Predictions For 2025 (EP.394)

Summary

Animal Spirits Podcast – Episode 394: Predictions For 2025

Release Date: January 8, 2025

Hosts: Michael Batnick and Ben Carlson
Description: Animal Spirits delves into markets, life, and investing, featuring discussions on current readings, writings, and media consumption. This episode focuses on financial forecasts for 2025, market dynamics, and broader economic trends.

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1. Announcements and Personal Updates (02:03 – 06:50)

The episode kicks off with Michael and Ben sharing updates about upcoming events:

• Naples, Florida Event: February 19-21
• Miami Beach, Florida Event: March 16-19, which includes a celebration for Ben Carlson’s 40th birthday.

Ben humorously remarks, “I’m turning 40,” at [03:36], highlighting the blend of personal milestones with professional engagements.

2. Stock Market Predictions Review (06:57 – 12:43)

Ben revisits his stock market predictions from the previous year, evaluating their accuracy:

• Media Streamers: Received a “B minus” for minimal activity except Paramount and David Ellison’s involvement.
• Apple Stock: Despite Ben’s bearish stance, Apple ended the year with a 30% gain, contrary to his prediction. Ben acknowledges the mistake at [07:17]: “Apple was up 30% last year.”
• Bitcoin: Successfully predicted Bitcoin reaching $100k, which came true, earning praise from Michael at [07:50], “That was your best one.”

3. Market Dynamics and Investor Behavior (13:05 – 22:18)

The discussion shifts to broader market trends and investor psychology:

• Momentum and Corrections: Ben forecasts a continued market momentum in the first half of the year, followed by a double-digit correction in the latter half, ultimately expecting a modest +10% annual return. Michael adds a counterpoint at [13:05], giving it a “20% chance.”

• Asset Allocation Insights: Michael shares his decade-long asset allocation studies, emphasizing the unpredictability of the next ten years compared to historical data. At [17:30], he states, “I think the next 10 years is going to be more unpredictable than people like.”

• VC Concentration and Private Markets: Highlighting a significant decline in venture capital activity, they discuss the implications of increased concentration among top firms and the prolonged capital return timelines.

4. Housing Market and Mortgage Rates (26:20 – 32:12)

Michael and Ben delve into the housing sector’s impact on the economy:

• Rising Mortgage Costs: Citing a Wall Street Journal report, they note that taxes and insurance now consume nearly a third of average mortgage payments, particularly in cities like Miami and New York ([37:02]).

• Economic Implications: Michael argues that maintaining high mortgage rates around 6-7% is unsustainable for continued economic growth, predicting that eventually, the housing market will impose necessary corrections on the broader economy at [30:00].

5. Private Markets and Big Tech Dominance (38:01 – 46:23)

The conversation explores the consolidation within private markets and the enduring dominance of major technology firms:

• Venture Capital Decline: With US VCs investing fewer dollars and major firms like Microsoft and Amazon acquiring hundreds of companies, the ecosystem is becoming heavily concentrated ([41:35]).

• Big Tech's Expanding Portfolio: They discuss how companies like Apple and Google are now funding multiple ventures internally, reducing the space for independent startups. Ben emphasizes at [43:50], “The biggest companies are being funded by the largest... their stock is still Amazon stock even though the business is way more diversified.”

6. AI’s Role in Financial Planning (47:26 – 48:43)

Addressing the intersection of technology and finance, Michael and Ben debate whether AI can replace financial advisors:

• AI Assistance vs. Replacement: They agree that AI will enhance the efficiency of financial planners by handling tasks like note-taking and client communication. However, Michael asserts at [47:51], “wealthy people will not trust a robot,” suggesting that personal trust remains crucial.

• Future of Financial Advice: While AI tools may democratize financial planning for the masses, the nuanced and trust-based relationship between advisors and high-net-worth individuals is likely to persist.

7. Cultural and Media Discussions (61:00 – 69:28)

The hosts shift gears to discuss various cultural topics, including movies and streaming trends:

• Decline in Movie Attendance: Michael references a trend where domestic box office revenues have declined by 50% from their peak in 2002, attributing it to higher ticket prices and the migration of high-quality content to streaming platforms ([54:34]).

• Sequels and Streaming Content: Ben highlights the proliferation of sequels in top movie charts, drawing parallels to the saturation seen in sports leagues like the NBA. They critique the over-reliance on existing intellectual properties by major studios.

• Personal Movie Experiences: Both hosts share their recent movie-watching experiences, discussing films like "Hand Up" and classic actors like Kevin Bacon, blending personal anecdotes with broader media critiques.

8. Personal Anecdotes and Listener Interactions (50:00 – 69:28)

Throughout the episode, Michael and Ben engage in light-hearted banter and respond to listener emails:

• Existential Reflections Post-Sale: A listener shares his post-entrepreneurial existential crisis, prompting the hosts to reflect on how immense wealth can lead to unexpected personal challenges.

• First Car Dilemmas: Ben contemplates giving his daughter a Porsche as her first car, while Michael advises against it, emphasizing practicality over status.

• Tech and Lifestyle Tips: Practical discussions include recommendations for waterproof phone pouches and the efficacy of masks on airplanes to prevent illness.

• Movie Recommendations: The hosts exchange thoughts on various films and series, reflecting on personal preferences and the evolving landscape of entertainment.

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Notable Quotes:

• Ben Carlson at [07:17]: “Apple was up 30% last year. No revenue growth, lot of multiple expansion, margin improvement.”

• Michael Batnick at [22:18]: “You own the index. That's how you ensure that you own the winners.”

• Ben Carlson at [43:50]: “The biggest companies are being funded by the largest... they're already here. It's already happened.”

• Michael Batnick at [47:51]: “Wealthy people will not trust a robot.”

• Michael Batnick at [26:53]: “Do you have any human being who says they didn't have that on their bingo card.”

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Conclusions and Insights:

• Market Uncertainty: The hosts emphasize the increasing unpredictability of financial markets, urging listeners to adopt diversified and flexible investment strategies.

• Consolidation Risks: The concentration of venture capital and the monopolistic tendencies of major tech firms present both opportunities and systemic risks.

• Economic Indicators: Rising mortgage costs and declining housing market metrics serve as potential harbingers for broader economic slowdowns.

• Technological Integration: AI is set to augment, but not replace, the personalized nature of financial advisory services.

• Cultural Shifts: The entertainment industry's pivot towards sequels and streaming over original content reflects broader changes in consumer behavior and economic pressures.

---

Closing Remarks:

Michael and Ben wrap up the episode with personal reflections and an invitation for listeners to continue engaging through emails and discussions. They underscore the importance of staying informed and adaptable in both financial and personal realms.

Michael humorously comments at [69:28]: “Let's try. Don't get.”

Thank you for tuning into Animal Spirits Podcast. Stay informed, stay engaged, and see you next time!

Transcript

[A]

Today's Animal Spirits is brought to you by fabric. Michael, as I reach middle age, one of the strange thing is that you start getting morbid thoughts.

[B]

Yeah. Oh, you just started.

[A]

Well, yeah, I guess so. Seeing your, your parents age and seeing their friends get sick or die. Life, death and taxes. Correct. And I think maybe is that one of the reasons that people don't spend a lot of time planning for things like life insurance, because they don't want to think about that kind of estate planning, life insurance. They want to think about that stuff. But would you rather just not have your family be covered? Right. And not be okay if something, God forbid, something should happen to you?

[B]

Can I admit something to you right here, right now, in person? So I'm covered on life insurance. I did that pretty soon after the kid's born.

[A]

Okay.

[B]

Nothing with the estate.

[A]

Okay. Estate planning is easy to put off as well. Life insurance is easy, though. Fabric by Gerber Life, it's terminal life insurance. You can get in right from your couch online, on your schedule. You can be covered in 10 minutes in the health exam. You click on their website. It's. It's meatfabric.com Spirits coverage amounts are like 100 grand to 5 million. Terms are 10 to 30 years. I'm not an expert, but I think when you're younger, you, it's going to be cheaper. You probably want to go longer. Right. But again, I'm not an insurance expert, but it's very easy and it's, it's relatively cost effective. You can join thousands of parents who trust fabric to help protect their family plan. Just minutes [e-mail] spirits meatfabric.com Spirits policies are issued by Western Southern Life Assurance Company. Not available in certain states. Prices subject to underwriting and health questions. Check out meatfabric.com to learn more. Welcome to Animal Spirits, a show about markets, life and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Gritholz Wealth Management may maintain positions in the securities discussed in this podcast.

[B]

Welcome to Animal Spirits with Michael and Ben. Mr. Carlson, it's good to see you in person.

[A]

We haven't done one of these together in a while.

[B]

John, when's the last time? It has been a while.

[A]

Over a year.

[B]

Yeah. Good to see You.

[A]

Is it easier to have me a distance away so you can be longing for me? Right.

[B]

It does feel a little bit more natural. I think it's just what we've gotten accustomed to. It feels a little bit more natural for me when we're zooming, you know?

[A]

Yeah.

[B]

Reciting. All right, we're gonna start the show with not housekeeping. I had this realization this morning. When I make these announcements, I call them housekeeping announcements.

[A]

You need a new term for that, too. Yeah, I'm on board with a bingo card into the parlay, making that thing happen.

[B]

Okay.

[A]

It's not in my parlay.

[B]

It's just an. I have an announcement to make.

[A]

Okay.

[B]

Or a plug. It's not a housekeeping note. What does that even mean?

