Animal Spirits Podcast - Passive Income (EP.57)

Episode Date: November 28, 2018

Why monetizing content is so difficult, the myth of passive income, is it even possible to sell out in 2018, the difference between investing & gambling on options, how private equity ruined the grocery industry, Amazon as a scapegoat, when cash outperforms everything else, the chances of a recession, investing in art & much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

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

this podcast. Welcome to Animal Sellouts with Michael and Ben. Kay He wrote a post last weekend, I believe, the gnarly truth about the content business. So this was for his rad reason. If you haven't heard of him before, he actually did a great podcast with Patrick. I don't know, must have been a couple years ago. And he actually is a retired. Wait, can I make a confession? Sure. I don't think I told you this. Okay. So I listened to his podcast, K, with Patrick, and I was under the influence of alcohol. Okay. So I sent him a DM.

Wait, you listen to podcasts when you're drunk? Yes, and more on that later. Okay. But I sent him a DM like, dude, I love you. Okay. Like, I was so inspired by his podcast that I sent him with definitely an appropriate DM. He doesn't know who I am. Way to go.

And I think I left it there. I don't think we ever met. Okay. Yeah, that doesn't sound creepy at all. Yeah, no, definitely not. So he wrote a piece about how hard it is to monetize content. And so he retired at a young age from the hedge fund business. And he's writing and his blog is called Rad Reads.

And he takes a very honest look at trying to generate. I actually think that he was at Black Rock. Do you not know anything about Kay? No, I said, I didn't say, yeah, he worked for the hedge fund business at Black Rock. All right, sorry. Obviously, you feel like I'm a fan. I'm a fan. You feel like you have a very personal connection with him from listening to this one podcast.

So he talks about something that I think a lot of, internet entrepreneurs like the holy grail is to like generate a passive income and in my mind that whole idea is kind of bullshit because to ever get to that point where you're generating income while you sleep or whatever you have to put in a lot of hard work so the whole idea of passive income I think first of all needs to be debunked but he kind of walks through and he does a very honest appraisal of him trying to do this through writing and podcasting and he says in getting media hits and he said it just hasn't really worked out like he thought it would and he's actually had to do more consulting than he would have thought instead of making money producing good

content. And it's a really honest look at this because I feel like you don't see this side of things very much. Yeah, I just agree. And so he even like goes through and shows his earnings and the clicks and all the stuff he had. So it's definitely worth a read. I think on one of the things that he mentioned, like with the Amazon links, which you and I both do, and I guess like maybe it pays for my books, probably not even. But I think he said he got like $8 or something. Right. And I think Amazon won't even cut you a check for less than 100, but that's what he earned from the time spent reading a book, writing about a book. He got $8 back. So it sounds glamorous to pull this off, but it's much harder than people think. The idea of a side hustle is a side hustle is like somebody's primary job, right? People that talk about having a side hustle, like Tim Ferriss will tell you to have a side hustle, but that's his job.

Well, I mean, I do like the idea of a side hustle where you can do something while you are still in your job. So for me, for instance, I started blogging on the side when I had another job and my blogging. had nothing to do with my previous job in a lot of ways. And even though I was taking some of the stuff I was learning there and sharing it. So I think it is a way that you can kind of try something out using technology. But the idea that you're going to do it in overnight, you're going to make enough money to quit your desk job, I think that's a fallacy that a lot of people need to grab their heads around. But also, that was a side hustle that you put how many years into before you started. Yeah. I mean, I was doing, I did it because I, and I think that's the point is that

you do it because you really enjoy doing it. And if I didn't enjoy writing, I would have given up on it after three or four months because it's not like you get instant feedback from it. And yeah, it's not that easy. So on Friday night, so we're in the process of looking for a house in my hometown on Long Island. So I am doing all that I can to enjoy the remaining time that I have left in my neighborhood in Brooklyn, meaning I'm going out to dinner by myself on Friday night because I enjoy doing that. And that would be very weird if I did that in my hometown. Like to go to a restaurant by myself would be very, very unusual. People would stare. But in Brooklyn, it's not a big deal. So anyway, so on Friday night, I went to a bar and I had my headphones in. I had my customary

