Animal Spirits Podcast - A Shortage of Workers (EP.199)

Episode Date: April 14, 2021

On today's show we discuss housing bubble talk, huge fund inflows into stocks, gains for the bottom 50%, shortages, inflation and investing in collectibles. 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. On last week's show, Michael and I discussed the possibility of a housing bubble. And I wanted to get my thoughts in order on that a little bit more after we got done talking. So I went and wrote a piece, but first I did a bunch of research on Y charts. And they have an extraordinary amount of data for real estate. So I looked at the Case Schiller Index. I looked at the U.S. existing months home supply. I looked at U.S. building permits, the number of U.S. housing starts,

the U.S. household debt as a percentage of disposable income, the amount of equity homeowners have in their houses in the U.S. So all this stuff. So I was able to show the data. And I got some pushback on it, of course, but we're going to talk a little bit more about that today and some pieces that other people have read about the housing market because I don't think that stuff is going away anytime soon. So to see all that real estate data and more, go to Y charts, tell them Animal Spirits sent to 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 Battenick 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 Ritt Holt's wealth management may maintain positions in the securities discussed in this podcast. So I am on vacation, as you know, and we had on Good Morning America. I guess not surprisingly, they were talking about the Red Hut real estate market, so it's gone fully mainstream.

Okay, it's out there. It doesn't seem like the normie anecdotes are there. We'll get into that a little bit. I wanted to get into one of your favorite stories, which is... Top shot? Fund flows. It's been a while. It has been a while.

This is from CNBC. It's been too long. More money has gone into stock-based funds over the past five months than the previous 12 years combined, according to Bank of America. In raw numbers, $569 billion has gone into global equity funds since November compared with $452 billion going back to the beginning of the 2009 to 2020 bull market. Can I fix the story? Sure. If you change it to 11 years instead of 12 years, a story completely goes away. Have you figured this out? No, but isn't that, it's got to be what it is. We're including probably record outflows in 2009. So there's, what was that book by Jordan Ellenberg,

something about math. He wrote a book, we've referenced this past, how to not be wrong. And when there's negative data involved, meaning like negative and positive numbers, you can do some wild things with the data. So one of the examples of the book that stuck with me for whatever reason was the government of Minnesota one time claimed that they were responsible for 50% of the job creation in the United States. Obviously, and I don't know if 50% was the right number, but obviously that's nonsense, right?

Minnesota is not responsible for half the growth in job creation. But when you have states that are losing jobs, states that are gaining, and you net it all out. So that's one example of how to lie with numbers. I don't know what's going on here with the flow is being netted out. But there's obviously some shenanigans going on. Yeah, the initial thought is, okay, everyone is jumping in the pool at the same time. But something seems weird. Obviously, I'm guessing there's outflows in like 2009 and probably 2010, 2011 to, you know, things like stock buybacks. I just, I don't think it's like everyone has just jumped in all at once right now. Well, yeah, certainly. I mean, again, The data might be accurate, but the implications, the story that it's trying to craft, the narrative is nonsense. The narrative is everybody's in the pool, buy or be aware type of thing. And I don't really buy that.

Okay. I thought we were done defending index funds, but there was a piece in the Atlantic. Could index funds be worse than Marxism? This is just, I don't know. I got sent this by a million people, so we have to talk about it. But some of these takes were, if there's enough bad stuff going on in the markets to put your attention on, index funds are perhaps the greatest creation for investors of the past 40 years, I would think. Correct? Yeah. I actually, I didn't think the article was that bad. I thought it. I did. I did. I thought it was awful. Obviously, the headline was nonsense. And I don't like what they were trying to do, which is stir up people like us talking about it. But in a vacuum, I've seen worse takes on index funds. But here's a bad one from the article. Quote, with index funds, nobody's behind the scenes dumping bad investments and selecting good ones.

Nobody's making a bet on shorting Tesla or going along on Apple. Yeah, like that's gone well. Nobody's hedging Europe and plowing money into Vietnam. Nobody's doing much of anything at all. Yeah, exactly. These funds are passively managed in investor speak. They generally buy and sell stocks when those stocks enter exit indices, such as the S&P 500 and Siser Holdings, according to metrics such as market value. No, no, no, that is the metric.

That's the only metric is market value. And the active managers, which there still are plenty, do a pretty damn good job of setting markets. So free riding, if they want to call it that, has been one of the best things that has ever happened to investors. But the idea that people do well by shorting Tesla going along Apple or anything else, listen, we don't need to spend that much time on this, but beating the market is difficult. Most people would be better off to just accept market returns. Right. And saying that active managers put in companies based on research and development in human capital, it's like, come on, they do not. That's not what all active managers are doing.

This is the kudegroff nonsense. Bernstein, who pointed out that in a world with exclusively passive investors, capital will get allocated only to the big companies and not necessarily to good, promising, or efficient companies. This is a complete straw man. It's nonsense. It's like saying what happens when everybody goes to drink water and nobody drinks Diet Coke or soda or orange juice or whatever will run out of water. It's just like, or what happens when everybody goes to eat healthy?

