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Cute puppies, kittens, Instagram dogs. Americans are spending more and more on their pets. And at Morris Animal Inn, cats are also vacationing in style. The inn offers luxury accommodations, including condos and kitty suites with plush beds and TVs. Meals for pets just like this one made with human grade ingredients. That's become the standard for the emerging trend of fresh dog food. U.S. pet spending hit $72 billion in 2018. About $3 billion more than the year before. And if you look at the data since 1994, you can see how rapidly the industry is growing. The pet industry's growth isn't showing any signs of slowing down. In the United States, the number of dogs and cats could increase faster than the human population, according to one forecast. People are even taking out pet insurance plans to help pay for medical procedures and help their pets live longer. Here's how Americans' love for pets turned into big business. Americans love pets. In 2018, about two out of every three U.S. households owned a pet. Dogs and cats remain the two most popular companion animals in U.S. homes. Birds and horses come in at a distant third and fourth on that list. The number of cats and dogs in the United States is predicted to increase at a faster rate in the U.S. population in the five years from 2019 to 2024. Humans and their pets are attached at the hip. Once a clear delineation between master and servant, the human pet relationship has changed significantly over the last 30 years and brought humans and animals far closer together. Years ago, we didn't fully understand animal welfare as well as we do now. So what people did with their animals before, which was commonly accepted, might, for instance, include things like tying your dog outside to a dog house. We now see that that's not really appropriate to just tie a dog out there for a number of reasons, not least of which is that there are weather issues and the dog is not getting enough social interaction. I think through our advanced understanding of animal welfare, we're starting to realize that these are social creatures that want to spend time with us. That was Nancy Gee. In 2017, she and Rebecca Fox published a paper in which they concluded that since the late 20th century in Great Britain, the relationship between humans and animals had become more intense and responsible. People are seeing maybe their pets more as not necessarily humans, but maybe as part of the family. Sort of recognizing that they're not just an animal, but that they're an important individual who is important within the family, that kind of thing. And I'm not saying nobody did that before. But I think it's a lot more common and a lot more accepted now. Historically, people only spent money on their pets when the economy was booming. But with pets moving closer to family status, pet owners are more likely to pay for their pet's needs during tough times. Industry experts call this phenomenon pet humanization. And here's who's driving. The pet industry's growth of late is in part coming from demographics. You have the aging demographic, the empty nesters, and they're having more and more pets because they don't have children anymore. But also, you have the millennials who are coming in and delaying the raising of children and they're having more pets. And you put those two together. And in the U.S. today, seven out of ten households have pets, and that's twice the number that have children. Humans are going beyond basic food and vet services. We've begun to treat our pets the same way we treat ourselves. To that end, pet owners are purchasing indulgent items like premium pet food, daily supplements, tech gadgets, clothing and even matching streetwear. We conducted a completely unscientific poll at CNBC to see how much people spend on their pets. This is Bubba. He's an eight-year-old pit bull and he loves sleeping and our family loves him so much. We spend about $1700 on him a year. The most expensive thing we get for him is his monthly allergy medicine. That's about $100 a month. He has to have a special food for his allergies, which is about $60. We spend about $45 on her litter and hay and just food in general every two months. Our other pets are a little more expensive. My two shepherds, it costs about $110 a month to feed them. $60 every two months to get them groomed. They're both on pills from the vet. So $45 each a month. I'd say for the year in general it's about $800 just for their vet costs combined. This is Chewy. He's 14-years-old and he's the fourth dog I've owned. We spend about $150 a month on him just between treats and dog food. But we don't do pet insurance. We've never really seen a need for it. This is Oliver. He's 11-years-old and we have spent a good amount of money on him buying him ridiculous things like Halloween costumes. We did not get him health insurance and we should have done that because he's had Lyme disease three or four times. But he's our family member and we, we love him. The average U.S. household spent $662 on their pets in 2018. That's a slight decrease from 2017, but it still represents massive growth from 2013. Investors are itching for a way to make money off of the booming trend. One way to get a heartbeat of the industry has been through exchange-traded funds, a collection of stocks tied to one index or in this case, one industry. ProShares has an ETF called PAWZ that tracks public companies in the pet industry. Our ETF follows the FactSet Pet Care Index. And in Q2, as an example, those companies grew their earnings 12 percent. And this is an environment where we all know that earnings growth is very hard to come by. So it's translating into the bottom lines of these companies. Just a little bit less than two thirds of the ETF are pet health care focused with the rest being pet supplies and retail and, of course, pet food. And it's not surprising that a good chunk of this is in the pet health care business because that's where much of the growth is in the opportunity in pet care. You know, pets are getting