Animal Spirits Podcast - Micro Bubbles (EP.27)

Episode Date: May 2, 2018

The most common ages in the US and what it means for the markets, micro bubbles in tech stocks, Amazon's Field of Dreams moment, Peter Lynch's stock picks, how our families impacted our thinking about finances and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing, hosted by Michael Batnick and Ben Carlson, two guys who study the markets as a passion and invest for all the right reasons. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions in the securities

discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Ben, today is your last chance to sell in May. What are you going to do? I think today's your first chance to sell in May, actually. No, it's your last. So, all right, this is kind of, this is kind of interesting. By the way, this will never go away. There will always be selling May articles every single year for the rest of eternity. I wish Selle and May blog post would go away. Never. Eddie Alphabet tweeted, going back to 1896, the Dow is an average gain of 0.49% from May 6th until

October 29th. The rest of the year, it's average 7.11% does not include dividends. I don't know, bro. Yeah, I'd like to see that done on Bitcoin, actually. Stocks only. So then Ryan Dietrich tweeted, before we get carried away with Selling May and go away, just remember that the SEP 500 has been higher in May each for the past five years. Well, there goes that theory.

Debunked. I actually think that this started in England, and I think there was something to this about why people actually went away, but I can't remember. I think it was something to do with horse racing, or does that sound familiar? I thought the idea was that all the traders go away in the summer, and they, I don't know. I got nothing.

Okay. Let's move all this topic. It's enough. So this week, Bill McBride had a cool piece, and he was using some U.S. census data that just came out, and he had a great chart. his piece and he writes at the blog Calculated Risk, which is probably the best and maybe only economics blog that I read. And going from the U.S. Census, they list out the top 10 most popular

ages by different years. And so he shows the first common with 2010. And then the one in 2017, the majority of the most popular ages in the U.S. are in their 20s. There's a couple in the 50s there. But the interesting one to me is that by 2020, the top 10 ages in the U.S., every single one of them will be 35 and under. Whereas in 2010, the majority were in their 40s or 50s. And so this is just the huge uprising of the millennials, which are getting ready to take over the world. And so it's kind of interesting to think about what the implications for this might be. Well, if demographics are indeed destiny, then what does this tell you? And by the way, who came up with that? I don't know. Albert Einstein.

All right. No, people attribute every quote in the internet to Albert Einstein. I think the biggest thing for me here is the fact that I don't know what this means market-wise. I don't think you can really use demographics to predict what's going to happen in the markets unless your last name is Mr. Dent. But I think the big thing for me, the financial implications is I think all these young millennials that are turning 30 are going to be moving out of the cities or within the cities are going to be buying real estate. And so I think by 2020s, 2030s, I don't know when, I think we're going to see a real shortage in real estate and young people bidding up prices of houses. All right. So buy home builders. You heard it here first.

I don't know. I guess I agree with you. This is not something that I spend that much time thinking about, but I mean, I suppose there could be political implications if all the young people vote. Again, I don't know the market implications are going to be, but I just think, I think the dynamics of the housing market have changed so much that many young people these days have been watching HGTV for the past 10 years, and I only say this half, half tongue in cheek, and they have high expectations for their first house. And so I think a lot of these young people want to skip the starter home and just buy something nice. And I think in a lot of places, those houses don't exist or they're too expensive. And so I think it's just, unless the baby boomers, I'll turn around and give their houses

to their children before they move to Florida, I really think it's going to be hard for this cohort to be able to, A, afford a house and B, find a house that's suitable for their HG, TV desires so they can entertain people in an open concept. Yeah, good point. I think that a lot of people, our age and a little bit younger maybe, are going to be spending more time in the city. So our parents, for instance, their start a house, they bought when they were like 23 years old, 24 years old. And now, like, I'm not moving to the suburbs. I'm 33. I'll probably be there when I'm, I don't know, 35. Right. So the 2030, the projection is all the top 10 ages will be basically mid to late 30s and 40. And so that's the point where, like you said, we see this mass migration

