The Fat Pitch For Bears (EP. 465)

Summary

Animal Spirits #465: The Fat Pitch For Bears

Hosts: Michael Batnick & Ben Carlson
Release Date: May 20, 2026

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Overview

In this episode, Michael and Ben tackle the big question circulating financial markets: is the current exuberance, especially around AI and mega-cap tech, setting up an irresistible "fat pitch" for market bears—or is the market simply rational in pricing in the ongoing boom? They discuss market corrections, the psychology of bubbles, the role of AI in portfolios and the broader economy, the impact of inflation, wealth inequality via homeownership, and the changing landscape of both investing and everyday life. All while displaying their signature banter, skepticism, and common sense about what’s real (and what’s hype) in the investing world.

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Key Discussion Points & Insights

1. Market Pullbacks and Bearish Setups

[01:33–04:56]

• Michael observes that the S&P and NASDAQ have been above trend for so long that a 4–7% pullback would be "what the doctor ordered."
• Ben notes how each brief rate spike sees panic, but often, “rates fall again and nothing happens.”

  “Every time rates get to 5%, people flip out and then what happens? Rates fall again and nothing happens.” – Ben [02:04]

• Michael’s anecdote: even people who rarely trade are taking profits; this could be a sign of overheating.
• Michael dubs this "the fattest pitch setup for bears" with credible risks: “capex memory bubble,” new Fed chair, sticky inflation, and high rates.

2. Bubble, What Bubble?

[04:22–13:26]

• Ben argues that all the risks are "widely known"—could this finally be a “first level thinking” bear market?
• Michael reminds listeners that 7 months ago no one was calling it an AI bubble; the narrative changes quickly.
• Debate on whether fundamental risks (overbuilt data centers, capex bubble) truly matter, or if the market’s strength will persist.
• Duality Research charts show that multiple contraction and earnings growth are widespread; much of the market by stock count trades under 20x earnings, while market cap remains concentrated among high-multiple giants.

  “The market is getting cheaper or we still have room to run. There's no euphoria.” – Michael [11:41]

3. AI’s Real Effects & Bubbles Revisited

[13:26–18:13]

• Nvidia as a “size problem”—forward net income has exploded, but PE ratios are lowering, suggesting rational—not bubble—pricing.
• Ben notes, “If a company’s growing this fast, why isn’t it given a 40x multiple? Because then it would be a $10 trillion company.”
• Michael: The S&P is not in a broad bubble; most stocks remain reasonably priced.

4. Market Timing and the Limits of Expertise

[18:29–23:08]

• Discussion of an eminent academic recently flipping bearish in Nov 2025, “raising cash for the first time”—only to admit months later: “This is why you don’t time the market. I was wrong.”

  “If I could give investors one ability, it would be to listen to these smart people and just completely discount it.” – Michael [20:12]

• Ben recounts how experts—no matter how knowledgeable—cannot reliably predict market turns; referencing past predictions by Michael Burry and others that haven’t played out as forecast.

5. Passive vs. Active, Indexing Myths

[23:08–25:51]

• New Goldman Sachs research: passive-fund ownership is far from a market juggernaut (passive mutual funds + ETFs = ~16% of market).
• “Direct household ownership” remains the largest slice, much in the hands of company founders.
• The changing analyst landscape (fewer following mid/small caps) is affecting market dynamics—but AI may soon expand coverage and level the field.

6. AI’s Role in Investing and Its Societal Impact

[25:51–39:26]

• Listeners ask: can AI help replicate strategies like the Compound's Porterhouse SMA? Michael explains how AI is democratizing tools but highlights the risk of endless “tinkering” over sound discipline.
• Michael shares how AI (Claude) helped him break down a complex technical article in minutes—a task previously requiring days or weeks of skilled labor.
• The hosts play and react to Ken Griffin’s sobering remarks:

  “Work that used to be man-years... now being done in days or weeks by AI agents... I went home one Friday actually fairly depressed by this.” – Ken Griffin [34:26]

• Ben wonders: is AI doing “jobs” or only “tasks”? Both note the paradox—AI is scary but also deeply exciting in terms of productivity.
• Ben raises a key question on politics: if AI leads to major layoffs, will companies face punitive taxes or regulation?
• Michael highlights humanoid robots achieving “human parity” in warehouse tasks—another sign of sweeping change.

7. The Boons & Psychological Problems of Sudden Wealth

[44:22–47:49]

• Bay Area “wealth divide” is creating both envy and existential drift—massive windfalls for those at OpenAI, Nvidia, Anthropic, etc., while others feel left behind or without purpose.
• Michael: hitting his own goals after a long struggle made the climb meaningful; sudden wealth “breaks your brain.”

  “Being on top of the mountain is not fun. It's climbing the mountain. And that's, like, the whole purpose of life.” – Michael [46:53]

• Even the ultra-successful make comparisons—gratitude is key, but it’s psychologically difficult amid such stark inequalities.

8. Inflation’s Lingering Impact

[47:49–50:07]

• Ben shares a conversation with a post office worker convinced Weimar-like hyperinflation is imminent—reflecting how inflation’s psychological impact lingers far beyond falling rates.
• Michael: the behavioral scars and pessimism from the past few years may long outlast the actual problem.

9. Housing Inequality—The “Biggest Wealth Inequality” of the Decade

[51:29–53:30]

• Ben discusses how the divergence in housing costs between existing and new homeowners is now a leading source of wealth inequality:

  “The new homeowner vs. the existing homeowner: Huge.” – Michael [53:21]

• Existing homeowners enjoy sub-4% mortgages and locked-in low costs, while new buyers must pay far more, even within the same neighborhoods.

10. Cautionary Tales: Private Market Vehicles & Fixed Income Flows

[53:40–55:31]

• PSA: Many investors in special purpose vehicles buying private shares (e.g., OpenAI, SpaceX) may not actually own the underlying—they’re subject to risks akin to “not having the title to your home.”
• Fixed income: Blue Owl's flagship credit fund saw inflows collapse from $500 million/month a year ago to just $26 million—underscoring rapid sentiment change and structural market shifts.

11. Behavioral & Generational Spending Patterns

[55:36–58:28]

• Ben and Michael reflect on personal frugality (“soap-watering” parents, sticker shock, lingering habits from growing up with less).
• Michael admits his childhood limitations made him an "overspender"; Ben can’t see himself ever buying a luxury vehicle out of principle.

12. Personal Anecdotes—Parenting, Sports & Social Dynamics

[58:28–61:49]

• Ben’s moving story: the “joy of youth sports” is fully realized watching his daughter score the winning goal—reminding that these moments, not trophies, are why parents often sacrifice their weekends.

13. Recommendations

[61:49–64:50]

• Ben’s Podcast Picks:
  • Where Everybody Knows Your Name with Ted Danson and Woody Harrelson (notably, the Harrison Ford episode).
  • Life is Short (Netflix): Martin Short documentary, with positive takes on gratitude and life perspective.
• Michael’s TV Recommendation:
  • Half Bad: The Bastard Son & The Devil Himself (HBO): Dark, intense, and graphically realistic miniseries by Richard Gad.

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Notable Quotes & Memorable Moments

• “Every time rates get to 5%, people flip out and then what happens? Rates fall again and nothing happens.” — Ben [02:04]
• “If I could give investors one ability, it would be to listen to these smart people and just completely discount it.” — Michael [20:12]
• “Being on top of the mountain is not fun. It's climbing the mountain. And that's, like, the whole purpose of life.” — Michael [46:53]
• Ken Griffin: “Work that would usually take people with Masters and PhDs in Finance weeks or months, being done by AI in hours or days...” [34:26]
• “The market is getting cheaper...there's no euphoria.” — Michael [11:41]

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Timestamps for Key Segments

• [01:33] Opening – Market can't go up every day
• [02:13] Ben on rates panic cycles
• [04:22] Market “fat pitch” for bears
• [06:37] Companies, management, behavioral risk
• [09:44] Lessons from past bubbles (Telecom, Dotcom, Data Centers)
• [13:26] Nvidia’s size & forward PE dilemma
• [18:29] Market timing, experts, and “pulling it out of their ass”
• [20:12] The case for ignoring expert market opinions
• [23:08] Passive ownership & index investing myths
• [25:51] AI as portfolio tool, research accelerator, & industry disruptor
• [34:26] Ken Griffin on AI’s real-world impact
• [37:35] Political risk and societal backlash to AI
• [44:22] Life in the SF "AI Wealth Divide"
• [47:49] Inflation’s psychological legacy
• [51:29] Homeownership and wealth inequality
• [53:40] Private market pitfalls
• [55:36] Personal finance, frugality, and generational spending habits
• [58:28] Joy in youth sports
• [61:49] Recommendations

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Tone and Takeaways

Michael and Ben mix skepticism, gratitude, humor, and the lived perspective of market observers and participants. They challenge bubble narratives—arguing much of the market is rational—while recognizing the risks that come with scale and extraordinary innovation. They frame AI as both massively disruptive and misunderstood, urge listeners to distrust market prediction “experts,” and repeatedly return to the theme that behavior—on Main Street and Wall Street—trumps all forecasts.
Their recommendations and anecdotes (from AI chatbots to post office inflation rants to youth soccer tournaments) ground financial discussion in the increasingly weird but very human present.

