Animal Spirits Podcast - Rush For the Exits (EP.94)

Episode Date: July 31, 2019

On this week's show we discuss intellectual shaming, power laws in the stock market, the insane number of stocks that end up losers, why are fewer people driving minivans, what would happen if the USD lost reserve currency status, will there ever be negative interest rates in the US, why you should never borrow money from a friend and much more.   Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions and the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. So my family's irrationally rational purchase of the summer was a new jet ski. And it's

irrational because like the fire people take a look at it and say, if you were to take that money and invest it over 30 or 40 years, you're missing out on hundreds of thousands of dollars. Anyway, the irrational part of it is Michigan has like three good months in the summer to take, to make use of all the good water. and a jet ski is just really fun and so I like to spend a lot of time outside now that we have kids and stuff and make use of it. So anyway, when we went to buy it, my wife and I were total new whales, know nothing about motorsports or any of that stuff. So I've always had friends with boats and jet skis and that's about my extent of it. So total newbils. So we go to this place

to buy the jet ski earlier this summer and I was a little intimidated to go because I knew nothing. So it's one of those, you know, it's one of those power sports place where they have like the four-wheelers and the motorcycles and jet skis. And so we go in there, total nob whales and know nothing.

And I was kind of intimidated that they were going to make me, make us feel like idiots. You're getting a lot of joy out of this. Newbill is just the greatest word ever. Yeah. The fact of this podcast brought that word to work. life. Yeah, so total new bills on that stuff. And we walk in totally intimidated because we didn't

know anything. And the guy there could not have been more helpful. I thought they're going to be like kind of looking down on us. And shout out to Matt at Fox Power Sports of Grand Rapids. Because he took care of us and he walked my wife and I for like three hours through everything you need. Like we didn't know what kind of gas it needed. We didn't know how the registration stuff works, a trailer. And so the fact that this guy who probably knows more about this stuff than we could ever hoped to learn in a lifetime, like walked us through it and didn't like thumb his nose at us for not knowing what we were doing with this was great. It made the process a lot easier. And so he like he really walked us through it and we've called them a few times since with questions and there has to be

a point coming soon. Yes. And so I think a lot of people in the finance community can have that like sort of intellectual superiority over people. Like how could you not know this? Like I thought that's what was going to be. And so the fact that he did that was great. So, last week on last week's show we got dragged big time we got solar shamed big time solar shame because we didn't know anything mostly me but we got a lot of emails from people and they did the opposite of what that guy did they they made us they basically said you guys are idiots and you should you should know better and they they like they solar shamed us and that's like the worst way to get your point across and the i mean one of the greatest things about this podcast

is I think a lot of our readers send us good information, but also a lot of them understand our sense of humor and get on some of the jokes with us. But the people who went over the line and basically called us idiots, that's like the worst way possible to get someone to understand something. Correct? Like that superiority, I'm smarter than you. You're an idiot. But anyway, I wanted to kind of throw us a lifeline here because someone tweeted at me that there is a difference between there's two types of solar energy. Solar photovoltaic, which I probably just butchered, which generates. electricity in solar thermal, which generates hot water. And they sent us like a picture of it.

You were obviously talking about solar thermal. Exactly. I don't know why people got that twisted. Anyway, I think that's a problem in finance that sometimes, and I'm sure I was guilty of this in the past of looking down on people and saying like, how could you not know this? What is wrong with you? But I think that's just like, especially in like even like the political discourse these days, like that attitude is never going to help anyone get on your side of the I'm smarter than you. That's a very good point. I had a new boy. experience recently, too. We were in, when we went to Austin, Texas, I said to one of our colleagues that I would meet

him in the gym at the hotel. Going into a gym is your... So I walked in, and there was only like three people in there. But I got like very embarrassed and self-conscious. I walked in and I walked out. I'm sure that happens to a lot of people, too. I felt like I was being judged and nobody was looking at me. You're right.

it's always probably mostly in your own head. Look at this new whale walking in. He has no idea what he's doing. Yes. But I think you're totally on to something. The moral of the story is be nice to new whales because not everyone knows as much as you about stuff. Anyway. All right.

