Animal Spirits Podcast - Inflation Truthers (EP.185)

Episode Date: January 6, 2021

On this week's show we discuss why inflation isn't being understated, why the economy is so difficult to understand, why growth is outperforming value, the case for higher returns even with valuations so high, why Bitcoin is a religion, how incomes rose during the pandemic 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 our friends on Y charts. I want to go on a rant today about inflation truthers who believe that inflation is higher than the reported figures. And so to do this, I'm writing a long piece on this, but we're also going to talk about on the podcast today. I used Y charts for a ton of economic information. So I looked at inflation that could go back to the 1970s. I looked at the commodities chart going back to the 1990s. I looked at GDP growth versus nominal and real going back to the 70s. I looked at wage growth. And I'm comparing all these things and it was so easy to do on Y Charts because they have the search feature where you can look at specific indicators or just search them if you can't find them.

And White Charts is very helpful in these things. So go to Y Charts. Tell them Animal Spirits sent you and get 20% off your Nistler 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 expressed 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. About a week ago, I sent out a tweet and I just said, what happens if people get these $2,000 checks and everyone gets vaccinated and we have a spending boom? and for some reason, we don't see a meaningful uptick in inflation. So we had these trillions of dollars that got thrust into the economy, and we don't get that other side of the risk of inflation. Do we just give higher checks an extra session? Does the government think they can spend more?

What is the end point if inflation is not the risk? Throw out the economic tax box. Basically, honestly, 90% of what I learned in economics classes in college has been debunked in the last 12 years. Anyway, that's another topic. Every time I send a comment like this side or I blog about it, someone will write, I mean, you don't really think that inflation is as low as they report, do you? They assume the government figures are completely understated, and then the true cost of inflation must be higher. Because have you been to the grocery store lately, the price of beef has been going up for the past three years, and people have this availability bias where something that easily comes to mind and that they pay attention to, they think that that must be how the whole world works.

And then they have these other things that they don't think about, that technology is completely eating away from deflation. So we have a bit of availability bias here too because this is a great topic and we can't not talk about it. But think about all the people that don't tweet this nonsense to you. True. It's a very small percentage of the people, but it's such an outrageously ludicrous mindset that it has to be debunked.

To be fair, the economy, these are very complex topics. But the people who say this, they have 100% certainty in what they're saying. instead of saying, like, oh, you know, maybe this topic is more complex than I think. So there was this tweet from a few days ago, said the Chaput Index is really interesting. I'd never heard of this before. It got debunked immediately, but it suggests that the true cost of living in America has been going up 10 to 12% per year rather than the 2% implied by CPI. And the greatest thing I think about finance Twitter is that there is always a smart person

who has done the work and supplies the evidence and debunks theories like this that don't make sense. people did this immediately. The easiest retort was, well, first of all, the person who made this up as a Charlton and the methodology behind it is not useful at all. Second of all, if inflation is running at 10 to 12 percent per year, that means we've been living through a depression, meaning the economy has completely crashed and our well-being has just gotten decimated in the past decade, which look around you. That hasn't exactly happened. But alternatively, that would also mean the government has been underreporting nominal GDP growth, which is hilarious. Why would the government ever say that nominal GDP growth has been lower than it has? Because if you look back at the 70s, real GDP growth was relatively higher than it stays. It was like 4% per year.

But nominal growth was huge because the inflation rate was 7% per year. But wages grew like 150% in the 70s versus in 2010s it was 50%. You picked that data up in the 70s when we had this inflation. There's things that we can measure. Home prices, wages. Yes, exactly. To the home price one, this was interesting. So this is from Jake at Economic, who is a serial mythbuster. And he always backs it up with data. I asked him for this. He was going to update it, but this is through 2019. He said housing affordability, as defined by the average real monthly mortgage payment on a new home, has been pretty steady for 50 years, going back to the 70s. Meanwhile, the average new home is 70%

larger from the one in 1971, despite smaller household. So he looked at if you account for a lower interest rates and the inflation over time, the mortgage payment has basically been steady for 50 years for the average median home. Obviously, people are going to say, well, I live in California and posing prices are higher. But this is why inflation is hard for people to wrap their head around because it's an average. Certain things have gotten worse. Certain things have gotten deflated from technology. But when you really start looking through this, all the things you don't see. So I sent you this video from Russ Roberts. And it's called the numbers game. Let's party like it's 1973. And he looks at how things have changed.

inflation since 1973, and he actually comes to the conclusion that we've been overreporting inflation, that it's actually not as bad as it seems. So he says prices are five times higher today based on CPI, but how do you measure the quality of goods and services improving? Think about the 80-inch TV you have on your wall, how much higher quality that is, the amount of channels you get. I scroll through HBO Max this weekend. For the price of one DVD per month, 1499 for HBO Max, you get 2,000 TV shows and movies. If we're just going to pick random shit I'm Use this evidence. How much was VHS at Blockbuster back in the day?

