Animal Spirits Podcast - How to Create the Perfect Fund (EP.55)

Episode Date: November 14, 2018

Universal basic income, the cost of paying every citizen $1,000/month, the perfect hedge fund, the language of money, the reason for the decline in youth sports, million dollar homes in San Francisco, how income variability should impact your savings rate, career advice for a new mom and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

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

discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. We're going to start with an article on CNBC. This 43-year-old running for president for 2020 wants to give everyone $1,000 a month in free cash. And they're talking about an entrepreneur named Andrew Yang, and he wants to give every citizen ages 18 to 64 a check for $1,000 a month, no strings attached from the U.S. government. Ben, what are your thoughts on this? I kind of like the name, actually. They called it the freedom dividend, which I feel like if you're going to sell something like this, you have to have the right cachet with it in terms of selling it. Yeah, that's a $2.7 trillion name right there, which is what this would cost.

It feels like this is a topic that's coming up more and more because of the rise of automation and the rise of tech billioners and all this stuff. But it is kind of funny to think that the unemployment rate is, what, 3.7% right now? And people are worried about automation, but it seems like this is something that continues to gain groundswell for a certain group of people. My guess is totally unfeasible to actually see it ever happen, not just fiscally, but politically. What do you think? Yeah, I mean, we're rambling about these are completely uninformed opinions because there's a lot of politics in this. But the article says that he wants to do a value-added tax of 10% on goods and services and company produces.

Europe, for comparison, already has a VAT, with rates ranging from 17% in Luxembourg to 27% in Hungary. So the basic idea for companies paying this that are sort of disrupting the workplace, like Amazon, for example. So Target disrupted, like, Mom and Pop retail, and then Amazon disrupted Target. So in 2017, just as an example, Amazon did 2.5 times as much revenue as Target, but they only paid... I'm sorry, but Target paid 1.7 times as much in taxes. Now, it's hard to punish Amazon for not being profitable and not paying as much taxes on, say, a smaller company like Target does. But I think that's the whole point, is that companies like Amazon have gotten so big and you can't tax, I think the article said you can't tax robots, so you're going to tax companies directly. I think that something like this is probably dead on arrival.

Don't you think this is the reason that Amazon announced their second headquarters right outside of Washington, D.C., to make sure stuff like this doesn't happen to them? Oh, yes. Yes. I mean, it's an interesting idea. I think especially for the poor, I think, honestly, I think the amount is actually probably right if they ever did something like this because I don't think you can give people enough money where they can't work at all because I feel like there is something to be said for the psychic income you get from working for having a purpose and doing something

with your life and not just being paid to sit in the couch all day and not do anything. That's the second time you've mentioned psychic income on this podcast. I liked it the first time and I still like it. All right. You're paying attention. That's good to know. So I think that, yeah, I think that you have to weigh those, the fact that people get some sort of meaning in their life by having a job. This thing is such a lightning rod.

So there was an article on Bloomberg two or three years ago saying, I think this is Megan McArdle. She said that the universal basic income is an idea whose time has not yet come. Or so say the Swiss in a referendum this weekend in which the idea of a basic income grant was overwhelmingly rejected with more than three quarters of the population voting against. And this article had 900 comments. So really strong opinions on both sides. But I guess there's a few things. So there are around 115 million people in this country ages 18 to 64, which would be $2.7 trillion if they each get $1,000 a month. But the government currently spends, or at least as of 2015, spends about $1.2 trillion on welfare, unemployment insurance.

Social Security and food stamps. So where would the money come from? Well, it sounds like the VAT tax, but that seems like wishful thinking because that would obviously impact a lot of other areas too if they just started taking the money out of these corporations. It seems a little bit fiscally irresponsible, shall we say, but this is an interesting idea, and I agree, this seems like something that people, that economist debate that will probably never happen. Yeah, I think, I think, and I haven't really thought this through, but I think I like the idea of this. just in terms of lifting people out of extreme poverty. But, you know, we're going to be having this discussion in 40 years probably.

