Animal Spirits Podcast - Everyone Should Earn 3 Percent (EP.60)

Episode Date: December 19, 2018

On this week's show we discuss Robinhood's checking & savings debacle, do Millennials care about financial regulations, where to find higher yields on your savings, putting fund flows into context, the number of bear markets around the globe, can individual stocks be in a bear market, the student loan crisis, the "everything" bubble, market valuations, lifestyle creep, Jimmy Butler's minivan and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing, hosted by Michael Battnick and Ben Carlson, two guys who study the markets as a passion and invest for all the right reasons. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities

discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Story of the week comes from Robin Hood and there are 3% checking slash savings slash not a checking savings account. Can you put checking and savings in air quotes when you say that? Yes. This was kind of wild. So this was the, I don't want to take a victory lap too early, but I'm going to take two victory laps if you will allow me. I think I before on this podcast said Robin Hood is going to try to be the bank for millennials, which they're obviously trying to do. But I also said it's going to be really hard for technology firms to make it in the regulatory environment of the financial space. And I think this story is kind of both of these.

So first of all, not being an expert on banking regulations from everything I can... Don't be so modest, Ben. Okay. In my spare time. It sounds to me like it's almost impossible for them to even offer a checking and savings account. because of the way that they're structured. So this would have, let's say this happened, even though it sounds like it's not anymore. This would have been a brokerage account,

and they just totally mess this up. This was like the Facebook move fast and break things, and I just can't believe that like the lawyers signed off on this because the story just kept getting worse and worse. There's a lot of people saying that they didn't mess up, that this is intended and they actually executed flawlessly because they were able to sign up 600,000 people, myself included.

I signed up. I'm on the way. list. I tried. That's the thing. Maybe the thing is millennials won't care anyway because they already hate the big banks. But if you listen to Ashton Kutcher, he says the truth is everyone should be earning 3% interest, but there's only one place you can get it at Robin Hood app. Hashtag investor, which this was deleted later. It's kind of funny. He deleted it. Yeah, someone screenshot it. No, it's funny. As this kept evolving, we have like seven different links in our doc that we use for the show. It kept growing. And I mean, the thing is, yes, I agree with you.

like, it's kind of the no publicity, you know, there's no such thing as bad publicity. Maybe it'll work and it'll get people to realize that Robin Hood is trying to do something for them. And in how many millennials really care or even know what FDIC insurance is or SPIC insurance or whatever it is, whatever SIPC, whatever they're trying to get? This is funny. The SIPC said Robin Hood hadn't contacted the organization before the introduction. Stephen Harbeck, its president's chief executive officer, suggested the SIPC would not insure the product. Honestly, this, so I have a local credit union account through my mortgages through a local credit union and I earned 3% on my max checking account. So it's not like this is that far out of the realm of possibilities.

They never said, I guess, what the max would be. Well, Marcus offers 205. Mine has a max of 15 grand. So maybe they would have maxed it out anyway that you couldn't have done it. But this was just, I don't know, this just was a bungled operation from the get-go. The thing is that I don't think that it sounds. like maybe the cash would be guaranteed. I'm not really sure how this works,

but the 3% interest would not. That would be subject to market fluctuations. Right. By then, they could be higher or lower, depending on the Fed does. So even in a low cost product and a low duration, like SHY, which is the short-term treasury ETF,

one to three years, you get 2.7% now almost. Okay, so what if they invest in that and or something even shorter than that, 30-day paper, and they're getting whatever, percent. And then what if they subsidize the other 100 basis points through profitability from their other operations when they sell the order flow and stuff like that? And they're actually

losing money on this. And the idea that they will get more people to sign up and more people to trade on their platform, which will ultimately result in profitability. I think that their only profits actually come from venture capital investors that give them money. I don't think they actually make money elsewhere. No. But so the thing is with my credit union is that offer. That was weak. That was weak. Okay. Thanks. Nice shirt. So through my credit union, like I said, I have a mortgage. So they are, even though they're paying out 3% in checking, they're earning a spread by offering that mortgage, even though there's a duration mismatch there.

