What are the key takeaways from this Animal Spirits episode?

Key insights include: **International Stocks Surprise:** EFA outperformed S&P 500 by 14% in 2025, the largest outperformance since 1993, driven by valuations and fundamentals beyond just dollar weakness. European banks outperformed Nasdaq 100 over five years, showing diversification finally worked after years of US dominance.; **Valuation Context Matters:** S&P 500 doubled from February 2020 despite ten-year treasury rates rising from 1.6% to 4.2% and forward PE increasing from 19 to 22. Revenue per worker hit record highs after fifteen years of stagnation, justifying higher multiples through improved business efficiency and profit margins expanding from 7% to 16% since 2005.; **Housing Market Frozen:** Mortgage payment for new buyers vastly exceeds both rental costs and existing homeowners' payments, creating complete market paralysis. Government intervention with teaser rates for five years could unlock activity by allowing 3% mortgage holders to move at 4.5% temporarily before market adjustment.

How long is this episode of Animal Spirits?

This episode is 75 minutes long. SignalCast provides an AI-generated summary so you can get the key insights in about 3 minutes.

Animal Spirits

Tax the Billionaires (EP. 446)

January 7, 2026

75 min episode · 2 min read

Episode

75 min

Read time

2 min

Topics

Productivity, Investing, Fundraising & VC

AI-Generated Summary

Published Jan 7, 2026

Key Takeaways

✓International Stocks Surprise: EFA outperformed S&P 500 by 14% in 2025, the largest outperformance since 1993, driven by valuations and fundamentals beyond just dollar weakness. European banks outperformed Nasdaq 100 over five years, showing diversification finally worked after years of US dominance.
✓Valuation Context Matters: S&P 500 doubled from February 2020 despite ten-year treasury rates rising from 1.6% to 4.2% and forward PE increasing from 19 to 22. Revenue per worker hit record highs after fifteen years of stagnation, justifying higher multiples through improved business efficiency and profit margins expanding from 7% to 16% since 2005.
✓Housing Market Frozen: Mortgage payment for new buyers vastly exceeds both rental costs and existing homeowners' payments, creating complete market paralysis. Government intervention with teaser rates for five years could unlock activity by allowing 3% mortgage holders to move at 4.5% temporarily before market adjustment.
✓Disney Parks Paradox: Disney parks generate massive profits with roughly one million daily visitors across all locations, yet earnings per share remained flat for a decade. The stock underperformed S&P 500 on every timeframe from one to thirty years, with cumulative returns of 675% versus 1800% for the index, suggesting Disney Plus and linear TV anchor the business.
✓AI Hallucination Risk: ChatGPT-4 maintains 45% hallucination rate for incorrect responses, essentially a coin flip for factual accuracy. Users paying $200 monthly subscriptions encounter frequent errors on simple tasks and basic facts, revealing significant limitations despite revolutionary capabilities and ongoing improvements in the technology.

What It Covers

Michael and Ben analyze 2026 market predictions, international stock outperformance in 2025, AI investment risks, housing market stagnation, Disney's underperformance despite profitable parks, and California's proposed billionaire tax that could trigger mass exodus.

Key Questions Answered

•International Stocks Surprise: EFA outperformed S&P 500 by 14% in 2025, the largest outperformance since 1993, driven by valuations and fundamentals beyond just dollar weakness. European banks outperformed Nasdaq 100 over five years, showing diversification finally worked after years of US dominance.
•Valuation Context Matters: S&P 500 doubled from February 2020 despite ten-year treasury rates rising from 1.6% to 4.2% and forward PE increasing from 19 to 22. Revenue per worker hit record highs after fifteen years of stagnation, justifying higher multiples through improved business efficiency and profit margins expanding from 7% to 16% since 2005.
•Housing Market Frozen: Mortgage payment for new buyers vastly exceeds both rental costs and existing homeowners' payments, creating complete market paralysis. Government intervention with teaser rates for five years could unlock activity by allowing 3% mortgage holders to move at 4.5% temporarily before market adjustment.
•Disney Parks Paradox: Disney parks generate massive profits with roughly one million daily visitors across all locations, yet earnings per share remained flat for a decade. The stock underperformed S&P 500 on every timeframe from one to thirty years, with cumulative returns of 675% versus 1800% for the index, suggesting Disney Plus and linear TV anchor the business.
•AI Hallucination Risk: ChatGPT-4 maintains 45% hallucination rate for incorrect responses, essentially a coin flip for factual accuracy. Users paying $200 monthly subscriptions encounter frequent errors on simple tasks and basic facts, revealing significant limitations despite revolutionary capabilities and ongoing improvements in the technology.

Notable Moment

Michael test-drove both a Lexus GX and Range Rover, ultimately choosing the Range Rover despite acknowledging its reputation for unreliability and calling it a douchey car. He frames the purchase as personal achievement recognition rather than status signaling, planning to lease to mitigate breakdown risks.

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Episode Transcript

Today's animal spirits is brought to you by YCharts. As we kick off the new year, one of the biggest challenges for advisors is figuring out what actually mattered in markets and what was just noise. That's where YCharts Advisor Pulse comes in, a LinkedIn newsletter that delivers clear market context, timely charts, and concise takeaways advisors can use right away. The latest post was a 2025 wrap looking back at the year end markets, breaking down the biggest winners and losers, the economic forces that shaped returns, and how advisers navigated volatility all through simple client ready visuals. Instead of chasing headlines or scrambling for talking points, Advisor Pulse helps you stay prepared, save prep time, and show up to client meetings with clarity in 2026. Click the link in the show notes to subscribe on LinkedIn and get 20% off your initial YCharts professional subscription when you start your free YCharts trial through animal spirits, new customers only. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Happy New Year to everybody. Hope you had a nice break from school, from work, etcetera, etcetera. I had the flu, and I think I had it coming then. I, I came back from Disney, spent one night in Universal, had a great time, spent another three, four nights in Disney, had a wonderful time. And, when I got back, somebody was saying, like, hell, you must be exhausted. No, not really. I've got stamina. Not to brag. I just I don't get tired. I've got a I've got a motor. I've got an engine. I've been above my two hundred day moving average for a long time. I was due. I was due for a correction and boy did I get a correction. So Thursday night, I watched, Begonia with Robin. She actually, she actually Robin and I have been DMing each other on on Instagram. Not sure what's happening, but we've been, like, tagging each other, like like, oh, look at this. Look at this. You know? My wife sends me stuff and gets mad at me because I never check Instagram. I do all the time. How weird was Begonia? Because this was a preview, and I thought, it looks pretty weird. Okay. So Begonia, obviously, a Michael movie. Meant to see it in theaters. Didn't get around to it. And when I saw Robin send it to me, I thought, this is interesting. She obviously has no idea what it is and thinks it's something else. So …

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Tools

ChatGPT-4
by OpenAI
“ChatGPT-4 maintains 45% hallucination rate for incorrect responses, essentially a coin flip for factual accuracy. Users paying $200 monthly subscriptions encounter frequent errors on simple tasks and basic facts.”
YCharts
“YCharts listed as sponsor (ycharts.com)”