Animal Spirits Podcast - Everybody's Trading (EP.125)

Episode Date: February 12, 2020

On this week's show, we discuss the rise of TikTok Tesla traders, material signs of wealth, the generational wealth gap, why so much money is going into bond funds, why NYC is the enemy of personal finance, the Coronavirus and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain position. and the securities discussed in this podcast.

Welcome to Animal Spirits with Michael and Ben. Somebody sent us a tweet of a kid in college doing a TikTok video where she's going through what she's doing. She's taking a video in class. It says one, open a TD account, two, download think or swim, three day trade. And it seems like for the first time in the market in the last few years, we're actually getting a taste of euphoria. Now, it's obviously very stock-specific, all concentrated in Tesla. But there was another one. This person, Rachel

Osteovic, is a UFC fighter. She wrote, made my first option trade, praying I can really keep this going as a steady income. Any tips for me, please let me know. Now, options trading and steady income are not necessarily synonymous. I don't think that it's possible these people are really trading because I was told everyone is indexing and there's zero price discovery left. So I don't think this is possible. You're right. Let's move on. I was at a party over the weekend and was this going to be cocktail chatter here? Are you doing cocktail market chatter? This actually happened? I actually was involved in some child birthday chatter. Yes, I was. Okay. So friend's mother was talking to me about trading, not necessarily day trading, but I'm surprised. I was just nodding my head and listening. Don't really have much to add there, but she didn't mention Tesla. I was sort of

surprised to hear this. But it does feel like, again, finally, we're at the point where, everybody's trading. Do you make anything of this? Or is this just highly stock specific and not necessarily a broader look into the economy? Now, I will say, or the market, I should say, I think stuff like this is way better anecdotal data than the market cover indicator. You know what I mean? Agreed. This is actually people doing something, not just saying something. Right. I wrote a piece yesterday trying to take the other side because, of course, the initial reaction from people on finance Twitter is going to be, oh, this is the top. This is crazy. People are going bonkers. And again, it's hard to figure out which is worse. Well, no one is trading anymore because everyone is just indexing and they're just leaching

on to the market and they're just takers instead of price reactors. And now we have people trading and they're like, oh, this is the worst. People are trading now. So it's almost like you do something you can't win. You don't do something you can't win. Wait, it's almost like people on the internet are angry. Who would have thought, right? You just can't win. But I tried to look at this from, let's put a positive spin on it. Because the obvious thing for a negative spin is, yes. This won't end well. Yeah, this won't end well. And, obviously for most people, it doesn't. And I actually used you as an example of someone who... Excuse me, sir. What? What? What? How dare you? It was your idea. Was it not? You said, why don't you use me as an example? You threw yourself in my blog without me even asking you. But it worked because I said, here's an example of someone who started off trading and ended up being more of a long-term investor. You just had to start somewhere and get your feet wet or maybe freeze your feet off, if you will, for looking for a better analogy.

But I said maybe it's good that these people are getting in somehow. And my example was in the 90s. The share of Americans who owned stock went from 30% in 1990 to 55% by the end of the dot com bubble. And so we had this huge influx of people coming into the market. And it's basically stayed flat since then. It dipped a little bit in the crisis. And I was actually back to where it was then. Maybe getting these people involved in the market somehow will wet their beak a little and they will want to stick around. Even if they're learning the wrong way, some of them will get involved. And maybe the ones who end up letting their money on fire and they just shun the market for good forever, they probably would have never got involved anyway. So some people, you're never going to be able to help. But some people maybe can use this as a learning experience. I could not agree more. Speaking of that, got an email this morning from a listener asking about whether they should read. They're new to the market and they just found this person and should they read their books. And I think your early experiences are incredibly formative. So I said, hey, you know what, actually, this person's stuff is interesting. It's definitely different,

not the same stuff that you're over and over again. But maybe wait a little bit because I don't think that this person's worldviews, they might make you a little cynical. Probably not best to start there. If you end up gravitating there later in life, fine, but as a new investor. So, yeah, I think this is all good if Tesla crashes and obviously nobody knows that it will. But let's just say it does. Okay, so you learn a lesson, hopefully with not too much money on the line. But there are people, as there always are, who are going to the extreme. So in this article on the Wall Street Journal, investors bet against Tesla. They found a person, as they always do, this person was a Montreal-based pharmacist who has profited from Tesla's such a stock price. They made more than

$100,000 in profits over the last month. And I actually heard a story this morning from a colleague here whose friend was trading Tesla so heavily that he just liquidated. So kudos to this person, didn't have to learn the wrong lesson. Or maybe you do learn the wrong lesson from winning like this. That's a whole other topic. But he did so well that he sold everything and actually bought a Tesla from the profits. Wow. You almost can't make that up. Yeah, it is funny because I feel like that is actually more dangerous than losing five grand. Right. If you do well at the beginning and make some money, that's probably the worst thing that can happen to you. Yeah. Yeah. All right. So in the article, this is important. Obviously, people that have bet against Tesla have gotten their