We'll run out of vegetables. What are you talking about? It's not happening. So it's also saying the big worry is, well, Vanguard and I shares are in State Street are going to have all the voting shares, and if index funds are voting on behalf of corporations and making the rules there, things are going to go bad. Like, active fund managers have been doing any better voting? Like, have they helped CEO pay over the past 40 years or something like that? Like, that's nonsense to think that active managers will be voting proxies better than

index funds, who, by the way, are going to be the ones holding these companies forever. They should care more. Exactly. A company with high turnover or fun with high turnover is not exactly caring. You know what? Now that I think about it, this article was not great. because I'm about to read something else that irked me. This is wild. Active managers, direct investment dollars to companies on the basis of those companies, research and development prospects, human capital, regulatory outlook and so on. They take new information and price it into a company stock when buying and selling shares.

If companies A stock price tanks when it announces a major scandal, that's because active investors are selling. If company B's share sore when it announces it's centering a new market, that's because active investors are buying. Yeah, that's what they do. So what's the problem? There's still plenty of active managers doing exactly what she just said. Passive investors, by contrast, ignore annual reports and market rumors. They do nothing with trading for a gossip. They make no attempt to research what to invest and what to skip.

Whether holding international domestic assets, holding stocks or bonds, or using mutual structure and ETF structure, they just mirror the market. Big U.S. stock funds buy big U.S. stocks just because they're big U.S. stocks. All right, give me a break. First of all, how many people, Ben, do you know that just buy the S&P 500? That's a strut man as well because you can still buy small stocks in an index fund. And also, to Cullen's point, even though people who are constructive index-oriented portfolios are not buying and selling stocks based on trading floor gossip, which I guess is like a good strategy, they're still making very active decisions on where to allocate their dollars, even if it's not at the individual security selection level. I just think index funds are one of the great steps forward we've ever had in the investment industry in trying to put them down for reasons like this just makes no sense to me.

Let's move on. That's enough. there was a chart from J.P. Morgan's Guide to the Markets showing the ratio of U.S. financial assets to GDP. And this number has gone up and up and up with a few hiccups, obviously, during bare markets, but it's basically gone up uninterrupted since early 1980. So this has gone from two and a half times in 1951 to 6.1 times now. Right. So this is a great chart for what we always talk about on the ever-changing nature of markets and why being a slave to historical data, well, listen, we use historical data. I'm a fan. I think that you should certainly be aware. But to compare today versus any previous point in history as an apples-to-apples comparison, I think is foolish. And this chart is a great representation why. Elon Musk tweeted to Kathy Wood. What do you think of the unusually high ratio of S&P market cap to GDP?

And this is what Kathy Wood said. She said GDP statistics evolved during the industrial age and do not seem to be keeping up with the digital age. Thanks to productivity, real GDP growth is probably higher and inflation lower than reported, suggests that the quality of earnings has increased significantly. The technologically enabled innovation evolving today is dwarfing that during any other period in history. It's creating a good deflation and explain.

Explosive demand. Battery technology is a good example. In Arc's view, EVs will scale 15 to 20 fold to the next five years. Wow. So Kathy Wood is the antithesis of an inflation truther. She goes the other way. Inflation is lower than reported, she's saying. But she goes out to say the seeds for the explosion innovation today were planted during the tech and telecom bubble in late 90s. Back then, investors chased a dream before the tech was ready and while costs were too high, I don't really think it's relevant for what we were talking about. But I think she makes a good point, is that GDP statistics are not irrelevant today, but they were created in a prior error. This ratio thing of the financial assets to GDP, you sent this to me and said, what do you think?

What's going on here? And I said, well, Wall Street didn't really exist in its current form in like the 50s or 60s. It was this barren wasteland following the Great Depression. No one wanted anything to do with markets. And then you had the 70s where we had inflation and markets got killed even worse. And so it wasn't until the 80s that Wall Street really took off. and things are so much more like you didn't have 401ks and IRAs back then even there's this chart that shows ownership of corporate stock and 80% of stock used to be held in taxable accounts back in the day now that's more like 25% and you have IRAs and pensions and 401ks that hold all this money and foreigners too and then you have the fact that it's so much more global that half of sales come from overseas now and that's why these statistics over time are just hard to do but yeah the kathy wood thing is interesting to me that she thinks inflation is probably being overstated and GDP understated. You don't hear that argument too often. Apparently she doesn't never heard a little thing called the Chapwood Index. Jerry and Timmer has a great chart. This goes back to what we were just talking about with

the flows. He said the chart below, again, we'll look to all this in the show notes. We still get a ton of questions on where people can find the charts that we're talking about. Ben and I each have a blog, and everything that we discuss gets posted on Wednesday morning. All right, sorry about that. Ordin, if you want to see some of the charts, we put roughly half the show up on YouTube. Those videos are going up on Wednesday, afternoon, Thursday morning-ish on the compound. Okay. By the way, I still cannot believe that people enjoy watching podcasts. And I understand that it's cool to see the charts and stuff. But to me, the beauty of the podcast is like, it just fills dead time. Well, listen, this is me personally. I usually don't watch podcasts

because I enjoy doing them on the go when I'm taking a walk. I think there's not much overlap between YouTube viewers and podcast listeners. I think it's a totally different crowd with people. But we have people on the YouTube channel who say, why don't you guys put the whole podcast up here? And we never thought anyone would want that. All right. Anyhow. So this chart below shows that equity funds and ETFs have barely taken in fresh investments since the March 2009 bottom, despite a 660% return for the S&P 500.

