Animal Spirits Podcast - Money Made By Chance (EP.77)

Episode Date: April 17, 2019

On this week's show we discuss the guy who bet $85k to win $1.2 million on Tiger winning the Masters, Ray Dalio's plan to save capitalism, are we really worse off than previous generations, investing in college grads, how do advisors spend their time, Disney Plus, why didn't the bull market help pensions more, why we need more house flippers, when the real world throws a wrench in your investment plan, when is the right time to meet with a financial advisor and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by Y Charts. Ben, you did a post how dividends don't matter as much anymore. Care to explain yourself, sir? Yeah, I kind of ran this one by you, and I wanted to figure out, because buybacks have been so prevalent in the last, especially, it started in the 1980s, but especially over the last, call it, 10 years or so, I wanted to see what happened to the dividend yield in the S&P. So I went into Y charts. I looked at the SPY and I looked at K.I and I looked at K. QQQ, which is a NASDAQ, and the NASDAQ yield right now with like 79 basis points. The S&P is yielding 1.8%. And the NASDAQ has crushed the S&P over most timeframes you look back at.

So the idea was, do dividends not matter as much anymore in the U.S.? And what do you think? Well, as dividends have come down, total shareholder yield in the form of buybacks has actually gone up, has it not? Yes, that was the point that it's buybacks that matter more. But it's just my point was not that dividends don't matter for individual companies, just for the overall market. And I looked back, the NASDAQ goes back to 1973 and it's actually outperformed the ESMP by about 50 basis points annually. So dividends used to matter much more than they did as my whole point to the overall market. Well, even like going back way before the 1970s,

stocks were used to be considered, well, I guess they still are, but certainly riskier than bonds. And one of the way to entice buyers was a juicy dividend. And certainly that is no longer the case, right? Like people aren't buying stocks anymore. At least the majority of people aren't buying stocks for the dividend. Yes. So we'll include this graph in the show note that shows the history of the dividend yield again from Y charts. If you reach out to Y charts and you're a new subscriber, mention Animal Spirits and get 20% off your subscription. Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing, hosted by Michael Batnik and Ben Carlson, two guys who study the markets as a passion and invest for all the right

Reasons. Michael 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 Ritthold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael is currently drinking a Starbucks such as something I will never do in my life. And neither will Susie Orman because she says she would never spend $3 a day on a coffee. And so I'm writing a post about this right now. $2.66. Wow, it's not bad. You go for the straight black? The dark roast. Okay.

So I was doing some research on this. And I'm going to make the comparison that Susie Orman is like the Stephen A. Smith of the personal finance world because she's all about hot takes. And so she says she would never buy a daily coffee yet. She owns like a private island in the Bahamas with a mansion on it. And now we don't need to read the blog post. Thank you. Yep, it's over. So did you get the story about the guy who won $1.2 million on his first ever sports bet on the Masters for Tiger Woods winning?

Is that really his first sports bet? I don't believe it. It's funny because he says he's in finance. That's what he claims he works in. But it says that he is a 39-year-old self-employed day trader. And he said he has a mortgage on his house, two student loans, two car loans, and he decided to take $85,000, which is, quote unquote, everything that I could afford to lose and place it on Tiger. And his reasoning, I just thought it was predestined for him to win. There's got to be some more to the story that comes out. I mean, it has to.

What do you mean? Like he had some inside information? Something else about this, it just seems crazy to me that, I mean, there's no way you could have inside information of who'd win the golf tournament. So this guy was literally walking around in Las Vegas with a backpack full of cash, looking for someone to take this bet from him. I didn't recognize the name of probably some shady casino. but they did it and they're going to pay him out. It's just kind of mind boggling that everyone is

kind of throwing adulation on this guy, but then the Annie Duke side of things is this is looking more at the outcome than the process. And this guy is nuts, right? Well, of course he is. But this is the thing about investing and gambling is that, and I wrote about this in my shameless plug for my book, that money won by luck is indistinguishable for money earned by skill. And the bank takes it and you could still spend it, and that's what keeps people coming back for more. Because you wrote a piece a while ago, a couple years ago, called My Friend is Beating Me, and it was about someone who emailed you and said, hey, I have just some index investments. My friend is invested in Facebook and Apple and Google, and I can't take it.

