Animal Spirits Podcast - Apocalyptic Thinking (EP.123)

Episode Date: January 29, 2020

On this week's show, we discuss living for today, why millennials own such a small piece of the real estate pie, why investors trade more than they used to, why older people will be working longer, FIRE backlash, the Fed's role in stock valuations, the finances of ditching your car, why people are drawn to apocalyptic thinking and much 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

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 Rithold's wealth management may maintain position. and the securities discussed in this podcast.

Welcome to Animal Spirits with Michael and Ben. So obviously the news yesterday about Kobe's death was just gut-wrenching. To me, that was the, I was trying to think back and put it in like historical context. The only one to me that kind of had those same shockwaves was magic and I was in fourth grade, I think, in one of those you remember where you were kind of places. And obviously that one was people predicting tragedy more than it actually happening. but it's pretty bizarre how just shocking it was to so many people. I imagine this is what the world felt when John Lennon was killed.

Like something similar on that, of that magnitude. Yeah, the way that I look at it, though, I feel like sports stars are almost seen as more invincible and especially someone like him, whereas with musicians, it almost seems to happen more often. People can kind of, obviously, that was more of a tragedy in a different way. but you look at these people as being invincible in a lot of ways and just thinking that it won't happen. I don't really know what to say about it. You had a really nice piece about it today. So if anyone wants to read your thoughts, you can share as much as little as you want, but I enjoyed your piece today for this. Thank you. I think I felt the same way that millions of people felt.

It felt personal. And it's just so shocking. I mean, I spent a lot of yesterday crying, just very difficult to process. It's such a strange part of the human condition that every one of us is going to die and that still there's no playbook to deal with something like this, whether you know that person or not. Stephen Colbert was talking to Anderson Cooper about this when Anderson Cooper lost his mother. And he said something that I thought was so profound when Stephen Colbert, so he lost his father and I think two older brothers in a plane crash. And he said that he learned to love the thing that hurt him most, something along those lines. Just that tragedy gave him such a strong

perspective on life. And I took those words and I made it personal to myself because, boy, can I relate. It felt really weird to even write that, that I'm grateful for my mother's death because obviously I'm not. And it just obviously was a rocked my entire foundation. But the one thing that I am glad for is that it has just given me such perspective that you don't get in regular life. So, Russ and peace, Kobe and everyone involved, just unspeakable horror. And I don't know how to move off of that. But why don't we talk about baby boomers, but yes. Okay. Washington Post had a piece. And these numbers actually surprising. I've seen a lot of stats over the years about how millennials are falling behind prior generations in terms of

financial assets and homeownerships and income and these sort of things. So they took baby boomers, Gen X and Millennials, and they plotted this on a chart, and they showed where people owned housing at by each generation when they were by their median age. And in 1990s, Baby Boomers owned over 30% of the housing market. In 1992, Gen X owned like 5%. In 2008, millennials were around at like 4%. So anyway, it says, when Baby Boomers hit a median age of 35 in 1990, they owned nearly one third of American real estate. In 2019, the millennial generation with a median age of 31 on just 4%. I guess I didn't realize it was this bad. And again, Gen X started in a similar spot as millennials and grew to be they're now 25-ish percent. Hang on. I have a question.

Okay. One, we talked about a version of this chart a few months ago. Do you recall? Yes. I just didn't realize it was this bad. Okay. Two, I'm not saying that this isn't portraying an accurate picture. I just wonder what other factors were at play. When baby boomers were 35 and 1990 as this chart shows compared to Gen X at 35 years old a few years ago, was there other structural forces at work? Let's see. Just taking a wild stab at this, the previous generations maybe weren't living as longer and we had more baby boomers coming up that were able to buy the homes.

In other words, if you look at baby boomers as a percentage of the overall population, I suspect that they were also a much larger piece of the population. So it might not be as dire as this chart suggests. It's just you're seeing the millennial one already kind of. a roll over because of the since the crisis and it's it's actually gone down a little bit in recent years. I would expect that to change and it's going to, someone has to buy those boomers. You're buying this dip. Yes. I think it's a, what do you call it? Give me the technical analysis term for this when a line is bottoming. You're just buying the dip. That's all.

