Animal Spirits Podcast - Millennials on Communism (EP.120)

Episode Date: January 8, 2020

On this week's episode, we discuss Ben's new book Don't Fall For It: A Short History of Financial Scams, the future of the publishing world, how markets respond to geopolitical uncertainty, why this bull market lacks euphoria, risks & opportunities from an aging population, how many people actually have a budget, 401k hacks 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 sponsored by our friends at Y Charts. One of the reasons that I like Y Charts is because it makes our lives easier as someone who's trying to provide content to people. So I wanted to see how U.S. stocks have performed under previous geopolitical crises. And so I went back and I looked at what happened during World War II in the Korean War and the Vietnam War. And it was easy enough to pull up not only those charts, but also put a headline on them. So I put World War II, and then in the bottom, it has our little Ritholtz wealth management logo. So I love the fact that you can just take the data instead of having to transfer all over. Put it in your own thing and it looks good.

Whitech does that for you. Go see them, tell them Animal Spirit send you, and get 20% off of your initial subscription. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Batnik 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. A hearty congratulations, Ben, on the upcoming release of your third and final book. Potentially. It could be after what I went through this week with it. But yes, as people read this, my book should be available at all finer book establishments except your local bookstore because they don't have any books there pretty much, right? Do you mind if we do the obligatory take a step back? Sure. Let's do it. By the way, that's another phrase that is only used on podcasts and never in the real world. Imagine in a conversation somebody said, wait, let's take a step back.

I don't think I've ever got a hearty congratulations since like 1984 either. So that was pretty nice. Well, there you go. So, all right, the book is called Don't Fall for It. And what's the subtitle? A short history of financial scams. And when I had the book idea, I think after I even signed my contract, I didn't have a title. And you actually gave me the title. I said, here's the premise. And I cannot figure out for the life of me what it should be called. And you said, oh, call it, don't fall for it. And that's what we went with. Hey, sometimes, I don't know. All credit. I think. I don't know why I wanted to write a book because everyone who writes a book always talks about how miserable an experience it is. And it actually wasn't that miserable for me. The miserable part for me was after I was done writing it actually because I don't really enjoy the back and forth editing. I was finished with this book in July. And we're now going on the beginning of January and

it's finally going to be published. And it looked like this week, I got some emails from people who had bought advanced copies and said, hey, I got an email from Amazon saying it was pushed back to February. And unbeknownst to my editors, there was a problem or my publishers, there was a problem. And they just fixed it. Can I give you a compliment? Sure. You are the number one endurance writer in the entire financial world. Okay. Do you say that's fair? Endurance. That's probably not a bad way to put it. Like, okay, so you know there's people that are in like the 100,000 mile club or whatever it is? Yes. I don't even think anyone comes close to writing as much as you do. I am surprised how much I enjoy. It's just part of my routine. I feel like I need to write something every day. I'd say

that's fair. As I was writing this book, I was still blogging and writing for other places and yeah, it's just, so I actually kind of enjoyed the writing process, even though by the end I was just ready to be done with it. And I wanted to make it a short book. And the whole idea, I actually wanted to write. My publishers approached me and said, hey, it's been a few years. I were ready to do an updated version of a wealth of common sense yet. And I said, well, no, I wrote that in 2015. That's that's a little, you know, that's a little presumptuous to think that people would want another revised edition already. I might do that in like 10 years or something, but I had actually already been putting some Google docs together for possible other books. And one of them was a

personal finance book, which I'll never do because I don't think that there's a need for that. And another one was, like, I wanted to do the 10 greatest charlatans of all time, because I started reading about some of these people. And I wanted to know why people fall prey to charlatans and why they make bad decisions. And most of the time it had to do with money. and I thought that would be a little too mean, maybe, mean-spirited. And so I went down the rabbit hole a little bit, and I'd already probably been researching this for three or four months when my publisher approached me. I said, well, what if we do this, more about financial scams and fraud?

And they said, great, let's do it. And then you gave me the name, and here we are. Well, there are some, so I read it. There are some incredible stories. Like, I remember as I'm reading it, I'm just, like, ready to you. Like, I can't even believe that this is real. But I think the thing that stood out the most was probably, I don't remember the exact details, but the man that, like, sold the Eiffel Tower?

Yes, was that it? Twice. Yeah, a guy tried to sell the Eiffel Tower twice. By the way, he did not own it. No, he was scamming people, and he pretended to sell it. And the guy who he sold it to the first time, never even reported it to the authorities, which is one of the themes I ran into in the book is that a lot of times these people would have fraud committed against them, and they wouldn't want to tell anyone because they were too

embarrassed. So the book is pretty short. I tried to keep it. They wanted like 225 pages, and I said, sure, I'll give you that much. and ended up being 170, which is exactly where I wanted it pretty much. It's short, and I just wanted to find the best stories and anecdotes and data points from all these different stories about financial fraud and scams. And then I found all these, as I was doing the research, I found all of these pieces that

kind of came together where there were these certain elements in all of these situations that kind of brought it together. And most of the time, it was a financial rip-roaring bull market. And so I got to do a little bit of financial history in here, too. Wait, that's kind of interesting because you would think that potentially it's easier to sucker people when they're down on their luck? I kind of said it's probably easier at the extremes, but bull markets seem to be like the roaring 20s is probably the most fraud committed per decade of any I came across. It was just ridiculous. What was the most recent example? Well, the one that I put in there was the, I used some of the made-off stuff, but I looked at that from the victim's perspective as opposed to his perspective and what he actually did. And I tried to put a different spin on these because a lot of these, There have probably been 100 books written on the South Sea bubble, which is by after my research, probably one of the greatest bubbles of all time. And I tried to put a different spin on it. So that's where I use my type one and type two charlatan angle. So can we just describe that really quickly? Because that was my favorite part of the book. And we say this to each other all the time. So I actually workshopped this a little bit with William Bernstein, who's one of my favorite authors. And I told him my idea for this book. And he said, well, if you're going to write about charlatans, you have to batch them into two different groups. One of them.

is insanely smart and believes everything they're doing and still takes people for all their worth. And the other person goes in as basically a crook looking to scam people out of their money and they know exactly what they're doing because they're so good at sales. So type one is the smart person that's fooling themselves or that believes their own BS? Yes. And then type two is the one who comes and they are just trying to make as much money as they're possible. Yes, exactly. And so I don't know. I couldn't figure out which one is worse because they're both hard to see through. Maybe the second type is actually harder. so that's one of them.