Robin Hood doesn't have that ability. Right. So they're not a bank that can earn some sort of interest spread, even if the liabilities are mismatched. So making this promise, again, I think I agree, maybe they're just decided they're going to go for it and get as much publicity as they can and sign as many people up to everything that they can because they kind of did something early in here with crypto. I don't know how that's working out for them. So this is a cash management surface.

It's not a, I mean, because it's a brokerage account. It's not checking you in savings. Right. I mean, the crazy thing is it's bonkers to me that people are so excited about 3%. It just doesn't, in the past, that would have been just a, I guess that's kind of the state of the world we're in now. I got excited about it. Yeah, I guess it sounds okay. But I feel like they're going to have a harder time in this space than they have planned on.

Maybe I'm wrong and maybe millennials won't care. So how does this, how does this, for later? to Netflix. Okay. So do you remember a few, I guess it was 2011. Netflix tried to roll out there. I'm trying to look at different ways this could go. I do remember that because I shortened Netflix before earnings.

Actually, I did a shorten them. I bought put options. And I think I like made 5X on my money. So Netflix back in the day. My best trades ever. When they used to do the DVDs in the mail, which I used to do until probably like 18 months ago or two years ago, I still had it. They were going to split the company into two things.

One was a streaming and one was going to be DVD. and they were going to call one of them Quickster. It was 2011. And it was a horrible rollout. It didn't work. They got a ton of flack and feedback. And then they ended up backtracking. And at the time, people thought, oh, this is just a stupid technology company. They have no idea what they're doing. There was a lot of bad press for them. And what I'm saying is Robin Hood could go one of two ways. Path one would be, this is how things are going to go. And maybe they haven't thought through these things enough as much as they should. Path two is, this is a bad PR thing. And they're going to figure, out and come to a conclusion eventually and that's something, you know, that works. And they have, maybe this will be their Netflix quickster moment. I don't know. Maybe that's a little. Path three, a lot of people thought that this was actually brilliant marketing, that they knew exactly what they were doing, that they would, they would get a slap on the wrist, they would say sorry, and they executed exactly on what their vision was. I have no opinion if that's true or not. Were you reading this on a Reddit thread? This sounds like kind of a conspiracy theory.

Well, no, this is, this is a common hot take on Twitter. I mean, and again, the people that run Robin Hood, it's two fairly young tech guys. I don't think they really understand the financial services industry as much as they probably could because they don't have a lot of experience in it. And maybe it is the move fast and break things that that's what they're going for. So I guess I could see that. Let's pivot to the market. How are your call options doing from last week?

You know, somebody tried to dunk on me on Twitter. Okay. I think they don't understand the purpose of call options. I can't prove this, of course, but I genuinely. believe this to be true, and I'm not kidding, that if I bought the call options on Monday morning, I would have sold them by Monday afternoon. You're the, you're the greatest paper trader in the history of paper trading. You don't hold weekly options to expiration. I wasn't trying to exercise him, for goodness sakes. All right, so Jen Oblon tweeted, U.S.-based stock

funds post $46 billion outflows in week-ended Wednesday. Largest withdrawals on record dating to 1992. By the way, that's all caps and got a lot of attention. 223 retweets, 362 likes. Then Urban Carmel tweeted, Lipper reporting $46 billion equity mutual fund and ETF outflow in the past week, which is huge, but at least half of this is seasonal end-of-year stuff.

And he shows the outflows of the last six years and they're all big numbers. And then finally, sentiment trader comes in and says, the largest equity fund outflow of the year almost always occurs in mid-December. Even so, this week's outflow of 0.44% of total equity fund assets

This is the largest than 15 years. The previous record was 0.39% of mid-August, 2011. So a lot of the data that we're getting on the market in terms of the sell-off and stuff like this is the worst since 2011. Okay. Isn't this kind of a Dow points thing where the bigger the stock market gets, of course the outflows are going to be bigger when people sell? Yes, this is true. But the sentiment trader did it as a percentage basis. You know, so he normalized it.