Six bucks, seven bucks? Right. I mean, think about all the music you get from Apple or Spotify or Amazon for what, $9.99 a month or $14.99 a month. Go back to the home thing. We have home data, good home data. And how much more luxurious and spacious our houses today than they were in the 1970s and the 1960s?

This is the other thing that people say. The thing that irks me about this is just the amount of store. certainty people have in these inflation numbers when they say that they're reported, because they say, well, we have asset price inflation, which I think is the calling card of a charlatan. There's a point nine eight correlation between people who say asset price inflation and someone who's been wrong about the markets or economy. Let me ask you a question. Is there earnings per share inflation as well? I mean, honestly, like the HBO Max and music stuff, for us, that's anecdotal just like the grocery store stuff. Of course. To be fair. But the Bloomberg Commodity Index,

these are actual inputs. Alleged. It is below 1991 levels. and it's down 70% since 2007. These are actual inputs that are used in the production of goods. To be fair, we have to talk briefly about the two areas of the market or the economy where we're seeing rampant price rises. One is in higher education and two is in healthcare. And health care is honestly the one where... Health care is the worst. If you had that, that could be a personal hyperinflation for you depending. And I think that's another reason why it's so hard because you could have a personal situation where your spending has gone up and other people's has gone down. So I want to kind of debunk the college education one, minorly, based on

the sticker price. I started reading the new Ron Lieber book. He was nice enough to send us an early copy. The price you pay for college, it's coming out later this month. I already know where you're going with this, I think. This stat, I had never heard this before. So you started reading this book. 89%. He said, if you're going to a private college versus the sticker price that they show like what it is, in 2019 to 2020, the average discount paid to go to a private college. Do you Remember what the number is? Did you get there that far yet or not? What was it? 53%. The average discount someone at a private college pays is 53% versus the sticker price. I'm early, but this is the stat that stuck out to me. 89% of students at private colleges get a needs-based or merit aid

discount. 89% don't pay the sticker price. Again, and the average discount is 53%. The sticker price inflation is absurd. He goes through some of the reasoning behind this. It doesn't really make sense why they do it this way. But for some reason they do. And then they pay maybe for like international students pay the full price and they end up footing the bill for people and people with wealthy parents pay more. Hey, actually, so I am going to finish my piece about this this week, I think. But last week we mentioned that I was looking at these numbers. So somebody asked, if I want to pay the full freight for my kids, what are we need to save? And college, which is up there with the most ridiculous price increases we've seen over the last few decades, has gone up, I think, 5% or so a year.

That's really high. This Chapwood index, that's claiming 10 to 12%. What is it claiming? I mean, absurd. My other favorite one, the anecdotal one, is you've probably seen this. It's a 1991 Radio Shack ad. People have shown this and it's got a viral social media post. Everything on this Radio Shack ad can be put into an iPhone now.

So it's a computer, a mobile phone, an AM FM clock radio, a pocket calculator, compact disc player, all this stuff, camcorder, all this stuff that would have cost in 1991, like $4,000. can now be done on an iPhone. How do you measure that? This is nonsense tinfoil hat shit. You could say that you think that CPI is not a great gauge, that whatever, PCE is not the greatest gauge, whatever you're looking at. But to suggest that we're living through hyperinflation and we don't know about it or something, what planet are you living on?

And the fact that wage growth wouldn't be keeping up with that. Because again, that happened in the 70s. The thing that just really bugs the shit out of me is that Bitcoin is the answer. I mean, isn't that what all this is driving at? And so Joe Wysenthal had a post this morning. And I've said this, comparing Bitcoin to a religion. And in fact, that's a big part of why I'm bullish. I want to get long, irrational exuberance. Yes. I look at Bitcoin as a call option on human nature. My entire thesis for it. It is a religion. They're never, ever selling. It's much like Tesla. Joe said, and as a prophet, Satoshi, who not only has been identified, but who has apparently departed the world. Bitcoin. Bitcoin's first block was called the Genesis block. Bitcoin has a sacred text of the white paper. Bitcoin has original saints and apostles. There's holidays every May 22nd. Bitcoin is remember a famous transaction where someone spent 10,000 Bitcoin on two pizzas. Meanwhile, every four years, Bitcoiners celebrate the halving. So the answer to this asset price inflation, the stealth

hyperinflation, whatever, whatever, is to buy Bitcoin. Give me a break. Just stop. On Joe's Oddlots podcast with Tracy Alloway, they had this Michael Saylor guy, who's the CEO of, company is the CEO of? A big company, micro strategy. Yeah. And he was talking about the fact that his reason for owning Bitcoin was because the Fed has devalued the dollar by 50% in the last 60 months, which is completely false. There's no way. What's you look at? Money supply. So he said that the dollar has been devalued. I think this is the thing that gets people mad about the crypto space is that there are people who have been right for the wrong reason. The dollar has not been devalued by 50%. In fact, if you look across against other currencies, the dollar has been strengthening

