Animal Spirits Podcast - Michael's Fitness Pal (EP.82)

Episode Date: May 15, 2019

On this week's show we discuss are the tech companies going to make us all fat and lazy, some good news for once in retirement saving data, the huge growth in tax-deferred accounts, how the S&P 500 has changed over the years, why is growth destroying value, why does Uber lose so much money, is it time to break up Facebook, why is it so hard to beat the S&P 500 and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by Whitecharts. Contact them and mention to Animal Spirits for a 20% off your new purchase. Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing. Hosted by Michael Batnik and Ben Carlson, two guys who study the markets as a passion and invest for all the right reasons. Michael Batnick and Ben Carlson work for Ritt Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion. of Ritthold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions

in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. So last week we recorded the podcast from Austin, Texas. And after that recording, we decided to hit the streets of Austin. And we used some of those tech scooters. What do you even call them? Scooters? ride-share scooters? Well, they're like, they're electronic scooters that are in some of the bigger cities now. I think they started in Silicon Valley and moved around a little bit. And you take out your phone and you scan in the barcode and they cost, I don't know, like two bucks a ride, basically. Very cheap. I felt like a giant tool riding it for the first time. You know, it's funny. I'm much more self-conscious, I think, in public and have like the sort of social anxiety. Maybe social, why would you get social anxiety around the ride shooting, ride the scooter? Anyway, the point is, I did not feel embarrassed and you did.

Yeah. Maybe it's because I looked at you and I felt embarrassed for you, no. But because I got a picture of you and no one got a picture of me. But I just felt a little weird and I got more used to it. And we ended up using them all over the city and we took them around to some of the meeting places we had and we drove them all the way to the University of Texas to check out the campus. And my question is, couldn't we've, I mean, tech is making us so much more efficient with these

things, but are they just going to all make us fat and lazy eventually? all these tech companies. Like, we could have easily walked to a lot of those places, but we took the scooters because it was kind of fun. Well, I wasn't planning on bringing this up, but since you mentioned it, fat and lazy, my dad bot is fully formed. Okay.

Josh posted a video of us in Texas last week. It was my profile with a bunch of other people in the room. And the only thing, the only part of me that you could see was the tip of my nose and my belly. Yeah, you pointed that one out. So maybe we could have left a little more time and walks in places, I guess. Hold on. There's a point coming. So I'm reading a book called Measure What Matters. And in the book is a chapter on My Fitness Pal, which I assume you've heard of because you're a fitness person.

No, I've never heard of this. All right. Well, it's an app that was bought by Under Armour. And you upload your calories and all that sort of stuff, what you're eating. So I just downloaded that app. I'm going to make a concerted effort to eat better. I'm going to do March for the fall this year. So anyhow, here's the point. I bought an Apple Watch. And I bought one because the last time I bought when I returned it because what I wanted to get out of it was the ability to listen to podcasts without your phone. And the old watch didn't have that. The new watch does. So you could just walk with your phone and your AirPods, which is terrific. So I'm on the phone with Robin yesterday. And I said, you know how I told you I wanted to eat healthier and start exercising? And she just

started cracking up. And so I started cracking up. And so we stopped laughing. And she's like, okay, what's your point? I told I bought the watch. So she has no faith in you. Zero faith. All right, we shall see. But I don't, so we saw these scooters all around town, and it seemed like they were everywhere, and there must have been, I don't know, five or six different kinds of them. How do they ever plan on making money on this stuff? Well, I love the new business model of tech companies, is that to just make the consumers

life better and roll this money and you spot us 30 years and don't worry about it. It's all good. I love it. And you know, let's just talk about this Uber IPO for a second. So Uber went public last week, and it had lost. more money than any other company prior to going public. And since the IPO, it has lost more money in market cap than any IPO ever in the first few days of trading. Is that true? I didn't realize that. So there were some stories I posted on Twitter yesterday in March. They were hoping

for a $120 billion valuation. Yesterday, it was basically like $62, $63 billion. So from their hopes to what it actually is now, it's almost been cut in half. Obviously, it didn't IPO at that. Some people finally sent us the story, why does Uber lose so much money? And the quick back of the envelope was they did $12 billion in bookings last year. 8.2 of that went to drivers. I think maybe another billion went to drivers in terms of bonuses. And then they had a bunch of other things like taxes and stuff they paid, but then they broke out their operating costs. And so just simple things of running a business, sales and marketing, administrative costs, research and development, operations and then this big other operating cost.

