Animal Spirits Podcast Episode 435: The Zero Dollar Club

Hosts: Michael Batnick & Ben Carlson
Date: October 22, 2025

Episode Overview

In this episode, Michael and Ben explore the ever-shifting landscape of market sentiment, speculative fervor in unprofitable and "zero dollar" companies, the persistent AI bubble debate, and how investors are dealing with systemic risk warnings. They discuss their nuanced views on owning gold, analyze ETF and equity market flows, and comment on trends in housing, consumer spending, and auto markets. The hosts combine historical anecdotes, personal investing philosophies, and contemporary data to help listeners make sense of today’s investment climate.

Key Discussion Points and Insights

1. Market Sentiment, Bubbles, and the Difficulty of Reading the Room

• The AI Bubble Debate Continues

  • Michael and Ben reflect on media fixation with the "AI bubble," and how the relentless commentary itself signals something unusual.
  • Michael: “No bubble in history has ever had so many people call it in advance… but no bubble in history has ever had this many people giving opinions all the time.” (03:31)
  • They reference a Today Show segment and the persistent caution from major news outlets, illustrating how ubiquitous the topic has become.

• Historic Bubbles and Sentiment Indicators

  • Michael describes reading Andrew Ross Sorkin’s book on 1929, drawing parallels with current speculation:
    • Quote from 1929 article:

      “It is quite true that the people who know the least about the stock market have made the most money out of it in the last few months.” (05:31)

    • Jesse Livermore used this as a contrarian signal, shorting the market and reportedly making $100 million then.

• Relevance and Reliability of Sentiment Indicators Now

  • Both hosts agree that traditional sentiment signals are far less useful due to the democratization of information and mass participation.
    • Ben: “I’ve said this a million times. Are you looking at Schwab investors? Reddit? Wall street bets? Media wants a bust—they’re dying for it.” (07:05)
  • They caution against taking negative headlines as systemic warnings without supporting data.

2. Systemic Risk Warnings and Investor Behavior

• The “Everything is a Risk” Narrative
  • Michael voices fatigue with endless doomsaying:

    “I'm sick of people warning me about systemic risk. I’m at the show-me point—stop telling me what could happen. Show me when it does.” (10:31)

• BDCs, Regional Banks, and the Default Setting for Worriers
  • Ben: “The more you expose yourself to different asset classes, the more likely you are at some point to rip something out because it’s not working.”
• Historical Perspective
  • Many worries, like the recent 10-year Treasury yield panic, faded away: “Remember we were worried about that? Doesn’t matter anymore.” (09:08)

3. Why (Not) Own Gold?

• Personal and Philosophical Stances
  • Michael outlines his arguments for not holding gold, while acknowledging reasonable "insurance" and diversification cases.
    • Michael: “Three out of four decades where gold was in a lost decade.” (14:09)
    • Ben counters that those periods followed exceptional runs, and rolling returns or correlation with a 60/40 portfolio should be considered.
• They joke about bitcoin’s failure to “knock gold down a peg.”
• Notable Exchange:
  • Ben: “Gold is a headline asset... gives potentially uncomfortable feelings about the system.” (11:39)
  • Discussion of “gold bugs” who only seem happy when the system fails (12:05).

4. Diversification — You Can’t Own Everything

• Trend Chasing and Portfolio Construction
  • Ben: “If you own everything, at some point you’ll rip something out because it hasn’t worked over X period of time.”
  • Historical examples: Managed futures after 2008, gold’s various cycles, etc.
• Diversifying Assets Keep Rotating:
  • Citing Verad Capital’s research, they note that the “best diversifier” shifts every few years.
  • The challenge: “You have to be okay not owning everything.” (17:50)

5. ETF and Equity Flows — What’s Driving the Records?

• Enormous ETF Flows:
  • $1 trillion mark in ETF flows — “Unbelievable.” (24:29)
  • Top flows to S&P 500 and Bitcoin ETFs.
  • Theorizing the drivers: Inflation, baby boomer rollovers, conversion from mutual funds, workplace retirement contributions.
• Equity Value Across Households
  • Under-40 households have increased equity value by 542% since 2020. Ben and Michael debate whether this is healthy speculation or a risk-prone surge.
  • Ben: “It would take an extended period, maybe a crisis, for young people to throw in the towel.” (28:25)
  • Michael self-corrects, noting most young investors' assets are probably in blue chips or ETFs, not meme or speculative stocks.

6. The “Zero Dollar Club” and Speculative Mania

• Companies with No Revenue, Huge Gains:
  • “Zero Dollar Club” refers to heavily-speculated companies with little or no revenue, now commanding multibillion-dollar valuations.
  • Michael: “This is a young man’s game and I’m no longer a young man. That’s $35 billion.” (31:40)
  • They acknowledge some may be justified if national policy shifts or government support comes in, but recognize the enormous risk.
• Speculative, Retail-Led Environment
  • “Despite clear outperformance from such stocks, long-only managers underperform… This decade, literally the only people winning are retail.” — Jim Chanos, quoted by Michael (44:10)
• Shorting is Hard
  • “Hedge funds are so bad at shorting stocks.” (42:12)

7. Crypto, Housing, and Other Asset Classes

• Crypto Market’s Big Bets
  • Will Bitcoin top $200,000 by 2027? The odds are near 50/50 in prediction markets.
  • Michael: “That number should be 25%.” (45:54)
• Housing Market Frustrations and Wealth Effect
  • Data from Redfin shows homes sitting longer, higher down payments, and a shrinking qualified buyer pool.
  • Ben sees a sharp uptick if mortgage rates dip back under 5%; Michael’s more skeptical after seeing repeated “failed rallies.”
  • Ben: “It’s a shrinking group of people who can afford to buy.”
• Regional Home Cost Differences
  • Data from Flowing Data: States like California are far above average, but “there are more states below the national average than above.”

