The Stock Market Is Doing Something We’ve Never Seen Before (EP. 463)

12:53Ben Carlson:Remember that was a thing for a while? Like once the base effects go away? Yeah. Remember the other one was, what happens when the excess savings from the pandemic goes away? You don't hear that much anymore, remember? And at the risk of just sounding insanely bullish.

13:08Michael Batnick:How do you not sound like a cheerleader? How do you say data like this and not sound like a cheerleader? It's impossible. I know. No, but I don't know. I feel like we're telling the truth. If it sounds like we're being cheerleaders, all right, guilty as charged, I suppose. I'm telling you what's happening in the market. What if we had a conversation with Crane Shares earlier in the week? What if robotics is the next thing, like human-oriented robots? And maybe that's a pipe dream, but maybe it's not. What if that's the next$5 trillion market?

13:35Ben Carlson:So in Drees and Horowitz, A16Z has these charts of the week now, which is pretty cool. And they show the margins. To your point about the 70s, they see not your grandpa's stock market. Profit margins at all-time high again.

13:47Michael Batnick:Yeah, don't ever show me the CAPE ratio that from the 50s when profit margins were 5%. You are comparing computers and something else. Something else, Ben. Think of something clever.

14:03Ben Carlson:so financial times says they talk about google's numbers and they say big tech's ai spending plans rise to 725 billion dollars and they show the capex just keeps every quarter gets higher and higher and it's not coming back this is from mike zaccardi uh wait i'm just staring at these numbers

14:23Michael Batnick:i shared this with you and josh let me just pull this up um okay sorry the one was good the big

14:30Ben Carlson:four, which is Amazon, Meta, Microsoft, and Google, are together expecting to spend 77 % more in CapEx than last year, which was a record. 77 % more than the$410 billion they spent last year. Just these four companies alone.

14:44Michael Batnick:So Meta, a company that the stock market is not super excited about right now. I think it fell 9 % after earnings, and there's no bounce. You a buyer here? I'm not. Purchases of... Your paper count? Nope. Purchases of property, plant, and equipment was$6.4 billion for the quarter in 2024, in the first quarter. All right? Just two years ago. That is$19 billion. So it went from spending$6.4 billion to$19 billion. Well, you would expect free cash flow to get destroyed, right? Because that's a lot of the part of the narrative. is their free cash flow is eroding really quickly. It's all being financed by debt.

15:34Michael Batnick:They're not gonna be able to pay for this. Their free cash flow in the first quarter was$12.5 billion. And the most recent quarter is$12.3 billion. How? Well, their net cash provided by operating activities went from$19 billion to$32 billion. In one, two, three, four, five, in eight quarters. Wow. 19 to 32 in eight quarters. And think about how long ago the pandemic was. I'm only looking back to 2024. What was Facebook pre-COVID?

16:08Ben Carlson:And the stock's in a 24 % drawdown at the moment.

16:12Michael Batnick:So yeah, I don't think the market is... The market is certainly not showing signs of euphoria, at least not in the Mag 7. The stuff that's going on with the chip names is starting to worry me a little bit. Western Digital,

16:27Ben Carlson:CNDisc, Micron, yeah.

16:28Michael Batnick:Now, the earnings are up. I did this with Josh last year, last weekend. What are your thoughts? The earnings are up like 10x, so maybe what do you expect the stock to be doing? I think in one case, I think Santa's the only ones might be up 50x year over year. I'm not kidding. Something nuts. So I guess you would expect the stock to be, you know, going along in concert, but it's a lot of market cap. It's like I'll be So you feel like Micron goes up 8 % every day. There is a lot of chasing going on here. Yeah, those stocks are up.

16:57Ben Carlson:Those stocks, they're like the new quantum computing stock, it seems like. So you mentioned the cash flow part. Bank of America via Mike Sicardi. Hyperscalers' CapEx has a percentage of operating cash flow with 70 % in 2025, expected to be greater than 90 % in 2026. Holy smokes. They are just going for it. This is crazy, too. This is from the Atlantic.

17:19Michael Batnick:Hold on a sec. CapEx as a percent of operating cash flow.

17:26Ben Carlson:That's nuts, correct? So this is below 25 % in 2012. Now it's going to be 90%. This looks like a stock chart. Okay. Give him the Zach Galifianakis gift there, Duncan. This is another crazy one. So the Atlantic had this piece on Anthropic. Okay, so they say, Anthropics revenue is increasing faster than Zoom's during the pandemic, Google during the early 2000s, and even Standard Oil during the Gilded Age. If the company's current growth rate were to continue by early next year, they'd be taking in more money than any company in the world.

18:03Ben Carlson:Not like 10 years out, not five years out, just the current trajectory to next year, their revenue would be higher than anyone else.

18:14I don't know, man.

18:16Ben Carlson:No precedent. No.

18:18Michael Batnick:We've never seen this before. Yes, if you're comparing this to anything in history. We've seen high growth. We've never seen gigantic rapid growth like this. Which has never happened before. It's not. All right. I'm going to take the under. I'm going to guess that they don't have the most revenue in the world a year from now. I'm going to guess that the growth slows down. You know, going out on a limb.

18:40Ben Carlson:That's probably fair. Maybe we'll be wrong. Exhibit A chart of the week. This one surprised me. I didn't know this. Trudkin Matt sent us out last week. Exhibit A for advice.com if you want to learn more. We're now a double from the lows of 2022. The S &P 500 is up 100 % from the lows. See, when inflation was at 8 % in the fall of 2022, and the world seemed like, okay, recession is like any day now, or we're already in a recession. You bought back then, you're up 100 % in the S &P. It's pretty good. I didn't think that. Should have got an all-in. All right. Damn it. Let's give some bad news. I think this is bad news.

19:23Ben Carlson:TLT, iShares 20-year-plus treasury-bound long-term government bonds, now have a negative return over the past 11 years. Nowhere for 11 years. Still in the 40 % drawdown from the highs of early 2020, mid-2020. Because rates have gone from essentially 1 % or something to 5 % now or something. Was this the easiest crash of all time to hedge? Of a pretty substantial asset. This is, long-term government bonds are a substantial asset. I don't know how many trillions of dollars it's worth, but it's a lot.

