Animal Spirits Podcast - Money Tree (EP.190)

Episode Date: February 10, 2021

On this week's episode we discuss Elon Musk becoming the new Warren Buffett, companies putting bitcoin on their balance sheet, the Mount Rushmore of CEOs, NFTs and trading cards, tapping your home equity and 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

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Analyst for forecasting. Sign up for free at portfolio analyst.com. 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 Battenick and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions.

Clients of Ritthold's wealth management may maintain positions in the securities discussed in this podcast. All right, Ben, I want to start off giving a shout to Tyrone Ross, friend of the show, for getting Learn to Money up and running. The website is learntomoney.org. We're going to put this in the show notes. So what they're doing is Tyrone and his partners are creating a 10-part video curriculum. that teaches the basics of financial literacy with a fresh voice. So if you are in the school system, please reach out to Tyrone, email us if you want an introduction. If you want to teach your children about the basics of money, we'll definitely link to this in the show notes.

I had Tyrone on a video with me three or four months ago when he was raising money for this. He kind of bootstrapped it. He did a go-fund to me for it. And his whole idea is he's looking at this from such a fresh perspective that a lot of people don't, is there are so many people out there who don't know the basics of opening a bank account and checking and budgeting and saving. And a lot of the stuff that we get into, frankly, like, overlooks the fact that there's this huge group of people that just need the very basic stuff to get ahead financially. Like a checking account. What's debt? And for those people, the difference between getting from zero to whatever they need to get to is can be a huge change in their life from just

getting those basics. So he wants to help those people who don't have this infrastructure. structure or get into schools. And so I think it's a wonderful idea. And the way that he does it, he has so much enthusiasm for this stuff and he's just like a perfect messenger for this message that the way that he speaks and how powerful it is and how like into it he is and how much he believes in it. It really helps the cause, I think, his ability to tell the story. I was going to ask you about financial literacy. This is on the other side of the spectrum and how it might influence people's decision specifically as it relates to like trading, GameStop, Robin Hood, etc. But let's table that. Why don't we talk to Daniel Crosby about that? On Friday, we're talking

to Daniel Crosby. I think that's a good topic for him. Right. Behavioral psychology expert. That's a good idea. I like it. That is not a financial literacy issue. Teaching personal finance in high school is not going to stop people from trading their butts off when things go crazy. All right. Anyway, back to today's show. We're going to start off with personal finance. There was an article, sort of a debate, I guess, in the Washington Journal, whether or not 401K withdrawals should be easier. this is surprising. Last year, they waived the 10% early withdrawal penalty and allowed up to $100,000 worth of withdrawals for people with hardships, which was a lot of people. But I was surprised

only 6.3% of eligible participants at Fidelity, which is the number one 401K provider, only 6.3% of people took money out. I guess what that tells you is if you are lucky enough to have a job that has a 401K, you're probably doing pretty good because 50% of the population in the U.S. owns shares of a stock, basically. I think that's probably about the percentage of workplaces that offer a 401k. It's not that widely held that people have access to a 401k. So I guess the idea is probably if you have a company that offers access to it, you're probably doing better than the average person. The argument for why it should be easier, pro withdrawal comes from Norbert Michael from the Heritage Foundation. And his argument is, quote,

the dominant view holds that people will squander their money if they don't face withdrawal restrictions, which will leave Congress with no option but to raise taxes to help support the growing tide of impoverished elderly citizens on social security. But such restrictions insult the intelligence and integrity of millions of people. These rules assume that people are incapable of understanding their own circumstances and interests, as well as basic financial concepts. It is a condescending and false view, end quote. I understand that point of view, and part of me is simply.

sympathetic to it. In other words, don't tell me what I can do with my money. It's my money. Let me be a grown-up and I'll make the right decision. But sometimes guard rails help. Think about the retirement program in Australia where people are literally forced to save. The employer is forced to save on your behalf. You're forced to save. You can't opt out of that. You have to save. I honestly think that would help more people than it would hurt here. Auto enrollment. Yes. Right? The work that Thaler's done makes an enormous difference. Do you have a strong opinion on this? I like the idea of keeping it harder for people to take money out of here out of your 401K. I don't think we should make it easier. I like the idea that there's gar rails and this stuff should be thought

of as a bucket that you should not touch. But what about for people that like genuinely face financial hardship today? Yeah. Do you put together a tribunal that overlooks this stuff and say, we're going to waive the penalty for you because you lost your job or maybe that's the kind of thing that could come from your employer saying like this person is facing financial hardship? I don't know. That'd be hard to get around, I suppose, where you could waive it for people who actually are in need. I don't know how you'd figure out the rules on that. Here's a fair point that he made. He said, consider this.

When Congress waived the penalty on early withdrawals last year, relatively few people opted to tap their retirement funds. It seems as though savers have far more restraint than lawmakers and advocates give them credit for. So this person is saying most people will use common sense in this. And what's the point of having these guardrails up? Basically. Maybe the other side of that is most people assume these.

guardrails exist and didn't even want to do it because they probably didn't know they could. I mean, how many people actually knew that these changes came down? I don't know. Fair point. But again, the point is on a lot of this stuff is that just there's a lot of people out there who getting to that point where you're having a 401k and you're setting aside retirement money to like Tyrone's financial literacy thing, that's the huge first step is just getting people there and saving. So you shared with me, Ark Invest, Big Ideas, 2021. We're going to get into some of the specifics of this futuristic presentation, I guess you could call it. There's one idea that went to get into because of the news today. So they put in this graph. They said if all S&P 500 companies

were to allocate 1% of their cash to Bitcoin, Arc estimates the price would increase by approximately $40,000. I almost tweeted this last week with the caption. And if a frog had wings, he wouldn't bump his ass when he hopped. Do you know what that's from? But I feel like nobody would have got that. Now, is that a movie? It's from Wayne's World. Okay. Cassandra says it. Okay. You're the only person I know who still quotes Wayne's World. It was a big part of my childhood. Yeah, it was on the Super Bowl, too. Wait, hold on. Good point. When I saw that commercial, I was like, nobody knows who this is right now.

