Animal Spirits Podcast - Late Cycle (EP.59)

Episode Date: December 12, 2018

Are we in the late cycle, why every correction always feels different, why losses this year are perfectly normal, why a shallow recession and "normal" bear market would be a good thing, why more money doesn't make rich people happier, the labor market is heating up, alpha is getting harder to find but institutional investors are still willing to pay up to try and find it, millennials really like Amazon Prime, the unbelievable ending to the Madoff saga, Michael's coat-buying experience, the new Tom Cruise movie and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing. Hosted by Michael Battenick and Ben Carlson, two guys who study the markets as a passion and invest for all the right reasons. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Ben, did you hear the story about Ryan Toys Review? Yes, from about 12 different parents. Okay. So this kid has 17.3 million followers. He has a total of nearly 26 billion views. And he made $22 million last year playing with toys. What are we doing wrong?

Good for him. But if I, I'm sick with this story. All right. I saw it so many times. All right. We'll leave it there. You've got this chart that we're looking at. S&P 500 peak to trough annual drawdowns from 1950 to 2018.

What does it show? I would like to make the case that this year isn't out of the ordinary at all. People are freaking out. But I feel like people have been showing this chart forever. So this is just since 1950 through 2018, the average, annual peak to trough drawdown intry year. So just using the calendar year basis is 13.3% since 1950. Fifty-four percent of all years have seen stocks fall double digits in that time. And so pretty much every other year, entry year, you see a double-digit decline.

And so my case is this is completely normal. That doesn't make me feel any better. It never does. Of course. You look at this chart and you go, oh, of course. And the other thing is well over, I think it's like two-thirds of the time when you had a double-digit, draw down like that, stocks finish the year up. So even though they had a double-dig decline, they still, depending on where they fell, they still finish the year up, which is kind of what's happened this year that what stocks are down, I don't know, one or two percent on the year, last time I looked, the S&P. There was a good data point I saw this weekend. If the S&P 500

doesn't close positive this year, it will be the first time in history that it has been up 10 percent during the year only to close in the red. It's kind of my point that things that don't happen in the stock, things that have never happened in the stock market happen all the time. I feel like the fact that we have so much information these days makes it easier to kind of find these things. But I'm going to go out on a limb and say maybe my call from, I don't know, five or six podcasts ago that the S&P would finish the year at a new all-time high is probably

not going to come true this year, unless we get a mega Santa Claus rally. Yeah, I'm going to say that's probably true. Can I tell you, can I make a confession? Yes. I'm breaking news. I thought about buying S&P 500 weekly call options this morning. Why? For fun.

You ever hear of it? Do you ever trade options? Nope. I haven't done it in maybe six years. See, to me, this sounds like, I'm reading a book I'm going to talk about in recommendations about drug addiction. And to me, this sounds like a relapse. You're having like a trading relapse here.

Man, you have me pegged. This is a total relapse. When I come to New York, you're going to walk in the morning, and there's going to be like five people sitting in a circle, and we're going to have an intervention. Because this sounds like, okay, continue. Why do you want to buy call options? Because you think that it's a coiled spring, or what?

Okay, there's really no hashtag thesis here. It's just that I was thinking that there might be about. I think you need to start pulling out your trading diary again in rereading some of those things. No, no, no, hold on, hold on. But that was different. That was, I was actually trying to make a go of it. This is pure gambling.

I just want to have fun. That's all. Okay, that's fine. I'll sign off on that. But you, you were on record this morning saying that you think this correction is different. Like I said, this is like, listen, every time it's always something different, but, and I said,

I was trying to make the point that this seems like it should be kind of normal. Like, same thing in emerging market. So I got, since 1994, emerging markets have a bare market or a correction every other year. Same thing with EFA, basically. It's like once every two to three years for a correction or a bare market. And the reasons are always the same, are always different. But this is just something that happens. That's my whole point.

But you think, no, this is a different one. Okay. I think you're probably more right in terms of they all feel different and they all feel equally lousy. and it's hard to imagine any of them ending. Like, at the time, it's hard to think that the next 20% is higher rather than lower. So I, by the way, I always feel this. I will admit that every single time stocks have this sort of correction, I always think it's the end of the bull market.