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For full charts, show notes, and further discussion, visit the podcast website.

Transcript

[Ben Carlson]

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[Podcast Host/Intro]

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 Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

[Michael Batnik]

Welcome to Animal Spirits with Michael and Ben. It turns out the stock market cannot and will not go up every single day.

[Ben Carlson]

Why? Because we had one down day.

[Michael Batnik]

We had one and a half, we had two. But now there are of course headlines that are following why stocks are down. And I'm not dismissing the yield inflation stuff. I you know, I think yields being at their highest level ever. Not that. Ooh Jesus. Not ever. They're at their highest level in quite some time. You know, it's, it's worth, it's worth looking at. Not sweeping it under the rug.

[Ben Carlson]

I'm sweeping that under the rug.

[Michael Batnik]

Okay, fine.

[Ben Carlson]

Every, I've got plenty to say about this but every time rates get to 5%, people flip out and then what happens? Rates fall again and nothing happens.

[Michael Batnik]

So let's, let's hope that complacent Ben is right that. But I'm just saying like the, the, the S and P and the Qs in particular are so far, so so far above any sort of normal trend moving average, whatever. If we get a 4% pullback. Heaven forbid, even 7. It might just be what the doctor ordered.

[Ben Carlson]

Yes, this could, this is, this is. Has to be one of those. Eventually we'll get a. Okay, I'm taking profits here. All those semiconductor stocks that are up a million percent, people will go, okay, fine, I'm getting out. I'm taking some profits. I made a. I made so much

[Michael Batnik]

money so front to buy. I, I was like, I don't want to say it's not sure, it's not really nice. But last. What day of the week was it when we was texting me? I don't know, Tuesday maybe Tuesday or Wednesday, I can't remember. And this is the friend of mine that like, I, I don't, I didn't. I did. We never. We don't speak stocks. I assume he doesn't listen to the podcast and he said, I like what you guys are saying about Micron. I don't even know what show he was talking about because we talking about it so much. He sold 10% of micron at whatever he crushed. He made it, you know, percentage wise. I don't know how much I know. Obviously I'm not asking how much money he put in, but he did, he did quite well in the trade. And he was saying how he sold 10. He's mad that he sold 10. And I was like, ah, you know, if you're bad that you sold 10 of a stock that tripled, I don't know what he bought it. Like that's, you know, that's, that's a pretty good, good sign anyway, I do think, I do think that. So friend, if you're listening, sorry to dunk on you, but whatever their dunk, a fair dunk. I do think that this is the fattest pitch setup for bears. Now, I, I just thought of this. So I haven't really like gone back and checked the tape that we've had in a while because you have. You could very credibly or easily make the case that we are in a capex memory bubble. Whatever. Choose your bubble. While at the same time we have a new Fed chairman coming in. Inflation is sticky, rates are high. We might actually need to raise rates. Like that is. That is a very plausible potent potable. Never potent potables from Saturday Night Live. I don't remember what those were, but that's a pot of cocktail.

[Ben Carlson]

But wouldn't the, but wouldn't the. The comeback would just be.

[Michael Batnik]

AI well, yeah, I'm not.

[Ben Carlson]

Good luck with that. AI.

[Michael Batnik]

I'm not suggesting that that's going to play out. I'm just saying there's a lot of meat on that bone for bear situation.

[Ben Carlson]

The weird thing is this has been the first level thinking bull market for so long now. It's not, it has been second level thinking. So could we actually for once have a first level thinking bear market as well because oh fair. The, the risks are so widely known right now. Everyone knows what the risks are, right? Yeah. Inflation is sticky, the war interest rates are going up. AI potentially just blowing out way too much excess. And that's. Those are all the risk. Everyone knows them.

[Michael Batnik]

But the AI bubble seven months ago, that was not a thing because as we all remember, everyone wanted no part of the bubble. These stocks were getting murdered. There was no memory up 8x earnings. Like we were in a different environment and it happened so fast. So like eight months ago nobody was saying the AI bubble, it was the anti bubble. As a matter of fact the narrative that we were saying was there is no AI bubble and as a matter of fact it is actually destroying everything else in its wake while simultaneously not getting blown up itself blown up to the, to the upside. But Ben, speaking of like the, the first, first level thinking, I've told this on the, I've said this before on the show in 20, I don't know, 14, 15 family member of mine had been a longtime sheld of Apple and he said the next Apple is Apple or something like that. And I definitely like ha. You know, I definitely like laughed at him like that internally. Yeah, he was right. It's been a first level thinkable bull market. Howard Marks ruined it for, for semi intelligent market participants. Anybody that thought that they were like moderately clever could, could blame Howard Marks.

[Ben Carlson]

It's a great company but that doesn't mean it's a great stock. But guess what? All the great companies have been great stocks. Yeah, it is really like the first time in history it's lasted this long. So yeah, maybe it will be just the, the obvious risks will be the ones that eventually get us. But the thing is the, the one the outcome that is going to leave no one satisfied is, is just that we have a really quick correction and then this thing just keeps going right. We have a woo 10% whoosh because like we need to pull back a little bit but it's not the system clear everyone wants to see. And then we just kind of a few months later pick back right back up where we left off.

[Michael Batnik]

We'll talk about smoother for longer there in the show but let's start Here. So we were talking on TCAF with Kai, who killed it. He was really good on the show. And we've. We've had this conversation a bunch, like, all right, what stops us, right? An object in motion stays in motion. There has to be something to knock it off its. Its course. And Kai was talking about, like, because I said, like, what do we think about the fact that companies, management. And listen, I know there are a lot of dumbasses out there, okay? So it's very easy to, like, say, what about this, this, this, this and this? But management teams have a lot more information, by the way.

[Ben Carlson]

Great. You've been using the word dumbass a lot lately. For some reason, it always. It always makes me laugh. Yeah. I don't know. You did it on the show the other day, and I laughed.

[Michael Batnik]

Okay, that's.

[Ben Carlson]

That's a good. That's a term we use a lot in the 90s, I feel like. So I'm glad you're bringing it back.

[Michael Batnik]

Speaking of the 90s, I saw Beavis and Butthead is going to Netflix.

[Ben Carlson]

Oh, really? Okay.

[Michael Batnik]

You know, that might be the origin of the word dumbass for all I know.

[Ben Carlson]

Possible.

[Michael Batnik]

So let's.

[Ben Carlson]

I think the guy on Back to the Future used the word dumbass. Marty McFly.

[Michael Batnik]

Okay, let's all agree that companies are better today than they were in the past and look no further than profit margins. I mean, they just. They're better businesses. Okay? Whether you want to ascribe that to management or the products, who cares? Doesn't matter. But the point that Kai made was it doesn't matter. It's behavioral. So it's not that they're less intelligent or more intelligent than, you know, management in years past. It's that there is a behavioral component to follow what everybody else is doing. Perhaps right off the cliff, matter of fact, Netflix, Streaming, great example. All of these. All of these companies that were in traditional legacy Hollywood media studios, they followed Netflix right over the streaming cliff. They overspent, and it nearly sunk them. So maybe my theory is. Is bunk. So anyhow, from Torson, Slok, America's data center is a count is about to nearly Double. In the US there are roughly 4,000 existing data centers, and there are almost 3,000 data centers under construction. So the. Perhaps oversupply. The way the telecom bubble bust, maybe that's just how this one plays out too.

[Ben Carlson]

I feel like we're reaching here. We're re. We're reaching for risks here. Everyone's just. Everyone. I just feel like everyone wants.

[Michael Batnik]

Hold on, dude. Hold on. Last week you said like, how do you not sound like a cheerleader? Yeah, I mean, should we do that every episode, just be like, this is amazing. Holy shit, can you believe these earnings?

[Ben Carlson]

My, my whole thinking though is that whatever, whatever knocks us off of our current trajectory, it's going to be something that we're. No one's talking about. That's just the way that, that's not,

[Michael Batnik]

that's not always true. That's not always true.

[Ben Carlson]

It's not always true.

[Michael Batnik]

But I, dude, we're not reaching here. I'm not saying if this, this and then this and then this and then this happens. I'm just saying oversupply, it can overbuild, that. That's a reach.

[Ben Carlson]

When I write a book about bubbles 20 years from now and I talk about the AI trade, that'll be a stat that's in there. Like, hey, there was 3,000 data centers that were, that were set to go under construction. Half of them never got built. Something like that. That's what happened to the railroads, right? They had all these lines that were going to build, never got built because they oversupplied. Yeah, I, that, that's certainly a possibility.

[Michael Batnik]

I actually bought a book, a physical book, because they don't have it in audio, called Broad Bandits about the over. The over building of, of the fiber optic cables. And we think a lot about like the dot com bubble. Like it was an Internet bubble, it was really the telecom bubble, like the build out of all this stuff. So I think that's a very plausible ending for this duality research.

[Ben Carlson]

But what causes the mega cap hyperscalers to pull back on their spending? What is the thing that makes them stop? I don't know, because it seems to me like the demand is there. So what's going to cause them to all of a sudden be like, all right, fine, we're getting off the train.

[Michael Batnik]

That I agree with you. But two things can be true. There can be enough demand to soak up all of the excess supply that is going to happen in five years. But like, I'm, you know, I'm not

[Ben Carlson]

saying it's tomorrow because that's the thing in the fiber optic cable. There wasn't enough demand there. We didn't have the computers and stuff ready for that yet. It had to come down the line.