If you're under the age of, I don't know, 30, like, you're like, wait, who are these old guys? That's true. They said, like, if corporations put 10% of their balance sheets in, it's worth 400,000 to Bitcoin or whatever. Did you check the math on this? I don't know what exactly how they're running the parallel here, but sure, whatever. come to find out today, Tesla has announced that it has bought $1.5 billion worth of Bitcoin, had to do a filing with the SEC on this. This isn't a small piece of their corporate cash whore. This is 10% of their cash because I think that what's the other one that Michael Saylor does, micro strategy? This is like 1% of cash. This is a big part of Tesla's cash.

This is not a small part. So this had a big move. What did Bitcoin was up 15% today, I believe. This was a huge move. Have you read the book on Musk before? from that Ashley Vance guy. No. I mean, there were multiple, multiple times where this company was going to go under. And it could have, like within weeks of basically going out of business. And now that he's the richest person in the world, I put this on Twitter today. I honestly think 20% of this stuff he does is just to troll people.

Yes, I agree. I'd say 40%. Maybe 140%. Maybe he thinks we really are living in a simulation because he puts Bitcoin in his profile on Twitter a few weeks ago and Bitcoin rises. And I said to you, isn't it wild that? while Bitcoin is becoming more mainstream, something like this can happen and it still sees such a huge rise from just a piece of news like this. So I was thinking, are we seeing a handoff here?

Like, I think you'd get a bigger reaction from Musk doing this. Like, let's say this would never happen. Buffett says we're putting 1% of our balance sheet from Berkshire Hathaway into Bitcoin. I honestly think the Musk news would have a bigger move on Bitcoin than Buffett at this point. Don't you think like he's almost past him in terms of relevance in today's market? Does he still have Bitcoin on his profile? I think he took it down. But I mean, he's got kind of the golden touch these days. He did that signal analytics stock that had nothing to do with what he tweeted.

He's been talking about Dogecoin and Bitcoin and all the stuff. And it seems to move whenever he makes a pronouncement. The guy has like the golden touch these days, whether people want to admit it or not, I guess, or whether you like him or not. In December, he tweeted Bitcoin is almost as BS as Fiat money. That's why you can never tell if he's really serious or trolling or I can't tell half the time. back to the Kathy Wood arc thing about this putting on it. I mean, obviously, there's tons and tons of Fortune 500 companies that would never do this. But will a few other companies do this?

Yes. Probably. No doubt. It'll happen. Will some of them live to regret it, potentially, if Bitcoin has another crash in the future? I'd love to know how this works, how long it takes to buy a billion and a half dollars worth of Bitcoin. I guess maybe we'll talk to Zach Prince about this next time he's on the show. But was this through BlockFi? Was it through Gemini or Coinbase? or, I mean, certainly not through Robin Hood, but where was the buying done? I would like to hear that, too, how of that liquidity is possible. But I think he's just at this point having fun with everything. Do you think he ever really expected Tesla to get this big in his heart of hearts?

To be the fifth biggest company in the market? Probably not. And this fast. I'm sure he's saying, like, I'm playing with house money at this point. Let's just see what can happen. He's been treating about this doge coin thing, which this is the dumbest thing going on right now, right? Yes. This is the dumbest part of the bull market.

it. This was a cryptocurrency that was created in 2013. This guy, they had a store in the Wall Street Journal about it. He said it took him three hours to code. And he said it's just absurd. He did it as a joke. He put a dog on it. And people are buying this. And it's going up. It's like a $10 billion market cap or whatever you call it with these coins. This is so stupid. There's probably a lot of dumb money in here. But I don't even know what I guess dumb money has lost all meaning. But Yes, it has. But maybe there's also some decent money in here. like, or I say decent, not so small money, where if you know that you're just playing the greater fool game, then the greater fool has been probably the greatest investment strategy

over the last decade. We've essentially gotten to the place where it's not pump and dump anymore. It's pump and hold. People like pumping and holding stuff. So much of the crypto stuff has gotten into more mainstream and it makes so much more sense. This part's dumb. This part is dumb. Anyway.

By being specific, this part meaning the doja coin. Yes. So Tesla is also going to start accepting Bitcoin as payment, not that anybody's going to buy test it with the Bitcoin you would think. It's interesting, though, when people talk about institutional adoption of this back in the day, it was more like foundations and endowments and pensions and sovereign wealth funds. I don't think people ever thought about corporations holding this underbalance yet. I think this is something new that people didn't really talk about before. What's your price target? I guess whatever Arc says it's going to be

worth. We'll go with that. The only Musk book that I read was the story of, I'm trying to remember the name of it, the story about Blue Origin and SpaceX. Do you know the name of that book? No, I never read that one. Okay, that was pretty good. Anyway, I was trying to tee you up, Ben, for the pivot, for the segue. Okay. So that's what Bezos is going to do. Bezos, did I say it wrong again?

I don't care. Screw you for getting that in my head. Last week, you called Jared Leto, Jared Leto. I wasn't going to say anything, but since you bring it up. Okay, come on. What? It's Leto. Whatever.

I don't care. All right, before we get into Bezos, we're telling what that means. I wanted to read this because this is from the Everything Store by Bradstone. Did you read that one? Nope. We're doing a lot of book drops here. This anecdote always stuck with me. In early 1997, Jeff Bezos flew to Boston to give a presentation at the Harvard Business School.