And I guess running a young, growing business because they have aspirations to really dominate transportation. Whereas I believe Lyft is really just focused on the ride sharing part of it. Uber wants to be in every facet of transportation and logistics. Right. So yeah, they almost call themselves a logistics company. So I think maybe the fact that they grew so fast. And maybe that's one of the good things about venture capital is that it allows these firms to just have this huge enormous growth in their early years and try stuff out. And I guess if it doesn't work, then, oh, well, a bunch of people are a little rich instead of a lot rich, I guess. I don't know. So with this article from Vox, one out of every 11,600 people in San Francisco is a billionaire.

Does this number change after the IPO? That's a good question. I mean, housing is just going to keep getting more and more expensive there. But that is wild. So how many billionaires are in San Francisco? Okay. So I did the quick math on this. I don't know how many people there are. but so one out of 11,600 is like 0.86%, which is still a small number, but compared to the world, so there's 7.5 billion people in the world. There's like 2,200 billionaires. So that would be 0.0029% of the population. So there are almost 300 times as many billionaires in San Francisco as there are on the rest of the world. Wow. So yeah, I guess that's a lot. That's why it's

just increasingly expensive to live there. But on the flip side, there was a CNBC article this week that showed that normal people beyond the billionaires are actually finally saving some money for retirement. And you wrote a piece about this, kind of showing that, hey, we finally got some good news in terms of retirement data, because it always seems to be terrible. You know what's great about this information, this data? It was not based on a survey. This came from Fidelity, which has, I believe, 30 million retirement accounts. Yeah, they have a huge 401k business. Seven and a half trillion dollars in assets.

You know what's funny? I got a lot of actually emails talking about all the bad stuff, but it's like we spend so much time talking about how much trouble the system is in. I was just trying to shine a little bit of light on some positive stuff for once. So you wrote the good stuff and people said, well, actually. Look at all these data points. Okay. So I was shocked to learn that there are 350,000 people at Fidelity alone that have at least a million dollars in either their 401K and their IRA. And I went to Fred and was really shocked to see how much money is in IRA and Kia accounts.

Now, does this, this does not include 401K is correct? Right. This would be just individual retirement accounts. It's a huge number. $781 billion. And so we talked a little bit about this on our, we actually recorded another podcast yesterday with Jeremy Schwartz of Wisdom Tree, which you can expect next Monday in a new talk your book about some of the wisdom tree strategies. And he talked about the massive growth in tax deferred accounts, which went from being basically non-existent in the 60s and 70s to being a huge majority. So I think he said probably what 60% is tax deferred, 40% is non. text deferred, something like that. I guess you have to tune in that and maybe we will too. But it's a massive number. And this is actually like a step in the right direction, even though it's not perfect yet. So people don't, you don't get to $780 billion in retirement accounts from like giant exits on your business or anything like that. Like that's taxable money. This is money that people are diligently saving. So maybe there's a little bit of denominator

blind this year. But hey, this is some good news. So let's get into the numbers. So the Average participation rates in defined contribution plans is 73% up from 65% in 2008. The average savings in terms of what the employee and the employer are contributing around an all-time high of 13.5%. That's a pretty good number. It's fantastic. That's a big number. I was surprised by that.

Let's see. The percent of employees holding 100% or 0% equity, so people that are either all in or all out has gone down pretty much every single year. That shows that education is working. People are learning about how to invest. and the cumulative percent change from people that have been investing for at least 15 years. I'm sorry, since from 2009 to today, up 460%. Fantastic. Yes. So can we reasonably say that the Fed has manipulated retirement accounts higher in the last 10 years? I love it. Keep it coming. And I think that retirement accounts are one area where the behavior gap, I'm not going to say it doesn't exist, but I'm going to say that it is minimal. I think that by and large, people behave really, really, really differently in their behavior gap. I'm not going to say it doesn't exist, but I'm going to say that it is minimal. I think that by and large, people behave really, really, really differently in their behavior. And they're

retirement accounts and they're doing their taxable accounts. So you showed the average participation rate in the defined contribution plans is like 74%. They also broke it down one step further and they showed average participation rates by automatic enrollment versus non-automatic enrollment plans, meaning you have to opt out of it basically. And the differences are huge. So in 2018 alone, it was close to 90% participation in the automatic enrollment versus 52% in the non-automatic enrollment. So it's almost like you have to do this for people and just make. them do it. And then it's not harder for people to opt out than to opt in. Sounds like socialism.