maybe to the suburbs away from the cities. And I think that's kind of been the what's happened with a lot of my friends from college. A lot of them move to cities for a few years. And once they settle out and have families, you know, people assume the millennials are going to kill all these different industries. They're not going to buy a car. They're not going to buy a house. That works until it doesn't. And people start having kids and grow up and have responsibilities. And then, you know, your tastes and preferences change over time. So what do you say? Two thousand thirty two, three real estate bubble. Is that? I had two thousand 31. We'll split the difference. All right. So there was a speaking of bubbles, there was a piece by research affiliates. Yes,

it's a bubble, so what. And I think the, I read this last week, so I forget the overarching thing, but I think that it was like that there are micro bubbles. I think they named Tesla for one as an example in cryptocurrency. It's not a, the entire market is not in a bubble, but certainly one of the areas that they identified as a micro bubble is tech stocks and a few good data points in here. At the beginning of 2000, the 10 largest market cap tech stocks in the United States collectively represented a 25% share of the SB 500, Microsoft, Cisco, Instagram, and Intel, IBM, AOL, Oracle, Dell, Sun, Qualaccom, and HP. And what's interesting is that over the 18 years, not a single one of those stocks beat the market. Oh, that's a good one. Here's, I'm not trying

to defend tech stocks here or their valuations, but here's an interesting counterpoint to this. Yeah, this time is different. Go ahead. So many, I mean, and maybe it was like this in the past, but it seems like so many of the big tech companies these days, before any challengers can even approach them, they just buy them out. So Facebook bought Instagram and WhatsApp and all these other Snapchat, I guess, is still staying public. But same thing with Google, and I'm sure Microsoft as well, there's so much, it's just so hard to infringe on their territories these days that I don't know if the competition is the same. Well, they agree. They agree. Actually, I'm making up. I don't know if they agree. But the question that they pose is, can all the seven tech high flyers collectively succeed sufficiently to justify their $4.3 trillion combined market cap? True. That's a fair point. And I guess that's the question.

And the other thing, this is all kind of maybe just, you know, a diatribe people like to go on in finance. But how long have we been talking about this tech bubble 2.0 since, I don't know, 2012, 2013? It's a good topic. Yeah, no, it is. But it's kind of like, even they say the term bubble gets thrown around too loosely. Well, yeah, that's a good point. They also would admit that, like, let's just say that they're correct and that this is a bubble. They do say that, you know, successfully timing it is, you know, ridiculously hard.

So what do you do by a fundamental index? So they're talking their book, but that's fine. I mean, we all do that. So I dug up an old piece of mind where I tried to define what is a bubble, and I use some definition of some Schiller and Asness. And I like this one from Cliff Adens. He said the term bubble should indicate a price that no reasonable future outcome can justify. And I suppose that's probably true in some of these cases. And in other ones, it's not.

But yeah, I do suppose that at a certain point, the growth rates and the valuations, you know, can continue forever. It's just a, you know, a point of expectations and what actually happens with the results. So we're anti-surveys here unless they either confirm our priors or we find humor in them, and this is one that I found humorous. They say a recent survey of fintech leaders, certainly a biased sample, but the group likely most heavily involved in trading cryptocurrencies, forecast returns for a calendar year 2018 ranging from at the low end 95% to 2,920% for the top 10 cryptocurrencies. That seems fair.

Okay. So that definitely seems like it falls under the clip as in this definition. By the way, what do you have to do to be considered a fintech leader? Oh, have it on your bio. All right. Hashtag. That's certainly a little crazy, especially since what are cryptocurrencies down so far this year? I don't know, 30 or 40%. Yeah. And then one other point that they made in the piece that I thought was pretty interesting that I haven't heard before, I don't think. If low yields in the United States justify high cap ratios, then why do zero yields in Europe lead to a cape ratio of 16 times? Yeah, that's a fair point. It's kind of the same thing as people assume that the Fed is manipulating the market here, which of course we know they are. But if the Fed is manipulating the markets here higher, why aren't the markets in Europe and Japan being manipulated higher? Well, because there's no micro bubbles because the tech sector is way, way, way smaller. Oh, true. Okay. So you can only micro manipulate things. All right. All right. Good to know. So we're going to stick with the bubble theme or the text theme, I should say. What was this piece from Oswath de Madarin? Yeah. Well, the first one from him actually showed, it was kind of interesting to point to your point about the bubble.

