Today's Animal Spirits is brought to you by our friends at Y Charts. Y Charts created a brand new deck helpful for advisers called Debunking Investing Myths, and I've got some favorite charts in here that they use. They have one that says fallen stocks will always bounce back. This is a thing where you know not true. No, it's not. So they show AIG 96% below all-time highs, Citigroup 88% below all-time highs, this one surprised me, Walgreens is 90% below all-time highs. So while sometimes it seems like, oh I'll just wait till the stock crashes, then I'll buy it and it'll obviously come back because that's happened to a lot of stocks in recent years, not all the time. Most of the time in fact these stocks never come back. If there was an ETF of stocks making new 52-week lows, it would be the worst performer eight out of 10 years. Yes, you'd have maybe one winner in there or something, but you wouldn't have a lot of them. So we're big fans of mythbusting here. Click the link in the show notes, download a copy of Y Charts deck, get 20% off your initial YCharts professional subscription when you start your first free YCharts trial through Animal Spirits. New customers only, YCharts.com to learn more. Tell me, Mike, we just sent you. Welcome to Animal Spirits with Michael Batnick and Ben Carlson. We're going to start the show with one more plug for Future Proof. Signups are going bananas. Ben's gangbu chart is like breaking out if you will. So if you are an emerging manager, again no offense, not like a pajama day trader but a real financial professional, and you want to showcase to the world what you're up to, sign up, link in show notes. It's one other thing that we've mentioned in the past but not for this particular event, again it's March 16th to March 19th in Miami, Miami Beach, literally on the beach. If you are an adviser, you are eligible for a $700 up to a $750 reimbursement for travel and hotel. So what that means is you're going to sign up, you're going to pay, but if you sign up for I think it's eight breakthrough meetings, and again we'll link in the show notes, it's all there, you have to pay but afterwards you submit for reimbursement and up to $750, with a free ticket I should add. So come on, no-brainer. Yes. And those breakthrough meetings are helpful too. Yeah, that's not homework, you opt in, you can meet with who you want to meet with. I think for one of these Future Proofs we need to do a roulette roll of the dice and all of a sudden Ben or Michael is there for one of these breakthrough meetings, a mystery guest if you will. Right, I don't hate it. I don't hate it. So okay, this has been a year. The DeepSeek stuff feels like it was 14 years ago. I don't love a lot of what's happening, but especially the fact that we have to be glued to our phones on a Sunday night. Not a big fan of that. Or the weekend. Did you just say or the weekend? Well just the whole weekend, yeah, because it's kind of started out on Friday. So I most weekends I'm busy with kids stuff right, it's sports and practices and birthday parties, and now we're going to go skiing or whatever. And so I, one of the great things about that is a lot of parents complain I'm so busy, but I love being able to focus on my kids and not have to focus on the outside world. I think it's actually one of the benefits of being so busy is like I don't have time to be glued to my screen. But this weekend, kids settle down and I'm looking at all this tariff stuff. Well you're a big tariff guy, let's just get that on the record Ben. A big tariff guy. I don't like the fact, first of all we're going to get into all the tariff stuff, and you know luckily it seems like that's on hold for 30 days, we're going to talk about what it means. Yeah, I don't like that we have to talk about this because I don't think that Ben and I are overly political people, but inevitably there are people that feel very strongly about this that are going to email us with strong opinions. I don't know how to be non-political about this, but my feelings on tariffs have nothing to do with the president. Okay, so tariffs, I just what are we doing? I don't get it. Now again, fine, you could say he won because it was all negotiating tactic, but he actually does like tariffs, this was not a bluff. And I guess credit to him because there were some deals that were made. But tariffs are not good, and what are tariffs? They are a tax that the importer pays for bringing goods into the country that ultimately gets passed along to everyone. It is destructive economic behavior. It is like the opposite of free market capitalism. So Callum Roh thought had the best idea because a lot of people were saying hey listen, I would rather buy products that are manufactured in the states and have to pay more, fine. People were saying this, and Callum Roh said listen, the genie is not going back in the bottle. We're a technology and service-based economy now. You can't go back to the way things were when everything was manufactured here. That's just not going to happen. I agree with the political thing because just because you have a financial analysis of something like this, it doesn't matter if it's a Republican, a Democrat, an independent, a Green Party, whatever. The facts are the facts. And the Wall Street Journal had the headline saying, this is the notoriously liberal Wall Street Journal, yeah, the dumbest trade war in history.