He spoke to a class taking a course called Managing the Marketplace, and afterwards the graduate students pretended he wasn't there while they dissected the online retailers' prospects. At the end of the hour, they reached a consensus. Amazon was unlikely to survive the wave of established retailers moving online. Quote, you seem like a really nice guy, so don't take this the wrong way, but you really need to sell the Barnes and Nobles and get out now. One student, bluntly informed Bezos. I just love that. You know who that student was? Cameron Winklevoss.

probably whatever take that however you want it in terms of learning a lesson but you can't always be right his timing here before amazon potentially splits up and spins out awes i think him leaving now this is perfect right you know he's still going to have an imprint on the company oh yeah well let me ask this who's more wrong the person who doubted bezos in 97 or the person who sold amazon short in 2011 that's true that's fair they're already established by that point so Bezos announced his retirement. I don't know if the retirement is the right word, but he's transitioning. Let's just say that. He's transitioning roles. Amazon just did a hundred, $100 billion, I should say, $100 billion in revenue and the most recently quarterly report. First time they ever hit that number. I mean, he goes on the Mount Rushmore of CEOs and founders of all time, right? And it's not even a question. Well, I think I'm just going to say what everybody's probably thinking. Are we sure he's not overrated?

Someone had to say it, right? Yeah. What has he ever done? profits more than doubled from a year earlier to $7 billion. Here's some AWS numbers. $45 billion in sales last year. So Andy Jassy, the new CEO, has been with Amazon since the beginning. He was the head of AWS. Man, $45 billion in sales, they're still growing at 30%, up 30% from a year earlier. Right.

Well, I didn't those students at Harvard realized in 97, they were going to create a cloud computing arm that way. They just completely missed that. How could they not see that? So do you agree with the statement? Amazon has disrupted fundamental analysis more so than any company of all time. with the exception maybe of Tesla. Amazon laid the path for all these other companies now. It's given investors pre-rain to view some of these companies

and pull forward things more than they ever would have done in the past because they point to Amazon and say, look, it worked. Right. I totally agree. We let them do this. Back to the Buffett thing. Let's say he's in his 40s right now. Do you think he would have been able to invest in this type of environment

and look past and say, well, Amazon and Apple and some of these companies have the most I'm going to invest in them? If Buffett was 40 years old today. Yeah, if he's investing in this environment, would he have been able to get rid of some of the Ben Graham stuff and go more with the monger and say, all right, I'm going to invest in the modes. I'm going to try to invest in Facebook and Amazon and Apple and these bigger quality companies. I think it'd be a meme stock guy. Impossible to say. This is pretty gross as a tangent. We got news last week. I think this sort of got swept under the rug. Amazon agreed to pay $62 million to the FTC to settle charges that had withheld tips to delivery drivers between 2016 and 2019. I mean, are you kidding me? That's gross, yeah, I agree.

I mean, did they pay, but they didn't admit wrongdoing? Was it one of those? Must have been. How do you withhold tips from drivers? I don't know how it works, but is it possible to have a company this big these days and not be a jerk sometimes? I feel like all of these people have that in them where they're just a huge jerk in some ways.

We've spoken about this before. I don't think you could get to the top without stepping on faces and being ruthless. So in that Everything Storebook, they said, the thing you never wanted to get an email from him is early in the days of Amazon. Basil was reading customer support emails when something would go wrong. When it would go wrong, he would forward the email to someone and all would have was a question mark. And that was when people were like, oh, he's pissed. If he just sent you a question mark and that would be like, fix it now, that was what you did not want to hear. But yeah, he had some stories where he just probably not a great guy to work for in a lot of ways.

it's a hard time squaring that sometimes with being so successful, but also being someone you probably wouldn't want to work for in most instances. So Apple last week, or maybe two weeks ago, also eclipsed $100 billion in a single quarter. According to Axios, the only other companies that have ever done that are Walmart and Exxon in the early 2000s. I kind of thought Walmart was doing half a trillion dollars right now, but maybe I'm wrong. Either way, that's impressive. So that leads me to this other thing that Axios did.

They threw up a chart of Amazon, Apple, Facebook, and Apple. Where's Microsoft? Either way. You said Apple twice. Okay. Apple, Alphabet, Facebook, and Amazon. I'm sorry. I prefer Google.

So do I. I'm just reading from the sheet. Okay. The growth in profits is ridiculous. I mean, absolutely ridiculous. Mep Faber did a thread, which we'll link to. Below is a list of my favorite charts demonstrating the U.S. stock market is bubbly, bubbly, bubbly. There's a lot of good charts in here that we will certainly link to in the show notes.

But I was thinking, as I'm looking at this chart, isn't this chart alone, if you had to push back for why the market is not in a bubble, to me, this is the single chart I would use, I think. These huge companies, yeah. If you do not have an outright, I'm stealing from Howard and Andrew Marks, if you do not have an bearish thesis for these companies, which are continuing to grow, as I said, AWS is doing 30%. If you don't have a bearish view on these giant tech companies, it's hard to be bearish and or say that the U.S. stock market is in a bubble because these are now 23% of the market and they're growing like gangbusters still. Yeah, if you had Tesla now, you're talking six companies that make up 30% of the market. Is it that big?

No. Pretty close. No? I guess Tesla's marked 2%. You're right. So it's probably 25, 26. Yeah. But still, that's one quarter of the market.

So to bring the whole market down, you're saying these companies have to come down or the other 75% are all going to crash, and those ones are doing really well lately. But if you look at the market X these names, I mean, listen, nobody is saying the market is cheap. I don't think anybody's saying that. I also don't think anybody would say that there's some crazy shit happening. We've been discussing this for years now. I don't think that you could just look at traditional fundamental analysis, the way that Amazon disrupted it. I don't think you could just use median price to sales or whatever we used to rely on. Just using that alone to say the market is in a bubble. I don't think that's right.

Market cap the GDP or Tobin's Q is not going to save you right now, trying to do median PE ratio stuff. If this is a bubble and it pops, I missed it. I don't think this is a bubble. Yeah. We've talked about micro bubbles. You're going to have micro crashes, I think. I think that's the way that these things are going to happen. And that's going to be harder for people to realize. I think you're going to have so many of these regime shifts where people jump from sector to sector place to place. All right, let's move on to market participants. So this is sad yet predictable. Here's some survey data. Among Democrats and millennials, about seven and ten believe the stock market is rigged against amateur investors. Wait, Democrats and millennials? Yes, for some reason. Oh, okay.

