Animal Spirits Podcast Summary: "Most Stocks Suck" (EP.414) Released on May 28, 2025

Hosted by Michael Batnick and Ben Carlson from The Compound, Episode 414 of the Animal Spirits Podcast delves into the intricate dynamics of the stock market, investor behavior, bond yields, real estate trends, and the evolving impact of artificial intelligence. Below is a comprehensive summary capturing the key discussions, insights, and conclusions from the episode.

I. Introduction and Market Sentiment

Timestamp: [02:21] - [05:05]

Michael and Ben kick off the episode by reflecting on recent market sentiments. They discuss how the market tends to focus on one primary concern at a time, positing that bond yields have emerged as the latest major worry among investors.

Ben Carlson: "The market only has room for one worry at a time."

Michael Batnick: "The market said, I don't believe you."

II. Bond Yields: Normalization or Cause for Concern?

Timestamp: [05:05] - [11:22]

The hosts delve into the topic of rising bond yields, exploring whether this trend signifies genuine economic concern or merely a return to historical norms. They reference historical data, noting that bond yields have fluctuated within a 4-5% range over the past few years.

Ben Carlson: "Maybe this is just what normalization looks like."

Michael Batnick: "The yield curve is becoming uninverted. Look at this. This looks normal to me."

They discuss comparisons to Japan's bond market and consider the potential impact of U.S. fiscal policies on bond yields.

III. Investor Behavior: The Buy-and-Hold Dilemma

Timestamp: [11:22] - [22:28]

The conversation shifts to investor psychology, focusing on the challenges of maintaining a buy-and-hold strategy during market volatility. Michael shares anecdotes from the Wall Street Journal about investors doubting their strategies during downturns but ultimately seeing recoveries.

Ben Carlson: "It's a chicken and the egg kind of thing."

Michael Batnick: "The market gave you a get out of jail free card."

They emphasize the importance of long-term investment strategies despite short-term market fluctuations.

IV. The Perception and Behavior of the Wealthy

Timestamp: [22:28] - [38:28]

Michael and Ben discuss societal perceptions of wealth, highlighting how affluent individuals are increasingly scrutinized for their spending habits. They reference a Wall Street Journal article on the high costs of luxury lifestyles, such as weekend getaways in the Hamptons.

Ben Carlson: "A lack of starter homes is one of the reasons houses are becoming unaffordable."

Michael Batnick: "Why are you telling people how to live their life? You don't have enough problems of your own."

The hosts explore the tension between conspicuous consumption and societal expectations during times of economic strain.

V. Retail Sales and Consumer Spending Trends

Timestamp: [28:33] - [36:32]

The duo examines trends in retail sales and consumer spending, noting a persistent increase in spending since the pandemic. They discuss whether this is a result of increased risk appetite or other economic factors.

Ben Carlson: "The 2020s might be our roaring 2020s."

Michael Batnick: "Spending, investing, speculation, risk—all that."

VI. Artificial Intelligence: Impact on Venture Capital and Academia

Timestamp: [36:32] - [44:28]

Artificial Intelligence (AI) takes center stage as Michael and Ben discuss its growing influence in venture capital and academia. They highlight AI's role in driving one-fifth of venture deals and its integration into university assessments.

Ben Carlson: "AI now drives one in five venture deals."

Michael Batnick: "People like you who are incorporating this into their own writing."

They express both excitement and caution regarding AI's future implications.

VII. Stock Market Fundamentals: Individual Stocks vs. Index Funds

Timestamp: [36:32] - [43:32]

The hosts analyze data on stock drawdowns, emphasizing that most individual stocks fail to recover after significant declines. They advocate for a shift towards index funds to mitigate risks associated with individual stock volatility.

Ben Carlson: "Only 46% of the stocks that had these drawdowns managed to recover their prior peak."

Michael Batnick: "Most stocks are garbage."