And my explanation of this, I watched the movie Saturday Night on Netflix this weekend, which was very good. Ben movie, not a Michael movie, I'll put it out there. So it was the very first night of the very first show of Saturday Night Live back in the 70s, and I guess they took like six months of stories and put them into one night, so it was very chaotic. And Jason Reitman did it, I thought it was very well done. And the guy who played Chevy Chase, because it was Chevy Chase and Jim Belushi and Gilda Radner and Dan Aykroyd and Billy Crystal and all these people, and I thought all the actors did a very good job. But the guy who played Chevy Chase just nailed Chevy Chase. He looked like him, the mannerisms were the same. You're a big Chevy Chase guy, right? Oh, love Chevy Chase. He's one of what, what movie says you've been in? I'm just kidding. So Chevy Chase, and apparently this is a gag he did, he's walking down the hallway and he does a theatrical trip and he falls over, and he gets up and he jumps up, he goes oh sorry, I tripped over my penis. And in a very arrogant way. And that's the way I view these tariffs. It's just more of an ego, arrogant thing, like why are we doing them? Because we can. And that because the US is in such a good position, it's like well why wouldn't we do this because we can. And I think that is the biggest mistake, like puffing our chest out and be like well of course we can do these, because you don't know what the downfield effects are of that. And that is my worry. All right, so let's get into some of the facts. Again, on hold, but who knows if they're going to be put on. So let's get into like if tariffs were to go into effect on our two biggest trade partners, what would that mean for us, Ben?
All right, before we get into this, the one thing I want to say is I would actually be okay with targeted tariffs on China. Like China is a huge competitor of ours. If we wanted to put targeted tariffs on China and not let them completely take over the world, I'd be fine with that. But the ones on Canada and Mexico, that's where it doesn't make sense because guess what, I like drinking Modelo. I like Pacifico. I like avocados. So this is from Torsten Slok. Goods imported from, well goods imports make up 11% of US GDP. 43% of imports come from Canada, Mexico, and China. That means 5% of US GDP is directly impacted by higher tariffs. And so it's a lot. And Callie Cox breaks it down for us. She did a great job on her site looking at all this. It's 90% of our fresh vegetables come from Canada or Mexico. 84% of beer, because Modelo is like the biggest beer company in the world now. These are high numbers. Berries and poultry and baked goods and wood lumber products, like pork, toys, games, and sports equipment, 73% of it is from China. All like all above 50% of our consumption of these comes from these three trade partners. It's a big deal. Bloomberg did another one where they looked at it, and again it's beer and fruit and vegetables and distilled spirits and poultry. 67% of our berries come from Mexico. Ben, I think I speak for all parents out there, kids eat a lot of berries. We go through a ton of fruit in our household. Yeah, so again, this is, and the funny thing to me about the tariff talk is no one ever even assumes that the businesses are going to pay for these, right? It's no one ever assumes like tariffs are attacks on businesses. No right, well they're not. Well, the right, but because they immediately get taken by the consumer, right. But you even again, they, Mexico bent the knee, Canada did next. And I don't say that it's a good thing, like I still don't think this was great on balance. But there were concessions, and again I don't know enough about the border stuff, like that's outside the scope of our stock. So this is from a Canadian listener, and a lot of people in Canada were rightly scared because it could have a real impact on their economy. We heard from a lot of our Canadian friends. Yeah, and this one was probably, you know, exemplifies this. So we're scared, we're angry, we feel vulnerable and betrayed. I live in a small province that relies heavily on non-energy US trade. We're going to be decimated. There was booing at the Raptors game for the national anthem over the weekend. Like this is not good. So the social media world freaked out. All the people in my financial sphere that I follow spent all weekend completely freaking out.
And I made the joke that like if social media sentiment from finance people translated into market moves, we would have had a 1987 moment on Monday. Like that's how much people were freaking out about this, because I think the people on Wall Street had initially thought like he's never actually going to go through with this, these are negotiating ploys. And I guess it turned out to be negotiating ploys. But Ben, you did a meme that was funny. What was your meme? Oh, I did a clown meme saying Wall Street analysis on tariffs, and it was basically like he's never going to go through with it, these are a negotiating ploy. Okay, they're going to be targeted tariffs but no, actually, if the trade war will actually be short-lived, if it happens. But the truth is again, not knowing his exact motivation, but it was it not a negotiating tactic? I guess, but it sounds like the tariffs on China are going through. So I don't think anyone, I think that's the hard part for people, is we don't know. So I think people spent the weekend freaking out because it's like, oh gosh, maybe this is going to go through, and people thought like the financial implications of this are just not good. Just an unforced error. We're so far on the other side of inflation, and like we're in a pretty good economic environment, and like why shoot ourselves in the foot now? Counterpoint, it's like well he ran on this. And now I wonder if like the market's reaction. So we'll talk about this maybe a little bit later, but the market, the S&P opened down 2% right now, crypto was crashing, we'll talk about that later. S&P futures opened down 2%, NASDAQ opened down 3%. The VIX only, I had to even say spike, but it went up to 20. There was a pretty muted reaction on Wall Street. And there were people saying like even last week on Friday, like why is the market looking past this, it feels complacent? I think the market was right in looking past this and saying like listen, this is not going to happen. It's your boy who cried wolf analogy from a few weeks ago. The downside of that is let's say you take the chance of the economy breaking from 5% to 15%. Right. So Jack Economic did this thing, he said if I wanted to crash the economy, I think I'd put on indiscriminate tariffs, push cheap labor out of the country, slash public jobs, cut public spending, promote an alternative to the dollar, and incentivize every global ally to look to partner with China. Maybe that's getting too cute. But let's say you just took the percentage from five to 15, I don't know how you reprice that. And I also think if we get out of a boy who cried wolf situation where like okay, finally he does say screw it, I'm going to do it, is there a potential for an air pocket in the stock market? And I think that there is. And I'm really glad that the stock market does not