Animal Spirits Podcast - Phony Happiness (EP.17)

Episode Date: February 21, 2018

Why our memories play tricks on us in the markets, the pros & cons of private equity, the permanent portfolio, scary market predictions 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

Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing. I hate the people who talk about it all the time, so I didn't want to be one of those people. From two guys who study the markets as a passion. Can I count on you to talk me off the ledge partner? Yes, and that's what this podcast is for. And trade for all the right reasons. That's my due diligence. I'm in. Dude, if you're in, I'm in.

A line of thinking is the higher the volatility on an asset, the higher the volatility on the opinions. so I feel like you have crazies on both sides. Here's your host of Animal Spirits, Michael Batnick. I can say that I was never driven by money. So you were trading three times leveraged ETFs for the love of the game. Exactly, man. I'm a purist. But anyway, and Ben Carlson.

This is true. I do not drink coffee. I've never been on Facebook. I've never done fantasy football. Oh, one last thing. Michael Batnik and Ben Carlson work for Ritt Holtz wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritthold's wealth management.

This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. Now, today's show. Welcome to Animal Spirits with Michael and Ben. So two or three weeks ago, on that Friday that stocks initially sold off, the main culprit that people were blaming was inflation.

because we had the highest wage growth of the current cycle. And then last week, we got CPI numbers, which came in higher than expected, and stocks were up on that day quite a bit. What do we make of this? I feel like someone on this show said that you don't put too much into narratives of these things, right? Do you remember that? Yeah, I think it's a little early for a victory lap because we might not be out of the

woods just yet. It does basically go from week to week between correction, come back. So stocks are up almost 6% from the lows, which is pretty impressive. By the way, if this thing does blast ahead to new highs, I mean, this market is just, it's like, it's crazy, isn't it? I mean, just, it's amazing how, just how much gets deflected off of this thing and nothing can touch it yet. Yeah, I'm shaking my head in disbelief because it does seem like this market as Teflot

and has been for quite a long time. So do you think that was it? Are we out of the woods? I mean, it's hard to say. I think this could be looked at as something of a flash crash correction where, Again, there really wasn't a good reason for it. I think all of the, like I said before, all the inflation and wage data was a good narrative and maybe that kind of made sense from a theoretical construct.

But it is interesting. Like, even if you had that data ahead of time, like they told you the headlines the day before that happened and you knew it and you tried to figure out what the market was going to do, it really wouldn't matter if you had that information or not, that's why it's so hard to make investment decisions based on all the huge smorgasbord of economic data that comes out each week because even if you knew ahead of time, you probably still couldn't position your portfolio correctly to take advantage of it. Yeah, on that, I think it was last Wednesday when the CPI number came out. And it did come in hotter than expected. And the S&P 500

futures were down over 1% like immediately. And then it was, oh, okay, here we go again. And then stocks ended the day sharply in the green. Yeah, it's crazy. It's just, that's why predicting what's going to happen in the short term of the markets, we always say this, but it's just, it's impossible. I mean, there's no way to predict what's going to happen. It's just, it makes no sense. Yeah, so two weeks ago, inflation was bad, and then last week inflation was good. And I was going through a book I had read a few years ago that stuck with me, stumbling on happiness by Daniel Gilbert. And I was looking for something in particular, but I ended up going through a lot of it. And he had a really great take on why stories are so comforting to us.

Quote, once we explain an event, we can fold it up like, freshly washed laundry, put it away in memory's drawer, and move on to the next one. But if an event defies explanation, it becomes a mystery or conundrum. And if there's one thing we all know about mysteries or conundrums, it is that they generally refuse to stay in the back of our minds, end quote. That's good. And I think that's why investors focus so much time on like the Great Depression in 1987 crash, because there really isn't an explanation for why those things occurred, for why stock market just got crushed, you know, out of nowhere in both of those instances. So this one will probably be forgotten if we do reach new highs again and people will

