Animal Spirits Podcast - 10,000 Day Traders (EP.156)

Episode Date: July 22, 2020

On this week's show we discuss new all-time lows in mortgage rates, why this is no normal recession, hopes and questions for a vaccine, Betterment vs. Robinhood, saving money when you earn a bonus and more.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by our friends at Y Charts. Today, we're going to use some data from Y Charts on the real estate market to show you why buying a home could be a better deal now than most people think. Go to Ycharts.com. Tell them Animal Spirits send you and get 20% off your initial subscription. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Batnik and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions

and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. From the Wall Street Journal, the average rate on the 30-year mortgage stood at 3.72% at the beginning of the year. 3.8% a year ago. It's now at the lowest level ever. It's under 3%. The 15 years under 2.5%. These are national averages. Unbelievable. I mean, unbelievable. The difference that this makes in your monthly payment is enormous. So I looked back. Whitecharts has the data for 30-year mortgages going back to

looks like the 1970s. And they also have, I looked at U.S. existing single family home median sales price. So that's taking out new homes, obviously. This is homes that are already on the market. Do we know why it's 30 years? You ever read any history on that? I was reading some history this weekend for a piece I wrote. And the down payment back in the day, like 20s before that was like 50%. Hold on 20s and before. Are you talking like the 1900s? What are we talking about? Yeah, before like the 1920s, it kind of shifted, whereas people were more willing to take on debt. Apparently used to be a social stigma that borrowing money was not good. No one borrowed money. And the 1920s kind of crushed that. That was when the installment plan came into place. It was like

I now, pay later came into like the nomenclature. But yeah, it used to be like a 50% down payment. Why it's 30 years? I don't know. It must have, I'm sure someone at a bank figured out they could give people bigger mortgages and make more money off of it or I don't know. Was there something in that book that we read by Joe Nossara, a piece of the action? I feel like there might have been something in there. Anyhow, back to today. It's a long dated asset, hopefully. And honestly, you should live in your home for a long time if you want to see some of the benefits. So I looked at it. The current, U.S. existing single family home median sales price is like $290,000. I went back to 1990. And so in 1990,

the 30-year mortgage was at 10 percent. The median single-family home sales price was at like 100 grand. So that would be like a $880 monthly payment. Shift to $2,000. We're now talking about $150,000 for median single-family home. Mortgage rates are still at 8.1% in the year 2000. I thought you just said the median home was $290. Now it is. 150 is in the year 2000. I'm sorry. Go ahead. So your monthly payment then is like $1,100. So from 2000 to now, 20 years later, 21 years later, it goes from 150 to $2.90. So that's a 90% increase in the median home price. But the monthly payment, because interest rates went from 8% to 3%, the monthly payment only jumps from 1,100 to 1,200.

So your monthly payment jumped 8%, while the price of a home jumped 90%. Obviously, this is median values. People could send in anecdotes about where they live and why that's, doesn't make sense. But as a whole for the country, housing prices have gone up a lot and people are right to complain about that, how it's unaffordable in a lot of cities. But because interest rates have come down so much, the monthly payment that you're making is way, way lower than it could have been. So since 1990, the median housing price is up 190%. Monthly payment would be up 40%. Wow. You think that because of COVID, because of ultra low interest rates, people are going to start

building bigger houses and maybe an extra room for an in-home office? Well, that's part of the other thing here is that if you look at all the stats from the 70s till now, houses are way bigger and they have on average fewer people that live in them because people have fewer kids. So not only are your monthly payments lower, potentially or not that much higher, but you're getting more bank for your buck because houses are bigger than they were in the past. Dollar per square foot is definitely way lower. Right. Yes, exactly. But yeah, build the home office thing. I could see that. Can you just buy one. one of those little Amazon houses and have put it in your backyard or something?

If you have property. For example, where I live, my lot is 60 by 100. So there's no room for anything like that. But for people that live in a more rural setting, I suppose, or just have bigger properties, then yeah, why not? That thing looks awesome. Patrick O'Shaughnessy's been tweeting about how he wants to get one of those. When we were in the heat of this in March and my twins were taking a nap in the middle

of the day while I was working from home, I was hiding in my walking closet to do Zoom calls. So that was fun. I could use one of those in my backyard, is what I'm saying. There's a lot of bad things about the low interest rate things that people talk about how terrible they are for asset bubbles and all these things and your savings rates are being punished. But if you're someone who's borrowing money and you're coming in right now and you're a young person and you can buy a home and let's say you stay there for a while, if your income is going to rise in the years ahead, a 30 year, even 15 year mortgage at 3% or 2.5% or whatever you can get it at, that's an amazing deal relative to history.