trade 24/7, because I think you would have seen a much bigger move this weekend, because crypto was a pretty good risk-off barometer. Right. So that's why I'm glad that the stock market has the weekend to kind of chill through this stuff. Through the lens of the stock market alone, there is so much strength underneath the surface. There is so much buying. Oh yeah, this easily, would you have been surprised if this was a down 6% day? Now I guess again, given that there was a deal made, you know, it's not surprising the way things ended up. But even prior to that, the market was really not down a lot, especially given that we were 2% from all-time highs. Like it could have been way worse. But the market strength, you think that, let's say we do have this trade and it goes on and off for the next four years, and tariffs here, no take them off, tariffs, like and there actually is an economic impact. Do you think that the economic impact could actually be greater than the stock market impact, because I think it's possible? What if AI is the counterbalance to all this in the stock market, and the stock market ends up being okay despite some volatility, because AI trumps all the tariffs, all the interest rate stuff, all the Fed stuff? The only thing that matters to the stock market is going to be AI for the rest of the decade. And the economy actually gets hurt more than the stock market in this? Well, it's so funny how quickly the narratives shift, because last week it was all about earnings, it was all about Mag 7, it was all about DeepSeek. Right, it was DeepSeek. And then how did Mag 7 look? And they look good, numbers look good, sounds better than DeepSeek. But it is DeepSeek. DeepSeek, my bad. What's Deep 6? Deep 6 is a better name. Okay, that sounds like some sort of spaceship in an alien movie. But the narrative shifts are wild.
Nick, so in terms, think about like the next four years. Nick was on with Jessica and Josh yesterday, said for as much as we talk about Trump's erratic policies, 80 of the hundred or something like that of the hundred lowest VIX closes ever were during Trump's administration, when there were tariffs. So it might not translate one for one. Now it seems like these are more aggressive than the first go round. These are way bigger. Yeah, so that's the potential difference. But I just think where we are, I think the AI stuff last week, Nvidia dropping 20% in a single day almost, I think that just shows that the margin of safety, to keep harping on that term, is much lower because stock prices are higher, valuations are higher. Yes and no. Yes no, have way bigger gains. So I just think the potential for a VIX spike is way higher now than it was back then. I think that ultimately the tariffs are, to use the dog on the leash analogy, the tariffs are the dog and AI earnings are the person walking the dog. And I think that ultimately Mag 7, the AI mega story, which is what it is, will trump, pun intended, Trump's policies. Not in the short run, not like overnight, there's gonna be wiggles and stuff, but ultimately that is the arrow pointing up. And the big downside risk is you have these tariffs and you have presidential volatility and you have AI that comes up short for whatever reason. That would be bad, but as investors, you know, this is unsettling, and whatever you might, you might like it, you might not, but you gotta look through the volatility. And my whole thing is, I just think there's going to be a lot of reasons to freak out. I tweeted this on Sunday night, like it's easy to freak out, but like there's a high likelihood any tariff-related selloff would be a buying opportunity. Yeah, it's because, and also if you press, we have the ability to walk them back. Because to your point, saying this is an unforced error, it does seem like it is. But it also seems like, the Fed raising rates is, if the Fed rates too high, they could just take them down. And if Trump puts tariffs on too high and it causes a freak out, he can take them off. And I think that's the way Wall Street is looking at this. Yeah, well, we don't know what happened in conversations with Trump and the leaders of Mexico and China yesterday. What if Trump was the one that caved due to the market's reaction, and he was just looking for, I'm not saying that happened, but the point is this is not separate from your portfolio. You have to, yes, you have to freak out about this stuff all the, even if you don't like the policies or whatever, you don't like what it's doing, you can't make investment decisions based on that. All right, here's another one again, we have to cover because I think it's a huge story. I am, my bias is I don't like this. I read this article, say I don't like this, it makes me uncomfortable, I don't like it. On the one hand, I also don't necessarily love how much bloat is in the federal government. Like there's no doubt that the federal government, the systems, the processes, the technology, is built on a layer that's from the 1970s, right? Like there's got to be a way to modernize the infrastructure, streamline it, bring it into the 21st century. I'm for that. I think that's probably on balance a good thing, and I'm willing to give them the benefit of the doubt to see where this goes. But this, this, can we start with the convenience fee every time I pay my property taxes? Sure, please, absolutely. All right, so what am I talking about? There was an article in The Wall Street Journal, DOGE gains access to payment system, doing out trillions to Americans. So let me read the article. The Treasury Department has agreed to give Elon Musk's Department of Government Efficiency access to a payment system that distributes trillions of dollars in entitlement benefits, grants, and tax refunds to Americans each year. Treasury Secretary Scott Bessent, who was confirmed by the Senate this past week, greenlighted the move to grant DOGE representatives access to the system, which is typically run by career civil servants. Treasury's payment systems is one of the main financial arteries of the US government, operating as an accounts payable department that disperses money to contractors and millions of Americans who get Social Security payments. Any interruption in its operations could result in far-reaching economic disruptions. The payment system handles nearly 88% of all federal payments, including some 81 million payments every month for Social Security, Medicare, and Veterans Benefits. Okay, so this is the most sensitive thing that we have, and the richest person in the world with all sorts of potential conflicts of interest is in charge. Again, do I think that this needs modernization? Yes. Is Elon the person to do it? I don't know, maybe. Is this idea a little bit worrisome? Yeah, it is. So I guess for years they've always said like, why doesn't the government run like a business, or why don't we have a businessperson running the government? And I guess this is going to be the grand experiment to see how those two things can coexist. Yeah, so I'm not going to make any decisions on ultimately how I feel before this pans out. Like I said, I'm open-minded, I like parts of this, but we'll see. Interesting, that's hedged, not quite. Okay, that was like a 70-30 hedge. Okay.