So I don't want to make the hard sell here. I'll probably go on a little bit of the podcast tour for people. I'll make the hard sell. I'll make the hard sell. This book was awesome. It's the best book of the century. It will only take you four hours to read. Get it on Amazon. This should be on the top 10 list for best books of 2020.

If Bill Gates and Barack Obama are not recommended this in December, something will have gone wrong. Yeah, I'll probably have more to say about this in other podcasts. I'll go on a little bit of a podcast tour. I don't want to go on a ton of them because I don't want to just give away the whole book. I want people to actually read it. Yeah. You know what? That's, hearing myself say that that sounds kind of jerky. In all sincerity, it was an excellent book. I really enjoyed it. And I'm not just saying that because I'm staring at Ben. Yes. And you were the first person to

ever read it. So there you go. All right. So you got into the IPO. Let's talk about a little bit about the publishing aspect of it. Yeah. This kind of made me realize, I feel like in a decade, 15 years or so, we're going to have a barbell publishing of the Tim Ferriss's and Malcolm Gladwell's and James Patterson's on one end where they sell millions of copies and get a huge advance and take some risk off the table for them versus everyone else just publishing on Amazon. Because that Amazon self publishing process, it was so much easier than this. And it's so much quicker to just hit a button and the book goes out to the whole world. Whereas, as you know, it kind of felt good to have your first book published by a publisher because it gives you some credence. It was credibility.

Yeah, it gives you credibility. And it's something of a business card. And it, but I just see the publishing world really changing from here where it's just going to be so much easier for people to do it on their own. And it's more efficient. You can get it out quicker. Well, God forbid your book sells well. And I don't think anybody writes a book to make money because that's not on the cards for most people. No. But my book actually did sell fairly well. And I was just looking at the economics of it the other day. And my payout was about 15%. Right. And you did 99% of the work, not to short shift your publisher, but in terms of publicity and putting it out there and getting the word out.

Right. Well, but here's the thing. That being said, I don't know that I would have sold as many books if I self-published. And I don't know that I would change anything because maybe the second time around, I wouldn't lead on them. But you're right. There is some sort of gravitas that goes with having it published. And they make it, it looks nicer than a self-published book.

They have the editing. You don't have to go and hire someone to put it all together for you and move it around and make it look nice. So there is something to be said for that. that makes it easier, but you can outsource that stuff if you know where to look. And so I just think if I continue to write books in, I don't know that I'm going to write one for a long time now, I'll probably continue to experiment a little bit and see what else is out there. Well, let's tease this. And I think, I'm sure we've spoken about this in the past on the podcast,

but we might actually do a book in podcast form. Now that we've said it four times, we have to do it. 2020, we're going to do it. Yeah, I'm not too excited with the idea of this gigantic. project but I think it could be fun we're in okay so anyway my book don't fall for it go find it anywhere which pretty much means Amazon are we going to look to it in the show notes link to it in the show notes I'll have more to say about it on my blog this week I'm sure and thanks to anyone who already bought it I really appreciate it and a bunch of people

already sent me that they bought advanced copies so that was pretty cool so on to better news world war three yeah what about it I mean obviously people are being a little hyperbolic I feel like any time there's some sort of geopolitical crises people bring that out now actually trending the other day on Twitter, World War III. Wait, can I say something? Yeah. How do we, obviously you and I, at least, I think I'm speaking for you, we know literally nothing about Middle Eastern politics, right?

Right. Yes. Fair to say. So how do we know that it's hyperbolic? What if we're just being... Do you ever really think there's going to be another World War, unless it comes down to nukes? I mean, fine.

Maybe that part is hyperbole, but... Could there be conflict? And especially as technology progresses, isn't it just going to be drones fighting each other one day and not in the human element is going to be taken out. I know that there's obviously people that are going to be in harm's way and people have already gotten harmed and killed because of this. And so that's not to diminish that, but don't you think that what World Wars used to be? That's just, that's off the table forever. Okay, agreed. But nobody cares about our take, so let's move on. True. Well, the point I bring it up is because I went and looked at some

of the performance of what happens. A few people came back to me, and I wrote a piece on fortune for this. A few people came back to me and said, oh, really, does anyone care what the markets do? when there's a conflict like this, people are dying. And it's like, yeah, of course, but people still have to live their lives and move on. And I was just surprised to find that. I looked at World War I and World War II. And somehow from the whole period of World War I and World War II combined, and this is, they're each like five or six years together.