My dad talks about how when he took his first mortgage out in the early 80s, he was paying, I don't know, 10 or 12% for it, something like that. These rates, if you can get financing, it's pretty good. You think this could fuel another housing bubble potentially? I mean, you got these weird things happening at once where boomers want to downsize as they retire right into millennials coming in and really wanting to buy houses. Well, that kind of... Isn't that happening already? Is that going to even each other out, maybe? We read last year that actually people are saying their houses way longer.

than they ever have. Could we see a situation where the 2020s real estate outperforms the stock market? For sure. I'd give that a pretty good chance of happening, especially when you add the leverage component on it and whatever, the ancillary costs that people don't take into account, obviously have a big deal about it and depends where you buy and all that thing. But on a whole, on average, could real estate outperform the stock market? That's probably pretty decent bet. Speaking of the housing bubble, Washington Post has an article titled, an indicator that pre-sage of the housing crisis is flashing red again. It's the share of mortgages that are newly delinquent.

And right now in April, they were 3.4%. The spike in, what is that, 0.9, 0809, that looks very modest. Am I misunderstanding this? So it looks like it only went up to 2% in the crisis and now it's, yeah, 3.4%. Is this kind of a YXIS crime? No, I think it might be a data input crime. I don't think that they could separate how many homes are in forbearance. You know what I mean?

So, for example, they said that 4.1 million houses were in forbearance as of July. So a lot of that isn't probably included in here. So hard to separate the, what's this phrase I always bungle? Hard to separate the wheat from the chaff? The kudigrat. No, is we from the chaff? That's how it goes. Yeah, you nailed it.

So core logic is modeling that delinquency rates could quadruple during the next 18th to 24 months, which obviously, we'll say, they don't know. Are lenders going to be a little more lenient right now, though? I know they have been. Don't you think even coming out of this when we have some of these things coming off in terms of kicking people out or whatever? Don't you think the lenders just will be more understanding or do you think that's not going to happen? If the Fed backs them, I don't think they're going to be more understanding. I wonder if lending requirements tighten up, especially if I think they probably are. If delinquencies continue to rise, how could they not? Especially with

rates so low. Bloomberg says that J.P. Morgan's Citigroup in Wells Fargo set aside almost $28 billion for bad loans in the second quarter as all the bank earnings came out. What does I compare with normal times? It said it's a mark that's surpassed only by the last three months of 2008 during the depths of the financial crisis. But this is kind of weird because at that point, the banks were scrambling to do this. They didn't really prepare for this ahead of time last time. And their balance sheets weren't ready.

Yeah. So this time they're preparing for it ahead of time. And so Jamie Diamond talked about it. He said, even though they're planning ahead for this stuff, it hasn't happened yet because we've had all this fiscal support and people have been spending money and people on not the same stuff. So Diamond says you will see the effect of this recession. You're just not going to see it right away because of all the stimulus. And I think this is actually a good thing, maybe for the banks. They're able to look ahead and say, like, listen, we haven't had all this

debt go bad yet, but it's probably going to at some point. So let's prepare for it now. So I think this is probably, I don't know, net a good thing that they're able to prepare for it a little bit and understand this is coming. And then maybe, I don't know, the banks put a little pressure on the Fed to say, hey, we're going to step up and eat some of this, but you're going to have to eat some of it too, right? This has to be the most telegraphed recession of all time, where every major corporation knew that it was a recession exactly when it started and had time, not a lot of time to prepare, but time to prepare. But the next chart from it bespoke is so insane. X-gas, retail sales are back to record highs. So what recession? I know. They said it's 1% above where it was

in January. So retail sales are basically back on the long-term trend. By the way, tracking the stock market. S&B 500 positive year to date. I keep coming back to this. The stock market is smarter than everyone. This year, I think the stock market is way smarter than everyone. All of the really smart people who are saying, this detached from reality, it doesn't know anything. Are you sub-tweeting me to my face? Oh, yes. Because I tweeted a couple months ago, it's going to be really awkward when the stock market is at all-time highs this summer. What I tweet to you? You tweeted me back a picture of a moldy burger and said, this tweet is going to age about as bad as this. And I'm pretty close. I mean, think about all the stuff. So we're seeing the vaccine stuff coming. Do you think the stock market was really smart enough to get ahead of the vaccine? Kind of, because there was more news today.

How about this? Okay, that's absolutely possible that the market saw this recovery, saw that things weren't going to be as bad as potentially we thought it was going to be with unemployment going to 25%. But what if it's simply the Fed on the liquidity and the stimulus or relief that they provided? What if it's more that than anything else? Yeah, it's all of that. But, I mean, the vaccine news of late has been, I think, I think.

think giving me some hope here. I mean, it's tough that our only strategy for this whole thing in the U.S. is to hope and pray for a vaccine. But it sounds like eventually we're going to get it, even though there's going to be so much damage in the meantime. Sounds like hope is your strategy. What else do we have at this point? The country doesn't have another strategy besides that. So Moderna, their immunologist said that their vaccine has exceeded all expectations so far. There was a long story in Bloomberg about this Oxford vaccine that's coming out, and they talked about they're going to pair with AstraZeneca to put out two billion doses. They said at the end of April, they're trying to crunch this process that normally takes five years into less than four

months. And the Sarah Gilbert that's running the program, I guess she got her triplets involved in the testing of it, the subject, which was kind of crazy. So she said it has an 80% probability of being effective and stopping people who are exposed to the novel coronavirus from developing it. She said they could know for sure by September. They came out with some news today in BC, NBC, that they've done it with 1,000 participants in human trials, and it's looking pretty good. Summer's almost over. Yeah. By the way, the summer going away and the hot temperatures didn't really help anything, did it?

