Animal Spirits Podcast - Bearish the Whole Way Up (EP.172)

Episode Date: October 14, 2020

On this week's show we discuss why it's impossible to invest based on the outcome of the election, how the market's reaction evolves over time, the coming travel spending boom, how healthcare costs have hurt incomes, baby bonds and more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is presented to you by our friends at Y Charts. Y Charts just sent us a brand new hot off the press as free guide. How do presidential elections impact the stock market? Michael and I are going to be talking about that today. There's going to be a link in our show notes that will allow you to download this. It's free to everyone. And they go through and answer some of the questions that I'm sure a lot of people are getting these days because I know our inbox is full of this stuff.

We also want to say congratulations to the team at Y charts. They were acquired last week by a private equity firm. So congrats to them and the whole team there. and they've been a pleasure to work with for us. So anyway, go to Ycharts.com, tell them Animal Spirits send you and get 20% off your first subscription to the products. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Battenick and Ben Carlson as they talk about what they're reading,

writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holtz 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 Ritthold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Annal Spirits with Michael and Ben. Here's one thing I'm certain of with the upcoming outcome of the presidential election. Whoever the next president is, stocks are going to go down. Regardless.

Wait, what? Was that a joke? No, this is serious. It's so. some point, stocks are going to go down. I looked at every presidential term going back to Herbert Hoover starting in 1929. For some reason, they used to change over in March. And then by the time Eisenhower took over, it's flipped to January. Anyway, I looked at every single presidential term starting from when they were inaugurated to when their term ended. Hoover all the way to Trump, every single one of these presidents oversaw a double-digit correction at least. The smallest one was actually Jimmy Carter from 1977 to 1989 for the 17% drawdown. Everyone else was 20% or close to it. Some of them were 19. But every single president has overseen stock markets that have

fallen. That's the only thing I'm certain of. Okay. Let me ask you this. Do you think the pendulum has swung too far to the side of presidents don't matter to the stock market? I think pretty much everybody is on that side of the boat. Do you think it's gone too far? When you say everybody, I think you mean people in the fin-to-it blogging space. But I think the everybody that you're talking about, normal people who don't pay attention to this stuff as much as we do, I still think a lot of people are worried. I've gotten dozens of questions from friends, family members,

podcasts, listeners, blog readers, asking. Well, that's a good point. The casual market... Do you think I should sell because of this person potentially winning? I meant people that work in the financial services industry or writers or whatever. Yeah, but you're already seeing a lot of... headlines and narratives that are changing based on what the stock market is doing. So, for example, Carl Kintaneda tweeted this morning from UBS.

They wrote, a prevailing market narrative a few months ago was that a blue wave would be negative for equities. But in the past two weeks, this narrative has completely flipped to the point where investors now view a blue wave as being a catalyst for a reflation trade. We spoke about this last week on Friday. I mentioned the word internal reversal. I believe you didn't like that phrase that I used, you took Cambridge. Yeah, I just never get caught dead saying that.

but yes. Well, what do we think? I think a lot of it, too, is not just who the president is. And so I looked at some stats from Strategic. And they broke it out not only by who the president is, but who controls Congress as well. What if there's a split house and Senate and all these other things? So it's the kind of thing like, okay, January 20th when the new president takes over, if it's a new president or the new term starts, do you sell the 19th and then buy back in in four years? But nobody actually does that. That's the thing. No one takes that next step to say, okay, I'm just going to sell. And Mark Cuban said he was going to sell all of his stocks when Trump won four years ago

and said it's time to go short or the stock market is dead. But no one ever thinks, okay, then what? What do I do next? But did he say that he's going to sell all the stocks and just buy UTFs instead? I mean, what was he going to do with all that cash on the sidelines? I don't know. He was going to buy some spas. So white charts broke it out.

And for whatever reason, when they just put the picture of the president on there, I feel like it makes it look more professional. I love it. I love these. So they broke it out. One of my favorite ones that I've never seen is they broke it out going back to Clinton, the different asset classes. So usually we just look at the stuff that's U.S. stocks.

So they broke it out by U.S. stocks, international stocks, emerging markets, and then different bonds too. And they looked at Clinton, George W. Bush, Obama, and Trump. And, yeah, surprisingly, three out of the last four, I've seen U.S. equities as the best performer. When you look at it this way and you see the different asset classes, it seems so ridiculous to think that the president controls. each of these. Like, of course they don't. However, however, so what drive stocks? Earnings, sentiment.