butts handed to him, which happens from time to time. But one thing that is rarely discussed is position sizing. How can you be wrong and still stay in the game? They spoke about Jim Channis, who's been a vocal bear for a long, long time on Tesla. And he's sticking with his short position. People close to the matter say it's about 2% of the portfolio. Right. He's not taking it to extremes. He's not betting the farm on this one position, which is how some people want these things to be. I mean, you develop such a strong conviction and obviously you have to balance conviction with, if you're wrong. And having a third of the portfolio or even a number approaching that is obviously irresponsible. Unless you're right, then that it's all good. But yeah, some of these people are

never going to be able to be saved, these people that are trading. They're going to go from one thing to another. I'm sure there was plenty of people who went from trading.com stocks to buying houses and trying to flip them to going into crypto. So there's always going to be people who are like that. But there are going to be other people who take a first step into the markets and realize they burn their hand on the top of the oven and they say, oh, wait, this is definitely not for me, obviously. And that's what happened to you. And people asked, I wrote about you and some people said, well, I want to hear more about Michael's story. It was actually our very first podcast episode, which I don't know the name, but I'll put it in the show notes. We went through our journey as

investors. And you talked about starting off as a trader. And so I'll link to that. So if people want to hear your story. I can't believe that you started off in index funds. That is like low sodium turkey. You want to know what my first ever purchased in the stock market was? A target date fund. Come on. Are you being serious? 2005 or six, I guess, whatever it was. Yeah, my dad helped me set up a target date fund at like T-roll price. Do you still hold it? I traded out of it and rolled it over to Vanguard or something, but it's, yeah. And some people are in my comment saying that everyone should be like that. They should just start off investing in low-cost funds and max out their 401K. And does that except for you. It's not going to happen for most people. It's just not. It's not how human

nature works. I'm sorry. But did you ever trade target date funds? Because that sounds like fun. Yeah, I was willing the relative value between the target date 2055 and target date 2020. Oh, man. Okay. So Jonathan Clements had a great article. Nobody told me, and it's 10 things that he wish he knew earlier. And I'm usually not a fan of these because, for various reasons. But actually, I did like this one, and he talked about something that. It's a podcast question. Yeah, well, because even if you knew this 20 years ago, what you know today, you wouldn't listen. You know what I mean? You are who you are at a specific. And that's the problem with telling young people good financial advice. Sometimes they're just not going to listen to you and they need to experience it for themselves.

Yeah, they're not ready, which is fine. That's very normal. So to that point, he hit on something that we spoke about last week, which is like, which is the true version of yourself type of thing. and one of the things that he wrote about was, will our future self approve? As we make decisions today, I think this is a hugely powerful question to ask, and yet it's only in recent years that I've learned to ask it. When we opt not to save today, we're expecting our future self to make up the shortfall. When we take on debt, we're expecting our future self to repay the money borrowed. When we buy things today of lasting value, we're expecting our future self to like what we purchase. Pretty good. His very first one, he said, a small home is the key to a big portfolio. And I was thinking about this. I have some friends who do well for themselves. and they have a really nice house but drive an old car. I have other friends who I don't know how well they're doing from themselves, but they have not so great of a house, but they have a really nice car. So which do you think is a bigger sign of someone who has their wealth or their finances in order? Someone who drives a really nice car, not a great house. What do you think? I mean,

no, when I see somebody who drives, not to judge, but forgive me, I will judge. When you see somebody in a Soso house and a Maserati, it's like, wait, what? Right. That's the one I was leaning towards as well, where you think this person probably doesn't have, even though you could save more money technically in your house by going into a lesser house, I feel like that person probably doesn't have their priorities in check. When you see somebody have a very nice house and a Toyota Camry, I mean, my thought is, wow, that person's doing quite well. Yes, that's my general thought as well. So we spoke about Jesse Eisenberg was on Conan, and he said something along the lines of he was talking to Conan about how Jesse Eisenberg drives a 15-year-old Lexus that his aunt gave to him,

and Conan drives a little fiat, which is hilarious because he probably barely fits in it. But Jesse Eisenberg said, you don't have to tell people your status because you are your status. Like, you're famous. Right. People already know. And there's nothing wrong with nice cars at all. By the way, I will say, I almost dislike people that are more anti-nice car than the people driving super nice cars.

Whoa, that's pretty meta there. The fastest way to lose money is to drive a nice car. It's like, all right, well, some people like nice cars. Like, back off. Right. There are plenty of different areas you can save your money. Now, that being said, I feel like obviously cars are like probably the most statusy thing possible.

Yes, and that's an easy way to blow some money. It's a gateway for a lot of people. But if that's your one vice and you're good everywhere else, then great, drive a nice car. So let's stick with this housing theme. So interest rates are low and going lower. The average rate on a 15-year rate mortgage fell to a three-year low of 2.97%. This is crap. I just refinanced like two months ago and the rates go lower Murphy's Law, right?