And that's kind of the thing. I'm sure a lot of people look at this guy and say, why didn't I do that after the fact? And my joke on Twitter was, with this one trade, if this guy was a fund manager, which maybe he is, he's a self-employed day trader. He would raise like $15 billion if he did this in the financial crisis as a hedge fund trader, just from this one trade alone. Did you watch the tournament? Yes. And I wanted to talk about that a little bit. Do you watch golf at all? I've never watched a tournament in my life. Actually, I wanted to watch it on, what was it on Sunday. I wanted to watch it, but I was like moving stuff, boxes and whatnot. I mean, I got chills when he

won. I'm one of those people that was fully all on Tiger. Like I would read a Richard Thaler or Dan Ariely piece about why people still root for this guy. despite the fact that, by all accounts, he was a really bad guy for a long time. And maybe he's kind of turned a page and moved on a little bit now that he has kids. But by all accounts, if you read the latest book about him, he was not a good human being for a long time. He just treated people like dirt. And I don't know why, but I can't help but root for the guy. And so I would love to read a behavioral research piece on why myself and millions of other people root for Tiger no matter what. I think there's a nostalgia factor there because he kind of came up in when we were

coming up, but I really don't know. So Ryan Rusillo and Bill Simmons were talking about this. And I think that they made a really good point that people root for the underdog. And then when they finally make it, eventually the crowd turns on them. And then when they're the biggest superstar in the world and they have their fall from grace humanizing them like Tiger did, we all pile on and call I'm a piece of trash and whatever, whatever. And then there's something about the comeback story that is so, I don't know if intoxicating is the right word, but just something about it that really gets the country's juices flowing in a way that it's really, to your point, just pretty incredible.

I can see it. And I guess that is kind of one of the things people are probably so sick of seeing other people on social media show this fake life that's perfect. So especially with our heroes and our celebrities, we want to know that they're just real people sometimes. Yeah, just a classic story, just a second chance type of thing. So you posted this story from Ray Dalio who blogs on LinkedIn, which I think is hilarious to me. How do you think Dalio and his team went through and decided, you know what, let's just put it up on LinkedIn. How did that conversation happen? I mean, they had to have their, what do they call

it, where they're completely honest with each other? Like, don't you think when someone brought up LinkedIn, someone in the room said, really? That's your idea? Did you watch a 60 minutes piece? I did not. I read through the blog piece. What did you think? I just, do you find it a little disingenuous when the billionaires say that they know how to fix the system? I don't know. It kind of rubs me the wrong way. Of course. It reeks of disingenuity. Is that the right word? But I do think that he's actually being sincere. Yeah, I think he is too. So you know what's interesting, though? He wrote about when he was raised with the belief that having an equal opportunity for basic care and education, employment, whatever. he said that was the American dream. And I wonder about this American dream. I think that it's only something that we created in hindsight. Like in other words, when he was growing up in the 60s and 70s, did he say, or did his parents say that you're living the American dream where this is the American

dream? Or is it an idea that was created after the fact? Right. How many people at that time thought this is the best? There's nowhere else to go from here. This is the greatest we can ever make it. It's, yeah, it seems to be, again, the nostalgia piece. And he posted a chart in here that I think is borderline chart crime, not because of the way the chart is presented, just because of the data and the start date. So he said, he showed a chart showing the percentage of 30-year-olds who are more than their parents, and it starts in 1970. And in 1970, it was like 90%, and now it's closer to 50%. And obviously, the trend is not good because it's going down. But wouldn't you expect people in the 70s whose parents grew up in the Great Depression in World War II?

Wouldn't you expect it to be a no-brainer that they would make more than them? Like, think about what was happening in their parents' lives. So I think this is the 90s. 1999-2000 start date for the stock market. This is using a top or a bottom to make your case. And I just, I think that this chart is just a little bit. I just don't think it shows what people are trying to get to. I think it's a permanent fact of society that older people will come out and say that things aren't the way they used to be. I just think that that is a permanent feature of society. Get off my lawn. And I agree that like a lot of the stuff he says, these problems, he's not making them up. A lot of them are true. And people's wages.

have stagnated inequality has gotten much worse. His theory for how to fix this was kind of bizarre. It was something like you would read from a macro hedge fund manager. He talked about making fiscal and monetary policy more intertwined. And the only way that you could ever really fix capitalism if he wants to fix inequality is just tax the rich more. Any of these other ways is never going to help. So I don't see any other solution to the problem. I think somebody called him on taking like a $200 million grant from the state of Connecticut tax break. Oh, he did? He did. Okay. To keep Bridgewater there.