It's a progressive thing compared to about three and five Republicans and baby boomers who said the same. Let me ask you a question. What's going on with the seven and ten and three and five? If you just normalize that, that's pretty much the same thing. Three and a half and five. They're trying to fool you with denominator nonsense. Listen, let's just normalize that. Seven and Ten Democrats and Millennials believe the stock market is rigged. And six and ten Republicans and baby boomers say it. So look, we're all in this together. We all think the market's rigged.

Baby boomers, Republicans, millennials, and Democrats, we all say it's rigged. They're basically saying there's a big swath of the population. And, of course, they did this after the GameStop stuff. I think it's rigged against them. They also asked some Robin Hood stuff. It's kind of interesting. We talked about this last week, but they're asking who expects to change their usage of Robin Hood coming up. And some people said, I will use Robin Hood less going forward.

It was a small number. It was like in the 8 to 15% range, depending on who you asked. How about this? An honest survey for once. I think it was honest, actually. Yeah, it's too bad people think it's rigged. You wonder how much overlap there is with people who think it's rigged and people are not participating in it.

Wait, hold on, hold on. So let's just break that down over time. For people that think the stock market is rigged, but we'll use Robin Hood less going forward. I mean, that's really special, right? Again, people who think the market is rigged and will use Robin and less going forward, that's only 8%. So if you think the market is rigged, there's only an 8% chance that you use Robin Hood less going forward.

So what does that say? I think the market is rigged, but F it, I'm still going hard. Well, there's actually 13% of people say, I agree the stock market is rig, but I will use Robin Hood more going forward. To get ahead. They're using the rigness to their advantage. I don't know. My whole point has just been, I think the stock market is one of the craziest places where you can play in the same playing field as them. You're on the same court as LeBron.

But if you, like, have patience and wait a little longer, you actually have an advantage. because you don't have to look at your sharp ratio or your Sortino ratio over like a three-week period like the professionals do. I feel like there's so many advantages. The problem is we've said, listen, index funds basically cost nothing now. It costs nothing to trade. If you want to have a frictionless investing environment, like you can do it really easily these days. And everyone has said, nope, here, Wall Street, take our crazy-ass options and volatility trades and make as much money as you want them. You can get market returns, pay very little, and do it. nothing. By virtue of doing that, beat most of the professionals to try and beat the market.

Yes. But by just getting market returns, you're not going to beat the market, obviously. And you don't get the own mean stocks very much. Right. So. Although Tesla's, what, 3% of the S&P 500? That's true. And if you've been in a total market fund, you've been in Tesla since 2010. So wait a minute. If Tesla's 3% of the S&P 500 and they've got 10% of their cash position in Bitcoin, If you own the S&P 500, you have 0.000000-064% of your portfolio in Bitcoin. So did you just get off zero if you're an S&P 500 investor? It's sad to say I actually calculated that today, what the amount is. Okay, hit us.

It's like 0.004 or something. All right. I was close. I'm staying out of this. But yeah, so you technically own Bitcoin now if you own an SEP 500 index fund or a total stock market fund. To the moon, Ben. Yes, it's a very small amount. But here's something I didn't realize.

This was from the Wall Street Journal, getting back to the Robin Hood stuff. Did you see this? By the end of December, Robin Hood had amassed 20 million users. This was before they had it cranked up where they were getting $500,000 or $600,000 a day in the past few weeks. That's a way bigger number than I had thought. $20 million? Between Gen Z and millennials, there's 140 million people, 130, 120. I'm not saying it's all young people, but it's mostly young people.

That's a huge chunk that Robin Hood. it has, correct? You and I looked into it last week. I guess I never realized this. They don't even offer tax deferred accounts. You can't open an IRA that it's all taxable. The percentage of people that they have of young people invested, even if it's a small amount in the average, what do you think the average, I think we've talked about this before, the average, few grand, two or three grand or something. It's not like it's that huge, but just having that many people, if they can upsell them in some way to different, that's a huge, huge number. That number kind of blew me away. Speaking of taxable accounts, I tweeted and deleted

of this because it felt mean and nasty, and I think this is why people get resentful. So the Wall Street Journal did this thing on day traders and taxes. They got a quote from somebody, and jerks like me were going to run with this. I've heard that taxes affect the bottom line, and I want to know more he adds. Yeah, so this was a 23-year-old. They interviewed a few people. But don't you think like this goes to the notion of everybody in Robin Hood is a new bail? And that's not really fair. Interviewed this one guy who said that he did like 200 trades a day, and he got his 1099 for, which is your taxes because you're trading in a short-term basis, and it was 34 pages long.

And he's like, oh, you and I talked about it. You could have a situation where people made a ton of money in 2020. And then they, like, put all their gains in GameStop and lost a bunch of it. And now maybe they can't even afford their tax bill. That's going to happen to people. You're going to get stories like that. 100%. We spoke about this last week, I believe. It looks like Robin Hood raised John Shrew Capital tweeted this. We'll share this in the show notes. They raised money at a 30% discount. I feel like someone called that on this show. Was it you or me?

I don't think it was me. No, it was me. Sorry, I'll just pat myself in the back there. Okay. So they were saying that it was the biggest capital raise for a private company ever. That's how big that number was. Bigger than WeWork? I guess so.

At a one-time deal, I think. It's a shame that WeWork is not spacking right now. That story didn't break a few years later because there'd be some fun stories from that. By the way, look at this chart. So Robin Hood did another post. I feel like they're bloggers now. Robin Hood puts out a blog post a day. Talking about a reflection on their growth.

