How America Invests (EP.180)

Episode Summary

Executive Summary: The episode centers on how COVID accelerated changes in media, markets, work, and consumer behavior. The hosts argue HBO Max could reshape movie distribution, dissect sky-high market optimism and investor behavior, explore the challenge of selling winners, discuss wage policy and corporate cash hoards, and highlight enduring hardship beneath the economic rebound. A BlockFi interview also explains crypto yield mechanics and institutional demand.

Main Topics: HBO Max and the future of movie theaters (Priority: 5/5): The hosts debate AT&T/Warner Bros. putting its 2021 film slate on HBO Max the same day as theaters, framing it as a consumer win but a major disruption to cinema economics and Hollywood labor. Market optimism, valuation, and speculation (Priority: 5/5): They discuss extreme bullish sentiment, record-high valuations, and whether the market could approach dot-com-era CAPE levels if rates stay low and speculation remains elevated. Selling winners is harder than buying (Priority: 5/5): Using Snowflake, Amazon, Apple, and long-term institutional data, they argue that investors are skilled at buying but often struggle with timing exits, especially after big gains. Robinhood vs. Vanguard investing behavior (Priority: 4/5): The hosts compare gamified trading on Robinhood with Vanguard’s long-term diversified portfolios, noting that the two platforms represent very different ends of the investing spectrum. Labor market pain, unemployment, and inequality (Priority: 5/5): Despite a strong headline recovery, the episode emphasizes persistent suffering, especially in restaurants and lower-income households, and highlights how much hardship remains invisible to many listeners. Minimum wage, corporate responsibility, and cash piles (Priority: 4/5): They revisit the minimum wage debate and argue large public companies have more capacity than small businesses to pay higher wages, while also noting massive corporate cash balances and likely buybacks/M&A. BlockFi, crypto yields, and institutional arbitrage (Priority: 4/5): A guest segment explains how BlockFi pays high yields on cash/stablecoins by lending to institutions engaged in Bitcoin futures arbitrage, market making, and GBTC premium trades.

Key Arguments: HBO Max may be a consumer-friendly innovation, but it likely changes movie-theater economics permanently and could marginalize local theaters. AT&T made the right strategic bet on streaming/content, but poor execution and confusing branding caused HBO Max to underperform Disney+ and Netflix. Investor sentiment and valuation look stretched; if rates remain low, markets could approach dot-com-like speculative extremes. Selling is exceptionally hard because great stocks can fall sharply before compounding for years; institutional evidence shows selling decisions underperform buying decisions. Robinhood’s gamified interface encourages frequent checking and trading, while Vanguard’s model reflects better long-term behavior and diversification. The recovery is uneven: headline unemployment improved, but core unemployment and real-world hardship remain severe for millions. Higher corporate cash and low borrowing costs make buybacks, acquisitions, and balance-sheet reshaping likely in 2021. BlockFi’s high cash yields are supported by real demand in crypto markets, not by a simple savings-account model; institutions borrow to arbitrage spreads and market inefficiencies.

Data Points: HBO Max subscribers: 9 million - Used to show how small HBO Max remained relative to competitors. Disney+ subscribers: 75 million - Compared with HBO Max to highlight Disney’s superior execution. Netflix subscribers: 170 million - Used as a scale reference for streaming dominance. AT&T market cap (2007): $250 billion+ - Starting point before major media acquisitions. Verizon market cap (2007): $120 billion - Compared with AT&T at the time. AT&T spending on acquisitions: $170 billion - Spent on Time Warner and DirecTV-related deals. Verizon market cap (current in discussion): $253 billion - Illustrates Verizon’s relative outperformance. AT&T market cap (current in discussion): $215 billion - Shows value destruction despite acquisitions. CAPE ratio peak: 44.2x - Dot-com bubble historical high cited in the discussion. Current CAPE ratio: 33.1x - Presented as elevated but still below dot-com extremes. Startups’ mega rounds in 2020: 223 rounds of $100M+ - PitchBook data cited to show funding frenzy. Vanguard average portfolio: 63% equities / 16% bonds / 21% cash - From Vanguard’s How America Invests report. Households holding no equities at Vanguard: 16% - Shows some diversification but still meaningful cash holdings. Households with 98%+ equities at Vanguard: 22% - Shows a meaningful concentration among some investors. Households trading in a given year at Vanguard: fewer than 25% - Indicates relatively low turnover. Typical number of trades for Vanguard traders: 2 per year - Shows buy-and-hold behavior. Walmart 2020 associate bonuses: more than $2.8 billion total - Discussed as evidence of wage/worker support. Walmart additional cash bonuses: more than $700 million - Announced as extra associate compensation. Non-financial corporate cash holdings: $2.1 trillion - Journal data on record cash piles. AT&T cash balance: more than $15 billion - Example of large corporate liquidity buffers. Delta cash balance: more than $15 billion - Example of large corporate liquidity buffers. Headline unemployment forecast (May WSJ panel): over 11% by Dec. 2020 - Forecast compared with stronger-than-expected labor recovery. Unemployment forecast for sub-7%: not until first half of 2022 - Shown to be too pessimistic given actual recovery. BlockFi waiting list: over 50,000 people - Shows strong demand for the Bitcoin rewards credit card. BlockFi platform assets: around $3.75 billion - Guest cited size of assets on platform. BlockFi assets lent out: 60% to 75% - Shows how much of the platform’s assets are actively deployed. BlockFi US dollar yield: 8.6% - Stated as the rate offered on stablecoin-reflected dollars. Bitcoin futures implied yield: north of 10% - Used to explain why arbitrage borrowers can pay high rates. AirPods revenue vs. listed companies: more money than Twitter, Snapchat, Spotify, and Shopify combined in 2019 - Illustrates Apple’s consumer product dominance. Mortgages over $766,000: up 59% in October - Shows strong demand for high-end housing. Mortgages $150,000-$300,000: up 13% in October - Compared with jumbo mortgage demand.

Pivotal Quotes: "some of our industry's biggest filmmakers and most important movie stars went to bed the night before thinking they were working for the greatest movie studio and woke up to find out they were working for the worst streaming service." — Christopher Nolan: Quoted while debating AT&T/HBO Max’s decision to release films simultaneously on streaming. "there's 9 million people on the service. 9 million. Disney Plus has 75 million in less than a year. Netflix has 170 million." — Ben Carlson: Used to underscore HBO Max’s small scale relative to streaming peers. "Selling is the hardest part of investing." — Michael Batnick: Summarizing the discussion on why exit timing is more difficult than buying.

Implications: The episode suggests streaming, remote consumption, and low-rate capital are permanently reshaping media and markets. Investors should expect more valuation extremes, more corporate buybacks/M&A, and continued debate over inequality, wages, and who benefits from recovery.