Because it is, because, yeah, it's much easier to look back out on a chart, obviously, and know when it ends. Right. What I would say about this time that is factually different is the flattening of the yield curve and the inversion that we had at one part of the curve. And the fact that the Fed might or I guess might hike us into a, a fallen version this month, where we are in the cycle. And just listen to myself, say this sounds ridiculous. But just looking at the charts, this is different in the sense that, look at like

AIG, for instance, or Goldman Sachs. And I hate to say like the canary in the coal mine, but these stocks are broken. They are going straight lower. Did AIG ever come up in the first place from the crisis? You're really using AIG? Any of the financials. They're going straight down. Like there are no buyers. It's just puking. And that, to me, is not a very good thing. Would you say that the sellers are in control? I would say the sellers are in control. They are firmly in control. Now, when I say that worries me, I need to put some context around that. I'm not worried about a bear market in the sense that lower prices is going to be the end of the world. I think that bear markets are totally normal and they happen and we should expect them and prepare for them ahead of time and it's all good. I just think that if I had to bet on us being near our current low, I would say probably, not. But however, let's just bring some data into this. So Urban Carmel wrote a really good recap of where we are in the market. And he said, it's encouraging that investors haven't become more bullish. And he's looking at AAII sentiment and some other stuff. But it's a bad sign what equities won't rally with their sentiment. The time has come for this to matter or a different investing environment has probably

arrived. And here's a good statistic. So Marty's Weig's breadth measure, which is a 60-day ratio of the NYSE 52-week highs to lows, fell to a cyclical trough this week. What this means is that a high proportion of stocks have dropped to a one-year low, and he highlights a chart, which will include on the show notes, highlighted below are 13 similar occurrences over the past 40 years. In all but one, the S&P 500 was very near a tradable low, using data from sentiment trader. So when we have been in this type of situation, it is usually marked, if not a bottom, close to a bottom. And I guess the point of this all is that, like, I am probably consensus. I am probably the crowd in terms of, like, getting nervous at the wrong time.

So I guess we will see. And by the way, we're recording this on Monday morning, timestamp. Yeah, it could be different by the tennis fairs. I think, let me lay out the perfect scenario, whether it happens now or whether this is just a bump in the road or 12 months, 18 months, 24 months. I think, honestly, the perfect scenario is a very shallow recession in a run-of-the-mill bear market that sees stocks fall. all 20, 25, 30%, but not a 2008 scenario, which everyone, I think, in the doomsayer camp has been predicting. So I would love to see just a run-of-the-mill recession and a run-of-the-mill bear market,

which means it probably won't happen. But I would love to just get one of those out of our system just to show people that every time stocks fall or the economy slows, it doesn't mean that it's going to be close to teetering on the end of the world. Well, we had two, and you cannot convince me of otherwise. We had one in 2011 and we had one in 2015-2016. Yes, and I guess a lot of people, economic pundits are saying maybe that one in 2015-2016 was something of a mini-recession that didn't actually get there in terms of the numbers because

we had such a slowdown in energy in those types of things. Well, here's the other thing why this is like so difficult. It's because you know that when stocks go down, they're riskier in the short term, but they've become more attractive in the long term. So it's like, it's like squaring those two circles and your brain is difficult. Every time. Yes, I totally agree. Because especially us, like if we're contributing to retirement accounts every two weeks, I don't want to buy higher prices every two weeks. Who wants to do that? But you also don't want to see your current dollars go down because it feels better to see them go up. Yeah, totally agree. I will say, based on the fact that we've been in the ninth inning for the last

six years, it does feel very late cycle, right? Is that what you're saying? Late cycle. That just sounds like something a smart person would say. Okay. So there was a... Well, hold on. One last thing. We don't know if we actually are late, but I feel like we kind of do, but we're certainly not early. Would you, I mean, obviously, correct? The yield curve stuff, the Fed raising rates, that just, that means we're definitely closer to the end than beginning. I will say that. That makes sense. By the way, that's your second time that you said, I will say that. And I heard you, I caught you saying it on the last podcast, just an FYI. Okay. Thanks for the, thanks for the heads up there, Chief. Chief, boy, that was rude.

