The Most Crowded Trade on Wall Street (EP.339)

25:16M &A picks up, the IPO window opens, people start spending furiously. I don't think that there's a chance that we get an overheating economy next year. It's possible. That's why we never got a recession this time because nothing ever went too excessive. We need the excess. Mark Dow always says you can't commit suicide jumping off of a six-foot, six-inch ledge. right? So that's why you need those excesses for the economy to really roll over. I think that's what a lot of people miss. So I think we do need some sort of blow off to make it happen. Maybe it'll happen. I wrote this back in 2017. What to make of today's twice in history S &P 500 valuations.

25:53So this was a big thing in 2017. The CAPE ratio reached 30 for the second or third time in history, I guess. I would say from 2014 to 2019, that five-year window, The CAPE ratio, we spilled a lot of ink over that topic. And credit to us. Credit to us. I think our takeaway, at least. We poo-pooed it. My takeaway was that valuations matter over the long term. Period. Hard stop. Right. But my point is maybe they don't always. So it was 1929 and 2000 were the only times in history before. So Lawrence Hamptell tweeted this last week. since the Cape first hit 30 in June, 2017, the S &P 500 has returned over 100 % despite suffering two bear markets along the way.

26:36And probably one that was close at the end of 2018 valuation based timing is hard. That was the biggest like insight that we had at the time was probably a better, not probably a better way forward is to, and this is not easy. It's easy say is to adjust your expectations for stock market returns. Don't try and get too cute with valuation, but the 10 % that we've seen over the last 10 years probably isn't going to continue. And guess what? It did. It did continue, which was great, which was great. Never been more happy to be wrong. That's why the expectation thing is you just never want them to go too high.

27:15Because if you take your expectations low and returns are better than you thought, that's a bonus as opposed to, I think returns are going to be 15 % per year and no, they don't do that very often. Then you're, then you're screwed. The most important thing for investors is just like, never get too hot or too cold. And it's okay if in 2020 and 2021, you know, maybe you chased a few things and you did some things that you probably regret. Hand up. We're, we're in that boat.

27:49We If maybe you took down your stock exposure from 80 to 70 or 70 to 50 or whatever it is, that's okay to do things like that, right? But the extremes of I'm in, now I'm out, now I'm in, now I'm out, that's how you really, really, really fall behind. And you can't make up for – if the market's up 20 % this year and you miss it, you can't get that back. And this is why the people we said at the time do not try to time the stock market with T-bills. Because there's a lot of people who probably said, I'm going to put money in T-bills or money markets that are earning 5 % at the beginning of the year.

28:30And I don't want to deal with the stock market. I'll just clip my 5 % and I'll be fine. And now the stock market's up 20 plus percent. Now what do you do? But my bigger point, you're right. My bigger point is it's okay to not be perfect, right? Like if you put 15 % of your portfolio and earning 5%, it's fine, fine. Okay. So you weren't perfect. That's the thing. Do it on the edges. Don't do the whole, don't go to extremes. Right. Yeah. If you're going to go from 80, 20 to 60, 40. Okay. So the 60 that, yeah. Yeah. Just don't go 80, 20 to a zero. Right. Yeah. And I think by and large, most people, most people pretty much know that at this point.

29:07Wall Street Journal had some good charts in here. It's a magnificent sevens market. The other stocks are just living in it. They compare Facebook, Tesla, Google, NVIDIA, Amazon, Microsoft, and Apple to different countries' stock markets and how big they are. One of us, I'm not naming names here, was on this about four months ago. I'm not going to take a Victor Lab here. The Wall Street Journal was a little slow to get to this one. I may have been on this, but Apple is nearly the size of Japan. Microsoft is bigger than China. Amazon is about the size of France, a little smaller. This is what I'm talking about with the things that we build.

29:44Yeah, we don't have these churches from the 16th century, but we've built the biggest, best companies in the world, and they impact way more people. We still know how to make stuff here. It's just the stuff we make is different. Okay, here. The combined weighting of the Magnificent Seven is larger than that of all stocks from Japan, France, China, and the UK combined. Just a mind-boggling stat. Wow. So this is the thing about concentration. Like I'm worried about these seven stocks. I don't know. Are you just as worried about the UK stock market as you are about one of the, so this is why the magnificent seven thing has never bothered me.

30:20I think it's a risk that people make up to try to scare people. I don't think it's an actual risk. I'm not going to lie. I've been scared about the size of these companies in the past. Like when these companies first hit a trillion dollars back in 2019, I think it was 2019. It's like, oh my God, a trillion dollars. Like a trillion dollars? How much bigger can they get? Guess what? Apple's 3 trillion. And guess what? It'll probably get to 4 trillion. Yeah. And if AI really is going to change the world, there's going to be three or four more stocks that are going to hit a trillion as well that we probably aren't even thinking of right now.

31:01And if one of these stocks falters, they're going to take their place. That's my Jerry Seinfeld way of looking at it. You never saw the episode where George always fell behind. Elaine was in the middle and Jerry came out ahead. George threw a$20 bill out the window and said, see if you can come back from now, Jerry. And Jerry put an old code on and found a 20 in there. That's the stock market. Seinfeld explains everything. Apple's trading at 30 times estimated forward earnings. Okay. Remember when it was at 12 or 10 a few years ago? I mean, it doesn't sound cheap, but that's okay. All right. Another Wall Street Journal.

