Animal Spirits Podcast - Free Trading (EP.105)

Episode Date: October 2, 2019

On this week's episode we discuss momentum crashes, free trading for all, public vs. private markets, IPO performance, Goldman's foray into banking for the masses, healthcare inflation, rich people giving money to Ivy League schools, Shawshank what-ifs 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

Today's Animal Spirits is brought to you by Y Charts. Go to YCharts.com. Tell them Animal Spirits sent you. Get 20% off your initial subscription. On this week's show, we're going to be talking about a plug-in that Y-charts gave Michael last week for a post that had him break down the different components of the Rolls for 1,000 over the past year to show how they've been performing. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Batnik and Ben Carlson work for Ritt Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions.

Clients of Ritt Holt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. So you had this theory that we're seeing a. momentum shift between growth stocks and value stocks. And you wanted to look at it over the past one year to see what's been happening. You know, you just made a mistake that I think a lot of people do, conflating growth and momentum. Not the same things. Sorry. Wouldn't you say, though, that growth stocks have been outperforming value stocks as well? Correct. Correct. True. So we know that the momentum names have been getting hit the hardest. So in other words,

the stocks that have done the best over the last year were the stocks that performed the worst and September. But I did not know that the inverse was true. That also the stocks that had been the worst performers from September 2018 through August 2019 were actually the best performance in September 2019. So whether or not this is a reversal of the momentum over value, growth over value. So give me some numbers and let me know how you ran this down a little bit. Well, so just like for instance, I'm actually, I don't have the spreadsheet open. I'm just looking at my post, but like Roku, as an extreme example, was up 150% in the 12 months from September through the end of August. And it was down 30 something percent in September. So there were

39 stocks that were up 50% over the previous 12 months. And there was 42 stocks that were down 50%. And the performance of the best stocks was terrible and the performance of the worst stocks was actually very good. So again, maybe this is just a minor reversal, whether this is like it and the 13 years of horrific returns for value is at a bottom. We'll see. Well, let's say this is it. It's always kind of interesting how these things sort of happen for no legitimate reason, really. There was no sea change or piece of news that made all these momentum stocks get destroyed. It just sort of happened, right? You know what's funny about that? You're right. And what you're going to hear, and I guess I was guilty because I was just thinking

it, is like, in order for this to continue, here's what you're going to have to see. Right. People love to say that. It's a great. A great pundit phrase, but no one really knows when these things. And these momentum crashes happen all the time. They've happened on the way up too. So there's been plenty of head fakes along the way. So who knows. But it is interesting that we've just seen this huge, huge reversion to the mean in a lot of ways. No, its stocks have not been doing well lately. What's that? The brokerage stocks. Charles Schwab, TD Ameritrade, Interactive Brokers, and E-Trade. I wonder why. This is a surprise. Well, so you sent me this. I didn't realize it was this bad. So they're basically all down. in the 35 to 40% range over the past 12 months or so? Since May 2018. Okay.

So Schwab announced today that they are cutting commissions across the board, U.S. stocks, ETFs, options, and they're getting hit. Their stocks down on 7%. But like, T.D. Meritrade holding is down 21%. So I want you to read what I wrote in the Google Doc here at the end of the last week, right below your chart. Is this a not-to-brag type of thing?

Yeah, that's kind of bragging. Where did you write this? Right below your chart here in the Google Doc. Oh, okay. Ben wrote Robin Hood, copycats are coming question mark. So there was a story last week saying Interactive Brokridge is going to offer an IBKR Light, which will have zero commissions on ETFs, no account minimums, no activity fees or no inactivity fees, free market data, all this free stuff.

And then today, Schwab announces that they're going to be offering free trades. I just think it was only a matter of time before or, all these other banks and brokerages and fund shops decided to offer free trade. I mean, Vanguard's got to be not far behind, right? Vanguard and Fidelity are almost certainly going to announce something similar. We are a day late and a Bitcoin short because we're recording this on Tuesday. And if you recorded this on Monday and you had your prediction, that would have looked pretty good. I would have been a man, hot take on all the finance streets. You'll get him next time. I will. But, I mean, don't you think that this was obvious? These places weren't

just going to let Robin Hood run roughshot on having free trades. And doesn't it make more sense for the bigger places to have free trades because they have the scale to actually allow this? This is why Fidelity did the no fee index funds and that sort of thing. I do think that. So the CFO said, quote, we don't want to fall into the trap that a myriad of other firms in a variety of industries have fallen into and way too long to respond to new entrants. It has seemed inevitable that commissions would head towards zero. So why wait? And to your point, like why wouldn't they do this? So they have enormous scale. They have 12.1 million brokerage accounts that are active, 1.7 million corporate retirement

plan participants, $3.7 trillion in client assets. And so what does this mean for their top line, their bottom line? The CFO said that they estimate that this pricing reduction is equivalent to approximately $90 to $100 million in quarterly revenue, which is roughly 3 to 4% of total net revenue. So I think this makes a lot of sense. They're going to obviously look to make it up in other ways. Well, unfortunately, last month, they cut 600 jobs. So I'm guessing that was in response to this or getting ahead of this. Yeah. So on interest, they make about, what is it, half their revenue or, no, half their bottom line numbers comes from the difference between what they pay and what they get.

