Animal Spirits Podcast - Is this worse than 2008? (EP.130)

Episode Date: March 18, 2020

On this week's show we discuss working from home, the enormous impact the coronavirus is having on the economy, how people's lives are changing in a hurry, turmoil in bond ETFs, the differences between now and 2008 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 at Y charts. I was looking recently at some data in the credit markets on Y charts, looking at the option-adjusted high-yield spread, which is just the difference in the interest rates between what you're yielding on a high-yield or junk bond and a diversified holding of those versus what you're yielding on a basket of high-quality U.S. Treasuries. And that has blown out in the last month by almost 5%, I guess almost 4%. It went from three and a half to 7.3. And surprisingly not quite as high as it was in 2016, not nearly as much as 2008, but that's a big blowout in a hurry. Especially with rates so low. So you had about three years worth of yields or something like that, whatever it is, ripped out in about

three weeks. J&K is down roughly 14% in a 40% drawdown. I thought this was a good way to show people that chasing yield has actually worked fairly well in recent years. And it's actually probably been a good strategy to do. But eventually that risk and return that comes due, and this is one of those times where high yields is just getting massacred. And that's sort of what happens when you go for the higher yield. You have that higher risk as well. So all of these periods have been buying opportunities.

You look back in time and you look at the charts. I forget who said this. Maybe it was Adam Smith said statistics tell him what they're bloodless tail. And what he meant by that was you don't get the exact. experience by looking at a chart. Because while all of these appear to be buying opportunities with the benefit of hindsight, in real time, they're really freaking scary. And it's very easy to say be fearful when others are greedy. It's entirely something else to actually live that. Go to Y charts. Tell me Animal Spirons that you get 20% off your initial subscription. If you're

going to be sitting at home and need some new research, they are a good platform to you. And we've obviously been leaning heavily on them lately. 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 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

annual spirits with Michael and Ben. It feels like three months ago that we talked, but it was only last Thursday. I miss you. I think this was probably one of the longest weekends of my life this past weekend. It was the first time that a weekend did not feel like a weekend since my twins were born in 2017. Are you getting the, I can't talk about this anymore from Courtney? No, I don't think that. We've been talking about it a lot, actually. We keep saying, let's stop looking at our phones for a while, but it's impossible. I keep wanting to pay attention. If anything, I feel like there's still probably way too many people out there that I talk to

in terms of friends and family members who still aren't taking this thing seriously enough. I don't know what your take on that is. I think there's still a lot of people who are a little naive as to what is happening. And I think they're really surprised at all the closings and such that we've had. I don't talk to a lot of people in general, but I would say anecdotally, I haven't spoke to anybody who's panicking, spoken to a few people that are like, what's the big deal? I'll be fine. And yeah, you might be fine, but that's a rather selfish attitude because there's a lot of people who aren't going to be fine.

I think we're in a, it's weird to pat ourselves at the back for this. But I think a lot of the way that you take this is where you're at in life. Like, if I was a young college student this happened, I don't think I would have the wherewithal to take this seriously. I'd probably be one of those kids, too, who's out partying and thinking like, this is crazy. Why don't I just keep living my life? Screw this virus. You saw that one tweet to AOC. This girl was like, I'm not going to let this virus win.

I'm going to Red Robin or whatever she said. Right. That was the right attitude to have in 9-11 maybe. But now, but I think honestly, if I was young, I almost give those people a pass in a lot of ways because I wouldn't have had maturity to think that. But now that I have kids, it's really changed the way I think about life and priorities and not only worried about them, but the grandparent thing is much as I'm going to miss my parents when someday they both pass, I'm probably going to miss them more for my kids than myself because they're grandparents now. And I think about people who are going to be losing their grandparents because that's the most at-risk age group. and that really scares me from that angle because I just think I just can't imagine that thing. So immediately my worry is my kids and it sounds like kids are not very highly at risk here,

which is great. But my wife is also, she works in healthcare and she's going to work at a hospital a few times a week. So that's scary. So the whole thing is just very, this is one of those crises where I've moved on pretty quickly from worrying about the financial market aspect of it. And that is way down the list for me in terms of what I'm anxious about. I'm, way more worried about other stuff. And that includes the fact that the economy is basically coming to a screeching halt out of nowhere. Yes. It seems appropriate to be more concerned for Main Street than Wall Street. Everybody is going to know people already does that are absolutely directly affected immediately. So people with portfolios of stocks and bonds are going to be fine. But people

in the real economy. Right. Those are going to recover eventually. The pain is difficult now, but that's going to recover. That's why I think this is way worse than 2008, even if the markets don't get to the same place because the impact of this. So we talked on last Thursday and I said, I'm preparing right now for schools to close. I didn't expect to receive a text message the next morning at 5 a.m. saying, okay, schools are now closing immediately for the next three weeks. And what if that turns it to four months? Because is it really going to be better in three weeks? I'm honestly planning on, I'm thinking there's a 60% chance. They just say all schools are closed until the summer. There are levels of suck. And right now I feel like we have the best level of suck because

we both have homes. So is it inconvenient to be home working with kids? Yeah, of course it is. But there are then people who have two kids in a 750 square foot apartment in the city. And what do they do from home? I think the first thing I do after this is over is buy a house because I would be sick of that really quickly. Well, and then of course you go a wrong lower and there's people who are uncertain that have a job in two weeks. And then, of course, there's people that know that they're going to get laid off today. Virgin Galactic, for instance, I think just announced like eight weeks mandatory leave, no pay. And this is going on all over the country. You have restaurants, open table show that New York City was down 58% new over year. That's going to continue to get