31:36More people own stocks than ever. So this is from the Fed survey. We've actually gone from 53 % in 2019 to 58 % now, the people that own stocks, highest on record. Kind of crazy. It was nearly 30 % in 1989. The 1990s really supercharged this. But this is another feather in the cap of a bubble, I guess, that it pulls people in, the whole Robin Hood effect and meme stocks and all that stuff. or the 2020-21 phrase? That I have in this chart, which is a really good one. Number one, the percentage of US households owning stocks in retirement accounts has gone sideways for the last 20 plus years. And there's no real reason why you would expect this to all of a sudden go up, but it did.

32:26It broke out in 2020, 2022. So the directly held stocks, which a lot of that is a Robinhood effect, which is probably not necessarily what you want to see. However, it did some good because it motivated people to, why else would there be a breakout in people owning stocks in their retirement accounts? And again, it's not number of people. So it has nothing to do with the labor market. It's the percentage. Right. It's a relative base. And it said that direct stock ownership, meaning if you own individual shares of stocks, had its largest increase on record. So it went from 15 to 21%. You're right.

33:02That's kind of crazy. Yeah. So the fact that that was a bigger increase than we saw in the 90s when stock trading really took off. So how about this? Can we say that the gambling that happens inside of the Robinhood app, which is not great, if it motivated people to get smart in their retirement accounts, can we say that that's at least net neutral, maybe even a net benefit? I think it's been a net positive, even if you don't agree with how it happened. It wasn't like some people read a book about personal finance and they decided, oh, the light bulb went off. I'm going to save and invest. It took this weird period to do it, but whatever, it worked.

33:36Wait, is that the Nick Majuli effect I see? That just keep, I mean, just keep buying came out and then that skyrocketed. I'm just saying. Nick did it. Okay. Credit to Nick. All right. This is kind of hilarious. Goldman strategists lift S &P 500 forecast a month after setting it.

33:57Listen, it's hard. An article from Bloomberg. Just one month after setting a 2024 target for the S &P 500, Goldman Sachs Group. Strategists increase their forecasts as the year-end rally shows no signs of abating. Koston noted, that's their chief strategist, that$1.4 trillion was poured into money market funds this year as interest rates climbed far higher than the$95 billion that floated into equities. Quote, as rates begin to fall, investors may rotate some of their cash holdings towards stocks. May. Yeah, may. They may. We've had this conversation a million times. I just, I think money markets, that's cash.

34:31That's, that's money from checking accounts into money markets. That's not, there should be a lock in effect for these, for these year end targets. You can, you can make one change. You get one mulligan a year. That's it. Because what happens is who are these forecasts useful to anyone? No. But what happens is they set up at the beginning of the year, they're wrong. And then three months left in the year, they just move it a little closer to where the market actually is. Remember a couple of weeks ago, we said, I think we just had a V-shaped rally. And we really did. So listen, this momentum is very strong in the short term.

35:04You will never hear us say, it's all clear, green light, go all in. But through the end of the year, I probably wouldn't want to step in front of this train. I was looking at. You also never got an all clear from that correction either. People are going to look back and say, oh, the Fed talked about easing. and that's the reason the stock market came back. There was nothing in October that said, okay, the market's bottoming. Coast is clear. Get back in. We're going to have a 20 % rally in seven weeks. It never happened. Stocks look bad. So I was looking at, I'll have a post later this week up on this.

35:38The percent change from the October lows for various stocks. And listen, interest rates matter a lot. Matter a lot. If you look at some of the interest rate sensitive areas, homebuilders, for example, real estate stocks. The five-week rally that these stocks had is almost unparalleled. Look at Home Depot, for example. I mean, there's a lot of them. The stock market, it doesn't let you - Homebuilders are up more than the NASDAQ 100 this year. They're up 57%. Dude, it doesn't let you back in. That's the problem with going to cash. There is never a good time to get back in. Never. You are so much more likely to buy higher.

36:25Part of this thing we do, someone actually emailed us last week. I don't think you saw this one. I think I replied and deleted it, but what is it? Personal emails, personal responses? That's taken off. Someone emailed and said - Our inbox is lighting up like a Christmas tree. Someone said, I don't want to simplify all that you guys do, but they said, and sorry for giving ourselves a pat on the back, but they said, one of the things that you do that I really appreciate is you take conventional wisdom or headlines or narratives and show why they may be wrong. or point out something that happened that was unexpected.

36:54Can you imagine saying mortgage rates are going to go to 8 % this year and home builder stocks are going to be up almost 60 %? I would have never believed you if you would have told me, if you would have given me that setup, right? What would be the world that would happen? And then you reconstruct that narrative and realize, okay, here's the things that made that happen and why, and new home sales were the only ones in town, blah, blah, blah, blah. But that's another unexpected thing that you would have, the macro part of it would never have led you to have that conclusion. Nobody has this all figured out.

37:25And one of the things that people dislike about financial commentators and talking heads is that it feels like they're talking down to the viewer, to the listener, as if these people have it all figured out just because they're on TV. And so I think we do a good job just hopefully explaining that this shit is hard and nobody knows the future better than anybody else. All right. Barry Bannister is a macro strategist at Stiefel. Somebody emailed this to us. Ben, you were talking about how come nobody inflation adjusted the S &P 500? Boom. Inflation adjusted S &P 500. Not particularly close to the 2021 high.

