Animal Spirits Podcast - Brothers from Another Mother (EP.19)

Episode Date: March 7, 2018

How your job should fit into your investing decisions, our thoughts on Jim Cramer, misconceptions about share buybacks 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

Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing. I hate the people who talk about it all the time, so I didn't want to be one of those people. From two guys who study the markets as a passion. Can I count on you to talk me off the ledge partner? Yes, and that's what this podcast is for. And trade for all the right reasons. That's my due diligence. I'm in. Dude, if you're in, I'm in.

A line of thinking is the higher the volatility on an asset, the higher the volatility on the opinions. so I feel like you have crazies on both sides. Here's your host of Animal Spirits, Michael Batnik. I can say that I was never driven by money. So you were trading three times leveraged ETFs for the love of the game. Exactly, man. I'm a purist. But anyway, and Ben Carlson.

This is true. I do not drink coffee. I've never been on Facebook. I've never done fantasy football. Oh, one last thing. Michael Batnick 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. Now, today's show. Welcome to Animal Spirits with Michael and Ben. We're going to do something a little bit different this week. Ben and I have been getting a lot of questions. So we're going to start out with a few reader emails that we've got in.

And apologies if we're not getting to all of them. I had responded to people that we're going to answer. answer them on next week's show. But we got so money that we're just going to answer some today and we'll try to get to the rest that we didn't get to next week. So first one, how much does your job matter in terms of setting your risk tolerance in a portfolio? Should freelance employees have a more defensive portfolio than those with a more stable job? What do you think? This is a good question. And I think it's interesting for us being in the finance world because we're obviously our jobs are so tied to the stock market. So I think if you're like a teacher or a government

employee you have a pension to fall back on. I think that's definitely something to consider. So I think it's certainly a part of you or should be a part of your risk profile when you're trying to think through these decisions and how much do you need in liquid reserves and all that stuff. Freelancers should absolutely be overweight momentum. Utilities and consumer staples. But I think it's obviously you have to take in like a ton of different variables when figuring out these decisions. And that's certainly one I don't think you can ignore depending at, you know, and I think that's another thing for, I think it's the other hard part about being a freelancer is like, how do you budget? Because your income is so, you know, facilitate so widely.

So that's another thing. So it's not, it doesn't make, you know, for a simple financial picture in general if you're a freelancer, I think. Yeah, we've been, we've been getting a lot of questions about cash and how we think about that. But for me, this is more of a personal finance question than an investing one. I don't think that they should be invested in a defensive portfolio because their income fluctuates so much. I think that the first step, is to have truly at least six months' worth of cash and then have a separate portfolio that doesn't necessarily integrate with the risk of their salary fluctuations. Yeah, it really depends on how your accounts are structured.

If they're all tax-deferred retirement accounts, then having a more defensive portfolio, what's the point of that? Because it's really long-term money that you're not going to touch for a long time anyway. So, yeah, it kind of depends on what your needs are in the meantime and how much of your portfolio you're actually spending from. Yeah. I would say just more cash and the defensive portfolio. I don't necessarily think I would agree with that. No, but I agree with you. A lot of these questions, they are investing questions masked as personal finance questions that they definitely should be. Okay, we got another one here.

It says, I'm about to turn 31. I have a decent amount saved already, but I'm almost entirely in stocks. How would you recommend diversifying better? Should I sell a few stocks, transfer to bonds, go to some safer assets, blah, blah, blah. This is a good question because, obviously, as your life changes over time, your portfolio is probably going to change with it. I mean, there's not a really great answer here. It, again, comes down to more of a personal finance thing. I think it makes sense to slowly do this, and I think you can rebalance in a couple of ways you can use, you can rebalance your portfolio,

you can just use new contributions to sort of diversify and do it over time instead of doing it in one shot. How did you do this? So I am 33 years old. So I have a portfolio or an account that is like my cash cash at Goldman Sachs. And then I have an account at a brokerage account that has municipal bonds that it's not, I don't necessarily view it as a clash equivalent, a little bit more risky. And then I have 100% stock portfolio. So I think that for this person is asking this, I think the probably the last few weeks are a really good test of how much you should be invested in stocks. If you have 50, 60 years, then I see no reason that you can't hold 100% stock portfolio right now with the caveat that, hey, if stocks go down 60%, you're not going to do something really,

