeah. So even if a house in my town is 5 ,000 square feet, now the 5 ,000 square feet is huge, but nevertheless, there's no property.

32:42So I think that's a big factor. True. The other thing is like, do you count mudrooms as part of your square footage or not? Actually, we had an email today from somebody thanking me for the nudge on the mudroom. I gave them permission, mental permission or something like that. There you go. They got cut back somewhere else then. Moving on to real estate or stick with real estate, I should say. The Restoration Hardware CEO, which is always a color for a conference call, he said, quote, I've never seen a luxury home market down 45 % a quarter ever, not even in 2008 and 2009. So I think we're near the bottom, but could it get a little worse?

33:12I think it could. Seems like that guy is like a macro guy a little bit. He always has macro takes. I mean, he's sort of at the epicenter of it. Imagine if... Have you ever shopped at Restoration Hardware before? Uh-uh. Expensive. I guess he did say it's luxury. Okay. He said, I think we're near the bottom. It's kind of nuts that the housing market went through this period of time. The high end got obliterated. Sales basically stalled. and yet the economy didn't fall apart. I know there's obviously challenges in certain areas, but housing got destroyed. The housing market, if you add it all together, construction and furniture, all the ancillary stuff that goes with this 20 % of GDP.

33:48It's a huge part of the economy. It is kind of crazy because it has just ground to a halt in a lot of ways. There's a great chart from Bank of America, weekly home improvement retail spending growth year over year, according to Bank of America, credit card and debit card data. Crashing is the wrong word, but certainly heading down. a lot. It's down 10 % year for year. And then there's another chart showing just weekly housing related services spending. This is even worse. I'm guessing so much of it was pulled forward. And also the home equity line of credits, it's now 7 % or 8 % to borrow from the home equity line of credit.

34:20I'm guessing a lot of that has fallen by the wayside. I'm kind of surprised. Home Depot and Lowe's are like, they're hanging in there. I mean, the stocks don't look great, but they're not like getting demolished. I still think that the renovation thing has legs for people like longer term, I don't know what it means short term, but longer term people staying in their homes and being like, let's add another bedroom on the back of the house. If you have acreage. Now, if you live in Michael's neighborhood, maybe you don't have acreage. No acreage. You have some room. So the plots here are 60 by 100.

34:45So I don't know what that means, but... Yeah, that's right. In the Midwest, we have more room, but they're building houses now anywhere they can find open land. There's not many lots left. The lots are bigger in Michigan, but they're putting homes anywhere they can. I feel like people want to build these days. This is interesting. I don't know where George Papadopoulos got this chart from, but it's the median down payment for US homebuyers. The median homebuyer, according to this chart, is only putting down 10%, which I guess made sense in 2021 when rates were low and prices were high. But now that rates are so high, I guess the problem is prices haven't budged.

35:20People can't afford it. That's the problem. But I'm saying if you're borrowing 90 % of the money, that's got to kill you on the monthly payment. Yeah. But otherwise, you have to save for a lot longer to get that down payment. I think my first home, I did a 5 % down payment. I get it. It's hard to, especially if it's your first home. All right. We talked about money markets before. This is a survey from Bankrate. 22 % of those with a savings account earning 3 % or more, while 24 % earning less than 1%. 16 % are earning nothing. I guess this is the money that's going into money market funds. Basically, 40 % earning less than 1 % still to this day.

35:54I guess that's a lot of those SVB people who are earning nothing. This isn't like checking accounts. This is savings accounts. It's kind of shocking. Do you think a lot of people just don't pay attention to this stuff in inertia? And I thought rates were still zero. What is the cause of this? I don't know. I think it's just lack of financial literacy. I guess. It's surprising though. I think you might be right, unfortunately, that people just, they assume like, I get what I get and there's no other choice. Hard to believe. So you put this credit card thing in here. Credit card interest rates are the highest in history.

36:22What are we at? 19 %? That's tough. If you are putting a vacation on a credit card and not paying it off, that's tough. Look at that. How high that went. How much money do banks make from credit card interest? I assume it's a non-trivial number. How much of it does also get written off though from people who don't pay because it's unsecured debt? I don't know. Good question. All right. You saw this Ivy League parents thing from Bloomberg? I saw the headline. What story here? College consultants charging as much as 750 grand to build applications starting in seventh grade. They interviewed this mom who talked about it and said her son applied to 22 schools and already has a spot at Yale.

36:57She said, we are fortunate that price is no object. Prestige carries a lot of weight and we want him to attend the best colleges. So they've been working in this place and they said they charge as much as$750 ,000 to work with students starting in 7th grade and as much as$500 ,000 starting in 9th grade. The guy who runs this company estimates clients spend over a million dollars to prepare their kids to get into an Ivy League school. And then they show the acceptance rates for Harvard and Columbia and UPenn and Yale. And they're all like 3 % or 4%. Dartmouth is the highest at six. I'm sorry, but reading this, this is like a wealth inequality thing.