The Dow was up 115% combined for both World Wars. And even in Korean War, stocks were up almost 60%. In Vietnam from 1965 to 1973, stocks were up almost 45%. My whole point was just, and I was kind of surprised by some of these because I hadn't really looked. And so I pulled up the data on white charts. And my whole thing was this was just kind of shocking and surprising to me that markets don't really react to people always say like markets hate uncertainty. Is there a bigger time of uncertainty than during war? Yeah, I don't think you're saying, I don't think you're hoping for war because it's good

for stocks, obviously. I was actually surprised that stocks did so well during the wars of the past. I think what you were pointing out is people's inclination is to be fearful as they should be on a human level, but it doesn't really affect the market the way that we would think. So point taken. So there was an article in the Walsh Journal of warring market, but less research. This is a good lead. If the S&P 500 rises 29% in a year, but no one does around to tell clients, does anyone make money? So the gist of this is the slow, gradual, probably secular decline in research analysts. The number of research analysts has declined at investment banks. It has declined from about 3,800 to at the end of 2018, down to 3,500 as of June. So pretty swift. And this got me thinking, remember like, I don't know, five, 10 years ago, there was a big article in either the Times of the journal that there was just way too many lawyers in school and in the field. And I wonder if the CFA exam is a new bar exam. Oh, that's a pretty good lukewarm take right there. Thank you. Give you credit. That's true. that it's just my first internship in the industry. I was a senior in college. I worked for

a couple. I interned under a couple of investment research analysts in Philadelphia. And they had, this is a place that no one has ever heard of outside of Wall Street, probably, and maybe inside of Wall Street either. And they probably had 40 different analysts, along with research assistance for those analysts. And that's who I worked for is kind of a person behind the person. And I couldn't believe how much research was being pumped out on these companies and sectors and industries. and that people were paying for it, it does seem like most places these days, unless you're producing it internally, most places can handle that themselves now. Why would they need to pay someone for it unless they really find an expert? So, I don't know, do you think that this stuff

is now just mostly PR, and that's why it's just in such a decline? Well, that combined with the move to index funds. Obviously, it's an enormous role. And Josh had a great point. He wrote a post this weekend talking about how people keep trying to figure out, why is there no euphoria in this market when people have been giving all of the opportunity to have just go crazy. And part of it is because Wall Street is not pushing on the gas pedal to push people into that euphoric time, I feel like, because we've had index funds. We've had people on Wall Street that are losing their jobs. And Wall Street does not feel like this.

You sent me a stat today saying, what was it, 11% of large cap managers beat their benchmark over the decade? Yeah. And there was this other story in Bloomberg that talked about how zero fee stock trading commissions were 50 years in the making. And I think this is part of it too where people on Wall Street are not going to be celebrating lower fees, right? That's the investors are going to be celebrating that. Right. And so I never realized. So they talked about how we've talked about this before. I think it was 1975. It was on May 1st that they abolished these fixed rate commissions

and allowed the prices to float a little bit. And that's when places like Charles Schwab sprung up these lower fee brokerage firms. I didn't realize that they called that May Day because the head of Morgan Stanley said that it was a code for distress. They thought this was going to be the end of the industry, basically. You thought I assumed they were just for the month. Yes, that's what I thought too, because of the month of May. But it was called May Day because they were so worried. And they said a year later, 11 underperforming brokerage houses had merged with competitors. Nine failed. But this Morgan Stanley guy back in the day, Robert Baldwin predicted 200 investment banks would go under because of these fees falling away. And I think it's just one of these things

where you, obviously you learn these places, kind of like a cockroach, will figure out a way to survive and move on to something else to make money on. So also in this article, here's a quote, big players like insurance companies and pension funds accounted for only a fifth of total trading volume in 1950. A decade later, they accounted for a solid majority. So does this mean that all data prior to, say, 1960, should be taken with a giant grain of salt. It's a grain of salt or sand? Why don't I keep always mess it up? Is it sand? It's a grain of salt. You said sand before. It's salt. All right. I got to write this time by accident. I think we could probably break it up into, I don't know how many different stages there are of.

So you have like your pre-internet stage and then your post-ternet stage and you have your pre-data stage, which was, I think they started putting it together in what the 60s or so, that sort of great depression period to the 60s. And then you have the period before the Great Depression where there really wasn't any data to be heard of at all. I'm sure we could kind of break this down in the different cycles and stages. But I think there's always going to be new as the data keeps progressing and getting better, there's always going to be these new stages where it almost makes the past moot in some ways. I feel like the only data we should be looking at is the modern data is March 2009 to today. That's what the stock market started. Yeah, exactly. There's never been a bare market.

You know what I know now that I wish I knew 20 years ago, that stock only go up. Okay. I wish that I knew people on podcasts were going to ask that question all the time so I could come up with a better answer. Yes. This could be a good project for us to come up with like a definitive start and end dates of these cycles, but obviously that'll change going forward as well. So Fred Wilson at AVC put together his what happened in the 2010s review. And I think he did 10 things that happened, which is a pretty good review. A lot of it is very tech focused. Here's the one that was interesting to me. He took this from Axios. And he said, he talked about how this was the decade where the rich got richer. And it says that the rich in already rich countries, plus an increasing number of super rich in the developing world, captured an astounding 27% of global growth. But the rate of extreme poverty around the world was cut in half over the past decade from 15.7% in 2010 to 7.7 now and all but eradicated in China. So my take from this is things like globalization have made things so much better and are lifting up people all around the the world, but they haven't really made things better for people in the United States because we are more in the mature phase of our economic life cycle. And so rich people are getting richer,

and it's almost like the middle class is slowly going away in the U.S. because we're being more mature. And when we were coming up in our growth stage, I wrote about this about how World War II basically created the middle class and gave us this huge burgeoning middle class that could afford homes and cheaper educations in the 50s and 60s. And that has basically gone away since the 70s, slowly, but surely. So it's weird to think, oh, the world is getting better, even though things here might be getting worse, but that's such an overgeneralization, right? Maybe it's not even that things are getting worse here.

It's just that things have reached a point. Yes, for a certain cohort, and it's harder for them to get ahead. It is a strange place to be. And I can see both sides of the debate saying, I like to point out the stuff that we talk about this. Maybe this was the best decade in human history as that Matt Ridley guy had said. But there were so many losers. Yeah, you still have to be sympathetic to the people that are potentially being left behind.