really dumb. So I think that the last few weeks is probably a good test for this person and for all of us how much risk we can really take in our own accounts. And it's just a form of mental accounting, but I like that idea of bucketing. So you have your short-term bucket and you have your long-term bucket, even though it's all in one big pool. I think that's a good way to separate out the emotions that come with it and figuring out how much you actually need. And again, there's this idea of the ability to take risk, which at a young age, you have a

huge, you should have a huge ability, but some people just, somebody just can't, you know, can't stomach it. So it really depends on your, you know, how much risk appetite you have. I like the idea of separating cash from like stocks in an account because if you have 30% of your portfolio in cash and you just have one account and it's 70% stocks to 30% cash and you're looking at it a bunch and you're always going to be like either lagging the market when the market is having a really great day or doing a little bit better when the market is having a bad day. But I think it just makes sense like at least for me mentally to know that this is my municipal bond account and this is my all stock portfolio. Just for me mentally, it's easier to have it that way. So there was a story in one of, I think it was Richard Stiller's book, Nudge. And it was about Dustin Hoffman as when he was starting out as an actor. And he lived with Gene Hoffman, I guess.

This is way back in the day. And he had no money. Hold on. Gene Hackman. What did I say? I think you said Gene Hoffman. Okay. Dustin Hoffman and Gene.

Maybe that's his brother. Gene's his brother. Yeah, it's not. Yeah, it's not. Gene Hackman. Have you heard this story? So Hoffman didn't have much money. And the money he did have, he bucketed literally into jar.

each week and he finally went to jean hackman and said you're kind of a successful actor can i can i borrow some money from you he said what all those jars are all full of cash he said yeah this one's rent this one's groceries i have nothing left over so i need to borrow from you so it's his form of like mental accounting and yeah anyway that it's just kind of a different way to think about it okay we got one more from another guy in their mid 30s this is a hi michael and dan and apparently i'm having by the way and this is this is the second time this week that you've been called dan yeah i got called dan and twitter once too so i'm having a huge impact on people obviously very memorable. I'm in my mid-30s trying to invest a little bit every month for the purpose of

growing my savings over the long term. I tend to buy in a haphazard manner, essentially what catches my fancy, whether it's an international ETF or General Motors. As a result, my portfolio is almost certainly suboptimal. He basically says it's kind of a long-winded question, but he enjoys, you know, reading about this stuff and learning about it. But, you know, is there a significant downside to having this sort of suboptimal portfolio where he's just adding pieces over time? Yes. There certainly is. but there's two parts of this. One, I would think that you could only do this for so long before you realize that it's totally suboptimal. Probably get bored of it and realize like, hey, this is just, I'm not having fun anymore and I'm lacking the market and it just doesn't make sense.

I guess the risk with that is if it's at a taxable account and it goes on for too long, it could be hard to unwind. But I don't see anything wrong behaviorally like learning about the market because I've said this before. Nobody opens a brokerage account that buys the total world stock index fund and then is done with it. You have to learn the hard way that picking stocks and timing the market and overweighting and underweighting and it's really, really difficult. So I don't see anything wrong with starting out this way. It's probably not going to last very long. I think the best way to do about this if you really want to scratch that itch and you want

to pay attention to the market and make all these moves is just have a limit. So make it 10% of your portfolio or 5% and go nuts in that. And the other part, just make it diversified and automatic and don't worry about it. And the other part you can have fun with. that's a great way to learn and realize, you know, maybe I shouldn't be doing this, but it's still kind of something I like to do and it keeps me engaged and involved in the market, knowing that the majority of my portfolio is taken care of. And if you want to scratch that itch with 5% to 10% of your portfolio, I would highly, highly recommend doing two things. One, make it a separate account

so you could track your results and then two, actually track those results. And I think I wrote about this or I said this earlier. The reason why I discovered that trading was so hard was because, I mean, well, obviously it is, but I was writing it down every single day. And that had a huge impact on self-discovery. Like, holy shit, this is A, really hard, B, my results stink. And it's hard to just do that day after day after day and keep fooling yourself. So separate account and track your results. Yep. Okay, moving on. So thank you for the questions. We really appreciate them. Yes, and send any questions to us at Animal Spiritspot at gmail.com for, and we'll get to some more in the future. And it's Michael and Ben, not Michael and Dan.

