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Clients of Rid Holz' Wealth Management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben Michael, something is happening in the market that I don't think people really thought was possible As recently as twelve, eighteen months ago Everything is up performing the S and B five hundred this year And I'm gonna start with the this is through the close on Monday. You know what I got a bone to pick with you God Your attention's not there. I feel like we need to go to couplplees counseling. There's a lot. I'm sorry. I apologize. All right. I'm to write here What's going on in your life? You got problems? Yes. All right. Figure it out. Kidding. All right, everything' is about performing the S and P five hundred this year And So I got Russell two this is through the close on Monday. The numbers don't matter because things are changing today, but the Russell two thousands outperforming by it's like doubling the S andP Small cap value outperform by a lot lararge cap value Reads Midcas, emerging markets Dividend stocks All outperforming the S andP five hundred, some by a very large margin I don't think anyone thought this was possible before. And I think the only way people thought this could happen is if the S and P five hundred had been falling. and it's up through the close on Monday up close to ten percent per year And so I think that the idea would be We talked about the dispersion thing last year last week, remember That happened in the tech bubble and then you had this other diversification stuff work because the S andP didn't in the early two thousands. Now it's working when the S andP actually is having a pretty decent year. This is surprising Because the Max seven are not participating in the rally And that is keeping a lid on the S and P five hundred returns It is weird. I don't think that anybody could have predicted that they would take a backseat and the rally would broaden out. It makes a lot of sense Why this is happening. I saw it it's not even really keeping lid on it though it's up ten percent six through the year. Tue, true,ue true Um I saw a trart this morning that the average PE for Microsoft, Amazon, Google and one other name are at their lowest level in the last five years. Microsoft is trading like death. It looks terrible, Not surprising. it is the largest software stock in the entire world. So AI is disrupting software. okay, makes sense Obviously, Microsoft does many things. It's not just a software stock, but that's what it's trading like Mada. is trading terribly as well U Well look at this next chart I have with all the drawdowns Microsoft is down thirty three percent. Meta's down almost thirty. Oracle is almost fifty percent off the highs. Netflix is still. Netflix is crashing again. you still a holder there So on forty five percent. I own Netflix. I amm down thirty percent. I don't think I've I can't say ever. in the last ten years I've never been down thirty percent on a stock It's just not my style. I cut my losers fast The Netflix is my smallest position And I'm very comfortable owning it here. In fact, I hope it goes a lot lower because I would be very comfortable buying a decent amount. u Yeah, not to get on Netflix specifically, but the transition from a growth stock T a value stack is very messy. And I think that's's happening right now Netfix, All right, whate. we're talk about that. We also have Google down a quick thirteen percent, Amazon down fifteen percent. Tesla iss down seventeen percent. L this is to me, SpaceX is down twenty five percent from the from the highs stocks been trading for a week, whatever I think this is good news. The market is doing okay and all these companies that people have been relying on forever are getting dinged. I think this is great news for them. It's not great news if these are your bigest st. I don't want to be insensitive if it sucks people I don't want when anybody is losing money. But if you zoom out, to the macro level, assuming that these hypers scalers don't completely fall apart, because right? like, yeah, it's good now, but it's like Microsoft downs sixty. that wouldn't be great for the overall market. I think I think the story makes sense. You're seeing the erosion of The halo that these stocks had I can't believe to use Josh' word to describe that, but like the invincibility u cape that these stocks had. with all of their gushing free cash flow. And finally the market is saying, wait a minute Like you're spending pretty much all of your free cash flow on CapEx Acidite was good Aid heavy, not so good What if these companies disruing? They literally disrupted themselves by doing this. The motorin was on Kaiwu's podcast last week the intentangical economy. And he was talking about the fact that these companies, this is a huge, huge risk that they're taking And he's he kind of said, listen, I don't know that they really understand the risk they took by doing this. byy getting into the more physical world, by building the data centers and becoming less asset light. and maybe their margins go down by a lot and that the fact that they're not as intangible as they once were. This is a huge risk. And is it possible that these companies disrupted themselves and all these other parts of the economy in the world? beneficiaries of that Yeah, I don't think I don't think that they don't didnt thinkink about the downside of it. like I think that there's probably spending a lot of time thinking about that They all said the same thing. This is and we view v view we view not participating as an existential threat We have no choice So' moreace Yeah, true. But as Mark Zuckerberg like, oh, no my stocks in a thirty percent draw down and I made a giant mistake, I really don't think so because he's he's a he's a psychopath. He doesn't like think about this stuff. He doesn't doesn't doesn't impact them at all, right? I mean, well, that's the benefit of having a founder CEO with biggest shareholder He has the ability to look past Rightly or wrongly, you know, well time will tell But a thirty percent drawdown, whatever he's down to is less hundred billion dollars So I think a couple weeks ago we showed the exhibit a chart about The S and P five hundred versus the four hundred ninety three versus the Mag seven. And this is this lead by the four hundred ninety three is widening over both the S and P and the Mag seven. This is honestly, this is this is shockrising. It is We don't have a chart showing the difference between the two. like overver over a three month period I'm going to guess that the four hundred ninety three is not outformed the Mac seven by this margin in a long, long time I'm here for it I think's wonder So we also got the we're recording this nine ten AM, Tuesday before the market open which usually when we record The NazAak one hundred is down three percent opening pre market South Korean stocks Scot wild last night, they're down ten percent or something. This is the second time in what three weeks this has happened where we've had this like really big flush. South Korea falls a lot, The NSdDAQ falls I get, I think this is good news that they're having they're having this this pullback, these two steps forward one step back peopleeople keep getting slapped on the wrist in these stockks to go, Hey, listen, if you want of these high flyers theseese stocks that have gone absolutely bananas. You're going to have to deal with G and take as pullbacks This is the market the market looked biting the hand that feeds you essentially I continue to think this is good news until it isn't and this happens more than more often than not. But Yeah. more I'm more l more on this later in the doc, but let's keep it moving Okay, Morning Star had this piece Last week. about the number of stocks