Animal Spirits Podcast - Borrowing From the Future (EP.47)

Episode Date: September 19, 2018

Taking financial advice from billionaires, Ray Dalio's work on debt cycles, how to think about government debt levels, why it's so hard to quantify the true amount in index funds, millennial banking habits, shrinking hedge funds, investing in foreign markets during a U.S. recession 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, the podcast that takes a completely different look at markets and investing, hosted by Michael Battenick and Ben Carlson, two guys who studied the markets as a passion and invest for all the right reasons. 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 Ritthold's wealth management may maintain positions in the securities

discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. There was an article, I think from last week in Barron's, and the title is Ray Dalio says the next financial crisis could be even worse than the last one. And I read the post and maybe I missed it. I was perhaps reading too quickly, but I didn't see anything in there that reflected what the title suggested. Did you read this piece? I'm not going to lie, I skimmed it. But that's because I was so busy also skimming Dahlio's new book, which I took him for the team here. It's called a template for understanding big debt crises. And so that's why he was doing out in the news.

And by the way, isn't it kind of funny that even like one of the most well-known hedge fund managers in the world has to go through this PR stuff and pimp his book out there? Wow, you are really firing shots. This is unlike you. Oh, that was a shot? No, I was just saying it's kind of funny. You'd think people would just kind of come to it and find it because of his name. So let me, well, yeah, so that's a good point. but let me ask you a question. Maybe they were, maybe this title reflected what was in the book. Is that accurate?

That's possible because it just went through case studies of every historical huge debt issue of the past. They looked at Japan. They looked at the hyperinflation in Germany. He looked at the U.S. and the Great Depression in the 1937, 38. And there were a lot of graphs. I mean, I would say don't read this unless you're a huge economic nerd who really loves to dig into this stuff. But so it's going to be more, it's people who are. really, really interested in learning. And it's good history lesson, I suppose, but his main point is that these sort of things happen on a regular, not on a regular basis. They all kind of look the same is what he's trying to get across. So he's seen this movie before. Yes, and he knows how it ends. But his other big point is, like, if you look at these throughout history, they're all trumped by productivity gains. And so in the end of the day, it ends up being kind of a wash, and these don't really matter that much, except for people in the moment.

Well, you wrote a piece last week about not taking asset allocation advice from billionaires. And I was thinking about this. I don't think that you were suggesting that advice from billionaires is worthless. I think you were making the point that when people see a Jamie Diamond say, don't own treasuries or a Ray Dalio talk about gold, they think that they are talking to them. When in reality, somebody with billions and billions of dollars could just have much, much, much, much different financial goals than you do. Correct. So my point is don't take advice from anyone unless you overlay context with it. You like don't take advice from us, whatever we say, unless you use like situational awareness and, you know, provide it under your own circumstances. So that's, that was the

point. And a lot of people are like, are you saying I shouldn't put 90% of my portfolio in the S&P and 10% in cash like Warren Buffett said? And I'm like, well, yeah, kind of. Just don't listen to what any of them say unless it pertains to you. I guess the point is that nobody cares about what we say, but when people, when billionaires do give financial advice, people listen. And they tend to put more emphasis on words coming from a billionaire's mouth. But Ray Dalio, for instance, is worth $18 something billion. He could lose 1% every single day for the next year and still have $400 million. Wow. That's not bad. So all he has to do to lose 1% a day is to join a trading system on Twitter. All right. All right. So sticking with the debt theme, Bloomberg opinion wrote a

piece titled 250 trillion in debt, the world's post-Liemann legacy. All right, I guess I should take it from here. So one of the things that they show, and this is not necessarily a chart crime, it's just these are gigantic numbers. And when you see the Y axis stretched out like this, it's just that much more scary, which we'll link to in the show notes. But they say that $173 trillion at the time of the 2000 financial crisis to $250 trillion a decade after Lehman Brothers collapse, and they're talking about global debt. Now, that is a huge amount of money. So there's no way to dampen this. However, I'll try my best.