Okay. So this company has been, Robin Hood has sort of seeming to like sidestep a lot of the talk about private market overvaluations. Don't you think it's time for a repricing in that company? Like, is that company really, worth $8 billion if all these other companies can come in and do the same thing. If TD and E-Trade, so TD lost 20%, that's not Toronto Dominion. That's the holding company. And if E-Trade, I don't know what it's down today, 10%. If these companies are taking a 10 to 20% haircut today, you got to think that Robin Hood's down 30%. Yes, but they're in the private market, so they don't go down at all, right? Until they do, I guess. But maybe that's something that all private markets should see some sort of hit lately, I guess, because things haven't been going so well when they've been trying to come public. But I just think that the finance side of things has sort of taken a backseat

to the tech, even if it's a fintech company. And eventually this stuff is going to matter to them because unless they completely take over the financial ecosystem of all millennials, it seems like these other companies are now coming for them. So the public is coming after private. Right. So I don't really thought about this, but this makes a lot of sense to me. Austin Allred tweeted, I can't believe how many people are saying it's just like 1999 again. Have you looked at the revenue? And then Josh Wolf did a quote tweet and said, that is the problem, that they have five to 500 times the revenue, but still cannot find a way to make a profit or not burn through cash is why it is worse. Selling $1 for $0.50 instead of $0.5 just means consumers get subsidized longer. I thought that was a pretty interesting take. And what are your thoughts on that? But don't you think that a lot of these companies are doing that on purpose because they're trying to position themselves at the next. to Amazon. And so the venture capital firms are allowing them to not have to make a profit. So if they can just reinvest in the business or spend a lot of money elsewhere, isn't that the

best case scenario for a lot of these firms? I don't think that's a bad strategy for a private company. I think that private valuation just got way out of control. And now the public markets are calling bullshit. Yes. So Fred Wilson had a piece on that too. And he talked about his sort demarcation line where how much you can make in gross margins. And there's a lot of these companies that these software firms have like 70 to 80% gross margins, but then you go down the list a little bit. In Uber and Lyft and Peloton are more like 40 to 50% than WeWork has like 20% gross margins and Spotify has 25%. So why should companies that are able to mint money like that with these huge margins? Why should it be valued the same as companies that don't have as big a margins,

which makes sense. So I guess those companies with the bigger margins can eventually pull that Amazon thing off and maybe turn off the spending spigot a little bit and make profit. so these other companies just can't. And I'm working on a piece right now for Fortune about the IPO market, trying to figure out what the big difference is and what's changed. And I looked at all the tech IPOs going back, all the sort of big high profile ones going back to 2011. So it started off with a Groupon and Zinga and even Facebook in 2012.

And it's amazing how much of the growth in any of those names, Twitter is another one, is all on the first day of trading. So besides Facebook and Beyond Meat and a couple of these outliers, the majority of the gains in any of these IPO stocks that have gone public in the last 10 years has all come on the first day. But I guess don't you think that that's actually a good thing that the market has absorbed these private markets and it hasn't been an issue? Like none of these companies have really done that well besides Facebook is the only that has probably made a dent in the entire market. You know what was actually the canary in the coal mine? What's that?

Fire Festival. That did it. So this was surprising. In the Fred Wilson piece, he spoke about the IPO index. And it's still outperforming the, still outperforming stocks. It's up, what is that, like 25% year to date? I would not have thought that. Well, I mean, there's a lot of other stocks that go public that you just don't really hear about as much because they're not, they're not sexy enough for the headlines. But yeah, and this is, this is 2019 alone. So this is one year. But yeah, I wonder how much. of that. Beyond meat is up 500% or something. A lot of these, I think a lot of them again come from which majority of that again comes from the first day. But should investors really care

that these IPOs are coming in and not making a splash? I feel like that's become like your thing. Should investors really care? Well, I mean, it makes for a great headline, but the market is within spitting distance of all-time highs again. Well, don't you think that investors in private funds should absolutely care? Yeah, probably, but don't you think they're going to be okay? in all this. Again, I think it's going to be like the employees of these companies that end up getting hurt. Well, hold on. Hold on a minute. It's not as if only rich people are investing in these private companies. Like a lot of this, and you know better than me, is from endowments and foundations. Yeah, pension funds. It's true, but I don't know. Walk it back. Walk it back.