two beers, because that's all it takes. You're a cheap date. I'm a very cheap date. And I was listening to Joe Rogan, who I'm not a fan of, but I'm not not a fan of. I just really have no opinion. But he had on Jake the Snake Roberts. And I saw Jake the Snake on Diamond Dallas Page. I think he did like a Netflix special. And I was a bit of a wrestling fan growing up, not like Phil Huber crazy, but I watched it as a kid. And there was seven minutes, literally seven minutes of advertising before the show began. So what did I do? I emailed him and I told him he's an asshole. No, what I did was I pressed fast forward until I got through the seven minutes of sponsorships. And then I think I see we're going with this. No, that's numb. And then I enjoyed

90 minutes of Jake the Snake Roberts. So he was telling some amazing stories about Andre the Giant. He said, and so Jake the Snake was a total, was a huge cocaine addict. And Diamond Dallas page took him through like this yoga program of rehabilitating him. It's an amazing story. But he said that Andre the Giant drank 48 beers without going to the bathroom and that before his body became dilapidated, he was able to do a backflip from the top ropes. So this was something that I highly recommend. And so the point is, listen, people are capitalists. They get paid for doing their work. Joe Rogan, seven minutes of ads. Michael Douglas was on with Mark Maron because he has a new show on Netflix, which I have not read yet. Oh, my God. You don't

read or listen to Netflix. I have not watched yet. But Mark Maren was talking about a show that he did in, or a movie that he did in China. And Mark Maren said, you did it for fun. And Michael Douglas said, no, I did it for the money. So I think what you're trying to get in a roundabout way is are we sellouts because last week we had a sponsor for the show. And a lot of people gave us feedback. And a lot of it was positive. And I will say, but we did have a few people say, I can't believe you guys did ads.

You're selling out. You know what's funny? the people that said that were never people that we had heard from previously. It was never people that said, oh, I love your show. Like, it was just like just the first time we heard from them, they called a sellouts. And I just want to say, Ben,

you are a sellout. I am innocent here. But so anyway, so we are going to do something moving forward with these talking book segments. What we're going to do is we're going to move them to a Monday release and it's going to be just Ben and I doing some banter and some more conversation about the interview before we go into this segment. This way it'll give us a better

chance to, because we understand that maybe it was a little bit awkward in the middle of last episodes. So we're going to do some back and forth, some context, some deeper thoughts, and then we'll get into it. Yeah, the point is we've taken some good feedback. We've got some constructive criticism. We're willing to roll the punches. And the thing that I don't get is, I don't know that you can be a sellout in 2018 anymore, right? Is it even possible? I mean, of all the stuff people do, I don't know. So there was a book I read, and it's probably one of the best books on sales. I've ever read, and it's by this guy named Harry Beckwith, and I've written about it before, it's called Selling the Invisible. And he said, like, when you're trying to price a service-based

business, how much should you charge? And he said, if no one complains about your price is too low, if everyone complains, it's too high. So if no price resistance is too low and 100% is too high, how much is just right? And he came to the fact that about 15% to 20% is about right. And he said, basically, 10% of the people will always complain no matter what you charge, and 10% of the people will complain because they just like complaining. And so I think that's kind of what happened with us. And we're fine. We can take it. We're big boys. But I just thought it was kind of funny. People called us sellouts. We'll take it. But anyway, moving on, I think we're going to figure it out and get this right. And we're going to make these standalone episodes.

