Animal Spirits Podcast - Cancel All the Debt (EP.177)

Episode Date: November 18, 2020

On this week's show we discuss vaccine Mondays, why the market doesn't care about increasing cases, what's the best age to die, making emergency funds obsolete, too much cash on the sidelines 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

By now, you guys have heard us talk about masterworks.io, the fine art investing platform. But if you haven't, go back and listen to our interview with their CEO, Scott Lynn. That was back in April. I had a blog post out this weekend detailing how I invest my own money and included that I have personally invested in art on Masterworks. Ben has done the same. Just last week, Masterworks announced that their first Banksy masterpiece was acquired, resulting in a 32% return net of fees.

Obviously, past performance is no guarantee your future performance and all of that good stuff. Check out masterworks.io today and their art experts will help create a custom portfolio to match your investment needs. Again, that's masterworks.io. Tell them AnimalSpirit sent you to skip their 10,000 person wait list today. See important information at masterworks.io slash disclaimer. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Batnik and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect

the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Wasn't last one? week, so much better than the week before? I don't know. Isn't it always if you're trying to improve yourself, Michael? If you just get 1% better a day, well, last week, our doc for the show was basically empty, right? The only thing to talk about was the election and the market reaction and I feel like we have a full doc this week. Life is back to normal. And for people that

aren't like obsessed with politics, I feel like one of the best things about having the election behind us, all of us can just have our life back. Whether you support the current president or not, you can't help but be sucked into the political vortex every freaking day. And with the president-elect Joe Biden, I think a lot of people are going to just go back to not caring, not having to watch every single day. What do you think the people that that's been their whole life for four years? Are they like that maybe I've used this analogy before, but when Forrest Gump stops running and all the people who have been following them through the desert? I feel like it's been my life for four years.

Yeah, what do those people do? What do you mean those people? You mean the Trump supporters or what? No, everyone who's just been, their whole life has been hanging on him and they tweet about him on social media every day and it's just all consuming. Now what? I don't know. So, Vaccine Monday, I guess, is a thing. What do they say? Turn around Tuesday in the market, but now it's vaccine Monday. We've got another one from Moderna today. This is another continuation of just this is awesome. Isn't it just like you wake up on a Monday morning and it's like Christmas? It's been a rough couple of weeks. So last night, the governor of my state in Michigan, Governor Whitmer, got on for press conference, and we watched because we didn't know what was going to happen,

they started shutting stuff down because it's getting bad. 14 or 15% positivity rates, the hospitals are filling up. By the for context, it's getting relatively bad in New York, but positive test cases here are under 3%. And you told me last night it's 12 to 14% in Michigan. It's crazy. And they're testing more people in the hospitals are filling up. Every time I drive on my main road, there's two WebMD-type places, walking clinics. and for the past few days, the lines are around the block every time of the day.

They're giving mixed messages here about saying people like, just if you came in contact with someone, doesn't mean you can get tested. They stop for the next three weeks, indoor dining, grouped exercise classes, bars, restaurants, any of that stuff, skating rinks, any indoor, anything has been closed. They're trying to stop, trying to cut down on big groups, meetings, obviously, and high schools are closed for three weeks for just a virtual. Luckily, they're still letting eighth grade and below go, which sounds like the experts are okay with.

I got to imagine this stuff is coming elsewhere, too, because there are other states that are doing much worse than us. So it is, again, hard to square this in your head with, oh, if we can just get over the finish line in maybe just a few more months, but now the pandemic is just growing exponentially. Dow just hit a record high. Here's one for you. Remember one back in March when the stock market cared about rising cases? Yeah.

Is there anything with the pandemic that would happen that would cause? is the stock market to fall out about. I don't think there is at this point anything that can happen if a vaccine is really on this time horizon. I said to Josh a few months ago that I don't think the market will react the same way to rising cases as it did the first time. And the reason why I said that was, I think I was right for the wrong reasons. I suspected that we had the playbook that we knew that fiscal stimulus could get us through the other side. I didn't think that we would have the vaccine here so soon. So isn't it fair to say that absent the vaccine, the market might have rolled over due to rising cases.

The vaccine came at a perfect time for this. Yes, I agree. Here's a question for you. Maybe you've looked at this, but how many new all-time highs in the S&P 500 in 2020 do you think? I calculated this morning. Well, we had a bunch earlier in the year. I'm going to say 23.

Pretty good. So if we're including today, it's 24. Pretty good. That's amazing. Again, it's hard to think about where we were in March, in the mindset that we had. 24 new highs. Wouldn't this be ironic, by the way?

What is the market up this year? The S&P 500 is up 12.7% year to date. And maybe the chase is on. We'll see. I was going to say, wouldn't it be sort of, I don't know if irony is the right word, but it would be something if this was an average year. You know how there are never average years in the stock market?

The stock market never actually does 8% to 10% a year. Yeah, this could be it. Wouldn't it be something if this was the outlier average year? I mean, the fact that it's up double digits. I keep coming back to those feelings that we had, and the conversations that you and I had in March and April, when things were just so, so bleak. It's really hard to believe. The Russell 2000 was down 40% year-to-date through March.

