Animal Spirits Podcast — "Hi-Yo Silver!" (EP. 449)

Hosts: Michael Batnick and Ben Carlson
Date: January 28, 2026

Episode Overview

This episode dives into recent market trends—including the remarkable rallies in silver and precious metals—along with deep discussions on portfolio diversification, the state of household balance sheets, active versus passive investing, prediction markets, economic indicators, the fate of active mutual funds, and fun sidebars on movie theaters and personal anecdotes. Michael and Ben mix market analysis with accessible banter, making it easy to grasp even the most data-heavy topics.

Key Discussion Points & Insights

1. Household & Government Debt: Changing American Balance Sheets

• Michael discusses insights gained from the Odd Lots podcast with the CEO of Pimco, focusing on U.S. debt metrics ([04:14]–[08:17]).
  • Household debt vs. government debt: Government debt as a percentage of GDP is currently at 121% and rising; meanwhile, household debt as a percentage of GDP has decreased significantly over the past 15 years.
  • Household assets way up: Since 2019, household assets in America (including nonprofits) are up 53%. Liabilities are up only 28% ([05:53]).
  • Wealth effect: The $66 trillion added in net wealth over six years equals more than three times 2025’s personal consumption expenditures.

“The consumer has delevered over the past 15 years.” — Michael [05:12]

• Ben notes this divergence is unprecedented. Unlike the 2000s, households aren’t borrowing as fast as their wealth compounds, which could have inflationary consequences if trends reverse ([06:58]).

2. Diversification & Market Rotation in 2026

• After years of "Mag 7" tech dominance, diversification is back:
  • Year-to-date, smaller caps and international stocks are outperforming the S&P 500.
  • Bespoke Research: Smaller is better, with micro-caps leading YTD; Mag 7 have gone “nowhere” for six months ([10:17]–[10:54]).
  • Participation broadening: More stocks are above their 50-day moving average—suggesting healthy breadth for the next leg of the bull market ([11:16]).

“Who doesn’t love to see this? The people who put all their money into tech stocks. Guess what? They’ve been doing fine anyway.” — Michael [11:19]

• Record inflows into emerging markets ETFs (“record since 2013”) signal renewed interest in “hard asset” markets ([11:39]–[12:34]).

3. Earnings vs. Market Performance

• Ben shares an analysis of nearly 100 years of market data ([12:36]–[13:54]):
  • Stocks and earnings rise together in most years.
  • Surprisingly, in almost half of all years, earnings and the stock market have diverged.
  • The market’s ability to look forward explains the disconnect, but it still defies investor intuition.

4. Small Caps and Economic Expansions

• Small cap earnings: Post-COVID, small cap earnings suffered a 35% drawdown, but are recovering swiftly ([15:11]–[15:44]).
• Expansions are powerful: During economic expansions, stocks are positive nearly 90% of the time; returns >10% annualized appear two-thirds of the time ([16:01]–[17:23]).
• Ben: “We just don’t have economic contractions anymore. … the stock market continues to go up.” [16:21]

5. Reflections on Jeremy Grantham’s Bearish Legacy

• Michael and Ben recount their recent podcast with Jeremy Grantham ([17:23]–[24:03]):
  • Grantham’s once-prescient bear forecasts have lagged as “mean reversion” failed, especially with the rise of the Mag 7 (top U.S. tech stocks).
  • His early successes (dot-com, GFC, Japan) led to overconfidence; he is still viewed with respect due to self-awareness and philanthropy.
• Ben reflects on the dangers of “overstaying your welcome”—applicable to permabulls and permabears alike.

“This whole…delusion that we were drunk on risk—yeah. There’s going to be a period when stocks go sideways, or even lose money, for 5 or 10 years.” — Michael [22:19]

6. Active vs. Passive Investing

• Michael highlights the ongoing exodus from active mutual funds ([26:41]–[28:02]), referencing Michael Mauboussin’s latest research.
  • Despite market gains, new money rarely flows into actively managed funds.
  • The rise of retail: More individuals now own and trade stocks directly than institutions ([28:28]–[29:13]).
  • Top 10% own the bulk of U.S. household wealth (67–70% by Ben’s estimate) ([29:13]–[29:33]).

7. Silver Surges, Gold Glitters, & Precious Metals Mania

• Hi-Yo Silver! — Silver is up 50% this year, “going literally vertical,” outpacing Bitcoin massively; gold rallies too ([33:25]–[37:56]).
  • Both hosts express confusion and awe—“This thing looks like a meme stock” (Ben [33:38]); retail speculation, trend followers, and perhaps central banks are driving the precious metals boom.
  • Bitcoin lags: Despite dollar weakness and fears about the system, “investors just want the booze, not Zima,” as Michael jokes ([37:45]).

“Who’s buying it today to send it up 7% after this run up? It can’t just be Reddit people.” — Michael [38:21]

8. Prediction Markets: For Fun, Not Fortune?

• The hosts reflect on a New York Times profile of professional “polymarket” gamblers ([48:56]–[53:48]).
  • Michael admits to dabbling and losing on Super Bowl bets, explaining: In contrast to the stock market, “bets don’t go to zero overnight, unless you’re doing options.”
  • Both agree that prediction/gambling markets are a zero-sum game—hard to scale and not positive-sum like equity investing ([50:47]–[53:48]).

