Animal Spirits Podcast - Record Outflows (EP.63)

Episode Date: January 9, 2019

The record outflows from stock mutual funds, what a bear market means for the wealth management industry, why timing the market is so hard, recessionary indicators, some good news for investors interested in yield, the ridiculous way some people pick funds in their 401k, credit card perks, the number of people living paycheck to paycheck and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by Y Charts. Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing, hosted by Michael Batnick 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 Ritthold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions in the securities discussed in this podcast. So we're looking at a chart from Bank of America Merrill Lynch. Record equity outflows over the past six weeks, and this is in billions.

So it's not exactly apples to apples with 2008 because, of course, the dollars are larger now than they were then. But it's kind of interesting that we saw what looks like, just eyeballing, the chart, obvious record inflows in 2018 and record outflows in 20, towards the end of 2018. I'm sorry. Yes. And any time you can draw the little circle and match it between now in 2008, that's always a good visual, right? Yes. It's good enough to get people at least nervous or scared, I suppose. This is an interesting chart. But I don't know. So what does this mean? We've been talking about outflows for like five weeks now. Well, here's a, here's an article from Citibyr, USA. Investors pulled $57 billion from actively managed funds in November, and they put

$56 billion into passive funds during the same time. So here's a question for you. If flows into index funds are distorting the market, how come flows out of active funds are not having any effects? because actively managed funds have much more money to pay for marketing and advertising to put down index something. That's pretty interesting. It should be, it'll be really interesting to see these numbers at the end of December because November was still more just flattish. There was volatility, but December was when like the pain really set in. And it is kind of funny that the actively managed fund community has been predicting for years, just wait until the downturn hits. And then all this index fund money will flow out and those investors will be screwed. And I've always thought that, that just the opposite, that index funds are going to see even larger inflows because I feel like investors will take that as a sign to finally get rid of some positions they've had and actually managed funds for a long time and they won't care as much anymore now that they have some losses to use for tax purposes and that sort of thing. So sticking with this theme, there was an article, where is this from? I think this is also from Citywire, actually. Boston-based asset manager

Northern Cross has closed its doors and announced plans to enter liquidation just four months after it was dropped as sub-advisor on the Harbor International Fund following a period of underperformance and outflows. So I was looking at assets under management, which you could see in Y charts for the Harbor International Fund, and it went from $40 billion in the middle of 2016 down to well under $10 billion lately, which is pretty remarkable because it says that the fund had lagged its benchmark MSCI-EFA in every calendar year for 2013 to 2017. But, and while that might be true, the MSCI-EFA over the last five years is up 6%, and this is

down six and a half percent. So certainly nobody wants to see, you know, negative, 1,200 basis points of underperformance. But that is not a massive gap. Like, we've seen way worse. And the fact that assets went from $40 billion down to $10 is pretty remarkable. You just use the phrase $1,200 basis points. I feel like there has to be an upper limit on the amount of basis points you can use. Like, I would have said 12% there.

I'm just saying. That was a bit of tongue in cheek. Okay. Like, I feel like my head can't comprehend what that means after a certain level. Yeah. Continue. No, you're right. No, that's all I got to say.

Okay. So this is just another sign of the times in the industry. And I think it's going to really be, like it really depends on, what happens from here? Is this bear market going to be of the shallow variety, or do we see a really long, extended painful one? And I think that will have a lot to say with what the industry ramifications are. And again, I think index funds are going to continue to see. I think they're going to make huge gains in terms of flows in a more extended bear market. So Tom over at Bloomberg tweeted, and I definitely won't try and butcher his last name because I did this once.

He is the kind of last name where it should be in his profile, how to pronounce it, right? All right, the P has to be silent. Okay. I'm going to listen. Send us how to say it. I'm going to take a raid check on the second half of his name. Okay. He tweeted that of the multifactor ETFs in 2018, only to beat SPY.