So there's like 17 legitimate contradictory arguments. Yes, and they can all be made at the same time, which is why it's easy to both be pessimistic and optimistic about where we sit in the world. Even though we've had a wonderful 10-year stretch, there are still many people out there who think that we just went through the worst decade in history. I think that your view... For some people, maybe they did. I was going to say, you're right. Whether you're optimistic or pessimistic is going to rely on one thing. thing. How is your decade? Right. No one cares about the economy if they're going through a personal

bare market because their income's not growing or they lost their job or whatever it is. So you shared with me the JPMorgan Guide to the Markets, which that's kind of your corner. You've planted a flag there. You did a post about this, right? I do love it. I mean, there's so many great charts. And I was thinking about this as this is going through this. This is free information. It's one of the better pieces of free updated information. And I don't know why. other investment firms haven't tried to copy this. Maybe it doesn't, I don't know how much it really does for them, but I think the research in here is great. And the reason I thought about this is because you shared with us, and I think you shared it on Twitter too, the growth of the middle class

and they break it down by emerging markets. And they're showing from 1995 to 2018 and then projected out to 2030, we're seeing this massive growth in middle class in places like India, Indonesia, China, Brazil, and Mexico. Going from like 14% in India, now to project it to be 80% in 2030, which I don't know how they're making these projections. So this looks like literally billions of people being lifted out of mass poverty. Yeah. So it's kind of crazy how the middle class in the U.S. is falling behind. And then you have all these people entering the middle class in the emerging markets. And then maybe potentially the next decade, it looks like they're predicting here.

A few other trots I want to mention. I think we've mentioned this before. I'm sure we have. The consumer balance sheet. And people always talk about the liabilities, which are enormous. 16.4 trillion dollars is just a number that is beyond comprehension. What have you stacked up 16.4 trillion, $1 bills? And then you compare it to Apple's cash, which one would be taller? You would reach Timely Jones' ship in Ed Astra. That's how far you would go. All the way to Neptune. But of course, on the other side is the total assets, which is $130 trillion. dollars. And yeah, the liabilities are big, but debt as a percentage of disposable income is basically at like a 40 year low. So it's lower than it was in 1980. And it peaked in 2007 before

the crisis at 13.2%. Now it's down to 9.7%. And even in 1980, it was at 10.6. Yeah, it's the lowest that's been on this record. This is just debt payments as a percentage of disposable personal income. It's kind of hard to believe after what we went through. Yeah, it sure is. Jake, At economic pick ran a poll, like, I am a blank and I blank the bombing. So it was Republican, support. Republican do not support, Democrat, you know. So one other giant determinant of whether you're optimistic or pessimistic probably has a lot to do with not just your personal position in life, but also your political affiliation. So there was a chart showing the percentage, again, from JP Morgan, showing the percentage of Republicans and Democrats who rate national economic

conditions as excellent or good. And 79% of Republicans said it was excellent or good. Only 33% of Democrats said it was excellent or good. And I would bet that these numbers flipped when Obama was the president. So leave. It's really difficult. It sounds so trite. But like, you have to leave geopolitical events and your political affiliation. You can't let that interfere with your investing. Yes. Can you do some technical analysis on this chart for me real quick? It is kind of hard to believe how it just shot up. But do you think. think that there are more than just a handful of people that wiggle around their portfolio based on what's going on in Washington? That's the thing. I think I'm guessing a lot of these people I'm going

to give them the benefit of the doubt and just say that they have this cognitive dissonance where even if things are going well for them in their portfolio, they probably don't touch it very much. They just say they feel better because their person is in the office. So I think this is more of a survey type of thing and it is people actually making legitimate changes to the way that they save, invest, and spend and that sort of thing. I think it's just people have pride. when their team is winning, quote unquote, and when it's not their team, they try to make excuses. So I think this is just another reason that we detest surveys so much. Yeah, we talk about them all the time because we have a lot of surveys coming up here, don't we?

They're juicy. This is a good chart. Who is this from the Capital Group maybe? I would not have guessed this. So this is in U.S. dollars, which changes things a little bit. But in 2019, 44 of the top 50 stocks, again, in U.S. dollars, were based on foreign soil. In terms of how they performed? Just performance. Okay. That is pretty impressive and kind of surprising. And now, do you think this gets to the point of how some international stocks are based in foreign markets, but then they list here?

And that's part of it? Or do you think... So it's the MSCI All Country World Index, XUS, for non-U.S stocks. But I guess, I mean, obviously there's a lot of problems here. Like, I'm sure I would guess that a lot of the 44 stocks on foreign soil were probably much smaller companies. So it don't quite have the same effect on the overall market. Right. Yeah. So this says 74% of the top stocks since 2010 have been based outside the U.S. And to your point, yeah, that's why you'd think, well, what about Apple and Amazon and Facebook? This is just percentage terms. This isn't like market cap growth or something like that, which has a much bigger impact on a market. If you looked at these indexes from 2010, the U.S. has demolished foreign and it's not even close. But I think that's almost one of the things you could hang your hat on if you're big on foreign stocks is they are basically small cap companies. Apple and Amazon,

are bigger than some of the entire markets in some of the developing world. Those stocks themselves are bigger than the entire stock markets in a lot of these places. So I think if you want to think of having opportunities overseas, it's almost like you have this long runway of these small and midcap stocks that have a ton of room to grow, hopefully, and think of those economies almost like that as well without being as diverse as we have here in the U.S. That'd be my sales pitch there. Makes sense to me.

