Today's show is brought to you by Simplify Asset Management. Two weeks ago, Ben and I had Paul Kim on the show to talk about their interesting suite of ETFs.
Diversify your diversifiers was the idea. One of them that's kind of interesting is option premium through the VIX, right?
Paul is way better explaining it than us.
But they understand the VIX term structure better than I ever could. That's an interesting one. S-Fall is the name of that very high distribution because it's using option premium.
And then the whole idea is that the option positions are trying to mitigate drawdowns, right? When there's an extreme period of volatility.
It's kind of like a countercyclical approach. Very interesting.
If you want to learn more about Simplify ETFs, go to Simplify.us and again, check out our talk with Paul Kim from a couple weeks ago called Diversify Your Diversifiers.
Welcome to Animal Spirits, a show about markets, life and investing. Join Michael Bannick 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 Redholz Wealth Management.
This podcast is for informational purposes only and should not be relied upon for any investment decisions.
Clines of Redholz Wealth Management may maintain positions in the Securities discussed in this podcast.
Welcome to Animal Spirits with Michael and Ben. This happens once a month or so now where we're kind of in the same room doing a podcast.
You and I were across from each other. A little different setup. We're on a team building experience.
We'll be calling this conference. Getaway, Austin, Texas.
You know where we're at? We're at a wellness center. I'm calling it that. That's not what it's called.
It feels like we're in the place from the retreat from Fleishman is in trouble. That's what this feels like.
It's definitely a retreat compound something. We're in Austin on the water. It's very pretty.
We're actually doing it two weeks.
I'm sorry. We're going to be back again then Florida for the conference. I kind of feel like when I travel for work or vacation or whatever that the stock market, whatever's happening in there is not actually happening.
So that we look at the stock market today. Do you have time stamp? That's your thing.
1024 Central Time. Yes. It screwed me up.
I came here and I said, okay, our meeting is at 11 today. And you said, no, we're on Central Time. It's actually at 10 because on my computer, it was still picking up Eastern Time.
So I would have missed the meeting by now or first meeting. So your your billion dollar idea still still holds. I think.
How do you feel about the stock market when you travel?
I just feel like whatever's happening. It's not really happening. I kind of feel like the stock market when I go somewhere else, the stock market in my brain shuts off.
I'm not I'm not attuned as much. I'm not paying attention. And so whatever's happening. It's not really happening. Does that make sense?
If the stock market falls, but you don't see it fall.
It's it's in a time up. So the stock market is, I don't know, getting killed today because regional banks.
Or did someone leak the Fed minutes? Well, regional banks are not 7%. So I'm just going to go out and learn and guess that that is causing some some coordination.
I wanted to get in this later, but the JP Morgan took over for sure public. And I I'm a chase customer. That's more I do my banking.
I logged in yesterday to look at something and the top of the screen says first republic customers. You're not it says it right there.
I'm kidding. Let me check it out. But it says continue to use your first republic stuff. So here's my one take on this whole thing. And the weird thing is, I don't know, it kind of feels like it doesn't matter that much anymore.
Because they're they're swatting these bank failures away like it's nothing.
Is that like a minsky moment where three, five, seven years down the line, the ease with which they're putting these fires out is going to make something even worse.
Well, for now, the damage from the fires seems to be relatively contained.
Yes, but it seems like it's very I mean, these are two Silicon Valley bank was what the 16th biggest one in the country by assets or however you first public is a pretty large bank as well.
It seems like putting out these fires has been a relatively simple process. It hasn't required a lot of pain besides it unless you were a customer there and you were worried for any day.
Or anybody holder or probably bond holder. My question is that there would there's got to be a moment with which it's like, all right, how many I mean.
Or does JP Morgan just become this behemoth and I don't know Jamie Diamonds like the Fed. So I don't know. I don't mind. I'm not thinking about long term ramifications of these banks going on there because who knows.
But at some point you would think that the market is going to adversely respond to this. I mean, how many more bank failures can we take?
I guess the good news is that this the kind of stuff that in like the early 1900s would have been a full on calamity and lead to depression. We've figured that kind of stuff out. That doesn't happen anymore.
That's a good thing. I do think the bad thing is what are the unintended consequences of that. And I don't know the answer.
Yeah. But that's my whole take on this is people are saying, well, JP Morgan got a good deal and I don't know. I don't know all that stuff.
I'm not exactly a forensic accountant for bank balance sheets. But it.
But you did read a tweet thread. Yes, it seems weird. All right. So when it comes to the markets, it feels like every few years or few months, we have the same arguments over and over again. Active versus passive.
Alternative investments is the 60 40 dead. Is this a top? Is this the bottom? Whatever. We have these same things over and over again. So the argument we're having now again is can the stock market hold up with five, four, seven stocks carrying the way.
So this is from Mike Zaccardi always share some good charts for us. He's showing that big tech. I guess it's seven firms in the big technology. I guess is in video one of them now.
I know is up 31% year to date versus like a seven biggest tech firms versus a 3% gain for the rest of the S&P 500. Another one from JP Morgan shows the top 10 largest companies account for basically like, I don't know.
So the S&P is up 8% this year. Call it. It's like 6% of the game. So they show Apple, Microsoft, Amazon, Google and video Tesla and Google S be on here twice because they have two tickers, which is dumb and always kind of G O O GL.
I am getting tired. I am getting tired of this. Sam Roel also had a good take on this and he has some good contribution charts to this and I'll.
Bama. Well, this is a new one. F A A M G. Fam G. Here as a dad. I gotta put this out there. I can't pull. I don't think most people can, but saying fam. Hey fam. What's up? How's it going fam?
It's a very it's a it's a feel like it's a Gen X thirst monster. Who does that? Yeah, I could never pull it off. Anyway, so we have these these although some people can pull it off like Rosen says fam and it does it.
It's OK. Yeah, but if you if you said fam, I would check you. I'm not going off for that. That's for sure.
Sam. I did like Sam Rose take on the T care that we hear that out. Okay. He said that these firms are so much more diversified than they ever were in the past. They have multiple business lines and different forms of revenue that like we shouldn't think of it as concentrated anymore.
Regardless, I wrote about this in 2021. I wrote a piece about like our five stocks really carrying the market. 2020. I wrote a piece about how those these biggest companies make up 20% of the S and P.