that are in the triple digit club. And they looked at Uh stocks this year that that are up one hundred percent or more So they say in sorry in the past twelve mons So we looked at the Morning Star large mid market index So they said, in the past year, forty two stocks have more than doubled. That's more than twice the ten year average. O in the past six months alone, twelve stocks are up one hundred percent each. Obviously, a lot of them are dealing with AI infrastucture boom And so they chart these out. it's the stocks we've been talking about, Sand Disk and Micron and Western Digital and Dell and intntel and all these Th companies Um But then they this is kind of cool. They looked at like how it's in the rolling twelve month stacks up at least one hundred percent U And the biggest one here is the rebon from COVID when there was a huge crash and then they came back. U This is crazy Ss Henckixx, this is before the little fall yesterday. was up over three hundred percent on the year. the last twelve months, just this year, six months into the year So the fact that you have these ten percent flushes or these three percent flushes the NazAq one hundred, that should be expected. We have gains this big This is the thing that you talk about, like the profit taking happens faster It should happen faststom. We have we have gains this big But obviously It's funny because we keep I feel like we've been saying all decade This kind of thing isn't normal. But we just keep seeing stuff that's abnormal becoming normal. Th like these huge moves in short periods of time What if that is just the new normal That's such a good point. There there's such as normal Everything is every market environ is a little bit different I mean what's norm Like when you say this isn't normal Where do people's heads go to a normal time of the market twenty fifteen? I mean, what are they seriously This this century, there hasn't been one like normal environment if you want to call it that. So the Wall Street Journal had this chart Give a day showing change from the start of the war through last Friday It's gold oil in the semiconductor index. And if you had just said, Hey, we're going go to war in the Middle East Oil prices are going to spike sixty percent on the year or something What do you want to own And it's not gold because gold is down since the start of the war. Goldld's down twenty percent since the start of the war, which is kind of craz oil has essentially round tripped almost. It's now only up ten percent from the start of the war And semiconductors are up seventy percent So you'd say, how do you hedge a war in the Middle East by se conductor But this is I guess the point here is that there really are no true perfect hedges for every situation Can I can I can I be you for a second Yeah The best hedge is a diversified portfolio of semiconductors, oil and gold, I guess U Goldman Goldman Sachs. I think Mab Faber had this one in his idea farm email. And if people don't have that, it's pretty good. he he he pulls together all the best like long form research pieces and sends him out once a week. M Mb and his team And Goldman Sachs had this had some really interesting charts on valuation that thought were worth. talking about So they compare the Cpe ratio to the ROE on stocks, which ROE is always Buffet's favorite indicator And this is something that you and I, I feel like weve we were really headhead to the game on this. I don't know, ten years ago saying that valuations should be higher. And this is just showing that valuations have followed ROE higher. which makes sense. Like I think I think what we did a good job of was putting a little bit of context around the P A Be becausecause I think a lot of the context, it was just the number with no with no look through to the fundamentals of what was actually driving the number The funny thing is, if you look at this next one, it's The trailing four quarter ROE, and it's just shot higher this decade especially And In my book, I wrote a piece about Buffet talked about how inflation impacts stocks because the ROE is relatively stable over time. He said it's like twel per to fourteen percent. That's like the ROE. And he wrote this in the seventies And he's like that ROE really doesn't change over time. whichich is kind of funny to think about now, because actually technology did change it It's in this it's in like this new vel. And then finally, this last one is just kind of hilarious. Wa, hold, hold on, I dont want to leave this is so important The return on equity was one of the most Cyclical data series and all of finance It was downed up then up and down. backack and forth for forty five years until these companies that we've discussed and Nauseum rewrote D phhysics laws of business of what we thought was possible What an incremental dollar invest it can generate And by the way That is changing right now It's going the other direction for the hypersllers. And you know, so what's happening with their stock price Makes sense and it's really, really interesting Yeah, you're right. This is like a new level. But look look at the next one. this is kind of hilarious It shows a semiconductor trailing twelve month net profit margin in this it was at, I don't know, a low of twenty five percent as recently as twenty twenty four. It's projected to be forty nine percent in twenty twenty seven We spoke to Dr. Anncor Crawford for a talk to book episode that came out on Monday And she's one of the best voices in my opinion on what's happening in the semi space. across all areas of the supply chain Um And it's really easy to look at the price and say buubble And I'm guilty of that too sometimes, whereere I say, oh boy donon't like this Um And you can have that opinion But you really need to have an a little bit of an understanding of what is causing the margins and the earnings to skyrocket And of course, the stocks following suit The question is what is this incentivizeed if Other competitors see a forty nine percent Net profit margin. What does that do? I don't understand this industry enough, obviously. Nothing My limited understanding is Taiwan semi is not the type of company that you could just spin up This is the most high tech You know, like, um, You know the scene, you probably didn't scene the durassic world where they walk into the see it. was awful. Okay. It was terrible. whereere they in in the opening scene where they walked to the T Rex like the what do they call that thing? the Domingus, the Dominus, I don't know, whatever it was the fake Yeah the alien T Rex, where they walk in with those Hzmat suits And everything is like like a snickers wrapper got in there and destroyed the integrity of the unit That's what these fabs are like. where they manufacture these semiconductors The amount of technology in these places is to an extreme level that There's a reason why there's only one Taiwan semi You can't just brring supply to the market And that is why there is a bottleneck at almost every area of the chain There is just a shortage and this is not, I'm not saying anything that's not very obvious and potentially in the price of The stocks But you can't just bring supply to the market. You can't just snap your fingers and fix the issue. It is interesting in what feels like we live in a world of abundance now when it comes to technology, that there still are our bottlenecks Great point You'd think that you wouldd think they wouldn't exist anywore. It' kind How is the Streit of Hormz still a bottleneck for energy? What it is. There's still these points that make things difficult to expand as much as we want to then one of my favorite u categories in our dock is the investor behavior section And I know we're on this beat a lot But I'm going to keep doing it because I think it's important