So there was an article, an op-ed in the New York Times. We're getting older, but we're not doing anything about it. Some pretty harrowing data in this one. The population of the prime caregiving age group from 45 to 64 is expected to increase by 1% before 2030, while the population over 80 will increase 79%. Holy cow. That's a wild statistic right there. So around my house, within five miles of my house, in the last, I don't know, two or three, years. We've had three new old people's homes go up, like these huge new complexes. And if I had

to bet on secular trends, they're going to continue for a long, long time. It would be old people's homes betting on this aging thing. And I would love to be able to bet on a way to tattoo removal for young people, for millennials. Those are my two age-based investment themes. I don't know how I would invest on them personally, but that's where I'm going because we've never seen anything like this. with the amount of people that are going to be living longer and I think it could potentially create this class warfare

between the OK boomer stuff I think is just the beginning of it. You think so? Yes, because old people are going to have so many needs and all at the same time that older generations of the past didn't have as much groundswell

to come together to try to create. I mean, think about how much money is going to be spent on health care for these people and assisted living. I think there will be a lot of stress on the children. I think an update of this article is something like 84% of patients have assistance from their family. So I think. Yeah, but I mean, don't you think all the stats show that the young people aren't prepared for that anymore? So don't you think they're

going to come hat in hand to the government and be like, listen. Well, 80 year olds don't have We need politicians who are going to help us. Screw the grandkids. We need help now. I'm not talking about our parents. I think it's our parents' parents. True, but the The sheer amount of baby boomers are going to be aging in the coming years. I think it's just, I think it's going to present huge, I don't know what it means. I think it's just going to be, to the point of this article, we're not doing anything about it. I think it's just going to happen all at once and people are going to go, holy crap, this is a big deal. What are these people are going to do? The median savings rate of people in their middle age, I guess middle older age is just $15,000. Social Security gets you another $15,000. So for a 20-year retirement, that's big, big trouble. This sounds like a big number, but I guess it's contextless. So there might be some denominator. blind this year, but this is from the article. People over 65 had withdrawn an estimated $22 billion from long-term savings accounts in the previous year to pay for health expenses. Medicare didn't cover. And yet, they didn't crash the market. People are worried that the baby boomers are going to crash the market when they all go to sell at once. I'm taking the other side of

that one, but maybe I'm wrong. So I know you're only half kidding about that, but that is a, I don't want to say legitimate argument, but it's an argument that you hear often that baby boomers cash in is going to crash the market. The market is owned. The ownership of the market is concentrated and people that don't need to sell. Exactly. Yeah, what is it? 85% own 10% of the assets. I like Schiller's point in this.

He talks about this in his book Irrational Exuberance, one of the updated versions. He said, and maybe this is giving the market too much credit, but he said demographics are one of the easier things to plot out now. I mean, not exactly, but you can plot out demographics pretty good. And so if the market knew that this wave of selling was coming, you would think that it would get ahead of it a little bit, wouldn't you? It's not like this is news to anyone that,

people are going to get older. And a lot of the older people have the asset. So I just don't think it's going to be that, have that big of an impact. So this article said, as you pointed out, the median savings of people in the middle age is just $15,000. And that's according to the National Institute of Retirement Security. Then there was this other article you sent me from investors.com. And they gave out the 401k retirement savings by age group. And this is from Fidelity. And they said the overall balance grew from the Q3 of 2009 from 68,000 to Q3 of 2019 to 306,000. And again, that's the average. And it kind of just shows how much difference there can be when you look at the numbers. I guess obviously this is kind of maybe a difference between

average and median, but it also shows probably the difference between people who have access to retirement account and people who don't. So I think the number is something like 40% of people have access to workplace retirement accounts, somewhere in that number. And I've seen if you include things like small businesses and people who sort of work on their own, the number is probably closer like 14 or 15%. Can I say, I don't believe this. These numbers? They're way too high. I don't believe that the average millennial has $137,000 in their 401K. I just think, I don't know, I think that's like not even close to write. See, someone tweeted out the other day that the oldest millennial is going to turn 39 this year. And that was a brutal sub-tweet of yours truly, because

that's me. I'm turning 39 this year. And so maybe the people in their older 30s, maybe they kind of skew the averages up in some ways and millennials are getting older. That's still a big number. And again, this is just from Fidelity. So this isn't all 401Ks. But Fidelity is like the biggest provider. That's what I mean. So I'm guessing Fidelity, guess what? They probably handle some of the biggest corporations in the country because they have trillions of dollars in their 401Ks. So they're probably catering to some of the more wealthy millennial crowd who makes more money in baby boomers. So that's why these averages are higher, I think, because it's coming from a place like Fidelity. If there's a listener who works at Fidelity or has access to this data, please send them to us, Animal Sparretspot at gmail.com.

But yes, it does seem a little hard to square away with other stuff that we've seen. Unless they were investing in Bitcoin. Yes. Everyone put in $10,000 into Amazon at the beginning of the bull market. When markets really started in March 2009, that's when everyone started investing. And the other reason this doesn't square away is because here's a CNBC survey. And this was kind of funny. I sent this to you yesterday and I didn't even really look at it. So you pointed out to me, this survey from slickdeals.net.

Sorry. When you get a website that has a dot net, does that, I mean, how does anyone still have a dot net? Doesn't that seem like something from like 1998? You ever see the Julia Roberts movie, the net? Sandra Bullock, actually. I'm sorry. I was a standard. Yeah. That was like, yeah, people climbing through wires and stuff.

So they said 74% of consumers say they have a budget, but 79% of them fail to follow it, which that's like the meme. I don't think this means what you think it means kind of thing. I would say 3% of people have a budget. Yeah. It's a very small number. But they say extra spending from people outside of their budget equates to an average of $7,400 per year, which honestly, this is a survey. take it with a grain of sand, to quote you. But I think the average credit card debt is something in that range of like $7,500. So this probably, for some people, it's probably not that outside of reality. Let's stick with service. America's love affair with driving takes a backseat according to the Wall Street Journal. Drivers aged 16 to 19, drove 24% fewer miles in