20:02Michael Batnick:What do you mean was it the easiest thing to hedge?

20:04Ben Carlson:Because all you had to do is go short-term debt.

20:07Michael Batnick:Oh, oh, oh, oh.

20:08Ben Carlson:It was the easiest hedge of all time within fixed income. Oh. Oh. Yeah, I think that's fair. I don't think that's hindsight bias. I think that's fair. I think if you sat through a 40 % crash in this thing and you've been in it since 2020 and didn't diversify your bonds, that's your fault.

20:24Michael Batnick:Harsh but fair. I did notice for the first time, gasoline is expensive. I filled up the tank, my wife's tank. By the way, I got a bone to pick with my wife. I don't know if your wife does this. There's never any gas in her car. Ah, okay. Never. Somehow, miraculously, the light is always on when I go in there. Except this time, there was only 10 miles left. And I had to take Kobe and his friend to Art. So the gas light was going on and off. And Kobe was like, Daddy, you got to pull over. It's saying pull over immediately. And I was like, I think we're going to be okay. So I filled up the tank. And I think it cost$90 or so.

21:05Ben Carlson:So look at the text message I put in here for my wife. Holy shit, gas is$5 a gallon. There's something about rounded numbers that get the human brain to, you know. No one ever says, oh my gosh, gas is$4.75 a gallon. It's the round number thing.

21:20Michael Batnick:I paid way less relatively. I think mine was like$4.25. But I noticed the bottom line, I feel like that happened fast, no?

21:29Ben Carlson:Look at the chart of average gasoline prices. It shot up like a cannon. It seems like the way that this works is that when oil prices rise, as they rise like, what does it say? Rise like a rocket, fall like a feather? Is that kind of how gas prices happen?

21:45Michael Batnick:I've never heard that before, but I like that.

21:47Ben Carlson:I mean, I didn't make it up. But that's what's happening now. And it still seems like, I mean, we're probably, I don't know. It seems like we could get$6 a gallon gas in the country on average and the stock market still won't care. Is that possible?

22:06Michael Batnick:The stock market still won't care?

22:12Michael Batnick:Uh, it's funny because we're in a place where it seems like every

22:17Ben Carlson:$6 is high. I think we're, I mean, when a lot of places we're getting pretty darn close.

22:24Michael Batnick:Oh, you know what? I asked chart kid to, uh, make this for me. A chart of, uh, gasoline versus the S and P 500. I bet that's not much of a, my suspicion was there's nothing there.

22:39Ben Carlson:Yeah, I'm guessing there's not either. But here's the thing. Every single oil analyst, every single geopolitical analyst, every single investment pundit right now is thinking like, listen, the energy markets are all screwed up and no one is paying attention to this. But doesn't this seem like the most telegraphed risk we've ever seen? Like, it seems like everyone knows about it. There's no one that if you're paying attention, you know about this. You know that energy stuff is screwed. So look at the chart from Financial Times. Scroll down a little bit. The loss of oil supplies in 2026 is the biggest of them all since 1973.

23:12Ben Carlson:Bigger than the Iranian Revolution in the late 70s. Bigger than the Arab oil embargo. Bigger than the invasion of Kuwait. Iran-Iraq War. All these other things have happened in the Middle East. This is by far the biggest supply. And obviously oil is more. There's a bigger supply than ever because there's more people. But this is the Austin Powers where the guy is standing in the way of the steamroller. Get out of the way.

23:34Michael Batnick:Get out of the way. that's what this is

23:37Ben Carlson:right yeah

23:39Michael Batnick:this morning I think Robin rolled over onto the remote control and the TV turned on and it was the local news so I guess before Good Morning America whatever it is like a local news and it started with gasoline prices fire in the city another fire somebody got stabbed in the face murder and then somebody spray painted a swastika on somebody's front door. I was like what the is this? Is this for real? And I feel like we've had this conversation over the years like this is just what the news is now but this wasn't like it wasn't like channel 12. It wasn't like that local news. It was like it was one of the major networks.

24:32Michael Batnick:It was either channel 4 or channel 7. And I don't know why I'm talking about this, but like this is just what the news is. It's unbelievable. Literally.

24:39Ben Carlson:Hang on a sec.

24:41Michael Batnick:Gasoline, fire, fire, death swastika. And then I turned it off. I'd had enough.

24:47Ben Carlson:Sorry, I got a busy day. DoorDash just came for me.

24:49Michael Batnick:That's okay. You don't have to apologize.

24:51Ben Carlson:This is why I've essentially checked out of news. Like I don't really want… I pay attention to financial news, economic news. I've checked out of the actual news networks. I don't like to watch them because it's just depressing. Does that make me a bad citizen?

25:04Michael Batnick:No. No. They're doing you no favors. I have mixed thoughts about this, Ben. I mentioned that I have that brick thing, right, where you lock your phone. And I primarily did it because I don't want to be with my kids on my phone. But I realized, like, one of the problems is in the morning I wake up, and now I'm just on Instagram for an hour in the morning in bed.

25:28Ben Carlson:Oh, so you went from doing one thing to another?

25:30Michael Batnick:Well, my screen time did not decrease. I'm embarrassed to tell you how much time I spend on my screen. You know, Apple gives you like your screen time for the week. So I blocked Instagram and I have, I have hardcore mixed thoughts. I feel like I'm, it's a little, I'm now I haven't, I'm still, I'm on Twitter and Instagram. I'm on Twitter on my, on my computer and that's enough. I've never, I logged into Instagram today on the computer for the first time. I've never done that before. It's, I was a mobile only.

25:55Ben Carlson:Desktop. I know you could do that even.

25:57Michael Batnick:But this is a, this is a big step. Cutting off Instagram. That's huge. Where am I going to shop? How am I going to find my fitness influencer stuff? Speaking of that, somebody, uh, I did, I did peek into the comment section because you guys shared something funny.

26:11Ben Carlson:You had to get roasted for that thing last week. I said, I wonder what people are saying about my, my fitness. So LaRosa, our colleague said, this has to be the most ridiculous shit you've ever bought.