So this morning Barry sent us, he's like, hey, new study about how the biggest winners drive the entire stock market. And I think you and I both had a collective eye roll. Like, yeah, we know. This is not new. Actually, we should have been nice to Barry. because it is new. Henrik Bessimender has a new paper out. I think the original was in 2017.

And it basically builds on his original work and takes it a step farther. And concentration was even greater outside of the United States. So they looked at returns from, I think, 1990 to 2018 and found that the best performing 811 companies, which is just 1.3% of the total, accounted for all the net global wealth creation. And I think when people look at this, the knee-jerk reaction, the knee-jerk reaction, is this is why you should index fund. And that's partially true. But I think the other takeaway is if there was a way, and maybe one of the reasons why discretionary stock picking is so hard is because if you're not in one of the big winners, then, you know, you're probably

in trouble. But if there was a way to systematically screen out a lot of the losers, that might be a more realistic way to pick stocks. Less than half of the stocks in the study, 23,9005 had cumulative positive returns. That's a more realistic way to pick stocks. That's a lot of That is insane. I think the other thing that I take away from this kind of study is that diversification is important because it gives you a chance to be part of these big winners. And the crazy thing is all of those losers, those 23,000, almost 24,000 stocks are basically they're completely swarmed by the huge winners.

So that's part of the reason that diversification matters is that you make sure that you get some of those big winners. Well, assuming you're diversified in a market cap index, not something like the Dowd Jones Industrial Average, which is price-weighted. True, but still has basically the same exact returns as the S&P 500 over time. True, but I was teasing. I was trying to lobby a softball. Okay. Did you know that DIA, the ETF that tracks the Dow, has $22 billion in assets? I did not know that. It's relatively small. I'm in the camp pretty firmly that they're essentially the same thing. They're U.S. large stock exposure. And yeah, there's some differences year to the year like

there was this year. But effectively, that's the same thing. But I wouldn't go so far as to invest in DIA. I mean, I am a gentleman. I honestly didn't even know that this ETF existed because people talk about the Dow all the time, but they use the SPY and SP500 interchangeably, but no one ever talks about this DIA ETF. All right. So there was an article in CNBC last week talking about like how the rise in index investing and passive investing is causing a bubble but not implicit you might think. I think that was the gist of it. But this part was sort of head scratcher, a head scratcher from me. So they specifically single out Tanger factory outlet centers. So this is research from Ned Davis research. Yes. And we're big fans in Ned Davis.

They have a lot of great stuff. So Tanger has 32% of the float held by ETFs, which is by far the most of any stock. So somebody said, to quote, Tanger Factory Outlets is the real crowded theater where investors might get trampled rushing for the exit. Tanger Factory Outlet Centers is the poster child for the passive bubble. And then he later said, Tanger is the stealth king of the passive bubble. So they also said ETFs hold more than 11% of the real estate sector and 9.8% of the utility sector. But those are even the Tanger one at 32%. Guess what? That's still a minority. Like this doesn't reek of a bubble to me. The argument of when everyone heads for the exits is a huge red flag in my book. Nobody's like, okay. All right, anyway. No, you don't, not anyway. As if heading for the

exits in mutual funds or single stocks, like there's always going to be booms and bust. But, but anyway, so I went, I went to the charts and looked at the performance. Over the past year, reits are up around 6%, and this particular stock is down almost 30%. Okay. So it hasn't really affected the performance. Like, if flows were propping this up or it was being distorted, wouldn't you think that it's to the positive side? Right. Well, and the idea here that ETF investors are going to freak out and panic more than any other investors. Yeah, that makes no sense. But still, these numbers are in a minority. So ETFs hold almost 10% of the real estate sector. That's still

a pretty small amount, right? Like, okay, that means individuals and mutual funds and people that worker the company hold the other 89 or 90%. What if they freak out? There's another article in the Wall Street Journal that had a lot of the same undertones. The articles with stocks at fresh highs, investors' portfolios look like, Ben, did you read this? Yes. Okay. This is pretty bad. Quote, big surges like Alphabet's 9.6% gain on Friday, can make those companies even more appealing to trend following investors, further concentrating them in a relative small group of stocks, analysts said. What does that mean? So, I mean, so it's trying to show that like these stocks are the crowded trade because they're expensive. But guess what? The fact that

