Ben's Bearish (EP.406)

Summary

Animal Spirits Podcast Summary: Ben's Bearish (EP.406)

Host: Michael Batnick and Ben Carlson
Release Date: April 2, 2025
Podcast: Animal Spirits Podcast by The Compound

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Introduction

Timestamp: [01:49]

In the episode titled "Ben's Bearish," hosts Michael Batnick and Ben Carlson delve into a multitude of pressing financial topics, with a significant focus on the implications of recent tariff policies introduced by the Trump administration. The conversation seamlessly transitions from macroeconomic policies to personal anecdotes, providing listeners with both deep analytical insights and relatable narratives.

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Tariffs and Economic Uncertainty

Timestamp: [01:49] - [13:14]

Ben Carlson: "Whatever the outcome is, it will have seemed so obvious in the future."
Michael Batnick: "Binary is the word I was gonna use too."

The discussion opens with the contentious topic of tariffs, a new category added to their documentation. Both hosts express skepticism about the longevity and efficacy of the current tariff policies. They outline two primary outcomes:

1. Economic Downturn: If Trump's tariffs severely impact the economy, there will be widespread criticism and blame directed at the administration.
2. Political Chess: The tariffs may be a strategic move to create economic chaos, allowing the administration to later claim victory through negotiated outcomes.

Michael voices increasing bearish sentiments, stating, "I haven't been this bearish since the great financial crisis..." reflecting deep concerns about the cascading effects of sustained tariff implementations.

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Impact on the Auto Industry and Consumer Debt

Timestamp: [05:38] - [11:11]

Ben Carlson: "Buy now, pay later for cars."
Michael Batnick: "You're going to get extended car loans much further because people will say, I'm not going to cut back... That's what's going to happen and that's going to be really bad for people."

The hosts analyze the specific impact of a 25% tariff on imported automobiles. According to Dan Ives, these tariffs could increase new car prices by $5,000 to $15,000. Trump's rationale is that higher prices on foreign cars will boost American auto sales. However, Michael counters this by pointing out that competitors will also raise their prices, leading to a uniform price hike across the industry.

This scenario is expected to drive consumers into deeper debt as they extend their auto loans to maintain their current payment levels. The discussion highlights the broader implications of increased consumer debt on the economy.

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Energy Sector and Corporate Planning Freezes

Timestamp: [08:14] - [10:42]

Ben Carlson: "These people are not happy."
Michael Batnick: "It's going to be more debt."

The episode shifts focus to the energy sector, referencing a Dallas Fed Energy Survey that underscores significant uncertainty among public energy companies. An executive from Public Trade expresses concerns that contradictory governmental messages undermine U.S. energy dominance, particularly at a time when oil prices are volatile.

This uncertainty is leading to a freeze in corporate planning, complicating strategic decisions within the energy sector. The hosts discuss how such instability can stifle economic growth and exacerbate existing financial tensions.

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Wealth Distribution and Private Equity in Retirement Savings

Timestamp: [29:30] - [36:30]

Michael Batnick: "This experiment is probably not going to go great in general."
Ben Carlson: "These strategies do not keep up with the S&P. By definition some of them are not even as good as a simple 60, 40, 70."

A significant portion of the conversation is dedicated to wealth distribution, referencing a Bloomberg statistic that states, "Half of American households hold 97.5% of wealth," with the bottom 50% holding just 2.5%. The hosts compare this to historical data, noting similar distributions during the aftermath of the Great Financial Crisis.

The discussion transitions to private equity's push into 401(k) retirement accounts. Michael expresses skepticism, emphasizing the illiquidity and complexity of private equity investments for the average investor. Ben acknowledges the potential pitfalls but also considers the psychological appeal of these strategies for investors seeking certainty.

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Real Estate Market Divergence

Timestamp: [35:40] - [49:08]

Ben Carlson: "The best time to buy is when you can afford it."
Michael Batnick: "There’s a significant divergence where some places are hot while others are cooling off."

The hosts examine the current state of the real estate market, highlighting a stark divergence between regions. In Northern Virginia, properties are selling rapidly above asking prices, suggesting a robust market. Conversely, in Miami, there's a glut of active listings with homes remaining on the market for extended periods and even recent price cuts.

This regional disparity underscores the importance of local market conditions over national trends. The conversation touches on factors like rising insurance costs and oversupply in certain areas, which are contributing to this uneven landscape.

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Options-Based Investment Strategies Critique

Timestamp: [23:55] - [37:00]

Ben Carlson: "The human element... investors want that certainty even though it's not completely certain, it's more bracketed in and it's a psychological thing."
Michael Batnick: "It's about having the certainty even though it's not completely certain."

Ben and Michael critique options-based investment strategies, such as buffered overlays and defined outcomes. Referencing a piece by AQR, they agree that these strategies often fail to outperform passive U.S. equities and have disappointing returns. Despite the mathematical shortcomings, the psychological comfort they provide to investors ensures their continued popularity.

The hosts discuss the growing trend of these strategies, fueled by increasing adoption among financial advisors and shifting demographics. They caution investors about the long-term viability and effectiveness of these approaches.

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Streaming Services and Market Performances

Timestamp: [50:58] - [60:49]

Michael Batnick: "Gold is still where people turn, not crypto."
Ben Carlson: "Bitcoin is a risk asset. That's it."

Shifting gears, the podcast explores the financial performance of streaming services, specifically Apple TV+, which is reportedly losing over a billion dollars annually despite having 45 million subscribers. They discuss the sustainability of such business models and the broader implications for the streaming industry.

Additionally, the hosts compare the performance of traditional hedges like gold to cryptocurrencies. Michael notes, "Gold is up almost 20%, Bitcoin’s down almost 10%," emphasizing that in times of turmoil, gold remains a more reliable store of value compared to the volatile crypto market.

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Personal Anecdotes and Lighthearted Discussions

Timestamp: [37:00] - [61:15]

Towards the end of the episode, Michael and Ben share personal stories and engage in lighthearted banter. Topics range from dealing with aggressive Canadian geese near Michael's office to reflections on classic movies like Glengarry Glen Ross and Hoosiers. They also touch upon their preferences in music and discuss the challenges of recommending shows to their children.

These segments provide a welcome respite from the intense financial discussions, showcasing the hosts' personalities and their ability to connect on a personal level with their audience.

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Conclusion

Timestamp: [60:45] - [61:15]

As the episode wraps up, Michael and Ben recap their views on the current market, reaffirming Ben's stance that a bear market is not imminent despite recent downturns. They acknowledge the binary nature of economic outcomes and the unpredictability that lies ahead, emphasizing the importance of being prepared for various scenarios.

Michael Batnick: "I'm sure Jamie Dimon is like the perfect one for this."
Ben Carlson: "We’re all just guessing."

The hosts invite listeners to reach out via email for more personal interactions, concluding the episode on a note of camaraderie and mutual respect.

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Notable Quotes:

• Ben Carlson [02:05]: "All opinions expressed by Michael and Ben are solely their own and do not reflect the opinion of Ritholtz Wealth Management."

• Michael Batnick [05:59]: "Trump said, listen, I don't care if prices on foreign cars rise because then people will buy American cars."

• Ben Carlson [14:55]: "Google is trading at... high teens, 26. Estimated earnings. I bought Nvidia yesterday for the first time."

• Michael Batnick [13:14]: "I have more bearish now than I have been in 15 years. This is what I'm going to say."

• Ben Carlson [27:44]: "People bought the shit out of US ETFs in the first quarter."

• Michael Batnick [29:52]: "It doesn't sound good."

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Key Takeaways:

1. Tariff Policies: Trump's tariff impositions are creating significant uncertainty in the economy, particularly in the auto and energy sectors. The potential for increased consumer debt and disrupted corporate planning is a major concern.

2. Wealth Distribution: The vast disparity in wealth distribution remains a critical issue, with the bottom 50% holding a minuscule portion of the nation's wealth. Private equity's shift towards 401(k) accounts introduces new challenges for retirement savings.

3. Real Estate Dynamics: Regional differences in the housing market highlight the complexity of national economic indicators. While some areas experience rapid sales above asking prices, others face oversupply and stagnation.

4. Investment Strategies: Options-based strategies, despite their appeal for providing psychological comfort to investors, often fail to deliver superior returns compared to passive equity investments.

5. Market Sentiment: Despite bearish analyses, the stock market has shown resilience, with major indices not reflecting the depth of underlying economic uncertainties.

6. Consumer Behavior: Rising costs in essential sectors like transportation and housing are pushing consumers towards higher debt levels, which could have long-term implications for economic stability.

7. Personal Insights: The hosts' personal stories and reflections add depth to the discussion, illustrating the human side of economic and market analyses.

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For more insights and detailed discussions, tune into the full episode of "Ben's Bearish" on the Animal Spirits Podcast.