It showed the Fang stocks, and it showed them by year from 2012 to 2017 through year end. And in 2012, at the end of the year, the Fang stocks, which is what Facebook, Amazon, Netflix, Google. Yeah, this does not include Apple. a lot of people call it Fang, but this is just Fang. Yeah, right. No long A. It was 3.5% of the S&P 500 as of the end of the year 2012. By the end of the year 2017, it was 9.3%. So that's just showing the insane growth of these stocks have had in the market cap wise. Where does this top out? This Fang gets a percentage of S&P 500. I don't think it's a bubble until we hit 9.5%. No, I don't know. Yeah, it's close. It is close. So there was an interesting article in HBR about Amazon.

and some of the metrics that they use, I think this was by Justin Fox, and one of the things that he said was that the key metric of a company's cash generating prowess is the cash convergence in cycle, which is days of inventory plus days of sales outstanding, minus how many days it takes you to pay your suppliers. And he said that super efficient retailers such as Walmart and Costco have been able to bring this down to single digits, which is impressive. But Amazon was negative 30.6 days, which is pretty remarkable. By the way, did you remember that form? from your days studying for the CFA? When I read it, I was like, wait, well, this sounds familiar. I did not remember it at all. Okay. He also said that Walmart and Costco take 30 and 38 days to pay their suppliers, but Amazon takes 9060s. So they have their suppliers by the proverbial, you know what. So it's like they're getting a float in many ways, like an extra two-month float on their cash. Yeah, so a chart that we've seen a million times, but this just does a good job showing the difference between their net income and the operating cash flow is gigantic. And what's funny was that I was going through this and you said, hey, you know this post is from 2014, right? Right. And it's the same

thing could have been written yesterday probably. But it is kind of interesting to go back a few years and realize it's the same topics we're talking about with Amazon. Can this stuff continue? Low profits, high revenue growth, long-term thinking. So sticking with Amazon, I know we talk a lot about it, but forgive us. It's just such a endlessly fascinating company. So Oswald had another piece, glimpses of Shoeless Joe. And what he was talking about was how Amazon has persuaded shareholders that if they build it, profits will come. So one of the amazing charts in this post, which we will link to, is the growth in AWS, which did not even exist in 2012. In 2017, it did $17.4 billion in revenue, which was 10% of all of Amazon's

revenue. It was interesting in the book, The Everything Store by Brad Stone. It's kind of a history of Amazon. They sort of go over AWS and what it is. He's basically saying how amazing it is that Amazon was allowed to just walk into this segment of the market and not see Google or Microsoft try to do the same thing. And they were almost surprised that it took so long for them to reach competition in this space and like the cloud space. Is there like a genius behind AWS or was it like a group effort? I mean, it sounded like I can't remember exactly. They have a whole chapter of it in the book. It's been a while since I read it, but I think it was kind of like one of these things they just kind of stumbled upon. It's not like it was a grand, you know, scheme of theirs to take over the space. It just sort of happened organically. AWS did $4.3 billion in operating profits in 2017. The rest of the company, the rest of Amazon, reported a loss of $225 million. So it's 10% of its revenue, but it's more than all of its profits. And so after reading this piece, did you decide to put on another short?

Are you going along Amazon now? Not quite, not quite yet. I mean, it was interesting how he broke it up into, and he basically said, you know, there's three companies within Amazon now that we're breaking it down in. And I think that's part of the big story. So he broke it down into AWS Prime and then, you know, their sales and their media. And I think that's an interesting way to look at it as a fact that they're just getting so ultra-diversified within the company and a lot of people don't even realize it.