26:26Michael Batnick:Right. I almost crashed trying to zoom in for a better view while driving.

26:33Michael Batnick:somebody wrote that was the dumbest workout machine I've ever seen and then somebody replied I know LOL can't you just swing your fist without a guide now yeah imagine I'm just doing this there's resistance there's resistance so my Instagram purchases are obviously going to tank which I I don't really love that that's where I get all my shit but I did buy I did buy one more thing Ben one more my my transition to fitness influence is almost complete so i'm not feeling great about my body there i said it feeling old i'm looking old don't feel great body issues ben you know what i bought so my i also bought this for practical purposes you know i have a rickety back my back is like just aching all the time i can't play basketball anymore so i need to strengthen my core.

27:25Michael Batnick:Planks are very good for you now. Yeah, I do planks. Yes. Yeah, of course you do. The problem with planks, Ben, hurts your arms. So I bought, you know, the wrestler, uh, edge. So Christian and edge, you don't know wrestling. They have a, they have a mat. So it's like two inches of foam with grips and a timer. So guess what I've been doing every day, Ben, planks, I'm getting in shape and it doesn't hurt your arm or elbow at all. Pureplank.com. Get 20 % off. No, you can't get any percent off. But it's working for me.

27:57Ben Carlson:Why don't you buy a yoga mat?

28:00Michael Batnick:Yoga mat? Those are this thick.

28:03Ben Carlson:Your arms are that sensitive? You can't go on the...

28:06Michael Batnick:I have sensitive bones.

28:09Ben Carlson:Okay. Got a bridge to sell you. Okay. So I think you put some charts in here from Duality Research. But why gasoline isn't... Part of it is percentage of wages, price of gasoline hasn't gone that much farther. their average cars are more fuel efficient than they were in the past. That matters a lot. So he, this is great stuff now.

28:31Michael Batnick:Yeah.

28:31Ben Carlson:Adjust for fuel efficiency. Like it's, it's much lower. I had Sean do. Whoa, whoa, whoa.

28:36Michael Batnick:He did three adjustments. He did three adjustments.

28:39Ben Carlson:Fuel efficiency wages. Okay.

28:41Michael Batnick:He adjusted for wages. Right. Cause we're comparing. Yeah. Guess what? Average hourly earnings have gone up a lot over the last 50 years. He could, he adjusted for fuel, average fuel efficiency. and then as a percentage of wages adjusted for fuel efficiency, the double adjust.

28:58Ben Carlson:That's pretty good. So I had Sean just give me an inflation-adjusted gas price going back to 1990. And we're essentially today on an inflation-adjusted basis where we were in 2004 and 1990 for gas prices. Just inflation-adjusted, which obviously takes a dope.

29:15Michael Batnick:So not adjusting for inflation, which is obviously absurd. Not adjusting for wages and fuel efficiency. that's like saying houses cost so much more money than they did in the 1970s on a nominal basis without talking about a inflation and b houses are a lot bigger and better there's double the

29:34Ben Carlson:square feet but this is more expensive but this is also why gas prices will annoy people and people will complain about it and it isn't more annoying to spend more it doesn't know it sucks it does suck, but consumers will probably be okay as a whole. Some won't, most will. That's probably where we fall on this, right? That's right, Ben. This is a garbage server. But that's kind of the way that things have worked for this whole cycle. Something happens, it annoys people, but people kind of just still push through it and we're okay. That's where we've landed. See the economist covers? That's still in la-la land.

30:08Ben Carlson:Why oil prices are not yet high enough. They're kind of thinking the same way, I think. You know, I thought there's a macro forecasting rule here. Because people have talked about, hey, if the straight of Hormuz is not open by X date, we're screwed. If you're a macro forecaster, never give a date. Always just keep it open-ended. Listen, if the straight of Hormuz doesn't open, energy markets are screwed. Oil is going to dot, dot, dot. Give an amount. You have to give an amount. Never give a date. Because the date thing, it always comes to pass. And then you realize like, oh, wait, nothing happened.

30:42Ben Carlson:push back a month. Don't give a date.

30:44Michael Batnick:Something to think about. Sage advice, Ben. All right, this is a garbage survey. The share of Americans who say their financial situation is getting worse. So it's at an all-time high as far as this poll is concerned.

31:00Ben Carlson:Yeah, this is a Gallup poll. They're doing, yes, and Axios did this.

31:05Michael Batnick:So right now the reading is 55%. And for context, during the great financial crisis, which was both great as well as a crisis, that number did not reach quite close to 50%. So more people are saying that the financial situation is getting worse now than in 2008. Or more likely surveys are broken and or more likely this survey is complete bullshit.

31:32Ben Carlson:You can't trust them anymore. These surveys, you can't trust them. It's, there's no way in any objective measure that people's finances are worse off today than they were in the financial crisis.

31:45Michael Batnick:All right, but I want to, I want to read a tweet to you from this guy, Peter Diamandis, MD. I don't know. I'm not.

31:54Ben Carlson:I read his book. He wrote, he wrote a book about 10 years ago talking about like the abundance in the future or something.

31:59Michael Batnick:Pretty good. Not familiar with his work. He said Elon Musk just crossed$800 billion, roughly 2.7 % of the entire US GDP. The last person to hold that much of the American economy, John D. Rockefeller in 1913. It took a century for anyone to match him. Rockefeller had oil. Musk has the future. Now, that, obviously, this is a lightning rod of a tweet, right? That in a vacuum doesn't bother me so much. Now, say what you will about Elon. He's created a lot of wealth for others, obviously for himself. But that's what we do in this country. Now, is it crazy? Yeah, it is crazy. But that's how this country works.

32:45Michael Batnick:That's capitalism. That's our system. For better and certainly for worse. I didn't love his response. His response was$10 trillion or bust. Now, I don't know if he's kidding or not, whatever. He's obviously provocative. but come on, dude.