Okay. It's a quadruple bottom. Did you read Derek Thompson's piece today by any chance? I did not. He wrote about these structural forces in society and particularly how it would have through the lens of Bernie Sanders surging in the polls. And he said that the loan to income ratio for millennials is basically double what our parents were at this time. So even if you are buying a house, you're taking out way more money to do it. Basically that people can't buy houses. So I don't know. I don't really know where I sit on this debate of will millennials be like everybody else and eventually buy homes? So I think there's a lot of truth to that. But I also think that just saying that hides the other truth, which is that it is different

for millennials than it was for their parents. So I understand both sides of the argument. Yeah. And everything has been pushed back. So I think, I mean, I would be shocked if this number didn't just skyrocket in the next two decades of millennial homeownership. Skyrocket. Okay. You don't think so? I don't know. I mean, I don't know. I suspect that you're probably right. Because, well, unless, what if they just continue to rent? There's going to be household formation eventually for younger people that move out of the cities and move to the burbs and have families. What if the future of housing is renting, not buying? I would take the other side of that. Maybe you're right. I would take the other side of that. I think eventually people grow older and they

settle down after they have some responsibilities. That I agree with you. Yeah. For sure. There was an article in the Wall Street Journal. Online brokers go from zero to hero. And this is interesting. I don't know that I would have, I don't know. I guess I didn't think much about this. All right. Total trades jumped 13 percent from the prior year, even though the quarter was less volatile. I'm trying to think like what I would have predicted this time last year. what trades will do it. I don't know what my answer would have been because now I have the data, but does this seem about reasonable? They're just trying to figure out what the impact of zero commission trading were.

That's it. Did trading skyrocket? I don't think that a lot of these places have these wild traders. I don't think people go to them for that. And do you think that's kind of been the case? Well, I just think, I mean, day trading is just much less invoked than it used to be. Yes. So people who thought that taking away that final last step was going to cause this mass amount of trades, it hasn't really happened. There is a jump, but... Well, 13% higher. Total trades were up 13%. So, I don't know, that sounds pretty high to me. Okay. Did you have any of this personally? Did you take part? I did not. We've seen this chart before, I believe, in term of the New York Stock Exchange average holding period.

So this chart shows 1929 to today, and it basically crashed. People are holding stocks for a shorter period of time than they used to. The average holding period, I think it looks like it peaked at around eight years. This is back when, I don't know, I guess people are just buying and holding some stocks. So it starts in 1929, which is an ominous starting point. And back then, the average holding period, this is in years, was around one year, which is where it's back today. So we've totally round-tripped. But that increase in years, so it went from one year to eight years from 1929 to basically 1960s, and then it's fallen ever since. Don't you think that a lot of that had to do with the fact that Wall Street basically just died in that 30-year period

and not many people were even owning stocks? People who did basically just sat on them. Well, here's what I thought of when I saw this chart. I agree that people are probably turning of their portfolio more than the usage is so easy and inexpensive. But, But I wonder how good this data is. Like, what is this even measuring? Is HFT in here or hedge funds in here? Like, what exactly is this measuring? That's interesting.

If HFT stuff was in here, then that would skew the numbers a lot lower. The other one, we talked about a few weeks ago, someone from Vanguard, I think, mentioned it saying markets are more efficient now than they were back then. And it's harder for people to just simply buy and hold a stock, especially active managers probably have to trade more to find value. I found the disclosure. It's not, it says, so it's approximately nine months. This reflects investment transactions driven by both individuals and institutional investors, but it looks like that's all that it gives you. So anyhow, I feel like, again, I'm not sure that I trust this data exactly, but I feel like

it's more or less gets the story correct. The trend makes sense that people are holding stocks for a lot shorter than they used to. Seniors are working at historic levels. Did you do this by any chance? Yeah, I think they talked about 20% of people, 65 and older in the workforce is the highest since June, 1961. It's almost a 20% increase since December. Don't you think this is just going to keep increasing? They kind of show it'll further increase by 2008. Yeah.

A lot of people are just going to have to work longer because some people want to, I'm sure, and can't let go. But a lot of people are going to have to for financial reasons. I think that's right. I do wonder what sort of jobs they are working. If you run the numbers, Charlie Ellis wrote this book on retirement, and I don't remember the exact numbers off the top of my head, but he basically said, listen, if you're someone who started late, and a lot of people probably did, started in their 40s or 50s, if you just start saving then, here it is.

He says, if you delay retirement from age 62 to 70, that could reduce your annual savings rate by more than two thirds. and if you then put off your Social Security because you're working longer, that also increases. And he said basically taking those together, basically pushing back when you retire by eight years, and then pushing back your Social Security could increase the savings rate that you need, could decrease it substantially. And so I think for a lot of people, it's almost a double whammy of putting off the time you're going to have to draw down your portfolio or your Social Security

and just not having enough assets in the first place and gives you more time to build a up and compound hopefully. So here's another stat, 2.6% unemployment for seniors in December 2019, which is below the national average of 3.5%. So I guess it looks like seniors who want to work or finally work. That's actually surprising to me that that would be a lower number. Me too. So people talk a lot about retirement and there's this thing that you see fairly regularly about I'm never going to retire. I can't imagine myself retiring. I would be so bored. I would be this. I will do that. Yes, I think I said something similar to that recently. Did you? Okay. I think that people have a complete inability to predict how they're going to feel