Yeah. But I mean, it's the nudge thing. And these numbers have gone up. So it was in 2008, it was 80% for the automatic enrollment plans announced close to 90. And actually in the non-automatic enrollment plans, it's gone down. I think Thaler introduced this idea and people are adopting it. And it obviously works. It's such a no-brainer. Somebody just asked us on Twitter. I wonder if you have any thoughts on this. This is Michael Antonelli. He asked, what's the right amount to pay for babysitting. And I think we're both before the stage. I'm just going to throw a random number.

We use babysitters, but I'm guessing the inflation in New York has got to be like at least a 20% premium. I don't know. Okay. So go ahead. Okay. So hourly, I guess we pay probably 12 to 15 bucks an hour, something like that. Well, so let me ask you a question about that.

Is it hourly or is it a bundled deal? So, I mean, listen, if you stay out for eight hours, obviously you have to pay a lot more. But doesn't really matter if you stay up for three hours or for five hours. I guess maybe it does in the sense that the person on the, the babysitter has to know what to expect. It's kind of like waiters and waitresses and bartenders working off of tips. They do it that way because that's the way it's always been done. So we always kind of try to do it hourly, I guess. What if you had a permanent babysitter? The deal was this. You get, I don't know, $65 a night, whether we're out for two and a half hours or whether we're out for six hours. Or is that not really fair. That might

because you could take advantage, but I guess it depends what the trust is in relation. Don't be an A-hole. If you're out for six and a half hours, you give a little bit more. You're just trying to lower the expectations on your future babysitting person. My knee-jerk number is $15 an hour. Yeah. I think that's probably about right. All right. So I tweeted last week that one of the reason why valuation comparisons are sort of silly, is because in 1957, the S&P 500 was 425 industrials, 60 utilities, and 15 railroads. So no financials, no materials, no tech, no health care.

Then in 1976, it was 400 industrials, 40 utilities, 40 financials, and 20 transportation stocks. And that fixed structure was in place until 1988. And why charts put together a chart that we'll share in the show notes. This chart is pretty wild when you look at it. Yeah, but somebody made me rethink this. Why does sector composition really matter in terms of what you'll pay for valuation? In other words, if all this is equal, and of course it's not, but let's just assume that all this is equal and that railroad stocks were the growth stocks of the 1890s or whatever

year was, or the 1850s, I guess. And the earnings are growing the same and the margins are the same and the economics of the underlying business are the same. Wouldn't $1 for earnings be worth what it was then versus what it was now? And I have two responses after thinking about this a little bit. And maybe this is confirmation bias because I think that it makes. sense that multiples are higher. So maybe I'm just looking for the right answer. But here goes. One is that companies are so much more transparent. Actually, three things.

Companies are so much more transparent about their entire business and their operating margins and everything. So you would punish companies that don't disclose everything. And you would be more skeptical about potential accounting irregularities. So those companies back in the day would deserve a lower multiple. That's one. Number two is that transaction costs have gone way down. There's way less frictions. So you would pay a higher multiple. That's number two. And the number three is that it really isn't all as equal because the scale of companies today and what they're able to do in terms of the efficiency of the business models and the margins, right? We've been at peak margins for the last 10 years. I do think that those companies deserve

a higher multiple. Am I looking for answers to support my bias or are these legitimate answers or both? Here's my looking at both sides of this equation. And again, you can see this chart we created because what it shows is that in 1957 and even 1976, there wasn't very much diversity in terms of sectors in the S&P 500. Now I think there really are. And we asked white charts to create something before us on this and they did, which was very helpful. And I think to your first point about why should the sector composition matter, maybe that's, that is the case where the, it's just about the risk premium in stocks and what are the, what does the asset class deserve? So maybe that makes sense. On the other hand, wait, what makes sense? Because

are more diversified dates of a higher. Yeah, well, you're looking at them in the past and now as, well, the stock is the stock market as a whole, what sort of risk premium does it deserve based on volatility and loss characteristics? And as we've discussed, that really hasn't changed much. So does the sector composition really matter in terms of, so maybe you can compare them? On the other hand, now that we have. Wait, hold on.

