Animal Spirits Podcast - Oil's 1987 Moment (EP.129)

Episode Date: March 11, 2020

On this week's episode we talk about the carnage in the stock market, the huge drop in oil prices, going from the fear of missing out to the fear of being in, why moves in the markets feel like they're happening faster than ever, some context around the plunge, are investors overreacting, the Fed's bazooka, why bonds are scarier than stocks right now and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, 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 Rithold's wealth management may maintain position, and the securities discussed in this podcast.

Welcome to Animal Spirits with Michael and Ben. The stock market is getting wrecked today. We are recording this at 220-ish p.m. Eastern on Monday. The S&P 500 is down 7%. The Dow is down a million points. This morning for 15 minutes, they had to halt the market for 15 minutes because a circuit breaker was hit. Wait, a million? I'm showing down 2,000.

Okay. Someone's going to quote the points. I knew you would. I don't pay attention to doubt points. This is a bad day, and this made me realize, so you know the Kahneman and Tversky research that shows loss aversion? Loss aversion means that a loss feels two to two and a half times worse than a gain feels good. So last Monday, stocks were up close to 5%. Today they're down 7%. I think when the numbers get this big, that equation is off. It's more like 10 times more painful. Don't you agree? That Monday did not feel

nearly as good as this Monday feels bad. I would totally agree. Well, especially because last Monday, I guess what the benefit of hindsight, rightfully so, nobody thinks it's over. Right. So are we going to do the let's show how crazy things are out there today? Or are we going to do the context thing? I think we can do a little bit of both.

But which one do you want to start with? Crazy. All right. Let's show how crazy the things are. Let's get a little crazy. So in the 13 days since the S&P 500 peaked, Again, 13 sessions. Oil Services, ETF, OIH, down 54%. XOP, the Exploration and Production Companies, down 50%. XLE, the big integrated names like Chevron and Exxon, down 37%. Obviously, that was

isolated to energy. Do you really understand what's going on between the Saudis and the Russians? Because I have no idea. I do not get this. The timing could not have been worse, obviously. Hey, let's wreck the oil market while we're going through a global pandemic. That sounds a good idea. You and I were talking about this before this morning. What would the market have reacted? How would the reaction have been if this wasn't going on during the coronavirus? You think we would have had like a one or two percent down day? The energy stocks would have gotten crushed and people would have moved on? Is this just a confluence of events where people are like, okay, I can really freak out now because this other thing is going on. And oil crashed more than 30 percent this morning. And I guess it's the second largest crash in oil since the Kuwait War in 1991 since Desert Storm. If you put $10,000 into Saudi Aramco at the IPO. So I guess the deal is Saudi Arabia plans to boost their oil output well above 10 million barrels a day. And it's some aggressive response to what happened with the OPEC alliance and Russia falling apart. I honestly don't get it.

And I don't know if you really need to get it. All I know is that oil crashed big time. And I looked at it today. The energy sector ETF, XLE, has now has a new. negative total return, including dividends, going back to 2005, the end of 2005. That's a decade and a half that's just gone. I tweeted this out on Friday, thinking I was being pretty slick. I said, so you want to be a deep value investor. The energy sector underperformed the S&P 500 by 210% in the 2010s. And this year, it's by far the worst performing sector down 30%. And that was on

Friday. It's down another 18 or 19% today. When does Warren Buffett step in to buy? the blood in the streets here? Is he like stockpiling oil in his backyard yet? Aren't we like a Warren Buffett headline away from a 3% moving the other direction? What's he waiting for? So cruise stocks also decimated. Royal Caribbean went from 135 in the beginning of the year down to 60. Oh, by the way, it closed on 60 on Friday or 65.

People were talking about like stepping in and buying these cruise names. Royal Caribbean is down 25% today. Another 25%. The travel industry feels like financials in O.A. I hate to hearken that analogy. No, it is. That's apt. But the thing is, every few months in 08, you would say, like, okay, now is the time to

step in and buy financials. And there was always another leg lower. Kind of feels like that. What would happen if Airbnb was a public stock? How much would it be down? We talked about this on this show before, how they really wanted to go public last year and they're going to do it in 2020. Now they're shelving it.

Do you think anybody's Airbnb being right now? I can't imagine they are. If you were going to travel at all, would you want to stay in someone else's potentially infested home? I wouldn't. Apartment or condo? Speaking of travel, my travel is looking increasingly supposed to be going away next Thursday. Not going to do it? Are you going to drive with Bahamas?