You're a terrible refinancing timer. I told you. We've been through this. Mine was like 3.6%. Here's the thing, though, eventually doesn't this lose some of its luster? Because I've refinanced since the first mortgage I got, it was like 6.25%. I probably refinanced four times between the two houses that I've had. Don't you think the lower I go now, I mean, it would have to drop a huge amount for it to make sense for me to refinance anymore? course. This is CFA part two, level two, right? Yeah, they didn't tell me this. But don't you think that eventually the lower rates, except for everyone who's coming into a new house, it eventually wears off and loses its luster and it doesn't have as big of an impact anymore. You have to have

a huge drop in rates for it to actually get something to happen. Well, that's what we just had. So the volume of refinancing, according to this article, jumped 15% week over week, which was the highest since June 2013. So you're wrong? No, of course you're not wrong. Eventually, the will dry up. But actually, I'm going through the process of looking to refinance. And I had poked around probably twice in the last six months. I bought my house a year ago. I got a 30 year, 4%. I was very happy with that. But now they're so low. They're so low, in fact, that I might look to lock in a 15 year. Obviously, I have to like speak with the bankers and stuff and find out how much it costs and what the difference is. But 4% down to under 3%. I don't know.

the math is exactly. I guess that's not very complicated. Like I said, I'm in the process right now. I'm sure it's pretty straightforward. But what I learned is that the fees vary wildly by state to state. So for me, I'm looking at like, I forget what it was. Not quite $10,000, but like a decent chunk of change. Yours was under five. Two to three probably for closing. New York is just on another, so we can talk about this now because the other story last week was New York had a brokerage fee if you were renting an apartment. I never realized this. Well, hold on. Before we hit that, what you were going at was there was a chart showing the relative value of $100, and Colin shared this like the hyperinflation zone.

And do you see this on the bottom of the sheet? Yes. You actually live in a fairly... The relative value of $100, it's saying, in your metro area. So obviously, New York is bright red or red as it gets. You are not... Oh, wait, you're on the other end of the spectrum. You bastard.

Yes, it's so cheap. I mean, it's getting more expensive where I am, but it's relatively... I said this to you last time as in New York, how have not been any years in the last few years where just millions of people all of a sudden left at once? I don't know how normal people managed to stay there with $15 beers in $3,000 rental apartment brokerage fees. People are leaving. Yeah. But so I never knew this, that you had to pay. This would be an out-of-pocket cost, almost like you're paying for the first and last month's rent or something. You'd pay it to someone who opened the door for you for an apartment rental.

It's huge. So here's the thing, though. there's no way that money just evaporates and goes away. How do they make it up somewhere else? They have to, right? Well, I don't think the fee disappears entirely. I think some of this will be burdened by the landlord, which will, I guess some people are saying it flow right back to the consumer. So it's going to be a watch. I don't necessarily buy that because I think the market will react to that. So I think this is largely a good thing. Brokers warn that the new rules would simply increase what tenants pay in monthly rent, since many landlords will likely pass Okay, I just said that.

There were 25,000 licensed real estate brokers in New York City. Jeez. It's a lot of people in New York City, but that's a lot of brokers. So what do those people do now? I mean, obviously they still are in their finder fees. Well, every time we talk about this, we get angry emails from real estate brokers because they're like, listen, I'm a real estate broker and I'm not exactly crushing it. And I understand that.

This is probably, you know the 80-20 rule? It's probably like the 982 rule in real estate brokers where there's a few that are wildly successful than everybody else is like picking off the crumbs. But there's just too many of them because the barriers to entry are basically non-existent. You probably have to take a test to get in. I think this is a good thing. I mean, this is so ridiculous that young people who have obviously issues with money to begin with have to pay 15%, which equates to like roughly one month for somebody, for an apartment that most people find the Craigslist or wherever you find in your apartment. Okay. Anti-survey podcast Exhibit 395. American status.

with their personal life is now at an all-time high. And the question asks, this is from Gallup. In general, are you satisfied or dissatisfied with the way things are going in your personal life at this time? 90% of people said yes. And knowing human beings, there's no way this is possible. Correct? No, it's ridiculous. I mean, you had the best point of this. And there was another one that asked about, are you happy with your personal finances? And because this is why surveys are so bunk because there's the one survey going around that says Americans, how many percentage of Americans couldn't afford a $400 expense? It's like 50% of Americans couldn't afford if a $400 emergency happened. And yes, we know that survey is nonsense as well, but the point

remains. Keep going. Yeah, I'm saying people use that and then they use this to say that things are crazy. There's no way this is possible that 90% of Americans are happy with their personal life. It's so ridiculous. I'm almost out of loss of words. Actually, you know what? I have one word. Top. Yes. It's at an all-time high. Nine and ten Americans are satisfied with the way things are going in their personal life. Apparently, none of these people have ever been on the Internet before, because if that's true.

And the other thing is, this is why it's so hard to believe a lot of these studies that say people are more depressed than they've ever been. And teenagers hate themselves because of social media, I just, a lot of this stuff is really hard for me to wrap my head around because it's so contradictory. I don't know how much of it is just we have more information now. We talk to more people and ask them about this stuff. again anti-survey podcast all right good one from the st louis fed this was interesting so we've heard a lot of stuff and we've talked about the fact that there's this generational wealth gap where millennials are poorer they're making less money on an inflation adjusted basis than previous generations at the similar age and the st louis fed broke it down by people who have a bachelor's

degree or more or people with no bachelor's degree and they looked at what they should have been making like what their expected value in terms of income and wealth would have been based on previous generations. So they had an actual and unexpected. In terms of income, people with a bachelor's degree, and this is millennials, were actually making 7% more than expected in terms of how much they make. Their wealth was 6% less. So that's pretty good. They're pretty much coming out even there. What do you mean by expected? So they did an expected thing based on previous generations and some sort of growth of what they should be based on where previous generations were at that time adjusted for inflation. So this is actually looking a little better. But then if you look at people with no bachelor's

