Who Owns the Stock Market? (EP.366)

24:15The 80s and 90s. Yeah. Right. Yeah. Saying the 80s and 90s, just being in that time. Just really showing that when you get started, it's everything. I also want to say that no one actually uses the 4 % rule. Bloggers do. That's not true. Bloggers do. Don't you think though? If you're talking actual clients who use the 4%, even if you started as a baseline, people's spending fluctuates so much in retirement. It probably is very high at the beginning of retirement. It slows down at the end. Healthcare costs, one-off costs. I'm just pretty sure no one actually uses the 4 % rule. I suspect that you have a spreadsheet with the 4 % rule built in.

24:52I will not be a 4 % rule guy. Five? Thanks to your savings? Maybe push it to six? I'll be a die with zero guy. I'll push it way up. I don't know. I don't know what my spending rule is going to be. All right. Let's talk about the economy. Money market funds are currently paying$500 billion in interest. That's 2.5 % of annual consumer spending. See, I like it when you – this is another Torsten Slott one. He puts a denominator in here for us. Put these numbers in perspective. So I think it's great perspective. I'll pick a nit here in that I still believe that money market income does not influence spending.

25:36I agree. I'm sure most people are not taking that income and then spending it immediately. Right. You think people are like, oh my God, I'm getting an extra$800 a month on my cash. I'm going to spend that. Right. I agree. Here's where people are spending. Concerts. I'm not a huge concert goer. I've mentioned this to you. I think I said it to you the other day, especially as a middle-aged person. I used to go to concerts when I was younger. I'm not ashamed to say I probably went to four or five Dave Matthews band concerts with my friends. That's okay. But that was an excuse to go somewhere and get drunk, right?

26:06It wasn't like I was the biggest fan of them and knew all their songs on their set list. So my wife and I went to see Zach Bryan in Detroit at Ford Field this week, last week. So we're talking, they must have had three quarters of the space open and behind the stage it was closed off, you know? So we're talking, I don't know, 40 ,000, 45 ,000 people because I think it could hold 60 ,000, 65 ,000 in there. So packed. Here's some observations. They have about four of those booths set up where you can buy the, you know, I went to Zach Bryan tour shirt, right? The shirt of the sweatshirt. Did you buy one?

26:40No. You don't buy the concert shirt, but everyone else did. Yeah. The lines to buy the merch were going around the whole stadium, every single line. I couldn't believe how long the lines were to buy this merch just to prove. Listen, I went to the concert. Damn it. I got my experience and I'm going to show her when I did it. I don't remember. Maybe this is just me being a hater again on young people. But I don't remember me or any of my friends ever being like, we need to buy the concert t-shirt. Right? True. Like you don't buy the, although I did have a friend who, whenever we traveled, he would buy a t-shirt of the city we went to.

27:10Let me ask you a question. Are you a singer? Are you a head nodder? Are you a dancer? None of the above? Do you just sit there? Do you just stand there awkwardly? Like I do? Well, I got a little tuned up for Zach Bryan. I had some of the tall Budweiser, so I might have been singing a little bit. Oh, yeah? Okay. But one of the best live shows I've ever been to. He was, the guy was, it was amazing. But here's my other thing, and maybe I shouldn't be surprised, but I assumed the crowd would be 30s, 40s-ish. And it was not that at all. I felt old. It was average age 18 to 22 probably. Young, young, young people.

27:48And how much were the tickets? Like get-in tickets. So this is the thing. This is my question. We got pretty good seats. And now not great seats, but pretty good seats. And we paid a decent amount of money for them. Say the number. I'm trying to think with the fees. Just say the number. Say the number. Don't be embarrassed. We're all friends here. Probably$600 or$700 per ticket. Wow. Wow. And pretty good seats. And all around me is these 18 to 22-year-olds. And I'm thinking, how the hell are these kids affording this? They're trading. Aren't you paying attention? I guess so. I'm going to a Billy Joel concert, the last concert actually, a month from tomorrow, July 25th.