these stocks gone up have gone up the most, of course they're going to be a bigger part of people's portfolios. And they looked at, they kind of did a cross-reference of stocks that are held in hedge fund portfolios and mutual fund portfolios to show which ones had the highest proportion. But again, these are the ones that have gone. And this kind of gets to that the study we talked about earlier with the small number of stocks taking, making the biggest amount of gains. Like, of course, they're going to be an outsized part of people's returns. So it's really not that surprising. Isn't this a permanent feature of the stock market? Yeah, I think this is just the way that things work. The biggest holdings are going to be the ones that have done the best.

So here's another one, quote, yet some investors worry that the concentration of money in a short list of stocks could exacerbate market declines if bad news sparks are rushed to the exits. My favorite line from this was the interviewed a value investor from some other fund. And he said, quote, I'm miserable. The last three years have been among the most difficult ever of 33 in the industry because we haven't owned any of the fang stocks. But he said he plans on sticking to his guns, convinced that the rally can fall apart if the Fed eases monetary policy less than expected or if the company's balance sheets worsen. That could result in a really big, ugly sell-off, he said.

I mean, obviously, like, to outperform, you're going to have to be different than the market, and that means, unfortunately, accepting periods of underperformance every once in a while. But completely ignoring the biggest stocks means that you're going to have some huge tracking error. Like, if you just completely get rid of those and don't have any holdings in them, like, and if you're expecting the Fed to sort of bail you out, that's a, I don't know. If I was an investor there, I wouldn't be feeling too great about that analysis. So, survey of the week. This comes from S&P Dow Jones Indices.

So they estimate the total assets index or benchmarks to indices using data, blah, blah, blah. So for the SEP 500, total indexed assets, including ETFs and non-ETFs, are around $3.6 trillion, which is around 15, 16 percent. Of the total stock market? Yes. Okay. That's all. So not that bad.

Okay. I don't know. When everybody rushes to the exit, there's just such nonsense. Okay. When everybody rushes to the exit, stocks fall. Yes. Or stocks are already falling and then, yeah, anyway. You're a winner, Ben, because you were off the minivan train very early.

I had my ear to the ground on that one. You did. Minivan sales declined 30% of the past two years and fell an additional 60% through June this year. I can, I mean, this is, this is, I have. I can't back this up with anything, but younger parents do not want to drive a minivan. That's what I'm saying. The data backs it up. Minivans are practical, but young people are not going to want to buy it.

And the thing is, they're very useful and they're also much cheaper than an SUV. Like, they're much more affordable. Well, people are buying SUVs nonetheless. This is kind of an interesting data point. 38% of the minivans sold last year, went to fleet buyers like rental car companies. So actually, what is this, hurts? So Hertz is like the ETF bubble for minivans. That's interesting.

Why doesn't Uber just buy all the minivans, right? So it looks as if individual buyers have rushed for the exits, but these ETFs are picking up the slack. This is pretty wild. So when it basically topped out in 2005, 2006, at over a million minivans sold in a year, now it's less than half of that. It's a pretty big drop off. I honestly don't know what to account for that besides the fact that more people are driving

SUVs and young parents do not want to be seen. in a minivan. That's pretty much it, I think. So J.B. Morgan says dump U.S. dollars as its century of global dominance is coming to an end. What is the catalyst for this? Well, it makes a case that two-thirds of global economic growth and 50% of global GDP is coming from the Asian economies. The Arabian Peninsula, Turkey, Japan, New Zealand, Russia, etc. So that means Bitcoin is going to take over for the dollar? But so, I don't know, but jokes aside, for second. If that were to transpire over the next 50 years, that would be a massive global shift, right? It'd be a pretty big shift. The question is, like, obviously the last time this

