Measuring the Wealth Effect (EP. 425)

Summary

Animal Spirits Podcast Summary
Episode: Measuring the Wealth Effect (EP. 425)
Release Date: August 13, 2025
Hosts: Michael Batnick and Ben Carlson

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1. Nostalgia and Upcoming Events

Michael Batnick opens the episode by sharing his excitement about an upcoming 1990s nostalgia tour featuring Blues Traveler and Bush, highlighting the hosts' shared love for 90s music. This segment sets a lighthearted tone as they reminisce about classic bands and their anticipation for the events.

"I never realized you were such a big Bush fan." [02:18]

2. Understanding the Wealth Effect

The hosts delve into a discussion inspired by Chart Kid Matt’s latest blog post, which examines the correlation between household net worth and the stock market. Ben Carlson emphasizes that the increasing integration of stock market performance with household wealth is a sign of financial progress.

"There has never been a time where net worth has been this tied to the stock market." [04:31]

Michael Batnick concurs, viewing this trend positively as more households are now investing in the stock market compared to previous decades.

"Most households who own stocks now versus 19% in 1983... I think this is a sign of progress." [05:37]

3. Stock Market Dependence and Potential Risks

The conversation shifts to the potential risks of this dependence, with concerns about what happens if the stock market experiences a downturn. Ben Carlson acknowledges the duality but maintains optimism, noting that while some households may suffer, the overall trend remains positive.

"I look at this as a positive development because most people don't realize that very few households actually owned stocks back in the day." [05:37]

They explore scenarios such as mortgage rate decreases potentially spurring housing market activity, balancing stock market fluctuations with consumer spending.

4. Evaluating Market Bubbles

Michael Batnick and Ben Carlson engage in a nuanced debate about whether the current stock market constitutes a bubble, referencing historical parallels like the Nifty 50 and the dot-com bubble. They discuss valuation metrics and the concentration of market cap among a few large companies.

"Can you call it a bubble if it's literally just a handful of stocks?" [12:16]

They conclude that while certain metrics may indicate bubble-like conditions, the current market dynamics differ from past bubbles, particularly regarding recovery patterns of major stocks.

5. Consumer Spending and Economic Outlook

A key segment focuses on consumer spending patterns, highlighting that the top 10-20% of earners drive a significant portion of spending. Ben Carlson points out that the sustainability of consumer spending—and thus economic health—hinges on this wealthy segment maintaining their expenditure levels.

"Whether we go into a recession will depend almost entirely on whether the top 10 or 20% of earners keep spending." [27:10]

They discuss the implications of this concentration, pondering if the stock market’s performance could directly precipitate a recession.

6. The Rise of Millionaires and Private Jet Usage

The hosts examine the burgeoning number of millionaires and their lifestyle choices, such as increased private jet usage. Michael Batnick shares statistics and anecdotes about wealthy individuals investing heavily in private aviation, reflecting broader trends in wealth accumulation.

"Billionaire club grew by more than 50% between 2015 and 2024." [28:41]

They debate whether such lifestyle choices indicate genuine wealth or potential vulnerabilities within ultra-wealthy circles.

7. Artificial Intelligence: Progress and Perceptions

Ben Carlson and Michael Batnick discuss the rapid advancements in AI, sharing personal experiences with various AI models. They express mixed feelings about the tangible improvements AI offers, noting that while some applications are impressive, others remain underwhelming.

"When this happens, all the AI people talk about and it makes me feel inadequate because there are two extremes..." [32:20]

They speculate on the future impact of AI on job markets and daily life, touching on the potential for universal basic income and the challenges of job displacement.

8. Institutional Cryptocurrency Investments

The hosts highlight significant institutional moves into cryptocurrency, citing Harvard Management Company’s $116 million investment in the Bitcoin Trust. Ben Carlson warns of the risks associated with numerous public companies attempting to emulate successful crypto strategies, suggesting that only a few may thrive.

"116 million bucks. Kind of amazing how slow these institutions were to adopt this stuff." [37:59]

They caution against the speculative plunge of multiple companies into crypto without a solid strategic foundation.

9. Housing Market Affordability

Michael Batnick examines the current state of the housing market, emphasizing the stark contrast between the affordability for homeowners who secured low mortgage rates pre-2021 and new buyers facing high costs. He argues that existing homeowners are in a privileged position, contributing to increased investments in money markets and stock portfolios.

"For the 65% of households that own a home already, it obviously it stinks if you're one of these people doesn't." [45:37]

10. Alternative Mutual Funds and Private Markets

The episode covers the high mortality rate of alternative mutual funds, with Ben Carlson noting that 75% of these funds have been liquidated or merged. They discuss the implications for private market investments in retirement accounts, anticipating disappointment among investors despite the absence of a catastrophic collapse.

"75% of Alternative Mutual funds have died." [46:05]

11. Streaming and Entertainment Developments

Ben Carlson and Michael Batnick discuss recent changes in the streaming landscape, including ESPN’s new direct-to-consumer model and Paramount’s shift of UFC fights from pay-per-view to streaming platforms. They express skepticism about the success of these moves, predicting potential subscriber fatigue and overspending.

"The day has finally come where cord cutters can directly access all of ESPN's content. This is big." [52:19]

12. Personal Stories and Movie Recommendations

The hosts share personal anecdotes about fishing with their children, emphasizing the joys of family activities and the contrasts in interests across generations. They also recommend various movies, including "Together", "The Naked Gun", and "Weapons", discussing their entertainment preferences and experiences with different film genres.

"One of the cool things about being a parent is seeing your kids do stuff that you like and doing it with them." [55:45]

13. Conclusion

Wrapping up, Michael Batnick and Ben Carlson encourage listeners to engage with future events and content, emphasizing the value of ongoing learning and adaptation in both personal and financial realms.

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Notable Quotes with Timestamps

• "There has never been a time where net worth has been this tied to the stock market."
  Ben Carlson [04:31]

• "Most households who own stocks now versus 19% in 1983... I think this is a sign of progress."
  Michael Batnick [05:37]

• "Can you call it a bubble if it's literally just a handful of stocks?"
  Lee Drogan [12:16]

• "Whether we go into a recession will depend almost entirely on whether the top 10 or 20% of earners keep spending."
  Ben Carlson [27:10]

• "116 million bucks. Kind of amazing how slow these institutions were to adopt this stuff."
  Michael Batnick [37:59]

• "75% of Alternative Mutual funds have died."
  Jeffrey Patak [46:05]

• "One of the cool things about being a parent is seeing your kids do stuff that you like and doing it with them."
  Michael Batnick [55:45]

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Key Takeaways

• Wealth Effect: There's a growing interdependence between household net worth and the stock market, marking significant progress in financial inclusion.

• Market Dynamics: While the stock market drives wealth, concerns about potential bubbles remain, though current conditions differ from historical bubbles.

• Consumer Spending: The expenditure patterns of the wealthiest earners are crucial for economic stability and growth, especially in the context of potential recessions.

• AI and Crypto: Advances in AI present both opportunities and challenges, while institutional investments in cryptocurrency signal evolving financial strategies but carry substantial risks.

• Housing Market: Affordability remains a critical issue, with existing homeowners benefiting from low mortgage rates, while new buyers face higher costs.

• Entertainment Shifts: Streaming services are undergoing significant changes, with skepticism about the viability of new models like ESPN’s direct access.

• Personal Insights: The hosts emphasize the importance of family activities and adapt their interests to align with their children’s, highlighting the blend of personal and professional lives.

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This episode of the Animal Spirits Podcast provides a comprehensive exploration of the intricate relationship between the stock market and household wealth, the evolving landscape of consumer spending, and the disruptive influences of AI and cryptocurrency. Through engaging discussions and personal anecdotes, Michael Batnick and Ben Carlson offer valuable insights for investors and listeners seeking to navigate the complexities of modern financial and social dynamics.

Transcript

[Michael Batnick]

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[Ben Carlson]

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[Michael Batnick]

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[Ben Carlson]

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[Michael Batnick]

Welcome to Animal Spirits, a show about markets, life and investing. Join Michael Batnick and Ben Carlson as.

[Ben Carlson]

They talk about what they're reading, writing and watching. All opinions expressed by Michael and Ben are solely their own opinion and do.

[Michael Batnick]

Not reflect the opinion of Ritholtz Wealth Management.

[Ben Carlson]

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.

[Michael Batnick]

Welcome to Animal Spirits with Michael and Ben. Michael, One of the things that happens in middle age as time passes, which I know you are well aware of, Summer's already gone is just nostalgia. And the 1990s nostalgia, I feel like, has really kicked in for me in the past few years of middle age. And you and I are going on a 90s nostalgia tour in about a month. So we just announced this last week at Future Proof. The musical acts are Blues Traveler as the opener and Bush as the. As the main show. And I don't know which one I'm more excited about. I never realized you were such a big Bush fan.