All right, Vanguard produced their look ahead for the 10 years, for what their capital market assumptions are. That's a very high-level sounding thing, what it just means is what do they expect returns to be. Now Vanguard is again, they tend to lean bearish on bonds for the long run, right? Yeah, right, well for the next 10 years they might be. So they look at the median, that's their base case I guess, and they think over the next decade bonds are going to beat US stocks. They said roughly 5% for bonds and 4% for US stocks. That would in no way surprise me. I don't, the scenario is easy to lay out. Yeah, we know what bonds are going to do, right? Bonds 5%, okay, that's about what you're going to get. Can I see stocks doing 4% given that we've just done 15 for 15 years? Yeah, no, I could also, here is a Grand Rapids hedge, I could also see the AI train continuing and lifting us much higher. But it is credit to Vanguard, like this is sticking their neck out. I'm sure it's valuation-based and mean reversion-based. And yeah, we could do 10% a year for the next 10 years. And counterpoint, literally not specifically to Vanguard, every single one of these capital market forecasts has been wrong for the last decade. Oh yeah, they're never, they're almost never right. Right. So Damodaran, Aswath Damodaran, the professor at NYU, who is probably one of the better podcast guests, if he's on a podcast I'm going to listen, he's always very good. He does this annual thing where he updates the calendar year returns for stocks, bonds, cash, and he added like small caps and real estate and gold and all these things. And I reference it all the time, I use it for my blog. And I was looking at it, and every year I update it once a year, I go through an update and I say, what are the, and he goes back to 1928, so I update what are the returns from 1928 to 2024. And so I updated it from 2023 to 2024, and I saw like the very long-term return ticked up. And I looked at this and I thought, oh, you know, a few years ago the long-term return was 9.5%, and now it's closer to 10% because we've had such a good run. And I wanted to look at how much this has changed. So since 1999, the long-term return for US stocks was 10.8%, this is the S&P. By 2008, after that lost decade, it was down to 9%. So we lost almost two percentage points of long-term returns from the lost decade, obviously that's at the bottom almost. Now since then, since 2008, we've added a percent back, so we're back to 10%. That's like how much this run has added, and how hurtful that lost decade was for long-term. This is obviously very, very long-term returns, this is now we're closing in at 100 years of return data. But I think it is interesting like how a 10 or 15-year cycle can really impact even the long, long term.