happened. What happened when the pound lost, you know, its global currency reserve status? Was that like World War I? When was that? But I mean, how much of an impact that, obviously, since then, the U.S. has grown a lot faster than the U.K., but, I mean, did people have this argument at that time, right? Like, what happens when the – so Mab had a pretty good tweet the other day. He said, the U.S. has a percentage of the world. The population is 5%, GDP is 15%, and stock market is 55%. So how much of the – is there any relation between the fact that our stock market is so big and well trusted and the currency. Does that have any link whatsoever? Yes. Even the stock market is not the economy. It's got to have something to do with it, right? The stock market is the

reserve currency. I don't know. I think so. This feels like one of those predictions that you put out there where you just, you're just really, really hoping against hope. Like, you know what? I'm just going to throw one out there. And if this catches like, I'm going to be famous. And if not, people forget about it in a week. Yeah. All right. So Byrd is in the news again. They raised, How much did they raise? There is a lot. But now they're valued at $2.5 billion. Their newest rounds is, let's see. I can't find it. They've raised $418 million total. So they're in the news again. But did you see this article about the company that just goes and picks up scooters from people that are complaining that they're on their property? I mean, not the greatest name I've ever heard for a company.

Scoot scoop. Yeah, Scoot scoop. Doesn't roll off the tongue. No. But so here's what they do. They charge the scoots. cooter companies, $30 for pickup, and an additional $2 each day. So that's a good business. We say that these new technologies are going to displace all these workers without thinking about the jobs that they create, such as Scoot scoop. So they're picking them up and charging them for them? Is that the deal? Yes. So it said initially, because I think Bird is suing Scoot scoop. Initially, Bird agreed to play along, and this is an article from the Verge, after Scoot scoop had impounded

1,800 bird scooters from July through November of 2018. So they wrote them a $40,000 check assuming that it would like sort of go away. It hasn't. I saw someone posted a viral video the day of a guy riding his scooter down the highway in Dallas or some big city like that. I just, I don't know. Happy to be proven wrong here. I can't see how this on these scooter things. Like eventually the cities are going to have to fight back, aren't they?

I mean, it's not like this, obviously it helps the citizens. it's a it's a service but do the cities themselves get anything from this at all taxes all right a little bit I guess but it's got to be just a rounding error for them you'd think you think that the downside is bigger than the upside here that's all I'm saying uh you put a chart in here 25% of all bonds in the world trade at negative interest rates and of course the chart going back to like 2014 it's just a flat line and now it's just gotten huge I still don't know what to make of this. I still can't wrap my head around it. So Joe Wisenthal had a tweet, and he's been kind of putting out some analysis and kind of some trolling on Twitter. He says if the nominal

yield on debt falls from... Kind of some analysis and kind of some trolling was very nice of you. So if the nominal yield on debt falls from plus 1% to minus 1%, is that fundamentally different than yields falling from plus 3% to plus 1%. My inclination is to think not and that there's nothing special about crossing 0% and that it's just another number. What do you think? I think Joe is a world-class troll. But it's kind of, it's an interesting point, though, because don't you think, okay, let's put this out there, will the U.S. have negative interest rates in our lifetime? No.

I almost am inclined to say yes, because they just keep creeping lower and lower. And one of these times a big recession is going to hit, and that they're going to do it just for like optics. If the rest of the world is already negative, then the U.S. is going to say, well, we need to be negative too. I feel like it's going to happen. But I do think that Joe makes a decent point that maybe in a vacuum there is no difference, but I do think that there is a psychological difference.

Yeah, but the other thing is we've had negative real rates before. Even in the early 80s, when rates were double digits, like 12 to 14 percent in the 10 year and the Fed funds rate, the inflation was higher than that. So real interest rates were actually negative at that time. So it's not like that's something that hasn't happened before. It's just people can't see inflation unless they go to the grocery store. and then, right? Yeah, but you, but Ben was joking.

Did I send you that last week? Someone called me a CPI truther. Yes. Because apparently inflation is all around us, but I don't see it anyway. So, but you and I have said that people live in nominal terms. Yes. But I feel like in the 70s, people really did live in real terms because inflation was so evident and everywhere. That's true.