And then the other ones that come out on Wednesdays will be, as they always have been. So nothing changed. So if you want to listen to the talk your book ones, feel free. If not, that's also your prerogative. All right. So let's move on to the store, the big story of, I believe this was not last week. This was two weeks ago. Optionsellers.com. I watched this, I can't remember if it was you or Josh sent it to me in a late night slack, and I watched the video, and my first reaction was, I don't know if this is real. There's no way this can be real. And I think the reason we didn't comment on this last week is because we wanted to make sure and wait until there's a story. But it's this guy named James Cordier or Cordier, I don't know. And he gets in front of a camera and he has to explain to all of his clients, I guess, do you call them? Subscribers. I don't know. So from the sound of it, these were actually separately managed accounts. So he said that he had a hedge fund. Maybe he did.

But so he said, and, you know, it was sort of, it was not sort of. It was very tone deaf. It was hard to watch, though, too. It was, I was cringing. He looked like Gordon Gecko. Yes. He had cufflinks on and a really expensive watch. It's like, dude, you should be wearing sweatpants.

He's sitting at like the big brown table. Basically what happened is this place called optionsellers.com had a strategy. that invested in options in the energy markets. And it's always this, did he call it a perfect storm or? Well, he said your account was caught in an extraordinary bad of volatility in the energy market. In particular, natural gas prices experienced a parabolic move over the past three training sessions. We had a short call position here that was on the wrong side of this. The magnitude of this wave was so fast and intense that it overwhelmed all risk measures in place.

It was like nothing we've ever seen. This is the worst one. I'm sorry that this rogue wave capsized our boat. growth. At first I felt bad for him, then I thought like, no, I don't feel bad for this guy. He lost people so much money. And not only did their accounts go to zero, but a lot of these people were on margin and owe money. Can you imagine? No, it's awful. Somebody made the comparison, something like if you have a strategy that works 99% of the time and it blows up 1% of the time, that's just gambling. Yes, it's speculation. If any part of your investment strategy has the ability to go to zero, or less than zero, then yes, that is not an investment strategy. You're just pure speculation. So they spoke to somebody, the Wall Street Journal got outhold to somebody. And he said at the end, my lesson is this, don't trust other people to trade your money. That's, or understand what you're getting yourself into because I wonder how many investors in this fund or this strategy actually

understood that it could get completely wiped out. I'm guessing not many. No, I highly doubt that. And maybe that's too harsh for a lesson, but if you're going to trust other people to trade your money, really make sure you know what they're doing and probably have it be not like a giant piece of your overall portfolio. Yes. Make it small. And yeah, if you're going to do this. But honestly, it was hard to watch the video. But if you haven't seen yet, it's probably worth a watch. So there was, I forget where this article came from. Let's just say, where did this come from? American Prospect. American Prospect. Okay. I'm not familiar with who they are. Are you? Never heard of them. Okay. So this is quite a lead.

Since 2015, seven major grocery chains employing more than 125,000 workers, have filed for bankruptcy. The media has blamed disruptors, low-cost competitors like Walmart, and high-end markets like Whole Foods, now owned by Amazon. But the real bankrupters in this industry are the private equity owners who were behind all seven bankruptcies. Do you think, so I read through this piece, do you think that the private equity industry has actually gotten kind of a free pass because returns have actually done okay? in private equity, as opposed to hedge funds have just been getting lit up in the media for years now, mostly because of their performance. And then when anything that they do goes wrong, people jump on them. Do you mean like morality-wise? Yeah, a little bit. Don't you think it's maybe the investors in private equity funds will start paying attention to more of this

stuff and being held accountable? I think that, yes, you're probably right. If this was done by hedge funds. But I'm not sure, like, I just wonder if this article was accurate in the sense that were these grocery stores going to be in trouble and the debt from the private equity firms was just like the straw that broke the camel's back. Yeah, there are no counterfactual. So you don't know if these were going to go down anyway and the private equity firms did what they could. There sort of is a counterfactual within this one because they compared Quager, which is, I think it's a public company versus Albertson. which is a P.E. bad company, and the financials of the two are way different, even though