just move on to the next thing. I mean, does anyone really remember the correction we had in 2015 and 2016? Those are blips on the radar right now. And I mean, people like us maybe, but for the most part, people have moved on and it is what it is. Yeah. And at the time, of course, those were huge deals. In August 24th, 2015, we woke up to the Dow opening down 1,000 points and many of the sector spiders. Like, I remember going to Josh's office and saying, XLV is gone. It's down 20%. I think SPLV was down 40%. And that was a crazy time in the market. And then February, the market bottom, but it was close to a bare market and a lot of noise surrounding that one as well. So who knows if this is the latest one that will just shrug off. I guess it's obviously way too

early to conclude. If it's animal base, this is either a dead cat bounce or a canary in a coal mine, right? One or the other. Which animal do you like better? I don't know. Okay. So you had a pretty funny tweet the other day. This is in the midst of the correction. And you said private equity is down 0.0% over the last two days, which is kind of an inside baseball joke for nerdy finance people like us because private equity doesn't really get valued on a daily basis like the stock market does. Yeah. And I think that's probably one of the biggest appeals to private equity is that in some ways it might actually prevent investors from being

their own worst behavior because if you don't see the price every day, then you're less likely to do something stupid. And I forget who gave this analogy, but they said, imagine seeing your home prices printed on the newspaper every single day, how much stupid behavior you would be inclined to engage in. And it does, the other thing about private equity is that you're forced to be a long-term holder. So you're forced to be in these funds for seven, 10, maybe 15 years. So those are some of the positives. I've written extensively in the past in one of my books about some of the drawbacks from private equity, which probably don't get talked about as much because people just look at the good stuff from how great the returns have been over time.

But there was a couple of articles the last couple of weeks that we've been looking at that try to pull the curtains back a little bit and figure out, is private equity really this great? And for those who don't know, private equity is basically just private investments in smaller companies and businesses and usually done by institutional investors through large private equity funds. So Paul Davies from the Wall Street Journal had a really good chart that goes back to 2001. I'm not exactly sure why that that was the starting date. But it just shows private equity beating the socks off of the S&P 500, like basically doubling the return. And he dug a little bit deeper and broke the funds by returns down into their vintage year, which is basically when they start. And what's really stood out to me was returns in the early 90s were insanely. good. I mean, for both private and public markets, but private in particular. And I guess there's a few reasons why, number one, there was much less money and much less competition in there. And these were probably the funds that were like seeding Netscape and early internet 1.0 companies. The other thing

to remember about private equity that I don't like these return comparisons because it really isn't apples to apples. So when you're investing in a private equity fund, you don't just give them your capital on day one and it invests like you do with like an index fund. And, or an ETF or mutual fund. The money is called in over time when they have investment opportunities. And one of the other parts about the great thing about being a private equity manager, so let's say you're a pension fund and you put in $10 million into a private equity fund. You don't just give that $10 million right away, but you pay fees on that $10 million

right away for most of these funds. So if you're charging a 2% management, if you're on $10 million, you're paying that whole thing upfront on a commitment, not the money you've given. So anyway, so over the life of the fund, they'll call it in whenever and investment opportunity arises when they decide to do a buyout or make an additional purchase or debt instrument in a current company. And so the way that they calculate private equity returns, this is a little nerdy and wonky, I guess, but it's through an IRA, which is an internal rate of return. And that's not exactly an apples to apples comparison to a compounded annual growth

rate because compounded annual growth rate assumes the time-weighted series of returns, whereas an IRA is a different beast. Because it's influenced by cash flows. Correct. And that's why they use an IRA because the cash flows have such a big impact. And so there's ways to game that system and by sending money back earlier or there's a lot of different ways that, you know, private equity firms can juice those numbers that where they're not exactly, you know, in the same, same ballpark. I saw a stat recently that there is $2 trillion invested and they're sitting on, in other words, two trillion deployed into these companies and $700 billion in dry powder waiting for it to find a home.