Yeah. So when he valued those three, he came to a shift. price of just over $1,000, which is 35% lower than today's prices. And I thought this piece was just really, really well done. He says that he hasn't owned the stock since 2012. And he wrote, given that I have not been able to justify buying the stock at any time in the last five years, as it rose some $250 to share to $1,500. My suggestion is that you do not take my word and that you make your own judgment. So I feel like I'm in good company with the professor here. And I wonder if, you know, it's always been said that Berkshire has something of a Buffett premium

built into the share price. You wonder if maybe there's now something of a Beasel premium where you can do all the discounted cash flow analysis you want and something like this. And obviously he put in a lot of time and effort and he's the valuation master in a lot of ways. But maybe there is something of a premium that Amazon is going to get from the market until the market decides to rein things in and call them out a little bit on some of their long-term thinking. Yeah. I mean, we said last week that it seems like Amazon has disrupted fundamental analysis, but there really is no company. I mean, it's still growing. Hugely, I think the, I mean, I'm making this up, but I feel like they grew recently at like 40% or something.

Like a huge company growing that fast is just unheard of. Well, and Charlie Blalow had, he had some good stats the other day on Twitter where he shared and he showed that Google, Apple, Amazon, all these big companies are still growing high double digit rates anywhere from 20 to 40%, which is insane because every year people say it's got to stop, it's got to stop. And of course, that's revenue growth. That's not profit growth. So obviously that doesn't tell you the whole story. but it is amazing how fast these companies continue to grow their top line. One last stat that stood out to me was that Amazon lost about $10 billion in shipping in 2017. That's like a gigantic number.

I'm pretty sure I contributed at least 5% of that because of all the boxes I've broken down in my garage over time. We must have, it's insane, but we must get, I don't know, five or six Amazon shipments a week. It is pretty crazy. And Galloway talked about this, too. I remember a few years ago when he was kind of down in the company saying that their shipping costs overwhelm even their prime subscriptions, I think. Right. Like that's not sustainable, but maybe it is. And did he did, did Galloway suggested they were going to buy the USPS or something like that? Yeah. It actually makes sense. It is kind of funny because the U.S. Post Office delivers to our house on Sundays because of Amazon pretty much. Like they never used to deliver mail on Sundays.

That's one of the things that has me looking forward to moving to the burbs because, I have two recycling bins in my apartment, one for, like, plastic, and glass and the other for cardboard. And the box, the recycling bin is like that big. So I'm always, so I'm like, I'm always like ripping the cardboard and making it to tiny pieces and just like fit it into that little thing. So I pretty much needed a three-stall garage just so I could fit all my Amazon empty boxes. And let me, let me update my housing model. Yeah, there you go. So there was a really cool tweets from last week. If you haven't heard about it, every year there's a Sone conference, which is pretty much a bunch of hedge fund and fund managers to come together and share their picks

for different securities, whether it's long or short. And it seems to be that the conference doesn't have quite as much publicity as it once did, I think, because the star hedge fund managers is kind of dying in a lot of ways. But there was an interesting tweet storm prompted by this conference from a guy named David Horn. And he talked about how he was put in touch with legendary investor Peter Lynch, who is the author of once it, what is it called? One up on Wall Street. Oh, one up on Wall Street? And also beating the street? No, that was Kramer.

Yeah, no, yeah, something like that. One up on Wall Street is definitely one of them. There was another one. But anyway. We need a fact checker here. So he said he was put in touch with Lynch. And Lynch is one of the most well-known, decorated mutual fund managers of all time. And obviously is still invested even after he got out of the game.

And this David Horn guy was talking about how he was put in touch with Lynch to discuss a company he was investing in. And eventually Lynch put a huge position in. And actually, there was a story in the Wall Street Journal. about it. And this is back in 2004. And a lot of people followed Lynch into this investment because he was so high on it. And I'm pretty sure it went to zero or, yeah, it went to chapter 11 bankruptcy. And this is when Lynch owned 8% of the company. And so a lot of individual investors followed him into it because they thought, well, this is a can't miss because there's

this legendary investor in it. And all these individuals followed him into it and lost all their money on it. Before Druck says, it was Lynch says. Yeah. And it's, It's just kind of interesting, and it's kind of a good warning for a lot of people who follow their favorite hedge fund or mutual fund managers or favorite author. For him, it didn't really matter because he admitted this kind of thing happens. I do my homework, but this is going to happen when you're going for home runs. Eventually, you're going to strike out. And so copying a big investor just because they seem so sure about their investment, that's a different story for the individual. So this goes beyond casual investing advice because this was a conversation.