And I assume that he's using U.S. only large cap to make apples to apples comparisons. But there was some pretty decent flows into these products with the biggest beneficiaries being the Oppenheimer one and the Goldman Sachs one. and Hancock had a actually there was a lot of money going to these products the s&P the last i don't call it decade or so i guess since 2008 this has to be one of the most impressive runs of any i guess if you call the s&P a strategy i mean it's just beaten everything when markets are up the s&P seems to be doing best and then when markets were finally down this year the s&P still beat everything it far outperform midcaps small caps value all this stuff it's i mean this maybe that's part of the reason it's been so so difficult to be an action

active fund manager lately is because the S&P just has just been a world beating lately. Does this have to reverse course or not necessarily? I guess you'd assume on just from sort of a mean reversion basis. Well, because this has to be just, we're talking out of both sides of her mouth because on the one hand, we say that this is fairly normal. Yes. In terms of like the winners leading the gains. So let's say that it's been Apple, Microsoft, Amazon, Google, Facebook of the last five years. If it's not them over the next five years, it'll be another group of.

fairly concentrated names. So maybe it doesn't have to get easier. Potentially. Or we could see the, we could also see that in a much smaller magnitude, like after the tech bust where you finally see these things like equal weight in small caps and midcaps, finding outperforming and international, which you've been showing me lately the last few months. You've finally seen an uptick in things like emerging markets and foreign developed markets, which got hit much earlier in the year, did a lot better than the S&P in the last couple months. So somebody sent this to me a few weeks ago we were talking about, I think maybe you made the comment, is there a seasonality's mutual fund? It turns out that there is one. And I don't want to

name names because what we're about to say is not that complimentary. At least these are just the performance number. So I don't want to talk disparagingly about this fund. But it launched pretty much at the beginning of January 2014. And what it is trying to do is pretty simple. It just, It wants to be in the market when things are looking favorable and it wants to get out of the market when it's when, you know, the opposite conditions are in place. And so 2014, 2015, 16, 17, 18. So it's got five years. And over that time, the S&P 500 is up 57%.

Just the total bond market is up 13%. One to three year, treasury bonds are up three and a half percent. And this thing is up just over 7%. So it's a tactical that'll go to cash or whatever. It does, yeah, it does a bunch of levered stuff and it could go be totally defensive and all in and then some. So, I mean, timing the market is just really hard. Yeah, that's true.

And especially when the market has been so resilient, anything you've done to bet against the market or manage risk or what have you for these past few years has not really worked out very well. So that is pretty much the singular defining thing in bull markets is that risk management is not rewarded. In fact, it's punished severely. Now, it's not to say that if the last five years went differently that this fund would have done any better or worse, I don't know, but it has tried to implement. And it does say that it's rules-based. And I was looking at some of the faction and stuff and just hasn't worked out. And not surprisingly, there's not a whole ton of assets in this

thing. This is the point where the fund manager says, wait to have a full market cycle. Isn't that kind of, that's the only play you have there, right? I think, I think that's pretty much it. Well, if you're in a fund that's done lousy, or any investment, for that matter, that's done lousy over the last X years, isn't it really hard to sell it? I don't care if the strategy is irrelevant. I don't care what market environment. I don't care what strategy it is. If you've been in something for three or four years, five years, and it's been so poorly, you have to think, even though you know it's not rational, that the minute you sell it, it's going to be at the bottom. And it's going to be even harder to sell if you didn't do well more recently.

over the last, call it three or four months. Like, if you've been banking on volatility in the market downturn as your time to shine and then you didn't shine, then I think investors are going to start, like, pounding on the door and say, get us out of here, you know. But this is just like regret aversion. You'd rather be wrong via an act of omission. Yes. Did you just create a new behavioral psychology term, regret aversion?

I did not. I did not. Okay. I was going to give that one to you. So you wrote something last week about using unemployment. to time the economy. It was kind of funny because the market falls and all of a sudden everyone says, okay, there must be a recession on the horizon.

And then we get some decent economic data last Friday and stocks pop huge. And everyone says, okay, coast is clear. The Fed was right to raise rates. Everything is fine. And I mean, it'll change again the next time some other data comes, I'm sure. But I just want to look at people say, well, we're at full employment, basically, the unemployment rate has been under four for a while, you know, must mean that the next thing is it's all downhill from here. Well, let me ask you a question. Do you really think that any, I mean, I think unemployment is just one, I don't know if it's an indicator, variable amongst thousands. Do you think anybody is really looking at the unemployment rate and then making investment decisions?

