Animal Spirits Podcast: So Bearish It's Bullish (EP.409) - Detailed Summary
Release Date: April 23, 2025
Hosts: Michael Batnick and Ben Carlson
Podcast Description: Animal Spirits is a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, listening to, and watching. New episodes are released every Wednesday morning.
I. Opening Banter and YCharts Promotion [00:00 - 02:20]
The episode kicks off with a lighthearted exchange between Michael and Ben about their screen time and usage of YCharts, a financial data platform. Michael humorously admits to excessive screen time, while Ben downplays his own, stating, "First thing I check in the day" is YCharts. This segment serves as a brief promotional spot for YCharts, emphasizing its utility in navigating market noise.
Notable Quote:
Ben Carlson: “[...] YCharts created a brand new deck Tariffs through the long term lens is packed with charts showing how markets have actually responded to past events and why short term noise really tells a story.” (00:31)
II. Economic Outlook: Tariffs and Political Influence [05:06 - 23:24]
The hosts delve into the current economic turmoil, centering on tariff policies and political maneuvers. Ben discusses a Wall Street Journal report about Trump advisors pushing for a tariff pause in Scott Besson and Howard Lutnick's absence, highlighting concerns about the stability of the American economic empire.
Key Discussions:
- Tariff Pauses and Political Strategy: Ben explains how senior advisors influenced Trump's decision to pause tariffs without Navaro's consent, aiming to calm markets.
- Power Transition Concerns: Ben expresses worries about the transition of power as older presidents like Biden and Trump face age-related challenges, stating, "Baby boomers are going to have a very hard time relinquishing their power." (05:30)
- Recession Fears: A New York Times excerpt reveals Trump's private anxieties about triggering a Great Depression-like event, which paradoxically makes Ben bullish, believing that such fears indicate proactive measures to prevent economic meltdown.
Notable Quotes:
Michael Batnik: “I am hard rejecting the idea that this is the end of an empire. [...] This is not the end of an empire. Stop it.” (03:18)
Ben Carlson: “So Trump is laying the groundwork to blame Powell for any downturn.” (23:24)
III. Stock Market Dynamics and Asset Performance [14:00 - 35:00]
The conversation shifts to the stock market's recent performance, highlighting significant downturns and contrasting them with asset classes like gold and Bitcoin.
Key Discussions:
- Market Declines: Michael notes a 16% drop in the S&P from its highs, with Nasdaq 100 down nearly 20% and Russell 2000 down 25% (28:17).
- Asset Resilience: Despite stock declines, gold has surged 42% over the past year, Bitcoin up 36%, and main indices show varied performances.
- Leveraged ETFs: A record influx of $6.6 billion into leveraged long ETFs indicates heightened speculative activity, with Ben questioning whether retail investors or institutions are the primary sellers (34:12).
- Investor Sentiment: Michael and Ben discuss contrasting investor behaviors, where some buy the dip aggressively while institutional players may be selling, raising questions about who absorbs the market pain.
Notable Quotes:
Ben Carlson: “Everyone's buying the dip.” (34:21)
Michael Batnik: “The stock market will be... the S and P was down more than 16%.” (28:17)
IV. Private Equity and High Yield Bonds [35:00 - 50:00]
The hosts explore the state of private equity and high yield bond markets, assessing their resilience amidst economic uncertainty.
Key Discussions:
- Private Equity Challenges: Wall Street Journal's report on private equity facing a "Perfect Storm," with firms struggling to return money to investors due to high levels of unrealized value, complicating fundraising efforts (46:23).
- Private Credit Shift: Ben observes a decline in high yield bond ETFs like HYG and JNK, suggesting advisors are pivoting towards private credit as a diversification strategy, even in potential recessions.
- Wealth Management Channel: Michael emphasizes the importance of the wealth management channel for private equity firms like Blackstone, asserting confidence in their long-term prospects despite current sell-offs (46:49).
Notable Quotes:
Michael Batnik: “I am, I am unwavered.” (46:23)
Ben Carlson: “I think that the sell off is justified.” (46:49)
V. Consumer Behavior and Small Business Impact [10:00 - 14:00]
Ben and Michael analyze consumer spending patterns and their implications for small businesses in the face of tariff-induced economic pressures.
Key Discussions:
- Elasticity of Spending: Amex's report indicates consistent spending levels despite macroeconomic uncertainties, challenging the notion of a significant wealth effect (14:55).
- Small Business Vulnerability: Ben references Ryan Peterson’s thread forecast, warning that thousands to millions of small businesses could go bankrupt if tariff policies persist, potentially benefiting Chinese manufacturers.
- Supply Chain Concerns: Discussions about collapsing container volumes and the potential for empty shelves highlight the tangible impacts of economic policies on everyday life.