Transcript

[Michael Batnick]

Today's Animal Spirits is brought to you by our friends at Y Charts, our very own Nick Magiulli of dollars and data fame. Just keep buying. Teamed up with wide charts and we'll be doing 29 years of market data. They didn't want to round up to 30, so looking at four different rebalancing strategies to see what the best approach is, I would say horseshoes and hand grenades, but I'm sure Nick ran the numbers perfectly here. If you're an advisor looking to understand rebalancing, portfolio allocation, improve performance, Good research from Nick April 10 live webinar with Y Charts. Use the link in the show notes. Also last week YCharts gave us a demo of their new AI tool which we mentioned, which is awesome.

[Ben Carlson]

I'm liking it, I'm using it.

[Michael Batnick]

It's really well done. They basically have an AI chat feature where you can type in questions, ask them to. I use it for all sorts of different stuff now.

[Ben Carlson]

Yeah, I'm using it.

[Michael Batnick]

Yes, I asked last week. Give me the.

[Ben Carlson]

Wait, did you just become a tech bro?

[Michael Batnick]

AI is integrated in my life so easily. It's just give me the annual returns for the US housing market going back to 1990. Boom. Done. Calculated.

[Ben Carlson]

Here they are. Yeah, it's really nice.

[Michael Batnick]

Really cool. 20% off your initial subscription if you go to Y Charts and tell them Animal Spirits sent to you ycharts.com to learn more. Welcome to Animal Spirits, a show about markets, life and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

[Ben Carlson]

Welcome to Animal Spirits with Michael and Ben. I don't know why it took us so long, but there's a new. A new category in our doc and that category is Tariffs. Long overdue, huh?

[Michael Batnick]

Well, I hope it's short lived, but I. It seems like at this point it's. It might not be. So we've got a lot of stuff to go on here.

[Ben Carlson]

Let me pull a Ben Carlson this is something that you, that you say frequently. All right, whatever the. Out. But I mean it this time, okay? Whatever the outcome is, it will have been. It will have seemed so obvious in the future. In other words, if Trump and his tariffs really nuke the economy, there will Be a lot of people screaming. Rightfully so. He was telling you he ran, he campaigned on this. You thought he was joking. He was telling you he's going to do this. Right. That's how come. Number one.

[Michael Batnick]

Yep.

[Ben Carlson]

Outcome number two, which we saw a glimpse of last week and a small glimpse of last night where he said he's going to be very kind on the tariffs or something. Outcome number two is this is all 19 dimensional chess. He creates the chaos that he can.

[Michael Batnick]

Claim part of the deal negotiating tactic.

[Ben Carlson]

So that he can claim victory. Okay, so if that happens and this is behind us, it will equally be. You idiots. You fell for it. He's a markets guy, he's a real estate guy, he's a rich guy. You think he's trying to nuke his wealth? Did you really? How stupid are you? And I feel like it's binary.

[Michael Batnick]

I was gonna. Binary is the word I was gonna use too. And everyone is going to pretend like they knew it all along, too.

[Ben Carlson]

All right, I'm. I'm like sort of. I don't know, I'm afraid to stick my neck out on the line, which I think I kind of have been. I'm in the second camp. I don't believe him. Sorry. That this, this could look. I could look like an absolute jackaloon. I just don't. I don't believe it.

[Michael Batnick]

I'm starting to fall more in the former camp because I can't believe it's gone on this long.

[Ben Carlson]

Yeah, well, how about this? My confidence in that has certainly shifted towards the middle. Like maybe he really does.

[Michael Batnick]

That's the surprising thing to me is how long this has gone on and how he keeps doubling down on this stuff. And you're right, we're going to go through a bunch of numbers here about what these tariffs could do. And then in a month it could be all meaningless because it could be just null and void. But I think we have to still look at what the impact of this could be if it happens. Because if it does, if he keeps his foot on the gas or the brake, whatever you want to say, the outcome of this is not going to be good for the economy.

[Ben Carlson]

Correct.

[Michael Batnick]

All right, so let's look at the numbers.

[Ben Carlson]

All right, so last week he announced again, maybe that there are 25% tariffs on all imported autos. Right. That was the announcement last week that sent the market diving on Friday, Thursday.

[Michael Batnick]

I thought the auto stuff was relatively new.

[Ben Carlson]

Okay, so here's Neil Dutta's take. He said the United states import, roughly $300 billion of vehicles per year. That amounts to roughly 1 percentage point of GDP. Thus, 25% of that implies quarter percent hit to GDP. Speaking of cars, according to Bloomberg News, car repossessions surged last year to the most since 2009, a sign that mounted consumer stress is reverberating throughout the economy. In 2024, roughly 1.73 million vehicles were seized. That's up from 16. That's up 16% from the year prior and 43% compared to 2022. The rise in auto loan delinquencies appears to be a lagged response to tighter monetary conditions. Now, I also not dismissing the data, but I think you have to also factor in the part that people went crazy. Excuse me, excuse all the F bombs. People went crazy in 21 and 22 buying things that they couldn't afford. So I think that's part of the story as well is overall consumer stress. Do you agree?

[Michael Batnick]

Yes. But here's what's gonna happen if these tariffs hit. So Dan Ives said in a research note that Trump's auto tariffs will cause pure chaos for the industry and add 5 to $15,000 to newer car prices. He says, and I quote, the winner in our view from this tariff is no. 1. And the thing is, Trump said, listen, I don't care if prices on foreign cars rise because then people will buy American cars.

[Ben Carlson]

That's a direct quote.

[Michael Batnick]

Yes, that sounds great in theory. Here's what will happen, though. If one automaker raises prices because they're getting tariffed, you think the other automakers are just going to keep their prices the same? No, they're going to raise prices, too, and they're going to make it up in margin.

[Ben Carlson]

So does this mean that I'm renewing my crappy Jeep? What do I do? Is Toyota off the table for me?

[Michael Batnick]

Well, that's the thing, though. It's hard to know where because the, the parts are getting tariffed. So it's not like you have any very few. It's, you could have a Honda car that's more made in America than a 4 because of where the parts come from.

[Ben Carlson]

Hey, let me ask you a question. Is uncertainty the same today as it always is because the markets are always uncertain?

[Michael Batnick]

Well, it depends because we have the binary outcome thing, Right? But here's the thing. On Liberation day tomorrow, on April 2nd, we're recording this on April 1st. Happy April Fool's Day. I mean, he's, let's say he says, here's my plan. But is that plan set in stone?

[Ben Carlson]

No, I'm Very curious to see how the market reacts. It's either gonna be up or down a lot, I would think, and not.

[Michael Batnick]

Just down the middle. Here's the thing on. You mentioned the repossessions and stuff on cars. I looked at this chart Kit. Matt created this for me. The how Americans spend their money on average and housing and Transportation make up 50% of the total. Transportation is like 17%.

[Ben Carlson]

Here's a whole kit and caboodle.

[Michael Batnick]

Here's the thing that. So this is a huge part of household budgets. Here's what will happen if, if tariffs raise prices for cars and vehicles 5 to 15,000, wherever it is that they're estimating people will extend. We're going to get like 96 month loans. People are going to say, I want this payment that I was paying, so extend the loan. We're going to get like 10 year car loans.

[Ben Carlson]

Buy now, pay later for cars.

[Michael Batnick]

Honestly, that's what's going to happen. You're going to get extended car loans much further because people will say, I'm not going to cut back. I'm not going to drive a Toyota Camry like Michael. I'm going to buy the same SUV and I want the same price but extend the loan. That's what's going to happen and that's going to be really bad for people.

[Ben Carlson]

It's a Highlander, sir. Sorry, that's a Toyota.

[Michael Batnick]

But don't you, don't you think that's, that's where we're headed though, if, if this happens?

[Ben Carlson]

Yeah, I don't know. I mean, consumers will change their habits if they get laid off, obviously.

[Michael Batnick]

Yeah. But short of that, will consumers actually change their habits? Are, are parents going to stop buying suburbans?

[Ben Carlson]

It'd probably just be more debt. Probably not.

[Michael Batnick]

That's what I'm saying. It's going to be more debt.

[Ben Carlson]

So. All right, the Dallas Fed Energy survey. I, so I read all, all of the quotes in there and it is gnarly. These people are not happy. This. So this quote reminds me of the Billy Bob Thornen line about what's a perfect price of crude.

[Michael Batnick]

Yes.

[Ben Carlson]

All right, so this is from an executive of Public trade. Yeah, here it is. Okay. The key word to describe 2025 so far is uncertainty. And as a public company, our investors hate uncertainty. This has led to a market increase in the implied cost of capital of our business. With public energy stocks down significantly more than oil prices over the last two months. This uncertainty is being caused by the conflicting messages coming from the new administration. There cannot be, quote, U.S. energy dominance and a $50 per barrel oil. Those two statements are contradictory. At $50 barrel per oil, we will see U.S. oil production start to decline immediately and likely significantly. This is not energy dominance. The US oil cost curve is in a different place than it was five years ago. $70 per barrel is the new $50 per barrel. And this was like a relatively tame one. These people are pissed.