Bond funds and ETS, meanwhile, have taken in more than $3 trillion. That begs the question, where's the bubble? And this chart is a nice piece of eye candy. Jake has been talking about this. Jake at Economic has been talking about this. for years and years and years, that this data is kind of funky because you would expect this to happen, which is not intuitive, because the biggest holder of stocks, which is the boomer generation, are net sellers of stocks always.

This is as simple as this is rebouncing. Boomers are closer to retirement and they need safer assets. That's not all of it, obviously, but is that part of it? Maybe that is all of it. I don't know. I don't know. That makes sense to me that they go from being mostly equities. And then when they get closer retirement, they realize, oh, I can't do this anymore.

I need some safer assets, even though yields are low. One more thing is that whenever you're looking at these charts, keep in mind, these are only mutual funds and ETFs. This says nothing on actual direct investments in the underlying stocks, which still is a thing, despite some article headlines. And that's a bigger piece of the market, too, than just the fund world. Yeah, the fund world is in and of itself something completely different than the whole stock market.

All right. I didn't really get much into this. I just saw this headline pass, but I just wanted to mention this real quick. Blackwatch just had their most successful ETF launch ever, I believe. They just launched two actively managed sustainable equity ETFs on Thursday, which together attracted more than $1.5 billion in assets primarily from global institutions such as pension funds. They have a U.S. carbon transition readiness ETF. I haven't had a chance to look under the hood, but it pulled in $1.25 billion.

Yeah, okay, more than any other ETF debut in history. Wow. So where's this money coming from? They had... They said pensions. Yeah, but maybe they had separately managed separately. Like, everything is getting funded these days. You have to sell something.

I guess maybe this was in a separately managed ESG fund or something, but the fact that that much money came in, that's wild. Yeah, it's a lot of cash. This is a true story. It happened right here in my town. One night, 17 kids woke up, got out of bed, walked into the dark, and they never came back. I'm the director of Barbarian. A lot of people died.

a lot of weird ways. You're not going to find it in the news because the police covered everything all up. On August days. This is where the story really starts. Weapons. All right, so I talked about the fact last week that I didn't think it was a housing bubble. I wrote a piece on it. I used a bunch of data from Whitecharts to help me out a little bit.

Anybody push back on you? Probably not, right? No, a lot of people. Yeah, not at all. Just wait for the 80% decline. You'll see. a lot of that and it reminded me in three years tweet kind of thing. Bill McBride at Calculated Risk wrote a follow-up. And I got a little nervous when I saw that he linked to my piece

because if he would have basically gone the other way for me, I probably would have changed my mind because I- You would have said heads? Okay, I'm wrong. Yes. But he asked, is there a new housing bubble and he linked to my piece. He says basically no. So he looked at the house price index to median income, which is one of the things that really tip people off before. It's definitely elevated, not nearly as high as it was. He basically says housing prices appear elevated relative the incomes, but still well below levels of a housing bubble. He says they're high, but lending standards have been solid and we haven't seen speculation. And someone on Twitter asked, well, what do you consider speculation?

And he said speculation would be house flipping, buyers letting home sit vacant, waiting for appreciation, loose lending. That's what I said. We're not seeing that. These are first-time home buyers. It's primary buyers. It's demographics and interest rates and COVID. It's not a bubble. Although prices are, yeah.

Yeah. Yeah, so he said, yeah, no, it's not a bubble. And he's one of the people that in like 2005 started warning, this housing stuff is looking crazy. He basically called the housing bubble, and then he called the very bottom in 2012 when housing bottomed, not that he is all seeing and all knowing, but if he was a person that would have said, no, this is a bubble, it would have given me pause and maybe change my mind. Same, like when Jake and I can on-pick likes one of your blog posts, I always have like a 30 seconds where I'm like biting my fingernails, like, is he about to tear me apart?

But the thing is, this is such a thing where, okay, a lot of people came back to me and said, okay, but how about this? and they give an anecdote, and they assume that it's like that everywhere. But it kind of is. Can I give you an anecdote? Yes, but can we have anecdotes and can we have craziness going on without things being a bubble? Can we say the market is red hot?

Oh, it's scalding hot, but I still don't think that means it's a bubble, like an unsustainable bubble because the thing is, a bubble means that you're certain it's going to crash. I'm not certain it's going to crash. I think because of, yeah, there's going to be like ebbs and flows, like interest rates could rise and that could slow things up a little bit or more supply. comes on the market where people decide to sell after the pandemic, and that could slow things, but the demographic wave coming, these young people aren't going to say, you know what, housing prices are too high, I guess I'm just not going to buy. When you get to a certain age,

you buy a house. Most people do. So we got an email, a list of an email from Seattle. Based on my current savings for a down payment of $300,000, I am pre-approved for a $1.5 million home purchase, but was hoping to stay close to the $1.2 million. My wife and I looked at houses in our preferred budget and everything went $2,300k over ask. I have a coworker who has put in five offers. Some escalating 500K offer and has not won a house. It has been demoralizing and I don't really want to look anymore. We are spending too much for our free time and emotion on this. This sucks. This really, really sucks. I feel for everybody in this situation. My main question is, my options at this point are to one, keep building up a bigger down payment

