Animal Spirits Podcast – EP. 431: “A Mania Is Brewing”

Date: September 24, 2025
Hosts: Michael Batnick and Ben Carlson
Podcast Theme: Markets, life, and investing—what Michael and Ben are reading, seeing, and thinking about the current investment climate.

Overview: A Mania Is Brewing

This episode centers on the burgeoning signs of a new market bubble—specifically in AI, robotics, and tech—and explores the unique drivers powering the current market environment. Michael and Ben discuss whether we are in the middle of a company-led spending mania (rather than retail-driven), how this phase differs from the dot-com era, and what the downstream effects might be for investors, companies, and the economy.

Key Discussion Points & Insights

1. Setting the Scene: Tech CEO Mania & Company-Led Bubble

• Location Update: Ben is podcasting from Banff, Canada, prepping for a talk on the future of financial advice for Canadian advisors (02:00).
• Bubble Dynamics:
  • The market feels like it's hit an inflection point—“bubble activity,” especially fueled by tech CEO spending, not retail investors.
  • “It feels like the AI bubble behavior is just going to hand the baton over to the robotics bubble at some point.” – Ben (05:40)
  • Energy is “company-led mania,” not the kind of rampant investor euphoria seen in previous bubbles.
• Standout Example: Pre-revenue companies like Olo (“a potential nuclear company”) up 1,500% and quantum computing stocks going vertical. OCLO now has a $20bn market cap despite having no revenue on the horizon (04:28).

2. Oracle, OpenAI, and the Debt-Fueled Arms Race

• Oracle Moves the Needle:
  • Oracle’s willingness to take on debt to chase AI infrastructure—breaking the pattern of hyperscalers funding growth through cash flow alone (08:54).
• Industry Implications:
  • The “stable oligopoly” (Amazon, Microsoft, Google) no longer treats AI infrastructure as discretionary—“What had been a disciplined, cash flow–funded race may now turn into a debt-fueled arms race.”
  • “That’s a vibe shift if I’ve ever seen one. Welcome to the next and newest phase of the capital cycle. I believe Oracle has just sparked the animal spirit to life.” – Michael quoting Doug Oughlin via Ben Thompson (09:21)
• Hyperscaler Spend:
  • Total CapEx marching up and to the right; tech titans like Meta’s Zuckerberg acknowledge aggressive spending risks, but say the bigger risk is not being aggressive enough (07:52).

3. Second- and Third-Order Effects of Tech Mania

• Diffusion Beyond Tech:
  • The mania will not just be about the MAG7; “Other companies will join, and it’s not just tech stocks. Companies will start laying off workers for AI productivity gains, and when one does, their stock will shoot up—second- and third-order effects at work.” – Ben (11:19)
• Market Concentration:
  • Nvidia and Apple now make up 14% of the S&P 500—Michael calls it “quaint,” suggesting even these eye-popping numbers might look small in hindsight (12:49).

4. Valuations, Bubbles, and Retail Activity

• Valuation Discussion (17:02):
  • Equal weight S&P at 17x earnings—“Valuations don’t matter until they do,” and overall, “valuations can get much crazier if this thing is gonna go.”
  • Nvidia’s forward PE under 30; “still room to get insane,” not outright crazy yet (17:32).
• The Cost of Missing the Big Days:
  • If you missed the S&P’s big rebound day in April, you’d be drastically trailing—“Trade like your life depends on it, or just hold on” (18:02).
• Active vs. Passive Management:
  • Passive funds now 55% of ETFs and mutual funds, up from 25% in 2012 (23:42).
  • If a tech-led meltdown happens, some active managers underweighting hyperscalers may vastly outperform—though, as Ben notes, you can diversify yourself with “value, quality, dividend, small caps, or international stocks” (24:36).

5. Animal Spirits: Mania, Contradictions, and Retail Inflows

• Retail Flows:
  • Largest weekly inflows since Dec. 2024; “There’s definitely animal spirits in pockets of the retail world”—though AAII and Schwab surveys still show no strong euphoria (26:02).
  • $7.7 trillion in money market funds—hard to square with other signs of risk-taking. “You have to hold several ideas in your head at once; cognitive dissonance rules the day.” – Michael (27:27)
• Bubble Barometers:
  • “NASDAQ may be at highs, but by hardcore metrics, not yet a ‘double’—this is ‘quaint’ compared to past manias.” – Michael referencing Nikla’s “A double is a bubble” rule (28:15)

6. Productivity, Work, and the AI Revolution

• Personal Use of AI:
  • Both hosts describe getting real productivity gains from AI tools (30:24).
  • Michael: “My output is at an all-time high and it’s not even close.”
  • Americans unlikely to cut work hours even as AI boosts productivity: “We’re not Europeans—all due respect, love the croissants.” – Ben (31:05)
• AI’s Long-Term Effects:
  • Ben wonders about a slow-burn AI transformation over 10–15 years; Michael thinks it’ll be more “overnight.” (14:25)

7. Market Turbulence: Housing, Permits, and Demographics

• Housing Market Issues:
  • Building permits see largest consecutive monthly declines since the GFC (55:13).
  • Different homebuilders (Lennar vs. Dr. Horton) subsidizing rates for buyers to differing results; government intervention is likely better targeted at buyers than builders (56:14).
  • Home prices at all-time highs while high rates persist—“Rates are high, prices aren’t coming down.” (56:41)
• Boomers and Housing Market:
  • 61% of boomers never plan to sell their homes; 88% don’t care if it keeps millennials out of housing, per survey (57:29).
  • “It’s not their fault. What are they supposed to do? Where are they supposed to go?” – Michael (57:45)

8. Economic Two-Speed Recovery & Inequality

• Wage Growth Diverges:
  • High-income Americans see wage growth, low-income see declines—a reversal from the post-COVID environment (38:01).
  • “There’s never going to be an economic environment that makes everyone happy.” – Ben (38:42)
  • United Airlines’ revenue up in premium cabins, down in economy (39:01).