I'm sure you do in 2019 and 2018. This is just an argument with the market cap weighted index that we're always going to have. And the thing is, if you look back, I did this one a long time ago. I should pull up the chart of like the 10 biggest stocks in the S and B and I think I did it every five years going back to 1980.
There's plenty of turnover there. So some of these big stocks eventually are going to fall to G. E. was the biggest stock forever. Almost or in the top five or top 10. And so I don't I don't.
I just don't think that you should be worried because there's only a handful of stocks carrying the market. This happens. Yeah. I think what's notable maybe is the fact that Apple and Microsoft are now.
They're waiting the S and P as as large as it's as it's been in this run for the top two stocks. Don't you feel good about that though? Like those are very high quality businesses.
That makes me feel safe. Not it like we're in danger. I like that. That's a good twist. I guess the so the implication.
Is that when these stop doing what they're doing, watch out below. That's that's the that's the that's what's under the surface.
But you're worried because I'm not saying you the Royal you are worried because the two of the greatest companies of all time having great returns this year.
That's fine with me. I'm I'm okay with that. If it was a bunch of junkie companies that were like leading the way, then I'd be worried. How's that?
Speaking of the Royal you yesterday when we sat down at the conference tables, the circle conversations. There's always notepads. Right? Yeah. And because I don't know. I guess I sell the basket the other week. I was just triggered a memory.
No one he's with Jackie Treehorn. Oh, he does the pencil thing. He does the pencil thing over the notepad. That's what I think when I see those notepads.
All right. So here's here's my counter like yes, the S&P is up 8% maybe it'll be up a little less after today. The equal weighted index is up more than 3% you today.
So it's not like the rest of the market is getting crushed. It's still up a little bit. Yeah. Not up much.
If the S&P was up eight and the S&P equal weight is down six. Okay. There are things to worry about, but I don't think this is one of them.
Good piece in the Wall Street Journal. I love these profiles. They get me every time. It's these are like these are like your like financial mysteries. Like, you know, you're like the mystery book. This is like Ben Katnip.
Yes. So they're looking for the bear markets biggest lessons and they interview all these these regular people about the their lessons.
We're doing this again where I get logged out of the Wall Street Journal. Don't tell anyone, but I'm still using your login for this. This is like, I don't share Netflix passwords. I share financial news sites passwords.
You're a freeloader. I think I have a I have my bearings to my FT. I don't think you ever gave me your your bearings, but they interviewed this guy and we talk about concentration a lot and this guy is a 40 year old accountant and he said that he put he had a combined $2 million position in Nvidia and Tesla.
And said it just skyrocketed until 2022. And I think what it in video is down 70% from the highs probably Tesla was pretty similar.
So this is part of it. So it says he ends up losing all the money he made since the start of the pandemic. He lost is a more than $1 million in his brokerage account, which even ate into his initial investments. He was down. I don't know when he got in the losses were stressful at times.
He skipped vacations with family to spend time in keeping an eye on his portfolio. I felt like I feel like I lost many years of my life. I had so many sleep in the sleepless nights.
So what are you laughing at?
The polls asking about pillows.
We have pillows on the table because.
That's a very spacious equity room.
Yes. So anyway, this is like the stuff about concentrated positions that if you would have just put $10,000 in.
We talk all the time about how if you're going to be in these greatest performing stocks, you're going to experience massive drawdowns.
It's just not worth it.
For most people, it really isn't.
No, because what you never think about the psychological toll that this shit takes on you. Again, the losses were stressful at times. He skipped vacations with family.
And the other thing, I'm trading and keeping an eye on his portfolio. This is no way to live.
But this is my whole thing about the stock market is not functioning while I'm gone. What can you do if you're down 70% that you can't put on vacation for a week?
I'm going to look harder. What can you actually do if you're in a bad position like that unless you sell it or buy more?
Skipping a vacation with your family is not in trying harder and doing more analysis is not going to help you in that situation.
So the subtext here is not buy an index fund to do nothing and enjoy your life, although that's certainly a reasonable response. It's diversification.
But having concentrated positions is just no way to live.
And if you're going to have, say, I want to put some money into this handful of stock, this stock or these five stocks, whatever it is, just figure out a good thing that you sleep at night position.
20% of your portfolio, 10, whatever it is, that it's going to have an impact, but it's not going to cause you to skip vacation.
Yeah, I don't know where the number is. It's different for everyone. So 20% is obviously concentrated. But when you have two stocks that is your entire net worth, that are as volatile as Tesla and Nvidia, I mean, even having all your money in, like, Coca-Cola or Pepsi would be like irresponsible for something like this.
It's just pulling up Ben's investment Excel spreadsheet of my asset allocation.
It's probably 80 to 85% is automated, allocated, diversified, and then 10 to 15% or whatever is I can make some other bets and take some chances. And that's like my, I'm not worried anymore.
And if this other piece goes to zero, man, that would sting, but it's not going to end to me and it's not going to cause me to neglect my family.
On the flip side, did you see what Chris Salted? Chris Salted's comma 50?
What? He just kept buying the debts and he's glad that he did.
Oh, okay.
So the title of the piece was what, like Bear Market Lessons or something almost like that?
Yeah, like the biggest Bear Market lesson.
They found somebody who happened to take advantage of the sell off.
Okay. Larry Summers thinks the Bear Market is not over, apparently. He says, be careful in equity markets. The bond market is predicting recession, but the equity market is not priced in yet.
He actually says that he would be short large cap stocks here.
And he's like a big name and he always makes headlines.
There's no way in a million years that someone in his position who says this actually ever follows through with it.
Right. He's an economist.
He's talking.
Yes. He's just talking, but he said to be short large cap equities.
Although I do, you know, it's part of the part of the, we're one of the things about being away from the screen is like, XLE is down 5% today.
Don't know why.
I think someone leaked the Fedness. Someone knows the Fed's going to come hard and they're keeping people keep saying the Fed's going to continue to raise.
And I kind of think they might, which is just more good deals for people owning T-bills, but so.
Wait, hold on. So they, but they are going to raise.
Right. Well, a couple of weeks ago, we kind of thought it's not going to happen, right?
They're done raising the bank failure stuff.
Right now, I mean, it is all over the place. Right now, there's an 80% implied probability that they're going to do 25 yesterday.
It was 93. So it's down a little bit, but they're going to go.