So there was an article, I think it's a few weeks old, and it caught our attention because cliffassness on Twitter was having none of it. The article was from institutional investor titled Smart Beta is Making the Strategist Sick. Ben, what were your thoughts on this one? So supposedly this was written by a guy who works for a pension fund. And it was very much an angry article in a lot of ways, obviously as the title can attest. But he had a lot of bones to pick with Smart Beta. And for those who don't understand, smart beta, is really just factor quantitative investing.

So it's things like quality stocks or momentum stocks or minimum volatility or value. And it's just bucketing those in a certain way where you pick a certain amount of stocks and in a quantitative way using screens and rules. It's fairly simple. And I think the reason that Smart Beta really seems to get people angry in the investing world is because it's really shown a lot of active strategies. to just be smart beta, you know, in disguise. And so if you can put rules to this stuff and charge a cheaper price for it, there's really

not much room for a lot of active managers anymore. And so I think a lot of people get angry when they understand that. So I agree with a lot of what he was saying. I understand why Cliff took exception with a lot of it. So for instance, this thing I do agree with. He wrote, it's not uncommon to discover that quality, momentum, and minimum volatility strategies are all buying the same stocks. they're brothers from other mothers. We're measuring the same thing twice, but calling it something

different. So there is a lot of overlap between dividend and value and quality. And then there was actually a really great chart that he shared. There was exposures in a multi-factor ETF to, like you said, value, investment, profitability, size, momentum. And the greatest exposure at that point is it's really just market exposure. So I think that there are responsible ways to use factors. and another thing that he said that I don't really agree with, and I think for this probably drove Kwan's up the wall, was adding low volatility, quality, high dividends, and profitability is pretty much the same thing. Intuitively, this makes sense. Companies with stable share prices often have the mature, steady operations that are a hallmark of regular distributors of cash, and a dividend itself can damp volatility because the rising dividend yield that comes with a falling price can bring in

buyers. I think that was taking a lot of liberty with the words and the truth. The other good point here, I guess, is the fact that you really have to know what these funds own because there are a million different ways to slice and dice these things, and there are different rules, and there are different ways around it, and there's different diversity Some of these are more concentrated. Some of these have more stocks than others. So I think it really just it's about understanding sort of the back to what you own and why you own it. And there's just so many of these days. I think that maybe that's part of the frustration. But a lot of his points didn't really make sense to me because, you know, I think this is just a different way of looking at the world. And if you want to slice and dice your portfolio and use these to give yourself some broader diversification, it can help. It just depends on what you're trying to get out of it. So are you saying that a dividend does not damp volatility because a falling price can bring in buyers? Yeah, that seemed like a little bit of a stretch. Okay.

Yeah. Lastly, and this is, this was sort of the hammer, the hammer on Cliff's head. And I'm pretty sure that doesn't make sense. But anyway, he wrote, it pays to dig into the facts because most people care not to do so. We live in an age of truth decay. The Oxford English Dictionary proclaimed post-truth the word of the year for 2016. The original smart beta factors aren't working. and the science behind it is known to be flawed, but nobody's telling the average investor because

there's no profit in it. There is a symbiotic relationship between the fund industry and the financial media. The industry needs the media to talk about and help flog its products and the media needs advertising revenue and something to write about. And quote, and this definitely probably rubbed a lot of people in the industry the wrong way. Yeah, this was, this was a little over the line. And he said, yes, you should be skeptical of my skepticism. So he gave himself an out at the end. This just seemed, I don't know, this just seemed like a hit piece to me, even though he brought up a few good points. So sticking with Cliff, Asness, he and a colleague, or I think ex-collee, actually, wrote an article, Pulling the Golly,

Hockey and Investment Implications. And I thought that there was a lot of really good meat in here. Let's start out with this quote. Pulling the goalie always increases the volatility of numbers of goals scored and is a negative expectations in terms of the score. For those reasons, it is often used as a metaphor for high risk desperation move. However, the point of hockey is not to maximize the differential between the goals your team scores during the season and the goals it gives up.

