Wages Are Beating Inflation (EP.361)

Episode Summary

Executive Summary: The episode mixes personal reflection with a broad market and consumer review. The hosts discuss the death of a beloved dog, then argue that U.S. stocks, profits, wages, and consumer spending remain structurally strong despite persistent pessimism. They also cover crypto ETF flows, a possible Ether ETF approval, ad growth, travel demand, and the shrinking viability of traditional comedy films.

Main Topics: Personal loss and grief (Priority: 5/5): Michael opens with a heartfelt account of putting his dog Bianca down, reflecting on grief, family reactions, and the emotional role pets play in daily life. Market concentration and U.S. exceptionalism (Priority: 5/5): The hosts discuss how the S&P 500’s share of global market cap has grown materially, and how public-market giants now dominate profits and employment relative to the broader economy. Inflation, wages, and consumer resilience (Priority: 5/5): A major theme is that wages—especially for lower-income workers—have kept pace with or outpaced inflation, supporting continued consumer spending and limiting recession risk. Sentiment vs. hard data (Priority: 4/5): They contrast negative sentiment surveys with stronger hard data on business conditions, cash buffers, spending, and small-business health, arguing that perception remains much worse than reality. Crypto ETF flows and Ether ETF odds (Priority: 4/5): They review massive Bitcoin ETF adoption by institutions and retail, then note a sharp shift in expectations for a spot Ether ETF approval after regulatory developments. Media, advertising, and streaming bundles (Priority: 3/5): The hosts discuss the scale and growth of ad businesses at Google, Meta, Amazon, and YouTube, plus the trend toward bundle-based streaming subscriptions and ad-supported models. Entertainment and cultural changes (Priority: 3/5): They reflect on the decline of theatrical comedies, the changing economics of Hollywood, and recommendations including 'Blended,' 'Outer Range,' and a Kevin Costner Western project.

Key Arguments: The S&P 500 is now a much larger share of global equity market cap, which helps explain why investors keep crowding into U.S. stocks. Public markets are only a slice of the economy: S&P 500 firms employ a minority of workers but generate roughly half of corporate profits. The strongest explanation for the resilient U.S. economy is simple—people are making more money, especially lower-income workers, and they are spending it. Headline inflation remains painful, but cumulative wage growth has offset much of it for many households, especially in the lower income distribution. Consumer sentiment can look weak even when the hard data are solid; surveys may reflect how questions are framed as much as actual conditions. Day trading and meme-stock speculation are not representative of true investing; long-term investing is more like the opposite of a casino because time improves the odds. Bitcoin ETF demand appears driven by a supply-demand imbalance, and spot Ether ETF approval odds rose sharply after a policy shift. Advertising is increasingly concentrated in a few large digital platforms, and ad spending is a meaningful share of GDP. Traditional movie comedies have become far less viable economically because studios now favor globally scalable tentpoles and streaming-era business models.

Data Points: Franklin Templeton ETF count: 72 ETFs - Sponsor ad mentions the company’s ETF lineup Franklin U.S. ETF AUM: over $20 billion - Assets under management in U.S. ETFs Bianca’s age: 12.5 years - Michael’s dog passed away after a long life S&P 500 share of global market cap in 2008: about 20% - Used to show the rise in U.S. market dominance S&P 500 share of global market cap today: about 40% - Shows how much larger U.S. equities have become globally S&P 500 share of U.S. employment: 18% - Torsten Slock chart showing public-market footprint versus economy Private firms with revenue >$100 million: 87% - Torsten Slock data on how much of big business is private Job openings from private firms: almost 80% - Shows private companies dominate labor demand Economy-wide corporate profits from S&P 500: about 50% - Illustrates earnings concentration in public giants Country returns leader: China, Taiwan, Denmark - Richard Bernstein Advisors chart on 2024 dollar returns Daily S&P 500 up/down frequency since 1950: a little less than 54% up days - Used to argue investing is not like gambling Target price reductions: 5,000 frequently shopped items - Example of consumer-sensitive pricing behavior Wendy’s breakfast deal: $3 - Another sign of value-seeking and competition Cash buffer at JPMorgan accounts: 11% above historical average - Median nominal cash buffer remained elevated but normalized Lowest-income real income growth since Jan 2020: up 41% - JPMorgan chart on income growth versus inflation All-incomes real income growth since Jan 2020: up 24% - JPMorgan data on household purchasing power Consumer travel intent this summer: nearly 60% - Morgan Stanley survey on summer travel plans Net increase in spending intentions: 32% - Survey result showing consumers expect higher spending Lower-income spending vs higher-income spending: lower-income outpaced since early 2023 - Bank of America consumer spending analysis IBIT reported holders in first 13F season: 414 - BlackRock Bitcoin ETF institutional filing count Gold ETF professional firms at first 13F: 95 - Used as a comparison for ETF adoption Professional investors’ share of Bitcoin ETF assets: 7% to 10% - Suggests Bitcoin ETF ownership is still mostly retail Total Bitcoin ETF inflows: $235 million - As of the recording date Bitcoin ETF net daily buys: 3,518 BTC - Compared with new daily supply Bitcoin daily supply: 450 BTC - Supply-demand imbalance framing Spot Ether ETF approval odds: 75% - Beltrunas/Safran update after regulatory news YouTube ad revenue growth: 10% annually - Three-year growth rate Meta ad revenue growth: 12% annually - Three-year growth rate Google ad revenue growth: 13% annually - Three-year growth rate Amazon ad revenue growth: 23% annually - Three-year growth rate Advertising share of U.S. GDP: 1% to 2% - Google Gemini overview cited during discussion Hotel tip solution: 100% of tip goes to room attendant - QR-code tip system via card or Apple Pay Movie Blended box office: $128 million - Example of a comedy that performed well commercially despite poor critic scores Blended Rotten Tomatoes score: 15% critics, 64% audience - Illustrates audience-vs-critic split Horizon production budget: $38 million - Kevin Costner’s self-financed Western project Dexter seasons added to Netflix: seasons 1 through 8 - Recommendation and streaming catalog news

Pivotal Quotes: "The S&P 500 is not the economy." — Michael: Used to frame a discussion about public-market concentration versus the broader private economy "The longer you stay and don't f around, the longer you're able to grind it out, the higher likelihood of you achieving success." — Ben: Explaining why long-term investing is the opposite of a casino "Everything is confirming the same thing." — Michael: Summarizing the many wage, spending, and cash-buffer charts pointing to consumer resilience

Implications:* Listeners should take away that the U.S. economy and major public markets remain more resilient than sentiment suggests, while crypto, ad-tech, and streaming continue to consolidate power. For investors, long-term discipline still matters more than trading noise.