So if you look at this first chart showing option and equity volume, and it goes from January 2018 to January 2020, or I'm sorry, March 2020 or so, and you see like, oh my God, the pandemic hit, people were home trading their butts off. And then if you zoom out, the spike in March 2020 looks like nothing compared to the spike in January 21. It's way, way bigger now. They're communicating more. They're being more transparent. Now I want them to step into the educator role a little bit. Even if 85% of the people on on there, ignore it and say, I don't need to know about this. If they can educate some people on options in what your range of outcomes could be, or here's what happens when you trade on margin,

if they could just stop 10% of their people from blowing themselves up potentially, I think that's a worthy goal if they try to educate more people on this. I think I'll take the other side of that. I don't think there's an education issue. It's a human nature issue. So you don't think there's any way that Robin Hood on there. So betterment, when they offer advice and someone's going to do a taxable trade on betterment, you get this. window that pops up and says, if you make this trade, here's what your potential tax ramifications could be. Do you still want to go through this? I'm not saying Robin Hood has to be betterment. There are no danger of that. They're encouraging people to trade. Couldn't they offer some guardrails

like, though? If somebody click buy in and they step back, I think Robin would be like, are you sure you don't want to buy? Maybe you should buy. That's what I'm saying. Wouldn't it be nice if they offered some guardrails to people? Don't give everybody a margin account. Some like the default retirement stuff we talked about earlier. Let's say there's a guardrail account and there's a non-guard. Like, you go to the blowing alley, when you go with my kids, you put up the bumpers.

So you're automatically into a bumper account if you're under a certain age or whatever or have a certain amount of money. And you can opt out of it if you want. But otherwise, that bumper account is going to stay on. And when you make a crazy mover trade, it's going to ask you, like, do you want to do this?

Well, what's crazy? Well, I'm saying if you make a bunch of short-term trades, it's going to say, hey, here's your potential tax liability. Well, they do that already. You can't day trade if you have less than 25 grand. Okay, so I guess that's a guardrail. But I think it's the margin loan and option stuff. Still, I'm saying more guardrails on the account, how that sound.

I think that could be their education if they don't want to tell people to do it. If nothing else, this is the cynical part of me talking, if nothing else to cover their ass, they should offer this. Yes, exactly. That's what I'm thinking. I'm sure that it sounds like a lot of their legal stuff they do get when you click a few buttons when you sign up. That's going to get them out of any lawsuit that anyone was hoping to hit them with. But I would just like to see them just attempt it. And even if it helps a small number of people,

not blow themselves up. I think that's a moral victory. Oh, how about that story from the Wall Street Journal about a company that made $700 million on GameStop? So it's their biggest gain ever on a stock. Now, I was always in these hedge fund pitch meetings back in the day. And they would be, they out their PowerPoint presentation, these people have the best like sales and marketing people ever. They were typically like very good looking people. They knew how to sell you and wine and dine you. And they would have this amazing. Now I know why I couldn't get a job. Yeah, there you go. But they'd have this amazing process and

they would explain it line by line. Here's how we buy a stock. All these things they go through. How do you explain something like this? Well, here's what they said. After the markets close on January 26, Tesla chief executive officer Elon Musk tweeted, game stank to a rallying cry used to users of Reddit's Wall Street bets for them. And that was the point they sold it. Imagine me like, so what's your sell discipline? Well, Elon Musk tweeted about a meme stock and we decided things were too crazy, so we decided to sell. That's pretty good sell disciplines. No? It is, but it's just funny to think about how rigid some of their rules are when they talk about their process, but then it really comes down to this. The fact that hedge funds are being pulled into

this meme stock stuff, I think is hilarious to me. Yes. Credit to them, they were in early. They were not like one of the funds that were jumping in and pumping you. They were, I guess, a year or two ago. Right. I would love to hear a story about a company who either got in and tried to ride this wave and got out or shorted it way at the top and was never involved in this. You know that happened. How about when they were selling when Elon was. tweeting, this is the unfortunate part. It's like they were selling to Newb whales. Yes. They basically top ticked it perfectly. Their fund was up 40% almost after fees in January. So they're the other side of Melvin. Melvin was down 53%. This place was up 40%. There's whispers that, or not

whispers, that Warren Kitty might be under some scrutiny. Apparently, they said that he still had a job through January 28th at Mass Mutual, performing financial wellness education for people. The irony. So they're looking at Mass Mutual. Like, did they know? I think this seems stupid. And if they went after this guy, it would be crazy, I think. We didn't realize this. He gave us a heads up on Twitter. You and me and Josh and a bunch of other people on finance Twitter. Well, it's my rule. If I'm tagged on a list with 17 other people, sorry, I mute and move on. And sometimes you miss a one-in-a-lifetime opportunity. I think it was in July. He tagged us all and said, check out my stream. We totally missed the Roaring Kitty everything. They better not go after this guy. I just think it's hilarious. And to your point about how is this going to die down?

and your claim was, well, when people go back to the office, this guy could have never done four-hour YouTube streams if he wasn't working from his house in a pandemic. And his company had no idea he's trying to pump a stock and pull a short squeeze. So if they go after this guy, given that there were some, maybe a few slaps on the rest in 2008, if they go after this guy, people are going to lose their mind. Yes, they cannot. It would be ridiculous for them to go after this. I don't know.

That better not happen. A few minutes ago, you talked about like, I don't know if you said rotation, but that's basically what you were saying, how different areas in the market have carried a baton. Bespoke did this really cool chart showing the bottom to today, different leadership groups. This is the kind of chart where I would spend like six hours in Excel trying to do this and get it right and never quite figured out. So this is line. Each part of the line is a different color and it shows which sector was outperforming at that time. I mean, I'm a sucker for this chart. This is just eye candy. It's beautiful. It really is. This just shows that it's been, it was tech, of course, in the downturn.

and then energy came back, and it's been a lot of different things, and utilities even for a while, it's kind of surprising how many times energy is on here. Oil prices went back above $60 a bailor or something. I know that negative 37 number is kind of hard to believe, but that's a $100 swing in the price of oil since April. That's a pretty big move, no? Yeah. So if you invested in USO back then when it was negative the day, you probably did okay for yourself, right? Did you invest at the negative oil IPO?