28:26Yes, I use my ticket broker. Highly recommend. The cheapest tickets on Ticketmaster are$900. Now, it's his last one, but I've never spent that much money on a concert ticket in my entire life. But you have to go because you're from all I on. Got to do it. My one big East Coast question is always, who's more overrated, Billy Joel or Bruce Springsteen? See, you are such a hater. That's just how I get people from New York really angry with me. So the Wall Street Journal had this piece about - You also don't like bagels. I'm starting to think that you don't like a certain type of person around here.

28:56I'm not going to say, I'm not going to get more specific than that. No, my whole point is just bagels are fine. Donuts are better. They're not substitutes though. It is. Donuts complement bagels. It's a carb for breakfast and they're both round. So it's in a round food. So Wall Street Journal had this piece about concert tickets and they say they've nearly doubled over the past decade. and the average ticket for the top 100 tours in North America has increased more than 40 % over the last five years. And I can attest to this. It's expensive. But they were saying that these people are paying, shelling out for VIP.

29:27It's like sitting in the box and having these barbecue and tacos and high-end. And they're saying the demand is insatiable for this stuff, to have the VIP access at these tours. I did the VIP experience once. Or like not VIP, just a box, a suite at Madison Square Garden for a concert once. who did I go see Rage Against the Machine I don't like Rage Against the Machine now they dislike him but it's not like I wouldn't go otherwise but if somebody incites me to a suite I'm going I don't care who's playing I don't care if it's Blippi on state I don't care if it's Blippi I'm going great experience yeah I don't know if I could do Blippi I've heard enough of him over the years I've had enough but the point of this like VIP access so another one from I can't remember where I saw this one from but the highest income Quinto we talked about this accounts for like 40 % of consumer spending.

30:16And that cohort has so much money now. Oh, you know, this is a great chart. So we've spoken about this a lot. The reason why I keep saying that, like, I don't think that it's necessarily 401ks or money market funds driving spending. The second income quintile and the lowest account for 22 % of consumer spending. That's not nothing. And they're spending most of their income and their income is up a lot. Right. So that's the - That's a much bigger driver of everything, of everything. When you walk into a Burlington, you're walking into amazing prices and great gifts. That's main character energy.

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31:41Bundling, just another way to save with a personal price plan. Like a good neighbor, State Farm is there. Prices are based on rating plans that vary by state. Coverage options are selected by the customer. Availability, amount of discounts and savings, and eligibility vary by state. Here's another one to show that people are still spending. United Airlines, Carl Cantania tweeted this, expect July 4th weekend to be the busiest on record. Is that a lot? Busiest on record? Is that a lot? Seems like it. It's a lot. You know, I've never been on a United flight that has the screens behind the seat. That always irks me.

32:21I feel like Delta is the one that has them the most consistently. United and American rarely have the screens for you behind the seats. I'm surprised you're not a Delta card user. What do you mean? Why don't you always fly Delta? Is it because sometimes they just don't have the location? like we went to Charleston a few weeks ago. Maybe I did do Delta for that. I can't remember what I did. But remember when we were in Charleston and the woman was giving us the tour and she's talking about just people are flocking there, right? Everyone's flocking to the house. We've heard this. We have people who, for Riddle's Wealth, who work in Nashville.

32:55And they tell us that the difference between Nashville now and 10 years ago, it's like a, it's like a just, the city's just doubling in size almost. So I don't think necessarily people are flying more because flying is so easy. but I was listening to Kevin Costner do an interview with Howard. Are you going to see an American Horizon, by the way? Or Horizon? It's coming out this week. Probably when it's on a streamer, I guess. I'm not going to it. You're going to be one of the few people who goes to it, huh? I think I'm going. But he was talking about just the differences between traveling now and traveling in the 1700s.

33:27He's like, when you said goodbye to somebody, that was, you know, have a great life. I'll see you never, maybe in the afterlife. And he said, on a flight, I just flew to New York and you put your seat back. If you're one of those people, we don't judge. You get a cocktail, you watch a movie, close your eyes. Yeah, it's easy. And you're there. Yeah, and like the 1700s, the hardest part, like crossing a river was hard. Like you got all your stuff. How do we cross the river? There's no bridges. Yeah, what happens if you got a cold? Yeah, right. F*** them. So the Bloomberg had an article about how in the South, they call it the anti-growth fervor grips U.S.