You can't say that the president has no effect. That manipulation. Well, that's true. I should have led with that. You can't say that the president doesn't matter because can they control the business cycle? Of course not. Done. I think everybody understands that. How's this? You can't invest based on who you think is going to win the election. I mean, can we just say that simply? Yes, definitely. You cannot come up with a cohesive investment strategy based around politics. You just can't. Right. There's no buy or sell signals here based on who's going to win. If you looked at Trump when he won, you would have said, all right, let's buy steel, let's buy coal, let's buy energy. And what's killed all those things? Clean energy. You never could

have predicted that. Maybe I'm trying to pick in one example. But the point is, just please keep your politics out of your portfolio. You could look at all of their speeches they give and what policies they say they're going to implement. But then how many promises that politicians make, do they ever actually follow through with? Or does that stuff get implemented in the first place? And those are the ones that I laugh at is the pieces that say, buy these four sectors right now because of who's going to be president. And then trying to figure out whether all these things fall into place for those sectors to actually dominate. That's really hard to do. Yeah, it's a joke. But let me ask you this. So over the past few days and weeks,

if you look at all the polls, they have Biden is climbing, obviously. The market is surging. Could this be a coincidence? Yeah, of course it could. But is it a stretch to say that the market is expecting a Biden win and a shit ton of stimulus? That's not a stretch. Right. I laid out my case to you three weeks ago on Slack. My case to you and Josh on Slack a few weeks ago was if the Democrats take everything, we're going to get a huge stimulus bill.

And maybe that's what the market is moving on today. Market is up a ton right now. Do you know what one of the best performing stocks in the market today is a little company in your backyard called Ford Motors? Maybe you've heard of them. Yeah, I think they're worth about 1% of Tesla's market value at the moment. So I googled Ford stock just to see what's going on, what's driving it today, because up 6%, which is unusual for the stock to be moving so bigly.

And here's what I found. Analyst's upgrade. Ford stock rallies after benchmark analyst turns bullish. That's new target implying a 38% gain. What year is it? That's it? It's an upgrade? The stock is moving on an upgrade?

That still happens. I know. So at one point, the NASDAQ 100, the best performing. ETF sector of for any time period you look at, it seems like, was up 4% today. So some of the gains that we've seen this year in the S&P is up over two. This is for the NASDAQ 100. It's up. Hit me. 2% or more on a single day 25 times this year. 3% or more 12 times and 4% or more 10 times. And that's not including what's going on today. Wait, up 4% or more 10 times. Yeah. That is a lot of big up days in one year. That is. Those numbers don't hit me for some reason.

anymore. They just don't do it. Just hearing that stat doesn't wow me. I think maybe if I saw it on a visual somehow, but that's a lot. A 4% day is a huge day, obviously. So stocks are basically back to all-time highs after that short correction we had, which again, I think felt a little healthy and now maybe it's unhealthy that came back. I don't know. I think we were on the record as saying it felt pretty healthy. Yeah, it did. That was the whole 30 of pullbacks. One of the things that would have surprised me, if you would have told me in March or April, that we got this huge stimulus deal passed. And by October, we still haven't crushed the virus. It's still coming and things are not better. And the economy in parts is still slowing. If you just said,

we're not going to get another stimulus bill passed by the election. I would have said, okay, the stock market is going to pressure these policymakers to do this because that doesn't make any sense that we wouldn't get something else. And we haven't. And John Turrick on Twitter shared this stat because a lot of people are saying, oh, it's going to be four months until we get one maybe, potentially. But what if the market just knows it's coming? This is the take, I think is interesting. He said it almost feels as simple as post the CARES Act.

The market just doesn't want to be on the wrong side of policy again. This has given in a way to a lot of policy asymmetry and why the market seems to be biased toward good headlines, even if the modal outcome is stickier than the tape suggests. Meaning people were way on the other side of this in March and got caught on the wrong side of this isn't going to work. Nothing's going to help. We're going into depression.

This is unlike anything we've ever seen. the economy is shut down. So people were on the wrong side of the stimulus working. Like you, you were a big D word guy. You were. You've been embarrassed the entire way up. What are you talking about? That's true, but I never dropped the D word. Who was the one who said that we're going to get the all-time highs again this year? Hand up. That was you. That was you? But you were bearish on the economy. Okay. And the stock market has outperforming the economy this year. I think you can't argue that. But this idea that the market learns this stuff and comes to expect it. That's why you almost can't anticipate what the unintended consequences of this stuff is going to be.

So let's say during the next downturn, they decide to implement fiscal stimulus again. And people try to say, okay, everything that happened in 2020, it probably won't happen that way again because everything is so ingrained and people are learning. They try to have these think four steps ahead. And so I just think you're going to get different reactions to this stuff going forward, whether it's already built in or priced in somehow. I've got the Galaphanacus numbers meme in my head right now. That's what makes it so hard.

That's what I'm saying, that people are going to think that, okay, I'm going to trade this exactly as the last one because that's what's going to happen. And I think it's just going to keep shifting as this stuff happens. I think that's what makes it so hard. Yeah. So I read this isn't actually a few months old, this piece, but it was called How Robin Hood convinced millennials to trade their way through a pandemic by this guy, Rob Walker. It was a pretty good read about how Robin Hood came up.