But I feel like if we did, if like the Fed. put negative rates on. The first time it happened, people would just lose their minds. And then it would become something that, okay, this has happened. We're over the hump. And then it could happen again in the future and people will get used to it. Do you think in the late 70s, people were like, this is amazing. We have 13% in our short-term bonds. Oh, no way. Yeah, because they're getting crushed everywhere else. But on the other hand, people were getting pretty big raises, I think, to try to keep up with that inflation. Speaking of crushed, Josh got dunked on Biggley. Did you see that? I saw a little bit of it.

Because he did a video comparing, I don't think he was necessarily comparing, but maybe implicitly he was. He said that the U.S. is borrowing at 2% and Greece is barring at 2%. Oh my God, blah, blah, blah. And people are quick to point out, yeah, but it's not like you can, it's not like we can invest in the U.S. and get 2% while we can. And then also, we're not making the choice to invest in Greece and get 2% because of currency effects.

But I think its point remains. And I don't think it's that ludicrous because forget about investors for second. He's talking about the countries are borrowing at the same interest rate. Yeah, that was the way I took it, too. Like, it's crazy that Greece's interest rates have come down that far that they can borrow. Right. Exactly. It's not like why would anybody invest in Greece at 2%. Well, we wouldn't. And if we were to, it would be, I don't know, still not a big number, like closer to 4%. But that's how I took it. Internet is not nice part 400 million. Right. Yes. I think some people in finance always look at things like a trade instead of looking at like the real world ramifications of, oh, it's kind of

crazy. Greece was borrowing at 30% in 2012 or whatever. Now it's 2%. That's pretty wild. So I saw this post a few weeks ago that's been just sitting in the dock. Somebody wrote an article about like, is it a bad idea to borrow money from a friend? Okay, I read this. Okay. Hey, what is the cut by the way? What is the what? The cut. It's a New Yorker thing. Oh, wow. That's where this article is from. Okay, maybe the cut is new. I don't know. The cut. Okay. So I've seen a few of them. But it's a, it's a, is a person who got laid off and need some money to shore things up until they get on their feet. And they wanted to ask their friend for $1,000 and ask, would it hurt the friendship?

Absolutely. And I think where you can see the most resentment, and they mentioned this in the articles, like, when you loan somebody money and then you see them either eating out or having a drink, you become like a stalker and it just festeres, even if the money is not relevant. So I think that to borrow money from somebody can absolutely permanently destroy your friendship. We had a friend like that in college who borrowed a few hundred bucks from someone. I think it was just like buy books or something. And then he would still go out to the bar. And the other friends would seem and be like, dude, you can't go to the bar if you owe that guy money.

That's, and it got really weird, right? I just, like, that's the point where I think that's when you make use of credit cards. If you're at that point in like, that's the emergency, like you almost have to, right? And from a lender's point of view, I think you almost have to write it off. Just say, like, I don't want this back. Here's $1,000. I'm sorry for your troubles. It's charity.

Yeah, it's charity. But honestly, like, that's the point where I would personally rather go into credit card debt than even ask my friend to borrow money from them. Same. Okay. So Robin Hood is raising more money again. They just raised another $3.23 million pushing their valuation up to nearly $8 billion. I guess I still don't know the finances behind the company. Obviously, it's growing like crazy because it keeps bringing money in.

Are they planning on going public? Do you think? I mean, that has to be the option at this point for the size, right? One thing I forgot to mention earlier that ties into this conversation is when we saw that there was like 24,000 companies with negative returns, which is basically half the listed companies. It's funny that you hear the argument that we need more public stocks when clearly public stocks are not that great.

Yeah, that's true. Many of them just can't make it or not. never will or never should. But, I mean, Robin Hood has to, if they're at an $8 billion dollar valuation, the only option is going public at this point, right? At some point. I suppose. And you would think that they have to get into other areas of finance, personal finance, mortgages, something. So this headline says it's from Robin Hood. So take a green of salt, but it says they're trying to democratize finance for all. I mean, can they really do that? Is that really going to happen? Like, are there the next one that's going to,