Hold on. Just stay with that for a second because that's really interesting because even though in the 50s, the S&P 500 was pretty much industrials, right? that's what it was. If you looked at the price, the daily price action of stocks in the 50s versus stocks today, they don't look a whole lot different. Right. The volatility and loss characteristics are relatively similar. So who cares if you can start a company with 100 people now versus 100,000 back in the day because you still lost the same amount in the overall stock market when it went down. And the other side of that is maybe we do deserve a higher multiple today

because things are so much more diversified. In the U.S. economy especially is much more more diversified in terms of the sectors and the types of companies. So I can honestly see it both ways. And what you don't see in this chart is the plunge protection team. And that's good for at least a 30% premium. Yes. But I mean, it's interesting to think about how it gets to be changed over time. Yeah.

So I guess I don't feel as certain as I did beforehand. So thank you for whoever. I'm sorry, I forget who pushed me on this. But I don't, maybe it's not so black and white. But I do think that there is good reason for why the multiple is higher than a was back then. It's one of those things that sort of makes your brain hurt as an investor because when you first start digging into the data on this stuff, you think you have it all figured out because, well, I looked at this back test and if I just buy here and I sell here based on

these multiples in the past, I should do very well. And now all that has kind of gone away in the last 20 years because everyone knows that data and things have changed. And so it just kind of shows it's never quite that easy, I think. And so Jason Zweig wrote a piece on Ben Graham this past week in the Wall Street Journal. And he kind of said, the question was, what would Warren Buffett's teacher make of today's market? And the number that stood out is he's using the S&P 500 growth index and value index. And he said, at this point, growth has slightly outperformed value over the past 20, 25, 30, and 40 years as well, which is kind of insane. Let me ask the question that I'm sure there is an answer. I just, I don't know which index they're using. Are they using indexes that

don't properly classify growth and value correctly. I don't know. I'm guessing these are very rudimentary growth and value concepts, but I'm guessing that these are Russell indexes. Well, no, S&P 500 growth and S&P 500 value. I take everything back. But I think it's kind of a similar framework. But here's another theory I'm trying to put out there on why this is happening. And maybe it's another reason why it's harder to look back at these factor relationships and take back so far. The fact is that the S&P 500 companies are dying and leaving the index much faster than they did in the past. And newer ones are coming in much faster than they did in the past. Meaning what? Does that make it harder to make historical comparisons? Because in the past-

I think historical comparisons are always hard. But in the past, a lot of these companies really stayed in for a lot longer than they are now. And does that make it harder? Or I guess this is kind of a, we're talking yourselves in circles here. But I don't know, it makes your head hurt a little bit. But do you buy into the fact that technology companies have sort of killed fundamental analysis? Oh, man. I don't know. That sounds so topy. I know it does.

I'm all that value. Professor Demodran was on Mab Faber's podcast this week, and he talked about how he, he said Amazon basically broke all of his discounted cash flow spreadsheets that he created because you couldn't value them the same way. So he had to come up with a new way to value Amazon. But Amazon's not the whole market. True. But if everyone would have put $10,000 in the IPO, Amazon would be the whole market now. It's hard. I'm just sure there's a lot of fundamental bottom-up stock pickers who are really questioning their methodology these days. And maybe they should. Maybe they should. I guess that's what makes us all interesting, is what I'm saying.

So I got a question for you. I know you're not really a big user, but is Facebook a monopoly? See, so the guy wrote the New York Times op-ed this week, and he was one of the founders, which I'd never been heard of this guy before to tell you the truth. But Chris Hughes is one of the founders. He said, it's time to break up Facebook. Honestly, I don't know. It's one of those things. I'm kind of in the camp of would it really make a difference if they did?

Like, are they so entrenched now, even if they spun off Instagram and what's app and all these other places? Does it, I mean, does it really matter? Didn't they have to sort of stop those mergers and acquisitions when they happened to actually make any of this matter at all now that Facebook has? three billion users or whatever it is. So this is a pretty wild data point. I didn't realize this was the case. 80% of the world social networking revenue goes to Facebook. Yeah.