Through March at the bottom, it was down 40% year-to-date. Now it's up six. So someone in the- Did you hear that? Down 40 to up six. I know. And the NASDAQ is still up 40% or something. So someone in our comments on the YouTube video, which again, check it out as the

compound if you want to see some highlights from the show. Someone said... This is after last week when we were, admittedly, I was in a great mood last Monday just because of the news that the virus. It's great news. Someone said, you guys are way too bullish. And I don't even think it's just to talk about the fact that- Me too bullish?

That's true, not you. You must have been talking about me. But to talk about the idea that there could be a bubble from this, just of our conversation, like there could be a boom from this. Just to put it out there, it doesn't mean that you're bullish. It means like you're looking at all sides because whatever, it's possible we could have a sell-the-news moment because the market is back on the trend line from last year. and it's up a decent amount. Could we ever sell the news? I don't know. Sure. But like, that's the whole

point of this thing is like, just because you're talking about a range of outcomes doesn't mean you know for certain that's going to happen or you're betting on it to happen. How much cash do you think that person is sitting on in their portfolio? Would you say 130%? How many times do you think that they've complained about fiat currency or free market price discovery this year? Probably a lot. I think one of the best thesis for a boom certainly next year is the savings rate, The savings rate in the United States skyrocketed. This is going to be so cliche going forward. So forgive me.

But pent up demand is a phrase that you're going to hear a lot in the coming months. Yeah, you've heard it in the previous months for me too. But Tim Dye, I was going to say this for later, but I'll talk about it now. He talked about six reasons why Biden is stepping into a dream economic scenario. He said, basically, number one, there's nothing fundamentally broken about the economy. Last time we had the debt overhang in the real estate bubble. Real estate is doing fine this time. The second one is the demand that you talked about.

There's got to be so much pent-up demand for a bunch of stuff. Three, was household balance sheets actually improved this year, which is just insane to me. Four, demographics are better now than they were then because millennials are starting to hit their peak earning years in hitting their late 30s and 40s and actually settling down. Five household savings has grown by a trillion dollars. And six, the vaccine is coming. He's saying it's really not as bad as you. Counterpoint.

What's the Cape ratio? That's true. Sorry. Schiller wins again. All right. I've been thinking, this is a survey from Pew Research, and this was in September. And they wanted to know the share of Americans that would get a COVID vaccine if it was available to them today. And they asked people in May and September. And they figured out that in about half of adults in September said they definitely would or probably would get a vaccine if it were available today. 49% said they would not get it today or they definitely would not get it.

intent to get a vaccine has fallen from 72% in May, a 21% drop. So it went from 72 to 51. I do not believe this survey at all. I think some people are going to need a nudge or shove, but let's say when this vaccine arrives and it's available to the general population, let's say a bar says you cannot come here unless you have the vaccine. You can't go to Disney if you don't have the vaccine. You can't go to a concert if you don't have the vaccine. You see your friends going out and traveling or going out to restaurants and bars who've had

vaccine. Are you really going to sit on the sideline and say, I don't think it's safe enough. I'm not going to do it. People who say they're not going to get it, I do not believe them one bit. I think I kind of agree with you. Will places be allowed to mandate such a thing? I know Americans love their freedom. But don't you think if you were a business owner, wouldn't you want to do that? Are you allowed to legally? Can you discriminate based on people not getting a vaccine? No shoes, no shirt, no vaccine, no service, right? I don't know. I equated it to this, and I'm doing a little piece of that I hope that this scientific breakthrough like hopefully this could be like our one giant leap moment because there was this huge technology boom following getting the man on the moon in the 60s. It wasn't just that we got them there. There was all this technology that came from it. And it was in that book we read one giant leap. And so I'm going to write about that. So they said in 1964, when they asked a group of Americans, should we go all out to beat Russia to find a manned flight to the moon? Only 26% said yes. Even in 1968 after that Apollo 8 mission that Robert Carson wrote the book on, Rocket Men, 39% thought it was a good idea.

to land of the moon. Fifty-five percent of people said four billion dollars being spent annual by NASA wasn't worth it. Do you think those same people agreed after we landed on the moon? That was like one of the greatest achievements in our country's history. Maybe the crowning achievement of all mankind. Do you think anyone remembers that beforehand they thought it was a bad idea? That's what I'm saying, the vaccine. I think we could see a similar thing where when it gets here, people go, okay, I said I wasn't going to get it, but now my friends are getting and my family's getting it. I'm doing it. Well, the flu is, I read somewhere this morning, the flu is 40 to 60% effective, the flu vaccines, and on any given year.

If this thing is 95% effective, why wouldn't you take it? I know. There are going to be some people who are hardlining and saying, I'm anti-vax. I'm not going to do it, but I agree. If you could, if you're a business and you could say, you cannot come to this, whoever a big show is, Beyonce or Taylor Swift, if they say, you cannot come to my show if you don't have the vaccine. People are going to get the vaccine.

Well, if we take animal spirits on the road, you absolutely cannot come in if you're not vaccinated. Yes. Okay. The fact that Fauci this morning said it could be here for the general population by April. I'm just going to be fascinated to see how they roll this thing out and how people are able to get it. I don't know. I'm really interested to see how they supply chain this thing. Speaking of surveys, by the way, I can't believe that we forgot to cover this last week. We didn't really do the Nate Silver stuff last week. Yeah, that was a big miss on our part, the fact that we didn't talk about pollsters being like surveys. We were off by three standard deviations on that miss. So this is a great headline from a Vox article. One pollster's explanation for why the polls got it wrong. The kind of people who answer polls are really weird and it's ruining polling. So this is the coup de graf from the article. Here's a quote.