37:25But also I think, I know they added some sort of tax above a billion dollars. These parents are insane. I'm sorry. They are. Yes. I know that I don't have a child who's college aged, and I'm sure that I will do whatever I can within reason to help my child be prepared to be in the best possible position to succeed. That's not what this is. This is insane. It's ludicrous, right? You're buying your way in. And it's also, if you knew your parents are doing this, maybe the kids do. I'd say, give me the 750 grand. I'll start my own business or travel the world or something and go to state school. This is such a small number of people we're talking about.

38:00It's not even worth talking about. So the fact that these schools let in 3 % of applicants, isn't it time we just start saying we're going to tax your endowment more or tax the whole thing if you don't start letting more people in? I think the tax is like over a billion dollars and it's like a small amount for the tax. Why do these places get tax exempt status if they're like this. If it's just a place for really rich people to go, I don't understand why they still deserve the tax exempt status. I think it's ridiculous that they have these endowments that have tax breaks still. For Talk Your Book this week, we talked commercial real estate with the USQ fund.

38:31And we discussed that there was a meme, Winnie the Pooh meme. And I said, apartments for the regular Winnie the Pooh, multifamily housing for Winnie the Pooh in a tux. And you said, no, no, no, that's not multifamily housing. A lot of people in commercial real estate said au contraire actually apartments are part of multifamily housing i stand corrected we didn't know but now you know multifamily housing all right i also got a lot of emails on stub hub just sucking so much there's a site called tick pick where i'm looking at like stuff for the nicks for example careful on the google for that one why tick pick i'm just careful if If you misspelled, anyway.

39:09Oh, Ben. What I like is you could buy a ticket and when you're buying something, it gives you, it says all in or something. Yeah, it gives you the price all in. That's all I want. You don't have the 17 extra fees after the fact. Don't charge me a$25 servicing fee. Just show me what the price is. You're like, oh, there's a good price. Actually, no, it's not because it costs you 30 % more than what you're seeing. So I hope TickPick disrupts StubHub. I'm sick of them. All right, this is, we'll move quickly on this because we're running a little bit long. But this is interesting, something that I never thought about.

39:41There was an article in the Washington Journal, but the TLDR is there's way too many parking lots and it's causing massive inefficiencies and driving up the price of rent. So here are some data points I pulled out. There is an estimated 700 million to 2 billion spaces in the US. I know it's a wide range of estimates. That equates to between two and a half to seven spots for every registered vehicle. In Los Angeles, for example, parking covers about 14 % of the land area. There's one data point where it says a garage adds about 17 % to the average rent. Almost three quarters of carless renters have a parking spot included in their rent, and they collectively paid$440 million a year for parking that they don't need.

40:18So somebody who studies this stuff said eliminating parking requirements can have this huge impact on the quality of life and sustainability of a community. It is among the most significant changes that a local government can make. So to that end, Buffalo eliminated minimum parking requirements and the city's population grew for the first time since the 1950 census. And if you look at, there's some great charts in here showing the average number of parking spaces per new U.S. residential unit and the average number of parking spaces per thousand square feet of a new U.S. office construction. And they're way, way, way down.

40:50Pretty cool. Do you think that's because of parking spots or Josh Allen fans? This is one of the things that the appeal of driverless cars could be someday is that you have your car drop you off somewhere and a car can drive off site somewhere, the park itself for whatever. Isn't that the dream? Yes. Or is that dream gone completely? Remember like 10 years ago, we were like three years away from driverless cars. People were saying, it feels like we've made no progress there. Not true. Kind of? Not true. You don't think so? So I'll get to this in a second. Just put a pin in this. So we got some auto numbers this week.

41:20As dealerships get more stock, automakers sales rebound in the first quarter. Car buyers are finally starting to see something they haven't done a long time on dealership. Lots more availability of cars and trucks, which is great for all of us, but it's terrible for me. So when my wife's transmission blew out, they gave her an A5, which is like the sedan. And if you start to drift from one lane to the next, it pulls you back in. Pretty cool. I've seen that, but I think my wife's Hyundai has that. But I wanted us to be further along at this point. That's all I'm saying. This made me laugh. We got a lot of emails about people being pro Tahoe.

41:55We got a few pro Kia Telly rides, got a bunch of people saying that that's great value. So somebody sent us a long email about being pro Tahoe and then said, if you're using a car to commute, you should pump the Jeep and go buy a used Tesla 3. Cut gas bill to zero and you can get them for 30K or so. Just don't talk about owning a Tesla because other people will want to kill you. I own one and try to never talk about it. I hate those people. That made me laugh. Okay, that's pretty good. So here's an update on my situation. If you miss this, I spoke about my leasing situation with car dealership guy on Saturday, which was an awesome episode.