Remember like in 2019, when did FANG, when was FANG coined, was it 2017 or 2015? I think 2017. I'd say 17 sounds about right. Okay, so of course there were many people who were like alarm bells, like this is the top, there's a name for these groups, Apple's a trillion, top right. So Damodaran did a blog post where he showed the contribution in overall market cap from the Mag 7, and this is from 2020 to 2024 by year, 44%, 30%, 43%, 55%, 50%. So from 2019 to 2024, 45% of the gains in the market are from the Mag 7. So we are a world that's resting on the shoulders of these giants. Wow, not bad shoulders to be resting on, but nevertheless. And I still feel like in the 2030s, there's going to be like two or three other companies that are robotics companies or AI companies that are trillion-dollar companies. I think they're going to be inside the Mag 7, like Optimus for Tesla, for example. These are the biggest venture companies in the world. All right, I just think there's going to be a new company that we don't know about, or that's, Nvidia was one of them. Nvidia was not in the top 10 as recently as 2019. True. So I just think there's going to be another company that comes up. Another, sure. But if you're going to say that like there's going to be a new crop that like takes the throne or the crown, I would take the other side of that. Nvidia just did that though. No, I'm saying like a new group of companies. Like group companies. Okay, the idea that the Mag 7 is going to turn over, I don't buy it. Yeah, the whole Mag 7, I agree. A few of them, I still think that's possible. All right, Eric Balchunas tweeted about the Vanguard effect. We've seen a $5 trillion swing from high-cost active to low-cost passive over the past decade. And you can see this, I mean we've seen this chart before, where one of them's going straight down, the other one's going straight up. Now Vanguard just announced this week they're slashing expense ratios on hundreds of mutual funds and ETFs, amounting to what the firm said is the largest cost cut in history, over $350 million investor savings per year. Like taking what it is now, they on an average that drops the fees from 11 basis points to 9 basis points. And someone will go geez, thanks, 2 basis points. But that's 20% savings, and on trillions of dollars, that's, now you're talking real numbers. BlackRock was down 5% yesterday. Why was a problem? This hello, earth to Ben. So just because Vanguard took their fees from 11 to 9, BlackRock down 5%? Yeah. Just because they know they're going to have to match. Yeah. Jack Bogle really is a saint. Like it's hard to, because if Vanguard didn't do this, BlackRock wouldn't have done this either. Is that fair to say? It would have happened, somebody would have done it. But it would have taken, taken any away from Bogle, all credit to him, but somebody would have done this. Vanguard is quite possibly the best thing that's ever happened to individual investors. Is that fair to say? No, that and triple lever.
DFS. Speaking of which, all the way on the other side. Okay, so Bloomberg had an article about levered ETFs, and they say traders have been diving into leveraged exchange. Before someone keeps, someone asks us, is it levered or leveraged, which one is it? Either way, either way, you dealer's choice. Okay, I say both. Okay, yeah, I probably do too. Yeah. Traders have been diving into leveraged exchange-traded products funds, excuse me, a subset of the derivative-enhanced products offering to amp up. All right, why am I reading this? They netted around $940 million in revenue in 2024, that's a record, 37% jump. $940 million in revenue. So like that's headline, right? Like holy. And my credit to me, my initial thought is well, I need to know more, all right, but what value are they providing? And again, we've spoken a bazillion times about these products because we get emails all the time. And we get another email from a very sophisticated listener who's like listen, if you are using these levered or leveraged ETFs inside of a portfolio, it can actually have like diversification benefits, you could get like intelligent leverage. I'm like listen dude, I'm not talking to you, you know exactly what you're doing, and there are absolutely ways to use this responsibly, even though they're not meant to be held for the long term, whatever, like there are ways inside of a portfolio. What I'm talking to is the kids that are just getting started that email us like, hey, why wouldn't I just put all my money in a triple levered ETF? Like that's what I'm talking to. But anyway, be that as it may, Jeffrey Ptak did, did Yardeni's work, I don't know what that means, but I know it's something people say, to like look further beyond just the fees, like what sort of value did they provide to investors? And look at this chart, it shows the fees versus the income and the gains. And the fees as noted are a billion, but the income and the gains are like 16 billion. So Jeffrey said, if you're like me, and Jeffrey is an analyst at Morningstar, if you're like me, you look at this and say sure, they paid a lot in fees, but they also made real money, 16 and a half billion dollars in income and gains. To put those numbers in context, the ETFs held $38 billion in average net assets that year. And all so it means investors paid 0.65% of average net assets in management fees, and earned a 43% return on those assets. Not bad, not bad at all. The funny thing is, no one has ever invested in a levered ETF before and gone, I wonder what the fee is on this thing. Yeah, nobody cares. Point. But what really stands out is the extent to which investors' dollar gains in these ETFs lagged the ETFs' reported total returns. So that's like the behavior gap stuff, we know that, that has nothing to do with the product issuer. And then Jeffrey goes further to say that like the actual gains lagged what the issuer said they might expect to gain. But either way, credit to Jeffrey, great analysis. Yes. But every time we talk about these products, we do get an email from someone who has an intelligent way of thinking about these, and I agree, if you have a highly volatile strategy within your portfolio and you use it to rebalance, it actually can provide benefits in your portfolio. Yeah. But a lot of people that ask us these questions are not doing that. Well, listen, also there are gazillions of dollars in these things, it's not all people that have no idea what they're doing, right? Like there's obviously a lot of institutional investors and hedge funds that are using this. We're offering a PSA here, keep your eyes, just keep your eyes open. Yeah, the fees are completely beside the point because they're getting access to an area of the market that's liquid and quick and whatever.