No. It's been five months. How crazy is that? More than month five of this. It's weird to say it feels like it's becoming normal, doesn't it? Anyway, this vaccine by the Oxford place, they say, is one of at least 100 being developed across the world. I have a ton of questions about if and when we get the vaccine.

I know they're going to try to ramp it up. Okay, who gets it first? Do they give it to young people so they go back to school? Do they give it to old people, since they are the most at risk? Good questions. Where are they going to give it out? Is it going to be at the local Walgreens in CVS or Rite Aid or whatever? How many anti-vaxxers are they going to be from this thing? You know, it would be great to administer tests these days if they were still around Theranos. Yeah, so it would be so easy.

I mean, do you think some people are going to have to see Bill Gates or Scott Gottlie get it live on TV the very first day just to be like, okay, this is safe. You can do it because obviously... No, you know who you should get the first? Tom Hanks and Rita Wilson. That's a good call. Bring the country together. Okay.

Probably like the NBA players or some billionaire. How many perma bears do you think are secretly going to be furious when a vaccine does come online? It's going to happen, right? There's going to be people who are going to be mad and not believe it. You know, you know that's going to happen. You know that's going to happen. Maybe internally. Nobody's going to be that much of a jerk.

Right. Okay. So Malcolm Gladwell shared a podcast. Right. You just told me to listen to it and now you're going to spoil it. I haven't listened yet. It was in the New York Times to this Michael Mina guy who's from Harvard School of Public Health. I'm just going to give you the background on this. And I just, I don't know, obviously, everyone premises stuff with I'm not a doctor. I'm not an epidemiologist, whatever. But you're really not a doctor. Is that what you're trying to say?

Honestly, but why not? My whole thing is it's really infuriating to me that we're not doing more experiments with this. Because obviously, we don't really have much of a plan. So why don't we just throw a bunch of crap against the wall and see what sticks? because obviously what we're doing now is not working or helping. But he talked about how they're basically perfect as the enemy of good with some tests. And the FDA was very stringent on some of their tests because the data on some of these tests that are cheaper and they just don't work as well on the fringe so they don't catch everything. But let's say they catch like 75% of the cases, but you miss 25%. They were not willing to allow those 25% to get through.

But this guy was saying you could basically have like a pregnancy test where it costs a dollar and you'd spit on a piece of paper and 15 minutes later you'd know if you had it or or not. And it might miss 25% of them, but you'd catch 75%. And that would basically be good enough to be like, okay. What if you just spent the hundred bucks? So you're buying the Tesla of these, right, at a higher price? Anyway, it sounds like it's not the perfect solution, but until we get that vaccine, I'm surprised we're not doing more experiments like this where, and it sounded like, I guess the FDA this morning said maybe they could do it. It's like this pool testing. I don't know a bottom of it. The podcast is worth listening to. I'll put a link to it. Have you heard anything

from daycare or anything from schools? What's going on in Michigan? our superintendent puts out a weekly video where he just basically says a vlog yeah we're listening at what the governor says if we're in phase three it's going to be at home if we're in phase four it's going to be in school with some protocols they don't know yeah it's so far away I mean it's not but so much can change I honestly think we're probably going to get an announcement like two weeks beforehand and people are going to be scrambling I'm expecting at least some time at home this fall for sure even if they try to go to school I'm guessing it'll go for three weeks and there'll be outbreak somewhere and they'll send them home for a while. I don't know. This falls, I'm not really looking

forward to it. Do you remember the acronym Tina? There is no alternative. When was that? 2013. I think 2013 was the year that first came about. And that's when people really thought this was a bubble because stocks were up 30% or something. I think one of the reasons why people said that was because they compared the yield on the S&P to the yield on treasuries. And it was like, where are you going to go type of thing. Am I getting that story right? I don't exactly remember. Yes. And of course, yields have only fallen further since then. So there's a chart. This looks like Bank of America. There is no alternative. So this is what they were showing. The percentage of S&P 500 companies paying a dividend greater than the 10-year treasury, just under 80% of all S&P 500 stocks have a dividend yield

bigger than the U.S. Treasury. Wow. The tenure, I should say. Isn't that wild? Yes. So you're getting appreciation and income better in the stock market than the bond market right now. You buy the 10-year for growth and you buy Apple for income? I guess. I mean, Apple has as good of a balance sheet as the U.S. Treasury right now, except they can't print their own currency. Is that about the only difference? And they can double their multiple, so they've got that going for them. This is a chart. This is a good one. Oh, I thought you were going to explain this next chart here. Not this chart that we're showing is a great chart, no? Yeah. Yeah. You want to give you a pat on the back for it? It's not my chart. It's a good chart. It's a good chart.