2017 than people the same age in 2001, according to a, you guessed it, a survey. If you surveyed me and asked how many miles I drove when I'm 17 years old. I don't. Yeah, that's true. How many 17-year-olds do you think run out of gas? Like, once a month. Like, when you're 17, you don't think about this stuff. When I really felt financially secure was when I could fill up my gas tank. Yeah, that's probably true. Right. Before, I don't know how old I was, you go to the gas tank and you give them 20 bucks. see or you're like you're like i have 785 how far will this get me so they say that the reasons for the decline is because a lot of young people are moving to their jobs in big cities that are using things like uber and a lot of more people are

working from home so they said that's increased since 2010 it was 5.3% in 2018 versus 4.3% 2010 i believe that i buy that honestly like there should be some sort of direct correlation between people driving less and having more happiness. Because when I looked for my office, I guess it was 2015 when I came to Ridholtz, my number one quality that I wanted in an office was close to home. So I have about a five-minute drive to my office. And before I had maybe 15 or 20 minutes, not too bad, but I never get stuck in traffic anymore. And I'd say that this has made me, I don't know, 7% happier in life, give or take. It's taking away that commute and not being stuck in traffic is just like a godsend. I think it's great. So driving fewer miles for me,

I think that's one-to-one happiness. Do you think that this is a chart crime? It shows change since 1971 in Miles Driven and the overall economy. And the y-axis is percent change. It's showing because from the early 1970s to the 90s, it was basically neck and neck and then it veered off. So I think anytime you can line up a chart and it looks the same as another chart, you just kind of go to yourself like, uh, yes, nailed it. We got this. I agree. These two time series are, do you think, were there chart crimes this bad in like the 1970s or 80s, or do you think data and information has gotten so bad that we're at an all-time high in chart crimes, and it's not even close? That has to be true. There's never been more chart crimes in history.

And I'm not calling the top either. Yeah, I thought the top would have been your pie chart, but apparently that wasn't the case. Still room to run. All right. One more survey. According to U-Gov, which conducted the poll, capitalism amid a widening divide between the haves and have-nots has plunged in popularity from a year ago, with one out of every two millennials, age 23 to 38, supporting it. Meanwhile, 36% of millennials polled say they approve of communism, which is up significantly from 28% in 2018. So I think this is, again, one of the reasons we hate surveys. This says 70% of millennials say they are likely to vote socialist. and I think that they're just conflating terms and ideas here, and the headline here about 36% of millennials support communism just is absolutely false.

It's totally false, and they don't even really know what communism is, and people who are trying to dunk on this and say millennials are all idiots, I think that this is just a poor survey, and it's poorly worded, and it's not true. I couldn't agree more. Yeah, so I don't think we're at risk of seeing a communist state when millennials all take over. So a few weeks ago, we discussed the longest drawdowns for different asset classes. I didn't realize that that chart started in 1970s. So I updated that. We'll look to that in the show notes. The drawdowns for various asset classes is. So you found, you did this chart again.

I think you had Nick Bajulia make this for you because it's a pretty chart and I'm guessing you didn't make it yourself. No offense. And so here's the one that surprised me. So gold is still, you looked at real drawdowns, inflation adjusted. Gold is still below its 1980. peak on an inflation-justed basis. Treasury bonds were in a real drawdown, basically because inflation was so high in the 70s and early 80s from 1940 to 1991. The other one, UST bills, which is basically cash, or the equivalent to cash, or your savings account, was underwater after inflation from 1933 to 2001. That's a pretty good stat for investment nerds like us. So this is pretty good. So yeah, we'll include this chart on the show notes, but this was pretty good, and you

math it out here. And it looked like a 60-40 portfolio was underwater on a real basis. The longest time ever was 1972 to 1983. Not bad. And that was a sky-high inflation in rising interest rates. So that's not terrible, actually. All right, listen to questions. Go ahead. I know you wanted to read some. Wuthering your thoughts of zero commission trades being part of the cause of this end of your rally. Hold on. It's not like I mentioned it on the show. It's not like we talk offline about this. I don't care that much. I'm sure I'm not a lot. I'm sure I'm not a little. that I used to save up at least $1,000 before buying to keep commission percentage down. That would take me several months.

Now I buy when I have enough to buy a whole share and not waiting. I'm going to take this question, if you don't mind, sir. The floor is yours. I don't think $1,000 is moving the market. Not to be a jerk. That's probably fair. I don't think individual investors, the zero commission notwithstanding is moving the market. So that's my answer.

So our colleague, Tadas Ascanta, wrote about this on Abnomah Returns the other day. And he said, I'm sorry. Tadas said that zero fee commissions for some like this actually makes it, it just takes away another barrier for people to invest and save. And so I think that's a good thing that I think in the past you would have to save up $1,000 or $3,000 to meet some minimums at places. And now that has been taken away and you can buy fractional shares. So I think it's just taken away one more barrier for people to invest. But as you say, I think that's not moving the needle. But it's a good thing for investors if it takes away that barrier. Cash is coming off the sidelines rapidly. big time dual income a couple no kids no debt approaching our mid 40s if our intention is to die broke at what point do we shift from accumulating to spending assuming we live on a 4% annual use of assets and maybe draw down okay how long would we expect them to last if we drew down 7% 8% per year okay honestly that's a pretty good place to be no debt no kids dual income this is the kind of thing where you have probably the most wiggle room for a margin of safety to change and update your plan as you go.

Don't you think that you can calculate a range, like, okay, if I live till 80, if I live till 70, I live until 90, and you could say, like, based on this, based on the eventual outcome of my life, I could afford to spend this. Obviously, that's like the ultimate unknown, is when are you going to die? Yes. Yeah, so you have some longevity risk in there. And I think the numbers are, like one of the spouses lives till 60. There's like a 60 or 70% chance that one of them's going to live till, if both

them live till 60, at least one of them's going to live till 90 or 90. So I would say, assume, be conservative and put out a long lifespan, say you're both going to live to 95 and just work backwards. Assume different rates return, 3%, 4%, whatever, whatever, and then work from there. How many years do you think having no kids takes off of your retirement planning? At least a decade, 15 years? Yeah, I'd say more. Probably. It could be 20, depending on how well you save and keep your spending in town. Okay, max out my 401k contributions each year and usually set the pace to hit the annual limit by early November. This gives my last few paychecks a little boost since no more contributions are withheld, which is nice for on the