173 to 250 over a decade is 3.75% a year in growth. And if we assume, and I'm literally making this up, I have, you know, whatever, if we assume that this $250 trillion is attached 3% interest, that's $7.5 trillion a year, which is, again, a giant number. But keep in mind, mind that there's another side of this. And that is global GDP is 80 trillion and global wealth is 280 trillion. What is a thousand trillion? Is that a quadrillion? Like in a hundred years, or we're going to look back and say these trillion numbers were kind of small in comparison and now we have a quadrillion dollars, you know, whatever in debt? Well, if the central bank keeps printing assets, then yeah. So the reason I say this because I've read a hand in the last few years, I read a handful of books about the depression and the aftermath and that period in the 20s, 30s, 40s, 50s. And every one of those books, people are worried about the debt back then.

And it was so much smaller than it is today. And so, like, in even Snowball, Warren Buffett's biography, he talks about how his dad was so worried about the debt in the country at the time leading to hyperinflation. And of course, it never did. And I just wonder, like, people have for decades now been trying to figure out what is the point. where debt is completely unsustainable, especially in the U.S., and it seems like there is no upper bound that people can figure out, like, this is, okay, this is it. This is the line in the sand. The author asked just that. He says, while they can effectively print money with help of central banks, no one is quite sure what happens when a global superpower like Japan reaches

a debt to GDP ratio of 224%. The U.S., UK and France have all surpassed the 100% level. Well, in terms of Japan, think about they've been doing this for, what, 30 years now? And they've had deflation. They've, they've had all this money and low interest rates and still nothing. So it's just so hard to sort of wrap your mind around this when you see these numbers. And to your point where you always say is, okay, debt's on one side, but then there's assets on the other. So it's like, how big is the other side of the equation? Where, what can cover this?

They show debt as a percentage of GDP and they break it down by non-financial corporations, households, financial corporations, the government. And the good news is that the first three that I mentioned are all going down. Households are particulars, that's a good thing. to see, but the government has gone way, way, way up. And if there is maybe a, I don't want to, you know, whatever, for lack of a better word, a black swan staring us in the face, or what could cause the next, you know, the next crisis, I guess this is probably the most, what people would say is the most likely candidate, which makes me think that it is going to be this. This is a gray swan. It's, it's hard to say because when you think about the fact that a lot of the growth in this

was probably the Fed holding some of these assets, but the other side of it is, it's kind of crazy that the supply and government bonds has gone up so much. That means that there are investors out there buying these. And so in some ways, it's almost like a non-risk, like a growth in non-risks where people want safe government assets. So it's like, I don't know, I look at it from an asset perspective of there are people investing in these bonds on the other side of that liability. But maybe not necessarily because they want it because there's mandates.

Well, yeah, that's part of it. But at the end of the day, there is a, there are investors in these funds. And so, like, I don't know, it seems like this is like an almost like an anti-risk bubble that we're in where more money is going into bonds than to stocks, even though stocks are crushing them over the last 10 years. Well, here's the end of the article. And all of these pieces tend to say the same thing. Quote, this is the post-Lehman legacy. To pull the global economy back from the brink, governments barred heavily from the future. That either portends pain ahead through austerity measures or tax increases or it signals that central bank meddling will become a permanent. fixture of 21st century financial markets. Yeah. Well, hasn't that been the case since the Fed was created, I suppose? I mean, of course they're going to be a part. But the other part of this

is, I feel like people always say like we're borrowing from the future. But like, I don't know, I have a hard time wrapping my head around this. Like, we're never going to repay all this debt. It's always going to be rolled forward or probably grow a little bit. So I don't know. Is it really screwing the grandkids here? It's growing with assets. Can you also say that we're actually recapturing the past because five-year returns have been incredible, but 20-year returns have just been so-so. Oh, that's a good one. So, yeah, that's not bad. Recapturing the past.

So we have some nostalgia. That's what we're saying. All right, let's move on. John Reconthaler wrote a piece last week. Problem for active management isn't indexing. And he made the case that less than 17.5% of the world's equities are indexed. And this is pretty complicated. What's your take on this?