But you know, it's kind of crazy to the point of value and growth and historical comparisons. Social media wasn't even a thing until very recently. Yes. I mean, social media is like an asset class now. I get the idea of wanting to regulate these companies, but I just don't know how, I don't know what you can do at this point because they're so big. And maybe it's hopefully it's the kind of thing where the public, at large is going to have to be the one that that sort of regulates them on their own and stops

using them. But at their size, I don't know. And I'm, I'm not a user of Facebook. So I'm, I'm completely out of this. So when everyone is brainwashed by Facebook someday, I'm going to be like the last person standing in the zombie apocalypse. So that's all I'm saying. I don't know. So it's all he's saying. I don't, do you think it would actually help anything if they broke them up? I think I really, I don't know. I feel like I'm so out of my depth here. When I'm like I just, I don't know. Instagram was obviously one of the greatest acquisitions of this century. And if they had not been able to make that acquisition, I think they probably wouldn't be nearly as, they wouldn't have nearly as a big of competitive advantages as they

do. But I don't know, I don't know what exactly it would do. And I think regulating them at this point would actually help them because it would further ensure that no one else could touch them in terms of getting to that, that size. So I think it's going to have to come from competition that just says, screw you. We're not selling out to you. We're not selling out to you. have spoken a lot about this recently, how speaking of social media as an asset class, obviously that was a joke, please do not take that seriously. But it really is reaching, we really are scraping the bottom of the barrel in terms of stupidity and what is being, not just social media, but just news in general, I suppose. In terms of the articles that are

being written and the tweets that are being sent, at this point, it is deliberate trolling. And they're actually getting very good at it. So for instance, here was a tweet from last week, or from earlier this week. Despite work-life balance buzz, Disconnecting to spend time with your kids could severely impact your future wages. Are you sure? Like, they're begging to be dunked on because that's what drives eyeballs and that's what drives revenue. Yes. Yes.

Anger and outrage is like, that's who they would like to get. But it's so easy to give terrible personal financial advice and there was an article in USA Today that got a lot of eyeballs. Yes. They showed American spend an average of almost $18,000 a year and non-essentials. and they showed things like restaurants, drinks, take out food, impulse purchases, ride sharing. But look what impulse purchases. It's a T-shirt. Like, is that not essential? The other one is personal grooming. Personal grooming is not essential. What? Sorry. And they have cable on here. I'm saying cable is definitely essential.

And excuse me, my head will not shave itself. Imagine? That is definitely essential. I'm sorry. Yeah. So there's this, I feel like things always swing too far in either direction. and obviously there's a need for better financial advice for people these days, but the spend shaming, I don't think is very helpful. And especially when it comes from rich people who spend whatever they want on things, I don't think that's, no one's ever going to listen to that advice. I have bad news. Okay. We're only in the top of the second inning of the shame spending game. It's early. I'm sure we are. Yeah, I just, can we move on from the coffee latte thing? Like, okay, we get it.

Don't spend $5 on it. We, yeah, we can. get it. If you make 30% a year on your money, you'll be a millionaire. Okay, survey of the week. So Schwab did a survey of their ETF investors, and they put in a chart in here that shows how long ETFs are typically held, and they broke it down into like one to four weeks, one to three months, four to five months, six to 11 months, and then up to one, two, three, and five years. And they found that close to 60% of their ETF holders are held, our ETF investments are held for less than a year. All right, two thoughts. I actually buy that number. I think that's probably reasonable. But I think

people have no idea how long they hold an ETF. Probably true. But why would that be reasonable? Meaning that amount of turnover? No, reasonable, not in the sense that that's appropriate. Reasonable in the sense that that's a good estimate for how long people hold their ETFs. Oh, that's true. So only there was 9% of people who said they hold their ETFs for five years or more. I also think that's actually kind of right. Two to less than five years. Yeah. Unfortunately, that's a double-edged sort of ETFs is that they're much easier to trade. there's basically zero commissions on them, and you can do it with a click of a button. And so jumping from one to the next, it just makes it too easy almost to do it.

Have you ever had breakfast in bed? I can't say that I have. Like on one of those little trays with like a flour in a mini vase and an orange, no. So I think I saw a tweet about this or something. It just got me thinking like, who has breakfast in bed? People in romantic comedies. That's it, right? It sounds actually incredibly unappealing.