[Ben Carlson]

I mean, listen, I'm a child in the 90s. Bush was.

[Michael Batnick]

I had the. What was the album called? Everything 10 and Little Thing. Yeah, I had that.

[Ben Carlson]

That was in. That was in every movie. Like there was one. There was five number one singles in that on that album.

[Michael Batnick]

Machine Head was in the Merck Wahlberg movie Fear. Yeah.

[Ben Carlson]

And I could google them, but I'm not going to. But I know for a fact many movie.

[Michael Batnick]

Yes. I don't think that movie would fly today. But also, you and I are going out earlier a day earlier to see Oasis at the Rose Bowl. So we're doing a complete 1990s tour and it's going to be fantastic. Obviously you don't just go to Future Proof for the musical acts, but that is. It's like the perfect send off for the conference at the end, right? You have all these meetings, you run into all these people, you do all this networking, and then at the end you have a thousand people in finance drinking beer and whatever, High noons and listening to music. It's amazing. This is a perfect send off to the conference and I can't wait. You know, I can do the whole fast thing on hook. I used to be able to do that in high school.

[Ben Carlson]

You printed out the lyrics and memorized them?

[Michael Batnick]

I don't think I printed them out.

[Ben Carlson]

I'm positive you printed them out or you wrote them down by hand. There's no way that you can memorize those lyrics without printing them out. That's okay. There was.

[Michael Batnick]

Do I know every word? No, but can I sing the thing? Yeah, probably. See how many. How many Modelos deep I am before I. But so check out.

[Ben Carlson]

There's still time. There's still time. Still time to register.

[Michael Batnick]

Yeah. What do we got? So futureproofhq.com to register. There's still time. And the spots are filling up fast, so hurry up and get there because it's going to be awesome. All right, we have an announcement to make. Chart Kid Matt has his own blog Now.

[Ben Carlson]

Oh Yeah. Oh yeah. Truckkitmat.com that's right.

[Michael Batnick]

It's going to be very chart heavy, obviously late in the words. So he had this chart last week on one of his blog posts measuring the wealth effect. And he looked at the change in household net worth versus the change in the S&P 500 just to show that there basically has never been a time where net worth has been this tied to the stock market. Right. Which makes sense. So this is increasing every, every decade it gets a little bit higher and higher and the 2000s are the highest. And some people look at this kind of data and they say, oh, this is very worrisome because if the stock market falls off, that's going to really hurt households. But I look at this as a positive development because most people don't realize that very few households actually owned stocks back in the day. So this, this is a sign of progress that the stock market is this big part of a wealth driver. And it's, I think it's an important thing because it makes households richer. The fact that there's 60% of households who own stocks now versus 19% in 1983 or whatever it was. I think this is a sign of progress, not something to worry about.

[Ben Carlson]

And we continue. Well, it cuts both ways. But yes, yes, I would agree with you. We've heard from a bunch of listeners over the last couple of weeks who cannot afford to buy a house right now and they've put at least a portion of it in the market, which is.

[Michael Batnick]

So you're coming around on this idea, aren't you?

[Ben Carlson]

What idea? That people are doing it. I mean, people are doing it.

[Michael Batnick]

You kind of poo pooed it a little bit.

[Ben Carlson]

No, no, no, no, no, no. I poo pooed the fact that these people are moving the market.

[Michael Batnick]

Okay. Right.

[Ben Carlson]

Yeah. I mean, I don't think it's.

[Michael Batnick]

But, but the idea that these, these people are probably better off financially than they would have been is interesting.

[Ben Carlson]

There's not. Irony might be the wrong word. But we, I would never give this advice to somebody who was buying a house. Now I guess just put, take some of your down payment and just make more money. Why would you put, why would you, why would you protect it in cash when you could just make more money?

[Michael Batnick]

That's true, but I think a lot of them are probably going. I think I'm just going to keep putting the house. I think that's what we've got heard from a lot of people is, especially in big cities, you know, I don't.

[Ben Carlson]

I don't buy that for a second. So when the marking, when the housing market unfreezes, thaws out. I think that's the one. When rates, when it thaws, when it thaws out, they are going to say, hey, I saved up $110,000 for a down payment and now I've got 150. I could afford a bigger house. Let's go now. People are, people are going to buy houses. That's what they do.

[Michael Batnick]

Yeah. What do you think the magic number is for mortgage rates?

[Ben Carlson]

It's under 6%.

[Michael Batnick]

Like 5 and a half. Like people go nuts.

[Ben Carlson]

Like 575, 5, 5 and 7 eighths. Boom. Unlock. There it is.

[Michael Batnick]

All right. Gun. John at the Wall Street Journal has a piece about the new generation of people buying the diplomatic. This is interesting. So she says, similar to Matt's point, as stocks are more intertwined with Americans finances than ever, stocks as a percentage of household assets surged to 36% in the first quarter, the highest on record going back to the 1950s. The share of total options activity that stems from these individual traders recently hovered around 20%, even higher than the peak during the 2021 meme stock mania. That surprises me so that like the meme stock thing for most of this stuff wasn't the peak. It was just another goalpost along the way, another mile marker.

[Ben Carlson]

I think it's, I think it's hard to argue at this point that the stock market is not driving consumer spending and consumer decision making. Now I had been on the other side of that probably, I don't know, 2023, Josh was very vehement that of course it drives spending. I think my point was, and I still stand by this, if, if people don't look at their 401k and decide to spend more. So let's just say the middle cohort, the 20 to 40% of earners that do have a 401k but don't have a brokerage account, don't have a side crypto account, don't have this and that, if their 401k goes from 55,000 up to 59,000, that doesn't impact your life decisions you're spending. However, if you have a jumbo E401K, a brokerage account, a crypto account, an Nvidia and a Palantir account, then yeah, you're having a great time.

[Michael Batnick]

I always kind of dismiss Josh's thoughts on the wealth effect as well. But here's the way that I personally think about it. As someone who's been saving and investing for 20 plus years. I almost look at it as like the, I don't really like this term, but like the coast fire thing, you know what that is where you save up a bunch of money and then you get, you get to the point where the pile is big enough where you don't have to save as much anymore or anything and you just let compound interest take from there. And so I look at my, my balance and it's probably higher than I expected because this bull market has been going on for so long. And I think, well, if it just grows at x percent a year over the next 10, 15, 20 years from the current level, I can let compounding do the most of it. And so like, if I'm not putting as much in, that's okay and I can just spend it instead so that I, I have personally have that mentality like, well, geez, if I save a little less this year, is it really going to hurt me that much if, if the growth is going to override the savings anyway? I think that's what's happening too.

[Ben Carlson]

Yeah. Like, I always fell back to the labor market. If people have a job, they will continue to spend money, but it's, it's part and parcel of the same thing. Right. If the, you can't, you're not gonna have a bull market in a recession.

[Michael Batnick]

Right? Yes. These things go hand in hand.

[Ben Carlson]

All right. We've been talking a lot the past couple of weeks about the mood of the nation juxtaposed with the stock market. A lot of angst, anxiety about AI college grads. Like, it doesn't. Things don't feel, things don't feel that good. Just, just based on the way that we're ingesting information.

[Michael Batnick]

I don't think, I don't think we're ever gonna get to the point where things are euphoric, even if people.

[Ben Carlson]

I'm just saying I don't think that we're giving positive vibes on the show over the past couple of weeks, do you?

[Michael Batnick]

Oh, that's interesting. A lot of people. It was pretty toppy a few weeks ago, but yeah.

[Ben Carlson]

Okay, well, either way, either way, I, I've said this before. I'll say it again. As much as we love the publications, they provide us with a lot of nuggets for the show, I always will fall back to listening to what the companies are saying. Listen to the companies, not the newspapers. So, for example, this is from the transcript. The CEO of MasterCard said consumer spending remains healthy, supported by low unemployment and wage growth that continues to outpace inflation. That is true across both affluent as well as mass market consumers, while macro uncertainty remains due to government actions and geopolitical tensions. Overall, we remain positive about our growth outlook as the fundamentals that support consumer spending have been strong. Here's another one from Visa. Within the US While spending growth differed among consumer brands. Spend bans. All spend bans in Q3 remain resilient and consistent with past quarters. Amazon. What we can tell you is that we've seen so far in the first half of the year, in the first half, we just haven't seen diminished Demand. And then SoFi, which serves a younger clientele, turn into credit performance. The health of our consumer remains strong and we're not seeing any signs of weakness. Our credit trends continue to be strong after seeing delinquencies peak early last year. So I know people feel how they feel and that, you know, it's important, of course. And there's obviously winners and losers in the economy and maybe there's just more losers relative to winners than there have been. I don't know what the deal is, but things are okay. Even though we got a slowish. What report did we get last week that spooked the market for seven hours? It was. Was it retail sales? I can't remember. Oh, it was job support. It was. Oh, it was a job support. Of course. How could I forget? Yeah.