33:03Ben Carlson:All right. So I was reading this week. Don't scroll down. I got a trivia question for you. So today the top 10 % holds roughly 67 % of the total wealth in America. Obviously very wealth inequality is a thing, right? Two thirds of the wealth is held by the top 10%. I'm reading this book called wall street of history. And you're talking about the wealth concentration, the heading into the 20th or in the early 20th century, like heading into like the roaring twenties, the top 5 % of the population back then controlled what level of wealth? This is in the early 1900s.

33:36Michael Batnick:When Vanderbilt died, and I guess, when did he die? The late 1800s? He, there was some crazy stat. He had like as much money as, I forget what it was. Whatever, it doesn't matter. Yeah, it's way, way worse. Top 5 % controlled 80 %?

33:55Ben Carlson:90 % of the wealth. Crazy how much worse it was back then. This book says math.

34:02Michael Batnick:It's not wealth inequality. It's like, it's massive wealth inequality between not just the haves and the have-nots, the people that controlled this amount of money and everybody else. Yes, right.

34:15Ben Carlson:And power.

34:16Michael Batnick:Right, it's the people with, you know, whatever.

34:19Ben Carlson:That number just blew me. 20 billion and up. That number blew me away that it was that much worse back then. But the thing is, no one knew about it. There weren't these stats that showed people.

34:31Michael Batnick:Yeah, Rockefeller wasn't tweeting. Right.

34:34Ben Carlson:All right, government debt. This is from the Wall Street Journal. As of March 31st, the country's publicly held debt was 31 point, well, they got three decimal points, 265 trillion, just over GDP. So it's 100 % of GDP now, the national debt. This is the kind of chart you show people that you really want to scare them. Right? Look at this.

34:56Michael Batnick:U.S. publicly held debt as a share of GDP. Yes.

35:02Ben Carlson:So I pulled this Steve Eisenman quote from when he was on TCAP with you guys, which was what, six months ago or so? Ish? Ten months ago? Sounds about right. The deficit is Wall Street's version

35:15Michael Batnick:of virtue signaling. People get on TV and they're like, they try to one-up each other. I am against the deficit. And then the next guy says, oh, he's not against the deficit. I'm so much more against the deficit than he is. I hate it most. I hate it more than him. He's nobody. Okay. And nobody ever asks the question, given all the agita around the deficit, why have none of these predictions ever even come close to happening? Yeah. And I think what they all miss is that the entire, like I said to that before, the entire financial system of planet Earth runs on treasuries. All right. So true. It's like, what, you don't care about putting all this debt on your grandkids?

36:05Michael Batnick:How selfish are you? You're leaving them the bill to pay for it. It's all virtue signaling.

36:10Ben Carlson:I just, my whole thing is, I agree with him that like we run the financial system for better or worse. Until there is a something better than treasuries that people are willing to put their money into, how is this ever going to be a crisis?

36:23Michael Batnick:I don't know. Well, I guess maybe it's worth worrying about only in the sense that if it does, if we go over the line, like this is the system itself. Right. Like you can't like, it can't break. because it's everything. It's a whole kit and caboodle.

36:44Ben Carlson:I said that last week, didn't I? If a better system comes along, if there is a better alternative to treasuries in the U.S. dollar. No, I know.

36:52Michael Batnick:My point is it's worth worrying about even though I don't like the hyperbolic constant worrying. It seems to be a waste of time.

36:58Ben Carlson:I just seem to think that inflation remains the biggest risk of all this spending, not like a system-wide crash. That's where I fall in. Like, oh my gosh, everything's going to implode. I just don't see that as being a big worry.

37:09Michael Batnick:Well, I have good news on the inflation front, at least here in midtown Manhattan. I got Chipotle today. It has been a minute then. 12.85.

37:20Ben Carlson:I feel like you're in an abusive relationship with Chipotle because you break up once every six months and then come back and tell us you got back together.

37:29Michael Batnick:I'm basically done ordering Chipotle only because I'm just not in the city that much. You know? I mean, there is one right next to our office in New York. Yeah. Convenient. But I remember it broke the$14 barrier.

37:43Ben Carlson:So you think that they lowered prices at Chipotle? I know they did. Okay. That's good. It is good. All right. Do you think that the AI people finally got the memo? This is Sam Altman tweeting last week. We want to build tools to augment and elevate people, not entities to replace them. I think a lot of people are going to be busier and hopefully more fulfilled than ever, and job doomerism is likely long-term wrong. Okay? I'm hopeful for a future where people who want to work really hard have incredibly fulfilling things to do. And people who don't want to work hard don't have to and can still have an amazing life of prosperity.

38:15Ben Carlson:PR people finally got to them, right? Said, hey, guys, come on. Stop talking about how this is the end of the world. Stop talking about labor market apocalypse. Not doing them many favors. Maybe I am, what do you call it, a Cassandra? I'm a glass-safel person. I tend to agree with him. I don't know if he believes this or not. I agree with his statements more than I do with Dario from Anthropic. So do I.

38:40Michael Batnick:So Ezra Klein was writing in the New York Times in an op-ed, why the AI job apocalypse probably won't happen. And he said, the more automation there is, the more people value a human's touch. Take coffee. It was once laborious to make espresso at home. Now Nespresso machines are everywhere. Has that led to Starbucks closing and neighborhood coffee spots dropping in prices? Of course not. There are more baristas than ever. There are more coffee shops than ever. Coffee as a commodity led to more demand for coffee as an experience. He said, in 1979, so bear with me, I'm going to read for a sec. In 1979, Visicalc, the first electronic spreadsheet, was released for the Apple II.

39:25Michael Batnick:It could do in minutes what previously took teams of accountants days. There were predictions of mass unemployment for bookkeepers. Instead, the number of accountants quadrupled over the next 40 years. The spreadsheets didn't replace the accountant. Maximoff writes, it unleashed latent demand for financial intelligence that had been there all along, waiting for cost to fall far enough to be demystified. So they talk about Javon's paradox, and he says, this, Maximoff thinks, is what AI is likely to do, even in the industry's most exposed to disruption. He thinks that in part because it happened before.

39:58Quote,

40:28Michael Batnick:was more to do.

40:31Ben Carlson:I agree with this. And someone's going to say, you idiots, this is different.