No, historically, these funds haven't performed as well as people think. I think that's always been the case. So you saw this thread from Jawad, man, a long thread about venture capital. I thought this is wild. From 1986 to 1999, 29, 29 top funds invested $21 billion and returned $85 billion, while the rest of the VC fund universe invested $160 billion and returned a scant $85 billion. So that was from $86 to $99. I wonder, I suspect that the numbers are similar from 2000. to today? What do you think about this? So he was quoting this Kauffman Foundation piece, which was from 2012, I believe. And this thing spread like wildfire in the institutional world. When it came out, I remember a lot of people tried to sweep it under the rug a little bit

because it did not paint the private market returns in such a great light. But the way that VCs typically talk about their returns and their funds are, listen, we're going to have one home run and three or four really good ones and four or five that are going to go bust. But in this power law distribution. And what many people don't realize is that the entire VC industry is like that too. So if you're not in those top funds, then you're pretty much out of luck because if you're not in one of the best funds that delivers the best returns and gets the access to the best companies and at the early stages, then your returns are going to be really horrible. And the range of returns between like the top and bottom quartiles and this stuff is enormous. So it's actually not

surprising to me that these overall returns, like you could never make a venture capital index fund because it would be terrible if you're not in the top funds. So there's an article in the Washington, Harvard gained 6.5% immuted year for university endowments. And we've, so the end of this article said, an exception where diversification helped was when endowments invested in private equity and venture capital, she said, I guess they're quoting somebody. For many investors, these strategies lifted returns as money rushing into. private markets field higher valuations. Whoops. Yeah. I mean, the thing is a lot of these Ivy leagues do actually have access to the best funds and even they've had trouble in recent years

because I think there's just more competition to get into those now. So big schools delivered 5.8% returns on average for the year ended June 30th. A 6040 portfolio was, I know maybe not the best comparison, but it's up 9.4% over the same time period. I would really... Careful. People on Twitter do not like that comparison. Oh, I think it's a fair non-comparison. Yes. In other words, I mean, we've done this a million times. I don't know that that's the appropriate comparison although I guess you have to start somewhere. But they said that the returns were weighed down by weak performances and natural resources and emerging markets. Okay. So the Wall Street Journal also had a piece on Goldman Sachs and their foray into banking for the masses. And this one actually kind of surprised me because you and I have been talking about marketing. because for a while now, we're both users of their savings account. We think it has potential to be like a pretty big growth engine for Goldman Sachs. And wrong.

Yeah, this story made it sound like that's not the case. And maybe I don't know who's running this, but I don't know what they're doing. So it said their consumer bank, which operates under the market's brand, has lost $1.3 billion since launching in 2016. It spent heavily to buy startups in cloud storage space, hired hundreds of techies and build call centers in Utah and Texas. loans have gone bad at a higher rate than that of rivals. Here's the crazy one.

So they worked with Apple to create that. Wait, before we get to that, let's just stick with the loans for a second. So it appears as if a lot of that $1.3 billion loss was really just an investment in getting this thing up and running. Right. But where their continuing losses are on the loan department, where obviously they are inexperienced in this. So they wrote up $156 million in 2018 and another $155 million in the first six months of 2019. So their losses are 5.5% of its loan book, which is higher than they just picked up here, Discover Financial Services. I'm not sure why they picked that, but which is, which was 4%.

So it's not like, I mean, I guess there's a big difference between 5.5 and 4% on when the margins are that thin. Do you get those things in the mail once a week like I do, whether it's telling you you can have $30,000 or $40,000 in a personal loan? I feel like I get those twice two or three times a week. From Marcus or from everyone? Them and everyone else. It's amazing how often all these new fintech places trying to offer you loans. It seems like this is like a burgeoning business now that people are growing into. And I'm kind of surprised that they didn't have a better handle on what those like delinquency rates could be. Maybe it's because they're just spraying and praying and see what happens. They were very careful not to not to come close to their image of being

like the vampire squid and going after people that they made bad loans to. Yeah, that's true. So here's the other crazy one. So Apple rolled out their credit card, apparently in partnership with Goldman. When Apple rolled it out, their ads said, designed by Apple, not a bank. Unfortunately, Goldman wasn't too happy about this. It sounds like, and they spent $300 million to build it. Yeah, I, I, on what? What do you have to spend $300 million on a credit card for? Like the titanium stuff? That's a lot of money. It's, it had to be engineering stuff, right? I mean, I know they're talking about wanting to help people track their spending and make it more like a mint kind of personal finance app, but this seems crazy to me.

that's a lot of money yeah it doesn't make any sense i i still think this marcus thing has a chance to be successful obviously it's it's not going very well thus far i don't know how like what the interest environment has to do with that and that sort of thing and the spreads on those things but i'm still cautiously optimistic on marcus how does that sound i'm still learning 2% of my savings account from them that's good enough for me all right fortune had a piece this week on the anatomy of the bull market. And they had this big chart that showed the growth from different sectors since 2009. Obviously, some people will say the bull market did not start in 2009. Hi, Barry. Whatever you want to say, the market started going up substantially in 2009.