And this idea of learning. So like a year prior to the crisis, Robin Hood couldn't figure out why they had so many people who signed up for their system and their program, but never funded their account. They made it in. They were waiting. Their account was ready to go. They never put any money in. And Robin Hood was starting to survey these people saying, what's the problem? Why aren't you investing? They're waiting for after the election. Duh. What can we do? And they said the most common answer they got was it just wasn't a good time to buy. The market was too expensive. When stocks dropped, all these people who've been waiting for lower prices came in. I don't buy it. That's what they said. I don't buy it. Okay, you think he made it up? They all bought the dip. That's what I'm saying.

I think people are learning. Even if these Robin Hood people are speculating and they're buying potentially the worst stocks for themselves and day trading them, the fact that they were thinking ahead that far and not jumping in because stocks were going crazy before that, you laugh at me and a lot of people do because human nature never changes. And I probably say this too much too, but I think people are learning and getting better. I think investor behavior is improving. Well, how about this? I do not want to be on the record taking the other side of that. I don't want to be the person dunking on young people and say ha, ha, ha, but... I'm saying on the margins, but everyone always talks about how people jump in when things are going good and bail when things are going bad. This was the opposite. Things were going bad and people jumped in and bought. That's different behavior. You have to give people credit.

This year, obviously everything is a little wacky. How about this? Here's the butt. These are speculators. And whatever, there's nothing wrong with that. It's not as if these are people that are like building positions for retirement or anything. They're buying momentum stocks, which is cool. It's working. I think it's a stretch to say that people are learning, that they waited for the pullback, they got the pullback, and then they bought stocks. That's not really what happened. The pullback came, Davy Day Traders started going nuts. These momo names started going bananas and then people chased. I think that's really more what happened. Still, though millions of people opened accounts during a pandemic in a recession and a 35% pullback. It's not nothing. It's great. I just don't think.

think that the narrative their learning works here. Sorry. I'm not saying this is going to solve the retirement crisis. I'm just saying eventually people learn stuff and it changes the way that markets react to things. Okay. I gave an analogy every time that there's a sci-fi alien slash monster movie at some point in the movie, the thing starts getting smarter and stronger and the main character goes, it's evolving as they're trying. They're like covered in blood or sweat or mud. And that is the market. The market is the alien here. Okay. All right. Good analogy. Let me ask you something. A quiet place, too. They put that on the shelf. They put it back on the shelf. Unfortunately, because I love the first one. I love that movie. Yeah. A lot of movies we've gone without. That is such a theater movie. Yeah, I guess so. You told me the other day that you're really missing movie theaters because you can't pay attention enough without looking at your house. Well, what we were talking about, kicking and screaming, the known Boundback movie. That's not an exciting movie. So, yeah, it's not a great movie and you have to pay attention because it's very dialogue-based. Well, that's what you said. You said, you really have to pay attention and listen, and it's hard to do that when you're sitting on a

couch and a slow movie. Right. So anyway, that's an interesting point you make, but I don't know that I would put the narrative on it. That's all. And my whole thing is just, even if you know what's coming, the reaction is always going to be what surprises you. Sometimes the surprise is going to be to the upside, sometimes to the downside. That's all I'm saying. Okay. So Jason's why. What an article over the weekend, basically saying, if you don't like low rates, then I don't think anybody does, don't make matters worse by doing something stupid with what should be that safe money. Don't reach for yield, whatever, like MLPs. Here's the TLDR, quote, we live in a 1% if not a sub 1% world right now. Nothing you can do can change that. That's what Jason wrote.

You and I have been kicking the tires on everything here in terms of what is that replacement for bonds. Right. There is nothing. There's just different risks. Yes, exactly. There's nothing that can match the head you get instability you get from bonds. Right. So are bonds going to provide the same returns going forward as they did in the past?

Of course not. Are they going to provide the same protection as they did in the past? I guess that's debatable. I still think they will. So you don't like your bonds yielding 1% or less. If that's like your biggest concern, so you go to Stice, I could lose 1% in 20 minutes. Yeah. Exactly. It just comes down to your appetite for volatility in what you're willing to accept. That's a tough thing for people to handle.

One of the areas that I'm bullish on and bearish the whole way up. How dare you? But you were 75% bearish. That's fair and you know it. I would say you were beating your head against the wall. You had a lot of blog posts saying, I don't get this. I don't understand it. But I'm going with it. I would say 80% bearish. Yeah. Okay. cautious? Confused? Cautiously bearish. Here's what I'm bullish on. Last week we had on Simplify Asset Management talking about one of their new ETFs. I'm super bullish on companies like this popping up and more products coming to market to fill some holes. Now, this wasn't necessarily to solve for the bond part of your portfolio, not giving you much. But

And maybe these aren't ETF, but companies like we've had on, like, Edley and Masterworks and Fundrise, people are starving for alternatives. Yes. And all these places seem to be doing fairly well. And they're intelligent people who are running this stuff. And, yeah, there are alternatives out there that are going to fill this demand. Correct. So whether these companies' products, some will do great, some will do not so great, but I'm super bullish on investors finding them.