[Michael Batnik]

That is.

[Ben Carlson]

Seems like now we have the demand.

[Michael Batnik]

There are too much demand. All you hear is, there's not enough compute. So that's a very.

[Ben Carlson]

And I asked Kai this, like, what, what is a better. What is More likely outcome, the baton handoff. And he's like, no, that never happens. And I totally agree, it could happen. I'm just, I'm just giving, I'm having an open mind that like, what if it does though?

[Michael Batnik]

I'm, I'm with you, dude. I'm doing the Tobias from the Tobias Harris who couldn't score a point in the final seven. Cor, what a bomb that guy is.

[Ben Carlson]

Tobias Fun from Russet Development. Didn't work for those people, but it might work for us.

[Michael Batnik]

I, I, I think that's a very like, likely possible outcome as well. All right, so duality research. Every week they show the, they show a chart of the, the price return of the sectors. Then they show the EPS growth and then they show the PE multiple growth. And what you'll notice is EPS growth positive in every sector and multiple contraction in every sector. Besides for staples, industrials and real estate,

[Ben Carlson]

that's a good chart.

[Michael Batnik]

So you could look at this from, you know, this is a Rorschach test. You could say that. If you're a bull. You could say this is phenomenal. The market is getting cheaper or we still have room to run. There's no euphoria.

[Ben Carlson]

Yeah. Fundamentals are not detached from reality. Fundamentals are literally great.

[Michael Batnik]

And a bear could very easily say, hey, dumbass, sorry, I did it again. The market's not stupid. These multiples are contracting because the earnings keep going up. But the market knows that they're not sustainable, so they can't possibly get it

[Ben Carlson]

one time shot in the arm for earnings. Yeah, great. You guys keep talking about earnings, but this is not going to last.

[Michael Batnik]

Right. So we, we spoke about this last week and we use this on tcaf. But I don't want to assume that everybody watches every single thing that we do. So these charts are too good not to share here. We spoke about Nvidia just getting bigger and bigger. The number, excuse me, the earnings, the market cap. And yet the forward PE is, is going down. And I said that's not cheaper, that's rational. So look at the 12 month forward net income versus the forward PE ratio. Yes. The forward PE ratio is on the lower end of its range that it's been over the last, I don't know, nearly 10 years. It has to be. When you consider that the forward 12 months ear net income has gone from what, what even, it's like I can't even see it. Is that 15 billion in 2023 to $223 billion today. You can't get a premium. It's too big. So Matt showed what the market cap of Nvidia would be if it were to trade at a. At various forward PEs. And right now at 25 times, it's 8 and a half percent of the market. If it were to take up to 30 times, it would be 10%. At 35 times forward earnings. That's 12% of the market. It's just, it's, it's, it has a

[Ben Carlson]

size problem, you would think too big. If a company's growing this fast, why isn't it given a 40 times multiple like it should be? But because then it would be a $10 trillion company. It's already a five and a half trillion dollar company or whatever.

[Michael Batnik]

Correct. All right. I. For anybody that thinks that we are in a stock market bubble, not an AI hyperscale, but just a stock market bubble. All right, let's like put a pin in the eye trade. The S&P 500 is in a bubble. Oh really? Duality research. Check this out. The distribution of forward PEs. I've never seen this before and I love it so much. The distribution of forward PEs by. He shows it both by the percentage of stocks and by the percentage of market cap. So true. The percentage of market cap that is trading between 30 and 35 times earnings, not cheap. Is 20%. But look at all of the percentage of stocks that are trading between 10 and 15 times. 15 and 20 times. 20 and 25 times. So 30% of the index by name is between 10 and 15 times 30%.

[Ben Carlson]

So the majority of the market trades below 20 times earnings.

[Michael Batnik]

Just. Yeah, not by market cap.

[Ben Carlson]

Right. But just number of stocks.

[Michael Batnik]

Isn't that wild?

[Ben Carlson]

It is. And if the AI trade blows up, it's not going to matter. The market will all go down.

[Michael Batnik]

True, this is the K shaped stock market.

[Ben Carlson]

But this is the kind of thing where you said if you were really concerned about it, if you were really worried about an AI bubble bursting, there's plenty of other places to go.

[Michael Batnik]

Totally.

[Ben Carlson]

Yes. A lot of places.

[Michael Batnik]

All right.

[Ben Carlson]

Exhibit A. Chart of the week. Exhibit A4advice.com if you want to try free trial. Matt and team did one on earnings growth and we talked about this. It looks exhibit.

[Michael Batnik]

Exhibit A. We speak about it all the time. It's. It's for advisors only.

[Ben Carlson]

Yes, yes. I think we had a few individuals try it. Like, like, hey, this isn't for me. Like, yeah, of course it's for financial advisors. But look at the earnings. Expected earnings this quarter just shot off, shot up like a rocket ship. It doesn't look like it's real. It looks like a Covid chart. So yeah, a lot of people could be saying to your point, hey das instead of dumbass. This is a one time boost, a one time shot in the arm. Like the market has already priced this in and it's going to move on.

[Michael Batnik]

How about this? If these earnings come back to where they were, the market will fall 40%.

[Ben Carlson]

How about this though? Mike Zard. Yeah, yeah, I'd have to. Yeah, it would go the other way, Mike. Zakari Russell 2000 is seeing EPS growth 40% this year, 38% next year for the small caps.

[Michael Batnik]

I need to look inside these numbers. That's wild.

[Ben Carlson]

Yes. We're going to have to put Charit on this one because I'd never seen this, that this has to be growth,

[Michael Batnik]

this has to be AI productivity. What else could it possibly be?

[Ben Carlson]

Are we really seeing that much productivity growth for small caps? It could just be.

[Michael Batnik]

What could it possibly. What could it be?

[Ben Carlson]

I don't know. Because growth was so low in 2025. I don't know. I honestly have no idea. All right, I'm putting you mentioned yields at the start. So yield. The 30 year treasury bond is up to like 5.1, 5.2%. Everyone keeps saying this is the highest yield since the great financial crisis and oh boy, this is a, this is, this is something. Just wait. Okay, so here's, here's. I can't remember where I pulled this chart from. It shows highest since 2007. Okay, so treasury yields are up a lot. Do you know what TLT. So TLT is a 20 plus year government bond ETF. Do you know what the performance is this year for tlt inclusive of the yield? What is the performance this year? If you had to guess because rates are up a lot.

[Michael Batnik]

Down 3%.

[Ben Carlson]

Yeah, it's down 2 1/2% or so. Do you know what the performance was last year? It was TLT. Yeah, it was up like 4 or 5%.

[Michael Batnik]

Yeah, yeah, but that, but that doesn't mean anything.

[Ben Carlson]

But I'm saying that.

[Michael Batnik]

No, no, nobody is saying the price of your bonds is the risk.

[Ben Carlson]

But this to me is a boy who cried wolf thing. Show me a real impact and I'll believe you. But every time this happens people freak out and nothing happens. So I'm saying this is a boil cried wolf.

[Michael Batnik]

Sometimes the wolf comes.

[Ben Carlson]

Do you know what the average Treasury. Do you know the average long term treasury yield is going back 50 years in the United States? What's the long term average for the yield, 6, 6.2%. Today it's 5.2%.

[Michael Batnik]

So what?

[Ben Carlson]

That's what I'm saying. So what? Stop telling me this is a crisis when nothing ever happens.

[Michael Batnik]

I'm not.

[Ben Carlson]

Show me. I'm sick of hearing about government debt, and yet in treasury bonds in Japan, they're saying Japan bond yields are up so much. Guess what? Stocks are at all time highs. Where are stocks at all time highs in the US Same thing. It doesn't matter if yields are higher until it does show me a crisis, then I'm sick of hearing people complain about it. Show me this. I'm sick of the Boyle cried wolf stuff. Nothing happens. Nothing ever happens. Give me a crisis, please.

[Michael Batnik]

I really, really, really hope this is an aged poorly. Now, listen, I am with.

[Ben Carlson]

Throw it on my face.

[Michael Batnik]

I'm sick of hearing you. I am with you. I am friendly with you. But we are here to talk about the market. And this is a potential. This is a potential risk.

[Ben Carlson]

Yeah. And I'm saying, no, it's not.

[Michael Batnik]

Okay. I hope you're right.

[Ben Carlson]

All right, I want to talk about market timing. So on the Prof. G podcast last November, they had asked about the motor not. And he's one of the smartest. If you listen to his pod, any him on any interview, he's one of the smartest people alive in the markets.

[Michael Batnik]

Probably easily.

[Ben Carlson]

He's ridiculously smart. I remember I read one of his books, his like books on valuations like this, you know, like 4 inches thick when I first. And a lot of it was over my head. But anyway, really smart guy. So he was saying, listen, I am super, super worried about an AI bubble and I'm raising cash for the first time basically in my life. And Galloway was like, man, because they work together at miu, he's like, I've never heard you sound this bearish before. This is. I. I've never heard you like this. It's crazy. And he said, yeah, I'm telling people they should maybe raise cash because this is. And I've never done this before. So he was on the show again this past week for an update, and he's like, you know, what did he say?

[Michael Batnik]

Just kidding.