[Michael Batnick]

Right. And they're talking about how the cost of all they're doing business is going up as oil prices are falling.

[Ben Carlson]

Yeah. So with the. I mean, the uncertainty is creating a freeze in terms of corporate planning. How could it not?

[Michael Batnick]

It has to be. That's the biggest. That's the biggest worry, obviously. Now the other side of it here is Torsten Slok says, listen, the debt thing, we've repaired our balance sheets. People are in a good position like the private sector is in good. People are so worried about government debt. But government debt, guess what? Government debt allowed us to do it allowed households to repair their balance sheets.

[Ben Carlson]

Yeah. Can I move the goalposts a little bit on some of the stuff I've been saying? Although I don't know if I'm moving the goalposts. If we do get a recession, of course, all this caveat, nobody knows, but this chart makes me feel pretty good about the fact that if we do get one, we are moderately well positioned for one.

[Michael Batnick]

Households are.

[Ben Carlson]

Yes, households are. So Torsenstock has a chart that shows the debt as a percent of GDP by sectors. And everything's going down non financial, corporate, financial, corporate households, everything except the federal government, which obviously is going up into the. Right.

[Michael Batnick]

Right.

[Ben Carlson]

So Americans have delevered. And should the economy not just slow down, which it is, but should it contract, I would expect a shallow recession.

[Michael Batnick]

This is also why debt for the household is going to increase. People are going to be. Whatever happens with the economy, I think if it just normalizes or if it slows down, people will be using more debt if rates fall. Yeah, I think that's a pretty easy one to predict. Right?

[Ben Carlson]

Yep.

[Michael Batnick]

So I think Wall street takes a huge L on this. However, however it works out into your binary point. Wall street was wrong on the way that this has worked out for Trump so far, which is kind of crazy that we're, I don't know, three months into his presidency. So this is.

[Ben Carlson]

Would you, would you say like Wall street was wrong? But I would extend it to say everyone was wrong. Who, who would, who would be able to have predicted the outcome at least of the market? Well, it's true Four months into his.

[Michael Batnick]

Administration, a lot of voters would have said, I want the 2016-2019 economy. That's what I'm voting for. I'm sure that's what a lot of people thought. And obviously this is. That's not what they're getting so far. So this is from the day after the election. Wall street salivates over a new Trump boom. This is from the Wall Street Journal. And then this is a few days ago. Corporate America's euphoria over Trump's golden age is giving way to distress again. This happened in five months, essentially. Very quickly, they're kind of saying, wait a minute. And I think Jamie Dimon is like the perfect one for this. So Jamie Dimon in. This is like the two days after the inauguration. This is from cnbc. Jamie Dimon says Trump's tariff policy is positive for national security. So people should get over it. Has there ever been a CEO who is more successful, who is also more wrong in headlines? I don't think anyone is wronger than Jamie Dimon in headlines while being also one of the greatest CEOs we've ever seen for this cycle. Is that fair?

[Ben Carlson]

Yeah. Yeah. I mean, also think he'd like a.

[Michael Batnick]

Mulligan on this one. Maybe.

[Ben Carlson]

Would he like a mulligan?

[Michael Batnick]

Yes. Probably a little one on that. Because, I mean, they didn't think that we're gonna like, listen, I think most people thought, hey, listen, we're gonna put some strategic tariffs on China. The stuff with Canada, that is the thing that is, that could have long lasting impacts. And those are the kind of things that make me pretty worried. And I'll say this, I'm more bearish now in my brain, my heart, whatever. Not in my actions, my feelings. I'm more bearish now than I have been in 15 years. This is what I'm going to say.

[Ben Carlson]

Really.

[Michael Batnick]

I haven't been this bearish since the great financial crisis on where things could go cascading into serious problems. I'm not saying that's going to happen. This is how I feel.

[Ben Carlson]

Maybe I'm overestimating or I've just been trained over the years. Overestimating the resilience of the US Consumer and our corporate behemoths.

[Michael Batnick]

Yeah, I have faith that corporations will, whatever happens, corporations will adjust. I just think that there's so much going on right now that has the potential for long lasting impacts. Here's the thing, a lot of people have been shoving it in my face saying, Ben, you always say the president doesn't matter to the Stock market. This proves you wrong. And the reason that I have always said that is because I never thought we'd have a president who would try to make the economy and the stock market go down. Seemingly so. I've read a ton of history on the Great Depression, and the crazy thing about it is the Fed and the economists and the politicians essentially made it 10 times worse. They, the, they didn't cause the Great Depression, but they made it way worse through their policies and actions. And my thinking is, well, we're never going to have that again. There's never going to be a politician who tries to implement policies that are going to hurt the economy on purpose. And that's what it seems like he's doing. And so that I never figured we would see this.

[Ben Carlson]

You think, do you think that there could be a 2010, 15% hit to corporate earnings?

[Michael Batnick]

Possibly. Although I don't know how much of it just gets passed through the consumer.

[Ben Carlson]

But, like, absent that.

[Michael Batnick]

But, but don't you think that the premium, the valuation is the piece here? What if, if investors just say, I'm not giving the US Stocks a premium anymore. Yeah, I think that's the worry.

[Ben Carlson]

Google is trading at. I own Google at low 20s next year, high teens, 26. Estimated earnings. I bought Nvidia yesterday for the first time. Never owned that stock before. I don't know, maybe I'm underestimating how crazy all this shit is. Like, I don't like it either. And I think that the uncertainty is getting extremely exhausting, the lack of a plan.

[Michael Batnick]

So this is from political. Wednesday's decision to slap the auto industry with 25% tariffs. While expected in some fashion in the near future, the announcement came together so last minute that the White House wasn't fully prepared and had to delay afternoon programming as they sought to finalize the plan. And so this is from that same. This is from someone in Trump's inner circle. They say for him, if the economy tanks, then fine, the economy tanks because the President truly believes that it will rebound and the country's will give in because they can't withstand the pressure from the US as far as political blowback, number one, the President is not running for re election. So where this may have been a political concern for the first term, it's not a political concern now. And number two, we're probably gonna lose the House in the midterms anyway. If that really is the feeling like, I don't care if this tanks, then that's where things get out of hand. That's where I'm worried. I can't believe we would ever let it get to that point. That's where you're coming from.

[Ben Carlson]

The fact of the matter is nobody knows. Right.

[Michael Batnick]

Like, and I don't, I don't act on my feelings, but I'm just saying if I can see a scenario where this thing gets out of control, that's, that's that, that worries me a little. I think there's a higher, that's a higher percentage chance that I ever would have ascribed to this situation coming into the year.

[Ben Carlson]

Yeah, fair. Okay, well listen, certainly there you're, you're not alone in that camp. What, what did Colin have to say about tariffs?

[Michael Batnick]

Well, he kind of goes through this back and forth on answering all the pushback from people who say maybe we do need tariffs. And he says, well, Americans will spy from US firms now. And he says Americans will have fewer choices because the government reduced competition and consumer options. This will drive up prices, especially when US firms realize they have more pricing power due to the government's manipulation of the market. That's true. That's what I'm saying. Automakers, if they're the last one standing in the US like US made autos, those prices are going up because they have more power now. He says, well we need to reduce the trade deficit because we're getting ripped off. And he said we're getting lower priced goods and higher margins and foreign countries get our income and investment. Like this is a pretty good deal. Joe Eisenthal had this idea where he said the one way to think about any relatively open trading block is that by allowing more specialization and focus, the economy can build out more complex market objects. If you want to have autarky, I can never say that word in America. You could probably do it. But good luck building out any advanced complex industry with so many resources dedicated to manufacturing kitchen mitts or microwaves.

[Ben Carlson]

Wait, what was that, what was that word you just used?

[Michael Batnick]

What?

[Ben Carlson]

Autocray. Where is it?

[Michael Batnick]

I can't find autarky, like being like having everything just made here. And so the idea is that sure, we could make everything here if we wanted to, but why don't we let other countries do that that have lower cost labor and we can specialize in more complex things and build cooler stuff here.

[Ben Carlson]

Oh, there it is.

[Michael Batnick]

That's what we've done.

[Ben Carlson]

I found it. A U T A R K Y Y. Gotta be honest, I've never even seen that word before.

[Michael Batnick]

Well, I've only seen it in recent months. Basically like being self sufficient.

[Ben Carlson]

Okay. By the way Ben, you getting scared about bearish on the market? I just want to say that for people listening, especially younger people, you should be on your hands and knees praying for lower prices assuming that you're contributing everything to your 401k.

[Michael Batnick]

I'm still a long term bull even if I feel uneasy about the short term on what possible could happen.