There's so many different sources of investor behavior different pieces of data that you could point to and say See? X, Y, Z Yeah back to your shoes shhine thing from last week Whatever narrative you want to spin about in the market, you could find it in various sources of investor behavior data So for example Acording to Citleill Scurities, Frank Chard tweeted this The day of SpaceX's blockbuster IPO marked the largest single day of net retail stock buying ever recorded by the firm, which handles roughly thirty five percent of US retail trading valumue. And in fact U nine of the ten largest training days ever observed on our platform have occurred in just the last month, including seven during the first half of Junan. Okay So factually, factually There is a mania around the SpaceX IPO. retail traders and having a moment of euphoria. They are trading a lot. A lot, a lot, a lot Now, is it all bullish trades? I don't know. I don't have how much money went into the two X spaceX negative leveraged ETF, the inverse, which by the way was down forty three percent to two days, I think It so bullish bears they're trading their asses off And then I'm on the daily chartbook this morning And I see equity positioning Now This says consolidated equity positioning. it gets a weighted average of Z scores for positioning indicators Mm And they're looking at this is from Deutsche Bank assset allocation. Okaykay. So I think they have like a pretty good view on whatever pool of investors they're looking at And if you're looking at this, you see Nothing Equity position sits in the forty second percentile Still far from crowded and leaving plenty of further upside. So you see this you go How how do you square this with what I just said? And then I see another one Discretionary, so again, from Deutsche Bank, they break down discretionary versus systematic stock equity positioning And again Nothing there. discretion the investor is forty first percent dile Systematic is forteth percentile Um exposure to equities in terms of like how how allocated you are. You say, you scratch your head, you're like, w, I I don't get this. Make it make sense. All right, well There's another chart from Bloomberg that shows speculators are getting shorter inequities This shows the net positioning. of the S andP, the NASC, the D Mcap futures as a percent of open interest and it's getting more negative They're getting more short than the market And then you say, okay, okay Well, this makes sense We're looking at the prime book, so hedge fund exposure Gross and net to semiconductors and it is Pabolic It has gone from eight percent at the beginning of the year to twenty two percent today So Hedge funds are all in on semiconductors And then you see retail piling into semi stocks flows for all US semi ETFs listed on Bloomberg compleompletely completely insane. All right. So like There's just so many different sources in here, Cy. Yeahah Everybody, everybody is overweight semis There was the Draam ETF as it went for. we said ten billion last week is now twenty billion Okay. so clearly, clearly, clearly Everyone in their mother is all in on Smmies rightly or wrongly Is it going to fall? thirty percent forty percent. Is it going to double from here? Who knows But there's a lot of there is a lot of optimism. Perhaps beyond optimism with retail behavior and professional behavior in semiconductor stock But everything else att least according to the charts that I just shared. And I'm sure there's others. Well, Kevin Gordon had him from Vandatrk. He said retail's single stock net buying is falling to the lowest since COVID Make it make sense I don't know if they just moved all to the the ETF's or what So anyway, I guess my point is I love, I love these charts as much as the next guy. But I think they're really noisy. And I think you should just consider the source, not in terms of like the underlying data But who is showing you the data And what narrative are they trying to spend because it's very easy to make any case based on any of these charts.. What was the the Muger quote from a few years ago, if you're not confused you're notaying attention, something like that How about this one? I've got a theory in this. So Citadel had this really good report that they put up monthly. they said household cash as a percentage of total financial assets is now eight percent. That's higher than it's been at any time since nineteen ninety Okay. What's your theory for why household cash as a percentage of total assets is so much higher than it's been in the last since nineteen ninetyies twenty years ago, right Yeah, mean Okay, the in my mind, nineteen ninetyies is always twenty years. No, nineteen ninety. was I was that was thirteen years ago Okay, the only thing that I can think of without having thought about this prior to the last ten seconds is people putting money aside to save for a house I didn't think of that I'm going say no Here's myere I have two theories. I put this out on Twitter and I ask because this is another one of those and you go how could we have a speculative mania when people have more cash than ever? And I think there's two things to an here. One is just we lived through a period that was so long with like financial repression and no rates. And now finally you can get three to four percent in cash. peopleeople are okay with that I think this is just baby boomers decid and people trrading down from fixed income going, I got nailed in bonds when interest rates rose. I'm going keep more money in cash and I'm retiring, so I need some money in cash. So I think I think this is mostly a baby boomer phenomenon. Yeah That' be my theory. I subscribe to that theory. That's good. That's better thanine It's it's surr another surprising thing though, right? You go, wait, this is a speculative mania and people are holding more cash than ever This is the episode of sururprises, I guess. byy the way SpaceX, I believe debuted at one hundred fifty when it first opened. Is that correct? Ish. I think it open ye, something like that. Y. It's back down there at pre markarket today So it round tripped So who is the bag holder in that scenario then? No, because the index funds it didn't really getting there right? So who conss the bag holder now? I guess people that bought of the top and are still holding on, I don't know. But but but the amount of trining happening that happened in SpaceX Yeah the volume was crazy. There's so much volume. So I mean, is it is anybody holding the bag? I don't know, everyverybody's trading their ar off. Some people made money, some people lost money Did you put this survey in here eightight percent of investors believe there isn't a bubble in an related stocks Oh, okay, this is interesting So sort of getting back to what we spoke with Dr. Crawford about and something that I take And I want to be careful saying this a little bit I was worse they're still Early does early might be the wrong word here. I then what I'm trying to say, Ben is I love that there is still so much doubt Now because just because everybody thinks that this is a bubble, that doesn't mean it's not. okay? So I want to be very careful. It doesn't mean, just because everybody thinks that it doesn't mean everybody's wrong But it does mean that there was a lot of doubt There are still a lot of people that are non believers that these things aren't going to come crashing down. So the AAII sentiment sururvey They asked, um Is there a bubble in air related to starks And No there isn't a bubble Only eight percent Now to be fair, I dont I don't think that I would say that because I think that you could credibly make the case that There is a bubble in some areas of the AI industrial complex This is also the way that this survey is worded. It says fifty one percent of people said