Do you want to take a step back and just like appreciate it for a second, like a piece of art? Honestly, I was gazing and it's just a good looking chart. All right, the next chart, this is from... Can we stop it with the acronyms? Look at this acronym. Fan mag. F, A-A-A-A-A-N-M. Like, that's not an acronym.

What's with the three A's? Apple, Amazon, who's the third A? People are doing alphabet for... Oh, that's right. Duh. Anyway. So what this is showing is... employees per $10 million in capitalization. And we've spoken about this, I think several

times over the years. How could this not affect multiples? If companies can be so much more efficient with their labor. Well, didn't you do one back in the day where you compared like U.S. Steel to Facebook? Like, I think I did sales per employee, something like that. So right now, the FANM companies have been pretty much steady at, it looks like two employees per $10 million in capitalization, but the SDP 500 has crashed, which is a great thing for investors, not necessarily a great thing for everybody, though. Right, for employees. Yeah, like being able to do more with less, that's one of the amazing things about technology,

but it's also one of the terrible things about technology is that people are getting replaced. You know what the best form of UBI would be? I mean, obviously giving people money is really helpful and it's shown to work for this whole thing. Yes, buy them fan. Everyone, when they're born, needs to get $5,000 on their name in a total. total stock market fund. I think people would stop being so mad at the stock market if everyone was involved in it somehow, even in a little bit, in a little way. I earnestly agree. Okay, I'm going to quote Michael Battenk here. America's first billion dollar corporation was

U.S. Steel. In 1902, they employed 168,000 people and had sales of $561 million. Did I trust for inflation? Yeah, okay, 3,300 revenue per employee, $90,000 in today's dollars. There we go. Today, U.S. Steel's revenue is 493,000 per employer, 5.5 times the amount it was in 1902. So there you go. Yeah. Is that company even worth a billion dollars anymore? Let's say. Oh, my God, 1.7. Wow. That's pretty crazy. So it was a billion dollars in 1902, and now it's still roughly a billion dollars. Nominal, a billion dollars in 1902. That's kind of amazing that it's actually still in business that long. The lesson is, do not buy and hold U.S. Steel. Just sticking around that long, he's impressive, though.

Can we do Michael's weekly sentiment trader stand account real quick? I'm just saying he does good work. So what is this showing? He said the S&P 500 just moved to within 5% of a 52 week high. You with me? More than 60%... Pretty sure I called that. Called what?

Oh, you did. We're going to be at all-time highs eventually. You did call it. More than 60% of stocks and the index are more than 10% below the... their own highs, which hasn't happened since dot, dot, dot, dot. I added that dot, dot, dot, dot, September 2000. Wow. Everything is really close to being in an all-time high again. The index, but not the stocks. Right. Okay. But within 10% is pretty close. No, it says 60% of stocks are more than 10% below their highs. Oh, below. Okay. I got you. So there are still a number of

stocks that are in a correction phase. Oh, yeah. Okay. Interesting. We spoke earlier. You said something like, shouldn't this be a great year for active managers? Not at all. Right, unless they just were heavily overweight. Yeah, if they're in one of the big five, then yeah, they've done tremendous. So this next chart shows... Can you imagine being an active manager and just saying, I'm going to buy in the weights of the NASDAQ 100? So I got 10% in Apple and 50% in those five names. Your investors would say, get out of here, you're crazy.

Right? If you would have handed that portfolio five years ago or whenever, people would have said, this is way too much risk. Yeah, why am I paying you for that? Because by the NASDAQ 100, this next chart is from, who is this, Deutsche Bank, showing the S&P 500 mega cap growth versus all others. This is a chart, too. Pretty easy on the eyes. Index to 100 starting in, is this January 2020.

So mega cap growth looks like it's up 35%. S&P 500 X mega cap growth is down 12 or 13%. I believe in technical analysis school, they call this bad breadth, right? Yes, this is quite a divergence between the two groups. It's just the weird part is we're seeing these relationships like they were in the tech bubble, but during the tech bubble, they didn't make any sense. None of those companies were making money. These companies today are all making money.

It's really hard to wrap your head around the fact that this does and doesn't make sense at the same time. It's both. These are the biggest beneficiaries. These companies are performing incredibly well. However, that was true always over the last five to ten years. What's true, it's happening now, is their multiples are going up and up and up. So it doesn't mean they can't keep going, but that's the story. Amazing chart from Lisa Abramowicz.

We spoke earlier in the show about the 30 year and the 15 year being at all-time lows. What's the tweet here? Lisa said, average borrowing costs for U.S. investment-grade companies have fallen below 2% for the first time on record. Wow. Look at that spike, though, when the crisis started. It shot up from below 2.5% to above 4.5, and immediately treated back to an all-time low. That was, I mean, you could probably point on that chart to where the Fed said we're backing up corporate credit markets. That's got Steve Mnuchin's handwritten all over it.

