Animal Spirits Podcast - Michael's Brain Fart (EP.103)

Episode Date: September 18, 2019

On this week's show, we discuss how to pass the CFA exam, the range of performance in S&P 500 companies, factor crashes, why quants matter more than index funds, influencer ghostwriters, understanding IRRs, what Amazon could do next, the best movies ever and much more.   Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is supported by Y Charts. Last week at our live show at Wellstack, Michael promised the audience that they received a lifetime membership to Y Charts, which was a little over the top. What did they get all the way through September for showing up since they were a sponsor? Wait, what? What about September? I think everyone at the conference got a free Y charts trial run through the end of September was the deal. You promised lifetime membership. Anyway, we got to meet some of the team at Y charts that we've never met in person there, which was great.

Anyway, mentioned Animal Spirits when you talked to them. We actually talked to a few people at the conference who had taken our recommendation, used Y charts. We're totally satisfied and happy with the research and the program that the user and the systems. Mentioned Animal Spirits, 20% off your new subscription. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Battenick 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 sold. 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 Ritt Holt's wealth management may maintain positions in the securities discussed in this podcast. So last week during our live show, I said literally a lot of times. Did you get called up a few people? I did. I got a few emails about it. It's fair. I'm not sure really what got into me, but it happens. Guilty is charged. Okay. Are you talking about the one we did in front of the audience or the one that we did in the podcast booth? In the booth. In the

We got a few emails from people saying that we were a little hyped up. And I think that we probably were. We were basically on like performance enhancing podcast drugs because there were people around us. And by the way, don't say podcasting is not hard. We had to skip lunch. Everyone else was eating lunch all around us and we had to skip lunch to podcasts. That's how much we like doing this. Last week, we gave a pretty lousy answer in terms of what young people could do.

Oh, hang on. I just wanted to say real quick before you get into the show stuff. How dare you cut me off, sir? I know. By the way, you got dragged a lot because people were saying that they were just biting their time waiting for you to cut me off during the live show. We did the live animal spirits, which another side note. Wait, what do you mean I got dragged? On Twitter? Yeah, of course. Nobody said that to my face. Not that I would do anything about it,

but just saying. Sub tweets. So we have been in discussions to bring the animal spirits live on the road. So we're still kind of in the early days of thinking about that. Very preliminary. It might not happen. We've got to figure it out. But if there's a city or a group of people that would like to see that, that'd be let us know. But we're in the early stages of brainstorming, bringing that show on the road because we had fun of that. And we just wanted to thank everyone who came to Wellstack, who was a podcast listener, because we had a ton of people come up to us, and it was kind of fun to actually get to meet some of the people. I think sometimes we forget that there's people on the other end of this conversation listening. So it was great to

actually meet a bunch of people who came to the conference and came and said hello to us, even though Michael and I are really bad at Small Talk. Yeah, I was just say, wasn't that fun? I enjoyed talking to people. And I think we determined, who do you think is worse at Small Talk, me or you? It depends who the small talk. You said you can only do small talk to people from New York. Well, because, like, they do most of the talking, so it's good. But if somebody says, hey, nice to meet you. I love your stuff and then they just sort of smile and stare at you. I got I'm not good at carrying a small conversation. So the white chart stats of the week that we got, I wrote about this on Sunday. And this was kind of cool. So I think you did something like this before.

And this must mean we're on the same wavelength here because I asked you how to create a graph showing the returns of every single stock in the SP 500 and showing them on a line graph. And you said I've already done that before. But I still went ahead and did it anyway. So white charts has this feature where you can go in and break down the individual components of the SSP 500. So each of the, I guess it's 505 stocks now because of some merger stuff and then the fact that Google has clothing companies. Dual share classes of like Undo Armour, Google, Discovery, Fox and one other. So there's 505 stocks and you can look at each of the stocks individually and then rank them

by a bunch of different characteristics. I wanted to do a simple sort based on returns for the year because the S&P is up like 22%. I wanted to see how the other stocks are doing. The best performer was Chipotle, which is up like 80. The worst is a biomed, which is down 42%. By the way, I noticed that you went with a line chart and not a scatter plot like I suggested. Care to explain yourself? Okay, look at the other chart that I used above. That was the scatter plot.

In the post? Yes, I actually did do a scatter plot if you bothered to read it. Plus, you can't do a scatter plot with one data point. You have to have two data points. Oh, man, that's embarrassing. Yeah. Have you used Excel, bro? Come on, Excel much. So I tried to use a scatter plot. You're such an Excel noob whale. And so I looked at a few other things. And you can break it down. This was just year to date. And some of the surprising ones, or a lot of retail ones are getting killed. Macy's Gap are down like 20 to 40%. So I also looked at it over five year period. And the S&P is up like 67% over five year period. I want to ask you this, because I didn't put this in the show notes for you. How many stocks do you think over the past five

years are down double digits when the S&P is up nearly 70%. I wasn't listening because I was thinking about something. What you could have done was if you just like sort of the stock. Are you still on the scatter plot? We're over the scatter plot. It's gone. It's gone. this past, like five minutes ago. You did it small to largest. If you just did it by like alphabetical order or something like that, then you could have seen the dispersion of returns better. Okay. Yeah, I try. All right. So here's my trivia for you. How many stocks over the past five years when the S&P is up 70%? How many of them are down at least double digits or more? Say one out of five. No, that sounds high. Go 60. It's close. So it's 73 stocks. So almost one

out of five or five are down. And there's 20 stocks are down more than 50% over the past five years and the S&P is up 70. Energy stocks? It's a lot of... And retail? The funny thing is that one of the best performers, A-biomed, it's in the top two or three, is actually the worst performer this year,

which is kind of funny. What do you think is the best performers? It's actually one you might be able to guess over the last five years. Netflix. NVIDIA is up like 800 change, 800% of change. Anyway, the point here,