for 10 or 12 years. It's one of the reasons that international stocks have done so poorly if you're a U.S. investor. That's one of the hard things to wrap your head around this thing, is that there are people who are right about Bitcoin because the price is rising, but they're right for the wrong reason. But again, this is one of the reasons that I think you and I own it. You and I were talking about 0.8 of a coin. It's not a giant number. I wish that I did this as a trade. I wish that I put more money into this. If I bought Bitcoin as a trade, I certainly would have sold it by now. But I just don't own enough. It doesn't do anything. So you put a blog post out saying how you're not selling it. This was what? 10 days ago when the price was, I don't know. All the way back at 24,000.

We did a podcast with Zach Prince of BlockFi Thanksgiving weekend, six weeks ago, maybe five weeks ago. And I think the price was around 17,000 then. And we were worried like, oh boy, can you imagine if we put this podcast out and then Bitcoin tops? And it's double. since then. This is the one asset where, strangely, the price goes up and it makes more sense. For like the long-term nature of it, obviously, crypto is going to crash again. Again, the reason why I'm bullish, it's very simple. These people are never selling. They're never selling. It doesn't matter if Bitcoin goes to $100,000 or $200,000, they're never selling. And the big institutional investors, it seems like it's not even the first inning.

They haven't even started. It's still all retail and tech libertarians. By the way, do you think there was any correlation? with the $600 checks hitting and Bitcoin going parabolic? Isn't that a little too easy? I don't know. But it kind of did. It could. Yeah, that could be it, I guess.

It's painful to be long an asset class where the people that are its biggest proponents have a visceral reaction to and disagree with. But here we are. Didn't you send me a piece this weekend that the soft bank guy is putting a bunch of money in? That was a joke. Oh. I was joking. The reason why it was going parabolic I was joking is because it looks like Satoshi's buying again.

Not Satoshi. Oh, my God. Yes. But would it surprise you if two or three big, deep pocketed institutions are putting money in here and that's driving the price higher? Would that really shock you? No. Even though the price move has, it still doesn't feel as silly as 2017. I'm sticking by that. Even though the price moves have been crazy, it still doesn't feel like that level of craziness and euphoria. Maybe because there's so much else going on in the world right now that not as many people can pay attention to it. All right. Moving on.

So value stock geek showed a table, the number of stocks with an enterprise value to EBIT less than five. And I wish I reached out and asked what exactly is in this. So in 2020, there were 78 of them in the beginning of the year. They underperformed the S&P 500 by 25%. In 2019, they underperformed by 18%. Of course, these are different stocks every year. In 2018, they underperformed by it looks like 6%. And in 2017, they underperformed by 15%.

So deep value has gotten its teeth kicked in. I mean, there's no other way to describe it. So this data goes back to 1999. And you can see from 2000 to 2010, basically, crushed. It just killed everything. Is it kind of fair to think that this is the meanest of reversion? I looked at this last week. I told you this. I'd never, for some reason, just never looked at this. So the NASDAQ 100 has outperformed the S&P 10 out of the past 11 years. And by an average of about 7% per year, a huge, huge amount. which is kind of hard to do because the S&P has outperformed everything else, basically. But the NASAC from 2000 to 2009 was down 50%. So from 2000 to 2020, they're basically even.

So you almost had this mirror version that people forgot that the tech stocks got crushed for 10 years. And I know it seems silly, but is this just value was just way too strong and growth was way too weak? And now we've had a come up and so now we're back to even. I mean, pick the start and end date and you can mess with this stuff. But that over the last 20 years, they're about the same. And we've just had two periods where value outperformed by a ton for a decade. And now growth has done the same thing. So JP Morgan's guide to the markets is sad. And they did some interesting stuff in value that I've never seen. They looked at the share of a value index with the beta greater the one. This is the Ross of 1,000 value, which some people equibble with whatever, get over it. It is rocketing up to 59, nearly 60% of value. talks of a beta higher than one. I thought this is kind of interesting. And it looks like it's been on the rise for the past few years or decades. What's my takeaway supposed to be here? Not sure. Just that value stocks are more volatile than you would probably think. Okay. Yeah, which makes sense because

they've been volatile in the wrong direction as of late. Next chart, just a few tries I wanted to pull. They showed the S&P 500 valuation dispersion. This is really interesting. They showed the value spread of the 20th and 80th percentile of S&P 500 stocks. I don't know. what they're using. What does it say here? They're using the P.E. And it is wider than it's been going back to 96. This includes the dot-com bubble, of course. By the way, this is the reason that it's always in never a stock pickers market. Because I remember back in the days of my money manager days where they would always talk about why it's a bad environment for stock picking. And they would use dispersion because the dispersion used to be a lot tighter. This is back in, I don't know,