or two, stretch my budget and buy a forever home now. I favor option one to let the housing market settle out and make a more rational decision. However, I'm worried by getting priced out of the Seattle housing market forever. What the heck am I supposed to do? Does it ever make sense to buy a home for the fear of being priced out? Is this the same as FOMO? By the way, I'll get to this question. I'm in Fort Lauderdale. My flight got canceled. Sorry, I have to stay a few days late. And there's literally a restaurant called Yolo. And it's not a coincidence. Like if you go to the website that's very much a you only live once thing. Anyway, so, Ben, what do you say to this person? I mean, here's what I said. Well, I wonder how many young people are going to start moving in saying,

okay, I'm not going to live in this area and a remote work is going to open it up for me. Like, that's a hard thing to do. We've talked about the friends and family thing holding you back and where you live and maybe that's tough. But at that point, if it's so crazy and you're in the Bay Area or Seattle or some of these places or Miami or whatever that's just on fire, don't you think this is insane? I'm not going to spend my entire budget on a house. I'm moving somewhere else. Come on. You can't do that. Why? Yes, you can. You can work remotely. You don't think that's an option now for young people. But what if this person's whole family is in Seattle? I'm just saying if it's between I'm going to spend 60% of my budget on a house or you rent. I don't know. That's the

answer, unfortunately. Here's what I said. I said, this is a tough one. I wish I could see into the future to help you. I think the real estate train has left the station thanks to the perfect storm of demographics, low rates in COVID. Demographics are the primary driver, just so many first-time home buyers in our age group. Obviously, prices will settle in at some point, but I would be surprised to see prices retrace

meaningfully. And if they do, it would likely be due to higher interest rates, which would help your down payment and hurt your monthly payment. Yeah, but that doesn't have to happen. If there's still people that want to buy there, waiting for a dip in the housing market, is something that barely ever happens. But that's my point. I said I don't really expect.

Okay. Or if I had to get, I don't think prices are going to come back meaningfully. But I'm saying even if they do, it's only because interest rates have risen. You're right. That affects your payments. But I looked in the past at times where mortgage rates have risen and housing prices haven't fallen off. There have been times where it has happened, but it's not a guarantee that if rates go

from three to four, that housing prices are automatically going to. But in an environment where housing prices have gotten up so much, rising rates will definitely slow this thing down. I would hope so. I think we probably need some of that. We do. But really, there's, as a first time home buyer, you're right, there's not a good answer right now. Maybe it's just you rent longer, but I'm sure rents are coming up too for some people. I honestly think it's not an easy answer, but moving to a lower cost of living area right now, if you can afford a $1.5 million home, you can move anywhere in the Midwest now and live like a king or a queen. Yeah, but Midwest. Okay. But that's what I'm saying. If that's your hangup and this

is going to ruin your life emotionally, maybe you have to find somewhere else to be that's happier. I'm just throwing it out there. On the record, I love the Midwest. Unlike Ben, who has some choice words for us Long Islanders, like, I actually like the Midwest. Oh, I saw a great take a couple weeks ago that basically said, if bagels were a thing in New Mexico, we would never talk about them as much just because New York people talk about them. And I totally agree with that another anti-Semitic dig? No, go on. I'm just throwing it out there. The bagel thing I'll never understand it. Props, pizza. You got, New York has the best pizza.

And the best bagels. I mean, Sabarro is amazing. Well, come on. Jeez, Ben. Come on. New York is like the greatest city in the world. I have to like give it back a little bit every once in a while. When my previous job, we have money managers come from New York all the time.

And they would always look at us like, why do you live in the Midwest? They would always like thumb their noses at us. So this is just me punching up a little. How's that sound? But I can't stop thinking about your Winnie the Pooh meme post. I thought of one today. I'm not even sure I know what this word means. I kind of refuse to look it up.

All right. I've looked it up. I still don't get it. Orthogonal. Okay. Is that just like next to? Yeah, it seems like a term only quants use. Is next to? Is it adjacent? Is that kind of, did I get that right? I don't know. I try not to use that word. I stay away. All right. So this is a good one from Bloomberg. Justin Fox had this piece. And I saw this chart going on from a few people. It showed, I don't know you could even find this, but the Fed has this broken out. The bottom half.

Can we trust it? It's from the Federal Reserve. Exactly my point. Okay. By the bottom half, wealth for the bottom half, wealth for the bottom half, the bottom 50% of people by wealth is now by far its highest value ever, almost $3 trillion. And that's from like a low of like $250 billion in 2011, 2012. Obviously, the housing market crushed people. And this is by far the height's ever been. And it's like a straight lineup. It's basically looks like the stock market from 2012. Which is interesting because

obviously the bottom 50% don't own very many stocks. The rise over the past five years and the past 10 years is by far the highest in the bottom 50%, not the top 1%. So you're seeing... I didn't get to the article. What's the upshot here? What's going on? So the biggest drivers is you've had this recovering for the housing bus, because this demo got just annihilated in a housing bus. You're having late cycle wage gains. So people finally started seeing wage gains in like 2019 right before the pandemic hit. And then, of course, some places are doing minimum wage hikes, like think about Amazon and Walmart and Target upping and Best Buy.

And then you got checks from Washington. The problem is it's the number of the share of wealth is still like 2% of the total. So even though it's come from a low base. Has the share of well gone up at all or no? Yes, but it's gone from below one to two. And back in the 90s, it was like four. So we're seeing a massive improvement, but it's still pretty low by historical standards. So, but good news.

