Animal Spirits Podcast - It's Hard Being Rich (EP.169)

Episode Date: September 23, 2020

On this week's show we discuss a minor correction in the stock market, why the upper middle class has so much debt, why fame and wealth don't always lead to more happiness, how baby boomers are messing up fund flow data, keeping politics out of your portfolio, the next big bull markets and more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

U.S. currency and circulation has risen by close to 15% since January 1st, 2020. If you're worried about future inflation, you are not alone. Unlike the U.S. dollar, there is one thing that fed in can print, and that is Blue Chip Art. Meet Masterworks, the first platform for investing in multi-million dollar works by the likes of cause, Banksy, and Picasso. Blue Chip Art outperformed the S&P 500 by 180% from 2000 to 2018, according to art price. With bond yields hitting the floor, people are looking for alternative asset classes. Now you can access the $1.7 trillion art market today by going to masterworks.io and use promo code animal to skip their 12,000 person wait list. That's masterworks.com.combo code animal today.

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 Ritt Holt'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. As of this morning, we're in basically a 10% correction for the S&P 500.

Speak for yourself. Oh, for the SP500. Okay. Don't go putting drawdowns in my portfolio. Yeah. Oh, your personal portfolio is totally high. Yes. Okay. All right. Here's the way the world looks this year. January 1st through March 23rd, S&P down 31%. March 24th through early September plus 60%. Now over the last, whatever, 10 or 15 trading days, down 10%. So we basically had three decent sized double digit moves. Doesn't this one still remain the healthiest in your mind? This was a good thing, I think. I'm in the camp of, healthy correction. This is fine. This is Whole 30. The correction's going to last for 13 days. 30 days. I'm sorry. Okay. Very healthy. You're still sticking with the whole 30 was healthy for you? That was a good decision. How do I look? Yeah, he looked great. Everything on your hair, your head is gone. Okay. weren't we just totally overdue for something like this to happen? I mean, I would have been more worried if we never got a correction following that enormous snapback rally. Yeah, I mean, tech stocks in particular, the mega caps were incredibly overbought on any metric that you're looking at. So healthy until proven otherwise.

And then, yeah, then it isn't maybe. But Apple's down 22%. And what was the news that made that happen? Absolutely nothing, which is just one of the more maddening things about the stock market. Well, this makes a lot more sense than it going up 30% on a stock split. So yeah, that's true. All right. There's an article in the Washington Journal, no job, loads of debt. COVID upends middle-class family finances. And it seems like if you're not in the top whatever percent, there's so many people that are in a world of hurt. Obviously, people that are on the bottom, whatever, quintile are being hurt, but also like people, middle-class people are in a lot of trouble. And I don't think that people making a decent living are any less deserving of

sympathy. For example, posting for jobs with salaries over $100,000 were down 19% in August from April, while posting for all other salary category. is increased. So high middle class jobs are in trouble right now, I guess. I think people are going to parse my words. Is that, I guess, upper class depending on where you live? Yeah, that makes sense, six figures. But certainly a lot of people would consider that middle class depending on what their lifestyles like. So I want to ask you about this stat. So I don't know where they got this breakdown. They said American families with non-housing debt making over $98,018 a year in pre-tax income owed an average of nearly 92,000 of such debt in 2016, which is the last time they had these

numbers. This stuck out to me. What does this mean? A lot of people were sharing this one to show that even people that make a decent living are still having debt up to their eyeballs and are living on borrowed money. I mean, this is an average number, so it's kind of hard to parse. What does a family with non-housing debt? Does that mean somebody that either rents or doesn't have a mortgage? That just means taking out the mortgage. These people in student loan, auto loans and credit card debt, they have $90,000 of debt. even someone who's making 52,000 to 98,000 has about $33,000 in that type of debt. I think that's tough to say because if you're just showing above $98,000 a year, you could be talking about

someone that makes a million dollars a year and has four cars, but they shared some anecdotes in this as they do. And this gets back to my car thing. So they talked about a couple who they said we're making like $150,000 for household income, but they pay $4,400 a month in their mortgage, four car loans and leases and student debt. and she drives an infinity, and he drives a Ford. Again, I don't want to spend shame people. His monthly payment for his car, $820. That's insane.

And it says, well, he got a lower-cost car and reduced it by 100. I think cars can make people go broke. I'm putting it out there. That is one of the biggest problems, I think. And I don't know. The point of this article was simply that even people who are doing okay by income standards are still hurting because they have a lot of debt that they're taking on. Don't you think this goes to like the lifestyle creep thing? Like the more money you make,

the more money you spend. And so the minute that your salary decreases, and I don't care if you're going from 70 to 40, 150 to 120, 300 down to 230, in general, people cannot afford to have their salary go down. It doesn't really matter how much you're making. Right, because for a lot of people, there is no margin of safety. And if you're not saving a lot, their buffer is nil. That's what they're saying. A lot of these people have seen their income drop throughout this pandemic. There's no room to make it work, basically. All right, sticking with this. So there's an article talking about there's a million mortgages that are passed due by at least 30 days. And to me, the biggest takeaway from this article was that people really

have no idea what's going on, what their options are. For example, a recent survey of the National Housing Resource Center found that 56% of responders did, didn't know about the forbearance program. Sixty-nine percent said they feared being required to make a large lump sum payment into the forbearance period. Somebody in the industry said, it's just scary every time they send a letter of being delinquent. I'm doing everything I'm supposed to do. What do you think is the right number for something like this? Obviously, that one million numbers sounds scary. I think there's 130 million households in the U.S. So that's not like that's an enormous number. Obviously, for a lot of people that is tough, but what is this usually?