40:34Michael Batnick:It is different. It is different. But and also, it's confusing because for all the reasons we don't need to get into about the obvious threats that AI poses, but there will be layoffs that are blamed on AI and part of them will legitimately be AI. But we heard from Coinbase this morning. Coinbase is cutting 14 % of their staff. It's 700 people. And they're citing AI. Of course, the stock is, you know, crypto is not, you know, not hot right now.

41:06Ben Carlson:He also said like, yeah, crypto is in a winter. We're in a bear market. So it makes sense to, yeah, and they've obviously overhired. But yeah, this is, and there are going to be certain industries. I just, I'm having a more positive view about this now probably than I did six months ago even.

41:21Michael Batnick:Well, here's another one. Positive, positive view. Torsten Slok, he said, AI's most exposed industries keep hiring. Nearly 2 million workers in the Philippines now work in call centers, up every year since 2016 and through the AI boom. Again, this is Javon's paradox in action. As AI makes call center work cheaper and faster, companies are buying more of it, not less. And then finally, Derek Thompson, Patrick Collison, founder of Stripe, tweeted, Stripe Atlas just hit 100 ,000 all-time incorporations. And Derek said, Stripe data shows that startup incorporations are way up, and startups and AI are seeing faster-growing revenue than is historically normal.

42:05Michael Batnick:For now, AI agents are better at creating firms than destroying jobs. So I haven't all of a sudden gone from worrying about AI to not worrying about AI, because I think, I don't think this. I know this. Everybody knows this. That there will be displacement.

42:19Ben Carlson:Yeah, the worries are legitimate in some areas. For sure.

42:21Michael Batnick:Yeah.

42:22Ben Carlson:But it's not black or white. Yes. And I do agree that business formation is going to explode. And it's going to keep exploding. And the ability to start your own thing will be easier than ever. Because you can ask all the questions in the world that you want. Alec Stapp put this in. The housing bubble in late 2000s looks quaint by comparison now. Okay. Imagine showing this to someone 10 years ago and trying to convince them that today is not a bubble. when the last one looks like it's, we left it in the rear view mirror.

42:52Michael Batnick:This is cute, but it's like, this is kind of a dumb chart, no offense. Only because, or it's not dumb, it's incomplete. Because it was the leverage, it wasn't the prices. Wait, what? This is showing the national price index.

43:09Ben Carlson:Yes.

43:11Michael Batnick:And the reason why there was a real estate bubble in the 2000s isn't because real estate prices were going up 15 % every year. It's because prices were going up with no equity down.

43:24Ben Carlson:Yeah, you're right. It was both. It's just, it's interesting to try to explain to someone how prices could be up as much as they are in the 2020s without having that stuff happen. Without having the leverage. Without having the home equity line of credit crazy in it. Like, without the, it's hard to fathom. It would have been hard to fathom we could have this boom without that stuff. without the speculation and people buying eight houses and eight condos, right? And the strippers were buying three condos in Las Vegas or whatever. We didn't have that this time.

43:52Michael Batnick:Yeah.

43:53Ben Carlson:Look, I found this. I'm not trying to pat myself on the back here. We've been talking about this forever. I wrote why this is not another housing bubble in April of 2021.

44:00Michael Batnick:What was the TLDR?

44:02Ben Carlson:It's just because people locked in low rates. People had way higher credit scores and people weren't borrowing their faces off and they weren't doing the adjustable rate mortgages. Like all the bad stuff that we learned our lesson on last time, we figured out. And it's another thing we just kind of moved on and we dealt with it.

44:22Michael Batnick:All right, let's do private markets real quick. So PitchBook did an analysis of private credit loans and top public BDCs.

44:30Ben Carlson:Does it feel like we moved on from this risk in terms of like the zeitgeist? It does. It's funny, yeah. Well, because, you know, you said it best.

44:37Michael Batnick:We can only pay attention to so many panics at once.

44:40Ben Carlson:Yeah.

44:40Michael Batnick:We move on. And also prices stabilize, right? Like that helps. So this doesn't sound great. Their Q4 2025 takeaways, key takeaways. Software exposure and related AI disruption risk is larger than surface level numbers suggest. Uh-oh. Software alone accounts for 25 % of the top 10 BDCs portfolio of fair value. And the real exposure runs deeper once you look past sector labels. Not great. First lean yields contracted by roughly a point over the past year. Lower base rates and tighter cash spreads drove the decline. Not great. Non-accrual stress is growing in dollar terms, even as headline counts hold flat.

45:18Michael Batnick:Not awesome. And then lastly, borrowers overlap as deeper than investors might assume. Some names appear across five or six BDCs simultaneously, meaning a single credit event ripples through multiple portfolios at once. Okay. All right. So not awesome. Yeah. Not awesome stuff. And then I was looking at some of the performance of the biggest publicly traded BDCs. uh, Golub capital, blue owl, Aries. And I'm looking at the total return. You're a date. And it's like, what are we talking about? Golub is up 4.5%. Blue owl. Like the, which is like the eye of the storm is down 1.2%. Yeah, sure. It was down.

45:56Michael Batnick:It was down worse. Um, it's just, it's a lot of energy and I understand why I understand why we spent so much time talking about private credit. Um, it just feels like outsized given, uh, it feels unfair and fair in certain ways, but it's flat.

46:14Ben Carlson:So this could be a situation where a lot of the weak hands got shaken out at the same time. Yes, and also TBD, right?

46:22Michael Batnick:Because we don't know what AI is going to do to the software in these portfolios. So we shall see. But I'm glad -

46:27Ben Carlson:Probably going to take a while.

46:28Michael Batnick:I'm glad that we're moving on because it did feel like it's getting overdone. All right, let's do - So survey prediction markets, as Bloomberg and the Wall Street Journal both ran some stories on this.

46:41Ben Carlson:So I made the joke on Twitter that this was like the same summer when Deep Impact came out at the same time as Armageddon. And remember there was Dante's Peak and the Volcano movie came out at the same time? Yeah. I think there was a Mars Red Planet one where it's like they got the same idea. So Bloomberg and the Wall Street Journal both did independent studies of, somehow they opened up the books and figured out who's making money and who's losing money. They both did it. Good numbers. and the TLDR is not great for people who are on these platforms? No.