Well, my favorite chart in here was he had a chart that, probably a huge chart crime, but I still loved it anyway. And it says professionally managed assets under management and chartered financial analyst candidates. And it shows both on the line, yeah, huge chart climb, but it shows that as a number of professionally managed assets has grown, the number of CFA candidates has exploded too, meaning that there's just, there's more professional investors in the world. But I think this, this is the type of thing that it's easy to argue about, but hard to put an answer on because there's so much money that is closet indexed in the world. And I think so much of what's been changing in terms of the indexing

revolution, it's just, I think a lot of it could just be money coming from closet indexing to indexing. So the biggest change is the fees people are paying. Well, there, but there are like gigantic SMAs that are run for pension funds and things like that that might not necessarily be counted in the index pile. Right. And those are way, probably way bigger than even the fund world in terms of indexing. So to your point, maybe this number is understated. It's complicated. But when people have asked me in the past, well, what level of indexing would you be worried? And I think it's hard to put an answer on it because when you look at the act of managed funds, a lot of them are so closely tied to the benchmarks anyway that for better or for worse,

most of the money is kind of indexed already. They might just trade a little more, hold fewer stocks, and charge higher fees. But we're going to hug the benchmark regardless. So I think it's hard to put an answer on it. Even if there is, let's say that there's a market crash, stocks fall 50%, some stocks fall worse, and the ones that are hardest hit are the ones that have done best lately. So say, like the fang stocks, for example, how can we know that it was actually caused by indexing? Yeah, I guess we could look at the flows, but yeah, I think it's going to be hard to put it. It's always going to be

hard to place the blame on any party when something like that happens. All right, survey time. where did this come from oh bloomberg americans spent 80.3 billion dollars in lotteries in 2017 up from 57 billion to 2006 that's wild that's a pretty big number all right this this is what i so that's a fact and this is i'm going to call a fiction on this one so they bankrate dot com did a survey they surveyed a thousand american adults on august 17th to august 19th okay a thousand people that's it and their conclusion was that the lowest income households on the US on average, spent $412 a year on lottery tickets. No freaking way. This one was flying around social media quite a bit. And of course, it's a survey of a thousand people, which is why we're

anti-survey podcast. But I mean, the initial thought on this is, let's say that number was true. A lot of people will say, oh, see, the lottery is a tax on the poor. I don't know if I necessarily believe this, but I'm going to try to take the other side of this one. Shouldn't the poor be the one that tries to do it this way? They have the most to gain from winning the lottery. Doesn't it make sense in some ways for the poor to try to play the lottery? Again, I don't know if I believe this. I'm just throwing it out there. I don't know if it makes sense, but it certainly makes sense that they would outspend

the rich people on lottery tickets. Yes, exactly. I think that's the case. For rich people, they'd say, why would I need to do this? I have money saved, and poor people, it's like, what do I have to lose? So this is part of the article, and I do believe this. Quote, lotteries have become an alternative mechanism of social mobility, a way of achieving financial success in an economy that's increasingly bereft of those

opportunities. There's an understandable belief that the economy is rigged and your best chance of making it out and getting rich is through the lottery, not through your job or savings. So there's actually some interesting studies on this on why turning savings into something of a lottery game can actually help people. And I'm going to have to find the research, but Ashby Monk is a really good follow on Twitter. And he talked to Ted Seidies about this on a podcast a while ago. And trying to get people on the lower income spectrum to save money, they've actually turned it into some sort of a lottery game. And if you save a certain amount of money in a bank account,

they put those people who put their money in the bank account into a lottery, and it gives you a chance to win. So it's trying to develop good savings habits with also giving people the chance to win bigger because they're saving. That's a great nudge. Right. So, yeah, it's a nudge. So, again, I'm going to have to find the research on it,

but I think it's like if they're already going to have that mindset and mentality, let's try to turn it into something good. And that's, I'll have to find the name on that one and put it in the show notes. But that's something people are trying to do. All right. So let's stick with banks. What do you say? Sure.