degree, the income is close to 10% lower than expected. And wealth is 44% lower. Sorry, question. Is this a survey? It is a survey. It is a survey of consumer finances. Consumer finances, which in terms of how surveys go, this is probably one of the better ones in terms of finances. So I actually kind of tend to agree with this one. No, listen, we're anti-survey if we don't like the results. Can we just put that out there? Sure. But I actually think that these results, make a lot of sense. So the people who are highly educated and going to college are actually doing pretty well. The people who aren't are not. And I think this is one of the reasons that it's so difficult on the middle class because in the past, you could get a pretty good job as a middle

class person and not go to college. So you could work in one of the auto industry and make a decent money and have a pension and not have to worry about education. Whereas today, we don't really have that for people. Super Mugatu, Dan McMurtry, and his partners at Tyra Capital wrote a really good piece, their 2019 annual letter. And he said something along those lines that in no city, in no major metropolitan city, can you rent a two-bedroom apartment on a minimum wage? I think it was minimum wage. I might have been median. I think it was minimum. But there you go. Back to my point of how do normal people stay in New York City? And you told me, well, a lot of people come, they live outside of the city and come in. But yeah, a lot of these places are just,

you have to go somewhere else. And in the past, that was places like the Midwest where you get a manufacturing job. And those don't exist anymore for most people. Big news in the financial world, Vanguard has announced that they are going to manage a private equity fund. Or I'm sorry, it looks like they're outsourcing this. So what are your first thoughts on this? I think to them it's like a call option because it sounds like they're going to be very, that's going to be small.

At first, it's only going to be offered to institutional clients. and then maybe people who have a financial advisor or in their wealth, more wealthy individuals. So it's not like it's going out to everyone available to everyone of Vanguard's clients right away. I think they're just kind of... But that's a point. It's Vanguard clients only for now.

Yeah, I think they're testing the water. Again, it's institutional to start. I think they're going to slowly but surely work up to it. I mean, this is smart in the fact that they probably don't want to get disrupted eventually. Not toot my own horn here, but toot, tut. The day before this news came out, what did I say to you on the phone? I said one of these places is going to get into private equity or venture capital. It's going to happen. That's not what you said. It is what I said. That's not what you said.

One of these discount places or a robo advisor is going to get into private equity or venture capital and make it free, make it more retail accessible. And I don't know how that's going to work in terms of liquidity mismatch because you would almost need a financial advisor to help you through the capital call process and the distributions and how the cash flows work on these types of funds to make it work for you. I think if you're just an individual DIY Boglehead, you're not going to be able to manage a private equity fund on your own probably. Well, I totally agree with that. However, that's not what you said on the phone. You said that private equity was going to get quantified, meaning there was going to be, it was just going to be factorized. And I took the other side of that. So my point was is, private equity and venture capital are going to be accessible to retail eventually. In the next few years, someone is going to do this. And it's probably not going to work very well, the first few iterations, but someone's going to try to put it out there. Okay, well, that I agree with. I can't tell if this is a reach for Vanguard and Jack Bogle is turning over in his grave, but I think this is just them testing things out to see how it works. Yeah, I don't know that this is a watershed moment or that this has like broader implications for the whole industry.

I don't know that that's the case. Obviously, Vanguard's a huge name, so I understand why the Nietzsche reaction is like, oh, everyone's in private equity now, but I don't know if that's the case. Jason Zwaig had a piece in the Wall Street Journal talking about bond funds are hotter than Tesla. I don't about that, but... I have yet to see a bond fund TikTok video. That's when I'll know that that's true. This is pretty mindblown. From 1990 through 1999, bond funds and bond ETFs accounted for only 10% of the cumulative $2.37 trillion have flown into funds from 2000 to 2009, bond funds

made up 26% of the inflows. And over the last 10 years, they made up 74% of the inflows. And I think the overriding reason for this is probably that this money is being driven by advisors and people aging. Yeah. Demographics has to be the big thing here. In the 90s, baby booms were coming up. And you see the slow migration to bonds. Yeah, let's just go Occam's razor on this one. Don't you think it's almost a good thing? It's showing people jumped into the stock market at first, then they slowly went into bonds and now they're making a rush for bonds, even though people have two, three, potentially four decades in retirement. Isn't this actually showing people, are being relatively level-headed? That's one way to view it, yeah. What's the other way to view it? I don't know, but that's one.

Because there's these other statistics that show, well, the percentage allocation for households in terms of equities has been now since the 2000s. I think the biggest reason for that is just that stocks are up far more than bonds. So even if people are putting money into bonds more freely, stock market has vastly outperformed the bond market. So you make up for it on just gains for your market value in our portfolio, even though money's going into bonds technically in terms of whether it's from rebalancing or new additional contributions or whatever.