lower. People that work at bars. So restaurants, retail, leisure, hospitality, anything that is hourly workers. And what is that? A hundred million people are making up a number. But it's basically everyone. It's a huge number. I went into the grocery store late last week and stocked up. And I gave the woman behind the counter who was checking me out a look. And she just looked like she had just been through it. And I feel so bad for those people who have to come in every day to work and put themselves at risk for people who are coming to the store to stock up. This impacts people in so many different ways. It's just, it's mind-boggling. So the Fed shot their bazooka. They took rates to zero. They're doing a $700 billion

QE program again. And from all the experts that I follow, this seems like the right thing to do, just in terms of liquidity needed in the market. Listen, they're not trying to stabilize the stock market. I mean, maybe some people think that and maybe that is one of the intentions. But ultimately, they're trying to make sure that credit markets function properly. So, okay, good. They did their job. Now it's time for Congress to do their job. And they're going to need to fire a massive fiscal stimulus package like we've never seen because what happens when all these hourly workers who don't have any savings, what happens when they can't buy groceries? What happens when they can't pay their rent? Do the landlords evict? And evict for why? There's

nobody coming in behind them. And do the banks take the property when the landlords can't pay? Why? There's nobody coming behind them. That's the crazy thing is that it just cascades up the rung. Every rung it escalates. Those people are screwed too. Everyone's a bag holder here. Right. So the government needs to step in like immediately with some sort of temporary UBI. Mitt Romney was pushing for $1,000 a month. They have to do something now. In World War II, they issued war bonds. And I think they put them at a lower interest rate. And they basically went to people's civic duty and said, we need you to invest. in these because this money is going to help the country. I almost look at this as our type of war

in some ways. Like for our generation, this is it. And people back then did a lot of sacrificing for the greater good of the country. And I think now is something similar. Like treasuries are yielding 80 basis points. Don't take two trillion out of treasuries and hand that money out to people to help them, especially those people who are in need. I mean, there's going to be a lot of people who, you're right, their lives are just completely done for in terms of they're going to have a personal depression from this. So Bill McBride at Calculator Wrists wrote, I just spoke with a tile subcontractor who mostly does remodels. He was completely booked for the next several months and all of his jobs have canceled for the next eight weeks. So this is going on all over the economy. So again,

it's one thing to talk about people's portfolio of stocks and bonds, which will recover eventually, but what about people whose incomes just get shut off? What is going to happen? So this is extremely frightening. So let's talk about how this is going to change things forever. And one of the things on people's minds is, is work from home here to stay? Icon was on TV talking about short and commercial real estate. I don't know if that was like necessarily a play on this, but I'll take the other side of that. After being home for just a week, I'm not exactly a social butterfly, but I do like being around people. I like being in the office and I can't wait to go back. I do work remotely, but I actually have an office because I needed that separation from home.

What if this led to a slowdown in working from home? What if it went the other way and people said, no way, am I going, maybe more people who work at Starbucks or something in the future. But I agree, it's really difficult to work at home because when I'm home, the rare occasions that I do work from home and don't go into my office, there's always something steering you at the face that you could be doing at home. It's hard to separate that. So I think I need to have that wall up and that separation. And I think there's going to be a lot of people who are going to say, get me out of here and they're going to be skipping back into work whenever that day should come. Yeah, I think you're right. So they spoke about they're going to suspend interest. student loans. Okay, that's great. How about you suspend student loan payments like immediately?

And what if this gets so bad? Why can't we defer those for 12 months or something? Listen, just press pause. If you got up that three or 400 or how many, five or six hundred for some people, dollars a month, that's huge. That could cover their car payment for them if they're hurting and just why not, right? So income's going to stop for people. Most are going to be shut down. I mean, retail just all over the place just decimated, just millions of workers without an income who have no money in savings. So the bills are not going to stop. What about utilities? Can the government backstop that? Just go to the utility companies and say, send us your bills? The interesting thing about that is because people's utility bills are going to be hired because so many people are going to be at home right now.

If ever there was a case for like short term MMT, this is it. So just before we got on, the Michigan governor got on the press conference and said, we're shutting basically everything down. Restaurants, bars, there's only takeout. We're shutting down casinos, gyms. and they said that people who work in the restaurant and lodging industry, that's 600,000 people in Michigan alone that work in that, that are just, what do they do? They live off of tips or hourly employee. We called our swim class for our kids last week and said, hey, we're going to put this on hold for a couple months. And I was talking to the manager there. I asked her, she sounded pretty frazzled. And I said, how are things going? And she said, it's been a

tough day. I've had a million of these phone calls. And it's a lot of young people that work there that are probably going to be out of work for a long time. And I'm pretty sure they're hourly employees. I don't know what they do, especially if you're young, you don't have a huge financial backstop. Like, you don't have a lot in savings and financial assets to hold you. You probably don't have a lot of other forms of income that can help you. Especially when it happens as quick, there's just, there's not much planning or changes you can make on the fly that help. I think beyond the government and the government certainly needs to do something is that people are going to have to band together, whether that's moving back in with parents or with family, like this is going