[Ben Carlson]

No, he was like, you know what? This is why you don't time the market. I was wrong. And he, you know, he owned up to it. And he said.

[Michael Batnik]

When did he say that? When did he say raise cash?

[Ben Carlson]

So this was last November, like last Thanksgiving. I remember listening to it when I was down at Disney. And I was like, man, this is A really smart person. He sounds uber bearish. He's like, listen, this whole AI trade, everything is the air trade, and when it blows up, there's nowhere to hide. I'm raising cash. He said, I've never done this before. And then he said, you know what? Timing the market's hard. I was wrong. And I just, I want to remind people how hard it is to time this thing and how long this thing's been going on and how no one is going to get it perfectly. And if they do, they're. They're lucky they're pulling out of their ass. It's not like a real analysis. You can't time these things.

[Michael Batnik]

I'm not as susceptible to market opinions from smart people as I was in the past. I. I used to be very easily influenced, especially if somebody had a British accent that was bearish.

[Ben Carlson]

That bow tie. Bow tie gets you every time.

[Michael Batnik]

That's my kryptonite. If I could, like, give investors general, like people listening, one ability, it would be to listen to these smart people and just completely discount it.

[Ben Carlson]

Yes.

[Michael Batnik]

Just say, okay, these are intelligent people. They can't see the future. Intelligent people can't see the future. It's so hard. It's so hard because these demoter and whoever you listen to, they know 400 times as much as you do.

[Ben Carlson]

Yes.

[Michael Batnik]

And so you think that they're experts and therefore they can predict. It just is not the case.

[Ben Carlson]

I learned this early, too. When I first was in meetings, when I first joined the industry, I would listen to these people talk about the markets and I'm like, oh, my gosh, I'm never going to be as smart as these people. And then I saw what happened in the great financial crisis in the years afterwards, and I thought, oh, none of these people knew it was going to happen. They've all been wrong. And that was like a real wake up call for me. Like, you're right. Like, don't take some analysis and tidbits from them. But they cannot predict the future. They can't.

[Michael Batnik]

Yeah. And I'm also not discounting experts.

[Ben Carlson]

No.

[Michael Batnik]

Right. Like, it's not just like the moto. Legitimately, these, some of these people that you listen to are brilliant and know. So, okay, so I was listening to Dwarkesh. I. I was listening to a podcast yesterday, the day before it ended on Spotify, and it automatically started playing the new one. Right. So it was Dwarkesh Patel and he had, like, he had somebody on that studies how. My God, I can't even. I can't Even describe what they were talking about. How your, your genes change over like millennium. Right? Like natural selection, how that all works. And these guys were speaking a different language, a different guy. Dwarketch could go so wide. It's amazing how many different things that guy can talk about. Anyway, I don't even know why I was listening to, quite frankly. I didn't understand the single thing they were saying. It was just sort of background noise. So this guy who was talking about like how things change, he can't predict the future either, Right. And did you hear the fertility guy with Derek Thompson?

[Ben Carlson]

Yes.

[Michael Batnik]

Like, and that guy can't predict the future. So those are legitimate experts. They know more about their field than anybody on the planet. And yet they're tossing a coin.

[Ben Carlson]

And the reason is because they're human. So Michael Burry. There was another headline. Michael Burry warns of stock crash as tech jump echoes 2000 peak. He said, history tells us that even if the party goes on for the week, month, three months, or year, the resolution will be much lower prices.

[Michael Batnik]

Why is he doing this?

[Ben Carlson]

We're getting into rare air so extreme the consequences will be unavoidable no matter where one hides. Kind of sounding similar. Spencer Jacob at the Wall Street Journal did this thing where he, he plotted bur's calls on the, on the line of the market, right? Remember 2019, he was calling for a passive bubble. He said in 2019, he said this will be ugly in 2022. He said this will be worse in 2008. Remember he had the cell tweet in 2023. I just like to remind people of these not to like shove it down someone's throat. Like, haha, you were wrong. But it's, it's to your point. You can't listen to every one of these predictions. I would love to drive you insane.

[Michael Batnik]

I would love to see what his returns look like. I'm guessing I bet they've been okay. I'm guessing they've been not even like if you, if you lined up the, the things that we see about him in the newspaper versus his performance, you would say something is not tracking here because there's no way that he's lost 20% a year for. I mean, obviously, right.

[Ben Carlson]

But it's like that with all those people with Drucken Miller and Dalio and ptj. You hear their, what they say in CNBC and you go, oh my gosh, these guys are so bearish. They're predicting another crash. Then you look at what they hold and it's not like that at all. They're making macro predictions, but they don't allow that to seep into their portfolio. That's the thing. All right. Speaking of a passive bubble, good one from Goldman Sachs, that I love this ownership of the US Equity market. So I saw someone post a thing the other day saying passive index funds now make up 60% of all fund assets. It's like, holy crap. Now look at for the total stock market, right? Passive mutual funds make up 6%. ETFs make up 10%, which is the same as active mutual funds. At 10%. Passive mutual funds and ETFs make up less than foreign investors. So it's, it's a tiny piece of the overall pie.

[Michael Batnik]

But what if foreign investors are holding ETFs and index funds?

[Ben Carlson]

I don't think it works like that. It doesn't work like that. They'd be, they'd be included in that.

[Michael Batnik]

Your point is taken. It's, it's, it's, it's simultaneously obviously a gigantic part of the market. I mean, obviously, right. It's like it's many, many, many, many trillions. But it's also, there's other things going on inside the stock market aside from index funds.

[Ben Carlson]

Here's so people keep saying people have no decisions. There's no fundamentals involved with buying this stock. The biggest piece of the pie is direct household ownership. And guess who owns those shares. Elon Musk. Jeff Bezos, the founders of these companies. Are they ever selling them? And that's 40% of the market. That's where most of that money is. It's people who work at these companies and own shares in the stock. They're not selling either.

[Michael Batnik]

Here's I what I think one of the things that is very legitimate about the changing structure of how the market is held and traded. Back in the day, there was a lot of analysts, a lot more analysts than there are today covering a bunch of different stocks like mid cap stocks, small cap stocks used to have a lot of analyst coverage and they just don't anymore. And if nobody discovers these names, it is harder for them to trade on fundamentals, which is why I think a lot of the active managers have had such a hard time. It's like there could be value in these stocks, but they're just dead money because nobody's there to recognize the value.

[Ben Carlson]

But all of these companies are going to be covered now because of AI. There's not going to be any more stones left unturned. Think about how much easier it'll be for an equity Analyst to have a wider cast, a wider net in terms of the companies that they follow.

[Michael Batnik]

Yeah, good point.

[Ben Carlson]

Right. There's going to be no more. No one pays attention to these companies anymore. That's the thing of the past. Equity research departments are going to cover every stock they can.

[Michael Batnik]

All right, so speaking of AI, let's get to this email that we got.

[Ben Carlson]

Okay. As you discuss your new Porterhouse SMA strategy, I wondered to myself, could I ask AI to tell me about their momentum strategy so I could skip all that pesky having to send Ritholtz my money and just get the expertise free from the machine? And then this guy sent us, like, whatever AI spit out. And I wanted to talk about this because this is going to be a thing where you can go to. You'll be able to go to AI and I'm sure. I think it's already, you know, public has something like this already. I'm going to create my own index, and I'm gonna hit a button and it's gonna say, trade it for me, and I'm gonna create my own rules. And I want this basket of stocks, and I want it to do this, and I want it to change this. Do it for me. That is definitely going to be a thing.

[Michael Batnik]

Oh, yeah.

[Ben Carlson]

But I think what's gonna happen is you're gonna create one of these systems, and then you're gonna tinker, and then you're gonna change this and you're gonna change that. Wait, that didn't work. Let's change this. Well, that didn't work. Take that out. And you're never going to be able to stop tinkering, because it'll be there. There's no barriers to entry. And sometimes having strategies with relatively simple rules. And our strategy actually is not that simple. It's a lot that goes into it, but the hard part is just sticking with something. That's the thing. And I think AI is going to. Just the barest entry, being knocked down. It's going to be impossible for people to stop tinkering with stuff like this.

[Michael Batnik]

Depending on your personality. Totally. For me, absolutely. I'm a tinkerer. You know that.

[Ben Carlson]

So what do you think about these people who want to just. All right, I'm just going to replicate what you do. I'll take. I'll. I'll. I'll get 75% of the way, and I'll. I'll try to do it myself. More power to you.

[Michael Batnik]

Yeah, sure. Why not? Experiment? Yeah, go for it.

[Ben Carlson]

You can outsource trading systems and stock Screens and all this stuff. But if you don't understand how a strategy works and why that's, that's the hard part.

[Michael Batnik]

It's like the portfolio construction. It's not necessarily building a screen is not rocket science. I mean there's, you know, not to discount how much work went into it. But it's the portfolio management and it's the, and it's the decision making and the behavior and can you stick, you

[Ben Carlson]

know, the stick to itness and like understanding, guess what? This strategy is not going to work at some point. No, no. Strategy works all the time. There's going to be a good win rate in the stock market is maybe 55 or 60%.

[Michael Batnik]

Oh yeah. So we, we had somebody busting our chops about launching momentum strategy after one of, after like an all time performance run for momentum. Is this the top. And he was just busting balls, like. And because I respond, I said we started building this in the winter. Like I, I wish that this didn't happen.