No, certainly not. I think my point was trying to be that you could take a lot, you could even take a lot of these scenarios and a lot of these different data points and try to pinpoint. I just think it's really hard to compare across different, like think about it. Before, call it pre-World War II, most of that time we were on the gold standard. And then we had these wars that completely, I mean, how can you make comparisons to what was going on in wartime versus now? And then we had these other periods where the demographics were so different and the inflation period. periods are so different. And then the 80s where we had a falling interest rate environment for the whole time because the rates started out so high. So my point was kind of that any of these variables, even if you took a whole host of them, I think it's hard to do an apples to apples across them and say, all right, now this, we're definitely going into recession now because I looked at these 43 economic variables and they all wind up from the past. Well, let me just ask you a question. Have you tried technical analysis? Yes. I found a double bottom the employment rate. I think, and I had a lot of people email me saying, well, actually, take a look at this and actually take a look at this. And maybe there are some indicators that will give you a better idea. And I just think it's, I just think it's really hard to do. That was my whole point. So Urban Carmel wrote something similar. He said, just talking about the economy and stuff. He said monthly employment gains averaged 220,000 in 2018, the second best year, the second best year with annual growth rate of 1.8% year. And obviously, we know what happens to stocks in 2018, not a great year. He said,

employment has been driven by full-time jobs, which rose to a new all-time high in December. Again, December, not a great month for stocks. So I don't think anybody thinks that, well, certainly, like using non-farm payrolls, that is a lagging indicator that is revised, I think, three times. I don't know how many times. So what you want to pay attention to in terms of more forward-looking economic data are weekly jobless claims. By the way, isn't it kind of funny that the people who, the technical analysts out there,

who for you know they've been right in saying that price is the only indicator that matters and stocks are falling and it'll be more volatile and that's stuff that we've looked into too but then when it happens then they try to justify it looking at economic data right they name names to fed watchers oh i don't know but i'm just i'm just saying it's like the term lagging indicator like isn't everything a lagging indicator in some ways any data point i mean nothing tells you what's going nothing's going to be a leading indicator that i don't see that there's anything that tells you what's going to happen in terms of where we go from here.

All right, feel free to email Ben and correct him. So Ben Castleman at the New York Times had another one. I think a lot of it is like looking at the trend. So he said the economy has added jobs for a record 99 months in a row and job growth is if anything accelerating. And he said basically, and he also showed that even with sub 4% unemployment, the wage growth is starting to accelerate as well. And so I think you could say, yeah, that trend could stop on a dime,

But the fact is the trend has been pretty unbelievable. And now I want to give you my hot take on the economy right now from a non-economy guy. Do I need to sit down for this? I don't think. So I wrote, I think a few people probably had a similar take. I think the day after Trump got elected, I wrote a piece, could Trump's presidency cause a stock market bubble? Because it seems like all these trends in the economy have continued to go in the right

direction and are finally accelerating a little bit. If he would have just got his tax cut through and gone away and just. gone to the golf course for the rest of his presidency and not done anything else with these tariffs and this border stuff and the trade war. Couldn't he have probably maybe got a wicked bubble going again that just blown this thing out of proportion? So you think he's actually second level?

He's playing it cool. He doesn't want things to get too far ahead of themselves. Of course he has no idea what he's doing. But I think had he not done some of these other things that have gotten people thinking about uncertainty and problems with the trade war, like if he would have just got the tax cut, and let this economy run a little bit, he could have just let things get totally out of

control. And I think at that point, the Fed, there's nothing they can do. Like, they tried to raise rates in the real estate bubble and they got to 5 or 6 percent and it didn't work. So people tried to like blame the Fed. I think at that point, maybe the, so I don't know. That's my hot tech in the economy right now. We could have been blowing a bubble and maybe the trade war stuff actually like tampered it down a little bit. Interesting. Good way. So JP Morgan did their guide to the markets, which always has some great stuff. And I think we've going to over this a bunch of times, but they had a new one this time that I really liked, showing income earned by $100,000 investment in a six-month CD versus the income needed to beat

inflation. And it is pretty wild looking at history how CDs used to give like a pretty nice real rate of return. It's still very low even in 2018, right? If you look at it across history. Wait, what? Yeah, no, I'm just saying when you look at the course of history, how low it is, people are, like, excited about 3% interest rates again. Oh, got to, got it. People think that, like, that is high because they've anchored to these past rates that were zero or whatever. I mean, it's, it is pretty wild that it's still way low compared to the last 40, 50 years,