some but not all air related stocks are too expensively valued Yeah, that's that's probably what I would that's where I would Anyway whatever The fact that there' been people who have been calling for a bubble for twelve years in a row Just because those people continue to call buubble doesn't mean there's not going to be a bubble at some point Right? So you can't use that as a like disqualifier, like, hey, correct. This person is still calling a bbble, that means it can't be. You can't use that as a aqualifer. Correct. If somebody worded this better than I'm going to be. But they said, ussually And again, not disqualifying what we just spoke about Usually tops happen because everybody's looking to buy Right? Like there is when when there is nobody left to buy There will be a top. Yeah. But there's still there's still so many people that are just saying like This can't continue. But to your point about there being so many different investors There is no like everyone in the boat anymore. It's not going That's not going to happen. There's too many diverse set of investors today. There is no everyone. All right, let's talk about spending. Mikecardi tweeted this from Bank of America Consumer spending momentum is remarkably robust, with total card spending rising five point one percent year over year in May, the strongest growth in nearly four years. Now of course There are Some reasons for this, Gasline being one of them strongest growth in nearly four years I got toa whatever, whatever you want to say, people are spending We've talked about this before I need someone to explain this to me. So the average credit card rate is somewhere in the range of twenty percent to twenty five percent, depending on who you ask, right? It's really, really high. They pay out the rewards. I know you spend the two to three percent at the vendors. But I keep getting these, I think I sent you a picture of one. I keep getting these Things for hey, zero percent rate for twenty one months or something How do we live in a world where the credit cards can charge twenty five percent, but also zero percent for twenty one months because the twenty five pay for the zero That is insane to me that that So had we did like a zero percent financing for our flooring we did last year O course I'm gonna take it. They gave me zero percent for eighteen months When that runs up I found a zero percent for twenty one. I'm going gonna roll of it over to that and just keep having the zero percent go. likeike why and solely payid off? Why wouldn't I do that I just can't believe that's actually an option that they give This is like this is like the reverse Robinhood stealing from the poor to give to the rich. kind of is. And obviously you're when you apply, they don't give you a huge limit And also your limit, I'm sure is determined by your credit score Bragg got a good credit score. Of course. But I can't believe that these things exist in today's day and age It's on say Now you could say that like, And I'm sensitive to this argument that these rates are punitive There is a reason Why subprime borrowers have to be charged a high rate It's because they're rky to loan money to. I know that sounds cold, but like and this is It's completely unsecured deb There's no recourse Um, all right, uh more decent economic news From bespoke, retail sales, breadth in this month's report was remarkably strong, with just two sectors showing negative growth. So it's not just gasoline Following these results, our diffusionent index, which measures the six month average net number of sit is expanding up to the high end of its recent range. goodood news The diffusion thing got me. I don't know. that's just a lot of terminolog. Don't worry about it. donon't worry about it It's very technical. you w look if you look at that chart of retail sales that just had the one it sprung up from COVID. And obviously part of that is inflation. It's not everything But that was another thing that is on a completely new level. Like the trend was broken forever. And we just spend more and everyone has just moved on. It didn't come back All right, hold on the market is open Let's Nvidia O, NvidIia is down three point four percent. Let's take a look at the The NS is down two and point half percent. Pro finishes green by the end of the day too the point that we were making earlier about Everyone in Semies. everyone in semis Yeah, there's going to be bigger air pockets. So Micron is down eleven percent. Sant this is down eleven percent. I think Micron reports after the bill. Guess what Micro could Micron canon probably whether or not the Microon could fall thirty percent. Matter of fact, I keep I know I said this every episode It just did in March. Micro could fall thirty percent in a week and still be in an incredibly strong upturn Like the shakeouts are probably going to be just as fast as the Rise. Noll pay no gain. Exactly. All right, cool one from strake straight up G Alex here They look at new business applications. I think this is one of the things I think, why why why do you skip that whichich people compl to the worldse I it' is a good topic You want to do that? o Yeah. I am these are the absolute worst. Yes. So this is from the Wall Street Journal. Okay. America's economic anxiety is rising up the income ladder. and they ask people a set of questions, Do you think America's political and economic systems are stacked against people like me And the upper middle class people in twenty seventeen said twenty nine percent said yes In twenty twenty six, sixty five percent of people said yes. Also, do you lack confidence that their life will be better for your children than it is for theirs? In twenty nineteen, it was sixty four percent said yes twenty twenty six, eighty six percent so they lack contence that their children would have a better life than theirs stacked against is give me a fking break Yes. Now I I know I know that it's hard to live in it's hard to live in expensive areas Long Island being one of them I am sympathetic to that Uh but stacked against you Come on There are people who actually have The system is stacked against some certain people. Yes, We are not one of them St in the upper middle class, yes, just that rich people, this is such a big pet peeve of mind. Rich people who pretend or say they're middle class complain about their lives, when there's other people who have actual complaints that are worth telling I hate it. This is what makes America great. new business applications This is something we never could have possibly foreseen. when we remember all the conversations we had, like, what is COVID going to do Like what is the thing that it's going to change forever And We had all the and there was a lot of wrong predictions, there was some right This is something no one ever would have predicted. that you'd see this huge increase in business applications. There's a reason for it back then. Soning to Desk and team at Stripe what about this. They said Um the PPP program, there was a small business loan program required an EIN and a little else for eligibility. So you got like these loans and it was like, hey, guess what? If we make it easier for people to start businesses, they're going to start businesses. And you saw this huge rise in business formation. But then it's stuck and now you're seeing another acceleration And the team at Stripe is saying There is no program now that's causing this. What's causing it? AI. And so they break it down by saying It's easier for people to start businesses now because of AI. And I think this is this is actually a very good This is a great thing that's happening. And look, look at the numbers from two thousand five to twenty eighteen or so. These numbers were stuck, they didn't move much at all. And now we've essentially