VIII. Real Estate Market Trends and Challenges

Timestamp: [40:00] - [48:41]

Michael and Ben discuss the stagnation in the real estate market, focusing on the increasing median age of homes and the lack of new construction. They explain how these factors contribute to housing unaffordability and limited starter home availability.

Ben Carlson: "A lack of starter homes is one of the reasons houses are becoming unaffordable."

Michael Batnick: "Rates are ridiculous."

They also touch upon consumer preferences shifting towards larger homes with more amenities.

IX. Private Equity and Retail Investors: Risks and Opportunities

Timestamp: [43:32] - [47:02]

The conversation turns to private equity's growing influence and its potential risks for retail investors. They discuss concerns raised by industry figures about private equity firms potentially leaving retail investors as "bag holders."

Ben Carlson: "Retail is going to be the bag holder."

Michael Batnick: "87% of U.S. companies with over $100 million in revenue are private."

They explore the accessibility of private equity investments for the average investor and the importance of cautious participation.

X. Lifestyles, Spending Habits, and Social Perceptions

Timestamp: [48:11] - [60:48]

The hosts share personal anecdotes and observations regarding societal spending habits, such as the rising costs of entertainment and leisure activities. They discuss the societal resignation towards inflation and high prices, highlighting how consumer behavior adapts to economic pressures.

Ben Carlson: "There's a lot of spending, investing, speculation, risk—all that."

Michael Batnick: "If someone has a big line behind them, it's very rude."

XI. The IMAX Phenomenon and the Movie Industry

Timestamp: [56:07] - [61:46]

Michael and Ben delve into the resurgence of IMAX, particularly following the success of "Mission Impossible: Dead Reckoning." They discuss the exclusive deals and high box office revenues, attributing part of the success to premium viewing experiences.

Ben Carlson: "IMAX kicked off the summer in record fashion."

Michael Batnick: "The sound is wild. You better see it in IMAX."

They reflect on the broader implications for the movie industry and consumer preferences for high-quality cinematic experiences.

XII. Closing Remarks and Market Outlook

Timestamp: [66:41] - [Ending]

In their closing segment, Michael and Ben touch upon the rapid passage of summer and provide a brief update on the stock market's performance, noting a slight increase and expressing optimism for the ongoing bull market.

Ben Carlson: "The stock market wanted to move higher."

Michael Batnick: "We're back in the black."

Key Takeaways:

1. Bond Yields as a Primary Concern: Rising bond yields are causing significant anxiety among investors, but some argue this may represent a return to historical norms rather than an immediate threat.

2. Investor Behavior and Strategy: The importance of maintaining a long-term investment strategy is emphasized, with caution against panic-selling during market downturns.

3. Real Estate Challenges: The increasing age of homes and the decline in new construction contribute to housing affordability issues and limited availability of starter homes.

4. Private Equity Risks: The growing presence of private equity in the market poses potential risks for retail investors, particularly concerning lack of transparency and accessibility.

5. AI's Expanding Role: Artificial Intelligence is increasingly influencing venture capital investments and academic assessments, raising both opportunities and challenges.

6. Societal Perceptions of Wealth: There's a growing scrutiny of wealthy individuals' spending habits, reflecting broader societal tensions regarding economic disparities.

7. IMAX and Premium Experiences: The success of IMAX and exclusive movie deals highlights consumer demand for premium entertainment experiences amidst changing market dynamics.

Notable Quotes:

• Ben Carlson: "If you hold stocks over a 20-year period, nominally you've never lost money." ([20:06])

• Michael Batnick: "The yield curve is becoming uninverted. Look at this. This looks normal to me." ([10:23])

• Ben Carlson: "Only 46% of the stocks that had these drawdowns managed to recover their prior peak." ([35:07])

This episode provides a multifaceted exploration of current market trends, investor psychology, and broader economic and societal issues affecting the financial landscape. Michael Batnick and Ben Carlson offer insightful analysis and practical perspectives aimed at helping listeners navigate the complexities of investing and economic behavior.