Yeah, I think this is more positive than negative. The non-positive part, of course, is bonds aren't paying anything and it's a tough situation to be in if you want to find income. Or there's a bubble in bonds, which we've discussed doesn't make sense, only in the sense that I understand what people are trying to say that you're not getting compensated for the amount of risk that you're taking. But with a bond, again, especially Treasury, you're not. getting your money back. So sure. Hot take. It's not the Fed manipulating interest rates. It's

the baby boomers who are putting money into bonds. Well, baby boomers are controlling the Fed. Ah, but this gets back to my point of, I really think that there's a decent chance. Interest rates are low for two to three decades. Well, that would be supported by this chart from visual capitalist, visualizing the 700-year fall of interest rates. Hey, do you think there's a visual socialist, too? I can keep going So the trend line has been down for I don't know what is the 700 years

Yeah I don't know I mean obviously there's been spikes along the way Clearly we saw a spike just not so long ago Four decades ago No four decades ago Am I doing the math right? Yeah four decades ago Who could forget when Charles Dunkirk sold

Discounted cash bonds for 16% in the 1600s Well guess what I hope rates don't go up for our sake And for the government's sake I tweeted a chart yesterday total debt as a percent of GDP is basically as high as it's ever been in the United States, at least in recent history. We're at like 120 percent Japanese levels. But interest payments as a percent of GDP are nowhere near all-time highs precisely because rates are so low.

And if... If you would have read my piece from last week in Japan, it's 300 percent right now. Oh, wow. But somehow when this is from wisdom tree, I stole the stat from, Japan's debt to GDP jumped from 100 to 300 percent. and their interest income as a percentage of GDP went down because their rates are negative or so low. It almost doesn't matter. So we're having a similar thing.

Now, if rates do go up and not to like 3%, and I'm not saying they're up to like 11%, but let's just say they go up to like 4 or 5%. We're in trouble. That's when the tough choices need to be made. My point, I wrote out the deficit last week or so. If inflation and interest rates continue to stay low, the deficit and the federal debt shouldn't be that big of a problem for us. That's like the fingers crossed.

If they don't, no, seriously, fingers crossed because if they don't, some bad things are going to happen. By the way, speaking of Wisdom Tree, I've wanted to plug this for the last two weeks, I just keep forgetting. They have this like amazing portfolio visualizer tool, an ETF screener and index, all sorts of things that you could do there that I don't really see them promoting too often. So I just wanted to give that a plug. We'll put this on the show notes. All right. Last week we talked about how Barstool Sports was bought out by Penn National Gaming. This week, we talked about it last week, too, but it was finally finalized.

Spotify bought the ringer. And my initial thought here, I had two of them. So this is the Bill Simmons ringer. I guess it's probably about four or five years old, not that old since he left ESPN. And someone on the Karas Swisher Scott Galloway podcast, they said that they heard that it was bought for $100 million. That was the number that they heard thrown around, which is pretty amazing. Also kind of crazy that the ringer was going through a unionized deal about three months ago. So I don't know if that had anything to do with this.

But two thoughts. So that's two companies now with huge podcast footprints that have been bought out. for hundreds of millions of dollars in the last few weeks. Earth to Spotify. What? Call us. Oh, okay. Animal spirits is taking offers.

We're on the block. ESPN totally missed the boat on podcasts. I tweeted this out the other day. The top will be when we get an injection of private equity money for this podcast. That'll be the top. All right. Well, we get retail private equity buyers into Animal Spirits. There it is.

Then it's over. I mean, ESPN is so huge. It wouldn't have moved the needle that much. But how are they not just dominating sports podcasting at this point? Too late. They missed. I was actually thinking about this morning. I was listening to Bob Eiger on Bill Simmons. Which was great. That was fantastic. They were talking about cannibalizing your own business and being afraid to take risks. And it was sort of ironic that this conversation was happening on a podcast, a boat that they completely missed. Yes. And again, wouldn't it move the needle that much? Probably not. But in terms of staying relevant, I'm surprised ESPN has taken. so long to get into it. Now they have a few, but... Well, you know what? That's a really good point. I mean, let's just say that they launched the most successful sports podcast of all time. Big deal. Yeah. Well, I mean, they did launch Simmons, but they

didn't, they didn't haul onto him. The other thing is, that's a casino who bought a media company, and that's also a music company that bought a podcasting company, basically. I know the ringer has a website, but I'm sure that they were bought because of their podcast, not because of their writing. I think in the next decade or so, we're going to continue to see just strange bedfellows in terms of media companies getting bought. Strange what? Bedfellows. I don't know that word. It's a pairing, basically. Is that from Detective Books? Yeah. Sorry to keep using words that I'm going to have to get you the dictionary of the day. Ben, come on my level. Level down. But I think we're going to continue to see these strange media

pairings where it's going to be just a random billionaire buyer, if it's like Bezos buying Washington Post or some of these random ones where a media company gets bought out, because obviously for a lot of places, the media thing is not that successful. So I think we're going to continue to see these strange pairings in terms of different media companies getting bought out. And it's kind of nice to see, too, that actually were successful to get bought out in recent weeks, whereas a lot of them have been getting taken over by hedge funds and private equity, and then they just toss out the parts and throw them away, basically. Blackstone is going to buy Mark Marron's WTF.

Yeah, that'd be a good pairing. How's that for a bed fellow? All right. Google it. So we talked last week. Someone sent us this, the downside of sports gambling. We said sports gambling will probably be the next stock picking as a habit. Maybe stock picking is the new stock picking, according to TikTok.

