Animal Spirits Podcast - Episode 395: "A Key Market Signal"

Hosts: Michael Batnik and Ben Carlson
Release Date: January 15, 2025

In this episode of the Animal Spirits Podcast, hosts Michael Batnik and Ben Carlson delve into a variety of pressing topics ranging from the devastating wildfires on the West Coast and their implications for the insurance industry, to the current behavior of the stock market influenced by rising interest rates. Additionally, they explore social trends affecting younger generations and engage with listener interactions about movie recommendations and personal experiences.

1. Wildfires on the West Coast and the Insurance Crisis

Timestamp: [03:06 - 08:04]

The episode opens with a discussion on the unprecedented wildfires ravaging the West Coast, described as potentially the "costliest wildfire disaster in American history" by UCLA climate scientists. Michael highlights the profound impact on homeowners, emphasizing that for many middle-class Americans, their home is not just a place of residence but also their primary financial asset. He reflects:

Michael Batnik [04:13]: "For many middle class people, a house is not only like by far and away their biggest financial asset. For some people, it's their only financial asset."

The conversation underscores the dire situation where insurance companies face immense pressure. Due to constraints like California's Prop 103, which requires government approval for premium hikes, many insurers are pulling out of high-risk areas, leaving homeowners either uninsured or facing exorbitant rates. Ben expresses uncertainty about potential solutions, contemplating whether government intervention is inevitable.

Ben Carlson [07:37]: "I have no idea."

The hosts also touch upon the secondary effects of the wildfires, such as the housing shortage exacerbated by displaced residents seeking rentals, driving up prices and creating further economic strain.

2. Stock Market Behavior Amid Rising Interest Rates

Timestamp: [09:04 - 16:23]

Ben leads a segment on recent stock market trends, noting that stocks have been experiencing a healthy correction driven mainly by rising interest rates. He succinctly states:

Ben Carlson [09:24]: "The economy is too strong. Could there be a better reason for stocks to fall?"

Michael concurs, agreeing that higher rates are a logical response to a robust economy and questioning the necessity of further rate hikes unless they severely restrict economic activity.

The discussion transitions to global interest rate trends, with references to a Bloomberg chart illustrating rising 10-year yields worldwide. This global perspective suggests that the increase in rates is not isolated to the U.S. and may reflect broader economic adjustments rather than localized policies.

Ben shares his personal investment moves, mentioning his foray into zero-coupon bonds as a strategic play in the current interest rate environment, while Michael humorously recounts recent investment anecdotes, including an ill-timed recommendation on quantum computing stocks that faced significant declines.

3. Social Trends and the Rise of Loneliness in Youth

Timestamp: [16:34 - 38:10]

Shifting focus to societal changes, the hosts discuss Derek Thompson’s piece, "The Antisocial Century," which examines the decline in social interactions among Americans, particularly younger generations. Key statistics highlighted include:

• A 30% decline in U.S. adults having dinner or drinks with friends on any given night over the past two decades.
• A 29% increase in solo dining over the past two years.
• A surge in the number of teenagers reporting loneliness, with the percentage of 12th graders going out with friends dropping from 80% in 1980 to 50-60% today.

Michael emphasizes the importance of social interactions during youth for emotional development, advocating for traditional experiences like college to foster necessary social skills.

Michael Batnik [36:13]: "The socializing aspect of college is the most important part of it. And that's why I think college is still very important for young people."

Ben concurs, acknowledging the complexity of balancing technological connectivity with genuine social engagement. They reflect on personal measures to instill gratitude and prevent entitlement in their children, such as involving them in charitable activities.

Ben Carlson [49:16]: "We're lucky that we're able to do this. You do the best you can."

4. Listener Interactions: Movie Recommendations and Personal Stories

Timestamp: [38:32 - 61:49]

The hosts engage with listener emails, sharing their thoughts on various movie recommendations. They discuss titles like Red Rooms, Woman of the Hour, and Kneecap, offering critiques and humorous exchanges about the subjective nature of movie preferences.

Additionally, personal anecdotes enrich the conversation. Michael recounts a memorable VIP tour of the Empire State Building facilitated by a listener’s connection, highlighting the rewarding experience shared with guest Bill Sweet.

Michael Batnik [50:31]: "When we walked out on the observation deck, Bill and I both kind of like. Like, it was kind of breathtaking."

Ben shares his struggles with sports betting, providing a candid look into the risks associated with gambling and the emotional toll of unexpected losses.

5. Miscellaneous Discussions: Language, Media, and Cultural Reflections

Timestamp: [54:17 - 60:53]

The conversation briefly touches on linguistic curiosities, such as the phrase "dollars to donuts," exploring its origins and common usage. The hosts also reminisce about the cultural phenomenon of the Jerry Springer Show, discussing its portrayal of human behavior and its place in media history.

Michael expresses his disdain for modern social media’s impact on human interaction, lamenting the shift from communal activities to online engagements.

Michael Batnik [38:57]: "I think it's been a horrible, horrible thing for us."

6. Concluding Thoughts and Wrap-Up

Timestamp: [61:10 - End]

As the episode nears its conclusion, Michael and Ben reflect on their personal lives, including upcoming nuptials and shared interests in movies and television shows. They encourage listener engagement, inviting reviews and feedback to foster a sense of community.

Ben Carlson [61:50]: "Michael and Ben, my fiance and I absolutely adore you both."

The hosts humorously joke about podcast-related experiences and future content ideas, maintaining the episode’s engaging and personable tone.

Notable Quotes:

• Michael Batnik [04:13]: "For many middle class people, a house is not only like by far and away their biggest financial asset. For some people, it's their only financial asset."

• Ben Carlson [09:24]: "The economy is too strong. Could there be a better reason for stocks to fall?"

• Michael Batnik [36:13]: "The socializing aspect of college is the most important part of it. And that's why I think college is still very important for young people."

• Michael Batnik [38:57]: "I think it's been a horrible, horrible thing for us."

Conclusion:

Episode 395 of Animal Spirits Podcast offers a comprehensive exploration of current economic challenges, market dynamics, and significant social trends impacting society today. Through insightful dialogue, personal anecdotes, and engaging listener interactions, Michael Batnik and Ben Carlson provide valuable perspectives for investors and individuals navigating these complex times.

For more insights and discussions, subscribe to the Animal Spirits Podcast and join the conversation every Wednesday morning.

Disclosures:
All opinions expressed by Michael and Ben are solely their own and do not reflect the opinions of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions.

For disclosures, visit Ritholtz Wealth Management Podcast Disclosures.