Yes. And a lot of this stuff is being made for retail investors. too. And this stuff, you would have never had the opportunity to invest in in the past. This surprised me. So there was an article in institutional investor. Quote, public markets have largely recovered since their lows in March in April, but private equity funds wiped out six years of gains in the first half of the year, according to the most recent data available from EFront, the private market software and research from own BlackRock. Here's another quote. Most of the downward adjustments

were made in Q1. Managers rapidly reflected the changes affecting financial markets and macroeconomic environment and adjusted quickly and sharply the value of the value of their funds. Ben, what's going on? Isn't this like what never happens? Isn't this the joke that the returns are unchanged? What's going on here? Well, they're usually three to six month lag on these. So I'm just guessing they quickly reflected this probably March 31st data they're using. And then once we get to 630 and 930 data, it's going to be reflected right back up. They tend to follow the public markets on a three to six month lag. Okay, fine. But I think the thing that surprised me the most is they wiped out six years of gains. So back to 2014, they were that aggressive in

writing down their investments. You got to give them credit, no? Yeah, that is surprising. I guess they take the leverage into account. It was kind of shocking to me too, because yeah, usually during the financial crisis in 2007 to 2009, there was a way longer lag time for them to finally say, okay, it's really worth way less than it was and not just mark it down 10% at a time or something. So one of the knocks on private equity is, is that I don't know if people mention the sharp ratio. But their risk-adjustive returns are great because they don't mark to market obviously. And when they do, there's a huge lag and the numbers aren't real. Well, so maybe things are changing. Yeah, a little bit. I just can't believe anyone actually believes that volatility stuff.

It's Schrodinger's portfolio. Just because you don't look, doesn't mean it's not happening. You've been on the record saying that one of the silver linings of this, and if I'm putting words in your mouth, correct me. One of the silver linings of this whole thing is that people are leaving the city and rents are getting way more affordable for younger people. Yeah, I think that's true. And it's finally happening for them. So there's a chart showing year of year change for studio rents in Manhattan. And it's down almost 20%, which for young people, that's awesome. And San Francisco we spoke about last week down 20% I think or more. It's a big number. Yes. Guess what? Young people are not going to be

scared away from being in cities, I would imagine. They can wait this stuff out. Yes. On the other side of it, mortgage credit, so talking about owning, mortgage credit availability is going down pretty sharply, unless this is a chart crime. Nah, it's down a lot. Here's a quote. There continues to be fewer lower credit scores and high LTV loan programs. The housing market overall is on strong footing, but the data show that lenders are being cautious given the spike in mortgage delinquency rates in the second quarter, as well as the ongoing economic uncertainty. Do you think this has something to do with the fact that rates are so much lower now, and there's just such a little margin of safety for banks giving out these loans now?

When they're giving out two and a half percent loans, maybe they're getting – I mean, when I went through the refi process a few months ago, it was three months of back and forth and constantly asking me for more and more stuff. And I have pretty pristine credit score. What's your credit score? I don't know. I'm not going to – What?

That's too personal, 770? I don't know exactly what it is, but it's – yeah. Not to brag. I pay my bills off, yeah, all that stuff. So wait, they were so thorough that they asked you which target date fund you're in. Yeah. Couldn't tell them because I was changing it over in March because my risk tolerance changed. Yeah.

So for some people, it's probably harder to get mortgage right now then. A lot of the housing's on fire stuff that we've been speaking about is taking place on the up brand. Yeah, that makes sense. Again, and a lot of people keep pushing back on us saying we keep saying how the lower rates, that's the other side of low yields is you get lower rates to borrow. And a lot of people are pushing back saying, well, you still have to come up with money for a down payment. That's true. That's the other side of this where maybe a lot of these people on the lower end just can't come up with a down payment money.

They can't take advantage of the low rates. Which is why we were bullish on companies like Unison that are going to help people with down payments. I think those companies are going to see a lot of activity in the coming years. Oh, speaking of which, this chart that taught us Viscontas shared us from Bill McBride, U.S. population for selected age groups, 20, 29, 25 to 34, and 30 to 39. So this chart is what Logan Motashami has been talking about. He's been saying for a long time that this is a 20 to 2024 story. He was on with Josh talking about this, about the housing market. And the demographics, I mean, we are in the sweet spot for housing. And so people are wanting to move because they're

having kids and stuff. You're right. Like now is a great time to own a home if you have a down payment. And if you don't, and you still want to get a house, then companies like Unison and other are probably going to do a fairly well in this environment, I would think. Right. So it looks like the 30 to 39 age group is increasing by 4 million over the next decade, basically. Is this the other side of there's 10,000 boomers retiring every day? Yes, I tried to make that. So here's something I didn't realize. By the end of this decade, Gen X is going to surpass baby boomers in numbers because some of the baby boomers will be dying off. Wow. Are you an Xer? I think I'm probably technically the oldest millennial in the world.

