Animal Spirits Podcast Episode Summary: "Did Trump Blink?" (EP. 405)
Released on March 26, 2025

Introduction

In Episode 405 of the Animal Spirits Podcast, hosts Michael Batnick and Ben Carlson delve into a variety of topics ranging from recent stock market movements and economic indicators to personal reflections and media insights. The episode, aptly titled "Did Trump Blink?", intertwines market analysis with engaging conversations about investing strategies, the real estate market, and the evolving landscape of media consumption.

Stock Market Update

Market Performance and Key Indices

The hosts begin by discussing the recent performance of major stock indices. Michael highlights a notable surge in consumer discretionary stocks, particularly Tesla and Amazon, which collectively drove the XLY ETF up by 3.8%, marking its best day since November 2022 ([13:25]).

Ben adds, "The market pushed him [Trump] and he had no other choice. What was he supposed to do?" referring to Trump's economic policies and their impact on the stock market ([13:25]).

Investor Sentiment and Behavioral Insights

Michael emphasizes the importance of understanding investor psychology, stating, "The problem with selling out of emotion is it is the easiest thing to do" ([14:10]). They caution against making impulsive decisions based on short-term market fluctuations, advising listeners to maintain a disciplined investment approach.

Ben references a study by Mike Bird from The Economist, noting that "American households have never been more exposed to the risk of a stock market sell-off," with stock wealth now at 170% of disposable income, double the long-term average ([16:40]).

Investing Strategies and Resources

Barry's Book: "How Not to Invest"

The discussion shifts to Barry's latest book, "How Not to Invest," which Michael praises as a comprehensive guide for new investors. Ben concurs, highlighting the book's practical lessons: "If you realize what the unsuccessful ways are and try to avoid them, that's almost easier than figuring out, like, the perfect way to invest" ([05:42]).

Chart Kid Matt and Exhibit A

Michael shares the story of hiring Chart Kid Matt to revamp their client deck, leading to the creation of Exhibit A—a platform offering over a hundred professionally designed charts for financial advisors ([11:43]).

Ben explains, "We've had hundreds of questions from advisors asking if they can use our charts. Now, they can literally take the charts we've created and make it their own" ([12:38]).

Economic Indicators and Consumer Sentiment

Consumer Spending and the Wealth Effect

Ben discusses the concept of the wealth effect, questioning its actual impact on consumer spending. Michael adds, "It's subconscious and it is vibes all the way down," suggesting that while the wealth effect exists, it's intertwined with broader economic factors like employment and income growth ([17:52]).

Bond Market Insights

The hosts analyze the bond market's current stance, noting that despite a slight uptick in high-yield spreads, overall sentiment remains positive. Michael trusts the bond market as a more reliable indicator than stocks, stating, "I trust this [bond market] more than stocks" ([27:23]).

Private Credit and Market Risks

Ben addresses concerns about private credit firms pushing boundaries by increasing leverage and lowering credit quality to remain competitive. "The risk of your manager taking on too much risk instead of adjusting yields is very real," he explains ([28:04]).

Michael echoes this sentiment, noting that while a massive blow-up isn't imminent, the potential for lower returns due to increased risk is significant ([29:36]).

IPOs Spotlight: StubHub and Klarna

StubHub's Performance

The hosts discuss StubHub's upcoming IPO, highlighting its recent financial struggles. Ben advises caution: "You're going to short that one out of principle from day one," referencing StubHub's $2.8 million loss on $1.77 billion in revenue for 2024 compared to a $405 million profit the previous year ([49:15]).

Klarna's Evolution

Klarna, the buy-now-pay-later giant, is another focal point. Michael shares how Klarna continues to grow despite skepticism about its sustainability in a rising interest rate environment. "Delinquencies are nowhere. It's under 3%. Really nothing to see here," he notes, emphasizing Klarna's robust loan management ([51:49]).

Ben raises a critical question about the future of buy-now-pay-later services in a recession: "Do you think people just got used to using these programs? Do they increase usage during a recession to help people get by?" ([53:26]).

Real Estate Market Trends

Michael and Ben explore the current state of the real estate market, noting a significant decline in mortgages issued to individuals with low credit scores—a trend that has reached its lowest point since 1965 ([44:50]).

Ben scrutinizes home builder performance, citing KB Home and Lennar's substantial drawdowns of 40% and 35%, respectively. "Rates staying this high for this long. These stocks had to get hammered eventually," he observes ([47:04]).

Michael adds that despite favorable long-term housing market conditions driven by demographics and undersupply, consumer confidence is waning, leading to muted demand in the spring selling season ([47:04]).

Media and Entertainment Discussions

TV Shows and Movies

The hosts take a lighter turn, discussing recent TV shows and movies. Ben expresses enthusiasm for quality dramas like Severance and White Lotus, despite facing criticism from some viewers. Michael shares his disappointment with new show debuts but appreciates platforms that offer well-crafted content suitable for short attention spans during travel ([60:30]).

Listener Feedback on Ratings System

A listener suggests implementing a rating system for TV shows and movies. Ben supports the idea, stating, "If I see a movie or a TV show as a seven or above on IMDb, I'm gonna give it a try," while Michael humorously contemplates the challenges of aligning their individual rating scales ([63:28]).

Listener Feedback and Personal Reflections

Ben shares a relatable anecdote about a midlife conversation, emphasizing the episode's underlying theme of middle-aged reflections and challenges. Michael contributes personal insights on stress levels across different life stages, agreeing that modern factors like COVID, social media, and housing costs uniquely impact younger generations ([55:01]).

They discuss societal shifts, such as the shrinking middle class and the increasing number of individuals moving into the upper class. Michael reflects on the paradox of wealth and happiness, citing Daniel Crosby's observations on materialism's impact on personal fulfillment ([57:14]).

Conclusion

As the episode wraps up, Michael and Ben touch upon their upcoming plans, including live shows and personal trips, while acknowledging the importance of maintaining strong relationships and adapting to new challenges in the investment landscape. They sign off with gratitude to their listeners, encouraging continued engagement and support ([68:43]).

Notable Quotes:

• Michael (04:27): "Now I do feel a little bit middle aged in the sense that I've got two blocks of 20 years."

• Ben (05:42): "If you realize what the unsuccessful ways are and try to avoid them, that's almost easier than figuring out, like, the perfect way to invest."

• Ben (14:10): "The problem with selling out of emotion is it is the easiest thing to do."

• Michael (17:52): "It's subconscious and it is vibes all the way down."

• Ben (27:23): "I trust this [bond market] more than stocks."

• Michael (51:49): "Delinquencies are nowhere. It's under 3%. Really nothing to see here."

• Ben (53:26): "Do you think people just got used to using these programs? Do they increase usage during a recession to help people get by?"

• Ben (62:27): "Excited about publishing my next book with Harriman House."

This comprehensive summary encapsulates the diverse range of discussions in Episode 405, providing listeners with valuable insights into market dynamics, investing strategies, and personal reflections shared by Michael Batnick and Ben Carlson.