This is a Good Thing (EP.352)

Episode Summary

Executive Summary: The episode mixes sponsor reads with a broad discussion of markets, inflation, housing, consumer behavior, and media recommendations. The hosts argue that cash mostly competes with cash, foreign ownership of U.S. equities is a meaningful support for valuations, younger people are being pushed out of big cities by affordability, and inflation remains nuanced: some prices are sticky, but consumer behavior has shifted toward dining out and spending more. They also debate real estate commission changes, Bitcoin ETF flows, and the social/behavioral effects of technology and inflation.

Main Topics: Cash, money market funds, and asset allocation (Priority: 5/5): The hosts argue that the surge in money market assets is mostly a reallocation within cash rather than money leaving stocks, because most of the flows likely came from checking/savings into higher-yielding cash instruments. They frame cash as competing primarily with cash, not equities. Italy trip, global markets, and foreign demand for U.S. stocks (Priority: 4/5): Ben describes speaking in Milan and uses the trip to compare European and U.S. investing culture. The discussion highlights rising foreign participation in U.S. equities and suggests this global demand helps support U.S. valuations. Inflation, consumer spending, and price psychology (Priority: 5/5): The hosts debate whether inflation is truly 'done,' noting shelter lags, real-time inflation estimates, and commodity price rebounds. They also discuss grocery prices, dining out, and the gap between statistical inflation and how consumers feel prices in daily life. Housing, commissions, and supply constraints (Priority: 5/5): The conversation covers the NAR commission settlement, the possibility of lower transaction costs, and whether real estate stock valuations are justified. They also argue that the real housing fix is more supply, citing Austin as an example of prices easing when construction rises. Wealth, recessions, and macro resilience (Priority: 4/5): A discussion of Fed data shows Americans’ net worth rising rapidly, especially among younger cohorts, and a chart on recession months suggests the U.S. economy has spent less time in recessions over successive eras. The hosts credit the Fed, corporate America, and economic maturity. Bitcoin ETFs, flows, and ideological concerns (Priority: 4/5): The hosts discuss strong Bitcoin ETF inflows and why the U.S. market has embraced them more than Europe. They express skepticism toward some crypto rhetoric, arguing it can be misleading, anti-establishment, and dangerous if widely influential. Media, lifestyle, and technology recommendations (Priority: 3/5): The show closes with recommendations and cultural observations, including Up in the Air, The Gentlemen, Wanderlust, Ghostbusters, and Dune 2. They also touch on tech dependence, social media’s effect on youth, and a possible Apple feature to prevent accidental calls.

Key Arguments: Most of the huge money market buildup likely came from people moving idle checking/savings balances into yield-bearing cash, not from stocks or bonds being dumped. Foreign investors and global savers are increasingly buying U.S. equities, which may structurally support higher U.S. valuations. Inflation is complicated: shelter data lags, real-time measures may be much lower, but commodities and some visible consumer prices are moving up again. Consumer complaints about inflation are real, but behavior is not always changing enough; many people still spend heavily on eating out despite higher prices. Housing affordability will not be fixed by the Fed; supply expansion and reduced regulatory friction are the real levers. Lower real estate transaction costs may increase competition among agents, but it is unclear whether they will meaningfully increase turnover or crash commissions immediately. U.S. net worth growth and longer stretches without recession suggest the economy has become more resilient over time. Bitcoin ETF success in the U.S. reflects better distribution, major issuers, and a more speculative retail culture, but some crypto narratives are viewed as manipulative or worse. Youth mental health issues are likely worsened by screens/social media, so sports and offline activities are important protective factors.

Data Points: Advisor switching or considering switching advisors: 75% - YCharts survey cited in sponsor read; up from 48% in 2023 Advisor switching or considering switching advisors in 2023: 48% - Prior YCharts advisor communication survey Life insurance application time: Less than 10 minutes - Fabric by Gerber Life sponsor message Italy gas price context: About $8 per gallon - Ben compared fuel prices in Italy by liter to U.S. gasoline pricing Foreign ownership of U.S. equities: Close to 20% - Discussing Goldman chart on U.S. equity market ownership since 1945 Households ownership of U.S. equity markets: About 40% - Goldman chart referenced by the hosts Money market/cash thesis: $6 trillion in money markets - Used to argue most cash stayed within cash, not stocks Checking account balances: From about $1 trillion to $4.5 trillion, then back to about $4 trillion - Fed/FRED checkable deposits data during and after the pandemic Bottom 50% checkable deposits: Higher than before across wealth percentiles - FRED data broken out by wealth groups Net worth growth in the 2020s: Already ahead of the 1990s pace after only four years - Fed quarterly data on wealth growth by age and decade Food at home and food away from home inflation since 2020: About 26%-27% - Compared with roughly 20% overall CPI growth Overall CPI since 2020 versus wages: Wages grew faster than CPI by about 1% - Hosts comparing inflation to earnings growth Grocery prices in the 2010s: Less than 9% - Compared with 27% earnings growth over the same period Average hourly earnings in the 2010s: 27% - Compared against grocery inflation in the same decade Car rental prices: $38/day average; down 8% year over year - Journal report on falling car rental costs Car and truck rental CPI index: About 20% below peak - Host chart discussion on deflation in car rentals Months in recession over 30-year periods: 180, 150, 90, 60, then 36 months - John Arnold chart showing declining recession time across eras Coinbase scam loss: $10K - Listener email describing a fraudulent phone scam Bitcoin ETF net buying: 220,000 Bitcoin - US Bitcoin ETFs in first 10 weeks of trading, despite GBTC outflows Bitcoin ETF streak: Seven consecutive net positive weeks - Todd Sohn/ETF flow discussion Spot Bitcoin ETF category flow: $23.6 billion - 2024 year-to-date ETF flows by category Intermediate duration bond ETF flow: $16 billion - 2024 year-to-date ETF flows by category Audio/film polling: Two-thirds of U.S. adults prefer streaming over theaters - Survey of the week discussed near the end Large central metro share for Gen Z: 39% - St. Louis Fed generation/location study Large central metro share for millennials: 44% - St. Louis Fed generation/location study Large central metro share for Gen X: 45% - St. Louis Fed generation/location study Large central metro share for baby boomers: 50% - St. Louis Fed generation/location study Large central metro share for silent generation: 58% - St. Louis Fed generation/location study

Pivotal Quotes: "Cash mostly just competes with cash." — Peter Crane (quoted by the hosts): Used to argue that money market balances are not necessarily a bullish signal for stocks "This is a good thing." — Ben Carlson: Repeated in the housing discussion about building more homes and apartments lowering prices "If the hodlers are right, they're also the new elite." — Dave Nottig (quoted by the hosts): Referenced during the discussion of Bitcoin's long-term social and political implications

Implications: Listeners should expect continued debate over inflation, valuations, and housing, but the hosts’ core message is that supply, behavior, and global capital flows matter as much as rates. Cash yields, construction, and ETF adoption may keep reshaping markets and consumer choices.