38:02So if we look at it through this lens, the bull market, just getting started. We've got a ways to go to take out the inflation adjusted high from 2021. So if inflation goes up again, that means stocks are going to go up even more to catch up. There you go. All right. This was a really interesting chart from Gina Martin Adams at Bloomberg. She shows the annual change in the S &P 500 versus the estimates from the beginning of the year through the end of the year. So I'll read her the tweet and then I'll explain this. Don't make the mistake of overemphasizing consensus estimates as particularly meaningful.

38:43And it's funny because we talk about of consensus a lot and what's priced in and how this impacts and influences things. She says, estimates are not an indication of what's actually priced into stocks. S &P earnings results relative to beginning of year consensus and corresponding index price returns shown below. So as an example, in 2020, earnings came in 20 % lower than estimates at the beginning of the year. The market was up 20 % that year. estimates, actual earnings overshot to the downside in 2022 and stocks were down a lot. But you saw the same thing in 2023. Actual earnings did not meet expectations and the market was up over 20%.

39:29In other words, there's no pattern here between where consensus is, estimates are for earnings in the beginning of the year versus the end of the year and corresponding stock price. I thought that was interesting. Right. Sometimes earnings fall and the stock market falls. Sometimes earnings fall and the stock market rips. But even relative to expectations. So you would think, you would just think that if earnings fall relative to what is estimated in the beginning of the year, the stock market has to go down. Not even close to true. 2019 is another year. It's just not even, it's just completely random.

40:00So this is a really, really good chart. I've done this before where I looked at the percentage of years where the S &P 500 is up when earnings are down. When the earnings are down, the S &P 500 is up more in those years than it's down by a wide margin. It's very counterintuitive. Yeah. Because the market probably fell the year previously as it priced in falling earnings. All right. That's a good fallback for moving your goalpost, though. If you're wrong, you go, the market's forward-looking. Of course. Duh. Of course the market is going to rise because it's seeing that there's going to be interest rate cuts.

40:35It's priced in. Yeah. is wrong 80 % of the time. That's pretty, yeah. That's already in the stock. It's already baked into the pie. That's somebody who's missed the market, who's missed the rally. One of my favorite things that financial commentators do is pull percentages out of their ass though, like that, like 99 % of saving and investing is living on less than you make. And I just love when people make up numbers like that because you can't refute them. Well, of course there's actually nuanced into what I just said. But yes, you're right. When the market falls 25%, generally speaking, the bad news is priced in.

41:15But it's not true on the upside. Right. Like if there's like a skew, you could say if the market's up 20%, you could say it's priced for perfection and it could still go up another 50%. Usually doesn't happen to the downside. That's fair. Because the downside stuff happens faster. Can you guys please talk a little bit about leveraged index funds? I'm cringing as I'm reading this. I'm already investing in index funds like the Qs and SPY, and I'm in them in the long term. Should I consider investing in leveraged funds like TQQQ or SPXL, which are 3X leverage for the NASDAQ and the S &P? uh okay it's been a while and boy are we so back in 2020 and really i think heading to 2021 we got this question a lot once or twice a week probably a lot and the answer was forget about the fact that these things have like a daily reset and they don't actually track 3x over any meaningful period of time.

42:17These are trading vehicles, not investing vehicles. But yeah, in a bull market, these things will beat the market. Not by 3X, but they will beat the market. The problem is in 2020, this thing fell 70%. I got this TQQQ, which is the three times. It was down 80 % last year. That's a great depression level crash. Yeah. So, no. It's up 200 % this year. You cannot stick with these over the long term. if you want to say, hey, I hear you guys. I'll make it 2 % of my account. Fine. Fine. But please, for the love of God, do not get crazy with these things. Do not make them a meaningful percentage of your portfolio, especially after a 20 % run in the S &P 500.

43:04The answer is no. Do not do this. If you really want to be intelligent, people always say, listen, I can stick with it. They always say that. and I don't know how many people did in 2020. Yeah, you probably can. If it's 2 % of your portfolio, you probably can stick with it. Or make it 5 % and then have some really stringent rebalancing rules because it's going to be so much more volatile than everything else. So when it rips, you sell some and get back to your target weight and when it falls, then you have to lean into the pain. That's the only way that something this volatile can work. In the same vein, sentiment trader tweeted, retail traders are all in again.

43:39Dumb money confidence just jumped to the third highest reading in 25 years. Maybe they just never left. This is no problem at all in 2020, 21. Other than that, very high confidence typically precedes modest gains at best until sentiment resets. And I think this is fair. Even though I said you probably don't want to step in front of the strength through the end of the year because chasing and catch up and all that sort of stuff. after a 14 % move in 32 days or whatever we had, that's probably not going to happen again over the next 32 days. So whether we correct through time, if we have a pullback, whatever, but not to be rude, I get a little bit weary when we see questions like this after such a magnificent gain in the stock market.

44:26So Ben, you mentioned earlier in the episode that we've got stocks at 52-week highs. We've got gas at 52-week lows. Unemployment at 4%, below 4%. Consumer confidence is on the mend. Real wage growth, yeah. Great chart from Renaissance Macro. Okay. This is my 2024 prediction. Just wait till the political season ramps up. Sam Rose chart of the year. This is kind of like the Goldman one you talked about. Forecast a consensus 2023 real GDP. It started out at 2.5 % in January 2022. It got down to 0.3 % in January 2023, back to 2.4 % by the end of the year. This is interesting because this basically matched the stock market perfectly.