This was interesting because, so they basically looked at what happens in hockey. So when you're down by a goal, one of the moves you can make as a hockey team is to pull the goalie and add another skater to put pressure since you have a one-person advantage. And he was basically saying a lot of teams for a lot of years weren't really using data to make their decisions and they wouldn't pull the goalie until it was far too late to give themselves a chance to tie the game up. And basically, this was an interesting way to look at risk in terms of can the other team score any easier because your goalies pulled or does it increase your odds of scoring the

goal and tying the game if you pull the goalie and when should you do that? What's the optimal way of viewing the investment world in terms of risk and return as well? So yeah, he spoke a lot about even though some coaches might have the data, it might not necessarily change the way that they function because he used a John Maynard Keynes quote, worldly wisdom teaches that it is better for reputation to fail conventionally and then to succeed unconventionally. Yeah, so this was kind of like an idea of career risk. So people were just doing the same thing that other people were doing, and that's the way it worked.

So instead of looking at the actual numbers, and this kind of goes to like the NFL, and this is another Richard Thaler one where the idea was you should never use a first round pick. You should always trade down and get second, third, and fourth round picks. And they presented all this data to NFL coaches and GMs. They said, oh, this makes tons of sense. We should just stockpile draft picks in the later rounds because it's really hard to pick the best players, and then after they got all the data, of course, they just made their first round picks and never traded down and followed it just because that's just the way things

work. Even more compelling data is that you should almost never punt on fourth down. Yes, right. I actually wrote this a while ago. There was a high school coach who never punted and only gave an onside kick because he figured out the odds were in his advantage, even if it didn't work every time. So even if he was in his, inside his own 10, he'd go for it on a fourth down every time. I think the only coach that can really pull it off is Belichick and he won like four Super Bowls before he was able to do the sort of thing. There was a call that he made, I think it was against the Colts maybe like close to 10 years ago where he went for it on fourth down. I think it was like a swing pass at Kevin Falk and they didn't get it. And he got a really hard time for that

even though it was like probably the right move. Right. In hindsight. Yeah, it's like an outcomes versus process thing. So Cliff also brought another point here. It's like, you know, investors spend a lot of their time they focus on the risk of a single investment instead of figuring out what that risk would look like to the overall portfolio, which is a great way to think about things. I think people think if they have a volatile investment, it doesn't make sense. But if you add a volatile investment to a portfolio and it acts differently at the rest of the portfolio, it can actually add some value. And not only can add some value, but you could add a outlandishly volatile asset to a portfolio and reduce total portfolio volatility. Right. It's very counter to it. The magic of diversification.

Beautiful. Speaking of volatility, there's a research company called 13D that wrote something the end of the low volatility regime, why buybacks are a clear and present danger to the anomalous market they helped fuel. And so the gist of this article was that buybacks are basically driven by price insensitive buyers, which in their estimation has contributed to the low volatility that we've seen over the last few years. However, as rates continue to rise or as rates have risen, buybacks will slow down, volatility will turn, and ostensibly hurt the stock market. Buybacks have definitely kind of got a black eye and probably in the last decade or so is because people think that companies are, corporations are using all of their money to buyback

shares and not investing in the future. And I guess there may be some credence to that, but the idea of buybacks is kind of a misnomer for a lot of people because if you just replace the word buybacks with dividends, that would probably change the way that you view these things. And of course, buybacks are much more cyclical than dividends because the research does show that corporations buy back more of their stock when things are going well and buy back less of it when things aren't going well, which is sort of a poor way to invest. Obviously, they're buying high and maybe not buying as much low.