47:10Michael Batnick:Shocker. Here's a good one. On Polymarket, Noah Colwin tweeted this. On Polymarket, the journal found 67 % of profits go to just 0.1 % of accounts. That means less than 2 ,000 accounts netted a total of nearly half a billion dollars. I said this a couple months ago, and I will bang the table on this, bang the drum on this. you should not be allowed to wager on outcomes that can be known in advance. For example, you can't know who's going to win a basketball game. Now, there might be a player if you want to whatever, be annoying. There might be a player that's like trying to throw the game, but in general, just stop.

47:55Michael Batnick:You can't know who's going to win a basketball game. You can't know how many Teslas will be delivered in 2030, right? Or how many humanoid, like things like that in the future events, nobody knows. But if there are things that you can bet on where a small number of people might have that information, cannot bet on it.

48:19Ben Carlson:Well, so obviously, yeah, that 0.1 % is obviously is mostly insider trading. The thing is - Cannot do it. You would think that they would want to get rid of this because that's causing people on their platform to lose money. That money comes from the losers of those bets. the fact that the 0.1 % accounts for all the take-home profits, they should want to root out that bad behavior. Right? They should not want that to stay there.

48:39Michael Batnick:So, you said this is what the prediction markets are for. Will GameStop buy eBay? Great. Nobody knows. Right. You want to wager on that? Get closer to the truth, because there'll be a marketing? I'm all for it. I am all for that stuff.

48:53Ben Carlson:Should Ryan Cohen be able to bet on that from GameStop? No. He should not be able to bet on that.

48:57Michael Batnick:Yeah. But even he He doesn't know. Now, maybe I guess as it gets closer, but you would assume that's reflected in the data. Either way, stuff that people can know in advance, get rid of it. What is this thing?

49:07Ben Carlson:What is a part from Bloomberg that says that bots netted 131 million at the expense of other polymarket users? Is that just algorithms that are trading? It's like market makers. Okay.

49:16Michael Batnick:This is hilarious. This is really hilarious. The head of comms at CalShe. The Wall Street Journal came to us with a profitability analysis of Publix CalShe profiles. of public Cal sheet profiles, which was inaccurate because the majority of traders keep their profiles private. So we did the analysis ourselves and gave it to the Washington Journal. Our analysis showed that Cal sheet traders win more than they do on day trading, options, sports books, and futures. Are you kidding me? That's like saying cocaine is healthier than crack and like doing a victory lap. It's the first time we've given out that data.

49:55Michael Batnick:We debated whether or not to give it out, but we figured it was better than a shoddy analysis that showed people lose a lot more than they actually do. So this is the chart. They showed the percentage of traders who lose. And yeah, prediction markets, only 75 % lose. This is a brutal chart. I didn't see this. Only 75 % lose, whereas with day trading, 80 % lose. Are you out of your mind? You're bragging about this? you have a better chance of making money in prediction markets than options. Look at these numbers. Now, I'm not a prediction markets hater. I love gambling. And I think that like, yes, even though I hate that it ruins lives, there's lots of things that ruins lives.

50:37Michael Batnick:It's a straw man. I don't even want to go there. I love gambling, but clean it up. Yeah.

50:41Ben Carlson:Clean it up. You can't have the insider. These numbers that options lose money 90 % of the time, sportsbooks lose money 95 % of people who are on there.

50:50Michael Batnick:Lukawa made a chart at Sherwood showing that Robin Hood made more money on event contracts and cryptocurrencies in the most recent quarter. Wow.

51:00Ben Carlson:Which says a lot about both industries at the moment, obviously.

51:03Michael Batnick:Yeah. Ben, let me ask you a question. Are TVs now movies in terms of quality? How come beef is so good in terms of production? Now, somebody emailed me, like beef went off the rails. It jumped the shark in season two. I'm guessing this person didn't watch season one because it was the same thing. where it was sort of plausible and then it just went completely kablooey. Yeah. Right? Like, I don't know. It's absurd. That's sort of the point of the show. It's an absurd show. But just the production. Now, you might not have liked the way that season two I did or season one I did, whatever. But that's not the point.

51:36Michael Batnick:The point is, like, the gap in quality between shows and movies is massive and it's, like, backwards. Whereas, like, all of the Netflix movies are such garbage. Like, they're just garbage movies. They're crap. They're not... well done and I think they know it. It's quantity over quality. Whereas, and not all TV, a lot of the TV is crap too, but it just seems like the quality in TV is better in a lot of cases. It's weird.

52:01Ben Carlson:It's also crazy to think that almost every show now has a movie star in it. There's movie stars in all the shows now. There's shows that are out with movie stars that you've never heard of these shows before and you go, wait, that's on right now? Nicole Kibben's in another TV show? It's kind of hard to wrap your mind around. Yes, the quality is way better. We started Beef. it's it is it's a hard show to watch because just things keep happening that are bad to people but it's you want to keep watching see what happens

52:27Michael Batnick:it's like the opposite of rooster it's like it's not a very it's not a very chill show you don't you don't watch it to relax yes

52:32Ben Carlson:I can see why you like it though um all right Derek Thompson did a good piece on millennial parents and they have the numbers here millennial dads do four times more child care than boomer dads did and it shows that every generation does more child care per day than the previous the silent generation didn't do a whole lot right Uh, baby boomers a little more. Gen X a little more. Now millennials do more. Uh, this is just obviously a sign of learning and progress. And then it's not, it's not like saying one generation is better than the other, because I think you could make the claim that there's a lot of millennial parents who are so helicopter that it's bad for their kids.

53:06Right.

53:07Ben Carlson:But this, this is, this isn't something new. You notice this with all the other dads around you too, right? That they are just so much more involved than the previous generation was. It's, it's obvious.

53:17Michael Batnick:Um, a lot of factors in here. I feel like I am with my kids all the time. Yeah. All the time. I am home when they get home. I'm home when they go to bed. I guess it's like normal. I'm with my kids all the time. It's all weekend. And if I sound like I'm complaining, maybe a little bit. It's a lot. It's a lot. I had a fantastic relationship with my dad growing up. Still do. And I never saw him. We didn't run the same house. I mean, my parents were divorced. So I saw my dad like twice a week. And I think it probably spoke to him every day. I can't remember. I'm, you know, we're getting old. But so I'm not saying that like, that was good.