[A]

Okay, we have an announcement to make.

[B]

We have announcement to make. Two announcements to make. One, Reynolds Wealth Management is coming to Naples, Florida.

[A]

Beautiful area of the country.

[B]

We're going to be there February 19th through the 21st, meeting clients, meeting prospects, doing a live TCAF with our friend Brian Belsky. So if you want to see us, get in touch. Inforedholtswealth.com that's February 19th through the 21st. Okay. And then the next month, we're going to be on the other side of Florida. Last week, I dropped a breadcrumb about future proof Bahamas. I jumped the gun. That's not until October.

[A]

Yeah, we got two more.

[B]

I skipped one. I skipped two. Three.

[A]

That's right.

[B]

So in Miami, March 16th through the 19th.

[A]

On the beach.

[B]

On the beach, literally. We're doing future proof citywide. And there will be a Michael Batnick birthday celebration. I am turning 40.

[A]

I did not realize this. You're drink 40 while we're in Miami.

[B]

Well, a few days later.

[A]

Ish. Okay.

[B]

Yeah.

[A]

Okay. You know, Doug Bonaparte did a 40th birthday party when we were in. Out in California. I think it was like a month early. What's the. What's the range there?

[B]

Because that seems a month early is. It's very. Doug.

[A]

That's true. Sorry, Doug. We love you. Okay, so what do you want done for your 40th birthday party?

[B]

Well, in Miami, I don't know, but Robin's talking about planning something for me for my 40th, and I said, can we just skip it? I really. I'm not. I'm not like a. So for my bar mitzvah, when Jewish boys turn 13, they have a party. It's like a sweet 16, I guess, for.

[A]

I've been to a bat mitzvah before.

[B]

Okay. Same Thing.

[A]

Yeah.

[B]

So the idea is usually it's like a. It's like, I don't know, like a wedding without a wedding. It's like one of those formal parties where the boy or the girl runs in and there's, like, dancers and everybody's looking at them. That wasn't for me. I couldn't do that. I don't like the spotlight being on me.

[A]

Like, between the bar mitzvahs. Bar mitzvahs and the bat mitzvahs and the summer camps, you Jewish parents watch it. You have to understand, you spend a lot of money on your kids. That's like three weddings before they're.

[B]

So I was the only person in my age group that I knew that I didn't have a traditional bar mitzvah. I just did like a sports party.

[A]

And you. Because you wanted it more low key.

[B]

Yeah.

[A]

You're saying. So I am on the record saying once you turn older, like, you can't celebrate your birthdays big anymore. Like, I don't like celebrating birthdays big. I want you to do 40, but I'm saying 40 and 50, you should definitely do something. You have to. When you turn 40 and 50, that's when you can celebrate. I'm going to give you a free pass. You have to.

[B]

I know. I just don't like that. But now.

[A]

All right, and you're. Everyone has to do, like, the black streamers. Right? When I did turn 40, I had black streamers. You know, when you turn 40, it's like, oh, your life's over. You're old. And so the signs are all in black and everything's bad and. Right. Because you're old and over the hill. You never seen that before?

[B]

I haven't. Yesterday I was having a call with Chart Kid, and Chart Kid is. I don't know how old he is, but he's a young man.

[A]

He's in his mid-20s, probably.

[B]

Okay, so before we. Before we get on the call, like, hey, who is this person? Like, I don't know, like, how old are they? What. Who are we talking to here? And he's like, I don't know. He's probably middle age, like 35. And I was like, are you kidding me? And he was like. And I think Chart Kid, no offense, Matt, added himself that he's not really an animal spiritual center, because he didn't really understand the.

[A]

The middle age.

[B]

He didn't understand that. I was like, that that was a thing for us. But he wasn't kidding.

[A]

It's a reference point thing. Your Age depends on how you think middle age is.

[B]

I guess so. So we've had a few emailers say, like, guys, come on, enough with the middle aged stuff. You're, you're young. Bed.

[A]

No, but look at the, the data for how long you're going to live.

[B]

Listen, we don't need to, we don't need to beat this dead horse. We, we went over it. According to the Wall Street Journal, middle age of 62. Let's just leave it at that.

[A]

That's aggressive. All right, Anyway, Miami Beach, March 16th through the 19th, which is great for me because spring break is always the first week of April. So I got like a pre spring break and then spring break. Right. It's going to be great.

[B]

All right, so I did my stock market predictions and I wanted to go back a year ago.

[A]

You do it 10 predictions and you've done this a couple years?

[B]

Yeah, I forgot a lot of my predictions from last year. I think the number one thing that. Well, let's just go through them real quick. Give myself like a B minus, no consolidation, media streamers. I think that was pretty damn good. The only activity there was Paramount and David Ellison, but other than that, nothing.

[A]

Okay, so you said that's not going to happen yet.

[B]

Yeah, I said, because a lot of.

[A]

People were suspecting it. Okay.

[B]

Yeah. Apple gets dropped from back seven. Netflix replaces it. Obviously that was wrong. Although Apple did start the year in like a 20% drawdown, which I think people forget through April is lagging pretty badly. Apple was up 30% last year. No revenue growth, lot of multiple expansion, margin improvement.

[A]

You had a slight paper short on Apple all year.

[B]

I did, yeah. I think the, I think the stock is ahead of its skis, so to speak.

[A]

Over its skis.

[B]

Ahead, over, not ahead. Okay.

[A]

It's hard to get ahead of your skis once you fall. I don't know.

[B]

Speaking of skiing, you saw the people complaining about the park city.

[A]

Yes. The lines for ski hills were. That's, that's a Richard Thaler sunk cost thing. Remember, his whole thing was always, let's say you bought tickets to a concert or a game, but there's a crazy snowstorm. What do you do? You've already spent the money on the tickets. Do you go. So this is the sunk cost thing where people said, I already spent the money on the tickets. I'm going to go wait in a line that's a half mile long. I would have been in the ski lodge drinking beer. There's no way I would have waited that long to get on A ski hill.

[B]

All right, allow me to do the trump weave, because I'm about to go three different places, and I'll come back to where we started this. Speaking of sunk cost, so somebody asked me about the Knicks Bucks game. This was probably, I don't know, a couple of weeks ago. There's a bunch of kids in my town going. So I looked at the schedule and said, wait a minute, January 12th or 13th, whatever the date is, that sounds like football season. So I opened the calendar and I said, shit, that's Wild Card Weekend. That's my favorite weekend of the year in terms of football.

[A]

Okay. You don't wanna miss it for the Knicks game.

[B]

So I bought four tickets, and I told Robin, I said, I can't go. And she was like, what do you mean? I was like, I can't go. It's Wild Car weekend. She's. It's. What? Who cares? I care. It's a big weekend, so my dad is taking the boys to the game.

[A]

Okay.

[B]

So no sun costs there.

[A]

All right? Oh, you're. Okay. Sun costs, we're thinking. But would if you went to a ski hill and you saw a line that was half a mile long.

[B]

I'm not a skier. I didn't grow up skiing. Skiing is for people with means. So I was not one of those growing up. And I feel like. I feel like people don't pick up skiing later in life. I feel like golf is one of those things that you could pick up later in life, not skiing.

[A]

I moved to Northern Michigan when I was in fifth grade. And there's a little tiny. Where I was in West Michigan, and I moved to Northern Michigan, so I was here. Then I went to here, and I met up here. Here. And there's way more snow up here where I lived. And there was these little ski hills in town that were not for the people with means. It was two chairlifts. It was three runs or something. And one of them was a bunny hill. I was in fifth grade, and my uncle said, just do this with your skis. Snowplow. That was. That was the brunt of my learning.

[B]

What did you call that?

[A]

Snowplowing.

[B]

Snowplowing.

[A]

Okay. Yeah. And that. That's all I was taught. And I was like, go learn on the bunny hill.

[B]

Do you ski now?

[A]

No. I stopped in college, probably.

[B]

Well, anyway, the reason why we bring this up is because. Was it Vale Resorts?

[A]

I think so, yeah.

[B]

Was it like a strike or something?

[A]

Yeah. There wasn't enough workers, and that made.

[B]

The lines really long, and the company didn't tell any of the guests. And so there was people, pictures everywhere. Yeah, people were upset. I would have been really upset.

[A]

And then people were making an economic thing about it that that had nothing to do with the economy.

[B]

Well, so yeah, so there was a tweet that went viral like this is the economy in 2025.

[A]

Right.

[B]

And then before I knew the story I was thinking like, because somebody emailed us asking about vacation. You know, their, their baby is getting to the age where they could start traveling. And is this like, is everything really expensive now? Is that just the way it is? Is it like really 10 grand for vacation? And I think the answer is it depends on where you go and when you go. But vacation is expensive, obviously.

[A]

Yes. More than it was. Even though plane tickets are kind of level that way.

[B]

No, no, no. But there's a chart that we have later in the doc from the tsa. Travel is still autumn eyeing.

[A]

Okay, how did we get here? From your predictions.

[B]

I can't retrace that.

[A]

All right, what's your biggest prediction this year that is going to blow people away.

[B]

Hang on real quick. Robin gets acquired. That was really dumb. I didn't, I didn't realize that Vlad had all the voting shares. Him and his co founder. So that's a, that's an F. Money stays in money market funds check. Inflation gets to the Fed target. The economy overheats. Inflation picks up a little bit. But let's say that's wrong.

[A]

Yeah, that's wrong vibe.