they're in the same exact business. And obviously, the biggest thing is when these private equity firms buy them, they add a ton of debt, which kind of almost gives them like a ticking clock to turn things around. And actually the research shows, even though the private equity firms, like when you sit down with these private equity firms for a meeting and they're pitching their funds, they all say that what they're doing is coming in and changing the operations and making better strategic decisions. But the research shows that's actually not the case. So Dan Rasmussen, who I think we've mentioned before, has written a couple pieces on this and talked about how it's not really the fact that they're these masters of the universe who make better strategic

decisions as consultants or whatever. It's just the fact that they're buying, they used to buy smaller firms at lower valuations and now they're not doing that anymore. And so when they actually try to do the operations to these companies that maybe don't have as good evaluations or as much runway than this happens. Well, I think that grocery stores are the perfect target for these type of firms because they have real estate, right, that they could spin off. They have high, well, very predictable cash flow. So this is like the perfect target for LBOs. By the way, since you're thinking about moving to the suburbs, can I make just one suggestion? Yes, you can. Especially since you have a kid and never set foot in a grocery store on a weekend in a suburb because it is the worst

place on earth. There's a trader Joe's that the parking lot is a zoo, obviously. 90% of our groceries are now, we pay for one of those delivery services called Shipped. And it's amazing how much better your life can be not having to go to a grocery store with kids. So I've never heard of that one. Why do you use that instead of Amazon or Whole Foods? It's just because that's the one that is attached to our local grocer. If it was a different one, we would probably use a different one. But yeah, it makes your life 10 times easier. And you know, I think you actually end up spending less money at the grocery store, too, because when you go to the grocery store, you just start picking stuff up and, oh, I could use this and that looks good. But if you actually just pick it out

ahead of time and have someone else do the shopping for you, I think you actually spend less money. Okay. Getting back to this article, they... Diet tribe over. Yeah. At the end, they spoke about some, what seemed to me to be some fairly common sense legislation that can be enacted. So, to quote the article, first, in a joint letter, major federal bank regulatory agencies have issued guidance to banks to limit the debt they load up to companies to not. no more than six times the EBITDA, a debt higher than this in the view of these regulators puts a company at too high risk of bankruptcy. I'm sure that there's some unintended consequences that are involved that I'm not thinking about, but that seems sort of reasonable. California law

now requires that public sector pension funds, who obviously are big investors in these private equity firms, collect information on what they have to pay PE firms and management fees, expenses, and carry interest, and make this information available to the public. Monitoring and transaction fees charged by a PE firm directly to the companies acquired by the buyout fund that sponsors should also be reported to P.E. investors. In the case of public sector pension funds, all of these fees should be made publicly available. Again, I think that sounds reasonable. Yeah, that's fair. But I mean, odds of seeing reform in the private markets, I think, is probably slim to none, considering it's hard enough to do in the public markets.

Yes. And then the last thing, I'm sure that there are plenty of good actors in this space, and of course, the news being the news, only reports cases like this. I think it's also interesting that Amazon is a perfect scapegoat for everyone now. And you wonder how many other dying companies or industries are just going to blame Amazon for all their woes in the future, whether it's because of Amazon or not. That just seems like a perfect company to place the blame on when you have poor decisions or just are in a bad industry. Right. Ben, you wrote a post, Cash hasn't outperformed both stocks and bonds over the course of the year since 1994. I looked at the S&P 500, five-year treasuries and one-month T-bills,

and it actually looks like cash is kind of outperforming this year. So if you're you looked at just the total stock market is actually down. I don't know what it's done this week, but it's probably flat on the year, flat-ish. Bonds are down 2% and cash is actually up 1.5%, which is kind of crazy. And part of that is obviously because the Fed has finally stopped punishing savers and manipulating the interest rate market. So it's kind of crazy that cash is actually outperforming. It's only happened 10 times since 1926, so 10 times in 92 years. And actually the only time it happened where cash was up, but stocks and bonds were down were 1969 and 1931. So pretty rare, but it's something that's happening. And of course, it's kind of funny to see the comments

on this because you put something out there like this and then you get comments to people going, oh man, I went to cash 12 months ago and nailed the timing and see cash as a, you know, wait for the fat pitch and it's optionality. And it's just funny how the narratives change depending on the market. But cash hasn't, it has not outperformed by that much. It's not like stocks and bonds are getting creamed at all. That's what I said, too. It's not like it's a huge deal because everything is still so close and who knows, but it's kind of an interesting dynamic that hasn't happened in a long time. So the Wall Street Journal did a similar thing where they said they have a cool chart that we'll share. A record share of asset classes have posted negative total returns this year.