[Michael Batnick]

Um, I feel like pulling this stuff from the transcript. These are the. These sound like the same quotes we've been reading for three or four years.

[Ben Carlson]

For years. It's. They keep saying the same thing.

[Michael Batnick]

The credit card company. And it's always a credit card company.

[Ben Carlson]

There was one quarter of recently about like macro uncertainty and recession Watch, of course, but they keep saying the same thing.

[Michael Batnick]

So I put my, I put my favorite cartoon in here. The one where they talk about the pilot said we've a little turbulence and the guy screams, we're all going to die. And then the lady says he's a financial reporter. That's a little extreme, obviously, but there's maybe something to that.

[Ben Carlson]

No, there's a lot to that. It just. There is.

[Michael Batnick]

All right, I had a little discussion. I think Lee Drogan was putting this out on Twitter and I wanted to get your thoughts on this. So he was saying, can you really call it a bubble if it's real, if it's literally just a handful of stocks? So JP Morgan has this thing that shows the top 10 and they're. They're trading at 29 times earnings and the remaining stocks are trading at 21 times. So like, if it's. If the only things that are quote unquote overvalued, however you want to say that, is a handful of stocks, can it really be a bubble?

[Ben Carlson]

Okay, that's obviously not true though. It's not just a handful of stocks. But.

[Michael Batnick]

But I guess if you think about. So if you look at this, the performance of the NASDAQ and the S and P versus everything else, the small caps, the mid caps, international stocks, those ones are obviously very muted. I guess the point. Of course there are other speculative areas, but it's not like in 1999, Coke was trading for 40 times earnings or something and GE was trading for 40 or 50 times earnings. Like all these other stocks were overvalued.

[Ben Carlson]

That was one of the biggest bubbles in history.

[Michael Batnick]

So I'm looking, yeah, so I'm looking for a better way to look at this. And I think it's the Nifty 50. So the Nifty 50. I don't read this thing from Jeremy Siegel about this. He wrote this in 1998 and he looked at the Nifty50 and you look at all their different PE ratios and you know, Avon was trading for 60 times or whatever. That was a big one. And Polaroid and all these, these companies were always Avon, Coca Cola. What do you mean was Avon?

[Ben Carlson]

I don't know that. What company is. Do they make makeup? What is that?

[Michael Batnick]

Yeah, it's a. Makeup sales used to be like door to door. But all these companies were trade. Coke was trading for 46 times earnings.

[Ben Carlson]

Why was a makeup company door to door sales? That was a big innovation.

[Michael Batnick]

Exactly right. So Siegel had this and he looked at the Nifty50 and they were. The Nifty50 was trading at 42 times earnings in 1970. Something S&P was at 19. So it's. It's an even wider spread than today. But the S and P ended up falling 36%. But American Express fell 63%. This is, I think this. When Buffett bought American Express because of the salad Whatever thing, McDonald's fell 62%. Walt Disney Company fell almost 2/3. Xerox fell by 70%. So these companies all got slaughtered and the market did. Didn't do quite as bad. But I think that's probably the better comp. Than the dot com bubble is the Nifty50.

[Ben Carlson]

Three things. Number one, these companies that are propping up the market, they all did just have their crash. Less people forget 2022 happened and Nvidia fell 70 and Netflix fell 70 and Meta fell 70 and Amazon fell 50. That just happened. And it just happened again in the first quarter. Not quite to that extreme but Nvidia fell 37%, something like that 40 almost. Difference is obviously these stocks recovered, but I don't know that I buy that argument. Can you call it a bubble if it's just concentrating a few stocks? Of course you can. I saw a stat yesterday from a subset called the falling Knife. People were sending this round about the Russell 2000. Somebody wrote between 2022 and July 2025 the earnings of the nine large nine of the largest companies in the S&P 500 grew by an impressive $290 billion which was quite remarkable. But their combined market cap grew by over 13.3 trillion. That is a 45 times multiple on incremental earnings over that time. I also find the whole conversation about is this a bubble? Isn't it to be sort of not helpful? Right. Because we've been having a version of this conversation for when did I create that first pie chart? And that was even late in the game.

[Michael Batnick]

Yeah. And they just keep trying. I agree that the, any washout would probably be similar where you, you could have. Yeah. 30, 40, 50% downturn in these stocks but it's probably not going to last like the dot com bubble. Like Microsoft is underwater for 13 years following that.

[Ben Carlson]

Yeah, I find that, I mean Nvidia can, I suppose but, but just not helpful in the sense that if we do have that level of, of Wipeout 40 and they don't recover. All right, so we're back to what, 2022, right?

[Michael Batnick]

Yeah.

[Ben Carlson]

And what, what if you, what if you're like this is a bubble. I don't want to deal in the S P, I want to go somewhere else. What if that you think you're gonna be safe? I mean maybe value stocks can, can hold their own like they did in the, in the dot com bubble.

[Michael Batnick]

But I just think that small caps.

[Ben Carlson]

And value stocks following the historical playbook, I mean not super original. Right.

[Michael Batnick]

All right. Duality Research was a great follow on Substack. Some of the best charts out there. And he looked at the different sectors by P ratios which is really cool to see. Obviously in a bull market you'd expect the P ratios to continue to rise and technology's trading at 30 times. Communication services is essentially technology. That's 20 times. But look at healthcare. It's the only one really that's below the. They show the 5 in the 10 year average as well. And healthcare is Way down. It's now down to 8% of the or 9% of the total S and P. So if you had to guess, is healthcare the next energy or is this like a massive buying opportunity? Not being a healthcare expert, like, how is there not going to be just massive healthcare spend by the baby boomers for the next 30 years?

[Ben Carlson]

I literally know nothing about healthcare, but. So I hate to give an opinion, but I would say opportunity sure seems like it.

[Michael Batnick]

Right, here's another thing. I know you and Josh talked about falling knives a couple weeks ago, maybe last week on what are your thoughts? I feel like I just should. I should buy Nike and just close my eyes and plug my nose.

[Ben Carlson]

For the record, Nike is not a knife at all. Nike has. Nike is where it was in June of 2024. So Nike has stabilized. It is above. It is above the 2. It is above the 200J moving average. This is, I mean, it's in a downtrend. Well, I guess depending on how you define it. But this is not a falling night. But why should you buy Nike?

[Michael Batnick]

Well, it's. It's 60% below the lows. It's at levels that started first trading out in 2018. It's now the 98th biggest stock in the S and P. Here's my bull case. All my kids were Nike. No, but head to toe, it's like. And that's all they wear Caitlin Clark thing. I think you're riding Caitlin Clark for 20 years. She's going to have her own shoes coming out soon.

[Ben Carlson]

I think this is like that time I pitched the mining company because they were having the Olympics in there in Australia.

[Michael Batnick]

I just. Is the Nike brand really? Because I know they had missteps. They did try to, they tried to go straight to consumer and they like took it off of Amazon and they tried to just, hey, buy straight from us. And it was a disaster. And they need those other retail channels and it sounds like they're. They're figuring that out, but this just seems to me like a brand name thing where anytime Netflix falls 60 or 70%, you buy it because it happens so often. This just seems like a buy the brand type of dip fair.

[Ben Carlson]

I don't own it, but not the worst thesis I've ever heard.

[Michael Batnick]

All right, what's your, your Schwab thing? I feel like you, you've been tracking the Schwab index very closely lately.

[Ben Carlson]

I have been. Well, listen, I don't know. The Schwab is the biggest brokerage in the world, is it not? Is this not like is there not $11 trillion there? It's seems relatively important. No.

[Michael Batnick]

Okay, what do you got?

[Ben Carlson]

Why are you poo pooing Schwab?

[Michael Batnick]

I'm not. I'm just saying you.

[Ben Carlson]

It's not, it's not. It's not Weeble. No disrespect to Weeble, but this is, this is a. This is a big, big company. A lot of people here.

[Michael Batnick]

S Tax or stacks.

[Ben Carlson]

What do I call it? I call it stacks. No, I call it S Tax. You call it either way. Either way. I guess the theme of this show is it's. I'm confused. Narratives are all over the place, right?

[Michael Batnick]

There are thing. If you're not confused, you're not paying attention.

[Ben Carlson]

But especially now there are obvious pockets of. Of wildness. There are a lot of stocks that are not working. You could support whatever, whatever case you wanted to make about this market. You can make a credible argument, right?

[Michael Batnick]

I think so.