2010, 2011, 2012-ish. And you can see it is a lot tighter then. And they, said, if dispersion widens out, it'll be much easier to be a stock picker. And we've had that. And guess what? It didn't matter because if you weren't in the tech stocks, you got killed. So it's just always and never a stock picker's market. It's just pick your poison. Some other trots that are good. So they show the PE ratio of the top 10 stocks and the remaining 490. So we've got 33 times for the top 10. It's a lot. I still can't believe, though, small caps outperformed the S&P in 2020. I know. That's a while. I think the Russell was up 20 percent. It was about 100 percent from the bottom. And I think the

S&P was up 18 and change. So small cap stocks, even though everyone said it was only five stocks carrying the market higher, outperformed the large cap stocks 2020. Wild. The rest of the market is at 19.7 times, which seems reasonable, I guess. Valuations have been trending higher for the last three or four decades. And then this was interesting. Ernie's contribution of the top 10 in the S&P 500 is one vertical in 2020. So fundamentals are. more than backing this up. Is it just completely thrown out the window at this point? Doesn't matter.

Honestly. I get it. I can't say the dollar that you pay. It doesn't matter. I know. Maybe people have been given too much credence to valuation and not enough to the growth part of things. Maybe it's somewhere in between, but I can't say the valuation doesn't matter.

My brain can't go there. How about this? If rates stay low for 30 years, valuation doesn't matter. Then what does matter? Just the only thing that matters are the fundamentals. I guess that's fair. Is the business doing better? Yes or no?

Yeah, maybe. But to that point, to matter. What, there's no price too high? That doesn't make sense. Come on. We know better. I know. And this is the whole point of one of Jeremy Siegel's books. I think it was it was not stocks for the long run, whatever his other book was. He made the point that, especially over the intermediate term, expectations matter so much more than fundamentals. Undisputed. That's fact. In the short term, median term, even long term, five years, valuations don't mean anything. I think it's indisputed. Undisputed is if you win the championship belt.

What did I say? You said, undisputed. Whatever. It's that too. Jeremy Siegel is the undisputed champion. All right. So there was this thread by Conner Senn, and I thought this was interesting because for the longest time, and you and I have been on this camp for... It's in this camp.

Sorry, in this camp. Nice trying. Undisputed champion of sayings. Logically, valuations high for some time now. Forward returns should be lower, lower your expectations. That is what every commonsensical person has been saying for, I don't know, five to seven years probably.

And it made sense, even though returns have been higher and so, okay, well, we're just pulling them. forward. They have to be lower. So I think we've tried to think what could be the situation where that is not true, where valuations are higher, yes, but returns are still going to be, whatever, average based on long. And so Connorson said, I used to think high starting evaluations for stocks and low interest rates on the bonds spent expected five to 10 year returns and financial markets were low. What it's actually indicating is that there exists a lot of fiscal capacity for higher levels of government spending, which can boost real GDP and Ernie's girl, probably some inflation too,

an outcome better for financial markets than you'd get without that policy shift. We did the last one. But for older investors whose careers have overlapped with high inflation over low inflation in a policy environment dominated by monetary policy, they're not thinking about this. It's a flaw in their framework. So speaking of flaw in their framework, somebody tweeted, I just can't believe Larry Summers goes on for a decade about secular stagnation and then says checks will overheat the economy. Yeah.

He jumped the gun there a little bit. Let me ask a naive question. I think I understand, but maybe I don't because I never lived through it. Again, I had never lived through this. But, like, the worry about an overheating economy, shouldn't that take a backseat to, like, allow people to survive? Yes. Like, yeah, the risk of overheating an economy is real. But there's risks today, very real risks, hundreds of thousands of small businesses going under.

The other side of that risk would have been a deflationary depression spiral that we couldn't get out of. So I would take an overheating economy to that any day of the week. Back to this ConorSend thing. This is essentially the Jesse Livermore P. If the economy overheating. then everyone will just buy Bitcoin and everybody will be fine. Yes. Isn't that the going thing on Twitter right now is that if you don't own Bitcoin, you're

going to be poor? I was made aware that's a thing. That's a tough look. So anyway, this is the Jesse Livermore piece about upside down markets where if the government plays ball here and who knows they will again, this is all about political will. And for some reason, the Republicans turned down a $2,000 check, which I don't know. So I talked about this last week. There was a survey done, new national polling.

78% of voters say $600 checks are not enough. 78% of voters support $2,000 relief checks. This seems like the one issue, there should be no partisan politics. Every voter would like to get money if they could. If you get this situation where the government plays ball and does increase their fiscal support, it's true. That could be good for risk assets, even in a high valuation environment. And we could have earnings growth.