Of course. But here's the thing that I think gets really lost in this. There are, obviously, and we talk about this all the time, there are a ton of problems in society. Things aren't perfect. There's a lot of people that are living in terrible conditions, but we spend so much time on this. And I'm not saying we should throw our hands in the air and just say, oh, this is the way it is and don't worry about it. But really, think about how much better things have gotten. And again, there is a lot of data to support the fact that wages have stagnated and things are

aren't that great. But really, things have absolutely improved from literacy to education, believe it or not, to infant mortality, to life expectancy. Well, I wrote about this the other day. There was a poll from Gallup that went back to the 70s and showed people are reporting that they're less happy than they are back then. And it's another line that goes from left to right going down. And my point was back in the day, people didn't have the luxury of being mad all the time and outrage because they actually had real stuff to worry about. There was the Great Depression, which led into World War II, which led into the Cold War. I mean, there was a lot of stuff that people really had to worry about back then

that we just don't really have on our plates today. When is this time period that everybody was happy? Yeah, I don't really buy it as well. Honestly, I think that the picture of happiness is maybe the 50s, right? Like, after World War II, the country was united and we had a lot of infrastructure projects going on. But then things started to get really pretty scary in the 60s, and obviously the 70s had a ton of issues.

Were the 80s, like, peak happiness? Every book I read, they make it sound like 1960. is probably one of the worst years of the last century. I mean, yeah, I feel like the people who assume now is worse than ever, they've never read a history book or they choose to ignore it. And so they had an interesting story in Bloomberg this week, how young people are trying to maybe correct one of these problems for themselves and student loans.

And they said that there are now college grads taking stakes in themselves, kind of like the Lambda school model, which we've talked about in the past. And so they talk about this one girl says, to pay for college, this Amy Orbluski sold a, piece of her future every month for eight and a half years. She must turn over a set percentage of her salary to investors. Today, about a year after graduation, she makes $50,000 a year as a high education recruiter. And the cut comes to about $280 a month, which is less than her car payment. So the way it works is you don't take any student loans out and they help you pay for college

and give you living expenses and you pay a cut of your salary every year. And it sounds like it says English majors pay about 4.5% of their future income over 10 years. Chemical engineers would be 2.5% over 7 years, which is kind of interesting because they actually change the rate based on your future earning power. So I think this is actually a great idea. What happens as you make more money? Does the percentage go down? Yeah, the percentage goes down, which would make sense. Who are these companies doing this? Well, actually, it was, I don't know the companies, but actually it was Purdue University who partnered with a lot of them. That's the one that they're profiling here. here. Didn't we speak about Purdue University a few months ago? Yeah, they obviously are forward thinking in this. I don't know if it was for this or something else. But again, it's sort of going from, they make it look like students are going from debtors into stock investments. And I think it's a great idea. See, this is what's wrong with capitalism. This is exactly what Ray Dalio was

talking about. This is basically like an insurance policy on yourself for if you don't get a job that works out after college. Let me ask you a question. At what point can the students do buybacks if they start doing really well? And now we're talking. All right. So, Michael, Kitsis did a survey. He pulled a thousand financial advisors. So I think that you could say that this is a decent representation on hours spent by the typical financial advisor across various weekly tasks. And honestly, actually, you know what? I'm going to actually myself from 10 seconds ago. I don't really know that advisors actually know what they spend their time on. I guess we're not really financial advisors in that traditional sense. But if we ask our financial advisors,

it might be hard to quantify. Yeah, people ask this question, like what's your daily routine look like. And most people don't have the same set daily routine. And it's one of those things like budgeting where most people probably don't really know where their money goes. So how well can people actually budget their time? But I guess the difference between like sales and marketing and business development versus actual working with clients, that's probably the big takeaway here is what is the difference between those two? I think probably the one that would jump off the screen to somebody outside of the industry is investment management. And by the way, this is not percentage. This is just hours. So the average looks like I'm just eyeballing

it, maybe 10, 15%. Investment management, five and a half hours a week. Right. Most financial advisors aren't sitting there staring at their Bloomberg terminal looking to make a trade on your behalf. And I'm sure a lot of people do really think that. And that's kind of how it's portrayed in the movies and on TV shows that that's how managing wealth works is you're constantly doing something. And there's a lot of other behind the scenes stuff that goes on. And obviously, the biggest chunk of the pie here is direct client activity and working with clients, which is what you would hope, I guess. We'll link to this in the show notes. So there was an article in the New York Times less than halfway through April. Retailers have announced plans this year to shut 5,994 stores,