Okay, AI Ben, this was good. Somebody uploaded a bunch of Ben Carlson posts into one of the LLMs, I don't know which one, and they said like, let's see what Ben Carlson would say about DeepSeek. Okay, pretty good. It's pretty good. Okay, here we go. It's hard to keep up with the AI arms race, you know what, why don't you read this? I mean, this is your writing that I, I looked at this, I read it, I read it, I'd say no, I just want to get my, no no no, I'll read it then you can respond if you don't feel comfortable reading your computer voice. It's hard to keep up with the AI arms race these days. One day everyone's talking about OpenAI and Nvidia, the next a Chinese startup comes out of nowhere and wipes out half a trillion dollars in market value for the biggest AI players in the world. Welcome to the stock market in 2025. And then it goes on, I'm, I don't know man, this sounds, this sounds pretty good, this sounds like you. So they did like the takeaways at the end. And then at the end it says, read the takeaways. That's bad. Okay. Disruptions happen fast, the AI race is still in its early innings, diversification is your friend, market reactions are often overblown. Okay, that's, but the ending here, the takeaway, go ahead. If you're investing in AI, buckle up, it's going to be a wild ride. I don't, I'd say it's like 60% there. No, this is you dude. The takeaway isn't that this is you, the takeaway isn't that Nvidia is doomed or that DeepSeek is the future. It's that innovation is unpredictable and markets will always struggle to price it correctly. That's the Ben Carlson Grand Rapids hedge. I'm sorry dude, they got you pegged. You will be obsolete. I don't think I'm ready to lose my job yet, but it's not bad. So I was playing around with my kids, they ask questions all the time, and I finally put ChatGPT on their iPads and said why don't you play around with this a little bit. And it's funny, the one thing my daughter wanted to do, she's like what do I ask it, and she asked some questions and she was kind of bored immediately. And I said why don't we do a Taylor Swift thing. So she said all right, because she's big into basketball right now, I want you to write me a song about Taylor Swift and basketball. And ChatGPT did a Taylor Swift song about basketball that honestly my daughter and her friend were singing it and they were like, it was actually pretty, it was actually pretty.
Good, the way that they were rhing stuff. I was actually kind of impressed, all right. Let's talk about crypto. You know, funny about the crypto stuff like I think that people say that like one of the good things and they usually say sarcastically about crypto is that it's like a risk gauge for sentiment over the weekend. Yeah, and I think that if crypto wasn't behaving the way it was behaving, people would probably have been a little bit less freaked out, right? Like it got nuked like 20%. It was down 30% at one point over the weekend. It was down 20% in a day. So my first take is crypto is not a tariff hedge. I think we can rule that out, take that off the hedge list of crypto. But I do think that it does serve a purpose on the weekend. I think one of the reasons that the stock market didn't freak out so much because crypto did it for them, maybe. Right, crypto already did it. What, Bitcoin was down 15% or whatever. And nobody saying crypto is a tariff hedge. I know it's, I just, I don't know, no one said that, but I feel like the crypto people are like secretly hoping it's going to hedge one of these things eventually and not just be completely risk on risk off. But it is. But that's what it is. It's a risk asset. Why would it not behave this way?
Exactly, it's a risk asset on steroids with leverage. There was $2 billion of leverage wiped out. It was the biggest wipe out ever. But don't you remember the whole narrative of Bitcoin when it first came out was this thing is going to be an inflation hedge. The narrative changed. It's not. If someone plotted TQQQ, which is the two or three times levered NASDAQ, on Bitcoin, it basically follows it exactly. Yeah, right. So yes, it is risk on risk off.
I did want to plug our talker book with Calamos this week. We talked to Matt Coffin from Calamos. And when these downside protection ETFs from Calamos came out, there was a story on Bloomberg and there's a story on CNBC. And I saw people on social media dunking on them and saying like, why would you ever want to protect Bitcoin? And there's one where you can have zero losses but your upside is capped like 11%. There's one they come out today actually, like downside is capped at 10% but upside 30%. I thought it was 0-9%. Is it 11? Either way. And then there's another one that you're capped at 20% downside but your upside is 55%. And all these people are going, Bitcoin is this huge volatile asset, why would you want this?
Yeah, the volatility is the point. And we, you and I both, we talked about this before. We talked to Matt and we said like, I don't understand this. Well, let's push him kind of hard on this. And you folded like a cheap suit. His explanation, so I, if you've heard of these products, listen to our podcast with him because I think your mind will be changed or at least we'll give you a different perspective about the reason for strategies like this. And it made way more sense to me than it did just from reading the headlines. Yeah, so it's worth a listen.