45:13I mean, it literally bottomed when the MAG-7 bottomed in December. So track them pretty closely. And it's also predicting essentially a economic slowdown that never happened and quickly revising up higher. That's a good chart. That is a good one. Ben, last week, and really for the past couple of weeks, we were talking a lot about consumer sentiment and all that sort of stuff and the disconnect. After that episode, I went in the car and I turned on the radio and was listening to Howard. And there was a commercial right as soon as we recorded. The world was getting worse and worse by the day. It was a commercial for gold.

45:58It is funny. You never hear a gold commercial or silver commercial where they say, things are getting better. Buy gold and silver. They never take that tact. Demand for gold has never been higher because things are okay and people have excess money. Last week, we spoke about the heinous commercial from Coinbase, which basically was contributing to all of this pessimism, piling on the pessimism. Credit to Bitwise. Did you see their commercial yesterday? It was pretty good. The most interesting man in the world. It was awesome. Credit to Matt Hogan and the team over there, whoever came up with that commercial.

46:30Not trying to scare you. Matt Hogan for Matt, who knew? That was an awesome commercial. They had the most interesting man in the world talking about Bitcoin. Ben, this is a throwback. I don't know what year we're in. It gave me flashbacks to the supply chain issues, but I ordered something and it said, I get an email. We appreciate your extra patience as we navigate the obstacles affecting supply chains right now. Please be assured that we have received your order and it's at our production. I'm like, wait a minute. You can't. It's 2023. Yeah, that's a, that's a, that's, I'm falling back on an excuse there.

47:04You cannot. Supply chain stuff is over. I'm sorry. I'm sorry. You cannot talk about supply chains. By the way, we're coming to the end of the year. You know, I'm a big email etiquette guy. What's, what's your protocol for happy holidays? Hope you're, hope you had a nice, hope you had a happy new year. One, one week, right? I try not to do it unless someone else does it first. Oh, okay. You don't even do it. You don't exchange pleasantries. Actually, speaking of things you do or don't do, you want to tell us a story about you throwing a chair at a ref over the weekend? That's right. I slacked you.

47:42I coached third and fourth grade basketball. My daughter's oldest daughter basketball. I've coached her for a couple of years. And at that age, you could call a million things a game. but if it's close to a travel or a double dribble, if it's blatant, then you call it. So I feel bad for the refs that have to do this. But we played a game this weekend, and not to brag, it was our last game of the year. We were going for an undefeated season, right? Pretty good. And a lot of these girls are still learning how to play the game, but this other team had one girl in particular who was just blatantly following our girls to the point of taking them down and bear-hugging them, and the ref wasn't calling everything.

48:23and it's one of those things where... How old is the ref? There was one older ref and one younger ref. I usually just talk to the girls. I never talk to the refs, but I kind of said, hey, are you going to... It's getting pretty bad out there. He did the... You know when the ref has the blinded on, just stare straight ahead and won't look at the coach? I was like, oh, okay. It was one of those things where the fouls kept happening. Again, if it doesn't impact the play, the shot, or the possession of the ball, I don't really care. Yeah, let him play. But it was every time we were shooting, the girl was bear hugging and they weren't calling and you know the parents like start like everyone's well someone will go like hey come on and then after another bad one happens everyone goes hey hey you know one of those it got to one of those and I'm the coach and so and at the end of the quarter the girls sit down and one of the like the toughest girls on our team is crying because she got just raked on the arm right and so I walk up to the other ref and I'm like hey come on can you call something, please?

49:20I got a girl. And I, when I see the, if it was a boy, I wouldn't have cared, but it was a girl crying. I kind of see red, you know? And I may have raised my voice a little bit and said, can you please call something? And she said, you know what? I'm on this side of the court. It's kind of, she's, she's basically throwing the other ref under the bus. It's his fault. And, uh, she said, so I can't really see if there's a foul or not. And I said, I could see it from a mile away. So I, I did raise my voice. And guess what? After that, the game was called more fairly and we played and it was no problem.

49:48That's it. Even when you're mean, you're nice. That's all. Well, after that, I raised my voice, but after the game, I went up to her and I apologized and we, and I think she actually felt bad because she knew that like, okay, it's getting out. And plus you're teaching the kids at that age, right? That, you know, you can't, and once they, you tell the girl like, Hey, you can't play like that. And she didn't. And it was fine. I'm moving on. There's have to be guardrails here. Good for you. Um, all right. This is a little bit in the weeds, but there's been a lot of talk about the cash only thing in terms of the ETF for crypto.

50:26You've seen a lot of people tweeting about that. I see the ETF Twitter people talking about this. I don't get it. Well, there was a really good explanation. Again, it's probably too far in the weeds for, I don't know, 80 % of our audience, but I think the other 20 % will appreciate learning about this. So Six Figure Invest, what's this person's name? I want to give them credit. Vance Harwood. He tweeted, cash only means that the authorized participants, which are the entities that directly interact with the ETFs, will only be able to obtain more shares, aka share creations, of the ETF by bringing the appropriate amount of cash to the table.

51:05For example, if the net asset value of the ETF is currently$15 a share and the fund requires creations to be 10 ,000 share blocks or more, then the authorized participant needs to transfer $150 ,000 to the issuer. The issuer would then transfer 10 ,000 shares of the ETF to the authorized participant who then uses those shares to cover short positions or sell to buyers. Some funds allow in-kind creations too. And this is the big one because a lot of, I think most funds follow the in-kind creation method. For in-kind creations, the AP brings the asset that the ETF tracks and exchanges it for the ETF shares.