between one of the best of all time and somebody else on the other side of that. And yeah, you just got to be really, really careful with investment advice in general. Like, it's almost, it almost never ends well. Have you ever heard a story from a family member or a friend who said, I just got the greatest stock tip ever? This guy told me about a stock and now I'm up 300%. What do you think I do now? It never happens that way. No, it's always, yes, I got a stock tip. It didn't work out so well. Now what do I do? I've lost a time. Do I wait for it to come back? Um, so, by the way, beating the street was his other book. Okay. But yeah, a good, a good cautionary tale. So a chart floating around the interwebs this week was from the St. Louis Fed has a blog where they showed

retirement account balances among all U.S. households, and it paints a pretty bleak picture. The median U.S. household held only $1,100 in its retirement account. And they go a step further and break it down by age because a lot of this is skewed by young people who do, who just, you know, are just starting. but even when you break it out by age group, it's not much better. No, this seems to be a running theme where I'd say once or twice a week, we see the retirement crisis stats, and they all are fairly the same. Now, was this a survey? I'd like to know. Oh, no, this was a survey. 2016 survey of consumer finances and author's calculations. But this actually, that survey of consumer finances is probably one of the better known ones

and it's by the Federal Reserve, so I'll allow it. That's the best survey. Yeah, but it's true. And obviously, You talk about this a lot, and these scary retirement stats seem to never work in scaring people into saving more for whatever reason. It just doesn't help. Yeah, well, it won't happen to me, I guess. Or you'll deal with it when you get there. Like, saving money is hard for most people. And I get that because, yeah, when you're young, you're not making as much, you're trying to

save for other goals, you're trying to save for a house down payment. Kids come along. I can see how people can put off saving for retirement, something that's decades and decades into the future. you just assume, well, when I make more money, then I'll save more. Yeah. Which is, which sounds great until you get, you know, get to that point, you don't have those saving habits ingrained in you. And this gets back to the bigger problem of income inequality. Most people, unfortunately, just don't make anywhere near enough to consider saving for retirement.

They have to worry about today. Right. Which I always tell people, like, if you're arguing over which smart beta fund to use or which value metric to use in your mutual funds or what your asset allocation is, that's kind of luxury to be able to complain about that because the majority of the population simply doesn't ever get to that point of being able to play with their portfolio and understand the little intricacies and try to worry about basis points. So that's in a lot of ways that personal finance stuff is just so much more important. So these type of charts and stories we see and hear

on the news every single day. My wife likes to wake up to Good Morning America and it's nothing but fire in the Bronx, burglary, this person was hit by a train. It's just like absolute garbage for the brain. Nothing good ever happens according to the news. But you wrote a really good post last week about all of the ways in which the world is getting better. And I talked about this a little bit with that book I read and I recommended it last week to you and Morgan. And this was based over the last six to nine months, I read four different books. And the theme in all of them was progress. And it wasn't that things are perfect because obviously there's a lot of problems in the world.

But if you look over any different period, the last 20 years, the last 50 years, especially the last 100 or 150 years, all of the lines are going in one direction. And things are getting better from almost every standpoint of humanity. And I think for a lot of people, it's hard because we live in this relative world where we compare ourselves to other people. And that free flow of information from the Internet makes it really easy to do that. So I took 50 different data points that I found in these books and I put them in a piece. And it was kind of nice because this got shared a lot and it went a little viral and a lot of people shared and gave, it had some nice things to say about it. I didn't receive too much pushback. I received a little bit.