seen more than a doubling of business applications of people starting their own businesses because it's easier There is a lot to celebrate about what's happening in the country It's very, very Easy U lose sight of that given all the negativity And a lot of the negativity is genuine. I'm not trying to swep the negivity under the rug. There's a a lot of shitty, terrible things happening to a lot of people There's so much gooduff happening too. Just think about how delusional you have to be to start your own business though It's really, really hard It's pretty psychotic But so many people do it in this country becausecause like there's this idea that yes These surveys talk about things getting worse, but you don't start a business if you don't think that it's going to work or that yeah, you're not somehow optimistic. I think that's All right, let's let's let'sivot let's pivot to the dark. It's enough positivity for M I right So Tim Farris wrote a post desescribing that his books sales are crashing. Now Tim Ferris is probably the modern day king of the sell the self help, like the the the Wait, this is not dark. I think I'm going to go on record and say this is a good thing Yeah know. I' say like no, I totally agree. I'm just saying the transition to AI doerism. I think this is a great thing But he's all like the the self help Hackcker book, right? Like the four hour work week, the four hour body, the four this. He basically said there there's still the stuff that he talked about in the four hour body that I do today still. Like there's some workout stuff in there that he laid out U that it's like it's a really big book and most of it was useless to me. but there was some stuff that I still use to this day from his book from that for a body book So his catalogue will sell roughly eighty percent fewer print copies in twenty twenty six than it did in twenty twenty two. U and of course, The self help books are being displaced by Claud, because you could ask it anything and I think that's great Um, en what's your take on this? No, I that The self help genre. I think it's useless to ninety five percent of people. I think you read one of these self help books and you go, yes I'm going to change my life and then you don't do anything It just gives you this initial pop and I have very mixed thoughts on this Be I' sure though that this is all AI related. Is Is this too much of a causation thing Or this just what if just a Tim Ferris? not, let's say it's let's just say it's Adbson A II. Maybe Tim Ferris is run of the scores. his book's been out for a long time. Yeah. That's the thing This is pretty this is pretty Actually would I wouldn't have thought this, but it does make sense I think self help is sort of like Um how some people feel about religion Some people like say religion is bad for reasons X, Y and Z And''s it's nonsensive. Bah, Okaykay fine, you might feel that way. But there are genuinely people that get a lot out of it Anyway, it gives people hope Okay, so I think self help is the same But but when you read your first self help book you are sort of energized and charged and like I'm going to change the world or I change myself at least Most of the time doesn't happen. I think there's not I read it People are mad. peoplee are mad at this help creat. It's mad, but it's like, that person is Chlotte right They're getting rich by telling people they know what to do. I think that's generally the complaint There need there shouldn't need be more self books, but it's true that sometimes the way the message is crafted just needs to be changed And sometimes people people find comfort in that stuff So I don't want to be too big of a hater. No Listen So there was someone who said, like, hey, Ben, there's nothing new in your new book And I thoughtt like, well, yeah, someone told me a long time ago. someomeone told me a long time ago, Hey, listen, No one goes to church on Sunday, expecting to hear an eleventh commommandment Sometimes you just need boom love it. Sometimes you just need to be reinforced Yeah in that you're So that's why self help books will always but I gott to say, this is this is not one of those outcomes I would have predicted. It's pretty interesting that this is happening add this to the mile on.' you think sorry, one more thing.on't you think podcasts are also part of it too? podcasts that replace books for People always say like, oh my gosh, no one's reading anymore. podcasts and replace book for a wide for a big segment of the population Fse Why would I want to read Tim Ferris's books so I could listen to his podcast? I'm sure that's part of it too Jsier All right, so add this to the my long list of things that we might look back on and say what in the world How was this not more clear that X was going to happen ere's a tweet from Sharish They are putting data centers in the ocean now Panth Alasa, startup from Portland just raised one hundred forty million dollars They build floating platforms that sit out at sea and run AI No power grid needed. The ocean's waves make all the electricity. The seawater keeps the chips cool Um, big floating balls bop up and down the waves that that motion makes power. the power runs AI chipps inside back by T to Tel. company now with almost a billion dollars. All right, whyy not? I mean, what do I know? Sure. It looks like a scene the picture looks a scene from a Star Warsks movie S why not It is funny because there's obviously roadbocks to data centers and now that that's A lot of Municipalities and cities are saying, no, we don't want them here Obviously, it's so important for these hyperersillers to get this stuff out that they're going to put them wherever they can. They can talkking about put them in space and in the ocean and It is kind of insane. So I guess part of the push and pull that we keep talking about is We're looking at the prices of semiconductors We're looking at the valuation of sppaceX. And it feels how it feels. Let's be honest, we all feel in a certain way Right? likeike this feels This feels like ninety nine. What time is it? Who knows Um And I'm reminding myself off what Gavin Baker said where he's like, look think about all the the shortage of compute that we keep talking about And just think about the fact that Literally less than three percent of the world Maybe even lesson that is actually even using AI And so like, all right, well, that's one end of the spectrum versus the other And how do you think about like investing through those two prisms? And it's hard I do think it's helpful to read both finance people and tech people right now to keep yourself balanced. I feel like if you just focus on one not the other You're not seeing both sides of this and you're not having a more balanced view because the again, we've talked about the finance people tend to be lean more bearish on this stuff, the tech people more bullish. This is a, you know generalization, but I think it's important to read bothoth accounts. All right, I'm going to keep a positive here. I want to give a talking wealth plug again. So talalking Wealth is our YouTube channel and podcasts for financial advisors. We talk about everything. All things wealth management. Last week, you had Jason Wank on the show from Alt of us talking about their new AI platform called Hazel We're putting we're putting good stuff it's really I was thinking though, like ChBT calling it ChadCBT was like the big one of the biggest fumbles in history, the fact that they didn't call it a name, like a verb or a noun or a name there has to be a rebrand at some point to call it something because every new AI systemm now is a name, right? It's kind of a cutesy name, right You have to make it something people will have about on to. Just drop the GPT Just chat. Yeah, right Where's Justin Timberlake