to take a village. Well, the crazy thing is, for a lot of people, that's probably a bad idea with school because one of the things they're worried about is that grandparents are going to be helping out watching the kids, but that could be fatal to the grandparents because the kids could have it, be asymptomatic, and pass that under the grandparents who are not of the best health or just because they're older, the elderly, and we're at risk. So it's kind of a crazy situation where a lot of people are just going to be on their own, unfortunately. And I don't know how some people, some people just don't have jobs that are able to work well from home,

especially when they're watching kids. It's a really, it's going to be tough for people. And I don't, like you said, if we get to our three week mark and things keep getting worse, they're not just going to tell people, all right, go back out into the wild. Let's restart this thing. Right. It could be a while. All discretionary spending is done. So whether that's electronics, jewelry, clothes that you don't need, like all of the stuff, it's just on hold, like indefinitely. And hopefully people get their act together and realize the seriousness of this thing and stay home. What are the economic ramifications of shutting the country down for three months, four months? Nobody knows. So Deutsche had a note out today. So it's a chart showing the number

of months the U.S. economy is in recession. And it looks like on average, it's 13 months. Again, back that Adam Smith, quote, looking at these. chart, it's like, okay, average is 13 months, no big deal. That's 13 months in real life. That's a long time. And honestly, that can put you back in terms of your personal finances for much longer than that. It's not like it starts and ends and then you pick up right where you left off when it's done. Right. Good point. So Deutsche said the current slowdown is not driven by an endogenous buildup of imbalance in the economy, but rather by an exogenous shock that literally came out of the blue. This argues for the current slowdown to be short and deep. So,

Okay, short, but deep. And this is going to be deep. And honestly, any of these estimates that you see from Goldman or some of these strategists, I mean, don't you just throw those out the window? There's no way that you can estimate what these types of shocks are going to be and what the numbers are going to be and what GDP is going to look like and how it's going to snap back. I was talking to Morgan, and Morgan Housel said that the data that's coming out, it's going to look like typos. So earlier I talked about open table. That's just going to keep going lower. Travel, gone. So we're starting to see the first bits of data come out. Empire State

Manufacturing Survey absolutely crashed to the lowest level since the great financial crisis, not surprisingly. Is unemployment rate, is unemployment going to go up to 10%? Is it going to go higher? It could. And here's the thing, trying to look past this a little bit, not that, I mean, we're still on dating into the worst of it, which is crazy because I think the realizations people are starting to get are just like how bad it's going to get. And it just came. It I thought it was going to get bad. I have a brother who works for the CDC. He's been warning me about this for a while. I kind of feel like people who have been on Twitter, it's kind of strange to say, maybe a little more informed about this than the average person.

It seems like Twitter, last week I was wondering, is social media making this worse? I actually feel better being on Twitter for the last few weeks than not being on it because I feel a little more informed. I'm shocked to agree with you. Twitter, which previously to this has become a source of great frustration and anxiety, has turned it to a real cesspool. I found that over the past few weeks, it's been really helpful. You have to know how to filter and find the right sources and use the right people and get rid of those who aren't. I've been blocking and muting liberally lately.

But I think it's actually helped a lot. And I still think there's a lot of people out there who just don't understand what is coming. And it's not only the realization, it's still going to get worse. And like seeing hospitals be overrun with people and hearing stories of people potentially dying in the hallway of a hospital. That's not out of the realm of possibilities. And that's a scary thing. It's just overrunning our infrastructure because no one knows how fast this is going to spread and how much we can stop. I think a lot of the steps that we've taken have been

the right thing to shut everything down. But now it's a question of like, is it going to work? Well, I think that the government has taken appropriate measures because people need to be nudged because they're not going to listen. And let's talk about a member of the financial Twitter community. Ray Dalio was in the news this week. Pure Alpha had a rough month down 13% through Thursday, following an 8% drop in the first two months of the year. So Pure Alpha is down about 20%. And that's because they were betting on rising equities and rising treasury yields.

This is one of those times where I don't think it's fair to dunk on some of these hedge funds for missing this. No, hold on. Okay. I'm not saying this to dunk on them. I say this to make the point that we've been making is that retail investors are not what moves markets. It's giant pools of money. It's giant hedge funds and sovereign wealth funds and pension funds and all those sort of foundations. They control the money. So,

it's not going to be vanguard investors buying or selling that's going to really move things in mass. It's giant piles of money like this. And yet, to Ben's point, I don't blame Bridgewater for not seeing this coming. I mean, not many people did. Right. And guess what X this pandemic that is a potentially once out of a hundred year type of thing, they were probably positioned right because the way things were going, the economy was doing fine and markets were doing fine, and they were probably positioned right for a scenario where we didn't go into a global pandemic.