basically. So you've said, probably this is a hard switch. We're done with that. You've said often that one of the things that nobody says in a bare market is now expected returns are higher and dividend yields are higher. Yes. Everyone always says, I've seen this movie before and I know it ends in a bull market. And my take to that is, yes, it ends with lower prices and higher dividend yields and lower valuations, which is good for people who are putting money into the market. So I was looking at this again on Y charts and the S&P 500 now on a

traveling 12 month basis yields 2%. Emerging markets are at 2.7%. Pacific stocks are at, that 3% and Europe is almost 4%. That is wild. This is a cool chart. I would not have guessed that European stocks are almost at 4%. And going back to, I guess it looks like, what is this over the last year, six months? It's basically doubled, right? The dividend yields.

This almost looks like the opposite of the Fed's balance sheet. Yes. We've got to overlay it to show how dangerous this is. And again, for Animal Spirits listeners, if you contact Y-Charmer. and tell them that you found them through us, you get a 20% off their subscription. Yeah, feel free to reach out. We've got a few questions for people in the last week or two after we mentioned that, and they're happy to answer some questions.

We've been getting a lot out of that, and we're going to show another little wrinkle from them next week. So I found another piece of good news for those people who are worried about the latest downturn. So this is from Asop the Motrin's blog, Musings on Markets. He is the only person who is allowed to say musings. I think so. That's fair. His blog looks like it was created in like 1994. It's so well. He uses the blog spot one. And I actually give him credit for sticking with that old, old look. It's pretty impressive. By the way, we spoke about this a few weeks ago, not on the show, but he wrote a book

with William Bernstein like a long time ago, something, something, something investment analysis that I have, I bought, but I've not read. Oh, I did not know that. Yeah, I'm sure, I'm guessing I've read some of his evaluation stuff before. He's a master on this stuff, but it's a little dry. So he said he calculates, I don't know if he does this in a monthly or quarterly basis. He calculates the equity risk premium. And he looks at this and it uses a lot of forward-looking data in terms of interest rates and growth rates and that stuff. So he kind of put some caveats in here. But he says his calculated equity premium, which is equity returns going forward from here over bonds, and he has it at close to 6 percent, putting it in the top decile of historical numbers.

exceeded only by the equity risk premiums and three other years, 1979, 2009, and 2011. So he's saying after what we've had and based on the interest rate environment, stocks are actually undervalued. All right. Thoughts? What were the other three years? 1999, 1987. 79, 2009, and 2011.

Well, those were all good times to be buying stocks over the long term. I mean, isn't it always? Isn't it always been? I'm just trying to look at the glasses half full here, Michael. That's good. I'll take it. Oh, speaking of this, it is pretty wild how quickly the market can go from overvalued to quote, undervalued.

Yes. Right? And it's also amazing, like how little that matters. Well, don't remember earlier this year people were trying to make the case that Amazon is a value stock? Yes. After it felt like 10% or something. Yes, it happens. And how little the market cares what people consider over.

undervalued. We used to have a money manager back in the day. I won't name many names here, but they had a fair market value for the S&P 500, and it used current interest rates and a bunch of other variables. They, like, did their own roll-up of earnings numbers. Does his name rhyme with Way Callio? No, this was like just a stock money manager. And it was kind of like a strategist where the market would move and the fair value would follow whatever the market moved. but they'd always say like if interest rates go from 3% to 1% the market is actually 45% under value or you know it's like it's so hard to do because all it did was track the market basically so that's one of my least favorite terms I think in the market is fair market value oh yeah

that is a that is a red flag for charlatans everywhere yes and that's kind of the way that you get out of making a a prediction as well yeah oh you know what fair market value is nobody else does right exactly like it that's the kind of thing that even if you could get a precise like hold on that like the market doesn't care what you think it is the same people who say fair market value are the same or the I'm sorry the people who say fair market value are the same people who say full market cycle yes and they also say 1200 basis points wow wow okay so this was a good paper I think Josh sent us this one I've never I've never seen this before so this was a paper on SSRN And they found, they looked at these 401K, so they say using a proprietary database of 401K plans, we show that alphabetically, the order that fund names appear when listed in alphabetical order significantly biases participants and investment allocation decisions.