No. So I guess it's all about timing there, but you did okay for yourself probably, right? Well, we don't have to guess. Let's just look at the chart. It was a low of 17 bucks, almost 1688, and it's up to 38 now. Man, this thing is volatile, super volatile. As we know. All right, anyway, I want to talk about a blog post from Jonathan Bales, who is the co-founder of Fantasy Labs, which is a daily fantasy sports research tool. That just sounds so weird that that's normal now. Oh, yeah. He does daily fantasy research. Duh. I mean, anyway. All right. He said, trading cards might very well become a stock market for athletes. What was once play, kids training physical sports cards with friends could transform it to something completely different. When you start to go down this rabbit hole, you inevitably

end up asking, why does this thing need to exist in the physical world at all to have value? As I examine the sorts of areas to which I've gravitated from an investment standpoint, I notice a trend. Digital art, cryptocurrency, e-sports, training cards. They're all continuation of this inevitable trend of moving the physical world online. Can we stop for a second to recognize the absurdity of this all? I was on the phone last night with someone named non-fund gerbils, waiting out a $35,000 transfer of Ethereum so I could purchase a video of a John Morant where you could view anywhere on the internet for free. And the best part, I think $35,000 was a deal. You told me about this stuff a few weeks ago. You read about this

and you sent it to me. What are these called NFTs? What does it stand for? Non-fungible tokens. Don't ask me to explain it. Okay. It's basically a short video like you could get on YouTube, but you own the rights to it. And it's like a trading card, but it's a video clip. It's basically a GIF. You explained it to me, and four years ago, I would have laughed you out of the room. And now when I heard this, I thought, it kind of makes sense to me. And I almost wanted to punch myself for thinking that. It actually kind of makes sense. Everybody's knee-jerk reaction is, wait a minute. You're telling me that it's a GIF.

Yes, that's what I'm telling you. You're telling me that you're buying something that you could see on YouTube. Yes, that's what I'm telling you. So why does this make sense? Well, I don't know, because people think it has value and so therefore does value. My whole thesis on this is like, this is Bitcoin money. It's people that have way too much money, way, way, way too much money speculating. Cuban did a post on this the other day.

He's involved. A LeBron clip went for $100,000 a week ago, I think. The Jordan rookie card is going for like $700,000 and it could have gone for $50 a year ago or something. I honestly think, I don't know how long it's going to last. The best investment thesis right now, the simplest one, might just be wealth inequality. Rich people have too much money and nowhere to put it. They're licensed by the NBA, so they're partnering with the NBA, which is brilliant, and they're controlling the supply.

So they're selling packs, right? And this isn't beta mode, by the way. This is like day one, not even day one. So I got an email that packs are dropping. So I went on and I was already like 20 minutes late. But by the time I got on there, they see. sold 2,700 packs for $1,000, and there was 20,000 people on the waiting list. By the way, when you told me this, you know the Steve Buscemi Giff or meme that says,

like, how do you do fellow kids? When you told me that you were on the waiting list for these packs, like, that's what I pictured. I was going to put your face on that, I think. I'm picturing you at this point, it's people with money and kids who want to get in this stuff. So the hope is that you buy a pack, at least for me, I was going to buy a pack, hope I get a good gift. And then sell it. If you ask me, like, am I long-term bullish on this platform? I have no idea. But right now, it's like an absolute mania. And yeah, this thing could go away and maybe it's something else that takes this place. But it's weird that four years ago, I would have said, get this out of my face. But now it's like, dude, four months ago, a year ago. It kind of makes sense even though it

shouldn't, which that's just where we are, I guess. All right, this shocked me. Angelus. By the way, I don't know that we've spoken about this. We're doing this angelus thing. we're investing alongside Paki McCormick's syndicates. So that's fun. Yeah, our first time ever getting into this stuff. And it can do it kind of for small amounts here and there. It's not that big. All right. So more than 80% of startups that change valuations in the Q4 were marked up. Think about where we were like, I don't know, a year ago, where all of these things were potentially just going to get wiped out, like a lot of young companies that weren't going to be able to make it. So again, more than 80% of startups that

change valuations in Q4 were marked up, which was remarkable. Similarly, there was a post about what's going on a Y Combinator. So they now have companies that are valued at $300 billion. So I guess this is sort of how VC works. Venture capital is creating more zombie companies than the Fed. Is that what's going on? Wait, how? Because don't most of these startups fail?

Good point. The Fed is allowing these zombies to be born. All right. Anyway, just three companies, Airbnb, DoorDash, and Stripe represent more than half of their top company's portfolio value. and the top 10 companies represent 75% of it. Here's from the article, bear in mind, most of these companies raised seed rounds

at $3 to $10 million valuations. So a median top company with a $500 million valuation is now valued at a whopping 50 to 150x at seed stage valuation. That's pretty wild. Not bad. So they gave some color on like where the puck is heading. They said consumer is dead.

While that sounds like hyperbole, consumer has been shrinking dramatically over the years and there is no top consumer companies one to four years of age. Fintech is shining, Stripe, Coinbase, financial technology has displaced consumer as white combinators, runner-up category of B2B, and old as sexy. The puck really seems to be going towards health care, real estate, and construction and industrials. These old economy industries are right for disruption. Insurance, for example. I would love to see a fintech firm. I just wrote a piece about this. Come in and make it easier for people to tap their home equity. Oh, let's talk about

this for a second. There was a story in Bloomberg, and it said a third of all people in home are now considered equity rich, meaning that, hang on, where is this? Well, not to brag. More than the third of U.S. homeowners were considered equity rich, meaning their property was worth twice as much as the underlying mortgage. Wow. If someone can figure it an easier way than a helock or a reverse mortgage, just make it easier for people to tap that somehow and use it, I think that's a huge opportunity. I contacted my bank, Wells Fargo, to find out if I could set up a helock. I just want the option, right, in case of emergency, whatever. I want the option.

So I called them, and they told me they haven't done helox or cash out refies since March, and they're still not doing them. That's wild for such a huge company. Which made me think of the old Mark Twain quote, and maybe I'm going to butcher this, but a banker is somebody who lends you money when it's sunny and ask for it back when it begins to rain. Well, it's just surprising now that this long into it is still going. I can understand in March pulling back the range a little bit. Okay, fine.