So in that sense, it doesn't make sense. But in terms of the return to an investor, a buyback is pretty much the same thing as a dividend. So if you said companies are offering too many dividends to investors, people wouldn't get worried about that, because it's just a way of returning cash to investors in a different way than a dividend. So they had a few good stats. One of them was, according to Artemis's calculations, buybacks have accounted for 40 plus of the total earnings per share growth since 2009, and then an astounding 72% of the earnings growth since 2012. And when you see things like that, it certainly is a little bit of a head scratcher, but Ed Yardini had a post over the weekend, Dow Vigil

Jalanties. And in it, he wrote that S&P 500 revenues rose to a record high of $329.49.41 per share at the end of last year. And revenues are something that cannot be, quote, manipulated by buybacks. Right. Yeah, it can't be gamed. And the other thing is that people kind of lament the fact that dividend yields are much lower than they've ever been. So dividend yields on the S&P 500 are below 2%. In the past, the history, historical, they've probably been in the 4 to 5% range. But that'll changed in the 1980s when tax policy actually made it sort of incentivized corporations to buy back their stocks. So if you look at the actual shareholder yield, which is a combination of dividends in buybacks, it's actually not that low in comparison to history. So it's close to four to five

percent. It's just that you don't see those because when they buyback shares, it just offers, you know, higher earnings per share to the holders of the equity. Right. So share re-purchases are just a much more tax-efficient way of returning cash to shareholders and through dividends. And I will say that dividends are much more sticky, and corporations have a harder time lowering their dividends. They have a much easier time playing around with how much they're willing to use for buybacks. So in that sense, it is a little more cyclical. But yeah, at the end of the day, it gets you to the same place pretty much. And from a tax perspective for an individual investor, you're actually better off with buybacks than with dividends. I guess the stain on buybacks

is that buybacks go nuts in a rising market and sort of peter out during a bear market. which it should be the opposite. Yes, which, yeah, which I totally agree with that and understand it, but that's the way that, you know, a lot of management teams make their decisions. So this was an interesting data point that they had. Since 2009, the largest equity drawdowns August 2015, January to February 2016, and two weeks ago all occurred in or right after the share buyback blackout period. Could be a coincidence, but maybe not. The other interesting thing is, and this is something Urban Carmel has written about the fat pitch blog, is that the share buyback index has actually underperformed the S&P 500.

for a number of years now. So if you just got those companies that had the most buybacks, they've actually done worse than the overall market, which is kind of a way to refute some of these ideas. But yeah, it is kind of interesting to think about what corporations do with that cash. But again, I don't think it's quite the end of the world as people make it out to be. So this is where they lose me a little bit. Buybacks have been essential fuel for the low volatility regime, enabling steady equity appreciation and in turn the rules-based strategies pegged to that tranquility. Now as volatility returns to equity markets, buybacks will likely prove key. to understanding and anticipating the threat of a high volatility crash, one way or another

as the low volatility of regime winds down, buybacks appear destined for a day of reckoning. I think that might be a bit hyperbolic. But if I was paying for research, even though I might not necessarily agree with this, this is what you should be paying for because you should be paying for research that doesn't just confirm what you already believe. Otherwise, what's the point? It definitely makes you think a little bit. You know, I've never actually used the phrase Dave Reckoning in a blog post before. I think that's going to be my goal for 2018. Yeah.

So even though the message and, you know, we might disagree with, I can appreciate a different point of view. And there was some good stuff in there, even if I don't agree with all of it. So there's another report by Morningstar this week. And it looked at the idea of how active equity mutual funds do in a bare market. And the idea is, you know, will active actually? save you a little bit when stocks fall in the volatility picks up. And so they've looked at the numbers and these are fairly well known at this point in terms of how poor active managed funds have done. So they said only roughly 28% of active U.S. equity funds beat their benchmarks

for the past three years to the end of January. But the idea was, you know, how do they do when stocks are down? And they actually found close to 60% of funds outperformed in down periods on average. And by the way, this is over the last 20 years. So not a huge sample size and not too many down periods, but I guess it is what it is. Yeah, so the idea is, is will active management save me in a down period? The problem I have with this kind of analysis is that it assumes that people are going to be able to figure out when the down times are coming, right? So does it make sense to shift from passive now or indexing to active now?

So I think if you're thinking in those terms and trying to game the system in that way, it's not going to really help you because that just adds another element of timing to the to the equation. Jeffrey Patak wrote, by contrast, so 60% outperformed their benchmark in a down period, but only 32% of active U.S. stock funds be their indexes in an up period. And then the other point is that when active funds succeeded, they did not sustain their outperformance. Only about a third of successful funds went on to outperform in the next non-overlapping 36-month period.