But in the UK, sports betting is already legal, from what I can tell. And someone sent us this, this is crazy. So the NHS, which is the National Health Service in Great Britain, was forced to open 14 gambling addiction clinics to the tune of 2.3 billion pounds for helping out people with their mental health from betting on sports books. That's crazy. So it sounds like they're basically saying this is having huge effects on people in terms of their mental health issues, the sports gambling stuff. Obviously a very unfortunate side effect. Anyway, good story. So real quick on the media thing, this one surprised me. So a couple weeks ago, Google broke out for the

first time YouTube's annual sales and it was like $15 billion in a one-upsmanship, Facebook released that Instagram now has one quarter of the revenue last year and it's $20 billion more than YouTube. That surprised me that Instagram would be bigger, more revenue than YouTube. Thoughts. When you some YouTube is just bigger, that really impressed me in terms of Instagram because I feel like they're still like scratching the surface on people buying stuff on there. You have a new t-shirt on there like every week. I pause. Well, I'm wearing one right now. It's under this because it's so freaking cold. building heat is off today, actually.

When is the building heat ever on in New York? Well, it's freaking freezing in here, like I said. But I just paused to think, I don't know what I would have thought because now I know the answer, both giant platforms. That's a lot of money, $20 billion. For my kids, YouTube is basically my daughter likes watching music videos on there. I always say, oh, MTV, I grew up with MTV, it's gone. My daughter just has the ability to watch music videos on YouTube.

And my other little kids, like, they watch cartoons on YouTube, whether it's on her TV or like a little iPad or whatever. Well, here's the thing. I don't spend time on YouTube, do you? Not much. But when I see some of the numbers for these kids videos, it's like a kid playing with a Barbie doll or Plato, and it'll be like 109 million views.

It's just insane to me. That's why I thought YouTube would have been bigger. Maybe that's just availability for me. All right, WTF News of the Week. According to a study by MIT Sloan School of Management and State Street Associates, there is a 70% chance of a recession in the next six months. Based on what?

Well, based on something called the Malahannobus distance, which was originally conceived to measure the statistical similarity of the values of a set of dimensions for a given skull to the average value of those dimensions for a chosen group of skulls. It measures the distance between a point and a certain distribution. So using this principle, they looked at industrial production, non-reform payrolls, stock market returns, and the slope of the yield curve. Okay. So the measurement of your skull, I don't know.

Can I confess? What's up? I'm with them, but not for the reason that they cite. Although 70%, I don't even know how you put a number on this. But you always say 40%. It doesn't matter what you think. 40% always. I told you.

There's a 40% chance. I'm going to say it. There's a 40% chance that there's too much complacency in the market related to the coronavirus. It's hard to know exactly what's going on because we just don't know what we're seeing from the Chinese state-run media. But you see like the... Whoa, that was very zero hedge of you. No.

Take your rose-colored glasses off for a second and join me. These are giant cities in one of the most important economies in the world that are basically shut down. How is this not going to have a big impact on global GDP and therefore businesses and therefore stock prices? That seems like a stretch unless it gets really... My view of this is, is this something that we just put aside? and say, don't ever pay attention to what could be a pandemic. No, but I think should you

personally panic if it's not your job to think about these things? Probably not. Well, no, I completely agree. I'm just saying I'm always of the default setting that the market is right. Obviously, this is extremely public news. So no strong insights here. But I was watching, okay, so actually two points on this. I think it was Friday. Whatever day it was, David Muir came on the news and we're not a news hassle, but it just was on for seconds. I was like, oh, I just looked up. And the way that they talked about the coronavirus, is very alarming. And I'm not saying that it shouldn't be. It's obviously very serious. But it was quite scary. So there's a chart from Data Arbor. Major TV news coronavirus sounds the sirens.

And it shows the ratio between rolling 30-day sums of pessimistic versus optimistic segments covering flu virus and other health scares. And this is at an all-time high, well, of the less 10 years. So it seems like there's a ton of emphasis in the news, but very little reaction in the market, which is sort of the story of the last few years. like stories in the news. Don't you think 95% of the time the market is smarter than the news? Totally. Completely agree.

See, with this coronavirus stuff, some people say, like, we can't trust China. I trust China to way more than I trust America to handle something like this. Do you remember the movie World War Z with Brad Pitt? Of course. And they travel overseas and they try to figure out which places have contained this. And they figure out the way that you transmit this disease in World War Z was you get bitten by someone who has it. Then you turn into like this zombie person who goes crazy.

And they figured out that the one country that stopped it was North Korea and they just pulled out all their citizens' teeth and that stopped the advent of this in that country. What are you trying to say? China can make shit like that happen. They're not going to pull everyone's teeth out, but they talk about how they created a hospital in like two weeks. I'm just saying I trust China to move mountains more than I would trust the U.S. on this stuff. Okay, agree with that.

Can I hedge my previous statement and make my stuff? sound even worse. Okay. You're going from zero hedge to negative hedge. As I'm talking through this whole weather situation, I actually do type in my zip code in the morning, but I guess I'm even dumber than I thought because I only look at the temperature. I'd never look at like the daily report.