Do you think there's really a greater risk of traveling to the Bahamas and going in an airplane as opposed to riding the train in New York City? Okay. The answer to that is, no, I don't. And by the way, I might be staying at home entirely. Maybe this is like the loss aversion thing or the risk ofversion thing that you just spoke about. I get it. But I don't, do you think, sorry to pull out the U-turn here, do you think social media is making this thing worse or do you think it's helping? Because I feel like you see someone on Twitter with an MD after their handle and they get 4,000 likes and retweets. And I feel like you get this thing of, oh, there's nothing to worry about and oh, we have to panic. And there's not much middle ground. of, well, it doesn't seem like there's people in the middle saying, like, Elon Musk saying this thing is ridiculously over, the panic is too much. Do you think it's making it worse that we have all this information now? I don't know. I really don't know what to think. I mean, I was talking to my dad and he's like, listen, I'm not going to tell you what to do, but you have a baby at home, you have asthma. My dad just got over cancer. I see him a lot. God forbid something happened there. It just seems like the risk reward is so skewed, even if it's a small,

chance. And who knows what the chances are of getting it? I don't know. And luckily, we have jobs that allow us to work remotely, whereas a lot of people just don't have that luxury. How about this? In terms of, again, risk aversion, all those sort of stuff, how much of an asshole would I feel like if I went on vacation and got the coronavirus? Wouldn't I say, wow, what a silly, silly, immature, stupid decision? And with that said, I still might go. And honestly, I think a lot of people are dealing with that. It's this miniscule, small chance. And then, to be the other guy, then someone else is going to say, well, you have a greater risk of getting killed in the car on the way to the airport. That's the dumb and dumber, right? It's hard to deal with

these things because we have this thing staring us in the face. Okay, let's talk about the market again. Maybe I'll write about this, but I was talking to a friend the other day, and he basically said to me that, so he knows what I say to him. Listen, we're 35 years old. We have 30 years. Who cares where the market goes? Obviously, you know, I'm not minimizing it. I don't hope the market goes a lot lower. But my point was, if our destination is 30 years in the future at ostensibly higher prices, don't we want lower prices? Doesn't that make sense if you're contributing every two weeks? So I was just trying to talk some sense to him. And he's telling me that people at his job are calling him saying, don't you see the risk involved? And a friend of a friend is texting him. And it's almost

not to be condescending, but it's almost like the blind leading the blind, how people should invest. Well, this is the difference between the fear of missing out and now you have the fear of being in. So that's exactly where I was going where oftentimes investing is a game of implied peer pressure where you feel FOMO, but it's not because your friends are necessarily telling you you're an idiot for not owning Tesla. But now when the market's down 20% are close to it, this is going to start coming up in daily life where your family, your friends, and your coworker are going to be like, oh my God, I sold last week. Why didn't you sell? And the reason why that goes on is because investing, just like politics and sports, is so tribal. People don't want to be alone on an island.

Yeah. And that's why you get this herd mentality of people make decisions that they never would make individually, but it's easier to do it in a herd. And especially when it happens this fast, that's what makes it so scary. So we're basically at the same losses now. We're a little, I think the S&P's down 18 or 19%. That's basically what happened in the end of 2018. And it sure didn't feel like this. And again, at the time, I didn't think that. I wasn't that nervous about that one because it just seemed like there was no reason for it. And that turned out to be the right stance. Not to brag.

Well, I mean, but then again, you never know. You never know what's setting people off and what the overreaction coming from or where they're starting. But here's why. A, as mentioned, obviously we have the fear of a health pandemic, which is making this feel a lot worse. But it is worse because in December 2018, it took 56 days from the top to the bottom, 56 days to fall almost 20%. today. And that felt fast at the time actually. That felt very fast. Today, I'm looking at the Dow. It's 17 days. So I think the SP is 13. And it was coming from an all time high. It's so quick. It came from an all time high. I think that's what's making this so just crazy to deal with. So here's the other thing. So we're back at 2754 in the S&P. That brings us back to May 2019 levels. I mean, this is context guy here that not helpful at all. We're things that bad in May 2019. By the way, A, no. And B, nobody would say that's a big deal. The thing is, people think that stocks are going to go a lot lower. And actually, Miles wrote a really good piece over the weekend about, like, the Pinkerton view of...