Right. There's, what, $19 trillion in mutual funds? It is kind of interesting when you see these capitalized numbers and look so big. And obviously, they're talking about it on a relative basis, but the fund industry is so large. These are just tiny, teeny edges, right? Don't you think? Moves around the edges? Oh, yeah, yeah.

I have a hard time using these numbers to mean anything. I agree. They're good for tweets, and I don't really think they're actionable. There was a chart floating around two weeks ago from MSCI, fact set. The percentage of MSCI world stocks and market cap now down 20% or more. And it's getting up there. It looks like about 50% of world stocks are in a bare market. I know people have a problem with saying individual stocks are in a bare market. You know what? Let's address that. I have a problem with that. I do not have a problem with that. What's your case?

It's such a newbail thing to do. Why? Individual stocks are so much more volatile than the overall market. A bare market is like a collection of stocks. It's not the whole, it's not a single stock that goes into a bear market. And you don't, you can't say like this stock is in a bowl market. This stock isn't, I don't buy it. All right. I guess I don't really care that much, but I don't think it's a big deal. I mean, whatever.

By the way, someone sent us an update today of the chart of the number of, the number of places in bear markets. And it's, I think it's now up to almost 40% of countries in the world are in a bear market, which is kind of crazy. And the funny thing is, when you think about this, the U.S. continues to be like the cleanest dirty shirt in the laundry ham. but the U.S. is the one that people have been screaming about for years as being overvalued and there's so much going on and there's so much debt in the country and things are screwed up

and the U.S. continues to be the strongest market in the world pretty much. It is kind of amazing, isn't it, that all the doomsayers and charlatan parma bear people have been pointing to the valuations in the U.S. and the U.S. continues to hold up better than international markets. So the Russell 2000 is in a bare market. It's in its third. So I think there also wasn't a 20% decline in 2015 and 2011. But, you know, I'm having this interesting thing now where I'm reading some bearish arguments that make sense to me that I'm not dismissive of, but they're coming from people that I strongly disagree with. Is that because they've been bearished this whole time?

Yes. That's my problem is how do you separate those opinions when someone's been bearish for seven years and now, now, now you're just taking whatever the market is doing and applying it to their data or their analysis. Well, there's definitely a lot of that going on. I am not, and I'm not Uber bearish, but I don't expect lower prices because of like, you know, any macro sort of stuff or it's just that stocks are going lower, so I expect them to go lower. So you're not Uber bearish, would just say that you're Lyft bearish? Not bad. All right. And so over the weekend, there was a piece of the New York Times style section.

This one got a lot of Twitter play. What was the headline? So in the Sunday style section of New York Times, the headline read, assume crash position, and it had a picture of a wave that was like a stock chart cresting. And it says,

are you ready for the financial crisis of 2019? This was so bad. There was a list of five potential catalysts, I guess. One of them was student loans, which we'll talk about in a minute, but it was just so bad. Like, I don't know why this person was writing. Who, like, gave this person the green light to write about this? But he wrote, quote, what might prove the pinprick to the everything bubble, as doomers like to call it?

Could be anything. It could be nothing. Only time will tell if the everything bubble is a bubble at all. I think my favorite one was they listed out in five different things. And the number one thing was an anti-billionaire uprising across America. And the only explanation was it could happen, just saying, And that was it. Just saying.

So similarly, over the weekend, Barron's came out as they do every year with the, I don't know if they interviewed 10 or a dozen Wall Street strategists. And I don't know when exactly these forecasts were made, but being that the market just sold off, the average strategist is expected the S&P to end 2019 at like something like 2940 or something like that, which is 16 or 17% 100%. higher than where we are today. Melt up. Is that what they're saying? Was there anyone who was bearish? I don't think so. No, nobody was negative. Okay. I guess that's, so you wrote an article about this and you kind of bounced some of the ideas off of me a little bit. And you went through, how long did this take it? You went through and found all of the Barron's predictions since how long ago? 2007? Yeah, I did a presentation on this earlier in the year and I just, I just never wrote about it. I don't know why. I guess I forgot.

a lot of the work was up front. Here's my rule of thumb as a pundit. If someone asks you for a year-end target for something, just don't answer it. Like, is there ever any upside for giving a specific value? I think the S&P is going to land the year at 2564.73. All right, so this is an animal spirits exclusive. My 2019 year-end forecast for the S&P 500 is... What are we at now?