In the world. I don't know if 1981 is the cut off. You're the oldest millennial with the best credit score. Yeah, so maybe I don't qualify as a millennial if I don't have a bad credit score. Hey, I had student loans, damn it. I count as a millennial. So millennials pass baby boomers a few years ago. Gen X is going to pass them at the end of this decade.

So yeah, I think... I did not know that. You could make the case that we could be doing a baton handoff from one generation to the next and that millennials and Gen X is going to pick up the slack on a lot of this stuff from baby boomers. Remember the whole what happens when they go to sell their stock? You don't see that too much anymore. Again, I think that's part of the inequality thing because so much of it is held by the rich people that it doesn't matter. Here's one from David Brooks talking about the generational thing. And he talked about how America is having a moral convulsion and how levels of trust in this

country are in precipitous decline. So there's a book. I think you and I both read it in the last few months. It failed to mention down here. It was called The Death of Expertise. And it's a perfect read for right now with all the people that don't believe what's going on in the pandemic. Tom Nichols wrote it. I think he's from the Atlantic. Very good piece. And how we don't trust our institutions anymore. And in this piece, Brooks talks about how there's this huge gap in trust between young people and old people. So he says by the time boomers hit a median age of 35, their generation on 21% of the nation's wealth, as of last year, millennials who hit an average age of 35 and three years owned just 3.2% of the nation's wealth. And he talks about how 35% of young people versus 67% of old people believe that Americans respect the rights of people who are not like them. Fewer than a third of millennials say America is the greatest country in the world compared to 64% of the members of the silent generation. So it's just saying that we're having this huge disconnect between young people and old people and trust and faith in the systems. Speaking of America is the greatest country in the world,

I don't think we ever spoke about Bill Simmons and Jeff Daniels. That was awesome because Jeff Daniels said that on the newsroom, which I like that show. Gone too soon. Yeah, it was good for one season. Then it kind of lost his mojo. He lives in a small Michigan town, not too far from me. Does he? You ever see him around? Chelsea, Michigan. It's a little too far away for me to go to. Anyhow, yes, the gap. So there was this piece called the... We're moving on. I don't. Did you want to talk about some dumb and dumber for a while? I didn't know if you were finished making the point. We can move on. So there was this survey and they looked at 2020 summary of health benefits. And they looked at since from 2010 to 2015 to

2020, they looked at the percentage of health care paid by employers and employees. From 2010 to 2015, there was a 27% increase in health benefits paid. And from 2015 to 2020, it was a 22% increase. Is it possible health care is a big reason for stagnating incomes for a lot of people? because I don't think many people look at all their benefits as part of their pay package, but I think that's part of it. In employers, it looks like pay probably just eyeballing these numbers, 75% of it, of the total. It went from 9,700 to 12,500 to 15,700 per year for employers. So obviously, if healthcare were to stay the same, potentially that money could have been passed on as raises to employees.

but instead, employers are picking it up. And costs are going to be so high next year after COVID. Yeah, probably. I mean, we see this with our small firm. What is it? I think Bill, our CFO said the cost for the employer contribution arising like 14 or 15% a year the last couple of years. I think next year it's going to be over 20.

It's outrageous. That's one of the reasons that people maybe aren't getting because employers are having to put so much into their health care. Do you think this is something that we could ever fix? Or is this something that is just it's too complex? complicated, and it's just never going to happen. Yeah. So they broke it out single versus family coverage, too.

And the average family worker contribution is like $5,000 to $7,000 a year. That's a lot. That's coming out of people's pockets, not including the employer contribution. So that's a lot of money. People are paying for health care. Yeah. All right. Baby bonds.

So Morningstar had a piece talking about it was called, can baby bonds shrink the racial wealth gap? It sounds like some of the governments are pushing forward to this stuff. So there's one program designed that it's actually in draft legislation, and it says under this model, every child would receive $1,000 in an account at birth, followed by subsequent contributions of up to $2,000 each year depending on family income. Money would be invested in treasuries and could be withdrawn by the child to pay for expenses such as college, purchasing a home, or other wealth building activities not specified. See, this is where they're getting it wrong. They should be in SPACs, not bonds. For sure, they should not be in bonds, all of it. At least put this in a more

diversified portfolio instead of treasuries? Like a 20-90 target date fund? There you go. Well, put them all in a target date fund, 20 years into the future. But I do love the idea. And they're saying that this could help with the racial wealth gap a lot because it gives people an opportunity when they're young to do something and use this money for good. I think it's a great idea.

I'm all for this. I don't care people who disagree with us and are going to get mad at us. Socialists, whatever. This is a good thing, in my opinion. Right. Doing something like this versus changing some other policies, this seems like it would have an actual impact, as opposed to these other policies where you just never know what they're going to do. Why would somebody be against this other than for personal reasons? Like, I don't want to pay more taxes. Why is this bad? It's not. The one thing people always say, well, I didn't get it. So why should other people get it? Like, what if we wiped out all student loan debt? And then people who paid student loans would say, this is crap. I didn't get that.