34:05South after pandemic boom and someone says, I live in hell. Like all these Southern towns, which people decided I can work remotely. It's cheaper coming from California, New York. So they say that in Tennessee and the U.S. South, the region's population is increased by 2.7 million people, the size of Chicago. So they're saying like these towns are not big enough for all the traffic and their municipal systems are like, the water systems are under pressure and strained from all the demand. And they say from early 2020 to mid-2023, the Southeast, including Texas, counted for more than two-thirds of all U.S.

34:39job growth, almost double its pre-pandemic share. Tennessee's economy was the second fastest growing in the U.S. from that time. They picked out this one county in Tennessee that the number of apartments in the county doubled in the four years through 2022. And it's one of those double-edged swords of, I live in a place with good weather and it's highly desirable, but now other people want to come here and it's ruining the experience for me. And I don't know how you, how you stop that. So Lawrence Hamtel actually did a whole piece on this. He did a, like a white paper on the implications of business and population migration.

35:14And just look at the, look at the businesses moving to the South and leaving the Northeast and Midwest, that second chart there. Wow, that's a great chart. And the population going to the South, just, it's insane. And all the people who live there probably are saying, we don't want this. So both of our regions, the Midwest and the Northeast, are in secular decline. Yeah, that means less traffic, at least for me. But they also show the tax burden. So they look at the difference between California and Texas taxes or New York and Florida taxes in 1980 versus now. And look at how much that spread in taxes has jumped.

35:53Meaning it makes, so the people who live in California, New York, it makes so much more sense for them to move to these areas from a tax perspective. Got it. Good one. Yeah, that's a good one. Yeah. Ben, we got an email from a listener and the TLDR is, why are we in such a high-reliberate rates? Okay. Let me just read a quote from this email. It feels to me like we're addicted to historically low rates, much in the same way that patients begin abusing their once legitimate medications and frankly, I'm not eager to see the Fed feed into that addiction. In my mind, the case to cut rates should be a much higher hurdle than the case to raise rates.

36:31I would agree with you there. Given the natural inclination that lower borrowing costs feels better to the quick gratification sides of us, that I want everything to be cheap. Simply imagining that at some point rates will hypothetically be cut and saying, why not start now, does not meet that bar for me. I think this person's feelings are felt by a lot of people, not an entirely uncommon view. I don't know that the hurdle should be higher for lowering rates and raising rates. All right, well, we could debate that. But I guess one immediate, like my immediate reaction to this was, if nothing else, and I'm not suggesting that we need to cut from five and a quarter down to too or anything, but let's start to heal a really dysfunctional housing market.

37:20That's the biggest case for me is housing, which is a huge part of the economy. Right. So Michael McDonough tweeted a chart of existing home sales, and he breaks it down by, I'm going to click on this so it's less blurry. He breaks it down by region. And actually, surprisingly, the Midwest is hanging in there. But the point is, if you just look at the total, It's bad. It's really bad. People are stuck. You got to unlock some inventory. We had the blip in 2020, 2021, maybe 2022, when people started to build because the demand was there. And now it's falling off a cliff. So Bloomberg had a story saying the new home construction plunges to the slowest pace since June 2020.

38:01And I looked at - Sorry, but before we leave this topic, I just want to do one more thing on the why now thing. I am of the opinion, and this is mine. You might disagree with me. I'm of the opinion that at this point, the job is done. Inflation is mostly under control. And the longer you leave rates in a tighter than necessary posture, the more likely you are going to cause a recession. And so to me, the risks just seem asymmetric. I don't necessarily see the harm in taking rates from five to make up a number, four and a half, whatever it is. It doesn't have to go back to zero. Right. There's some middle ground there.