The assumption that poll respondents and non-responses are basically similar, once properly waited, used to be roughly right. And then, starting in 2016, it became very, very wrong. People who don't answer polls, sure argues, tend to have low levels of trust in other people more generally. These low trust folks used to vote similarly to everyone else. But as of 2016, they don't. They tend to vote for Republicans, end quote. So what do we do about political polling going forward? Because I think this is a very critical and obvious point.

On the one hand, you have very big extremes on the Nate Silver thing. On the one hand, people say, no, people just don't understand probabilities. That's not how these models are supposed to work. On the other hand, you have people who say, no, these people are idiots. Their models are useless. Throw them out. And obviously, the truth usually falls somewhere in the middle. there is a huge element of garbage in, garbage out with these things. They're taking the data from the pollsters they get. It's not like they're out administering these polls. They're using the numbers they get. But it is kind of bizarre that they had two polling errors, quote unquote, two elections in a row, and both of the errors went in the same direction. So that whole thing about trust, if there's one

group of voters that doesn't trust the people that are calling them and doesn't answer their phone, it's hard to take them completely seriously. The other thing I think, why do they have to put a probability on it. Because they say, well, Biden is 90% chance to win. That would mean he'd win in nine out of every 10 elections and Trump would win in one out of every 10. Guess what? Those people are all going to vote the same regardless if you ran this a million times or one time. So why don't they just say, we think Biden's going to win? Why do they have to put a percentage probability on it? I think the probability, you can't make probabilities on real life. It doesn't work. It's not a casino. Well, yeah. I mean, are these polling models broken? I guess they say they leave some

room for error, but the question is, will people care? People are still going to go to them for their analysis, so it might not matter. Is this number high or lower than you would have thought? About 4.5% of Vanguard 4.1K investors took a coronavirus distribution around 12 grand, it says. That's actually not bad, I think. That's probably lower than you would have thought when they announced this. Do you think? Yeah, so 1 in 25-ish people. So they said that the amount was roughly $12,000 people took out, which again shows there was a group of people that probably needed to have some more government assistance if they're having dipped into their 401k to cover things. Here's a nice nudge that I think we might see in the

future. There's an article in New York Times talking about a money payroll deduction emergency savings plan. More than half of working adults surveyed by AARP said they would probably participate in a payroll deduction emergency savings program. So they spoke about one company that gives its employees a $20 sign-up bonus, and then it matches employee contributions up to $40 a month. So if you put $240 over a six-month period, you'll have a balance of $500. I love this idea. That's great. Right? Yeah. Because guess what? If your employers, employees have their personal finances more short up, and it's not going to be a huge emergency for them if their car breaks down or something, that helps keep them on the straight and narrow for their

job and they tend to it, not worry about that stuff. It's a great idea. There's this thing called the saver life program, which allows determine how much they want to save. And the quote from the article was, this program encourages seasonal goals, like saving refunds during tax time or saving for gifts during the holidays. I think people really need something like this. Yeah, because most people don't break their finances out into, like there's all these infrequent things that you have to buy occasionally that you don't plan for like on a set schedule. It's not your Netflix subscription. it's a car breaking down, even Christmas gifts. Instead of trying to spend $1,000 or on the holidays and come up with that, you could be saving $100 a month to build up for that. But most

people, unfortunately, don't think like that. So if you had a program that encouraged it, it would help people. So those things that are infrequent, but still you can plan for, they wouldn't become emergencies anymore. What was that debunk data point that people still reference all the time? Forty-five percent of Americans don't have $400 in savings? Yes, that one is used by a lot of people in it. Even if that's not, even if that data point is not precise, let's just say that it's fairly accurate. It could be 30%, whatever it is.

Too many people don't have an emergency savings. So I think that this is a great solution. Yes, totally agree. When Gallup asked 100,000 U.S. college graduates, what part of college contributed most to a satisfying and while paying career, the number one response was internships. I don't know what I would have thought, but this surprised me, maybe because I didn't have a traditional college experience. I mean, I would have said networking if I had to guess.

Honestly, I'm sure for a lot of people, that was the way that they found employment. Doing an internship program for a semester was probably the best thing I ever did. Where did you intern? I did a program in Philadelphia for an investment analyst firm. And honestly, without that, my career office at my tiny liberal arts college was not helping me at all. So if I didn't have that for my resume, I would have been screwed in terms of trying to find a job. So I do think that there probably are a lot of colleges out there that could do better in terms of not just teaching you the textbook stuff, but how to get a job. I don't think they do enough

of that. So this comes from an article in the journal by Greg Ipp, How to Spend an Education. The average college degree holder earned 64% more than the average high school graduate in 2018, up from 35% to 1980. But as the college premium has grown, it has also become more variable. Among college graduates in 1979, those at the top earned 4.2 times more than those at the bottom. By 2018, that ratio, I'd go into 4.8%. And here is the coup de grace, again, to misuse a quote, a Manhattan Institute study found that the lowest paid 25% of college grads now earn less than the highest paid 25% of high school grads. So those are probably the people that go to college. Mark Zuckerberg. Yeah. They chase their dream and they major in the wrong thing and they didn't