[B]

Covery begins. Yep. No recession. Stocks gained 20%. Large cap tech rolls on. Correct. The other 493 catch up. Incorrect. Bitcoin hits small cap did catch up.

[A]

For a little bit.

[B]

It did. And Bitcoin hits 100k. Check.

[A]

You did say that.

[B]

I did say that.

[A]

Oh, that's pretty. That's a good one.

[B]

Yeah, that's a good one.

[A]

That was your best one.

[B]

So just going through the charts from last year, Amazon, which is a stock that I bought after going through this exercise, I don't think people remember that Amazon went the longest amount of time in between alltime highs. So it had gone 624 days.

[A]

Wow.

[B]

People forget how shitty of a year 2022 was.

[A]

Right? Big time drawdown. Amazon was going nowhere for a while before that.

[B]

For a long time I didn't realize or I forgot that last year ended with a monster bank. The S and p was up nine straight weeks going into 2024. Do you remember that?

[A]

No. And then it was just a monster melt 57 all time highs for 2024.

[B]

Yeah. So that was going into 2024.

[A]

So that was like 25% of all trading days because there's 250. Now do my math. 20% all trading days because it's 252 trading days a year, if I'm not mistaken.

[B]

Yeah.

[A]

So 20% of all trading days were all time highs.

[B]

That's a good year. All right, so my biggest, my boldest prediction. So finally this year I did the odds as I said I would. All right, I'll pick this one. Momentum keeps going in the first half, but we have a double digit correction and in the back half of the year and down overall on the year, I put that at plus 10,000, which is a 1% chance. Now that doesn't sound like a 1% chance, right?

[A]

No, it sounds like there's a, there's a. I would give that like a 20 chance.

[B]

Okay, so would I until I looked at the numbers with chart kid and there has only been one year, and this was 1928 where the mark was up 10% in the front half of the year and then ended the year down, which really surprised me.

[A]

That is surprising counterpoint. Things that never happen before happen all the time.

[B]

Yeah.

[A]

So that's one of those. Okay, Can I give a couple. Okay, any. So micro strategy leverage ETF blows up.

[B]

Yeah, so I wrote that prediction like probably a month ago and then this microstrategy fell 50 plus percent. And so I actually think that dramatically diminishes the odds of a blow up. I thought that microstrategy was going to get too big. Now if it goes back to 100 billion, then I think there's something. Now I'm talking about the levered ETF, not MicroStrategy itself. I think the levered ETFs can blow up. And I don't know all the inner mechanics well enough to comment on how that might affect the underlying, but there's just not enough inventory. And there's some weird going on with the dealers and the gammas and the hedges and all this nonsense.

[A]

Right. As they get too big the option, it screws up the options market essentially. Right.

[B]

You got anything?

[A]

I got a couple. I'm going to offer a Grand Rapids hedge prediction. So don't give me crap about this, but I'm basically going for the tails here. So either the AI bubble kicks into gear and we start looking like, okay, this is the 90s, 20%, 30%, 20% like that kicks into gear with what?

[B]

The overall market.

[A]

Yeah. And we're and people start thinking like, okay, we're on the. If we're going to do this and they're going to keep spending and AI is going to be big, we're going to get on this thing and we're looking at like a dot com bubble starting to blow. Like I think like another big year and people go, holy cow. Or like Nvidia falls out of bed and everyone goes, oh no. Okay, air pocket. So I'm, I'm betting on those tape. I'm. That's my prediction. That's kind of a hedge to say both of those. But I'm not predicting like, oh, it's just going to be boring. Nothing's going to happen here.

[B]

Yeah, I'd say 60, 40 in terms of like keep going versus it ending this year.

[A]

So if I.

[B]

It just feels like early to end.

[A]

That's why I actually think that yeah, there's a better chance of like, okay, we're really going to do this and it's going to start inflating.

[B]

It's a back half of 2026.

[A]

So I think that if Nvidia did fall out of bed and it took the whole market down with it, my other one would be bonds outperform stocks. People are way too positioned for rates going up and the economy is overheating. And that if Nvidia falls out of bed, GDP growth is maybe not as high as people think. Interest rates fall, bonds up like the 10 year outperforms the S and P. How's that then? The S and P ends the year unlike it ever does with a 0 to 10% return. I always say that you never have a normal average year. Yeah, that would be my prediction that we have a normal to every year.

[B]

I saw somewhere recently that Europe has had a lot of average years.

[A]

Oh really?

[B]

I didn't look at their like 5 to 10% returns.

[A]

Okay, you said money, money stays in money market funds again.

[B]

Yeah, I mean I feel pretty, pretty good about that. The counter, it's going to stay there.

[A]

For the counterpoint to that would be if like growth does like inflation comes in lower than people expect, growth comes in lower than people expect. The Fed starts cutting more than people assumed. Then people, oh, the Fed just cut 100 basis points in the last four months or something. I think it's possible you could start to see some of that come out and people look at bonds and go, oh, wait a minute.

[B]

Yeah, I don't think every dollar stays. But I'm saying like, even if that would have happened, I think it would go from 7 trillion to 6. Maybe, maybe, maybe, maybe 5.

[A]

So Cliff Asness at AQR wrote a 10 year postmortem or pre mortem, I guess saying this is what I think I'm going to be writing in 2035 from an asset allocation perspective. And he wrote about US equities being overpriced and bonds actually doing okay in international stocks basically doing all right because they've been left for dead and because. So this is more of a. The world is going to return to a more reasonable place, which I think wishful thinking, potentially wishful thinking. So my only counter to that would be. So I was. I do my update every year on like an asset allocation quilt and they have those everywhere now. But for some reason I started doing it like 10 years ago, which is kind of funny because the original 10 year period I did was through the end of 2014. So 10 years later I did it and now that that period completely drops off and I have the data going back to 2000. So I did this.

[B]

The next time you clean the slate then you'll be entering middle age.

[A]

I'm already there, man. But I. So I did this for the.

[B]

You're not there, you have a six pack.

[A]

I'm 43, I'm middle aged. I'm in better shape now than in my 40s, than I was in my 30s, which is kind of crazy.

[B]

I'm pretty sure I will not be that person. I'm happy for you, but I also hate you.

[A]

I hate myself because I'm on like a, I have like a diet. So trust me, there's a lot of hatred going on inner too. I used to never care what I ate. Now I like have, I like care what goes in my body. It's, it's, it's very annoying. Trust me. I've. And there's, there's people who love to talk about their diets and the food they consume. I personally hate it. Yeah, I hate having those conversations. It makes me feel like internally ill. So this is the last time we're talking about it. So anyway, I did one for the years 2000 to 2009, which itself is an outlier period. So look at my, I did my asset allocation quote for 2000, 2009. It looks completely different from the last 10 years. Look at emerging markets from 2003 to 2007. This is like a dot. They were up 56%, 25%, 33%, 31%, 33%. So you look at that and you probably go, well that period was an outlier. China was building cities, ghost towns, and they were pouring more cement than had ever been poured in the world before that or something. So you'll get this period and you say that's the outlier. But my whole point of this exercise is I think the next 10 years is going to be more unpredictable than people like. I think there's way too much recency bias going on. Even if that recency bias could continue to work for two, three, four years.

[B]

That's a good take. I firmly agree.

[A]

So I think it's hard to envision a scenario where these companies that are heavily investing in what potentially is a game changing technology don't continue to keep their lead. It seems ridiculous to think that, but history has shown these cycles come and go and the, the winners, the leaders and laggards constantly change. Even if those cycles can go longer than you think. Yeah, that's where I've fallen on this. J.P. morgan had a good chart showing the share. I think this was a semblance one that the share of MSC all country World Index and it's US Europe X uk which I don't know why they do X seems like a just kind of kicking them while they're down because the UK is just not as big as it was em in Japan. And you see the change in Japan is probably even more stark than the change in the US going from 45% to 5%. But this is the whole point that these things can and will change. Yeah, that's a good chart. It's also one where you look at it and you go what stops this train? And that's the thinking. I do think that there is a little too much recency bias that people forget the other side of that people don't forget. But people would tell me, Ben, you're way too locked on that lost decade from 2000, 2009. I feel like that decade shaped me as an investor in terms of asset allocation and diversification. And people might tell me that experience has weighed on you too much. You're missing the. So that's, that's fair. I also think that people who have come up as an investor for the last 5, 10, 15 years have no basis in reality before that.

[B]

Speaking of people, don't forget I was watching I love you man last night in bed we were talking about.

[A]

Okay, so you put it on.

[B]

It's on Paramount via Prime, I think.

[A]

Do you have the app that tells you what streaming service is on?

[B]

Yeah, it's called Google.

[A]

Oh no, I have one called Just Watch oh, yeah. And it tells you what streaming series. Okay.

[B]

But anyway, he had a bush like a 40 year old Serbian. They just don't make movies like that anymore.

[A]

It's true. It'd probably be a TV show if they made it today. Probably.

[B]

If you're. So we were talking to Sean yesterday about I love you, man. So I dialed it up. If you're a young person and you missed that, if it was before your time. God, it's funny.

[A]

Great one. All right, this is from gmo. This is another. Like, has the world really changed? They look at the top 10 stocks in the S&P going back to 1957 versus the equal weighted 490. The other 490 stocks. And they show that in that overall period, the top 10 stocks have underperformed by 2.4% annually. If you just invested in the top 10 versus an equal weight of the rest. But since 2013, the top 10 has outperformed by 5% annually. So this is one of those. Do I go with history or do I go with what my eyes are telling you right now?