And they had some listings. And these numbers always kind of blown me away. From the market bottom in 2009 to now, the capitalization of companies listed in the SP 500 index grew by more than $18 trillion, but three of every $10 in gain. came from the 73 tech companies in the index. And the true bull market of the past decade was even narrow than that. Nearly 16% of the market cap growth derived from just four stocks. Apple, Alphabet, Microsoft, and Facebook, their combined valuations stored from over 300 billion to more than $3 trillion.

I know that this is how index funds work, but... This is how capitalism works. But these numbers still are mind-boggling. That $300 billion to $3 trillion to those four stocks is just unreal. Is it not? Anyway, that gets me every time. All right. The cost of health coverage in the U.S. now tops $20,000 from an annual survey of employers. This is in Bloomberg. And they try to get around why health insurance is so expensive. So this is kind of crazy. So they made the point in here, this guy from the Kaiser Family Foundation, Drew Alden, it's as much as buying a basic economy car now to pay for health insurance every year. So every time I write in a piece about the fact that inflation remains subdued, I always get hate mail from people saying, no, it's not. Look at my health care, student loans,

college spending, cost of groceries. And sometimes I try to laugh that stuff off. But for a lot of people, that's the truth that their personal inflation rate is much different than the inflation rate being put out by economists. What say you? I actually meant to bring this in. We got a bill from the insurance company for delivery of the baby. And I want to say it was like $38,000 or something outrageous. We paid 300 bucks. It's wild, right? Yeah. Imagine if you were someone who didn't have any health insurance. I know health insurance is very, very complicated and I know very a little bit about it. So I don't even know where to begin. All right. So it's not like people are paying 20 grand a year. That's how much it costs. So the average worker's contribution is $6,000 for a

family plan, which is still relatively high. So that means employers are picking up the bulk of those costs, but that's still pretty high, especially if you're someone who's trying to go at it alone to be an entrepreneur and try to do it on your own. That's a pretty good cost that you have to eat right up front. So Apple fell 39% from October to January, and then it rose 63% from the low in January to today. Charlie Bellew tweeted that. Does this mean markets are wrong sometimes that they're macroefficient, micro inefficient? What do you make of this? Like, how could Apple fall 39% and then rise 63%. How's it possible?

In the short run, the market is a voting machine. And no. I don't know. Markets are crazy. People extrapolate. They panic. They overreact. I don't know.

You know, you should have used that one when I was talking about tech stocks like three minutes ago. Did you read this David Shaw piece? Sorry, I didn't get to it. A few crazy things in this article. Full disclosure. My old fund I used to work for actually was an investor in D.E. Shaw. and it's one of those funds where if you had a hedge fund allocation and you were an endowment fund that liked to think of yourself as intellectually superior, you basically had to have an allocation

to them. And I would venture to guess, I don't know, 65% of the investors in the fund could probably not explain exactly what they did. That's a guesstimate, but I'm thinking that's probably pretty true. Is that based on a survey? Internal survey of one. It's, I mean, it's not a black box, but they don't exactly tell you exactly what they do. It's sort of a roundabout way. And it's kind of like, we've been doing this for a long time. And the people we hire are really smart. And Jeff Bezos used to work here. And so just trust us. And it was one of those things where it's like, okay, sure, take our money. We'll pay you three and 30. Starting in 2011, when the oldest of their three children was about two years away from applying to college, the Shaw Family Endowment Fund donated one million annually to Harvard, Yale, Princeton, and Stanford, and at least $500,000 each to Columbia and Brown. You know what? I am so sick of rich people donating money to these big Ivy League. Oh, yeah? Oh, yeah? What? Hold on to the thought for a minute. Quote, people sometimes feel a million dollars should give me a lot of clout. In the scheme of things, not so much. A million dollar gift doesn't have the impact it used to have 20 years ago. These colleges have $20 to $40 billion endowment funds.