53:57Michael Batnick:This is bad. This is good. That was bad. Like it's, you know, it's, it's, it's not black or white, but I am, I was thinking this weekend, like we just did kid shit the entire weekend. Yeah. And it's, it was, it's, I don't know. It doesn't, it kind of feels, it kind of feels a little nuts.

54:13Ben Carlson:it's impossible to go to a kid's event of some sort sports or whatever without hearing another parent talk about how busy they are with sports for other for their kids oh this morning we did this and we did this you hear that same conversation every thing you go to but we're not we we don't

54:30Michael Batnick:we're we don't overdo it with activities in the sense that like my kids are not doing 19 sports i don't have like superstar athlete kids like but it's just it is my goodness is a lot that Derek says something that I'm going to, I will take on butch with. Oh, did I put this in here? So anyway, there's a chart in here. I'll get back to that in a second. Birth of first child. So there's a chart that shows dad's health declines. Guilty as charged, but his life satisfaction remains high. Look at this health. That's kind of wild, right? I mean, that's been my experience. Not yours, Ben. You bucked the trend, but.

55:05Michael Batnick:Not that I was a model of health before my kids were born, but holy shit.

55:09Ben Carlson:When we had twins, I realized that if I'm going to have energy to continue living my life like I want to, I need to change my health. Because three kids and no sleep. So I made a concerted effort to change my health when my twins were born. Oh, yeah? I mean, I got one of these weights that I do this with. And I do it all day.

55:30Michael Batnick:Oh, here it is. All right. This chart, I'm going to call bullshit on this. maybe this doesn't make me sound good, but I'm giving you my opinion. Dads like childcare more than watching TV. Really? Like it more? I'm making a face. Do they really? Do they really? Because I got to be honest. I don't. I love watching TV and I love my kids. So Kobe is now staying up until, I don't know, 9.15. Give or take.

56:04Ben Carlson:When the kids used to go bed at 7 o 'clock, you had a lot longer to just like decompress, right? So guess what time I go to sleep?

56:11Michael Batnick:I'm like sleeping at 9.45. I'm exhausted. And with these playoffs, forget about it. I'm really tired. And I wish I could watch more TV. And I know we talk a lot about TV, but it takes me a lot longer to get through a show. And listen, I know it's like, that's normal, right? Like we don't, you know, we have to prioritize our kids and we do what I do. but I like watching TV more than I like being with my kids at 915 at night. I'd rather be watching TV.

56:33Ben Carlson:At a certain point. We have figured out how to, I'm going through the nineties catalog with my kids now. And I'm, it's like, if we're going to watch TV, I want to watch TV with you. So this week we watched the river wild with my kids.

56:44Michael Batnick:Loved it.

56:45Ben Carlson:So good. I introduced my daughter, Libby too. She likes rom-coms now. We watch sleep. That's a,

56:50Michael Batnick:that's a river wild is a tough watch for kids.

56:54Ben Carlson:Yeah. It wasn't as bad as I thought.

56:58Michael Batnick:when they connect when they take the dad and they're beating the shit out of him oh yeah

57:03Ben Carlson:Sleepless in Seattle I watched my dog the other night just perfect rom-com so anyway I'm trying to yes make them sit more still and watch with me too but yeah you're right give and take right there's trade-offs as always I like this comment from last week we need the bat ETF B-A-T batnik ETF invest in all residential HVAC like carrier unreliable automakers Stellantis, Tata Motors, Auto Finance Ally, Auto Parts, what is that, O 'Reilly? New refrigerators, and even Mudroom components, Home Depot and Lowe's. All tracking Michael's major consumer purchases. Let's see if it outperforms the S &P.

57:39Michael Batnick:Can we have Claude track this? I haven't said it yet, Ben, but getting a Mudroom. I am getting a Mudroom. You haven't been to my new house, but you walk into my house and there's like little tiny, like, there's like tiny little cubbies for the sneakers and stuff. And there's no like hangers. So we just throw everything down and then you walk up the steps. So I don't know where to put everything. So we're getting mudroom. I'm selling, I sold more crypto to, I know I bought more crypto for you. We can say whatever. I need some cash. What are you going to do, right? Got to buy a mudroom.

58:14Ben Carlson:So you have to like, you're like doing, you're moving walls and stuff. I'm moving walls and stuff. Yeah. All right. That's fun. I think we should have Claude tracked this portfolio for us. All right. A bunch of people sent me this. You had the, what do you call it? This guy, that guy. There was a LeBron thing going on where he said, get a load of this guy is a new meme. And that's when we hadn't added to the list. Get a load of this guy. Get a load of this guy. That's pretty good.

58:38Michael Batnick:Ben, I tagged you on Instagram because you wrote a new book. And your handle is Ben Carlson 007 or something 007. Is it? Are you a huge Bond guy?

58:51Ben Carlson:No, seven was my number in high school. and I was just trying to get seven into it. So I'm not a Bond guy at all. And to be honest, I'm not really on Instagram. So I didn't even know that you tagged me on something.

59:01Michael Batnick:Okay, well, I did. Oh, okay. Well, I am quite torn about this Instagram stuff. I got to be honest because I really love it. I'm worried that if I don't have Instagram or Twitter on my phone, I really am going to lose connection with the outside world a little bit. See, I just –

59:18Ben Carlson:I can't help myself.

59:20Michael Batnick:I'm an addict.

59:20Ben Carlson:I only have the bandwidth for one social media thing. My wife always gets mad at me because she sends me like funny memes on Instagram, but I never check it. And she always gets mad at me for not checking.

59:29Michael Batnick:Like that's how I know what people are doing that I care about. You know, like friends and family and stuff. We have to be like me. I don't care what my friends and family do. That's fake lives. No, you know, I think, but I think, I think if I just look at Instagram for 20 minutes a day on the computer, that shouldn't suffice. I don't even know my phone. Okay.