Now it seems wild. All right, let's talk about the money tree. You know her as Kathy Wood. Apparently, people in South Korea, her nickname there is Money Tree. Does that mean that people in South Korea are investing in her fund? I guess so, yeah. Okay. So she is an international investing base. I guess that makes sense now that they run $50 billion or whatever it is. Wow. They just crossed 50. They were at $3.6 billion a year ago. So again, you sent me this arc big ideas one. Before we get to that, according to FACSET, this is from, I think Jason is why I wrote this article. 43.5% of arc's total equity holdings are in stocks of which the firm owns at least a 10th of all

shares outstanding. They're a huge player. Huge. They wanted to be in more smaller mid-cap names back in the day that could grow bigger. If her investor sour on her, if her performance starts to win, and I'm not predicting this. This is a big if she's got a ton of loyalty right now. But, you know, these things don't last forever.

I guess the point is if people rush for the exits, they're not all going to be able to fit through. Okay, so Wall Street Betts, those people will be shorting her stocks when she has to sell them. Is that what's going to happen? Oh, man, that's going to be rough. How about that? Wall Street Betts versus Arc someday. All right, anyway, this was the most bullish presentation, I mean, maybe I've ever seen.

In every futuristic area, she's like showing 45% Kagers. She is thinking big. What I said to you is offline is, it's funny to me that she's been right for a long time, call it 10 years about this stuff. And most of the stuff she's gotten right. And for a lot of people, it would be harder to get behind her optimistic view of the future than it would be someone who's been a pessimist for 10 years and been completely wrong because of the way our brains are wired. It's way easier to go with the bearish person like Grantham, who's been wrong for years

and years about a market bubble and be pessimistic than it is to go with someone's optimistic like her and been right. Yeah, because she looks naive. Optimists look naive of all the risks. But this is sort of one of the reasons why people sort of scoff at some of their work. According to ARC's research, deep learning will add $30 trillion to the global equity market cap over the next 15 to 20 years. Okay, that's deep learning alone.

And keep in mind, keep in mind, that's basically double what the U.S. stock market is worth today. That's pretty ambitious. And it's a lot of money. All of her charts sort of go like this, just ridiculous growth. So here's another one. ARC's research suggests that autonomous ride handling platforms will generate more than $1 trillion in profits per year by 2030.

I don't know what the total income is from the S&P 500, but if the U.S. market is called $35 trillion and is training at a P.E. of what? In the 20s? Let's say that's between $1 and $2 trillion, roughly. They're suggesting that ride-hailing platforms will generate more than $1 trillion in profits by 2030. I'm going to say $20 never. Not to be too much of a bear, but by 2030, that is extremely aggressive, no? Yes, it's all exponential stuff for them.

Global electric vehicle sales from 2020 to 2025. It basically goes from nothing to up to the sky. She's predicting an 82% Kager, 82% between 2020 and 2025 for global electric. vehicle sales. I mean, if they would have stretched this one out to 2030, I might, that one might be a little more reasonable because GM said recently, they're going to, by 2035, have full electric fleet. Maybe they're just a little early. I'm not trying to say that they're right, but all they have to do is be right on like one

or two of these things and they're going to be probably do okay, right? I don't know. All right. Global food delivery. They're projecting $18 billion in 2025 and $116 billion in 2030. By the way, I think Grubbup reported earnings. and I didn't get a chance to look at it, but I don't think it was very good. This is the one that really doesn't make sense to me, the food delivery stuff.

Maybe it's just, it's again a plan like rich people having too much money and just paying for convenience. I don't see this as like solving a huge problem for that many people, do you? I don't mind either getting delivery or just picking up. Here's what I do mind. So I got a DoorDash coupon for 50 bucks. That's not relevant, but whatever. So I got dinner.

I spent $45 on dinner for myself and Rob. Robin. $45 turned into 70. What, with all their fees and such? With all their fees. And they're still not making money. Yeah. Dude, 45 into 70. It's absurd. I will never use that service. We could look like idiots on this one and maybe we just don't see it all. But this is one that just, I just don't see the problem they're solving here. Well, here's the other thing that I was thinking about. We're not venture capitalists. So you see a lot of like ridiculous things on Twitter. But they're privy to a lot of the futuristic stuff that's being built. We don't see that. That's not an hour workflow. I have no idea what's going on. I guess maybe the other thought

is it's not just food. We're going to deliver everything to you. Anything you need anytime. We're going to have these fleet of autonomous vehicles driving around and it's just going to be at your door on demand. I guess maybe that's the dream. All right. I just want to talk just briefly because we're getting pretty long here. There's a new paper by David Hope from the London School of Economics and Julian Lindberg from King's College London. They examine 18 developed countries from Australia to the United States over a 50-year period, and they concluded that per capita GDP and unemployment rates were nearly identical after five years in countries that slashed taxes on rich and in those that didn't. But the analysis discovered one major change. The incomes of the rich grew much

faster in countries where tax rates were lowered. Oh my God, trickled down economics is bullshit. What a revelation. That is kind of crazy that the change in tax rates did nothing for. That just shows how much more important things like demographics and the invite. are than tax rates. I think the tax rates of people just adapt to whatever the rates are and they move on, right? It doesn't really change behavior that much. So people with a high income probably spend, I'm generalizing, people that are making six figures spend most of their income. A lot of it. They're putting more money into the economy than people with less means. But if you make, I don't know what the number is, five million, ten million. Where's the line where if you make that much money,

you can't spend it all? There's no Brewster's million. Slashing tax rates on billionaires doesn't do anything for anyone. Yes, I agree. Oh, before we get into listener questions, we had some feedback here. I'm a 35-year-old advisor in CFP, and I feel like I can offer some insight into the recent listener question, who was considering a career change from banking into advising. By the way, we get tons of questions on this from people who want to get into financial advisor. So this person says they were a banker at a national bank for five years and wanted to make the jump.