Isn't that a Weezer album? Yeah, I was just thinking like, so wait a minute, not Pinkerton. Pinkerton. It was a Weasel album. Steve Pinker, how he's basically just like mega context. Look how much better things are. But that's such a cop-out because it doesn't change the fact that things are like really bad. So you could say, you could say that things are so much better. And you could give all the context. but it's, well, it doesn't change the fact that this is kind of bad. I said this morning, the reason that market crashes like this, and I think it's safe to call this a market crash, especially on a day like today, the reason market crashes are so hard, especially when you're in it like this, when you're down 20%-ish, you always think that,

well, it's probably a little too late to sell, but it's way too early to buy. So then you just get stuck and then it's like paralyzed. One thing is going to happen where we either get a snapback rally in a big day like we had last Monday, or you get another leg down, and then you react because now you feel paralyzed. I, the thing is, I was trying to tell you this morning, this is one of the few times where I've been, I'm a little speechless and maybe that sounds like a cliche, like a sports cliche, because if you didn't have a plan going into this, that guess what, at some point stocks are going to get hammered, the reason doesn't matter, then if you didn't have a plan

going into this, there's not much help that you can get right now, right? No. I don't know that there's much that you can hear that's going to make you feel better or change your stance that's going to a lot like you can't go looking for a new source of advice right now and try to make things better unless you completely start over. So the S&P 500 is back to May levels or whatever you said. But that's U.S. large cap stocks. U.S. small cap stocks are now flat for the last three years. Energy stocks down for the last 15 years. So one thing that we haven't spoken about, which is even more absurd a move, way more, is the move in interest rates. Yes. And I wrote

this before knowing what was having today, and I still stand by it. I said, I'm more worried about the bond market than the stock market, because even if stocks fall another 20 percent, we get this 40 percent crash, I'm fairly confident that the stock market is going to come back. And if in 20 or 30 years, the stock market is not demonstrably higher than it is today, or even after a crash. Japan. Yeah. Then we have greater problems to worry about than, and I don't think that we are Japan, but that's why shorter term, the stock market is going to freak everyone out. And it probably rightly should for the moment. But I'm more longer term worried about... Would you say it's a voting machine? Only when there's blood in the streets. How much does the blood weigh? So interest rates

have just collapsed. If you look at the rates and I put a chart in this in my piece about, I looked at 30, 20, 10, 5, 7, 2, those rates are all now below where the Fed fund target is. So the Fed has their short-term rate at 1 to 1.25. And I'm waiting for it to happen. Maybe they're going to be patient with this. But when does the Fed come in with a bazooka? Are we talking a 100 basis point rate cut? Or are we talking like, what about fiscal policy? And I think that's what happened in the crisis, too. The Fed realizes we're in on this on our own because the government can't get their act together and put together a comprehensive fiscal policy statement. So we're going to have to pick up the slack. And we're going to cut rate

75 or 100 basis points again. And honestly, the bond market is, for sure, them to do it. What would that do? Nothing probably, but people who are trying to blame the Fed, they're using the tools at their disposal to do what they can, but it's not up to them to put together a fiscal stimulus package like the government should be doing. That's not their job. So they're doing everything they can. But the market is forcing yields down as people are moving into bonds for safety. And bonds are acting as a diversifier as they should. People have been worried for years that the bond market is going to blow up. And we have this bond bubble. and I tweeted last night that Alan Greenspan called a bond bubble in 2017 when 10-year

Treasury was at 2.3%. I think it got as low as 0.35% today or last night. And so if we're using the irrational exuberance speech that he did in 1996 and stocks didn't bottom or didn't top out until 2000, I think we still probably have a couple years in the bond. But I thought this could happen maybe in like two or three years. I predicted last week that we're going to get negative interest rates. I didn't think it was going to happen this year. If this continues, we might get negative interest rates this year. It's a possibility. And I think longer term, this is going to be a huge, huge issue for retirees, for pension plans, for insurance companies. These rates, it's not like they're all of a sudden going to snap back. Obviously, the move could move higher. But even if interest rates doubled from here and then doubled again, we're talking about 1% rates or something. We've never been in a situation like this before where interest rates are so low. This is a is one of the things that I'm probably most worried about long term for a huge number of people. I think this is going to be a real problem. I completely agree. And right now, everybody's worried about the stock market. But I think you're right. The bond market is the place that we really

should be worried about because unlike stocks, which have 4,000 variables, some of them known, the most important ones unknown. With bonds, it's really just simple arithmetic. The starting yield is the single biggest predictor by far of what you're actually going to get over the life of the bond. We basically know what long-term bond returns are going to be. Yes. It's impossible to guess at the stock market. With bonds, we kind of know. And from here, returns are going to be awful for a long time.