But I mean, I guess I would be worried if I was a Robin Hood investor that there's just going to be too much competition. So Betterment last week announced as well. They are the competition. Very well it could be. And maybe they've got enough people. But I think that the finance for all thing kind of loses this luster when you realize how many people actually – like, they're getting people who invest in them right now buying stocks. And there's a very small percentage of the population that actually owns any stocks. So I think this is just, this is not finance for all. This is finance for people who can afford it, basically. And so I'm just worried at the competition angle. So Betterment announced last week, they're doing this Betterman everyday thing where they're going to do checking in savings accounts that offer right now. 2.69% APY and they're going to like do an FDA insurance on it for a million bucks. You're going to have your cash in one or two business days. There's no minimum balance. There's no fees. They're going to they're going to give you refund all your ATM fees, which that's one of the most ludicrous fees on the

planet. When you use your ATM and you have to pay a fee on your bank and then you have to pay a fee on that ATM and you pay like five bucks take your cash out, that's like the most, that's the most ridiculous fee in all banking, right? Yeah. How much money do you spend the year on fees? Are you a stickler for that? I honestly, I barely ever carry cash so I don't do it very often, but I know if there's not an ATM for my bank and I have to do it. It's like, you got to be kidding me. You can't, that's just ridiculous. But anyway, so they're going to, and I think a lot of like credit unions. We'll do that to where they'll refund you. But I mean, do these smaller places, these fintech companies, Betterment and Wellfront has one and now Robin Hood probably will get into

this game. Can they get enough scale before the banks decide like, oh, wait, we messed up. We need to get this market too. Like, can they bring enough people in to do this? Or do you think young people these days aren't as tied to their banks and they'll be the ones jumping around looking for better rates? I have no strong opinion. I could see both sides. Okay. But do you think that? I don't know. Obviously, it probably doesn't cost them that much if betterment and wealth are able to offer these really high rates to get people to come in right away. But I just think the banks are missing a huge opportunity to get a younger clientele. Yes, I think younger people would prefer to work with a company like Betterment or Robin Hood. But, and I don't know this is

today, but younger people have no money. So there's really no incentive for banks to think about the next generation because they're so short-term oriented. That's true. Okay. Stato's flying are on Twitter, or on Twitter last week about Twitter. Survey? I don't know if this is a survey. 22% of U.S. adults are on Twitter. This is a Washington Post article. And 80% of the tweets come from the 10% of users.

If you're lying Twitter for your political information, you are being informed by pundits and bots residing within 2.2% of the population. I mean, this guy's not shared. Yes, but isn't this just like the stock market study we talked about earlier? Where, of course, the majority is it's going to be like top load. right, where the people with the most followers will get the most engagement in that sort of thing.

Isn't that how everything works basically these days? I think that... The wealthy on all the assets, the best stocks have the best returns. But the great thing about Twitter is that it disrupts places like the Washington Post potentially. And it gives like the crowd of voice, I guess. Yeah. But I mean, this doesn't seem like it's that surprising to me. Like they're saying you're getting, like haven't we always been getting information from a small percent of the population?

Like, how many newspaper reporters were there back in the day that you'd get your information from? Not a big percentage of the population. So I spent some time in my backyard this weekend. Burning stuff? Actually, I got a ring on the doorbell. My neighbors, from my neighbors. I honestly wish I could get rid of my doorbell. I don't know why houses have to have that anymore.

Have you seen the Sebastian Manascalco bit about the doorbell? It was on the comedians and cars getting coffee. Where he says back in the day, like someone to ring the doorbell, You'd go, hey, company's here. Come on in. And now, today, someone rings the doorbell. And you're like, who the hell is that? I got a, I'll link to it.

I'll send it to you. It's a good one. Well, that's pretty much what it was. And I see it's my neighbors. I'm like, oh, great. And they are, they're Russian, but, like, from Russia. So their English is not too great. And they were trying to explain to me that their kids have asthma.

They can't go in the backyard because I was burning stuff. Oh, my God. It was terrible. So you were burning stuff. So I apologize and whatever. But I was also putting together. That's an awkward conversation. Hey, nice to meet you.

Stop burning stuff in your backyard. Our kids can't breathe. I was like, no, I get, I have asthma too. I'm sorry. I was putting together a barbecue and doing some power washing. Do you own a power washer now? I'm a proud owner of a power washer. Great fun.