And so my point has been for the last few years that all these institutional investors who have big bogies to hit in terms of expected returns, they've wanted to make a big, huge push into private equity because they think that will solve their problems. And one of the reasons is, the other one, you said private equity has such larger returns, part of the reason is because they leverage up these companies. And so there was another piece by Dan Rasmussen, who we mentioned here a couple weeks ago. He had a podcast with My Favorite Hero, this really long. piece about all of his research on private equity over the last decade or so. And the interesting

thing for me, for someone who's invested in that space and studied it a lot and look at all the papers, I never realized the one thing that they tell you in all the private equity pitches is that they are basically better operators of businesses than the management, which is kind of funny because they don't have an expertise in all these businesses. But they say, we can come in and clean this business up. We'll fire some people or do whatever and increase the returns and then sell it and make a bunch of money for our investors. But what Dan found in his research was, no, it's not that they're better operators. It's just that they slap on a ton of debt. So the majority of the returns from private equity really come from the fact that they're investing in

small companies. And typically these are like microcap in size. And they're adding a bunch of leverage on to them. So it's just a huge risk play, basically, more than anything. So private equity did do really, really well from 1990 to 2010, according to Dan's paper. private equity did 14.4% a year compared to 8.1% for the SP500. And that was net of two and 20 fees. Right. So there so to your point in terms of money piling to this this I don't even know if it's I guess it is an asset class, particularly because there's such a shortfall in terms of what their return expectations are for private for public markets are very low for public stocks and for public bonds. So in terms of what they actually

did, Rasmussen did a study showing that in 54% of the transactions that they examined, revenue growth actually slowed, in 45% margins contracted, and in 55% cap-x spending as a percentage of sales declined. So most private equity firms are cutting long-term investments, not increasing them, resulting in slower growth, not faster growth. And the other big piece point he makes here is just valuation. So people are worried about public market valuations. They probably should be worried about private ones, too, because the multiples are paying for these companies continue to go up. And he's saying, when you add debt to the fact that you're paying it at a higher valuation, that's a toxic mix because it doesn't take as much of a loss

to really send a much bigger cascading loss into your funds when you have that much debt, you know, on top of things. So the debt has worked in private equity's favor for a few decades now. It's possible for pain. It cuts both ways. Yep, it's possible that when it turns the other way, that debt will really hurt on the downside. Going back to the thing that I tweeted earlier a few weeks ago, Dan was talking about how when oil got cut in half, a lot of the energy-related private equity companies actually reported growth. Institutional investors call these smoothing effects, and he quoted the CIO of the public employee retirement system of Idaho, who called this the phony happiness of private equity. Yeah, I like that phrase. I think what most people

don't realize is that these private equity companies, they either do it themselves in house or hire accounting firms to value these holdings for them because, again, they're private. So there's no public market that can value them like the stock market. And it's not to say that the stock market is super efficient because, you know, the value of a public company can gain a huge amount or drop a huge amount on, you know, any single day. But private companies, the way that they value these things, they do it usually for their investors quarterly. The statements aren't audited only annually.

But they're also reported to their investors on a lag. So we would get some statements that were three, six, nine months old. by the time we got them. And so by then, it's so stale you don't even realize. And if they're not really marking them to market as they should be, it makes it look like the volatility is much lower than it actually is, just because it's not reported on. So again, maybe that's a good thing from an investor behavior standpoint, but it's not an asset class that is as low volatile as the simple return numbers would have you believe. And he says in here in his piece, the volatility is probably double of what most people assume it is. Yeah. And Dan actually

made the point that there is something to that. behavioral effect, but right now, it sounds like you're paying a premium for that to capture that. Yeah. So this is something of a, I guess you could call it like a permanent equity class when these people get their money in. You and I have both written about the permanent portfolio in terms of public markets recently, and I wrote a piece on this recently, and mine was kind of tongue-in-cheek where I did a permanent portfolio for millennials, and I said it consisted of Bitcoin, Ripple, XIV, and weed stocks, basically. You top-ticked the new permanent portfolio.