older and they're needing more and more health care and people are treating their pets like they're members of the family. So there's tremendous investment there, tremendous opportunity. And the way I like to think about it, there is no Medicaid for dogs. There's a real opportunity to make money there that isn't as influenced and impacted by public policy and government decisions. Meet Dave Westenberg. He's an analyst at Guggenheim and he wrote a 138 page report for investors on the pet industry. It looks at where the future of pet care is headed by 2024. He writes that the industry became attractive to investors after the recession of 2009 when everyone was struggling to find growth. He also writes that: "A six percent growth rate with resistance to recession is a good profile for companies, particularly in the post great recessionary economy." Stocks in the animal health group have gone up 208 percent since 2014. The S&P 500 in comparison gave investors a return of 48 percent during the same time period. Veterinary services make up a big chunk of pet spending. In 2018, U.S. households spent an average of $662 on their pets. Just more than a third of that came from vet bills. There's three major drivers of veterinary spending. One is price in which is correlated with GDP, rise in pet growth overall, which is a one to two percent as well. And then there's service intensity and service intensity is essentially on the veterinary business becoming better businesses and that has equaled roughly the six percent growth phenomenon. Medical care for pets is getting more and more advanced. Pets now get C.T. scans, transplants, dentistry and chemotherapy. Owners want them to live longer and healthier lives. And as the vet bills pile up, more consumers are turning toward pet insurance plans rather than paying for procedures out of pocket. Right now, fewer than one percent of pets in the U.S. are insured. However, that number is expected to rise. In Sweden, for example, 30 percent of pets have insurance policies. In the United Kingdom, about 23 percent do. The pet insurance industry alone could be worth two billion dollars by 2024. Employers are now starting to offer pet insurance plans as a work perk. The biggest markets for insurance you actually also find this urban environment. Correlated with this urban environment is the access to these things, such as veterinary, acupuncture, oncology, dermatology. They're all really expensive services. And so this is all intertwined. The kind of customers that want to go to these kind of places are also going to be the ones that buy insurance. And more visits to the veterinarian, coupled with the growing pet insurance industry, also means that there could be a surge in veterinarian jobs. The Bureau of Labor Statistics predicts that by 2026, more than 57,000 veterinarian jobs will be added to the economy. That's an increase of 19 percent since 2016. As investors pile into pet stocks, it's easy to overlook what the underlying forces behind the industry's growth means for our dogs and cats themselves. It's part of a decades-long trend of animal rights and protection. It means that their lives are getting better and longer. If you look back at the history of animal welfare agreements, I guess it was sort of in the 19th century that they started making laws to protect animals. So things like the RSPCA go back to that period and there was kind of movements to protect animals, obviously in the late 20th, early 21st century they've increased a lot. And I think that's for two things, partly because maybe animals are given a higher status. But I think it's also because of the society we live in now, it has to be more regulated as well. So a lot of those laws that discussed in that paper, not necessarily just for the animals' benefits, kind of regulating them to make them fit in with human society as well. Fewer pets are being put down at animal shelters now. In the 1960s, one out of every four dogs in the United States used to live on the street. To address the national issue, advocacy campaigns pushed dog owners to become more responsible by sterilizing, microchipping and licensing their pets with their local municipalities. On the legislative stage, Congress introduced a bill called the 'Welfare of Our Friends' or the Wolf Act in February twenty nineteen. It would revoke licenses of dog breeders who violate standards of care. In January, twenty nineteen lawmakers introduced a bill which would make animal cruelty a crime on the federal level. The' Preventing Animal Cruelty and Torture Act', otherwise known as PACT, goes beyond an Obama-era animal cruelty law by making purposeful, crushing, burning, drowning, suffocation and impaling of an animal a direct offense. The bipartisan bill was unanimously passed by Congress and was signed into law by President Trump in late November 2019. While increased ownership and government regulation have led to a better standard of living for pets, it may be counter to what evolution had in mind for them. Experts who study companion animals point out that pet ownership standards might be for human benefit, not the animals. Fortunately, this concept of responsible pet ownership is, first of all, poorly defined. If we talk about what what does that mean to be a responsible pet owner, people will say we need to provide good food. We need to provide housing. We need to make sure our animals are free from pain. I think most people will agree on those three things. But then when you start to get into the nuances of what constitutes being a responsible pet owner, do you need to take your dog or cat to the vet every year? Is that enough? Some people don't think they need to do that. You give them their shots and that's it. You just let them live their life. I think that what we're seeing is a wide variety of different attitudes towards what constitutes responsible pet ownership. Regardless of pet parenting styles, the pet industry is getting bigger and bigger. Just look at all the dogs and cats with their own Instagram accounts. Wall Street wants to go along for the ride to.