Animal Spirits Podcast - Fallen Angels (EP.145)

Episode Date: May 13, 2020

We discuss why stocks aren't doing better in countries with a better virus response, why portfolio managers hate the Fed, how are the airlines going to survive, finding some gray area in the crisis data, food delivery price gouging, white-collar layoffs, working out from home, Peter Lynch crisis stocks, millennials receiving social security and more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by our friends at Whitecharts. To kick off the show today, we are going to compare some country returns between South Korea and the U.S. Because we've been tracking things. Everyone's been tracking the graphs like what is going on in these other countries and how they're doing so much better than us. But we wanted to look at how this is going through to some of the stock markets. And Whitecharts actually has the ability to look at the local currency returns for a place like South Korea to compare to the U.S. to see if the fact that they are doing better than us on the virus front is actually translating into the stock market. So we got up some charts from them, go to whitecharts.com, tell them

Animal Spirits sent you, and they will give you 20% off your initial subscription. 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 Holtz Wealth Management. All opinions express by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritthold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael

and Ben. Are you getting sick of charts lately? No. Line charts. I feel like I'm just inundated with line charts all the time. But you're seeing all these other countries that are doing well. And the one that it seems to be brought up more than others is South Korea. And they are kind of this beacon of light in terms of they've taken steps to make this and I don't think anyone really talks about China as much as being like this held up on a pedestal because they can snap their fingers and make their people do what they want. And they're probably hiding numbers and who knows what they're doing. But South Korea is a place that I think the latest reading was like 12 daily occurrences. They've pretty much stamped this thing out for the most part.

They've taken some pretty drastic measures, but they've done well. And so my thinking was, okay, a lot of these countries that have gotten ahead of this, they're going to be able to open up their economy a little quicker. And if they can open up their economy a little quicker, you'd think forward-looking markets would price in some, that things are going to get better there, and things would show up in the stock market. So I looked at the SPY, S&P 500 ETF versus EWY, which is the South Korea ETF. The S&P 500 on a year-to-date basis is outperforming it by over 10%.

Now, a lot of that is the fact that the dollar is really strong. And so if you take it out, and so I went on Y charts, and they have the MSEI, Korea local currency index versus the S&P 500. And you look at this, going into the crash, it was basically identical. And the S&P is outperforming that by roughly three and a half percent. So I think it's like five or six percent that is attributed to the dollar. But having everything that you know about what's going on, don't you think it would make sense that stocks there would be outperforming stocks here. Once you back this out and you

realize, well, this has a lot to do with exporting and who buys and what types of sectors make up their stock market and the different companies that make it up. And when you start to drill down into it, it actually kind of makes sense. And that's kind of one of the things people are missing here in the U.S. in terms of why the stock market is performing well, that you can't really just compare what's going on to the virus. And in some ways, the stock market doesn't care that much about the virus? Is that almost fair to say? Two thoughts. First of all, you look great. Ben shaved his beard. And he's wearing a pink sweater that, is that J. Crew? Sure. I should get a sponsorship after last week. I think I'm keeping them going. I'm the only one who readily admits that I wear J. Crew,

and I'm proud of it. I don't care. Say what you want. All right. So two things. What have you compared Korea to say the Russell 2000? I bet it looks much different. Point two is What if you compare Korea to a lot of other single country stock markets? Like, take the U.S. out of the equation. Okay. So you're saying the U.S. is the outlier. We have the strongest economy, stronger stock market going into this. So take the U.S. out of the equation.

How does South Korea compare to, say, Sweden, which is getting ravaged or Germany, for that matter, or the U.K.? So it's doing better than Germany. But Germany is actually one of the other countries that has done really well. And they're down 20% year to date versus the S&P's down. 8 to 9 and South Korea is down 12. Again, a lot of this, when you're translating it back into U.S. terms, has to do with the dollars strengthened against a lot of these currencies. So that's like a 5 or 6 percent of this, which is a big number in terms of a currency move. But just, I mean,

don't you think if you're just, I feel like so many investors right now are trying to figure out the market based purely on headlines. And everyone is trying to look at the headlines and say, I don't get why the market doesn't match up with these headlines. And this just shows why even if you had the headlines ahead of time, it wouldn't really help you that much when you're thinking about the stock market. And people trying to link the headlines to the stock market, that's just not the way that you should think about investing in stocks, because it just doesn't work like that. And maybe eventually we'll get there and you say, well, their markets are forward-looking. Again, wouldn't you think that a country like that would come out of this faster?

And their economy will open up and they'll be much better positioned to open up their factories and start their manufacturing and all these other things that you'd think eventually that would trickle down into their companies and their companies would be outperforming. And that is just not happening. And again, maybe that just gets back to the idea that everything is so globalized now that it's all interconnected and everything got reset. But I think anyone trying to make sense of this situation based pre-on the headlines is just it doesn't work.

Agreed. Square Peg Roundhold. There was an article in Bairns over the weekend, Fallen Angels, which are companies whose debt has been downgraded from an investment grade-dick junk, has never been higher on a global level. And there's three points in here. I want to hit on. This is a manager at Austro-wide strategic income. He said, I think it's wrong. Markets exist to allocate capital. Anything the Fed does to distort that process creates moral hazard.