So someone sent us this. JP Morgan is trying to go after the millennials. And I guess this kind of goes with what we were talking about in a previous show about how they are going for the Robin Hood demographic and giving away free trades. But they want to bring rich millennials into their banking sphere. And so they're offering Sapphire credit card users 60,000 points to sign up. for a checking account. So they know that millennials love their Sapphire Rewards card, which I use one. You have one too, correct? I do. And so to sign up for the points, which I think can be worth

$1,200 possibly if you use them in the right way, you have to bring in $75,000 in deposits for investments and keep it at the bank at least three months. So JP Morgan is coming for you, Robin Hood. One thing that I thought was really interesting was that it said the Sapphire Reserve card cost the firm hundreds of millions of dollars in rewards expenses. Yes, we maybe talk about this on the podcast or I put it on Twitter, but these credit card companies are spending billions a year in rewards. And the fact that they're able to make it up or more than make up for it through merchants paying in their fees or through other customers who own the cards not paying and paying interest is pretty astonishing. You're being subsidized. So if I use my credit card for

everything. And I just use it for the rewards. So anything I can put on my credit card, I will. Like, I never carry cash. And I just, all I'm doing is building up rewards and paying off my card each month. And it's crazy that they'll do that for you, right? Yeah. Sorry. I just got an, the Giants starting center is out for the season. Did you really think they had any hope anyway at this point? Giants have started 0 and 2 and 5 of the last six seasons. Well, the good thing is that you can now worry about other things because they're out of sight, out of mind, since they're already going to be terrible anyway, right? I mean, it's not like they passed up good quarterback in the draft or anything. No, I wish it worked that way. All right. Back to business. So, Jamie Diamond said

that he used, like, Amazon Prime as inspiration for this, which I think is genius. It makes sense. Yeah, just get everyone under one roof and give them good checking accounts in credit cards. If they're, if they're, if they're, if they're, if they're going to do this, why keep your money at whatever, Schwab or Fidelity? Like, people, you know, people have no loyalty there. So if you're going to get, if you're going to get these sort of rewards. And I think somewhere, someone said that each point is like two cents or something. Right. So if you can get, if you can get like 900 bucks for moving your money over and get free trades, why would you not do that? Right. No, I think, yeah, they, they seem that that Saffir Awards card was, it's kind of weird that a credit card could make the news. But the thing was in the news, all. the time about how people loved it and paying for experiences. So if you have $75,000 in deposits or investments, obviously you're doing well and they're hoping that they're going to make up on this with future services, whether it's mortgages or other banking services or whatever. So I think this is a great idea. I think the funny part about this is the fact that for years people have been preaching that millennials are going to be shunning the big banks, but they're not. I mean,

they're going to, millennials are going to use these things. because, you know, if they can't, especially the ones that have the ability to. I don't think they're going to care who they bank with and stuff as long as they're giving them rewards and money and whatnot. Yeah, Occupy Wall Street came and went pretty quickly. Yeah. Okay, so Bloomberg had, going back to them, another story called the Incredible Shrinking hedge fund, and they showed a bunch of really well-known big-name hedge funds that have

completely lost a high percentage of their assets. By the way, we used up all of our Bloomberg articles on this podcast. podcast alone. Oh, that's right. That's true. I can't believe they started charging people for those. I made the joke a couple weeks ago that I go on a media diet every month and it's called you've reached the limit of your articles. Yeah, pretty much. Wow. Okay, so they show some big name ones here, John Paulson, Bill Ackman, Paul Tudor Jones, David Einhorn. In most cases, these hedge funds have lost at least half of their assets from what the peak was. And the peak for a lot of these is not that long ago, 2011, 2015, 2013. So what do you make of this? Because I have a hard time

reconciling this with the fact that hedge fund assets are still at a record high at $3.2 trillion. So, wait, one does not negate the other. What this is showing is some of the, some of the managers that did particularly well in, in 2008, I think. Okay. And they've all struggled, which makes, I mean, did anyone come out of 2008 unscathed? Like, the people who, nailed it completely, made a ton of money, and have turned it around. Are there any examples of that where someone was able to do, you know, ride both waves? It seems like none of these people did. It's really hard that you make one of the greatest trades of all time and then you continue to have to enjoy success. It's just lightning does not usually strike twice. I mean, obviously it was