You can't really fault them for that. This is the Black Swan type of event. It's finally here. I was surprised to see GMO came out with, is it time to buy? Now, this is a phone call, so I don't know exactly what they said, But, so stocks are down a lot, but paradoxically, they can become more expensive if earnings continue to go lower. But we're not even, stocks are not like cheap here. They're at value shops. So I was surprised to see that. I don't think that you can even try to think about valuations from this point. Because again, you're looking at forward numbers that mean nothing right now. What do you build into your models if you're trying to do this? I don't see how you can realistically do that. So it is interesting. Like value investors tend to be. early in things. So I guess that would mean selling out a little early before things get crazy and buying a little early when things get crazy in the other direction. But obviously, I think

they're looking through and seeing, I'm just like thinking optimistically, how crazy is it going to be on the other side? We're going to see these huge drop-offs in data in sales growth and in the comparisons are just going to be otherworldly. But isn't it going to be great however long down the line, nine months or something when we see the other way, when you see the optic again? Oh, yeah. So like I said, they're going to look like typos on the way in and typos on the way out because you're going to see some gains that are like 225%. Yes, just this massive repricing. I'm a little surprised that they've been bearish for a long time. And now they're saying it's time to buy the volatility here. For a while, people were saying, we're having these 2 and 3% down days, even 4% down days. People were comparing it to 08. I kind of laughed at that and brushed it off. But last week, that's 08-ish. And today we're down another at 8%. Lord knows what we'll finish at. But last week was minus 8 plus 5, minus 5, minus 10 plus 9. Don't you think it's kind of crazy how you get used to this? Yeah, it's insane. Like I'm looking at

this right now. S&P's down 7.8%. It doesn't feel so bad. Right. This is one of those like, if we could finish down 5%, that's a win. Down 5 is the new up is a new positive. You do kind of become numb to it in some ways. And again, the market stuff to me, obviously the markets are important to us and they're important to our jobs and our clients and our personal livelihoods in terms of our savings. But the market is just way down on the list of things that I'm worried about right now. Yeah, I cannot agree more. But let's talk about the market real quick. So as it stands now, S&P peaked at Trough and I know Ben's a closing price this guy, but I'm not. So we had almost 30% decline. Now listen, is 30% that bigger decline,

relatively speaking, especially considering where valuations were? No, it's not. But my goodness, did it happen really fast. So can stocks go another 30% down? Yeah, they could. That's a crazy thing is if you look at these, I've been looking a lot lately at the history of bear markets and I've been tracking those for a while and I use them quite a bit. And if you look at the history of them, there have been far more bear markets that have been worse than this than been better than this. So it actually, in the grand scheme of things, is not that bad. Like if you looked historically and you go, oh, 30% bare market, that's not that bad. But just living through it makes it feel so much worse.

Another 30% lower takes us to 1740, which would be about 50% off the highs. And where does that take us back to? 1740 takes you to, it's a while. Not going to lie, it's a while. So I look back. So by my count, there have been, and it's hard to tell some of these times because when do you reset and when do you not reset? my calculation, there's been 24 bare markets since 1928, and 11 of them have been 30% or worse. 11 out of how many? 24, you said?

Out of 24. So a little less than half have been 30%. The other ones are in the 20% to 30% range, obviously. And again, so if you look at the ones historically where you get cut in half or you're down 40%, obviously the Great Depression is like 85, 86%. This one doesn't look that bad. And obviously it could get worse and it probably will. But I also looked at, okay, not only how long does it take the bottom and the average time to bottom for all these bear markets was like 330 days. So that's almost a year from peak to trough. But each day feels like a week. Right. But here's the thing. So the other thing I looked at, okay, how long does it take to break even? And the break even was since World War II, it was around a year and a half because the Great Depression took like 13 years to break even.

That's on a total return basis. So I looked for World War II. Wait, I have a question. When you say break even, you're talking about top to top? Yeah, and I use total returns from the bottom. How long did it take and make your money back? Wait, from the bottom? Yeah. From the bottom? When markets bottom, how long does it take to make all your money back? Yeah, not top to top. Yeah, I did both of them. I looked at one and then the other. So the total time from the top to the bottom to the top is roughly two and a half years, maybe a little less. That's a long time. That's a long time. But here's the thing. We went down so fast. it's possible we could snap back so fast. And I think this is possible where they don't call this a recession until a stock market has already started recovering.

Oh, I totally. Yeah, totally. This is one of those instances where the stock market can see a recession coming. It knows it's coming. It is telegraphed. We are going into recession. It's going to be nasty. And I think the stock market is going to be able to figure out when this thing stops based on a lot of the data and based on the fact that once we finally have these cases starting to go down, assuming we don't have this giant second wave that the doctors are worried about, which is a possibility. If we can avoid that second wave and it can start seeing business activity pick back up, they're going to say, hey, we're going into recession today, or we already went into one six months ago, and the stock market has already said, we don't care,

we're past it. So it's going to be, the timing of this stuff is going to be unlike anything we've ever seen in that direction as well. Agreed. So, all right, like I was saying, a 50% decline if we get to 1740 would take us to December 2013, a year where stocks were up more than 30%, and a year that felt like absolute euphoria. I'm not trying to make light of the fact that there's a potential to go there, and I'm not predicting we do. So as of right now, though, we've gotten rid of every gain since 2019, more or less. So the S&P is back to summer of 2017.

Okay. So we've broken well below the Christmas Eve lows of the two. No, no, no, because the Christmas lows of 2018 took you back to, like, beginning of 2017. There's some sort of technical analysis he can do for me on the Christmas Eve lows. What does that mean? Well, there's Fibonacci levels, of course. But... I'm glad you haven't lost your sense of humor.