9. Economic Indicators & Consumption Trends

• Economic indicators remain robust: Air travel, restaurant bookings, and daily spending are strong ([39:00]–[39:59]).
• Job openings and layoffs: Openings have normalized to 2019 levels; although not rising, “if you’re out of work, this is not an easy time” ([40:05]–[40:19]).
• Inequality’s rise: The top 20% now account for nearly 60% of consumer spending ([41:10]).
• Contrary to popular fears, credit card delinquencies are actually down from 2024 highs ([41:14]–[41:33]).
• Domestic tariffs: Nearly all tariffs are paid by Americans, but “in a $33 trillion economy, $200 billion isn’t much” ([42:42]–[43:36]).
• Housing and inflation: Home prices have far outpaced inflation since 1970, but modern homes are also much nicer ([43:37]–[45:35]).
• Michael and Ben muse on banana prices (great value) and Starbucks price hikes (less so) ([46:03]–[47:10]).

10. Movie Theaters, Streaming, and Pop Culture

• Ben is skeptical of survey showing a 25% jump in Gen Z moviegoing, but Michael notes “a material uptick” in NYC theaters ([60:12]–[61:27]).
• Netflix/HBO deal: Netflix wants to close its “quality gap,” and will feature HBO content ([61:27]–[63:18]).
• Quick reviews: “Sinners” grabs 16 Oscar nominations (both liked it but didn’t love it); “Landman” and “Mercy” (Chris Pratt) discussed; “From Dusk Till Dawn” gets a retro shoutout for over-the-top action ([63:32]–[70:05]).
• Both hosts lament a lack of time for the theater, but are excited about some upcoming releases.

11. Fun Anecdotes & Life Talk

• Snow day stories, shoveling preferences, battery-powered snowblowers vs. traditional ([01:14]–[04:14]).
• Parking tickets for “backing in,” childhood kitchens, and sledding with kids ([65:10]–[71:46]).
• On AI and coding: Ben is resisting “vibe coding”—prefers to be left behind by the robots ([42:08]–[42:40]).

Notable Quotes & Memorable Moments

• On household wealth:

  • “Household debt as a percentage of GDP has gone down in a meaningful way. The consumer has delevered over the past 15 years.” — Michael [05:12]

• On diversification:

  • “This is awesome. I think that more stocks are participating in maybe the next leg of the bull market.” — Michael [11:16]

• On Jeremy Grantham:

  • “He’s very aware of who he is…he knows who he is.” — Ben [24:03]

• On precious metals:

  • “This thing looks like a meme stock.”—Ben [33:38]
  • “Who’s buying it today to send it up 7% after this run up? It can’t just be Reddit people.” — Michael [38:21]

• On prediction markets:

  • “The stock market is positive sum. You stick around long enough, generally speaking, you don’t act like a complete maniac and you will make money.” — Michael [51:35]

Key Timestamps for Important Segments

• [04:14] — Michael discusses insights from Pimco CEO & Odd Lots podcast; intro to debt metrics
• [05:53] — Ben on household balance sheets and “the wealth effect”
• [08:51] — Market leadership shifts; diversification resurgence
• [12:36] — Ben analyzes divergence of earnings vs. market returns
• [15:11] — Small cap earnings recovery post-COVID
• [16:21] — How economic expansions fuel persistent stock gains
• [17:23] — Jeremy Grantham’s history, legacy, and lessons on market cycles
• [26:41] — Decline of actively managed mutual funds; rise of retail investors
• [33:25] — Hi-Yo Silver! The precious metals mania (silver, gold, bitcoin discussion)
• [48:56] — Prediction markets, their pitfalls, and Michael’s Super Bowl loss
• [60:12] — Are movie theaters cool again? Changing Gen Z/Alpha preferences
• [66:30] — Pop culture, book/movie/TV recommendations, snow day family anecdotes

Takeaways for Listeners

• The market’s fundamentals—especially the American consumer’s strong balance sheet—continue to support positive risk sentiment, but persistent outperformance can breed overconfidence.
• Age-old investment maxims aren’t universally true; cycles can run much longer—or end much sooner—than expected.
• The “real stuff” (hard assets, precious metals) is having a moment, but the historical boom-and-bust cycle still applies. Proceed with caution; don’t extrapolate recent trends forever.
• Active management continues to lose ground to passive vehicles and to retail stock ownership.
• Economic undercurrents appear solid, but housing affordability and inequality concerns are rising.
• Prediction markets are fascinating but fundamentally different (riskier, zero-sum) than long-run equity investing.
• Banter about everyday life, tech, movies, and sledding rounds out an episode as entertaining as it is informative.

Stay warm, stay curious, and until next time—enjoy the ride! For questions or to reach Michael and Ben: animalspirits@thecompoundnews.com