[Ben Carlson]

And if you are later in life and you don't have 40 years ahead of you and you're scared, take less risk. That's always reasonable.

[Michael Batnick]

So here's a question for you. Should the stock market be down more? Because if come into this year and we think through what the bad news is. So we've got bad news from tariffs. There's been bad news on the AI front. Right. The deep seq thing was kind of the first shot of across the bow. Coreweave Microsoft said they're slowing down data centers. The core weave thing to me is crazy that we could have an AI like I was promised a dot com bubble so we could have an AI company go public and they lower the price and lower the price and lower the price and then essentially the first day it does nothing. Yeah, I wouldn't have believed that six months ago, would you?

[Ben Carlson]

So, so here's my take on the stock market and I've been talking a lot about like the market seems to be unperturbed relatively speaking. And I think my point is you would expect, given where stocks came from the back to back 20% up years, the 15% compounded for the last 15 years, you would expect this to be weighing on the market much more than it is. So I have been thinking like if the market's not that concerned, I'm not, I'm not that concerned. And when I say not that concerned, here's where we are. So the S and P, the MAG7 stocks are getting killed. And I think that is adding to why people are really anxious. It's because most people own at least one or seven of these stocks. Right. So all of these Mag 7 stocks are in a bear market with the exception of Apple. Some are down a lot.

[Michael Batnick]

I looked at this yesterday. This is through some point on Monday. Apple was down 15%. Microsoft, Amazon and Facebook all down around 20. Google 25%. Nvidia is down 30%. Tesla was down almost 50%. So this, okay, this is something people have been waiting for to happen for a long time.

[Ben Carlson]

So, so if you are, if you're, if you've been concentrating on names, it cuts both ways. But this has been a really painful year. The s and P 493 is up half a percent this year.

[Michael Batnick]

That's pretty crazy.

[Ben Carlson]

So yeah, I would expect it to be significantly worse and maybe we get there. But right now it seems like the market is still too optimistic.

[Michael Batnick]

The market thinks that this is a negotiating play. How's that?

[Ben Carlson]

Right. So I mean, I feel like a broken record. But like I defer to the market. Doesn't mean the market's always right. And these are not like my feelings of oh, I'm bullish and naive to the risks. I'm just saying the market for now seems to be looking past it, relatively speaking. Now somebody could say idiot. What are you talking about? Look at the max. Okay, I get it. I'm just saying like in general, I would expect, given how shocking all this tariff stuff is and the uncertainty, I would expect to your point, Ben, for stocks to be down a lot more.

[Michael Batnick]

The S and P is down what, 5 or 6% year to date?

[Ben Carlson]

I mean, give me a break.

[Michael Batnick]

It's not a lot.

[Ben Carlson]

I know it's not fun. I'm not minimizing it and you know, people are scared. I understand. But it's just. It's just not that bad.

[Michael Batnick]

Yeah. But I also think that if, if he doesn't blink again and says no, I'm doing 20% tariffs across the board around the world. I think there's an air pocket situation potentially.

[Ben Carlson]

I agree. Yeah. So if on tomorrow he goes hard in the paint, we could be down another 10% next week. Until next. Next time we record.

[Michael Batnick]

Yeah. So Torsten Slack did another one that you used and it was basically like stock market performance after a 10% decline with a recession. Without a recession. And without a recession, obviously most of the time it just comes back pretty quickly with a recession much longer. So I think that is the. That's the thing.

[Ben Carlson]

But I also did a follow up post on this because Warren Pies broke out all of these lines and this is one of those charts that is not like misleading in the sense that.

[Michael Batnick]

Torson Slack is trying to average doesn't tell the story. Is that.

[Ben Carlson]

No. The. So Warren Pies broke it down and showed the path of all non recessionary and recessionary and it's spaghetti.

[Michael Batnick]

Okay.

[Ben Carlson]

Like it really is all over the place.

[Michael Batnick]

Right.

[Ben Carlson]

But yes, generally speaking, of course you would expect if we don't get a recession, this will have proven to be a great buying opportunity.

[Michael Batnick]

Yes. And probably and my, my level of bearishness would. Would level out if. Because this is all self inflicted.

[Ben Carlson]

Yeah.

[Michael Batnick]

Right. This, this is not a financial crisis situation. That.

[Ben Carlson]

But that's my point of why you can't get too, too beed up. Because this, this can be undone so quickly. And if it does, getting in is. Getting back in is a hard part. So to that point, this is a point that I'd be, you know, be over the head a million times. But Nicholas Cola said it best. He said getting out is easy, but getting back in is hard. I've seen every major market low since the 1980s and none of them were even remotely obvious. Right. So, yeah, get out. You're scared he's going to tank the economy. Like this is an obvious get out. When do you get back in? Because the bottom is going to look black as shit. Like it's going to be so dark.

[Michael Batnick]

Yeah. And people have obviously gone to a dark place already. Maybe myself included. But again, I have more faith in corporate America these days and their ability to handle these situations than I do our politicians. How's that? Yeah, I have more faith in the stock market than any institution in our country.

[Ben Carlson]

All right, I want to talk about aqr. Put out a piece couple of weeks ago. Rebuffed. A closer look at options based strategies. This is Cliff and his partner Daniel Villalone.

[Michael Batnick]

Remember when AKR had podcast Whatever happened to that? Dan was a host of it.

[Ben Carlson]

Okay. The holy grail for many investors is a strategy that generates market like returns, but with less risk. Enter options based strategies often labeled with words like buffered overlay and defined outcome. These strategies use options to capture the upside or downside of an asset's return. And managers who employ a mix of options can tailor an asset's risk return profile to align with an investor's goal. It's no surprise then that Morningstar's options trading related category have amassed $234 billion, up from zero. Like, I don't know, seven years ago. Whatever. It was wildly successful with investors. However, investors should expect disappointment from these types of strategies. This is not only because actual results have been overwhelmingly disappointing, but also because economic theory says these strategies should be overwhelmingly disappointing. Of the 624 funds in these options related Morningstar categories, we look at the 99 that have histories going back to January 2020. And for these 99 funds, we asked two questions. Did their cumulative returns exceed that of passive U.S. equities? Of course they didn't. That's me, not them. And were their worst drawdowns less severe than that of passive U.S. equities? And they ultimately conclude that when it comes to buying puts the Price of admission is generally higher than the benefit. And on that I would say yes, agreed, 100% right. I think the other side that I would offer because they're right in terms of like the math, they're right. These strategies do not keep up with the S and P. By definition some of them are not even as good as a simple 60, 40, 70.

[Michael Batnick]

They looked at like a 7030 portfolio in here and said like you'd be better off doing that.

[Ben Carlson]

Yeah, whatever, replication. But I think the important point is the human element. And if these air quote, not air quote. If these suboptimal mathematical strategies can keep an investor invested, then that's all that matters. And they can, I think. And that is why this category has grown as much as it has and in my estimation will only get larger. And I understand where the quants are coming from. Like I could give people a better. I get it.

[Michael Batnick]

Yeah.

[Ben Carlson]

But this is what people want for better or for worse.

[Michael Batnick]

Right? Some people just don't have the ability. They want the brackets on each side. They want to know I got here to here. Like it's. It's about having you said that the certainty even though it's not completely certain, it's more bracketed in and it's a psychological thing. I always tell people like.

[Ben Carlson]

So even if, even if you only get I'm making this up 85% of the upside and you get 93% of the downside, that might sound like it. That might sound moronic. But people want that.

[Michael Batnick]

I always say that people who. There's a lot of people who think owning individual bonds protects them from the risks of the bond market as opposed to owning a bond fund.

[Ben Carlson]

Same thing.

[Michael Batnick]

And it's the same thing. And I always tell people like it's literally a bond fund is just a fund of individual bond securities. But if owning individual bonds allows you to stick through rate movements and inflation and all this stuff, that's the thing. And to your point about keep growing blackrock had a new thing out saying they project outcome oriented ETFs will triple to 650 billion by 2030 fueled by growing financial advisor adoption and changing market demographics. And they have this chart in here show and it's currently. What did you say? 100 some trillion.

[Ben Carlson]

Wait, what? 234 billion?

[Michael Batnick]

Yeah, 234 billion.

[Ben Carlson]

Did you just say 100 trillion?

[Michael Batnick]

$1 billion. And they say like part of their reasoning for it is more people getting older and older people are going to want more certainty in their financial life. So to your point, could These possibly be suboptimal versus some strategies. Sure. But do people like having a little more certainty in their portfolio? Probably. So I think the psychology wins over the math in this one.

[Ben Carlson]

All right, Baltunas semi shock US focused ETF inflows have obliterated any other key one with $137 billion, which is 85% of all flows ex US ETF hall has actually been below average. So while the headlines talk hedge funds exiting the US etf, investors are on a buying spree for better for worse. Now I think some of this has accelerated in the last couple of weeks. So it might not be all in the data, but to me the big takeaway is people bought the shit out of us ETFs in the first quarter.