when you need him? So I talked to David Lao this week and that's going to come out on Thursday, I believe. And he he is in the insurance industry. And I asked him like, hey, AI has to somehow have an impact on the insurance agents industry, right? Like because it's quantitatively based It's numbers based, actuaries, these types of things And what he told me is that, okay, so we have we have a financial advisor group come to us and they have Thousands of clients and within those clients, there might be twoo to three hundred different insurance policies in the and in the, you know, and they could be What are they called Why am I blinking on the term? when you receive monthly income annuities Thank you, my brain. So you have three an anuities and there's all these different legalist terms. and he said, now we can just he said in the past We would have kind of given a blanket statement on these things. Now, we just upload statements for two or three hundred of these annuities that we can give perfect analysis like, hey, you should probably trade that one in for a new one. And he's like, we're doing work we couldn't do in the past. So suck. You know, this reminds me of my annuity days or my insurance days or in which I never sold a single policy to anybody else in my family But there was there was like people whose literal job it was to run the numbers. I mean, obviously, of course I was a job See ya But he's saying he's saying the thing is we keep talking about AI, like what task is AI going to replace And you know, that's fine. But what task is AI going to allow you to do that couldn't do before He's like list We never could have done this before We couldn't have looked at that many policies and that much data and many prospectuses AI can do it for us now in the blink of an eye and that's cool thing I think that we're not thinking enough of like what are the things we can do that we didn't do before? Speaking of which Midjourney. I knew midjourney as this company where I think you started doing this first where you could type in a prompt and it would give you a picture This is before it was easier to do on all the LMs, right? My kids love this. Make a picture of of Venom fighting Darth Vader Yeah So, I had aidourneyount, I think I paid for it at first now I don't need to do anymore because I' pful for of other st Last week Midjourney decided that they came out with this full medical body scan that you could do a full and remember, you didn't you just do this or something? You did a full body workup of something. I did blood work I remember we got a few people who said, Hey, Michael, you might not be a few medical people reached out and said, Hey, Michael, you' not be covering everything by doing this full bb work blah, blah, blah, blah. And I think a bunch of people said this too. I just think it's kind of cool that we can have something like this that The future is going be crazy as I'm saying Like stuff is coming. and I think it's really cool to see this even if it's even if this is not a foolpof. because there's a lot of medical people, no, way, w, wa All right, one more piece of good news Are you can'tagine you're in the Wor Cup at all you World Cup Not at all Okay, you were run to the NBA. I kind of got into it. My kids are enjoying it All. It's funny because my kids get a lot of their sports takes from YouTube, right? they watch YouTube kids and So my son, his NBA takes are just all kind of broke because whoever YouTube he follows on YouTube He's telling me like like this person James Howardon is so much better than Jayen Brunson. Yeah. so I have to like So he's like, oh, Ronaldo is the goat not messy and And I'm like, no, no, you don't realize Mess's like, he's the best player ever. You don't get it. You're listening to the wr Youube person. So Messi are like five goals anyyway There's all these sties going. ABC News had this story about how People from Europe are coming in and they're going viral because they're talking about, I'm sure you've seen this stuff on Twitter. The people in Europe going viral talking about the normal things we have in America And so here's something from ABC Ns. many visitors have expressed surprise at convenienceces Americans often take for granted, including free ice, retail stations, twenty four hour retail operations and the overall friendliness of the consumer. And they interviewed this person. he said, What Americans consider ordinary is often extraordinary to visitors And obviously there's some of this Americans go to Europe too, right? There's things that they have that we don't But I think I think it's just a great thing that It's funny. they said travel researchers have long found that tourists do not simply consume landmarks, they consume daily life And it's like the people, not the places that matter anymore And I just think that there's this thing on social media that we should all hate each other, right? And it's so cool to see people have like positive experperiences And it's like, We hate the Europeans and they hit us and the European mind can't comprehend.'s like, no, when they come here,'re like they're optimistic and positive kind of the way where we go over there. I think it's it's really cool to see. I agree Very cool. love it U All right, let's do some stuff on prediction markets. So Schwab is getting in the game U Prediction markets are are They're not going away They are going to be a lot bigger in the future than they are today. I don't know how big. Can you really see Swab comers using them and just for some binary bs Like is it going to be a big part of their business? No, I don't think so. Will the S and P five hundred be up on Fed? I think there is there is an appet for this. I just feel like the degenerate economy stays to the original degenerate places and not I feel like if like Vanguard and Schwab try to get into this stuff it's not going to work You know what? Maybe that's a harm what's a harm in term in and turning it on Right? It's like it's they're not going all in, like whatever. They're going to offer it where appropriate. They're not going to like let you do sports parlays or anything like that. But that's the thing, as we've seen, that's what it's used mostly for sports parlays. It's like It's still like ninety plus percent of sports Um All right, I did like this. I've been I've been critical of of some of the stuff that's happening, but I do like this. So our credit, where credit is due Calshu plans require users disclose where they work to make certain trades. this is from the Wallreet Journal And Calci is planans to require that participants in prediction markets disclose the identity of their employers. After an advisor committee recommended tight security measures to combat potential cy tring and market manipulation Jom I mean, who says no? Who says no to this Pretty easy This shit has happened Aounts belonged to military spouses on Cashi made accurate bets on whether on when former Venezuela President Nicolas Maduro would be ousted just days before he was seized by U. S. officials in January At least one of those accounts was referred to federal investators with I mean the No Straight to jail, you can't do this It's almost like traders. Can you imagine someone and like betting on when D day iss gonna happen? Back in the forties or something, gross It is a very. I didn't miss this one. A Google employee was charged with insider trading on polymarket more than this person made more than a million dollars using nonpublic information to bet on who would be the most searched people of twenty twenty five Um, here's a tweet from my insurance. spepeaking about what people are actually using it for This is the primary source of prediction market nihilism Two years ago, production market volume was over ninety percent politics