But that's how quickly this bank thing is over. Remember, we talking three or four weeks ago, like, this is going to be deflationary and this, the Fed has to stop raising now.
It was March. It was the March meeting.
Yeah. It was March.
Actually, people were pounding the table. I don't remember exactly what our reaction was.
I think I was probably in, they should pause.
I think I was in, they should pull up, but they're good to go.
Yeah. But that was, that was in March. And here we are in May. And I think they're going to go. They're doing another 25.
I don't know. Is it, does it do anything? That's my whole thing is I can look at it both ways of, is it really having an impact? And what's the point of it?
Oh, it's happening impact. It's hard to quantify and how long, how long it's. So is it having an impact? It's having a psychological impact for sure.
But it's not having an impact where they want it to. It's having an impact in terms of asset allocation. It's having an impact in the market in some ways in terms of how it's actually impacting their goals of slowing the economy and causing the labor market to chill out and causing prices.
It's not doing what they wanted to do. I don't know. Is it? Yeah, probably not. I mean.
So Larry Summers said the bond market is predicting recession. He's probably looking at the inverted yield curve, which is ridiculously inverted. We're going to plaid now. Get that one?
Do I get it? Of course you get that one. Okay. Just checking. So the Walter Journal had another one saying junk bonds are not screaming recession. And I think, do you, would you think junk bonds are the bigger tell than an inverted yield curve since the Fed is the one who's messing with the yield curve and
do you believe junk bonds more than the yield curve now? Absolutely, because the Fed is obviously manipulating the yield curve. But credit spreads for high yielding bonds and other bonds are controlled by buyers and sellers. It's entirely controlled by the marketplace.
And they worry about if you would see the spread between junk bonds. Okay. Do another call. One more. Yeah. I need that.
Grab a Coke. I'm a little worried you don't have Coke zero in here because I'm a convert now. I don't. I was telling you how does Coke zero tastes so good.
You've been diapepsi. So well, so I started off Coke when I was young and you drink. You and Josh are both DP guys. And then, yeah, then, but then here's my evolution. You realize, okay, if I keep drinking regular Coke, which I did throughout college, my teeth are going to fall out and it's really unhealthy.
So I go to Diet Coke and I took a while and I got there and then I don't like that. I get it from McDonald's because that's the best diet. Then I go to Diet Pepsi and now I'm a Coke zero guy because Coke zero tastes like Coke.
There's zero sugars. I'm sure someone can say like all these fillers or whatever they use are probably bad for me. But is this how people end up getting healthy? Is that the counterpoint I saw you running today and I saw you in the gym yesterday? Not the brag. Yes. I was kind of a short little compound. So everyone could see.
But is this how people eventually get really healthy? Is that scientists are able to make stuff like it tastes like chocolate cake, but it's actually not bad for you.
Listen, I was very, I was very, I was very, you know, speaking of not to brag, which we've pounded to death, I really feel like Verizon stole that from us.
Not that we're the only person to say that, but I'm sure many listeners have seen the commercial. It's totally egregious.
I've got to see this. So they still have an out to brag. Okay.
People keep saying we need to make t-shirts for this. Yeah. I think we do. So, okay, we're talking about junk food.
This is, everyone's smiling, there comes a blog post that I go, I wish I would a roll.
You know, while we're talking, my eating's been out of control. I just, I feel like I have to get that off my chest. It's been bad.
But I'm not getting weight. So I don't know what to make of that.
Well, I feel like the food that I'm consuming, it's got a lag like the...
Like the fat in the legs. Like all of a sudden I'm going to gain 10 pounds overnight. That's what I feel like.
Okay. Keep working out. Good balance. All right. So this is one from Phil Perelman.
Prime Cuts newsletter fills the man. He wrote, all this junk food is making all time highs.
And this is, so he wrote about all the crappy stuff we eat. McDonald's all time high, Pepsi all time high.
General Mills, what do they make? General Mills? That cereal for you? Okay.
Yum brands, which is... Talk about pizza. Talk about pizza. Talk about pizza, all time high, Hershey all time high.
Just a great take that like, we always say like don't bet against the US consumer.
Like don't bet against people eating crappy stuff. That is like all he's charging here.
Just a great take. Carl Cantinea had the same thing, small time highs. Chipotle, McDonald's, Yum brands, general, all these things.
What's mandaliz, is that? Mandaliz is also consumer packaged goods.
So the, the, the, Ozempic is the new drug that like could suppress appetite and make people lose weight.
Do you think that there's just something inherently in us that makes us unhealthy and that like this is always going to be a problem?
No matter what science comes up with. Well being the scientist that I am. I don't know.
So that's a weird question to ask me. Are junk food always, is junk food always going to be a problem?
Yes. Yeah, because isn't, isn't it like engineered to like make you feel good and keep, it's addictive, right?
Right. Isn't sugar addictive? Right. All right. Uh, did you read this daily Drucken Miller piece of FT?
Mm-hmm. That's how it headlines. Yeah. So, also I subscribe to the FT to read this piece so I didn't have to steal it from.
Do you have a, I support all of the financial subscriptions publications as well as multiple substackers because I feel like I want to, they're giving and I, you know, I want to, I want to get back.
All right. So I think Drucken Miller is the most honest portfolio manager there is. Like he, I love it that he admits mistakes.
Like there's a lot of people out there who just will say something crazy and outlandish and then move on and pretend like they didn't say it.
But he, he says crazy and outlandish stuff occasionally. Like this is the worst setup for stocks for a scene. But then if he's wrong, three months later he goes, you know what?
That's on me. Hand up. Yep. I was wrong. Yep. So he says he missed the dollar rally, which I guess this is the kind of stuff he trades his currencies because I could not bring myself to buy Joe Biden, Joe Powell and Jerome, J. Powell.
It was probably the biggest miss of my career. And he's talking about, because he always is giving Fed takes and economy takes and how, and I just, I'm just kind of appreciative of the fact that he says, listen,
I allowed like politics to get into my process. But the funny thing is like, I think you talk about in your book, what is he has that one line where he's like, what did I learn here? Nothing.
Yeah. Right. From the tech boom, whatever. Like he does this stuff and then he admits it. But then he, I don't think he, I don't think you can turn off that politics mind or whatever because that's the way he's wired.
But I just appreciate the fact that he says, you know what, I was wrong here.