Bloomberg had a post showing that over the last, call it, a year and a half, long bonds have had better risk-adjusted returns than every stock in the S&P 500. This is a truly a stunning move. And this is the one time in recent memory. You know, there's this old adage. Maybe it's gone. Like, I forget who says this. when everybody is on one side of the boat, I feel like out of everything, everybody, everybody was short in your duration. And it made sense. It made a lot of sense. And the exact opposite thing

happened. It's truly a stunning move. This is the most impressive bull market of all time. I'm calling that now. We've been in a 40-year bull market. And then they hit 2% and 1.3% and people say, okay, this is it. And it is. So there was a story in the Wall Street Journal saying that Well, a lot of the decline comes from people having to hedge and a lot of the banks have to hedge out a lot of their securities they're creating and the mortgages they're creating. They have to buy treasuries to hedge out. I don't think you can account this fallen rates to that. This is just such a momentum play and such a, I'm not saying that people should get out of bonds because guess what? When the stock market falls, the bonds still provide the best hedge that there is. There's no greater diversifier in your portfolio than bonds. That's not going to go away just because rates are low. But there's still going to be some really tough decisions that need to be made in terms of allocating assets going forward for people who want. Think about it. We don't need any inflation basically to totally wipe out bond returns for years right now. I was never necessarily a believer that Bitcoin was a risk off investment. But I ought to be

honest, I am shocked that Bitcoin, which was at 10,000, almost 400, a few weeks ago, is now at 7,700. Does the blockchain have margin calls? Is that what? happened? The blockchain called in a few margin calls? But I don't think that this is... So how far down is Bitcoin? I haven't really been paying attention that much. It was 10,000. Now it's 7,700, so 25% almost. I definitely don't think that people that are having margin calls or selling their Bitcoin to fund that. Like, I think it's two separate, two groups of investors. I guess I'm just surprised. Just a surprising turn of events. It's not negatively correlated. It's got no correlation. So sometimes that mean it falls at the same time. And again, this could be people just

completely getting out of risk assets no matter what. And obviously, Bitcoin is a risk asset. It's not a safe, but obviously something like gold, it's impressive that gold is holding up well and Bitcoin's not. Because I think the hope for a lot of people is Bitcoin replaces gold someday as that store of value. And right now, gold is still winning that race. Well, how about the fact that gold is doing so well when commodities are at like a 52-week low? Yeah, it's an animal of its own. But again, the bond thing longer term, where even if stocks fall another 20% from here. At that point, if stocks continue to fall, bond yields are going negative. I'm saying it again. It's a little easier to see it from this position than it was before, but I just can't

believe the speed with which this is happening. I'll go on record. I don't think that yields are going negative. All right. Taking the contrarian view. The Fed's going to go negative in like 15 minutes, probably. How's this for a contrarian view? All right. Forget about that. But bond yields are going to rise 50% in the next year from 50 basis points to 75. How's that? So somebody went on MSNBC last week and said something along the lines of Bloomberg, just with the amount of money that he wasted in the election campaign, he could have given every American a million dollars. And she got eviscerated. I thought... It's too bad because think about all the cash in the sidelines if that happened.

You know what we really stopped this market from stalling? If everybody would give up Pilates for just one week, put that cash on the sidelines, injected into the market, this thing would be over. But I understand why people freak out because it's the internet and basic math. And I thought it was, I don't know if unfair is the right word. It was just, it was a lot. It was just a lot of piling on. And if there's anyone who deserves the finger to be pointed at, it's MSNBC, because people always say, this is not an accident. This is a talking point. She was vetted. Do you think, and this is very cynical, I was just asking, do you think, do you think that MSNBC knew that she was about to say something catastrophically wrong was going to get egg all over her face and this clip was going to go viral?

I'm really angry that you used my theory for this and I didn't even think about it. I'm really mad that you came to that before me. Remember, this is my theory that a lot of these news outlets use outrage as a way to drive viewership and they make mistakes. That's possible, I guess. Seems hard to believe that no one would see this ahead of time and recognize that the math doesn't really check out that Mike Bloomberg probably. couldn't give every American million dollars. Maybe the math doesn't quite work. Yeah. Let's move away from the market for a minute. So there was an article last week in the Atlantic why so many Americans don't talk about money. Here's a survey. And 34% of cohabiting couples. Oh, before we get into the survey, this reminds me. Are you watching Love is Blind? I caught an episode or two with my wife, but I never got into it. Sorry. It is, no, that's okay. You don't have to apologize. It is crazy. When they,

I'm not a huge reality TV guy. However, do they have it all on once or do they're releasing it over time? Can you watch the whole season? Yeah, they watch the whole season. So when they get into the real world, it's so cringe. Like some of these people are such mismatches. So one of the couples, I think I'm on episode four or five, one of the couples was talking about money. One person makes a lot more than the other. And it's just, it's very awkward. Anyhow, back to the survey, 34% of cohabiting couples. One or both partners couldn't correctly identify how much money the other makes. I think that number is probably low. Really? I think there's a lot of couples out there who has one person who runs the show and knows what's going on and does everything

of the finances. That number doesn't surprise me. Maybe I have cognitive dissonance going on because Are you taking the other side of that one? No, I'm surprised. I guess that sounds high, but now that I'm thinking about it, I don't think Robin could answer how much money I make. I don't even think she can answer within plus or minus 15%. And honestly, I think there's certain people out there that that means so much to them that they would not only tell their spouse, but they'll tell their friends or peers or family. Do you have any friends that openly talk about how much money they make? In a roundabout way, I think there's people I know that talk about their finances way more than they should, probably. It's always very cringy. And so I can see why. I can see why.