51:41So for example, if somebody was like an in-kind would be, if you have the 500 stocks of the S &P 500, you could exchange that for a share of the ETF and vice versa. For in-kind creations, the AP brings the asset that the ETF tracks and exchanges for ETF shares. Apparently the SEC is not keen on allowing this for spot Bitcoin ETFs. The SEC's position is understandable because it will make it clear where the ETF gets is underlying Bitcoin from the ETF. We'll buy them, presumably from reputable exchanges, whereas if you allowed in-kind transfers, you wouldn't be able to know where the Bitcoin transferred came from.

52:16And that's like the big thing. That makes sense to me. My whole takeaway from this is I'm just glad this stuff all happens behind the scenes and I don't have to worry about it. Yeah, that's a lot. He said, finally, the impact of requiring cash-only transfers looks minor to me. Yes, it adds two more transactions, but at the scale that these funds runs, the impact should be small. So thank you for that really good explanation. All right, Ben, let's talk about real estate. Okay. Two out of every three purchases, two out of every three purchase mortgages over the last week were locked in below 7%.

52:51This is huge for affordability. This is a, who tweeted this? This is from, oh, the tweet was deleted. All right. Well, we've still got a chart from John Burns. This is why the whole Kahneman anchoring thing is so important. because if you would have said high sixes for mortgage rates are good, 12 months ago, you would have said, you're insane. But now we have 8 % to anchor to. The high sixes seem okay. This is what behavioral finance, behavioral finance is actually a good thing for us because it keeps the housing market humming along. If people were just comparing to past rates, they would say, this is ridiculous.

53:28Rates are still almost 7%. Anchoring for the win. Anchoring for the win. All right, Mike Simonson tweeted, There's still a ton of speculation out there that falling mortgage rates in 2024 might lead to a flood of sellers. The data is very clear. The opposite is true. Lower rates stimulates demand more than supply. Inventory falls with rates. This is how I illustrate the data in the chart below the green section. So we've got this chart in the show notes, but that's really good. And I think, so yeah, he's like, the data shows this. And I think lower rates are going to stimulate demand even more this time around.

54:01I think we're going to have more pent-up demand than before. And yeah, people are saying, well, if rates fall, there'll be more supply coming and there'll be more supply to demand. I think it's going to be the opposite. I think demand is going to be even more. Look at this chart from Bloomberg via Alison Schrager. As millennials grow older, their home ownership rate is approaching that of previous generations. How about that? 50 % of millennials own a home? Closing it on Gen X and boomers. People have been saying that no one can buy a house, right? people are still figuring it out. The activity is way lower, but it's, yeah, this is just what happens.

54:37So here's the reason demand is so much higher. Axios wrote this piece. America is short on 3.2 million homes, a big reason why prices are still high. 2.5 % of existing inventory, according to Heinz, a global real estate developer that came up with this. So you see, we're actually in a surplus in the 2000s, and that's part of the reason we had the bubble. And ever since the crash, we've had this huge deficit. I've seen the estimates be anywhere from two to five million homes that were short in this country. So Josh had this idea. He talked to Logan Motoshami last week on a podcast, and he said, why don't we give everyone the chance to have a 3 % mortgage at least once in their life?

55:13What would be the mechanism for that? It would have to be your first-time homebuyer. From the government? Yeah, like the government would guarantee a 3 % mortgage. So if you miss that window of 3 % mortgages because you just weren't buying or whatever and you couldn't find a house, everyone who didn't get one, once in your life, you get to check that box if you're a first-time homebuyer. Up to a certain level of mortgage, you get a 3 % mortgage. I love it. I love that idea. It would make a lot of young people happy. It would probably – housing prices would probably skyrocket because so many people would rush out to get it.

55:44You know why? I know life's not fair, and that's just part of the deal. but for homebuyers in 2022 and 2023 versus homebuyers in 2021, it really, it's not fair. No, it's just, it's just not fair. When we spoke about how my mortgage is$3 ,500, but if I bought it now, it'd be, I don't know, 10,$11 ,000. That's up. It's not fair. And so I love the idea. I'm not like a government should save everything, but if we have the wherewithal to do something, to create a program like that, I'm all for it. Yeah. It would certainly make young people a lot happier. I could hear our older audience yelling about mortgage rates in the 1980s.

56:35My first mortgage in 1980 when I bought a house for 11 cents. But good news from Bill McBride. Housing starts. We got that this morning. Look at that spike. is that? That's good. Supplies coming to the market? So one unit structures, that's awesome. I don't know enough about the housing starts and zoning and why there's a structural shortage, but you love to see this, no? I think because building a new house is one of the only games in town because all the builders are giving you the mortgage rate buy downs. Someone asked me, I'm going to talk about this on Ask the Cop on this week, but someone asked, Ben, if you were in the market right now for housing, you were forced to do it.

57:13You had to move because of family or a job or whatever, this really unhealthy housing market, what would you do? And my answer is I would build. That's just me. I would find a way to work with a builder because those builders have to get stuff out there because they have the inventory and they have the ability because all their margins have risen through this period because they had all the lumber prices go up and stuff and they raised their prices. And guess what? Those costs fell and they kept their prices similar. So they have huge margins. So you have the ability to negotiate with them. And a lot of it is them buying down rates to fours or 5%.