Oh, so they outperformed when stocks were down, but then in the following period, they gave it back. Yeah. So it's kind of like, do you want to have some short-term? comfort in your portfolio, but then still underperformer the long term. That's kind of what the odds are. This is like not sort of. This is definitely a tired topic, active versus passive. Yes. And we've spoken about this a bazillion times, but the real enemy to invest returns is not an index or, you know, it's not stocks inside of an index or stocks inside of an actively managed portfolio. It's jumping in and out repeatedly. That's going to kill your returns. So what if a mutual fund does 7.4%

and the index does 7.8%. That is not going to hurt you. What's going to hurt you is buying at the top and selling at the bottom repeatedly. Yes, not do you outperform, but do you underperform or outperform your own investments? And can you actually stay in line with your own investments, which is harder than it sounds for a lot of investors? So I got, there was a good one this week in Bloomberg. That caught my attention. And Harvard has had a ton of problems with their endowment fund over the last nine or ten years.

And I've written a lot about this. And so there was a story, and this one even kind of surprised me, even though they've had so many problems. And so the story says, okay, so six years ago, Jane Mandillo, then the head of Harvard's endowment, spent a week in Brazil flying in a turboprop plane to survey some of the university's growing holdings of forest and farmland. That year, Harvard began one of its most daring foreign adventures in investment in a sprawling agricultural development in Brazil's remote and impoverished northeast. Their workers would produce tomato paste, sugar, and ethanol, as well as energy after processing. crop. They basically figured out, they made all these investments in a farmland. Hold on, hold on. Finish that quote. You missed the most important sentence. Okay. The profits in theory could outstrip

those of conventional stocks and bonds and keep the world's richest university to step ahead of its peers. Which is honestly, like when I was in the endowment world, these are the kind of pitches we would get. Like, why do you need to be in stocks and bonds when you can be investing in Brazilian farmland and tomato paste and sugar? And of course, they ended up losing a billion dollars in this. So the headline was, yeah, the headline was hard. Harvard Blue $1 billion in a bet on tomatoes, sugar, and eucalyptus. And it's just, it just boggles my mind that if taking a turbo prop plane is part of your due diligence on an investment, like, why? What is the, like I understand. I don't know.

They have so much money. It probably doesn't matter. Like, the funny thing is, is they lost a billion dollars on this and they still have a $37 billion portfolio. But it just boggles my mind the thought process that goes into some of these investments by these large, quote unquote, sophisticated investors. I will never understand it. Would you say that this was a rodent tomato? All right. That was a four out of ten. Not bad. I mean, so honestly, these are the kind of pitches that we would get. We got all sorts of crazy pitches from these funds and investment styles that you've just never heard of that make zero sense, especially if you have no sort of idea or like expertise in the area. You're kind of, you know, offloading it in a lot of ways and outsourcing it

to someone who actually knows this stuff, but, like, what do you compare it to? Like, how do you benchmark tomato paste in Brazil, right? Like, how do you understand if that's doing well? You say, well, it could get a 15% IRA or something, but the alternative is it goes to zero like it did. Is there a fruit and vegetable index? Yeah. Actually, is tomato fruit or vegetable? I don't know.

So getting back to that tomato is a vegetable. It belongs in a salad. Okay. All right. Fair. Getting back to that Dow Vigilante's piece by Ed Yardini, this is an interesting data point. The operating profit margin of the S&P 500 rose to a new record high during Q4. Remember when like peak profit margins was a thing in like 2012 maybe?

Yes. It had to mean revert and there was no other possibilities. And there was a lot of talk at this point in the cycle, which is a thing that we hear all the time at this point in the cycle. You actually wrote something recently about like catchphrases that annoy you, but this is one for me. is there any way to know where exactly where we are in the cycle and if there was a way wouldn't that make investing a lot easier yeah well we've been in the ninth inning for the last eight years now or so give or take yeah it is kind of crazy that people think that like these things work on a set schedule like well it's been five years since recession so that means we have to have

another one which is another sort of faulty way of thinking about the world it is kind of crazy that that people think that mean reversion operates on a set schedule which is never the This was the craziest tweet I saw this week. This Silicon Valley Home just sold for $2 million, all cash, no contingencies, 10-day close. It's 800 square feet, and we'll link to the picture of this house. I almost can't even believe this. Did you see this?