Yeah, and I suppose there's other ways you could get around it, like, through people's tax rates and that stuff where you give them some sort of tax credit depending on their income level. But, yeah, this is a tricky topic. All right, so let's move on to a big article this week out of Bloomberg. AQR plays defense as crisis of confidence looms for Quantland. Is that hyperbole? Or is, or what do you think? I mean, they still have a lot of money. So it's kind of hard to call it a crisis yet, especially when it seems like since the market hasn't completely fallen out of bed yet, it's in some of these

funds are down, I don't know what, 10, 12 percent maybe at the most. It's hard to call it just a route by any means. But a lot of quant strategies have been having a hard time. I think that's fair to say. So there are some curious quotes on this article. Like people are timing these factors based on I'm not quite sure what, but somebody said factor tilts aren't reliable over a shorter time frame. Well, duh. We use our own rules to decide when to play in the sandbox with the qualits of the rules that dictate their play. This probably made Cliff want to pull out. I guess he doesn't have much hair left, but sorry, Cliff, neither do I.

So I get to say that. Yeah, but he has a beard. He has a beard. I can't even grow anything. Anyway, he said that in terms of timing factors, Cliff said if you're going to send sin a little. So the idea that people are timing his factors based on God knows what must give him hard burden. One of the hardest parts about these quant funds, I think, for people who don't know what they really do is when you invest in a market neutral fund, that sounds great because, yay, we can earn alpha and we're not like the market. But if you're doing a market neutral, that means you're going long a set of securities and shorter set of securities kind of in the same magnitude.

And so funds like this that go long undervalued securities and short overvalued securities can get dinged on both of those trades in a market like this where value is underperforming and growth is outperforming. And so you see funds like this that are down double digits, which a lot of people would think makes no sense because it's market neutral. So I think a lot of these hedge fund and liquid alt strategies are probably, they're kind of hard to understand in a lot of ways for people. So AQR's market neutral uses value, momentum, and quality, to your point to go long and short, but it's also global, which I mean, I would assume that investors know this, but maybe not. You could get this right from their website. So this fund, their market neutral fund, is currently in a 15% drawdown. But their assets, according to Y charts, are in a 40% drawdown.

In other words, this fund is 15% off its highs. terms of price and, you know, total return, but the assets in the fund are 40% off the highs. So investors are, to the artist's point, running for the exits. It is kind of surprising because I feel like a lot of people have been held hostage in hedge fund and hedge fund like strategies because no one wants to get out of hedge funds right before the market rolls over. I feel like that's been kind of the rallying cry for hedge funds for the past few years. Well, you can't get out of us now because the market has done nothing but go straight up. And so the question is, you and I have talked about this a little bit. Like, what do you want from a hedge fund? If you're

investing in one of these products, be it a liquid alt or a regular hedge fund structure, what are you even looking for these days if you're in one of these? Obviously, you want to have your cake and eat it too and get stock-like returns with bond-like volatility. But if you're being different than the market, what else can you really ask for? So, okay, let's just pretend there's a blank slate. And you can invest a portion of your portfolio into an alternative strategy. I guess that's probably what you should start. What are you looking for?

And I think that this is not a blanket answer. This is an opinion, right? Some people are looking for different things and others, obviously. And I think generally speaking, at least people think they want something that is not correlated to traditional stocks and bonds. But when the rubber meets the road, what they actually want is positive correlation in a ball market, a negative correlation in a bear market, and obviously something like that is hard to come by.

I think a lot of people also, following the mortgage crisis, wanted an asymmetric risk profile. They wanted the John Paulson Fund that goes up that we're betting or it's going to go up 10 times for every one it goes down or something. So I feel like a lot of people probably just don't have realistic expectations for these things, especially when you're doing it in a quantitative manner. There's no way it's going to be right all the time. And there are going to be times when there's a regime change or things. get taken too far in one way or the other that you're going to get hit. And that's just

part of life, unfortunately. Especially if you're looking for the correlation benefit, sometimes that means it just walks, you know, it's following its own path, even when stocks go down. And these correlation things, like they, they don't work every day, week, month, or even year. Like, you're adding non-correlated assets, but you have to take a multi-year, at least a multi-year time horizon, I think, to do this effectively. But I guess the nightmare scenario for funds like this is that they have not kept up in a bull market. which should be obvious, but doesn't make investors feel any better? And then what if they don't provide negative correlation in a bear market, but they sort of, you know, they act like cash or