[Ben Carlson]

All right. So why I find this noteworthy is because as we know, we had an all time high in the S&P 500 in July. But Schwab clients again took a careful approach. The S Tax climbed for the second straight month after three straight declines. But look at this. I mean it's. It's very low relative to where the market is. There's a huge gap. However they measure this proprietary index which is quantitative. They're not. There's not. There's no feelings in here. But here is an interesting nugget. Clients tracked by S Tax remained large net sellers on a dollar basis in the information technology sector once again, but flipped from selling to buying shares of Nvidia. So for the past two months, Nvidia was the single largest dollar stock sold on the platform. And then in July it flipped to the number one buyer. Oh wait, was it number one buyer if it's number one buyer. But it was. There were net buyers.

[Michael Batnick]

So I think the most interesting thing about this is that they have. Have the data going back to the Meme stock mania in 2021 and it's nowhere close to that. That was. Yeah. And that actually tracked the market perfectly.

[Ben Carlson]

So I think young people, and I'm overgeneralizing here that are participating in the meme stuff. Some of the newer issues, some of the eth. Treasury companies which are going to talk about later, I think there is a sense of euphoria there. But the older investors I think are very skeptical and that's a pretty clear divide.

[Michael Batnick]

That makes sense. And guess who controls most of the money? Older investors. And when you say that Schwab probably skews older as well.

[Ben Carlson]

Yeah, obviously.

[Michael Batnick]

Yeah. All right. We've. We've had this conversation a million times over the years, but I think it's time to have it again because, like, what I'm trying to think through, what if Trump. What happens if Trump gets his wish and he puts, like, Kim Kardashian and Eric Trump and Donald Jr. On the Fed Reserve Board and they lower rates, like a decent amount? It sounds like that's what he wants. Let's say he gets his wish. This, this. The money in money market assets keeps climbing chart. Kid did this for me. It's 7.2 trillion. This thing kind of looks like the stock market in a lot of ways lately, at least. Are people going to finally get out of this if rates go to, I don't know, and a half percent or something?

[Ben Carlson]

If rates come down to two and a half percent, which they're not going to, but if they do, then, yes, this money will leave money market funds, but it's not going to happen overnight. I think it's be very gradual.

[Michael Batnick]

Yeah, I, I just think that the, the increase over the last two or three years is, is so substantial that a lot of it has to be money that's just chasing yield.

[Ben Carlson]

But I think that. I think that you could still see this go up. If, if money market rates stay at 3%, do you think more than 3% is going to come out?

[Michael Batnick]

Yeah, I don't. I'm just. I'm preparing for a world that, what if rates are lower than people actually expect? Trump said he wants 1% rates. Obviously, that's probably not going to happen, but I don't know. He's firing everyone to do whatever he wants.

[Ben Carlson]

All right, Apropos of nothing, but this just happened. My puppy needed to get spayed, and so we used to use one vet in Merrick. They didn't have an appointment for, like, a month out, so we switched to another vet. But I think what happened was I booked an appointment with the first vet and I forgot to cancel. So this morning we had an appointment and we overslept. I had to drive Logan to camp. He missed the bus. Robin's getting mad at me because there's too many things, and we overslept. And she says to me, well, you made the appointment. And my response was like, what does that do with anything? Who cares who made the appointment? How is that relevant? Would I ever say that to you about something late like, you made the appointment? That's neither here nor there. So she's getting flustered. I took Logan to camp. She takes Roo to the. To the vet. She texts me there is no appointment because it was with the.

[Michael Batnick]

So you didn't.

[Ben Carlson]

I got a voicemail from the original vet that I forgot to cancel. And eh.

[Michael Batnick]

So you said to her, I see. I didn't make the appointment.

[Ben Carlson]

Yeah, yeah. Whoops.

[Michael Batnick]

Okay. I got screamed, I got yelled at. I got like. I got positive and negative because I was the one who pushed to get new floors in our house, which is turning out to be just really putting us out of house at home for a while. But it's. Once it's all in and it's three quarters of the way done, and my wife is like, thank you so much for forcing my hand to do this. I love it. It looks great. I wish we would have done this sooner. But then we. Then the guy said, well, we're going to be here for an extra week, probably because it's taking longer than we thought. And she goes, see, this was your idea. Why did you make me do this? So it's just the time of day kind of thing.

[Ben Carlson]

By the way, you're making. You're doing a home renovation. I'm buying a new house. I think we forgot to mention the obvious part earlier. I wouldn't be doing this if the stock market wasn't doing what it was doing. If crypto wasn't where it was, there's no way.

[Michael Batnick]

Well, if it was a bear market, you have more negotiating power.

[Ben Carlson]

Yeah, but. No, but let's be honest. There's no way that you would have done that. And I would not have bought a new house if the market wasn't doing what it was.

[Michael Batnick]

But I do think that the housing market could see a massive spike in activity even during a recession. I think that's.

[Ben Carlson]

That has nothing to do with what I just said.

[Michael Batnick]

But I'm saying I think we're gonna. The stock market could be falling and we're in a recession and we could see housing market activity explode and people are gonna go, wait, what? More people are borrowing from equity line of credit? There's more buys, there's more sells. I think that is a very likely possibility. And people are gonna be like, what? Why is this happening in a recession? Aren't you going to be borrowing more money if rates fall substantially?

[Ben Carlson]

Am I going to be borrowing more money to do what? Yeah, just.

[Michael Batnick]

I don't know if rates fall back to four or five. Yeah. To do something, I don't know, you have to spend a lot of money on A new house probably.

[Ben Carlson]

I don't know. Yeah, sure. If rates go back to down to 2%, I will borrow all the money.

[Michael Batnick]

The only thing you need, My only suggestion, if you're going to do a renovation, eventually you need an outdoor shower. If you're on the water, outdoor shower is the best thing you can possibly have on the water. You get off the boat, don't kids, don't go inside, take a shower outside immediately. Then you're clean for the day.

[Ben Carlson]

Good tip. All right. Heather long. The top 10% of earners now drive about half of spending according to Moody's, up from 36% three decades ago.

[Michael Batnick]

This chart is pretty crazy, but. And you and I have been talking about a few people have commented and usually we don't read the comments. But like, why are you talking so much about like rich people and all this rich stuff? It's like it matters a lot now. It's substantially higher and it's kind of leveled off a little bit. But I, I like this interesting thing. She said the bottom 80% of households are basically keeping their spending in line with inflation. This is a notable shift from the revenge spending era from 2022 to 2024, when people of all levels of income were splurging somewhat after the end of the pandemic lockdown. So you can see the, it really ramped up over inflation for the middle class and the bottom 40% or whatever and now it's just back to inflation levels like back on trend essentially. Whereas the top 20% continues to be way, way above trend in terms of spending.

[Ben Carlson]

She said whether we go into a recession will depend almost entirely on whether the top 10 or 20% of earners keep spending. So this is why we keep talking about rich people. And also I think that isn't there a K shaped recovery or a K shaped economy in the stock market? Look at how many stocks are getting annihilated, how many stocks are doing nothing over a five year period.

[Michael Batnick]

I feel like the K shaped thing is a relatively new term. I kind of like it.

[Ben Carlson]

I don't remember hearing about it prior to this decade.

[Michael Batnick]

But do you agree with this that if we go into recession we'll depend almost entirely on the top 10 to 20% of earners keeping spending? Yeah, but what stops them from. It's kind of a chicken and the egg thing. What stops them? The stock market falls. But what makes the stock market fall? A recession? I guess it's just AI, but that's the thing. Right.

[Ben Carlson]

But a lot of like the, the luxury Spending stalled out in 2022. The handbags, the Ferraris, the non.

[Michael Batnick]

Yeah, but you had other people revenge spending then. I think that's the thing. So is this the case where we could actually see this for once? Because usually it doesn't happen like this. Usually it's the other one. Could we see the stock market cause a recession? If the stock market falls because of AI spend and expectations and that causes people to pull in their spending and that causes a recession that usually doesn't happen. So could the stock market actually cause a recession this time?

[Ben Carlson]

Definitely.

[Michael Batnick]

Okay. All right. Another one from the Wall Street Journal. Was this gung again?

[Ben Carlson]

Another gung one. All right. Speaking of rich people, us added more than a thousand millionaires every day for the last year.