Yes. I mean, honestly, that house in West Michigan would probably sell for $60,000 maybe. I mean, not even kidding, depending on the neighborhood. It's just unreal. And there was actually a story in Bloomberg this week, too, looking at the percentage of buyers in a certain area that will put an offer on a house site unseen. And some of the ones in, like, L.A. and San Diego in different places in California were like 40, 50, 60 percent of buyers that would put a bit in a house and never look at it before.

I just can't even imagine. This gets back to our U-Haul conversation of last week, obviously, of why people are leaving in droves. I just can't. The thing is, even if you were a top executive in one of these tech companies, why would you want to live and work there still and make your employees do that when this is what they're forced to deal with in terms of living conditions? Got nothing. I'm out of loss. Yeah. But yeah, that was a pretty insane tweet. And it's just, I understand, obviously, like, it's probably not going to change anytime soon because it's gorgeous out there. And that's like the tech capital of the world. So it is what it is in a lot of ways. But it's just unfortunate. because a lot of quote-unquote normal people are going to be forced out of there and not be able to live there anymore.

I think Silicon Valley is coming back in a few weeks. Oh, I don't know if it'll be any good without Erlick Bachman on it, but we shall see. I think that show may have peaked last year, maybe two seasons ago. Okay. Speaking of, do you have any good recommendations this week? You told me about the James Al-Toucher, Jim Kramer podcast. I think Al-Tucher actually got his start, I believe, at the street with Kramer like 20 years ago. I think that's how we've got to start in investing. So I listen to this. And I'm fascinated by Jim Kramer. I think he's an easy punching bag for people in the financial media or for financial advisors to point to. The way that I look at Kramer though is he's almost like a sell side analyst where you don't pay attention to his recommendations. You pay attention to the information. Because sell side analysts are wrong all the time. Their buy sell recommendations are basically never right. But you can still use their information and they can have some value to it. And I think that's the way to

look at Kramer. You don't look at his recommendations. And I understand why people are sometimes mad at him because a lot of his viewers are just retail investors and think that when he says to buy something, it must be written in stone. But this was a very eye-opening conversation to me because he really opened up and pulled back the curtain in a lot of ways. And I've never heard an interview like this with him before. He has an open book. I mean, Confessions of a street addict was really, really personal. Yeah, that was one of the first investing books I read, actually. Yeah, you know, it's funny. Actually, I was in a dentist chair last week. and I was watching CNBC, and I think Kramer was on, and the guy asked me what I thought of Kramer.

And my answer was, I have a lot of thoughts. I mean, I think he is such a magnet for opinions, but he's a very complicated character. I mean, on the one hand, like, he has an easy punchback to your point. He makes 7,000 buy-sell recommendations a year. I mean, he's just not going to be right all the time. And he even admitted to that. He said, I'm on 250 times a year. You know, I can't expect to be right every time, which maybe at that point you don't make so many

recommendations. They just say this is how I'm thinking about the world. But he's sort of like the gateway drug into finance. Like that's how a lot of people get started. Yeah. And I watched him when I first started out too. And he does do a lot of teaching. But the interesting part of me here was about the work of life balance stuff. And so Altucher was really asking him questions about, you know, you have such a crazy workout because he says he's up like three or three 30 every morning working and he works till late at night. And he must have mentioned four or five times the fact that his wife and his children always tell him like stop working so much you don't need to you have all this money you have nice houses we can go on vacations and he couldn't do it and the one story that really

caught my attention was he said he went for a nice dinner and drinks with his wife and he came home and she said hey let's go upstairs and watch a tv show or movie and he said i can't i've got to go listen to some quarterly conference calls or quarterly earnings calls from a couple companies that i've never heard of and that's how he's he's reading the transcripts yes right it's crazy and so i mean in a lot of ways it's amazing that he was able to find this work that he is so passionate about and loves but it was kind of sad in other ways the fact that he just can't let go of control and enjoy himself it's like there's no it's he's a really extreme guy obviously which is part of the reason he's been so successful but it's in his personal life it doesn't sound like it's it's that great of a

thing for him yeah did you uh how about the the elan musk's story that he told at the end remind me Elon Musk said, are you a hologram? Oh, right. Yeah. I don't know. You're not just a hologram. Yeah, that was interesting. That's pretty good.