57:45That's what I would do if I was forced to be in the housing market right now is I would build. Ben, you nailed it. I have a$500 ,000 house,$1 million in farm and land property,$800 ,000 in taxable investments, 1.2 million in a 401k, zero debt. So I'm with$3.5 million and yet I feel broke. I go to Crested Boutte, Colorado. Boutte? How do you pronounce that? Pretty sure it's crested butt, right? Crested butt. Okay. It's probably B-U-T-T-E. We've got to ask Sean. He's from Colorado. I go to crested butt, Colorado, and see$5 million houses and feel like a failure. So, yeah, I'm rich, but I feel poor and like a failure.

58:26Awful, isn't it? I can't tell if there's a little bit of sarcasm. Is there a little bit of sarcasm at the end? I honestly can't tell. A little bit. So we started talking about this on this show a couple weeks ago, how there was a survey saying millionaires who feel upper or middle class I wrote a couple blog posts on this and I received dozens of responses from people saying, you guys are describing me. So we all know the reasons why, right? It's relative and comparisons and there's richer people than me. My question is, we know it's human nature. That's the reason for this, that these millionaires don't feel rich.

58:56What's the solution? Because a lot of them were, hey, listen, I live in California where houses cost a million bucks. What do you mean the solution? The solution, what, to fix human nature? There's no solution. What's the solution to make these millionaires feel a little bit better about their situation? Is there a way to fix this or do you think there's no way to fix it? No, it is what it is. Now, it's funny. I could hear another portion of our audience saying, oh, cry me a river. Yes, a lot of – yes. I don't necessarily think that these people are asking for pity or anything like that. But for people that don't have$3.5 million, certainly myself included, I think the more rational response to seeing this is like, wow, that's human nature.

59:43And to think that that wouldn't happen to you if you were so fortunate is probably naive. These people aren't dumb or broken. It's all relative. So they hang out with people with money. I made the point that, and I believe this, there are people that don't have a lot of money, but could be the quote richest in their friend group and feel like they're well off. Matter of fact, I saw this. So I worked at, I was a waiter at a restaurant for years and none of these people were making any money. These are people that were supporting their families on this. But there was like one guy that sort of had like a little bit of a side gig or another person whose wife did well.

1:00:28And I say well, like modestly well. And everyone looked up to them. And everyone looked up to them. And all of these people were lower income people, but relatively one or two of them felt very well off. So nobody compares themselves to the average American. It's who you hang out with. And so if you have$3.5 million, but you're hanging around people with 10, you're not going to feel too great. I have two solutions. One is I heard a lot of people in New York and California. Do you think people would be much happier if they moved out of New York and California with$5 million to a lower cost of living part in the Midwest or South or whatever?

1:01:06Would that? No, because here's the thing. I mean, maybe here's the thing. It's your personality. Yeah. It's your personality. It doesn't have anything to do with money. it's your personality yeah it's your emotional makeup the other thing is i heard from one person who was extremely frugal this guy i don't know he's probably worth 10 million bucks and he had a hard time spending it but he said he gave himself little luxuries when he hit 60 or something he said every time he flew he didn't care what the price was he's flying first class and i think if you you can say like why don't i drive a porsche or a maserati or why don't i have this house on the lake or whatever.

1:01:45I think you can give yourself smaller luxuries when you have that much money that can make you feel better about your situation. You just have to pick and choose them when to use them. It's an emotional makeup situation and I hope I don't get in trouble for saying this but or people think of a certain way. I felt rich like five years ago and if anybody who had money saw my income in my bank account, they would say what the f*** are you talking about? Because you were comparing yourself to five years before that. I was comparing myself to myself. Right. To where I was and where I thought I would be.

1:02:22Maybe that's the solution. As hard as that is to do, that's the solution. Not having to worry about money, to me, for me, that made me feel wealthy, which might be comical to some people. But my point is, it's your emotional makeup. It's not like a dollars thing. It's your personality. True. And you're stuck with yourself. Credit to me. All right. This Netflix thing where they released all their data about how much people watch, how many hours, what the best shows are. And it's for the last six months, I think they did. Right. But it's very interesting. Ted Sarandos was on the Matt Bellany podcast, The Town, talking about it.

1:03:05And this was this was an even bigger. We we we did it than the Fed this past week. Because Netflix basically said, we're going to open the kimono. People have been asking for this. other streamers go ahead and do it too because we know that people aren't watching nearly as much on your platform or they're on ours. Netflix just, this was their, they were already in the, this was the Rod Tidwell TD celebration from Jerry Maguire. Netflix has, it's over. These other streamers have to consolidate. I don't know, I don't see any other path forward for them if they want to compete with Netflix. Ben Thompson did a post on this.

1:03:47Just want to say one more thing about me feeling rich, just so there's no confusion. Five years ago when I felt rich, I want to say I felt rich five years ago, I felt good. I had no assets. And it's not like I had a giant income. Like you would have, but, and it's not like I don't even, I'm not rich today. I don't have millions of dollars. I don't even have a million dollars, but I feel good. I don't have to worry about money. And again, you were comparing yourself to a prior version of yourself. And that's the thing. I was comparing myself to the person that begged to be an external wholesaler in San Antonio.

1:04:18Yes. I look back at my own history and I think of I could not find a job out of college. I got turned down by probably seven employers of jobs that I thought I really, really wanted. And so, yeah, looking back at that and the starting salary I made out of college, which was just nothing, I can look back on that and go, that person would never have thought you would be where you are now. I think that's the way to do it. Not to get too corny on that point, But I think people that didn't have to struggle for their financial success, like it's understandable why they never appreciated it. I was 25 and unemployed with$0.

