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Video · 2026-08-19 · 1h 10m · 6 moments

The Best Bear Case on AI | Animal Spirits 478

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GUEST MichaelGUEST Ben

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01
Claim◆

The US is in one of the greatest bull markets of all time, comparable to the 1980s and 1990s.

Ben presents data showing the 2020s S&P 500 annual returns of 15.7% rivaling the 1980s and 1990s, with the total stock market index up 1500% since 2009. The bull market has broadened beyond just large-cap tech to include international, midcap, smallcap, and emerging markets.

transcript

Ben: 2010's S&P 500 was up 13.4% per year annual basis. Not bad. handful of like minor bare markets, right? We had a few like 19% in change ones. 2020s 15.7% per year. I think the 80s was like 17 and the '90s was 18, something like that, maybe flip-flops. So, a little higher from the lows in 2009, the S&P 500 is up almost 1500% or sorry, this is the Vanguard total stock market index... VTI is up almost 1500% in total. 17% annualized return since the bottom in 2009, which is when I think the bull market started... the last 24 months or so, the bull market has entered a totally new territory. So, we in the last week have hit new all-time highs in the S&P, the equal weight, Europe, uh, midcaps, small caps, emerging markets are basically there. Valuations are falling, profit margins are rising. This is the craziest one to me. Tech stocks are up 65% since January 2025. And I pulled this duality research chart. In that time the forward PE again that's this sector is up 65%. In that time the forward PE has gone from 29 to 22 while the stocks have risen almost 70%.

02
Claim

Young people today have excessively high expectations fueled by social media, and they should stop complaining because no generation had it easy.

Michael argues that young people see wildly successful peers on social media and assume that should be their reality at 27, when historically no young generation expected to be rich or have their dream job immediately. He contends the sympathy directed at Gen Z is overdone.

transcript

Michael: I think way too much kid gloves for young people these days. I'm sorry. We've given plenty of sympathy, empathy, whatever the word is for people in the housing market. I think we're we're way too like tiptoeing around young people. Oh, boohoo. Young people, you know what? Suck it up. You don't get to get rich overnight. You don't get to have your dream job right away. I think the problem with young people is that they know too much. Like when when I came up, no one expected to get their dream job right away. No one expected to be rich by age 30 right away. I think that's the young people live in a a day and age where they see other young people who are wildly successful and they go, 'That should be me. At 27, I should be wildly successful.' And I think that's I think the expectations for young people are way too high.

03
Fact

The viral survey about Gen Z treating sports betting as a financial strategy is misleading and reflects social media distortion rather than reality.

Ben and Michael dissect the Betterment survey that went viral, showing that when you read the actual breakdown, 36% of Gen Z don't bet at all, only 11% treat it as a high-risk strategy, and the framing as 'financial nihilism' is rage bait that ignores that young people are actually more financially engaged than previous generations.

transcript

Ben: So they said where sports betting fits into financial goals for Gen Z, 36% don't participate. That's not a headline, right? Nobody wants to read that. So 36% of Gen Z people just don't bet. 15% used it to accelerate a goal. All right. Uh 14% occasionally redirected funds. Also very not headliny at all. Nobody is going to kick click that. Uh 23% kept funds separate as fund money. Again, nobody's clicking that. That's not very interesting. That sounds dare I say that sounds responsible. And 11% 11% so one in 10 have it as a high-risk strategy investment strategy you know these numbers I I don't know I I don't find them unbelievable... The thing is young people are so far a so much further ahead financially than previous generations just because it's so much easier.

explains mechanism · 1

04
Claim

Professional investors have been badly outperformed by retail investors who simply bought and held well-known tech stocks over the past 15 years.

Michael describes talking to a friend who bought Google 10 years ago and held it, noting this retail investor has beaten professional managers. He argues this has been a 'first level thinking market' where buying household names was sufficient, making professional stock-picking largely unnecessary.

transcript

Michael: There's a lot of professional investors who want this era of the best and most well-known companies beating everything. People want need that era to end. They need it to end, right? This idiot just bought five tech stocks and he's killing me... my friend let's just call my friend the average investor who bought Google 10 years ago and just held it... Has beaten the And there's so many investors like that that have beaten the absolute living out of quote professional investors, right?... The story over the last 15 years is that to beat the market, all you had to do was buy the big names that every Joemo has heard of. No need for any satellite imagery, data, sophisticated algorithms, or complicated Excel models. It's been a very interesting 15-year period where the professionals have gotten smoked.

explains mechanism · 1

05
Claim◆

The debate about AI has shifted from whether the technology works to whether the massive capital spending will generate adequate returns.

Alex Epps is cited noting that technologists have been right about AI capabilities advancing rapidly, while economists have been right about the limited economic impact so far. Paul Kedrosky's bear case argues the ROI on unprecedented AI spending as a percentage of GDP won't materialize in time.

transcript

Ben: Alex Eis had a good good tweet here. If you look at the last three years of AI progress, technologists have largely been right about the massive increase in capabilities, right? That's probably better than anyone. The the things that AI can do is probably better than anyone could have possibly imagined when Chad GBT came out at this point. Like, oh my gosh. And the economists have largely been right about the economic impact. I don't expect that to change... Paul Kadraski has been making the case for a while now that this is a massive bubble... his bare case is that just listen there's there's never been this amount of spending before on something like this and the ROI is just not going to be there in time... It's and it's not just that it's the biggest spending as a percentage of GDP in history. It's that it happened faster than any time in history and you just there's too much other spending that has to go on in the future.

explains mechanism · 1provides context · 1

06
Claim

The 401k has been a resounding success that democratized stock market ownership, and Ted Benna deserves credit for creating it.

Ben argues that despite criticism that 401ks benefit the rich, they created widespread stock market ownership (65% of Americans) that wouldn't exist otherwise. With pensions disappearing anyway, the 401k filled a critical void, and now Fidelity alone has 600,000 accounts worth over $1 million.

transcript

Ben: Ted Bennett is the guy... he basically got the 401k because it was this tax loophole... he said, 'The 401k has has really benefited rich people more than other people. I want to make it more equitable.' I actually think the 401k has been a resounding success. And I know a lot of people would disagree with this... when he started this in the late 1970s, the 401k plan when it first got hatched, 38% of US private sector workers, many of them in unionized industries had pensions that promised income for life. It wasn't there was never this time that everyone had a pension. And now we have we would not have 65% stock market ownership in the US without a 401k. It simply that wouldn't be the case... There's 10 trillion dollars in 401ks. Ted, take a bow.

provides context · 1

Highlight slides
US Bull Market Rivals Historic Eras✦ from: The US is in one of the greatest bull markets of all time, comparable to the 1980s and 1990s.Bull Market Has Broadened✦ from: The US is in one of the greatest bull markets of all time, comparable to the 1980s and 1990s.Tech Rally Driven by Earnings, Not Hype✦ from: The US is in one of the greatest bull markets of all time, comparable to the 1980s and 1990s.AI Debate Shift: From Capabilities to ROI✦ from: The debate about AI has shifted from whether the technology works to whether the massive capital spending will generate adequate returns.Paul Kedrosky's Bear Case✦ from: The debate about AI has shifted from whether the technology works to whether the massive capital spending will generate adequate returns.
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