Hold on. I'll show you how the sausage is made. We are at 2563. My S&P 500 year-end forecast for 2019 is 2562. Okay. Can I bid $1? Is that how this works? Price is right?

Yeah, I'm going to go prices, right rules. I just don't see the, I wrote about this earlier this week and predictions versus preparing. And I just don't see the, I don't see how helpful it is because all these strategists that do this, they update as the year goes along and all they do is update by what's happening. So stocks, if stocks go up in the first quarter, they'll think they're pretty good and pat themselves in the back. If stocks go down, they'll probably lower their targets. And as the year comes closer, they'll just change until it's pretty close to what the market

actually is. I already saw a 2019 revision this morning. I think it was from their credit space or Deutsche Bank. But I think the forecast lowered from like 3,200 to 2,900 or something like that. That's perfect. Okay. So this guy in the New York Times says student loans are going to be. the next cause of 2019 financial crisis, which seems a little crazy. I mean, this is the kind of thing

that I don't know how you could ever, it's kind of like the pension stuff where I don't know how you could ever place a timeframe on when it's going to matter. But what do you think? Because there's another piece in the Wall Street Journal about student loans. And it feels like I hear about this all the time now. Are there credit default swaps on student loans? Why are you looking to bet against them? All right. So there was an article that somebody sent to us, college bloat, meets the blade. And some really good stuff in here. This is a wild statistic that I was not aware of.

The student loan debt market is a trillion, one and a half trillion dollars, which is twice as much as the total credit card debt. Did you know that? I did know that. Here's the thing that. Hold on. Hold on. How did you know that?

I was just doing some research on this. I've heard about this before. I was doing some research on credit cards. All right. I don't tell you everything. But here's the. the thing in my mind, shouldn't student loan debt be higher than credit cards? Like, you're actually it's a good investment for most people. Obviously, there are people out there who misuse it and

take out too much, but if you look at any of the statistics between unemployment or future earnings or expected earnings, it puts you in a better place if you get a degree. So I understand why there's more people going to college and why there's more people taking out debt. So I think it's getting really hard to sift through it on and figure out where the bad debt is and where the good debt is. And maybe the bad debt is rising because there's more people going to college who aren't thinking these decisions through. But shouldn't student loan debt be rising over time as more people are getting educated? Yes, that makes sense. So this article spoke about Mitch Daniels, who is the president at Purdue University? Or is it? Yeah, Purdue University, right? That's how

you say it? Yes. Didn't you go to Indiana? I did. You don't know Purdue? I got kicked out twice. That's true. No, I was just saying, I was just, wait, it can't be University of Purdue. That doesn't like that he says. Okay. So when he arrived at Purdue in January 2013, the university had raised tuition 36 years in a row. By graduation day in 2020, tuition won't have risen in eight years. We're able to say that the total cost and nominal dollars of going to Purdue will be less than 2020 than 2020 than it was in 2012.

Wow. So that's pretty cool. So he made it his, it was his thing. That was his thing. Like, I'm not going to raise 36 years in a row. That's unbelievable. Yeah. It's nuts, which is obviously the common thing.

one of the things that he did was he college textbooks fell 30% and college textbooks is the biggest racket out there. It is so ridiculous. They invited Amazon out to campus and they set up their first brick and mortar facility, which is, which is a pretty good idea. I've never heard this story before. This is, this is amazing because, yeah, if you look at the stats, the inflation stats, college textbooks have risen higher than the price of college even. Do you know that college textbooks are the new gold? How are they even a thing still if we have the internet? Like, why do we need college textbooks so professors can earn more money? It's nuts. I don't see the need for them at all. So this is my favorite part of the article. Another innovation introduced in 2016 is the income share agreement, an alternative to traditional student loans under which a student receives funding for his education