That's a good question. I understand what you're saying, though, that there's a lot of programs going on that you thought were helping people potentially stay in their home and trying to wade through this stuff when it was basically put together in a matter of weeks is impossible for people because there's no one to ask for help on this stuff in a lot of ways. Yeah, I think that's exactly right. People are getting letters in the mail and they just can't make sense of what's going on. Okay, so obviously it's not just homeowners. It's businesses, too, that are being affected. according to an analysis by Yelp, 98,000 businesses have closed permanently,

which is just too big of a number to even wrap your head around. Here's a quote from somebody that owned an orange theory, one of those fitness gyms that used to go to, right? Yes. Our gyms actually opened, I don't know, a week or two ago back here. I'm still doing the home route, though. So for 10 weeks, our revenue went to zero and stayed at zero. She said her rent bill was $32,000 a month.

So retail rent collections plunged in April to just 54% of the total owed by August that had rebounded to 80%. Okay, so not bad. But I mean, this is the kind of thing where this number, if this number doubled in the next six to nine months, would it really shock you in terms of restaurants and some of these places that are going to struggle more when the weather gets cold, unfortunately? I heard somebody talking about how they haven't had their house cleaner in their house for a long time. Talk about an industry that has just been decimated, and those are not high earners to begin with. You don't think that stuff has come back a little bit? Oh, it definitely has come back a little bit, but... You think there's still people that are backed off of it?

But that's another example of an industry that probably went, income went to zero for months. I just would have assumed that house cleaning would be something that people would still want because anything in the cleanliness department, people are game for. You just think it's weird to let someone in your house. People have that mentality. I don't know. We had someone to clean our carpets. this week, and it took us a month to get on their books. So I think that stuff has come back

for a lot of people, but I see your point. There was an article, I forget who wrote this. With the money Bezos made this year from the stock from Amazon, he could give every employee all $876,000 of them a $105,000 bonus. Are people still doing this without a smile on their face? Are they doing this a straight face? This was earnest. This was 100% serious. Okay. Here's one of the things I was thinking about. Technology has made our lives so much better and made this pandemic so much better because it happened any other time in history and it would have been a lot worse because of communication and work stuff and getting stuff sent to your door. Amazon and Google and Apple and all these places have really helped a lot, I guess. Does it surprise you at all that

these technology firms haven't done more to help with the pandemic efforts in terms of these are the best and brightest people and most innovative companies on the earth? And I know that they're trying to do what they can to survive this stuff and enhance their businesses. But don't you remember early on the pandemic, we were going to have stuff on our apps on our phones for tracking and tracing. And in the World War II, a lot of the biggest manufacturers stepped up and they made a bunch of the supplies and the vehicles and stuff for the war. Doesn't it seem like the technology firms should have somehow stepped up to the plate and helped the pandemic in a way? Or do you think that the government just steamrolled and did what they wanted and it wouldn't have mattered?

I'm not sure. What did you expect Amazon to divert resources into doing this? for the benefit of society? Yeah, that would have been great. I think maybe these technology firms could give us some goodwill for once instead of, I don't know, trying to ruin society is like the social dilemma documentary has shown. I don't know. I don't know what they could have done that would have helped that much, but I had thought maybe the whole world being interconnected on these platforms,

they could have done something to help the pandemic. I don't know. Yeah. Just volunteer. Or Bezos could have just given everyone an America a million dollars. Either way. Wishful thinking. Do you believe this survey?

77%. No, I don't believe it. I don't believe any surveys. Okay, go ahead. 77% of wealthy respondents said they grew up poor. No. There's no way that's true. So this was from a New York Post article, the title being, I'm a millionaire and it's really

hard being rich. I just give this woman credit. I guess her and her husband were early employees at Amazon or Microsoft and made a bunch of money and she's writing how hard it is to be wealthy sometimes. I don't know. Is this the kind of book you just keep to yourself? I'm sure it's helpful for certain people, but it's almost too easy to dunk on. Yeah, I agree. There's no way this can go right. I don't want to completely discount what she's saying. Like, these are human beings. And I do think that there is a burden of having tons of money. Now, let's be very, very clear. It is a burden that literally anybody would be more

than happy to shoulder. And everything's relative. And the problems that rich people have don't compare the problems that poor people have. So let's get that out of the way. You told me last week you don't watch the office, but they asked Michael Scott in an interview, what's your biggest weakness? And he said, my biggest weakness is that I care too much and I try too hard. This is someone saying, it's not easy being wealthy. Okay, I understand. Everyone has a cross to bear. And it doesn't make your life any easier. So the Hollywood reporter had a story with Chris Rock, who is going to be on the new season of Fargo. He's rich. He's rich, right? Netflix pays him $20 million to a 60-minute set a couple times a year. He's got plenty of money.