[Ben Carlson]

Right.

[Michael Batnik]

Because momentum, like anything else is seasonal, right. It has, it stays in the sun and then it has its periods where it sucks shit. And there's no doubt about it that momentum on wines are really painful. That's the nature of the beast.

[Ben Carlson]

Yes. And you also have to figure out the position sizing of, well, how much of my portfolio is this going to be, right? If you put all your portfolio in it, you're going to, it's going to be probably kind of painful. If you put a piece of your portfolio in it and you have compliments to it, that's a different thing. And that's. You're right, it's the portfolio management side of things. Anyone can create any screen they want these days. That's easy. Fair question though.

[Michael Batnik]

So I want to stick with, I want to stick. We're going to stick with this. I want to stick with some of the AI stuff because I think a couple of months ago, like man, the. The. My personal usage of AI has happened gradually. Then suddenly and I was trying to think of a different phrase because it's so cliche, but it is true. So like maybe like a year and a half ago, I was thinking like, how exactly, how are you. How, how exactly are you using AI? And I don't mean you Ben Car. I just mean like people that are talking about it so much, how are they using it? So I want to give an example of how I used it. Over the weekend, Howard Lindsin shared an article, AI is the new Netflix. And it was fairly technical and I am not a technical person, especially when it comes to technology.

[Ben Carlson]

I'm not gonna lie. I read this piece. I still don't quite get the analogy I did. Keep going. Okay, I don't get it.

[Michael Batnik]

So if I understand it correctly, the Internet was built and Duncan could jump in here, if this is a Duncan thing. The Internet was built for download. It was like. And. And when streaming came along and it really disrupted the broadband availability, like, I think it. Things sort of buckled. We didn't have enough infrastructure. So we were built to receive information AI. We are pushing it out. This is like an upload thing. So I think this article is about, like, how the system is going to evolve. So anyway, I asked Claude to break it down for me, and here's what Claude said. Back in 2008, video streaming was the thing that made people care about download speed. It ate bandwidth, drove everyone to upgrade their Internet and forced the cable fiber companies to rebuild their networks around it. Oh, Malik, he's. He's the. The author and also the guy that wrote Broadband. It's how I found the book. O. Malick's argument is that AI is now playing that same role, except it's flipping the direction. AI is the killer app of the next era, not because of what it downloads, but because of what it uploads. So I had never thought about it that way. And I said, let me ask Claude how our Porterhouse portfolio is positioned for this potential disruption, this potential theme. Now, obviously this is not investment advice. Okay, Duh. So we have. We have Porterhouse and Y charge as a plugin. And so it pulled it directly and it said, pulled the live book. Porterhouse is heavily exposed to this theme, but through a specific slice of it. And not the slice. Not the slice oh, Malik actually emphasizes. So I said, hmm, okay. So it showed me the holding, the ticker, the weight, and where it sits in the thesis. So Sienna, Vertiv and Amphenol, three of the bigger names in the portfolio. And it described what's going on here. And then it said to me, you have these. You have essentially zero exposure to the part of Ohm's thesis that's actually differentiated. Claude said his sharpest, least credit point was the access layer structural split fiber, which is Verizon and AT&T, as well as structurally advantaged cable, Comcast and Charter. Porterhouse holds none of these. No telecom, no cable. So the portfolio is loaded on the crowded AI infra Capex reading on the thesis, by the way. Yeah. Is Claude taking shots at our portfolio? Momentum by definition, especially when it's working.

[Ben Carlson]

Claude, guess what? I'm glad I don't own AT&T.

[Michael Batnik]

Yeah, when momentum works, it is crowded by definition. Okay, so that's, that's not like.

[Ben Carlson]

Because these aren't momentum names yet. Maybe they will if this thesis plays out.

[Michael Batnik]

Okay, so, but, but here's what Claude said. Let me finish. So the portfolio is loaded on the crowded AI infra capex reading of the thesis and has no position in the genuinely contrarian last mile angle. That's not a criticism of the signal. Telecoms haven't had the momentum to qualify, but it tells you the factor is expressing the consensus version of the theme, not the differentiated one. Not that you asked, but it is important, at least for me personally. One of the reasons why I love the strategy so much. Not to make this sound too much like a commercial, but I can't ride winners. I've said this to you guys a million times. I don't have the ability to do it. It's not in my personality. I know how hard stocks, I know how many stocks are terrible. And so when I have a winner, I, I take it. And Peter lynch famously said, selling a winner and adding to a loser. Now I don't do that. I don't add to losers. But selling a winner and adding to losers, which is like the natural thing to do, is like pulling out your flowers and watering the weeds and having a systematic strategy that doesn't do that for me personally, is hugely beneficial.

[Ben Carlson]

I'm the same way. I could not hold a stock for 500%. I, I sent you the quote yesterday. Howard Marks was like, there's two reasons you sell a stock. Because they go up and because they go down. Because they go down, you sell and they're up because you worry that they're going to go back down. And you sell the down because you worry they're going to go down even further.

[Michael Batnik]

Exactly.

[Ben Carlson]

That's why. Because momentum is. It's a totally behavioral strategy. And that's why there's not a lot of money in these strategies to begin with. There's. It's way easier to understand a value strategy. I'm buying a dollar for 50 cents or 60 cents. That's easy to understand. Momentum is not easy to understand. Like that. I want to say Claude by far is the best stock market analyst there is for these LLMs, and it's not even close. So I take, I'll take the year to date holdings for the s and P500, and I will upload them to Claude and say, what's going on here and it'll give me a sector breakdown, a stock breakdown. It's, it's actually pretty unbelievable.

[Michael Batnik]

So this brings us to what Ken Griffin said over the weekend. Like the work that I just described to you that I did over the weekend, which took me all of, I don't know, like I was start to finish between reading the article and getting this in 10 minutes. That's a job that might be multiple people's jobs. So Ken Griffin was talking about this, how this is going to impact financial services and I want to play this and get your reaction.

[Ken Griffin]

Ben, really interesting to watch. To be blunt, work that we would usually do with people with Masters and PhDs in Finance over the course of weeks or months being done by AI agents over the course of hours or days. So these are not, these are not mid tier white collar jobs. These are like extraordinarily high skilled jobs being, I'm going to pick a word, being automated by agency, AI. And I, I got to tell you, I went home one Friday actually fairly depressed by this because you could just see how this was going to have such a dramatic impact on society. And when you witness it in your own four walls, when you see work that used to be man, years of work being done in days or weeks, it's like, wow, that's the first time I've seen real impact in our four walls.

[Michael Batnik]

Thoughts?

[Ben Carlson]

I did listen to this. I agree with him. It's kind of scary and depressing in ways. The biggest question I have is it is AI doing jobs or is it doing tasks? And that I think that's a big distinction.

[Michael Batnik]

Dude, that's, that's some, that's a job. What I just did over the weekend and what he is describing and to his point, that's not, that's not like entry level jobs. I mean, you know, maybe the stuff that I was doing was. But so it is, it is certainly part scary and depressing. I mean it really is. And of course it's also super exciting.

[Ben Carlson]

So what will put more analysts out of work? AI or index funds? Did Jack Bogle do it or did AI going to do it? Because I could. You could make the case that index funds at a bigger impact.

[Michael Batnik]

Fire and gasoline.

[Ben Carlson]

Okay. Yes, I, I agree there is a lot of scary stuff with this and yet the unemployment rate is still four and a half percent.

[Michael Batnik]

Dude, we're so early. So, so to that point, what's the

[Ben Carlson]

timestamp 2027 before you can't see that anymore.

[Michael Batnik]

So Gavin Baker did a. I don't know. He was at the Stone conference talking about this and it's 25 minutes and I highly, highly, highly recommend it.

[Ben Carlson]

I didn't listen to this yet, but I heard a bunch of people say it's yeah. Worth.

[Michael Batnik]

He makes you feel way better about the bubble. About like he makes whatever. Just, just listen to it. But Gavin said 10 basis points of the population are using these models and there is a shortage of compute what happens when it's 5%.

[Ben Carlson]

So he was saying like it can't be a bubble if the demand outstrips the supply. Is that what he.

[Michael Batnik]

He. Yeah, he's basically saying like this was his case for smoother for longer. But dude, it is so early.

[Ben Carlson]

I was at a party a couple weeks ago for like a March Madness party and we were talking about, you know, how much do you actually use AI in your jobs? And I was talking about how I switch between Claude and Gemini and ChatGPT depending on what I'm doing. And this one guy was like, what's Gemini? I've never heard of that before. So that's most people though of course most people don't.

[Michael Batnik]

Don't tell me about the unemployment rate today. And I'm not predicting 10% anything like that. But to look at the unemployment rate today and say AI is not disruptive is a joke and you're better than that.

[Ben Carlson]

Do you. If you looked at the numbers of what's happening and this is still going on after it's been out for three or four years now, wouldn't you be surprised that the unemployment is still as low as it is given. Given all the leaps forward that we've had.

[Michael Batnik]

Yes, but was invented three or four years ago. It has only just begun.

[Ben Carlson]

Ben, here's the, here's the one thing that I think is impossible to predict in all this. So Alex Han put this tweet out. This is incredible. AI is getting booed out of the stadium at any commencement address is mentioned. So Eric Schmidt did a commencement speech at Arizona and anytime you mentioned AI, the students booed.