So they actually found that people would just choose the first fund that they saw. And they said there was a larger impact when there was a higher number of funds in the plan, but even when there were relatively few funds available, people would pick a fund that came first in alphabetical order. Well, that is definitely not surprising. I don't think anybody sorts it in their head, but if it's literally shown in an alphabetical order, then, I mean, how many, how far down are you going to go? So my first job. By the way, do you think that's why American, do you think American funds, like that's a good point? Was conscious when they thought about that? And they're huge in the 401k business.

So my first job I had in this industry. Oh, yeah. How do you explain Vanguard then? Oh, good. Maybe that's why it took Bogle so long. Wait, was this a survey? I don't know. It was a study.

So they had a proprietary database, so I don't know what that means. But the first job I had was at a shop called Aileron. Limited and Aileron is like a some term on a plane. And the guy, it was a small business. He said he picked the name because he's a big fan of planes, but he looked for something on a plane that began of the A because he wanted to be at the top of the order. Maybe also that's why Apple is AAPL. All right. That's true. That's why I got to a trillion dollars first because it had a good, it had a good ticker. So there was an article over the weekend or last weekend about credit card perks. This is from the Washington Journal. This is nuts. J.P. Morgan's credit card hold

as of the third quarter has accrued $5.8 billion in rewards they had not yet redeemed, up 53% from the end of 2016. Wow. And so this also showed that a lot of these places are potentially cutting back on their rewards. Is that right? And I'm sure all their other people are. The thing is, I go into these cards. I do a little bit of the credit card jumping around here and there.

I used to do it more and try to get the bonuses because you can get 100,000 miles or points or whatever it is when you sign up for some of these. So I used to do it more than I do now. I do it occasionally still. But I go in expecting that to happen, them to cut back. And it happens with airlines too. The miles are cut back and you can't get as much of the hotels. So I think if you're going to play this game and try to utilize them for the rewards, you have to assume that eventually they're going to cut it back. There's no way they can keep that pace up. So I think that's that's just part of the game. Now, can they, let's say that you've accrued a hundred thousand miles could they change what miles mean in terms of miles to dollar conversion yeah and i've

had them do that before with some of my cards where the the points just aren't worth as much anymore or it doesn't go as far or and i'm i'm sure if they see all those the value of those on their books i'm sure they think about that all the time so you've said people angry i'm sure but you've said in the past that people that don't pay their credit card bills on time are subsidizing people that take advantage of this. And I'm sure that there's something to that. But it's amazing how much these cards make from merchants. So the article said that merchants paid card issuers $43 billion in Visa and MasterCard interchange fees in 2017 up 68% from 2012. And this cost merchants about, let's see, around 2% of purchases. So they're paying a lot. Yeah. So I looked this up because I said I kind of made a comment on Twitter one day saying that people that pay their cards off and earn their rewards are being subsidized, like you said. And people said, no, it's actually the fees. So I looked it up. It's actually kind of amazing.

They make pretty much, I think it was a little bit more off of the interest rate charges, but it was kind of neck and neck between how much they make in terms of interest rate charges on the cards for people who don't pay it off every month and these fees from merchants. So I guess they just must have so much power over these merchants that they can do whatever they want. Now, I mean, I'm sure merchants take that into their price-setting mechanisms when they do that. But I guess that's why you see all these little places in New York that say cash only and we'll give you a lower price or something. So there was an article in Barron's talking with women money managers. and the study, I think, was done by a friend of the show, Nicole Boyson. And what they found was that, at least in terms of hedge fund managers, there is no difference in performance between men and women.

Now, pretty small sample sites. I forget how many women were actually in the study, but as you can imagine, it's unfortunately not a ton. Yeah, she said out of like 10,000, there's like 250 air women. Okay. Yeah, right, so like 4%. But what they did find was that women have to produce almost 100 basis points more to have the same assets under management. Oh, wow.