But it's amazing how many of these profiles you read where I guess he's 55 years old and he just had a messy divorce after two decades with his wife. He said he's in therapy for the first time in his life. He basically was super unhappy. He was addicted to porn. He was doing all these things when he went on the road. And with all the celebrities doing podcasts now, or a lot of them doing it, I think, feel like you hear this thing a lot of celebrities having to do therapy. And it's one of those things where from the outside you'd think like, gosh, these people are famous. Everyone loves them. They're fabulously wealthy. They have anything they could ever want. They have nice things. Why would you need to be in therapy? There is some understanding that that doesn't make it easier to live inside your own head. So from that perspective, I guess I can understand why you just never know what someone

else is going through in their life. There was an article, Kevin Love wrote something for the Players Tribune. He said you don't achieve your way out of depression. So, I'm very empathetic to the fact that everybody's human and I really don't think that money changes anything. It's one less thing to worry about. Let's put it that way. This is why the majority of billionaires talk about how they need to meditate. Doesn't seem like meditation is something that is mostly for rich people because they still need something to get out of their own head. That level of financial success, there are enormous pressures, daily pressures that come with that thing. And again, putting this in perspective, it's a big deal. Anybody would take it.

this. But I think one of the reasons why a lot of these people are in therapy is he sort of asked like, how come so many people who seemingly have it all commit suicide, Robin Williams, for example. Maybe because everything that they ever wanted, they got and it still wasn't enough. It still didn't cure them or fix them of their unhappiness. I totally understand that because at a certain point you think, well, what else is there? I've done all this stuff. I've been successful. Now what? If you had to choose sides, I'm way more empathetic to the. the fact that rich people are people too versus people who scream, oh, what do they have to worry about? Like to me, that's discounting the fact that we're all human. So did you ever read the

Steve Martin book, his biography? No. Okay. So Steve Martin book called Borden Standing Up. It's actually one of the better biographies. And the reason I love it because it's like 170 pages. It's relatively short. But it's a book about him coming up in the stand-up world. And he, by the end of the 70s, was with Richard Pryor and maybe a few other people, basically the biggest comic on the planet. And at the top of his game, to sold out theaters and making tons of money, he walked away and decided to take a break and get into movies. And it's almost like knowing yourself enough to know how crazy things are going to get. That's almost a better way to do it. And now he goes around and travels and does his banjo show or his two-man show with Martin Short.

Having like the self-awareness there is probably almost impossible to do it for most people. And he seems to be one of the people that did it. But yeah, I agree. Getting all that stuff just will, in the end, not always lead to a better life. All right. So there was an article in the journal this weekend talking about speculation in rare plant world. I mean, this is the one that if there ever was a stock market crash after the fact that this one gets in the book, right? It's better than the stock market, Mr. Garcia said. I got a bunch of these plants when they were in double digits and now they're in the four-digit realm.

And then somebody in the industry said, nothing's making sense anymore. it's got out of control. So I was thinking like, well, don't these plants die? Like, I don't understand. And then somebody said, the article said, collectors who have made a little cash by chopping off a stem here, a leaf there, said part of the appeal is that plans can rejuvenate themselves over time. So I guess they can't die, but they can also live and rejuvenate whatever.

But this is another thing that I was thinking. And I hate to be so, so cynical. But what are the odds that this is like a great story for a newspaper, but it's like not really a story? In other words, how big is this rare art? bubble, really. Rare plant bubble, you mean? Yeah, like, are there a few people participating in it? Like, I haven't heard about this, have you? Has anybody told you that they're trading tulips? I didn't know such a thing existed as rare plants, really. I, yeah, you got me. It makes for a good

to have mine, but probably, yeah, not much. All right, so one of the best strategies over the past few years has been paying a lot of money for stocks. And when I say a lot of money, I don't mean a high share price, although that's been a good strategy, too. I mean, paying a lot for stocks relative to their fundamentals. So, for example, buying stocks that are trading richly relative to their sales. Valuation hasn't mattered, more or less. Exactly. So thank you.

Jack Vogel did a study looking at, well, what happens if you buy a stock that's trading more than 10 times sales historically? And what did he find, Ben? It was surprising. I thought these numbers were surprising that it did better than you would have thought. Me too. That stood out to me as well. Like the numbers, so they lagged by, I don't know, I figured out, 2% a year maybe.

what stuck out really was the drawdown in 2000. So if you did this in 2000, you lost 81%. I thought the best chart of the whole thing was they showed the number of firms over time that have traded at 10 times sales. And it's a very tiny number. And you see this huge blip in the tech bubble of the late 90s. And now it's slowly rising since. And obviously a lot of it is technology companies that people are more willing to pay more for those sales. But it's a tiny number of firms. And I think what you get probably is there's a handful of winners there that carry all the losers. And yeah, the results were actually relatively surprising. Paying up for stocks actually is not a bad strategy sometimes, not as bad as it sounds at first blush. Morningstar did this

study showing U.S. equity fund flows. There's a lot of moving parts here, like a lot of moving parts. And there's record stock fund outflows as stocks are making an all-time high, which in theory is not what you would expect to say. We had a Slack channel discussion on this and I'm pretty sure I nailed it in one sentence. Did I not? You did. Give me some credit here. So you said, I don't know why this is happening. Apparently, a lot of the outflows were coming from Target date funds. And I said, over the next 20 years, the stock market flow stuff is not going to make any sense because baby boomers are retiring and are going to be spending down their assets. So it's even if the stock market is rising, you're going

to see mutual fund at ETF outflows probably because baby boomers have all the assets and they're going to be spending some of those down. That could be part of it. But I think what really did it was the Target Day fund rebalancing. So for example, somebody tweeted, I forget who this was. I'm sorry. Just looked at the Vanguard 2030 fund and it looks like they had to redeem roughly $435 million from total stock fund in August just to stay close to targets due to performance. So stocks were up 7%, bonds are down 1%. So that's one part of it. There's definitely other stuff going on because, for example, more than 70% of August outflows came from passively managed funds. That to me was really surprising. Nearly $10 billion left Vanguard total stock market index.