realize, oh, this thing I'm majoring in does not pay anything. Right. Maybe they take out six figures the student loan debt and they're screwed. I can see how that would happen. So this is a nice segue to the canceling the student loan debt topic that has been floated in recent weeks as President-elect Biden has won. I saw something last night. I can't remember who posted this. So they're talking about floating the idea of canceling up to $50,000 worth of student loan debt. Did you know that if that were to happen, this loan forgiveness would be a taxable event, leaving a lot of people no better off than they were having. the loan. Wait, how does that work? I don't understand. Obviously, I'm not an accountant,

but I believe that this is a taxable event, meaning you would owe ordinary income on whatever was forgiven. Oh, really? Okay. I didn't realize that. I don't know. I mean, people have really strong opinions on both sides of this. There's the people that say, this is crazy. It's crippling our young people. Older generations didn't have to deal with this. And there's other people who say, you can't cancel all the debt because I paid mine off. So why should these people, which I paid off my student loan debt? Would I really be angry if someone else got paid off? No. That's you, but I understand the argument for why people would be upset.

I do. Even though I think it's perhaps a little bit selfish, I understand. I don't know. My parents always told me sometimes life isn't fair, you know. But how about the fact that what is the average student loan debt? Is it 20 grand, something like that? It's in the low 20s now. It's been working its way up.

So, yeah, it's the price of a Nissan Central or something maybe. Okay. And then what about the fact also that, and I feel for people with crippling student loan debt burdens, but what about the fact that these people, generally speaking, are earning a lot more money than somebody without a college education. Yeah, to your point about education. And here's the other one. Richard Thaler shared this on Twitter this morning.

It's the share of student debt owed by each income quintile. And this is as of 2019. And it breaks it out by the poorest to the richest in fifths. And so basically the top 40% of income earners hold about half of all student loan debt. Okay. So you've got doctors and lawyers that are taking like these really advanced degrees and earning a lot of money. And it sucks. If you're a doctor and you've got $250,000 worth of student loan debt, I feel for you. That hurts. Yeah, I don't know if I really feel for doctors. I don't know. They'll be fine. Doctors will be fine.

If you took out $150 grand to go to a nice school and you got an English major or an art history degree, then yeah, I feel for you. Here's why people get mad. Because if we're going to cancel student loan debt, we have to somehow pay for it, that's where people get annoyed. MMT is going to pay for it. I get that. But I'm saying if the budget office is like, Okay, sure, we can do this. How are you going to pay for it? The point of all this, though, is that some people could see this as almost like a bailout of wealthy people. On the other hand, if you had all the student loan debt taken out the hands of young people, my first thought was housing market to the moon. Well, correct. However, again, if it's a taxable event, not necessarily, because it would

probably be a net neutral type thing. If I could wave a magic wand and have this student loan burden disappear without it causing like a political shitstorm, then I would do it. Sure. I honestly think you would see a bigger bang for your buck in the economy if we canceled credit card debt as opposed to student loan debt. I'm not saying we should do either, but don't you think that you get a bigger bang for your buck? They're actually probably similar sizes, I think. Well, let's take a look. All right, from Y charts, I have U.S. student loan debt is $1.5 trillion, and I have credit card debt at $800 billion. I have a better idea. Cancel them both. Yeah, there'd be people really happy about it.

about that. But I'm just saying, don't you think people who have credit card debt are probably bigger spenders and they would just immediately spend more money? I'm saying you'd get a bigger boost to the GDP if you did that. And then what happens if they get more credit card debt? Do you cancel that too? One time deal. If this is a magic wand thing, I don't know. If we're talking magic wand stuff, people with a lot of credit card debt, I have no evidence for this, but it seems to make sense, are in worse financial shape than people with student loan debt. Probably. And to my point, all the people that spent money this year from the CARES Act, those are people in the lower end of the income scale. And that's probably people with high credit card debt. But this is never

going to happen, right? Isn't this one of those things that it's fun to argue about? This is never going to happen. I don't know about that. It might happen. I think there's a non-zero chance. If we put this in an innate silver model, what's your probability of this happening? Eight and a half percent that's could happen? Okay, sure. Here's something that's never going to happen. Taxing people to work from home. This is the worst take of the pandemic. So Deutsche Bank had this article, what we must do to rebuild. And it was 83 pages long. There's a lot in here.

I call it a white paper. Okay. Before we get to that, actually, there was some decent charts in here that I want to talk about. One is showing the satisfaction with democracy by age. And to me, the takeaway is older people are pretty okay with how democracy is going. From ages 60 to 80 and 50 to 70, it's pretty much a flat line. Don't you think that the more online you are, the less satisfied? you are with anything, though? Oh, for sure. That's why, like I said, the internet, nothing is

properly rated anymore. So if you're younger and you're not as satisfied, there are reasons for that, but also you're just not satisfied with anything, basically. Am I reading this chart, right? Is this showing that older millennials, like you and I, especially you, are really unsatisfied with democracy? And by the way, there's a Y-axis thing going on here. It's not quite as stark as it looks, but from 49% to 44%, yes. Yeah. I mean, that's a fairly big drop. But is that with Am I reading this right? Yes. So they're showing that boomers are 50% satisfied.