I'm totally beating a dead horse is just that the rising tide doesn't lift all ships at all times. So this was kind of fun. You could look at it over different metrics on Y charts and break it down by stuff. Caleb over there helped us with some research on this. But this is kind of a fun little thing to actually... Is this something that technical analysts say? It's not a stock market as a market of stocks. Can you do a follow-up post with this just with a

scatterplot chart? Yes. I want to see you make this scatter plot and we're going to include an... Actually, you'd probably make this into a pie chart somehow. All right, moving on. All right. So like I said, before you so rudely cut me off, how dare you? Somebody sent to us, actually, there was some good recommendations for young people to get into the industry. So he said, fellas, last app had a question about finding jobs in the RAA space. Not sure where that was sent from, but most large local FPA association chapters have career fairs every year with dozens of hiring, RAs, and hybrids interviewing. I'd start there. There you have it.

That makes sense. I hear a lot of people that go through like a local CFA society to find some sort of analyst or portfolio manager role. Should we do the CFA thing now or should we wait for it? Let's do it. Okay. So there was this person who has an account litquidity. who is very big on Instagram. I think he might have just started on Twitter,

but big on Instagram, posted, I don't know where this came from, but this guy basically said that he did everything right for level one. Says this was an exchange on LinkedIn. Okay. He did everything that he was supposed to do. The 300 hours, this and that. But he's not quitting.

And I think there was probably an exclamation point there. He's not giving up. And then he just got decimated a little harshly. He wanted to take the other side of the people who congratulate themselves the day the CFA exam results are posted. and he didn't pass. Did you pass all three in your first try? Level two took me twice.

Sad. Just kidding. Me too. Same thing for you. What a noob. I blame it to my brother for having his wedding the weekend before the CFA exam. That's fair. What were they thinking, you know?

So this guy wrote, please don't romanticize a clear lack of aptitude and ability. Also, please refrain from putting up such feel-good crap on LinkedIn. The world is competitive out here and such comfort with mediocrity clearly won't do. Ouch. Stop motivating others into delusionally, overestimating their capabilities. Honestly, ridiculously harsh, ridiculously harsh, totally unnecessary, but also a little fair. 10% fair?

It's, I don't know. I mean, did he have to drag on him that hard? No, I'm saying the fact that he called him out is completely out of bounds. Like, go on with your life. But the actual message, I think there's something there. Yes. I got a question from someone this week. Hey, I'm sitting down for the CFA exam level one.

What do you think I have to do to pass the test? What would you tell a person in that situation? I would say focus on practice questions. Do not worry about the minutia and knowing everything. You have to actually be able to answer the questions. So focus on the questions. Did you use any study guides for us? Did you use all the CFA books?

I did Kaplan. Okay, I think I did the, what is it, Shwecher or whatever? I don't know. I think the study guides are helpful because the CFA books are just very dense. And so they go through and they actually pull out everything you need and bullet point it for you. So I think that's, if I say one thing, I would agree with you that take as many practice exams as you can, and then buy the study guides, they're definitely worth it. I have to be honest. That's

kind of like, obviously, doesn't everybody uses a study course. Honestly, for me, the very first level one, I didn't use the study guides. And I did it the second time. And I'm like, why didn't I use these before? So how did you do it the first time? You just read the CFA textbooks? Yes. Did you also keep all your CFA textbooks for like two years under the assumption you're actually going to use them? Like, I moved a couple times and I brought them with me and I carried them up and down the stairs a bunch of times in my different apartments. I'm ever going to use those again for anything. Well, it was kind of like a badge of honor at first, but then you're like, this is so dumb. Why am I holding on this? Yes. I'm never going to use these again. I actually think I kept all my notes. I have notebooks upon notebooks somewhere that

I'm sure I'll get no use out of something. So let's stick with the influencer social media thing. So there was a post. What's that new site that cut? Is it by like New York Magazine or is that New York Times? I think it's the New Yorker. Okay. By the way, New York Publications really love using the word New York. Don't even. I'm just saying. So would you if you were from New York. Okay. Just kidding. Not kidding. A wealth of common New York City. I was Caroline Calloway.

Seven years after I met the infamous Instagram star, I'm ready to tell my side of the story. You read this? I just, like, try explaining this to someone from like 15 or 20 years ago. Would their head explode? Like, they wouldn't believe you? It turns out that this person just like bought 50,000 followers and then sort of met a friend who was really clever and was able to come up with good captions and good suggestions. So this one woman was, she was an attractive woman and traveled a lot. and she wanted to reach influencer status

and she had a lot of good pictures but she used this other woman she met at school to write the captions for her how did that first conversation go when they decided to hatch this plan it was not that thought out right yeah it kind of just happened by chance and then she turned into an influencer

and then this the woman who was doing it kind of out at her and said this is just so bizarre but her influence was the same bullshit influence that everybody's peddling she wrote quote you could have an adventure anywhere if you're curious it's like look at my account, I'm able to do all these things, and so can you, if you only study 300 hours

for level one at the CFA exam. Yes, it's coming up with stuff is not the easiest thing at all times, but like, do the captions really matter on Instagram that much? Isn't it the pictures that matter more? I thought so. There was a lot in this article, and it was kind of longish, but the weirdest thing, and this probably only stood out to us because we're in the financial services business, but so she was going to move into Carolyn's apartment, and here's the Quote, but a week before I was supposed to move in, she called with a change of plans, something about the value of gold having dropped and her family being low on money. I mean, that was very weird.