Totally top-ticked it. And again, I was being facetious with this one. And they've all gotten crushed since then just about. But I got a listener question on this. And he said, you know, I'm in my mid-30s like you. If you had to choose a permanent portfolio for the next three, four, five decades, what would it consist of? Which is a really tough question because the whole point of my article was,

I don't think there is such thing because products are constantly changing with more options now than ever, you know, life gets in the way and causes changes. But what do you think about this idea? Yeah, I, so the traditional permanent portfolio is something that I've learned about also, which is one quarter in U.S. stocks, one month T bills, long-term government bonds, and gold. And those are four very different asset classes. And what it's done is it lagged, obviously. obviously both the SP 500 and also it lagged to 6040 portfolio going back to 1976. But what it did was give you a much, much, much smoother ride. So if there was ever a portfolio that you could conceivably hold onto for 40 years, I think the permanent portfolio was it. But I think that the idea of a permanent portfolio is just not practical because of the world that we live in. Yeah, it's just one thing people's behavior can't really stick with something like that. but I do like the idea of it, the fact that you're trying to hit on different types of,

you know, you're trying to hit on different types of economic regimes or market regimes where you have gold for commodities and hopefully in inflation play. Cash is sort of your buffer, long-term bonds, give you some income and also act as crisis alpha and then stocks hopefully beat inflation over the long term. So it's kind of four different quadrant. So I guess it makes sense from that perspective. And I think you could probably do worse than that, which is always the key when making these decisions.

You can always do much worse. Obviously, you can do a little better than that, I think, in a lot of cases, depending on your circumstances. But you could always do worse. I think as with all asset allocations, it really depends on your ability to stick with it and not just create it. So there's no such thing as a good optimized portfolio. It's more what's optimized and suited for your personal behavior and suitability and all that stuff. When you're looking at a 40-year chart, there is so much that gets lost in that just graph. And even looking at like, say, a long-term growth chart with a chart of drawdowns next to it, even that can miss the point. So the permanent portfolio,

which has been a terrific option for the last 45 years, and I guess for the last 2,000 years or whatever, but it looks a lot, lot, lot different than the market does. And I think behaviorally, that poses a lot of risk. So even though the drawdowns were significantly less, behaviorally, It's just tough to stick to. Here's an example. So in the three years from March 1995 to March 1998, the S&P 500 rose 134%. And the permanent portfolio over the same time was up 36%. Yeah, pretty much any asset allocation is going to be for patient people over the long term.

So anyone who's a diversified investor in something like this is going to have to get used to being different. And that's tough in periods like this. I mean, just think about the correction we just had. It was, what, nine or ten days in length? and people were comparing well here's what the 6040 did in nine days and here's what this did in nine it's like such a in that kind of thing on like you're like to your point on a long term chart is nothing but people are obsessing over it over this nine to 10 day period and so that just shows how hard it is to really stick with one of these things you know when you see an actual

bear market Bloomberg had a piece that active management shown over the last you know nine days and I can't tell if they were trolling or not but active managers like large value did better than the index. They were maybe throwing their readers a bone if that's possible. But yeah, so it's, it's so hard to tell with these things over such a short period of time. And that's why the biggest thing with investing is not the portfolio you choose. It's how you choose to stick with it. And, you know, step one is like figuring out, okay, here's the asset allocation I'm going to choose to stick with. And step like two through a million is, you know, dealing with the drawbacks of it constantly. It's comforting and easy to look at just like the benefits of something. But

But if you find the warts and what can go wrong and you're pretty aware of that, that's probably a better starting point because you could tell yourself, hey, I probably wouldn't have been able to stick with that. And one of the reasons why the idea of a permanent portfolio, especially today, is so artist because there's so many new shiny products to distract investors. Most recently, Vanguard announced a new offering. There's six ETFs that I think won fund of funds. the Vanguard is doing factor ETFs basically for free.

How do you think John Bogle feels about these ones? Has he spoken out about this yet? I'm sure he's not into it. So the U.S. value factory ETF is 13 basis points. They did a size, a liquidity, a quality, a momentum, and a min volatility one. And I tried to dig under the hood and really look at how these are constructed. And it doesn't really look like there's much there. I guess we'll wait for our nerdy friends like Wes and Corey to really,

do a deep dive and figure out the construction of this? Most people don't realize Vanguard actually has a really impressive quant team in-house. And I think they're actually holding things a little close to the vest in terms of how they're actually doing these. But on the one hand, I think this is amazing. I've talked about this before that, you know, an individual investor has never had it better than they have it now because in the past, these were strategies that were reserved. What a 35-K ratio on a yield of 2.5%?