Yes. So, again, another thing where we have a tailwind of low borrowing costs. And everyone always says, okay, what happens when interest rates rise? isn't it kind of crazy to think, okay, rates go from two to three. That's where they were a year ago, where things really that much worse back then? Or does everyone just kind of reset to the new normal of, no, no, no, we're benchmarking to these new lows now? All right, yes, it's kind of... I just gave a real-life shoulder shrug emoji.

I don't know. Okay. So the majority of the people at the protests, which are still going on in many cities, which is kind of crazy that it's been going on for this long. are mostly young people, it looks like. And there's a lot of reasons for young people to be angry. Some of that has to be financially. So Lee Clifford at Fortune had a cool piece where she looked at what every generation thinks about real estate. And she broke down the real estate wealth by generation. Survey? No, so this is actually, I'm looking at the numbers. Oh, I'm sorry.

There was some survey dead in here, but I'm looking at the number. So baby boomers own $15 trillion in real estate. Millennials own 1.1 trillion. And surprisingly, even Gen X is the same as the silent generation still owns 7.1 trillion, which is neck and neck with Gen X at 7.2. But millennial real estate peaked in like 2016 and has gone down since their amount of wealth in the real estate market. So they've basically gone out of it. I'm calling it generational bottom. I mean, that's a huge deference, obviously. But look at this number from Goldman Sachs. They look at U.S. equity ownership age group. So they break it down to above 70, 55 to 69, 40 to 54, and below 40. In 1990, 13% of the equity ownership of the U.S. market was owned by people below 40 years of age.

18% was over 70. Today it's 28% over 70, 4% below 40. Could this just be a demographics thing? Well, that's part of it. 55 to 69 went from 34% to 47. I mean, it's just a a huge, huge value in terms of it's basically like 75% is 55 and older. Again, yes, a lot of that is demographics and we have the baby boomers coming through there. But there's a lot of millennials too and they haven't really quite gotten there yet. And obviously a lot of that is just really, really bad timing. But I really get why so many young people are angry and upset because all the wealth is not only in the hands of a few in terms of wealth inequality, but it's in a few of the same demographic too. Old people hold all the wealth, basically. And when those old people

die, they're going to pass it on to their heirs that are obviously have rich parents. So it's probably going to stay. It's going to stay in the top 1%. A smaller subset of younger people than probably, again, it's kind of a timing, bad luck demographics, add all these things together. And it makes sense why millennials and younger people are angry at the older generations. From a financial perspective, saying, like, you all had a much better situation than we do. Interest rates aside, is that the only place that young people have the leg up now is interest rates? The other thing was like, so our parents got started investing really in their earning years in the early 80s. Right. Extremely low valuations, high dividend yields, high interest rates.

So you put your money in anything back then, and you did amazingly. And you always hear about parents that, oh yeah, they bought that house for whatever, $70,000. Now it's worth $800. Yes. And those opportunities seem to not exist today. Right. And, I mean, there's just so many reasons to be upset. You probably had a better access to a pension back then.

So a lot of people retiring today still at least have some portion of their income covered by a pension. Not a huge amount of student debt. Right. Good luck finding that these days. Yeah. So I'm saying young people have lots of reasons to be. angry these days. And I can sympathize with that. But we can buy shares for free. Yes. So this was from Bloomberg. 40,000 Robin Hood accounts added shares of Tesla during a single

four-hour span last Monday, I believe it was, current at robintrack.net, which compiles data from Robin Hood. We've said a lot on this, but it's, that's a lot. There goes Tesla. It's going up again. up 7% today. So it had a hard correction. What just happened? What do you consider a hard correction? How far was it down? I don't know.

15%. Okay. Was it? I don't know. I'm just eyeballing it. It went from a high of 1800 down to 1430. Unbelievable. What a stock.

Would you say that this is the craziest stock of the last decade? Who would even be number two? I don't know. I mean, there's been a lot of mini bubbles. What would even be number two? I don't know. This one definitely takes the cake, though. I agree. It's wild.

So 40,000 accounts. All right, good for them. They're up. Hope they have stop losses in. In four hours. So Eric Palchunis tweeted, this is kind of interesting. We've talked a lot about how retail from what it was in the past is much smaller, but it has been rising. So in 2010, this is talking about the composition of volume and they break it down by long only hedge funds, quant funds. They break out quants by lower and higher frequency.

Retail trading as a percentage of volume has gone from roughly 10% to 19%. 13% since 2010. That's a big jump. And it's been slowly going up each year. And obviously a lot of that has to do with costs coming down and the gambling mentality and all that stuff. So out of all these groups, retail is now the biggest. That's pretty interesting. So it's almost double what hedge funds are. Hedge funds have actually gone down a little bit in the last few years while retail has increased. Robin Hood is a new renaissance. That's the interesting thing is that. Nothing? Well, the reason that that was, yes, that was good. I'm sorry. You're really looking for some compliments today, fission.