1:04:53And so anything above that was gravy. All right. Enough about me. So Ben Thompson tweeted or wrote about this. There is no country. We're talking about Netflix, the Netflix data dump. There's no country-level data distinguishing between movies and TV shows, overall show level numbers, or whether or not a movie or TV show is a Netflix original. The data also only covers January through June 2023 and is not cumulative. In other words, it is awfully hard to pull out clear insights from this data without doing massive amounts of grunt work. There was, however, one chart that I wanted to make immediately and it turned out exactly as I expected.

1:05:31And the chart is a distribution. It's exactly what it looks like. All the watching is at the top 0.1 % of titles, and it just completely flatlines. Power law. That right there is a picture of the internet writ large. Power laws rule everything. Have you ever heard of The Night Agent before? That was the number one watch show in the last six months. Yes. I've never heard of it. We watched two episodes. I'm like, yeah, this is like typical Netflix junk. Okay, that's what I think. I wanted to know if I should watch it or not. You know what it is? It's Netflix's version of CSI. It's just like a background.

1:06:02That makes sense. Or SVU. It's just a background, whatever, whatever. So that makes sense why it's so big. Because Netflix, in a lot of ways, is CBS or NBC now or ABC. Somebody tweeted that. Did they? Okay. Netflix is CBS. I can't remember who. This is in my inbox. Max is now on YouTube primetime. Watch HBO original movies and more. This is interesting. Man. What's YouTube primetime? I don't know. But this, the whole, we don't have to rehash this. This whole HBO situation was so mishandled. Oh, my God. It's not even HBO anymore. It's Max. Unbelievable. Did you see the Hulu on Disney app? Yes. I've seen that.

1:06:46It shows up there. Now you can watch Hulu stuff. I already have Hulu, though. I pay for Hulu and Disney. What's going on? Yeah, you pay for Hulu and Disney, but now you get it in one app. Okay. Pretty cool. There was an article in the Watcher Journal. I think we spoke about this a couple years ago. Title is Movie Nerd Nirvana. Ekrem Dimbologlu, Delta's managing director of in-flight entertainment and connectivity, oversees a team of five employees. Their job is to devise the best mix of entertainment options each month for as many flyers as possible. The airline features about 1 ,000 pieces of content on its flights, including 300 movies.

1:07:22It changes 20-25 % of the lineup every 30 days, and parts of frequent flyers don't get bored. Picking the movies is the fun part. The hard part comes at the end of the month when technicians have to make sure they get on each plane. This is nuts. Manually. At Delta, that means boarding 840 planes with devices preloaded with the content usually overnight. What the hell? This reminds me of that scene in Zoolander. The files are in the computer. I don't get it. What are these people doing to the screens? I guess their technology must be so far behind. I could do this job. I feel like I know what people like on airplanes.

1:07:58The real joy comes from discovering the gems, lesser known films, and shows that passengers come to love. So for me, I would love this job. The dark and the wicked. Speak no evil. You just scare the shit out of people. All right. Follow up from our talk about sentiment. So why are people in the U.S. less happy than people in other countries? A listener sent us this. Research supports this claim. In the U.S., 40 % turned to social media for personal finance information, yet globally, the average is 19%. So people are getting more negativity bias here because they're looking for it more on social media.

1:08:32There you go. Good data. A lot of people last week, I heard from dozens of people say, Michael's take on loving funerals was an all-timer. You know why? I was thinking about this. And this gets back to being appreciative because, you know, things were not looking good for me. There's nothing that makes you more appreciative of being alive than being in a funeral. And most people go about their day, go about their life, just completely oblivious or not appreciating how lucky we are just to be alive. And life is hard. Life hack, go to one funeral a week. You'll be happier. Life is hard. I'm not going to call my wife, my wife, my mother's death a blessing.

1:09:22But that like really shocked me. And it made me in later years, like just dealing with tragedy makes you appreciative of being alive. You took it the right way. You looked for a positive out of a bad situation as opposed to the opposite. Yeah. So part of me at funerals like is cathartic because obviously I think of my mother, but it just makes me appreciative. like all of the noise and being on social media four hours a day and just all this flood of just noise, noise, noise, noise, noise. It's the only thing that like completely blocks it out. And just is like, you know what? Just happy to be here.

1:10:01You know, speaking of your, your life goals and such, I got a bone to pick with you because my wife occasionally listens to the podcast and I don't have, what are my life goals? I'm not a goal oriented person. No, last week you said looking for the best in people, that people should look for the best in people more. And my wife listens to the podcast occasionally, and we have these 8 a.m. Saturday basketball games all the time, and I'm not a morning person. So stay away from me for the first hour when I wake up. I'm just not a morning person at all. I don't want to talk. I don't want to smile.

1:10:33I need my time, and then I'll move on and start with the day. And I think I was a little grouchy. I can't remember what I said, because my wife is a morning person. She said, you know what? You should take Michael's advice more about looking for the best in people as opposed to the worst. That's not my advice. That's Bubby's advice. I don't look for the best in people. That's a great way to live. That's true. If only you could do it. All right. This made me laugh out loud. This email. I am sorry you had to find out Yokozuna was in fact not Japanese. I hope this will not be too further demoralizing, but Sergeant Slaughter was neither a military officer nor an automobile discharged.