Gen X is 47% and millennials are 44%. It's not that big of a difference, even though, yeah, the chart makes it look like there's a huge difference. This next one is interesting. Millennials and Gen Z and younger cohorts will have nearly as many voters as those in older generations in the G7 by the end of this decade. Yeah, baby boomers are going to start slowly dying off. Like I said, Gen X is going to pass the baby boomers in terms of numbers by 2030, supposedly, and millennials already have. So the younger generation is coming. This next chart ties into the first one.

The percentage of U.S. 25 to 34-year-olds living with their parents is 18 percent almost, and it's been rising since 0304 about. Now, if you're living with your parents in your 30s, you're not necessarily unhappy with democracy. You're not happy with anything, probably. Right. Yeah, you're just unhappy. Yeah, with everything. That makes sense. This is how the post starts. For years, we have needed a tax on remote workers. COVID has just made it obvious. Really? What do they want to do? They want to do a, tell me how this tax works. All right. So they said that work from home went from 5% pre-pandemic to 56% to today.

And they want to tax people that work from home voluntarily on a daily basis. So good luck enforcing this. Did a skyscraper write this report? This is the dumbest thing I've ever heard. Is somebody going to time in with the IRS? Hey, I work from home today. So they're basically saying that 5% of work, if you assume an average salary of 55 grand, 5% of work works out to just over $10 per working day, which is roughly the amount an office worker might spend on commuting, lunch, laundry, etc.

Nobody wants their taxes raised, especially just because they work remotely. This is just a bizarre idea. I don't even know where to begin with this one. I mean, it's going to raise a whopping $48 billion, which is nothing. I don't know. I give them an A for effort, I guess, but no. This is unanimous next. Yes.

I mean, especially, let's say you're someone who works from home and you, like, started your own business and you're already paying for your own health care or something. Like, get out of here. It would exclude those people. If you are self-employed, it would exclude you. Okay. But again, yeah, to that point, like, how is this enforceable? It's just its nonsense.

Dead on arrival, as they say. So I don't know if this was all the hedging of the election or what, or maybe it was, I don't know what this was, but there's now $4.4 trillion in money market accounts, an all-time high. Is that just because all of the money printing? Is that just the natural state of the world that this money, this chart is going to keep going up into the right? If you look at commercial bank deposits, that's pretty much what's going on. You see a huge spike in both. And the spike looks equal. So commercial bank deposits, yeah, are. 15.7 trillion. It was an increase of 2.5 trillion year to date. Well, what if this is all just the fiscal stimulus? I mean, that's got to be part of it. But don't you think that there's also the fact that just a lot of wealthy people aren't or can't spend money on stuff they used to? People are hoarding cash this year and they're not spending as much as if you're not traveling as much and you're not going to concerts and you're not going out as much. But why money markets? Because people are scared to the stock market. I don't

know. So you're saying why is there a huge uptick in money markets and not other stuff? cash in the sidelines. Is that the bulk case for 21? All the cash coming off? If you think about it, when things got really nasty in March, before the Fed threw their bazooka into the mix here. I think they shoot a bazook. You don't throw a bazook. I think Powell was like throwing the bazook like an incredible Hulk in the Avengers basically. Treasuries were selling off. Remember this? I mean, it's almost hard to go back there because it seems to go so long ago, but people were selling treasuries in mid-March. They were getting crushed. Cash was the only thing people wanted. That's true. I think that there was a safety trade here. And you can

see it slowly starting to come down now. You're 100% right. How quickly we forget that cash looked very, very attractive in March. It seems so easy now to say, oh, you should have bought hand over fist. Stocks were down 30%. It was so scary. Even when stocks rebounded a little bit, how many people were calling for retest of the lows for two or three months? It was not a foregone conclusion that we'd be at this place. Credit to sentiment trade. Remember, he had some stat that said, like, if this is a dead cat bounce, it will be the only time. I forgot what the data point was, but the breadth of the bounce was something that has never happened in a deckhead bounce anyway. Also, yeah, I remember the stock market bottomed like a 9% up day? And everyone said,

stocks do not bottom on those days. I just wrote a post on this and I was shocked to learn. When Rita Wilson and Tom Hanks that night, Rita Wilson, Tom Hanks and then Rudy Gaubert, that was like the holy shit night, right? I think stocks are down 9% the next day. The market bottomed only seven days later. That was at the beginning. And the market bottomed in seven days. If you think about it, in both instances, both the drop and the comeback, the stock market was ahead of everything in this. Because the stock market was falling for weeks before we had the Tom Hanks, oh, shit, moment. Right. Yeah. And came back way before, too. You talked about it. The vaccine hit at all-time highs, which is just, it's pretty hard to wrap her head around that

that happened. Jed Colco, the chief economist at Indeed, posted some great charts this week. U.S. job postings on Indeed are now 13% below last year's trend. Improvement continues, though, at a slower pace than the summer rebound. And I just wanted to make a comment. Isn't it insane that we have this level of detail on the economy in real time? Think about it. During the Great Depression, GDP had not been invented yet. The TSA airport travelers and all the stuff, the miles driven by cars and all this stuff.