There was a lot of weird stuff in there. It seems like the air is slowly but surely coming out of the influencer bubble. Yeah, I guess in some ways, but I think there's just certain people that are always going to flack to this stuff, no matter what. It's kind of like the financial fraud stuff I've been researching for a while. I think that stuff is always going to resonate with certain people. The self-help market has always been like a multi-billion dollar industry, and now it's just so easy for anybody to get in there and do their nonsense.

Yes. So they post some of her Instagram things in here, and one of them is just the woman in a dress, and it says, when I started wearing these sunglasses, it was ironic, but now it's real. So deep. God, I'm fired up. I mean, on the other hand,

you and I definitely share some draft tweets with each other. We try to give each other a yay or an A. We do that twice a week, maybe, three times a week. Michael, should I tweet this? Ben, should I tweet this? Have I ever said no to you? We're not very good filters for each other. Yeah, occasionally.

I'll give you like a six out of a ten, and you go through and do it. anyway, but... Not true. You made that up. Okay. Chart crime of the week. This was remarkable.

I mean, truly, truly remarkable. There's no other words to describe it. Do you think Mark Twain, is this one of those ones that Mark Twain really said? Or is this one that, like a made-up Mark Twain? Like, history doesn't always repeat itself, but it off and rhyme. Allegedly he never said this, but I'm going to take the other side of that. I think he did. Okay, so it's possible he said it.

The evidence suggests that he doesn't. So this person did a chart of the S&P 500 for 2018, just January through December. And then he did another line of the SB 500 in 2019. So stocks fell in, I guess, October of 2018. So that's where we are today. He put a question mark at the end of where we are today. But the problem is the lines don't match up at all. Not even close.

It's not even close. Yeah. But he wrote this year-over-year comparison should make us all a little uncomfortable. I actually just read that. I didn't even read it the first time. Wow. I mean, technically like any time you put a line over another line and the numbers are a little different, like it's never going to tell you what's going to happen.

but at least some people try to figure out a way to get those lines to match up more. Like, there's ways you could do that. Like, you can finagle the lines. Didn't you do this once, like, on a whim? Oh, yeah. You picked a certain stock in the market, and you got them to match up. I think that I picked, like, Mosaic or Ultria in the 1970s and compared it to the down in the 1950s or something like. But the point that I was making is there's only three directions a line can go on a chart, up down or sideways.

And it's not hard to find charts that look alike. And to suggest that one or something to do with the other, we obviously all know is idiotic. this was something. Turk Kramer of the Year candidate, right? Yeah, certainly. Gotta be up there. And end of the discussion, at least. So, Bob Schiller has a new book coming out.

Are you guys like buddies now? You call him Bob? Robert Schiller? Bobby Schiller? I mean, Robert Schiller, I guess. I don't know you and Bobby were on this. What, did I call it Bob? Yeah.

I honestly think that it's Bob Schiller. I mean, it says Robert in the piece here, but you and Bob are pretty tight, I think. So what people say about the economy can settle for recession. He has a new book coming out called Narrative Economics. And I think that this is largely true. He said the probability that a recession will come soon or be severe when it does depends in part in the state of the ever-changing popular narratives about the economy. For consumers, these narratives affect decisions on whether to spend or save, whether to take a

demand you or an easy job, whether to take a risk or stick with something safer, et cetera, et cetera. What do you think about this? I'm going to immediately take the other side of this. If narratives created recessions, we would have been a recession every year since 2009. People have been so bearish on Twitter. On Twitter. I mean, it wasn't until, too. 2013, 2014, people finally started feeling like, okay, this recession is actually over.

People have been poo-pooing this recovery since it started. You don't think that, like, the narrative has been like, unemployment is high and there's no jobs. And it hasn't been until the last couple years where people finally, like, came up for breath. I think that this idea is hard to quantify. And I think it in the book. I haven't read it yet again. But don't you think that there's a kernel of truth here? Yeah, of course. It all deals with sentiment and how things can build on top of one another. But I'm saying the last 10 years kind of refutes this point. Okay, but finally, not finally, it seems as if the mainstream media, for lack of a better term, is out in full force talking about recessions. His point he's made in prior books has been that the media actually has a lot to do with this.

And I actually used some of his research in my forthcoming book about how the media can fan the flames in this stuff. So I actually agree from that point of view, how I think what's screwing things up now is that way more people have a voice and a platform to, like, show their opinions off. And so sentiment is just ridiculously hard to actually track. I agree with that. It's ever been really easy to track, but now it's even harder than ever. Stunning stat. Of the 10 jobs in America with the most job growth, seven of them pay less than $34,000 a year, six pay less than $27,000 a year.

This was a tweet from Heather Long, just wow. Okay, so it's crazy how many of these are. So personal care aides, registered nurses, home health aides. In my area in Grand Rapids, within like a five-mile radius of my home, there's probably four new old folks' homes going up right now. Don't you think that that is got to be like the most immune industry of the next 20 to 30 years? Anything doing with health care? Yeah, it's going to be huge.