holidays. In 2018, I feel like this strategy backfired as I missed contributing during the late 2018 Q4 dip in the market. So this is a question about what do you think about lump sum in putting things earlier versus trying to dollar cost average and just do it over the course of the year? I actually ran the data on this. Actually, Nick did. So this person said for 2020, I'm thinking of ramping up my 401 contributions to max it out even sooner. So, again, another person who was in a very good place financially, if you, and maybe I'll do a quick blog on this, if you were to front load all of your contributions to the first half of the year, it makes virtually no difference in your returns, at least much less than I would have thought. So I think we started in 1986 to

today, you ended up with 2% more money. So for the financial stress that it might put on you in the first half of the year, probably not worth it. I think one of the problems with overcomplicating things like this and thinking about, well, if A happened, then B. And so I think anytime you try to do this and do the what if game, just keep things simple and just do it the same over time and try not to change it because there are always going to be certain instances where you say, I'm kicking myself, I wish I would have done this this year. And then last year I did this. And so constantly trying to game this stuff is just, I think it's just kind of pointless if you already have a good savings rate and sounds like this person does and that sort of stuff in place. So Julie LaRoche tweeted

Bill Ackman's President of Square Holdings ends 2019 up 58.1% making it his best you ever. That's obviously a pretty impressive return. So I think we all dance on his grave a little too soon and maybe he is the next Warren Buffett. Is that you're trying to tell me? But I feel like this didn't really get that much attention,

at least as much as it would have, two years ago. Are people over... I think he had four years worth of losses in a row, something like that. I think I did a piece on this. I think you said we were talking about this, Ackman versus Einhorn. And I think you were going to, if you had to bet on Mnivor version, you would have chosen Ackman, if I recall correctly.

Probably. But yeah, I think that had to kick in eventually. But honestly, I think after a while some of these darling portfolio star managers, after they've been in the news for so long and then they have their down period, I think people kind of forget about them in some ways. Do you think that's possible? And they kind of. I'm not sure. Yeah. Good for him. Way to go, Bill.

So from one star manager to another, have you looked into Wii ramp? yet. Yeah, I said he should change this into the, change the name to the new will portfolio. But our friend over at Ramp Capital is doing a crowd-sourced portfolio. And he has a whole list of how he does it. But I think every week he's going to have Twitter vote on four different stocks to put in his portfolio. You know what the best crowd-sourced portfolio is? SPY. Yes, there you go. I just said I can't wait until people on Twitter force him to simultaneously own and short Tesla because something like that is going to happen. But, But he's going to run a Twitter poll and use that to purchase his stocks.

I guess the laboratory results from this will be interesting. We'll put a link in the show notes of what exactly he's doing. I suspect that this thing will either destroy or get destroyed by the market because this is not going to be a portfolio of consumer staples. You don't think this is just going to turn out to be a tech-heavy index market cap-weighted. People are going to vote for the stocks that they like. Right now it's going to be because that's what's working the best. So the first stock that was chosen was Amazon. And I think as the market goes forward, I guess I would be interested to see what goes in and what comes out.

Because if these names get crushed, then they're going to come out of the portfolio. Right. Yes. Interesting experiment. How about this? I got the market plus 10%. Okay. That's your line. All right.

All right. So recommendations. We've had a couple of weeks with the holidays and stuff. We did shows, but our shows were a little shorter. Did you go through a lot of stuff here? I went through a lot of stuff. So we haven't recorded a show in almost two weeks. So I've got a lot of stuff.

All right. First, this is just an observation. I went to Trader Joe's, and I did a pretty big shop. I spent over $200. And the tax was $0.52. Is that normal? Is there a thing with grocery stores that I'm not aware of? That must be some crazy New York thing. You guys have taxes for everything. They probably taxed you for filling up your card or something. I don't know. I thought that was interesting. I'm sure somebody will let us know. I got a crackpot. So I'm back on the whole 30. I have two cheat days built into this month for reasons that are not important. Two cheat days in a month, so one every other week?

Yeah, you got a problem? No, I'm just, I'm asking, because I do one a week, basically. So this is whole 30x minus two days. So I got a crock pot. It was very cheap. I don't know, 25 bucks. And yesterday, here's what I did. Very simple.

I took a brisket, I charred it, some beef stock, crushed tomatoes, sweet potatoes, carrots. And I think that was it. And like, obviously seasoning. It was freaking great. Cooked it for eight hours. Nice. You a crockpot user?

My wife is. She just bought an instapot the other day. What is that? What's the difference between an instapot and a crock pot? I've heard, I don't know. There's something called pressure cooking. I'm like 10 years late to this. I don't really cook, so I don't know.

I'm a big cook. I'm not a cook. Well, obviously I'm not a big cook if I just got the crock pot. I enjoy cooking. You know what else I enjoy? I might have said this on the podcast previously, cutting vegetables. I feel like it's like the only time in my life where I'm completely removed from electronics.

I can see that. You don't listen to a podcast where you're cutting vegetables. Of course I do. All right, recommendations. So I'm sticking with my mission of seeing movies that I missed. So here goes a few of them. No offense to anybody who has mega nostalgia for this movie. And I know it was very important at the time.

I think it was 1974 shortly after the end of Vietnam. One best movie. I had a really, really difficult time with Deer Hunter. I feel like you had to be on acid to like that movie. Have you ever seen it? I watched it when I was in high school and I remember just thinking like this movie is so weird and out there.