in 30 years. I have much different opinions at 35 than I did at 25. And I imagine at 45 and 55 and 65, my opinions of what I want to do with my time will change also. Yes, I agree. It's impossible to guess what other people are going to do. I think it's even harder to guess how you're going to change. I wrote about this a few months ago. The behavioral psychology term is escaping me. But every time we get to a certain level in life, we think we've hit that peak maturity. In the past, we were crazy and we did all these things we never would do again. But now this is going to, this is going to be us forever. Daniel Pink writes about that a lot. Actually, this reminds me. I was thinking about this yesterday. What is the final version of you? And I guess there really never is one. But let's say

that somebody is 25 years old and they want to put off having children because forget about financial reasons. Let's say that somebody is a good earner and just really enjoys, it's at a good spot in their life. And they say, you know what? I'm 30, but I don't want to have kids until I'm 40. Just in a perfect world, whatever, whatever. I don't want to have kids until and they really, really love their 30s. It's the best decade of their life. They're traveling, they're making money, they're doing well in their career and all those sort of things. And they view it as like the best decision they ever made. Because you don't get those years back. Those are some of your best years. They have kids at 40 and everything's great. But then they're 75 and they're sick

and they know that their time is running out. And that person regrets not having kids earlier. But I was wondering, is that a valid form of regret? Because on the one hand, you have a 75-year-old who feels legitimate regret, or however they are. You have a person who feels actual regret, but also earlier in their life, they felt a different way. So how do you square those two circles? This is getting kind of deep here. I don't, unfortunately, I think some people are always going to regret the path not taken. And then there's those people who say, well, I never regret any decision because it got me to where I am. I don't know. This made my head hurt. It's just an interesting sort of thought exercise. Like, what version of you takes priority? Is it the final one

before you pass looking back? Or is it the one where you're in like your best years? I don't know. What I've changed my, even my thoughts in terms of like a personal finance thought process on this, especially in recent years since having kids in terms of before I think I put too much emphasis on saving. And I think a lot of people in the finance realm do that maybe to their own detriment sometimes. And that's why if you're in a good position and you have saved and invested, it's one of the as things to do is turning that mindset off and going the other way and figuring out how to spend and enjoy it. But I also think that I've tried to turn around and figure out ways that I can just enjoy it more now. So there's a lot of people who have a harder time delaying gratification for whatever

reason. That always came a little easier to me. But I also, now that I have kids, realize that the time, the clock is ticking. And it's like, I don't want to just save everything for when I retire and then miss out on all the things now. Well, that's the thing. And that's the blessing that I feel, having lost my mother is that it really hit me so hard, not to be irresponsible and blow all your money because tomorrow's not guaranteed, but really to live today because you don't know and not to be like corny or anything. But I think it's hard to find the balance between spending today and saving for tomorrow. And there was a video this morning on Yahoo about fire. And why do you think there is like a visceral backlash to it? I think the problem is that they do these pieces and

they show like these young pit people walking on hiking trails with their sunglasses talking about how we really don't live that frugly. It hasn't been that difficult for us. All it took was a mindset change to go from our six figure jobs and no kids to retiring by age 38. And it's just so easy. Anyone can do it. And that whole anyone can do it thing. I definitely these days, it just gives me a greater appreciation for understanding why there's a lot of people out there who can't force themselves to save. Especially since I have kids now, I understand how people could just put all their energy and time and resources into their kids and not have enough left over for themselves. I can see that. So I think when people go and show like, I retired

at age 37 and here's how anyone can do it. Just follow these four easy steps. It's never that easy for people to reach that point. I think that nails it. Obviously, I think that people should do whatever they want and should live their life. And if they want to retire early, fantastic. But I think that's the point is that the here's how you can do it type thing. I don't know. It's icky. Yeah, I'm more of the long lines of here's how I did it.

And maybe you can take some lessons away from our experience. But I just don't like when people say it's easy because it's never easy because everything is so situational and circumstantial. You just never know that sometimes people are just born on third base and life is way easier for them. than people in other situations that haven't had the same luck or the same position socially or financially as others have. Here's the flip side. Obviously, we're very lucky. We love our jobs.

It seems to me that everything I've seen of this fire movement is people that are generally unhappy in their work. Luckily, I don't know what that's like. So I would imagine if you're really killing yourself over work and you have a high salary, maybe fire does seem like a good path. Yes, I can definitely see it. I just don't like the way that a lot of people in that realm look down on others. And there's been some good ones.

There was one on The Longview with Jeff Attack and Christine Benz the other day. Chris Mamoula, I think is the guy's name. He talked about it from a, he was very upfront about talking about this is the way I did it, but I know not everyone can go this way. Not everyone in that space is thumbing their noses and showing people all easy it is. But I think that's one of the problems people have with it is just saying like, listen, saving 80% of your income and retiring in 10 years is easy. Everyone should do it. That's just not a great. Well, we haven't spoken about this in a while. I expect last time we did, we got quite a bit of feedback. So, yeah, both sides of the aisle. There are definitely strong feelings. Yeah, strong feelings here. Have you seen this chart at all? No, I have not. So somebody forwarded us to this post, a blog, it looks like a blog, Clement on investing. And there's a chart showing spending as a percent of GDP. And what really stands out here is federal.