You know, while we're in self reflection mode, I feel like I'm very low energy right now. I don't know if that's coming through. Do you feel my low energy?
She, Shawn, are you not in your head?
Are you a little hungover from last few days? I'm not, I haven't sleep in a while. I'm like, I'm a, I'm an above average sleeper. I might be the best that I know.
I might, my head hits the bell. That doesn't surprise me at all.
That I'm a great sleeper. Yes. My head hits the pillow and I'm out in 60 seconds.
I'm, I'm usually like that too. But for whatever reason, the last two nights I've seen the clock at three o'clock, which is highly unusual.
I sleep better on my own bed. Do I miss my family? Am I in? I can be it. You know, I remember, I actually did miss my family and I was thinking about this last night while I was rolling.
Duncan says you need to get Michael Manley voice stat. We tried to get him here. They don't have the blender.
I'm only at two o'clock. I remember when I first started at the insurance agency, I don't know why this stuck with me, but it really did.
This guy that I was working with for, I guess, who was sort of my sales manager, had three young kids. And I guess at the time I'm like 24 and he was probably 40.
And he was telling me about going, that he has to go and he's like, I hate going away. I miss my kid so much. And I was thinking like, loser.
Like, I'm there too. I had this exact conversation with someone yesterday who has kids at the same age as mine, you know, six to ten range.
And my six year old daughter, like, lost it when I left. And it is, I'm already, because I hear from parents, will there kids?
Because parents who have kids, will you always tell you what's coming next? This is the worst age. You know, that's the worst age.
And then just wait because when they come teenagers, they're not going to hang out anymore. And we're at this stage now where my kids want to hang out with me.
And I'm already like nostalgic for this period and it's not even over yet. Because I know it's coming a day when they're going to, dead, you're a loser.
I want to hang out my friends instead. But now they want to like hang out with me and they want me to watch their sports and their games.
And yes, that's the stage I'm at too. It's tough. But we, we, we, we do, we shorten our trip. We keep our trips pretty short.
Yeah. All right. This was a good one from Carl Cantina again. This is from Apollo. None of the indicators, the Enber recession can be normally looks at.
Suggest that we are in our session at the moment. I think someone, but it's coming. Okay. So this, this is the people while we set us with what we had two periods, two quarters in a row of contracting that national Bureau of Economic Research.
We've covered this before. They're the ones who calls it. I don't know who gave them the title or the feeling to do this, but they do.
And there's nothing showing a recession, which I think one of us said a couple weeks ago that there's no signs that we're in a session right now.
Yeah. You can say it's coming, but right now there are no signs of recession. This was a good one. I think I kind of asked this a couple weeks ago.
If, if people are still spending so much money, why isn't like credit card debt off the charts? Why is it still just back on trend? Why, what, what is filling the gap for people spending so much money on stuff and trips and the financial time said another one. This is from Goldman Sachs.
Wait, so what is it? So they set, so look at the real personal consumption. Scroll down to this chart here. It's like off the charts, like pre trend that the 2002 to 2016 trend or the 2017 to 2019 trend.
Personal consumption on goods is just way off trend. So they basically said the reason is consumers here. Consumers are broadly spending no more than what they're earning.
After stripping out certain misleading imputed costs, Goldman Sachs finds that nominal spending has risen by 3.5 trillion and nominal income by 3.3 trillion.
So they're saying that the rise in wages has made up for the increase in spending. And the whole thing is that the people on the bottom end who've gotten the biggest raises spend the most money.
But they've seen a few months or a rise in income with the spending. But this is inflation adjusted. This is inflation adjusted. Yes.
So I don't get it. If you're saying that the rise in prices was offset by their rise in wages. This is not prices. This is spending. So the rise in spending has been met by the rise in income.
I don't know, man. I was up till 3 in the morning. It was making my head hurt. It's interesting. It's like, how is this spending so off the charts? Because people are making much more money and the people who are making more money are the ones who spend it?
Right. Well, the lower court. But I mean, also, but obviously, like the fiscal stimulus. Yes. Yeah. So that's part of the intro.
But that gave the boost, but why hasn't it not returned to trend? Because people's wages aren't falling now. Right.
That we're at a new permanent plateau of spending. I don't know. But didn't we say that real wages had fallen behind inflation for like 16 straight months?
True. This is just good spending. So maybe the service thing is the component there. Got it. I guess. Right.
Kelly Cox from Etoro broke GDP down by component. Consumer spending was the biggest boost to growth. Right. So it's people are still spending money. Here's another one. David Beckworth.
US nominal GDP, looking at the pre pandemic trend and look at, obviously, this is not adjusting for inflation. But look at how much nominal GDP has risen, especially considering the fact that it was so much below trend for the 2020 period.
I think people just have a lot more money. I think that's it. It's as simple as that.
I feel like we've been having the same conversation for a long time. People are waiting for something to happen. We're kind of in the middle part of the whatever, right?
The market's like purgatory. Where are we right now? The purgatory market? Sure.
Another one from Apollo, Las Vegas. The occupancy is a charge on Las Vegas occupancy rate.
The occupancy rate for hotels in Las Vegas is not showing signs of weakness in consumer services.
All right. Here's something that is different. Remember when there was that period? This is a supply chain stuff. Maybe I took out a week to early.
Remember when it was like we couldn't find enough truck drivers to move all the stuff around the country? People are complaining like we got to fill every truck up because this is precious cargo and supply chain stuff.
The Wall Street Journal has something saying trucking demand is just fallen off a cliff. This is an independent trucker in the piece.
She says rates she can charge for hauling cargo from dog food to pillows have in some cases fallen faster than the fuel cost.
The low demand for freight is meant fewer diesel hungry semi-trailers on the road pushing some fellow truckers to sell their vehicles.
Chief Economist of a truckers association said that trucking companies with fleets ranging from two to three hundred vehicles failing at a rate of one per week.
Not good. It's just kind of crazy how that was the thing. Remember we were figuring out like how do we speed up the ports? How do we speed up the trucks?
That's just gone now I guess. Here's one. Sorry I wasn't listening.
Okay, there was a talk at the conference about being a good, what active listener? An empathetic listener.
And you went up to the guy after the talk and said, yeah, I don't do that. I'm not a good listener.
At least you would rather say yes. Yeah, at least you admit it. You're kind of like drunk. You know you're wrong. You at least admit it.