8. Consumer Credit, Spending, and Bank Health

• Amex: K-Shaped Economy
  • Amex’s premium business continues to thrive, with Gen Z showing 39% YOY spend growth, Millennials surpassing Baby Boomers for total spend (52:16).
  • Amex is not a traditional credit card, so these numbers reflect premium spenders, not distressed borrowing.
• Credit Card and Bank Charge-Offs
  • Bank of America’s net charge-offs and delinquencies are falling — “Show me the data.” (55:17)
  • Michael: “If you had one indicator… credit card companies, that’s your indicator.” (55:17)
• Historical Perspective on Poverty
  • Even after the Roaring ‘20s, 60% of households were below the poverty line; today’s pain is real but not unique.

9. Auto Markets — Sticker Shock and Underwater Loans

• $50,000 Cars and Average Car Age
  • Average new car price is now $50k, but longevity and tech upgrades are significant — “It’s like the stock market, the multiple should be higher, it’s just a better product.” (63:09)
  • Most cars are technically "underwater" immediately after purchase — nothing new here.
  • Bloomberg headlines about underwater loans (28% of new car purchases) are more dramatic than the reality supports.
• Anecdotes on Car Leases & Brokers
  • Exchange on end-of-lease car values and whether it’s time to switch brokers, with typical Animal Spirits banter.

10. Miscellaneous: ETFs, Regulation, and Consumer Experience

• Extreme ETF Products
  • SEC filings for 5x leveraged single stock ETFs raise red flags: “If this poses market structure risk, then ban it immediately.” (36:14)
• China, Trade Wars, and Macro Debates
  • China’s pain tolerance is discussed; Michael and Ben agree the U.S. caves sooner, but believe in the long-term edge of freedom and innovation.
• Media vs Reality
  • Michael notes that the abundance and repetition of headlines can distort historical memory; future generations may have a “choose your own adventure” version of history (58:24).

Notable Quotes & Memorable Moments

• On market bubbles:

  “No bubble in history has ever had so many people call it in advance… but no bubble in history has ever had this many people that are giving opinions all the time.”
  — Michael Batnick (03:31)

• On owning gold:

  “I just personally could never wrap my head around it… I get why people hedge or diversify with gold, but for me, three out of four lost decades is too much.”
  — Michael Batnick (15:53)

• On speculation and retail winners:

  “This decade, literally the only people winning are retail… retail degen traders or retail just, I’m going to buy what I know.”
  — Michael Batnick (44:10)

• On shorts and speculative stocks:

  “Hedge funds are so bad at shorting stocks… They did not learn their lesson from the Gamestop fiasco.”
  — Michael Batnick & Ben Carlson (42:12)

• On wife and pumpkin farms:

  “I’m done with pumpkin farms. Just take the pumpkins. I want to go home.”
  — Michael Batnick (69:42)

• On audio learning:

  “It feels like I’ve unlocked a new form of learning in my life with Audible.”
  — Ben Carlson (67:16)

Timestamps for Important Segments

• AI Bubble Discussion & Sentiment – 02:16–08:13
• Historic Bubbles & Contrarian Signals – 04:09–06:09
• Media’s Role and Changing Indicators – 06:43–10:47
• Systemic Risk, BDCs, and Risks that Don’t Materialize – 09:14–10:47
• Gold: To Own or Not? – 10:48–15:53
• Diversification Evolution and Limitations – 16:49–18:28
• ETF Flows & Equity Value Distribution – 24:29–29:20
• Zero Dollar Club & Speculative Stocks – 30:48–34:02
• Crypto Prediction Markets – 44:53–45:54
• Housing Market & Demographics – 45:57–48:47
• Amex Spending & K-shaped Economy – 51:13–53:18
• Car Market & Underwater Loans – 62:31–66:37
• On Modern Wealth & Historical Comparison – 59:42–61:38

Recurring Themes & Tone

• Origins: Rich with history, amusing personal stories, pop culture asides, and honest reflection.
• Tone: Mix of banter, straight-shooting optimism, skepticism about doomsaying, and a grounding in empirical data over narratives.

Closing: Recommendations and Listener Connections

The episode closes out with media recommendations (John Candy documentary, ‘Tremors’, and more), Michael’s favorite horror movies for Halloween, and playful anecdotes about family life, home renovations, and fall traditions.

Summary Takeaways

• Be skeptical of broad, systemic risk narratives unless backed by hard data.
• Sentiment signals are less useful in today’s environment of information overload.
• Retail investors have dominated during this decade’s speculative stretch.
• Diversify knowingly but accept you can’t own every winner.
• Beware of letting headlines overtake real, long-term investment discipline.

Email feedback or questions: animalspirits@thecompoundnews.com
Podcast link & disclosures: ritholtzwealth.com/podcast-youtube-disclosures