My wife works in health care. I told her, like, she'll have a job for as long as she wants because baby boomers coming down the pipeline, getting older, are going to need help in a lot of this stuff. But I didn't realize a lot of these areas didn't pay that well. I was thinking about this. So I told you a while ago, I have a piece that I'm thinking about writing something about like the Fed not creating income inequality. Why don't we just have people do the hate mail ahead of time? Yeah, yeah. I mean, I was also thinking, like, who even cares what causes inequality or not? Because even though I'm not sure that the Fed directly caused it, even though they may have exacerbated it, does it really matter? That's not a hell I want to die on because it's like if you were just to dunk on all the Democratic candidates and everything that is involved from the left side of the aisle and saying like, listen, I hate Donald Trump too. You know what I mean? It's like, is that a terrible, terrible analogy? Delete that part, literally. Totally over my head. let me back up the train has derailed yeah i think this the first time for this

this is your tommy boys beach all right so what was i trying to say all right so you're saying personally to you does it really matter what causes and i think this is probably one of these ideas where there are so many causes for this trying to point to one thing is going to be in possible. But does it make sense to try to figure out what's causing this? Probably because hopefully policymakers can do something about it. And I think that that's the thing is that I think policymakers have a much, much, much, much bigger responsibility for wealth inequality than the Fed does. Totally agree. And the fact that they're coming after things like share buybacks and they say that

that's the problem with it, I'm not holding my breath that policymakers are going to come up with a good solution anytime soon, which is part of the problem. So a lot of this is just stuff that gets argued about by intellectuals and nothing ever happens. And that's probably what will continue to happen. Yes, unfortunately. I was pushing Kobe on his bicycle yesterday. And there is a house around the block from me. It's a new construction that has been on the market for a while. And so I went to Zilla to see what was going on. So this house, this is kind of funky. Are you trying to get into house flipping again? Listen to this. Tell me what's going on here. Maybe this data is not accurate. So the house is listed on June 15, 2018. So almost a year and a half ago for $1.2 million. Actually, it was

$1.195, which is whatever. And then three months later, they lowered it by 4%. And then three weeks later, they lowered it by 2%. And then a month later, they lowered it by 2%. And then a month later, they lowered it by another 2%. And so they went from 1.2 down to a million 80,000, 1.08. You're going to make a we work analogy here? No. Okay. And then they removed the listing. And then they relisted it for more money than it was in the last listing, 1.1 million. So that was in April, okay? Now, no buyers, they raised the price by 4%. That is a bold strategy cotton. I think one One of the tricks in the Realtor Handbook is if something is on the market for a long time, they take it off and relist it. And people, a lot of times, look at new listings.

But you see that this was listed. So you're right. It might go in the newspapers, a new listing or something. But anyhow, so now this person has been sitting it with an empty house. I don't think there's anybody living in there for almost a year and a half because I won't just list at an appropriate price. Moral of the story, there is none. Let's move on. People are irrational about their own. This is the endowment effect, right? Yes. Kind of. So Robin Wigglesworth had a great thread about positioning and stuff. Hedge fund equity. Positioning and stuff?

Well, the first. Care to elaborate? I'm going to. The first chart that we're going to show in the notes, of course, hedge fund equity beta, nearest the lowest level since the GFC. Okay. What do you mean okay? We're near all-time highs.

Okay. Maybe that means hedge funds have de-risk and missed a lot of this. This looks like it's just happened in the last, I don't know. year. Maybe hedge funds all de-risked after the crash at the end of 2018 and they'd miss the rally. Doesn't that make sense, kind of? That's exactly what it looks like it's happening. Yeah. Okay. Not impressed. That kind of makes sense because that's what they do a lot of times. When risk hits, hedge funds de-risk after the fact, and then they miss the rally. That's called positioning and stuff 101.

Positioning and stuff? Last week, while we were in Arizona, there was a reversal of momentum and value. And more specifically, the best stocks did the worst on those two days and the worst stocks did the best. Any thoughts? Best and worst defined by what? Momentum. Performance, yes. Okay. So there's a big momentum quant crash. My point to you behind the scenes was, don't you think that quants have more of a handle on moving the markets than index funds in ETS? Absolutely. That was a good take. So, yeah, I'd like to think so. But quantitative investors, and this is, we're talking hedge funds, and it could be even an ETF or big separately managed accounts or like these stat ARB funds that look to find little relative value plays between factors.

They pile into these. And a lot of times some of the big hedge funds use leveraging these and the unwinds can be really quick. And that happened in, I guess it was August of 2007, which people thought was kind of an early rumbling of the financial crisis. And that was in the book, the quants. Who was that by against Scott Patterson? Yes.

You got it wrong a few weeks ago. I said Greg Zuckerman. It was Scott Patterson. Anyway, so I think a lot of times these quons. have a much bigger say in what happens in the markets in terms of these unwinds. But the thing is, they happen really swiftly and quickly, and then things kind of seem to just balance out. So do you think it really matters when you have a really swift loss in these factors and you see value stocks go up big and momentum stocks go down big and have this big wide gap? If it happens over the course

of a few weeks, should investors really care? Well, it matters to people that are in these stocks. Yeah, of course. But over a short time frame, but let's say these momentum stocks have done really, really well lately, and you just get kind of crushed at the end a little bit. I don't know, isn't that kind of par for the course? Well, it depends what type of momentum we're talking about. And allow me to segue, or stay with us, actually, I should say. So I was looking at MSCI is the index provider to MTF, the I-Share's product. And I was looking at it. And the biggest holding is Procter & Gamble. Not necessarily what you think of when you think of a momentum stock. And then you and I were talking just before this how it's kind of funny that a lot of the quant purists are not a fan of

M-T-U-M because it's not like the academic description of what momentum really is because we've heard over and over again that actually let me just rewrite from here don't you think that quant snobs are just kind of like exactly the same as beer and IPA snobs like it's kind of the same like they film their nose at what they consider to be less desirable factors yeah I think that's kind of an endearing quality of quants where they all kind of get on the same side and and like, oh, look at how they do their momentum. Isn't that cute? So one of the reasons why momentum is hard to capture in the real world is because this momentum effect disappears a lot and there's a lot of turnover in the portfolio.