what if they just act like cash in the next bear market? And they don't provide you much crisis alpha. I think cash would probably be the best case scenario for a lot of these funds in a bear market because most of these funds are net long in a lot of ways. So I think actually it's probably that might be the worst case scenario of a lot of these funds underperforming in a bull market and then having relatively poor performance in a bear market, maybe that's when we see a lot of people finally give up on hedge funds. But like I said, I think a lot of people are sticking in hedge funds and hedge fund like products because they are worried that they're going to get out right before markets fall. So October, Zero Hedge posted something that over the last three years, investors had

removed $100 billion from the industry, but performance gains had offset those losses at least until Last month, October was the worst month for the broader hedge fund space in seven years. And I know broader hedge fund space is sort of ridiculous because there's so many different strategies. But who do you think is to blame here in terms of, is it investors having unrealistic expectations in terms of what they should expect from these strategies? Or is it people that are selling these strategies promising the moon? Probably a combination of both.

And I think a lot of times the people selling these things are just giving investors what they want and they're using buzzwords. And then when it doesn't happen, they blame someone and they move the goalpost. I think that's what happens in the majority of these cases. Obviously, there are people like AQR. They're being honest with their investors. It sounds like they're accepting, you know, sometimes these things just don't work. But I think in a lot of ways, it's hard for these masters of the universe to actually admit that there are periods that they can't navigate. Yeah, I mean, Cliff wrote a piece called Liquid Alt-Ragnarok, where he was just basically venting, I guess, about his recent frustrations. But would you say,

say that like, again, not knowing too much of the particular strategy, but is this, it doesn't seem to me like it's broken. It's, it's not correlated. Yeah. And there's going to, you have to build it into your, into your models anytime you're buying, using one of these strategies that unfortunately there's going to be times where they blow out and it just happens. So, so, yeah, maybe this is not a failure of anyone. It's just like human nature that these things are just particularly difficult to stay the course with, like even, maybe even more so than just like an index fund, which has its own challenges. And for the fact that it's just so much harder in real time to be patient with these things than it is in a back test. In a back test, you know,

you know what it's going to end up looking like. And you can say, oh, that three year period was nothing. But then you get in real time and you have a three month period that's challenging and you're ready to throw your hands up and get out of it. And so I think it's just hard for people to actually live through these periods. All right. Let's move on. Survey of the week. Okay. I've seen a few of these before, but these kind of always, I don't know if they're shocking anymore. They're just kind of depressing. But according to a working paper, only half of Americans over the age of 50 answered at least two of the three questions correctly on a personal finance survey. Less than one third of them got all of them right. And when breaking down by education, only 44% with a

college degree, nailed them all. So here's the questions. Suppose you had $100 in a savings account, the interest rate was 2% per year. After five years, how much money do you have left in your account? And these are actually multiple choice questions. Second question, imagine the interest rate in your savings was 1% per year. inflation was 2% after one year how much you'd be able to buy with the money in this account and finally number three tell me whether this statement is true or false buying a single company's stock usually provides a safer return than a stock mutual fund so yeah less than half of people got these all right so what were the numbers 44% of people with a college degree

got all three right okay that's kind of encouragement you're encouraged by that I don't know it's the personal finance education thing kind of myths me because a lot of the studies show that people actually learning about personal finance, it doesn't really help them very much because knowledge alone, of course, isn't enough to change behavior? But isn't it kind of crazy that, like, in high school and college, I was forced to take another language. So Spanish and French or whatever, like, why are we never forced to be taught the language of money and understand these simple ideas? Doesn't that seem bananas to you? Yes, it does. We were taught to sew eyeballs onto a stuffed animal.

Wait, why? In home economics. Okay, see, I guess I never had to do that. That's a, yeah, that sounds a little odd when you put it that way. Like, teach someone how to balance a checkbook versus sewing eyeballs on something. What were you making with these eyeballs, by the way? Like a teddy bear? Yeah.

Yeah. Oh, okay. I guess I missed out on Homeck. So there was an article in the journal talking about Robin Hood and why free training in Robin Hood isn't really free. I think we both agree that this is somewhat of a non-story, but let's just get into this real quick. Maybe.