[Michael Batnik]

Oh, I love it.

[Ben Carlson]

AI is a villain. And so the question is, what are the political ramifications? And like our company is going to

[Michael Batnik]

get penalized if we have to tax the robots.

[Ben Carlson]

That yes, if.

[Michael Batnik]

If for nothing else to make us feel like we're doing something.

[Ben Carlson]

Yes.

[Michael Batnik]

Because I don't know that anything can stop this can slow this down.

[Ben Carlson]

Because I think if we. You just look at what happened sentiment wise after 2008 and none of those bankers went to jail, which is still beyond imagination from. I don't know how that, how no one went to jail.

[Michael Batnik]

You could draw, you could draw a direct line from that. The lack of ramifications to where we are today.

[Ben Carlson]

Definitely. So my question is like, are politicians actually going to do something about it? Will companies be penalized if they have a mass layoff because of AI? Will there be a penal. And will you say, hey, your company gets a lower tax rate if you keep hiring people and don't lay them off because of AI? Like, I don't. You don't. You can't see. Because some people just like, you know what, there's no use fighting it. It's inevitable. And I get that. But I also think you can't predict what the political ramifications of this are going to be because people are. People hate this so much.

[Michael Batnik]

Yeah. So that, that is a clear. You know, I know we keep talking about. That is a scary part of it. All right. Potentially exciting part of it. Although maybe scary too. So Brett Adcock, the founder of a humanoid robots company called. Oh my God, what is the name of this company? Gosh dang it. It doesn't matter.

[Ben Carlson]

IRobot.

[Michael Batnik]

No. So they have been live streaming robots sorting packages. They said our original goal was an eight hour run. We wanted to run non stop and fully autonomous. Since then we made the decision to keep the party going. We're now over 48 hours of non stop autonomous operation without a failure to perform the use case. This is uncharted territory. So the task is small package sorting. The robot detects the barcode, picks up the package and reorients its barcode face down onto the conveyor. Humans average around three seconds per package. The robot is now around human parody. I, I think it's still running. Man, oh man.

[Ben Carlson]

So this is one of those things that I think this is a double edged sword of, boy, this is scary. Robots taking our jobs. But I also think, I think we need robots in this country. So you talked about Derek's podcast about the fertility crisis, right. That we're not, we're not having, we're not replacing enough. If a couple has one child, there's. The replacement is not there for humans. So like eventually population is going to decline. We have, we're going to need robots to help take care of people in services and we have to have them, otherwise this whole thing falls apart.

[Michael Batnik]

Looks like they're coming. We were talking about.

[Ben Carlson]

Hang on, is a baby. Would a baby boom be the most surprising thing in the next 20 years if we had a baby? Boom. Would that be the most surprising thing that could possibly happen?

[Michael Batnik]

Oh my God. Imagine AI and robots make the world like this nirvana state and everybody just has free time to procreate and replenish the population. Hilarious. Well done, Ben. All right. A couple of weeks ago we were talking about. There was an article in the journal. Was it Greg Gip who we like? But like, he was making the. I think, I think he was making the contrarian case that an AI slowdown would actually be fine. No, it wouldn't. So Tor and Slock showed AI is penetrating every corner of financial markets. What began as an equity market phenomenon has become a capital markets wide transformation. AI now accounts for nearly half of all investment grade issuance, 87% of VC funding, and a growing share of high yield, underscoring how deeply the AI investment cycle has penetrated every corner of finance. If this stops, the music stops.

[Ben Carlson]

Can I just say though, that we have moved the goal post a lot on this because at first it was, no, this is never going to work. And now it's like, oh, now it's working too well.

[Michael Batnik]

Yeah.

[Ben Carlson]

So I think we've moved the goalpost in some ways. So this is better than the alternative of we spent all this money and nothing happened.

[Michael Batnik]

The, the, the top line numbers that are being reported out of Anthropic are like nothing we've ever, ever seen before. And, and in. When was the Max 7 and the AI trade really in the shitter? It was when Sam Altman went to the podcast. Was that the fall? I can't even remember. It was over the fall.

[Ben Carlson]

Sounds about right.

[Michael Batnik]

And all these names got hit and Oracle was at the center because, like, wait a minute, I don't think OpenAI's five year, $300 billion commitment to Oracle is going to come to fruition. And now that has turned dramatically both Oracle shares and the entire narrative because the fundamentals are proving every doubter wrong.

[Ben Carlson]

So I can't. Living in like San Francisco in that area has to be so trippy because everyone who talks about this stuff is talking about the world changing at the fastest pace in history. If you hear the tech bros go on podcasts and talk about this stuff, they're, you know, we talk about AI and what it's going to do. They talk about it like it's the, the, you know, nirvana is already here, but it's also the wealth piece. So this DD on Twitter post, he said this. The vibes in SF feel pretty frenetic right now. The divide in outcomes is worse than I've ever seen. So he said over the last five years, a group of say 10,000 people at Anthropic OpenAI Nvidia have hit retirement wealth of above $20 million based on their shares in the company. Everyone outside of that group feels like they can work their well paying jobs less than 500,000 for their whole life and never get there. Worse yet, layoffs are in full swing. But this is funny. He goes to all these different people and why they're miserable because of this wealth. And one of them is like, good luck competing with someone from Anthropic who just cash out their shares to buy a house, right? But he said the rich aren't particularly happy either. No one is shedding tears for them. But those who have made it experience a profound lack of purpose. Some have gone from less than $150,000 to $50 million in a few years with no ramp. It flips your life upside down. He said. Some of them escape to New York to live life. Others start companies just because to win status points they never imagined by age 30 they'd be set. I once asked a post economic founder friend why they didn't just sell the company and they said, then do what? Right now everyone wants to talk to me. If I sell, I will only have money. It has to be a dystopian, weird kind of place to live is all I'm saying.

[Michael Batnik]

There was a lot of people dunking on this and rightfully so. I understand the dunks completely.

[Ben Carlson]

He's totally on point.

[Michael Batnik]

He's like, so from the outside looking in that whole pocket of life is bizarre world. There is more to life than this, right? Okay. But if you are inside of that life and that is your life, all of the human emotions that he's describing are human. You need like. One of the things that I find so incredibly satisfying and lucky about my path is that I hit rock bottom. I was unemployed for a long time and I had no career prospects and things were going incredibly bad for me. And I had a 15 year ramp to get to the point where I am today, which I never thought I would get to. And it has been. I still cannot believe the journey that I've been on and how lucky I am. And I think about it every second of every day for the most part.

[Ben Carlson]

I wanted to talk about if that

[Michael Batnik]

happened, if that happened to me overnight. Like, yeah, it was totally screwed without the struggle and without like the gradual improvements. And now I can do this, and now I can do that, and now I can do this and, and do this for my family. And that if that just happens overnight, it breaks your brain. And then. And then living in society with your friends and your neighbors, when everything is so public, you become like, oh, that guy.

[Ben Carlson]

Think about if you joined OpenAI two years later, and you're more talented than someone else who joined two years before you, but they're 10 times richer than you just because they happen to join the company before you.

[Michael Batnik]

Is it because that scrambles anybody's emotional?

[Ben Carlson]

Is it because they're smarter than you or they're better than you or they're harder working than you? Maybe not. They might have just got lucky and timed it right. And so Clooney and Jon Hamm have talked about how they are happy that they found fame in their, like, later 30s, and they struggled for a while before to get there, because they're like, if I would have got it earlier, I would have been so screwed up. And sometimes waiting is so. I agree. The perspective thing, I just think it's. But I mean, again, imagine trying to compete for a house in that area when these people who just got all these shares go, I don't care. I'm buying whatever house I can. I don't care if I pay more. I got $10 million.

[Michael Batnik]

A couple of weeks ago, we were talking about the Three Kings book, or not Three Kings, whatever it's called, with. With. With. With Coppola and Spielberg and George Lucas. And they each said when they made their monster monster hits, they were depressed afterwards because, yes, that was the thing

[Ben Carlson]

I pulled out of the Spielberg thing, that I was like, oh, my gosh.

[Michael Batnik]

Being on top of the mountain is not fun. It's climbing the mountain. And that's, like, the whole purpose of life.

[Ben Carlson]

But he also talked about how Spielberg started working with David Geffen. And David Geffen was a billionaire, and Spielberg at that time was only worth $600 million. And he's like, looking up at, this is the guy who's created the best. Some of the best movies in history. And he's like, why don't I have a billion dollars? It's a natural human emotion.

[Michael Batnik]

So you can't. You just. It just. If you. The listener, if anybody was in these shoes, these people are all human beings. This is just what happens.

[Ben Carlson]

Yes, I. But I agree with you.

[Michael Batnik]

I'm very happy. I think. I think everybody reading this is like, thanking God that I'm not. That's not my life. Because that sounds miserable.

[Ben Carlson]

But you're right. I do think the one thing is the. The way that you break that Cycle is just gratitude. Like, I'm better off than I was before. I don't care if I'm not better off than that person. I'm better off than I was, than I ever thought possible.

[Michael Batnik]

Yeah, that's hard.

[Ben Carlson]

Ten years ago, that's hard.

[Michael Batnik]

But, yeah, that is the way.