Notable Quotes:
Ben Carlson: “It's going to be a bloodbath and then a collapse in trucking.” (09:32)
Michael Batnik: “As long as people have their jobs, it doesn't matter how worried they are.” (18:12)
VI. Housing Market and Future Trends [16:00 - 23:24]
The conversation turns to the housing market, with insights from Amex's earnings and Zillow's forecasts.
Key Discussions:
- Housing Market Predictions: Zillow forecasts a modest 1.7% drop in housing prices over the next year, classifying it as a "full-blown bear" market, which Michael and Ben find reasonable given current mortgage rates.
- Demographic Pressures: Ben speculates that younger generations, particularly Gen Z and young millennials, may face prolonged challenges in homeownership due to elevated prices and demographic shifts.
- Strategic Home Buying: The hosts advise older millennials to purchase homes earlier to avoid future competition, hinting at strategic asset accumulation amidst market uncertainties.
Notable Quotes:
Ben Carlson: “By then, there's going to be too much competition.” (42:29)
Michael Batnik: “Tariffs are a tax, they're negative sum.” (22:46)
VII. Bitcoin and Gold as Market Indicators [30:00 - 40:00]
Michael and Ben explore the contrasting movements of Bitcoin and gold, interpreting them as indicators of broader market sentiments.
Key Discussions:
- Bitcoin's Surge: Bitcoin's recent climb to $90,000 is analyzed, with Ben citing Ben Eiford's theory that Bitcoin is decoupling from the Nasdaq and aligning more with gold as a hedge against a collapsing dollar.
- Gold's Stability: Despite rising bond yields and a falling dollar, gold remains resilient, suggesting investors are seeking safe havens amid economic instability.
- Market Speculation: Michael muses whether Bitcoin is front-running a potential market rebound, indicating a possible liquidity flight or chaos hedge.
Notable Quotes:
Ben Carlson: “Bitcoin is NASDAQ denominated in a basket of global currencies, not USD and USD is collapsing.” (32:07)
Michael Batnik: “Bitcoin is absolutely flying. It's at 90,500.” (40:07)
VIII. Entertainment Segment: Movie Reviews and Personal Anecdotes [50:00 - 61:00]
Transitioning from economics to entertainment, the hosts share their thoughts on recent movies and personal experiences with film-going.
Key Discussions:
- IMAX Performance: Michael shares his bullish stance on IMAX after a successful box office weekend, highlighting strong ticket sales for Ryan Coogler's "Sinners" (51:39).
- Movie Critiques: Reviews of "Sinners" and "Warfare" are discussed, with honest opinions on their quality and market reception.
- Television and Streaming: The hosts touch upon shows like "Friends and Neighbors" on Apple and "The Last of Us," expressing mixed feelings about their performances and storylines.
Notable Quotes:
Michael Batnik: “I want to get back into reading, but I opened it up to read it, and the first page...” (61:37)
Ben Carlson: “I like putting, I'm setting a reminder to myself.” (43:04)
IX. Conclusion: Bearish or Bullish Sentiments [62:00 - End]
In wrapping up, Michael and Ben reflect on their market outlook amidst the discussed economic challenges.
Key Discussions:
- Dual Sentiments: Ben encapsulates the episode's theme by stating, “bearish. It's bullish. That's what I'll leave you with. Why? That's me looking at glasses half full.” (63:49)
- Market Uncertainty: Both hosts acknowledge the complexity of the current market environment, balancing cautious optimism with realistic concerns.
Notable Quotes:
Ben Carlson: “Bearish. It's bullish.” (63:49)
Michael Batnik: “I just don't want to give those vibes. I'd rather be embarrassed and being like, all right, things got worse than I thought they would.” (62:59)
Overall Insights:
- Navigating Economic Turbulence: The episode provides a nuanced view of current economic policies, especially tariff implementations, and their multifaceted impacts on markets and small businesses.
- Asset Diversification: Emphasizing the importance of diversifying portfolios, Michael and Ben discuss shifting trends towards private equity and private credit as traditional assets like high yield bonds decline.
- Investor Behavior: The contrasting behaviors between retail and institutional investors highlight differing strategies in response to market volatility.
- Market Indicators: Bitcoin's decoupling from traditional stock indices and gold's steady performance serve as barometers for investor sentiment amidst economic uncertainties.
- Balanced Outlook: While acknowledging potential downtrends, the hosts maintain a balanced perspective, viewing bearish signs as potential bullish opportunities for strategic investment.
Final Thought:
Despite the prevailing economic challenges and market fluctuations, Michael and Ben encourage listeners to adopt a balanced and informed approach, recognizing both risks and opportunities inherent in the current financial landscape.
For more insights and discussions on markets, life, and investing, subscribe to Animal Spirits Podcast and join Michael Batnik and Ben Carlson every Wednesday morning.