Spending is, has been on a, this is federal R&D spending, not just spending. I'm sorry, federal R&D spending as a percentage of GDP has gone way, way, way down. And I'm sure there's a lot of people who think, good, this sort of R&D should be in the hands of private institutions, not the government, because they're not very innovative. You have any thoughts here? Well, in the number for the industry has quadrupled since 1950s. Wait, wait, what about buybacks? Yeah, this chart to me, though is almost like the number of stocks that were available in the 1990s. The big increase in the 1960s is all from NASA. It says it's in this chart. Following the launch of Sputnik, we had this huge increase. And there was just this massive, you've read the NASA book about the moon landing

that talked about the insane number of people that they, they basically had a blank checkbook to do whatever they wanted. They hired tens of thousands of people. And so that spending increase was just kind of a one-time deal. And obviously- So you take that bump out. I don't want to call it artificial, call whatever you want. And this is really a non-story? That'd be my guess. Okay, let's move on. But the thing a lot of people don't realize is that a lot of the technology we have has been funded in the past by the government. I think a lot of people would fail to understand that. That's been the case. Okay. Michael Dariano sent us some good stuff. Last week, we were talking about whether or not financial literacy worked, and I think we spoke

about a study. It looks like he went in there and schooled us, so thank you for doing that. quote, only a small percentage of Americans know about the inverse relationship between the bond prices and interest rates. And Michael said, is this a good measure of financial literacy? Here's another one. You owe $3,000 on your credit card. You pay a minimum payment of $30 each month. At an annual percentage rate of 12%, how many years would it take to eliminate your credit

card debt if you made no new additional charges? And he made the point both seem diverged from the real world. Point taken. Yeah, the credit card one is probably more real world. So it said 21% of Americans know about how bond price. interest rates work. If interest rates rise, bond prices fall. That sounds high. Honestly, I don't see why that many people would need to know that. But the credit card thing makes sense. But honestly, there's so many rules and regulations on that now. If you just read your

credit card bill, it tells you if you pay just the minimum, it's going to take you 580 months to pay this off. But if you use an extra $100 on it, it'll take you 300 or whatever it is. They actually make it easy for you if you just do some looking. So it's almost like Google now where maybe you don't have to memorize everything and some of the things can just be made easy for you. So maybe that's the thing with financial literacy is we don't need to memorize this stuff, but you just have to make it easier for people to get into the system. A lot of good feedback on that one. So maybe people's retirement savings are better than they think when it comes to the government.

So Andrew Miller had a good tweet thread this past week and he talked about trying to figure out the amount of social security that what would it be worth if you were just given a lump sum? So he said the average claiming age is 65, and the average payment is about $18,000 a year. Average life expectancy of a 65-year-old is 19 years. So if you try to figure out, back out the present value of that $18,000 annual income stream, it would be worth more than $330,000. Could you go into the future and invest that $330,000 into Amazon? Yes, at the IPO. So we would need to come on back to the future of one and two to do that.

Where we're going. So that's another way to look at. His whole thing was maybe if you looked at that as more of a fixed income type of strategy, you would take more risk in your portfolio because you have this fixed stream. I'm still a little weary of that type of thing. I think you, self-sake your... What? I was just laughing at your, like, just say what you feel.

I feel like you're being very nice. You can disagree. Oh, I think it's just, there's, more middle ground there in terms of trying to keep that as a bond piece. I think you take all of your factors in and then you take your risk tolerance and with your portfolio. He was saying the average target date fund for retiree would be like 50-50 stocks bonds and maybe you treat this more like a bond so you could take more risk. Okay. But if you are lucky enough to have a pension, if you thought about it that way in terms of how much it's really worth, that income

stream was worth a lot of money if you live two, three decades, whatever into the future and you get that paid out. Well, I think for very financially literate people, for sophisticated investors, you actually can do something there. Yes. But again, yeah, you take out what your outlays are going to be and you net out your inlays and then you, that's how you kind of figure out what your portfolio is going to be, which you do with any income stream. So we speak a lot about the people who are obsessed with the Fed manipulating the market. And I feel like this chart from Ned Davis is an example of how the Fed can interfere the stock market. So this chart from Ned Davis research...