Okay. Okay, maybe not. No. But, I mean, that's part of it because it is easier to invest these days, I think. I think that access is part of the reason, one of the reasons, one of the many reasons why maybe we're at a permanent plateau. No, I didn't say that. By the way, this is going to be on cold takes exposed in about six months. I'm just saying these strategies in the past were reserved for ultra-high net worth investors who would get into separately managed accounts or hedge funds. And now you can buy it for basically

a fraction of nothing. And so in that sense, it's really great that investors can get these factors. And I think so much of outperformance in the past for mutual fund managers really was just these factors, momentum, low volatility, quality. And so the fact that you can build a portfolio of these is great. The drawback, of course, is that's why I think there's no such thing as a permanent portfolio, because these things are just going to keep coming to market. And it's so tempting for people to just, oh, I don't need my portfolio anymore. I need to add this. Either you turn over your whole portfolio all the time, or you just end up with a mishmash of a million different funds.

And then at that point, what's the point of even having all those funds when you're just basically tracking the market? Right. If you decide to go all in on these factors and you own all the factors, then it's just market beta. You might as well just buy SPY and just be done with it. Yeah. And there is, I think, a good diversification element to these.

I think a lot of people go into them with the wrong idea. They want to outperform the market. and they want to have a premium for investing in this stuff, and maybe that will be the case going forward. I think even if that's the case, it's going to be much smaller than it was in the past, but I think that you can make a really good case for the diversification benefits of these, where they made zig while those other zag, and you can get something of a rebalancing bonus and just, again, smooth out your long-term returns. I'm inclined to think that investors are going to zag while they should be zigging.

Oh, of course. So there's some really good charts in here just showing that these, Any excess return that you expect to receive is going to be lumpy as hell, and it's impossible. Even if you knew what type of market environment you were entering, which, of course, you don't. But even if you did, that would tell you nothing about what to expect from the value, the volatility, or the quality or anything like that. So I know that Vanguard investors have been pretty well behaved, but I am highly skeptical of people using factors successfully. I think it's definitely going to increase the behavior gap, not shrink it. in the ETF market where there's so much more trading. So these things are just going to get

sliced and diced and traded all over the place. And yeah, it's, it's stuff. I mean, and so if there's anything close to a cult or religion in investing, I would say it's Vanguard investors in the Bogleheads. But a lot of them, they want just the broad market exposure. They don't want these things. So I'll be interested to see who actually takes part in these in how they use them and what Vanguard does with these ETFs in terms of their portfolios. Yeah, and it would be interesting to get some more information. Like, is the momentum fund market cap-weighted for instance. I would think certainly not, but I have no idea. And again, the whole point of these things is if you're going to be in one of these factors to really harvest any premium

there may be, you have to beat it for the long term. You can't guess these and jump in and out of them. It's just, it's silly. And that's probably what's going to happen with the vast majority of them. But if you're going to be in this stuff, you have to kind of take your lumps and understand that you're going to have to eventually rebalance into the pain when it's not doing so well and hold it over the long term for it to work at all. So there was, so with the new tax regime, there is a new tax on endowments that meet some certain threshold. Can you talk about that for a second? Yeah, it's basically, it's not going to affect a ton of the endowment funds, but they basically said there's all these huge college endowments that have way more money they

need. And that's, you know, Harvard, Princeton, Yale. And I think the number is any of these colleges that have over $500,000 per student are going to be hit with a 1.4% tax. And so, I think the number is only like 40 to 50 universities that this is going to really hit. They're really huge ones. And I think the idea is to get them to spend more money on the kids now instead of just holding it. And in a lot of ways, these companies, these universities have so much money. Like Harvard has been buying up real estate around the Boston area for decades now. And that doesn't even count in their investment portfolio.