impossible to turn on the fees. But imagine if Paulson would have just done a mic drop in 2008 and I'm out. Greatest trade ever. See you later. I made $7 billion or whatever it is. Wouldn't that be kind of intriguing? Yes, but nobody leaves the table after a huge win. That's true. I mean, it is kind of crazy to see some of these big names like this and just completely their assets are just shriveling. So you had a good stat about the industry assets still being at all time highs. So yeah, I found this just to look it up. So there's $3.2 trillion. at the end of 2017, which is the highest ever, but 88% of the gains between 2017-2018 were from just market growth. Only 12% was from inflows. So in a lot of ways, hedge funds are

kind of like the actively fund management industry where the inflows are not really helping, but there's so much in assets that as long as markets are going up, they're being propped up in some ways. So it's kind of like it'll be a double whammy when we do see a sustained downturn, that you'll see assets shrink and maybe outflows potentially. And that could be where the problem is. One of the interesting charts in here was it shows that the number of new hedge funds is absolutely plummeted. And I wonder if ETFs have anything to do with this. So a lot of what used to look like alpha can now be explained as beta. And a lot of these products are now basically free. Either that or they've all decided, instead of opening a hedge fund,

everyone's going to open a private equity fund. I think that that's possible. All right. So there was an SEC complaint published this week. And the gist of it was that these... Did you actually read this thing? Because you posted in here an actual, like, legislative document. Yeah, I did go through a lot of the stuff. And my jaw was on the ground. So these representatives for retail customers held UWTI, which I believe was an triple levered long oil fund. And they held them for more than 400 days. Oh my gosh. And it wasn't a large amount of these people's portfolios.

There was three or four percent. But still, and it said that the guy purchases for his own account and for his family and friends account. So he had no idea how this works. So sometimes when we see articles about the triple lever to ETF, it's like, all right, we get it. Like, who doesn't know at this point? But apparently people still need to be reminded.

That's pretty bad. Yeah, those ones, without going into this. specifics. They just, holding those on an overnight basis even can just, like, crush you from the rebalancing and volatility. And then it was, like, some of the things that he said was, he was, like, bullish on an oil rebound. Like, what? So you had a, you had another piece in here about another ETF. Innovators, IBD, breakout opportunities, ETF. And you kind of flagged, did someone send this to you, trying to sell it to you? Or how did you find this one? No, I just saw, I don't know, maybe etf.com tweeted it or Balchunist or somebody tweeted it.

So I thought this was interesting. It's basically trying to quantify technical analysis. And when stocks are going down, of course, there's not as many breakouts. And then the fund could hold 50% of the assets in cash. So I found this intriguing. So I wanted to look into it a little bit further. Hey, can we do it real quick? Michael explains technical analysis to Ben.

Give me the breakout. Yeah, no, we're going to school. Okay. So the idea of resistance is the fact that stop laughing. I'm just picturing you put. I'm just picking you're writing this in your trading journal five years ago, but go ahead. You know what? I will draw a picture and we'll put this in the show notes. The idea of resistance is the fact that every time a stock gets to a certain level, the sellers come and they

overwhelm the buyers. That's called resistance. And the more times a stock bounces up against that resistance level, theoretically the likelier that sellers are going to give way to new buyers and, you know, it's going to continue to go up. So the reason why I like this was because it eliminates, it mitigates the human biases involved with chasing a breakout and selling on a retest like I did all the time. Okay. So because resistance has to develop over time, I was very surprised to see that six of the top 10 holdings in this fund or 20% of the fund are in recent IPOs. And if you just look at these charts, there's no resistance because these stocks are brand new. So I love the idea of quantifying technical analysis. I'm really interested