No, I wish I was a better listener. I think, you know what, I'm not going to say what I think because people already have enough opinions of me on the YouTube comments.
Maybe I'm just going to keep that one to the close of the vast.
When's the last time you checked the YouTube comments? Last week. Okay, you did? Not good. No, no.
Okay, I don't want to mix it up in there. All right, another one from the Wall Street Journal.
Been really getting a lot of miles out of that subscription lately. They had one on US construction spending.
And this is not what you'd expect in a slowdown. It's booming all time high.
So they break it up between residential and non-residential. Yes. And it looks up only. I mean residential, that's not in fairness.
Residential is coming quite a bit. A little bit. It's still much higher than it was before.
All right, but look at this next chart. Home renovation and repair spending. This is the four quarter average.
That had to fall. Don't you think a lot of it? But look at what happened here. Yeah, it went crazy.
And this would have to fall more, I think, because Home Echo ends up credit are 7% now, 8%.
So, okay, just prior to the pandemic, this was $325 billion. It shot up to almost $500. Now it's at like $450.
So from $325, even coming off the highs, we're still at $425.
That was a massive, massive increase. The next one, US construction employment.
This one is crazy to me that construction employment is just blew through all time highs.
And it's, I don't know, rolling over a little bit if we're doing technical analysis here, but it's still pretty darn high.
Did you know that a record, so they talk about like US manufacturing a lot coming down?
And I'm sure that narrative is partially maybe Toronto now.
A record of $108 billion was spent building factories last year?
That's a lot. I do see record. How many of those are Amazon factories?
Is that a factory or warehouse? I guess that's different.
Warehouse, I guess. I think we spoke about home builders last week.
Here's a quote from this CEO of Polty talking about like why new construction is in such a bull market.
He's talking about new buyers, so first-time buyers. They don't have a home to sell, and so they are not hampered by the low interest rate.
Ah, okay. That makes sense. Home, it does seem like the only game in town right now.
Because my friend, I have a friend who like, for various reasons, is looking to move.
And he really can't. It's just impossible to justify going from 3.5 to 6.
I said yesterday at lunch to someone, some bank is going to step up to the plate and say, we're going to allow you to port that mortgage.
You're going to take this 3% mortgage that you have here.
And what, just do origination fees?
Some sort of fee, but you're going to take that 3% from your $300,000 house and move it to a $500,000 house.
And we're going to charge you up a little bit for the fee.
I can't believe a bank is not going to do that. If rates continue to stay above 5% or 6%.
Yeah, maybe.
Also, just want to mention, button down or button up shirt today for you?
This is a button up.
Okay. Twice in the last month or so.
Maybe, so button down, I would have the...
All right. I have to get something on my chest about, I've been in a hotel a couple times last month.
The last two hotels I've been at, there's not been an iron on an ironing board. There's been a steamer.
I'm team steamers.
Okay. Steamers don't work for shit.
They don't.
They don't know how to steam.
They don't do anything.
You don't know how to steam.
I need an ironing boards at a hotel. It's like trying to iron on like a gravel road or something, but steamers do not work.
All right. In fairness, this is not my question.
Steamers don't work.
Steamers work.
If you have a wrinkle, like...
I mean, no, if you have an aggressive wrinkle, yeah, you're going to need an iron.
Well, if you pack in a suitcase, you're going to get wrinkles.
Steamer doesn't do anything.
Learn how to pack.
I'm sorry.
Steamers are useless.
Duncan, make that an Ask Steamer versus iron.
Are you doing this magic mortgage rate level thing?
This is a survey from John Burns Research Consulting.
More than 70% of prospective home buyers told the researchers that they were not willing to accept the mortgage rate about 5.5%.
And is that like the magic line in the sand?
There's no quantitative reason to back that up, but I do feel like if we get into the 5s, that is a psychological hurdle for people.
That would...
All right.
If I go to 3 to 5, 5 and a half, that's not terrible.
What was your first mortgage rate?
6 and a quarter.
6 and a half, maybe?
I think mine was 5 and a half.
And I'm pretty sure I was like thrilled.
Being a first-time home buyer, though, I didn't even think about it.
It was like, that's what the rates are.
But I was buying in late 2007 as home prices were crashing.
And my house price kept going down.
They cut the price of a new build.
They cut the price of it three times before I stepped in and I'm like, okay, this is...
It makes sense.
But yeah, 6.25 or whatever.
And it was just prices were way lower.
So it didn't sting as bad.
And then I got 3 finance three times.
What do you think...
Apropos of nothing.
This is a hard pivot.
What do you think about Louis Vuitton luggage?
Because there's always somebody with Louis Vuitton luggage at the airport, right?
True.
I guess I've never really given it much thought.
You're not going to see me with Louis Vuitton luggage.
I have an Amazon basics with a compound sticker on it.
But yeah, I'm not a big pay-up for luggage guy because it's always going to end up with
a big scratch because they chuck it in there or something.
So I don't know why I would want to pay up for luggage.
And unless I'm eating them, I don't want to kill a cow for a bag.
Is that fair?
Sure.
What are your thoughts?
I don't know.
I feel like I have...
I don't know.
It triggers...
I don't know.
Right?
Let's go to a great quarter, guys.
All right.
It's been a long time coming.
We're very excited about this.
I am a paying customer.
Do you pay?
Did you pay?
Of course I did.
What do you think?
Come on.
You pay for quarter?
Yeah.
I'd sign up for the...
Yeah, right when they send to us.
Okay.
Desktop.
So a quarter is on desktop now.
We've got a promo code for listeners.
Which is something they've always wanted to work on, but you and I immediately, like,
this has to be desktop.
I need desktop.
So the promo code is animal spirits one word.
I think you get 20% off.
But it's only if you pay for the full year, which I don't know how much is it.
I pay for the full year.
I thought the deal was you get 20% off for signing up and then you can extra 10% for using
animal spirits.
Do I have that wrong?
You don't know.
I mean, you don't listen very well, but put it in and see what you get.
It'll be a grab back.
You get what you get and you don't get upset.
We're investors in quarter, just a full disclosure there.
So yesterday, yesterday, I was here in the bungalow, I guess, and I got a ping on my phone
and alert.
JP Morgan Chase, M&A announcement live.
Conference call.
Boom.
Tuned in.
That's good.
