Animal Spirits Podcast (The Compound)

Episode 447: "Is the Stock Market Invincible?"

Release Date: January 14, 2026
Hosts: Michael Batnick & Ben Carlson

Episode Overview

In this week’s episode, Michael and Ben dive into a packed slate of market and financial headlines, debating the resiliency—and invincibility—of the stock market in the face of political turmoil, housing crises, credit card interest policies, and market euphoria. They parse through the latest data on jobs, inflation, housing, and the rapid evolution of AI, with their trademark mix of skepticism, stats, self-deprecating humor and perspective on what actually matters for investors. The episode is anchored in practicality, cutting through doomsaying and hype to highlight actionable takeaways for investors in today's complicated environment.

Key Discussion Points

1. Political News Bleeding into Markets

• Credit Card Rate Cap Proposal

  • The hosts break down proposals to cap credit card interest rates at 10%, emphasizing the negative repercussions on credit availability and access for consumers:
    • Michael Batnick: "A hard cap at 10% if implemented would crash the economy in two weeks…that will not happen." (03:16)
    • Consumers with revolving credit are already subsidizing the rewards for users who pay in full every month.
    • Restricting rates would drive riskier borrowers to predatory lenders or "buy now, pay later" schemes (04:08).

• Jerome Powell Indictment Controversy

  • Debate around the politicization of the Federal Reserve, including the Powell indictment news, is seen as destabilizing:
    • Ben Carlson: “Powell is probably one of the most upstanding citizens…probably the last actual independent Fed chair that we will have in our lifetime.” (05:04–06:02)
  • Commodities market reactions (e.g., gold rallying as a hedge), but surprise that bitcoin isn’t benefiting more (07:18–07:23).
  • Long-term risk: Undermining Fed independence could eventually require higher rates on US government debt.

• Populist Myths about Housing

  • RFK Jr.'s comments about Blackrock, State Street, and Vanguard “wanting to own every single family home” called out as grossly misleading (09:16):
    • Institutions own about 1-3% of homes, with much greater concentration in some local markets (10:31–12:34).

2. Housing: Policy, Supply, and Local Nuances

• Institutional Homeownership Ban Proposal

  • Trump plan to ban institutions from buying homes appeals superficially, but Ben and Michael find the market impact overstated—institutions are only about 3% of homes, though local effects can be substantial.
  • Underlying issue: The real solution is to build more homes, but this faces entrenched local opposition (“NIMBYism”) (13:09–13:38).
    • Michael Batnick: “Housing is local and there are communities…in which it does feel like institutional landlords own everything.” (12:31)

• Mortgage Spreads and Builder Incentives

  • Discussion of whether government could compress mortgage spreads by buying MBS; partial progress already showing (14:26).
  • Potential next step: Incentivize home builders and slash red tape (15:41).

• Housing Data & Affordability

  • Median home prices by county show a highly fractured, localized market; national debates miss these nuances (47:34–48:14).
  • Signs of relief: Affordability indices bottoming out, and average mortgage payments easing as rates fall (49:17).
  • Ben Carlson: “This map is an advertisement for remote work. Move to Arkansas or Iowa, somewhere in the middle of the country. Cheaper housing.” (48:14)

3. Labor Market and Productivity Paradox

• Weak Job Growth Despite Low Unemployment
  • Using a chart from their research, Michael highlights how job additions are far below historical average for current unemployment rates (16:39–17:57).
  • Question: Could rising unemployment be less predictive of recession this cycle?
    • Ben Carlson: “This is the cycle that could break the spell…would it shock you if that happened this time around?” (18:40–18:52)
• Productivity Boom via Experienced Workforce
  • Firms aren’t hiring, so the workforce is unusually experienced, boosting measured productivity—a potential illusion masking underlying weakness (19:21–20:36).

4. Stock Market Sentiment

• Is the Market "Invincible"?

  • Every major Wall Street strategist is bullish on 2026—an unusual consensus (25:32).
    • Michael Batnick: “A broadening of the rally…with more and more stocks participating, if that worries you, you will never make money in the stock market.” (27:38)
  • Meme stocks, high yield, and small caps are all rallying—a sign of broad risk appetite, not necessarily a sign to run for the exits.

• International Flows & Emerging Markets

  • After decades of underperformance, EM (EEM) is finally having its moment; past 10-year returns jump from 3% to 9% annualized after a huge year (29:07–29:53).

5. Inflation & Consumer Spending in the Modern Era

• 2025 Average Inflation: 2.7%
  • Long-term inflation averages ignored as consumers focus on pandemic-era price jumps (31:56–32:33).
  • New theory: It’s nearly impossible to curb spending when technology makes purchases frictionless—Amazon, algorithmic ads, online shopping, etc. (33:25–34:42).

6. AI Mania—Valuations, Startups, and Use Cases

• Rapid Valuations

  • AI start-ups like OpenAI, Anthropic, and xAI valued at $200B+; startup LM Arena raises $1.7B in funding, shockingly tripling its valuation in less than a year (37:20–38:37).

• AI’s Endgame: Google vs. OpenAI

  • Ben predicts Google (Gemini) may eventually win the “AI wars,” but Michael doubts it’s settled yet (38:41–39:18).

• Personal Anecdotes

  • Michael and Ben describe struggling through using new AI code tools, underscoring generational divides in tech adoption (21:17–22:25).