I can't imagine you want it to eat breakfast in bed. Yeah, and you get crumbs all over your bed. It's just a terrible idea. Yes. So before we get to listen to questions, I made a fantastic purchase. Okay, what did you get? So we have a doggie door. So my dog is in and out of the house all day, which makes me very, very happy because we

were cooped up in apartment she was for way too long. But the downside to that is that she's bringing dirt in. And I have all wood floors. And so it's getting very dirty, very quickly. And I've been vacuuming every day. So what we got was a Roomba, which is like the I-Robot vacuum. Oh, does it work? Not only does it work, it really works.

Okay, because my wife was actually asking about that this week. Okay, it's fantastic. It's not cheap. It's there about $400, but worth it because if you say it all the time and I couldn't agree with you more, that you spend money on things that you don't want to do. like you value your time. How much time do you want to spend vacuuming? So every day I use it and I dump out like a pound of dirt. Wow. Okay. And it's, it only runs when it needs to. Or is it constantly moving? No, you press a button. You could do it. You could like automate it. It's,

it's really, really good. Because we have like a cordless handheld vacuum that we use and I wrote about it this week actually about that's like one of the biggest purchases you need it when you have kids because my kids, like there's constantly crumbs ever in our house. And I said if we had an odometer on it, it probably would have like 100,000 miles at this point because we use it multiple times a day. So I might have to pull the trigger on that one. So this kind of goes into one of the listener questions we got about spending. So someone said, you mentioned several times that you open new credit card accounts to get the free points and rewards that come with it. My question is, what do you do with the old credit card accounts that you no longer use? Do you cancel them,

leave them open no balance and I'm just curious how many credit card companies you have done this with. I think the typical advice would be to keep it open and just do like one purchase a year on it because the more credit you have, the better your credit score. But after a while, it gets kind of tedious to keep track of them. So I don't know how many times I've done this. I've probably opened, I'll call it 15 to 20 credit cards in my lifetime. And occasionally I'll get a note saying you haven't use this in a while. If you don't use it, you're going to cancel it. But there are some that I will keep open for a while just because I like to have that credit just in case. And I don't really care which credit card companies to use. What do you do with your old ones? I don't have old ones.

I don't really have a million credit cards. Plus, I've been getting denied lately because I haven't too many, actually. I have to mention this when we were talking about the scooters. So in a book that I just finished this week called Tradeoff, which again talks about high fidelity versus high convenience, that products have to either be really convenient in terms of they're easy to use or they're very cheap versus high quality and typically expensive. And one thing that, and he talks about the fidelity belly where things are neither convenient nor really high quality and Segway fell in that in that bucket. And it got me thinking about the scooters. Like segways were just way too early and way too expensive. They were $3,000 a piece. Yeah, but you look like 10 times

a bigger tool on a Segway than you do on one of those scooters. 100% true. Right. Amazon used them in their warehouses, and eventually they got shut down. And I had more to say about it, but I forgot to take notes. All right, anyhow, getting back to the listener questions. Okay. I'd like to, go ahead.

Do you want to take this? Yeah, sure. I mean, you are the designated listener question you're reading, reader. Everyone knows that. 22 years old and I've been fortunate enough to max out my contributions to a Roth IRA, and instead I've been taking out $5,500 in student loan debt at 5.5% interest, doing this to take advantage of long-term compounding, and I'll still pay off my student loans and max my contributions.

in the 10 years after graduation. Is this a good idea? Should I be entirely focused on paying off student loans? This is an interesting little arbitrage that are trying to pull off here. I guess if you can manage the finances of saving and also paying off your debt at the same time, and you're okay taking on that debt, I guess that makes sense to try to leave it there and I guess the Roth offers some flexibility, but I'm kind of good either way in this one. I would like to apply a dollar cost average strategy with my cash position.