But I think it's just a good reminder every once in a while to realize that if you take a step back and look back beyond the headlines, things are getting better in the world. And my favorite quote from the guy wrote Factfulness, Hans Rosling, who actually passed away in 2017. Someone asked him, you know, so you're just this optimistic person and you never look on the, you know, you're just looking on the bright side. He said, I'm not an optimist. I'm a very serious possibleist. So he's just saying the possibilities of, you know, technology continuing to get better and people continuing to want to wake up and improve their standard, you know, their standard of living. It just means that these, these trends are just going to continue and it's going to be real hard to get in the way of those. So objectively, by any measure, things have undoubtedly gotten better. I think that one of the reasons why it might not feel that way is, well, I think the news plays a big part of that. And just I guess the speed at which progress happens is, you know, a sloth-like compared to how quickly bad news travels around the world. But I also think that people just adjust really, really quickly to a higher standard of living. And there's also like the counterfactual thing that maybe you only experience what you're going through. So you don't necessarily, you know, if things aren't

good for you relative to your neighbor or your brother or whatever, then maybe it doesn't feel that way. So two examples of that that are sort of hidden statistics. The number of people in extreme poverty has fallen by an average of 137,000 people every day for the past 25 years. That is like, holy shit, mind-blowing. I think one of the reasons maybe people in the U.S. maybe can't feel this is because we got there a lot quicker than other nations did. And so a lot of the people coming out of poverty are in these other nations. China and India, the biggest one, where almost a billion people have come out of poverty in the last 25 years or something. Yeah, really good point. Another one, there are 180,000 people walking around today who would

have been murdered just in the last year if the global homicide rate had remained at the same level from a dozen years ago. And you and I talked about this a little bit on the phone last week. It's hard to have those counterfactuals when it's something is just, there's never going to be a headline showing something that didn't happen today. That just, you know, no one's ever going to print that. So it's hard for people to realize. Nobody walks around. saying, oh my God, if homicide rates had remained where they were, maybe I wouldn't be alive today. Like, who walks around thinking that? Right. So a lot of these, you just can't see them or feel them. And so it seems like it's just this intangible that no one can really

wrap their arms around. So anyway, I did receive a few emails from people telling me I'm an idiot. And my favorite one was some guy wrote to me that the world is obviously getting worse. Dad is for losers. And I had to almost applaud him on that stance because that's high-level trolling. Yeah, that's good. Yeah. I mean, again, I just like to have a reminder every once in a while that, you know, and I get caught in this, it's really easy because these horrific stories you see in the news, it's easy to fall into that trap where everything you talk about and see is negative. But it's just a good reminder to realize that, yes, things are getting better even though it doesn't seem like it. It's also, it's hard to have the mindset of

being very grateful for what you have. Like, like, you could always think about people living in poverty and how lucky we are and you see, you know, starving kids in Africa and it's so freaking horrifying and you feel awful, and then 10 minutes later, you go back to living your life. And I think it's just like a natural reaction of protecting ourselves, of insulating ourselves from just breaking down emotionally. True. And by the way, the Africa thing, maybe that's a topic for another day, but there was some great stats about the African people coming out of poverty in the years ahead.

And I think not to sound like an investment prediction guy, but that could be like another thing that no one thinks about in terms of like growth going forward. consumers and the huge number of people coming out of poverty in that area. No, own it. You're bullish on the Sahara. Okay. We haven't done any listener questions in a while, so we've gotten a couple good ones lately. So this question came to us from an advisor, and this advisor says, I know a client's money is ultimately theirs and that our job is as an advisor is not to tell them what to do, but guide them and talk rationally about expectations and their goals. But what do you do

or say if a client was adamant about going to all cash, despite the decision not being in their best long-term interest? So two things stand out to me. One, I think. think it's really, really important before you onboard a client to set expectations about what they can expect from you. And one of the things that clients should expect from all of their advisors is that they will not take orders from the client because then they're not giving advice. They're just doing whatever the client wants. And we will never listen to a client who demands to go to cash. What we will do is return their money, explain. to that they're not valuing our advice. This is not the way that we do things. So I think that's

probably the answer is setting expectations up front. And if they absolutely insist, then they are not valuing your advice and they're not a client and you're not their advisor. And I think that that is one of the upfront things. It's not just what can I do for you as an advisor, but here's what I won't do for you. And I'm not going to be a miracle worker. And if you want to jump in and out of the market and go from fully invested to all cash, back to fully invested to all cash, you know, I'm sure you can find someone who will do that for you, but that's just not my job. And unfortunately, I think there's probably a lot of advisors out there who have to take on clients who maybe aren't the perfect profile for what they can do.