Okay. Yeah, I, yeah, that seems, geez. So maybe there's not a difference in performance between professional hedge fund managers, but I still do suspect that like for the average investor, women have a best. temperament for investing. Just because if nothing else, they're less likely to be stupid overconfident and trade more. And a lot of the studies show that men are more inclined to gamble. And especially, this happens a lot at hedge ones, especially when they get down and they're

underperforming and they're way under their watermark, their high watermark, then they take huge gambols to try to get it back. That's totally something I would do. And end up losing more, right? Did I just describe your trading strategy? pretty much. And stick it with this. So Mary Meeker of Kleiner Perkins is trying to raise, and I'm sure she will, $1.25 billion for a VC fund. And this is going to be, she's going to be the first woman to do so to raise a $1 billion VC fund. Yeah, that's impressive. And she also wins the

award for longest PowerPoint presentation every year. Yes. You go to that, it's got to be at least We spoke about that on the show earlier, maybe last year, yes. It's also, and it's always great information. So Einhorn was down 34% last year. It says he was down 9% in December. That's what I was talking about, where someone like him who's had outflows already, and we've talked about him on the show before, it has a really long track record, has been great, but has been banking on overvalued stocks going down. Wasn't he betting against every single huge technology stock? Shouldn't he have made some money just from that? And that's negative 3,200 basis points in alpha. Nice. There you go.

It says he posted 10 months of negative returns in 2018. I wonder if... For comparison sake, the S&P was up eight out of 12 months. This doesn't make sense. I was going to say, I wonder if, like, you know, people are like just squeezing him, but he's in these giant companies. Yeah, I mean, I would have to imagine in the next few months we're going to be seeing story after story of huge outflows from funds like that.

If they, people were holding out hope for them to do better in a downturn and then that happens, I can't imagine that's going to go over very well. I think he spoke about his bubble basket that he was shorting, like he stocks like Amazon and Netflix in 2015 or 16. Possibly he capitulated, but. So on the opposite side of the coin, Bridgewater's Pure Alpha gained 14.6% in 2018 net a fees, which is really funny. And another reminder to please not listen to what billionaires are talking about when it comes to the market, not because they don't know a lot or not because you're smarter than them. It just what they say is not relevant. What Dahlia talks about the economy or the market has no bearing on what his fund is actually doing

because he said in the early 2018, if you're holding cash, you're going to look pretty foolish. And as a matter of fact, cash was the best performing asset in 2018. And they crushed it. They were up 15% last year. Yeah. And you wonder how much, I don't know how the inner workings of Bridgewater Work and I guess maybe not a lot of people do. But he seems to be sort of riding off into the sunset and writing books and being more of a promotional person. Maybe I'm wrong on that. But yeah, it's, yeah, it's so hard to tell when these people say stuff how

much you can actually use. So last year, the strategy gains 1.2%. Of course, the S&P 500 was up 22%. And there, there I go comparing a hedge fund to the S&P. I'm sorry. But this. Wait, I'm going to, wait, I'm people that complain about that, I think that's a perfectly fine comparison. I'm going to, here's my reasoning. So people always say that, hedge funds take much less risk. I think hedge funds take way more risk than just investing in a simple stock market. Yes, they have lower net exposure, but they also have higher gross exposure because they're shorting stocks. You're investing in a liquid fund structure that you don't know what's in it. So it's basically a black box. You have no idea what the holdings are most of the time. And you get a monthly performance number that isn't audited until the end of the year. And sometimes you get an audited value like nine months after the end of the year to know exactly what that value is. So why is, okay, so very fair points, but why is the S&P 500 the right boge? Well, okay, let me backtrack a little. It probably still isn't.

But those places compared themselves to the S&P for so long when they were doing well. And the same thing happened with endowment funds. You hear these endowment funds crying now about, well, you can't compare us to the 60-40 portfolio or an S&P because we are more global and we use all these other things. But when they were beating it, they were more than happy to compare themselves to it. So I think if you're going to do it in the good times, you have to do in the bad times as well. All right. You have very good points there. But this strategy has operated for nearly three decades and has generated an average annual net return of about 12% per year. Pretty good.