Is there a recommended allotment size and time horizon for a Roth IRA? For example, if it's $100,000, divided by X allotments and buying every X weeks or months, what's the ideal X plus Y? We know that lump sum is right. So if that is the case, then the less allotments you have, the better off you'll be. We know that to be true from a math standpoint, but obviously this is a not math-related question. So I would just say, honestly, does it really matter? you do it in three or four or five. I would say maybe 24 months is too much, 12 months is

probably too much. I don't know what the right number is. I would say just whatever you're comfortable with. The most important thing is that you make a decision, you stick to it. It's horseshoes and hand grenades. Like close enough is good enough for this. Like you're never going to get it perfectly. So pick the time horizon you can live with and stick to a plan and then just don't deviate from it because you're going to want to depending on what the market does over time. Okay. Why does everyone say it's so difficult to beat the S&B 500 index? Asking, as it looks like a retail investor with a buy and hold strategy who puts in a little time following just a few companies, and most importantly, ignores all the crazy and costly market movements.

Shouldn't I always be able to beat the indexes if I do this? Your thoughts? This is one that we have never gotten before because we spend a lot of time talking about how hard it is to beat the market. And more importantly, how really unnecessary it is to even attempt to beat the market in terms of just what are you trying to get out of investment? investing. If you're trying to, you know, increase your purchasing power, maybe even do a lot better than inflation, that's why you invest. I don't think anybody is going to look back on their life and be upset that they didn't beat an index of stocks. But anyway, here's the point. Here's the point. Why is it so hard to beat the S&P 500 index? It's because so few stocks beat the S&P 500 index.

There's a great study by, is it longboard capital management or longboard asset management, showing that I think two-thirds of all Russell 3,000 stocks fail to beat the benchmark. So it's just that simple. The indexes are led by the biggest gainers, think Microsoft and Apple and Facebook and the companies that add up billions of dollars. And if you're not in them, it's really hard. So that I think is probably the simplest reason why beating the market is so difficult because the winners are so concentrated in just a few stocks. And my whole thing is there's nothing special about index funds.

they're simply, they have low turnover, they're tax efficient, they're low cost, and they don't do a whole lot, which is something that a lot of investors have a hard time with. So there's nothing special about that strategy, but... That's a good point. You could buy and hold 30 stocks, 20 stocks, whatever it is, and be just fine. Maybe you'll beat the index. Maybe you won't. But I think Ben's point is that the more you interfere with your portfolio, whatever you're doing, your side of your portfolio, probably the worst off you'll be. And most professional investors don't beat the index. sixes either. So if you look at any of them, it's probably over the long term three, five,

ten years, it's probably in the 70 to 90 percent range that don't beat it. So even if the professionals can't do it, it's pretty hard for novice to do it as well, even if you're going to take a longer time horizon. Okay, recommendations for this week. What do you got? What do you got? All right. I finished where the crawdad sing when we traveled to Austin last week on your recommendation. I really liked it. Not something that I usually read the type of genre. guess, but it was really, really good. And it's one of those books that gets better as it goes along, I feel like. I think so, too. And it sounds like Bruce Willispoon is going to turn into a movie or a TV show maybe, probably a movie. It's, I think that'll do really well.

I started watching the comedian based on a recommendation from Anthony Jesselnik, who we mentioned last week. He was on a podcast with Bill Simmons, and he said he watches it once a year. And it was this, it was this documentary about Jerry Seinfeld and another up-and-coming comedian in like 2001. It's really like the camera that was shot on is really kind of not very good, but it shows Seinfeld working out on his jokes at some of the places that we've been to in New York. And it was kind of interesting to see him bomb. And he's going up there with his notebook and before jokes are formed. Like when you see Seinfeld, you see him after he's tried these jokes out for years and years. And it showed him go up there and totally forget the punchline and bomb in front of people.

And they're like heckling him. And he's like, yeah, I kind of deserve it. and it was very interesting to see him putting that work in. And really, like, he's like, I, I don't know. I lost my train of thought, and I don't know where I was going with this joke. And so it's on Netflix. It's not very high quality, but it's pretty good. Listen, I can empathize with Jerry because I often lose my train of thought on this podcast.

That's true. Quite a bit. Okay. And finally, so I'm watching Game of Thrones, obviously. A lot of people lean in are mad. I honestly don't care because I never got invested in any of the characters. I was never, like, one of those fan boys for it. I just always thought it was a cool show.

and like I don't care how it finishes. But the other day I posted a meme because the S&P 500 was getting torched. And I posted a picture from the latest episode of the dragon letting stuff on fire. Didn't say anything about the episode. I was just making a joke about stocks being down. And I almost had 10 people say, hey, spoiler alert, what are you doing? Come on. No, you come on, sir.