[Michael Batnick]

A lot of this is automated and it would take a lot longer than three months of performance to change people's actions on this stuff.

[Ben Carlson]

Did flows slow down at all in 2022? I mean we had a long bear market. We had a long. We had a bear market. What it last for almost two years. I wonder if flow slowed down.

[Michael Batnick]

I bet one of our ETF people will give us an update on that.

[Ben Carlson]

All right, we'll grab that for next week. So I looked at that's a bad signal for Jeffrey Patek the other day.

[Michael Batnick]

Yesterday I was looking at year to date returns for a lot of the European stocks are up 10%, emerging markets are up 3 or 4% S&P down 6 and Nasdaq down 10. Russell 2000 down 10. And someone said what about long term Treasuries? They're doing better. Finally. So I looked up TLT and it's up like 5% this year. Not bad. You know, rates haven't fallen that much. But I looked TLT, even with income is still in a 40% drawdown from the pandemic. Can you imagine if the stock market was still in a 40% drawdown four years later? How freaked out people would be.

[Ben Carlson]

Such a good point. And on a real basis, forget about it.

[Michael Batnick]

Yeah, it's down more like 60 crazy.

[Ben Carlson]

Great point, Ben.

[Michael Batnick]

Okay, this is an interesting one from Bloomberg. I want to get your take on this stat. Bloomberg says half of American households hold 97.5% of wealth, meaning the bottom 50% holds 2.5% of wealth in this country. What's your initial read on a stat like that? I did some digging on this, so.

[Ben Carlson]

My initial read is that's not good.

[Michael Batnick]

It doesn't sound good. So I looked at this historically at the bottom of the great financial Crisis, which is essentially the bottom of the housing market in 2011, we'll call, was 99.4% to the top 50% and 0.6% to the bottom 50%.

[Ben Carlson]

Wow.

[Michael Batnick]

So the bottom 50% is actually that now is of course, after the great financial crisis, because most of the bottom 50%.

[Ben Carlson]

Yeah.

[Michael Batnick]

Like 50% of their financial assets are in their house.

[Ben Carlson]

So how's it so, but my, like, my second thought is, okay, on the surface, in a vacuum, this is an.

[Michael Batnick]

Alarming stat, and it seems like it should. And the highest it ever was is in the 90s, the bottom 50% held 4% of wealth. So it's never been that high. So my question to you is, is this just the way things always are? Because I think how many people automatically have a negative net worth? Because when I graduated college, I had a car loan and I had student loans, so my net worth was negative for probably four years after college. Like, I didn't save a lot when I first started working because I didn't make a lot. So my right out of college, boom, negative net worth. So that immediately brings down the bottom 50%, because there's so many people with a negative net worth just built in. So I wonder if this number isn't necessarily as bad as it looks, because there's always going to be some people who just have a negative net worth.

[Ben Carlson]

So I, I, I earned $270 in the year 2010. Not to brag, so I was right there with you after tax. But the second place that I go to is if you were to compare the real income, the standard of living for the bottom 50% over the last hundred years, I'm going to guess it's up and to the right.

[Michael Batnick]

And for the last five years or so, the bottom 50% has seen a huge increase in wealth.

[Ben Carlson]

They've also got destroyed by inflation. But I do think that there's more context necessary for data like this.

[Michael Batnick]

Yes.

[Ben Carlson]

So then they, they break it down in terms of like, all right, so, and we, we've, we've shared charts like this in the past. What does the asset makeup look like? And for the bottom 50%, nearly half of their household wealth is, of course, in real estate.

[Michael Batnick]

Right.

[Ben Carlson]

In their home. And that as you go up the wealth spectrum, that, that goes lower and stocks explodes. Right.

[Michael Batnick]

And I looked at this, that for the top 10%, it's essentially like 20% of their wealth is tied up in the home and 35% or so is in stocks. So it's just, there's more Diversification, the wealthier you get. And the house makes up much less.

[Ben Carlson]

What do you think other is like cash.

[Michael Batnick]

That's a good point. Must be. Yeah. Because it's not corporate equities or mutual fund shares. Yeah. So it must be cash. Everyone holds a lot of cash.

[Ben Carlson]

But Ben, this next chart, which I know you spoke about earlier, you do see the bottom 50%, it rises, right? Rising the share.

[Michael Batnick]

Yeah. All right, so the rich are getting richer, but everyone else is getting richer, too. It is not at the same pace.

[Ben Carlson]

You can't say richer for the bottom 50%. They're getting better off.

[Michael Batnick]

Richer than they were. Sorry. Yes. No, but I'm saying the rich are getting richer, but the rest of everyone is not. Is. Is making more money too, just not as much as they were as the rich.

[Ben Carlson]

America has never been wealthier. Here's why it doesn't feel that way. From our friend Tomlin Smith at the New York Times. And we've spoken about the troubles with surveys and sentiment, especially within the University of Michigan survey. But nevertheless, this part of it is interesting to me and I do, I do believe this drives with current feelings in the economy. He breaks it out by bottom third, middle third, top third. And not surprisingly, because the economy is in fact slowing down, the labor market is slowing down. The bottom third is particularly.

[Michael Batnick]

So that rolled over much quicker. That makes sense to me. The bottom third is going to feel the pain of a slowdown much more broadly. Yeah, that makes sense. All right, let's talk about private equity and 401ks. Bloomberg did this big piece on private equity is coming for America's $12 trillion in retirement savings. And this is the part that worries me. For the industry, the time is of the essence. After a decade of blistering growth, private equity firms are finding it harder to raise money from traditional pension fund clients. They're all tapped out. We've talked about this. For advisors, endowments and pensions have put money into privates for years. They're full.

[Ben Carlson]

They're good.

[Michael Batnick]

Meanwhile, higher rates and declining asset values have led fewer initial public offerings and sales. Investors aren't getting their money back, choking off the cycle of reinvestment. So the push to get into 401ks is part of a broader campaign to transform private investments from a roughly $25 trillion industry confined to Wall street into an industry of seemingly endless growth driven by an aging Main Street. That's what worries me. That this the reason for the push into 401ks and advisors is because private equity feels like their current client base. Is tapped out. And we like, we need an exit plan here.

[Ben Carlson]

I wouldn't say an exit plan. I would say more liquidity. Is that like the Winnie the Pooh meme?

[Michael Batnick]

Yes, I, yeah, exactly. My initial read on this is. I think this is a terrible idea.

[Ben Carlson]

Okay, I have, I have. My thoughts are extremely mixed because on the one hand what you just said is 100% true and I will not hear any, any. There's no counterpoint. It's true. The main client for these gigantic asset managers has been the institutional investor who are now full. Their belly is full. They're not getting as much money in as they were hoping.

[Michael Batnick]

Hey, why are we going to put money into your new fund if you haven't paid us our old fund back yet?

[Ben Carlson]

All right, so that's over and it's in the data. So then they went onto wealth managers and now they're eyeballing the largest pool of capital, the 401. So on the surface you're like eh, not great. On the other hand, if you are going to invest in these long term illiquid investments, they probably should be in your retirement account.

[Michael Batnick]

Yeah, tax deferred account makes the most sense for private equity. I just don't think the average 401 investor is ever going to understand what these.

[Ben Carlson]

No, neither do I. Neither do I. I think that in 15 years, I would guess not like with a huge degree of confidence, but fairly high actually. Who am I kidding? This will probably not go well for the average investor in these funds.

[Michael Batnick]

Can you imagine the person who leaves their job and instead of rolling their 401k over, they decide to try to cash it out. And it's like you can't cash this out. You're in a private equity fund. You can't do that.

[Ben Carlson]

All right, now here's one other flip side to this is that democratizing this to the extent that there's however many trillions of dollars in 401s will bring down fees and will hopefully, will hopefully have some other benefits. But yeah, I think that this experiment is probably not going to go great in general.

[Michael Batnick]

Yeah, that, that's kind of where.

[Ben Carlson]

But guess what? It is coming.

[Michael Batnick]

Yeah, there's no, there's no fighting it at this point. I agree. Okay. Surprising or no, this is another Torsten Slack one who's at all time highs in our doc. I guess 20% of households in their 40s or 50s have an outstanding 401k loan. He shows this by age and by decade. 20s, 30s, 40s, 50s, 60s. And for everyone it's relatively high. Does that number seem high to you? That many people have a 401k loan.

[Ben Carlson]

So 20% of people in their 40s. I would love to see a line chart over time. Is this normal?