We'll take it. It's not great. I still think the answer here beyond like policy stuff is just get more people to invest in financial assets somehow. Can't they offer bigger tax breaks to people below a certain? Like, if you make less than $60,000 or $75,000, or whatever they want to, they want to put it off at. Maybe some of the thresholds they did for the checks. If you make less than this, you get a bigger incentive to invest in the stock market through like tax deferred retirement accounts or something like that. I would love to see that. Okay, so I was driving around this past weekend.

I saw a big sign in front of Applebee's $200 sign up bonus. I tweeted something out about it saying restaurants and bars are going to be packed this summer. Like they're giving signing bonuses to employees? Yes. If you sign up, I work there, they'll give you a $200 check. And so they're obviously having a hard time. And I tweeted this out and a bunch of people wrote back and with similar things. A lot of people complained about the Fed and saying this is the Fed's fault. But I think eventually this is a good thing because these places are going to have to pay service people more. But I said bars and restaurants this summer are going to be packed and they're all going to be short-staffed. A lot of them, it's going to be hard to find people to work. And so

the New York Times had a thing about this saying that the National Restaurant Association had staffing levels at full-service restaurants that were still 20% below or 1.1 million jobs lower than a year ago, even though people are coming back to the work. Miles Edlin had something about Uber saying, is vaccination rates increased in the United States? We're observing that consumer demand for mobility is recovering faster than driver availability. And consumer demand for delivery continues to exceed our career availability. Again, they're having a hard time finding drivers. I mean, you can say part of this is the increased unemployment benefits, which I think for some people don't go off until like July or August or September. So that's certainly part

of it. I think another part is just people probably found different work. They want more pay to come back to a job like this from the pandemic. No, it's also a strong man argument. we're on this topic. People who think that these checks are going to turn the entire country into a bunch of sloths who don't ever want to work again. Yes, I got a lot of those comments and are there always going to be a few people who say, I'm living on this check. Why do we need to work? Yes, but most people find purpose in their jobs. Whether they like that job or not, it makes them feel like they're doing, yeah, so I don't buy that either. I think people are going to come back, but this just means service employers are going to have to pay more probably to entice

people to come work for them, which that's probably fine. Maybe they don't need to set a minimum wage, and this will just bump things up for people on the lower end of the scale. Speaking of which, Stephanie Kelton had a big piece in the New York Times over the weekend. So Stephanie Kelton, for people that aren't familiar with the name, are definitely familiar with MMT. She is one of the driving voices behind that. It seems like she's hyper aware and focus on inflation. Like the idea that, again, sorry for the third time we said this, but this is another straw man

that people that like MMT is about just spending and spending and spending. That's like the opposite of her view. So here's a quote from the article. Democrats are thinking about fiscal responsibility the wrong way. They could be on the verge of sparking some unpleasant short-term overheating of the economy in which price increases accelerate and the purchasing power of our dollars fall somewhat. If the final legislation were to grow much larger toward the $10 trillion level, many progressives in Congress are pushing, it could send inflation soaring.

The president called this plan fiscally responsible during his speech simply because it will raise more revenue than what he's proposing to spend. On paper and according to conventional wisdom, this is a balanced policy. it may satisfy the scorekeepers at the Congressional Budget Office or even earn high marks from deficit hawks. But because these proposed hikes fall exclusively on corporations and more affluent Americans who have a relatively high marginal propensity to save rather than spend, the taxes may not diminish enough private sector spending to prevent the government's own increased outlays from igniting some inflationary overheating, especially if Congress does go way higher. So then she says these are the questions we should ask our leaders and the ones they should be asking themselves,

is not how will we pay for it. So again, spending is not the right constraint. It's inflation. And she seems to be hyper-focused on it. I still come back to the fact of with the demographic stuff, I think we're going to see this short-term burst in inflation. I don't think it's going to go down. I think that's where we are. I'm sorry to just read. I just think this is so important. So I just want to read one more quote. She said, if Congress and the White House want to be responsible stewards of both society and the U.S. dollar's value, then rather than focusing on taxation of the rich, they should prioritize and supply exactly what it we take in terms of real resources to electrify the nation's power grid, repair every deficient

bridge, give caretakers a living wage, upgrade our railways, and deliver clean drinking water and high-speed broadband to every home. How many people will take to do all of that work? How much steel, concrete, and fiber optic cable? How many tower cranes and other kinds of building equipment will be needed? The list goes on. So her point is that just by paying for this, by taxing the rich, that is completely missing the forest for the trees. Like even though some of his supporters might like that. That has nothing to do with the real constraint, the real worry, which is not the deficit, it's inflation. And guess what? Most of the rich people will figure out how to sidestep a lot of those taxes anyway, right? Right. So, all right. I wanted to mention

this. So we get a ton of emails, as I've mentioned, as we mentioned many times, about people looking to get into the financial services industry. Fidelity is hiring 1,000 financial planners. So we will link to this again in the show notes. And actually, we got an email from a listener that got a job at Fidelity. And this also says not just financial planners. They're hiring 4,000 new employees. It could be on the operational side of things, too. It's not just that.

Again, I think a lot of people ask us how to get into RIA, I think working for one of these big firms if you can't find a smaller boutique one, right? That was my winning two meme. It's not a small asset manager firm. It's a boutique investment manager. But working for one of these big places like Fidelity or Vanguard and getting that on your resume, I think if you can't get somewhere else. I think you're going to learn a ton at one of these places.