38:38I don't think anybody's saying that. So that's where I stand on this. All right, Ben. Back to the - Well, I think it ties into this. The stuff in the housing is, by them leaving rates higher like this and cutting out - So look at this U.S. building permits, which had a huge run-up in the first couple years of this decade and now has crashed again. And they're stopping building homes. This is going to make things worse in the future. So by the Fed constraining the U.S. housing market, they're just going to make things even that much worse in the future. They're putting it off when just having a little bit of a release valve there to open up some more construction and part of the economy that's 20 % of GDP, that makes sense to me as being a good reason to cut some rates a little bit.

39:18Now, I don't know enough about the mechanics of how this works, so I'm talking out of my ass here. But if you told me like, well, why doesn't the Fed just start buying mortgage bonds again? And maybe that will help to heal the housing market. If that's a legitimate option, and again, maybe it is, maybe it isn't, then that's fine too. But there's gotta be, the housing market does need some medicine. Right, that is one thing. If the Fed would say, listen, we wanna leave rates kind of restricted We're going to cut 25, 50 basis points, but we want to narrow that spread between the 10-year and mortgage rates because we're going to buy some mortgage bonds.

39:46That actually kind of makes sense to me. Yeah. Saying like the housing piece is the one we want to target. I'm sure people would still freak out about that, but here's a good one from Judge Glock, which sounds like, I don't know, a bad guy in a movie, but good name. He says, I don't want to trigger anybody. The OECD housing ranking of total affordability, size and quality metrics has US at number one. So again, I don't know how much the quality piece fits in there, but affordability, size, and quality, the United States is ranked first in terms of affordability across the globe. I just don't think this makes anybody feel better.

40:22Nobody gives a shit about what it's like in Canada or France. I don't live there. I live here, and I can't buy a house. So just because the person in France has no AC and a smaller unit than me, and it was built on like$1 ,600, I don't care. I can't buy a house. Don't care. Okay. It could get worse. That's my thought. Here's an interesting survey. This is from Goldman Sachs. It's the GSAM Global Insurance Survey. They receive responses from 296 chief investment officers and senior investment professionals, 42 CFOs and senior finance managers, and 21 individuals who serve as both CIO and CFO, the insurance company surveyed, have over$13 trillion in balance sheet assets.

41:11So these are real people. Real people. And they were polled, which asset classes do you expect to have the highest total return in the next 12 months? And it's US equities, investment grade debt, cash, et cetera. The whole shebang bang.

41:3153 % said private credit. Even more than stocks. 53%. And here's an interesting quote that I don't know exactly how to square this circle, Ben. Insurers' appetite for credit is growing. 35 % of insurers look to increase credit risk in their portfolios over the next 12 months, despite 59 % of insurers expressing concern that the credit cycle is entering a later stage. So we think a recession might be coming, but we're still looking to increase exposure there. So to me, this is very, very simple. This is career risk and incentives, and it's the volatility laundry that Cliff always talks about. If we don't see the marks, we're better off.

42:15And look at the yield we're getting, right? Yeah. Do you think the thought process, too, for a lot of people is, well, it's whatever, 12 % or 14 % yields. And even if some of these default, we're still going to get 10 % or 12 % instead of 12 % to 14%. You think that's the thinking? I think it's that. I don't think they would say this out loud, but I think not seeing the volatility, not seeing the prices on a daily basis, even though we know that's not real alpha, it feels like it. Yes. The need or desire for liquidity is trumped by the fact that we don't see the marks every day. Now, global insurers, they do have a long-term time horizon.

42:55So if it makes sense for anyone to be using these instruments, maybe it's them. Right. But will these people be complaining if and when they can't get their money out on a fast enough basis when they want to? I mean, I would hope not. Yeah. But there's going to be stories in the years ahead if this stuff ever runs into trouble. Listen, they tried to get their money out and they couldn't. That's coming someday. There was a headline over the weekend that I didn't get to read yet. Pensions piled into private equity and now they can't get out. But again, I don't know if the reality matches the headline.

43:27Yeah, that's what private means. Okay, here's a great survey. A couple of surveys. Again, I'm just not sure how to square all of these round objects. Per the latest J.P. Morgan, Blake Merlot tweeted this, J.P. Morgan Institutional Weekly Survey, there's virtually no risk appetite to deploy fresh capital into equities. Investors continue to show no love for stocks in 2024. So they ask, are you more likely to increase or decrease equity exposure over the coming days and weeks? And this has plummeted to 17%. And then simultaneously, now these are institutional investors. They've got Bank of America Global Research.