Well, I had a lot of caffeine before the show. All right. I really bought into the idea that there's fewer suckers at the poker table, and that's why it's harder to outperform. Those suckers have come in. They're back. But is it possible that those suckers are a little more informed than they were in the past? I mean, maybe in the past people were momentum traders with a value investor's time horizon.

Now they seem to be momentum traders with a momentum trader time horizon, and maybe they're not getting clipped quite as bad as they once were. Is that possible? We have no data on this. I'm just making this up. But I feel like, again, I am making this up. So I don't know where I'm getting this from. But I get the sense that people aren't buying a giant winner and then riding it all the way down. I guess maybe the reason I'm getting the sense because nothing is going straight down. So I guess we'll see is what I'm saying. We don't know. We haven't seen the other side of this if there is another side. Right. So is it possible people are whatever cutting their losers a little faster and following some of these old trading

rules? I don't know. Is that possible? If and when this turns, they're going to hang on. Let's be real. Oh, yeah. There's going to be some huge losses, and especially if we see another downturn. I didn't put this in the dock, but wasn't there something about somebody wrote a letter trying to sue because JCPenney's stock went down? There was a shareholder lawsuit. Did you see that? I forget the details. Oh, so there was an article on Bloomberg profiling, John Stein and Betterment. They now have $20 billion in assets, over 500,000 customers. We partnered with them full disclosure, fantastic company. They were less valued at $800 million. What is Robin Hood valued at? Isn't Roberthood like $8 billion for their last round? Isn't that wild? So Betterment

has $20 billion in assets. Robin Hood has what? What was the number on Robin Hood? I think it's probably in the 15 to 20 billion range now. Okay, so obviously this is not apples to apples. Betterment charges a small AUM fee. I totally get it. and Robin Hood is selling their data to Citadel and others, and they're probably making multiples of what betterment is making. Yeah, it's a revenue thing. Just thought it was interesting. Right, that they have similar revenue numbers or asset numbers, but yeah, I mean,

at this point, is Robin Hood too highly valued for someone to buy them, or would they have to be just a huge Goldman Sachs, JP Morgan to come in and make sense? Why doesn't Schwab buy them? I don't know. I'm kind of surprised we haven't seen more copycats come in and just take it to the next level. $8 billion is still not a lot of money in the grand scheme of things. Yeah, especially for financial firms. But I think a lot of people would say, like, all right, we need a more responsible Robin Hood to come in and educate better and stop the gamification.

Never going to happen. I'm surprised we haven't seen the other way where someone has just tried to triple levered version of Robin Hood and made it just a slot machine and make it even work and go the other way. I'm surprised people haven't seen what Robin Hood has done and try to copy that and just make it even one step further. What if they added a feature where you could just pull a virtual lever? And you got a stock from the S&P 500 at random. Just boom, assigned to you. Isn't that what Dave Portnoy did when he pulled out Scrabble letters? Yeah.

I mean, I guess that's... Robin Hood should build that. And then you could test it against the mutual fund manager to see how it performs. Start throwing monkey. We spoke a few weeks ago about the economics of Grubhub and how come pizza places can do it. And we got a lot of email saying to listen to the odd lots. Tracy Alloway and Joe Wisenthall had a podcast episode speaking specifically about Domino's and their success. And I think we were mostly right. The two things that we didn't

mention are, one, quality control. So if an order goes bust, Domino's will just send it right back. It's all internalized. Domino's has datified everything. It's out of the franchise of these hands. That's true. If you use Uber Eats and they mess up your order, you don't call Uber Eats and say, hey, bring me back another burger. This one was wrong. Right. Exactly. Speaking of Datafide everything, and I'll get back to this, we went to a new carrier, got a new iPhone. which we'll get to this in a second, comes with 12 months of Apple Plus TV, Apple TV Plus, whatever it's called. And they said that the company just ships them phones of whatever is selling the best in a store. So they don't carry excess inventory. Whatever's selling

in the store, that's the phones that they're getting, which makes sense. So that's like a momentum sales play then. Makes sense. All right. Getting back to the Domino's. The other thing is the reason why pizza works so well is because it's so cheap. Ah, yeah. That makes sense. Some of the stuff is just harder to prepare. Yeah, you could feed a family of four on 20 bucks. It's easy. You know exactly what you're getting. There's just fewer variables that go in there.

So here's your random Michigan trivia now. Domino's and Little Caesars are two pizza places that were started in the 50s within like a year of each other in Detroit area. Why? The owners never really knew each other. But if you were to take what it costs back then and apply inflation to it, a pizza would cost like $70 now. Wow. You can get the Little Caesars with hot and ready for $5.55 or something. something out of the door. How's that possible? I don't know, man. Deflation. All right, listener questions.