All right, there was an article over the weekend or last week that got a little bit of attention. The headline is Parents Ditch 529 Plans That Embrace Bitcoin for College Savings. And of course you see this and you're like, what the, come on. No, don't stop. Like no college savings in Bitcoin. No. And some quotes from the article. Take Jim Kryder, a 35-year-old father of four from San Antonio, Texas, who wants each of his kids to have one whole Bitcoin saved by the time they turn 18. As a certified financial planner, he knows some consider putting all his children's savings in Bitcoin risky, but he believes the asset will reach $1 million in a decade. The opportunity is too good to pass up, he says. And then he said, I think it's incredibly risky to have 0% exposure to Bitcoin. And I think people see this and understandably their knee-jerk reaction is top, oh my God, blah blah blah, this makes no sense, it's outrage. But like I still think that Bitcoin is still so, I'm going to say underowned. Like it should be owned by everyone, but it's still like a fringe asset despite the tens of billions of dollars in Bitcoin ETFs. Most people still don't own Bitcoin. And I think if you're looking at stories like this that admittedly sound like top-heavy and stuff, I just think it's like, that's not it. This also happened. I had a friend's parent from college tell me that saving for college in the 90s was easy because we didn't even bother with 529 plans. We put it in the stock market in a brokerage account and the stock market went up 20% every year, whatever. And so I think that's also why these stories happen because people see the huge gains that you've gotten and then they think, okay, sure.
Um, do you think this guy is a financial adviser? Do you think that, does that... I don't know. As a financial adviser, that seems a little risky to me. In a five in issuing a 529 plan to put your kids' college fund into Bitcoin, putting all his children's savings in Bitcoin. Yeah, that's right. I'd say I understand, like I want my kids to own Bitcoin forever and I'm going to start them early, that I can see. But for college savings, to me, I think that that is a leap to do all of it. Yeah, what I would say is not what I would recommend, but to each their own. I would not have expected that coming from a financial adviser. I guess a young financial adviser that makes sense, but that's all I'm saying.
Okay. Lance Hamtil, friend of the program, wrote a great story at Fortune Financial about the implications of an aging household stock. And he looks at how the Census data provides this. When were the houses in the US built that people live in? More than 60% of houses in the US are at least 35 years old, so 1989 or earlier, which is crazy. And look at the number of houses that are still 1939 or earlier. It's almost 12% of houses were built that long ago. Obviously there's been remodeling, all this stuff. I do think this is going to be a massive story because I just don't think young people are going to put up with an aging housing stock. Okay, so Ben, I am a shareholder in Home Depot and Sherwin-Williams. It sounds like you want to jump in while the water's warm.
I've been talking about home renovations forever and I don't know why I don't own these stocks. I'm an idiot. I don't follow my own advice. Guess what? The market's open right now. It's not too late.
So I mentioned before my daughter has been watching Full House lately. She's on like season, she started with Fuller House and now she's going back and watching the original. So every once in a while I'll watch an episode with her before she goes to bed. And one of the things I can't believe, well funny enough, I'm thinking about the fashion at the time, like Uncle Jesse and Uncle Joey have mullets which are apparently back in style. They're back. Yeah, the hairstyle is back. But remember when Uncle Jesse starts dating Becky, who's the mom who went to jail because of the college scandal a few years ago? Yeah, but she has her own apartment before they get married and they try to dress it up as like this stylish because she's a news reporter, you know, on like the San Francisco Today Show or whatever. And she worked with Danny. Yeah, she was Danny's co-host. But her apartment is just so, it looks, they try to make it look like in the 90s it's chic, but it's like pink carpet and green furniture and gold whatever. It's just that kind of stuff just would never fly today. And I think that's, I just think the tastes of young people these days, blame it on HGTV or whatever, are so much like there's going to be a massive remodeling boom if they're buying these older homes. That's my point.
Bobblehead behind you, is that you? It looks like Jack Bogle. It is me. It looks like a young Jack Bogle. Uh, the Motley Fool did something and used one of my articles for something and sent me this. I'm even holding my own little book here. Yeah, that's me. Uh, yeah, Full House, what a show. What else we do with houses? So I looked at like the equity, it just keeps going up. I looked at an old piece I did in like 2021 and I was saying like, gosh, home equity is at like $20 trillion, this is crazy. It's at $35 trillion now. Wow. Home equity, it just, look at this. This is like a chart of Nvidia, home equity in the United States. So I want to talk about my strategy for renovations because the Axios did this piece where they looked at the median price of home renovations and it's gone from $15,000 to almost $25,000, prepandemic to now. So obviously wages have gone up, materials have gone up, and the demand for the stuff has gone up. So I feel like these people can do it now. So they say the high-end kitchen remodel can run up to $200,000, which is just insane. Obviously, I have a friend of mine who's doing something like that and it's wild. But he's like, dude, my mortgage is under 3%, where am I going? So here's my strategy. So we have some stuff we want to do. I'm thinking about maybe adding an office space for myself at home, extra mudroom. We need a bigger mudroom. We do. That's maybe something eventually. My wife is talking about how she wants more storage in the kitchen. Actually, she said, you know what, I don't need the kitchen stuff yet because I just want to keep taking vacations. That's where I want the budget to go. So kudos to her for not wanting to have her cake and eat it too. But I think my strategy for renovations is I think the cost of this stuff is just going to keep going up. And if I'm just borrowing for my home equity line of credit to do it, I think I would rather do it sooner than later because I think every year you wait, the cost is just going to rise.
And yeah, you pay Ben, just discover inflation.