That's when valuations really, whatever, for a while, don't matter, right? That's a pretty good case for this. As long as companies continue to meet or exceed expectations, Until investors decide that it's gone too far and good luck, there will be a point of time where earnings, top line beats whatever and the stock sells off or stock sell off. You're going to time that? Well, yeah, that's right. The timing is that. But here's the thing. Let's say we did get an overheating economy. Inflation picks up and interest rates rise from 1% to 3%. Isn't that a perfect situation for value stocks where they finally have their day? Growth stocks get

crushed from higher rates and then value stocks have their day in the sun. How's that? I could easily foresee that happening. Let's talk about personal finance, the new Treasury Secretary's personal finance. Janet Yellen collected more than $7 million in speaking fees during more than 50 in-person in-person. I wonder if her resume rates are lower than in person. To me, one of the strangest things about this, it's not strange as the wrong word. Maybe surprising. Her disclosers also show she and her husband own a stamp collection worth between $15,000 and $50,000. I didn't know that she was an alt investor. Is that a thing yet where you can invest in stamps? That's got to be coming. There's got to be a platform for that. This is something. The CFA Society of Atlanta paid her $180,000? $180,000 lower hour fees. Goodness. What are their dues for the CFA in Atlanta? It's national. Does this bother you? The fact that she's done $7 million in speaking fees, I think it gets a lot of people pretty riled up. Besides her punishing savers, the Federal Reserve Chair is a more important job than the president, as far as I'm concerned. For financial markets?

Walk it back. Well, for financial markets. Ben, I'm giving you a chance to walk that back right now. For the economy and financial markets, the Federal Reserve Chair is far more important than the president. How about this? I'm not bothered by it either in the least bit, but I understand why people are. I know someone who works for Citadel, the hedge fund, and they talk about how she did his speech there. They told me, they brought in Bernacki for a consulting role where he was involved in like 10 meetings. And they told me his per meeting amount. And it was a disgustingly high amount. And I thought, you know what? He's worth it. It's the most important policymaker. And this is after he retired from FedShare. But you know, Bernanke is moving to South Beach?

Right. I'm sure. And he's going to buy Ethereum probably. What is this in there right now? Everybody's taking their talents to Miami. That's because they're all contrarians. The only reason people make good investments in B.C. land is because they're all contrarian. People are moving around, at least on the internet, like it's the NBA off season. Yeah, Kevin Durant announced he's moving to Miami, too. Did you know that? Come on, nothing? That's four to ten.

Tough crowd. All right, this is surprising to me. So Bill Sweet sent us this. This is one of the things that seemed like a layup when you're making predictions in March and April. The states and cities and municipalities are going to get crushed by the pandemic. They're going to have to spend more money. They're going to bring in less in tax revenue. The most recent quarterly summary of state and tax revenue, the most recent quarterly summary of state and

tax local revenues from the Census Bureau shows that tax revenues for the first three quarters of 2020 are down about 1% relative to 2019. Without the pandemic, they probably would have increased 3%. This is crazy to me, because remember, people were worried, people asked us, are my immunity bond's going to default? What's going to happen here? These things are screwed. And honestly, that made sense in March and April. Of course it did. They said this piece from, I think it's from the Burking Institute. They said that the declines in employment this year have surpassed those experience during the Great Recession, despite smaller revenues. And what happened is more people stopped working for these places and that made up for the gap.

And you think, like, oh, that's too bad people got laid off or whatever. But a lot of it had to do with, they didn't need bus drivers and cafeteria workers for K-12 schooling and universities. There were fewer staff needed because so much of it was done virtually, which is crazy that it made up for any shortfall in tax revenue. I'm going backwards. Here's another wild stat about things ending up better than expected. This is JP Morgan. Free cash flow for the core of the equity market, which excludes financials, research. and energies was actually up in Q1, Q2, and Q3.

By the way, energy stocks around 33% this year. Can we just do everything X energy from now on? Yeah, everything looks better, X energy. So get back to this income thing. So Neil Irwin had a piece for New York Times. He was trying to answer the thing. Everyone keeps asking, why was the stock market so strong this year when everything else was so weak?

He said total employee compensation was only down 0.5% for the first nine months of the year, akin to a mild recession more than an economic catastrophe. And he said, how could the number of jobs be down 6% but compensation only be down 0.5%. And he said it had to do with which jobs were lost. So the millions of people who are no longer working were in low-paying service jobs, whereas high-paying professional jobs were pretty much unaffected in a handful of sectors have been booming such as warehousing and grocery stores, which actually got an increase in pay this year.

So incomes were relatively flat this year or wages were, while you had these other forms, you know, the unemployment benefits increase, the stimulus checks. This is the same thing with the S&P 500. The smallest stocks got killed, the market didn't blink, getting back to the Yellen thing. I think this is what pisses people off. It's like you have rich insiders setting policy for the rest of us and they're out of touch. I'm not in that camp, but that's the mindset of the person that sees Janet Yellen making $7 million in speaking fees and gets very upset. I got pulled into anti-capitalist Twitter the other day. Wait, what? What did you tweet?