I got a pal the other day. I think that's even worse. Oh, here's what I wanted to say. When people say the end, is the end also technically the beginning of something else? That's what I always like to say is like the market doesn't shut down when it has a bare market or hits a low. These things are cyclical. And you reminded me, I was trying to figure out how much does the stock market give back when it has a bare market versus the gains that it had? and you made the point that, well, if stocks are always at all-time highs, maybe the bull market never ends, right? And maybe the bare markets are the friends we lost along the way. I don't know. That's my inner ramp capital speaking. Oh, by the way, speaking of ramp capital, he had a poll up over the weekend. Will the next 10% move in the stock market be higher or lower? 1871 votes, 50% higher, 50% lower. How's that? That's perfect. That's probably how it should be.

Okay. So those are a great piece in the Atlantic this week. Was it by your boy, Derek Thompson? No, this is a Joe Pinsker. I never heard of them before. But it was called The Reason Many Ultra Which People Aren't satisfied with their wealth. And this is kind of almost well known at this point, but it's still, these things

still kind of boggle my mind sometime. So this was a study done by the author of the book Happy Money, which is a book I love from a few years ago. Elizabeth Dunn and Michael Norton wrote it. And Norton's work is cited here. And it just says that he wrote a paper earlier this year. year where they have more than 2,000 people who have a net worth of at least $1 million, how happy they were in a scale of 1 to 10, and then how much more they would need to get to a 10.

And it basically said all the way up the income wealth spectrum, basically everyone says they need two to three times as much to be perfectly happy. So it didn't really matter how much money they had. It always needed to be multiplied by a factor of two to three to get to that point of being totally satisfied. Yeah, I am a big believer in this. I don't think that there's nothing that can convince me of the fact that more money, like, doesn't make people with money any happier. Now, obviously, people that have no money, more money would make them a lot happier, right? But I'm talking about people that already have money, more does not make them any happier. And, I mean, maybe a select few people it does, but, like, in general, I just, there's nothing

that can convince me of the fact that more money doesn't make you more happy. I guess in some ways you could put a positive spin on this and say this is a good thing in terms of like the human spirit of wanting to progress and get better and but it is kind of I don't know if it's a good thing or a bad thing the fact that you know that no matter how much money you have there's always going to be someone richer than you and I don't know maybe it makes you feel better that that some of these really ultra wealthy people just aren't as happy as they think like did you see the thing with the guy from Twitter the CEO Jack Dorsey he went for 10 days to that Ace Ventura two place to go not talk for 10 days like I'm sorry but

But if you need to do that as a billionaire, that, like, how many people that meditate do you think are really ultra-wealthy people who just have realized that the money hasn't made them any happier? Yeah. It's got to be a high percentage, right? You see all these rich people who talk about meditating, and you wonder if it's because they get to that point, they realize I've got all the power and money in the world, and it still hasn't, like, made me whole. So now I'm going to go to some third-world country and sit in a room for 10 days and not talk to anyone.

Don't you think that's why a lot of the rock stars commit suicide because they finally have everything that they've ever won and they're still not happy? Yeah. And then they just realize that like they will never get there. I'm going to put on my serious hat for a minute here. And I think this is something I've realized probably just in the last few years. Like I think if I won the lottery tomorrow and maybe you can call BS on this, I think it would actually make me so much more unhappy because I feel like the wanting to get better and improve and seeing progress slowly over time, Like, that's part of it. It's kind of like the... Yeah, there's so much, there's so much fulfillment, like personal fulfillment in that. Absolutely. So, no, I believe you when you say that the winning lottery would not make you any happier. Because then what purpose do you have?

If you could just buy 10 Ferraris today, you know, just, I don't know. Yes. Okay. So we've solved it all. And so that means I don't have to get up at 3.30 in the morning to meditate to be happy for my morning routine. Just never go to sleep. Ah, now we're talking. Okay. All right, survey time.