To me, that's very different. But that's what people say. I think this is a good thing. Income inequality is out of control, and this seems like a sensible solution to tackle that. Right. Guess what? The last four years of politics, that stuff is only going to get worse if we don't do something about this issue. So we're planting seeds for what?

How long would it take for this benefit to kick in 20, 25 years? Yeah, I guess it would take some time. I don't know if they let people take them out early, but I love the idea of getting it started. So I've been talking about the post-COVID travel boom that's going to happen. You have? When this is over, I think we're going to have a massive spending boom. Where have you been talking about it? With you, if you ever paid attention to this show, I guess.

That's fine. You've forgotten all of our takes from the past six months. That's not true. I don't remember you talking about the travel boom. I'm sorry. Okay. Only go on record now. I'll timestamp it.

There's going to be a huge travel boom when this is over. I think people are going to open up their wallets and I'm ready. Six months out, I keep making plans to go somewhere. and then if it gets closer and we're not ready yet, then I'll cancel it. Where are you going? I'm not going to go to a resort and wear a mask. I'm just, I'm not going to do it. We had a trip planned to Florida that we canceled a month after the quarantine hit and

want to go back. So this is kind of crazy. I guess I haven't seen a lot of this in the news. And maybe they're full of crap and lying. China has not had a local case of COVID since August 15th, according to Bloomberg. Does that seem crazy to you? You buy that? So they said in October there was a holiday there.

and they said half a billion travelers in China went on a trip. It's called this Golden Week holiday. So this is like the first time the country said, okay, everyone can open up. 425 million people took trips in four days of this week long holiday. And it said that their travel spending went bananas versus what it usually does. Hotel prices shut up and their ride-hailing apps crashed and tickets to the Great Wall sold out. So after like nine months,

they're saying half a billion people are taking a vacation. and spending money like crazy because they haven't been able to do it for nine months. If you had to buy travel stocks, would it be in airlines, hotels, casinos, cruises? Maybe it's cruises. But this is one of the things where I think hopefully the benefit would go to small businesses that would hurt in a lot of local places and restaurants that have seen things fall off. So that would be hopefully a good thing there that some of the local places would do well. But I think it's possible.

People are just going to go, when this is over, we're going to have a crazy six-month period of people going nuts. Yep, I agree. Nuts will be had. Even if there is an explosion in travel, don't you think that the business travel is like permanently impaired? Yeah, I do. Yes, definitely. So airlines, for example, are right in the teeth of that. And I keep hearing from so many people saying, too, if I'm going to be able to work from home more, I'm more apt to rent a house for a week and work from there than anything else. So I think that kind of behavior, though, could continue. Remember, Luminary? Is it still alive? The Netflix of podcasts. I think so. They raised $100 million. They have 80,000 subscribers. That's not a ton. Okay. So Luminary is the quibby

of podcasting. I mean, for something like that to work, you have to have a huge name. Set it off. Bill Simmons has to go there or Joe wrote one of those types of people. I think this is one of those things that a lot of people were like, I don't think this is going to work. Because people are too ingrained with the current model of advertising and being free and on their player. There's just so many great free things to listen to. So this is an article in the FT. This surprised me. So the U.S. podcast advertising revenue right now, which is growing very quickly. I think they're expecting it to grow 45% next year. They're expecting it to hit $1 billion next year. Total. TV, which isn't declined. I don't know if it's secular decline, but it's declining, you would think.

Is that $70 billion? Does that sound right or does that sound stretch? That's 70 times bigger than podcasting. No, that sounds right to me that it should be. But obviously, podcasting will see enormous growth in the years ahead and put a dent in that. Does it say how much radio is in this article? Because I think radio is still enormous too. Oh, really?

How big is radio? I don't know. You know what's awesome? This is a company called Google. Total radio advertising. Let's see. According to this, it is $18 billion. Wow.

Okay. So you could make the case that podcasting will infringe on radio more than television needs to head. But if you're not watching live sports, when's the last time you watch an actual commercial? Isn't that the biggest separating between baby boomers and young people? My mother and father-in-law and my parents always talk about like, did you see that one funny commercial? And I'll be like, no, I don't watch commercials.

Speaking of old, this kind of mess. my head up. So I'm 35 years old. Ben is older. Michael Jordan, when he took his last shot against the jazz, was 34 years old. You saying he seemed older than that? I feel like he's 20 years older than me in that picture, like when he was doing that. But you guys both have the same hairdo, so you got that going for you. Yeah. Yeah, I think LeBron is 35, right? Yeah, LeBron's 35. Do you remember music videos? Yes. I grew up in the MTV age. So I was thinking about this because I was driving this weekend and Aerosmith came on. The song Crazy.

Do you remember that music video? Was that the Alicia Silverstone one? Yes. And Liv Tyler. Yeah. That was 1993. That one's like ingrained in my head. She was 16 years old, Liv Tyler.