[B]

Yeah, but I don't know that the answer to. I don't know what the answer is because I can't see the future. But what's more important, the history from 1957 to 2004 or 2004 to today?

[A]

You know what the answer is here? You own the s and P500. You don't try to pick and choose.

[B]

Right.

[A]

Because the. The index will give you the winners. That's. That's my. Not trying to get too cute with it.

[B]

That's not really true. I mean. Yes. No, the index will give you the winners, but that's not what this is saying. Like.

[A]

Yeah, so my point is I. You own the index. That's how you ensure that you own the winners. I don't think you try to get too cute with it. All right, I did this chart. I had the chart. Kid, make me this. The past five years of return. We're halfway through this decade of the 2000s. And this is one of those, to me, the middle aged thing again. My youngest daughter was in kindergarten when the pandemic hit. And I think back to the.

[B]

She's getting married.

[A]

Yeah. So now she's in fifth grade. And it is one of those, you know, type of moments.

[B]

Yeah.

[A]

But it's. It's. I don't know, one of those hard father time is undefeated kind of things. But so halfway through the decade and every single year for the s and P500 at least has been a massive year in 2020. We had a 34% drawdown and 18 up year, which is a crazy move.

[B]

Wow.

[A]

2021 was.

[B]

You know what? That will never happen again.

[A]

See, I think that it's more likely to happen something like that because cycles are moving so much faster.

[B]

I'm saying they're but down a third in the middle of the year and still ending positive. 18.

[A]

Okay.

[B]

The only thing that could cause that is a pandemic or something like that.

[A]

1987, it almost happened. 1987 was down 34 and end of the year up 5, but it was up 40% going into the 2021 was up almost 30%. 2022 was a 25% drawdown and finished the year down 18. 2023 was up 26, but had a 10% drawdown, and then 2024 was up 25. Isn't it a contrarian play to say maybe that's why I made that prediction, like, just more boring and average for the next couple years. I don't think we have that ability, though.

[B]

Yeah.

[A]

Can I just make a New York comment real quick?

[B]

Go ahead.

[A]

As a non New Yorker, the sounds coming from buildings. We're recording this right now. It sounds like someone is moving like massive pieces of furniture above us. There's sirens constantly going off. The heaters always make really loud noises. Do you just get used to that New York building?

[B]

I didn't notice it, John. Do you.

[A]

You must just get used to it. It's just. To me, it feels like just constant noise and I. That I'm just not used to.

[B]

I think we're comfortable with the chaos.

[A]

It must be. The building may implode on itself because the boiler started on fire in the building yesterday. And we took the elevator up this morning and the guy said he had to sleep here just in case. I don't know. Do I feel great about that? Not really, but I guess he'd roll the punches.

[B]

All right, Baltuna's checking in with the final top 20 ETF leaderboard for 2024. Voorhees ended with $116 billion in flows, so that's that. Voo is Vanguard's S&P 500, but it.

[A]

Is totally surpassed SPY as like the S&P 500 ETF. Is that fair to say or not?

[B]

No, it's not.

[A]

No. But I mean, in terms, it seems like a few years in a row now that it's gotten. But in the other one, IVV is.

[B]

Well, they've had more flows, but SPY is still the biggest.

[A]

Okay, so they. But.

[B]

But they'll be passed this year by IVV and Voo, it looks like.

[A]

So IVV is the iShares one. That was number two. So the S&P 500 again is the thing. This is interesting. So I bet the Bitcoin ETF was third.

[B]

Wow.

[A]

VTI was fourth. Okay. Q. Q. Q. Spy. Here's a surprising one. AG was seventh. The AG. I looked at this the other day. Bonds are still in a drawdown. I think the AG is down 9% from the highs. We're in a five year drawdown for bonds on a total return basis, including any income. And over the last 10 years, bonds have returned the AG like 1.3% per year. Maybe the worst fixed income environment ever.

[B]

People still on balance.

[A]

But it's easier to lean into bonds, I feel like, because you see. Well, yeah, but yields are 4 or 5% now. So. Okay, I. Announcement to make. Not housekeeping announcement. I put a new title in here on the doc.

[B]

Okay.

[A]

I put a new section, Retirement.

[B]

I don't think there's going to get a lot of play. I feel like there's like a one every eight episodes to think. But it's okay.

[A]

I feel like retirement for the financial advice space. Retirement is the biggest thing for the next 20 to 30 years because 70 million boomers are retiring every day. Yes, something like that. Okay, so they had this story called Financial Regrets and wisdom of Americans over 80. This was interesting to me. Sue Jones thought she had more than enough money to live on when she was in her 50s. She wasn't counting a living to her 90s. She retired.

[B]

Yeah, but how much fun did she have in her 50s? That's what I want to know.

[A]

That's a good question. So she retired with $50,000 in retirement money and a $2,900 a month pension in Social Security. Her husband had a pension. And those pensions, they do not account for inflation. Like if you have a. The Social Security is like literally the only one that really accounts for inflation. So that, that 2,900 must have seemed like a lot of money back then when she was in her 50s, probably not as much in her 90s. And she, she just said, I plan to die at a more normal age. You know, good news, I live longer. But can you imagine the fifty thousand dollar retiring and just hoping that Social Security and pension covers you? There's gonna be a lot of people in that situation though. Yeah, we've seen the stats there. There are plenty of people that have a lot of money. That we talk about and talk to, but there are way more people that have little to nothing save for retirement.

[B]

I thought a lot about this. Not, not through the retirement lens per se, but just like older people and regrets. So I do respect the fact that as you age through life, you get more wise and, you know, more introspective and all that sort of stuff. But should potential regrets in your 80s supersede how you feel in your 40s? And I don't, I don't, I don't, I don't buy that. Because if you're 80, like, oh, I wish I would have done this. And hypothetically, if you had a time machine when you're 80 to go back to those things that you regret, I think you would probably still live the same way.

[A]

Right. So she was much happier in her 50s, and maybe not as happy in her 80s or 90s, but it was worth it for the 50s.

[B]

Exactly.

[A]

Right.

[B]

So, yeah, I get why you would say at 80 or 90 that you have some regrets at that age.

[A]

Right. And when you're 90, it's also path dependent.

[B]

You can't see the future. Guess what? If she died at 78, no regrets.

[A]

Yes. But 40 years ago, dying young must have seemed like more of a possibility probability, right? Yes. All right, Torsten Slok chart of the week. Credit card debt as a share of disposable income is very low. This has been dropping for a long time since the crisis. We have a lot of room to run here. If things get hairy in the economy and wage growth starts to slow. Growth starts to slow. People have the ability, if they want to use more debt. And I feel, I still feel like that is what's going to happen. Consumers are not going to stop spending on the ski slopes and the vacations.

[B]

Well, if they get fired, they will.

[A]

True. But even if the unemployment rate goes from 4 to 6, 94% of the labor force is still working.

[B]

Right.

[A]

So I just think. I don't see how people all of a sudden retrench. The consumer retrenches and says, nope, I'm done not spending money anymore. I feel like people are just going to go into debt to keep the spending alive. Right. The friends that you have that take vacations and stuff and got hooked on it after the pandemic, you really think they're going to slow down? I feel, I just feel like there's room.

[B]

I think it all depends on their job situation. I do think that if people, you know, lose their job, they're not going to take vacations like Duh, of course.

[A]

But my point is that's going to be a smaller percentage of the population than those who are still working. All right, we talked about this, I believe last week and I, I just said I don't know how we can continue to have high mortgage rates. And I think that was one of your predictions. What did you say? That mortgage rates remain high. Yeah, I don't see how mortgage rates remaining 6 or 7% doesn't eventually impact the economy. And so Luke Kawa at Sherwood wrote about this saying housing is the business cycle. So he writes, in a world where prospective new buyers are deterred by high long term interest rates, home builders are facing pressure on margins, thanks in part to trying to subsidize some of this rate sticker shock like they've been buying down the mortgage rates. And with management of these firms warning of lower than expected deliveries in the first quarter, employment and residential construction stands out as a clear vulnerability for the US job market. Given the old max. And that housing is the business cycle popularized by a well timed 2007 paper by Ed Lemur of the same name. That means it's an important flashpoint for the US economy and financial markets as well. I just think that this is one of those like lag lags that eventually catches up. I don't see how we can continue to have strong growth in the economy with 7% mortgage rates. Eventually it catches up to us.

[B]

Didn't we just discuss this the other week?

[A]

We did, yeah.

[B]

And you have a second thoughts?

[A]

No, I'm, I'm doubling down on it. He's saying housing is the business. Remember I said how can it be such a big part of the economy and not have an impact? And he's saying no, housing is the business cycle. And I think maybe the reason it's on such a lag is just because of the 3% mortgages. And eventually it's going to have to trickle through and there's only the.

[B]

But. So I was looking at a chart. Somebody has the effective mortgage rate versus the current mortgage rate.

[A]

Right.

[B]

Could have been. Doesn't matter where the chart came from. We're still so far below where current mortgage rates are. And the high mortgage rates are impacting a very small percentage.

[A]

Yeah, it's growing. But just can you imagine being a realtor in this environment? Like how many people have dropped out of that as a, as a profession because there's just little to no activity.

[B]

Yeah.