And I think that's a great place to start. So it's been a while since we've seen this chart, but margin debt is starting to creep up. Margin debt is $814 billion, up 49% from one year earlier, the fastest annual increase since 2007. Yeah, well, you would expect that given what the stock market did a year ago and what it did in the year since. So, okay, that's not a surprise.

But we've had versions of this headline, this exact headline, since, I don't know, 2013. So you mentioned our friend Jake at Economic. He wrote about this in 2015, ignore the margin debt alarm. Good enough. He basically said absolute levels of debt don't matter. It's the assets versus debt. So when stock markets rise, margin debt's going to rise too.

They basically rise concurrently with one another. It's not a signal. It's basically looking backwards and showing what happened to the stock market. If the stock market rises, margin debt is going to rise. If the stock market falls, margin debt is going to fall. It's not a signal for anything. I just got a text, finally got a Y-chards demo. Wow, I can see why you rave about them.

From who? A financial planner. Somebody in the industry. Yeah, a friend. Okay. Nice plug. All right. All right.

So what's this average ultra high net worth asset allocation? This is a survey, so I don't know if I really believe this. No, this is 100% legit. Says who? I don't know. Whatever. I don't know where this came from. I do.

Corey Hofstein tweeted it. Okay, this says collectibles make up 5% versus like gold and precious metals make a 3%. I kind of believe this. Also, well, what about, I mean? Cash is 11%. So art's a collectible, correct? So that's what I'm, people collect art, wine, watches, all this stuff. Like, this is one of the reasons that collectibles exist as an asset.

if you will, because wealthy people make them an asset class. More or less, the boom we're seeing now is more retail-oriented people being able to get access to it. Why just survive back to school when you can thrive by creating a space that does it all for you, no matter the size. Whether you're taking over your parents' basement or moving to campus, IKEA has hundreds of design ideas and affordable options to complement any budget. After all, you're in your small space era. It's time to own it. now at IKEA.ca. So not that I'm an ultra-high net worth investor, but I dip my toe into collectible with an A.

I finally bought my first collectible thing on collectible. What did you buy? It's a one-of-one. So this is where you buy into shares of like a sports card. Yeah, and I'll get into this in a second. So I saw one that piqued my interest, Magic Johnson and Larry Bird. It's a card. There's a jersey.

I think there's a piece of each of their jerseys. signed it. It's a one of one. How hard was it for you to get into this? Not hard at all. Guess what the valuation is or the market cap this thing? 50 grand. 500 grand. Okay. That's what you bought it for? Seems a bit rich. I did not. No, I'm saying that's what they bought it for and everyone buys it because they only let you buy like what? I took them the whole thing. But then they let you buy like a few hundred dollars in it. It's actually pretty cool. Here's how it works. So there's a cap. I think the initial cap is like, I don't know.

For this one, I think it was a thousand bucks. Something like that. They give you an initial cap. And then if the cap is not filled in the first call it 15 minutes, then they'll raise the cap. Okay. You know what I mean? Yeah, that makes sense. Let's say there's only 80% sold out after 20 minutes, whatever the time is. Then they'll raise the cap. But speaking of collectible, I love what they're doing.

So they crowdsource whether or not they're going to sell one of their pieces. So for example, investors, this is a tweet that we'll link to. Investors have opted to reject the $34,500 buyout offer presented. to them for the 1996 Sports Illustrated for Kids, Tiger Woods card, which is a PSA 10. Ben, listen to this. 91% of shareholders voted no on what would have represented a 37% ROI in 40 days. They said no. This is going to be like, remember when Microsoft offered to buy Yahoo for like $45 billion

and Yahoo turned them down? It's going to be one of these eventually. Wait, here's another one. Collectible received an offer to acquire the Wilk Chamberlain, 19, 161 Fleer Rookie card for $350,000. The asset was offered on collectible this past Sunday, April 4th, for $200,000. So that was, when was it? It was like six days later, it went from $200,000 to $350.

And yes, I think shareholders elected to hit the register on that one. Unbelievable. Okay. Survey time. One in four workers, 26% plan to look for a new job at a different company once a pandemic has subsided. By the way, is the collectible market in a bubble or is that just red hot tip? Oh, I don't know.

I think it's between red hot and bubble. It's weird because it's at a new stage where markets are being formed on the internet. Exactly, right. If that's not in a bubble, it will be. Oh, what's the survey? 26% plan to look for a new job at a different company once a pandemic has subsided. I don't know. That might make sense.

One in four workers. Yeah, that's too much. Okay, here's another one. Individuals who begin investing in 2020 now make up 15% of current retail investors, according to a survey published by Schwab. That seems high to me. Do you believe that? 15% of all retail investors are new. No way. That's way too many. That's way too big.

Well, can't you just, like, do the math? Because how many new Robin Hood accounts were there? I don't know. I'm running the orthogonal square root. All right. So, Coinbase comes public this week. I think we're going to have more to say on that. We might even try to do a video on this. But is it fair to say that Robin Hood could now be seen as a crypto play when it comes public? Okay, this is from a story they're doing, which, by the way, Robin Hood's communication is just gone through the roof since they had those problems because the Vlad CEO guy was on how I built this this week. I feel like their PR team is in overdrive, putting them out because you never heard from this guy before they had the GameStop thing. Did you hear one interview with him? Now he's on

everything. He's on Twitter all the time. All right, in the first quarter of 2021, 9.5 million customers traded crypto and Robin Hood crypto compared to 1.7 in the fourth quarter of 2020. That's nuts. I mean, couldn't you say Robin Hood is effectively, I mean, they're trading for free, but all that orderful. Could they be a crypto play kind of when they come public? Yeah. That's a huge, just to reiterate, 1.7 million in the fourth quarter of 2020. So not four years ago, in the fourth quarter to 9.5 million in the first quarter. Jeez, that is nuts. So I think Robin Hood's IPO could be even bigger than people think. I think that's good. People are talking about the Coinbase one being massive. I think Robin Hood could be sneaky big.