in exchange for a percentage of income for up to 10 years after graduation. And this is similar to what that guy, I forget his name, is doing with Lambda, right? Yeah, the Lambda school we talked about. it makes I mean it makes a lot of sense you wonder how how students feel about it that long out after graduation if they're starting to make more money but for someone who can't afford it or doesn't want to see that much student debt it seems to make a lot of sense to me yeah I think I think I think it's a great trade all right anything else on this topic I don't know it's one of those topics that I feel like it's always going to be used to scare people in the future but I think

there needs to be a little nuance and I don't know what the value is in terms of what's the tipping point where it gets too out of control. I really don't know what it is because I still think getting education is probably the best thing someone can do in terms of further than their career prospects. Well, let me ask you this. Do you think that this is going to be a headwind

for like household formation and housing and stuff like that for people a little bit younger than us? It could be, or it could be an excuse for young people saying there's no way I can afford a house I've got to pay these student loans. So that makes sense, but I think people figure out a way and it'll happen. And again, the average is what in the, I don't know, $20,000 range per person.

So obviously there's a big range around that average. But I think it's roughly $20,000 a person, which is not fun to be paying off when you're first getting into school or getting out of school and into the working world. But I don't think it's, if that's the amount of money you're paying back, I don't think that's enough to hold you back for your whole life. Yeah, there's, by the way, before you email us, that we know we're fully aware of all the horror stories out there. Obviously, not every individual horror story, but we've read a lot. lots of them. And so, we do get a lot of actually emails, don't we? We do. Yes, that's true. Feel free to send them. We don't care. All right. So, Bluegrass Capital, tweet, it's about market valuations. This came from Bloomberg, it looks like. Excluding Fang and Microsoft, the remaining

495 stocks and the SP 500 are priced at less than 13 times expected 2019 earnings. Now, two caveats. Well, one thing, that sounds pretty attractively priced, but of course, we don't know what 2019 earnings are going to be. Did you know that my heating bill X energy is $0? No, no, no. It's, come on. I don't know. I don't know these X, no. I mean, you're the pie chart guy who can, can show how much, how big these. I just don't see that if you're going to look at the overall market, you have to include these stocks because they make up such a huge piece of the overall pie. True. But maybe, maybe he's coming at it from the angle of stock pickers.

Yeah, that's true. If you want to, if you want to go against these. And again, to my point, So we had our Talk Your Book segment this week talking about international stocks. And I said maybe it's easier to beat the markets internationally because they don't have these huge stocks. But let's say you do decide to bet against these. And you're betting against all these big fang stocks that make up, let's say, what is it, 15, 20% of the market, if we include Microsoft too, maybe a little less than that. You're effectively shorting these names. And that's a huge bet. Now, again, if you want to outperform, you have to try to be different.

but if you're making that bet and one of these stocks continues to do well and the other four or five don't, you're probably still going to lose. So I think trying to look at the market this way is tough too. And again, that's one of the reasons the S&P is so hard to beat for people, I think. Thoughts? Yeah. No? You just zoned out.

No, I didn't. I was listening. I was following you the whole time. One of the reasons why international stocks or international markets might be, you know, easier to be is because they're less prone to manipulation. Okay. Manipulation by the Fed? Yes.

Okay. So the EU isn't as good at manipulating as the Fed is? That's what I'm saying. The point is, stocks are going down, and with stocks going down, valuations are getting more attractive. Correct. And we've spoken about this previously, and I think Jake and Economic sent to something about this, that you don't want to, I mean, okay, depending on your time frame, like,

when valuations are coming down, that is not. bullish, at least in the short term. But it's really wildly bullish for the long term. It's a great thing because your expected returns are rising. Yes. So it's all about identifying your time horizon. That's correct. Okay, so this week Market Watch did a list of the

50 Twitter accounts to follow and I appreciate that we were on this list, but I have to say I really hate lists in general, but especially like top 10 lists or who to follow list in particular. Because for a few reasons,

A, I don't like that it hurts people's feelings. People always get mad at these things, don't they? Yeah, but it sucks. If you're on the fringe and you're not included, you don't feel good about yourself. But it's also like these lists just in general, I'm not saying market watch this list, because I honestly didn't even go through it. But in general, lists just suck, right? Like, there's never a consensus list that people agree with for obvious reasons.