Can you really, can there be spoiler alerts anymore? No, that's half the fun is the memes from it. And I don't say what's going to happen or who dies or anything like that. No, no, not fair. If you're watching Game of Thrones, you watch it live or you don't watch it at all. And I don't even watch Game of Thrones, but that's the rule. Or if so, one of the episodes a few weeks ago, we had to DVR it. And I stayed off the internet, like I stayed off Twitter the whole day because I knew people would ruin it for me.

So here's the deal. If you, in terms of spoilers, what's the correct amount of time? With Game of Thrones, it's instant. There are no spoilers. Too bad. With a movie, like a highly anticipated movie, all right, you got 24, 40, you got 48 hours. Is that fair? I think so.

Or you just, if you know, you want to know for sure and not have it spoiled, then just don't look and stay away. You can't be mad at somebody that spoils it for you, unless they go out of their way to be an asshole about it. But, uh, yeah. All right. I started watching. I haven't finished it. Just like, actually, I started watching this a few weeks ago while I was putting furniture together. Our Planet on Netflix.

It's sort of like planet Earth. We've been putting that on for our kids lately. Okay. My two-year-olds love it. Did you see the walrus scene? I don't think so. Okay. it was really heartbreaking, and I hope I'm not virtue signaling right now, but there was

walruses like falling off a cliff because of, I guess, their geography shrinking. Oh, I mean, yeah, I saw a lot of the stuff with the ice melting, but I didn't see that. It was really, really terrible to watch. How do they, how do they get some of the shots so close? I don't understand it. Is it CGI? It might be CGI. I don't know, but it's, it is really well done. I don't, yeah, I don't know. I recommend game seven of the Eastern Conference Finals between Philly and Toronto.

If you haven't seen that yet, sorry, spoiler, Kauai won it. Yeah, it was a buzzer-beater. Measure What Matters, a book by John Doer, who is a big name in Venture Capital. He talks about this thing called O-K-R, which is objectives and key results. And it makes a lot of sense, and I would love to be able to implement something like this in my life because I think I really need it. I just don't know how practical it is. Are you going to use it for your fitness goals?

Well, I did actually, today was the first day I started entering my lunch, my calories into my fitness pal. And I feel like honestly, for my mindset, if I don't hold myself accountable and actually enter it, I'm not going to do it. Okay. Can I give you some advice? I have such, I have no, I have no willpower. Can I offer you some advice in terms of like making this an investing parallel? Please do. If you have to like count your calories every day, it's never going to work. Like from a behavioral standpoint, like you need to just figure out a few meals.

You need to automate it like you automate your investing. So figure out a few meals that like hit your calorie levels instead of eating something different every day and then trying to count because you'll never get it. So pick a few meals that. Yeah, but counterpoint. I know I can't automate my eating. I just can't. Okay.

So I think that if I write it in or if I enter it in, then I will, I don't know. I don't know if the answer is obviously. I mean, for goodness sakes, look at me. me. All right. We'll get a progress update every few months from you. No, but you know what? This is, so investing parallels, you should not talk about your investing in public because for all the reasons we've discussed. I feel like if I talk about my eating weight loss in public, that's a good way to hold myself accountable. Yes, I definitely agree. So I'm not saying that I'm going to look like you, Ben, but maybe

I won't look like me. Okay. Get down to your natural weight. Okay. A few housekeeping items. Monday, we will have an episode out of Talk Your Book with Jeremy Schwartz from Wisdomtree. And then we're going to start our next. We'll have another talkie book the week after that on another Monday. And then the following Monday, we're going to do another rekindled. And we're going to do another rekindled. And we're going to do where are the customer's yachts. So if anyone wants to read along with us, we know we got a lot of good feedback on the big short rekindled. And people said, give us a heads up next time. So in a couple weeks, we will be doing a rekindled of where are the customer's yachts. If you never read it, highly recommend. But the beautiful thing about that book, among many beautiful things. beautiful things is that it's only like 150 pages. It's fairly short and it's one of the best written investment books I've ever read and it was written in like the I don't know 40s 50s way back when. But it's definitely worth the read. 18 or 19? I don't know. Right. Okay. Send us an email Animal Spiritspot at gmail.com and we'll talk to you next week.