We've got a lot of surveys. By the way, I think we didn't have one last week, so people sent us a bunch. We've got, I think, three surveys today, so let's do it. Okay, 67% of workers earning over $100,000, seen themselves quitting in the next six months. Now, obviously, this is... B.S. Yeah, BS. However, there was something in here that I thought made a lot of sense to support something

like this. According to Crop, who I guess is somebody from the article, the ad hoc, the adolph, the average increase in compensation for a worker who quits their old job for a new one in today's tight labor market is about 15%. You're never going to get that 15% increase by staying at your current job. He tells CNBC make it. That's just not going to happen. And oh, by the way, another quote is, the gold watch of 2019 is on with an incredibly strong employment market, more professionals than ever on to look out for a better future. That is hashtag late cycle. By the way, isn't it like this is why the economy is so hard to understand for a lot of people,

unemployment rate is really low, the labor market is finally heating up, and now it's like the Fed's going to come in and turn off the spigot and maybe take things too far. It's almost like it's so backwards and counterintuitive in some ways of it's bad news because we finally have good news, but all those years we had bad news and it was really good news. I don't know. I'm kind of twisted in a pretzel on this stuff sometimes. But isn't this late cycle stuff obviously when the employment market is like this? Yeah, but it's like maybe I'm also one of those people think, like, if the economy can't handle two and a half or three percent short-term rates, like, isn't that a problem in and of itself? And obviously, maybe that's just expectations

and built-in stuff. But would it really- Let me say, can I say one more thing about this late-cycle stuff? If I, because I could hear somebody saying, well, if you're so convinced that it's late cycle and we're closer to the end of this current one, why wouldn't you sell your stocks? Because. And the reason is, let's just say that I am right and that A-top is, in. The September top is a top that we won't take out for whatever, a year and a half, two years, or whatever it is. Why wouldn't you sell your stocks and just wait for the dust to settle? Because let's say that we do enter a 20% drawdown, 25% drawdown. I won't get back in. Right. Because I will think that we're going to go lower. So I have no desire to like do that.

Yeah, I agree. And plus, if you look at all the stats, timing of recessions with the timing of stock market falls. It's never perfect. And a lot of times we don't know it's recession until well after the fact. And so I just, yeah. And by the way, I'm going to hold this late cycle stuff against you when it's like 2022 and we still haven't hit a recession. Fine. Well, I also have money and our trend following model that I trust will help me emotionally, mentally if we really do go a lot lower. Okay. So this next survey is from institutional investor.com. And this is the perfect way to describe institutional investing from my experience. So this Nataxis survey, they said 61% of respondents, all of whom are nonprofits and institutional investors, said active management

outperforms passive in the long run, which empirically is not right. They also said three quarters of survey respondents said alpha or risk adjusted returns above a benchmark is becoming harder to obtain as markets become more efficient, but 78% said they are willing to pay a higher fee for strategies that deliver outperformance. These people are all basically admitting we have no idea what we're doing, but we're willing to pay a high fee for it. I would pay a high fee for our performance. Yeah, it's the expectation of outperformance.

It's not the actual outperformance. By the way, is it? I always thought it was Natixis. You said to Texas. I thought I said in Texas too, did I? Hey, boy, you're really coming down in my grammar and my speech patterns today. Jeez.

Take it easy. Just because I make fun of your shirt one week. All right. We had probably 20 people sent us this, which is pretty good for our brand because we are now known as the anti-survey podcast. This one was pretty good, though. And I think this gets back to something we talked about before.

So this is the Amazon one. Business Insider said 44% of millennials said they would rather give up sex than quit Amazon for a year. And 77% of those surveyed would choose Amazon over alcohol for a year. So this is kind of like the one where we tried to figure out how much would you pay for Google if it was taken away from you. I mean, these numbers actually sound right to me. What? No. No.

Okay. You have to choose for a year between Amazon Prime. or alcohol. Which one do you choose? I'm just saying it's a harder, it's harder than it sounds. By the way, that pause was me thinking. Oh, I know.

That's what I'm saying. It's not easy. I mean, I don't need my stuff in two days, so I probably choose alcohol. Not that I'm a huge drinker, but... Amazon Prime is one of those things you never knew you needed until you had it. Kind of like an iPhone for me.

I honestly think that I'll be very okay without it. I really do. Okay. I mean, it just makes my life much easier. I would think for you living in a big city without a lot of department stores that it would be more convenient to have it than elsewhere for me, like in the burbs.