59:43Ben Carlson:20 minutes, an hour, and then you're back to square one. Yeah. Yeah.

59:47Michael Batnick:I need some recommendations, people. I've got a nonstick pan and guess what? It doesn't work. Shit sticks. I know there's probably chemicals. I know there's like a whole, you know, people have a lot of feelings. I'm sure Duncan could chime in on the nonstick pans. I got like the hex pan or whatever it's called. And my eggs are sticking. So I also, I need a full, I need a full reboot on my kitchen stuff. I still have like plates for my wedding, I suppose. but like if you were to look if you were to walk to my house my kitchen is a disaster in the sense that nothing matches I have just like hodgepodge I have forks and spoons that don't match I have cups that I need like a I just need like to throw everything out and start over

1:00:31Ben Carlson:we did an Airbnb and we found some silverware we really liked and we bought the silverware because of like the functionality of it I've been using AI for so much more when it comes to shopping would you I want to buy this well what about these things and how about this and I have back and forth all the time about shopping now, about big ticket items. Okay, let's do recommendations because we had to go soon. Marty Supreme's on HBO Max. I watched it. I feel bad because I feel like I'm constantly a hater of the new movies that everyone loves.

1:01:01Michael Batnick:You didn't like Marty? Come on, dude.

1:01:05Ben Carlson:Listen, it was really well acted. It was really well, it was like cinematic. It was very visually pleasing. I'm not sure what the point of this movie was. I thought I'm going to watch a guy who's like a ping pong prodigy. Yeah, true.

1:01:16Michael Batnick:You're right.

1:01:17Ben Carlson:It wasn't about absolutely nothing. Well, what was the point when the bathtub fell through the floor and then they lit the gas station on foot? Like, weird. It was the plot jumps that happened in this movie were so bizarre and I didn't understand. Man, this guy. What was the point of a bathtub fell on top of a guy and his dog? I don't—it had nothing to do with the plot. It was bizarre. The stuff that happened in this movie from a plot perspective, I was like, well, I just didn't get the choices. It didn't make sense to me. It was very high quality. The acting was great. I loved seeing Gwyneth Paltrow again.

1:01:50Ben Carlson:Chalamet was, you know, he was good. I didn't understand what the point of this movie was. You're breaking my heart, Ben. I can't get behind you on this. I'm sorry. Are you ever going to watch this movie again? One time in your life? There's no way.

1:02:02Michael Batnick:It was very high quality. I will watch it if I'm on a JetBlue flight and there's nothing else to choose from. I had a great time watching it. It was high quality. I don't understand the point of it. It's just like one bad life. It's no train dreams. A guy looking at the sky, missing his family.

1:02:21Ben Carlson:Yeah, that actually has some meaning to it. Sure. All right. What else did you hate? My Audible recently, The History of Money by David McWilliams. And it's a history book that just goes through the power of incentives and money and how it happened. And there was two stories in here. Anytime I have a new nonfiction book, I just want some anecdotes to pull out. There was two of these that I've never heard before. Tell me if you've heard these before. One, during World War II, because he lived through Weimar, Germany, in hyperinflation, Hitler was planning on, Hitler had counterfeiting going on day and night, and he was going to drop out of planes like$10 billion on London and try to give them hyperinflation.

1:03:02Ben Carlson:He was going to try to wreck the system using money. And supposedly the war got too far on and it never happened, but this was an actual thing. They had counterfeiters at concentration camps making money, but they were going to drop in London. And the funny thing is, if that happened today, I don't know, you would never have enough airplanes or currency. Think about how many trillions of dollars we spent in the pandemic. It would be impossible to do today.

1:03:26Ben Carlson:Two, supposedly there's a theory that The Wizard of Oz was a movie or a book written about the downsides of the gold standard. I'd never heard this theory before. I've heard that before. I never knew that. Anyway, two anecdotes from that book. I really like, like most history books, there's a lot in there that, you know, is probably unnecessary. but I enjoyed that one. Oh, one more thing. Yeah. I listened to your CAA book and I listened to your Three Kings book, the Spielberg one. Oh, you listened to the CAA book? How good was that? Here's the thing that it's, those books are very interesting with the stories.

1:03:58Ben Carlson:Also kind of depressing that I feel like to be in a position of power that big, you have to kind of be a bad person. And I don't know how to reconcile that. Well, well. Not a bad person. You have to say. Ovid's partner, everybody loved him. But like the people in power, you almost always have to step on next to get there.

1:04:14Michael Batnick:Oh, yeah, yeah. Take money that could have gone to other people. And that's the part that's kind of, it kind of bummed me off. Did you finish the King's book?

1:04:21Ben Carlson:Not yet, but it's, I never knew the story of DreamWorks like that. So it's news to me.

1:04:25Michael Batnick:That's great. All right, last thing. I saw season, I saw episode one of Your Friends and Neighbors.

1:04:37Michael Batnick:And you know what's interesting about that show? I'm not sure how the season is going to unfold. whatever. It's a fine show. I enjoyed it enough. I feel like there's this weird paradox where the characters are simultaneously so unrelatable in terms of the life that they live, like the luxuries and the way they all look and whatever. I don't know anybody like that. I don't live near people like that. I don't know anybody who would be on that show. and yet the characters feel themselves feel very relatable in terms of what's you know what I mean like just in terms of what's going on like what actually matters to their life the relationships like I love John and Amanda

1:05:20Ben Carlson:John Hamm and Amanda Pete so that's why I watch the show I'm still I think season two we're all caught up halfway through the season I like it Zach Lowe was on the last show

1:05:29Michael Batnick:okay okay yeah I heard he's with an OG makes an appearance

1:05:33Ben Carlson:yeah there's NBA players okay

1:05:36Michael Batnick:All right. Okay, that's about it. We are out of time. Animal Spirits at thecommentownnews.com. Thank you very much for listening.

1:05:42Ben Carlson:Hey, listen. It's not always going to be like this. There's going to be a correction. Stocks will go down. It's not always going to be like, oh my gosh, this is so amazing. But enjoy it while it lasts. All right.

1:05:51Michael Batnick:We'll see you next time. Thank you. Thank you.