and economics Today, these same categories are under six percent of total volume So it's basically it's all sports and partarleys and sports partays. The idea was, yeah, you're going to be if because sometimes the market doesn't react to the headlines very well, the data But it's like no, you don't have worry about that over your under reaction by the market. You can actually bet on the actual outcomes, but no one wants to use it for that U Polymarket got busted There was an investigative report done by the Wallreet Journal U, They looked like they were getting rich on polymarket, but none of it was real. That's a headline. basasically They Iillin not, let me just read it. In his videos, George Makihara appears to have a lucrative side hustle making bets on polyarket. In January, the college student posted video that showed winning a hundred thousand dollars a wage that Pident Trp wouldublic say thed McDonald's month Bette was one one hundred and forty five that Makihara appeared to place on Polymarket's website between January and May, based on his videoos,. B's adding on to almost four hundred ten thousand dollars But None of those bets were real according to a Washingt Journal investig So, um Apparently, they paid a lot of influencers to post fake trades and fake wins and Not awesome Oh, I thought this guy was faking. but polymarket was trying to show They paid a bunch of influencers to to Post fake shit. The journal reviewed. one thousand one hundred five videos posted by ten creators, endorsed by poolymarkets contractor between december twenty twenty five and mid May seventy percent of the videoos is a creatorive place a bet. No Cues in the video showured that none of the betets onene point nine million dollars in total were real Of. These hundred and eighteen videos depict the creators winning almost nine hundred thousand dollars. in reality, those bets would have lost more than one hundred sixty six thousand dollars Not awesome. Um, not awesome. Yeah, that's Yeah that's sort of stuffs front p So The fact that this is all sports betting if what if just another better platform for sports beting comes along? That's how are these compies what me do these companies have at all because they they just stole from Draft Kings and Fandle if you're not going to use it for politics and economics, and obviously when the presidential election comes around, it'll be more politics based, but I don't see what kind of mote these firms have It's regulatory But that that's not a boat. if regulations can Oh yes, it is. Yes, it is. These companies spend Tens of millions of dollars on legal and lobbyists and that sort of stuff. It' defitely emote. Well, yes, obviously it helps when the presresident's son is on the board or something. But what happens if there's a change in office At that point, these companies aren hugely under pressure I't know Let's talk about crypto I want to talk about Ethereum because Look at the price of this thing. It's essentially back to almost the twenty seventeen highs, which was like four thousandteen hundredars. Yes Okay I remember this piece, Packy McCormick wrote this in twenty twenty one called On the Interet, the Bollcase for Ethereum. He talked about Patrick O'Saun had Justin Drake on B business breakdowns to discuss a theoreum. James W James Wang wrote a great post on theores Q and upp results Boomberg Je Whell wrote about a post about finance normories gettingeth pilled. Generally a lot of the smartest people I know are getting very excited about theereum And the idea was, remember, it's like, hey, if you could invest in the HTT or HTML or whatever, that's like what Ethereum is, right? It's smart contracts, it' You're it's like the smart way to instead of Bitcoin. What happened What happened to this thing? is it seems to be Nothing happening with it. Why was everyone wrong on this? If you're asking me what happened to the Ethereum network and prices I don't know that I could give you great answer What happened to this thing being like, I'm going to own the internet? Ethereum is owning the interternet, smmart contracts A lot of people were saying this. I want to know what happened ' I feel a lot of this stuff, we have the hype And then there's no explanation afterwards when the hype doesn't come true Well, what's really interesting is that is having a moment It's just the blockchain and not the tokens. And I know that sounds like punch yourself in the face asshole Butember that was the funny meme like I'm buhed on a blockchain, not bititcoin But I'm serious, lookook at what's happening to All of the exchanges are getting destroyed.s that's more of actually a cucii listing their perpetuals issue than a crypto thing. But look at Visa and Mastercard These stocks are getting hurt pretty bad. They their multiples are coming down And a lot of the chatter is think that's a stablecoin thing? is because of stablecoin and the future of crypto and what's going to happen there Um, and just this week Uh what a Andrew Cromo forormmer governor New Yor Um will co chair a joint venture between the owner of the New York Stock Exchange. and the crypto exchange, OX, the two companies, the project will focus on taking New York stock exchange listed assets and tokenizing them putting them into blockchain wrappers So there is stuff happening. Yeah Visa is twelve percent off the highs. Come on V are to uppton of the eyes What's it? I'm just saying I want an explanation for what happened because I There's a lot of people saying like, this is it. this smart contracts. These are the things. Nothing happened with this stuff. well hereere's an explanation They were wrong. I mean, what more do you need I just think it's good to remember that I think I think people lost their minds in twenty twenty one Remember this thing, people sold an NFT for sixty nine million dollars? R remember this This is my favorite posts of Jew Dixson He posted this Ethereum rock was selling for two point two million dollars and he put it against a house in Florida on the water That was also sun for two point two million dollars. And he said, which one would you choose? I think people forget People lost their goddamn minds in twenty twenty one for twenty twenty one was the drunkest. experience of investor euphoria that I've ever witnessed. It's kind of, I mean, I know that we had a lot of stocks that fell fifty, sixty, seventy percent back then and obviously Bitcoin had a crash. It is kind of crazy that it didn't really spill over to the rest of the market which obviously wouldn't happen these days if AI really blew up. wouldn't have that scenario where the market only falls twenty percent or something I just think it's a good reminder that people really lost their minds back then Mhm I think that that period was way more of a speculative mane than the current one And I don't I don't think it's close Oh I agree. I totally agree That was a speculative mania This current environment is different I'm not saying that it's not speculative, O course there was an ement that, no doubt, but it's being driven by real ship Yes, there's way more real stuff likeike, I don't know. eararnings and margins All right, this is a chart from Morgan Stanley I don't know how many people would actually believe this. They look at affordability going back to nineteen ninety one And they break down affordability, basically showing the current levels it's fallen because I think incomes have risen. So this is monthly payment as a percentage of income. Now is the same as it was in two thousand seven two thousand four ish and then like nineteen ninety four. How many people do you think would believe this if you show them this That's affordability of that Not that many, right I think one of the hard parts for this Like the affordability thing might be the same