which is more than was announced in all of 2018. I don't know about you, but I must do 98% of my shopping online now. Going to an actual store, I'd be happy if I never had to do that again. As you know, we furnished our house. The only item that I bought in a store was my dining room table and chairs. Okay. I guess for us, we had to go try out the couch. That's probably it of stuff we had to see. You're right. The couch too. But everything else, even like my mattress, I just took a flyer on a mattress. I just Googled like best mattresses and a consumer report came up and that was it. But the great thing is, Amazon has forced all these companies into doing free shipping and free returns. They have to to compete. And so even with clothes and shoes, you don't have to go to

the store to try them on anymore because you can always just send them back. It's great. So people might think that there is relating this to investing that there's value in a lot of these retailers. And maybe there is. Obviously, I have no idea. However, maybe it's just getting started because Jeff Bezos wrote his annual letter. And I think he said that 90% of shopping occurs still in brick and mortar stores. Did I make that up? I honestly didn't read the Bezos letter. I haven't turned into an annual tradition yet. I mean, I guess that makes sense because so much of the, I think the amount of money spent on the internet is very low still in terms of retail spending. It is a very small fraction of money that is spent online. But one of the

biggest things that stood out to me was the growth of third party sellers on Amazon. Again, something that we've spoken about in the past. But they said that first party business, So in other words, stuff that Amazon directly sells grew from $1.6 billion in revenue in 1999 to $117 billion this year, which is obviously remarkable. Can you imagine if you put $10,000 in Amazon's first party business in 99? I never thought of that. That's crazy. So that's a 25% annual growth rate.

But in the same time, third party sales have grown from $0.1 billion to $160 billion, a compound annual growth rate of 52%. And just to give some context, eBay's gross merchandise sales in that period have grown at a compound rate of 20%. Which is also still damn high. Wow. So two thirds of Amazon or maybe 60% is just them building out the infrastructure so other places can get on their platform to sell.

I mean, it makes sense. Is Amazon first party the active management of Amazon retail? They are consuming their own business here. Four out of seven days a week, we have something delivered from Amazon. I'm not even exaggerating. What exactly are you getting? Everything. Like paper towels?

Yes. Household goods, anything for the kids. I go there for everything. And what do you do with your boxes? I break them down. And then what? When they don't fit into the recycling bin, there is a huge trash bin outside of my office that I pull up and dump them in. That's great.

So quick tangent. I was going to save this for later, but let me do this. So I have boxes all over the place. From moving, I moved 30 boxes. I've got delivery stuff. You know what? That's what else we did. When we moved, we saved Amazon boxes for like two months and used them for moving.

But I would love it if someone would pick them up from me afterwards. So I have in my backyard a chimenea. Do you know what that is? No. It's like a giant clay viz for burning shit. So I need to get a fire pick. I like lighting fires. And so anyway, so I went outside and I collected a lot of wood that was lying around in my backyard.

And I brought the chimenea into the middle of the backyard onto a piece of like, it was pretty much dirt. And I came prepared with a pot full of water. Chimenea sounds like the way that a person of means would say chimney. All right, listen. I had a pot full of water and a bottle full of water just in case anything happened because the grass is pretty dry. It's pretty much dead grass. And I am burning wood and I'm burning boxes and I'm on my cell phone and I look up for a second and there's like a three by three foot, three foot by three foot fire on the grass. So homeownership is going well for you so far.

So I dumped the pot on it, didn't put it all out. The bottle water didn't put it all out. So I'm like, oh, shit. You thought a bottle of water was going to save you? I had a big pot, a big deep pot. So Robin came home and there's like a big black patch on the grass. And she's just like, what is wrong with you? I guess you couldn't have done that in your apartment in Brooklyn, huh?

Let me just knock these out while we're at it. Two more quick homeownership stories. So I'm on my AirPods. I'm listening to Ryan Rusillo, talk to Trent Dilfer, as I am unpacking stuff. And that was an excellent podcast. I highly recommend it. Yeah, I like that too. And all of a sudden, I hear like Robin screaming at me.