No, but I think the cost is going to rise more than the rate of inflation is what I'm saying. I think the increase in this stuff because I think that the home renovators are going to have so much leverage because they're going to be so busy that they can offer you obscene estimates and it's going to be like, I don't care, I've got so much work. It doesn't matter. Supply and demand.
Is that fair though? You've done some renovations in recent years. What's your strategy?
My strategy is to invest in the home renovation stocks and use the gains.
How do you, how do you source these things? Because that's something I haven't, I haven't done any large projects that require like a big chunk of money. Okay, but you did like a, you added stairs in like a play space for your kids or whatever in the attic. Like that's a pretty decent sized project. Like I've, we bought our house brand new and so we've never had to do any full-scale renovations. Like how do you even go about finding a person to do these things? I sound like such a noob, but that's where I'm at these days. I guess you ask around. Do you have a contract broker that you use for a general contractor? There should be a contract broker. I know that's how it is. It's you ask people like, who do you use? But just specifically if you're asking me like what would I do if I needed to do my kitchen or something, yeah, I would take it, I would do a HELOC.
No, yeah, no, I'm not saying how would you pay for it. Yeah, that's what I'm going to do too. I'm saying like how do you find the right place to do it?
Okay, it's, this is crazy. I would call a friend and say, hey, who did your kitchen? Were you happy with the work that he did?
Yeah, the way that I'm going to do it is I'm going to get three or four bids and see where they come in. I'm going to shop around.
Okay, well, come on, no offense, but I can see you just taking the first one and be like, ah, fine, that's good enough.
Ah, you got me pegged. Like when you did your, no, no, no, no, no, the first mudroom, didn't we talk about this? I went nuts on the show. The first mudroom quote tried to give me $40,000. Oh, no, it could have been 40. That's insane. It was a quote that pissed me off so much because I'm like, and then I spent 10 grand on the mudroom, I think. And even that pissed me off when I saw what the actual scope of the project was. Beams, this, that, come on. So I feel like it's like a car relationship. So the, I'm having a guy do a quote for us for the office and he said, think about what you want to spend for your budget. But I don't want to give them a number. I want them to give me a number first.
I think you have a number in your head. Yeah, so that's the thing. I want to tell them what I want. I don't want to give them a number because I feel like whatever number I have, they'll anchor to it and add 20% or something.
Yeah, right. So I don't want to. Guy's like, just give us what budget you want. I'm like, no, you tell me what it's gonna cost. What's your budget? You tell me how much does it cost.
Yes, exactly. Listen, as somebody who climbed out of the passenger door, I think that you're going to get steamrolled.
Okay, no offense. Hey, I'm good at negotiating for my cable bill. And you know, I ran into somebody recently this week actually. Where was it? I was talking to somebody maybe on the phone. I can't remember. And they're like, was Ben kidding or did he really climb out the passenger door? Sadly to say, I actually did climb out the passenger because my kids got in the car and said, why is your door, why is your seat all dirty? Uh, in hindsight, I did, I make the wrong move. Yeah, yeah, okay, everyone agrees. Live and learn.
Oh, I got a good, I got a good survey for the week. This is from the National Bureau of Economic Research. How much do employees value remote work? Did you look at this already?
If not, don't look. I did, I did it. Okay.
Okay, on average, what are, this is a big giant survey they did where they said they kind of had these numbers before, they wanted to look at it in a deeper way. What pay cut would employees be willing to accept for partly or fully remote roles versus going into the office all the time? What kind of pay cut would people be willing to accept? 8 to 12%? 25%?
All right, that's, that's not true. I believe that's what the survey answered, but no, that's not actually when the rubber meets the road. No way.
They also said 11.8% of full-time workers work fully remote, 29% are partly remote. Does the 12% number surprise you? Is it higher or lower than you would have thought?
That seems pretty high for all full-time employees. That's not just saying white collar work. Uh, I don't know, feels rash. I do think people that have lived through the remote work, I think part of it is if you were already working remotely and you said you have to go back full-time, I think that's when the pay cut thing comes in because if you already tasted that sweet, sweet nectar of remote work, right, I think it'd be really hard to give it up. And I think you could say like, yeah, I'd take a lower wage to do it. But anyway.
All right, the Bonapars, Doug and Heather, have this subset called The Joint Account where they talk about money and relationship issues. And they did this post a couple weeks ago said No We Will Not Ski With You. And they were saying that they've been getting a lot of peer pressure from friends every ski season. And they said they're not big skiers. It's expensive and it's time-consuming and there's kids have all their stuff going on and they just feel the pressure, but they just don't want to be pushed into the skiing thing. And I DM'd Doug a little bit and I said I've felt this exact same thing. We have friends who ski. I've never asked people, are you a skier? Have you ever skied? What do you think? I can't. I bet you've tried it before. There got to be mountains in upstate New York, right? I've tried it, but I feel like you either grow up skiing and then you're a skier or you're not.