7. Crypto, Gambling, and Financial Risks

• Gambling Surges

  • Gambling is now the US’s second-fastest growing sector by GDP since 2019, concerning both hosts (39:37–42:35).
    • Michael Batnick: “I would wager…that the amount of people that are ruining their lives financially…is 50 times greater than people that were day trading yoloing on Robin Hood.” (41:14)

• Crypto Rug Pulls—NYC Mayor Edition

  • Former NYC Mayor Eric Adams launches a new token, then is quickly accused of a “rug pull” theft of $1M—hosts have zero sympathy for speculators (43:41–46:19).

8. Private Markets and Structural Risks

• Private Equity’s "Rot"

  • Secondary funds and circular deals are on the rise, as private markets wrestle with illiquidity and markdowns (52:38–54:24).
    • Michael Batnick: “Why is this [private market secondaries] happening so frequently? How much money is stuck?…I am looking skeptically, I am looking sideways at these deals.”
  • Direct lending spreads offer 200 bps over syndicated loans—but with big risks (55:09–56:01).

• Venture Funding Snapbacks

  • SVB analysis shows VC companies going public are now much larger but growing slower and facing higher costs (57:04–58:44).

9. Earnings Season—Corporate Health Check

• JP Morgan & Delta
  • Jamie Dimon strikes a bullish tone: “These conditions could persist for some time. This is basically Jamie Dimon saying, holy things are amazing.” (58:44–59:34)
  • Delta registers record revenue and expects 20% margin and earnings growth in 2026.

10. Lifestyle, Movies, Recommendations

• Box Office and Movie-going

  • Debate whether theatrical moviegoing is cyclical vs. secularly declining; Michael argues for a rebound in 2026 with pent-up supply, Ben is skeptical (61:05–65:33).

• Streaming and Technology

  • TV prices have plummeted due to technological advances in LCD manufacturing, not just competition.

• Reading & Watching

  • Rounds of recommendations:
    • Audiobook: Cameron Crowe’s “The Uncool.”
    • Hollywood Business History: “Powerhouse” by James Andrew Miller.
    • Movies: Ben’s top pick—“Sentimental Value” (2025).

Notable Quotes & Memorable Moments

• On Credit Card Rate Caps:
  Michael Batnick (03:16):
  “A hard cap at 10% if implemented would crash the economy in two weeks…that will not happen.”

• On Powell Indictment and Fed Independence:
  Ben Carlson (05:04):
  “Powell is probably one of the most upstanding citizens…probably the last actual independent Fed chair that we will have in our lifetime.”

• On Wall Street Bullishness:
  Michael Batnick (27:38):
  “A broadening of the rally…with more and more stocks participating, if that worries you, you will never make money in the stock market.”

• On Housing Myths and Reality:
  Michael Batnick (12:31):
  “Housing is local and there are communities…in which it does feel like institutional landlords own everything.”

• On Broadening Bull Markets:
  Michael Batnick (27:38):
  “If your knee jerk reaction is to be bearish when things are going well, that’s a personality type…and that’s not how you make money.”

• On Financial Addictions:
  Michael Batnick (41:14):
  “I would wager…that the amount of people that are ruining their lives financially…is 50 times greater than people that were day trading yoloing on Robin Hood.”

• On Spending Tech:
  Ben Carlson (33:25):
  “It’s so much easier to spend money now. It’s harder for people to slow their spending because you can click a button…there’s no friction.”

• On “Fake Wealth” Home Equity Debate:
  Ben Carlson (51:30):
  “Just because you can’t spend your house doesn’t mean it’s not, you’re not building an asset and it’s building wealth.”

Timestamps for Major Segments

• 02:31 – Cap on Credit Card Interest & Market Consequences
• 05:04 – Powell Indictment and the Threat to Fed Independence
• 09:16 – RFK Jr. and "Institutional Buying" Populism
• 13:09 – Why Building More Homes Is So Hard
• 16:39 – Labor Market: Low Unemployment, Weak Job Growth
• 25:32 – Wall Street Strategists’ Bullish Consensus for 2026
• 29:07 – Emerging Markets Finally Outperforming
• 33:25 – Frictionless Spending and Inflation Psychology
• 37:20 – AI Start-Up Valuations Rocket Higher
• 39:37 – Gambling’s Rapid GDP Growth
• 43:41 – Crypto “Rug Pull”: The NYC Token Debacle
• 52:38 – The Private Equity Secondary Market Problem
• 58:44 – JP Morgan & Delta: Earnings and Economic Health
• 61:05 – The Secular vs. Cyclical Movie Debate
• 66:40 – Why TV Prices Have Stayed So Low

Tone & Style

As always, hosts keep things conversational, witty, and accessible—quickly swapping between data-rich market insights and tongue-in-cheek personal anecdotes. They speak directly to a smart, market-savvy audience, taking clear sides on policy pitfalls, market psychology, and investor behavior, but with room for self-deprecation and humor.

For New Listeners

This episode is a can’t-miss for investors seeking both skepticism and perspective in a world mired in hype and headline risk. Michael and Ben serve up actionable analysis alongside hard-earned lessons on when to tune out the noise. If you want a weekly navigation of complex markets with nuance and levity, "Animal Spirits" is your podcast.