[A]

Think about when you move, you pay movers, you buy new furniture, you redecorate the home you might do some renovations. Now there's still renovations going on or people are staying at their houses, but there's so much loan departments, there's so much activity that is tied up into the housing market activity. Yeah, I just think eventually it has to make. It has to make a dent in something.

[B]

All right, moving on. This is a great email. I'm the college professor from the Nvidia article that Michael famously derided as, quote, I give them no credit as investors. They just got lucky. Thanks for the credit for holding through the 70% drawdowns, buddy. All right, well, he's back and he's nailing it again. He nailed the qbts trade. These are the quantum computing stocks.

[A]

Okay.

[B]

And Rigetti, let's see, let's check in. Rgti these still ripping credit to you, sir. So yes, I dabble in small stocks and I'm one heck of a lucky guy. They also are held at a Roth, so tax considerations aren't an issue. Extra credit to you. Okay, now we all know that Michael would have locked in his 30 cent profit and sold both a while ago. True. I was just telling Ben, hey, I'm up 80% of Moderna. Do I sell it? But this is a conundrum in the middle of a bubble. When to sell. Let your winners run, take some profits. I sold some Nvidia in 2008 to pay off my mortgage. After. After. Okay, I won't say that this is the cause of a consternation and regret. So I don't want to sell too early, but I hate to leave a lot of money on the table again. So what would you do if you.

[A]

Don'T see how you can regret having sold a stock to pay off your mortgage? That should be a non regret. Even if the stock continue to go up.

[B]

Yeah. So he's, you know, do I wait for an acquisition? Do I sell at a particular number like Ben and BTC at 99? Do I sell covered calls? Love the show. You guys are my favorite parasocial relationship. Love you too. And no, in all sincerity, this, there's obviously. There's obviously a degree of luck, but there's obviously a degree of skill here. Right? I mean proof is in the pudding. Obviously. Dabbling in early in stocks and having the fortitude to as guys who aren't.

[A]

Going to hold 10 baggers, probably. Besides the S&P or VTI, there is no good advice to provide here.

[B]

But wait, but, but really, but really, if part of your investing strategy is to be speculative with small stocks and invest whatever a Couple thousand bucks. Like, and ride the winners of the losers. That's. That takes skill. That's hard to do.

[A]

Yes.

[B]

So anyway, there's there to Ben's point, there is no. This would be a lot easier if I could see the future. Right. I'd give you perfect advice. But I understand the regret part is like, I'm sure it's painful to sell at 6 and watch something run to 30. I wouldn't know.

[A]

The other just kidding thing. I'd have to play head games with you is am I really picking another Nvidia here? Like, are these really going to be a huge winner? Like that was. That's, that's.

[B]

Who's to say?

[A]

Yes, that'd be the hard part. Like, or is this. Are these stocks going to round trip? Because I don't know. This quantum computing thing is not gonna be as big as people are saying it is.

[B]

So I would say the way that I would recommend paper recommend because I'm not actually doing this because I don't have these sort of giant winners. Is it just a trailing stop? Like, is it something as simple as that? So like I won't let this thing fall more than 10% from its all time high.

[A]

Or 20.

[B]

Like whatever your number is.

[A]

20% and I'm out.

[B]

Whatever your number is.

[A]

I don't want any losses below 20%.

[B]

So then you have to be okay with saying like, there's no way I'm going to sell the high just by definition with the trailing stop.

[A]

Right. That's. That's not a bad.

[B]

Or how about this? Let's say that I'm making this up. Rigetti is at 19 bucks. What if you put an upside target? All right, I'll sell at 25 come hell or high water. Whatever it is. You have to decide beforehand that, that I know for sure.

[A]

I just love that. I don't know why this is called Rigetti. It sounds like the name of a character on Saved by the Bell. Like, oh yeah, Zach dated Stacy Rugetti that one summer. Yeah, it just. It sounds like. Did an Italian person.

[B]

Whatever happened to Jeff from the max? I feel like that guy was like a poor man's Rob Low. He was in Starship Troopers. He got his brain sucked out.

[A]

He was too creepy with Kelly Kapowski. That was the problem. Yeah, right. Can't tread on her. All right, from the Wall Street Journal, a few people sent us this one. Insurance and taxes now cost more than mortgages for many homeowners. And they show that the share of average mortgage payment going to Taxes and insurance is now close to a third, which is kind of crazy of the of like the cost of the mortgage. And they say in five metro areas, Rochester and Syracuse, New York, Omaha, Nebraska, New Orleans and Miami, at least a quarter of borrowers spend more than half of their monthly mortgage payment on taxes and insurance. So part of this gets back to the thing we've been talking about that home insurance in a lot of places is rising for a number of reasons. Part of it is insurance market and part of it is people suing these places, I guess. And part of it is the weather. I think the other part of it though is just if you bought a house 20 years ago or something and you have a very low mortgage payment or you refinance a few times, you have a low. Like of course taxes and insurance are going to continue to go up as a portion of it. It means your mortgage payment is just really, really low. So I don't really have a lot of sympathy here for people complaining about this. For some of the people.

[B]

Okay, that's Ben at.

[A]

I'm just saying I don't think I have way more sympathy for people who are not able to buy a house.

[B]

Listen, as a non man of the people, I'm not surprised to hear you say that you have no sympathy then.

[A]

People who did buy a house and now are seeing their costs rise. Guess what? Your house is worth way more than it was right now. There's some people who are. Who bought in the. They had stories here about people who bought in Florida and are saying, I wish I would have never bought in Florida because the cost of my insurance and property taxes are way more than I ever thought. Yeah, sympathy there. But I don't have sympathy for people who bought a House in 1997 and have an extremely low mortgage payment and now their property insurance is going up too. Guess what? Your house is up fivefold since then. Yeah, you're fine.

[B]

Yeah.

[A]

How's that? I'm having sympathy. The other third of the country that never bought never bought a house. Fair. Okay.

[B]

All right. J.P. morgan guy to Alternatives. You go through this one?

[A]

I did not.

[B]

Okay. They have a chart showing us real estate transaction volumes. And I kind of feel like we stopped talking about the office space crash.

[A]

That's right. Commercial real estate was the next Lehman Brothers. Right?

[B]

Yeah.

[A]

Remember that?

[B]

I do.

[A]

What happened to it?

[B]

I mean, it's still disgusting. Like the transaction volumes on apartments are way down. I mean, industrial's hanging in there, but.

[A]

I think we kind of nailed that at the time. We said Listen, this is not going to be an event. It's going to be a death by a thousand cuts if anything really bad happens.

[B]

So they show the US online retail sales by segment and they compare today with pre pandemic and total Online retail is 15.6%. Today it was 11% before. Clothing in general merchandise is 14 and a half percent, up from 10. So we know where all these trends are going. And they look at the change in the number of physical retail establishments and the biggest hit is, not surprisingly, department and discount down 40%. And this will just continue to shrink, right? Like there's no more. Nobody's opening up a Macy's. And in fact I went to a Macy's, Ben. The other day I was, it was January 1st. I was in the city, you know. You know what? Really?

[A]

You went to like the Macy's? The one with all the decorations and such?

[B]

You know what gets my rocks off? I like working with nobody else's.

[A]

Yeah.

[B]

Makes me feel good.

[A]

You came and worked on January 1st, right?

[B]

Yeah, it makes me feel good.

[A]

Okay.

[B]

You and I'm a sick puppy.

[A]

You and Jensen Wang from Nvidia. Did you read that thing about him?

[B]

No.

[A]

That said that he, he loves working on vacations. His team. This is from the new take him book about Nvidia and it. Someone posted a little screenshot of it and he said his team hates it when he goes on vacation because he says, I'm sitting on my balcony watching my kids play in the sand and I'm firing off more emails than ever because I love working on vacation.

[B]

Okay. That I, that I just, I don't do that.

[A]

Michael Badnick is just like the Nvidia CEO.

[B]

Yeah. No, that's not healthy behavior. No, it's not.

[A]

No, not at all. He says like he love, loves, loves, love working.

[B]

Okay. Okay. Well, anyhow, so I was in New York City without a belt. I only have, I only have two belts. What's your belt situation?

[A]

I have a jeans belt, like a leather belt and I have like a summer belt that's more of like a.

[B]

So you only have two belts too?

[A]

I'm a two belt guy. Yeah.

[B]

Okay. So I'm a two belt guy. One of my belts is a little bit too small, so it doesn't really fit well. And then the other one is just worn down.

[A]

Plus I feel like you have to. When you have a belt that fits perfectly and you've got it, like there's no need for another one.

[B]

Yeah. Until you lose that belt.

[A]

What happened?

[B]

I don't Know, just can't find it on vacation. So anyhow, I was in the city, pants were falling down, went into a Macy's. Not a great. Not a great experience.

[A]

Never is.

[B]

No. Horrible.

[A]

No. Finding the stuff you want or need and the sizes, it's. Yeah.

[B]

So the Macy's right over here. What? You know, the flagship. What is that store losing $150,000 a day. Obviously I'm making that number up, but it's just a slow drip to zero.

[A]

Yes. But they have great decorations though. Yeah, can't beat that.

[B]

All right, I want to talk about private markets. The FT did a piece on the state of the industry. They said the tally of VCs investing in US headquartered companies dropped to 6,175 in 2024, meaning more than 2,000 have fallen dormant since the peak of 8,300 in 2021, according to PitchBook. And I think this is very much like all the IPOs that shouldn't have happened in 2000. Right. Like it's sort of naturalist healing type of thing. So they, they show all these charts off point.