So, that's large-cap stocks. The Russell 2000 is down like 38%. Same thing with transports. And individual stocks, forget about energy, obviously, which is just gone, basically. But J.P. Morgan was down 40% from peak to trough. Disney was down 40%. Isn't it kind of crazy? We had that big worry about oil, and now it's like, we've completely moved on from that. Let's talk about bonds and bond ETFs in particular. So there was some funky activity on Friday where bond ETFs dislocated from their NAV. I don't know if we've ever seen this in bond ETFs, and especially in the credit ones, but even in something like BND, which is just the total bond index, and there's some, there's certainly some corporates in there. But Dave Nadig.

We did. We got a ton of questions about this from people. So the. The big thing that happened was Vanguard has a total bond market ETF, B&D, and they also have a total bond market mutual fund. And the mutual fund prices at the end of the day, like all mutual funds, where the bond ETF trades during the day. And there was a difference in prices between where the ETF closed and where the mutual fund closed. And the ETF closed down quite a bit and the mutual fund closed up a little bit. Now, the reason this matters is because this was a huge down day for the stock market. And if you wanted to trade out of your bonds, your bond ETF to buy stocks that day, you were selling lower from bonds. I think this is a black eye for the ETF world. A lot of people were defending it and saying it isn't. I think this is a minor problem. I don't think it's a huge issue. I think it's a minor problem. Where do you fall on this? I see both sides. I think there's no denying the fact that this is an issue. So he said he thinks the big problem is he said, well, what is fair value? Because maybe the mutual fund NAV is not the fair value and they just are slow to catch up. And he said he's a 100% convinced it's the

ETF closing price is the fair value. Right. So Dave is saying that it's hard to turn illiquid assets liquid and a lot of the bonds inside of the total index just don't trade. He gave one example of an issue that's traded like 15 times all year. So Dave is saying that actually the ETF prices are right, not the mutual fund. So there is a lot of nuance here. I highly suggest you read Dave because he is an expert on this things. And the other thing is, yes, it could have been painful for that one day, but over the long haul, these are minor differences. And I think if you're not a short-term trader, these things shouldn't matter all that much to you. Maybe you got hosed with a bad price if you were

trying to trade that day. But I'd never think an investment strategy should be predicated on what happens on one day anyways. So there was an interesting article in the Wall Street Journal about traders. And the article didn't really say anything that interesting other than the fact that they found somebody to get a ridiculous quote from. I love these things. Could they potentially make these up and no one would never know? Although we have to say, we love these stories and we talked about one one time and the guy who they were talking about actually emailed us. Do you remember this? Yes, he was tightening up his whatever. They must just have their rolodex of people who they call who make these short-term moves, and this one, you read it because this one is hilarious.

Actually, if I remember correctly, the last guy that we were laughing about, and we're not laughing at him, so please, take it easy. It's just the quote itself was very silly. It's hilarious how they put, they do these serious stock market stories about what's happening, and then they throw in this one little anecdote about what some Joe Schmo is doing out of his basement. Like anyone cares. Yeah, that is what makes it funny. We're not poking fun at the specific person. It's just like, again, this is a serious publication. They grab one random person to say something. So in this case, it's Morty Chemowitz, a day trader from his home in Spring Valley, New York, who usually trade stocks from 4 a.m. to 11 a.m. 4 a.m. What is he,

Mark Wahlberg? He's a Mark Wahlberg of Jewish traders. This guy's literally a pajama trader. I thought they didn't exist. And then he trades again from 3 p.m. until 8 p.m., drawn to bigger opportunities to profit at those time. So he really is relying on the ramp capital, the 330 ramp. ramp. He uses the four-hour, this quote, I use the four-hour break to catch up on some sleep, play tennis, or tend to other family matters, Mr. Hamowitz said. That is, so he should write a life hack book. He wakes up to trade at 4 a.m. He trades for how many hours a day? 12 hours a day, this guy's trading. I mean, I'd pay decent money to look at his brokerage statements to see like how much tourney he's doing. This is the guy that went on overdrive when commissions went to

zero. Again, maybe he's got a decent strategy, but it's just funny how they stick these stories in. Speaking of trading, Robin and it has been in the news again, and some people think that they're being treated as fairly. I don't know. I feel like if you keep going down, that's not a great place to be. We were talking about what would happen if Airbnb was public? What would happen if WeWork was public right now? What would happen if Robinette was public right now? There would be a lot of startup that the prices would just look ugly at the moment. I mean, easily a 50% repricing, don't you think? If not more.

Yes. They said our capital position remains strong, which is something you never want to see. That's Dick Fuldish. When the bank CEO says that, that's usually a red flag. So they, it said the story was from Bloomberg, they drew their entire $200 million credit facility. And this is before they got into trouble closing down. And they said that they've returned the capital.