You're not going to believe this, but a portfolio manager who wants to buy distress assets does not like the Fed. News at 11. Yeah, exactly. But we don't, but I completely understand that rationale, right? If you are trying to evaluate companies and look at fundamentals and basically makes your job not obsolete, but what's the point? If every time there is... are re-rating, the Fed comes in. So I understand that. That's not, I understand that. Alternatively, the Fed is going to be part of the markets forever now. Their tentacles are there. And it could be a long, long time until the Fed raises rates again. And if they do, it's probably going to be a lower low from what it was in the past. You just have to get used to it,

unfortunately. Maybe that means jumping in when we have a crisis like this and things spreads blow out or stock markets blow out. And maybe in the future portfolio managers will be a little quicker to jump in some of the junky stuff because they know it's probably going to rally. And so maybe they just have to take that into consideration. I mean, again, you don't learn that in CFA level one that play the Fed put, but that's just the way the markets are now, I think. They made the point that perhaps the rationale for buying ETFs, because obviously that's not providing primary capital to these companies, is to avoid playing favorites. So how do you pick which sectors, which industries to bail out and which not to it? Maybe that's the- The Fed is diversifying.

And I guess why does that matter? Here's why it matters. Because they made the point of these two small Canadian companies whose shares are in YG. And if that tide rises, so the price goes up, the yields go down, it makes it easier for them to restructure their debt. But haven't you and I proven that buying an index fund doesn't lift all boats? We've talked about this effect that ExxonMobil was the biggest company for 20 years almost. People are buying the S&P 500 and it's not rising. The same thing with GE. So don't you think that that doesn't really hold water? No, I actually do think there's something there. And I know I'm saying... You're arguing with your own argument, though. I am. I'm speaking out of both sides of my mouth. However, when the Fed announced

what they were doing, H. Y, G, and K rallied very hard. Now, did every single underlying bond issue or rally the same? No, of course not. But there's no doubt that they had a massive effect. And if the yields of these companies is being driven lower because the Fed is there, again, then they can restructure at better prices. So there is, the Fed has their hands all over this. And I'm not saying right or wrong. I'm just saying. Yeah, that makes sense. I think them buying an ETF in the secondary market, that doesn't make it easier for some of these companies to refinance their debt and make investors feel better about that's the psychological part about the Fed again. I'm saying it does. Okay. I think them buying in high yield ETF does not make it easier for a company to refinance its debt. The fact that the Fed says, we'll buy corporate paper, that helps, again, from a psychological perspective.

But that doesn't mean that just buying the ETF makes it easier for these companies to refinance. I agree to disagree. Okay. All right. Are airlines going to make it? I feel like you're just turning into it. You're like 49% of the weight to being a Fed Truther at this point. Did you subscribe to Peter Schiff's newsletter yet?

I feel like you're getting there. You're close. I call it like I say it back. I'm just saying. You're jumping to the other. team. When you start reeling against buybacks, I'll know you're gone. Gone forever. So this is wild. The major airlines are losing collectively, not individually. They're losing 350 million to $400 million a day. They're averaging 23 passengers of flight.

Traffic is down 94%. So on an individual level, Southwest is losing 30 to 35 million. American is losing 50 million. How do they get through this? And obviously the political will and what if they have to do another round of bailouts. Don't you think people could be like, no, enough is enough? And then from Congress's point of view, or the Fed or whatever, aren't they married at this point? Like, why would they have done the first bailout package that they're not going to see this thing through to the end? Yeah, this is throwing good money after bad. Who are these 23 people that are flying on every flight? Where are they going? What would it take to get you on a plane? Are we talking vaccine or tests at the door? There was a piece in the Atlantic last week about a guy

who was on a plane and he made it sound like it was just the worst experience of his life. Honestly, like, even if I'm going to Florida or something, I'm probably taking that 24-hour drive rather than a flight. How do these companies exist in a year from now? How do they make it? Eventually, Buffett steps in Dubai after he sold. I have no idea. Obviously, like, it doesn't make sense from a business perspective.

Can they all just consolidate into one big entity? Is that what's going to have to happen? So Delta, for instance, has $6 billion in cash. equivalence. So if they lose $50 million a day, they've got just over 100 days. Now, I know that they got money from the government, but I don't know that's not exactly Einstein level math right there. But how do they make it? Yeah, do you want me to check that math real quick? Because last time you did math in your head on the show about Disney, we got a lot of hate mail. So I should probably check that real quick back in the envelope. I know that there's a lot of factors involved. And I didn't

even mention their debt that they have, which is considerable. I got nothing here, man. If these companies go away, what happens when the economy reopens? Like, people need to fly. This is just a disaster. Yeah. This is one I don't, I honestly don't get. But, but.

The double butt. I feel like every time we think people's behavior is just going to change forever, every day you see these restaurants that are full on Twitter and you see. This is different because the procedures for going to the, airport and getting on a plane are going to be so treacherous. That it's just going to scare people away. Yeah. It's going to be so awful, getting on a plane. You can't social distance on an airplane. I guess the biggest flyers are, let's say, the business travelers. They're the ones who are coming

up with the easiest solutions to this in terms of having Zoom calls and not having in-person meetings. I agree. It's hard to see a path where in six months from now, we don't say, what is the point of throwing them a lifeline again, if it's just going to be another one six months from then and six months from them potentially. Do you think actually at this point, it would almost be a safer bet to buy cruise ships than it would be airlines in terms of the stock? It almost feels that way. Yeah, yeah.