And they all, they all admit, they all turn away like 95 to 99% of people that apply to the colleges. It is so ridiculous that they, like I am all for taxing the crap out of these endowments, especially the Ivy League schools. It makes no sense that wealthy people continue to give them so much money. So total donations for this foundation was $37 million over seven years, which is $62. of the foundations giving over the time period. I'm sure he has other foundations and I'm sure he gives a ton of money, but come on. And to make this a bit ironic, his wife is a personal finance expert. You think she's on finance Twitter? So for those who don't know, David Shaw was this unbelievable quantitative math hedge fund thinker. And Dee Shaw's hedge fund has been one of the

better performing funds of the last few decades. I don't even know if he's still involved with the hedge fund at all. I think he kind of turned it over. Now he just does research. But you sent me this article and he has some odd billionaire quirks, correct? Yes. Basically quantifies every single decision in his life, which I guess, you know, why not? The craziest thing was that when he goes on a trip somewhere, he has someone who works for him, take that trip beforehand and sit in the exact same seat on the airplane he's going to sit in? Yeah, that's a bit much. Stevie Cohen did something similar where he had his desk set up the same everywhere he went. All right. So getting back to his wife, she wrote a book called Make Your Kid a Money Genius, even if you're not, and get a financial

life. Oh, okay. So teach your kids from a young age, do not drink lattes every day and someday you'll be rich. Is that the message? Give $37 million to various colleges and your kid can do well too. Yes. Okay. I mean, we probably, I've probably given them too much crap for it. I mean, obviously these Ivy League schools do good stuff in terms of research with some of that money. Weak hedge, week hedge. Just go in. All right. Here's my thought for a future blog post.

I would like to take the top, call it 25 or 30 endowments, and compare the number of students they have per dollar of endowment. Can we make some sort of Ben Carlson endowment ratio from that? Yeah. And then we tax over a certain threshold. I'm in. All right. So why is basketball better than baseball, you ask?

Because baseball is boring. True. There was an article in the Wall Street Journal with Daryl Morey and the general manager for the Houston Astros. Darry is the general manager for the Houston Rockets. This was a great piece. And the GM of the Astros said, how often do you have games where you know the outcome after the first quarter? Does that ever happen? And Mori said, never.

And then he said, okay, that's a difference. There are enough games in our world where you pretty much know you're going to win the game or lose the game by the third inning. That was pretty crazy. So make baseball games three innings. That would be so exciting. That's a good idea. Yes. After the third inning stretch, it's over.

So the other one, they talked about why did the Houston Rockets trade for Russell Westbrook? And he said, Mori said, because even if we're literally the same team, I would take the variance. I need the top end of the tail. He said literally. Uh-oh. Hate mail. Cue the hate mail. By the way.

That's Darry at hotmail.com. after we talked about the littler thing last week we got we got actually to get a literally thing stop sending us emails on the literally thing we don't care by the way a little pet peeve here this is talking on a podcast about blogging which is i don't know not not that great but i'm going to do it anyway do you care when you have a grammatical error in one of your blog posts no someone sent me an email last week saying i need to get an editor and i said it's a blog you know honestly i used to be like like, ah, you used to eat me up. I honestly, like, because I know, like, I'm going through the editing process in my book right now. I probably, I probably read each chapter, I don't know, 20 times now

a piece, and I'm positive, and I'm having editors look it over. I'm positive. There will be a grammatical error in this book. Oh, yeah? It's impossible to get by it. Yeah. I mean, you had it in yours, too. You were pissed. Yeah, I was. Understandably, because a lot of them were errors that you'd caught before and they didn't fix in time or something. Can I tell you I have a pet peeve as well? Yesterday, I was at Robbins' grandmothers for the holidays. They have a lot of cats, and I'm extremely allergic to cats, and I just wanted to get out of there. So, I went to Starbucks, did some reading, then I went next door to an Italian restaurant to get dinner.

Solo. Yes. Of course. I mean, it was like a quarter to five. Nobody else was in there. Ordinarily, I wouldn't do that. Movies are one thing. Going to a restaurant by yourself, that's a little much.

So the bill was... You do stuff alone more than any person. person I know in my life. I like my, I don't, I was about to say I like myself. That sounds weird. I, uh, I don't know if I enjoy my own company so much as I don't. I just like being alone. All right. So the bill was $20 and I left five because I used to be a waiter, so I like tip decently. But then I looked and she charged me $2 for Seltzer. Ooh. Isn't that so annoying? That's a little much. Yeah. Did they, did they ask what kind of water you'd like? You know, and it was not a bottle. It was just from the tap. And I almost,

I just like asked her, I know that would have been really awkward, but I was like, I just got, I'm just curious. Are you, are you told to charge for this? You're trying to get a bigger tip? Yeah, that's a little much. So you've staked your ground on the influencer bubble is popping. And get off my bubble. By the way, I'm furiously buying calls on my Irishman puts that I bought. I bought some long-dated Irishman puts like six months ago. And I think it's got like 100% on rotten tomatoes right now. And all the critics just absolutely love it. And they're calling it like a masterpiece and a classic. So maybe my take that it's not going to be very good is a little... No, I think you didn't buy puts. You sold calls. You are fucked. You are fucked.