I think maybe it's a non-story. Do you think, so it sounds like the idea is Robin Hood gives order flow to high-frequency hedge funds, and that's kind of how they make money. I think the question is, should Robin Hood customers care that they do this? Obviously, Robin Hood had to make money somehow, and they were making some money on a spread or something because they're giving clients free trades. The question is, should clients care or will they care? I wouldn't care.

It depends what your balance is. So I think the article was saying that if you're trading in large sums, maybe getting a penny higher or less is going to affect you and you're worth, you know, it's worth paying $5. But they're providing a free service. So I don't, you know, this would not bother me. One thing that I did not know that the article revealed was that if you want to move your account from Robin Hood to another broker, you must pay $75.

I did not know that either. That's kind of, that's a bizarre one. So you get taxed on the way out. Okay. What are we thinking? Is Robin Hood still going to be the bank of the millennials or still up for grabs? I don't know. That's tough.

Do they do any personal banking stuff yet? No, I think that's a, I think they want to be like the bank of the future for millennials and young people. And maybe they will be if it's on the app. And it is, I have a Robin Hood account. It is a smooth. I just wanted to try it out. And it's, it is pretty nice. But yeah.

And I think there is something to the cachet you get from saying you're doing free trades, whether you're paying for them in another way or not. And so I think, again, yeah, I think a lot of people on finance Twitter threw their hands up at this one and said, hi, I told you so. But I think the customers probably don't or shouldn't care. Okay, so Trulia had some interesting information I tweeted out the other day. This is kind of crazy to me. So they looked at cities in the U.S. with the highest percentage of million dollar homes in their metro area. San Francisco had over 80%.

San Jose, California had over 70%. Oakland is over 30%. L.A. was over 20% of the homes in those cities that are worth a million dollars. We've talked a little bit about the Silicon Valley real estate before. This is just crazy. So less than 4% of homes in the U.S. list for a million dollars or more. I just don't see how normal people, quote unquote, can manage to live in these areas anymore. Obviously, I know that there's a difference between renting and owning, but you'd think at a certain point, every teacher, firefighter, police person is going to be completely priced out of these markets. I don't see how it is

sustainable. I suppose you could have said the same thing before. One thing that was really nuts about this chart is that it shows the percent of a million dollar homes in metro areas in October 2017 and then compared to today. So San Jose was 55 percent last year and now it's up to 70 percent. San Francisco was 67 percent and now it's up to 81 percent. That's like a gigantic, gigantic increase in just a year. Right. So it was already crazy. but now it's effectively everybody. Every home in San Francisco is a million dollars, pretty much. And it's one of these things where if you're there, I feel like you're, and I got a lot of comments on this on Twitter, a lot of people are just starting to justify the fact that this must

be normal. And they say, well, incomes are going to go up too and people will be able to afford it. Or I had a lot of people guarantee me that these housing prices in four or five years are going to be exactly the same or going higher. I guess maybe it's possible. And it's just the tech elite who lives there and a bunch of homeless people, I suppose. But it just seems like I don't understand how normal people afford to live there. It doesn't make sense to me. Okay, so the Atlantic had a story on youth sports this week, and some of the numbers are kind of shocking. So they looked at the share of children 6 to 12 who played team sport on a regular base, and they said it declined from almost 42% in 2011 to 37% in 2017. And going back to 2008, participation is lower across

all categories, including baseball, basketball, flag football, soccer. And in some cases, a lot. Baseball is down about 20%. And it sounds like they're saying the big reason for this is economics, more or less. And because the wealthiest families have actually seen an increase, and it's all the people who are down the wealth spectrum who have seen the biggest decrease. Okay. So I was going to guess that maybe like e-sports had something to do with this or video games in general,

like Fortnite. But is that because playing organized sports? is an expense? I think that's kind of what they're implying here, the fact that a lot of these, you're playing in club sports, and it's just, it's expensive to travel around and buy equipment and be part of, let's say, like an AAU team or something where effectively it's paid to play. Well, so you're reading the book that we spoke about last week called Everybody Lies,