I'd never look at like if it's going to rain or not. I just look at the temperature. Because you've got to keep your skull warm. Which makes no sense. Now I will click on hourly just to stay ahead of the rain. In other news that will further divide the country, there was an article. I guess this is in Yahoo a few weeks ago. Americans are projected to inherit $764 billion this year and will pay an average tax of just 2.1% on that.

Thoughts? My guess would be that a lot of it is just spread out amongst a lot of people. True. Does that make sense? Yes, it does. This is something that you've been seeing at financial advisor conferences for years now, the coming wave of inheritance that's going to hit this country, right? Yes.

Isn't this how the millennials pay off all their student loans? This is how they survive? Well, not with people living longer. It's almost a trillion dollars this year. That's kind of a lot of money, correct? Millennials are going to be 65 when their parents die. Yeah, some of them probably. So you and Josh got into it a couple weeks ago, I guess, about how rich Jeff Bezos is

and his family. They're going to be set up for a thousand years or something. And this does seem like it's this not having a big inheritance tax or a death tax under a certain amount. It's just easier to pass your wealth on. So I actually wrote about this in my book, the half-life of wealth for ridiculously wealthy people. It's kind of surprised because it was actually a paper by William Bernstein and Rob Arnaut. And they looked at this half-life of wealth. So how long does it take the next generation to basically cut the wealth in half?

And they looked in the top 10 families by wealth in 1918, 1930, 1957, and 1968, saw their wealth cut in half in 13 years, 10 years, 13 years, and 8 years, respectively. And that's just the top 10. they found that the second generation saw half-life of 24 years on average where the grandkids took 11 years to cut their inheritance half. Can I put holes in this? Have that it. So you said 1918, 1930, 1940, 1960, whatever? Yeah.

The financial universe did not even exist back then. I'm not just saying that, like, oh, they could just buy an index fund, but they could just put in a money market fund, and whatever the number I gave was, like, the baselesses could get $3 billion a year in interest and just in cash alone. Okay, this gets back to the human nature thing in trading. How many rich kids and rich grandkids do you know they're going to take their billions and put it in a money market fund and not say I'm going to, they're going to go into venture capital

and they're going to be a tributtal. They're going to go into Tesla and they're going to start building. That's what I'm saying, though. Of course, if they just put it in money markets, they could live off the interest. They're not going to do that, though. Well, I agree, of course. That's the thing. But if you have $150 billion and your next generation cuts it in half, I think they can still live on $75 billion.

I generally agree with that take that future general. squandle of the wealth. I'm with that. I just think that the Bezos has happened to be an exception only because of how much money it is. I agree. For really wealthy people these days, there are way more avenues to take care of money in terms of having tax consultants and family offices. Yeah, exactly. Just in terms of like, okay, you don't think the Bezoses are like, no, our kids are not just going to get $75 billion checks. There will be so many trusts set up to prevent this sort of thing, you would think. Yes. But then there's also the Warren Buffett giving pledge that they're giving half of their money to him, or they're giving half their money away to charity.

So there's your half-life right there. Anyway, all right. Solved it. One more poll. Harris poll asked more than 1,000 U.S. adults how much they're likely to tip at a restaurant. Only 82% of respondents say they actually leave a tip, meaning 18% do not leave a tip for people at a restaurant. How crazy is that number? That's ridiculous.

So I think rule of thumb, you double the tax and add a few bucks if they were good. And if not, you just double the tax. Well, taxes in New York City are ungodly, so... So in New York City, the taxes, what, I don't know, 9%. Yeah, that's probably a good rule of thumb. I mean, I always just do 20, I guess, and maybe a little bit more if they tell me my kids are cute. But I couldn't believe that 18% of people in this survey, again, a small survey, actually admitted they don't tip someone. Well, then it's got to be higher.

It's got to be higher because we know how surveys work. People don't reveal their worst characteristics. I can't believe that that is that high. Do you tip on takeout as well? What's a takeout tip? Usually not. I'm sorry. I usually don't.

Okay. I do like two or three bucks. I do here and there. I'd say one out of five times for no real reason. If they're looking at my eyes, I do it. All right. Listen to questions. As many brokers reduce their fees to zero for trades are investing strategies that used to be thought good on paper,

but in practical real life due to the transaction costs. Now practical. Oh, not a bad question. What do you think? Momentum, I guess is what he's getting at. Yeah, I think it makes sense. I think you have to counterbalance that with how many other people are going to be able to do it now and what the competition is. But certainly something like direct indexing now is going to be way easier. And we're going to see a huge growth in that in the coming years in terms of being able to set unique strategies because it won't matter. It'll be way easier to pick stocks. So yeah, I think there are going to be a lot of things that'll come out now that people can do. Just because they're easier and more cost effective doesn't mean they'll work better. But it certainly means the, ease of access is the barriers of entry. They're much smaller. So, yeah. Thoughts? Agreed. Currently work as an investor in a private equity fund, and I'm considering a move to an

LP side. LP is just a limited partner, i.e. like a major pension fund who invest in global private equity. What are your thoughts on whether this would be a good idea? Would you rather be in a direct investing role or a broad global capital allocation role in order the long-term prospects for both sectors? Don't you think this is just like, what do you, is it personal? Which side do you prefer. So I've been on one of these sides, the global allocation side. I would say right off the bat, just an overall rule of thumb, you're going to make way more money working for private equity than you award for a pension fund. Maybe some pension funds pay okay, but the majority of nonprofits the pay is not as well. So if that's a stopping point for you right there, just throw that one out,