I'd say my takes on Twitter are basically, I 51% believe in them, and 49% is just me being whatever, just throwing something out. That's terrible. Take a side, Ben. I said 51%. So I said, the whole vaccine rollout, it shouldn't be surprising, but it is. And I said, why don't we have Amazon and Walmart run the logistics for this? I said, Bezos would have this clean up at 24 hours.

And one of the woke anti-capitals people quote tweeted me, I guess I didn't realize how hated corporations are by a certain segment of the population. I got decimated. I told you, they were dunking on me like I was Sean Bradley because I actually said something nice about Amazon and Walmart and apparently that is not cool. There are people who just hate big company and so I get the throughout from people, but I didn't realize it was that strong. People really do not like Amazon and Walmart in some circles of the social media world. Did you know that Jack Ma is missing? This is one of the richest people in the world, correct? I saw this trending on Twitter today and I was like, wait, what? Where is Jack Maher is

Jack Ma is trending. Questions arise about the billionaire's whereabouts. So you remember that Ant Financial was supposed to go public and you would know about them if you subscribe to any technology substack, right? Right. It's a huge, huge company. He started Alibaba. He's one of the richest people in the world and he basically hasn't been seen or heard from in two months. How come we're just finding out about this? I think people have been asking for a few weeks and now it's finally, I don't know, because they can make people disappear in China. This is the risk in emerging markets. Can you imagine if Jeff Bezos was, Damn it, I said it because you got it in my mind, Bezos.

There you go. You said it properly. If he was gone missing for two months and no one had heard up from him, how bad would Amazon stocks crash? Amazon stock crash, right? You would think so. Somebody sent this to us. Last week we were talking about wine.

In 2001, there was an experiment conducted at the University of Bordeaux. In one experiment, this person got 54 Onology students. I guess that's like expert wine tasters and had them taste one glass of red and one glass of white. He had them describe each wine in as much detail as their expertise would allow. What he didn't tell him was both were the same wine. He had just dyed the white one red. And in the experiment, he asked the experts to rate two different bottles of red wine. One was expensive. The other cheap. Again, he tricked them. He put the cheap wine in both bottles. So what were the results? The taste is in the experiment, the one with the dyed wine, described

the sorts of berries and grapes and tannins. They could detect in the red wine just as it really was red. Every single one, all 54 cannot tell it was white. How is that possible? In the second, experiment, the one with the switch labels, the subjects went on and on about the cheap wine and the expensive bottle. They called the complex and rounded. They called the same wine and the cheap bottle weak and flat. That's rich. I love stuff like this. I did this to a friend in college. He was a snob and he said he only drank gray goose. And I think he just liked carrying around the gray goose bottle because it looks pretty. And so he said, there's no way you can tell me that pop off and gray goose are, you know, I could tell the difference easily.

And I did this. So I said, all right, we'd do a blind taste test. And I put pop off in both of the cups. and he tried to guess, and he thought one was different than the other. But still... I feel like vodka, you can actually tell. Okay. You say that. You think people that, like, study wine... Yeah. But presentation is everything in there, right? It's got to be part of it. Yeah. All right. So there was an interesting article in the journal about the streaming things. Dryten Neshow from Harris X said, instead of a streaming word, there's been a streaming coexistence and parallel growth. Disney Plus did not displace existing services. It complemented them. Here's some data. U.S. households now subscribe to

3.1 streaming services on average up from 2.7 last year. My household brings that average way up. We're like eight. I think I'm in everything. And it's so easy to just share password. For example, I think I have a friend's Hulu password. Right, of course. So Netflix is still the king. They showed average daily U.S. traffic. This data is terrific. Netflix versus Hulu, Disney Plus, Prime Video, HBO, which is on the basement. Come on, HBO, get your act together. And Netflix had a big spike after the pandemic started. That was pretty much all Tiger King. That's pretty wild that Disney Plus has already supplanted Prime Video.

Prime Video is pretty good. It's not bad. They don't have as many amazing shows as the other network's quite yet, I'd say. Oh, for sure. Well, speaking of that, original episodes release per quarter. Look at this next chart. Look at Netflix. Yeah. Wow. And they show Netflix compared to Amazon compared to HBO, Hulu, and Disney again. So 700-ish for Netflix in the latest quarter. I mean, it's unbelievable. It's overwhelming. And Amazon Prime is in second with 150. Speaking of Netflix, I watched Bridgerton this weekend. Okay, thoughts?

If you described the show to me, I would say I'm out, but I like it. I think the acting is good. I think the story is good. I like the romance. Okay, my wife told me that it's probably a show more for her than it is for me, so she told me to sit that one out. Yeah, no, that's fair. I like it, though.

Yeah, I can get into those shows every once in a while. There was a duel. What time period is it from? Early 1800s. And they have electricity. They have light bulbs and stuff, which I think is pretty sure that's fake. Okay. I mean, late 1800s was when electricity kind of, I'm guessing the Royals were the first ones to have it. I think it was their early 19s. But either way, it was certainly not the early 18s. That's for sure.