The turnstiles on the subway. I thought this particular one was interesting. the bottom third, in terms of wage earners, the bottom third and the middle third have rebounded really sharply. The one that's lagging behind is the top third, the high income earners. And we've heard a lot about how this is an uneven recovery. But I think that really is the very wealthy have seen their net worth increase. But people that are like high income people, but not necessarily wealthy, have gotten hit really hard. Yeah, if you're kind of in the middle ground, I could see that And the low on, too. I was walking by a construction site. This is a couple months ago.

And these two young guys looked like they're in their 20s, siding or whatever on the side of a house. And the one guy goes, so my dad says, stocks are back to all-time highs. Everything's doing fine. And he said, Dad, the stock market does not sign my paycheck. I wanted to pat the guy in the back, but he probably punched me. So Bill McBride, a calculated risk, had this thing about how this time period between now and the vaccine and things taking off potentially could be really dicey for a lot of people. So he said that there's these two programs that are going to basically run off at the end of the year. There's this one assistance that provides 39 weeks of benefits to business owners and self-employed contractors, gig and workers not receiving other unemployment insurance. There's 9.8 million people in this program right now. He said there's this other program that has 4.1 million people.

And since October 1st, it's basically doubled. So there's still a lot of people who are going to be hurting for this. Now, the other side of this, if things do come back and like restaurants start hiring and bars start hiring, Do you think it's going to be hard for some of these people to find workers? Is that possible that even though there's still millions of people unemployed, that they're going to be a little more discerning what they're looking for, and that there's going to be certain businesses that are going to have a hard time staffing up if and when they need to, if demand surges back faster than people assume? That's a good one. Is that an inflationary call? Oh. Wage pressure? I didn't go that far, but maybe I am. I don't know.

Buy gold? Silver. Isn't Bitcoin the inflation hedge now? I can't believe. In an election year, obviously, our current outgoing president doesn't always do things by the book, but how could someone not force him to make another stimulus plan before the election? I still can't believe that didn't happen. The fact that there are still tens of millions of people unemployed that they did not get more money

or more help or an extension, I am really shocked. I think looking back on that, people are going to go, what was he thinking? Why would they not do another fiscal stimulus plan? And again, there's still going to be people that are going to be hurting that until a vaccine hits. guess what, if their finances are ruined or their job is ruined for six months, a vaccine hitting is not going to help them very much right now, right? Yeah. Did he read this article from, was it Ezekiel Manuel in the Atlantic?

Yes, it was him. Called Why I Hope to Die at 75. This hit me. This was heavy. Well, it hit me too because my dad is in his mid-70s. Joe Biden, 78. My dad has said that he doesn't want to live past 80 because he doesn't want to go through a lot of this. So the whole point of this article talks about how a lot of the increases in science just

it's not like we're making people's lives better. It's like we're staving off dying, which seems kind of bizarre to think and talk about. But unfortunately, that's where most of the health care spending comes, I think, these days. Yes. So this guy is an oncologist. The article was why he wants to die at 75. He said, quote, compression of morbidity is a quintessentially American idea. It tells us exactly what we want to believe, that we will live longer lives and then abruptly

die with hardly any aches, pains, or physical deterioration, the morbidity traditionally associated with growing old. It promises a kind of fountain of youth until the ever-receding time of death. It is this dream or fantasy that drives the American immortal and has fueled interest and investment in regenerative medicine and replacement organs, end quote. As somebody who's watched somebody die, my mother died 10 years ago, you don't just go poof. And somebody's here one day and then they're gone the next.

Death is dark and painful and long. I mean, some people just die in their sleep, and that's obviously a wonderful thing. But yeah. It is kind of weird to think because my grandparents, three out of the four died relatively early. And my dad's dad, my grandpa, he died taking a nap watching a Tigers game. And he didn't live very long. I was like one years old when he passed. And my grandpa on my mother's side, he died at like 75.

So I was maybe early in high school. But he lived a hard charging life. He smoked all the time. He drank. he partied. He went out like, and you could see like the years on him by that point, too, you know, like living a hard life. He was in World War II, all this stuff. You wonder if just going hard that whole time and dying at 75, I don't know, if you live a full life. I mean, I found myself agreeing with a lot of what he said. He's like, listen, I'm not going to kill myself at 75

by any means, but I think he said he's going to stop doing preventative. So over age 65, no more colonoscopies, no more anything like that. And one of the reasons why is, here's a quote from him. He said, no child wants his or her parents to die. It is a huge loss at any age. It creates a tremendous, unfillable hole. But parents also cast a big shadow from most children. Whether estranged, disengaged, or deeply loving, they set expectations, render judgments, impose their opinions, interfere, and are generally a looming presence for even adult children.