1:11:10That was pretty good. we should do recommendations. We've been going for a while now. Okay. Let's save some of this stuff for next time. All right. Recommendations, Ben. What do you got? All right. I flew through the Beckham doc on Netflix last week. I'm a little late to this. Is that a movie or is it a series? It's a documentary. It's a four-part series. They're each like an hour long. I really liked it. I was never a soccer fan growing up. I didn't pay. I knew David Beckham from magazine shoots and heard about him a little bit, I guess, but I never watched soccer growing up. but, and so there was a lot of the story that I didn't know, and obviously him and his wife were probably producers of the show, so they spun it to make it a positive, put him in positive light, but I came away liking him and his wife way more than I did before going into it.

1:11:51And by gosh, was that, he was one of the most beautiful men alive. Very handsome. Holy cow. Very handsome. Just, but it, I really, really like, because it was pop culture and sports, and it was very good. Also, I don't know if we can, it's too early to start a best movies of the 2020s yet, but I have a candidate for one of the better ones. It's called Past Lives. It's a Korean movie. I don't think it's a Michael Batnick movie, but you did like The Whale, so it's hard to say. It's such a simple - I surprise you sometimes. That's what I'm saying. So I absolutely love this movie. It's such a simple concept.

1:12:24It's girl family lives in Korea. They immigrate to America when she's young. She keeps a friendship with her best buddy, who's a boy from Korea. And it's 24 years of their lives of them coming in and out of each other's lives. and then they finally meet after 24 years in New York for one day. Oh my God, are you kidding me? I love it. That sounds like a tearjerker. And you know I love to cry. There's a scene at the end in a bar where all it is is dialogue. Nothing else is happening but dialogue. And it was, I'm not a person. It was like a beautiful scene. This, I loved, and I keep thinking. You're not a crier.

1:12:56No, I didn't. You could get a little dusty. I don't think I cried, but it's a very, very good movie from such a simple premise. Wait, where do we watch it? I'm going to watch it. I rented it. I rented it on Amazon. The run of Korean, Koreans make better drama than we do these days. Parasite, I think is - An amazing fried chicken. Pretty good. Parasite was, I think, one of the best movies of the past decade. Minari, I liked. Squid Game, obviously, was good. Pachinko on Apple was good. They make better dramas than we do now. We got an email. I was talking about like, are foreign films better after watching Godzilla Minus One, which is still in my brain?

1:13:33Great movie. somebody said the films that make it here and you hear about are the best movies that the country is offering you don't hear about the bad ones because they don't make it out and film critics and snobs don't talk about them they only talk about the good ones alright so yeah it's a you know I'm looking at all the best stuff Kree has to offer but it's been really good I think the past few years but you can say the best that they have to offer rivals the best of what we have to offer yes minus minus Talk To Me and all the great horror movies that we have you should watch Talk To Me okay my you're talking about Godzilla.

1:14:05All we've been watching lately is for my son is King Kong versus Godzilla and this other Godzilla. And he's just going down the rabbit hole. He's going to like Godzilla minus one, I think. No, no, no, no, no, no, no. That's not for him. Okay. No, Godzilla minus one is not, that was the real shit. Not like this Hollywood bastardized version that we do. All right. So the New York Post wrote that Mark Zuckerberg is reportedly building a sprawling $100 million Hawaii compound complete with an underground bunker and its own food and energy sources in a secret project suggesting the social media mogul is trying to conceal his doomsday preparations.

1:14:40There's no way in the zombie apocalypse he's going to make it there without getting killed first.

1:14:49Did you see... So all of this, the scariness is starting to seep into pop culture and I don't know that I like it. We saw Leave the World Behind. Did you see the trailer for Civil War? Yes. The A24 one. That looks very creepy, but also pretty good. That's scary as shit. Yes. It looks good, but yeah. I spent the week watching comedy on Netflix. I'm not quite sure why. I went to the Comedy Cellar a couple weeks ago. I told my friend to give him a plug. Mint Comedy. So Mint Comedy allows you to stream. So you see the specials on Netflix. So this week I watched Andrew Santino. Did you see that one?

1:15:29He's a guy from Dave, the redheaded guy. You know, as much as I love comedy, I have a hard time watching the stand-ups anymore because I feel like it's so much better live. It is so much better live. So Andrew Santino, how's it going? Pete Holmes, that's a good one. And the big dude Stavros, such a good one. Anyway, Mint Comedy, you're able to stream live shows from the seller in other locations. So it's pretty cool. So it's not like the headline specials. So you see the real deal. Not in person, but second best thing. Lots of up-and-comers, huh? Yeah. All right. All right, we did go along, huh?

1:16:03Hour 20 minutes. We're going to do our best to have episodes the next two weeks, even during the holidays. We're going to make it happen. Compeller High Water, the show must go on. Remember, personal emails, personal responses, animal spirits at the compound news dot com. Thank you to Duncan and John and the rest of the team for editing this lengthy episode. Thank you for listening. Happy holidays. Merry Christmas. Happy New Year. We'll see you next week.

1:16:38Hey, Ryan Reynolds here. Wishing you a very happy half-off holiday because right now Mint Mobile is offering you the gift of 50 % off unlimited. To be clear, that's half the price, not half the service. Mint is still premium unlimited wireless for a great price. So that means a half day. Give it a try at mintmobile.com slash switch. Upfront payment of$45 for 3 month plan equivalent to$15 per month required. New customer offer for first 3 months only. Speed slow after 35 gigabytes of networks busy. Taxes and fees extra. See MintMobile.com