to this point of this article, why people don't talk about money, the people that do talk about money talk about it in the wrong way. Meaning what? They flaunt it. It's usually people who are doing okay for themselves and they flaunt it. They talk about all the things they're buying. To their spouse? I mean, to just everyone else. They're talking about all the toys that they buy and how much their house costs. And I think we know people like that. And I think for other people, that makes them recoil and not want to talk about it at all. I mean, I've obviously spoken to Robin about money and stuff, I just don't think she really listens. I don't think she really is interested. So the point of this article was more about talking about money with your spouse, not just

talking about money to other people, other family members. Right. Yeah. And problem is a lot of people are not good with money. So bringing it up is a sore subject probably. And so it's easier to just sweep it under the rug and not talk about it. Huge kudos to this article, because listen to this. They're questioning the results. So she said, these results seem to point to a society-wide gag will that discourages the discussion of financial details, but there are caveats. The companies that tend to publish finance like these stand to gain for persuading people to talk more about their money, if not with their loved ones and with a professional financial advisor.

So they're anti-survey like us? Well, they're just saying like people who make a lot of money are less likely to talk and more likely to talk. Yeah. Okay. That makes sense. Maybe it's one of these things, too, where because people aren't educated on this stuff, they just don't feel like they're.

entitled enough to share their opinion on money. So no one wants to talk about it because they really don't know what they're doing with their money. And that's another reason I think why it's hard for some parents to pass down good money habits to their kids. Because if you're in credit card debt and you don't have a lot of money saved and you're hurting financially, what are you going to teach your children about money if you've not succeeded with money yourself? Yes. Actually, at that point, again, sorry to bring up the show again, but there was one conversation where one of the people in relationship said to the other, I work to live, I don't live to work. Because she was saying how she has, like, however much money in credit card debt and student

debt. And the guy was just like, and it just got very awkward very quickly. You are all in on love is blind, don't you? Well, it's interesting. Come on. You've mentioned it a number of times over the past week. Matthew Ball wrote an article on the end of pay TV. Did you read this one? his articles are a little long. I may have done some skimming, but yes, I read it. He was on

Ben Thompson's Stratory last week on his podcast, which before we get into this Matthew Ball thing, so he was on that podcast. Ben Thompson runs Stretri, and it's like $10 a month and $120 a year. It's one of the few subscription newsletters I pay to, and I just recently signed up for it. I've always liked reading his stuff. He puts out one free article a week and then three behind a paywall. and I think it's a cool business model and he started putting all of his pieces on podcast now. He'll take his daily read and put it on a podcast to give people another way of doing it

and then he has occasional interviews and I signed up for it because they're going on podcasts. So I like the idea of having the choice between reading a blog or listening to a blog. And I really liked that idea that he did that. So anyway, so he had Matthew Ball on and he talked about this a little bit on, but I like this idea of giving people the option

of different ways of consuming content. So do you think there's a world in which our blog posts will eventually be on a podcast? I don't know. I feel like my post in particular are very chart heavy. So I guess I could explain it. But I don't know. I don't think there's an audience for that yet. Maybe there is one day, but I don't think anybody's necessarily asking for that.

But I was looking at a chart of Viacom CBS. Looks like a cruise line. This thing was $40 in the beginning of the year. It's now 19. And so this is one of those stocks that's actually getting hammered. Because we talked a few weeks ago how a lot of the cable companies are holding up well. This is one. Yeah, so Viacom CBS. So in Matthew's article, he talks about how Bob Eiger was talking to Bill Simmons about how ESPN is going to be more of a direct-to-consumer product. And they were saying how, like, live sports

is still the last thing that is holding these networks alive. But what happens if, when ESPN, Disney goes straight to consumer? I think that's just going to be harder to do. I think it's going to be a long time that's until that happens. And I think you need the right medium for it. So I got a new TV this weekend. I've now replaced two TVs in last year and I've gone from, I've gone down market a little bit. I went from Samsung TVs to these TCL, which I don't even know where the brand came from. Value investor? Yeah, I think so. They're relatively cheap and they come with Roku. And I've never really used Roku before. How much are they? Like six or seven hundred bucks for a 65 inch. Pretty reasonable. And the quality is good. CNET had them as the most affordable