If ever we were going to make that device that teleports you from one place to another, come on, Elon Musk or somebody. Yes, it's going to be needed. But maybe Buffett should be buying Carnival after he sold Delta. I don't know. That's where the blood in the streets. I got nothing. All right. A lot of company-specific stuff was in the news. It seems like layoffs, job cuts, earnings are coming out. So I want to first talk about Instacart. So we get Instacart deliveries. I don't know if this is specific to Fairway, which is where we get it from. I don't think it is. But Robin was telling me, she's like, this is getting pretty expensive. So I was like, what do you mean?

So I think we're paying like $30 to $40 every time for. Instacart on top of what it would cost us to go to the grocery store. And I'm not saying I want to go to the grocery store. We're lucky to be able to pay for this, obviously. But the delivery fee is $4. The service fee is $15. You have to tip these people like... Yeah, you have to give a good tip. I've been tipping 10%. So right there. So four plus 15, if you get $250, it's a $25 tip. So that's $40. I mean, this gets really expensive. And then last night I tweeted that, so we ordered dinner, Italian food. It was $68. With DoorDash, there was an 11% service fee, a $4 delivery fee, plus what you have to tip the driver.

So it would have been like 35 to 40% more to use DoorDash. And I'm not blaming DoorDash necessarily. Yeah, honestly, for them, like, it almost feels like price-couging because I thought the same thing I order on the Chick-fil-A app all the time. And I went to go get it from DoorDash. And every item on the menu was more expensive than it is on the regular Chick-fil-A menu. It seemed bizarre. I don't think it's a viable business model. Forget about what they're charging.

Like, there's too many hands in the first. pot. It doesn't work. Is it just too hard, do you think, for some of these small businesses to hire a fleet of drivers? Yeah. And say, we're just going to cut them out of this? I mean, DoorDash is also taking a piece from the restaurant directly. Right. Yes, they're sharing the bill a little bit. And they still can't make it work. I just don't see how, I don't blame anybody. I just don't think that this is a real business. This is the kind of thing that everyone thinks is going to change forever because of this. And then when this is over, that may be the kind of thing that just kind of goes away, right? or it doesn't do as well, it doesn't survive in the form that it's in because people finally

wisen up to it a little bit. Although, let me ask myself a question. How come, how come when I was living in Brooklyn, I would order seamless all the time and it didn't feel egregiously expensive? Maybe it is a little cheaper in the city because there's so many more people that are available in the burbs, it's a little more expensive because they don't have as many drivers and such. Maybe you're playing a suburb premium?

Yes, that makes a lot of sense. That could be it. Don't you think we're in the point where everyone, obviously, this whole virus has become politicized, which is just crazy to me. Like, the virus really cares if you're left or right. But everything is black and white now, whereas people are saying, well, the stock market is pricing in only a V-shaped recovery, or it's got to fall 80%, or people's going to change forever, or it's not going to change at all. And I feel like so many people are not leaving room for some middle ground, which obviously this phase of whatever is happening in this opening is, kind of middle ground. I tweeted out this thing the other day that was a complete joke because there was a headline saying Shanghai Disney is reopening and the first day ticket sales sold out in

minutes. And there was something saying cruise ship for all the pent-up demand in August, it's up like 600% and it's up 200% year over year. And I said, oh, it looks like people's consumer behavior is going to be changed forever. And then I showed these two headlines. I said, wait, what? And people jumped down my throat, even though I was kidding, because the Disney thing is the only opening at 30% capacity and it's not sold out past the first day or whatever. But don't you think there's obviously room for middle ground here that some things are going to change. Some things are going to be exactly the same. The stock market's not necessarily pricing in a V-shaped recovery. It is pricing in things getting a little better and there's all this stimulus. I feel like I have no views

right now. I contradict myself every 20 minutes. I just feel like any extreme position right now in terms of yes or no or on or off or change or not change. I feel like that's just taking any of those positions just seems foolish to me right now because you just, who the hell knows, right? I'm in wait and see mode. This person that I know asked me, I don't know why it keeps coming up. When are you going back to work? I'm like, I don't know. I don't know what it's going to be like. I don't have a plan. My plan for going back to work will be dictated by what's going on around me. By the way, I honestly think it's possible depending on vaccine. You could lose not only the rest of 2020. You could lose all 2021 of ever going back into the city. I think

that's possible. I'm hunkering down. I've got a standing desk. And unlike you, Cheapskate, I got the electric, not crank, just the button. It was totally worth $400 so you could push the button instead of crank it. It's like I'm starting an engine every time I raise mine. And the other thing is I feel like we're going to have this whatever 18 month period until we get a vaccine and I am optimistic about that. A lot of people think, well, we're never going to get a vaccine. Whatever. I don't know anything more than anyone else, but I... Whatever. I'm choosing to be optimistic on that. But we're going to get all these behaviors that people say, like, okay, you've done this and these behaviors are going to change forever.

And then we're going to get a vaccine and I feel like people are going to go, ah, nah, I'm done of that. That's over. And then completely move on. So I feel like the stages of behavior are going to be so different, too, in terms of people are going to get locked into one thing and then completely let it go, because I'm sure I will do that, too. We didn't do a podcast on Friday, and now our Google Doc is 27 pages long. Yeah. We'll definitely have enough for another one this week. So, Disney has 55 million people on Disney Plus.