Not real. I think it was, yeah, mid to late 1800s, people started getting electricity. How about this? I'll just fact check right now. Google. When was the light bulb invented? 1879. Oh, okay. Later than I thought. All right, so we're both wrong. Okay. Let's move on to listen to our questions. I never realized this. There are a lot of strong opinions about Roth versus traditional IRAs. There's a lot of, I mean, good questions, but people have very strong opinions on this. Well, we only got one nasty email where the person was like, I have a lot of experience and you're wrong.

I mean, that was pretty much it. I'm guessing that guy's an inflation, truther. Let's be serious. We got like seven or eight thoughtful emails. So what I think we're going to do is we're going to grab Bill Sweet and we're going to do like a quick 10 minute standalone episode that will, I don't know, do it this week or early next week. But we'll do that as a standalone because we got too many to do in this. segment. Boy, if my 18-year-old self could see me now, we're going to do a whole episode on Roth IRAs. This is just riveting. But it is something that people brought up some very good

counterarguments. And so, yeah, bringing in a tax expert like Bill, I think will be helpful. All right. This is a good one. Kind of long. So stick with us for a sec. I'm 26 and work in real estate private equity, but I'm actually about to begin a role as a broker. So I'll be going full commission. I'm really fortunate that my parents trust me to help handle their finances where they've given me $125,000 plus over the last two years. They went through a bankruptcy as a result of the GFC, so they're very risk-averse and not investor-minded. My net worth is about $250K with $75 in stocks and ETFs, $25 in Bitcoin Ethereum, now $40K, LOL, the rest in cash, minimal debt. Since 2019, I've told myself, I have too much cash not earning a return, but the market,

both in real estate, small apartment market and stock is too pricey. I don't want to buy at all-time highs. So as a result, I have not made a lot of trades over the last year or two, but the trades I have made have done well. So now here we are going to 2021, and everything feels frothy as it can be. I have a lot of cash, and I'm getting closer to the point of reducing my cash further by investing in accepting the slow rate is going to lead to a continuing risk on environment. But I'm afraid of a major withdrawal correction right as I buy at the top of the macro market. So I have a lot of thoughts in this. One, how old is this person? 26. The first thing that popped in my head is you're 26. You're going to deal with crashes

and bare markets and overvalued markets and undervalued markets. You're 26 years old. You're probably going to have seven more recessions than your investing career, maybe more. you're going to have 10 or 12 bare markets, you're going to have three or four huge market crashes. I would get out of that age. You don't even need to worry about it at all. How about Bob, the world's worst market timer? Can we learn anything from him? Yeah, I showed. If you bought at MarketPeaks and held onto your stocks, you did just fine. Now, can you still have a good plan where your dollar cost average just to make this a little easier on your psyche? Sure, but at 26 years old, you do not need to worry about how the macro

environment is going to impact your money that's going to be used in decades and decades into the future probably. And here's another thing. The data shows, I understand your feelings. Listen, I'm scared at all time highs. I totally get it. But the data shows you are no worse off buying at all time highs. In fact, all time highs tend to cluster.

It's not bearish. The data shows that you are okay buying at all time highs. Now, all time highs in February of 2020 and we had a quick 35% decline. It could happen. I agree. Change your mindset if you can. All right. one more. You have mentioned in one of the surveys that average FICO is arising. Recent versions

of FICO have been updated to include rental payment history, utility payment history, and exclude medical debt. Uh-oh, is this a FICO truther? One could argue whether or not it is a better measure of overall risk, but bottom line is that the FICO today isn't the same as a FICO from even five years ago. Do you feel like there's an overall reliance on FICO as a risk measure and then perhaps there's more inherent risk in the system because of companies just trust the black box that is FICO. Wow, it is a FICO truther. There was a small piece in the big short where Michael Lewis talked about this, saying that they kind of take it as inflating FICO scores for a lot of people who get homes.

How about this? I have no opinion on FICO. I'm not, I mean... No, this is one of those things that this is the system, so you deal with the way it is. I can't dismiss what they're saying. It could be true. I just said, I don't know anything about FICO. Maybe because I have such a high FICO score for me, I'm biased.

I don't know. Not to brag. I'm just saying. All right. Recomminations, Ben, what do you got? I'm in agreement with you on Wonder Woman 1984. Oh, you saw it? We watched it.

It was bizarre. The plot made no sense at times. And it was way too long. Like there was so many things terrible about it. Oh yeah, but I mean, it had some entertaining action scenes. It wasn't like I ever got mad enough at it like I was with Tenant that I wanted to shut it off. I was like, okay, I'll finish this. But honestly, as someone who is more or less anti-superhero movies, are any of the other superhero movies any more realistic?