lower-end TV that was also really high quality. It was like their best TV of 2019 under a certain price point. My theory has changed. I don't think it makes sense to spend a ton on a nice TV because you replace it every three or four years when the technology upgrades a little bit. That's why we did because our smart TV was going a little bit and acting funky. But Roku is the system that you go through for everything and it has all your apps. And it's by far my favorite one. I even like it better than the Kindle Fire system on Amazon. And so I think if you have that right system in place that it makes it easy to find stuff, then this bundle idea of bundling them yourself is probably becomes a little easier. I'm still not giving up cable anytime soon, but I can see a system like that that

actually I really like the way they do it. And it's better than the stuff you get through the direct straight to the TV for their smart TV option. So I'm a fan of the Roku stuff if people have tried that. Do we speak about this when I read the Netflix book that Roku was started inside of Netflix as an idea and then read Hastings and started to spin it out? Really. It's very clean. So we did our random watchdown Wall Street on the founder for this week, which probably no one's paying attention to because it's coming out the Monday when the stock market is crashing. But I searched for that on my Roku, and it came up this random streaming thing that comes for free with ads, and I found the founder on there, and I could watch it for free with ads.

Some streaming thing I've never even heard of. There's so many of them out there now, and some of them are free with ads, and I found it on there, and it was really easy to get it, and you can find, it's easy to find movies and TV shows across the different streaming platforms and HBO and stars and Cinemax and all these things. So, yes, I like Roku. But, again, I'm going to be the last man on Earth who gets rid of cable TV, so I'm not going anywhere. So the other day, I saw Hall Pass was on TV. Yeah, underrated comedy, I think.

I remember really enjoying it. It got destroyed on Ronald Tomatoes, 33% critic, 40% audience. See, I like Jason Sudecas, so I like that one. I thought it was quite funny. So I was thinking, like, the 2010s had a lot of. those very funny movies that sort of, I don't know if they went under the radar, but don't get spoken about it today. So, for instance, you ever see the other guys with Mark Wahlberg and Will Farrell? Yeah, it was great. Hilarious. I love you, man, role models, Dodgeball. Dodgeball is a little

earlier, but I thought Dodgeball was a little overrated, but I get your point. Mark Wahlberg, there's a new movie that I told you about on Netflix, terrible, called Spencer Confidential. Which is too bad because, so Spencer is a series based on Robert Parker Books. And that's one of my all-time favorite detective series. And they tried to turn it into a movie. And it sounds like they didn't do a very good job, which doesn't surprise me. It was so bad. It really was.

It's one of those things where you can see how it would be hard to translate the book and the tone into a movie. They made a TV show about it a long time ago, too, and it didn't work, I think. So I have a high tolerance, as you know, if you're a listener. I have a high tolerance for bad movies. But even this one was really bad. So I was listening to The Big Picture podcast from The Ringer. They were doing the top five Mark Wahlberg movies. I like forgot, I guess, that he was in.

He's been in amazing movies. So just to name a few, the fighter, the departed, boogie nights, the perfect storm, he's had a ton of hits. Yeah, I didn't really think it was an argument that Mark Wahlberg hasn't made in good movies before. Who are you arguing with here? That he's made good movies. Yeah, he's made some good movies. A ton of good movies. No?

Three Kings? Fear? I think you're arguing with a straw man here. I don't think anyone's arguing that Mark Wahlberg hasn't been in good movies. I'm just saying the last one is really pretty bad. Let's move on to us some listening questions. All right. First, I want to do a listener email. We talked about some children's books last week, and someone emailed us, and I like this.

They said, you guys should definitely write a children's book on finance called Pete the Dead Cat Bounds. So I wanted to come up with some other children's books that you and I could write about teaching finance people. So what do you got? Carrie, the canary and the coal mine. We could do one, like putting all of your eggs in one basket. Like my kids like the bunny books with eggs and such. What if all the eggs are little Humpty Dumpties? Yeah, that's not bad.

That's what's happening right now, right? They're all breaking, all the eggs. By the way, when all the eggs break, that's when correlations shoot to one. Okay. I hate that argument. What argument? When the stock market goes down, all correlations go to one. That doesn't make sense to me.

I don't like that argument. Why not? Because, of course, when stock markets go down, all stocks are going to go down. That's not the point of diversification. I don't think that's what they mean. I think what they mean is all correlations shoot to one because there's margin calls and there's just liquidation everywhere. That's what it means. So it's not just within stocks.

It's within all asset classes. So another children's book would be throwing the baby out with the bathwater. Oh, my God. This is too easy. All right. All right. I am curious how you consider Social Security within a retirement plan. Do you think of it as a source of future income or do you factor it into your asset allocation strategy in some way?