Like it's always, but I guess on the flip side from the point of view of people making the list, it gets a lot of clicks, a lot of attention, a lot of talk. Yeah. Can I tell you why these lists are made in the first place? Sure. So when I first started blogging, I guess it was about five or six years ago, I remember trying to read up in someone tried to give me some tips on how to, like, build my audience. And they said that there used to be these things, it was like a blog, you know when you look into a mirror

and there's two mirrors on either side of you, and it goes a million different ways in each direction, you can keep seeing the reflections. That's what these blogs used to do, where they would say, I'm going to post 30 blog links of all these other blogs and then someone else is going to do that and someone else is going to do that and we'll build up our link backs and our traffic by posting each other's posts

on each other's blogs. And it'll be like, yes, that's how people used to try to build traction with SEO and these things. And I said, that doesn't make any sense. Just if people want to read my stuff and it's good enough, they'll read it. I don't want to try to trick people

into reading it and getting this SEO stuff. Anyway, that's what these lists are. They post them and they hope that the 50 people on the list will share it and say thanks and that'll drive more clicks. and okay you're a hundred percent right about that clicks on top of clicks on so it's like the double mirror thing where you're looking back and forth into a mirror yes okay having said that having said that it's it's an honor to be on this list yeah exactly all right what are your

thoughts on twitter threads i'm not a big fan here's my rule of thumb for twitter threads i think they should never be longer than 10 i feel like anytime you get into like the 20s that i'm out of there i barely read past two to be honest but yes i don't think i've ever made it 20 deep okay So there have been some Twitter threads that I really like. For instance, Dan Egan had one this week where he was talking about behavioral finance stuff, a presentation that I did for Betterment, which I have not watched that, but I would like to, and I'm going to. And he said, if I could slay one demon, it would be lifestyle creep. What are you laughing at?

There's no way you're going to watch it. No, I'm going to. Okay. By the way, side note, there should be an easier way to, and I think maybe there is, people have probably told me this on Twitter before, because I've talked about it, but there should be an easy way to turn presentations into podcasts. Because who wants to sit there and watch an hour-long presentation on YouTube? Okay, so next week, next week come back to me and see if I watched it. Okay, I'm going to hold you to this. I'm 50-50. I'm going to be honest. I'm 50-50. Exactly. Because

like, I'm totally going to get to it. That's like, that's what I, yeah, me too. But I agree on the lifestyle creep. Yes, that is one of the harder things to do. And this kind of gets back to our talk from, was it last week or two weeks ago, about people not being happy because it's always two to three times more that they need. And that's the same thing with lifestyle creep is that you, you change the baseline and you move it up a notch every time you get more money and you decide to spend more. And it just kind of spirals out of control. I think it is the rare person who truly has no material ambitions or vanity or anything like that where like every dollar they get, it's just boom. They just pocket it. I mean,

Maybe this is you in some ways already because you had your last coat for 12 years. So, obviously, right? Yes. Your lifestyle is not creeped in your winter gear. That's very, you know, it's funny. If you were to like look at my spending habits, it's totally irrational on like what I'm comfortable spending money at or what I'm not. Like I had a, yeah, to your point, I had that with your code for 12 freaking years.

But it's, it's hard because some of the best advice I could offer to someone getting out of college is to continue to live like you're in college for the first few years and build good saving habits that way, and live with some roommates and don't spend, and like, if you want to spend money going out, because that's what we did in college, that's fine, but don't spend on a lot of other stuff. And that's a good way to sort of ease your way into that without just going overboard because you're making a little money finally. One more observation. Okay. You know that there's like people on Twitter that, and it's the same people always say that next week will be key. Yes. It's a line in the sand, right? We'll see what happens is next week. Next week will be very

important the next fed meeting the next beige book the next jobless numbers the clothes like it's always but watch next week um like what are we going to get to the important stuff is it always next week this is the most important election can i be honest about something uh following along this is kind of off topic but i see it on twitter all the time i have no idea what the hell is going on in brexit do i can someone explain it to me because i still don't know what quantitative easing was that's true uh it was the fed printing money to manipulate the stock market market. Hold on one last thing.