33.5 million are paid. So, not bad. I'm not going to try and do the math again. All right. But. So they're making next. negative $3 a month is what you're trying to tell me based on carry. Okay. We spoke a few weeks ago about this. They actually did suspend their dividend.

Yeah, surprisingly. I guess they're not like one of the dividend aristocrats with their pinky in the air, but that one is kind of surprising that people were calling for them to do that and they did it, which is honestly good for them. That's a good thing. So I think we're probably moving into the time where this thing has been going on long enough and a lot of the lowest income people got laid off first. And now I think it's moving up to the white collar people. So Airbnb. said out of 7,500 employees, nearly 1,900 of them are being let go. So it's about 25% of the company. And this was straight from the co-founder. So they, as we said, they raised a bunch of money. What did they raise a billion dollars? And then still had to lay off 25% of their workforce.

I wouldn't doubt if that's the next shoot a drop here, right? Is that this starts working its way up the ranks and people in the higher middle management roles or whatever start being let go as well. Well, NBC Universal is cutting pay of its senior management by 20%. Anybody making more than $100,000. Recent pay increases are getting rolled back. And this was a press release today from all the room's analytics regarding Airbnb. This was surprising. Airbnb bookings in the U.S. are rebounding an accelerating rate,

implying a possible V-shaped recovery, 90-day occupancy rates. The percentage of nights at properties listed on Airbnb booked over the next 90 days, reached 17.5% on the 8th of May, a gain of 7% on the week. So that sounds like a big disconnect there. I mean, I know it's a big jump over the previous week. I want a moratorium on the use of V-shaped recovery. I feel like everything is going to look like a V because it's coming off of nothing. Right. So they say, despite the rebound, 90-day Airbnb occupancy rates are still down 38% compared to 2019. So it's like everything coming off of a low base is going to look like a V of course. A V assumes you go from one point,

down and then back to that same point. This is not that. This is like, I don't know what that's called, but it's not a V. It's a WTF formation. Uber is laying off 3,700 employees. Global gross books are down 80%. How is that not down like 95%. Yeah, I don't know who's still taking an Uber. Do they count eats on that? I don't know. That seems like the only thing that could save them at the moment. That's 14% of their workforce. And this is interesting. Uber have been in talks to lead a $170 million investment in Lyme, the Scooter Company. The valuation was 500, I don't know if they did or not, but the valuation is $510 million, which is an 80% drop from their previous valuation. I still don't understand.

So Uber's stock price is up 8% this year. Looking at these numbers of all the layoffs and global bookings down 80%, and the stock is up 8%. Fundamentals. Relative fundamentals, I have no idea. So a lot of the tech companies being up, a lot of those stories really make sense in the fact that their stock price is up. This is a story to me that doesn't make sense, especially because it's not like Uber Eats is that big of a business for them. This is one of the ones that doesn't make sense to me. I feel like the failing New York Times really did me dirty. I think, I don't know how I backed into this, but when you got your Peloton, I'm pretty sure that I ripped on you pretty hard. Did I not? Yes. I think I

let you have it pretty good. And then the pandemic happened and I got one. And I tweeted something about getting a Peloton saying that I never would have got one without the pandemic, but I did. And so a reporter from the New York Times reached out to me and asked me a few questions about this. New converts, new converts. Yeah, he is a new convert. What about me? New converts include Ben Carlson, a wealth manager in Grand Rapids, Michigan. He wasn't interested in a home workout setup before he exercised on lunch breaks at a gym near his office. But now that he's working at home with three children under the age of six, it's harder to get away for a run. Last month,

he bought a Peloton, which he rides after his children are in bed. Here's a quote from Ben. The bike is part of my new life for the time being. Mr. Carlson, 38 said, you're 38. You look pretty good. Even when things reopen, I don't know that I'll be the first one to rush back to the gym. What do you think about the Peloton, Mr. Influencer? I like it way more than I thought I would. I still haven't told anyone my handle yet.

I probably won't, but. J. Crew, 99. Yeah, I've never used the workout bike before, so I like it way more than I thought I would. And the fact that you have all this classes and the big screen, I think it's great. I'll give you credit. You were right on this one. Give me credit for Disney Plus, and I'll give you credit for Peloton, even though I was the one who got the pub on this.

Isn't it kind of funny, though, that all it takes to find a source for an article? I think in the past they probably would have had to go to Palatine and say, hey, give us some of your customers that we can talk to. But now this New York Times reporter just probably searched for me on Twitter and saw that I tweeted about Peloton and asked for a source because it wasn't like we followed each other or anything. So Palaton's crushing it. They added 1.1 million users to its digital fitness platform. That doesn't necessarily mean bicycles. I don't know exactly what that represents. But there is like an online thing where you can do other things other than bike.

For instance, I did a high-intensity training, 20 minutes, not to brag. Do you find yourself competing with the leaderboard? No. Is it like a rotten tomatoes thing? How do they calculate the leaderboard? I'm physically incapable of competing with the leaderboard because I'm chubby. I'm not saying that I'm going to be in the top of the leaderboard, but I want to be top quartile-ish. I'm like racing against that instead of myself.

You know, it's incredibly deflating? So I did that thing and I was absolutely dead. And you know, after a workout, you feel ripped, but you actually are and I'm not. So I feel like my muscles are pumping and then I go take a shower and I don't look. I have a dad bod. It's not great. I give you credit. Sounds like people working out every day. Thank you. I appreciate that. This place again, perfectly like right place, right time for this stuff. Anyway, $524 million in sales versus estimates of $488 million. The stock price is doing really well. I kind of got annoyed at myself. This is one of those things that seems so obvious in hindsight. There's a lot of those.