And I couldn't really make it out. So I'm like, what? She's like, Kobe locked himself in the bedroom. So he went in his bedroom and he turned the lock. And so obviously, like, I feel panic for a second. But no harm, no foul. I was able to just take a screwdriver and just like. Look on the top of your doors.

you have those little keys on top of the door. Oh, but this is just a very easy thing. So I just took a flat head screwdriver and just opened it up. Lastly, so in between my house and the other person's fence, I just put a temporary fence, just like the green mesh type of thing. And it was really, really windy the other night. And I guess it like pretty much got knocked over. So I get two calls yesterday while I'm in Penn Station on the way home. And I've been getting a lot of open calls lately like everybody else. And a third call. And a third call. And I'm a third call. And I can't hear. It's just literally just dead.

And I don't know what came over me, but it's rare that you get three calls in a row. So I called the person back. And he's like, is this a number I kept calling? And I'm like, yeah, what do you want? And he goes, I have your dog. Oh, no. And I'm like, so I was just like obviously very flustered. Did you think it was like a Liam Neeson situation where he took your dog for hostage?

So anyway, Bianchi got out. And I felt terrible because I was like. asshole. I just thought it was like a robocaller. So I got the guy a bottle of wine. I've been in the house for six days now. Sounds about right. Last week we talked about how you didn't think voice was going to be a big deal. And there was a piece in the New York Times from their technology opinion writer Farhad Manjou. The title of the column is, I didn't write this column. I spoke it. And he says that he walks around and records on some program that takes what he says, and then he comes back and he transcribes it under this program called Descript, which is an app that builds itself

as the word processor for audio. So he says that's how he's starting a lot of his columns these days, just walking around and talking so he doesn't have to sit in front of a screen. And he said, obviously, it's a pretty rough draft that he has to go back and fix, but that's how he kind of gets his baseline done. That made me think the perfect situation for bloggers like us would be, I would love to speak a post and then go back through and edit it. And when I'm done, it spits it out as a podcast. So we have a blog post and a podcast that comes from the same program. And every time you edit it, it would bring your words down so they match up. That would be like the dream for me as a blogger that so people could consume any way they want. So are you switching your mind on the

voice thing yet? I might have used some lousy experiences to cloud my vision. So the last time that we spoke about this, I was trying to talk to Siri to tell her to call Robin. And then Siri ended up calling Ed Borgado. Yes. However, I think that I might be coming around. So one of the things in my new home is the new Verizon, Fios, remotes. See this, Ben? You press this blue button right here and you say ESPN.

I still think remote controls. That's not that cool. Wrong, sir. It is very cool. I have no idea what channel. anything is. So I just press this button and I say Disney. I say Netflix. Yeah, that's true. The other cable thing I don't know, and maybe it's getting better, but we have one of the Kindle Fire Sticks. Why is the Kindle Fire Stick the size of a pack of gum, but the cable boxes have to be huge? Why can't all that stuff be stored

in the cloud for the DVRs now? I don't get that. You make another good observation, but my friends over-ever-R-Rife as Fios, who happened to not be a sponsor of this podcast, they have new boxes, and the new boxes are very small. They can be, I think the guys from Geekswung my TVs, I think they taped it to the back of the TV, so it's completely wireless. Or with smart TVs, why don't we have the option of not even having a box?

So we don't have to do the wires at all. I mean, that's how Hulu Live TV and those ones work. My point is, this is just as good. It's getting better. Okay. These small boxes get taped to the back of the TV, so you don't have wires hanging down anymore. Not bad.

Okay. Sticking with the streaming TV, I'm going to give myself a quick pat on the back here. I've been screaming for six to nine months now about pounding the table on Disney Plus how big it's going to be. And they announced last week and the stock went up, I don't know, 10% after the announcement, which is kind of crazy because everyone knew it was coming out. Maybe it was the price. They said they were going to charge $6.99 for it. But can I really pat myself on the back if I only bought Disney in my paper trading account and not for real?

I should have been putting $50 a month into Disney stock for each of my kids for the amount of Disney that they watched. Isn't this like a perfect example of what looks so obvious in hindsight? Yeah. So they said within a few years, they're going to have like 60 to 90 million subscribers. I mean, seven bucks a month. If you're a parent, you have to buy this. You have no choice if you have kids under the age of call it 10 or 12. Was there a moment when you were like, I'm such an idiot for not buying the stock? I still think I may put a few hundred bucks in for each of my kids in the stock and just never touch it. I mean, obviously Disney is a big company. And this is going to be kind of just a small piece of their business. And I'm not one of these people that thinks people are going to choose between Disney and Netflix. They're just going to have everything. Like us. We have Hulu. We have Prime. We have Netflix. We're going to have Disney Plus. And we have cable. But, I mean, it is what it is. Right? That's nothing I do about it. That's the world we live in. That was a lot of soundbitey phrases right there. That was one. It is what it is. It's a world we live in. I think there was one more. I'll have to check the show notes. Someone did ask us for transcriptions of the show. It would be terrible. I don't think it would work. How would it work when I cut you off every five seconds? Like, would it be Michael like sound?