[A]

That decline is not a worry as much as the worry was.

[B]

I'm not worried back then, but I do think it has massive implications which we'll get to in a second. So they say more than half of the $71 billion raised by US VCS in 2024 was pulled in by just nine firms. So concentration in VC, like everywhere else entries and Horowitz iconic thrive, you know, the giant ones. And so funding is down. And so the little players, the ones that came in, they're gone. They're having a much more difficult time raising money. They said the time to return capital has elongated a lot across the industry over the last 24 years.

[A]

You don't hear very long.

[B]

You don't hear that elongated in the 1990s. It probably took seven years to get your money back. Now it's probably more like 10 years. Some LPs have run out of patience. The $71 billion raised by US firms in 2024 is a seven year low and less than 2/5 the total haul. And they have a chart showing new VCs. They basically went to zero.

[A]

Right.

[B]

Like they raised 20 something billion in the peak of 21 and it's effectively collapsed to zero. All right, so I think there are massive ramifications for this. Not just like for the entire economy and for the stock market. Okay, hit me with that massive. So look at Sherwood has a chart showing OpenAI's valuation in context. The latest is 157 billion. And that is bigger than Zoom, Snap, Zillow, Warner Music, Domino's, Ralph Lauren, Roku, Duolingo, American Airlines and New York Times combined. Combined. There's another chart that shows big tech has acquired 870 companies again from Sherwood. Looking at Google, Microsoft, Apple, Meta, Amazon, Nvidia. 870 companies. So back in the day, Vision Pro would have been a venture backed company. Like the company making the Vision Pro would have been a venture backed company. Now it's just Apple.

[A]

Right.

[B]

So the biggest companies are being funded by.

[A]

Right. Waymo would have been its own company.

[B]

Exactly. So the biggest companies are being funded by the largest, by the Mag 7 and the largest venture capital companies that don't write $200,000 sea checks anymore.

[A]

Can we.

[B]

Because the funds are so gigantic.

[A]

Can we spin this in a positive way?

[B]

I don't, I'm not saying this is bad.

[A]

No. But my positive spin on this would be if you're investing in the s and P500, it's not as concentrated as you think. Sam Rose made this point a lot that you're, when you're investing in one of these big companies, Google, Microsoft, Apple, you're not investing in one business line.

[B]

I get it, but I don't buy it. Like I, I, Sam is right in saying that the businesses are way more diversified than they were in the past. Look at how many different business lines Microsoft has and Amazon has and Google has.

[A]

But yeah, would it be a healthier dynamic if these were their own companies? Yes, I totally agree.

[B]

Yeah, so, but Amazon stock is still Amazon stock even though the business is way more diversified.

[A]

But if Vision Pro was a stock, what would it be down right now? All the way beyond 90%.

[B]

All the way. So anyway, I'm not, I, I don't know that this is good or bad, but it is.

[A]

Right. It just is. And we've been going towards deregulation and that was always the biggest worry. I heard that from a lot of like value investor friends, like just wait when they break up Amazon or they break up. And that is just not happening.

[B]

So it's a fundamental shift from the way things used to be, the way things used to get funded and further solidification of the Mag 7 as giant moats. Yeah, like Nvidia is funding Core Weave.

[A]

Yes. I feel like everything I learned about monopolies in my econ one on one classes, throw it out the window.

[B]

Yeah.

[A]

Right. Because these monopolies actually make it cheaper for people buying their products in a lot of ways. Easier and more efficient. They're not. They're not. You can find bad stuff they're doing, but consumers love this.

[B]

I think five years ago you and I would have said there's a 3% chance that in 20 years Amazon and Apple and Microsoft are still dominating and Google are still dominating. Now I I is a 50 50. I'd say better than even odds.

[A]

We're closing in on four three companies that are worth $4 trillion.

[B]

I'd say it's better than even odds that these companies are still dominating a decade. I'm not suggesting their stock price is going to continue to grow up 20% a but still 4 trillion is a large number. What? Who replaces them? Oh, Michael, read a history book. Okay, things change, right?

[A]

But what's the time frame on those changes? Yeah, maybe. Maybe the leaders stay leaders longer than they did in the past. No, not maybe.

[B]

I'll pound the table on that. It's already here. It's already happened.

[A]

One of them is going to make a mistake though in this whole AI thing.

[B]

But they did look what Meta did with with Metaverse with what's their lapse called? What do they call that portion of their business? That segment?

[A]

I don't know.

[B]

Reality labs. Right.

[A]

Is web3 still thing is that they.

[B]

Did up the stock dropped 75%. Same thing with Netflix. Guess what? They fix it.

[A]

True.

[B]

All right. One other chart that stood out to me in the J.P. morgan Guide to Alternatives. They have U.S. private credit versus leveraged loans and they show the share of leveraged loan in default by industry over the last 12 months. And by far the number one. Actually, that's not true. Number one and number two are pretty close. Number two is healthcare. That's 20% of the total default volume. Number one, 23%. That's media. Media is just in rough, rough shape. Rough shape.

[A]

And the reasoning is just.

[B]

Social media has disrupted traditional media.

[A]

Social media, Internet, podcasts, podcast. Yeah, that makes sense to me.

[B]

All right. You have mentioned the growing popularity of the CFP over the cfa. Have you ever talked to anyone in conversation that thought that AI could replace a financial planner? I can easily see it in the retail aspect. Create a realistic image of a fake person and add the conversational aspects of AI. A lot of what the financial planner does is just make the client feel good about the path they are on and whether the volatility seems easy to replicate. If AI if is what they say, it will be sort of reasonable. Take that. I disagree with.

[A]

Yes. So Josh and I talked about this on Ask the Compound Like a month ago or two. And his take has always been, and I've stolen this probably before. Josh says wealthy people will not trust a robot. And I completely agree with that statement. Yeah, maybe someone will throw it in my face. I think actually an AI financial planner for people who aren't traditional wealth management clients. I think it can actually help a lot answer questions. I don't think it's going to replace financial advisors.

[B]

I think it's going to help. I think AI will help a lot on the people that are just getting started.

[A]

And it'll also help financial planners be more efficient. Our financial planners are already talking about this. The notes that it can provide after a conversation or the emails it can provide. It's going to make financial planners who use AI better advisors. But the replacement thing, I feel like every 10 years something comes along and people wonder, is it going to replace financial advisors? TurboTax did not replace CPAs.

[B]

It did for a certain segment of the population. And I think I, I will do the same. All right. Hey, guys. Love the show. I was curious if you could talk about your bench. How you benchmark your own personal portfolios given that neither of you are very close to retirement, equity heavy. Do you try and beat the s and P500? Do you anticipate moving some year, missing some years, outperforming others? I often hear you guys talk about gains and losses in individual stocks, but I don't know how you view your own benchmarks. I gotta be honest, I don't know.

[A]

That's a really good question.

[B]

No, no. Like I literally don't know what my performance is. And I don't. I just don't really care, as crazy as that might sound, I, in the.

[A]

Back of my mind, back of the envelope, I guess, know what my performance is based on what I own and such. And once a year I update my spreadsheet. I did it last week. I update my spreadsheet. I look at my performance. Here's what I put in. Here's the difference, here's what I made. Ah, that makes sense. Here's how I benchmark myself. I do a simple spreadsheet where I say, over the next five to 10 years, here's how much I think I'm going to save, here's how much I assume in market growth and where am I along those goalposts? Am I better or worse? And I look at it and I update course correct. And I do kind of look at that.

[B]

Yeah, I don't do any of that.

[A]

But I don't look At a benchmark. I've used this before, but Jason Zweig interviewed a bunch of people in Boca a number of years ago and asked a guy like, did you beat the S and P, like to retire here and, you know, live on the beach? And the guy said like, I don't know and I don't care. I'm in Boca.

[B]

Yeah.

[A]

So I, I did something right.

[B]

Yeah. So that's.

[A]

It doesn't matter.

[B]

That's where I am. I. I just care that my number goes up into the right. And a lot of that is a function of saving more than my performance versus the S and P. And yes. Do I want to be the S and P? Yeah, of course I do. Do I think I'm going to? Probably not. Do I care?

[A]

No, I don't.

[B]

Because also, to be clear, I'm talking about. So I am picking stocks. I've got a. I've got a taxable account that I. That I mess around with, and I've got a SEP IRA that I. That I do my stock picking in my 401k. I'm strictly broad market funds. So that is the market. And so, you know, it's. Listen, this is personal, right? Like, there are some people that are very analytical, very rigid about their math. And that's one personality type. I'm on the other end of the spectrum. Personality type. I don't care.

[A]

I prefer to just get the market returns. That's where I am. So I don't care if I beat it. Yeah. All right. So this post went wild from the guy who was a founder of Loom. What's his name?

[B]

I forget.

[A]

Okay, so he founded Loom and he sold the company. And he's worth I don't know how many millions of dollars.

[B]

I think he sold his share, he said was 60 million.

[A]

No, he said that if he would have stayed there, he would have. He's giving. He had enough money where he gave up $60 million if he would have stayed on.

[B]

Oh, so tons of money.

[A]

And it's a. Yeah. So I don't know how much he sold for the post is all about. I'm really rich.

[B]

Just read the first thing.

[A]

Oh, that you posted here. Okay. You read. You're a better reader.