So they have so much money and they get so much from alumni. So I don't think it makes, I don't necessarily know that this tax makes sense. but I guess I get the point. So there were some Harvard alums that said, you know, we know how to fix this and improve it. And they basically said you should invest in a simple index fund in the portfolio, which probably, I don't know if that's not necessarily the extreme they need to go to. They're at the other extreme now where they do what they do the yield model of highly illiquid portfolios

and private equity and venture capital and all these different things. And they even have some internal managers, I think they're getting rid of. but I think to go from one extreme to the other is probably a bit much, but it's certainly interesting exercise to think about, you know, what they could do to improve because they've had a really tough time for the past decade or so. Yeah, so this might be pennywise, pound foolish. They're estimated that that 1.4% tax is going to cost them, or would have cost them $43 million last year, but this is a $37 billion portfolio. So that is literally nothing. And to just go from all illiquid to all

S&P 500 or whatever other index now in the cycle. Granted, I guess we can't know exactly where we are, but just seems sort of like a head scratcher to me. Shameless self-plug here. This is basically the whole Harvard situation is about my book organizational

alpha. And so it doesn't really matter what kind of portfolio Harvard does if they don't figure out a way to improve organizationally. Because they've had six different chief investment officers over the past eight years or so. And it's a very political environment where the students and professors are always protesting because the investment officers make too much money. So I don't think it really

matters what they do. If they don't have the politics of the organization figured out, it doesn't matter what their portfolio looks like because there's always going to be something to complain about and some change to make. So I don't think that this is a, is something that can fix the problems that they're seeing there just by going to an index fund. It's really more a philosophical thing and a political thing for them to get through organizationally. I didn't realize that you were such a talented global macro thinker until I saw this recently. Remember over the summer you wrote something about the Canadian housing market? I had looked into some numbers and I can't remember where I found the graph, but I recreated a graph from the Fed.

And the Canadian housing bubble made the U.S. housing bubble look like a joke. How do you even know those numbers are right and not manipulated? Well, it is the Fed. So that's possible. But anyway, so there was a chart that came out last week. Toronto home sales crashed 27% from December. January, Canadian existing home sales fell 14.5% which was the biggest drop on record. So kudos to you.

You might be in the next George Soros. I don't think I've ever gotten more. So I wrote this piece for Bloomberg, and I got so much hate mail from Canadian readers telling me I'm an idiot for suggesting that their housing could go down. And there was a lot of good caveats given for why the Canadian housing market is so much different than the U.S. And these things always, you know, sound good at the time. And I even said, you know, I'm not an expert on when these things can happen. But it just sure seems a little out of whack, especially when you compare it to the U.S. housing bubble. So I'll take it.

I am going to apply to a job at the Soros Fund after this. So from good calls to bad calls, I saw somebody tweet this last week. And I can't remember. I think it might be Eddie Elvenbund, but I'm not positive. long-time technical analyst Robert Prechter said on Tuesday, he expects that as the U.S. economy sinks into a deflationary depression, stocks will plunge. And his price target was Dow 1,000. And so I took up my calculator and I said, holy shit, a 96% decline. And then I started cracking up when I realized that that article was from July 6th, 2010.

out he is not wrong just early and what was his reasons for this crash going back to a thousand sunspots i don't know all right astrology anything the thing is the thing that really gets me is that these people who always constantly make these crash predictions are always going to be the news and someone is always going to believe them i mean i guess that that's just human nature confession what confession sometimes i believe okay i'm I mean, maybe they're right. It's just, it's just so, you know, boy, it just. Okay, so I say, I mean, I am mostly kidding, but like, I am interested in to hear what they say.

So for the average person who's at home, who doesn't know that prector makes these statements all the time, I think the thing that pisses me off is that these people are just predators that prey on the financially illiterate. And it's so easy to sell this message. And they are costing people, like millions and millions and millions. of dollars from going to cash to whatever. They are doing some serious damage to people. Yeah, I'm just, yeah, not a fan, especially, I mean, if you've been wrong in the past, I feel like my solution is you get like a three-hole punch card. And once you've called the crash three times, you're done for the rest of your career. Like, that's it.