It requires turnover to capture because it's fairly quick in nature. It doesn't take a long time to happen. Right. There's a lot of decay is the lower than I was looking for. Oh, wow. That's pretty smart. Thank you. Is that robust? Care for my morning routine? So M-T-U-M, there's only a semi-annual rebalance, which is remarkable. So it is like the opposite of what momentum purists think it should be, yet it has absolutely kicked ass and has been one of the absolute best factors, along with Minval. Right, because most momentum strategies probably reconstit to do once every month. So they say that replicating momentum in investable portfolios presents unique challenges due to

the special nature of this factor. As a result of the unique nature of this factor, the academic definition of momentum is extremely difficult to implement in practice because it tends to lead to high volatility exposure and excessive portfolio turnover. So when we have, as I said, a lot of quons that, obviously, they all have the same backtested data. They kind of know how this stuff works. And when we have all these quants get on sort of one side of the boat or whatever, doesn't it make sense that occasionally we're going to have these weird periods where their technical

definition of the factor doesn't work as well and something else kind of odd works? So somebody posted on Wes's site. So also, these academic portfolios, they're long short. Obviously, the I Shows product is long only. So they say the winner's mind and solution's portfolio is dollar neutral, employs 200% leverage and load significantly on other style factors. But the market neutral momentum index had like its ninth and tenth, the worst day ever on Monday and Tuesday. So short term, who knows whether this is sort of the top for growth versus value.

Obviously, a lot of people are praying that's the case. I guess it remains to be seen. We'll see. Wait, what was your call the other day? Oh, you're going to out me? Well, last night I said that perhaps energy names have a really big Monday due to the drone attack. Oh, let me ask you a question. You said oil stocks may do well and the value growth unwind continues.

of the past week and a half. By the way, that would have been a great, some strategist that a big bank probably wrote that same thing. Oh, 100%. Like some 5% of the world's oil was destroyed in that attack. However, with oil up 8%, check my math. Is that like a break even? Here you're the one. I don't know. I guess I wasn't really paying attention to oil stuff that much? Who was the one that said, wasn't there someone recently that said, wasn't it Marks who said there's really nothing you tell from the price of oil ever? Yeah. It's one of those factors that is just, it's worthless to try to gas, right? Mm-hmm.

Now do natural gas. Okay, is this another headline thing? Are you worried about the headlines again? From the oil? You can't dunk on me. You're on the wrong side of this take. Are stocks not back at all-time highs, almost? Almost.

Almost. Yes. I never said that stocks can't move higher with headline risk. Okay. You just said that it was at an all-time high. Fact. Elevated. I said elevated.

Let's move on. All right. What's your survey you got here? Oh, this was interesting, but I don't know what the finally was. Oh, the finally was like... What was the question? Have you ever had vegetarian burgers or something like that? Okay.

Are you now or have you ever been a vegetarian? Well, these are the questions. Do you buy plant-derived meat products? The finding was that one in five has had one of these burgers? Oh, yeah, someone sent this to us. There's no way that one in five people have had a beyond meat stuff. No chance. Not a chance.

Yeah, this was a thousand people. Again, this is why we're an anti-servary podcast, but will you ever try that stuff? Or what would cause you to try it? Not only will I try it. I have tried it. Oh, you have? We're at. I had the impossible whopper. See, that's the thing. Someone would have to give me a free one, I think, for me to try it. If I'm at Burger King and there's a regular whopper and impossible whopper, I'm not going to try the impossible one just to try it and say that I did it. It was quite good, better than a little good, quite good. Could you tell the difference? Probably, but like barely. Okay. Did it make you want to become a vegetarian? No. Can you consider yourself a vegetarian if this is all you eat? Yeah, why not? I don't know. It still looks like meat. I think they should change the shape of it or something. So I wasn't going to say anything, but since we're on this topic, I'm on a diet, inspired by Ramcap. Capitol. So here's the thing. Can I try to talk you out of this one? You can, but it's not going to

work, but go ahead. All right. I want to hear. Tell me about your diet. Okay. I'm not one of those people that has willpower like you. I don't have willpower. I have systems in place. You went for a run at six of the morning after a hard night of drinking. How is that not willpower? I needed to sweat it out before. Okay. So I don't have that gene. So I need strict rules, and I've never ever done this before. So you might call it a fan. I've literally, and I think that's the first time I said the word literally in this podcast so far. I have never done a diet where it was like, this is what you are supposed to eat. So here's what I'm doing.

It's called The Whole 30, which apparently is like not new at all. It's been around for quite a while from what I understand. So Ram sent it to us and I'm doing it. It's quite restrictive. No dairy, no carbs, no corn, no beans. No sugar. Meat and veggies, right? No sugar, no alcohol.

So it's basically meat and vegetables. A low-carb diet is like... It's only 30 days. That's why I'm doing it. You can't do something for 30 days. By the way, famous less words, I'm probably not going to do it. By day eight, you're going to be punching yourself in the face.