Which is a lot of money. Did you get to the bottom of this one or not? Why it happened. Maybe Beasles was paying out those bonuses. It's hard to unwind. But then Ben Johnson put this table in and showed that there were outflows and the Buba target date funds. So 2020 had...

Isn't it... Go ahead. Isn't it surprising that target date funds don't get nearly as much hate as index funds do? Because target date funds are, I mean, because they're the default option for the majority of 401K plans, they're already huge. I know there's well over trillion dollars in them. They're just going to continue to get bigger. I'm surprised that they don't get the same hate from the people that don't like passive investing as index funds do. Because these things are the most passive of all in that. They have their

rules base and they rebalance and just put that on your radar. That's going to be the next thing people go after in the future is Target Day funds. That's going to cause the next crash. Just wait. I think you're right about this drawing IR from people. But what's going on here? So over the last month, money is coming out of the target date 2035 and 2040. What do you make of that? I did a quick rebalance. I took a little more risk in my personal portfolio. Oh, that was you?

Yeah, that was me. Sorry. So 2050, 2050, is still getting flows. 2060 got a ton of flows. That's the millennial Gen Z target date. That's you. That's all you. Couldn't we see some people who have the majority of their 401k in a target date fund,

roll it over to another fund company when they retire, get out of the target date fund and diversify it on their own or give it to a financial advisor? Yeah. That's what I'm saying. So these flows, I think the boomers. There's going to be funky stuff. Yeah. Screw this stuff up.

Well, look at the next one. Nakerossey showed mutual fund in ETFs, 12-month rolling fund flows. And again, I don't know exactly what's going on, but there's a lot of money coming out of the market. Maybe people are worried. I don't know. You're a big fun flow guy. Jitters? You always have to.

Well, I mean, I do like to look at it. I think that if there was any signal here whatsoever, we would know about it. That's probably the main point is that there's so many moving pieces that it's impossible to draw any firm conclusion from this. Well, let me ask you about this. What do you make of monster fixed income flows even with rates as low as they are? So flows in 2020 alone, we're already at almost all of the flows in 2019. And it's only September.

I don't know, retiring boomers and people are scared and they need something to stabilize their portfolio. And apparently the Fed stopped buying too, so it can't be them, right? That's not the Fed. unless Jerome Powell opened a Robin Hood account. So unfortunately, there's going to be a lot of election stock market stuff in the next couple of weeks. This is one of those things that people cannot help themselves with wondering.

Should I sell my stocks now? This is the kind of thing that people, it just, no matter how much evidence you have that whatever happens is going to be probably counterintuitive or it won't make as much sense as people think. I mean, remember, Obama was going to be horrible for corporations, and the Dow was going to go to zero because he was a socialist, and Trump was going to screw everything up, and the stock market was going to crash. Why do people have to have these reminders every four years? Just because it seems it's like a macro thing that people want to call the macro, I don't know. It's just I constantly get the questions about this, and I always think, okay, let's say you sell your stocks today.

And let's say even if you're right, when do you buy? Do you wait four years until the next election comes around? Do you wait until all their policies are implemented and then buy? What would be the next step of that strategy if you're going to sell because of who the president is? Yeah, I mean, so Santoli did a really good article on this. He wrote energy and financial stocks reviewed as the best bet on their deregulatory Trump administration, yet they've been the worst sector since 2016. So again, had you known Trump was going to win, you probably would have bet on those. He mentioned the bare market of 1982, which was not too long after Reagan took office, who was supposedly incredible for the stock

market, cap gain tax increases, which people are worried about if Biden wins. That happened in 1986 in 2013. That did not derail the bull market. And when Trump won, futures trade a limit down, didn't they? And then pretty sure they were green by the close in the next day. Right. We had like a, I don't know, correction for like three hours in the futures market. I looked at this before, too. I went back to 1929 for all the presidents. And I showed the worst drawdown in history during the president. Guess what? Every single president since 1929 has had a double-digit correction. So that's the thing that there's going to be risk involved, whether the president does something good, bad, or otherwise, regardless of what they do. And so

that's just the stock market. So then he talks about positioning and what's going on with VIX and implied volatility and what the market is expecting. And he says, if institutions are already well hedged and clenched up in anticipation of the vote this far ahead of time, will a result, any result, not trigger a tension release. To me, that's one of the most salient points is that the election shit might really go ugly. But like, we know it's coming, right? So people are prepared for this ahead of time. It's not going to surprise anyone. You know, a lot of smart people are saying, no one is pricing in the risk of a contested election that lasts a long time. It's like, no, everyone is thinking about that. Literally everyone is thinking that. And we know it's not going to

happen on election night. And people know that. But yes, here's the contrarian view. You say, the market hates uncertainty. So when the president is named, then things will be fine. That's a contrarian view right now. If you just kept politics completely out of your portfolio forever, you'd be much better off. That's my stance. Less politics, more technical analysis. Yes. Is that what you say? Yes. Unless you're Burton Malkiel, who is not a big fan, who's, by the way, going to be on our show. in the coming week, potentially.