So I wrote this piece yesterday about like the five types of investors right now. And one of them is, why would I own anything else, which is like tech stock investors? The other one is, I don't want to own anything. And there's a lot of people who think that we're going into a great depression and there's no reason to invest in anything. One of them is I wish I would own that. And it's Netflix and Walmart and Amazon and Peloton and Slack and Zoom. There's a lot of those where you hit your heading to go, oh, this is such a Peter Lynch thing.

This is like the invest in what you know market in a lot of ways. I do own Slack, but I will say, because I mentioned this earlier on the podcast, probably bought this towards the end of 2019, I think. But here's another one, for instance, biotech stocks. So, XPI is at an all-time high right now. Doesn't that seem so obvious? Don't you feel like an idiot for not owning that? Yes.

There are a lot of things. And you had a chance to buy a lot of these too because everything got hit initially. That first wave of- Well, that's the thing. That's what I was going to say. So let's say that during the first wave, you're like, okay, I'm going to buy health care or biotech because there will be a vaccine. But those things got slaughtered just as same as everything else did.

As well as the NASDAQ 100 is doing, it was still down 29%. It was? Yeah, 29%. I looked at this. That surprised me as well. So a lot of this stuff got killed and you had a chance to buy it. Unfortunately, you didn't have that much of a chance. The pitch was too fast. Couldn't swing. Okay. So there's an article in the Wall Street Journal. U.S. Treasury expects to borrow $4.5 trillion in fiscal year as a share of GDP, the roughly $3.6 trillion of emergency spending Congress is authorized in the past six weeks is about what it spent over five years during and after the 0809 recession. I thought this. This was a terrific quote from Mark Goldween, senior policy director at the committee for a responsible federal budget. He said, when your farm is burning, you don't worry if you have enough water to make it through the next three crop seasons. You put out the fire and then you worry about it later.

Other people would say, well, you let the rotting crops die. Yeah, and stop the bidex. So Jim Bianca was on Barry's podcast this past week, and he talked about the U.S. brings in whatever, two trillion dollars in tax receipts a year. if there's a situation where we do not get any inflation from this, or above average inflation that goes kind of crazy and things get a little wonky and interest rates shoot up, you could make the case that MMT, those people are right, that, okay, why are we collecting taxes at all? Why don't they just print $2 trillion a year, lower everyone's taxes, and if inflation is not going to come, what is the point of that?

I can't wait for the hate mail. I'm not saying this, Jim was saying, his point was saying, Are you saying ban taxes? No, he was saying, like, there will be unintended consequences of this down the road, but it's either, would we rather deal with those consequences in two years or now? And the point was, we do not want to deal with those consequences now. So we did this. He was also saying, like, if this doesn't lead to unintended consequences,

then you have to rethink everything, don't you? I have a great idea. In two years, when the chickens come home to roost, let's kick that can down the road. Yeah. Screw the grandkids. That's what everyone always says, even though we never pay any of this debt off anyway. We've been getting a lot of those, by the way. A lot of emails about, I guess you guys don't care about your grandchildren. Yes. Right. And guess what? I guess our grandparents didn't either because they left us with a lot of debt too.

No, I don't care about my great, great, great grandchildren. That's who I don't care about. Okay. No loyalty. If our great grandchildren are able to borrow at 50 basis points on the 10-year treasury, I think they'll be okay, right? What do you think the DAW will be at with your kids, grandkids, grandkids, when they go to retire? Will Social Security be there? Well, I think the dollar will be at 9 million. Is that conservative? I want to talk about Social Security. You were a really good piece on this. Can we do that?

Yeah, so I got a question. I think this might have been a question for the show, actually. Someone said, okay, the government is spending like crazy. I'm already worried about this. Do you think Social Security is going to be around for millennials when we go to retire? And people have been worried about this already. And the response I got for millennials without even reading the piece on Twitter was, I am not planning for this at all.

And I said, oh, contraire. You don't have a financial plan. What's that? How many of those people who are saying they're not planning for this, have a plan in the first place? No, but a lot of people were saying, in my financial plan, I'm not taking Social Security into account at all. And so I looked at this, and the Social Security, like their administrative board of trustees, puts out an annual report every year. They map this thing out based on demographics and life expectancy and how people are going to take and what payroll taxes are going to be. So obviously, all these things are subject to change.

But this has been known for a while now that in like 2034, the amount of money that comes in from payroll taxes is going to be less than the money that goes out. So it's going to be at like 80% at that point going forward. And so at that point, good, you're still covered 80% of the way there. So let's say they decided, you know what? We don't think Social Security is that important. We're just going to pay out what comes in. So you get to 20% haircut. Now by 2094, they estimate that payroll taxes will still cover 73% of it. All right. It's back in the plan. It's back in the plan. So I'm saying what politician in their right mind would ever cut Social Security, which for a lot of retirees is the majority of their retirement income. You would be nuts to ever cut

this program. So guess what? This situation is shown if there's political will to spend on something, they will fill that gap. This is not one of those things where the trust fund runs out and they go, oh, now what do we do? There's no money left. The government can find money somewhere else and use it as a priority and maybe deprioritize somewhere else if they want to keep things clean. But I would maybe you have to take it at a later date if you're a young person, or maybe it's not going to be as much as people are getting now. But I'm pretty confident in saying it's going to be there in some form. Well, this surprised me. In 2019, an estimated $1 trillion were spent on Social Security, which is 23% of the annual budget. Holy cow. Yeah, it's a big piece. And they were saying