Everything's fine. Again, I think before people are asking, is Robin Hood going to fold, I think that's probably a little quick. Don't you think someone would step in to buy them at some point and say, listen, we have this great base of millennial clients, we can shore them up and hopefully do better for them and make sure they don't keep doing this. I don't really know what to think. But this is obviously the broker of choice for the Wall Street Reddit crowd. Although this is one of those things where you'd expect when there's blood in the streets for there to be a ton of takeovers and mergers

and buyouts and acting, being greedy when others are fearful. But that's harder to do when you are in the midst of a crisis and you need to show. So there was a story last night that eight of the biggest banks in the U.S. all decided to pause their buybacks now, which a lot of people said, good. Yeah, a lot of people said that's so stupid. They're worse than than retail mom and pop investors. They're buying high and selling low. No, this is sometimes what happens. When you have a crisis, what good is it going to do to buy back your stock at lower prices and valuations if you completely use up the capital you need to shore up your company and you have to lay people off and what's the point, that's actually one of the upsides of buybacks for corporations, I think, the fact that they can be

cyclical. That's not a bad thing. That's a good thing. It gives them some more flexibility when something like this happens. This is not news that buybacks are pro-cyclical. You would expect them to be. I mean, I was thinking about this in terms of individuals. Think about how many individuals have been waiting for a crash to put their money to work. And they've probably been hoarding cash in talking about how it provides optionality. And I'm going to buy when there's blood in the streets. And then what happens if you get to that point. And yes, stocks are 30% lower. But wait, my income is cratering because my business is going down. Is that going to help me at all to put that money? Like, am I going to put that money to work in the market because I'm sitting on cash? Or am I going

to continue to sit on that cash and backstop my finances? So that's another reason why your personal finances sometimes dictate what your investment plan is going to be. Because if you don't have a backstock somewhere else and your career is faltering, it doesn't matter that you've been sitting on optionality. It's useless to you. Yes, could not agree more. That was a really good point that you made. Speaking of points, this is, think back to two Wednesdays ago, I think it was, it's really amazing to think that Adam Silver changed the trajectory of how serious we took the virus. And that really was the tipping point.

I think that was only a week ago. That was last Wednesday. It was last Wednesday? Okay, I'm losing track of time. I mean, the last week feels like it took four months. But Adam Silver absolutely woke us up to, holy shit, this is no joke. And he said that when he found out that O'Bair was positive, it was a split-second decision. There was no indecisiveness whatsoever. Yeah, they had to, and it was the right call. When we talked on Thursday, we thought this was the tipping point.

Obviously, for a lot of people, it still wasn't. I think, again, that's why the government had to step in and close all this other stuff, because people couldn't self-regulate or chose not to believe what was happening around them. I don't know. I don't know what the percentages are in terms of people doing this and not paying attention, but it's easier than ever to see those decisions. I'm looking at it the other way, like, what if social media and the internet didn't exist right now? How much harder would it be for the government to control its message during this? How would they get the word out to enough people to know, like instantaneously, what's going on? Everybody would be glued to the TV like the moon landing. I guess so. And I think that's probably why so many people in the older crowd pay attention to the 20s. 24-7 cable news all the time because back in the day, that's just where they got all their information from. They had three channels and all of them had news and those would be the people that they trusted the most in the world. And now they've moved that trust to 24-7 cable news,

which is sometimes to their own detriment. But I'm hopeful that the internet has actually made this thing better rather than worse. And I think it probably has. So there's an amazing chart from Visual Capitalist, the history of pandemics. Have you seen this one? No. So it's showing the death toll of the highest. It was the Black Death, which was called the Bubonic Plague. 200 million people. So it's not normalized for population. But we'll put this in the show notes.

It's really pretty incredible. And the best thing that I've listened to so far on the topic was, I forget the guy's name, but there was an epidemiologist on Joe Rogan's podcast last week. Did he listen to that? Yeah, it was very good. So he was debunking a lot of the myths about what's going to make this virus go away and what do they know and really, really good. All right. We were right for the wrong reasons, Ben. We were bearish on the film industry in 2020. This is all the perm bears taking a victory lap right now for the stock market going down, even though it had nothing to do with the reasons they've been bellowing about for 10

years. So box office receipts, year over year, like restaurants, down 58%. And so what's going to happen because a quiet place too, for instance, which is supposed to come out on Friday, is being pulled? Why can't they just release some of these to us now? I would pay $50 to watch this on demand. Paper view? Yes. Charge 50 bucks for a new movie. So in Disney to move forward, Frozen 2 to this weekend, and we've already watched it

probably 17 times. Why isn't Netflix moving up the release of Ozark to now? It was supposed to come out March 27. Move it up now. Why are they not moving these things? And guess what? They would get so many new people signing up because they have nothing else to do. Netflix can, but movie companies have like distribution contracts with the theaters and

everything like that. Like I don't know that they can just go. digital. I thought they had some things where you could pay for. They're trying to set that up. Keep things going a little bit now. You're not going to get a ton of people to do it, but some people, I would pay a lot of money for a new movie release at the moment. I don't know. I would love for some entertainers to get creative right now and just try something because we're all stuck in this together for potentially a decent amount of time. Yes. Somebody tweeted, Fang Reminder, these are the new Berkshires. Apple has $207 billion in cash on hand. Microsoft has $134 billion. Google has $120 billion. So at what point, it can't be

too far away. Do you say, back out the cash at Apple's trading at six times earnings? But again, this is the time for them to step in and buy things. But don't you think that they're looking at this as, okay, this is our backstop. Things are going to slow. We've had to shut out all our stores all over the place. We're not going to put this cash to work now. Isn't Buffett one of the few people who still does that, even though he hasn't stepped in yet? I can't believe we haven't had the Warren Buffett story yet. Moving on to some listener questions. I own ETFs and index funds for tax purposes. Does it make sense to sell positions that are showing losses now and at the same time use cash savings to buy back into similar ETFs in

index funds? I know there's a 30-day rule for buying and selling the same stock, but there are many different ETFs and index funds, which has essentially the same holdings. So he's asking, should you take advantage of tax lost harvesting here? Yes, absolutely. Assuming that you have gains elsewhere, yes, absolutely. Or even if you know it, absolutely. Because for instance, the SDP 500, it's a commodity. So you can get that from Vanguard. You can get from my shares or state shooter or anybody else. So yes, I would absolutely consider doing that.