I guess. It depends. One of the cool things about being in the allocation role is you get to see all different types of money managers and strategies and regions. And so it does get. It does give you more broad base of knowledge, but it depends if you want to be someone who understands one fund or strategy or sector or someone who understands a lot of them. But again, I think the money, people who work for private equity companies make a lot of money. So if money is a big thing for you, that's it. Not for everyone, but that'd be my thoughts. Okay. Recommendations. What do you got? I finished The Witcher on Netflix, probably a stayaway for most people. I tweeted about it, and I said, I don't understand it, but I was still kind of entertained. And everyone said,

well, that's because you have to read all the books and then go play the video game. And I'm like, no, I'm not going to read all the books and play the video game for this show that I didn't understand. Like, well, it makes more sense if you do those things. It's like, honestly, I kept watching because it was entertaining, but I had no idea what was going on. We started the morning show on Apple TV. So if you get a free year of Apple TV Plus or whatever it's called, if you have an iPhone or an Apple account, you get one free year. Okay. So we had a lull on our TV schedule, and we started the morning show.

and I went in with low expectations because I had mixed reviews of this show. This is the one with Steve Carell and Jennifer Aniston and Reese Witherspoon. It's a little over the top and dramatic at parts, but I actually kind of like it. We're like four episodes in. It's actually pretty good. I actually like it more than I thought I would. Maybe it's because I had low expectations, but we're going to finish that one for sure. I kind of like it.

And finally, this weekend, we were given Toy Story 4 on Disney Plus, and my kids watched it a million times. the technology of the Pixar animation now is just mind-boggling how good it looks. There was a scene at the beginning where it was raining, and it looked real to me. So we've been treated to that, and then the new Lion King, late on Disney Plus. So Carlson Household is still a strong proponent of Disney Plus. Here's the thing, though, I'm surprised they haven't had more scripted television shows come out besides the Mandalorian. I thought for sure they'd have some in the wings waiting, and it hasn't happened. Maybe they don't need them yet, but Disney Plus is still good for us.

You've never been more right about anything in your life than you worry about Disney Plus. So prior to Disney Plus, Kobe had not seen any, we hadn't shown him any Disney stuff. But to your point about Toy Story 4, he put it on and I said to Robin, oh my God, you got to come here. You have to see this. So I've rounded it just to show where the rain in the beginning. So now Kobe's obsessed with Toy Story and Toy Story 4. It's going to be the theme of his birthday party. And we're doing like a sort of half birthday party for Logan at home.

And Kobe's going to happen on to that. So we're doing Frozen theme at home, Toy Story on the road. And so usually, literally we wake up and he watches Toy Story the first one. And then he watches it probably when he gets home at night. And I know where it's too much TV. Leave me alone. I'm with you. It's always out in the background.

I never really watch it. So like I've seen Toy Story three a hundred times. But I don't even know what it is because it's just in the background. With Toy Story 4, I actually watched. And I didn't finish it. I saw half of it. But very good. All right.

So for recommendations for me, you might not like this, but I got to tell you. So sticking with my theme of catching up on. old movies. I saw a National Lampoon's Vacation. The original. Okay. It's okay. I mean, I laughed a few times. Really? Do you, like, love that movie? Yes. I mean, Christmas Vacation is the best one, but that one just for, like, its originality.

Nostalgia? Yeah. Yeah, it's a little cheesy at points. I'll give you that. I chuckled like four or five times, but I don't know. Is it considered a classic or not even? Yeah. I mean, the part where he has the dog on the leash on the back of the car? Yeah. I mean Yeah, it's not bad It's not terrible

It's not amazing But it's good Okay For me it's a nostalgia thing Got it fair Okay I can't really recommend this Because it's so freaking upsetting

But I watch Don't Fuck with Cats The documentary on Netflix And I struggle to even say It was good Because again it's so horrifying What this animal

was doing To these poor animals But let's just say It was well done So again I'm not say Go home and watch it But

So animal cruelty Okay I'm out Yeah. Fair enough. Absolutely fair enough. What else? Oh, I don't know if this is a new Twitter account. I wasn't really cognizant of that because I don't follow a lot of VCs, but VCs congratulating themselves is pretty hilarious. This is a real thing. So funny. These people are insane. It's a really good account. So again, this is not, I don't follow these people. So I didn't know that this was like a thing. And it's not even humble bragging. It's legitimate bragging. Yeah, there's no irony there. It's just. yes honestly people being serious on Twitter with no irony is almost hard to stomach a lot of times but especially when it's about yourself that's really tough right it's very odd and lastly I've been using this piece of software called tiller money I believe to look at like where my

money is going for budgeting purposes because I don't think a fair idea like you have daycare and groceries but I didn't really have like an actual dollar amount so I'm trying to track that there's a little bit of a time commitment to get it all set up but this software is pretty neat so again, we'll link to this in the show notes. All right, that's it from us. Thank you for listening. Animal Spiritspod at gmail.com, and we will see you next week.