You've had the tinfoil hat on a lot lately. Listen, I'm living in the real world, brother. You don't believe the unemployment rate. I call it like I say it. The Fed is manipulating utilities. So this chart shows the S&P 500 utility sector forward PE ratio. Again, this is from Ned Davis. We will put this in the show notes.

and it shows just the price with below it, again, the forward PE, and this has been going up and up and up and up and up. And for whatever reason, well, I know the reason. I think I know the reason. Utilities are trading at 20 times of forward earnings. By far, by far the highest going back to the early 90s, it looks like the mean is 13 or so. What's your reasoning for this? And I'll give you mine. Wow, that was, you look like you're like ready, your body language, you look like you're ready to pounce. So I'll give it to you. You look like you have a great retort. I can't wait to hear it. Okay. The simple reason is this. Because yields are so low, people go reaching for yield. Boomers' portfolios are loaded with dividend stocks. And there's more

demand than it pushes up the PE. Yeah, I was going to say because the Fed must is obviously buying utility stocks. It's because rates are falling. I thought that my explanation was Occam's Razor. Yours is like really. Did I say that right? Is it Okum? Occam. Hawkins Razor. That's how I've always pronounced it. But yeah, it's because interest rates have fallen. Yeah, I mean, it's not a mystery. Yeah. The Fed controls short interest rates, not long-term one. So you could quibble there. So I did my- Wait, hold on, hold on. I mean, obviously that's true. But is it not also true that other areas of the curve follow or at least are influenced by the short end? I mean, is it that reasonable? Yeah, there's a million variables. We're talking about inflation and growth and all these

other things that come into play when we're talking what is creating interest rate levels, though, as well. Okay. And aren't those also manipulated by the Fed? The unemployment rate is. So I did an update on my asset allocation quilt. Someone asked, take it back 20 years instead of 10. And so I took it back 20 years all the way to 2000. And one of the surprising things to me was that best returning asset class over 20 years was REITs, which you would not expect considering we had this huge real estate blowup. And REITs fell like 75% from 2006 to the bottom in 2009. You know what the big reveal here is? The big reveal is that you're taking requests. Can I put in a few? I have some ideas for stuff that I'd like you to write. Yes. You can reach me at Ben at Slack. But I think one of the obvious reasons is because interest rates have fallen and a yield asset like that is going to do better when interest rates have fallen. Okay. So I'm just saying it's sort of a simple explanation for the performance. Okay. But yes, it's the Fed's fault. You're right. Not saying it's your fault.

Just saying, here's what. All right. Anyhow, there was an article written by Kyla Scanlon. I've never seen her work before. The title of the article is, ditch your car, ride sharing is more cost effective. And she did all of this analysis. And as I'm reading it, it starts to get like super nerdy with numbers and regressions and all sort of P and T stats and whatever, whatever.

But the bottom line is, if you drive less than 10,000 miles, ditch your car. And I want to get back to the meat of this in a second. But I was looking at her resume and looks like she's like a college student, college athlete, and it just goes on and on and on and on. And it's one of the most impressive resumes or things like I've seen it a long time. So if you're looking to hire somebody soon, she's a – Oh, it says she's a CFA level one candidate. Okay, I see a lot of people talk about this in big cities, especially, that it's not

worth it to have a car and just doing ride sharing. I think it probably makes more sense in big cities than small areas. And the other retort to this is, if you have kids, this would never work. True. Of course true. But yeah, I think, especially though, if you're in a big city, if I didn't have to have a car, I would never want to have one. I would love to not have to have a car. I mean, there's been a lot of articles we've learned about this, how cars are dormant for like 98% of their life or whatever the number is. Why don't we share cars the same way that we share everything else? Yes, it does make sense, but... And I know there are a lot of companies going in that direction, but not even talking about like Uber and Lyft, but literally like ride sharing cars where you're actually driving.

Seems like that could be the future. And again, I know that this stuff already exists. I'm just saying it seems like this is only going to continue to grow. Yes. So you're saying we should hire her for statistics on our podcast. I was reading through her resume. It just keeps going. Like she's done more at her age.

I don't know how old she is. then most people will do ever. It just keeps going. Yeah, it's pretty impressive. We'll look to this in the show notes again. Yes, I will be following this blog now. Yes. It's called Math, musings, and markets.

What is that? Math musings and markets is the name of it. I'm using an anti-musings guy. Not a big fan, but I'll let it slide. You don't know what I'm kind of anti? Anytime someone says pro-tip, if someone says pro-tip, it's probably going to come from an amateur. Don't you think?

I feel like it's gotten so overused that it's, almost exclusively used ironically at this point. To your point, if it's not, I agree. It's terrible. How about this? This is not their first rodeo. Like, has anyone ever been to their I've never been to a rodeo before? Why is it always a rodeo, though? The only rodeo that I've ever been to is in basements of New York City bars where people get drunk on the electronic ball. Yes. By the way, my cheat day, did I cheat or did I cheat? You cheated. I was in New York City last week. and we went out, and Michael always shows me a good time when I go there.