And you're not going to have a problem finding taxes to harvest here. Losses to harvest. There's plenty of them out there. I am curious, and I'm sure many people are too, about your thoughts on when to deploy dry powder in this downturn. What is the best way to determine the bottom and bite deals in your watch list? I know market time is a fool's errand. Okay.

So listen, there are people that have different strategies, obviously there are people that are traders that are looking at market internals that are looking at breadth measurements, advanced decline, percentage of stocks about moving averages, looking for divergences and all that sort of stuff. They don't need our help. I would say for people that are just like thinking about this, here's the thing. You're not going to get the bottom. No one can. That's a fact. Well, somebody will buy a chance, but you're not going to get the bottom. You don't need to get the bottom. I'm actually working on a piece now, answering this question, when do you buy? Assuming you buy even close to the bottom.

And I'm saying even close, like literally, if you have two years on either side, assuming that this is a purchase that you're going to hold for 10 years, don't worry about it. I would say that just put money to work with the understanding that it could potentially get worse. And to that point, if you have $1,000 that you want to put to work, you don't have to be anxious about what's the best price. You could break that up. So if you want to do that over five weeks, by all means. So I would say, that's the right way to think about this. All right. Next.

I guess I don't get to answer it. No, go ahead. My answer was it good? It was okay. No, I was just going to say, I may read about this too, but in 2008, Warren Buffett wrote his op-ed for the New York Times in October saying, buy American I am. Stocks fell a further 30% through March. So he started buying when stocks stalled another 30% to go. So that's the thing. Break it up. I mean, could this thing turn in a dime and bought tomorrow? Guess what? If that happens and you miss out on a few purchases, you're going to be better for it because the rest of your investments are going up. So if you want to break this up and buy it

here and there and buy a little bit after every down day. Do that, but just have a plan in place and understand that things probably will get worse. In times like this where the stock market is swinging daily and bonds are all over the place. By the way, I think I saw a tweet that on Friday there was like 16 different 1% moves intraday, something like insane like that. Shoo. Anyhow. All right. Is it better to be in a set allocation fund like Vanguard, target date rather than managing your own allocation, which performs better in the long run? Also, please comment that I don't have Robo advisors are performing recently, whether they're gaining or losing customers.

Okay, I'll answer the last part first. Robo advisors, I don't know. I'm sure that we will find out some data from Betterment to Wealthfront in the weeks and months to come, or maybe we won't. I would imagine that their clients are doing just fine. The average balance is a relatively low number. These are young working people that are probably adding to their account. Listen, if you're down 25% and your balance is $20,000, it doesn't change anything.

It's completely irrelevant. So are they, in terms of how are they doing in terms of their investment? Yeah, they're down a lot like everybody else's. And then specifically, is it better to be in a target date fund or managing your own allocation? I don't know. Better how. I would say it's better in the sense that you don't have to worry about it. Are you going to out-allocate them?

I don't know, probably not. You're probably better off just being in a target date fund and moving on with your life. It honestly, it depends. Do you have the fortitude to rebalance into the pain? Because a target date or life strategy fund is going to rebalance. Now, it might not rebalance exactly when you want it to, and that could be good or bad. because, again, you're not going to pick the bottom of yourself, but those funds that have a set allocation, they will rebalance back to that set allocation. If you set it yourself, unless you,

in a lot of 401 plans and IRAs, you can set those to automatic rebalance too. So if you want to run your own allocation, that's fine, but just have some rules in place to guide you and don't try to guess at it and hope that you'll do it and just forget. So I think as long as you set some parameters, it probably doesn't really matter. What kind of impact of housing prices do you think a stock market drawdown would have if it were the same magnitude of 2008? Okay. So let's say that stocks do fall 50%. What is that going to do to real estate prices? I mean, you would think that they've got to be affected, right?

What do you think, Ben? I don't think too many people are going out to open house at the moment. That would probably be go against the social distancing norms. Well, you list your house today. Are there any bids? That's a good question. I'm sure there's going to be a slowdown. And the thing is, it's another case where the housing market was relatively strong going into this.

And I mean, the thing is, the number of rabbit holes you can go down in terms of people whose lives and jobs are affected. So obviously, realtors are going to hit some pain here. Any way you think about it, there's someone who's going to be impacted. It's just a question of how long. And obviously, this is a market where it takes a while to make transactions anyways, but there has to be some sort of slowdown. Here's another one similar to what we got earlier. I would love to hear you guys talk about market bottom approaches. Maybe it's a little early.

I think we were heading to a bare market. Oh, we already are. But he said indexes moving above their 15-day moving average, five-day moving average crossing above the 13-day, changes in bond yields, any other signals, call versus put options. Listen, listen, there are no shortage of quantitative metrics that you could be looking at. None of them are going to tell you with any certainty what is going to happen, okay? Every one of those signals has a story that says it worked here, but it didn't work here. There's nothing that works all the time. I got to say, though, the five-day moving average crossing above the 13-day.