9. Amazon, Ads, and the Moat of Tech Giants

• Amazon’s Ad Business Soars:
  • $13.9B in Q1 2025; Comcast/NBCUniversal did only $2.6B in all of 2024 (47:49).
  • “Amazon now runs the world’s greatest side hustle.” – Michael citing Mike Shields’ piece (48:47)
  • Amazon’s ad revenue is up 400% since 2019, now rivaling Meta and Google (49:27).

10. Odds and Ends: IPOs, Retail, & Lifestyle

• IPOs:
  • Many 2021 unicorns suffered; StubHub now valued at $8B, down from $16.5B (51:14).
  • On IPOs: “Most are crap investments. One good one can dwarf the losers, but there are a lot of bad ones.” – Ben (53:29)
• Retail & Shopping Habits:
  • E-commerce as a % of retail is right back on its pre-pandemic trendline (34:43).
  • Michael’s in-store Banana Republic shirt saga; surprised by how deep discounts are necessary for brick-and-mortar retail (37:20).
• Generational Tensions:
  • Wealth concentration with boomers likely to cause more, not less, generational anger ahead (58:14).
• Survey Data Declining:
  • Government labor force survey response rates have dropped from 83% pre-pandemic to 69% (59:29).

11. Personal Moments & TV Recommendations

• Ben’s NFL Gambling Hiatus:
  • Bad beats, disgusted with Giants, pondering a “season off” (21:38).
• Audiobook Addiction:
  • Both hosts are listening to biographies rather than podcasts (71:22).
  • Ben’s on Hamilton, Michael’s deep into The Power Broker (72:47).
• TV Shows:
  • “Black Rabbit” – “Cliché but I’m all in. Jason Bateman is fantastic.” (68:48)
  • “The Paper” (an “Office” spin-off): “Not as funny, but good background show.” (70:01)
  • Butch Cassidy and the Sundance Kid: “We do not have actors like Newman and Redford anymore.” (70:39)
  • Field of Dreams still works despite an insane plot. “I’m going to cry at the end.” (74:12)

Notable Quotes & Timestamps

• “It feels like the AI bubble behavior is just going to hand the baton over to the robotics bubble at some point.” – Ben (05:40)
• “Oracle has just sparked the animal spirit to life.” – Michael, quoting Doug Oughlin (09:21)
• “All this spending before was just from their cash flows... They haven’t even really pushed their foot on the gas pedal.” – Ben (10:30)
• “Things happen so much faster [now].” – Michael (15:19)
• “Valuations don’t matter until they do.” – Michael (17:20)
• “There’s never going to be an economic environment that makes everyone happy.” – Ben (38:42)
• “Amazon now runs the world’s greatest side hustle.” – Michael citing Mike Shields (48:47)
• “Most IPOs are crap investments. One good one can probably dwarf all the bad ones.” – Ben (53:29)
• “I’m doing more with the same amount of hours. My output is at an all-time-high and it’s not even close.” – Michael (30:49)
• On generational housing: “It’s not their fault. What are they supposed to do? Where are they supposed to go?” – Michael (57:45)
• “I haven’t listened to a podcast in a month.” – Michael (71:59)
• “Field of Dreams: What a dumb movie. Only in the sense that the plot is so insane...It really shouldn’t work, but it does.” – Michael (73:48)
• “Jason Bateman is fantastic. He’s always believable in every single part.” – Ben (68:57)

Timestamps for Major Segments

• [02:00] – Ben in Banff; Future Proof Miami preview
• [03:29] – Company-driven bubble signs; Olo and quantum computing stocks
• [04:28] – Oracle/OpenAI, the new capital cycle in AI
• [08:45] – Quoting Ben Thompson & Doug Oughlin on Oracle’s impact
• [11:19] – Bubble’s second- and third-order effects
• [12:49] – Nvidia, Apple, and S&P 500 concentration
• [17:02] – Valuations and bubble metrics
• [18:02] – S&P’s April rebound: the cost of missing big days
• [23:42] – Passive/active fund dynamics
• [26:02] – Retail inflows and conflicting market signals
• [30:24] – Using AI to boost productivity
• [34:43] – E-commerce trends in retail
• [55:13] – Housing permits and builder dynamics
• [57:29] – Boomers’ housing response
• [68:48] – Black Rabbit and TV recommendations
• [71:22] – Audiobook vs. podcast routines

Closing Thoughts

This extra-length episode offers a lively, nuanced tour through bubble mechanics, AI hype, market concentration, investing strategies, generational divides, and the unpredictable effects of a debt-fueled tech race. There’s palpable excitement and unease as Michael and Ben try to make sense of a period where markets are at once frothy, fractured, and seemingly poised for something profound—whether slow-burn or overnight.

Animal Spirits delivers its trademark blend of market skepticism, historical lens, pop culture asides, and personal anecdotes—leaving listeners with questions more than answers, but always entertained and better informed.