Yeah. I'm, I'm lost. It's a total loser. I mean, the only saving grace would be that the critics are just saying this because all the other movies have been crap this year and they won an Oscar contender. You were searching for yield. Needs some income. I chased yield big time on this because here's the thing, though. I was going with the averages because there really hasn't been a good Netflix movie yet. And it's not by all, by the sounds of the critics, this is the first one mischaracterization it's a Scorsese film that is not a Netflix movie I know and someone was actually saying it's a this is a bad thing for Netflix because people should be seeing this in the theater not on our couch like what was the headline is this movie too good yes something

like that that's a yeah so I'm I'm eating craw on that one I haven't even watched yet I'm already I'm already backtracking big time I got a movie thing okay so I stayed in a hotel on Friday night in Pennsylvania for March for the Fallen not because I'm a prima donna but barracks snoring. My baby's up at three and six. I just wanted a peaceful night. So I stayed in the hotel and I watched. You podcasters are such prima donnas. Yeah. I watched some American pie. Iconic movie. Would you agree? Definitely. 1999, 20 years ago. Love it. I loved it too until I saw the rewatch. Oh, really? So his dad is hilarious. Eugene Levy. Best scenes in the movie. A lot of it did not age well,

unfortunately. And the critics and audience actually agreed on this one. They both gave it a 61, which is like, you know, it's good, but not as good as I remember. It's a nostalgia film. It's a nostalgia movie, definitely. It was a very important movie because it kicked off the whole run of teenage movies. Yes, people copycat about it big time. Okay, so here's the, maybe, I don't know if your influencer thing is right or wrong, but they had a story in the Wall Street Journal that there are now these Instagram content factories and how that's a problem for Facebook. And so maybe the bubble is just moving over. And it's talked about this place called 421 Media.

And they have a staff of... By the way, I see what they did there. What's that? 421. What? 420. 421. Okay.

Is that, you're saying they're potheads? It's a play on marijuana. Okay. All right. Good one. So they have 421 accounts. Sorry. That's where the 421 came around.

Oh, really? Sorry, it wasn't a cool potheads thing. I think it was deliberate. So they have 30 workers that turn out dozens of posts from more than accounts that reach more than 300 million followers. And so they do at funniest and at tat and at pups. And they have just taken over and they try to make this original content that looks like it's coming from just this one person,

but it's like a content farm. So maybe the bubble has just gone from public markets, public influencers to private influencers. I don't know. It just seems, it's such a bizarre thing that they have these professional people that do this. Wouldn't you feel kind of duped if you're just having professional people put out memes for you? Don't you want that person to be figuring out how to use Photoshop and do it on their own

instead of having like a content farm do it for you? Yeah. Okay. Instagram accounts for 22% of Facebook's, total ad revenue now. And revenue at the app is growing faster than its parent company accounts for 54 cents of every new ad dollar of Facebook. So Instagram is insanely important for Facebook, which means hopefully they break it up and separate the two so I can like Instagram but hate Facebook. How's that sound? I'm long IG short FB. Can't do it. Okay. All right,

this was an odd one. Mark Hulbert at Mark. Mark, Marker Watch had this. They took a look at this Edward Macquarie guy, a professor at the Levy School of Business in Santa Clara University, looked at returns for stocks and bonds going back to the 1700s. He found from 1797 to 1942, stocks and bonds basically had the same returns. This is an inflation adjusted basis. Then from 1943 to 1982, stocks heavily outperformed bonds. But since 1982, stocks and bonds have basically had the same returns. So his theory was there was a 40-year period from the 1940s to the early 1980s where stocks and bonds had this divergence, and that was it. Otherwise, you should assume stocks and bonds will return the same. Don't buy it. Sorry. Sorry. Not buying it.

This was data mining to the extreme, I believe. I mean, where is this data from 1797 coming from? Please, tell me. I don't know. I can't, and yeah, you can't even, stocks back then basically were bonds. They, they, I mean, they were more or less indistinguishable. People had to pay, companies had to pay these huge dividends just to get people to invest in stocks because no one wanted to because bonds were thought to be so much safer from a number of different perspectives. So yeah, I'm with you. I didn't buy it. And yes, financial market returns going back to 1797 is a little suspect. And did you know in 1797, that was before people knew dinosaurs walked to the earth? Wild. I know. I can you, I can't believe it. So I played basketball on Tuesday a week ago. Oh, sorry. Before we get into this,

we didn't talk about your merch for the phone. How did you, what did you think about it? This is the segue. Okay. I played basketball on Tuesday. And so I moved back to the town that I grew up in. And the guys that were playing there, I used to play with him like 10 years ago. What are the age range of, everyone on your age?

No, mostly older guys. I would say 40s, 50s, some 60s. So 10 years ago, I was decently better than most of them just because I was 24 and they were 50. You could outrun everyone. I used to have a game like that. So now they have stayed the same level, right? Because they were 50, now they're 60, whatever. But I am a shell of my former self.