One last thing. Sticking with the next week will be K, it's very similar to your New York City restaurant argument. Okay. So I was in New York last week visiting you. And obviously, everyone who lives in New York assumes it's the center of the universe. And maybe there's a good point to that. But every time I go there, you guys try to show me a good time and take me out to the best restaurant ever. And every time we go to these restaurants, every time we go to a restaurant, we'll go to it.

And the food will be great. and you'll say, and some will say like, okay, this place was okay, but the next place is going to be even better. And it's the best. And every time I go to the best restaurant, but there's always another one that's even better. And it's maybe that's New York lifestyle creep where you can't, uh, there's never the best. It's, it's always one better. So be careful on your New York restaurant recommendations, I guess. All right. Listener questions. So I've come to understand the case for increased diversification and the possibility of a better lifetime risk-adjusted returns by incorporating non-market factors in a low-cost manner. However, as a long-time index-only investor, I also value

keeping things simple. So does incorporating something like a multifactor ETF make sense as a way of meeting both goals? So I guess does it make sense if you're a person who only uses the beta index funds to go out and use something like a factor fund? It can. Yes. Obviously, There are limits and there is a deep, deep, deep rabbit hole you can go down. But if you are comfortable, put it this way, if you are comfortable with indexing and you're not checking your account every three seconds and you're not really into mechanics of the stock market and you're just dutifully saving it in an index fund, I think that's probably, no, I know that's probably good enough.

And if you don't want to try to understand all these things, like you said, there's a million different ways to slice and dice these things. And it's not always as easy as it sounds. So I think if you want to keep things simple and you're okay with it, then it might be more trouble than it's worth. But if you understand this stuff and want to get some diversification benefits, I think it can help. So it can kind of go both ways. Yeah, it depends. With respect to the advice you were giving to the new college grads starting out, this one, perhaps you were trying to balance it out between saving, repaying at the cost of living life and enjoying at this time in their life, but you implied that it's okay to ignore the credit

card debt and have fun now. This has come from the mother of a 22-year-old who has been trying to instill good saving. Okay, first of all, I did not, at least, okay, maybe it was not my intention to imply that it's okay to ignore the credit card debt. What I was trying to say was that if you are fortunate to be a young person making enough money to max out your 401K, then you should also enjoy your life at the same time. However, if you have credit card debt hanging over you, then obviously you should pay that before you invest your money. Yes.

Yeah. They may have misconstrued your words. Okay. Number one rule of personal finance don't carry credit card debt for month to month, especially for paying interest on it. Okay. Recommendations for the week. I'm going to start. I finished the new Jack Reacher book, Passed by Lee Child.

What? Of course you did. I don't know there was a new one. Yes. It was awesome. How many Jack Reacher books have you read this year? This is the 20, this year, this is the 23rd. He puts one out each year, and I've read them all.

And I thought it was kind of like going, kind of going downhill a little bit, and this one was great. It could be totally be a movie. I loved it. It was, he is the best at, you know, sometimes the best thing of, the biggest difference between a fiction book and a movie is you can get a lot of this buildup where you have no idea what's going to happen in a fiction book. Like, it's easier to hide stuff and hide characters and hide, you know, motives.

And I think he's one of the best ones at doing that is like the buildup. is almost better than the ending usually sometimes. So I like that. Wait, question. Wasn't Jack Reacher a Tom Cruise movie? Have we been over this? I don't think we've talked to, yes. See, this is tough because it's pitting my love for Tom Cruise

versus my love for Reacher books. And in the book, he's like a 6-6-250-pound guy. He's not Tom Cruise. I thought they did an okay job, but it should have been Liam Neeson or even like Chris Hemsworth, the guy from Thor. It should not have been Tom Cruise, as much as I love T.C.