Pretty good, 1,200 basis points a year. Okay. Survey time. According to Nielsen's study, 25% of families making $150,000 a year or more are living paycheck to paycheck. One in three that earned 50 to 100 are living paycheck to paycheck. And less than 50 grand percentage actually increases to half, which I would assume that would be even higher for people earning under 50 grand. My take on this, the hardest part about these surveys is you don't know, obviously the circumstances are always different, but I think the biggest thing is like, where do you live? Yes. But I think surveys like this are fair, just because you're not asking anybody to predict how they're going to feel. You're just saying, hey, are you living paycheck to paycheck?

And I think people are fairly honest with that when they answer. Yeah, I think that I actually think these numbers are probably pretty, pretty good. This is one survey we can get behind. Well, there's actually one more survey that we can get behind that's coming up. But, but this, this makes a lot of sense to me. And I was reading over the weekend, the wealthy barber. Have you heard of that book? Yes, he was on Patrick's podcast.

Oh, that's where I heard him from. I thought it was from Patrick's podcast, but I wasn't sure. So some of the ideas are a little dated, but the most powerful idea in the book is so simple. but it is, it's so obvious. The way to get wealthy is, or maybe not whatever, the way to be comfortable is to save 10% of your income and just invest it. And do that automatically. Just have 10% come out.

You won't even notice it and just put that into the market. Good to me. And I think that a lot of people that are living paycheck to paycheck, obviously, don't do that. Yep. All right. So here's one more survey. And this was actually coincidentally done by Y charts. 65% of millennials, ages 22 to 37, say that they'll reach seven-figure wealth by age 45 or sooner.

And this finding is actually corroborated by another survey released earlier this year from TD Ameritrade, found that more than half of millennials expect to be millionaires in their lifetime, with more than four in 10 saying it'll happen by 50. And the hammer to the study is that fully two-thirds of millennials have nothing safe for retirement. Yeah, but they're all going to create the next Facebook. So here's my question to you. am 37 years old going on 40 probably. Can I consider myself a millennial or am I just kind of in no man's land? Because they say like 80, I was born in 81. Can I really consider myself a

millennial? I'd say no. Are you Gen X? I think I'm a no man's land. I'm nothing. I have no generation. No, no, you're a millennial. You're one of us. I figured I could rip on, okay, I'm just, I'm like an elder of the millennials. Yes, exactly. Okay. All right, let's get on to some listener questions. If my investment horizon is roughly 40 years until retirement on a max on my Roth IRA each year, saving through a consistent monthly contribution. Would you increase the amount to something like 2000 a month in January through March while the market took such a big hit? It avoids timing the market, but also takes advantage of a 20% downturn. What do you think? Yes, of course. And that's good market timing. Yeah, I think I'd be fine with

that, especially if you're well aware of the 40-year time horizon and understand that you could put that, you could front-low that contribution and still see the stocks fall more. I think you just have to deal with it. But if you want to do that and get your saving out of the way now for such a, I mean, why not? I see no problem there. Yes. All right. Some recommendations. What do you got? I was reading the book, Impossible to Ignore, which I heard it on some podcasts. I believe Barry was talking to someone. I can't remember who it was, but it was kind of the psychology behind getting people to pay attention to you. So it was really cool about, it's kind of the, like, how the brain processes memory and how to get people to remember you in presentations and speeches. And this was really

interesting. So here's a good one that I saw. They talked about this, this museum and how they get people to kind of come in and stay longer at their exhibits. It was a really cool profile they did at the beginning of the book. But they talked about how the Metropolitan Museum of Art New York, visitors spend an average of 32.5 seconds gazing at a work of art. And the Mona Lisa, which is arguably the most famous painting in the world at the Louvre, captures a visitor's attention for roughly 15 seconds at a time. So I was saying that even this stuff, like, it's crazy how like how short our attention spans are. And this book tries to help. you get people to remember you more. Oh, that's good. Which is interesting. Yeah. I mentioned Escape Adanamoa before, finished that one last week. It was excellent. And it kind of got me thinking there should probably just be more shows that are just one

season or a miniseries because so many of my, like, I love the marvelous Mrs. Maisel. Couldn't, first season, couldn't get into season two. Me too. Sneaky Pete was great for one season. I couldn't get into it. Maybe that's just my short attention span. No, I think I think you're absolutely right. I second that Escape Bad Tadamore was amazing.