So this is like the opposite of McConaug, quote, from Days of Confused. It was terrible. They stay the same and you get worse. I was getting to the hoop and breaking layups. And then I was like, it was like in my head, like Chuck Knoblock. It was terrible. It was embarrassing. I was dribbling the ball off my foot.

After one game, I was totally winded. When's the last time you played? Like 12 years ago. Basketball, it's a great. Getting it out and running is a great workout. And I used to be very competitive. Like if it was a one-point game, I would, like, play defense as tough as I could, go for rebounds. And now at one-point game, I'm malget it.

I'm like, just I had to get, let me get off the court. Did they have any of the old guys there that would call foul every time they got the ball? Yeah, yeah. There was one of those. It was, come on, man. But so I was going into it, I was a little bit nervous because I had the March, I guess, five days later. And I knew that would be cutting it close. And it was because when I went to sleep on Friday, I was.

my thighs were definitely still tight. But I woke up Saturday feeling like 90%. And so the march was great. Obviously a very good cause. By mile 10, we're cruising. I'm like, oh, next year we're going to bring everyone and blah, blah, blah from work. And by mile 23, I was like, I'm never doing this again. That sounds about right. It was, but it was. How many miles is it 28? It's 28. And it was interesting in the sense that at no point it was like huffing and puffing really. I mean, there's some uphills that are kind of tough, but it was more just like your body starts to break down towards the end. And certainly mine broke down. I guess, I don't know, mile 18 and it started to get kind of tough. But good experience overall. No cramps on the drive home.

The drive home was sort of tough. Will it be back next year? Maybe. Okay. One of these years, I'll do it. Did you listen to the Shawshank rewatchable? I loved it. Easily the number one rewatchable movie of all time. Yes. We talked about having the best movie discussion. of all time a few weeks ago, even if that's not your favorite movie of all time, I think if anyone said that's either my favorite or it's the best, I don't think there's any argument against it. Even if you have another one in mind, I don't think anyone can legitimately argue

that Shawshank is not one of the best movies ever made. I did think some of the what-ifs about casting were insane here, the fact that it could have been Tom Hanks, Kevin Costner, or Tom Cruise for Andy Dufrane, and Tom Cruise actually read for the part. It was sort of funny in the podcast. Like, obviously, Tom Chris is always animated when they're like, imagine him doing the, Are You Being Uptu's line? Right. I'm a huge TC fan, but I cannot see him playing Andy. Tom Hanks, I think, honestly, could have done it just as well. Yeah. Do you think Tom Hanks? Kevin Kossner would have been maybe in the middle ground. I think the only one you could never replace would be Morgan Freeman. So Rob Reiner wanted to do the movie. They produced it, but he didn't direct it.

And he wanted Tom Cruise to be Andy. And he wanted Harrison Ford. to play Red, the Morgan Freeman character. That would have, I can't see that. I mean, obviously, it's hard to replace Morgan Freeman because he's just so iconic in the voice and everything. But how about, this is a small role, but Boggs, who was the leader of, what's the name of that gang, the girls? Yeah.

They wanted Gandalfini, but he was filming true romance. I would have thought Gandalfini would have been better as the guard, as the prison guard. That guy was brutal. So I'm working my way slowly but surely, through the Sopranos, and I'm going to wait. I'm on the last season now. I'm going to wait until I'm completely done to give my review. Can you tell me about your Sopranos routine? How do you do it? Okay, I do have a routine because there's no way I could sit there and watch every single

episode. Are you skimming? No, I have watched every episode, but I'm not doing it while I'm while I'm replying to emails while I'm writing blog posts while I'm doing stuff from my book. So this is one of my routines for like writing my book. I'm not the kind of person who has music on in the background. So I've either used movies or TV shows. And so I'm kind of paying attention when I know that there's a part coming up that I'm going to want to watch. I take a break and watch. But I kind of have it on in the background. That's surprising. I can't, I can work with like classical music in my years. I cannot listen to lyrics when I'm doing work. Yeah. So I like to have, I've done that just in the last year or so, having TV or movie, TV show or movies in the background. Because it's like seven seasons long and 13

episode apiece. So that's a lot. So again, I'll save my, my total review for what I'm done. That is, that is definitely one of the benefits to working remote alone. Yes. Yes. I have no one getting in my way. So that, that's who keeps me company, Polly Walnuts and Tony Soprano. All right, listen to our questions. Just turned 31, started at a big law firm and doing full 401k contribution in HSA. No kids, no mortgage, no student loans. That's not a bad place to be. How should I allocate my 401k investments if I don't self-direct. Obviously, putting all in stock portions, but there are value, growth, mid-cap, et cetera. So this is basically a question. If you want to go 100% in the stock market, what's the best way to do that? I wouldn't pay attention to that.