and one of the interesting data points in that book was how when you think of an NBA athlete, you think about somebody, single parent home. inner city, but that's really not the case. Like, LeBron is a total outlier. You're much, and the way that he analyzed this, I think it was somebody else's study, you're much more likely to see names like Kevin than you are a name like LeBron. So it's a misnomer that that poor kids end up in the NBA. It's usually middle class people. Yeah, it's actually that that is, it is still more of a long shot for people coming out of that, a poor background. And they show here, they said if you divide American households into five quintiles by income, the richest group earns about five times

as much of the poorest, but spends about seven times as much on their kids. And so the idea here is that the rich parents are able to spend more money on their kids in terms of sports and the poor parents aren't. So you're seeing this this huge inequality in terms of kids coming to sports. And I agree. I kind of would have thought maybe social media and video games and stuff would add a impact here. And maybe that is the case. But it sounds like a lot of it is just divided by wealth as well. So that's pretty awful. The idea that, that poor kids are already disadvantaged so much and makes the UBI a much more interesting idea. I see what you did there.

You tied it in. I did. Very nicely done. Article from the journal called Wall Street analysts are now selling more data, less analysis. And they show a chart from Greenwich Associates of U.S. stock trading revenue generated by research units is on the decline. So from 2011 to 2018, it's fallen from about $6.5 billion to closer to $4 billion. And I wonder if, I mean, this is probably the result of a bunch of things.

One, ETFs, right, have certainly taken a larger share of trading than individual stocks. Makes sense. I also wonder if there's been less turbulence, so just less trading in general because there haven't been as many hurricanes in the market. Fair. But the article goes on to say only about 21% of research emails tracked by street context were even opened during the second quarter. And that actually sounds high. I would think that most of this gets junked. That is a pretty good road.

How about this for another reason? There's just more freely available information and data these days. Social media, blogs, podcasts. I'm patting ourselves on the back here. But I think that sort of has something to do it too, the fact that there's more people putting out free information and analysis these days. And the fact that all the studies show that a lot of these research reports from Wall Street aren't useful at all. they have yet to prove that they're worth paying for in a lot of ways.

By the way, so Greenwich Associates is the firm founded by Charlie Ellis, author of Winning the Losers game. Isn't it kind of hilarious that one of the biggest proponents of index funds in history made his money by selling research to actively manage funds? Couldn't that be like a line in an Alanis Morissette song? Yes. Right?

Okay. Yeah. Sorry, just had to get that out there. So, at HSBC, research analysts recently used software to read the transcripts of 20,000 corporate earning calls to spot trends. So I think, like, people still think they have a shot at beating the market. Right? Yeah, of course.

The average investor, and because you open up an account and you buy yourself a stock, you could either win or you could lose, right? And it's not that hard to win in the short term. But if you saw what, who you were. competing against. Like, if you literally went to a trading floor and said, hey, do you think that you could out-trade those guys? Of course, everybody would say no. That is one of the bizarre aspects of the market, the fact that you're all on the same playing field. Like, we buy and transact and sell in the same exact market as everyone else, right? It's kind of mind-boggling. And I think

some people don't take the time to appreciate that. Who's not only the best, biggest names and well-known investors, but all these other financial firms as well, who are buying and selling millions and millions of securities on a daily basis. Yeah, and I can't substantiate this, but you see people on Twitter that are morons, and you're like, oh, I'm trading against that idiot. Like, I'm so much smarter than him. But they control, like, zero capital. Right.

And most of the time, they're using paper trading accounts, right? And not real. Is that? No, it is kind of bizarre. You don't think about the smart people. No offense. But your paper trading account has been getting roughed up. Yes.

Yes, my paper long in Facebook. By the, how many stocks did you? short this year that have maybe maybe now they're finally coming back down to your levels i haven't shorted any stocks this year i think you paper shorted tesa at least six times i did not no which which hunt i did not paper short Tesla all right all right moving on to some listener questions okay in terms of dollar cost averaging what happens if you earn more or less income during your career should one increase or decrease the amount invested maintaining the or maintain the proportion invested to income wouldn't it affect the results if you can have more income and buying more shares during times of highs or lows in the market?

Yes, it absolutely would affect it. But I think that you've probably written about this a lot, that it makes sense to increase your savings commensurate with your income. I think that should probably be proportional. And that's one of the ways you get out of the rut of having your lifestyle inflation got out of control as you continue to increase how much you save as you make more money. Save it. That makes sense. What about the other half, though? You spend it so you can see your lifestyle increase. What about the other half?