[Michael Batnick]

That's nuts. Billionaire club grew by more than 50% between 2015 and 2024. The story is how flying Honda private jet became the number one marker of real wealth. This was interesting to me because they talked about all these people who fly private. And they said this one guy, Kevin Hooks, who I guess he sold his company like 20 years ago, he's a Flexjet client, said he spends around $800,000 annually on private flights. He has noticed plane hangers around the country growing more crowded because of increased demand since the pandemic. So way more rich people means way more people flying private. Now, I looked at this. Nick Magi talked about this with me couple weeks ago. So I, I listened to this podcast on Money Wise, which is the kind of podcast you don't want to listen to if you get very jealous of really rich people. It's all about people who have founders who have had exits and how they spend their money. Sam Parr puts it on. That's really well done. But if you, if you get like, again, very jealous and envious, don't listen to this podcast because it's how like the other, the top 1% lives. So they said to start from flying private cost around $10,000 an hour. And that's like buying shares in a one of these. You know, you're essentially a timeshare private jet. And it goes up substantially from there, obviously if you own your own jet. But then they looked at this. Was this private jet expert, they looked at what income and net worth do people start flying private. I don't know if you looked at this, but what do you think is a net income or net worth where people start flying private? Not all the time, but sometimes.

[Ben Carlson]

I'll answer your question in a second, but this chart is a face blower. There are 475,000 people worth more than 30 million. Is this just in the US or is this global?

[Michael Batnick]

That's a good question. I don't know.

[Ben Carlson]

That sounds impossible, right? There's that many people with that much money. All right, so what level of income do you need?

[Michael Batnick]

They did a study. A net income, right? Net of taxes and everything. Like how much you take home or net worth when people start flying private.

[Ben Carlson]

All right, I would say a net income. I would say a net worth of 50 million and a net income of. I would say the net income is surprisingly low relative to the net worth. I would say a net income of 4 million.

[Michael Batnick]

Okay, so they said 2 million in net income and 20 million in net worth. That doesn't sound high enough for me to.

[Ben Carlson]

That's not high enough. Yeah, pump the brakes, wise guys. Anyway, you're not that guy.

[Michael Batnick]

There was a story a number of years ago about Abigail Disney. I think she's the granddaughter of Walt Disney. And she talked about how she flew private her whole life and she thinks it screwed her up because she like never had to deal with real problems or people didn't. Never had to wait for anything. Never had to like sit with normal people and just constantly skirt of the line.

[Ben Carlson]

And I think, I think most people don't envy this. I think mo most. I think like most reasonable people that are. That are successful. I should say, I should caveat that most people that are doing just fine don't need to fly private. Don't envy the lifestyle of. Of these people. I mean, I think your friends and neighbors is pretty spot on. These people suck and they're miserable. And there are obviously exceptions. Are obviously phenomenally philanthropic, wonderful people that you know. But as a group, like I do believe that your friends and neighbors is pretty accurate. These people are just stab each other in the back. It's the same people. It's the same bullshit. They have nothing to talk about. They're just one up in each other. This watch, that, that car, this flying private. Like, I think most people like, you know what? I'm okay. I'm pretty comfortable.

[Michael Batnick]

Yeah. It. Yeah. You think when you have a delay or something and you wait and go through security, boy, my time is so much more valuable if I just flew private. But $10,000 an hour valuable? Probably not. And it's probably more than that too. Yes. All right. Can we talk?

[Ben Carlson]

AI let's do it.

[Michael Batnick]

All right. I sometimes when they launch a new model and this could be any of them. I know ChatGPT just did a going from 4 to 5. And Grok has a new model and Claude has a new model. When this happens, all the AI people talk about and it makes me feel inadequate because there are two extremes and one of them is, oh my gosh, this new model is so good, it's going to be the end of humanity. Or oh man, this model is so much worse. I wish they would go back and the end of hypergrowth or this is the end of AI hypergrowth. And to me, I never noticed a difference.

[Ben Carlson]

Yeah, same.

[Michael Batnick]

Yeah, I don't notice, like, this is so much better or so much worse. To me, it's the same. So maybe I'm not using AI enough so I feel inadequate. What do you think?

[Ben Carlson]

Yeah, I think I'm in the same boat as you. Like, I use it daily, but I'm not using it all day by like coding.

[Michael Batnick]

And it's so like we had. We had to get new rocks for our fire pit because the old ones were breaking and, and gunking it up. So I had to take all the rocks out. And then I look and I said, okay, this thing is. It's a circle and it's 39 inches around and it's 4 inches deep. How many bags of 20 pound bags of rocks do I need to get? And it said, probably five and a half. Make it six to be safe. And it was perfect. It calculated it perfectly. But then I took a picture of our railing last night and I said, hey, here's our floor coloring. What color should we stain this railing? And it sent me back these really awful, terrible, funky pictures. And I said, hey, these pictures stink. Do it again. And it did it pretty good. But again, I don't notice a difference between that and what I was doing last week.

[Ben Carlson]

No, neither do I.

[Michael Batnick]

Okay, I have an AI idea. If anyone wants to fund it, they can. All right. I want to create a country music AI because I was never a country music listener until we started going on the lake more. And it wasn't like I was anti country. Like, I know some people were back in the day, just country music. I didn't grow up listening to it.

[Ben Carlson]

Country music in the 90s was not cool. The music stunk.

[Michael Batnick]

No, no, no. Yeah, it was basically Garth Brooks, right? It's way better these days. It's more poppy. But when you go out on your boat, country music is great because our. Where we have our. On our lake, I'd say it's like half redneck, half yuppie. Like, there's a very good diversification. And I Like the redneck side of it on the lake. Because it's. Because all they talk about in country music. And this is what my AI is gonna be all my songs. I'm gonna release an album every year on Memorial Day. Okay. And the album's done Labor Day. Cause you want it to coincide with summer, right? When people are outside on their boat. And all the songs are gonna be about cold beer drinking. Getting drunk. Getting drunk on a boat. Margaritas, tequila, whiskey. Okay. And so I'm gonna have AI create these of drinking cold beer and whiskey and tequila.

[Ben Carlson]

On a Friday night.

[Michael Batnick]

Yeah, on Friday night. And maybe some stuff about cowboys and call girls. And that's my country music AI generator.

[Ben Carlson]

All right, good. All right. So AI is disrupting a lot of things. Here's one that I read in the transcript in the second quarter. This is from Chegg, a company that I never heard of. I had to Google it.

[Michael Batnick]

Well, that's like rental of textbooks, right?

[Ben Carlson]

Yeah. Which is ironic given what I'm about to say. In the second quarter, total revenue was 105 million, a decrease of 36% year over year. This includes subscription services revenue of $90 million. We had 2.6 million. All right, 2.6 million subscribers during the quarter, representing a year over year decline of 40% as we continue to feel the impact of lower traffic, largely due to Google AI reviews or overviews. Excuse me. So what did I do? I pulled up the mark, the stock. I mean, obviously this was not a surprise.

[Michael Batnick]

Holy smokes.

[Ben Carlson]

Yeah, it had a market cap of $15 billion in 2020, and now it's 120 million.

[Michael Batnick]

Whoa. And this is obviously other stuff going on, but AI, there's.

[Ben Carlson]

I mean, I think put the nail in the coffin. Yeah, but there's gonna be a lot of this.

[Michael Batnick]

Yeah.

[Ben Carlson]

In fact, transcript did mention a lot of other companies that are just. Google is no longer sending people out to different links. They're just answering the question in Gemini.

[Michael Batnick]

So did you see this AI usage by date?

[Ben Carlson]

Yeah.

[Michael Batnick]

That just shows like once college was over, it dropped off a cliff. Yeah, I don't know if that is a good thing or a bad thing in terms of AI though. Like if, if, if most much of the usage is just college students writing.

[Ben Carlson]

Papers and doing today fast forward. I think that this is. I think that we've got universal basic income coming in the next two or three elections, maybe even sooner.

[Michael Batnick]

You don't think we're just going to make up a bunch of new jobs, like, hey, sit in the robo taxi and make sure. No one is doing it in the backseat.

[Ben Carlson]

I don't think that there will be. I don't know whom. Who am I to. I'm not qualified to speak on this, but I'll give an opinion.

[Michael Batnick]

The history of. The history of labor says we always create new jobs. Sometime that's going to be wrong. Maybe, but I. People need something to make them otherwise. Like there's gonna be riots in the streets. Like, we saw what happens, how pissed off people get if you just pay people to do nothing. It's not. The outcome is probably not good.

[Ben Carlson]

Yeah. No, I am not. Not worried about this.

[Michael Batnick]

I hope not. I'm of the opinion that we have a dynamic economy and the transition from here to there will be painful, but we'll just make up a bunch of new jobs. Someone has to oil the robots, right?

[Ben Carlson]

I hope so. All right, let's talk about crypto. Harvard Management Company, which oversees the university's $50 billion endowment, disclose a $116 million position in black. I share is Bitcoin Trust, which is not a insignificant amount of money. 116 million bucks.

[Michael Batnick]

Kind of amazing how slow these institutions were to adopt this stuff since they looked at themselves as like being on the forefront for so long. I like the last adopters.

