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.

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.

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.”

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!