that for a lot of retirees, this is a huge, huge part of what they spend every year. So hang on let me find this. Okay, so half of all senior citizens get at least 50% of their retirement income from Social Security. Around one in four, 25%, receive 90% of retirement income from Social Security. Guess who votes? Old people. You're not going to ever get elected to a higher office if you're taking away their Social Security. That's the way that I look at it. Again, maybe they can say anyone under the age of 40, we're raising the earnings cap because they don't tax people over a certain amount. So I think that they could do some simple fixes that would make it probably on sounder financial footing. But I think if you're a millennial, you can plan on it being there in some

form. I wouldn't say it's going to be zero when we get there. Demand for small business loans cool. This one surprised me. There was an additional $310 billion in relief coming. After two weeks, more than 40 percent of the money remains available. So the first round of PPP loans was gone like that. And then they were worried that we're going to need to do it again. And then we're going to need to reload and do it again. And this one is, what does it say, 40% of the money still remains? That's shocking to me. What do you think the reason for this is?

Well, one of the reasons is because people are doing the calculations. They're saying, oh, this doesn't make sense for us because then we have to hire back everybody. So Marco Rubio said, we're hearing from a lot of businesses. We can't do 75% in the next eight weeks for a lot of reasons. This loan will be forgivable. This was never designed to be a loan program. It was designed to be almost like a grant program. So I think that there's going to be so much confusion over what guys.

gets paid back and when and how. Don't you? The aftermath of this is going to be kind of rough. But that's honestly why if I was a small business, I would just take it and then ask questions later if I'm not following everything to a T. Because who's really looking through the books to make sure that these companies are following along or paying it back or maybe I'm wrong on this? But do you think that on the downside of this, are there a lot of businesses that say, like, what's the point? If we're going to hire these people back for two months, we're going to go out of business anyway. Why not just rip the band it off and do it now and not have to have that stress hanging over our head. You wonder if that's a lot of it, too. But I was surprised that because

people were mad that a lot of the money, they said, didn't go to the right people the first time. And now this, there's still a lot left. This is surprising to me. I guess the hope would be that maybe they'll let some of those businesses that took one the first time, roll it over again and take it again in a couple weeks or months whenever it runs out. I don't know. But this is one of those things that didn't make sense to me. Have you been noticing lines into the street at drive-thrus? everywhere. Starbucks and McDonald's and all these places. Someone's going to figure it out, don't you think? Chick-fil-A so far has the best system I've seen. They have two drive-through lanes. And then in the parking lot, they have four additional mobile lanes that they created. And they have people running

from inside to run your food out to you. And it was still packed, though. Well, you might not be seen beef on the menu at every place you go. So an analysis of 185-1, these restaurants found that up to 10% of them have taken beef off their menus because 20 meatpacking plants around the country have temporarily closed, reducing the country's overall beef production last week by 35%. So probably going to see some higher prices at the... It sounds like a lot of these places closed because they were being hit with sickness. Is that right? Or is it just they closed for...

Oh, yes. The meatpacking plants, yes. Right. This is another kind of weird unintended consequence I wouldn't have thought about. So, yeah, I went to try to re-up my burger order at Omaha Steaks, and they're going to gone. Oh, really? Yeah, everything was sold out. Last week, you made a claim that you make really good scrambled eggs. Yes. I pressed you and you said, I just do. So somebody sent us a video. It's like the 10,000 hours thing. I put in 10,000 hours on there. I can't explain it to you. I just have to do it.

Somebody said this a video of Gordon Ramsey making a scrambled egg and my mind was absolutely blown. Have you seen this? I actually didn't watch it. Sorry. Okay. Well, it turns out that we, I don't know about you, but we have been making scrambled eggs wrong this entire time. How do you make a scrambled egg? Tell me now. What's his secret? Here's what he does. You crack the eggs into the pan, whatever.

You scramble them up. You whisk them up. You put them in the pan. You take them off the heat, then put them back on the heat, off the heat, back on the heat. And you're scrambling the entire time. And so I did this, and it's a completely different scrambled egg. It almost is like an oatmeal. Like it has a completely different texture.

My mind was completely blown. I'm trying to think. I guess, so I have my little spatula, and I'm constantly cutting and moving the whole time. Okay, fine. So you're doing it right, but now you've got to take it off and on and off and on. Okay, I guess I don't take it off the heat. I keep it in the middle, but I'm constantly moving and cutting. Okay, so you were.