[Ben Carlson]

Yeah. So this week was the week that. Or maybe not just this week, but especially this week, ETH exploded relative to bitcoin. Bit Hedge has a chart showing the ETH volume exploding to the upside over Bitcoin volume 14 days in a row now. So I want to give a. A mea culpa on the dumb money comment they gave last week, but also more context. And not a full mea culpa, but just. I don't know if we mentioned Tom Lee last week. Maybe we did, maybe we didn't, but.

[Michael Batnick]

And this was the idea that all the.

[Ben Carlson]

Of all the Treasury.

[Michael Batnick]

Treasury companies. Okay, buying.

[Ben Carlson]

So I listened to Tom on Bankless, and Tom Lee might be the person that has got in more things right over the last decade than any other pundit talking about the market. Who's been more right than Tom?

[Michael Batnick]

He's definitely been more right than wrong, which is not something you can say about a lot of people who've been more right.

[Ben Carlson]

Who's been more right than him?

[Michael Batnick]

That's a good question, because there's not a lot of pundits who've been right about stuff. So, yeah, you're right. He probably is.

[Ben Carlson]

So I didn't know this. I listened to him with the Bankless guys talking about bmnr, which is what does that stand for? Can't remember. But did you know that Tom was responsible for the digital gold analog? He was the first one to like put that out there into the world.

[Michael Batnick]

Didn't know that.

[Ben Carlson]

All right, so anyway, he was talking about the company, how it got funded. Some of the early investors. Bill Miller is an early investor.

[Michael Batnick]

What did this company used to do? Because it's been around for a long time. Bit my new technology.

[Ben Carlson]

Is that what it's called? BM.

[Michael Batnick]

But it's been around since 2008.

[Ben Carlson]

No, no, it was a spec. Yeah. All right, so I think Druck Miller is an early investor. It might be Paul Tur Jones, I can't remember. But he was explaining that Michael Sailor laid the blueprint for what he's trying to do. And you might sell say. Well, microstrategy is nonsense. All right, well fine. But it's, it's worked remarkably well and that is what Tom is trying to do. So he spoke about like the liquidity and the number of ETH per share count and the liquidity. Did I say liquidity already? And liquidity and also the liquidity. So anyway, look at this chart that Matt kit that, that chart Matt made for the listeners. He Matt charted the s and P500 constituents and he looked at the market cap versus the 30 day average trading volume. He included Bit mine Technologies which is obviously not in the S and P. Look how far off the charts this thing is. It traded more yesterday than like me. It's one of the top volume stocks in the market.

[Michael Batnick]

So the thing that you were saying last week, the whole idea is like, so these companies are just going to borrow money to buy an asset. Like how does that end up? Well, right, that's, that's the word. Like okay, you're going to borrow money to buy stuff and then it'll keep going up and up and up forever. That's like the, the rational response to this.

[Ben Carlson]

So Tom just. I think Tom bit mine or. Yeah, they just did a $20 billion equity offering or at least that hit the wires today. So Ryan Adams tweeted that Tom is the first to $1 million in ETH. They're trying to get to 5% of all ether supply and if anybody can do it, I suppose it's him. Tom Dunleavy tweeted, for what it's worth, I'm still getting decks for nine figure eth and bitcoin digital asset treasuries that are close to being filled. No stopping this train anytime soon. Okay. However, so, so I would Say Tom is in a different category because if there's anybody that can galvanize the, the, the crew and get people to believe and the velocity and the liquidity and the wheel spinning and dilution and more time, blah, blah, blah, it's him. However, however, this will not end well for a lot of copycat companies. Like, I don't think everybody can, can make the strategy work. So for example, the FT just did a post. The title was why Struggling Companies are Loading up on Bitcoin. So here we go. Three months ago, George. George Koram had never considered for a moment that his semiconductor company might start buying Bitcoin. Shares of his New York listed B business had been struggling for some time when he read about a healthcare company that had bought the digital currency and seen the stock price soar. The French chief executive says he began reading about Bitcoin and became intrigued after a failed deal spooked investors. He says, I was looking for ways to unlock the value of the company. Sequence Communications raised $384 million from debt and equity markets to spend on buying the world's most popular token. Its share price surged 160% of the news. So I am.

[Michael Batnick]

So this guy just now started reading about Bitcoin?

[Ben Carlson]

Yeah. So anyway, so I immediately pulled up that chart of sequins and it went straight up and straight down. So for everybody else, for all of the 154 public companies, according to Financial Times that have either raised or committed to raise a combined total of $98 billion in order to buy crypto, I can't imagine this working for all of them. In fact, I would bet a lot of money that it won't. And for people that are piling in, I mean this. If you're piling into these other ones just because you're hoping to save your company or whatever like this. I'm sorry, this is, this is dumb.

[Michael Batnick]

Yeah, the funding will dry up or it might not ever.

[Ben Carlson]

Not everybody could have a premium to their nav.

[Michael Batnick]

No, it's.

[Ben Carlson]

It's Michael Saylor and it's Tom and maybe it's the Trumps, but it's. This is. So that was just my me a couple ish.

[Michael Batnick]

That makes sense anyhow.

[Ben Carlson]

All right, moving on. So the spread between the 30 year mortgage and 10 year US treasury yields is coming down, but it's still too high. 2.6%.

[Michael Batnick]

See, this is how we lower mortgage rates though. All the Fed has to do is say we want the spread to be lower and it immediately happens. Don't you think? I'VE been saying this for a while. All right, you've heard of the 50, 30, 20 rule, finance rule. So you the rule of thumb is you spend 50% of your budget on necessities, housing, transportation, etc. 30% on your wants and desires, whatever entertainment, eating out clothes, that sort of thing. And then 20% on saving, paying down debt. This is a rule of thumb obviously and they're not always close. But of that 50 for your necessities, typically the number that's thrown out is you want to spend $30 on your monthly housing payment, be it rent or mortgage. Okay. Redfin says a household on the median income would need to spend 39% of their earnings on a house to buy a medium price home today. And basically saying that it's, you know, it's pretty unaffordable for anyone in the, you know, most of the population to afford today. Obvious, right? You're spending a much. But this got me thinking. For anyone who owned pre2021, it's gotta be in who refinanced at 3% or lower. It's gotta be way, way lower than 30% for them, especially as incomes have risen. So for the 65% of households that own a home already, it obviously it stinks if you're one of these people doesn't. But if you own a home already, you are in such a good position relative budget wise you got. So it's like the luckiest budgeting thing that's ever happened for people. I mean the average for them probably has to be 20% or so. Think about that gap between what you'd have to spend now and what you currently spend and what the difference is. And all that money is going into money markets, into the stock market and whatever, right? Renovations, all this stuff.

[Ben Carlson]

All right. Jeffrey Patak had a piece in Morningstar. 75% of Alternative Mutual funds have died. There are lessons in that for would be private market investors. And he starts the piece by saying on January 1, 2015 there were 1345 alternative mutual funds in existence. Those funds follow the approaches that utilize hedging, shorting or trend following. Guess how many of those alternative funds still exist? 341. The other thousand or so have been liquidated or merged away. A 75% mortality rate.

[Michael Batnick]

That is pretty wild. Crazy. I, I think this actually is a perfect encapsulation of the what's coming for private markets into 401ks and individuals. I, I totally am I bored of this as an analogy.

[Ben Carlson]

I'm not at all, not even a.

[Michael Batnick]

Little not necessarily that, like, I think just not working very well.

[Ben Carlson]

I think, I think that this is, I understand what Jeffrey's saying, but I think the big difference is, and I don't. I'm not all right, These strategies were launched to save people from a bear market, to save people from a colossal bear market and to do the impossible, which was not have any downside and get most of the upside. A lot of these strategies cannot work by definition. Right? I think.

[Michael Batnick]

You'Re saying they got like.

[Ben Carlson]

They were launched as a, they were, they were launched as a result of the great financial crisis. And a lot of these strategies were just impossible. They're trying to beat the market, not have downside, get the upside. Just. It cannot be done. These were dumb strategies and private equity and private credit. I'm not saying that they're all going to work or that they're all going to deliver alpha or excess returns or any of that, but these are, these are apples and oranges.

[Michael Batnick]

I just think that trying to roll this stuff out to retail in the illiquidity mismatch that's going to occur, I just, I don't think that it's going to work very well. I think the results are going. It's not going to be a catastrophe and it's not going to blow up people's retirements. I just think people are going to be very disappointed in the results.

[Ben Carlson]

Well, that I'm 100% on board with. I think that people. So there was a law passed last week, or was it signed, about letting private assets into, into four 1Ks.

[Michael Batnick]

It's getting there.