So Deutsche Bank did this thing where they showed that 90% of the 70 asset classes that they track are posting negative total returns in dollar terms through the year to November. The previous high was in 1920 when 84% of 37 asset classes were negative. Last year, just 1% of asset classes delivered negative returns. And you also have to keep in mind that stocks were up, the S&P was up what, 25% last year, international stocks were up even more. Yeah. I'm kind of surprised they're actually able to find 37 asset classes in 1920. Did 37 asset classes even exist back then? All right. Take it for what it's worth. Wait, was this a survey?

That's possible. I mean, obviously they recreated some data for this and that I'm probably guilty of that too in my research, but go on. So another clip from the article that I thought was interesting, 26 funds dumped their entire stakes in Facebook in the third quarter. 26 active mutual funds? I don't know if it was hedge funds or mutual funds or what. The other interesting one that I was looking at this morning that kind of came out yesterday was the fact that Microsoft passed Apple and Amazon in terms of being the largest company in the S&P now. And Facebook has dropped a few. It's kind of interesting to see, obviously, it's just maybe shuffling the deck chairs a little bit, but how many people would have predicted that Microsoft

is the largest company at any point this year? When everyone was looking at Amazon and Apple and Tom Lee nailed that one. Okay. But let me ask you this. Is it time to get long Facebook in your paper trading account? I'm going to wait a little bit. Aren't you greedy when others are fearful? I'm going to wait until the dust settles on that one. Have you been listening to the podcast with Galloway, the Pivot podcast? I have. Did you listen last week, Galloway said something like, I love corporate governance. I've served on many boards, and I like to remind you because I'm deeply insecure. Yes, he's good. Their dynamic is really good. And the way that they care swisher is the other one on that. The way that they go at each other, I think is really good.

And the way that they go at the tech industry and the way that they talk about Facebook kind of makes you, boy, it makes you feel like it's probably the kind of thing where nothing will happen. But if any of those tech companies are going to be brought down by regulators, it sure seems like Facebook is the one. But on the other hand, at 16 times earnings. Right. Okay. So in the Atlantic this month or this week, Derek Thompson had a piece and he said it was called, is a recession coming? And he interviewed my favorite economics blogger, Bill McBride. And he asked him, he said, you know, stocks are falling. The housing market is softening a little bit. What do you think? And McBride, who writes at calculated risk, said, I do not see any signs

up a recession in the next six months. I think the economy is pretty solid. Recently, new home sales have slowed due to several headwinds, mostly higher mortgage rates and new tax policy. And so he said a slowdown, but not a downturn. And I am notorious for kind of poo-pooing economic predictions, but if I'm listening to anyone, it'd probably be Bill McBride and the other one would be Cullen Roche at pragmatic capitalism. Because I think those are two of the more level-headed ones that don't allow politics to influence the way that they They view the economy, but it is kind of interesting how quickly people turn on the economy when stock market starts to fall. And maybe this time is a little different because

as we talked about a few weeks ago, housing is softening. But McBride says nothing for a while, at least in terms of recession. Who knows if he's right, but he said if you're going to be worrying about things, worry about China and the looming shadow of corporate debt, which just kind of seems like something people are talking about more these days. But didn't we debunk that one a few weeks ago, too, though? It's back on the table. All right. Okay. No comment there. No comment there. I'm pretty sure you were just checking your phone. Guilty as charged. All right. All right. So, let's look at some of the tweets that we saw this week. So, Jerome Blochland, I don't know if I pronounce it right. He tweeted stocks with lower credit ratings have done exceptionally poor in the recent