Yeah, let me just say one thing about me calling you out. I would do this on the phone too. Would I not? It's not like I'm just putting this on. That's fair, yes. You called me out on our last talker book because I said bone crushing like four times. Offline.

Yes. You said bone crush it quite a bit. It happens. All right. Let's move on. So I saw this article about a new private equity fund or venture capital. I'm not sure which one it was, but this company called or a fund called Redbird. Did you read this?

No, hit me with it. All right. So this guy, it's actually pretty interesting. He does, he was doing a lot of stuff with Jerry Jones and the Yankees and he's done quite well. But this quote really stood out. he said it's inconceivable that we would ever lose money on an investment if something comes out of left field we'll grind it and work through it I don't care if we hold it forever we'll get back to where I need to be I will never lose anybody's money by the way do me a favor click on this link I see

the picture yes wait scroll down do you see the picture of the Hulk yes what is that all about he has a 10 foot statue maybe even taller of the Hulk in his office that's the his spirit animal yeah there's a quote at the end about why the Hulk is there, I forget. But what do you think about that quote? Is that extreme? Well, it's definitely the definition of anchoring in thinking about earning your money back. These are private investments that he's doing. Yes. And you know, it's funny you say that because that was my first thought. It's like, yeah, you could get back to even over a 15-year period on an investment, but I wouldn't necessarily want somebody that I invested with saying. Getting back to the delusions of institutional investors, I think, honestly,

this is the stuff a lot of them want to hear. Like, they soak this up and they, eat this stuff up in a lot of ways. And the Hulk thing is a great storytelling narrative, I'm sure. Oh, the Hulk is there to remind them to be a little pissed off, a little hungry and a little angry in the midst of having $10 cappuccinos. This has been said to death probably, but like what kind of pants is the Hulk wearing that he can grow four times his size and the pants still fit? Lulu Lemon. That's true. They can be a sponsor for the show. I guess the denim is a little stretcher these days. I think that probably is one of my top 10 favorite innovations of the last 10 years is the fact that guys' jeans now have stretched denim in them. It's magical. I, I, uh, I've never

You don't own any pairs. It feels like you're wearing sweatpants. No. You've never bought a pair of jeans that have a little stretch in them. It'll change your life. Trust me. I'm wearing your, yeah, okay. I'm wearing a green neck t-shirt. So, apparently there has been some good news in the Madoff case. I don't understand how this is possible. Like, if you had told people this, when this first came out or even in the years aftermath, it sounds like all the victims of the crime are getting at least their initial investment back? Well, I don't know about all, but a lot of, so a lot of the clawbacks are coming from people that have, that took profits.

So this is just nuts. There was $45 billion in fake profits. That's pretty crazy. So as of now, almost 1,400 victims who had claims of $1.83 million or less have been repaid in full. That's nuts. 1,400 people. Like, each of these people's lives have been ruined over the last 10 years.

So it's amazing to see them made whole. but this is just I mean obviously beyond beyond awful I was having a back and forth on Twitter about this last night with the aforementioned ramp capital you know who was an investor in this fund and lost pretty much all their life savings is Kevin Bacon and his wife Kira Cedric yes you knew that I did know that yeah okay I always like looking through the I guess John Malkovich was on there too there's a there's a slide show from some website we'll put it in the show notes of all the rich people who lost money on it they were talking about like who's eligible who's not because a lot of the money into Madoff was from feeder fund funds. And the article says that recoveries and Ponzi schemes range from 5% to 30%. And many victims don't get anything. So this is just an amazing job by the team of lawyers. Well, I'm looking at this story. I didn't realize Stephen Spielberg's foundation was in it. And it says in 2006, about 70% of its interest and dividend income came from the made-off firm. Wow. Nuts.

I just wanted to make a quick talking point about something that we brought up in last week, maybe two weeks ago show. I asked where the Vanguard of annuities is, and I had about 100 people email or tweet us that saying that Vanguard is a Vanguard of annuity. So I guess they, they, it says Vanguard had their first annuity in 1991. So I guess there already is a Vanguard of annuity is in its Vanguard. Yes, we got a lot of those. I'm surprised that they don't, they don't talk about it more. You don't really hear them.