to see how this does going forward. I just was surprised by its makeup. And the thing that I brought up to you was, I wonder how much liability these ETFs have to follow the own rules that they state. Like, you're basically pointing out that they're not really following what's in their prospectus. No, I'm not saying that. I'm just saying that if they had some language or if they put into the algorithm, that these stocks have to be, I don't know, two years old, that would certainly change things. True. Or, and the other point is, like, it's great to have a rules-based framework, but you have understand that there could be unintended consequences from the rules you create that you may not realize. Right. The output is only as good as the input. So let's move on to some listener

questions. What do you say? Okay. Is investing in foreign assets a good hedge if you think a U.S. recession is coming in the next couple of years as Ray Dalio does? Bring this full circle here. All right. Well, I guess it would depend on where you're investing. So obviously dollars play into this. So my first, my needy reaction was to say no, especially today where it's such a global economy, you would think that if the U.S. goes into a recession or just has a bare market without a recession, that it would be like that international stocks would not do so great. So I went back and I looked at the MSCI, All-Ccountry World Index, XUS, and found that there was 112 times since 1970 that the S&P 500 was down year over year, 112 times. And in 86

of those times, international stocks also fell. So 75% of the time, when U.S. stocks were down in a 12-month period, international stocks were also down, which makes sense. So sure, international stocks were up 25% of the time when U.S. stocks fell, but I would certainly not say that international stocks are a good bet when U.S. stocks are falling. If you want something that's likely to go up when U.S. stocks are going to go down, I would probably look to bonds. And especially since the U.S. is 50% of the global market cap, it's very likely that international could probably do worse, too. And so, yeah, and a lot of people chalk it up to, oh, diversification doesn't work, but diversification is not supposed to save you from those times.

By the way, before I get actually, I understand that bonds don't have to go up. I'm just saying that they have a higher likelihood of going up when stocks go down than international stocks. Right. And when risk assets fall, the majority of time, they fall together. And so that'll happen. Okay. Second question, how would you advise someone on investing when they receive a lump sum payment? Is it smart a dollar cost to average and purchase on a month schedule or something like a three or six month period or just pull the trigger and buy it once? these investments would be diversified, large, mid, small, U.S., some bonds, blah, blah, blah, blah. All right. Well, I guess it depends on where the money is coming from.

If it's coming from like a bonus at work, that's one thing. If it's coming from, you know, an inheritance and it's maybe a little bit more emotional, that's probably a different topic altogether. But in the case where it looks like it is coming from work and the person is in a diversified portfolio of different asset classes, that I would say putting it in all at once is the correct mathematical answer, and even probably the correct answer, period. Because like I said, if you're in stocks and bonds, then just get it over with. Now, if you are only in stocks, and even though we know that stocks go up most of the time, so opportunity costs would dictate

that lump sum is the right way to go. Emotionally, that might not be the best because you're probably just nervous that, of course, I invest now and the market top. So if you have to spread it out over four quarters or eight quarters or whatever it is, I would say the most important thing is to make sure that you have written down what your plan of action is going to be. If you don't commit it to paper, it's probably not going to happen. I looked at this, I wrote about this earlier this year, and Van Gogh did some research on it. They looked at the performance of a 60-40 stock bond portfolio in the U.S., UK, and Australia. And they looked at a lump sum immediate investment versus investing it on 12-monthly purchases over the course

of a year. And lump sum beat dollar cost averaging two-thirds of the time, which makes sense when you think about the fact that markets are basically up two-thirds of the time. So, yeah, the probability is you'll probably do better lump sum. The problem is everyone assumes they're going to put a lump sum in and then markets are going to get crushed. So it really depends on what's going to minimize your regret. But I don't think there is a right or wrong answer here because it really depends on what you can force yourself to stick with. All right. I think this is a pretty good one.

Illinois Tool Works is considered a blue chip company that has 54 years of consecutive dividend growth. About a month ago, the company declared a $1 dividend up from $0.78 since last year, 20% growth. it's still trading around that's 50-week low, and if dividends signify the future cash flows and optimism of the company's future, why is there such a disconnect between what management sees as a bright future and what Wall Street sees? Okay, this is an interesting one because a lot of it, like some people look at the fact that they're paying a lot in dividends and assuming they have nothing else to invest in. And that means they're not investing in the future of the company.