Why do you say that? Because it's hard to go from zero to 60 on this stuff. I think you have to do it incrementally, just like with finance, because if you go, I understand the idea behind it. The problem is I think you do this. And even if you see some good results, you probably just go right back to what you did before

because it's so restrictive. I think you need to take like baby steps to get there. Like, I never ate good. it all through high school college until I like had kids and I felt like I needed to start change my diet. And I did it like incrementally. Like I first changed my breakfast and then I changed my lunch and then I changed my dinner. And then if I would have done it all at once, I never would have been able to stick with it. I'm not saying you can't do this. But I'm saying I think incrementally is probably an easier way to not just kill yourself doing this. 30 days is a long time.

But what you just described requires a system. I'm not a systems guy. Okay. I think you are a systems guy, though. Because you can place rules on your systems, too. And then if you have a bad day where you mess up or you have a conference where you're going, you drink a lot and you eat a lot of crap, then you just go right back to what you're doing before and get back on the horse. All right. I know it can work, but I think the incremental approach is probably better for most people because it doesn't require a wholesale shift in mindset and what you're doing. I'll be interested to see what your results are. Okay. I look forward to showing you. I'll send you picks of my abs. Okay.

Do you think that babies get bored? Yes, of course they do. You don't think so? Well, you're a newborn you're saying? Yeah, like, I just think he's, like, bored all the time. There's not really much to do as a baby. Yes, that's probably true. I mean, you put them on a little mat on the floor and they can look up with the thing that spins around, right?

Yeah, it's a pretty boring lifestyle. I'll say that. That's why they sleep all the time. They have nothing else to do. That sounds like something you ask someone when they're high. Do you think babies ever get bored? All right. Well, here's another thing that you ask somebody when you're high.

This is another random question I was thinking about last night. Bob and I were watching TV and people said goodnight to each other in bed. And I said, I don't think we've ever said good night. Is that weird? Is it weird to say good night? Or is that something? I said, I feel like that's something that only happens on TV. Do you say good night to Courtney?

Like literally in bed before you shut out, the lights are closed, turn on the TV off. Do you say good night? Yeah. You're just an animal. Wait, is that like your thing and I'm being a total asshole? I guess I don't really think about it. It just kind of happens. Good. Yeah, good night. Yeah, see them. Yeah. Very kind. So how about this venture capital?

Okay. So Fred Wilson had a piece on venture capital. He talked about how people need to kind of adjust our expectations a little bit, but he said, wait, expectations are too low. No, expectations are probably too high. In the last 15 years, VC has become an institutional asset class with a permanence and stature that brings seemingly endless ons of capital to it. And so the returns have stabilized in or around the 2 to 2.5 percent, 2 to 2 point times over 10 years number, which produces high teens, low 20s, which is enough to stay in the sector. Now, there's two ways to look at returns when you're talking about private equity or venture capital because you don't just give them all your money on day one and they invest it like you would like a mutual fund or ETF or separately

managed account. They call the capital in overtime as opportunities rise up. And so you have to manage your money a little bit to make sure you have money there and then you have to figure out what to do when you have distributions come back in. So anyway, if you look at this stuff and a lot of pitch books show high teens, low 20 IRAs, people say, well, this is amazing. Why wouldn't I invest in private equity, venture capital. But if you look at the money return, so he's saying over 10 years, you return two to two point five times the money you put in, that's a compounded annual return of roughly 7.2% to 9.5%. Now, that's not terrible. But when you compare that to high teens, low 20s IRAs, which people think they're getting in the institutional funds, that's not the same

thing. And I'm honestly not sure how many institutions really understand the difference between money on money returns and those IRA returns. I find that very hard to believe. I was in the institutional world. I am positive. These people think that they are getting compounded annual returns. A lot of them do think they're getting these teen returns on their money. Okay, but what about when the fund closes and they get their money back? Don't they notice a mismatch?

No, that's not how it works. You get your money back slowly over time. So if you're invested in a fund, you're slowly investing over the first call it five to nine years. And then over the following, and if you have a big win over that time, you get the money back slowly. So the cash flow are constantly going in and coming out. So the thing I'm trying to say is that money is not invested the whole time. And a lot of times, I think the average is roughly 60 to 80 percent of capital ever gets called for a lot of private equity funds. So if you're a big endowment or foundation, you make a $10 million commitment, you might put in $7.5 or $8 million over the course of the fund and you won't do it over.

So the thing is, you have to actually understand managing cash flow and know that you're not getting those returns that look like in the pitch books really, really amazing returns. Okay, fine, but you don't think that they have an Excel spreadsheet? I'm saying it's much harder to track than you think it is. So this is what I did at my old job. I tracked all these infows and outflows. And it's not as easy as some people. I just think that there's a lot of people in the institutional world that look at the numbers and say, oh, man, we're killing it here.

It's not really the case because they don't understand the difference between an IRR and a compounded annual return. Okay. All right. I'm just throwing it out there. I'm saying it looks much juicier and sexier than it is. And I'm not saying everyone here because obviously some people know what they're doing here. But I think there are a lot of people who look at those numbers and say, this is what we need because we can get those bigger returns, and it's not as big as I think.

Okay, so I finally listened to the first half of the Amazon podcast that you told me to listen to, Land of the Giants with Jason Delray, had a few thoughts. So the second or third episode was on Alexa, and they interviewed a guy who had like 14 Alexa connected devices in his house. That was weird. Yeah, but can't you see a case where that's where a lot of people go, where everything in their home is connected? So I have the Alexa microwave.