Is it in terms of income, because incomes have risen But it's just the activity is so much slower. That's what makes it harder Because yes, you you can't there's not enough houses to buy in most places So even if you have the ability to buy it, it's hard Mike Simon look at this thing, like, How was it How was the speaking of normal? there being no such thing as normal How long will it take to get back to a normal level of activity And he's showing if rates are at five point five percent or six point five percent. And he's looking at these different ranges. And he's saying it's probably somewhere like the early twenty thirties And it's funny because Getting one to hold dness There being no such thing as normal There hasn't been a normal housing market this entire century, right? We went from a housing bubble in the early two thousands to a housing bust I don't think you could give him call the twenty thousand ten ss normal becausecause people were still suen shell shock. No and they weren't building And then twenty twenty s, of course is not normal. I don't think you could you could plot a path out saying, What's going to happen in a more normal environment because there's no such thing as normal in the housing market I mentioned a couple I mentioned a few times on the show that I think housing might be might be turning a corner. We saw a jump in in u existing home sales. And I point to some of the stocks that are you know, working a little bit And then I look at Zillow and to say, well, maybe not So Zillow stock is sixty six percent off its highs in the last three years But it made a new it made an ultim high earlier. So it's eighty five percent off the utim highs in twenty twenty one during the mania and had a forty eight billion dollars market cap. It is now under seven Holy. I made the mistake of buying this company. It was down forty percent. And I think it dropped another thirty from therem go, I'd find out This is shocking to me with how strong of a brand that they have You would think the Zillow brand alone is worth, I don't know, make up a number fifteen b It's shocking. So forty eight to seven billion, holy cow and still just getting hammered all the time Is there any like takeover activity possible for a name like this I mean, at some point if it gets to five billion dollars, like Wh would be the buyer No d Private equity The latest Social Security report came out They do this annual report every year and they look at they run the numbers based on the demographics and how much payouts have happened And they look and they said between now and twenty thirty two or thirty three They can handle one hundred percent of the payouts from all the taxes coming in in the current So security f By twenty thirty four, it will drop to eighty three percent projection by twenty twenty one the year twenty one hundred So it'll be sixty five percent based on In twenty thirty four, when it dropped sevententy percent, what happens Do they cut social security benefits? orr does the government ever just decide we're going to pay more They'll pay more Right? They'll just go into debt to pay it All right We have five minutes to wrap this up because Verizon is on their way to my house Toy Story five Monster open with one hundred sixty million dollars, according to Ert Davis, that is the biggest opening of twenty twenty six The biggest opening for a Ty Story movie, the second biggest opening ever for an animated movie, and the second biggest opening ever for Pixar behind the Incredibles two Um I I I thought this is great. I mean obviously, it's toy story. like they don' They' miss. was wonderful.'s great mov You asked it already Did I did I fallseleep twice Yes, I did But my kids loved it, and it was good. I agree with Tarantino. this should have ended after the third one I know why they keep making these. But I thought the first like the way that they wrapped the third up, I thought it was perfect. The kids left and they didn't need to make more of these. But I get why they're doing it Um All right, Widows Bay. u This show had a lot of hype. And I think like everybody else, when there's a lot of hype, you underreact. I think that probably is what happened to me. I like the show just fine When you describe the premise of the show and the way that the show came out It's a ridiculous promise The island is haunted and blahah. I mean it's n sense And it was a serious show. L they did a really good job with it Um, I just don't know that I loved watching it And again, maybe it was because I thought like, maybe I was just infected by the heype machine But what are your thoughts?id you love it? 'cause I didn't love it? I liked it. See I never got into the hype machine at all on this for some reason. I didn't listen anything on it. I just I heard about it. So I'm taking the other side of this. I liked it I you said you said this is a one season show. I thought they left They probably left way too much on the table in terms of like to open ended at the end to want to season two, but I can't wait for season two. I like I really really likek the show. I thought it was very was good. He was good. and it just it made me kind of want more. I wish they would have D done a little more with the Sale My wife was like, oh, that's it. That's the payo. Itn't of aayoff at the end. Mm We was just enjoy it And yes, andm I'm excited for season two now, but so I stayed away from the hype machinine. so maybe my expectations didn't get too um too inflated. Okay. I watched The Hand that rocks a Cradle They did on the reatchables. It's on Netflix I watched it too. I'm pretty sure I saw this movie in the nineties but I can't quite remember. I wanted it one time in the nineties on TNT or something. Okay It's such a it's such a nineties movie. first of all, great title Are you kidding me? The Handbx crrle? Yes and it's just it's just a classic nineties thriller. Like, by the way, it's not rewatchable. like it is that is not I guess it's only just like, they did it for the Rwook because it's like it's hilarious. It's like right,'s not's the movie you watch once and don't need to revisit. Yeah, ever, ever, ever. But it did remind me, it's like they don't make thrillers like that anymore. just like the slow burn thriller, which was a staple of the night.ese another fact Apple did revive it. Cape Fear Cape Far feels like a modern day oppos show because it's a remake of a nineties mov Yeah, they they're doing a good job there I got I know you gott to learn I got I got a quick story here for you, I got to tell. T minutes's go I have a good morning lady at my office. So I walk out of my office a couple weeks ago and this lady you know walking in with like three purses and sunglasses on and coffee and She goes, goodood morning. And I said Hey and I don't know this is. I said, Hey, good morning and she said, That's all I get And I said, Oh. She's like, you're a man of few word. So I'm like, okay, I'm like, I don't know you. Anyway I walk out my office morning I'm going to the bathroom This woman is ten feet behind me She says, Good morning And I thought she's on the phone or something and she said, excuse me to me and I'm walking into the bathom I said, I said, Are you talking A you talking to me? She said, Yes, I said good morning to you. You could say it back And I said, I'm sorry I didn't realize you were talking to me. I'm ten feet ahead of you And she said, Jeez, you could have said I'm like, I wanted to be like, Hey, what's going on here Sorry. I like I like it. you know, positivity in the world. I love it. That is funny Yes.es. she wants more than a good morning. and All right, next, gif, J just give a hug next time I guess so. What do you want from me, lady? Gosh. All right, Animal sppirits Pot at the compomp News.ot com We're as confused as you are