We'd go out to a nice dinner. We had like 12 pounds of steak a piece and a burger and French fries. And we went to a donut shop after a comedy show, and you hammered three donuts. I think I put down one and a half and you hammered down three. And then the next day you go, there goes my diet. I feel like I had more calories that night than I have in the last two weeks. Like, not even kidding. I had a food hangover the next day.

that shows how old I'm getting, that it's not alcohol, but food that makes me feel bad the next day. That was rough. So there has been a conversation happening for years now about where do stock returns come from? Is there returns of stocks more influenced by the sector that they're in or by the geography? Well, according to you, it's the Fed. So, Ben, where do stock market returns come from? Don't ask. I'll tell you. Over the last 25 years, companies in developed markets have actually had a stronger relationship with their home country than sector. There's this analysis.

This looks like it's from, it's a few years old from 2016, Adam Butler linked to this. So again, where do stock returns come from? Is it the sector or is it the country? And it looks like it's generally speaking more so the country than the sector unless it's things like, I think energy and technology were the outliers where it was sector first. So does this mean that trying to compare companies in the same sector? in different countries is not as easy as it sounds. I don't know if that's a takeaway.

I think it was just like when you're buying stocks, where do the return streams come from? Okay. So it's more just the home country's economy matters more, which is another, maybe I'm reading this wrong. You can correct me, but is that another case for international diversification where you have these, you're diversifying by economy really? I think so, but it's not that cut and dried. Like I think that you could look at this data and you can make either argument.

Okay, so Visual Capitalist had this thing. We've been talking a lot about this about the aging population, and they say by 2050, there will be 10 billion people on Earth compared to 7.7 today. Many of them will be living longer as a result. The number of elderly people per 100 working age will nearly triple from 2019, 80 to 58 in 2016. We kind of talked about this already today. But this got me into, I just started the book last night. Jason Zweig interviewed Lawrence Siegel, who is the author of fewer, richer, greener, prospects for humanity in an age of abundance. And I read the first two chapters of this. We'll report back more when I finish it. Sounds like a textbook. It actually is a book and it leans a lot on a lot of good research that's already been provided. Like, factfulness is mentioned throughout from Hans Rosling that we've mentioned before. It's pretty good. And it talks about how if you were to tell people, well, we're going to reach 11 billion people by in this century, people say this is crazy. All our resources are going to be drained. The food's going to be gone. And he's

saying no, that that's just the way that this works. And they talk about this. Actually, I saw this Dan Brown movie. I think I read the book, too. What's it called? Where they have to kill half the population. Yes, that made me think of this as well. This happens a lot in books.

It wasn't that was Phanos' problem, right? In The Avengers, he wanted to wipe out half the population. Thanos was a good guy. He was just looking out for people, for the greater good. Thanos is kind of like the Fed. Here's my blog post about that. Wait, which book was it? Oh, keep going.

Oh, it was Inferno. Yes, Inferno. Yeah, you had to kill half the population because we're going to destroy it. I love Dan Brown books. Is that okay? That one was a little out there. So this Siegel has, and he talked about to Jason about this, how he thinks as we grow richer and more people come out of poverty, we're going to solve a lot of these problems people think that we're creating. They look at this stuff in a vacuum and think, well, more people means fewer resources, but we're getting smarter about how we handle these problems.

And he actually has a fairly optimistic view of this. And I think the book is fairly good so far. And he had some good lines in here that you highlighted, too. Well, before we get through the line, you know what I want? You ever see Alien Resurrection? Probably. You know, he drops what looks like a chicken broth cube into a glass, and he just puts the laser on it, and you get scotch?

Oh, yeah. Kind of like in Back to the Future, when they put the little disc in it clicks, and then there's a pizza that comes out. I got to see Back to the Future again. I haven't seen it in 25 years. Anyhow. Back to the Future, too, is probably one of my all-time favorite 80s movies. How about we go back to this quote?

See what I did there? Mm-hmm. Sorry. This is a great line. Apocalyptic thinking is a neural mistake based on our need to survive in a cruelly hostile environment that doesn't exist anymore. So he's almost saying that people that think this way, it's like a some sort of like brain defect you know what I mean yeah it was interesting and Jason's piece had a great lead into what it was about so he talked about how this 22 year old talked to him

about where should I save and he talked about put it in your open an individual retirement account and put it in there and she said when she figured out that she couldn't take it out penalty free until she was 59 and a half she said by then the planet will be a rotating cinder and he was trying to talk her off the ledge of this thinking that a lot of people think that we're just going to ruin everything. And Siegel's book is a little more optimistic on that. But it was another one of those things where human nature causes us to think that everything is going to just go to crap. So we had a question about cell sign analysts and price targets and all that sort of stuff. And the person said, how much cretis do I give to what