Michael, sound. Michael jumps in again. So they had a really good article in the Wall Street Journal about something we've talked about a lot, which is pensions. And why did the bull market not fix pensions? How did they end up getting worse during the bull market? And so they had some good graphs in here about especially local and state government public pensions. But basically the reason is the 80s and 90s. kind of screwed everyone's expectations up.

So they said basically double-digit stock and bond returns in the 80s and 90s convinced all these governments that they could afford these huge benefit increases. They've made promises they can't keep. It's not an investing problem. It's expectations and underfunding problem. Yes, exactly. They over-promised. They even showed some cities in here, which will include in the show notes.

Is that kind of as another one of those? What's that? If you have a podcast and you don't say included in the show notes, do you really have a podcast? But so this is like no amount of Alfa. in the world could have solved these problems. No. They showed all these cities that are in trouble like Chicago is the poster child for this. And they showed what they are paying now. And they showed what they would have to pay in terms of a percentage of their citywide revenues. And this is assuming a 6% return. So Chicago would have to pay over 60% of citywide revenues to make this

pension hole. So again, the solution for most people is going to be these benefits have to get cut. There's no other solution. I don't know what the political will is to actually get it done. So another one in the Wall Street Journal, they had a piece that house flipping is back to pre-crisis levels. Does it not feel like at least once a week we get a blank is back to pre-crisis levels? And they say it's less of a concern this time. Because it's different this time. Well, they said the current flippers are actually professionals and it's the financial institutions who are buying up these private equity companies and professional real estate investors and not cocktail waitresses in Las Vegas like it was last time. So they're saying that it's not that big

of a deal. And honestly, I almost anecdotally agree with them because there just haven't been enough new houses built. Wasn't your house a renovation? Like, don't you think there is a huge glut of homes that could be updated, renovated, and young people would move them in a heartbeat? I would say, and I'm making this up, of course, but 60, 70% of the houses in my neighborhood were built before 1990. More than that, actually. So in this, they said, 39 years old, the median age of a home flipped is as old as it's been since this core logic has been tracking this. So I think there's probably a lot of homes that if they got a little TLC and you had a professional organization that knew what they were doing and could actually be efficient with the way that they have the cost and they could fix it up, maybe make a little bit of a profit. And maybe the margin is not so huge so they do it on a bunch of them.

I think that a lot of people would benefit from that. Because like in our area, if there's a new home that pops up, it's gone. really fast because there's just, there's nowhere else to put new homes. And I think young people want an updated, more modern living situation. Yeah. So somebody shared this article with us. There was something last week about Fidelity using some questionable numbers to report that active management is actually better than the rap that it gets. But so somebody sent us an article an institutional investor, which we will put in the show notes. And it says that the best strategy for active managers over the last 10 years was emerging markets, closely filed by developed markets

outside of the U.S. and Canada. In both of these asset classes, 90% or more of active managers in Will Shire's universe outperform the relevant MSDI indexes over the 10-year period. And, of course, this is gross of fees. But is that possible? Wait, this is gross of fees? Before fees. Okay. So what point does it have then? Good point. But even still, is that possible that 90% of EM and developed XUS and Canada beat their benchmark? I'm going to say, no way. There has to be survivorship buyers or something in this numbers. I mean, if you look at the S&P numbers, it's like flipped to the opposite and it's usually

80% of them underperform. But that's net of fees. Yeah, there have been studies done by Morningstar that say, listen, all these fund managers aren't idiots. When you look at their performance gross of fees, they do add some value. And most of it is literally just fees. in transaction costs that eat up all their returns. I don't think it's 90%, but Morningstar did did have a piece on this saying, no, they're not all just dart throwing monkeys. They actually have some skill. I don't know if it's 90%. This part was very surprising. Over the last 10 years, only 13% of active managers targeting U.S. high yield did better than the index before fees. I thought that was a space where active managers could add up value. I've always kind of heard that too because

it's so hard to replicate the high yield index. I don't know. Obviously, you almost have to always take these studies with a grain of salt because grain of sand, salt? Maybe with the high yield stuff, what we hear is that the active managers do better than the ETFs. Because the ETFs don't really track the index. Right. The index is not investable in high yield. I think that's the deal. I think a lot of times with these stories, you have to check the source on it. Because like you said, the Fidelity one, Jason Swag, did a piece on Broad Street Journal poking huge holes in it saying it didn't tell you anything. So sticking with your homeowner theme, you did a post last week.