Are we going to grill him about his views on technical analysis? Well, the technical analyst didn't like the fact that I included him in a blog post recently and said this was a great post until you included Bert Malkiel who doesn't like technical analysis. So, yes, we'll see. All right. Here's my biggest bull market for the coming years. I think housing is just going to continue to go bananas. But this is from the Wall Street Journal.

Almost $10 trillion in U.S. homeowner equity in mortgage properties, which is an all-time record. This is with people falling behind of their mortgages and that sort of stuff. So they said 7% were in forbearance as September 6th. Here's another one that's kind of interesting. As of 2010, the percentage of mortgaged U.S. houses worth less than their debt was like 25%, meaning they were underwater. Now it's down to three and a half or four percent.

Isn't real estate going to be the next big thing that some fintech or technology firm is going to unlock how you can spend your home? because all these people who are financial asset poor, but house, what do you call it, house poor or house rich? Which one is it? They're going to figure out ways that people are at house rich. They're going to figure out ways to unlock this. And the old stodgy Tom Selleck reverse mortgage commercials probably aren't going to do it for a lot of people, but they're going to figure out a way to help some people spend their house without moving out or something. And I think that's just the next big thing is figuring out how to unlock this home equity for people that is outside of the banking

world somehow. Doesn't that seem like a layup? There's this company called Easy Knock, which has raised $25 million from venture investors. I forget what is this in the journal. Anyway, here's a quote. Sal leaseback transactions are common in commercial real estate and involve the owner of a property selling to investors and then renting it from the buyer. Such arrangements would allow those who face a prospect of losing their homes to cash in on high house prices without having to move. So maybe this is the company doing just that. Easy knock. Okay. I'll put on my radar. But I think especially for all the lower 80 or 90% in terms of wealth that have the majority tied up in their home, they're going to have to do something. I mean, it could just be you sell your house to a millennial and you downsize or rent or buy an RV and travel the country. But there's going to have to be some way to unlock all that value. That's just too much money sitting there for someone not to come in and figure out how to do it, something with it. All right. I thought this is very good. Jonathan Clements wrote an article about my regrets and he talks about. about financial regrets. He said, almost everybody insists they're a careful spender, the size of

their portfolio, or lack thereof, often suggests otherwise, but trust me, I really am frugal or recreational to my own detriment. My biggest mistake was probably spending too little on my first home. I could have afforded a more expensive place, but the money involved made me uneasy. I ended up buying a rundown house that over the next two decades cost me more in remodeling than the home's original purchase price. And even after all that money, it still wasn't that great of home. This is why I'm anti-starter home for most people. It's good advice. That's why I think for a lot of people waiting until you can afford a little bit of a nicer place instead of just running out and buying the first thing you can, I think that actually makes more sense in waiting a little longer until

you can get something that you can grow into the payment and stay for a long time. I have no appetite to ever do a fixer-upper. I've done projects on my house before and I know how painful that is and how much waiting is involved and how much cost overruns there are. And I'm good without ever having to deal with that. Last week, I was putting together an end table. Did you use like a little Allen wrench to put the whole thing together? Why did I just say sofa instead of couch? I don't know. Is that like a pop soda thing from the Midwest versus East Coast? I don't know. What do you say? I say couch. I say couch 99 times out of 100. I don't know why I just sofa. Anyway, that's kind of like a dinner supper thing. Does that any of your life say supper anymore? Or is that

like a 1950s thing? No. In Yellowstone, they say supper a lot. So I was putting together this thing. there was an Allen wrench involved. And I got to the very end and I'm ready to put like the top on and I'm looking, I'm like, mother, mm. Ah, I do that all the time. I had one piece backwards. And you know what I thought?

That's risk. Risk is not reading the instructions carefully enough, putting something on backwards and then the whole thing is cabloy. So I had to take it off and it started over. So I say that because I'm with you. I'm never reminded. I can't do anything. Same way. Yeah. And I don't know enough to judge the work of someone else or

the estimates. And yeah, it's too much. So we got some feedback. We've been doing a lot of Evergreen stuff on some Friday podcasts. And on the last one, what we've done, let's see, we did homeownership, parenting, and we did spending. And then finally we did, what was the last one we did? Retirement. Everything you need to know about retirement. And we've been getting a lot of good feedback from people about some stuff that they've done and some of the strategies they've had. So we wanted to read some of the ones we've gotten. So someone sent us in and said that they would pay up for up to a state school for their children or if they receive scholarships, they would do it to a private school if it had similar costs, which I think is a good way to give your

children, you can go to a private school, but you're going to be paying the difference and we'll pay up to a state cost. I kind of like that. They said that their children were required to work in the summers and also contribute to a fund that was $1,500 a year. So they kind of partnered with them, and they're talking about how him and his wife saved about one year of tuition for each kid, but they had to put some money in. And they also offered 0% financing for their master's degrees, and two of the kids had done that. I like that idea, that you set some boundaries in the financial aspects of your kids when they get older and let them know what exactly they're getting into so they don't just come asking and they already know it in advance.