[Ben Carlson]

So I think you mentioned the illiquidity mismatch there. There is no liquidity in 401k. I mean, like, if, if they're, if you're going to have it anywhere, I guess it's a sensible spot to put it. But I am fully on board with investors being disappointed. But I also don't think it's going to be the catastrophe that a lot of people are, are saying it's going to be. What's the opposite of virtue signaling?

[Michael Batnick]

I don't know. But I, I just think that introducing the, the high fees and I, I agree with your point that you said before that like this is going to open up the kimono a little bit and make it so these companies have to be more above board. And I think that's just going to lead to worse and worse results and people are going to go, why did I not just have my money in index fund instead of this? What was I doing.

[Ben Carlson]

So I think that I. I think the main entrance is. It's going to be target date funds. And do. Listen, do I want this to exist? No. But there's a lot of things that I want. Don't want to exist that do. So whatever that.

[Michael Batnick]

But the thing. Here's the thing though, the alternative. It's much so it's kind of like if you invested in actively managed mutual funds that underperformed, you were still invested. You didn't do as well as the index. I think this is probably kind of the same thing, only the bigger spread because fees are higher. You're still going to do okay because you're going to be fully invested into equity of some something. But it's just, you're going to look at it and go, oh, I could have done way better if I just done this simple, easy thing.

[Ben Carlson]

I'm not sure that private credit is going to underperform the ag.

[Michael Batnick]

Oh, no, it shouldn't. I hope not. It's going to be like high yield, right?

[Ben Carlson]

Yeah. So anyway, I, I think there's a lot of hemming and hawing. I think people are getting a little hysterical. We don't even know what's coming yet. And I get it. Will investors be better served in these products? Probably not. Will the managers be better served? Obviously. So I understand why people like us are writing articles and pushing back. I. I totally get it. But I don't think that this is gonna like, cause a retirement crisis or anything, even of the sort.

[Michael Batnick]

Yeah, I hope not. Yeah, it's not like people are gonna be right. I don't think this isn't something that people are asking for. So it's not like people are gonna go, okay, great, I'm put all my money into this.

[Ben Carlson]

Yeah, all right, you know what? Can we just skip this whole article? There was an article in the FT about the troubling decline in consciousness, the critical life skills fading out and especially fast among young adults. Can we just skip it? It's enough.

[Michael Batnick]

I was going to short this one.

[Ben Carlson]

All right, me too. It's, you know, it is enough. It is really enough. We understand that social media and a lot of different forces are converging and making it hard to be a young person. Guess what? It's always been hard.

[Michael Batnick]

You know, the thing is, I don't.

[Ben Carlson]

Want to like, add to the, to the misery.

[Michael Batnick]

So I've had four or five conversations in the past two months with college students who've reached out and said, hey, I'd love to talk to you and Pick your brain, that sort of thing. I'm always happy to have those conversations. And these kids, maybe this is like a sample size bias thing or selection bias or whatever. These kids are so far ahead of the game. Where I was and I talked to a high school senior yesterday, I talked to college seniors. They know what they want to do. I had no idea what I wanted to do. I had no clue. And the only reason they do is because they have the Internet now. And so these people are so far ahead of the game in terms of learning and understanding what they want to do than I was at that age. And so there. Obviously there are negatives of this stuff, but.

[Ben Carlson]

Oh, there's a loneliness epidemic. Oh, yeah. You know what I did when I was 17? I remember sometimes being home in the summer, looking out my window, looking at my window. I was like, who should I call? I don't really know anybody. My friends. I don't know what that person is. Right. Yeah, it's enough. Yeah, I agree. For the college people that I speak with, again, small sample size, but, like, they seem perfectly fine. And I'm sure not. They're. They're all not. I'm sure that this is not, like, completely fabricated, but it just is enough. It's getting too much. Too much oxygen. Let's move on.

[Michael Batnick]

They just need to party a little bit more. That's all they need to do.

[Ben Carlson]

All right. Big, big, big, big week for streaming and entertainment. So Alex Morris wrote, After seven years with the ESPN plus diversion, a product compromise made in 2018 that reflected a combination of an unclear strategic vision and concerns about business model disruption and significant technical challenges that needed to be addressed. The day has finally come where cord cutters can directly access all of ESPN's content. This is big. We've been talking about this for a long time.

[Michael Batnick]

How much is this going to cost? I think this is going to be a. I don't think this is going to work.

[Ben Carlson]

25 bucks.

[Michael Batnick]

He's going to want to pay 30 or 40 bucks for ESPN.

[Ben Carlson]

That's your only way to access it.

[Michael Batnick]

Why not just double that and buy YouTube TV for 80? Then why would you pay for just ESPN? I think this is gonna be a bomb. I don't think this is gonna work at all.

[Ben Carlson]

You might be right. Here's another one.

[Michael Batnick]

It's way too much espn. Cause you still don't get all the games for everything else. Like, I know they're trying to buy stuff, but you still have all these other places you have to go to get games. It doesn't give you everything. I wanna. I don't wanna pay 40 bucks a month to watch Stephen A. Smith and scream at me all day.

[Ben Carlson]

Well, nobody watches that. It's for. It's for the games. All right, here's another one. Paramount, you. So no more pay per view for. For UFC fights. Mark Shapiro, TK Group's president and coo, said the pay per view model is a thing of the past. What's on pay per view anymore? Boxing.

[Michael Batnick]

Oh, so instead of pay per view, you pay for Paramount.

[Ben Carlson]

So Paramount plus is getting. Is getting UFC fights. So you. They're paying $1.1 billion to UFC for seven years. That is good for them. Lots of.

[Michael Batnick]

What's going to be. What, is there going to be more overspending on AI Capex or live action sports? Because eventually these places are going to overdo it because they're going to go, listen, we need live action to get people to pay. And they're going to way overspend. And they're going to go, oh, my gosh, what were we thinking? This is.

[Ben Carlson]

It is interesting. Although I still think the streaming, like today's options, even though we're probably not saving money. In fact, I'm sure I'm paying more because now I have. I pay for cable and I still pay for all this stuff.

[Michael Batnick]

Oh, yeah.

[Ben Carlson]

But I'm a much happier viewer. Much more to watch.

[Michael Batnick]

Yeah, it's just not as easy to switch back and forth. But yeah, it's more. You know what stinks, though? I have the app that looks where stuff is streaming like a movie. You pull up a movie and it'll go, this movie is not streaming anywhere. That means it's just gone forever. Do I have to buy a Blu Ray player?

[Ben Carlson]

You buy everything on prime for the most part.

[Michael Batnick]

Yeah. I'm saying some of these streamers, these movies, I wanted to watch PCU. I'm going back in the 90s. Nostalgia. It's not streaming anywhere. You can't even rent it. Nothing. There's something like that. All right, story time. So one of the cool things about being a parent is seeing your kids do stuff that you like and doing it with them. Like, my daughter loves to shoot baskets in the driveway. That's one of my favorite pastimes. I would go out for hours and hours and just shoot baskets. Back to being lonely, right? By myself, I had a loneliness epidemic, I guess, but what was that word? Loneliness epidemic. Right. But I think it's also cool to experience things that you never did through them. Like my two daughters, both Love playing soccer. I never played soccer when I was growing up. I never watched it. I was never a soccer fan. And now I love it because they play, right? And my son, God bless him, he has a little bit of redneck in him. And I say that as a term of endearment because I have plenty of rednecks in my family. Again, term of endearment. My dad was never like an outdoorsman, but all of his brothers hunt and fish. And a lot of my cousins do too. It just never. That bug never bit us. But. And I think my son got this aspect of them. He got the Carlson redneck gene in him. And so fishing is his, literally his favorite thing. He loves to go fishing. And I don't like fishing, but I like to do it with him. And all I do, I'm just there to service him. I change the hooks. When he gets tangled, it cuts a line. You know, I'm afraid to take the.

[Ben Carlson]

Hook out of the mouth.

[Michael Batnick]

Yeah, he. No, he does that now by himself. He like grabs the fish by the mouth. Like he knows all this stuff. He puts the worm on himself. We're getting into lures. So for the whole summer he's wanted to go charter fishing. He's never done it. So we went on Lake Michigan this past weekend, charter fishing, and he absolutely loved it. I put some pictures in here for you to look at. We got these huge king salmon something. Huge fish.

[Ben Carlson]

Oh, those are salmon?

[Michael Batnick]

Yeah. On Lake Michigan. Huge.

[Ben Carlson]

I mean, did you eat them?