So maybe that's why people, I know nothing specifically about this company. But I can see looking at the other side of this listener. question and thinking they've really run out of things to invest in so they're giving the money back to the shareholders. Well, I don't know that dividends necessarily signify future cash flows and optimism of the company's future because I guess you would have to look at the dividend payout ratio. So maybe they raise their dividends by 28%, but what if they're only paying out 50% of the free cash flow into dividends? You know, that would be a much different story that a company that pays out, say 80% of it. So I think that it's probably case specific, but I don't

think that dividends necessarily reflect management's optimism or pessimism about future opportunities, especially with company that's had 54 years of consecutive dividend growth. Now, if I was a pundit on TV right now, I would say, hey, this company is paying you to wait for that growth to come in. So if you think that, I don't know what the yield is on this stock. Stop, you nailed it. You nailed it. All right.

Go on top. Hold on. But he has one more bonus question. There's a book called Beating the Dow where the author makes a case at the buy stocks on the Dow with the highest dividends. Is this a viable trading strategy if you're interested in a long-term growth? growth. All right. So I think there was something similar called Dogs of the Dow, and this is really just value in drag and probably not the best way to capture value stock. So this is not something

that I would go for, but people love dividends. And if this keeps you invested and it's, you know, personal preference, even if it's not maybe the most tax efficient strategy, I, you know, I don't have any major issues with this. I have a hard time offering the fact that this is called a fun question for a bonus, but I guess for us. Okay, one more. This is going back to you for your trading strategies. I've recently instituted a 15% stop loss rule in my portfolios, and I'm sure glad I did. What do you think of stop lost orders in general? Well, this depends on what type of stocks you're trading. If you're just index, asset allocation, I would say that's probably a pretty bad idea. There's better ways to mitigate risk. But if you're trading,

especially high beta stocks, then I think that you need some sort of risk management. And I don't think that stop orders are a bad way to approach that. There's obviously different type of stop orders, market limit, et cetera, and you've got to be careful with what you're doing, especially if some of the ETFs that can get triggered during a flash crash type of thing. The one thing that it can do is, like you said, it defines your risk that you're willing to take. Unless you cancel it. Right. I mean, there's, yeah, there's nothing that says you have to follow it to the law, but whatever the number is, if that's what you define your risk as and you're okay with being stopped out and then seeing a stock go up, then I guess whatever works for you. But I think you have to

understand that there are. So let's say the 15% is you're going back to your technical analysis, that's your resistance. If you set it at the wrong point and stock bounces, then you're going to feel like an idiot. I would always set my stops at, you know, some random 37 cents below where I hope to see support. But you got to, if you're trading, you got to give yourself an out. You have to know where you're wrong. So I am fully supportive of having an exit plan before you go, before you go into something. All right. I'm going to start off recommendations. this week. We went straight from Ozark into Jack Ryan on Amazon, and I thought it was great. Like, when that first came out, I saw that John Krasinski was in it, and it looked like a cool CIA one.

Like, it totally lived up to my expectations, exactly what I want from a CIA show. It also kind of got me thinking, like, with Ozark and that show, I mean, it's basically like a really long movie, right? Those shows, they don't even, they're not like shows anymore, which is great. And obviously that doesn't work every time. Like we watched Sharp Objects this fall or this summer. And like that was one that probably could have been a movie. It didn't need to be eight episodes. It was good acting and such.