Okay, that sounds fair. Okay. So I didn't, I didn't, I think you might have told me this story once, but I don't think I've realized that the genesis of your blog, So you wrote something, what you learned from the NBA. So why don't you talk about that real quick? Yes, I did a little walk down memory lane because I was out in New York City last week and I was doing some reminiscing on the way home. Well, how the hell did I get here? And so I started, I did some writing on the plane at home.

And so I just thought it's kind of crazy how just the act of starting this blog has changed so much of the trajectory of my career. So I actually, yeah, I took an MBA program and I said it in the, piece. I didn't really need to take an MBA program. My company was going to pay. What were you thinking? Well, my company said they'd pay for it. They said they kind of pushed me to do it and said they thought it would be good to, you know, try something new. And so I was just kind of bored and said, all right, I'm going to get my MBA and I did it part time and they paid for it. And it's not that I'm above getting an MBA or anything. I think it can help for the right person. It just,

it probably wasn't something that I needed, but I decided to do it anyway. And the best thing it came out of it was that I started writing a blog because one of my classes we had to come up with a business idea that incorporates technology and could help people. And I decided, well, I'm going to figure out a way to help people, you know, make better money decisions and understand the markets and the complexities of finance for normal people. And that's kind of how I started my website. A couple months after that class, my professor said, hey, you really should try to do something with this and see you can do it. And I said, I don't know. So I just on a whim started a website and started writing. and that's kind of how my blog started.

That's a wild story. Yeah, it was very random, and I never expected anything out of it. And my whole point was, I think going into it with low expectations was probably the best thing that could have happened because I didn't set myself up and say, I'm going to start a blog, and then I'm going to get a book deal, and then I'm going to write for a publication, and then I'm going to get a new job out of it.

That was never even entered my head. So the fact that I did have low expectations was a good thing for me, because it allowed me to keep doing it even when I didn't see any results right away. Interesting. Yeah, for me, it was just, it's kind of a, I found the older I get, the more I'm trying to look back on things and thinking a state of mind of gratitude and how random life can be.

And again, once I started this, I never would have expected everything that came out of it to occur, but it's been a fun ride so far. Well, I'm happy to be on the ride with you, brother. all right and we should we should note that last week when i did come to new york city it's kind of bizarre but we we went on a podcast host date on valentine's day oh that was lovely michael and i saw a comedy show together and when we made the plans it was a few weeks prior and we never realized that it was february 14th so we'll do that again next year yeah so i saw some weird tweets this week actually just one that i want to mention i don't know why just so it's like weird so this is like weird

So this is in Reuters. Jeffrey Gunlock and other market gurus who predict the sell-off say that the current com is an illusion. Meaning that they don't think it's done yet? I just from start to finish that was like, who wrote that? Well, I mean, yeah, that's just a typical news headline, right? I guess so. Yeah.

So they're in the dead cat bounce camp, obviously. Yes. This morning, there was an article in the journal, Washington's $500 million financial storm forecaster is foundering. So did you ever know that there was something called the Office of Financial Research? No, that's new to me. So let's see. They said that they argued the government needed a new agency to, among other things,

vacuum up and standardize Wall Street trading and lending data and stored in a central data repository. That would make it easier they felt to identify systemic risks like the buildup of dead that bankrupted Lehman, so 500 million dollars they spent basically trying to be the weather channel of the finance market like if any storm was brewing they would get in front of it and I don't know to what end so I'm not like anti-regulation far from it but this just seemed like man when you hear about people talk about like waste and bureaucracy like 500 million dollars has been spent over the last 10 years on really nothing I could have given them the sound bites that they made for much less than that because I'm sure that's all they did is give sound bites and headline risks and yeah that you call you called the

Canadian housing topic they should just ask you yeah I'm sure you do it for much less oh boy that yeah that's yeah that seems like a huge waste of time to get someone to try to predict systematic I mean you'd think that's kind of the fed's job correct that they don't need another but I mean yeah I suppose but like who thought this was even possible that they can identify risks and mitigate it my guess is this is one of those things that After the crisis, everyone freaked out, and they said, we need to prevent this from ever happening again. And let's- That's exactly what happens. So they started this.