sell-off, looking at standard imports ratings. And I guess there has been a lot of talk that you want to own quality, you want to own stocks with better balance sheets. And I always thought that that was just like something that just sounds like filler. You know what I mean? It does sound like a pundit thing to say. But maybe, just maybe, if this is a serious downturn, the higher quality companies will hold up better. You know, I guess that makes sense. All right, David Chowell tweeted, remember these structured notes? They're now busted with Facebook trading below 141. Retail buyers are now shit out of luck.

And these are structured notes. Who is this from? From Credit Suisse. By the way, can I give you Ben's rule of thumb on buying investment products? Anything with the word structured in it, just run the other way. True. Well, this will have a maturity duration of two years, non-callable for three months. Let's see.

Our desk would bid on the note if you needed to sell in the second. secondary market. So there's that. And we are targeting a 20 to 21% coupon per annum. So at my old endowment fund, we would get pitched these sort of structured notes all the time. And they were so wacky in some ways. Some of them were trying to like do the arbitrage between like China A shares and the China shares that traded in Hong Kong. And they always sounded so brilliant. But these things rarely ever work. And they always, especially after the crisis, They're all about, like, containing the downside but still allowing you some upside. And the way that these things work, the prospectuses are always like 400 pages.

And I just think 99% of the time just look in the other, run the other direction. So here's the chaser. Facebook currently trading at $202, 30% downside protection preserves your coupon payment and principal as long as the stock does not trade below 141. Well, guess what? Facebook is now trading at 135. So this structured notes in my paper portfolio and I'm screwed. Yes, you now owe optionsellers.com $150,000. All right.

And the weirdest story of the week, a listener sent us this. Title of this article is, Michelangelo Buy sends former waste manager shares soaring. So basically, a company called Yulong Eco Materials spiked 47% after the company said it agreed to buy a crucifixion painting for $75 million. The company said that it plans to pay for the acquisition by issuing $7.5 million restricted shares valued at $10 per share.

Why would the, so the company's jumping because they're taking out debt to buy a painting. So that's a big shift from Yulong's prior business model as a vertically integrated manufacturer of eco-friendly building products and a construction waste management company located in the city of something something China. So now the company wants to issue stacked by art, display its purchases, and open the opportunity of shared ownership of its acquired masterpieces to any one. with a brokerage account. This does seem like it's something that is coming,

that's an idea that's growing a little bit like shared ownership. I've seen there's that company that does, you can buy a piece of, yeah, classic cars. What's the one where you can buy like the really nice shoes? So I have an idea. Let's say that they issue just one million shares at just say $1 share, right? So if my math is right,

they raise a million bucks and they advertise on animal spirits. It could be lucrative. What can go wrong? Okay, let's get to some listener questions. I would like your thoughts on the debt snowball plan a la the Dave Ramsey method. As a background, I had a failed business in 2009. The business loan stuck around. I had grad school loans and a car loan. All together, I found myself $125,000 in debt with no breathing room. So I went scorched earth to pay off the debt. However, I also contributed 6% to more 401k, blah, blah, blah. So the debt snowwall plan is basically the

idea that you pay off your loans with the smallest balance first, and it doesn't matter what the interest rate is. So the math would tell you pay off the highest interest rate debt first, but the psychology would tell you pay off the lowest balance first because it gives you a win, and that allows you to psychologically get over the hump and continue paying off your debt. Yeah, I think we've spoken about us in the past, and this makes a whole lot of sense to me, like giving yourself that psychological W. Right.

The idea of earning a small win, like that is such a huge, like endorphin kick. Is this psychic income? No, different than psychic income, but it's... That's close. This is side hustle. I'll let you have it. All right. You want to read a question since you always complain?