Watch that video. It's creepy. She did not look that young. She's on a stripper pole in that video. That's his daughter. Yeah, probably a lot of stuff that went in the 90s. that wouldn't fly today. That was weird at the time, I think.

I'm pretty sure people were like, well, this is weird. Anyhow, music videos were big back in the day. Huge. Yeah, you're right. YouTube has replaced them. MTV? Of course. You'd have to wait on MTV to listen to the songs and not pull them up in the band.

All right. Listener questions? David Hunter has been forecasting. I'm not sure who that is. Do you know who David Hunter is? No, I don't. Maybe he has a newsletter, I guess. Okay.

That S&P 500 will melt up to 4,000. a NASDAQ to 15,000 first, and then the world will go through a deflationary bust. Oh, boy. From those levels, the market will see a fall of 80%. Oh, God. And rates will rise for the rest of the decade. He says, and this is a quote from the email, it is just how cycle works. Would love to know both of your views on the same.

I don't even know where to begin here. I think this is the perfect way to be a perma bear and never be wrong. Because you always say there's going to be a melt up first and then a meltdown. Yeah. It's classic. Classic. Yeah, I don't know. Listen, if stocks didn't fall 80% this year when the economy was, they turned the light off on the economy for a month and a half, I don't know. I don't know what it's going to take for that to happen. But I'll say I'll take the other side of that one. I have no views because I guess we would need some context. Like, why does he think what's going to cause a deflationary bust? Anyhow, it really is a shame because we see this and we laugh because it's so absurd. But this person that emailed us is not joking. There are so many people that, I mean, it is so easy to scare people. That's your thing. It is so easy to get a follow and just saying scary shit. And it's a shame that that is so prevalent today and always. Fear is a good marketing strategy in the markets. Yeah, it's great. look at any outlook from a bond manager these days because they know there's no yield in their asset class. That's the only thing they have to go on is scaring people out of stocks, pretty much, if you're a bond portfolio manager. You really think it's that calculated? I think a lot of

them probably maybe it's not calculated. Maybe it's just that they've come to think that way because of the asset class at their end. What's the alternative for them? I think there's something to it. All right. Proposed to my girlfriend of three years recently. I've heard many different ways that married couples managed finances from sharing all their accounts to having only one shared account, to sharing none of their accounts. Do you guys have any advice on this? What is the best ways to keep things organized and fair? Well, I would say that this is probably the most whatever works for you type of question. And there's probably multiple ways of doing it. For example, I pay all the bills out of my account. So my wife's check gets direct deposited into my account.

Everything runs through my account. I'm sure that I know there are people who make it work by separating their finances out. I think that is just adding a degree of difficulty to the equation, though. And there's no points for difficulty. Right. Trying to split things up and make it harder, I'll pay 60% of the mortgage and you pay 40% and I'll pay this utility, you pay that one. I'm sure it can work, but I think that you're increasing the hurdle rate for making a happy financial marriage. That'd be my thought process. I'm sure people can tell me I'm wrong with. That would be my way of looking at it. Shared is probably much easier from the get-go. Yeah, I mean, that's what I do. All right, let's do one more. I'm 26 years old, and I've been managing

my own investments for a little over three years now. My investment style is very boring, no trading, no turnover, at cash once a month. Right now, my portfolio is two U.S. large-cap stocks. Over the last three years, I've been in the S&P by decent margin. How do I know how much this is because of luck? I wonder if I'd be better of using index funds long-term. All right, so spoiler, yes, a lot of that is luck. which is cool. The bank takes money that was earned by luck as well as skill. But am I better off using index funds of the long term? Maybe. Most people are. Here's why most people are bet off in index funds. And this is so simple. One of the reasons why so many stock pickers failed to

beat the benchmark is because so many stocks don't beat the benchmark. Historically, two out of every three stocks in the Russell 1000 don't keep up with the benchmark. So if you're just throwing darts, and I'm not saying that you are, but let's just say you are throwing darts, Chances are you're going to not keep up with the market. So it doesn't have to be an all or nothing if you want to split it or whatever. If you're putting cash in once a month, you could slowly diversify away from those two stocks and start adding to a more diversified position. You don't have to necessarily sell them all on day one if you want to diversify more.

But I would personally feel more comfortable being more diversified than only two stocks. That's just a lot of undiversifiable risk that you're setting yourself up for if you own only two stocks. All right. Recommendations. What do you got? Okay, here's one. I've been using Upwork for a while.

Used it on a self-published book in the past for a book cover. Basically, this is kind of like Fiverr, one of those places where you go and you post a job. You need something done. Someone designed our Animal Spirits logo for us on there. Someone did when we made those t-shirts, the new whale one, someone designed that for us on Upwork. You go on there, you post what you need done, and you either set a budget. I can only spend $100 on this for $500 or $1,000 or whatever it is.

and someone comes back to you immediately and says, I can do it for that or I can do it for this or you can pay hourly. I've found a lot of success on it, and I'm working on two projects right now. One of them is a cartoon I've been trying to turn one of my blog posts into, and hopefully that'll come out in the next couple weeks. For the rates that I found, and it's people all across the globe, so the guy who I found to illustrate this for me is in Uruguay. I'm looking at doing another design project right now, and the guy is in the Ukraine. And the fact that these people to do this and all the messages are done on their platform and back and forth, it's so easy. I've had a lot of success in that. So if you need some sort of project, I really like Upwork.