Should it guaranteed income be considered a part of one's fixed income bond portfolio since you can't rebalance into and out of it? Go ahead. I think we hit on this before. But honestly, with bond yield so low. and people were telling me that, well, if bond yields are so low, the solution is going to be annuities. Guess what? Insurance companies are investing in the same assets as you and me. So those annuity rates are going to come way down to because guess what they do? The underlying funds in there. They invested in fixed income in stocks. And so those annuity rates are coming down to

the greatest annuity in the world is Social Security. Do you mean Ponzi scheme? That too. But I don't think you can think about it in terms of asset allocation. I think that you have to factor it into your overall financial plan as part of your income stream, and then you build your portfolio with the understanding that your Social Security is going to cover X amount of your spending needs. That's the way I see it. So I think it can, it has a part in your risk profile, but I don't think it necessarily acts as a bond. All right. Speaking of bond, should I salaricate the 10-year treasury fund that's demonstrated extensively the starting yield of a bond is the best predictor future performance. Last year,

the 10-year treasury gained 15 percent and the starting yield was 225. With nine years left, there only 7-5 remaining from the original yield. Wouldn't it make sense to sell this fund? The returns have been heavily front-loaded. Okay. And not only has a 10-year been doing well, but TLT, which is the 20-plus-year treasury bond ETF, is up 6% today. So that's the stock market is down 6 or 7%. Long-term treasuries are up 6 or 7%. And the bond returns over the past year, I looked at that too, are just insane. When you think about how low the levels were that they started off from. So TLT over the last year, 49% gain. What about zeros? Zero coop. What is it? ZROZ. Yeah. So this is the PIMCO 25 plus year, zero coupon, treasury ETF. 78% gain over the last

year. Oh my God. And again, coming off of the rates were so low to begin with, it's crazy how good these returns have been. So the question is, is now the time to shorten my duration? Doesn't make sense to take duration risk, because you've been paid extremely well for that. And guess what? If rates go negative, these things are going to continue to go up and scream higher. Your call is to that they do go in negative. So I guess you just answer your own question. Okay. I think they're going to go negative. Is that guaranteed? Of course not. And it's one of these things where is that extra bit of reward worth the risk of staying and out and getting slaughtered on the other side if it doesn't happen? That's a tough sell. I think you're going to have to have a more longer term

plan in fixed income than you've ever had to have before. I think Fixed income investing was so easy before, and it's not going to be anymore. That's my main point. The easy rates have been lost, but don't you think it makes more sense to time the bond market than the stock market? Right now, and again, you have to define what you're looking for out of the bond part of your portfolio. Are you looking to gain income?

Guess what? That's out of the window right now, unless you want to really chase yield. Do you want to have some stability in a hedge for your portfolio? You can't even chase yield. That's true. I know there's, I mean, high yield and that stuff is getting crushed right now because that has more equity risk than people realize. It really depends what you want. And again, I'm not saying you should sell out of your fixed income, but you have to have a good plan for what it means. And people are going to have to understand what duration risk is. So when rates eventually do rise, if they do, what that means for your losses and how quickly that happens. That's enough. Yeah. I don't know. That's the thing. It's tough. All right. Recommendations. I'll start. So I was watching, so Kobe is obsessed with freaking Tangled now. We got into that one for a while. It went from, I think it started with Moana to Toy Story to Frozen.

Now he's obsessed with Tangled. It's like twice a day. It's too much. So I tried to get him to watch. I didn't mind tangled, actually. It's not that I mind it or don't mind. It's just too much. Yeah.

Now he's obsessed with shooting the TV. So he takes the drumsticks or anything. And he goes, peepoo, pew, pew, pew, pew. like at the TV. And when he gets mad at us, he's going, phew, phew,

like, oh. So anyway, I tried to show him the Little Mermaid. It's a classic, right? I haven't seen that movie in 25 years,

I guess. And, wow, the advances that they've made in animation, obviously, are incredible. But I will say,

my kids can never really get into the cartoons. They only like the Pixar animation. So we watched it for 30 minutes. I thought it's pretty good.

Easily a top, I don't know where top 10 Disney movie soundtrack a part of this world top five or a part of your world I'm sorry yeah I'll buy it great song okay so Joe no Sarah wrote a book called I think I've spoken about this maybe a piece of the action and there were two chapters I'm not done with the book I'm reading it pretty slowly two chapters that stood out in terms of just like some of the best writing on the topics that I've ever seen he had one chapter on inflation in the 1970s and one chapter on Peter Lynch. Just kickass. He's an excellent writer. Lastly, I don't know why. I watched as good as it gets. You ever see that movie? Jack Nicholson one. Yeah. Pretty good. So Jack Nicholson, Helen Hunt,

and Greg Kinnear. And the movie itself was just pretty good. But Jack Nicholson in that movie was so incredible. Yeah, he's amazing. Holy cow. So I googled it. I didn't realize this. Him and Helen Haunt each won the best actor award for that movie. Yeah, critics loved that movie. I remember when it came out. Yeah, good movie. Nicholson's the best. I mean, he might be the best actor ever.