called investing in the real world. And you kind of told me about this a little bit. And why don't you fill us in on the story about why you had to get out of the stock market right as the plunge protection team was making waves? So I think I signed my contract to buy the house sometime in November with a closing date of March 15th. And I was trying to sell my apartment by myself, as listeners of the show know. So here it was, it was, I forget what date I put. Maybe third week in January. And I still had not sold my apartment. So I called the bank. I said, hey, listen, I've got like three weeks left. So even if I somehow miraculously find a buyer, there's no way that I'm going to close on my apartment before closing date on the house.

So are there any options? What can you guys do for me? So he said, do you have money that you could put down? And I said, yes. And he said, how much and I told him. And so I said, like, can I get like, I don't know if a bridge loan is the right term? Or like, what can you guys do to help me out? So. Don't you guys have like a loan shark in New York City that you can meet in an alley somewhere? That sounds like something people in New York would have. So he said, give me a day or two and I'll get back to you. So in my mind, I felt as if I had no options. Like I might have needed this money in three weeks time. The market had already balanced like seven or eight percent from the low. So I actually felt very fortunate at the time. And on the other hand, I was like, oh, I never had plans to sell these investments. I had really decent size gains and not patting myself on the back. are index funds, but it's just... Yeah, not to brag. I got pretty good gains. I mean, no, it's index funds.

I know. It's been five or six years. So anyway, the point is that I sold, so I took a 15% haircut right away from Uncle Sam. And then I bought back in like more than 5% higher. So I experienced my very own personal bear market because this is what happens. This is life. So you did buy back in, okay, I didn't get that part of the story. Yeah.

Okay, I was going to ask what you're going to do next. Okay, that's good. So, and you live with it and you eat it. And honestly, in the grand scheme of things, in 30 years, are you even going to remember this? No, no. That's like the great part about it is, unfortunately, as long as you have a plan to get back in, you're going to be okay eventually, even though it kind of stings now. I'm very much over it.

Like I said, there's nothing I can do. I don't think that I, like, panicked or anything. Somebody was like, oh, why didn't you just take out a margin loan against your portfolio? And I'm, like, thinking, I'm going to carry two mortgages and have a margin loan on my portfolio after the market just went down 22%. What are you insane? Yeah, that's a bit of a stretch. The real point was we look back at these strategies and the market and assume perfect

execution and perfect behavior and no outside interference, but the real world just does not allow for those sort of things. Yes, you couldn't put this into a back test. Exactly. Or into a spreadsheet five years ago as you were planning retirement. Okay, good listener question for the day. When is the right time to meet with a financial planner? I'm a husband and father of three and will be graduating soon with an accounting degree.

Our income expenses are relatively low and we are anticipating a. substantial increase in income after I graduate. Should I be looking for a financial planner now or should I wait until I have some real income first? I think this is really easy. I think the answer is, and it's different for everybody, of course. But generally speaking, I think that when you feel like you need help, that's the right time to speak to a financial advisor. I don't think that there's a income or debt or any sort of threshold like that. When you feel like you need help, contact somebody. And luckily, today, there's enough options out there. We talked about this on last week's show where I think young people who don't have a lot of assets can actually get decent advice these days

if they know where in the past they really couldn't. So there's more options than ever. If you just want portfolio advice, you can get that anywhere. If you just have a few questions, you want hourly consulting, you could find that. So if you want advice and you're thinking about getting advice, just get it. And maybe you figure out, oh, you know what? This is overkill or it's too much or this is great. But I just think that it's hard to tell somebody what to do. I think just do it and you'll figure out what's appropriate for you. I actually think testing it out while you don't have very much in assets is a great way to do it because you're not going to get screwed out of anything if you meet with the wrong type of advisor and learn like, okay, this person is really not helping me. When you don't have much in the terms of income or assets and you're just trying to grow your base, that's probably a good time to really try to weed out the bad players in terms of those that are giving you advice.