Obviously, they've been big on pushing their index funds. But anyway, thanks for all the heads up from people on those. All right, so good tweet by Odd Stats, who is sort of like a parody account of the nonsensical data mining that exists in the Twitter sphere. So I highly enjoyed following this person. They wrote, we have yet to actually book a negative 3% day in December this year. But here's a list of a matter of fact, he said with 48 minutes to go in today's session as with this post. So I think we actually did have a 3% down day. Yeah, we did.

We did. We did. Okay. But here's a list of every. years since 1950 that saw at least one negative 3% day on the S&P 500 of December, 2008, 2000, 1997. You can't make this up. The funny thing about me, and obviously, it sounds like this is a tongue-in-cheek stat, but the funny thing to me about when people show these stats and it shows 2008, 2008, 1997, 73, 74, and maybe like 2929, is that when you say this has only happened four times in history, they're not saying it as, oh, wow, this is a small sample size.

Maybe we don't know anything. They're saying it as, this must be. definitive because it proves it just kind of boggles my mind. Notes actually made me kind of bullish. 2008 was kind of towards the bottom. We only had three more months of pain. That's true. I think they were only down another 30% from there. Is that about? I looked at when I was looking at the intra-year drawdown. So 2009, stocks finished up, I think, 26%. They still had a 27% peak to trough drawdown intra-year in 2009. So for that first whatever, two and a half months of the year, one and a half months of the year, stocks are almost down 30% before, then rising almost 30% out of that hole, which is crazy. All right, listener questions. Wait, wait, I have one more.

All right. So this sort of blew my mind a little bit. Modest proposal tweeted, serious question. Why is it reported as a matter of fact that the abundance of private capital was driven by low interest rates? I, yeah, I agree. If people think that money is flowing into venture capital or private equity because interest rates were close to zero, that makes no sense. You're not comparing your cash-like returns or short-term investments to the investment outlook of a private investment that doesn't make any sense. Maybe Lyft and Uber and Airbnb and all these companies and the ones I came after got funded because people like to take long shots and when they can compare it to what if this is the next Uber, then they're going to do that. And I suppose, not I suppose,

matter of fact, cheap capital made that easier. But it's really hard to say that these were funded because of cheap capital. Right. Yes. Maybe it becomes a little bit circular. But I just thought that that was an interesting observation. Okay. I'm graduating undergrad in this December. I have student loans and credit card debt. How should I attack the student loans and credit card payment other than maximum R 401K? What else should I be doing for saving and investing as a young person. Well, I would say first of all, my thought would be before max out that 401 pay that credit card debt because you're never going to get a higher return on your investments than you are by paying down high interest rate credit card debt. And before maxing out the 401k, you should have

some fun. Wow. Okay. You think so? How's that? If you have the ability to max out your 401k from your day one of your first job, honestly, if you're 23 years old or 22 years old and you could afford to max out your 401K, take $2,000 and go on vacation. Good point. Yes, I'm with the, yes, enjoy yourself crowd, but with the understanding that you want to build some good saving habits. How's that sound? You're like the devil on the shoulder and on the angel.

Well, those are such precious years. And if you're making good money, like, you should be enjoying yourself as much as possible. And, you know, if you could max it at your 401k, I'm sure this person is having fun. That's one of the most important things that, like, my wife and I wanted to do when we got married is travel a bunch before we had kids. And we did that. And I'm really glad we did. I don't look back and say, man, if I would have taken that money and invested it over 40 years, it would be worth X. That's a, I don't like living that way. Right. Let's assume you're going to retire at your current age. What safe withdrawal would you be comfortable with? What would your

asset allocation be? I really don't even have any thoughts. This is like following up on our fire stuff that we're talking about last week. It's a, it's a good question. Obviously, it's very dependent on how much money you have and I mean you looked at this a little bit on you're writing a post in this I believe yeah as far as it's taking me a while well because it's hard with the 4% rule work as a 35 year old or whatever you say something in your 30s I would be that would be a little too much for me because especially if you have zero other income coming in well it depends how much money you have if you if you have 10 million dollars you'll be fine well more than fine maybe not if you're using 4% I don't know that you will

be. If you're taking a percentage of the total, then it doesn't matter how much money you have if the sequence of returns. You can always cut back if you have more money. But I think if you're making your money lasts over 60, 70 years, 4% might not work if you don't have enough any income coming in. You're talking about percent that I said it would work for $10 million as if the dollar matters. Yes. Sorry. That was a law of large numbers, right? Is that what you're... All right. This one's for you. One market truth you guys have discussed recently is that volatility drives more volatility, but how and when does this cycle end? Is there a certain point, either absolute a relative where traders and market makers do nothing thus leading us to a sudden drop in vol. Okay.