Here's another one. Open a Roth IRA for your kids. Once they earn their first taxable income, you impose a dad tax and extract a small amount and then demonstrate your love by funding it to the maximum allowable with dad. that dollars, then teach with the rule of 72 and the concept of delayed gratification. While the math of the former is easy and the implementation of the latter takes a stick, even my two smartest millennial law spring will now admit it created a solid foundation. I got an email from somebody who said that their parents did that and they have a decent

sized portfolio now, which is pretty cool. I just wish that the Roth thing for your kids, that there was no earned income necessary. I know that people have sent me some workgrounds in the past. I just wish there's an easy way to set up a tax deferred retirement account for a kid whenever you wanted to. I don't know why that isn't an option. It doesn't make any sense to me. You can't just employ your three-year-old?

You could. I mean, honestly, I've heard of bloggers who put pictures of their kids in their blog and pay them an income so they can open a Roth on their account. There you go. So we spoke a lot about like the importance of starting early. I mean, we all know how this works and we've seen the numbers, but I thought this is a really good one that I'm at home. Justin Carbono tweeted,

Investor A saves two grand a year from age 26 to 65. Investor B saves two grand a year from age 19 to 26 and stops there. Both achieve a 10% annual return. The person that invested from 19 to 26 somehow ended up with more money. I almost don't believe this. It's so startling. You've never seen one of these examples before? I don't know if I've seen it this way.

This is very good. Yeah. So because compounding. you start earlier and you have longer to go, it's hard to believe, but saving early for a similar return gives you a bigger bang for your buck. I've said this before, and I probably still somebody. Like, we could think linearly. We cannot think exponentially. Yeah, that makes sense. The problem is the majority of the gains you get from compounding happen at the end, because once you start getting larger numbers in your portfolio, then they compound each other

and you get, that's when they get bigger and bigger numbers. That's like the kind of the thing, like, who cares if you have, like if 90% of your wealth comes after age 80, I can't get excited about that. I think compounding is overrated. Oh, hot take. Good one. How about that? All right. I want to compound today. How about this? That's one of the reasons that you start saving earlier, though, so you can enjoy compounding earlier in your life than later. How's that? That's true. But if you could just compound at 1% an hour between 930 and 4 every day in like three weeks. You're rich. Yeah. You just solved the retirement crisis. There you go. So my second bull market for the coming years, I've talked about this before besides housing. Didn't you also predict a bull market

in lawyers? Did I? For crypto? Earlier in the year? I forget. Probably. Contract lawyers, right? Maybe. Maybe that never happened. It's possible. I make a lot of predictions that don't come true. So Will Hershey from Round Hill Investments had a deep dive on the acquisition of Penn of Barstool Sports. So Penn is a gaming company and runs a bunch of casinos and they acquired Barstool Sports. And I think that just the whole sports gambling thing in general, we've talked about this, your daily fantasy stuff you play. Did I play this weekend? Did you? Yes, I did.

Okay. I don't want to hear about your lineup. Listen, hold on, hold on. I have to interrupt. Who should I start this week? I will never bore anybody with my lineups. I didn't do it last week, so don't act like I did. Thank you.

Okay. I didn't name a single player. All right. You might have named a few players. I did not name a single player. Go back. Matthew, run it back. Check the tape.

Check the tape. I know you did. I'm running it back. You talked about how if I would have just started this guy, everyone had him and I would have won. I said James and Crowder was in the winning lineup of everybody. I did not name a single player. All right.

Anyway, I think this is the one thing that could get boring sports like baseball to come back. I think I listened to an interview with the Penn CEO. Alex Rodriguez and Big Cat at Barstool have a podcast called The Corp and they interviewed the guy who is a CEO at Penn. And he said within four or five years, he's estimating 80% of all states while sports gambling. A boring sport like baseball where they cannot get fans and young people to pay attention anymore. If you could bet every at bat, this guy is going to hit a home run or a single or strikeout, I think they're going to get people with that stuff. And I think it's probably going to make for a better fan experience,

even if it's going to cost people a lot of money and they'll end up losing most of the time. I think this stuff, when you're betting on the outcome of a single play or a quarter or whatever, I think all these little minor bets, I think this is the kind of stuff that is going to get, this stuff is going to be huge, I think. He gives some numbers in his piece here,

and they talk about, so the people at barstool sports, so they say from this survey, 62% of people who follow barstreltsdial sports bet on sports. 44% of them bet at least once a week. And I think the way that Penn is doing it by getting these personalities in there who talk about their gambling and how they do it, I mean, a lot of these people are just degenerate gamblers. But having the personality mix there where you're attached to a brand and why would anyone care where they, that usually, unless they have those brands, I think it's genius. And I think that this stuff is just going to go through the roof. So they also talked about how, so Goldman says by 2033, this could be like a $20 billion market. Some of the other places put out some lower numbers than that. But 2020 is shown. We love to speculate. That's what people love to do. And we love sports. So put those two together. Someone comes up with a Robin Hood of gambling on an app and boom, it's over. They showed their audience demographic breakdown. Not surprisingly, it's because very young. But how about this? Looks like 5% of their audience is over 65. Is your data stoolie?