Is Robin Hood going to buy Wells Fargo? Okay, Barron's had a Bitcoin on the cover, which I didn't see that many, this is the top jokes. Well, why don't we, since we're running a little bit late, why don't we save that for Zach? Okay. Yeah. All right. So Friday, we're going to have Zach Prince on back from BlockVite to talk more crypto. So, all right, well, good idea.

We'll save that for him. All right, one more. 54% of people who have already been vaccinated. That's me. I get my second, what do they call it in the UK, a jab? I get my second jab on Sunday. 54% who have already been vaccinated are still very or somewhat worried about catching COVID, but only 29% of people who refuse to get vaccinated are very or somewhat worried about catching COVID.

That makes sense. Yeah, I guess. That's just not a great. But if you've been vaccinated, you shouldn't be very worried about catching COVID. I think getting the vaccine out and rolling it out has been really amazing and probably faster than most people to have assumed. The education on this has been lacking, severely lacking. I'm sure they wanted to play defense on this and not tell people something that they had to then pull back. But I think the education on this has been not very good. Oh, real quick. Here's a great thread by John Paul Koenig. He showed that the amount of U.S. dollar banknotes, fiat, if you will, in circulation, just said $2.1 trillion.

He said there's an extra $220 billion in bills or $650 per American. Most of you are probably not holding an extra $650 in cash. So who is? He said, my guess is that lockdowns and slow retail sales have made it difficult for organized crime for longer cash. And so they are forced to hoard. How about that? Interesting. They should use Bitcoin.

And I can't wait for Ozark. When does it come back? I don't know, but I'm psyched. All right, listener questions. We only have time for one. By the way, I propose, we got such good response to the listener question episodes, and we have so many, like still in the queue. It's remarkable. We could almost do those once a month. Maybe we'll do those once a month and just get rid of the listening questions on the episodes. We'll say. All right, let's just get to one real quick. We talk about dollar cost averaging an index funds and ETFs. Is it a bad idea to do the same

with single stocks rather than trying to find the best time to get into a stock, especially when you only have 150 bucks every two weeks to invest in these stocks. P.S. I already maxed out my Roth IRA and I'm close down my HSA in 401K, but like trying to pick stocks for the long term of five or 10 year periods. I've heard worse ideas. I mean, stocks are way more volatile than indexes or indices. The thing is, over time, indexes of stocks tend to go up. You can't say the same with the individual securities. But if you do dollar cost averages to stocks, you can actually outperform the stock. Well, you and I talked about this. If these stocks have more drawdowns of the 30, 40, 50 percent variety than the all

stock market, and you're buying them when that happens, you could potentially outperform even if the stock itself doesn't outperform. Assuming they come back. Yes, because not all of them do. But I see no problem with this. Also, if it's just a small piece, I agree. If this is just five-cent-year portfolio for fun, and even if it doesn't work out, all right, big deal.

But yeah, I don't think this is a bad idea at all. All right. Recommendations. Let me go. I got a bunch of them, kind of. Me too. Go ahead. I had Euro trip on in the background.

Love that movie. It's a weird one because the plot is so dumb, but for some reason I really like that movie and I enjoy it. But is the Matt Damon cameo singing Scotty Doesn't Know at the beginning, the most random movie cameo in history? It was stuck in my head all week. Scottie doesn't know. I watched a movie this weekend that had a random cameo. Not as random as that, but have you ever seen Thief with Jimmy Khan?

No, I saw that it was on rewatchables recently. It's so good. It's such a good movie. Yeah, I watch it because we watch it. It's on HBO Max, like everything else. HBO Max is so great. And you know who makes a cameo on that? Look, wait a minute, huh? Willie Nelson.

Isn't that an older movie, too, from like a 70s? 1981. It's phenomenal. Oh, okay. High rec. So there's some stuff in it that did not age well on the racism stuff. If racism aside, that's something we wouldn't go over today. But that aside, excellent movie.

Did you watch the WeWork Doc on Hulu? No. Okay. I don't know that you have to. Honestly, it was okay. It wasn't nearly as good as a fire fest. I feel like, think about that for a while on this podcast. that was the biggest story we were talking about. And now it seems like it's so far down.

And it was going to come public. I guess it's backed recently. It actually could probably be kind of a good investment at a lower valuation, I guess. But it's just the only thing it showed, you already knew a lot of it because we followed it was him and his wife, Adam Newman and his wife, were probably nuttier than they even appeared in the stories. He was definitely like one of the biggest grifters of the century. The fact that he walked away with so much money is just, it's almost criminal. He was a total type one who believed everything he said. But I think once he got some money in power, he turned into a type two that basically just lied and schemed his way into getting a bunch of money. The funniest thing that I saw that I didn't realize,

so Ashton Coucher, so his, first of all, his wife is cousins with Glentotha, which has mentioned a bunch of times, but Ashton Couther's buddies with Newman. And right as like the tippy top of this thing, when it was like $50 billion investment, Ashton Coucher said he's an investor and he has total confidence in this company, like right before it crashed, which was a good one. I forgot to tell you, I patented him the name Animal Spirits, and I wanted to sell it to you for a million dollars. Okay. Boom. So yeah, some of those tough people, and they did not have a hard time finding old employees who basically called this guy in a hole in just every other name. All right. A couple of rewatches, this weekend. Panic Room.