I mean, maybe there is, I have no idea. I don't know. Obviously, we think that volatility begets more volatility, but at some point it stops and it doesn't, you know, it's not an indefinite thing. So I don't know. After we talked about that, we got one email from someone who basically said, you guys are morons because if volatility begets more volatility, then volatility to get out of control until the markets go to zero, which obviously it stops at some point. But yeah, I don't think that there is a perfect level or a mounter that all a sudden you hit this tipping point. It starts, keeps going or it stops. Wait, I think it's the third week on a Thursday. Only if it happens during the double death

cross thing. I don't know. Okay. So I have had an old ski coat that every year, Robin is like, please get rid of that. Do you actually ski or do you just have a ski coat? I don't ski. So why do you call it a ski coat? Because it literally is a ski coat. Okay. It's like one of those big winter coats that is meant for the ski mountain.

Okay. And I, man, I forget the brand. But I probably, my mom bought it for me, probably in 2006, I'm guessing. Did it have any holes in it or? No, it was a great coat. Very warm. By the way, before you get into this story, pro tip, if you buy Patagon, they will more or less ensure that coat for life.

And if you have a hole or rip or tear, if something falls off, you can send it into them and it'll fix it for free because they are so in tune to the environment. I wish I knew that last week. Are they, uh, is it expensive their products?

I mean, it's north face-ish prices probably. Okay. Well, anyway, there is this, so, so I decided, you know what, it's enough. So I donated that coat and another winter coat that I have. And then I was like, oh, shit, now I don't have any,

I don't have a winter coat now. So I walked to, there's a North Face store in Fifth Avenue. And I was looking online and pretty much like, the coats are like around $300. So I went to the store. I tried it on my coat. It was warm. It was nice. Whatever.

I walked to the register and she's like, that would be $575. So I handed over my credit card and then I said, what's the return policy? So you didn't want to like backtrack and. Who buys something without looking at the price tag? I don't buy stuff. I guess not. I don't shop, so I just didn't even, I just did it occur to me to look. I mean, of course, if I'm browsing through like a store, I would check the labels.

I don't know, whatever. So I put it on, and I was wearing just a t-shirt underneath it, and it was super warm. But matter of fact, it was too warm because I was like sweating on the subway. And it has, it's a down coat, and I'm allergic to down. So I was like getting all itchy and stuff. So the next day, so I started rationalizing this purchase. I said, because $500 for a coat to me is like a crazy amount of money. But I was like, well, I had my last coat for 12 years.

Yeah, if you amortize it over 12 years. Yeah. I was like, if I have this coat for 10 years, that's $50 a year. That's like a steal. Oh my God. I think I ripped them off. Yeah. So anyhow, I returned the coat and I got a synthetic one, which is like half as thick.

So I don't sweat on the subway and it was only $220. Nailed it. So I feel very good. So now you don't have to sweat on the subway and then wear a crumpled-up old v-neck when you podcast with me. It's a win-win-win. Well, I can also wear a sweatshirt under this coat and not, like, be sweating a ton. So I am a winter sweater, by the way. I sweat more in the winter than I do in the summer.

Okay. I don't know what to do with that information. Okay. All right. So recommendations, I did a talk last week in Wisconsin and had a really good group come out. And again, got the question of how do you guys have so much time to read and watch TV or whatever and doing recommendations. And I would say at any one time,