Okay. All right. What career path would you recommend someone like me? I'm a 33-year-old new mom with eight plus years of banking experience, a master's agree, currently studying for the level three of the CFA exam and have an entrepreneurial spirit. I've thought of fintech, buy-side, research, creating my own side hustle. The list could go on. Based on your experiences in the markets, what do you think would be the opportunity to start something new right now or what should I do? Yeah, that's a good idea. And it sounds like this person, it sounds like she has a lot of good stuff going for her. The master's degree, the CFA already have a lot of experience. I think she could do a lot of different things. In terms, FinTech kind of the one that I would lean to as well. I think the side hustle is not a bad idea as well because it allows some flexibility and you can, you don't have to just quit a full-time job to do it. You can actually do it on the side and test things out. And I think technology makes it easier than ever to do things like that these days. So that's sort of why I would lean. But I agree. the ability to be flexible, especially as a new mom, is probably not a bad thing. Okay. What if you really like an investment strategy, but the fund costs two percent per- You are hogging all of the questions. Isn't that how it works? I read the questions.

All right. Go ahead. I guess it does. I'm just impressed you're listening to me. All right. What if you really like an investment strategy, but the fund costs 2% per year? Let's say it's a long, short, U.S. stock fund with a track record going back to the 2009 being the S&B. This must be a really specific fund here. Would you invest or pass given the high fee? It depends. That's a good answer. Right?

I mean, what do you? You know, it just depends. And I'm not even trying to be a wise ass. But I don't think, I don't think that, I don't think it's a definite no. I think that there can be circumstances where getting access to something that you can't get anywhere else for 2% could potentially make sense. Obviously, the majority of the time it does not make 2% make sense to pay 2% for something. But I think that there are occasions when it does. You better really understand that fund and what the opportunity set is and what the differentiation is to be paying that much.

I can say that that's a huge hurdle. I'm not saying it never makes sense, but I think you really have to understand what the hashtag edge is. How about this? Here's an example of something I would pay 2% for. Okay. A fund that loses no more than 4% a year, but when the market is down double digits, this thing is up double digits. Okay.

So let's create that back test. I mean, I don't know what that is, but if something like that existed, that's what I would invest in. Okay. Yeah, I think it's a really big hurdle rate, and I'd have to know how scalable the strategy is and how, yeah, I'd say probably no 99.9% of the time.

How's that sound? Okay. Here, Michael, why don't you read this next question? No, you know what? Let's save it. Let's move on to some recommendations. Okay, we got a lot of questions. We'll save some for next time. By the way, thanks for everyone who always emails these in.

This is, we do get a lot of questions from listeners, and we appreciate it. Okay. Oh, wait, you know, hold on, hold on. Before we move on to recommendations, we got a lot of feedback last week on the segment where we discussed husband and wife separating their finances. So I just wanted to read two of those. I think it's East Coast bias. I grew up in Staten Island but moved to L.A. for college and I live in Seattle.

Almost all of the married couples with whom I talk about this say that they keep their finances separate. I didn't realize that finances had a coastal bias. I've heard of East Coast bias in terms of college football, but never in finances. That's a new one to me. Yeah, same. I didn't think about that. The next one was, we kept our prematterous savings and checking account to separate and start a new joint accounts.

All income goes into the joint accounts and all expenses go out of the joint account. But we each get a monthly stipend to our personal accounts. The benefit is personal purchases come from this money and aren't subject to second-guessing by the other. We have different spending habits. Okay, so I thought that that was reasonable. Yeah, no, that's a good way to do it. Like the personal allowance, so you don't have to nickel and dime each other in every single

big purchase and you can have your own stuff and buy gifts. And that's a good, that's a good middle ground, I would say. All right. Now, what do you got? All right. So I don't think I mentioned that I finished bodyguard because I started it, talked about a few weeks ago. I thought it was one of the best shows of the year and got some new recommendations from people for other British shows.

Wait, hold on. Before you move on, can I just say something about the bodyguard? Hit me with it. So I am on the third episode. The beginning of, well, I finished two episodes. Cover your ears. This is a bit of a spoiler alert. But the sexual activity between the bodyguard and ma'am.