I'm 23 graduated in December, worked for about a month and got laid off through the pandemic, been collecting unemployment since April and saved diligently most of what I had. How should I go about paying my student loans? Recently refinanced and consolidated, so it's only like a 2.25% variable rate. That's pretty good. Might have landed an internship so I could get a more reliable source of income. Should I let the money sit and pay it off or try to make double payments, a lump sum payment, keep funding my IRA. What do you think if you have this money sitting around and you have loans sitting, you're staring in the face? Okay, this is a personal decision because some people feel differently about debt than others. I would think if you've

got two and a quarter, what's the sense of rushing to pay that off? Yeah, I wouldn't be in a hurry for that either. It's basically free money. And especially when you're in a really terrible job market, this is another reason I feel for young people is that they'll probably be the first in the chopping block if they're new. So you could get a new role. And unfortunately, maybe things take a turn for the worst for that business in the coming months and you get laid off again. Cash is king right now for young people. If you have that cash and you've saved it, good for you. I would want as much flexibility as possible. I would not be in a hurry to pay that off. I would wait until you're really more on sure footing for a job. Okay, I've got regular deposits coming out of my checking into my

investment accounts, twice monthly basis. About two months ago, I received an annual cash bonus. That's about 4.5 times a size of a single paycheck, and that's after 401k and all this stuff. I don't have really debt to pay down. I've already spent a small chunk on some fun things. So how to think about investing it, one chunk, dollar cost averaging. I thought this was a good question because I feel like the bonus changes your mindset on these things. This happens to me sometimes if I get in some extra income. Everything else is automated. So I feel like when you get a bonus, I feel like it's more tempting to try to time it with something. It's easier to fall into the trap of Because it's not automated.

Yeah, it's like this is a bigger amount. What if I waited a little bit until stocks fall? I feel like it's the kind of thing where I've had to push myself in the past. Like, that's my rule. If I'm going to invest this, waiting a couple months and seeing what the market does is just such over the long term is never going to probably work for you. So my thing is just do it. Do what?

50% Tesla, 50% Zoom? Yes, the Michael Baddick-Shore portfolio. I agree. Nick McChulia has written a ton about this in terms of the dollar cost averaging versus is the lump sum. It's not close. If stocks have a positive expected return, then the mathematical answer is always to put them in as soon as you possibly can. However, in the real world, it's not so black and white. So I think whatever you're more comfortable with, the mathematical answer is lump sum. Probably the better advice is just to put it in overtime, but don't wait too long.

I do think a bonus can be used for funding a vacation ahead of time. You can get created with that money where you can set it aside for other goals where you say, you know what, I'm going to fund if we ever have vacations again. I'm going to fund a vacation for 18 months in advance. and it's going to be sitting there and waiting, so I don't have to worry about that at the time, stuff like that. One more. I want an RIA, have been thinking about starting a monthly video newsletter to my clients. Issue is what information to cover. My initial idea has to have a few data points.

For example, SEP for performance, CPI, yield curve, jobless claims. I'd like to keep it fairly short and high level. I've made the mistake of talking sharp ratios and meetings and seeing clients' eyes glaze over. Oh, sharp ratio. That's a big no-no. Hard pass. What would you recommend? I think there's a few things when you're writing.

I think first thing is... Hold on. He's not writing. Video. Okay. Monthly video newsletter. Okay. Talking, writing, same thing. Talk about stuff that you're interested in because if you're talking about stuff that you don't care about, the people are going to know right away. I think it's also helps to answer people's questions. Like, I'm sure if you have clients, you get a lot of the same questions over and over again, answer those questions. Finally, I think you have to, if you're running someone's money, I think you have to have an overarching worldview or philosophy. And I think if you have

you have that worldview or philosophy, figure out different ways of getting that point across the people and you can kind of just use it for any time something comes up and there's new news or events that happen. So I think that's kind of the way I think about it. But first of all, make it something you're interested in because if you're not interested, people are going to understand that right away. Ten minutes tops. All right. Keep it short and sweet. I agree. If you're talking to yourself or whatever on a video, it's harder than it looks. I would also say practice a two times first. Practice and watch it. How many practice podcasts would be to do when we started this that were awful? Five or six at least that we threw in the dump and never to be heard from

again. Yeah. I would definitely practice if you've never done this before. Recommendations. All right. Before I get into recommendations, I wanted to mention Tyrone Ross, friend of the show, is trying to start a new financial literacy program for young people. And he's doing a GoFundMe. And he did this video on it. And it just sounds like an amazing opportunity. doing a GoFund. He's trying to raise $225,000. He's already raised $30,000. I'm going to put a link to this and watch the video of him talking about financial literacy and how important it is for people that are unbanked and don't know anything about this or a family that struggle with their finances. I think this is a really good program. So I'm going to put a link to this

video in the show notes and the GoFund because I think it's a really cool idea. All right. So you have your free 12 months of Apple TV Plus. The new movie on there that released from Tom Hanks. It's called Greyhound. Harder was not great. Someone said that to us on Twitter. I like it, actually. Did you? Good, not great. It's about the ships that were going across to Europe during World War II,

and the naval carriers had to basically guard these supply ships. There was a point in the ocean where air support, you couldn't be helped. There was a certain point. Would you say that they were meeting tactical resistance? Yes. It's like not a great World War II movie, but a good one in one of the angles I've never seen before, so I liked it. Showbiz Kids on HBO was good.