And that's a tough position to be in. But I think you do have to realize that that client that you're going to be going back and forth with and trying to talk off a ledge all the time is going to be taking your time away from another client who you could be focusing more on things that you can actually help. And unfortunately, there are a lot of. of clients who have to experience a lot of mistakes for themselves before they can really get to the point where, you know, they understand that it makes sense to not play these games anymore. So another one, my 97-year-old grandfather is an incredible investor and I certainly call the

investment bug from him and my mom. Shout out, Grandpa Sam in Lacone, Illinois. Did both of you grow up in families that spoke openly about money and finance at the dinner table? This is a good question because I think a lot of, especially maybe not even investing, but personal finance stuff, I think you can get from your family. And again, I've said this before, but I think it's hard for parents to force good financial habits on their children if they don't have them themselves. And we didn't really ever talk about the markets or anything like that. I really didn't pay attention to the markets at all until I got out of college. I was definitely not one of these people reading barons every week as a high schooler or something.

But I think the personal finance side of things I definitely picked up from my parents and the fact that especially my dad really preached the virtues of not going into debt and saving money and not having that lifestyle creep. And so I think a lot of that really, I really learned from them from an early age and how important that was. And so I was brought up with that savers mentality. And I think that really helped a lot. I was not brought up with any introduction to finance. It was not spoken about by my, my mother didn't speak to me about it because she didn't really know much. And my father was a dentist. And thank God he didn't talk about stocks to me. But I don't think I would have been receptive to it either way, even if they did try and teach me responsible financial behavior.

That's true. And I think it's interesting to think about it now from the other side of the equation, now that we have young ones, like, how do you think about even trying to slowly ease them into that process when you're trying to teach good financial habits? Well, Kobe goes to sleep to animal spirits in the background. There you go. So he's thinking, short Amazon, short time. So one of my favorite tweets from this week comes from Urban Carmel, who always puts out really great stuff. So one of the pictures that he posted was source of change in the S&P index from the first quarter of 2010 to the first quarter of 2018. And a valuation increase drove 26% of the return, profit increase drove 68% of the return,

and share reduction, aka manipulation. was only responsible for 6% of the return. This is great because it shows that fundamentals have really been carrying the majority of the weight. And I think it's actually kind of surprising to see the valuation increase didn't have as much of an impact as profit increasing. And obviously, you could just circle this whole thing

and do Fed manipulation as 100% of it. But I mean, we'll post this one in the show notes again. But it is kind of, you know, people people, again, I've been calling this a bubble since, I don't know, 2010 probably. Just to just to say that there are some fundamental underpinnings to the stock market going up nine years in row, even though it may not seem normal. I remember one of our top caller people in the financial Twitter said in February of 2013, this reeks of euphoria. Yes, I do recall that. Yeah. And maybe the time it felt like that. And I think it's hard for people to wrap their heads around the fact that, you know,

just because markets are growing up doesn't mean that the fundamentals aren't as well and that they're going to follow the fundamentals accurately. But it is kind of nice to see the fact that, yes, part of it has been fundamentals increasing. All right. So recommendations. What do you got? Okay. I have a theory about Westworld. Did you watch this first season of Westworld? I did. Okay. I thought it was great. The twists at the end were amazing. I thought the whole buildup in the last few episodes were awesome. It was really well done. Great actors. I watched the first episode of the second season and I think this season is going to jump the shark

and I'm going to have to give it up because I think they ran out of stuff to do. I think that at a certain point there's some shows that are so good in the first season that they can't possibly hope to top them going forward. And I think that's going to happen with Usworld. That's how I felt about dark,

how I feel about dark. Yes, I said I am cautiously pessimistic about dark going forward because I don't know that they can top it going forward from here. There was so much good stuff that happened. I think that's going to be the case of Westworld. So I have a very tight trailing stop on Westworld. And I think I don't know if it's because I'm getting older, because I have kids,

or because of the fact that there's just so much good television on these days. But I definitely am much quicker to just completely shut a show out of my life forever. I'm with you. I'm taking a wait and see approach to Westworld. I'm not going to watch until the reviews are in. I just think that's probably a better approach. There's so much to do. So like why waste your time being first when you,