42:28So it turns out, Ben, so my thought was that I was going to go from my wife's Q7 down to a Q5, save money there, use some of that savings to upgrade from a Jeep to a Tahoe. None of that is happening. Why? I'm underwater on the Audi by$12 ,000. What does that mean? So when I bought it, it was no good options. Thanks, Jerome Powell, or COVID, I guess too. When I bought it, I could either increase my rent at the time by like$500 a month or just buy the car for what I thought was a fair price. So I bought the car and now I owe 40. The car's worth 28. So in order to get out of the Q7, I went to a dealership.

43:07You're like someone in 2007 with a house. Yeah, literally. So in order to get out of the Q7 and go into the Q5, I would have to put down$6 ,000 and pay another$100 to$150 a month in rent. So why would I do that? Why would I pay $6 ,000 plus another$2 ,000 a year or so to get a smaller car only so that I can pay$700 more on my Jeep. Because the Tahoe, even with my positive equity in the Jeep, I have like positive equity in the Jeep. That would get rid of the down payment for the Tahoe, but it would still be like $1 ,150 a month. You bottom ticked Facebook and top ticked the car market. I top ticked the car market.

43:46So I think the deal is that I'm kind of stuck. Now, I do want a Tahoe, but not that bad. It's like a legitimately like$7 ,000 or$8 ,000 more a year, really for no reason. And if I have the Q7, then I don't need a Tahoe. So anyway, I'm stuck is the bottom line. I have no flexibility. Good thing you got that warranty to fix the transmission. All right. You want to wrap this up? Yeah. Go ahead. What do you got? I don't have a lot of recommendations because I'm on vacation here, but I tried to watch a movie on the way down. A Man Called Otto with Tom Hanks. I don't know, man. Has Tom Hanks had a good movie since Castaway?

44:18Oh, stop it. He has to. He's a decent movie. He isn't a great movie. This movie was about a guy who lost his wife and he's kind of a curmudgeon and it was okay. I honestly couldn't. I watched half of it on the plane and I'm like, I'll watch it on the way home. And I'm like, I don't think I will. I love, love, love Tom Hanks. Oh, wow. You're right. These are his last movies and stop me when I get to a good one. A Man Called Otto, Pinocchio, Elvis, Finch, News of the World, Greyhouse, A Beautiful Day in the neighborhood oh that was supposed to be good yeah toy story for the post the circle inferno sully a hologram for the king ithaca bridge of spies that's 2015 that was decent his last good movie is 2013 captain phillips you're right it's been a decade i'd love tom hanks his last 40 movies are terrible yeah that's all i got for recommendations so some news dropped actually yesterday here's what's coming on warner brothers i think is working on a harry potter show okay my daughter is reading those books right now.

45:13She loves them. Amazing. Heat 2, did you see that? They're working on Heat 2, I think. I'm usually anti-remaking, but I'm reading the book Heat 2, actually. So it's like a prequel and a sequel together. Oh, like the Godfather Part 2? Michael Mann wrote the book. I think that's what it's about, is like the prequel sequel kind of thing. And they're making a live action Moana. That makes sense. Which your kids must be stoked for. I think that might be the best Disney soundtrack of the last 10 or 15 years. All right, I got an email. This is from the guy who recommended Brawl and Cell Block 99 and Bone Tomahawk, so you know he's reputable.

45:47I watched Infinity Pool after you mentioned it on the pod the other day. I thought it was fantastic. Nightmarish and dreadful and deserving of a rewatch so I could follow it a little better. See, this guy gets it. Did you see his other film, Possessor? Thought it was great too. Did I? Loved Possessor. I have one for you. You can't watch it with your wife around or even let her know you're watching it because she'll wonder what the hell is wrong. with you? Believe me, that's what it always is. A friend recommended a long time ago. And for the first 45 minutes, I kept telling myself, why the hell are you watching this?

46:14But if you keep watching, I promise it pays off. Martyrs, check it out. I did check out Martyrs. I didn't like it. How do they still have enough names left for horror movies? How have they not gone through all the names yet? But Martyrs was definitely demented. I don't know, it's old. And then he said, Speak No Evil was also really good, but tough to watch if you have kids. Yes. Speak No Evil was the most horrendous I felt after watching a movie. Sean Fentasy was pounding the table on that. It was, oof, it hurt to watch. Absolutely hard to watch. All right, last one, not a recommendation. So I guess I have no recommendations for the week.

46:43I watched Jurassic World Dominion with Kobe. That's the last one, right? Yeah. And you remember my scalding take of how terrible that movie was? Yeah, it was not good. Robin was like walking in and out. She goes, what's happening? I feel like there's like a million different storylines. I said, right? This is the worst movie ever. It was worse the second time. Just horrendous. The Jurassic Park sequels, they did never nailed a sequel. Just the two original ones, the original first one and then the reboot was good. But other than that, I did like Jurassic World and I even liked Fallen Kingdom. But the third one was terrible.

47:12All right, Ben, you're a hero. You potted even on vacation. It's lunchtime here. I'm going to have Miami Vice. There you go. Wish me well. Enjoy. Bye. Bye.

47:36Thank you.