You wouldn't get it. You wouldn't get it. That's a new one to me. I'm just saying. You wouldn't get it. All right, last one for today. We have a bunch of these that we're just sort of rolling over to the next one. And we might do another episode on Thursday for a Friday release.

We'll see how the market goes. We did that last week and we got some good feedback. I have decided that I'm going to wait on home buying. Good call. Actually, maybe not. We'll say, not sure when I will consider buying again, but guessing in the two-to-five-year range. It seems like having kids would be more of a trigger to buying your home. location, schools, and stability become more important. I'm sitting on $150,000 in money market

communities that was being safe for home purchase and tempted to get into stock market after state declines over the last week. It doesn't necessarily have to be all or nothing, and I understand that there's no way to predict when the market will cover. Yeah, I mean, well said. Listen, to reiterate what we've been saying, nobody knows how bad this is going to get. But if you do have this person does, you have $150,000 in cash, does this seem like a good place to start buying? Yeah, you better believe it does. Could it get worse? Yes. Will it get worse? I don't know. Probably. I hope it doesn't. But if you have money to put over the market over the next three to five years and you can hold through the pain,

you will probably, hopefully be rewarded. Here's the thing. I'm taking the other side of this from you. He says he's going to consider buying again in the two to five year range. I think if that's the case and you have a defined time horizon, it doesn't matter if markets are going up or down. You should have that same risk profile no matter what. And I think anything under three, maybe even five years in stocks, if you have a goal coming up to, To me, that's probably too much to put all of your money in stocks, certainly. Maybe, like he said, it doesn't have to be all or nothing a little bit. I would like to see some balance there because if you put it all in stocks and we have a long,

we talked about the break even. If it takes a long time to make your money back and stocks continue to go down for a while, I think that's just playing with fire, especially if you're talking about something like buying a house. All right. Recommendations, I really got nothing because I've just been glued to the screen. I didn't read anything outside of current market. commentary, which is unusual. Yeah.

So I finished the outsiders last week, and I thought the finale kind of was a dud. I compared it to like a 1990s IPO that it came out screaming out of the gate and it was up like 500% on the first day. And then that was like the first two episodes. And then it crashed. And that was like episodes three through eight. And then the last two were just okay. This is a weird show because it wasn't that bad, but relative to how great it appeared

in the beginning, it was such a disappointment. So overall, it was fine, but I was very disappointed and I was not happy with the end. Did not do it for me. I thought the latest curb your enthusiasm episode was a total all-timer, instant classic with John Hamm. Did you see it yet? Yes. I absolutely loved it. And it made me think, would Larry David not do the best episode on the coronavirus? If anyone could make us laugh about this, wouldn't it be him? If he could come up with that and Friday we tried to watch uncut gems maybe it was just bad timing because so much was going on and I just didn't care for it that much I thought it was everyone said like you're going to be glued to the screen and maybe it's again because of when I watched it there was people

that were really up in arms that Sandler didn't get an Oscar for this I just thought he seemed like one of his normal characters just dressed a little different and I didn't think it was that I don't know I didn't the one Robert Pattinson movie that you recommended to me from the safety brothers who made that, I thought that was better than uncut gems. That was very good. I liked uncut gems, but I thought the first 80% was, like, pretty good. I love the ending. Yeah, like, that's the thing that I thought the first 80, it was just a little too slow for me. And I just, I didn't really have enough invested in him as a character to care what happened to him either way. Yep. Whatever. Whatever. I mean, at the time, I didn't really care. I'm typically not a very anxious person. Not a lot

really bothers me. I mean, I let little stuff, I complain about little stuff all the time, like big stuff for some reason never bothers me. But this was probably one of the most anxious weekends of my life, I'd say. I had a hard time sleeping. I just feel like this is just a strange period in our lives. The 2008 thing, it never really stressed me out that much because, again, that was more like financial market thing. Obviously, there was people who were losing their homes and that was difficult

in losing their jobs. But this is just on a whole other level because we not only have that financial anxiety, but we have this other health angle to it and potentially people dying. So this, to me, is worse than 2008. in those aspects in terms of like stress and anxiety. I find this period to be way, way worse. It's worse for you personally because you're a grown person now. Yeah.

2008 didn't really impact me that much when I was going through it. Maybe I was just too young and dumb and naive. And that's the point about these people now who are going on to the bars and stuff still and not really caring. But I think in a lot of aspects, this is worse than 2008 for a lot of people. I think the disruption of life is obviously way worse, even if it doesn't take as long to play out as it did. But to me, this thing seems worse than 08 from that perspective. Well, this is interesting times that we live in. And yeah, we're just scared for everybody that

is going to be seriously affected. What's up? Can I'm kind of a positive or a funny note? Sure, please. Yeah, please. Everyone keeps saying, like, Isaac Newton developed calculus under quarantine back in the 1700s or whatever, and Shakespeare wrote some of his best plays under quarantine. Guess what? Back then, life was quarantine. There was literally nothing to do. All the life hack people are going, oh, you know, Newton developed cuckus, so what are you going to do on your quarantine? It's like, dude, bro, get out of here. I want to hear this right now.

Those people had literally nothing to do. All right. Well done, Ben. Animal Spiritspot. We will either be back on Friday or regular scheduled for next Wednesday. Thank you for listening. We'll see you next time. Thank you.