yet depressing. It's about all the kids, the kid from E.T. and one of the kids from Stand By me. By the way, the actress from Matilda, she had such a recognizable face. She was from Miss Dadfire. She was incredible. Did you watch the movie too? I didn't recognize her. Yeah, I didn't either. I was like, who's that? And I was like, oh, my God. But wasn't the documentary very depressing? Like, would you ever want to put your kids into show business after watching that? That's tough. I mean, if a child wants desperately to be an actor because that's who they are, that's one thing. But it seems like from watching this a lot of times, that's not necessarily the case. Yeah, the parents pushing them into it. A lot of recommendations this week. Land of the Giants

about Netflix podcast, things from Vox is really good. It's only 20 minutes an episode and they interview all the big name people at Netflix. I definitely would not want to work there. It sounds like it's a very ruling place to work and they fire people all the time. Reed Hastings is going to get fired soon. It's possible that Ted Sarandos guy, who's now his co-CEO, he talked about when they interviewed him and when he signed. on for, what was the Kevin Spacey show that originally was their big one? House of Cards. He did it without telling Wheat Hastings. $100 million.

$100 million and didn't tell him. He's like, that's kind of a place we have. So it sounds like an amazing culture that they have there, but one that I definitely don't have the type a personality to ever fit in. Finally, Hot Hand by Ben Cohen was a recommendation from you. A good one. I really enjoy. He's got tons of good stories. It's about shooting in basketball, but it's not really. And the story about the guy who created NBA Jam video game was so cool was amazing finally we finished dark i don't know how they did it but they brought it around and finished it in such a way that actually made sense even though this is probably the most complicated show i've ever watched in my life and i spent a lot of time on reddit message boards trying to

figure out what the hell was going on my dad said he stopped after four episodes he said he hated it okay season three was not the best season but the last two episodes i thought they were going to go the lost direction where they just don't answer any questions but they did they answered all the questions. It's Zach Alfenakis Giff. Thank you. Yes. This was probably the most complicated show that I've ever watched and they still somehow landed the plane at the end and the ending I was happy with. So I think keep going. We keep getting emails from people asking us where to find the Tadas Visconta from abnormal returns, his advisor email list. This is the last time it will be in our show notes. I'm asking you with peace and love. This is the last time. I'm too busy. This is

the last time. I'm not angry. I'm just disappointed. We do show notes for every one of our shows on both of our blogs, a wealth of common sense and relevant investor. It'll be under the recommendations. You told me about the James Miller Origins episode. And thanks to my bicycle roddy in the morning, I was able to knock out this five-part podcast on Almost Famous. How amazing is Cameron Crow? Holy smokes. First of all, if you haven't seen Almost Famous, watch it and then listen, if you have time. It's sort of a commitment. I rewatch the movie after listening to the podcast again. I had to. It was so incredible. So I have so many things to talk about it. I'm not going to bore everyone. But one thing that was really interesting was Brad Pitt was

supposed to be the lead. He had the part for four months, right? So he was supposed to be the lead that Billy Cruda played and questioned about him. He never really had a leading man career like he could have. I don't know what happened there. Apparently he hated Hollywood and would not play the PR game. I heard him in an interview. But Brad Pitt would have been amazing in that role, though. yeah that was such a great podcast thank you i didn't realize what a prodigy cameron crow was that guy sounds like he could have done anything yeah but he was an amazing author a writer a director so it was sort of a biography of him an autobiography the movie was yes but then the fact that he still questioned his own ability as a writer it was so great yeah that's a great podcast apple tv plus again is it for

new apple products or just the iPhone either way and by the way It's so funny. You go on your TV on the app section, and it's like literally, HBO, Showtime, Disney, Hulu, YouTube. I mean, it's just madness. But it's still better than cable, no? Definitely. Oh, I have both. I do the apps and I have cable.

I think it's cheaper. My bundle is cheap. When you have the bundle, I get access to all the apps for HBO stars and Showtime. There you go. Defending Jacob. Are you watching it? I watched it all, yes. Okay.

So tell me if this hypothesis is true or not. true. I'm three episodes in. I'm into it. I'm afraid that it's going to drag on. I think it should be six episodes, tops. Yes. It started out really good. It got really slow. The last two episodes were good. You can probably skip one or two episodes in the middle and go to the ending. Let me only feel the ending because I'm not sure all I felt about the ending. I'm already upset about the show. It did drag. Yes. It could have been a couple episodes shorter. Little tolerance for dragging these days. All right. Animal Spiritspod at gml.com. Thank you for listening. Hope everybody's summer is doing well. I think we'll finally be out with our edly one on Friday. We had some technical difficulties with that, but it should be out this week, I think. All right.

We'll see you next week.