Don't you think this is probably how our audience demographics would look to pretty much? Close enough. Maybe. Yeah. I mean, there's going to be a lot of probably shenanigans and people, maybe the pear trade here is for some sort of mental health counseling, which is what happened in Great Britain, where people are probably going to lose a lot of money on this stuff, and it's going to end up bad for people, but I don't see this thing not snowballing in the years ahead to be huge. And who knows if there's other companies that come in to make it even bigger. But I just think that's a bull market of the future. Agreed. Listener questions. A very smart friend is trying to convince me that all the money printing in the U.S. and our excessive debt burden will inevitably lead to a total collapse of the

possible end of the Fiat money system and that I should buy lots of gold and crypto and real estate to diversify into real assets. I try to tell him the doomsday scenario who envisions actually happens and owning some gold in real estate isn't going to matter much. Can you please weigh in? Is there anything prudent to do about it now? The prudent thing would be to send him an article that Morgan Hasl wrote called The Seduction of Pessimism and then don't talk to him ever again. I think anytime the word Fiat is used, that's a huge red flag. because this person has either been indoctrinated by a macro newsletter who is calling for the end of the world to sell you subscriptions.

I mean, how many people have made money betting on the end of the world? And you know what? They don't even bet on the end of the world. They just want to be able to say, told you. Yeah. Exactly. You know what it is? Their parents didn't hug them enough.

Yeah, I don't know. I mean, seriously. Sorry, I know your friend that's not going to like that answer. But pay him no attention, please. Yes. This is also why this friend may be very smart. intelligence does not always translate into good investors. I'm sure he's smarter than we are, but yeah.

All right, you often discuss in your show how Fang is different than many of the tech stocks that were exploding in the late 90s because they report solid earnings. Could this be a bubble not because of a lack of earnings, but because of geopolitical risks? I don't see the connection. While I understand that these are not all iPhone, China still makes up the largest iPhone market in the world. Will increase trade and potential military disputes between China and the U.S. widen the gap. Okay.

Ben, how do you answer this? So this is just saying the whole China thing because China has started all of their own technology companies. They basically stole all the intellectual property from the U.S. companies pretty much besides Apple and then just started their own, which I don't know. Yeah, I almost have to give them credit for that. But it's saying could they make it a geopolitical thing and make it a dispute? Yeah, sure, that's possible, especially since Apple has all their supply chains over there. But I'd say you would say Apple is the biggest risk there. If you want to say that's one of Apple's biggest risks, sure.

I could see that. But I mean, that's a risk to China as well. That was kind of like China saying they were going to completely get rid of the NBA. That would have been a risk to them as well for getting rid of the NBA. All right. I graduated in 2019 and started off working for a large one of those company, which pays quite well. I'm looking to make a career switch to investing, a hobby of mine. Most of the roles I have interviewed for our client services roles at wealth management shops. Is this the only way to break into wealth management that professionally manage money for people? Ideally, I would like a role with more financial modeling exposure. Okay, if you want to get into wealth management, you're going to have a very difficult time getting

in on the financial modeling side. There are, I mean, with the rise of index funds and model portfolios, wealth management funds are generally not trying to deliver alpha. So that's probably not the right part of the financial industry that you want to go into. I would lean into the client service stuff. If you're good at that, bringing in clients and working with clients and getting new prospects in business, that's the kind of thing that will never go away. If you say that this is your hobby and you like stocks and you want to get into the analysis side of things, can you do that?

Sure, if you have a- No, no, you can't. There are stories of people doing that, but- Well, yeah, Bill Gates became a billionaire, but I hate to be the bear of bad news. That's not going to happen. So I knew a story of a guy, Erlon in my career, he was a vacuum salesman and got a CFA while he was selling vacuum cleaners and ended up getting a job at J.P. Moore. Morgan and working his way up, and he was a big guy in their portfolio analytics staff. It can't happen. What Ben is trying to say is first sell vacuums, then do the CFA, and then you can get a job. Yeah. And if you sell vacuums, taking the CFA at the same time, it won't suck, right? Oof.

Come on. You always yell at me for not laughing at your jokes. That was okay. But yeah, but getting into the analytical side of things in the investing world, it's difficult if you're not already in it or coming right out of school. I agree. If this question was asked 15 years ago, sure, go for it. But the world has changed. It's a different now. All right, what recommendations do you got? Did you watch the social dilemma on Netflix? I did not. I think I'm going to pass.

I don't think you need to watch it. It makes you feel bad about using your own technology. And it's not anything you didn't already know that these places, the interview all these old employees from Facebook and Google and YouTube. And they're trying to be these people that are taking on the social justice aspects of this now, and they're going to make it better because they've seen the light. And part of it makes me feel like, I don't want to listen to you because you went and made millions of these companies because this one person was like, I worked at Google and YouTube and Facebook. And now I know that these companies are wrong. It's like, now that I've made my millions, I'm going to talk about it in this documentary. Those are rich people

that I don't have empathy for. Yes. But the way that I'd see it is, the biggest difference is people back in the, whatever, 1800s would buy snake oil because it was going to solve all their problems. The difference was back then, you had to go town to town to find those suckers. Now you can find as many suckers as you want on the internet, and Facebook has two or three billion of them to look through. So the scale of which we've changed this whole advertising thing, they were talking about how the biggest problem with these things is that it's an advertising business model and you need to keep eyeballs on it for it to work. That was the wrong incentive structure from the beginning. And I don't know what the solution is. It's too late.