I read, this week I read the Spider Network. It was by David Enric, who I think works in the New York Times. It was about the LIBOR scandal, which was a huge deal that maybe got, I don't know if it got underreported or if I just didn't really care about it. But to me, the main takeaway was how unbelievably easy it was to manipulate LIBOR and how not really even. secret of these people were about it like they were just they would just tell them the banks where they needed to be and they would put in their orders and it wasn't really getting checked and there was really very little control surrounding it and who ended up being like the main culprit so there was this this guy named tom haze who really took the fall he got 14 years in prison um which is

a lot for a white collar crime and it's a lot for it's a lot of time and nobody else nobody else did any time wow so uh that was a really interesting read almost done with the Teddy Roosevelt book, which is unbelievable. Again, it's a trilogy that I mentioned on an earlier podcast by Edmund Morris. It is so, so, so good. As far as what I'm watching, I started watching The Marvelous Mrs. Maisel on Amazon, which was recommended by a bunch of people. And it's hard to even describe it because it's just a very different concept. But I'm three episodes in and I really enjoyed it. It's about 1950s Jewish family on the upper west side and she becomes a comedian and it's different definitely different so i recommend it i think

she just won best best actress in emmy or something for that too so that's on my list uh my suggestion this week so there's a my favorite comedian right now is sebastian maniskelco he is a special on netflix called aren't you embarrassed so my wife and i got away from the kids this weekend in chicago and went and saw him at the chicago theater and you and i are both huge fans of stand-up and i think this was probably the best show i've ever been to which is saying because i've been to a ton of these shows. He will, I mean, I think for my money, he's the best, he's got the best stand-up set of anyone right now. He just killed for like an hour and a half and didn't let up. It was amazing. He's also got a book called Stay Hungry. I started reading. It's kind of about his story.

It took him like 20 years to break into the stand-up comedy world. And now he's like one of the biggest, he's like the top 10 earner last year or something in terms of comedy. And he's kind of blowing up. The other one I kind of was rereading lately. Oh, sorry. One more story. I saw. Yeah, so apparently, that he has a podcast, too, that I listened to with another comedian named Pete Correlli, who I think you've said you just saw recently. Oh, yeah, he would, yeah, Josh, Chris and Fahmi, and I saw him recently. He was funny.

Yeah, so those two do a weekly podcast together, and they just kind of just sort of shoot the shit with each other. It's nothing too big. But so on the podcast, they mentioned JJ Watt is a huge fan of his, and he said he's going to go to the show in Chicago. And he actually was at the show, not to brag. He was about 10, 10 rolls behind me, so I had better seats than JJ Watt. but so so he's obviously enormous so what do you do in that situation do you go up to him and ask for an autograph or not no yeah yeah obviously i didn't i'm not an autograph guy either but people were like hounding him and he ended up getting taken out the back door but uh thought that was kind of cool

i think one of his brothers was there too a place for the pittsburgh's dealers but although by the way i said i said no emphatically but i'm the guy that i was in the serious building and i walked into the bathroom and mad dog chris russo was in the bathroom and i screamed holy shit Chris Rousseau and he looked at me like, what is going on? Yeah. So that was one of the cool parts of the thing is seeing him there. The only other book I recommendation I have this week is I was rereading the hard thing about hard things by Ben Horowitz, who is one of the founding members of A16 Z venture

capital firm. He works with Mark Andreessen. It's probably one of the best business books I've read because he really looks at it from it's not like just phrases and sayings and simple life hacks it's actually like running a business is hard and here's what it takes and uh why do you pick that up again i was doing some research for a blog post and i remembered some quotes he said and so i think i might use them in an upcoming post and just kind of started looking through my notes on it again and for regard that it was a really great book and i think that's all i got all right yeah so we got a few

good other good reader questions for next week but feel free to send them again animal spirits It's pod at gmail.com. If you feel so inclined, leave us a review on iTunes. And thanks for listening.