I mean, do you really need it? No, but it costs like $60. and I thought it would be fun to play with. But here's where I think we're going with this. And stop me if I'm wrong, because if your whole house is connected, I mean, the internet is the most important thing in that whole home, basically, right? Because if the internet goes down, you're out of luck. Where are you going with this?

Don't you think we come to a day where we have a prime or a prime plus where Amazon gives everyone the internet and they make sure that internet is like a rock solid? And somehow, I don't know how, I don't know what the backup could be. You know, some people have generators in their homes if a storm knocks out the power, where the internet is somehow have a backup system or Amazon. And then I think the next step is they have Prime Internet. If they're going to do Prime Internet and they're going to give you Prime Internet, because that's the one area where it doesn't make sense to cut the core

because you still have to pay for Internet from the cable providers. So they still kind of have you there a little bit. Don't you think the next step, if they give us Prime Internet, would be Prime Live. We have Hulu Live and YouTube Live where they give you 60 channels or whatever and it's most of the sports, where Amazon has their own live TV where they give you the local channels and the sports channels. and that opens up the door to them to then getting NFL or MBA coverage and MLB coverage or whatever. Don't you think that's where it's kind of going where Amazon has that whole ecosystem just cornered? Like, wouldn't you rather have internet from Amazon than Charter or Verizon or Spectrum or whoever, AT&T?

Anyway, I think that's where we're going. The other one, they had a fulfillment center episode where they talked about like that one million square foot fulfillment center in Kansas. And we drove by one that's on the outskirts of Grand Rapids this weekend and it's actually 850 square feet. It looks like the Mall of America or something. It's just enormous. Do you mean 850,000 square feet? What did I say? 850.

That's like a small part width. Sorry, yeah. It's a studio, but I mean, really small boxes. Yeah, it's 850,000 square feet, but it's pretty close to us. And here's the thing. So we went out to dinner with friends, and they have young kids and, you know, the kids sit in the car seats and they kick the back of your seats with their dirty shoes. Okay.

Right? Yes. Do you have this? They have seat covers for the back of your car seats that you can get. So your kids, when they're in their car seats, don't kick the back, or they don't get the back of your car seat's all dirty and ruin the upholster or whatever. Anyway, we kind of liked it. We were going out to dinner with friends and they were driving and they had these in there.

And my wife ordered them. So this is at 630 or 7 at night on Saturday. We had that to our house the next day on Sunday by the afternoon. Definitely not a back seat cover guy. You should see my car that's a disaster. Okay. But I'm saying we got some. I put them up immediately.

I think it's pretty, not a bad idea. I have three kids sitting in the back seat. So I really. Not to brag. Yeah. Yeah. Did you see this tweet? Neiman Marcus sells a couch.

that looks like a hot dog for $7,100. Yeah, I mean, is that a PR stunt? That's not real, right? They did this to get PR, right? Don't you think this is like one of those hot take headlines? Yeah, they probably made one of these. Yes, this is something that this is brand awareness. Yeah.

Don't you think? I mean, it's stupid, but does this couch count as a sandwich? Is that the argument we're going to have here? Yeah, no. So after the conference, we were hanging out on the pool, and we're talking about what the best movie is of all time. And it's just, I think you and I agree that's a dumb conversation. because it has to be segmented.

You have to do it by decade. The problem is people started getting into a real argument about this, and you and I were flamethrowers, and we just poke people hoping they'll get mad because you know they will. My one comment was, if you live in New York City, you have to put in Goodfellas no matter what. What does New York City have to do with this? It's a great movie. Yeah, but New York City people probably appreciate that movie a little more than other people for some reason.

Okay. Someone threw out heat, and someone else said, no, you have to have Goodfellas overheat. And I said that's just New York City. People have to put in Goodfellas. Anyway, yes, our conclusion was it's impossible to the best stuff conversation. It's like, say, who's the best athlete of all time? Well, what sport? What decade?

Yes. It would take me four weeks to come up with a top 10 movie list, and I'd have probably 26 variations. I would be Charlie Day in Always Sunday in Philadelphia, with all the strings going all over the place in the board. It's an impossible thing to come up with ever. So without any further ado, what is the best sandwich of all time? Best sandwich? No, I'm kidding. Sorry, bad joke.

All right. I saw two movies this weekend that were on TV. I wasn't really watching him. I watched Spider-Man 3, more than I probably should have. The Toby McGuire one? I remember seeing this in real time with, like, the W-TF Giff. I remember it was really bad. It was so bad. There's one scene that I was embarrassed to watch. I was almost sweating from embarrassment. Where Toby McGuire is in the nightclub and he's singing on the piano and he's dancing. It's so awkward. And James Franco plays like a really odd character.

The whole thing was just so bizarre. And I went on Rotten Tomatoes And the critics gave it a 63 Are you kidding me The audience gave it a 51 It deserves like a 15 It was so bad Then on the flip side of that

I say you're a trip I like that movie I don't know why I know why Because it's a good movie The opening scene with Matt Damon Seeing Scotty doesn't know Is an all-timer

And that was a long time ago I think that movie was like 2003 or 4 So the critics gave that a 47 The audience knows better 75 You're saying the audience is a smarter one here I'm saying in comedies, when the audience is like 80% higher score than the critics, always go with the audience.

My rule of thumb, I never listen to movie critics. I don't think I'd ever take a recommendation from movie critics. You know, that's a good point. I don't think I've ever wanted to see a movie and then be like, oh, this critic doesn't like it. Nah, that's my go-to critic. I'm out. Nope. I think the collective Twitter is a better source of recommendations than movie critics.