I'm halfway there. You were 80% right. All right. So Derek Thompson had an article in the Atlantic about the Planta Safe Restaurants. By the way, Derek Thompson, a noted your boy guy, got a shout out from Bill Simmons, who had a really good chat with Chuck Closterman. Did you hear that? Yeah. He said that they're going through who their news sources are for all the COVID-related

stuff. And he said that Derek's been killing it. He's been doing a great job, like two or three long pieces a week, all about how things are happening in a lot with like restaurants and the economics of this. And he's been very good. You were early. You corner the Derek Thompson market. So kudos to you. All right. So is this a good idea or a bad idea? Derek said, I've spoken with several retail analysts about the possibility of automating more of the restaurant business. They point to places in China and Japan that use tablet ordering and convention. very belts, do you think American restaurants are ready to automate that? And this is what the guy said. I think he was a chef or a restaurant owner, I'm not sure. Sure, I could see more

automation, even if it means reading the menu online before you come into the restaurant to cut out that interaction, that would change the whole dining out experience by shrieking it to 30 to 45 minutes. So, I mean, I understand that that could be tempted, but isn't kind of like, isn't it fun? I don't go out to a restaurant that that often, but isn't kind of the experience you go there, you sit down, you look through the menu, you chat. That would be a place that my family would go to that. I know I'm going to get in there. I'm going to order right away and I'm going to pay right away because I have kids. That's like a family place probably. Okay. So there's a red robin that opened up here. And I feel like Red Robin, Applebee's family places like that, I think that perfect. You

definitely want to automated. But if you're going out to like a nice place, like you don't want to be rushed out of there. You want a little talk. And don't you think that the biggest loss for a lot of these places, though, is the booze. Isn't that their highest margin product? People getting drinks? A lot of local places are selling alcohol, but I'm making it on my own. They're not selling them at $8 a beer like they do in New York, or $9 a beer. I don't know. I haven't ordered. It's a good question. I've seen some six packs and stuff, but you can't sell it for, I mean, in New York, you'd be buying a six pack for $75 for the prices you paid a bar, right? True. Is it unknocked up or a four-year-old virgin where he says, yeah, today's $17 beer night? That's like every time

go to New York. Like, they've got to be losing a lot of money on alcohol sales, I would imagine. All right. We just realized that we have already hit our limit. So you got dragged pretty good for not wanting to do another episode. No, you know why? You're a lazy millennial. No, here's the thing. We literally have 27 pages of stuff in the dock. I'm not complaining. Listen, the podcast is my favorite thing that I do all week, but it felt like it was becoming work. You're right. We needed a break, and now I feel like we got a break and we'll come back strong on prior to another one. All right. Let's do a... a listener question here.

Before we get to the listener question, let's talk about the interactive broker blowup. We were asking, like, who are the winners, who are the losers in the oil thing? Here's a quote, at midnight, Shah got the devastating news. He owed interactive brokers $9 million. He'd started the day with $77,000 in his account. This is crazy. So this guy, Thomas Petter for he, was a chairman and founder of interactive brokers. He said that the journey into negative territory exposed bugs on the company's software.

the quote is, it's $113 million mistake on our part. Oh, man. They said that their prices didn't go negative. It was almost like a Y2K bar. It's like a Y2K. So he said we will rebate from our own funds to our customers who were locked in with a long position during the time. Price was negative. Any losses they suffered below. So it said that like, I think it was CBO or somebody or CME sent out a notice like, hey, make sure your software is able to handle negative prices. He's like, but we got that warning like five days. It wasn't enough time. That's rough. So the broker is not only are they dealing with zero dollar trade commissions now. They're dealing with negative oil prices that are eating into their profits too. I mean, with the increases in trading, they're

just getting hit from all angles here. You'd think this would be a time when volatility strikes that these places would be doing better. So interest rates are coming down, so they're having a harder time on the interest rate margin. And they're getting maybe these places are going to be in big trouble. I don't know. Real quick, survey of the week. Nearly half of men say they do most of the homeschooling, well, three percent of women agree. Say that one more time. Say that one more time. That's amazing.

Half of men say they do most of the homeschooling. Three percent of women agree. That's perfect. This is a survey I finally get on board with, and I totally agree. Because my wife is doing everything for homeschooling. Well, okay, I probably do like 5 percent of it. The question was, who is spending more time homeschooling your children or hoping them with distance learning?

And men said 45 percent me, 39 percent my spouse. Women said 3% my spouse. And I will, to Robin's credit, she is doing 100% of the homeschooling. That being said, she took this year off to be with the baby anyway. So, but I would say I'm 2%. They're trying to send us homeschooling for my daughters in kindergarten. You can't homeschool a kindergartner. They give us stuff to do and it's projects.

And I feel for these teachers because they're trying to do YouTube videos and they were not prepared for this. They're trying really hard to like give them stuff to do and then share videos back and forth, but this is, if we get to fall and this is still going on, I feel for the kids who are in, like, middle school and high school, like, I don't know how they're handling this. It's tough. As you know, we got Kobe a Kindle Fire for kids, and we've been sitting on it for a few weeks because we know that once we give it to him, it's life is different. There's no putting the genie back in that bottle.

So we gave it to him, but we put a timer at two hours a day. So after two hours, it gets locked and that's it. So on the first day, the time locked, we're like, oh, time's up. We explained to him, he gave it back. He's like, that was fun. And Robin and I looked at each other like, whoa. Next day, the timer went off. His time was over and he had an absolute full-blown meltdown.

I don't think there's too many parents who are concerned with screen time during this quarantine. But yeah, it's, honestly, they're all going to be so good. My daughter's been using one since she was young, too. They're going to be so good with this stuff. All right, listen to her questions. What are your thoughts on momentum investing as a long-term versus short-term strategy is a product like M-T-U-M, which is the momentum I-share's product, really that different in terms of style long-term over an SPY. It seems as if market cap waiting is really

a long-term momentum play anyways, right? I'm still surprised that momentum is not becoming more accepted. It's a little harder to understand than something like value where you say I'm buying a dollar for 50 cents. But maybe that's the problem. Is it so counterintuitive? But momentum funds are not as big as you would think. It is definitely more of a trading strategy, I think, than people that are buying into ETFs and such. Yeah, it's a total drop in the bucket in terms of assets relative to say value, for example. So M-T-U-M, which I believe is by far the biggest one, has $9 billion in assets. And if you look at like the Russell 1,000 value ETF from I shares, let's see what this is. This is $34 billion. Right. That's just one product.