Someone also, someone mentioned, well, I can remember the company, but they said in the
first two lines of this report, we mentioned this and this and this.
And I immediately went on to quarter, sent the transcription myself so I could pull that
part out of it.
Was it for Franklin?
Oh, that's it.
Yes, Franklin Templeton.
So, and they said this is what, and I pulled up quarter and I sent myself a transcript because
I wanted to read it.
It's very cool.
It's nice.
All right.
I guess I want to, listen to Spotify.
Did you listen to these calls last week?
No, I have to say I've never, I've never been a Spotify user.
So it's interesting that you mentioned that.
So I was an overcast guy.
I'm a Spotify shareholder.
It's not very expensive.
But I use Apple Music because I have all the Apple stuff.
Okay.
So I use Amazon Music, but I'm pretty sure that either with Amazon or with Spotify, you
could only do like five fast forwards in an hour.
So it's almost jet ski season.
So I listen to 90s alternative tunes on my jet ski.
Offspring, for example, bands like that.
Really?
Okay.
I dial it back to the 90s.
I turn it back.
But you can only say anyway, so I did, I ended up paying for Spotify.
So now I'm going to be unlimited.
But anyway, the point is that, look at these charts.
I mean, just the monthly average active users up until the right, it's mostly still premium
subscribers.
The ad support in margins, it's just, ads are just a tough business.
Yes.
And that's probably in a bear market right now.
Well, look at this next chart.
So they show gross profit by segment and gross margin by segment.
And it's basically the ad is like it just the tip.
So they were asked a few times about AI and copying artists.
And I can't remember what they said.
I think it was probably along the lines.
I like, listen, super early, fluid situation, moving fast.
Everyone seems to be on board that this AI stuff is like, that seems like the eventually
there has to be some sort of deal reached where there's a specific way to do it.
And there's a revenue share there.
If you create it, then you pay eight, whatever the number is.
You know what this would be?
This would be bull market in lawyers.
Yeah.
Right.
Because if you are trying to monetize off of somebody else's brand, like that's going
to be, that's not going to be.
I would bet on Taylor Swift over AI Taylor Swift.
Like she'd be the one that would be able to handle this, I would assume.
You mentioned Chipotle earlier at an all time high, they are just crushing it with price
increases, I guess total revenue, up 17% year over year comp sales credit to them up
up 11%.
That's a lot.
That is a lot in restaurant sales increased 23% digital sales represented 40% of food
and beverage revenue.
You did this all without Michael Baddege there anymore credit to them.
So a lot of this was, yeah, no, I got Chipotle one time last quarter after a Nick game.
I'll let you think about your life in terms of quarters too.
But no, but the business boom, it's not just price increases, although that's obviously
a certain part of it.
So there was, so I went to the Nick game on Sunday afternoon and there's a lot of kids
in the crowd on a Sunday afternoon.
And I am a welcoming home fan for away fans.
I don't give them a hard time.
I'm not a heckler, I'm not a jerk.
You know?
What do you mean?
I'm just, yeah.
So, but there was a guy five rows behind us who was such a jerk.
He was heckling the whole crowd.
That's a gutsy thing to do if you're an away fan.
Yeah, he was just, he was just, it wasn't funny every single time that the Knicks felt
the heat, he would scream play by the rules every single time.
That's kind of weird because it's not really breaking the rules.
You're following the rules, they just call the foul on it.
Yeah, no, that's the rule block.
The rules of the foul, you...
Yeah, it's called, it's not...
So anyway, one time we got an N1 and he said something and I just turned around and I
said, I don't know, I screamed something at him.
I think I might have cursed.
There was a line that he went too far and I just couldn't help myself.
And there was a guy behind me with his like four year old five year old son and I said,
sorry.
That's on me.
He goes, it's okay and I'm a huge fan of your work.
See, this is why the show Beef is seems so realistic to me about people reaching their
brain.
And I don't know, it does seem like since a pandemic people have that breaking point
where they're just, they're willing to just lose it.
I'm not a yellow, I don't yell at people.
Yeah.
But that's why that show Beef resonated.
I didn't finish it yet, but just losing it and like reaching your breaking point, I feel
like people get to that wake sooner now than they used to.
I mean, I gave this guy like two quarters.
He had just some nerve.
Hutsbo, if you will.
All right, this is kind of nuts from Amazon.
I did not listen to the call, but revenue from ads products grew 21% of the first quarter
from the same time last year to nine and a half billion dollars, which is a lot of money.
Their ads are now growing faster than AWS.
AWS is about twice as large, but from Axios, Amazon's share is expected to grow to a 12
and a half percent, excuse me, this year, up from 11.7% in 2022.
Amazon seems like the most natural ad platform.
Makes sense.
It's like, yeah, it's like Google, you put something in and the first one's an ad and
the second one is.
Oh, the stock is acting like pretty trashy.
Until Bezos comes back.
Now we're talking.
Right.
It's up on the day.
Now we're talking.
Anyway, check out.
Oh, one more thing.
One more thing.
We spoke about this last week or two weeks ago about the Amex call, about how much millennials
are spending, but I just want to read from the call.
We acquired 3.4 million new cards during the quarter.
Demand for millennial and Gen Z consumers continue to fuel its growth, account for more
than 60% of all new consumer account acquisitions in the quarter.
Millennial and Gen Z customers also continue to be our fastest growing US cohort in terms
of spending growing 28% from a year earlier.
I'm sorry that this upsets people.
Things are okay.
Things are always scary.
Yeah.
Right.
I'm not saying things will always be okay, but a lot of the angst that we rightly felt
over the last 18 to 24 months has not come to fruition yet.
And it's always yet, yet, yet.
I get up.
Just wait.
Just wait.
I know.
But like if we just pause and just reflect on where we came from and what things are compared
to what things could have been, not bad.
People are still out spending money, right?
Not bad.
Here's a not good one.
This is from CNBC.
Share.
I think this is from Sean.
Share of total net worth held by the top 1% in the US.
We talk about this in the pandemic and we said unfortunately the pandemic is going to
make any quality worse and it appears it has.
This was 25% and the top 1% of net worth in the early 2000s.
Now it's up to more than 30, just roughly 32% or so.
Not a great trend.
And I don't really know what unless you just increase taxes on the wealthy to an unbelievable
level.
I don't know what stops this.