Okay, so sticking with the children's movie ones, a lot of the ones that you named have songs in them, and my kids tend to prefer the movies of songs in them, too. I think that just keeps their attention because they really like music. I took my five-year-old to see Onward this weekend, which is the new Chris Pratt, Pixar one. You're a big Chris Pratt guy. I like Chris Pratt. Yeah, I like him back from his Perks and Rex days before he was this big superhero. guy. It started off pretty slow and is a little boring, and I was like, it didn't have a lot of

the music, so my daughter wasn't into it at first, but it came around and by the end, I almost got a little choked up at the end. It was a story about two brothers, and I really liked this one. And Pixar, to me, I give the movie industry a lot of crap for not being very creative. I think the animated movies are some of the most creative and unique ones that are being made these days. The storylines that they craft are always really good. And this one, the ending I thought was just excellent in this movie. So my daughter, my daughter liked it, too. I think we kind of nailed it. Didn't we say that 2020 was going to be a huge letdown at the box office?

Like, I haven't seen The Invisible Man yet. I really want to see that. But Rich Greenfield tweeted, and maybe this is coronavirus related, but I don't know about that. Weekend box office, down 52% year over year. Now, I don't know what sort of outliers, what we're comparing it to, what was out this time last year. But that is a big number. And I don't go to the movies as much as you do. But we have a new theater in town in downtown.

And it's got those reclining seats with the heaters and the coolers on them. I remember going to the movies back in the day, and the seats were awful to sit in, not comfortable at all. I'm amazed at how nicely movie theaters have moved along. And I guess they kind of have to these days to make people want to come to them to see a movie. Welcome to the movie theater game. Yes. Do you sit in one of those by yourself on a Friday evening? Yes, I do.

I do. Good call from you on Knives Out. I loved that movie, the pacing of it. And I love a thriller mystery where you have to guess the whole time. So I spent that whole movie guessing to my wife who did it and what happened and how they did this. And I guess I kind of came close to the ending, but I thought that movie was fantastic. And Daniel Craig with a Southern accent, if you would have told me that, I would have said, that's never going to work.

He was awesome in it. I said he played Joe Namath. Yes. And then the housekeeper, I thought she was fantastic. Chris Evans was good in it. That movie was so good. I don't know who did that one, but I just like the pacing of it and the whole mystery and all the twists. I really enjoyed that movie.

movie. That was a good one for me. And high fidelity on Hulu. I loved the movie High Fidelity when it came out. That's the John Cusack. And I think it's probably Jack Black's best movie role he's ever done. Have you seen High Fidelity? I've seen that movie multiple times. When I was much younger. Worth a rewatch. I love that movie. It's based on a book. And they made a Hulu series out of it. And they used Zoe Kravitz. So they changed it up a little bit and had a woman be the centerpiece instead of a man. And they changed up some of the other roles. But they stayed pretty true to the movie. I'm only halfway through, but I really enjoy it. I think if you liked the movie, you're going to like the show. And they do just enough to keep it new and updated and original

game with that. So that's pretty good, too. Okay. Stock market is still down 7%. What a week. What a day. I mean, this is over a third of the way to a 1987 in a day. Oh, come on. Stop it. I'm just, it's true. Is it not? Seven percent in one day is a lot. 22% is eight times worse than down 7%. Well, we can never get to 22% again, right? Because the circuit breaker would get hit. That's true. This is wild stuff.

And I'm ready for the long profile of who, what companies go under in the energy field because of this. Wait, go on record. Go on record. What do you think? Okay. Last week I said, this feels like a relatively orderly fall. Stocks were down 12 or 13%. We're losing 3, 4, 2% a day.

7% to me in a day seems like an overreaction. You heard it here, folks. Yeah, not going on a limb, but I think we've reached the stage of like the fear and panic where people are really overreacting. And again, I think if this would have happened outside of a global pandemic, potentially, I don't think we would be seeing this type of reaction

to oil falling 30% in a day. I think we would have a reaction. I don't think it would be this bad. This feels like an overreaction to me. That's all I'm saying. Last week I said things are going to get worse. Today, I think overreaction. well this take will age it will age we don't know in which way it will age but it will

age thank you very much for listening animal spiritspot at gmail.com we'll see you next week