I'm not sure how I feel about that. That was sort of a jump-the-shark moment. Oh, really? See, I definitely didn't see it coming. Just wait. You've got a lot more twist and turns coming, my friend. Okay, no, it's certainly early. Yeah, it's, I thought it was one of the, yeah, I didn't expect that to happen, but it's, I thought it was one of the better shows of the year.

So someone sends me some recommendations of some other British shows. The one we're on right now is called Happy Valley. I think we're four. It's another six episode series, which is amazing. These British people have it the right way on TV. Only six episodes per season. Do you have any recommendations from Wales? I got to get the accent down first.

So Happy Valley is another one. It kind of reminds me of the movie Fargo in terms of like a crime gone wrong. I'm in. Fargo's one of my favorite movies ever. So I'm just going to. going to put it in terms of British Fargo. I really like it. I'm excited to see where it goes. Wait, hold on. Happy Valley. Where was it? On Netflix. Yes. I like it. Gritter and Genius by Michael Lombardi is what I've been reading lately. We had him at our conference in June. He gave a great

speech. He's a really good guy. You and I got to spend some time with him. Highly recommend if you're an NFL fan. He's got some wonderful stories about Al Davis and Bill Walsh. And so good. And finally, we watched The Outlaw King on Netflix, which is a movie with Chris Pott. and it's something of a sequel to Braveheart. Yeah, Braveheart, which is kind of, yeah, it's like Braveheart Part 2. I wouldn't say it's a good movie, but it was the first movie on Netflix I saw that I thought, holy cow, this is actually like a big budget movie and it felt like a good movie. The ones on Netflix before, I've always kind of felt like second tier.

And this was still a poor man's Braveheart in a lot of ways. But it kind of made me think, like, I think Netflix is going to figure this out eventually and have some really good movies that are straight to Netflix. Hold on. Are you bullish? Is this a market call? In my paper trading account, yes. My second paper trading account, I'm going to go long Netflix for a trade on The Outlaw King. Oh, you told me that you watched the Sandler special and you have a new rule? I feel bad saying. I mean, I wanted to give it a chance. I really did. I honestly made it

five minutes. I think my new rule is if you're a rapper or a comedian, no more rapping. or stand-up comedy past the age of 40. Does that mean? Okay. What if this rule holds true for blogging because you're knocking on the door? Ouch. Ouch.

That's okay, fine. I will, I'm quitting at 49 and 364 days. How's that sound? Okay. Anything else? Nope. Go for it. Oh, somebody on Twitter is like obsessed with me watching that Nazi zombie movie.

Okay. What's it called? I'm Googling Nazi zombie. It's called What the heck There's multiple Nazi zombie movies There's one from 2009 called Dead Snow Oh, Overlord

Okay Honestly that sounds like something you'll watch It really does But I don't think I'm gonna go I don't think No yeah I'm definitely good to see this But I'm not going to the theater So back off

All right So I'm reading a book by Tim Harford Called 50 Inventions That Shape the Modern Economy And one of the chat And I like this format because it's like three, four-page chapter, so it's very bite-sized. One of them is management consulting, and he talks about James McKinsey, and his

breakthrough book was published in 1922 called Budgetary Control, which sounds just abominably boring. Rividing. Oh, yeah. All right, so this is surprising. In 2000, a study done in 2015 showed that globally consulting firms charged their clients a total of about, what would you guess? In total, I have no clue.

I know. It's like one of those. I know you don't know. Just guess. It sounds like one of those Google interview questions, like how many gas stations are there in the country? I don't know, $200 billion. Pretty close. $125.

Okay. Isn't that so much money? Yes, to bring in people to do your job for you, more or less. And what's interesting is the genesis of why this came about or why it like really blew up. So in Glass-Steagull, among many provisions, this legislation made it compulsory for investment banks to commission independent financial research into the deals that they were brokering, fear and conflicts of interest, Glass-Degel forbade law firms, accounting firms, and the banks themselves from conducting this work. In effect, the Glass-Degel Act made a legal requirement for banks to hire management

consultants. Wow. I would not have put that together. So there's a bunch of examples like that where it's like this led to that and that to this. It's pretty good. Okay. That's it. Thank you for listening. We'll see you next week.