But I don't think it needed to be that long. But these ones are made better, I think, by the fact that they're longer. And there was Jack Ryan, I thought was really good. So this morning on Good Morning America, which my wife likes to put on in the morning, I saw something for IMAX teaming up with like Netflix and Amazon Prime to bring their movies to the big screen. I think. Huh. Okay. I don't really know why you would pay to go if you, although I guess if you don't have, okay, wait, you know what? If you don't have a Netflix or Amazon Prime membership, maybe that would make sense. True. Just to see those ones. That makes

sense. So my other one here, let's see, the North Star podcast with David Peril was really good with, he had Austin All right on this week, who formed the Lambda school. And I'd heard of this before, but never really did a deep dive. And the way that this school works is they train you, in like six months to be a programmer or in computer science and get you a job as like a software engineer and you don't pay anything for tuition and what they do is they instead once you get a job making $50,000 a year or more they take 17% of your salary for the first two years and that's how you pay back in tuition and it's capped at like $30,000 I think so unless you get a job and make some money which going back to our talk last week about college and what could upend it like this is great

is like a trade. They're literally teaching people how to do a job and they're trying to help them get place and get a job. And so this, I thought was, I'd never really heard much about it. So I thought this was amazing. So they're swapping a free education for equity in their future earnings, which is probably a win-win for both sides. And they said a lot of people are coming back from having another job and not being happy and then going back to school. And I think it's a great program. One more thing before we get to our Animal Spirits book club this month. So when you have kids, I've found that you need to have a really high tolerance for repetition because they do. So my daughter will watch the same movie dozens and dozens of time and listen to the same song. And so I have to get used

to these and a lot of them I don't like. But she started watching The Greatest Showman in the past couple of weeks with Hugh Jackman and Michelle Williams. It's like a musical of P.T. Barnum. They turn it into a movie. And actually, the soundtrack is not that bad. And so I'm saying if you're a parent and don't want to get into too many annoying songs, the Greatest Showman is actually not terrible. Okay. So you and I had a book club last week kind of when we both read Lake Success by Gary. How do you pronounce his last name? Steingart. Okay. Let's hear your take on this one. I think we both read it last week. So it's obviously a take on modern society, which to me wasn't the focal point because I think we already know what's going on with the haves and the half-nots.

So I mean, and that was definitely a big part of the book. But I saw it from more the point of view of just people are not all good or bad and people are complicated. The main character is Bobby his name? I don't know. I'm drawing a blank. He was a hedge fund manager. And his wife is complicated and the whole, I mean, I loved it. I thought it was really, really great. He's definitely a good storyteller. And it's kind of hard because none of the characters in the book had many redeeming qualities, I thought. So it was, I think it was kind of hard to, that's kind of hard to pull off to make you really want to get into the book. So I liked it.

I thought it was 90% of a good book. I think a lot of times with a novel, you can have such good buildup, and then the ending falls flat, and I thought that happened here. But I still liked it. And I'll probably go read some of his other books now that I've read it. But I liked it. It was, if you want to, like, hate on hedge one people, it's probably a good one for people who are on that side of the aisle.

But it was a, I enjoyed it. No, what I thought is probably as high compliment as you could pay to a novelist. It seemed like a short story, even though it was 300-something pages. It felt like a very quick read to me. Yeah, I flew through it pretty quick, too. All right, you got any other ones? I saw Upgrade, which did you recommend that? I don't think so.

What's that one? Okay. I do highly recommend this one. It was thematically very similar to X Machina. And the main actor who I've seen in other movies... Is this on Netflix or at the theater? I'm going to confess. I saw it on...

Reddit. Okay. So this is like a bootleg copy? No. Well, yes, I stole, but it was good quality. I didn't know you could watch movies on Reddit. So the main guy, his name is Logan Marshall Green, and he's sort of like a poor man's Tom Hardy.

Okay. Worth seeing? If anyone's listening, when it comes out on Apple iTunes, I will pay for it to redeem myself. But yes, it was very good. Animal spirits is now being investigated by the SEC. Okay. somebody on Twitter at FBG Chase

posts a lot of really good stats about football and this is sort of wild. Yesterday the NFL had an average passer rating of 105.1. Aaron Rogers' career passer rating is 103.9. So obviously the rules have changed that are making the game a lot different than maybe you're seeing that pan out

and Fitzmagic and some of the other stuff going on around the league. But if only this could help the Giants. Too soon. All right. Thanks for listening. We'll see you next week. Feel free to email us at Animal Spiritspot.com.