Love that one. Is that Fincher? Yes. And like, I remember a lot of people, you said hidden gems was like you're on the edge of your seat the whole time. Uncut gems, yes. This is a movie I thought they had the whole time, you're tense. And I didn't realize it was a David Fincher movie until someone mentioned it in a podcast recently. And that's a great movie. But at the end, their whole thing about stealing in the safe is Barabonds. Do you even know what a Barabon's? Do you even know what a Barabon? is? Yeah. What? I had to look it up. Okay. It doesn't really exist anymore, but it's basically a bond.

Is it like title insurance? It's basically a bond. It was on a piece of paper, which is kind of funny because the movie's from 2002, but it was kind of unreported and unregulated, and they don't really exist anymore. I had to look it up. And finally, you were a romance guy, so have you ever seen the movie, What If? It's on Amazon Prime right now. No.

It's actually the guy from Harry Potter. I never actually watched any of those. And Adam Driver plays the goofy best friend. Pretty good rom-com. Put it on your list. What if? Did you read Harry Potter? No, I never did.

Actually, I started reading it with my daughter and it was a little overhead, so we're going to wait. But I've never watched or read any of that. So I never got into it. I was a huge fan like millions of other people. Oh, really? I wouldn't see that. The movies were great. Movies actually lived up to the book.

Okay. Okay. First time, I saw a snatch. Never saw it before. Man, you were so far behind on movies. What did you used to do all the time? I smoked a lot of weed. Okay.

But that's the best thing to do we smoke weed is watch movies, right? I didn't realize. So Jason Stathen was in that end, the guy who played Capone in Borderwick Empire. That was one of his early roles. So on your next one, did you watch Lockstock and Two Smoking Burials yet? It's on my list. Okay, that's the next one. I thought that's even probably better than the snatch. All right. So I recommend Jimmy Com is... Is it on one of the streaming channels? So I don't have to look? It's on HBO Max. It's just Jimmy Khan is really. Speaking of Jimmy Khan. Are you guys buddies or something? You call him Jimmy?

Yeah. He was on Mark Marin. And some of the stories he was talking about The Godfather were sensational. All right. I've watched a lot of horror movies in the past like two weeks. I watched the conjuring movies. I watched like insidious. I feel like I've seen bits and pieces of them, but I watched him in full. And then I went back and I watched The Exorcist, which again, I think I saw him when I was younger, but I can't really remember it. Same thing with poltergeys. I saw it a long, long time ago I didn't remember it. And I totally get the cultural relevance of The Exorcist. It came out of 1973. Like there was no horror movies like this at the time. And even today, some of the language from the little girl is jarring and shocking. So I totally get why it had the effect that it did in 1973. It cost $12 million and did like $400 million, not inflation adjusted. It did like $400 million in the early 1970s. It's okay. It's like not a great movie, in my opinion, just today in a vacuum. So no disrespect. But I kind of think like the conjuring, for example, having said that. Having said that, the conjuring, in my opinion, is a much better movie, but it's apples to oranges, okay?

Hear me very carefully. Saying the conjuring is better than The Exorcist is like saying that Anthony Davis is better than Bill Russell. Gotcha. It's a different time. It's not a fair comparison. I'm just saying in a vacuum, I don't think it aged that well.

It's a 50-year-old movie for crying out loud. So I'm not like, and not disrespecting the Exorcist at all. I thought the poltergeist aged better. That was 1982. Horror movies just don't do it for me for some reason. One more thing on horror. So I don't like Gore.

I don't like hostile, like, and that's not my thing. That's hard to watch. It's not in the theaters. And that just, that wasn't fun for me. Same thing with like the Saw sequels. But they sort of all follow this similar arc where when you're finding out what's going on in the psychological terror, like the first hour of a horror movie I love.

And then the resolution's like almost always fall apart. That's fair. It's like a good novel where they don't know to land the plane. Yeah. It's like once you see the demon and it's like, yeah, at that point, who cares? It's all about the buildup. I can see that. I'm more of a thriller person than a horror person.

How's that? Same. I'm horror slash thriller. HBO Max. What a service. I was telling you, they have the best movies by any streaming service at this point, don't you think? Yeah, if you're looking for something, their catalog is huge. It's almost always there. Beverly Hills Cop. I was looking for Beverly Hills Cop for

years. Couldn't find it. My kids got into Wizard of Oz recently. You know what year that came out in? 1939. 1939. Maybe it's just because it's fantasy. Even though some of the special effects aren't that great, the movie holds up really well. It does. It did surprisingly well. My kids still love it in all the songs and stuff. And that's on HBO Max. All right, Friday, check us out. We'll have Zach Prince from BlockFi on, once again, to talk crypto markets, which are getting crazy, send us an email, Animal SpiritsPod at gmail.com, and we'll see you then.