[B]

Okay, thank you. Life has been a haze this last year. After selling my company, I find myself in the totally unrelatable position of never having to work again. Everything feels like a side quest, but not in an inspiring way. I don't have the same base desires driving me to make money or gain status. I have Infinite freedom. Yet I don't know what to do with it. And honestly, I'm not the most optimistic about life. I know this is a completely.00th world position to be in. The point of this post is not to brag or gain sympathy. To be honest, I don't know exactly what the point of this post is. I tried to manufacture one, but just. I just felt like a phony. Then I recognized the irony of creating purpose out of a blog post when I don't currently have much conviction of purpose in life.

[A]

So, anyway, Tulum sold for $975 million. That doesn't mean he got that much. But he got 50 to 100 million. Something like that, probably.

[B]

Yeah, I understand this completely.

[A]

It is funny to me, though, to think it becomes an existential crisis when you become ridiculously loaded. And I get it, but read through all the old books about, like, the Gilded Age, the Rockefellers, the Vanderbilts. There was no existential crisis about being so wealthy they either spent their faces off partying. You've read the. Have you ever read the Vanderbilt book? They literally passed out, rolled up dollar bills to smoke cigarettes out of. They were smoking money. They were just lighting money on. They were spending so much money on parties and boats, and they spent all their money. Or it was Rockefeller and turned around and, like, gave it all away and set up charities. Like, they did not have an. You had no existential crisis back then.

[B]

Yeah.

[A]

You either spent or you gave it away. And I understand why we have the existential crisis now because of how interconnected we are and the Internet and all this stuff. But it's. It's interesting to think about that. That was never a thing before. Really.

[B]

Yeah. I think it's probably also isolating and lonely. Oh, I'm sure when everybody knows, when you can't hide your wealth, it's like, dude, it's a headline.

[A]

It's probably like, becoming famous. Like, if you're an actor, an actress that becomes famous, like, you can only talk to other people in that position. There's not many of them.

[B]

Yeah. So I think that the entire audience, ourselves included, would say, well, give them the money. And I'd. I'd figure it out. I wouldn't be having an existential crisis. So I don't think this guy's not asking anybody. Feel bad for him. But it's just. It's just an interesting thing that when you get. When you finally get the prize, it's like an empty feeling.

[A]

Right. He's talking about, like, traveling around the world and Meditating and all. It's. Yes.

[B]

It's also personality type. Right. Like I think that there are people that money has all sorts of different impacts on them. Some, you know, are their best versions of themselves, some of their worst. Some are in between, some are.

[A]

This is my thing about 10 million being the sweet spot and, and having 50 or 60 turns it from being. This is amazing to. This is a responsibility. I don't want to mess it up.

[B]

Yeah. All right. Also from that Sherwood post that I referenced which is just very chart heavy, they have one that shows how sequelitis changed movie titles. So they show the top 10 movies per year and then they show how many of them are sequels. And if you look at 24, if you look at into 25, it's a lot of sequels.

[A]

Unfortunately, this is what's ruined movies, I guess. Lucas Shaw did a post called the fact that he looked at ticket sales by year and he said rising prices have masked 20 year decline in US movie attendance. And he said domestic box office based on tickets sold peaked in 2002 and has fallen 50% from that high. He said even excluding the couple years most affected by the pandemic, inflation adjusted revenue is near an all time low based on data going back to 1985. And I guess that's part of it is a lot of the high quality stuff that would have drawn people to theater in the past is now just on tv. But I think you see this a lot with TV shows. There's a lot of TV shows that should be one season and done and they come back for the second season and it's not as good. And you just think those. Well, those have been movies in the past. We've lost those as movies because now they're TV shows.

[B]

Yeah.

[A]

So I think that's a trade off that I think I'm okay with in some ways and not okay with in other ways.

[B]

You know, people are mad about LeBron for ruining the NBA with the big three stuff. How it became like just a superstar type of league. I think Marvel did the same thing to the movie industry.

[A]

Yeah, right.

[B]

It just became so bankable to just find this IP and just beat it to death. And they went too far.

[A]

Yeah, that's fair. And yeah, the studio said we can't make money on this stuff anymore.

[B]

Yeah.

[A]

So we're not going to make it.

[B]

What happened to juror number two? They like didn't do a wide release. So juror number two came to max last week and I kind of like, I know, I heard about it, but I kind of didn't see it. And you're probably in the same situation. Like wait, where heard about it. Wait, Clint Eastwood? Like, huh. So Warner Brothers didn't do a wide release. Not exactly sure what the story is.

[A]

There because the movie kind of stunk.

[B]

Oh, you thought it stunk. So give me your take.

[A]

It was a better premise than a movie. The premise was really interesting. What would you do in this situation? I love those. I thought they could have done a really good twist ending. Right. Did he? Didn't he? Did he? Didn't he? And then they leave it up to. I didn't like the. The ending at all. I thought the movie was way. Could have been a half hour shorter.

[B]

Okay. Dan LaRosa hates the movie and he doesn't understand why.

[A]

So he's with me.

[B]

Yeah, he's with you. I liked it. Chris. Jonathan liked it. I thought the one complaint that I had about the movie was because I love the premise like you did. The supporting cast was horrific. And not J.K. simmons or Kiefer, but who was just in like one scene that was kind of weird. But the. The other jurors were really bad actors.

[A]

So Clint Eastwood is a 94 year old director. He's just. You could tell the quality of his movies has just dropped off a little bit. And that was part I saw.

[B]

I didn't like Emile either that much.

[A]

Interesting. Yeah. Interesting premise.

[B]

Okay. Would appreciate your call on this situation. I agree that the first car should be a hand me down. Mine was a 1987 Ford Escort and my wife got a 1984 Chevy Celebrity. The oldest car in our family is a 2017 model year compact SUV. My daughter will be a 14 in May and is already gunning for it. When she turns 16, it will be 10 years old with 85,000 miles on it. Probably worth around 12 or 13 grand. It's all wheel drive, plenty of safety features, and it's just a 2.0 liter four cylinder. Sounds perfect, right? Here's the catch. It's a Porsche McCann in Carmine Red. Based on all other criteria, it fits the bill. But what kind of monster will we create if we give our daughter a Porsche as her first car? Am I nuts to give her the car?

[A]

Can't do it.

[B]

Can't do it.

[A]

Can't do it.

[B]

You can't give your kid a red.

[A]

Porsche even if it's really used. And you just can't.

[B]

Yeah, I agree.

[A]

Sorry. Sell it. Or can you keep driving it? I don't know.

[B]

Can't do it.

[A]

Yeah.

[B]

Somebody sent Us an email that made me chuckle. Love that we are getting more lazy. River commentary. Michael needs a sealable pouch for his phone. This is Water Park 101.

[A]

Yeah. You don't have one of those for your jet ski?

[B]

No.

[A]

You really don't have one of those?

[B]

No.

[A]

My wife has them all over the place now because she dropped her phone in the lake last year. So, yeah. You waterproof thing. And you can still use the phone in the waterproof.

[B]

I'll get one.

[A]

So you can put it on your neck. You can put it in the holder thing.

[B]

Okay. I'm thinking about becoming the person who wears a mask on an airplane. Thoughts?

[A]

Sick of getting sick.

[B]

The dude next to me on the way home was blowing his nose the entire time, and I was. I don't mind germs. I'm sort of a. What doesn't kill you makes a stronger type of guy. But I don't want to get sick going somewhere or coming home.

[A]

I'm surprised we don't see more. That's one thing I would have been wrong about, that we don't see more on airplanes. Because it does seem like every time you go on an airplane, you're rolling the dice of getting sick.

[B]

Now, do masks help you not get colds? I literally have no idea.

[A]

It's got to help a little bit, right?

[B]

I would think.

[A]

I think we would know this. It is funny to think about all the stuff that people thought was going to happen following the pandemic that didn't. Right.

[B]

But what do you think about my idea? I said, it's not crazy, right?

[A]

No, I don't think it's crazy at all.

[B]

Yeah. Because I floated by Robin and she said, well, people are going to be looking at you.

[A]

How many people we talked to in the last couple weeks that travel, that are just deathly sick right now. Right. It. It totally throws your life into a tail spin.

[B]

Yeah.

[A]

When you're sick like that. All right. So I. I usually, because you told me to take. I take a. When I get into LaGuardia, I take a cab to the train station, and. And I always try to tell the cab I'm going to the 30th, 3rd and 31st in Astoria. And they always give me an address, and I don't have one.

[B]

All right. I was like, dude, it's a mile away.

[A]

Yeah. And then I take the train in, go to Queensborough Plaza, all the way down to Grand Central or whatever, the next stop when I get off, and I'm right by the library. But it was Way too cold. And I thought, you know, screw it, I'm taking an Uber. I'm not gonna stand on the platform and wait. So I took an Uber and thinking, you know, I'll just work in the car with my little handy iPhone hookup for my laptop. But it took me like 30, 35 minutes to get in.

[B]

And I was like, that's amazing.

[A]

This is so much faster. Because usually it would take me an hour to get an Uber. And then I got here, and everyone's talking about congestion pricing. Bill Sweet shows me his, like, phone of all the traffic, and it's all green. And having not thought about this at all because I don't live in a big city, I don't have any, like, big takes on it. But it was just shocking to me that this. This happened. And now I guess you have to pay $9 if you're gonna ride in congestion times, because I did it at.

[B]

8Am how much did it cost?

[A]

I didn't even look at my app to see how much it costs. 70, maybe.

[B]

That's a few money right there.