2009, this thing started. Right. And some of the work that they've tried to do, there was a project that took them a year, and it really, the results were like, that's it, because, whatever, just too much government waste in this one. So you're not libertarian. Is that you're saying? I'm basically Rand Paul. All right. But they both like gold, so they are in your camp, kind of.

True. We are three pieces in a pot. That's a good way to end. What did you see or read this week? That was good. My recommendation for this week, I've been really enjoying season two of crashing on HBO. So this is the show about stand-up comedian, Pete Holmes, and it's actually made with Judd Apatow. Pete Holmes is kind of a goofy guy.

He's got a stand-up special, I think, on Netflix. He's pretty funny, but it just goes through the trials and tribulations of a comedian who really hasn't made yet and really wants to. And so instead of looking at it from like the Seinfeld perspective of someone who's made it and is doing stand-up, he's like starting at the very bottom and trying to work his way up. And then they have different comedians on every week that are trying to sort of mentor him. And so if you're into stand-up comedy as I am and as we are, then that's a good show. Start with season one was good too, but I think season two is actually better. Start with season one. That's good advice. Can't pull me. What else? That's all I got. I have three kids. I don't read anymore.

All right. So we listened to Bill Simmons had a really good podcast on recently, and I wish I wrote down the guy's name. The music producer, do you remember his name? It's not coming to me right now. Ben's going. Are you going to the phone? Yes. Keep talking. I'll go to the phone. Okay. The new Chris Rock special was good, but I feel like you're just anchored to like 1998 Chris Rock, who was like the funniest man ever. Yeah, I watched it too. I liked it. I didn't love it. I thought the part on how we need bullies was really funny.

He said something like, it doesn't matter if you could code if you cry when your boss walks by without saying hi. Yeah, he was definitely, I mean, he's great. It's definitely a little over the top for people who aren't into, end of stuff that's really over the top.

He went, but yeah, he was good. I still think he's one of the best ever. You're right, but it seemed like he was kind of coasting on prior stuff. The one from Bill Simmons was Scooter Braun, who is like Kanye's manager and kind of came up through the music scene. He had a great, great story and some really interesting stuff about how he thinks about money and finding his number for having enough and that sort of stuff. Yeah, really good stories about happiness and all that. Speaking of happiness, so again, I did thumb through a lot of stumbling on happiness.

And I think the reason why those sort of books are so great, especially for us, is they provide lessons in all walks of life, but particularly in finance. And I don't know. remember what this was in reference to, but he had a quote. We tend to remember the best of times and the worst of times instead of the most likely of times. So we spoke about this earlier. We remember 1929. Well, not that we remember, but it's in the books. 1929, 1987, 2009, 2007. But a year like 1996, just sort of... Mm-hmm. No one cares. You know, no one cares about. All right. So lastly, I did watch American Made. And?

And... And... Here's the thing. You said that you liked it better than Blow. Did I pump up your expectations too much? Blow was one of my favorite movies. And I gotta tell you, TC mode fell flat from me. Really? Yeah.

You watched Alien versus Predator and didn't like this movie. Expectations. I was expecting nothing out of Aliens versus Predator. If you told me watch America Made, I might have felt differently, but I'm trying to be objective. And I just don't think I liked it. Okay. You didn't think it was just a crazy story about how it all unfolded. Hey, this is, this is like, this is how markets are made, differences of opinions, correct? Yeah. All right. Hey, that's fine.

I don't mind. Can we still go out next Valentine's Day? You got it. All right, thanks for listening. We'll see you next week. We need to mention, I don't know how to use it or log on to it, but we do have now of an Animal Spirit's Facebook page, correct? It's a good thing we have, all of our, yeah, all of our stories will be on there, our podcasts, our links, and luckily we have a young person in the office who knows how to log on to it. Yeah, I can't tell you how to get there, but we'll link to it in the notes. All right. Thanks for listening.