44:10There's this Global Fund Manager Survey, again, institutional investors. Global Fund Manager Survey sentiment, most bullish since November 21. Ben, make it make sense. I think we have too many opinions out there today. Let me give you one more. Let me give you one more. Now, these are not necessarily institutional investors only, but Dot Shun has tweeted, VOO is a virtual lock to blow away the all-time annual flow record at$44.5 billion. It is only$5 billion away, and it's not even halftime. This is surprising to me that SPY is going to be dethroned potentially because that's... they had a big head start.

44:52Huge head start. Very big brand recognition. Like you never hear, I don't know, you don't hear people talk about VOO very much, but it's obviously just the expense ratio. What's SPY expense ratio? It used to be nine. Is it lower than that? VOO is three basis points. SPY is, did they, what is it? Okay, SPY is, yeah, nine. SPY is nine, VOO is three. Which is funny because that feels like splitting hairs a little bit, but if you're saying, listen, this thing is three times as expensive as this one. We're going to the cheaper one. That's surprising though. All right. Jeremy Horpital, I want to hear your explanation of this because I can't come up with one.

45:31I'm asking questions today. Americans spend on average 6.7 % of their income on groceries, the lowest in the world. Now he compared all this is from our world of data, compared all these different countries. And then my first thought was, oh, well that's simple because we spend more on restaurants than going out. And then he did a follow-up saying he included restaurant spending as a percentage of income and it's still the lowest in the world so is this just because we have higher incomes what would be an explanation for this i couldn't come up with a good one why would we spend the lowest percentage on food in the in the world compared to all these other countries that spend way more of their income as a percentage on food do you think it's just we have lower costs here because of uh bigger more resources lower energy you call it like lower taxes?

46:17What would the, I'm going to guess, I'm going to, yeah, I'm going to guess you're right with a denominator thing. It's got to be with higher incomes. That'd be my explanation. But again, I color me surprised on this one. Yeah. Color me as well. All right. Oh, it does the next one show the same thing. Yeah. Just with restaurants. So the first one is just groceries. And the second one is groceries plus, plus restaurant spending. Yeah. I don't know. That's a good one. Um, but we got an email. I'd like to remind Ben that car horns were invented to warn others of a vehicle's presence or to call attention to a hazard, not to show disapproval.

46:49I don't remember. What did you say about honking? Are you a frequent - I said it's okay to give - Are you a frequent - Okay, let me throw an example out at you. This happens all the time. You're waiting in like a left turn lane and it's a longer light and you know the person ahead of you has got their head straight down looking at their phone. Light turns green. Way to beat. Yep. Way to beat. Yep. Honk. Go, a-hole. What are you - you're on your phone like an idiot. what sort of, what sort of hunk do you give? You probably give a little to it, right? Like tap. If you're, if you're doing that and you're holding up a whole line of cars, you deserve to get a little honk to, Hey, wake up, buddy, get off your phone.

47:25But there agree. There's a world of difference between a respectful toot and an aggressive hunk. Oh yeah. I don't do it. I don't, I don't hold it. I give it. So I got, I got an aggressive hunk yesterday, actually. And so how I was, it depends. Now, listen, I guess the thing is that you don't know how long you're waiting for, right? If you, if you're staring at the light and it turns green and you get a hunk immediately, that's, that's the worst. So I was looking down guilty as charged. I don't know how long I was looking down. Oh, you were the guy I'm talking about. I deserve to be honked. I did.

47:55I did deserve it, but it was, it was a too long hunk. And when somebody too long hunks me, I don't move. I, I will roll away at five miles an hour. So you had a standoff. Yeah. Yeah. So, um, But then the person, so I'm driving slow, and the person is way far behind me. So eventually I drive, and they're driving, and it was a half a car. You know those half a cars? I got honked up. I got aggressively honked up by half a car. And then they were like a mile behind me. That really annoys me. If you're going to honk, at least speed around me. I don't mind. Just a little tap. There's probably two buttons, like one nice, one aggressive.