I'm reading? So it was just great timing because this happened last week. Joe Wisenthal tweeted, this is definitely not something you see very often. UBS just more than double. doubled its price target on Tesla. It still says the stock is to sell. Right. So they had to raise it basically because the price has risen so much, but then it's probably still under where it is. Point being, I think it's really unfair. It's an impossible task. So these people who are analyzing these companies can be the best business analyst. They could tell you chapter and verse what's going on with the company, with management, with its peers, competitors, all that sort of stuff. And then they're going to,

they have to put a price target on it. Like, it's not fair because we just talked a few weeks ago about the multiple on Apple. That's like the ultimate unknown. And how the hell are they supposed to predict what people are going to pay for a dollar worth of earnings? So they can, again, they can nail the fundamentals. They can nail everything. Maybe some places do this and I'm unaware of them, but wouldn't it be a great way to stand out to say, listen, we are going to analyze these certain companies or these specific industries or sectors, but we're not going to put price tags on them. We're not going to say buy, sell, hold. We're not going to put a price target. we're just going to give you the analysis of this company and do with it what you will because

that's what it's all for anyway. The buyer sell is just to cover your ass type of thing. So why wouldn't a research firm, why wouldn't they just say we're just going to do deep dive research on this and you can make your own conclusion of it instead of trying to take what they say for buy sell whole doesn't when they downgrade from strong buy just to buy. What does that mean? Well, don't you think that- Do away with that stuff. Independent research companies exist all over the place. We just don't see them because they don't create headlines. Yeah, and maybe a lot of that has gone to, like, blogs and such these days, I suppose, where they have to put a point on it. But I don't know why the Wall Street firms don't do that,

just to try to, what's the point? I don't get it. Yeah. So, all right. Owen asks, do you have a general suggestion when it comes to 401K and Roth IRA contributions? What I mean is, do you typically recommend contributing to both or max 401K? So it's a whole sort of questions about taxes. and 401K and Roth and all that sort of stuff. So I have zero opinion here because I don't know anything about this stuff, but I know somebody who does. Bill Sweet is here to answer those questions.

So the listener makes a great point about tax diversification. So I think we spent a lot of time thinking about asset allocation in the investment space. But if you think about retirement, having the ability to pull from a non-qualified, a tax qualified account, and then a Roth account is a pretty powerful thing if you think about options. So it's not just 401K versus IRA in the way that. listener lays out, you can have a Roth 401k at work, giving you a total of 19,500 plus 6,000 in an IRA. So almost 25,000 is the total that somebody can sock away. The way that I think

about it is just depends on when you want to pay the tax. So like I favor Roth contributions when somebody's making a low amount of income now, but they expect to increase their income over time, especially if they're going to continue that in the retirement years. And the exact opposite is true for traditional. If you're in a high income tax bracket now and you expect to make little or nothing in retirement than a traditional for you. And just the last point I'd like to make on it is if you're in a high income tax state, so let's say New York City, let's say somewhere in California, you're paying as high as 11 or 13%. I think that actually favors traditional assets almost no matter when, especially if you're planning to move out of state on retirement. Thank you, Bill. That was great.

And the usual line of thinking here is always do the 401k first if you get a match. That's a 100% return and you're never going to beat that anywhere else. So that's the simple one. And then from there, it really comes down to your investment options, is my line of thinking. If you have a crappy 401k fund lineup that's charging you a lot and you want to take the money after you're getting your match and put it in an IRA, go for it. But I think that's a general line of thinking. That's a good point. I didn't even think of that.

Okay. Have a good scenario for you. I'm in my late 20s and a tech employee, but half wealth is tied up in the pre-eastern. IPO late-stage startup I work for. The rest is a lump sum from an inheritance. The second half is sitting in cash and is enough that I don't really have to work, but I don't touch it since I make more than enough money in my job. The private company stock is highly volatile and also worth quite a bit, but I'm not really counting on it paying out. It's just icing on the cake. Kudos to you for that line of thinking. My question, rationality tells me that I should invest

the entire cash amount to the market in some sort of low-fee wealth manager thing. I forget about it for a a good long while. Does that logic still hold with the market at all-time highs, given my time horizon? Should I hold off throwing the entire lump sum in now and just go for a portion? All right, Ben, Ben, Ben, did you just call me Bill? I called you, Ben. Did I say Bill? What do you got? Okay, sorry. I have thoughts. Okay, let's hear your thoughts. So, Nick Majuli did a post, I don't know, six months ago, on dollar cost averaging versus lump sum investing. And dollar cost averaging, I think outperforms 95% of the time.