[Ben Carlson]

All right, I want to talk about a discussion I had at the post office, so. About inflation. So I've been. There's a post office right next to my office, essentially, and I'm sending out books to people. I'm sending out signed copies of my book. And I went there two or three times in one week because I had this big batch of books. And the guy at the post and is this really large guy, like muscular, like built, you know, kind of guy. His name is Cletus. Okay? So I get to talking a little bit. He goes, why do you keep sending out so many books, man? Because you have to tell him, what are you sending? Oh, it's a book. He said, are you an author or something? I said, yeah, I am. And I wrote a book. He said, well, what are you writing a book about? I said, well, it's about investing in markets. And he said, let me ask you something.

[Michael Batnik]

You still. You still like Micron here?

[Ben Carlson]

He goes, what do you think about everything that's going on right now? And I was like, what do you mean? Go, keep going. And he's like, just. He's like, are you familiar with Weimar Germany? Hyperinflation? People carrying wheelbarrows full of cash down the street. He's like, I kind of think that's where we're heading. I said, okay, you should have given

[Michael Batnik]

him a signed copy of your book and said, read this.

[Ben Carlson]

What I told him is, all right, man, listen, I don't want to debate you on this. This is a very articulate guy. I think he went down kind of a crypto rabbit hole on this stuff. And I said, I'll tell you what, Next time I come in with the next batch of books, I'm going to give you a copy and I want you to read it and let me know what you think. Here's my thinking on this. I think having sky high inflation this decade was one of the most surprising psychological outcomes. I totally underestimated what it would do to people. And I think for him, it was all about inflation and how he's like, inflation is basically ruining the country. And I think we've all been reading and writing about behavioral psychology for 10 years now or something. I was. I underappreciated the psychological impact of inflation on people.

[Michael Batnik]

It was a doozy.

[Ben Carlson]

Yes. And I think that's going to remember we talked about, like, what the, what is the long lasting impact of the COVID pandemic going to be? Because the Great Depression caused all these depression babies who wouldn't save or save too much and wouldn't spend their frugal or whatever the outcome of the COVID pandemic is, whatever. However long the sentiment from high inflation lasts, I think it's going to have a longer tail than most people realize.

[Michael Batnik]

I agree. All right, this is interesting. Julian Klamochko tweeted a chart of bitcoin and software going back to 2021. And some of these charts are hard to eyeball when you squeeze the Y axis and make them different. So I, I put them into Y charts and I stacked the charts and yeah, they do look directionally the same. Not the same at all points in time. But just eyeballing this, they look like they move together.

[Ben Carlson]

No, it's pretty wild that it goes that far back. That's all. That's a pretty long time for the correlation, right?

[Michael Batnik]

Yeah, I mean, it's, it's, it's, you know, again, if you zoom in on different periods of time, maybe they diverge a little bit, but zoom out and they sure look like the same chart. All right. Anyway, he said, so it's bitcoin and software. Igv, digital gold, monetary hedge, decentralization, global liquidity, all with question marks, Censorship, resistance, portfolio diversification. Turns out bitcoin was just a software stock.

[Ben Carlson]

I wonder what it would look like in the 2017-2021 era, though, because one of the things that people talk about with bonds and stocks, people are saying now that bonds are broken because they're more correlated with stocks. But I think in a diversified asset, you want something that's going to change its stripes and sometimes it's correlated with this asset and sometimes it's not. So eventually bitcoin won't be correlated with software stocks anymore. It'll be correlated with something else.

[Michael Batnik]

You would think. But in 2017, Bitcoin was not an asset class. What was the market cap? It was tiny. Anyway, not to say that this will forever and always be the thing, but I just said, is it really that simple that I really own that much software?

[Ben Carlson]

All right, I want to talk about the biggest inequality, wealth inequality of this decade. What I think it is. I can't remember where I pulled this from, but it's the economic innovation group. They look at the new Homeowner penalty. So it's existing homeowners, the proportion of their income that they spend on housing costs versus people who are now buying New homeowners. And existing homeowners are basically the lowest they've been since 1990. Housing costs as a percentage of income.

[Michael Batnik]

Got it. Okay.

[Ben Carlson]

So if you owned a home, you refinance into a 3% mortgage, your housing costs as a percent of your income are about as low as they've been over the last, you know, how many years has it been? It's been 12 years since 1990. Right. 15 years or the last. Whatever, 35 years.

[Michael Batnik]

Let's go.

[Ben Carlson]

Homeowners is, has just shot up like a rocket and paying way more. This is a big source of wealth inequality. And we keep asking, where's all the money coming from? Where's all the money coming from that's going into all this stuff? Guess who has more disposable income? People who owned a home with a, with a way low, lower price and a low mortgage rate. Think about how much more disposable income those households have. And that's a big proportion of the country.

[Michael Batnik]

So this is, this is what we were just talking about earlier with gratitude and whatever. I had a thought. And this is not something I spent a lot of time thinking about, but I am a new homeowner and my friend who lives across the street, I probably paid, I don't know, three times what for this house, what he paid for his house whenever he bought it. And I'm like that. Mfer. All right, this is, you know, but. And I'm not right.

[Ben Carlson]

You're in the new Homer thing.

[Michael Batnik]

Yeah. I'm in no position to complain. And I'm not right. But it does suck.

[Ben Carlson]

Yeah.

[Michael Batnik]

And it is a huge source of like the K shaped economy is the new homeowner versus the existing homeowner. Huge.

[Ben Carlson]

Yes, you're right. Yes.

[Michael Batnik]

Yeah.

[Ben Carlson]

Because there's people now who are moving into neighborhoods who are like five times richer than other people who live there. But they, their housing costs are way higher.

[Michael Batnik]

Yeah. It's weird, right? It's definitely weird.

[Ben Carlson]

It's a bizarre thing.

[Michael Batnik]

All right, I want to give a public service announcement. I'm sure we've spoken about this at some point over the, over the course of the show, there was a large demand for these basically publicly traded companies that were privately held. So SpaceX, OpenAI, Anthropic and or like all these giant names and the way that investors would access them was with something called a special purpose vehicle. And there were Special purpose vehicles inside of special purpose vehicles. It was like a Russian doll where you don't really know who this primary source of liquidity was because the companies have, in some cases, in many cases, no oversight into who's selling what shares to who. So imagine you thought that you were a shareholder in OpenAI and you're like, or SpaceX, and you're like, licking your chops to find out that it goes public and you don't even own the stock. Could you imagine the nightmare fuel? So anyway, for people that are thinking or working with an advisor or asking somebody, hey, can you get me in? Just be very, very, very careful.

[Ben Carlson]

Well, this story from the Wall Street Journal says people are freaking out, like, realizing you don't have the title of your home as the market rips higher.

[Michael Batnik]

Yeah, scary, scary, scary. This is also scary. Blue Owl has seen inflows at this from the ft. Blue Owl has seen inflows at its flagship credit investment fund for retail investors. All but dry up. The group's near $20 billion Blue Owl Credit Income Fund reported just $26 million in new investments on May 1, about a 50% decline from the prior month and a 95% decrease from this time a year ago. So at this time last year, the fund attracted nearly $500 million a month. From $500 million a month to. What did it say, 26.

[Ben Carlson]

Can you imagine being an advisor trying to talk your clients into. Blue Owl right now, though, with all the headlines and.

[Michael Batnik]

Yeah, that's. That's got to be a special group of advisors.

[Ben Carlson]

All right, I got a personal. I got a personal finance question for you.

[Michael Batnik]

Go ahead.

[Ben Carlson]

So I was home in Traverse City this weekend for a soccer tournament. That's where my parents live in Northern Michigan. More on that later. And it gets me every time I go in the bathroom and I wash my hands and I go to the soap dispenser and it's soapy water that comes out. And my father, when it. When the soap gets to the end and there's a little soap left to keep it going, he fills it with water. Okay. My dad did not grow up with a lot. He grew up in a tiny house with four other siblings. I look at the house now and I go, how do they have five kids in there? Like, he did not come from. Not even. I wouldn't even call it like, middle class back, right? So he. He came from not a lot. He has those few frugal. That frugal mindset still is with him. And some of these things I'm like, dad, you can afford this stuff. Why don't. For him, it's not like a money thing. It's a principal thing.

[Michael Batnik]

Yeah.

[Ben Carlson]

So I was thinking, like, what's something in your life that you're still. Because you can't spend some things, you just. Out of principle, you go, no, I'm going to be cheap on this. So what are you still cheap on? Because I was thinking about this.

[Michael Batnik]

I'm like, what is Rob Sam cheap on? I want. So I went the other way. I grew up. I'm not even gonna pretend that there was poverty, because it definitely wasn't. But I had. I had restrictions. Like, I remember my mother saying that I couldn't order like, chicken parm at the diner. And that, like, sort of scrubbed my brain a little bit. I was like, why not? Why can't I just get chicken parm? And it was like, just because it's 20.

[Ben Carlson]

Yeah. For me, we'd go to Arby's. I'd have to get the junior roast beef, but I want a regular roast beef.

[Michael Batnik]

Right. So I went the other way. Like, my limitations in terms of what I could buy as a child or my parents could afford caused me to like, overspend. So I am like the opposite of frugal. I don't. I. And it's not because I make good money now. Like, even when I made a lot less, I just didn't care about saving. So I was. I was always a natural overspender. But I'm sure there are things that I am cheap about.