It's interesting. You mentioned the Price of Peace, which is the John Maynard and Kane's book. I'm reading that too because both of us are doing a best of 2020 business book review. And you and I are kind of tagging that. And so we've got, what, five or six books that we've got to read. So maybe by the end of this, we can say which one we picked. But it's a really great history book on how I'm through the part where they're funding World War I and World War II. And the biggest thing to me, I take away from this, there was a lot of stuff I didn't know about it and how ingrained Keynes was in a lot of those choices. The fact that the U.S. came out as a superpower from the wars, part of it was just luck.

None of our cities were bombed to smithereens like they were in Europe. And so much of the outcome of what happened in those wars, it's not like anything that we did. It's geography. Yes, it was more luck than anything. And I think there's this idea that, like, the history is written by the winners. It was not a foregone conclusion that the U.S. was going to be this superpower. Oh, you listen to a revisionist history? Yeah.

The one on Curtis Lameh? Yeah, it was great. When he said, if we lose the war, I might be tried as a war criminal. Yeah, it's hard to believe. I mean, people back then probably didn't think, okay, the U.S. is going to just dominate the next 70 years or whatever happened, and that's what happened. One movie wreck from a podcast listener actually called Plus One. It was on Hulu. You know Dennis Quaid's son who's on The Boys?

Yes, I do. So he's in it. And the girl, into the actress who plays, it's like a rom-com, but I read it and it says, two friends decide during wedding season, they're going to be each other's plus ones. And the entire movie takes place either at a wedding or at a reception. And I read it and I was like, okay, this is going to be a cheesy rom-com. It was actually really good. And I was surprised.

Love rom-coms. Yes, it wasn't too cheesy. And I think people either love weddings or hate weddings. There's not much middle ground. I've always been a person who just loved weddings, open bars, people are happy, dancing. Cocktail hour? Yes. They nailed the wedding, the awkwardness of wedding speeches that, I don't know, what do you think?

One out of ten wedding speeches is good, maybe? They nailed that pretty good. Have you ever seen one in person? Like a really, really weird one? Oh, yeah, definitely. Yeah, great. Can't look away. The train crash.

So I really enjoyed that movie. It's on Hulu Club Plus One. All right. I watched a few movies this week. Spring Breakers. Not at all what I thought it was going to be. Not even close. I thought it was terrible.

It kind of felt like euphoria, the HBO show. Yeah, I turned it off halfway through. I couldn't take it. It was too over the top for me. Not very good. It was an A24 movie, one of their early ones. And it felt like one of those indie movies. That's just not what I thought it was going to be at all.

I was way different expectations. I thought it was going to be like silly. Yeah. It was weird. Dark and weird. Jeffrey Prattack coming through again. So he recommended Eastern Promises, which was a kick-ass movie, when we were Kings, which has been on my list for a while.

And now he's three for three. Sexy Beast. Sexy Beast is about, and I don't know where the title came from. Maybe I wasn't paying attention when I missed that part, but had nothing to do with the movie. It's about a guy who retired, a hit man who retired to Spain and said him done. I'm out. And then his boss, Ben Kingsley said, comes in and says, no, you're not done. You've got to do this job for me.

And that's basically what the movie is about. Just one more job. Yeah. Ben Kingsley convincing the guy and the main guy is Frenchie from the departed, who I've never seen in any other movie, but he was the star in this movie. Did you watch it? This movie? No, I haven't seen it yet. Ben Kingsley was amazing. I mean, what a great recommendation. So if you haven't seen it and you probably haven't, put that on your list. Sexy Beast. That's a full wreck. No hedges. All right. No trailing stop. No hedges. Lastly, I saw 50-50. Did you ever see

that movie? You're a big Joseph Gordon-legged guy, aren't you? Yeah, he's all right. Yeah, with Seth Rogan. I thought that movie was, it was decent. It was pretty good. Yeah, pretty good. Good and not great. That was a Peloton movie. That's what that was. Okay. I can't believe you watch movies when you're into Peloton. Why not? I don't know.

Just whatever you got to do, I guess. My podcast got myself on the Peloton. Sorry. That's okay. Anyhow. Why don't they let you watch TV or movies on the Peloton? I know you have to pay attention to the class. Why can't you do a screen and screen?

Right? Because they have a nice big screen there for you. Peloton should do a deal with like Dish Network. Yeah, make it happen, Peloton. I don't know why I just said Dish Network. Anyhow. Animal Spiritspod at gmail.com. Thank you very much for listening.

We'll see you next week.