[Michael Batnick]

We. They fillet them for us and we're gonna cook them up. I can't wait getting. Being salmon for weeks. But there was a good. And he had so much fun. And the guys on the charter, like, did a great job of like adhering to him. But what they do is the boat kind of trolls around slowly. It idles essentially. And it's got. It's got a thing that, you know, it marks it off and it dries by itself. But the guy was saying, there's an investing lesson here. I'm thinking this. He said, because eight year olds like George are the best fishermen. And I said, why? He said, because the older people come in and think they know what they're doing and they. They move it all around and whip it and stuff. And he said, because the boat is moving, when we get a fish on it immediately hooks like, you don't have to hook it. All you have to do is literally reel it in, which is a fun part. But you reel it in for like 15 minutes because it took a while because it was so far, it was like 80 or 100ft deep. That's where you found the salmon. But he's saying all these guys come on the boat and I tell them once or twice, don't whip it or otherwise it's going to come off the hook. And they never listen and they're terrible fishermen. But he said, your son, he'll just reel it in and pull it in. And that's. Those are the best ones because they don't move it around so much. There's an investing parallel there, right?

[Ben Carlson]

Anyway, charter fishing now by ether treasury companies, Is that what you're trying to say?

[Michael Batnick]

Exactly. Not something I'd ever want to do on my own or again. But now that he's got the bug, he had the best time of his life. He told me it was the greatest, greatest day he's ever had in his life.

[Ben Carlson]

A lot.

[Michael Batnick]

And again, this is not something I would choose to do. But my brother in law came, he's a big fisherman. My father in law likes to fish. And I'm just kind of there for the beer and outdoors.

[Ben Carlson]

All right. I've also got a little redneck in me. My stepfather is a redneck and he, so he took me hunting a few times. Not for me. I love animals. I wanna shoot animals and it's boring.

[Michael Batnick]

Oh, wait, sorry. Speaking of that, the first fish he took out of the water, he gets the fish out and you have to put it out of his misery, right? So the fisherman punches the fish in the face to knock it out. And my son just goes, he just goes, oh. He felt that was the coolest thing ever. He was just showing off.

[Ben Carlson]

But yeah, my stepdad has got the big grizzly beard. He's got, he wears a cowboy hat. Like really and truly. He does not look like he's from around here. So anyway, so he bought a cabin in like the 90s and he, he gave it to us and his, his, his sons. And so we take care of it now. And I had to go to the bank to deposit a check for something for the cabin. I don't know what it was. So I walked, I went to the bank, I filled out a deposit slip for fifteen hundred dollars. I gave it to the, the, the teller and he said, you got, you got the money? And I said, yep, there's a deposit slip right there. And he's looking at me and I'm looking at him and he's looking at me, I'm like, I gave him like, what's the problem? And he said, sir, do you have a. Do you have money?

[Michael Batnick]

So, yeah. You had no check? Just to deposit slip.

[Ben Carlson]

Oh, it's been a while. Sorry. It has been a while. You actually. I actually need to give you money. That's right. So I. Yeah, I had to go home and get a check.

[Michael Batnick]

Whoops. All right, recommendations?

[Ben Carlson]

So last week you're like, oh, light week for you. I have. I forgot. I did go to the movies last week. I saw Together the James. The David Franco movie. Excuse me, not James.

[Michael Batnick]

You know, he's done a couple of horror movies now. What's the other one? He did Cabin Something in a. He did an Airbnb. I don't know. I watched that one.

[Ben Carlson]

You did he.

[Michael Batnick]

Because he's doing these.

[Ben Carlson]

Oh, he directed that movie.

[Michael Batnick]

Yeah. Did he direct this one too?

[Ben Carlson]

You know what? You're right. He did not direct this movie. Okay, Dave Franco, Cabin movie. What was that? The rental?

[Michael Batnick]

Yeah. That's okay.

[Ben Carlson]

I saw the rental. It was good. I enjoyed it. Anyway, together was. Together was good. Together was a good time. Right down the middle. Genre.

[Michael Batnick]

Horror, thriller.

[Ben Carlson]

It wasn't really horror, but it was fun. And then speaking of fun, Naked. The Naked Gun. So that is. I don't know if we ever spoke about this. That is like my number one laugh track. That is the first comedy that I remember dying, laughing at.

[Michael Batnick]

We always talk about it all the time. Yeah.

[Ben Carlson]

Yeah. So the new one held true. Like it was just joke, joke, joke, joke, joke. I belly laughed two times. It was everything I wanted.

[Michael Batnick]

An hour and a half.

[Ben Carlson]

It was an hour and a half. And you know what? You know, I know we're getting old. I fell asleep twice. Like I was falling asleep during an 80 minute movie.

[Michael Batnick]

My friends and I grew up. We. We quoted Naked Gun quite a bit. Yeah, that was a movie for us for sure.

[Ben Carlson]

Really good. All right. And finally, actually, not finally, I have one more. Weapons. The hype is real. Are you seeing this? You're not seeing this movie, but you've seen the Hype, right?

[Michael Batnick]

Never heard of it. What is it really?

[Ben Carlson]

So my dad texted me yesterday. My dad went to go see Weapons during the middle of the day. And he does not go to the movies a lot, but that's how hyped it was.

[Michael Batnick]

Okay.

[Ben Carlson]

The weapons is. You're. You like barbarian.

[Michael Batnick]

Okay, I like that one.

[Ben Carlson]

Yeah, right. Same director.

[Michael Batnick]

Okay. I like this or not.

[Ben Carlson]

Josh Brolin. This is a great movie. Well, it really was. Okay, so here's. Here's the plot. At 2:17am all of the children in a classroom, except for one run out their front door and disappear.

[Michael Batnick]

Okay.

[Ben Carlson]

So it's like a mystery horror thriller. Okay, all right, Very funny. Very good. All right. And lastly, lastly, I was talking about this with Chris. He was asking me about Parasite, and I was trying to explain to him the plot, and I totally forgot what it was about.

[Michael Batnick]

Okay.

[Ben Carlson]

So I rewatched it. That is a good movie.

[Michael Batnick]

I think it's one of the best movies of this century.

[Ben Carlson]

Yeah. Not a hot take at all. Did it win Best Picture?

[Michael Batnick]

Yes.

[Ben Carlson]

Okay. That was a great movie.

[Michael Batnick]

I liked it. Okay. I had an email from a listener a couple weeks ago saying, how has Ben not watched Lessons in Chemistry yet? And I said, hmm, never heard of that. It's a miniseries on Apple. It's got Brie Larson stars, and it's got Bill Pullman's son on it, who is fantastic. He is really good. He's gonna be a great actor. Lewis Pullman, I don't know.

[Ben Carlson]

He had a son.

[Michael Batnick]

I kind of didn't realize I had to look him up. But. So it's a miniseries based on a book. It's about. I love shows and stuff. Set in the 1960s Mad Men style. It's like Brie Larson plays a chemist and she's sexually discriminated against. Cause she's a woman. They don't think she can do it. Then she takes her chemistry lessons and turns it into a cooking show. Like using chemistry and heat and stuff. An understanding of chemistry to make better food. And it's just really well done. Apple just not a Michael show. Sorry. But Apple's shows are just very high quality. Good acting like it looks good. It's just very high quality. We're two episodes away. We cruised through the first six episodes. Very good. I liked it. Finally, my daughter and I watched Karate Kid 2. After the first, I forgot how bad the second one was. Oh, my God, What a fall off. Just awful.

[Ben Carlson]

Did she like it?

[Michael Batnick]

She. She. She kind of liked it. Okay. But one of the things she said again, for after watching both movies was it's so funny to see all the teens wearing jeans. Like Daniel does his final fight. He's wearing blue jeans. She said no one wears. Like, all the kids today are slobs. They wear pajama pants or yoga pants or joggers. Kids don't wear jeans anymore. And I never would have thought in a million years you could have disrupted jeans. And it's. What if jeans are just, like, totally disrupted?

[Ben Carlson]

Interesting.

[Michael Batnick]

If young people don't wear them anymore.

[Ben Carlson]

Do you remember jeans with the stretchy waist.

[Michael Batnick]

Oh, yeah, that's right. You're not talking about, like, for, like, pregnant people, right?

[Ben Carlson]

No, for. For little boys.

[Michael Batnick]

Okay, I don't remember those.

[Ben Carlson]

It was like an elastic waist, right? Because 7 year olds don't want to wear belts.

[Michael Batnick]

Oh, okay. Oh, yeah. Okay. Yeah, that makes sense. But yeah, kids don't wear jeans. Like, maybe a little bit. But my daughter's like, I'm probably never wearing jeans. I said, you need to be the one who brings it back.

[Ben Carlson]

What a shame.

[Michael Batnick]

Bunch of slobs.

[Ben Carlson]

All right, what else?

[Michael Batnick]

Nothing. Sign up for future proof. Check out Talking wealth, our advisor Only channel. What else? Good talking books. Lately we've been having summer email us animalspirits at the compoundnews. Com and see you next time.

[Ben Carlson]

Don't get.