I mean, if you're 31 and you don't really care to learn and to dig into the weeds, don't even bother. My recommendation would just be to buy a total index fund and not worry about it. Yeah, but I mean, I think you can also diversify globally. internationally emerging market, small, whatever, I don't think, to your point, I don't think it's really going to matter that much. I think it can help from the perspective of rebalancing every once in a while into the parts that have done poorly. But if you're going to go all on stocks, the loss profile is going to be similar wherever you go. So, like a total world index fund would suffice. Sure, if they have that, but probably don't. All right, here's a good one.

I'm a terrible reader. What do you suggest I can do to be a more proficient reader? I got it. Okay. I think reading is a skill that nobody is born with. And it takes practice and I wasn't a big reader growing up at all. And I think I was probably like 23, 24 when I got into reading. I was on vacation in Mexico and I picked up in the airport, the Pelican Brief by John Grisham. And it was a ton of fun. And I was like, huh, this is why people read. So I started reading books like that that weren't mentally challenging, but they were actually entertainment. And that was, that was like the gateway for me. I feel like we're soulmates here because that was exactly what happened to me too.

I think I started out. Was it the same book? What resort were you at? No, mine was just, I was never a big read. Like, I never read any books for pleasure in college or high school. I bet I didn't read one book, like front to back. And I started reading after college. And I think I started with a James Patterson series, the Alex Cross one.

And I think you have to find like an author that can suck you in or find a subject. matter. So then when I started getting into the world of finance, it was easy for me because I enjoyed the subject matter. So I feel like if you're reading something that you don't enjoy or like reading and learning about, then it's going to be easy to give it up. And I agree to. It's something that you can really get better at over time. Yeah. So I mean, I would say start with like Dan Brown, like the Da Vinci Code or something. And if you want to be a better reader, you have to practice. But like anything else. All right. Any recommendations? I watched between two friend's movie. Not very funny.

I feel like after he did the Hangover movie and he, that was like an all-time part, I feel like he tried to be not as funny. I don't even know that means. He legitimately went out of his way to not be as funny as he could have been. He didn't want to be like a Will Ferrell and he could have been. So Will Ferrell was actually in this movie. Okay. So I feel like he took, he wanted to be different in artsy and not, because he even says that in his comedians and cars getting coffee with Seinfeld that he hates being a celebrity and he hates people coming up to him. I feel like he could have taken a different route if he wanted to because I don't think that that show was very funny at all. Well, I do think the celebrity

interviews are funny, but I do recommend you can go on Netflix, just go all the way to the end and go to the outtakes. Yeah. The outtakes where he's sitting down with the celebrities and you see them both like break is very funny. I've heard that too. Okay, so we finally broke down and watched Avengers Endgame. I think I'm probably the last person on the planet to do so. As a known hater of these these movies I actually kind of liked it I went in with low expectations because what was the previous one? The one where

Infinity War. Infinity War was long really long. I didn't really care for that one because it was just I felt like I was watching a video game the whole time. It was like a CGI fight the entire show. Like I thought Avengers Endgame was good because it actually got into the characters and some of their acting. It wasn't like a bunch of cheesy one-liners. I liked it.

It was okay. I thought it was pretty good actually. It was good. Yeah. I mean, yeah. So I was surprised we watched the movie yesterday how was it one of the better like feel good movies i've seen in a long time it had a touch of romantic comedy to it i enjoyed it okay it kind of got lousy reviews like i was so it was it was like the first like start to finish it was a feel good movie and if you can get over the fact that the premise is a little odd because this guy wakes up one day and no one can remember that the Beatles exist that's the point of the movie no right yeah

so if you get over that immediately is it a tearjerker not really even it's more of like a ah gosh it's kind of nice to watch something that like is not painful or like bad news it's it was just like an uplifting movie and i actually kind of i really liked it uh and also i broke down but for your recommendation got an electric fly swatter the kids like leave the doors open all the time what do you mean broke down it's not like i was uh i wasn't pressuring you to get an electric fly swatter i feel like subliminally you were you kept talking about how amazing it was and i got to say maybe this is this is like inhumane of me but man that sound you make when it hits a fly it's

satisfying holy cow is that satisfying and it makes a pop like a and you can see the little electric thing go it's good for fruit flies it doesn't get like the flies that fly yeah we had some we had a kid left a banana in the back of the pantry that we didn't see it's like shoot and fish in a barrel so yeah we took like 20 of them out with this thing and man and i i touched it once on accident? Holy cow. It's got a little bit, I mean, it gets here, right? Did you ever touch it?

No, Ramp said not to. He said, do not touch it. I never touched it. Like, to my elbow, my arm was tingling. So, anyway, that was a, it's more satisfying than you would think. Okay. All right, murderer, Ben, wrap it up. Animal Spiritspot at gmail.com.

We'll talk to you next week. Thank you.