[Ben Carlson]

Like, for. For me, for instance, I'm looking. My lease is up on my Explore. I drive Ford Explorer. I'm looking at new SUVs now. And I. I'm looking at the prices and big time sticker shock. For me. I. I think I will never be able to buy a luxury vehicle. I can afford it. I don't think I ever. I will never, principally. I will never. Because I'm an. I'm an A to B guy as far as vehicles go. I. I think I will never be like, one of those people that could spend a ton of money on a car. I just. My. My internally won't allow me to do it.

[Michael Batnik]

Oh, here. Yeah, no, I. I get it. The sticker shock is. Is something for me, I would say it's probably take out food now. I still, I've gotten over it. But, like, it still pisses me off. I still give Robin a hard time when she gets a salad for $27. I'm like, are you kidding me? And she'll always say, like, why is this a thing? Because it's ridiculous. It's a salad.

[Ben Carlson]

But I think this is one of the reasons that fire people get so much flack from. From everyone else. Because that thing with my dad having like that, you know, growing up, his parents were depression era people, like, it stands out more if you're like a fire person now, because more people are word cheap. Like that in the past. Cheap, frugal, whatever you want to say. And now you stand out if you're that way because not many people are anymore. Yeah, it's not as prevalent as it once was anyway.

[Michael Batnik]

All right, Ben, I got. I have another bone to pick with Apple, if you could believe it or not.

[Ben Carlson]

All right,

[Michael Batnik]

I have a. I have speakers in my backyard. I have to go into the Sonos app to change the volume. I can't. I can't use the volume on my phone to control the speaker. The speaker volume. Is that some shit?

[Ben Carlson]

That's a Sonos problem, not an Apple problem. Don't blame Apple for that.

[Michael Batnik]

Apple blocks it. Wait, tell me why.

[Ben Carlson]

Because the Sonos app is awful. I have Sonos as well. It's terrible. That's a Sonos problem, not an Apple problem.

[Michael Batnik]

I'm pretty sure that Apple will not allow you to do it.

[Ben Carlson]

I don't know. I think the Sonos app is just really. They made a change, like, two years ago, and it pissed everyone off because it stopped working.

[Michael Batnik]

All right, I'm. I'm. I'm new to Sonos, so.

[Ben Carlson]

Okay. I have a love hate relationship with youth sports. I've talked about it here before. The whole, like, I have some friends who. We have both my daughters in club soccer, and they travel a little bit. And my friends, like, talk about it like, I'm an idiot. Like, I can't believe anyone ever do that. Like, at, like, age 7, these kids have to start doing tryouts, which seems, like, not even fair. Like, why do we have to have. And like, you're on the best team, and you're on the second best team. You're on the third best team, which is actually the worst. Like, and then you. You have to travel to these places and there's games all weekends. And like, we went to. We went to a tournament in Traverse City this weekend. There was 35 soccer fields all going on at once.

[Michael Batnik]

35.

[Ben Carlson]

35 fields. There's one road that goes into this place to park. So the parking was an absolute nightmare. We're dealing with lightning delays and rain. And, you know, then it Got hot. And it's like we traveled two and a half hours to get there, and it's like, why do we do this? And then my little princess Kate, she's eight years old, just turned nine, and the very first game was really close. We were down 2 to nothing. Then we scored and tied 2 to 2. And, you know, the only people watching these games are, of course, parents and grandparents. So there's 20 people on the sideline. And my daughter kicked in the winning goal, basically as time expired, which doesn't happen in soccer. And she's not the star player, you know, she's not the one that, like, scores other goals. And I saw the smile on her face and that was like, oh, this is why we do it. This is when it clicks. Like, oh, the look on her face, like, I don't care if they win or lose. I don't care if they score. They don't score. I just care that they try hard. But when they're happy, that's why you do it, because they're so happy. It was like the crazy, like, she scored and then he blew the whistle, like, that's game. And it was like, usually you don't have, like, a buzzer beater in soccer, you know? And then they went on and won the championship for their thing. And, like, the smile on her face was like, oh, this is why we do this, because it makes your kids smile.

[Michael Batnik]

I still. I still wouldn't go, that's great anyway. That's great.

[Ben Carlson]

All right. Recommendation.

[Michael Batnik]

I got a few emails. The reason. So the reason I had a few people email me. What about me leaving the parents? The. The flag football chat. They said, michael, just mute your phone. I said, hey, were you not listening? I muted the conversation. Apparently, if there are non iPhone users in the group chat, they sneak through and ding. Darn.

[Ben Carlson]

Andrew people.

[Michael Batnik]

So did you leave the.

[Ben Carlson]

Did you leave the chat?

[Michael Batnik]

Of course I left the chat.

[Ben Carlson]

Okay. Did you. Did Robin give you flack about it? Like, hey, I saw you left the chat?

[Michael Batnik]

No. No. Well, people were. People were making fun of me in the chat.

[Ben Carlson]

Ah.

[Michael Batnik]

So Robin was like, I'm so embarrassed.

[Ben Carlson]

I think you look. Come out looking cool on that, though. Okay. All right. Recommendations. Speaking of, like, the whole gratitude thing, I've got two. I think I listened to the best podcast of the year this week, and I hear many people talk about it, but Ted Danson and Woody Harrelson have a podcast called where everyone. Yes, isn't that crazy? So Woody Harrelson barely comes on, but Ted Danson interviews Celebrities. And so there was a podcast this week with Ted Danson, Woody Harrelson and Harrison Ford.

[Michael Batnik]

Oh, man.

[Ben Carlson]

Oh my God, it was awesome.

[Michael Batnik]

What's the name of the show where

[Ben Carlson]

everybody knows your name? I think everybody knows something like that.

[Michael Batnik]

I'm gonna find it right now.

[Ben Carlson]

I don't know that maybe he's been on it before. I don't think I've ever heard Harrison Ford on a podcast before. And as a guy who's quite possibly the biggest actor of the past, arguably of the past 50 years, maybe one of the most important of the past 50 years, he, you've seen him on interviews before. He's, he's very self deprecating. He hates talking about himself, he hates talking about movies. But he was with two other, you know, really big actors talking about the craft. And I think Harrison Ford might be the coolest guy alive.

[Michael Batnik]

I can't wait to listen to it.

[Ben Carlson]

It is so. And like him, he's. He, he drops F bombs a lot, which is kind of funny. He sounds like a guy that you just love to have a beer with. But his whole thing is he hates talking about himself. He could have the biggest ego in the world. But he talks about how grateful he is for like. And how lucky he was.

[Michael Batnik]

Well, he was lucky. He was. He was Brad Pitt in Once Upon a Time in Hollywood.

[Ben Carlson]

Yes.

[Michael Batnik]

He was a carpenter. He was the guy building celebrities houses on the roof, probably smoking a cigarette, looking all cool with his shirt off. Yes, but one of the coolest guys ever.

[Ben Carlson]

Yes, easily. And he, so he, but he has this, he has this aura of gratitude. It's like that's how you find happiness with success, is you have gratitude. So the other one I'm watching is Life is Short on Netflix. So it's a Martin Short documentary. So I've now seen the John Candy one recently. Steve Martin had a great documentary and all these kind of intersect because they knew each other. And the Martin Short one on Netflix, it's not that long. It's like an hour and 40 minutes and same thing. He is a very grateful guy for what he has and all the success he has. And he seems like well grounded and it's great. But just the old stories of Eugene Levy and Martin Short and Dan Aykroyd and John Candy and Catherine o' Hara and, and Gilda Radner. All these people coming together at the same time in their 20s to create comedy. It's anyway really like, I've read his book before and I just really like his outlook on life.

[Michael Batnik]

Very cool.

[Ben Carlson]

Both of those guys.

[Michael Batnik]

All right. I was hesitant to recommend the show because it is extraordinarily dark. All right. It is not an uplifting show, and it's quite graphic. It's called Half Man. It's on hbo. It's a miniseries.

[Ben Carlson]

But you think I would like it?

[Michael Batnik]

I'm pretty sure you would like it.

[Ben Carlson]

Okay.

[Michael Batnik]

It's by this guy, Richard Gad, who did Baby Reindeer, which was a phenomenon. I didn't see that show.

[Ben Carlson]

Never heard of it.

[Michael Batnik]

Here's a description. When Nile's estranged brother Reuben shows up at his wedding, it leads to an explosion of violence that catapults us back through our lives from the 80s to the present day. And it is intense. It's. It's something.

[Ben Carlson]

Okay. But it's a miniseries. Six episodes.

[Michael Batnik]

Six episodes.

[Ben Carlson]

You can sign me up for that.

[Michael Batnik]

It's a. It's a strong. It's a strong wreck for me, but, yeah, it's graphic. Very graphic.

[Ben Carlson]

Okay.

[Michael Batnik]

All right.

[Ben Carlson]

Stock market. Stock market's down again.

[Michael Batnik]

Good.

[Ben Carlson]

We could use a correction. Yeah, I always say this. We could, though.

[Michael Batnik]

Well, I don't say we could use a correction when we're in one.

[Ben Carlson]

That's true.

[Michael Batnik]

When we're in a correction, I say, please stop. This isn't fun. All right. Animal spirits are the compoundnews. Com. Thank you for the emails. Thanks for listening. We will see you next.