Tax the Billionaires | Animal Spirits 446

Episode Overview

• The hosts reflect on personal holiday experiences—from getting the flu to an emotional family trip to Disney World—using them as entry points for broader market and investment discussions.
• A deep dive into the 2024 market outlook suggests that major 2023 trends will likely continue, including a focus on AI, a stagnant housing market, and the avoidance of a recession, while also highlighting the statistical probability of a significant market correction.
• The conversation explores the disconnect between pervasive online economic negativity and underlying data, revealing how foreign-driven misinformation can skew public perception and discussing the future threat of AI-powered deepfakes.
• An investment case study on The Walt Disney Company analyzes why the beloved brand has been a long-term market underperformer, arguing its costly streaming venture has overshadowed the profitability of its core parks business.

Key Concepts

• Market & Economic Predictions: The primary forecast for 2024 is a continuation of existing trends rather than a dramatic shift. While the market is favored to have another strong year, historical data suggests an 80% chance of at least one 10% correction.
• Valuation vs. Interest Rates: Despite interest rates more than doubling since 2020, stock market valuations have remained high, supported by expanding profit margins and productivity gains from new technology. Those who have bet against the market on valuation alone have been consistently wrong for over a decade.
• Misinformation & Sentiment: A significant portion of online economic pessimism is driven by inauthentic sources, as exemplified by a viral negative tweet traced back to an account in Bangladesh. This raises concerns about future, more sophisticated AI-driven deepfakes.
• AI's Real-World Impact: The immediate fear of mass job displacement from AI may be a "red herring." Data shows that tech layoffs have actually declined since the launch of ChatGPT, suggesting a more complex, less dire short-term impact.
• The Disney Case Study: The "invest in what you know" philosophy is challenged by Disney's stock (DIS), which has underperformed the S&P 500 over every major timeframe for the past 30 years.
• Streaming as a Strategic Error: Disney's decision to launch Disney+ is presented as a major strategic mistake. The immense cost and competitive pressure of the streaming business have acted as an "anchor" on the company's stock, masking the high profitability of its parks division.
• Technology & Optimism: A firsthand, positive experience with a Waymo self-driving car serves as a powerful counter-narrative to technological pessimism, highlighting the unbelievable progress of human ingenuity.

Quotes

• At 1:46 - "I was due... I was due for a correction and boy did I get a correction." - Michael Batnick jokes about getting sick with the flu, comparing his long stretch of good health to an overextended stock market.
• At 5:47 - "You don't understand how important being healthy is until you're unhealthy." - Ben Carlson reflecting on Michael's story about being sick and the renewed appreciation for good health.
• At 6:47 - "Here's my simple Ben, grand unified hedge predictions, that things are not going to change." - Ben Carlson introduces his set of predictions for the upcoming year, which largely involve a continuation of existing market and economic trends.
• At 10:50 - "Just the whole thing of how rates more than doubled... there's no way anyone would have thought, okay, the stock market doubled in that time frame." - Ben Carlson expressing surprise at the stock market's strong performance from 2020 to the present, despite a significant increase in interest rates.
• At 21:22 - "Two-thirds of all years since the 1920s have had a double-digit correction at some point peak to trough." - Ben Carlson provides historical data to support his prediction that a 10% market correction is highly probable.
• At 25:11 - "This is how much of the negativity is literally fake foreign agents?" - Michael Batnick questions the authenticity of negative economic sentiment online after discovering a viral doom-and-gloom tweet came from an account based in Bangladesh.
• At 26:08 - "That's going to look quaint compared to some of the deepfake stuff that's coming with AI that is going to be completely indistinguishable." - Michael Batnick expresses concern that future AI-driven misinformation will be far more sophisticated and difficult to detect.
• At 39:51 - "I don't know how you could see something or experience something like this and be bearish on the future of humanity. The fact that we created a car that can literally pick you up and drive itself... it's unbelievable." - Ben Carlson shares his profound optimism after his first ride in a Waymo self-driving car.
• At 45:52 - "I literally cried. Like it was..." - Michael Batnick describing his emotional reaction to watching his son have a magical moment with Peter Pan at Disney World.
• At 47:50 - "If Disney never would have done Disney Plus and they just would have, like, give their IP to other people... is the stock way higher today?" - Ben Carlson posing a hypothetical question about Disney's stock performance if they had avoided the streaming wars.
• At 48:59 - "So for the 30-year timeframe, the S&P's up 10% per year and Disney's seven. That's... that's a big number." - Ben Carlson reacting with surprise to a chart showing Disney's significant long-term underperformance against the S&P 500.
• At 49:27 - "Because the Disney parks don't scale. That's the thing. The hope was Disney+ will scale. Obviously, it didn't." - Ben Carlson explaining the market's rationale for valuing scalable tech businesses more than Disney's successful but physically-limited parks.

Takeaways

• Critically evaluate viral economic negativity on social media, as it may be artificially amplified by foreign misinformation campaigns.
• Avoid making investment decisions based solely on high market valuations, as this has been an ineffective strategy against a backdrop of technological productivity gains.
• Approach claims of mass AI-driven job displacement with skepticism, as the immediate, negative impacts are often overestimated in the short term.
• Prepare for market volatility by recognizing that even in strong years, a double-digit correction is a statistically common event.
• Separate your affection for a brand from its investment potential; a company with beloved products can still underperform due to flawed strategic decisions.
• Understand that the market often values the potential for scalable growth over existing, physically-limited profitability.
• Seek out direct experiences with new technologies, like autonomous vehicles, to gain a tangible sense of future progress and counter prevailing pessimism.