I thought Patricia Arquette and Eric Lang, the guy that played her husband, Lyle, really carried the show. Oh, he was excellent. Didn't he felt so bad, that poor bastard. If you look at the pictures of them, they look like that. They look just like that.

Yeah, they were so good. But to your point about one season, so Robin watched the second season of Maisel. I love the first. I just, I just, I was, I didn't really need a second season of it. But I don't think that, I think that it's hard to keep re-requered.

creating like new great material and if they have an awesome season well of course they're going to milk that you know yeah okay one more we watched the movie life itself on amazon prime came out in the theater as a while ago and just hit amazon prime i feel like i heard this is this is this is from the guy who created this is us which is my one of my step he shows so he was on the bill simmons podcast a few months ago talking about it and it actually got really bad reviews got yeah 12% of rotted tomatoes it went when it went to the so i went into the low expectation so i'm to preface it by saying that, but I actually liked it. Okay.

And I can see why some people wouldn't because, not to spoil anything, but there was a few tragedies, like early in the movie where you kind of go, whoa, hey, you know, I wasn't expecting that at all. But then it kind of turns around. And by the end, actually, I believe that was a spoiler. It may have been a spoiler. But I think that was kind of common knowledge from him who read about it. And so there are some sad parts to it, but it actually turned around and by the end,

I kind of liked it. So low expectations help, though. All right. Well, here's where low expectations don't help. I watched Venom. Oh yeah, what do you think It sucked Oh really

See that was gonna be One of the few comic book ones I was gonna watch And I So when I was growing up I loved Spider-Man I never really read the comics I much

But I loved the cartoon And I really liked The character Venom There were some really Really kick-ass Scenes But it was a crappy movie See because I'm a big fan

Of Tom Hardy too Yeah I know I mean The good news is that It was not very long So it didn't really Cost me too much But it was not good

Okay Okay, so the wealthy barber, I'm not done with it yet. I'm almost done. It's definitely for beginners, but sometimes it's good to revisit the basics, you know? So for people looking for easy to digest personal finance books, I do recommend it. Okay, I read a book last week or over the last two weeks, I should say, that was really excellent called the coddling of the American mind. And it spoke a lot about what's going on in college campuses and the safe spaces and and how we got there. And it spoke at one point about how the year you were born influences your politics,

which was work from the New York Times. And it really packed a punch. I highly, highly recommend it. Who wrote that one? It was, I'm sorry, I only know one of the author's names is Jonathan. His last name is H-A-I-D-T.

So is it? Jonathan Haid, yeah. Hate, yeah, yeah, and then the other person, Greg, I'm sorry,

I don't remember his name, but highly, highly recommended it was excellent. And, oh, I want to tell you this. I know we're almost done, but so last week I spoke to you about the iPhone and how when you hang up on somebody on FaceTime, you like, by accident, you hit somebody else's face. I mean, you scrambled to close the thing.

So there's a lot of talk about automation and voice and is that the future. So this morning, it was freezing and I called Robin and it said, you have two Robbins in your phone book, Robert Smith or Robin Batnik. So I said, call it Robin Smith. And then it said, okay, dialing Ed Borgato. And I'm like, no, no, no, no. And my phone was in my bag, and I could have grabbed a time. It was early. And I think Ed is on the West Coast.

I was like, no, no, no, hang up, hang up. And then it says, okay, FaceTiming John. And I was like, no, no, no, what, stop. And this is like simple audio stuff. So color me skeptical that we're going to have flying cars in five years. Okay. Before we go, I got one question for you. Okay.

As a bald man, how do you make the decision to wear a hat? You're wearing a Nike hat right now, so you pick it. Yes. So how do you make the decision to wear a hat? Be more specific. Is your head cold? Oh, yeah, always, yeah. Okay.

Is that why you decided to wear a hat inside? So I'll tell you exactly why since he asked. In the morning, I wear a winter hat, but it's too hot on the subway. Because you're a winter sweater. I'm a winter sweater. So I usually just take my hat off, but I haven't shaved my head in a few, in like, maybe two weeks in. I'm kind of sloppy. So that's why I'm running the hat inside.

Good to know. All the hard hitting stuff you need to know here. All right. Thanks everyone for listening. Hit us up, Animal Spiritspot at gmail.com. We'll talk to you next week.