Okay, before we get into recommendations for this week, this tweet, I thought, was great. and I think that this dad should be the country's personal finances are. So this Claire O'Connor tweeted out, I told my mother I was considering buying a Peloton and received this email from my father minutes later. Peloton is like the, I think it's like $2,000 to $3,000 for a bike in your house. And it's got this beautiful screen on it that you can interact with and do cycling classes with people from around the country.

And I think you have to pay a subscription for it too. It's like people call it the Netflix of Exercise. It seems a little pricey to me, but whatever, teach their own. this dad says, I've heard of Peloton and concluded that like the use of cocaine, it's another way of God saying people have too much money. It's a ridiculous amount of money for such a basic concept as riding a stationary bike. You can ride a bike on your own for as long as you want and cut the inevitable boredom factor by listening to podcasts or watching TV clips. The idea of looking at a screen while some cycling pro broadcast encouragement is preposterous. I would implore you to

not waste precious after-tax income on this latest attempt to encourage social strivers to show that they live at the more rarefied level than the proletariat. That is such a dad email. Yeah, harsh but fair. Like, we need this guy to be the personal finances are that people send in their requests for spending. Like, I'm going to buy this $80,000 Ford F150. What do you think personal finances are? And he would give you what is the what, you know?

So are you saying we needed Susie Ormond? Yeah, I think I just tuck myself into that one, didn't I? All right, what do you got for recommendations? I just want to take a moment to acknowledge the hot takes. there is nothing that is beyond, like, being shot all over, whether it's Star Wars or Buffett or Tiger. Like, it is just amazing that you will find haters somewhere for everything. Everything. Yes.

And it's not even someone being a contrarian. They just love taking the other side of every argument. Oh, Game of Thrones. Sucks, worst show ever. Yes. Do you watch Game of Thrones or no? So I'm an idiot. I gave up in season four because I wasn't paying attention and I realized that I was watching.

I said, wait, I don't even know who anybody is. So I sort of regret giving it up. I still don't. And I will say it probably was a better show to binge than watch all the way through because people forget the first few seasons were kind of slow and boring and you didn't really know what was going on. It's only the last few that I've gotten really good. My wife and I have been with it since day one.

We had her ear to the ground on that one. No big deal. But it was hard at the beginning because it was a little slow. And then every once in a while they'd give you something. But I haven't been this excited for a final season, probably since Breaking Bad. and maybe lost before that. I am so excited for it. Oh, wow.

I watched the first 20 minutes and I got bored because I didn't know what was going on. I just wanted to see. There's a million characters and, wait, who's that? Are they related? I thought he died, but I still love it. The dragons are the best. All right. So I was rewatching Hall Pass, just like I only probably watched 25, 30 minutes of it.

What a great movie. Yes, underrated. Jason Sudec is hilarious. That's an A in my book. Yes, I like that one too. Is that it? That's it. Okay.

I'm doubling down on Schitts Creek. We're about two seasons in. You just like the name. No one ever told me about this one before, and I put it out on Twitter that I loved it, and I had a bunch of people tell me that it's one of their favorite shows, so I really enjoying it. It almost reminds me kind of of...

Wait, Netflix? Yeah, it was actually a Canadian show first. It reminds me a little bit of modern family and the kind of humor, even though it's a different story and different people, but that's kind of what I get, like the early seasons of modern family. And reading this week, experiencing The Impossible by Gustav Kuhn,

which he's a magician. and it's a book all about the psychology behind magic tricks and why we fall for them, it's actually really interesting how we position ourselves to fall for this stuff and how most people don't want to know the secret behind a magic trick and it kind of actually makes it worse. So he's telling how they do some of these magic tricks. And you know how they have people that go up on stage and they get hypnotized? And he said one of the tricks that they'll do is they'll have two pieces of paper and you won't be able to see one of them. And on one of them they'll write a word to the crowd, but they hypnotize the person into thinking that every

piece of paper is blank. So it looks to the crowd like you're showing them a sign with a big word on it and the person says, oh, that's a blank piece of paper. But they switch it out and it really is a blank piece of paper. So they trick you into think the person is hypnotized even when they're not. Anyway, they walk through a bunch of examples like that and kind of the psychology behind why magic works on us and fools our brains and it's really interesting. So that's all I got. Okay. Send us an email Animal Spiritspod at gmail.com. Again, follow us on Instagram. We've been kind of tooling with that a little bit. Animal Spirits Pod, and we'll talk to you next week.