All right, listener questions. I was helping my son with a project he was doing on Legos. The company is valued at $14.6 billion. How the hell is Uber, Wework, and all these other IPO? companies valued higher than Legos. How is Legos worth $14.6 billion? You don't think a lot of kids buy Legos? I'd rather invest in Uber than Legos.

Okay. Well, actually, WeWork is probably worth less than that now. But I think the point is expectations, future growth, these sort of things. Wouldn't Legos almost be like the Procter and Gamble? Yeah, I was saying, that's a consumer stable. There's no growth there. It's the fertility rate. Yes, and maybe that's the point where people see fewer kids coming on board and Lego.

Give me Uber all day. By the way, I'm almost done with the Uber book. Very good. And yes, Travis is horrible. At what price would you buy Uber stock? Market cap or dollar? Because I don't follow the chart. Hold on.

Let me pull it up right now. See what's on the chart. You don't own Uber, do you? No. Go on with the listener question. I'll get back to you. Let's assume the last 150 years of growth is actually an anomaly. What if we have negative future growth rates?

What would that mean for future equity returns? Well, it wouldn't be good. That's an understatement. It'd be kind of silly to worry about if the economy stops growing forever. I think we're all kind of screwed, probably. Did you ever read The Rise and Fall of American Growth by Robert Gordon? I did. I mean, he's not saying growth is gone forever, but he's saying high growth is probably

grown forever and a lot of the low-hanging fruit has been picked already. I would say read that book. It was a long one, but it was a good little history exercise. Yeah, it's probably not a good thing if we'd never have economic growth again. But I'm living under the assumption that people are waking up each day, hoping to better themselves, and that translates into innovation and growth and higher productivity and all that stuff. Okay, any recommendations? I have a recommendation.

Oh, I was listening to The Ringer has a podcast called The Big Picture. Podcast is about the Oscars. And they were talking to the director of It Chapter 2. They had four hours. Barry didn't trademark that? I can't imagine that. Four hours of footage. Yeah, that's a lot.

No, thanks. You said before, this is probably going to be the worst Oscars in history. You know what's going to win, unfortunately? Because I think this is far from his best movie. What if this is the year that Tarantino gets his Oscar? Okay, I haven't seen it yet. Obviously, you didn't like it very much. But I guess that would make sense.

I'm sure critics love that movie. Yeah, I definitely loved it. Okay, so before I went to the conference last week, I was like, Robin said to me, what are you wearing? And I was like, oh, shit. Because really all I have are T-shirts. So... You don't say.

So, I went to Nordstrom-Rack. Is that bad to admit? No, that's not too bad. I don't know, like, know where that is, like, the hierarchy of shopping. I go to Norsum Rack, occasionally. Okay, so I got some good stuff there. I'm not going to pour shame you for going to the Rack. Okay, thank you.

I got a pair of jeans called Joe's jeans. Are you familiar with those jeans? Vaguely. Very comfortable. Highly recommend. Okay. Joe's jeans from Northam Rack. That's my recommendation.

Where were they like size 38, 35? Or are those like the only sizes left? Oh. Okay. So you put in something here about Bill Burr. Are you going to take my take? I had this first. Wait, what?

Okay, you wrote it down first, but I had it too. That's a bold call. You had it first. I had it in the dock. It's not even worth it to give a recommendation for comedy anymore because it's really personal. But like a lot of comedians these days, he starts off complaining about how PC everyone is and how everyone overreacts to everything and you can't make a joke about

anything. These comedians need to shut up because they're getting paid 20 or 30 million dollars by Netflix. Comedy has never been bigger. Netflix is just throwing out checks everywhere. Eddie Murphy is going to get 70 million. Yeah, so it has swung way too far. Like, obviously the sensitivity of the audience. They can say whatever they want. And they're playing sold out shows in like the biggest stadiums in the world. And they're complaining about not being able to say anything because a couple people are complaining online. Give me a break. Get over yourself. So, yeah, it's guaranteed that every comedian is going to say something about how sensitive the crowd is. Would they rather go back to the days when no one cared about what comedians said and did?

They were just this little side thing that not as many people cared about. Comedians are huge these days. And the fact that they have a bigger audience just means more people are going to end up complaining. Okay, but that said the special is pretty funny. I laughed. Okay, I got one more new detective series for you. Come on. Is this a parody?

I mean, honestly. I needed a new one. My dad's a big reader. I asked my dad. The guy's name is Scott Hamilton. He's written 11 books about the outside. Alex McKnight series. Just stop it.

You can't. This is your 15th detective book recommendation. I started the very first one. It was in 1997, I think. And he actually is an author from Michigan, and he writes about a detective who was a detective in Detroit. And now he lives in the UP, in the Upper Peninsula. The UP?

Yeah, the Upper Peninsula. Here's a theory. Have you ever heard of the UP before? No. It's the upper and lower peninsula. You read the first page, the 40th page, the 100th page, and the last page of a book. No. The detective series are the only ones I never skim.

I only skim nonfiction. because you have to read the whole thing to get with the series. The first book is very good. I'm going to stick with these because it's a series and they have some Michigan landmarks too that kind of makes it interesting for me.

Anyway, thanks again to everyone who came out to Wellstack. We're going to do it again next September. I think we're going to have some more time to plan and make it even bigger, I think. We did have fun doing the Animal Spirits Live. We appreciate it. Everyone come up and saying hello.

We'll talk to you next week, Animal Spiritspod.com.