[Michael Batnick]

That's what I don't know either. So our own Blair Duchenne was on asset compound with me a couple weeks ago talking about how she they were trying to sell their home, but also buying a new home and to bridge without to not have two mortgages and to have a down payment. She took a 401k loan out, use it for her down payment on her house, on her new house. And it took longer to sell the old house. Once the old house was sold was sold, she could then take the proceeds, pay off the 401k loan. She actually decided not to do that. She's going to slow pay it back to herself because rates right now are like 8 or 9%. You're paying that to yourself effectively. So there are times when it's not just like people are. People are completely at their lap, you know, nothing else. Do I have to take money out? There's times when it actually could possibly make sense, but the numbers are higher than I would have thought.

[Ben Carlson]

Same Ben, we got an email this morning from a listener who said, michael, this one is for you. A medium coffee doordash from Starbucks in Seattle is $21.51. Come on. So I'm taking a look at this. I'm like, hey, wait a minute. Listen to this order not to Starbucks shame anybody. Shareholder proud coffee drinker. All right, this person got an iced brown sugar, oat milk shaken espresso that includes brown sugar syrup, a blonde espresso line the cup with caramel sauce, non dairy salted caramel cream, cold foam, caramel drizzle, oat milk shots, cinnamon powder. Again, to each their own. That's a $10 coffee.

[Michael Batnick]

That's a lot of stuff in there.

[Ben Carlson]

There's the se. I guess the Seattle regulatory response fee. What in the world? What the hell is that? That's five bucks. The service three is three bucks, the tax is two bucks and he tipped a dollar. That's 21 and a half bucks for a coffee.

[Michael Batnick]

I don't feel bad for that person.

[Ben Carlson]

I don't think he's asking for sympathy.

[Michael Batnick]

It's just like if you're getting your macchiato, espresso, venti, whatever with 12 drips of caramel. I'm a caramel guy. You're a caramel guy. It happens in a private taxi. Then you probably should be paying 20 bucks.

[Ben Carlson]

But how is it caramel if there's an A between the R and the M?

[Michael Batnick]

I don't know. None of the words in the English language make sense. All right, this is an inch. This is probably the best thing I've read in the last couple weeks. So the last decision by the world's leading thinker on decision. This is from Jason Zweig, and he talks about Daniel Kahneman, who passed away last year at age 90. And it turns out he decided to end his own life. And Jason. And he emailed people to explain the decision. I guess he went to Switzerland, where you can administer the shot yourself, whatever it is. And Jason is trying to go through. Because he was friends with Kahneman, they worked on thinking fast and slow together, which I think is not reported on enough. The fact that Jason Zweig was essentially got started with Dan O'Connan on Thinking Fast and slow and editing and helping. And I think they kind of split ways at the end and didn't finish it together. But. And so he. Jason's trying to figure out, like, this guy spent his whole life studying decision making by human beings. And he decided when he was 90 years old, his facilities were going to be going down very quickly. He wasn't as mentally sharp. He didn't want to get to the point where he could see that happening to himself and had to be a burden on other people. And he decided to end his life at 90 and said, at 90, you know what? I'm done. And honestly, thinking through this, and I've been thinking about death a lot lately. Obviously his decision makes a lot of sense to me, even though that was my reaction as a loved one. You gotta be thinking, like, hey, we get a few more years together. Like, this is crazy. I totally get not wanting to go through that period where someone's having to get you out of bed in the morning and help you go to the bathroom and help you shower. And he decided, like, I want to go out before I get to that point. And I've lived a great life, and I've lived for 90 years, and that's a long time.

[Ben Carlson]

Yeah, 90. It's. I get that. I mean, he's. It's enough.

[Michael Batnick]

My dad has said for years that, like, once he's in his 80s, he's like, he's. He's good. Like, he doesn't need to go past that, which is kind of crazy because he's coming off an 80 in the next couple years. But he said that for years. Like, I don't need to live to the point where I'm like incoherent and I need you all to take care of me.

[Ben Carlson]

I don't know if we spoke about this on the pod. Sorry to totally derail this conversation, but at your brother's funeral there was like collage's pictures and one of them was of your dad shooting a basketball with like, you know, the shirt up and whatever, shorts and the socks. And we said, see, that's what a dad looks like. Right? Like that's what a dad is supposed to look like. That's what our dads look like. And I was thinking about this last night, so.

[Michael Batnick]

By the way, my dad has one of the silkiest smooth jumpers you've ever seen in your life.

[Ben Carlson]

Really?

[Michael Batnick]

I mean he could sit in the driveway and just swish after. Swish. Yeah, Eddie had a wicked jumper that doesn't go away. No, he could still fill it up.

[Ben Carlson]

So last night I was watching Glengarry Glen Ross just the first 15 minutes. I fell asleep because I saw the play last week and it was on prime video. So I fired it up. Been a minute since I saw the movie. First of all, a couple observations. I kind of forgot that the Alec Baldwin scene was so early in the movie. And I also. I don't know that I forgot, but I was re reminded of. Holy shit. One of the greatest five minutes in any movie scene ever. Like really and truly.

[Michael Batnick]

His speech. Yeah, it's one of the all time speeches.

[Ben Carlson]

It's incredible. I was also reminded of the fact that back in the day a lot of dads were salesmen.

[Michael Batnick]

Yeah.

[Ben Carlson]

And you had no idea what they did or how or what they sold or. But they went into the city with a briefcase looking like these trench coat. And they sold whatever it was, real estate, vacuum cleaners, flyers, whatever it was, they sold shit. And then lastly there was one scene where they did the baka thing for our younger listeners. That's a mouth spray. Remember that thing?

[Michael Batnick]

I don't see that anymore.

[Ben Carlson]

That's right, you don't see that anymore. So it was the. And then like the innovation was. Remember they had like the little thing in the tube that was like the huge disruption.

[Michael Batnick]

Oh yeah.

[Ben Carlson]

So Bacca got disrupted by the little Listerine things.

[Michael Batnick]

Oh yeah.

[Ben Carlson]

And then that got disrupted by like the tabs, the things that you just put on your tongue that dissolves like acid.

[Michael Batnick]

I always thought, I always thought it was Jim Carrey and Dumb and Dumber who was the end of the mouth spray. Yeah.

[Ben Carlson]

So anyway, getting back to condiment Sorry.

[Michael Batnick]

No, I just. Someone said he interviewed Philip Tetlock, who said, I've never seen a better planned death than the one Danny designed. And so thinking through, like, was this a good decision or not? Like, to him it was ask me again when I'm 90, I guess. But I actually understand what he did here. And that was, I said, my brother, his whole thing was, I'm not going to just wilt away. And I totally am on board with that idea, even if other people would be against it.

[Ben Carlson]

I'm always uncomfortable talking about how I'm going to feel in the future, especially at age 90.

[Michael Batnick]

Yes.

[Ben Carlson]

I mean, because the truth is, you really have no idea. Not a gosh darn clue how you're going to feel about your life in the future.

[Michael Batnick]

No, but I, I. Where I am now, I understand it at least. So. All right. Remember how this was going to be the crypto presidency?

[Ben Carlson]

I do.

[Michael Batnick]

So this is almost cherry picking, because if you looked from election day, it's not as bad, but just going from inauguration day, Bitcoin is down 20%, Ethereum is down almost 50%, and Solana is down almost 50%. So you'd say, well, look, from actual the day of the election, and it's probably more of like a round trip, but this is the interesting thing to me that baby boomer gold is still a better hedge than millennial gold. So over the last year, Gold is up 19 or 20%, Bitcoin is down 10 or 11%.

[Ben Carlson]

Whoa, this is year to date.

[Michael Batnick]

Oh, sorry. Year to date. You're right. Okay, so gold is up almost 20%, Bitcoin's down almost 10% or more than 10%. You're right. I'm the one who created this chart, too. So in times of turmoil, gold is still where people turn, not crypto. And I don't know if this will ever change because crypto is a long.

[Ben Carlson]

Time, but for now, bitcoin, it's a risk asset. That's it.

[Michael Batnick]

Yeah, Yeah. I mean, gold, over the last year, gold is up 40% or something.

[Ben Carlson]

So, yeah, the analog, the mental framework of thinking about it as digital still makes a lot of sense to me, but it doesn't behave like gold.

[Michael Batnick]

No, that's a good.

[Ben Carlson]

Yeah, for better and for worse.

[Michael Batnick]

All right. From Redfin, who's now owned by. Who bought them?

[Ben Carlson]

Rocket.

[Michael Batnick]

That's right. They're buying a bunch of companies all.

[Ben Carlson]

By the way, what's with Isaiah Stewart? Speaking of Detroit. Guy's an animal.

[Michael Batnick]

We're bringing the bad boys back. You're Just scared to play them if you're the Knicks. Right. I'd be a little nervous somebody tweeted this.

[Ben Carlson]

But the only, the only time you. I've seen clips of that guy are fighting. I've never seen him like there's, I mean there's never been an Isaiah Stewart highlight.

[Michael Batnick]

He's. He'd be the guy that hate as a. From another team. But you love when he's on your team.