The quant people will kill me here, but I think that in some ways you're wrong. You could say that a market cap weighted index and P500 is a little bit like momentum. Okay. Because the cream rises to the top and you're buying the winners and the losers are going to the bottom, I think in a roundabout way, the quant people will kill me and say that's not true momentum. You have to go 12 months out and... Well, it's not true. There's a piece from Aaron Stanhope.

I'll try and find a link to. I understand what you're saying, but actually. Semantics. Nah, not really. All right. This is a quant thing. Whatever. All right, recommendations.

What do you got? I listened to the two rewatchables this week. which is on the Ringer Network, Bill Simmons podcast, Gladiator. Do you remember how massive that movie was? Like, I remembered when I saw it, and I was, what year was that? Came on in 2000. I loved that movie. I still do.

I was 15 years old. Honestly, because it happened so long ago, it aged well, I still love that movie. I think it's probably the best movie of the 2000s. I agree. I mean, that's a top 10 for me. I love that movie. So the rewatchable is great. Also, Groundhug Day.

Did you listen to that yet? Yeah, I did. And I watched it on Netflix. this weekend. Did you? Yeah. I've always loved that movie. I kind of forgot how short it is, too.

It's an easy rewatch. It's 90 minutes or something. I need to rewatch it because even though I just saw it for the first time in 20 years, I completely forgot. Like, my expectations were, I thought it was a comedy, as I said. It's a thinker of a movie. I've probably seen it 30 times by now. And it's one of those movies that just gets better every time to watch it, I think.

All right. So I recommend the Vera desk. It's a standing desk that I got. If you're going to be home for a long time and you've got a place to put it, it's excellent. I'm catching up on billions. I watch season two. I'm enjoying it.

The dialogue is a little over the top. Not just the finance parts, but it's very theatrical. But the plot is very good. So I'm enjoying that. And season one, wrapped up season one of Sopranos. Okay. Thoughts? Very good.

I can't remember how it was season one ended. It all kind of blurs together to me. I still don't know how I'm going to watch like 70 more hours of this, but I guess I'll get through it eventually. It's tough. Every season's its own little island and you get new characters and you have to do it. Sorry. All right. I loved normal people on Hulu. It's based on a book. And this is an addicting show. I will say it's not a show you want to watch with your kids or your parents because there's a fair amount of sex scenes in it. And it's a love story. So if you're not into love stories, don't watch it. But this was an addicting show where you think, you know what? I knew nothing going into it. Apparently, it's a really successful book. And I liked it so much I picked up the book and plowed through the book this weekend, too. So my wife and I probably finished this in like four or five nights, which is pretty quick for us in terms of binging. And it's these two Irish actors who I've never heard of that are the leads. I assume they're from my own, maybe they're British, but the acting was phenomenal and the two leads in this were

really good. That's one of the better ones I've seen in a while. Did you watch the new Seinfeld on Netflix yet? No. I couldn't get into it. I love his stand-up. Maybe it's the quarantine stuff, but he was talking about going out and going to restaurants, and for some reason I just couldn't get into it. We watched 15 minutes of it and gave up. I don't know if he mailed it in or if it's just my state of mind where I'm not ready for someone who's not talking about the current situation, I just couldn't get into it. How about Save the Last Dance? You watch it last night?

I actually don't think I've ever seen it before. So I said this before on a podcast a few months ago, but I got killed again for saying that after watching the last dance last night that the biggest Al Michael Jordan ever took was Space Jam. I think this movie has a nostalgia premium from kids in the 90s, so I haven't watched it again. I watched it with my kids a few weeks ago, and it does not age well. It was a really bad movie, really bad. But people from the 90s love it because it was from their childhood.

I love watching Jordan watch players talk on the iPad and seeing his reactions. It's so good. And people talked before this came out that you're going to see another side of him that you don't like. And honestly, I just like him more after watching. I like him more. And I feel like this was very much out there. The fact that he was hyper competitive in a bullying practice was not news to any sports fan. Yes, but had he gone through the Twitter era, he would not be as liked as he is.

He got some pushback then as it was for being like a ball hog and such. But if he was doing that stuff today, he flew under the radar and he timed the social media era just right. But Simmons and Ursula were talking about this. I think they made a good point. This wasn't for Instagram. This was authentically who he was. Now you see players post a video and they're like hustle, grind. This was his authentic self.

He was not a hashtag guy. Yeah, he wouldn't have been on social media back then if it existed. He would not have been showing his workouts. And yeah, it's still great. There's only two more left, and I wish that there was more. So anyway, we will be back. There's a lot of stuff waiting it to about housing and the economy and employment. Value investing.

Value investing from Cliff Asness. We're going to get to all that on Friday. The Michael Lewis podcast, we didn't talk about that? Yes, on credit card. Yeah, make sure you listen to that. The new Michael Lewis podcast was good. So we will see you again on Friday. Send us some email Animal Spiritspot at Gmail.com.