Because it's not like all of a sudden the stock market is going to hinder them.
The top 1% is going to get to 50%.
40.
I don't know what I want to talk about this.
I know.
It's not good.
Here's just something for you.
So the stock market is down 1% to 2%.
Bitcoin is up 2% today.
Are people looking at it again as an anti-system play?
For today it is.
Gold is also up 2%.
So I think this bank stuff, I'm not trying to minimize this.
You know, this is concerning.
I'd minimize it.
I think it's a thing.
I think it's a thing, again maybe down the road, but the bet on the AC.
When you say you don't think it's a thing.
I don't think it's like a systemic- Regional banks write a 52 week load.
They're down 7% today.
So are you saying it's a stock market thing?
It's not a real world thing?
I think if you're a regional bank shareholder you should be concerned because I think we
talked to the concentration is just going to get bigger.
JP Morgan and all these big banks are going to get bigger.
I think that's a slow realization.
I don't know.
Maybe it doesn't make sense.
So I did see someone on Twitter.
What to have so many banks?
Yeah.
I think someone on Twitter also said maybe we shouldn't let anyone in California have
a bank.
I kind of like that one.
I just think the big ones are going to continue to get bigger and whether that's people finally
getting over the inertia of moving their accounts.
But don't you think all the biggest business accounts now are going to say what matters
more to me like having the best rates or feeling the safest with my money?
And I think people are going to come to the realization of, yeah, I get worse rates there,
but I feel I don't have to worry about it.
I don't know.
This whole like how do people feel about banking is a very, I don't know how to comment on
how people in the country feel about their local bank.
I mean, obviously people that pay attention to our podcast are probably more concerned
about their bank than non-financially centric people, just normal people.
Like I don't know if normal people are concerned about their regional bank.
But is the stock market powerful enough to put all these banks into trouble to the point
of, okay, the equity is effectively worthless like this bank has to be moved somewhere else
or someone else has to take them over or whatever it is.
I just think the consolidation thing, that's going to be the story for a while now.
Well, so the consolidation thing, how does that immediately impact consumers?
Or depositors, I should say.
That's the thing.
I don't think depositors are going to be impacted.
I think it's going to be more of a, the shuffling of owners.
Oh, they will be impacted.
Whether it's worse customer service, higher rates, harder access to credit, they will
be impacted.
Okay.
Yeah, that's true.
Just the banks, yeah, worse yields.
Or, or if the banks continue to- But are we realizing that these banks are offering unbelievable
rates to get new customers?
No.
Don't forget about the California banks.
If the regional banks get taken over and they still, they still stay where they are under
a different banner, maybe it's not so bad.
I don't know.
I don't know.
It's bad for the equity.
Netflix is still the king.
I bought more stock, by the way, for what it's worth.
Netflix accounts for between 7% and 8% of TV reviewing, of viewing every month.
No other service besides YouTube tops 4%.
People spend more time watching Netflix.
This is from a Lucas shot at Bloomberg.
People spend more time watching Netflix every month than Hulu, Disney, plus an APO, Max
combined.
That's nuts, no?
That is a little nuts.
You mentioned how beef is higher quality.
Sorry, last thing.
Netflix accounts for between 70 to 80% of the top 10 most watch shows in the US every
week.
That's wild.
All right.
So someone told us, watch the diplomat.
I watched, my wife and I were watching the recruit.
And Netflix, which is CIA one, I watched one episode of diplomat last night after we
got back to my room.
Wasn't quite ready to go to bed yet.
That's good.
They're both entertaining shows, but they don't feel as weighty as an HBO show.
It's more like it's just kind of like...
This is the stakes are lower.
The lower stakes.
That's what it's like.
They're entertaining, but the stakes don't feel as high.
When I'm watching succession, it feels like there's high stakes up.
Well, there's HBO quality, and then there's more or less.
I mean, Apple's got some good stuff.
I'm a diversified TV viewer though.
I like having both options.
Sometimes I don't need to be so keyed in.
Yes, totally.
I'm very...
Not very.
I'm a little excited for the Citadel on Amazon Prime.
I don't know what that one is.
Okay.
It looks like CIA espionage maybe.
I don't know.
Action.
Okay.
All right.
But yes, be an argy guy.
All right.
Oh, I got...
I went to a...
I got a...
I got a random thoughts here.
Went to a stand-up show on Friday in Grand Rapids.
They're standing up in Grand Rapids?
It's surprising.
A place called Dr. Grins.
Right?
The laugh factory.
Those places all have weird names.
But there was...
The guy...
Chad Daniels is a guy.
He's the Midwestern comedian.
I never heard of my brother-in-law and my sister, a big fan of his.
It was funny.
And he says, listen, here's the center line for politics.
I'm one step to the left of this line, but now what I'm going to do is I'm going to make
front of this side over here and this side over here.
And he did.
And when he made front of this side, people got really quiet and mad.
And it was funny.
But watching people who at a stand-up comedy show, you mentioned before hiring...
I think before we hired someone, we needed to take them out for a drink or go out for
dinner or something, like get to really know the person.
I feel like another test on that realm would be taking someone to a stand-up show and
seeing if they laugh.
Like, there's people at a stand-up show where their arms folded, not laughing.
And that's fine if the person's not funny.
But I see people like that and I think I wouldn't want to hang out with that person.
Who can't laugh or laugh at themselves or their...
Anyway.
That's a good observation.
Did you see the new Mulaney stand-up special?
No, I didn't watch it yet.
Good?
I have not watched it either, but I'm going to.
Okay.
The other thing I realized is that they had the MC, the opener, and the headliner, right?
It's funny to notice the difference because you think this person's funny, they're funny.
The MC set up a joke and then botched the landing of the plane.
He messed up how he said it.
And then he tried to come back.
But you could tell, he missed it.
Same thing with the opener.
He set up this joke and he said, wait a minute, he's backtracking.
He said, wait a minute.
Yeah, you could tell.
He like, in his head, he's like, I messed up the words.
And then the guy who was the headliner didn't miss a beat on anything.
And he nailed every line, every punchline, you know, just...
And it's interesting just to see the difference, but just like misplacing two words here or
there can totally ruin a joke.
And the person who's an actual pro has been doing this for so long, like never misses that.
It's interesting to...
I saw a Norm clip with Seinfeld, the comedians and cars.
And it was like the Cosby hypocrisy line.