I read too many of them. I don't always complain. I complained once. You're extrapolating. I live in Toronto, Canada, and am in my late 20s with a relatively long-term investment horizon. I earn save and spend the Canadian dollars. I currently have 85% of my portfolio in VOO, the low-cost S-P-500 Vanguard fund.

The other 15% is in a low-cost total bond index. The Canadian dollar has moved significantly versus the U.S. dollar with the last 45 years. Should I consider moving to a Canadian dollar hedge S. 500. The hedging comes out obviously at a cost. So what are your thoughts here? I thought, you know what? Let me answer this one question. I thought this was interesting that he has like the total opposite of a home country bias. And if anything, I would say that he's probably too invested in the United States. That's possible. But it is interesting to think

about the idea of someone in another country having to deal with the U.S. that makes up 50% of the global market. And I think, I guess a lot of it depends on when, when he's going to be spending down this money. So he said that the Canadian dollars move 30% against the U.S. dollar in the last five years. I would say it's hard to time these things. And my stock answer for this is usually pick one or the other and stick with it because a lot of times these things get... Or split it, 50-50?

Yeah, you could split the difference in rebalance and maybe that's a way to think through it. But I would refrain from jumping in and out of the hedge-unhed decision and just pick one. But, yeah, I think that maybe splitting the difference is probably not a bad idea. All right, I turned 21 this Wednesday. My grandmother brought me shares of Disney when I was born as a gift. Those shares are worth now roughly $25,000 and we'll transfer to my name on my 21st birthday. I already own a Roth IRA. It started when I was 19. It would like to begin investing adventure with my Disney money. My dad suggests an index fund. What would you do? What would you suggest as an initial investment should I keep the Disney shares or explore other options?

All right. So here's what I would say. By the way, best grandmother ever. Yeah, I got freaking like bonds, I think. Yeah, my $50, I bond or whatever. On my bar mitzvah, I got like, yeah, just bonds. All right, anyway, wait, my bar mitzvah was 1998. I guess it would have bought at the peak. Probably better off. If you would have put that money into Amazon. Yeah. All right. So here's what I would suggest. I don't think that anybody should start off investing in an index fund. And the reason why I say that is because the reason why people should invest in an index fund is because beating the market and beating an index fund is ridiculously exceedingly difficult. However, shout to Jason Zwey with my adverbs, by the way. Nobody can tell you that beating the market is hard.

That is just something that you have to figure out on your own. So I would encourage new investors to try it out to buy some stocks, trade some ETS, buy some mutual funds, whatever you got to do. And maybe you're really good at it. Maybe it's your passion and you love it and you fall in love with it and that's great too. Or maybe you decide that this is probably not time well spent and you do find yourself in an index fund in five years and that's fine too. But anyway, the point being that you have to find your own way of doing this and nobody can tell you how to invest. I do like the idea of trying out different strategies and investing in companies as a way to learn about the stock market and how businesses work. And so if you want to use an index fund,

I'm fine with that, but maybe keep out a little bit of fun money to trade and play around with and then have kind of a core and explore. Okay, you can. Wait, last thing, last thing, but I do think it makes sense to diversify out of Disney at this point. I don't know. I'm going all in on the Disney flicks when it opens next year. Maybe that's just because I have kids who love on-demand movies. But when that opens, I think, big for Disney. So I'm going long, Disney short Netflix in my paper portfolio. All right.

You can buy a two-year CD paying 3.1% right now. Would you rather have that or an intermediate bond fund over the next two years? All right. To me, this is a financial planning question, right? Because do you need to lock, I mean, if you don't need the money, then maybe it makes sense to buy the CD, but what does the rest of your portfolio look like? this is just like a question in a vacuum that I don't feel comfortable answering. It's kind of like, do you need, what position in your portfolio is this? Is this your entire

fixed income? And the thing you're giving up by putting money into your CD is liquidity. Obviously, you could take it out early and pay the penalty. But having your fixed income allocation locked up in a CD, even if it pays more money, doesn't allow you to rebalance if you want to or need to. So I think that's the kind of thing. It depends on your liquidity needs. So all right, recommendations for the week. I'm going to start this one off. my wife and I watched Homecoming over the long holiday weekend finished it last night