The only time it didn't was when the market is crashing. And think about the idea that you're actually going to dollar cost average as the market is cascading lower. Not practical. Now, obviously, I understand completely the psychological impact of putting your money in in a lump sum and watching the market crater 30, 40%. But here's a caveat. You don't have to invest in the SME 500, which is. is, yes, at all-time highs. You don't have to go all out on the SB 500. There's plenty of assets all around the world and in the U.S. that aren't at all-time highs. So the math is

indisputable, but if you are worried if that's in your personality, then fine. Dollar cost average. Here's the rub. You have to have a plan in place. And if you can automate it, even better. Because if you're just like waiting for what seems like a good time to buy, that's just, that's garbage. That's not going to work. So again, math says lump sum, real world says maybe dollar cost average or maybe do half now and whatever you got to do, but you have to have a plan. I think that's what I'm trying to say. My other regret minimization framework here, if you get some sort of bonus or in this case an inheritance and you know you want to save part of it, take a little bit of it and have some fun.

Go on a trip, buy something big, buy something you wouldn't normally buy. And I think that's a good way to balance out this fear of, I think maybe that's part of it for people is just you're putting money away for a long, long time. You have this fear something is going to happen that's just going to go immediately wrong. But the other way I think, this is retirement money and you're in your 20s and you have decades and decades, that initial plunge is going to hurt. But if you were a baby boomer and you put all your money in on October 19, 1987, and you immediately saw 30% of it evaporate, would it have mattered 30 years later to your overall wealth? Well, assuming you didn't sell on October 19th.

I don't know. Maybe that's a highbrow way of looking at things and doesn't take into account the human element here. But that's the point is that if you have that much time, stocks are going to be higher 20 or 30 or 40 years in the future. And if they're not, then we have bigger problems on our hands. Well, I think one of the problems with this is like the longer you sit in cash, the more it rots your brain. It's like a black cloud hanging over your shoulder. So what? Like you're going to wait for the market to like crash or go down 20% like that. It's just not healthy. So I would say, come up with the plan to get invested. Again, it doesn't have to be 100% SB500. In fact, it probably shouldn't be. But come up with the plan.

Yeah, but did you see the tweet that Buffett's holding $100 billion of cash right now to be taking that into account? Okay. Recommendations. What do you got? I don't have much this week. I said I started that new Siegel book. I tried The Witcher on Netflix. I'm two episodes in. Someone else can tell me if they finished it whether it's worth continuing. It just seems like Netflix is trying to be the Game of Thrones. And it's like, ah, it's okay. There's a million characters, and I don't know if my brain can handle that again. So if someone really liked it, let us know.

Why is it that always, they're trying to make these shows look like they're in medieval time, and that was Game of Thrones as well. But they're obviously these fake, made-up realms. Why do all the actors have to have British accents? Is it just that we equate that with, like, being in medieval, even though it's a made-up place? What if they're British? Good point. All right.

So that's all I got. Other than that, not much. Okay. I feel like Drive is a movie that I've heard about, just mentioned. I never really paid attention to it. And I think the photo of when you Google Drive threw me off of what it was. Drive is written like neon pink. And I don't know. I just, I missed it. I never, never saw it. I love that movie. You love that movie? Yeah, I think it's great. Not what I expected. And I agree. It was very good. There was no fluff. It just got right to the point. Ron Perlman and Albert Brooks are such great bad guys. Albert Brooks is really good in that movie. Terrific bad guys. It was very good. You know what else it has? Good soundtrack.

It does. Good, like, 80s-ish soundtrack. So it's a strong recommend. However, it is fairly violent. Very graphic. Yeah, if that's not your thing, not for you. You know, when I was watching, I was like, who is this? Ryan Gosling, who is excellent?

Who is his love interest? I was like, she looks so familiar. I wait until after the movie. I didn't want to get distracted. But she was in Wall Street 3. She was Gordon Gecko's daughter. Yeah, Carrie Muggan. Whoa.

She was a pretty big actress, bro. I don't know what happened to her. What else was she in? She's been in a lot of stuff. Nothing off the top of head, but she's been a lot of stuff. So I was looking at the Safty Brothers who did Uncut Gems, and I found that they have a movie on Amazon Prime. Maybe I heard somebody talk about it. I probably didn't find it myself.

I can't remember. But there's a movie called Good Time. Big recommend. Robert Pattinson was great. It was very, very similar thematically to Uncut Gems. Like, it felt very stressful, and I don't even need to tell you what the story's about. Just watch. it. Very good. That's all I got. Oh, wait. I'm sorry. One less thing. The outsider. I caught up. I watched

four episodes. And I thought the first two were great. And then I was thinking like, oh, man, is this going to be one of those shows where it's just open-ended and it's supernatural and there's no sort of, it doesn't really, it doesn't give you a satisfying ending? I spoke to Dan La Rosa, who works in our office. He read the book and no, no, actually, it does wrap up. So I was very happy to hear that. Good. I don't like the open ended either. Right? I was like, uh-oh. Is this going to a dark place?

Great. Especially with a murder mystery. I need some closure in my life. Yeah. So, all right. Animal Spiritspod at gmail.com. If the fire stuff upset you, send emails to Ben. Thank you for listening and we will see you next week.