Do you know what I'm talking about?
I don't remember.
Okay.
But just anyway, your point about professional comedians versus everyone else, huge guy.
You could just see it on display.
It's really...
NBA versus middle school.
Yes.
And even when he was riffing, you could hear...
You know when a car goes by with a loud stereo, you could hear it.
Like you could hear it through the walls of this comedy place.
It's like...
And the guy goes...
In the middle of a joke, he goes, wait.
We all just witnessed the coolest guy in the entire world just drive by.
Even his riffing stuff was good.
Okay.
And I got very much recommendations this week.
I mentioned the recruitment diplomat.
I'll keep going with the diplomat.
It was okay.
Duplicity on stars.
Excuse me?
Julia Roberts, Clive Olin.
You appreciate this because the...
He's not going to Clive Olin.
He was good.
This might be the last good Julia Roberts movie.
She might be in the Tom Hanks realm of when's her last really good movie.
It's kind of like a...
You pay for stars?
It's with my cable package.
Okay.
Yeah.
I'm still getting cable.
Trust me.
It's in my bundle.
2009.
Ooh, March 20th.
Right near the bottom.
It's like a con artist.
Espionage, kind of corporate espionage kind of thing.
Not a bad movie.
Good cast too.
Paul Giamatti's in it.
The audience give it a 37.
Really?
I remember people not liking it.
I enjoyed it.
It's got a good little twist ending and it's also about finding a cure for baldness.
Okay.
You know what?
I'm in on Clive Olin.
Very in on Clive Olin.
I like it.
I don't know where he is now but come back to us.
I thought it was an underrated...
Not like a great movie but underrated movie.
All right.
What do I've got?
So Josh and I had DK Metcalf on the podcast last week.
It's on YouTube if you want to watch or podcast if you want to listen.
And he mentioned something about movies and I had to open that door and I said, what
movies do you like to go see?
And he said, I go see horror movies by myself.
And I was just like, my man.
It's like your experience.
I gave him a pound and Joe as advisor sent me that picture.
And he said, he called us like horror freaks or something like that.
So I emailed him and I said, tell DK that I saw Evil Dead this weekend with a bunch of
16 year olds.
Is that what it is?
Is it horror movies younger?
I guess it's like...
It's always teenagers.
So I was genuinely like frightened to go see Evil Dead because the trailer looks...
I think it's funny with all the horror movies you've seen that you still get worked up
or scared about them.
How are you not just even handed and I've seen everything?
Well, because I get scared of it.
I mean, I do this sometimes.
I do.
I get scared.
But Evil Dead was good.
It was scary but not as terrifying as I feared.
So it was by the rumor cell the news type thing.
But it was a good movie, fun movie.
All right, here's some notes I've got.
So I'm listening to a podcast with Adam Neiman and Sean Fennissae on the big picture.
They're talking about Bo is Afraid.
Is that the name of the movie?
What?
Bo is Afraid?
I never heard of that one.
Okay, so Bo is Afraid is a movie by the guy who directed Midsomar and Hereditary.
Okay, another...
Love...
Sean, top 10?
Top 15.
Top 15.
I like both of those movies quite a bit.
I don't know if I'm going to see Bo is Afraid.
In fact, I probably...
How about this?
I'm not doing it.
It's three hours.
I'm not doing it.
But I loved...
I really enjoyed listening to them talk about the movie such as the power of podcasts that
I listen to these guys for an hour talk about a movie that I have no interest in seeing.
I felt like you didn't need to see it probably, right?
What's that?
I probably felt like you didn't need to see it because they explained it all.
Yeah, I probably will watch it eventually.
I'm not going to go see it in the theater but win for podcasts.
All right, what was I watching on the airplane?
Sentive a woman.
I don't know if that's Philip Seymour Hoffman's first role but you could already tell that
he was going to be throwing 95 miles an hour.
Get a bunch of good side gigs in the 90s.
So Sentive a woman is Al Pacino one for Best Actor.
It's about 90 minutes too long.
It's actually a perfect airplane movie because it's like two hours and 40 minutes or something.
There's no reason for it whatsoever.
It's ridiculous.
You're not going to watch it on the couch.
But Al Pacino deservedly won the Oscar for it and it's got the ultimate that guy in that
movie, James Redborn.
I see the dad from Meet the Parents.
They didn't lost dad, right?
Yes.
It was a big shot.
Yeah, I like that guy.
He is the ultimate that guy.
So I'm glad that I watched that.
That's been on my list for like, you know, my grandpa liked that movie.
Poppy is what I called him.
That's how old that movie was.
I'd spent a long time so I saw it.
I loved it.
It's not worth revisiting, but Poppy and I was incredible.
Okay.
I watched Reservoir Dogs, a movie that I've probably seen, I've seen a lot of times, maybe 10,
maybe more.
And I was just, this sort of blew my mind.
So there's a scene with Buscemi and Harvey Kitell where they're just going back and forth
where Tim Roth is on the ground bleeding out and they're like, who's the rat?
And it's just incredibly.
But it is just incredible, incredible.
So I don't know when Reservoir Dogs came out.
Ninety-six.
Well, Pulp Fiction was 94.
Ninety-two.
So I think that was, I think that was.
The Reservoir Dogs was at the four Pulp Fiction.
I think it was Tarantino's first movie.
Like first movie that he directed.
I'm not 100% positive, but I think so.
Anyway, Harvey Kitell and Al Pacino were both 83 years old.
Really?
And Jack, who was at the late Chris game, came out, is 86.
And this is how old Reservoir Dogs is.
Do you know when Chris Penn died?
Take a guess.
I didn't know he was dead.
You know how Chris Penn died?
I guess I...
Dude, 2006.
Trying to say we're old?
Yeah.
Okay.
I remember that.
I remember that very well.
I'd be like, oh shit.
Because he was a young man when he died.
2006.
Oh my god, I was 17 years ago.
We're old.
I'm tired.
All right.
All right.
I miss my kids.
Let's call it.
AnimalSparesPod.gmail.com.
And listen, I will step, I will be back in form next week.
I'll be back.
Maybe it's because you have the button down shirt on.
I'm just not myself.
I'm taking it all.
I'll take it all.
I'll take it all.
And it's ParisPod.gmail.com.
We'll see you next time.
Bye.
Bye.
♪ I'm okay ♪