[A]

Sorry. I think it was 70 bucks. It's not bad, which is probably. But I couldn't believe the speed I stopped at. One light, maybe, and I didn't. I couldn't believe how fast it was. Okay, So I. It probably stinks for the people who used to drive and now have to ride the subway or figure another way to get in.

[B]

I saw a lot of people talking about this. I don't have any. I don't know the first thing about congestion pricing or is this good or bad? I don't know.

[A]

For me, it was good because it took less time to get in here. But, yeah, I think there's going to be some unbelievable economic.

[B]

I think people are. People are upset because they're trying to force people to go. To take mass transit on the subway has been pretty dangerous here, so people are understandably not too thrilled. I get it.

[A]

That's fair. We walked out of a Knicks game last night, and there was two people who I thought could probably do me bodily harm that were walking around the city. Correct. And you, what, you just do a beeline across the street and put your head down? Oh, that's. That's the move.

[B]

Yeah.

[A]

Guy waving his arms and yelling and.

[B]

You just get out of Dodge?

[A]

Yeah, you just keep walking.

[B]

Somebody sent. There's an article into Esquire. Do you. You. You read Esquire, don't you?

[A]

I still get the physical copy of Esquire and gq.

[B]

You know, I Feel like you are the exact profile of somebody that reads both those magazines.

[A]

Oh, yeah, right. Fair.

[B]

40S, best shape of their life hair.

[A]

And I still would never buy any of the clothes. Fashion, it's so. The clothes are so expensive in those magazines.

[B]

So somebody emailed us 50 things a man should not know. And number 37 was any human being who says they didn't have that on their bingo card.

[A]

That's pretty good. I like it. That's a good take.

[B]

That's a great take. All right.

[A]

Which Harry Potter house he would have been sorted into? That's pretty good. I like it. Ooh, this is a knock on me. The healthiest item on the Cheesecake Factory menu. That's. That's fair. That's pretty good.

[B]

Of the salmon. Broiled dry.

[A]

Yeah. All right.

[B]

Steamed broccoli.

[A]

All right. Recommendations? My kids had already seen Wicked. They'd seen the play with my wife. My wife has seen the play multiple times, loves Wicked. Took the kids to see the play with her mother last year, then took the kids to see the movie. They had loved it so much they wanted to see it again over break because we honestly, after two weeks, ran out of stuff to do. Let's put him. Bring him to a movie. So I had to go see Wicked. I kind of knew. I was like, oh, it's a Wizard of Oz spin. And I like to give my wife shit about it because it's like, actually, the witch in wizard of Oz was not a bad person. And I said, you're rewriting history here. You can't do that. So I kind of give her crap because she loves Wicked. So anyway, we went to see the movie Hand up. Did not realize how much of a musical it was. I think I texted you from the movie, like, so this is a musical. Despite the fact that I'm not a fan of musicals. Personal preference. Don't mind people who are. It's just not my thing.

[B]

Love musicals.

[A]

It was a very well done movie. Oh, yeah, it was.

[B]

Did you enjoy yourself?

[A]

I kind of enjoyed it again. I. It was like. I didn't need all the songs.

[B]

Yeah.

[A]

But it was. It was very well done. My kids absolutely love it. They can't wait for the next one to come out. But I thought it was very well done.

[B]

Is the next one coming out next year?

[A]

Yeah, it's like a year away, so. My kids. I can't wait for it to come out.

[B]

Were they upset with the cliffhanger?

[A]

I don't think so. No. I. I think they. They enjoyed it. Okay. I watched Blink twice on your recommendation. And I put this in the bodies, bodies, bodies. And it's what's inside. Two other Michael Batnick suggestions that I liked. This one I didn't like as much. No, A little too dark for me. And it was one of those where like a lot of these thriller movies, like, you know there's going to be a twist. But I felt like this one was like, there's a twist coming.

[B]

I loved it.

[A]

I, I thought it was like too much of like, yeah, we know there's a twist coming. It was well done, but it was just too dark for me, you know.

[B]

How about Christian Slater? Still looking good.

[A]

You know who wrote and directed that movie?

[B]

I don't.

[A]

Zoe Kravitz. Oh, yeah, I. Which I did. She wrote it and directed it. All right. I came across Diner the other night for some reason. Kevin Bacon movie.

[B]

I never heard of it.

[A]

The 1970s, like one of his very first movies. And it's a good, like guys in the 1950s, like, the diner was their hangout. And God, Mickey Rourke, before he had his plastic surgery, messed up. I know there's been stories on it. What a great looking guy he was. He really messed up by doing all the plastic surgery.

[B]

Did he die?

[A]

No, he's still alive. But I, I, I started going through the Kevin Bacon movies again and I feel like I'm here to go against your Kevin Bacon chart. Animal House, Diner, Tremors, Footloose, River, Wild, jfk, A Few Good Men, Murdering the First Sleepers, Mystic River, Crazy Stupid Love. He's been in some really good movies. I think your point was like, Footloose. I mean, I don't like Footloose, but that's.

[B]

You really do like musicals.

[A]

I've actually never seen Footloose.

[B]

Now my point was.

[A]

But he never delivered at the box office. Is that it?

[B]

He was like the 14th choice for all the good movies that he didn't get. And now it's not his fault because he was going up against Mr. Hanks and, you know, that whole cast of characters.

[A]

True.

[B]

But my point was he's been in a lot of stinkers. I think that was the point of the chart.

[A]

Right. Okay. I picked out his classics. All right. One more thing. My kids are into the Mr. Beast stuff, which I don't want to be the adult that like, shits on the kids. Trashy stuff. Because I watched plenty of trash back in the day. I watched dating shows. I watched the real world. Road rules, challenges. Like my parents, I'm sure thought, what.

[B]

Is our core tv? We Judge Judy guy or I never.

[A]

Got into the Court TV, actually. My kids watch the new Mr. Beast show on Amazon and I never really got the Mr. Beast thing. Just whatever. I'm past that. But all he does is he puts people in situations of, of my kids are constantly saying, what would you do in this situation? Like, would you do this thing for a lot of money or not? So I guess that's his whole. I'm sure there's more to it than that. But that's the whole thing. Like we're going to put you in an uncomfortable situation. You're going to have to potentially screw people over or do this weird thing for lots of money. And that's the whole thing.

[B]

That's it.

[A]

That's pretty much it. Yeah.

[B]

Is it good?

[A]

My kids like it. It's, yeah, it's okay. But is it coming and out of it?

[B]

Is it his money that he's giving away? Is that sort of what makes it so cool? Probably interesting.

[A]

Probably not. I'm sure it's Amazon's money.

[B]

Okay. All right. Oh, you see this 8 bit Christmas poster in here?

[A]

Okay.

[B]

You ever see this movie?

[A]

We tried it this year.

[B]

Didn't like it.

[A]

My kids gave up on it. I, I, I thought it was okay. I was watching it.

[B]

Somebody emailed. It's a Christmas movie that you should add to the list.

[A]

Okay. Didn't draw my kids in, but you know, we had other stuff going on.

[B]

Okay. All right. I'm here to say that if Linus were on Netflix, it would be a massive show.

[A]

Okay.

[B]

I binge watched not just season one, but also season two. And there are phone down shows like White Lotus Severance. Right. Where you're dialed in. I would say that Linus is as close to the line of a phone down show, but also, but it is on the side of a background show. In other words, you could have it on the second screen while you're working.

[A]

And still I feel like Taylor Sheridan shows are, it's okay to be on a screen a little bit because there's.

[B]

A bunch of dialogue that you can completely zone out of. Yeah, but the action is serious. Morgan Freeman is cooking.

[A]

Nicole Kibbon too, Right? I watched the first episode.

[B]

Yeah, Morgan Freeman is in it a bit, but when he is, he's throwing 175 miles an hour. Remember Doug from House of Cards?

[A]

Oh yeah. He was in Penguin 2, right?

[B]

He was in Penguin 2. You know who he looks like in our universe? Wes Gray.

[A]

Ah, I see it.

[B]

Right?

[A]

Yep, I see it.

[B]

I'm just telling you Right now. Anytime there's incoming, get down. Yeah, I'm in.

[A]

Okay. Yep.

[B]

Right. It's like. It's. It's that type of a show.

[A]

It kind of goes right into it, too. Right. Doesn't mess around.

[B]

It's good. It's good clean fun. It's only eight episodes.

[A]

She was on. What's her name?

[B]

Zoe Saldana.

[A]

Yeah, she was on Smartless recently. It was very good.

[B]

She was in the. What's that Amelia movie people are talking about?

[A]

Or Emily Perez.

[B]

Amelia Perez.

[A]

It's on Netflix. I thought about watching it because I got Golden Globe stuff. We'll see.

[B]

Is that also musical? From now on, you were an exclusively a musical guy.

[A]

What was it? La La Land a few years ago.

[B]

I never saw that one.

[A]

Ryan Gosling. I. Five minutes. I turned it off. Yeah, I just. I. No offense. No offense to musical. That. It's not my thing.

[B]

Okay.

[A]

Like, I don't. See? You can't move a movie plot forward with a musical number.

[B]

It's tough.

[A]

All right. We did it in person.

[B]

How'd it feel?

[A]

Not bad.

[B]

John.

[A]

Great. We're good. All right.

[B]

All right. Keep the emails coming. Animalspiritscompoundnews.com thank you for listening. Have a great weekend and week. This is an awkward close. I don't think there's work done. We'll see you next time.

[A]

Let's try. Don't get.