[Ben Carlson]

Of course. Is he good?

[Michael Batnick]

I don't know. He fights a lot of people. So all time high for median monthly payment, which makes sense. So this is taking the median price, putting on the current mortgage rate, it's up 5% year over year, by far the highest.

[Ben Carlson]

This to me is nuts.

[Michael Batnick]

Yeah.

[Ben Carlson]

And this chart is devastating.

[Michael Batnick]

So from 2022, the start of 2022, we've gone from $1,600 to $2,800 for the median monthly payment. If you're buying the median price house at prevailing market rates.

[Ben Carlson]

I mean, doesn't add up. It's. Wow.

[Michael Batnick]

No, it really doesn't. From the Wall Street Journal. Home buyers are starting to come off the sidelines even as rates, prices stay stuck and they interview a bunch of people and going through their decisions. And someone said, listen, you can't pause your life for what rates are going to do. People finally throw out their hands. And this is not everyone, obviously, but activity is coming back slowly but surely from people who are going, what am I waiting for? I've been waiting for two or three years for rates to come down. They haven't done it yet. Let's just rip the bandit off and go, why am I waiting?

[Ben Carlson]

Two other good quotes. Compared to my siblings and all of our friends who are homeowners, it was not the best time to buy. Jamil said, but I think the best time to buy is when you can afford it.

[Michael Batnick]

She added, by the way, that's a great line.

[Ben Carlson]

We spend a lot of time like poking fun out of these people. But at the media outlets that just pick random people. This was the article that I read. I was like, these are, these are really smart people and really great. Great quote.

[Michael Batnick]

Level headed. Yeah, that's. I totally agree with that. The best time to buy is when you can afford it.

[Ben Carlson]

Here's one more. I'm sure looking back, there could have been a better time. Or alternately, there could have been a worse time. The question was, is there something we find that we think is worthwhile to take that leap of faith? So these people are being very sober about the situation. Sure. They've been waiting for years. Things aren't changing. And if they can do it, they're going to make it work. Even if it's not like, quote, the best time or the best investment. You got to move on with your life. And people need more space.

[Michael Batnick]

Hopefully they can refinance in a couple years if and when rates fall. So we always talk about national housing prices, but housing is obviously local. And I think we're getting to a point where we're seeing a pretty big divergence. So this is another one from Tal Smith and he posted this thing from someone in Northern Virginia, which I never knew was called Nova. Did you know this? Okay, N O V A. So this person said, I listed my home in the 1996 Colonial in a nice neighborhood. By Sunday afternoon we had nearly 50 potential buyers, resulting in seven offers, all of them over asking and most of them non contingent, done by Sunday night, closing with no, you know, all this stuff, no appraisal deal. And this person's saying, I've never seen it like this in 30 years of living here. He's like, they say you can't, you can never tell it's a bubble when you're in it, but man, if this doesn't qualify, I don't know what would. So that's in Virginia. Bill McBride says in Miami there was, hold on.

[Ben Carlson]

Just on that point, bubbles need to pop and it's hard to see what causes real estate prices to go down significantly given the demographic tailwind. There's still so many more people that need to buy.

[Michael Batnick]

Yeah, and maybe he's saying the activity is a bubble, but listen to this, the other side. Bill McBride says in Miami there was 1440 single family homes and condos sold in February. At the end of the month, there were more than 17,000 active listings for over 12 months of supply. So the average supply for the country is like three and a half months. Months. For Miami, it's 12 months. And he's saying, ouch. And someone asked him why is this? And he said, well, the. Remember that con, that condo building fell a few years ago, like, so insurance rates are jacked up because they have to have a higher emergency fund. And there was just too much buying there. So the Wall Street Journal says that here's. They say the divergence is playing out in places like Wyckoff, New Jersey. Did I say that right? Wyckoff. Wyckoff, I think Wyckoff. You've ever been in New Jersey, even though you live in New York, there's.

[Ben Carlson]

Like a hard line. People From New York and New Jersey. We're cousins, but we don't congregate.

[Michael Batnick]

We're a four bedroom ranch that's on the market for so over a week. In early February with dozens of offers, the winning buyers contracted the buyer for about 200,000 above the roughly 1.1 million asking price. But in Miami, a six bedroom with a grand staircase and a pool has sat on the market for nearly two months without a firm offer. The sellers cut the price recently by $9,000. And so they give this chart of median days on the market and in places like Florida, Georgia, South Carolina, Texas, it's staying on the market a lot longer. And the whole point is that like we're finally seeing some divergence where some of these places that went nuts and to be fair, places like Miami, that's where the prices went way up, way faster. And so it makes sense. And again, the insurance costs are rising and. But we're getting back to a point where the location matters more, a lot more than the national housing industry and what's going on there, which good or bad. I think in certain places, like you're going to be able to give some great low ball offers. If you're moving to Florida or Austin or some one of these places and you're giving a low ball offer this spring, I think you're going to be in a wonderful position as a buyer. Not so in the Midwest and other places.

[Ben Carlson]

Hope so. All right, moving on to some streaming stuff. So there was an article in the Information about Apple tv. Plus there's some newly revealed numbers. The service is losing more than a billion dollars annually. They have 45 million subscribers. $1 billion sounds like a lot of money and it is. But I can't imagine Apple gives too much of a shit about $1 billion. One of the people said that Apple has spent more than $5 billion a year on content since launching Apple TV. Plus they trimmed their budget by $5 million last year. What's that? Yeah, Tim Cook is taking a harder look. It's. But Apple TV is, is blowing up. So Ted Lasso is coming back. Severance was wildly popular. I'm on episode six, by the way. I'm watching it. I have no idea what's happening. Not a, not a clue. Dope Thief is one of, one of the shows that I'm very much enjoying and my new favorite show on TV of all tv. There's only two episodes, but did you see episode two of the Studio?

[Michael Batnick]

Yes. Let's say that for recommendations. I want to talk about the Studio. They also had this movie called the Gorge.

[Ben Carlson]

The Gorge.

[Michael Batnick]

Did you watch it?

[Ben Carlson]

Not yet. I'm going to.

[Michael Batnick]

I watched it. It's almost kind of like a horror thriller. It was like just okay. But I never even heard even talk about it. It was Miles Teller.

[Ben Carlson]

Yeah.

[Michael Batnick]

And.

[Ben Carlson]

And the girl from. What's her name? From the Queen's Gambit.

[Michael Batnick]

Yes. Anya Taylor, Joey something. She's got three names.

[Ben Carlson]

Yeah.

[Michael Batnick]

Here's something I've noticed about streaming lately. I want to get your take on. But.

[Ben Carlson]

But Apple's. But Apple's going in like, there's a lot of quality. It's very high quality stuff coming out of the.

[Michael Batnick]

They're like the company, junior, hbo. When my wife and I watch a show now, every episode they give a recap of. Here's what's happened before on this season or this. Like, I feel like you used to get a recap at the beginning of the season and that's it. Now they do a recap every single episode.

[Ben Carlson]

I'm insta. Skip. Do you skip?

[Michael Batnick]

Of course. I tell my wife is like, why'd you skip that? I wanted to see. I'm like, we're watching the show. I know what happened. And she'll. And she likes it. But do they do this now because people are on their cell phones so much and they forget what happened in an episode? Yeah, that's it, right? Yeah, they do it for every episode. I don't need a full rewind of the season two episodes in. Yeah, I hope not. All right, question for my kids. My kids love picking songs and listening to music in the car and telling Siri what to do. The other day they asked me on the way to McDonald's for breakfast who has the greatest singing voice of all time. What is your answer?

[Ben Carlson]

All right, I have two answers. One man, one woman.

[Michael Batnick]

Yep.

[Ben Carlson]

All right, man. Freddie Mercury. Okay, woman, Whitney Houston.

[Michael Batnick]

All right. I said Whitney Houston. I feel like that's a. And I. I said Marvin Gaye. Whitney Houston. Aretha Franklin, maybe. But I think Whitney Houston is especially for people our age, that's the easiest answer. It's a lit.

[Ben Carlson]

Because it's the right answer.

[Michael Batnick]

All right. I got more questions last week about my sweater than anything market related. So I wanted to just give a shout out here to Marine Layer who should be giving me a sponsorship at this point.

[Ben Carlson]

But how much was that? Buck 60.

[Michael Batnick]

You know, it was on sale. I sent it to a few people. It was on sale for 118. Maybe they have.

[Ben Carlson]

Great stuff. Big fan.

[Michael Batnick]

I love that place. Okay. Story time at my office. I have what is called a lake out of my office when it looks more like a pond, but it's one of those office lakes, you know, there's a little lake outside, and there's all these Canadian geese that congregate on there. And they always annoy me because I hear them outside of my office just quacking all day because they, like, quack at each other, you know. But when I go walk to my car sometimes, they'll be sitting there and they'll be on the sidewalk and they'll just hiss at you.