They transitioned to advising while studying for the CFP, took four years to get back to the high water salary that they made as a banker. We kind of mentioned this last week. Now this person is in their fifth year, has graduated from the new advisor role, and the grid rate was substantially reduced, and it probably won't be until next year that they're back to their higher salary before. So it took five or six years for this person to get back to break even going from being a banker to an advisor. So he said the money has been difficult, but doable because they have a working spouse. If you can afford to take the risk is worth it because the earnings potential is unlimited, and a lot of families and clients will need a financial plan and your advice. His recommended

reading is a new financial advisor by Nick Murray. Good to know. It's possible, but you do have to potentially take a step back money-wise. Here's one more. Thinking about the question you received from the 35-year-old thinking about making a change into personal financial management, I worked with a woman who worked for H&R Block during tax season and would take classes for the rest of the year, she told me that a lot of her clients asked her about two things, retirement planning and real estate. That has been my fallback plan if I was to get laid off to work for one of the tax prep companies, build up a book of content. tax and do a CFP boot camp. That's interesting. Not a bad idea.

Haven't heard about that. Okay. All right, let's just do one question. Not sure if this is better as an end-of-show question or perhaps a longer segment in a future show, but I'd love to hear y'all's take on term versus whole-life insurance and using the latter as an investment. I personally against it, but I feel like it's a good thing for people to know more about so they don't get sold in it without fully understand the pros, cons fees, penalties, et cetera. You know, I don't know if you sell this in our inbox. We got an email from somebody who is sold whole-life insurance in a 10 pay, meaning you pay annual premiums 10 times and then you're done. This person does not have a family. They do not have a big income and they're spending, I think, $4,000 a year on Whole Life

Insurance. And they emailed us, hey, is this a good investment? What do I do? So the short answer is no. Whole life insurance is not a good investment. Whole life insurance is a way primarily to cover estate taxes if you have a very large estate. It is a very expensive investment option. If you have maxed out all of your other accounts, if you've got your 401K maxed, you've got everything else, you've got your meme stocks, and then you want to diversify into something like this, I guess, no. The answer is no. Do not do it. Yeah. Insurance is about protecting risk and investing is about growing your wealth or preserving it. So it's a very big difference. There's room for both, obviously, in a financial plan, but that $4,000,

for a young person. That's almost maxing out an IRA right there. I'm not anti-insurance by any stretch of the imagination. I think it's very important for people that have families. But as an investment option, for somebody without children, what are you kidding me? No. Hard no. All right. Let's get some recommendations. I read Cousin Sal's book, You Can't Lose them all. He is Jimmy Kimmel's cousin. He's been on the Jimmy Kimmel show forever and he's on the Bill Simmons show during NFL season every your cousin Sal. What was the word they told us a few weeks ago, D-Gen? He's a consummate degenerate gambler, and he almost leans into that degenerate gambledness of his, if that's a word. He has some hilarious stories about himself and his friends and all these other degenerate gamblers

she knows losing money. And those ones are almost more fun to listen to than anything else. Just his whole life is built around. He gambles on everything. And it's kind of funny to hear some of his stories. And I guess maybe I'm a DGN now because I lost money on the Super Bowl, betting on it through the online sports stuff. I had my money on KC.

Thanks a lot, Melvin Capital, for that recommendation. But I swear all these casino apps, draft kings and Fandul and Barstool Sports, they've read Conneman and Tversky in Thaler. Your first bet is like risk-free, so they'll give you your money back so you bet again, or they offer bonuses for signing up, or they offer these ridiculous odds that make you win once so they get you hooked. These places are smart. It was entertaining for me to do it. I just did it for entertainment purposes. Maybe I'll do it for like every big game in the future. I'm not going to do it for like a random NBA game on a Wednesday or something, but they know what they're doing. So if you like reading gambling stories like Cousin Sal's book,

Not to brag, but... You won. You took Tampa and the Under. I took a victory. I will be opening a sports betty hedge fund very soon. I'm sure there's going to be stuff like that where people have systems are going to sell. That's probably not too far behind. We watched this movie Our Friend this weekend. I don't know if I can necessarily recommend it to someone. It was like this moving, heartbreaking movie.

It's a true story about this young couple who had two young daughters and the mother is going through cancer and she's, you know, before you get it, she's going to die. I'm out. Yes. It was really hard to watch, and I didn't know how heavy it was. Jason Siegel plays his friend, and he comes and lives with them for like 14 months to help them through this process. And it's one of those things where it kind of restores your faith in humanity because this guy basically dropped his whole life. He like ended a relationship and lost his job for this. The original story was in Esquire, I guess, and I read the story.

But it was too hard to watch that I wouldn't necessarily recommend it. But it was really beautifully done and really well acted. But it's almost too hard to watch. I wouldn't even recommend it. Even though I enjoyed it and I'm glad I watched it, I wouldn't recommend it to someone else. Yeah, anyway, it's a hard watch, but it was still pretty good. This came recommended by young Ben C. He told me to watch the Connor McGregor Doc on Netflix.

I think it's a few years old at this point. But I very much enjoyed it. I'm not a huge M.MA guy. But what I liked about the doc was, it started with him in Ireland fighting. None of his childhood. You know what I mean? It was just about his fighting journey, which was excellent. Didn't have the usual biography fluff that I don't like.

No bio, straight action. Okay. All right. No movies or TV shows this weekend. I have one episode left in Dave. I can't believe how talented he is. I thought it was just about dick jokes and stuff, but the episode of mental health? Yes.

The writing of the show has got a few deep angles to it, too. All right. So again, on Friday, we're talking with Daniel Crosby, the behavioral finance expert, Dr. Daniel Crosby. That's going to be really, really good. I'm looking forward to talking to him. Thanks, God, Interactive Brokers. Animal Spirits is brought to you today by Interactive Brokers. Savvy investors use portfolio analysts to create a consolidated view of their finances

and check the help for their complete financial portfolio, sign up for free at portfolioanalyst.com, something Michael and I have both done. It's a cool little tool. Animal Spiritspod at gmail.com. We will see you on Friday.