48:30You know how on the toilets in certain states or countries, they have the flush for one, flush for two? That's a great idea. There should be a tap hunk and a hunk hunk. Yeah. I don't use it much, but just when someone needs a little reminder, there you go. Yeah. Okay. Matt Bellany tweeted, Horizon, an American saga, chapter one, has dropped to a$10 million opening weekend. Not great. That's pretty bad, no? So how much money is he going to lose, Costner? They said he put 30 into it, So I don't know the economics of, you know, margins. I mean, I'm sure he loved this to be a resounding success. I don't know.

49:07The guy said he got to do what he wanted. I'm sure it was a fun experience. Why doesn't he just sell to a streamer? If Netflix bought this thing, way more people would see it than we'll see it at the theater. I'm sure he's probably a theater guy, though. Yeah, no, yeah. He seems like this has to be seen at a theater. You know what kind of bombed over the weekend? The Bike Riders. You'll see that when it comes out. Awesome bought by Tom Hardy. I'm a big Tom Hardy fan. Yeah,$10 million. That's not good, right? It's pretty bad. No, not great. I just think it's really hard to get people to go to the theater.

49:39But Inside Out is just blowing up. I think Inside Out has done$750 worldwide. $724. Yeah, it's incredible. Wow. I haven't seen it yet. Have you? No. I don't think I saw it first. We're waiting for a rainy day to bring the kids. Logan keeps asking me. I watched Monkey Man. It's on Peacock. Dev Patel. who does great work. Big fan. Okay. Looks like an action movie. Yeah. It's like a light John Wick. There was, I'd say, I don't know. It was okay. It was, there was parts of it that were really cool that I really liked and there was parts that just like dragged and weren't overall great. It was, I probably wouldn't recommend it.

50:18It was fine. Some good, some bad. Mixed bag. Is that, are we talking on our movie here or is it a little lighter for my son? Because he likes the action. Oh, no, no, no. Okay. No, it was violent. It was violent. Okay, good to know. I don't have much, but I rewatched, it was on Amazon, came up for like, you might like this, A Guide to Recognizing Your Saints. It was a movie that came out in the mid-2000s. And it's interesting to look back now. It's a biopic of this guy who grew up in Queens in the 1980s. But it was one of those flashback ones, you know, where it's like, here's the guy older and here's him younger with his friends.

50:55Holy shit, what a cast. Look at the cast. So Robert Downey Jr., before he took back off again, a young Shia LaBeouf, a young Channing Tatum. This is all them, like a young Rosario Dawson before they really took off. Chaz Palminteri is in it. Diane West. Pretty good movie. Eric Roberts. Yeah. Who directed this? I don't know who this is. The guy who directed it is the guy who wrote it. It's about his life. It's based on a true story. So not a great movie, but a pretty good flashback movie. I had nothing to watch and it came up as a recommendation for me on the Amazon Algo. They know I like coming-of-age movies.

51:30Yeah. Right? I want to rewatch, as I was listening to Kevin Costner, I haven't seen The Bodyguard since it came out, and I was seven. I saw it in 1992. Probably a little bit too young to watch that. Okay. One of my mom's favorites. That's a good movie. The only other recommendation I got since I haven't been consuming a lot of entertainment lately, I was thinking this. So Tadis at Normal Returns does all the daily links and just does it every single day. But then on Sundays, he puts out the top clicks of the week. And so sometimes if I miss some of his link fest during the day, he does the top 10 most clicked on.

52:05And I look at that every single week on Sunday to find the stuff that I missed. So subscribe to be on Normal Returns. Still the best in the business at putting stuff together that you need to read. Agreed. Animal Spirits at the compoundnews.com. If you're looking at the end of my calendar, do not rush me. I'm going to need the list of Michael Batnick email etiquette for how to get on your calendar. I'm a simple man. Just do the right thing. Okay. Have a great week. Thank you for listening. We'll see you next time.