[Ben Carlson]

Oh, yeah. You know, they're nasty.

[Michael Batnick]

They're nasty. And so the other day, I'm walking out and I'm talking to my wife on the phone about something, and one of them is 20ft away from me, and all of a sudden it takes off flying. And I think it's just gonna take off flying. It flies right at me, and it's doing its wings at me like this, and it's hissing at me. It's like five feet away. And I'm like, hey, get out of here. You know, I yell, hey, you jerk, get out of here. So then later in the day, the same day, this same goose is about 100 yards away as I'm walking to my car. He takes off again. He's coming straight at me like a train.

[Ben Carlson]

How do you know it's the same goose? I mean, it's gotta be.

[Michael Batnick]

It's gotta be. And then he does the same thing where he flaps his wings at me and he's like, doing this thing. And. And here's the thing. Canadian geese are useless. Would I be out of order if I just stepped on his neck? Like, is that fair? That's what I wanted to do. I'm like, you come at me again, I'm gonna step on your neck. What are these things for? They're not cute. They hiss at you. They're mean.

[Ben Carlson]

Crap everywhere.

[Michael Batnick]

Yeah. The green crap everywhere.

[Ben Carlson]

Yeah. Awful.

[Michael Batnick]

Am I within my rights to just step on his neck?

[Ben Carlson]

They're horrible animals.

[Michael Batnick]

They're the worst.

[Ben Carlson]

Yeah. So what did you do? Did he run?

[Michael Batnick]

I just yelled at him and kind of took a step like this. And then he kind of, you know, hissed at me, and then we went our separate ways. But he. For. I don't know if someone else made him mad earlier today, or maybe he didn't like my sweater, but just came at me like a bullet.

[Ben Carlson]

Yeah. Canadian geese. No, no, no. Good. Not a fan.

[Michael Batnick]

Tariff on him. All right. Recommendations? You mentioned the studio. I Was very excited about this show because I read an article with Seth Rogen in one of my magazines, one of my men's magazines, gq, Esquire. And here's my initial take on the show. I don't like it as much as I wanted to like it, and I think it should have been a movie instead of a show.

[Ben Carlson]

Did you see episode two?

[Michael Batnick]

I did.

[Ben Carlson]

Okay. That was. Come on. That was incredible.

[Michael Batnick]

I think. I think it's a little too over. Here's the thing. I think satire works better in a movie than a TV show.

[Ben Carlson]

Harsh critic.

[Michael Batnick]

I really wanted to like this show. It's got everything I want. It's got great cameos. It's about Hollywood.

[Ben Carlson]

But don't you love being in Hollywood?

[Michael Batnick]

I do. I. I think it should have been a movie, but.

[Ben Carlson]

But it's only two episodes. Way too early to say.

[Michael Batnick]

I'm going to keep watching it. But I'm surprised. I don't like it as much as I wanted to.

[Ben Carlson]

I'm very surprised. I love it. I'm so happy. And I hope. I hope it doesn't. The bottom doesn't fall out. But I freaking loved episode two. I thought it was masterful.

[Michael Batnick]

Okay. My. My daughter is reading. She's in a book bowl for school where she had to read all these books before a certain date, and they have a test on it or whatever. And she wanted to make sure she got. And one of the books was a baseball book. And they talked about all these old sports movies in the book. And so she had a list. She said, I want to watch all these sports movies that they list. And so we created a list. Field of Dreams is on there. That's our next one. But we watched Hoosiers with my kids.

[Ben Carlson]

Tell her. I saw it in theater when I was 4.

[Michael Batnick]

That's true. And we watched Hoosiers and Overrated. Oh, whoa.

[Ben Carlson]

Sorry.

[Michael Batnick]

It aged so well. And at the end of the movie, when they won, my kids. My twins got up and started clapping. They were so happy with the movie. And I. I feel like if you make a movie about the 50s or the 60s from, like the 80s or 90s, it always ages. Well, that movie still rocks. Obviously. There's some cheesy parts in it, but. And I got one more. I somehow got sucked. You ever get sucked into Tubi?

[Ben Carlson]

Like, I don't think I've ever been on it.

[Michael Batnick]

Okay. I got sucked into About Last Night, which is a Demi Moore and Rob Lowe rom com from the 80s.

[Ben Carlson]

80S. Okay. I've never heard of it.

[Michael Batnick]

Not Bad. But they're talking at the bar. They just go to the bar and it's a. You know, it's got all the beats of most rom coms. Will they, won't they? They're gonna break up. Are they gonna back together? But they're at a party and this woman goes, it was actually the lead in Big with Tom Hanks, the one who jumps in the trampoline to them. Can't remember her name.

[Ben Carlson]

Oh, she's great.

[Michael Batnick]

She's in it, too. She said, worried about.

[Ben Carlson]

She still works.

[Michael Batnick]

She's talking to Jim Belushi and she says, are you worried about much about Western civilization? It's collapsing, in case you hadn't noticed. And I thought, I guess that's just what everyone thinks. So I know people think that's happening now, but that's what every generation thinks.

[Ben Carlson]

True.

[Michael Batnick]

That's all I got.

[Ben Carlson]

Speaking of old, getting back to Kahneman, Scott Glenn and making an appearance on White Lotus. Did he watch White Lotus this week?

[Michael Batnick]

Yeah. I didn't know that was his name, the old guy.

[Ben Carlson]

He's 86.

[Michael Batnick]

Okay, still looking good.

[Ben Carlson]

Old and not looking good. Bobby D. The Alto Knights bombed. Supposed to be horrendous.

[Michael Batnick]

I mean, he's doing too much stuff. He did that Netflix show, too.

[Ben Carlson]

I like that Netflix show.

[Michael Batnick]

Okay, me and you are on separate wavelengths on TV shows lately.

[Ben Carlson]

Did you watch that show, the Zero Something? I love it. I was entertaining half an episode. Six episodes, yeah. So the cinema is in not a good place at the start. The first quarter was a disaster, and it's not looking great. So we watched, you and I, the trailer for the new Paul Thomas Anderson movie from Warner Brothers. They gave him $140 million to make this. It's called One Battle After Another. Now, I've discussed multiple times that I'm more of a description guy. I don't like to see this trailer. I don't like spoilers. Just, I'm in, I'm in, I'm out, I'm out. I'm not watching this movie. So I said, you know what? Let me see the trailer. It looks horrendous.

[Michael Batnick]

It doesn't look good. I'll still watch it because Leonardo DiCaprio, but it doesn't look bad.

[Ben Carlson]

Do you agree, though, the trailer looked like.

[Michael Batnick]

Yes. I immediately slapped you guys. And I said, I'm shorting this movie. I'm putting an immediate short on it. The film people will say they love it because they have to say they love all Paul Thomas Anderson movies, but it's not going to be good. It looked awful and I'll still watch it.

[Ben Carlson]

So. You know what? You know what took the prize for the latest weekend in terms of box office? Gross.

[Michael Batnick]

What do you got?

[Ben Carlson]

A Working man, which is a movie that I had never heard of. I'm guessing you never heard of it.

[Michael Batnick]

Oh, no, I saw the preview.

[Ben Carlson]

It's old reliable Jason Statham.

[Michael Batnick]

Jason Statham, he's like a construction guy, but his background, he's actually right.

[Ben Carlson]

Listen, after he's capitalizing on the success of the Beekeeper, Jason Statham still plays. But you know what's interesting? I've never seen his original old movies.

[Michael Batnick]

That's the thing. He's fantastic in lock, stock and two smoking barrels.

[Ben Carlson]

So that one I saw. But all of his series, the Mechanic and all the others, I've never seen those.

[Michael Batnick]

Okay. I liked him early in his career, but yeah, he's a newly Ennisa, I guess. Just he keeps cranking out action movie. They're exactly the same.

[Ben Carlson]

Yeah, works. All right, Ben, anything else?

[Michael Batnick]

What's the market doing today? Yeah, market's down a little bit.

[Ben Carlson]

Down 90 bips on the S and P. We'll see. We'll see.

[Michael Batnick]

Are you still saying no bear market?

[Ben Carlson]

Yeah, I'm still saying no bear market.

[Michael Batnick]

All right, I. I totally agree with your binary outcome thing, though. Everyone is going to pretend like they knew exactly what was going to happen after it happens, you know, no one knows now. Yeah, let's be honest.

[Ben Carlson]

Let's be honest. We're all just guessing.

[Michael Batnick]

All right, anal spirits@the compoundnews.com Email us personal emails, personal responses, mostly from Michael, sometimes from me. I've never seen with a backwards hat on before.

[Ben Carlson]

I used to exclusively rock a backwards hat.

[Michael Batnick]

Okay.

[Ben Carlson]

Back in my bald days.

[Michael Batnick]

Looks good. See you next time. That.