Don't you have to suspend reality for all of these movies? I don't think it was the unrealism that pissed people off. It was just the plot was terrible. I mean, the cheetah part, what was that about? Okay, yeah, Kristen Weig as the bad person of this one was not a great. But it was entertaining enough, right? I mean, Kristen Weig, I think, is one of the funniest people on the planet. Can you picture Will Ferrell as, like, the bad guy in a movie?

No, it didn't work. But here's the thing. Our movie is going to be the new TV shows. If we get all of these movies come to streaming and more people can watch them all in the same weekend, because, like, there should have not been this much buzz for a movie, but because it came on streaming, people are binging at different rates for TV shows. What if we have movie releases that come out and more people watch it, and you have more discussion around it.

I wonder if this came out in theaters. Would it have done a billion dollars and everybody would have been really mad? Yeah, it's possible. I think it was easier to watch, so maybe that's why people, I don't know. How about this? There's zero chance that I was going to go into the theater to see this. Like, once the bad reviews came out, I'm out. Yeah, well, I wouldn't have ever gone to the theater anyway.

So that's, to my point, that's why people are going to watch it sooner. You're not giving an opinion. I thought I was like, eh. I didn't hate it, but obviously it wasn't good. Yeah, it was not good. But I finished it. I'll give it that much. You got me onto the comedy store on Showtime Anytime, which is a docu series.

Did you finish it? I'm like two episodes in. Right in my wheelhouse. The stuff about Freddie Prince, who's Freddie Prince Jr's dad, I'd heard of him before. I'd never seen him even. I didn't realize he killed himself at age 22. He was like LeBron, right? He was like the youngest, biggest star.

He was on Carson at like 21 years old. The story about him shooting a bow and arrow into John Travolta's door was just amazing. Amazing. The part about his death was tough. I got there. Michael Keaton being on it. Oh, you did? Wasn't that story?

That was powerful, right? Here's the thing. Especially from that, starting out in the 1970s and 1980s era, those comedians do not age well. Just that lifestyle, the cocaine they did. You see them as older people? Like, that is a hard lifestyle. I had no idea Michael Keaton started as a comedian. If you were a comedy fan, to me, this is like, you have to watch us.

It's one of my favorite things that I've seen in a long time. I think I will probably watch it again at some point. It's very good. My coming of age movie for this weekend is the way, way back. I know there's the way back with Ben Affleck this year, but this is not that. This is from... Somebody recommended that to me. How was it?

Which one? The Affleck one or this one? No, the way, way back. I like it. So it's Steve Carell, Sam Rockwell, who I think is like a serially underrated actor. I love him. He plays like this sarcastic. It's about a summertime where a young kid, a teenager, works at a water park.

And Sam Rockwell is the manager of the water park with Maya Rudolph. Tony Colette's in it. Steve Correll plays like an A-hole, the jerk stepdad. It was good. I kind of like it. So it's a good coming of age one. You might not like it. Okay, thank you.

I like that. You know what? I'm going to cross it off my list. I appreciate that. By the way, we went to the comedy store. Yes. We saw open mic night and it was terrible. I can't imagine anything harder than getting on stage and making strangers laugh.

These were all young people, all the door people, the bartenders. It was... Don't remember the guy tried to... He tried to take me out in the crowd because you were sitting in the front row. I do remember that. I forgot about that. It was like over 18 and then we left. I saw Argus Hamilton, the MC, and I was crying.

I never heard of him. I guess he doesn't travel. He's only... He's like the permanent host there. Thinking about things that. I'm going to want to do when this is all over. So some people want to come back to concert. Some people want to go to sporting events.

Comedy? I cannot wait to come to New York and go to the comedy cellar with you. That is one of the things I'm very much looking forward to and this is over. Yeah. You know, I went to the cellar on March 9th. It was my last day in the city. And I kind of knew that I was out. I rounded up my friends.

I said, let's go out. Let's get Manetta Tavern and let's go see a comedy show. And it was awesome. You missed coronavirus by six inches at that place, probably. Good point. March in New York. Nikki Glazer was there that night. Okay. This week I watched, what service was on? Prime, I think. There's a movie called No Way Out, 1987, very, very 80s. 80s movies are the best. I mean, they're the worst, but they're the best with like the saxophone music and the ridiculous music. It's with Gene Hackman, and it's Kevin Costner's second big role. He plays a, eh, the plot is irrelevant. I'm just saying, it's a good movie.

I've actually never even heard of this before. Watch it. The female lead is, I'm not. Heinhorn, Finkelah Seinhorn. Apparently, she was like a very, very attractive, famous movie star in the 80s. Oh, Sean Young. Is that her name? I forget. Okay. You've been working through your old movie list. Well, that's why I'm not watching Tenet. There's so much to watch. Yeah, true. All right. Animal Spiritspot at gmed.com. We will be back on Friday with Michael Bartolini from State Street talking about the 2021 Outlook. So we'll see you then. You know,