Of all the anxiety that everybody has over politics and whatever, like, is it not all social media? Pretty much. I mean, back in the day, you had to wait until Monday morning to talk to your colleagues to figure out what everybody else thought. And now it's just, it's in your face. It's all the time. So one of the podcasts I'm recommending here is called It Was Said, John Meacham's new podcast. Have you heard of this? No. He talks about famous speeches in history. So the first one he does is Martin Luther King's final speech. And then the next episode is Robert Ruff Kennedy's speech about his eulogy for Martin Luther King, Jr. At the speech of his eulogy, Kennedy actually told the crowd, Martin Luther King has just been shot earlier today, and they

didn't know. They were like audible gasps. I mean, today, that information gets to you immediately. Back then, they learned it from a speech. And I mean, do you think people back in the day living in rural America on their farms were better off just not knowing about everything else was going on in the world in some ways? I hate to say yes, but in certain ways. But this podcast is great. The first one, he not only talks about MLK's final speech before he was shot and killed, he gives some background leading up to it. And he talks about how King was basically one of the founding fathers of the country in a way and getting us to a new place. And this was interesting because he said, like our more familiar founding fathers, Washington Adams, Hamilton, Jeffers,

and King was a practical idealist, a man who could articulate the perfect, knew that he in progress while sometimes intoxicatingly rapid tends to be provisional. And I think this is something that I probably fall prey to. He talked about the fact that King's main points were always economic and how even though we've seen so many leaps forward technologically, that so many people are left behind by them. And so I think sometimes people say, like, look at how far we've come. And I'm, again, I'm guilty of this too, but so many people get left behind in these things, even though there's progress. That's the way the world works. Yeah, unfortunately. Finally, movie recommendation. the way back with Ben Affleck yet? No, I can't get myself to watch, and I'm sure it's good, but

I don't know. I don't want to watch it. It's good. He plays basically himself, I think, in a different life, but he's a basketball coach that comes back to his old high school where he was a star. He's an alcoholic. It's very heavy at times, but I really enjoy it, and Affleck is very good, so that's my movie record of the week. Last night, I didn't watch, but I saw somebody tweeted. They do comedy for the Emmys, but not for the Oscars. Explain. Well, because, I don't know, There's more comedies on TV. I guess I don't know. The Oscars is more hoity-toity.

They take themselves more seriously. I saw Michael Clayton. I don't think I ever saw it. Very good movie. I was underwhelmed. I know a lot of people think it's an amazing movie. I thought it was just okay. I wouldn't say amazing.

All right. I enjoyed it. I thought it was worth watching. George Clooney plays a fixer. It was pretty good. He's another one. I feel like he was A-List, but his career didn't go the way I would have thought.

No, not really. Didn't have that many great movies. I know last week I spoke about Kevin Costner Somebody made a good and obvious point that after Waterworld and the postman his stock just got crushed Ah worse than Nicola, huh? Yes.

I saw, since I'm doing the Peloton I have more time to watch TV movies. I finally saw Schindler's list and the only reason why I didn't get to it previously was just three hours is just a long time but I mean needless to say

holy shit what an incredible moving movie felt almost like a documentary Ray Fines was an incredible villain. Liam Neeson was unreal. It was just an incredibly beautiful and moving movie. Unfortunately, this week I saw a study or a survey that showed almost two-thirds of young American adults do not know that six million Jews were killed during the Holocaust. More than one in ten believed Jews did cause a Holocaust. Almost a quarter of respondents said they believed

the Holocaust was a myth or had been exaggerated. I mean, there's a lot of ignorant people. Unfortunately, I feel like a third of people in this country don't know that the world is around. Yeah, unfortunately. That's probably always going to be the case, isn't it? I mean, this one was particularly upsetting. Yeah. All right. I also watched when we were kings on HBO Max, the documentary about Muhammad Ali, the

Rumble in the Jungle against George Foreman. And I didn't know about the outcome of that fight. So no spoilers, but it was like suspenseful almost because I didn't know what was going to happen. George Foreman was basically like Mr. T, just totally indestructible. Yeah, they almost like killed each other, right? And obviously, Ali was larger than life, the way that he spoke and everything was incredible. All right, I read a book this week. Congratulations.

A very good book. A very good book. Countdown to 1945 by Chris Wallace, yes, the reporter. It was about the 116 days after Truman took office until they dropped the bomb. And so it started like 116 days, 90 days, 75 days, et cetera, et cetera. until the very end where it's like one day, 13 hours, seven hours, four minutes, three minutes. And it was incredibly suspenseful. Like, obviously, you know that they dropped the bomb. So there wasn't any, but even still, I had the lump in my throat reading that. So I would recommend that if you're looking for a book to read. Countdown 1945.

Oh, we're going to be speaking about gold on Friday. We're talking with State Street. Yep, we'll have something all about the gold market. Thanks again to Masterworks. see some important information at masterworks.io backslash disclaimer. Thanks for listening, Animal Spiritspod at gmail.com.