you can just get recommendations from people that you trust. Totally agree. We watched a movie this week called Three Billboards Outside of Ebbing, Missouri, which was good. So that's the one with Francis McDormant, Sam Rockwell, Woody Harrelson. Very good movie. It was a tad on the depressing side, especially at the beginning. So not really an uplifting movie in a lot of ways,

but there was two Oscars. Sam Rockwell won Best Supporting Actor, I believe. Oscar and Francis McDormant won Best Actress in it, and both of their performances were really well done. and it was the kind of movie where it was very depressing at first, but I think they kind of brought it around at the end, and I would say, I'll give this one a recommendation. And then just one book recommendation.

I finished a book called The Fallen by Ace Atkins, and he is actually an ex-football player from the University of Mississippi, and he writes a detective series based in the South. He's probably written, I don't know, seven or eight of them. It's a Quinn Colson series, so this is another detective one I read, and The Fallen was a good one, a good bank-wrapery one. So I add that one to my list of fiction. books. I didn't know that there was another detective series that you read. This is news

to me. I probably have, I don't know, six or seven that I've read in excess of 20 books a piece on over the years. I read the new, I read the new one every year. A lot of these go back to the 90s in some ways and they just release one or two books every few years. The only series of 20 books that I ever read is maybe goosebumps. That's all I got. That's like my, that's, and honestly, that's like part of my competition with TV. shows these days is fiction reading, which I don't do nearly as much as I used to. So that's all I got. How about you? Okay, so I'm almost done with Wild Wild Country. What a story. Yeah, it's bizarre. So I saw Infinity War on Friday, and the meme about the most ambitious crossover ever

was totally appropriate. That was a lot of movie, quite ambitious. I'm not exactly sure what I thought of it. It was a lot. Can I offer a spoiler? Sure. They're going to make more sequels. Nailed it. All right. I read Drive by Daniel Pink. And the basic gist of the book was that people are driven by three things, and that is autonomy, master, and purpose. And the external motivators are not nearly as powerful as we think. And one of the things that he did at the end of the book that I thought was really smart was he gave a Twitter summary of what the book was. Oh, nice. I don't remember that.

I read that book a few years ago. I really liked it. So there was just like a 140 character synopsis of what the book was about. I thought that was pretty clever. That's a good idea. You're going to start thinking about that for your book. Yeah, I thought about it. Too late.

I thought that was a really good idea. I don't think, I don't know if we spoke about this previously, but the Andre the Giant documentary was amazing. Did we talk about that? Oh, yes. No, but I loved it. It was really well done. Yeah, it was just freaking awesome.

So much of that, like it was definitely before my time. So all of that was new to me. I mean, the stuff about his, his drinking and eating, it was just, I mean, the stuff of legend, but the sad part was. that a lot of it was he was doing it because he was in so much pain because his body was so huge but yeah that was a really I thought that was really well done and he could tell he was like loved by everyone he came into contact with seeing him on the airplane was like a holy cow moment that was pretty sad yeah before they had like private jets for those guys and yeah but it was

that was really well done and then one other book that I read that I really enjoyed um I had no idea what this was about I uh I got this has a recommendation from somebody by the way I take book recommendations much quicker than stock recommendations. So this book, it's Killers of the Flower Moon, and I think that's like end the founding of the FBI. So the FBI part was what intrigued me. But this was about the Osage Indians in the early 1920s were basically pushed from county to county, state to state. And where they settled in Oklahoma was like the richest plot of oil in the country. And they sold rights to the land to the United States and to oil explorers and were just gazillionaires. And one by one, they started to die. And they were just

getting murdered for their money. And it reads like a, it reads like a fiction book, but it's not, this is the same author of The Lost City of Z, which I really loved. So I highly recommend that one as well. And that's all from me. I guess we'll see you guys next week. Yep. Email us at Animal Spiritspod at gmail.com. Check out the show notes at either of our websites, the arreloidinvestor.com, or welcome to commonsense.com. Thanks for listening.