Okay. It didn't make sense. So this was a Josh Brown recommendation. I started watching Escape at Danamora, which is the true story of a prison escape in 2015, I believe. It's actually directed by Ben Stiller, I guess. And it's really good. Beniso del Toro, Paul Dano, and Patricia Arquette are in it.

And I think there could be some awards for this one. They're all really good in it. And it's kind of a crazy story about these two people who escaped from a prison. It's like a seven-part miniseries, and they used a woman who worked there. There was kind of this weird love triangle, and they kind of used her to help them escape from prison. This is like big national news. I remember it at the time,

and I haven't gone through to read the story because I don't remember how it all ended, but I'm halfway through it. I'm probably three and a half episodes in, and it's really good. It's like a real-life Shawshank in some ways. And finally, this story was going on Twitter quite a bit from everyone.

It was called, the title of the article was called My Dad's Friendship with Charles Barkley. Did you read this? Yes. It was amazing. It was a great story. What part did you cry?

You don't cry, do you? I don't think I cried. I mean, it was crazy how Barkle showed up at this guy's dad's funeral. Yeah, that's the part that made me cry. No one believed his dad was just this regular dad who met Charles Barkley in a hotel lobby and they became really good friends.

And no one believed this guy that Charles Barkley is one of his best friends. And they would meet up all the time when they were traveling for business and Barclay came and said some words at his funeral because he was just like the nicest guy in the world. And yeah, it was a great story. So I read Brent B. Shore's book,

The Messy Marketplace, totally completely outside. of obviously what we do. So I learned a lot. And I really appreciated the fact that it was only 100 pages. There was like an appendix in a lot of terms that were more, but like the meat of it was 100 pages.

So I definitely learned a lot. And I actually have some tangible takeaways. So I recommend that one. I listened to J.J. Reddick interview Jimmy Butler. And Jimmy Butler gets driven to the arena in a minivan. Any reason for that? I don't remember. I think he just likes it.

You had a minivan. You're off the minivan wagon. As of two weeks ago, no more minivan. I was not sad to see it go. Really? You were so pro-minivan. Yeah, I don't. Well, my wife was probably happier than me that it's gone.

But moving on. Okay, so one of the things that I thought was really interesting in that interview was, so you know Jimmy Bother hit two game winning shots early on. I mean, he's only been there for about 10 games, I guess. And they were both like dribble, step back three-pointers. Okay. So they're both, like, really ridiculously difficult-looking shots. And he was talking about how before the game, like, that's a shot that he practices all the time.

It was not like an accident or a fluke. Like, it was not a hell Mary. He practices those shots. So I just, I just love listening to players talk about, like, the dedication and how much time they put into it. Because you only see the finished product. Isn't it crazy that during the NBA season now, you can listen to podcasts between players who are talking. That's the access that you have now is just insane. between yeah it's it's kind of crazy so he was talking about a vacation that he went on and he would

wake up at five o'clock and like mark walberg but a little bit later and he would play basketball and he would come home and and take a shower take a nap and then go play basketball and like he would that would just that would they would do that all day long so that's the whole life that's the whole life um did you see this ink story that talked about the most successful people in the world look up before i am it just it's so funny it just keeps getting earlier and earlier so now mark walberg is is literally waking up at 2.30? Is this a joke? Like, what the hell is going on?

I don't even have the energy anymore to, like, take these things on. I'm just going to let it go, and I don't know. I'll take the other side of you taking the other side. Okay. What else? Oh, so anyway, I really like the JJ Redick podcast. Next week he's going to have on the CEO of Goldman, which is going to be awesome. Oh, wow.

Yeah. What's the guy's name again? Is he the guy who's like the DJ? Yes. I don't know his name, but I know that he's bald, and I appreciate that. Okay. And all the guys at Goldman Baldwin bald? Yes.

Okay. You have a place if... Baldeman Sachs. Hey, oh. Yeah, that was bad. Terrible way to end this podcast. All right, thank you for listening. Sends your questions at Animal Spiritspot at gmail.com and we'll see you next week.