I think those guys were all in acid when they did it, were they not? I just found it tough. The first hour was just dragged and the transitions and the storytelling. I understand it was, again, it was an important message and it was shocking at the time

to see what these people, to see what these boys went through in Vietnam. I just found that to be a tough watch. Stick it with the 70s. Believe it or not, I love aliens. Ridley Scott movie. I feel like that was one of the

first movies my dad showed me. I've seen all of the Alien versus Resurrection, the crappy ones. I like them all, even though. I know the reason ones are junk. Alien versus Predator. Requium. All right. That one sucked. But anyhow, so I saw the original alien for the first time. 1978? I don't remember what year it was. Wow. Excellent. It's pretty good still, right? We watched it 10 years ago again. Excellent movie. It actually holds up. It holds up incredibly well. Sigourney Weaver is just such a great actress. And I can't even imagine how shocking it was when the alien burst through the chest of the guy in the theaters in 1970, whatever it was, before this was a franchise. So that is definitely watchable.

I don't know why I saw this. I guess, you know what I'm doing? I'm scrolling through Showtime on demand, HBO on Demand, Prime Video and Netflix and just seeing what's available. I'm like, oh, here's a movie I never saw. In the line of fire, Clint Eastwood and John Malchievich, 1993, I believe. Is that the one where he uses like the plastic or the wooden gun to shoot at? Yes. At the end, yeah, that's a pretty good one, right?

Not really. Oh, no? Okay, I don't remember it very much. Probably was, well, it was Reveal Seved. I think it did pretty well in Monde Tomatoes. Not a very good movie. Put it this way. It was totally fine.

Just... Decent 90s movies. Easily, easily skippable. I saw 310 to Yuma, the remake with Christian Bail and Russell Crow. Did you ever see that? I remember that was kind of a... No, no, no. You liked it?

I liked it a lot. Christian and Bail and Russell Crow. I remember thinking it was like a six out of ten, maybe. No, I was closer to an 8. It was very good. And then lastly, I watched this with my wife. We both enjoyed it very much. Molly's game, I think you recommended that last year.

I did. I read the book, and I liked one of the stories so much that they didn't even cover in the movie that I included there's a story from that movie and book in my new book. Oh, really? From Molly's game. One last thing. You know, it's kind of fun about watching these old movies. Wait, you read my book.

I read your book two years ago. That's true. Very good book. Highly recommend, by the way. If it ever comes out Going through these old movies You're like, oh, that guy So I don't know if you saw Saw

I feel like you're not a horror movie fan I like to say I probably watched the first three of them So you know the guy that played Jigsaw Yeah He was in the line of fire And he was also in the firm I couldn't tell you the last time

I watched a movie with my wife And I didn't say who is that person again And I looked it up on IMDB I do that for every movie I watch What was this person? I watched one more movie. Last thing. I almost forgot about this.

Long shot. Yeah, yes. I was pleasantly very surprised. It had some funny parts, didn't it? If you get over the fact that it's Seth Rogen and Charlie's Theron, right? I just, no, I bought it. I did not buy it at all. Of course it's ridiculous, but I thought it was like, I actually enjoyed it.

It was surprisingly funny, funnier than it, than I thought. When every time he fell down a flight of stairs or something, it was, shouldn't have laughed, but I laughed. He was good. All right. Stick with the Seth Rogen thing. much neighbors the other day. I feel like if you have small children, this gives this movie like a 20% premium, that's a really funny movie. I think that's one of the more underrated lowbrow comedies of the 2010s. And I think Rose Byrne is sneaky funny. She was in Bridesmaids

as well. Oh, she's very good. Yeah, I like her. We plowed through the show You second season on Netflix. I think I mentioned the first season. It's almost like a millennial version of Dexter. And season two definitely had some Dexter feel to it. They even mentioned Dexter on the show. So not a must watch, but if you're into the serial killer stuff, some of these stuff is a little out there. But for some reason, the show is really addicting, and we plowed through it quick. We're also four episodes into Messiah on Netflix. Oh, and he good? Which is, it's not bad.

It's one of those where I think the ending is going to have a lot to say about what it really is. We're like four episodes in, and it's the first few episodes really sort of draw you in. It's like a CIA one, but then this guy who starts this religious following and has this series of unexplained miracles. Okay. So it's pretty interesting. I'm pretty much out on TV. I just mostly do the streaming. I like the A16Z, why we should be optimistic about the future podcast with Mark Andreessen

and Kevin Kelly. I think a lot of people as smart as Andreessen find ways to be pessimistic about the future and he's always optimistic, which I like. And I didn't read much nonfiction because I'm still trying to plow through the Godfather, which I think at this point, 75% of the way through might be the best book I've ever read my life, which is saying a lot. In terms of fiction, it might be the best book ever that I've ever read. It's crazy.

But I'm reading The Box by Mark Levinson, which I think a listener actually recommended. And it's about how shipping containers change the world. And it reminded me, like, it should have been a chapter in that how we got to now book by Stephen Johnson of how shipping containers, relative to the size of the U.S. economy, in 1960, the U.S. international trade was smaller than it was in 1950 or even 1930 because trading had gotten so expensive. And then when shipping containers came along in like 1960 or 1970, it totally changed the way that globalization worked.

and they finally figured out how to do it in a cost-effective manner. So it's too long for maybe a single topic book, but if it was a chapter and something else, it would be really, really good. So that was interesting. My reading is crashing and I'm totally fine with it. Kids go to bed at 7, 15, which is great. The last thing I want to do is just read a book. Yes.

People who ask us how we get stuff done, though, if you don't have your kids going to bed at like 7 o'clock and have that extra two or three or four hours or five for me sometimes, that time. My wife and I said the other day, we alternate bedtimes for our oldest, and we say that we get irrationally happy when it's not our night to do it. Like, even though it doesn't take that long. But think about if you have four hours, I mean, that's like 25 hours a week. Yes. That's a lot of time. Okay. So we've been doing shows all through the holidays, but if you haven't been here, go back and check it out. We did trading places review, and we did a

couple other shorter podcasts so check them out if not we're glad to be back we're probably to do margin call next for the rewatchable i think margin call a lot of people have asked for that one a random watch i shouldn't call it a rewatch random watch yes we're in there so anyway send us an email animal spiritspot at gmail.com we'll talk to next week