This can be wonderful. It can be annoying. It can be destructive. But it is inescapable as long as the parent is alive. And while children can never fully escape this. weight, even after a parent dies, there's much less pressure to conform to parental expectations and demands after they are gone, end quote. And I think he nailed it. This is really deep. Yeah. It's the kind of thing where like when you get to that age,

then you push it out a little longer, right? And you... Yeah, but I mean, the idea of a long and drawn out painful 80s, I don't think that sounds appealing to anybody. I agree. But here's the counterpoint. So my grandfather died at 75. My grandmother lived till 95. She essentially said afterwards that she almost had this other second life that she never knew would exist. And obviously though she missed my grandfather, I think she enjoyed having some freedom and doing what she wanted to do for 20 years. And she did have, and at the end, it was, she's in a nursing home and it was really bad. But yeah, I don't know. Imagine you don't have that. You don't have financial security. You don't have the family. You have nothing but pain. So a lot of this is going to be situational,

right? Definitely. There's going to be people that have incredible lives well into their 80s and 90s that to your point get a second lease on life, get to see their great grandkids, but a lot of other people become a financial burden and emotional burden. Imagine you're 65, 68, 70 years old, still caring for an elderly parent. Then you are robbed of some of your prime years of your life. Are we going to shake on it now? If at 75 we're still alive, we'll jump off the Empire State Building together or something. Is that our pact we're going to make? All right. No, I can see it. Honestly, maybe my mind will change as age, but deteriorating physically is going to be very hard for me. I don't know how I'm going to be able to handle it. Well, you're going to be fine. Look at me. I hope that Peloton is paid off

by then. I think this is definitely worth a read. If nothing else, it'll make you think for sure. Yeah, I highly recommend this. All right, listen to questions. All right. This is kind of something we talked about today. Can you talk about emergency savings sometime and how you actually treat it? In what circumstances should it be used? The reason I bring this up is that I'm similar to Ben and that I have a key lock for real emergencies. Otherwise, other than my mortgage, everything's paid to the money I have. I hear people talking about using their emergency savings for things that break down their car or something, but shouldn't home and auto repairs be expected from time to time. I have a sub-account where I put away a couple hundred bucks a month for these expenses that I can dip into when repairs need

to be done. How do you think an emergency savings strategy that is prudent? I think that this is a very personal decision. But for me personally, I just wrote about this. I used to have more in savings than I do today, more in cash. And one of the reasons is not that 2% was so much money. but 0.6 percent, I just, I can't do it. To this reader's point, though, there are things that you should prepare for, even if they don't happen on a monthly or weekly, whatever basis, that you should have money set aside. A car repair is not an emergency.

That's something that you should prepare for happening once every 12, 18 months or something, that you should maybe prepare for and put away $25 bucks a month or $50, whatever it is, for that. So you're not having to scrounge up money and freak out and stress yourself out because something goes wrong. That's just something you should prepare for. Oh, absolutely. Whatever that number is, if that's five grand, 10 grand, you should absolutely have that if you could afford to do so. If you really were that ahead of the game and preparing for this stuff, then effectively an emergency savings is pointless. You don't really need it.

Well, let me ask you this. Who should have 12 months in savings? I would say somebody that A, has a lot of money invested. I would say B, somebody that has a highly variable income, right? Yeah, someone who's self-employed, maybe, or owns their own business. Yeah, or has a high-risk job. And that's all that comes to the top of my head. If you have a comfortable living and paycheck every other week and you can talk me into someone who is retired could keep a higher percentage in cash because they're going to need to spend it, right? If you're highly risk-averse and you're waiting for the market to fall 70% to buy the dip, no, I'm just kidding. But yeah, all right, next question. After maxing out my 401k in Roth, oh, we've got a fireperson. I've started putting all extra money into, a taxable brokerage account. One question I have is, why not use margin to increase buying power in non-retirement accounts if your time horizon is long? My answer to that used to be the rates are high enough for margin that I'd take on significant risk of the index funds I would invest underperforming the interest charge on the margin. However, I recently discovered a company which offers 2% margin loans up to 35% of your account value. If I'm investing in VTI with a long time

horizon, why would I not take a 2% loan to increase my buying power? Okay, so it sounds like you're not going to get a margin call based on what loans are up to your account value. If you have enough cash to put it in in case the market does get shellacked, I guess the risk is always with this something like your risk tolerance changes and you can't swallow as much downside as you thought you could. That's the risk. And if you can't, then this blows up and you're just cooked. If you're just running the numbers and you have a 30 or 40 year time horizon and you're only doing it with this 35% of your account value, I think there's a textbook case to be made that this is actually, it kind of makes

sense. I'm hesitant to say that, but... Right. But yeah, the downside is being human and freaking out when your losses are much bigger because you're taking out money on margin. If this person specifically is maxing out their 401k and their Roth, obviously they're a very disciplined person. So if they're able to stick with it,

I don't see any huge issues. All right. Recommendations. What do you got? I don't got much this week. The Dan Patrick podcast that I mentioned before is called That Scene with Dan Patrick. He interviewed Will Ferrell about the streaking scene in old school, which was great. And here's something I didn't know.

This is just a little movie tidbit that seems like it would only be interesting to me, but I thought I'd share it. So Todd Phillips directed Old School and The Hangover, which I think are probably two of the funniest movies of the last 50 years. Remember how in Old School when Alan, Zach Alf and Atkins refers to them as the Wolfpack? You said Old School. Oh, sorry, in The Hangover. So apparently that line, the Wolfpack came from Old School because Will Farrell,

it came on the set of Old School. Will Ferrell said that like every other day. one person would get mercilessly attacked by like Vince Vaughn or Will Ferrell, just ripped on. They said they just love to have back and forth with people and just rip on people. And he said they would call that wolf packing them. And that's Todd Phillips stole that and used it in the hangover. Anyway. Have Galafanax and Will Ferrell ever collaborated?