I probably have like six or seven books going on at the same time. I'm to jump around a little bit and skim, and I'd say probably... I don't think I knew this about you. Two of them, maybe I'll finish the whole thing. Three or four, I'll skim, and the other two I will just completely drop

and get disinterested in. But every, I'd say, one out of every 25 books I get where I read it and I start reading it and I drop all my other books completely and just finish this as fast as I can. And I had one of these books. So I went, when I flew to Wisconsin, in last week. I forgot my Kindle, which I had a slight panic attack when I was about to get on the

plane because I don't like to use the internet on the planes. I just like to read and decompress. That's like my Jack Dorsey meditation time. But do you sweat more in an airplane or more in the plane? Right. In the plane. And so I bought this book called Beautiful Boy by David Chef. And it was actually just made into a movie with Steve Carell. And it's not my typical kind of book because it's kind of a sad book. I usually like to just kind of pretend that all the sadness. Is it nonfiction? Yes. And it's this true story about him and his son was a drug addict. That's why I was talking about you relapsing into trading earlier. So it's really, really sad. And it talks about addiction. And I kind of learned a lot. But it kind of, the book hit me like a ton of bricks from being a parent and trying to think about how you would deal with it and how it would impact you if you had an addict as a child. And it scared the crap out of me thinking about that. But he talked about what were some of the reasons. Did you cry?

Not going to lie, I got a little dusty at a few parts. It was, it's a very good, he's an amazing writer, and he does a really good job explaining it, but the story is just the kid relapses dozens of times after going through rehab, and he becomes an addict at like age 15. It's almost hard to read, but I think sometimes it's good to read those kind of books just to, I don't know, put things in perspective. So is this a full recommendation? I would recommend it with the understanding that if you're, if you don't like these kind

of more sad sadder tales you probably won't like it but i i liked it more than i thought i would with the understanding that it was not very uplifting for most how are you going to pivot to your next recommendation well there's no pivot here it's just so i watched mission impossible fallout which i believe is the sixth one this is perfect tom cruise movie he runs a lot you know have you have you seen the tom cruise montage of him running in youtube no google it sometime it's just tom Cruz running. I remember one time on the Bill Simmons podcast, they tried to figure out what 40 could Tom Cruise run in his peak. And they figured he could probably run a four or five just by the way he looks when he runs on the screen. Anyway, this is, this is like the perfect action

movie for me because it's kind of mindless entertainment. There's a few little twists and wrinkles. But I think this is one of the series where the last three movies in the Mission Impossible series are probably better than the first three, I think. And you know, you know exactly what you're getting in them, but they're still very entertaining. Double-thum. up from me on this one. I told you that I haven't seen any mission impossible besides for the first one, but I saw the one with Philip Seymour Huffman, which was good. And some of the storyline still is going from there. But the last two or three, I thought have been great. And just in terms of like mindless action movies. So I double thumbs up with Tom Cruise still

doing it at his age. That's all I got. So I forgot to say in the show last week that on factfulness, on the cover of factfulness, which I think I have here, it says Hans Rosling with Ola Rosling and Anna Rosling and I was wondering who are those people so in the back of the book there is a an afterward I suppose and Ola and Anna are his son and daughter-in-law and so he got diagnosed with terminal cancer I believe and he knew that he was going to die while he was writing this book and he did and his son and daughter-in-law finished it but I was thinking who was this guy and what did he do he was like a medical doctor that just happen to write an incredible book. So I am re-recommending this book. He was, from all accounts,

he was just an amazing person. He's got a really good like TEDx talk too if you don't want to read the whole movie or read the whole book. I'm sorry. That's worth watching. All right. And then again, reiterating. So I am finally almost through only yesterday. And I really loved how he wrote about the culture, the politics, the end of the war, all of that stuff. And he built it up to the final two chapters, which is the final two chapters are the big bull market and then crash. And Jason Zweig wrote a three-part series last week about how to be a better writer. And I always say that if you want to be a better writer, you have to be a better reader. And especially in terms of history, reading stuff that was written in real time.

So this book was written in 1931 versus if you read like the Great Crash by Galbraith, which I think was written in 1955, it's just different. And I'm not saying you should read one versus the other, but reading something that was written in actual real time pretty much is just awesome to do. And I highly recommend this book, full endorsement. Five stars. Okay. Thanks for listening. Quick shout out to all of our listeners. I know we talk a lot about the bad emails we get and people hating on us, but the good stuff far always the bad, I think. And I kind of realize that when I'm out and about and talks to people. So thanks for all your support. Email us, Animal Spiritspot at gmail.com. And we'll talk to you next week. Thank you.