it's the new Julia Roberts one on Amazon okay hit me what do you got I liked it it's it's kind of like a psychological thriller it's a mystery where each episode you get a little bit closer to what is really going on and it's kind of obvious from the beginning that what they say is going on is not really going on and I like

that I was satisfied of the ending it's kind of in a way like a novel where the buildup is almost better than the ending yeah but I think I like the buildup a little bit it was a little slow at times but it's only half-hour episodes. How many episodes? Ten episodes. It probably could have been, it could have been eight, I would say, but I liked it. I was satisfied of the ending. I would put it in the good, not great category. Okay. So I enjoyed it enough where I liked it. I also read the next millionaire

next door this week. The original was put out in 1996, Thomas J. Stanley, and his daughter actually helped to finish this one because he actually passed away, I guess, as they were working on this together. And this is kind of an updated version. I think if you haven't read the first one, the millionaire next door, which is probably on every financial advisor's shelf across the country. I think you kind of have to read this. It's just kind of mind. The first time I read it, I remember having my mind blown. It kind of gets into the idea of they profiled like 10,000 different millionaires.

And it's kind of counterintuitive because a lot of these people drive the same car for 10 years. They don't live in the biggest houses in the world. And they don't spend a lot of money on clothes or watches. And so I think it kind of goes counter to what people think of a millionaire being. It's not spending a million dollars. It's saving a million dollars. So I think this one is good for anyone and that hasn't looked at it yet. That's all I got.

That's all you got. All right. I read a book called Banana, the fate of the fruit that changed the world. And earlier in the year, I read the fish that ate the whale, which is excellent. There was some overlap here. But getting to read the story a second time about how the CIA went into Latin America to fight for the banana companies, which was just pretty wild. And I just want to read one quick...

Wait, when? is this? Like 60s, 70s? This was in, when was this? The early 1900s couldn't be because the CIA wasn't around then. Was this the 1950s? Okay. Yeah, I think that sounds right. Okay. When we see bananas in the field, our tendency is to think that they are somehow upside down. The opposite is true. The top of the bananas we eat, the pole tab where we start to peel away the fruits convenient packing is actually the bottom. Do you remember Ramp Capital tweeting about this a few months ago that we eat bananas backwards. I saw this on the internet last year and I did it and blew my daughter's mind. And she, every time she says, I want to eat a banana. I don't want to open a

banana like a monkey does because they open it. Monkeys open it from the bottom. I think we heard about at a zoo maybe. Yeah. And it is, it actually works too. It's much easier. So this book was good, not great. All right. The, I'm just looking this up. So the Cohen brothers have a new movie on Netflix called The Ballad of Buster Scrugs. And I knew nothing about it. So I was sort of confused at first as to what was going on. So it's basically there's like seven or eight vignettes and it's, it takes place at the West and they're completely unrelated. So I don't even know how to describe it. The only common theme throughout the movie seemingly is that in each vignette, somebody dies. Nice usage of the word vignette, by the way. Thank you. So if you like

the Cowan Brothers, I would recommend that movie. And then I also am almost done with factfulness, which you recommended earlier in the year. I like this book quite a bit, but it's not as good as everybody lies. They're similar. Okay. See, I think different kinds of books, but yeah. I thought fact for this is probably one of my favorite books of the year. And then lastly, if you are okay with fast-forwarding through seven minutes of advertising,

that Joe Rogan podcast with Jake and Snake was freaking good. You got it. All right. Send us an email, Animal SpiritsPod at gmail.com. Hold on. One last thing. One last thing. On Monday, there will be an Animal Spirits Talk Your Book with Will Rind from Granite Shares.

We're going to be talking commodities. And you like this one because. we got to talk about gold, your favorite subject in the world. I did like this one, and there'll be some more commentary from us before the segment. All right. Thanks for listening.