That's a good question. It was almost like the screen would implode if that happened. I don't know. That's a good question. We'll have to look that up. We watched On the Rocks. It's an Apple movie with Bill Murray and Rashida Jones. Sophia Coppola's movie?

Yeah. I liked it. What I hate it? Possibly. Here's the thing. If you like and are amused by Bill Murray, you will like this. Bill Murray was awesome in it. Bill Murray may laugh multiple times.

It's just kind of a fun, quirky movie, like not a big investment. It's kind of an odd premise, but it kind of works. And I just thought, if you like Bill Murray, you will like this movie because he's basically playing himself. But here's my thought on this. Couldn't Amazon, Apple, and Netflix effectively take over the entire movie of business that they wanted and put everyone else out of business? Because they have the money in the capital and the ability to borrow.

Tim Cook decided to hit a switch. say, we're going to buy all the fast and furious movies, fast and furious movies. I guess you'd have to have Disney to this list. But couldn't those companies just take over the movie business for the next two decades if they wanted because of all the capital they have? I know the movie studios have to like borrow money and sometimes it's hard to finance these projects. Couldn't these places just say, out of the way, scram, we're taking over all of this.

Scram. Right? I don't know. Yeah, I think that's all I got. But yeah, if you like Bill Murray, you like On the Rocks. I listen to, so I'm a big fan of the Big Picture podcast with Sean Fentasy. And Amanda Dobbins, Sean Fantasy and I think Chris Ryan did a podcast this week where they spoke by Garbage Crime Movies. Did you listen to this? No, but I do like that podcast. Oh, God, is this up my alley.

So Garbage Crime movies, like SWAT, for example. You ever see SWAT with Colin Farrell? Yeah. I think I thought a theater, unfortunately. So these are just good, terrible movies that they're just fun. They don't cost you anything. Gerard Butler movies, for example. And what was that one with him in jail? Do you know what I'm talking about? Law-abiding Citizen. You ever see that one? Sounds familiar. I'm sure I did. A great, terrible movie. And you know who hates great terrible movies? Rodden Tomatoes.

Shooter. I tweeted this last week. Shooter, critics hated it. That the Mark Wahlberg one? Your thoughts. What you expect for something like that, right? So I was just poking around Rotten Tomatoes. This is not a garbage crime movie, but Bloodsport, for example.

How many times have you seen Bloodsport with Van Dam? A Million when I was in TBS when I was a kid, yeah, for sure. 40% of Rotten Tomatoes. Who has a worst model, Nate Silver or Rotten Tomatoes? And we know how the Rotta Tomatoes works. I understand. Don't get all nerdy on me. I know how the model works. But 40%, 74% from the audience. Anyhow, I bring all this up to say that after the garbage crime section of the podcast, Sean Fentasy spoke with Brandon Cronenberg, son of David Cronenberg, who did like The Fly and some other gory movies. This guy has a movie out called Possessor. You probably never heard of it. No, it sounds like it's right up your alley, though. It was so, excuse my language, it was. was so fucked up. I almost want to talk to this guy and be like, what is wrong with you?

So it was, it's like inception, kind of, where a hitman takes over other people's bodies to assassinate people. It's sci-fi and it was well done. So I'm not recommending it unless you like those type of movies, but it was just absolutely visceral, hard to watch, gory, that dude's got issues. And I made that in the best way possible. And I don't know what it says about me that I like these. Okay. Another sci-fi movie that I saw this weekend, the movie Her, Waking Phoenix, and other people. You're behind of that one.

I love that movie. Would you classify that a sci-fi or like, it's not really a rom-com or a drama? I think it's sci-fi. It's just a really well-done movie. I think it's kind of an interesting thought experiment on what the future could be with technology. Everyone had their own personal assistant living in their ear. So this is a no-hedge, full-blown recommendation. If you're listening to this, I recommend that you watch it.

What can Phoenix fall in love with his AirPods, which are played by Scarlett Johansson? It was an amazing movie, which I think they actually used another woman's voice and put Scarlet Johansson in after the fact. Oh, really? I think I read that before. Yeah. That's a great movie. All right.

So Ben and I are trying something different, which has gotten good feedback so far. We're going to be posting probably once or twice a week a blog post that we're going to read that'll be in the animal spirits live stream. So I did one on Saturday. Ben's going to do one this week. And I think we're going to keep going. We know some people don't always like reading online and sometimes it's just easier for people to listen. We're trying to get people more avenues to consume all our content.

So we're going to put occasionally if we think it's right for the animal spirits audience. We're going to put them on the stream. If you don't like it, let us know. You know what? If you don't like it, just keep it to yourself. If you don't like it, just delete it. How's that sound? Great.

We're going to experiment with this. Three or four minutes probably, right? It'll be very short snippets of our blog post. The blog post don't take for long to read. So it shouldn't be too much of a time commitment. We're back on Friday talking about direct indexing. that should be a lot of fun animal spirits pod at gmail.com thank you for listening and we'll see you next time