Yes. Power washing is surprisingly like cathartic. So I listened to two more rewatchables while I was doing that. Sort of coincidentally, both Tarantinos, Reservoir Dogs and True Romance. Okay. I haven't seen either in a while, but I do love Reservoir Dogs. Both incredibly rewatchable. Yes, it's been a while. So someone tweeted out the other day that Disney now has the five biggest movies of the year with all their Marvel movies and then the Lion King and Toy Story remakes. Wait, what happens when everyone rushes to the exits? I know. Disney's screwed. Isn't there

a joke in there about shouting fire in a crowded movie theater or something? Yeah, I thought about it. Here's my question I put in our Google Doc. What is the Cape ratio right now for Marvel movies and TV shows? Are we at NASDAQ 99 levels or Japan, 1988? Oh, wow. Okay, no, so they laid out there like phase four at some Comic-Con thing. Wait, you ask the question.

Okay, well, I'm just explaining this. So there's a, like, they've got all these shows coming on. They need to feel like the Disney Plus, and they've got shows and Thor 16 and, And all these, obviously, there's still a huge audience for these. But at some point, they're going to get to the point where they're going to be investing like billion, like they did in the telecommunications bubble where they invested billions of dollars in those cable lines that weren't ready to be used. Like, doesn't Marvel reach that point eventually? Or is there a never-ending, like, appetite for this stuff? I think that's what I thought.

I guess a counterpoint is had they shown all of these movies that they were going to do like 10 years ago, people would have thought that this is. insane, but it does seem like they're milking this for everything they can, which is obviously what businesses do. Yeah. But I don't know. Like, I don't, does anybody, is there really an audience for Hawkeye? I mean, yeah, that's what I'm saying. There has to be like a saturation point at some point where they, they kind of go like,

okay, we get it. Like, are there any bad guys left? Is there any part of the planet that hasn't been blown up on these movies? Like, and here's the other thing. Who's funding the infrastructure to clean this stuff up after like the aliens blow everything up? SoftBank. That's true. Yeah, I think this is Japan 89.

Okay. I mean, I've been wrong the whole time. I can't believe people are still watching as many sequels as they are. Are you, is this, I'm not wrong just early? Because you've been bearish on superheroes for quite some time. I guess I'm not bearish. I just don't understand it. You are the Jim Rogers of Marvel.

Yes. I haven't gotten bearish yet. I didn't put on a paper trade. But this is my point where I'm saying like, okay, it's time to lighten up a little bit at least take your profits if you will okay listen to questions if past performance is not indicative of future results why do momentum strategies work this is a really good question thoughts okay i wish i had a better answer i think uh okay because the way that momentum typically works is based on very short time frames and so momentum strategies

typically work on three six nine 12 month look back periods and they turn over quarterly probably at the latest, sometimes monthly. And so momentum strategies are constantly churning. The problem is when people read this past performance is not indicative of future results thing. They try to invest in a value strategy. They try to invest like a momentum investor but using a value strategy time horizon.

That's what I did. Yeah, they look at a fund that's done the best over three or five years and invest in that. And that's not the way that momentum works. Okay, here's the thing. I think that this phrase is, at least when I hear this, I think that this applies to mutual funds and not necessarily to individual stocks. Right. This is a stock strategy where, again, stocks that have gone up over

the last three, six, nine, twelve months as a group tend to continue to go up over the next three, six, nine, but it's a short time period. It doesn't last very long. And it can have a drop off pretty quick. And so that's the thing. Momentum, it has a lot of turning into it. And so it's a strategy that it is very counterintuitive, but that's sort of the difference. Okay. I wrote about this one, but it was kind of interesting one. I'm 32 single, make over 100K a year, own my house, barely have any debt left on the mortgage, no other debt, and just got a million dollar bonus from the sale of this small company. I was thinking about putting in betterment or bogleheads, three fund portfolio. Don't need the cash for anything other than

trying to retire early, but I'm scared of this inverted yield curve for the past quarter. What should I do? Help. Yes. Help. Well, what did you say in your blog post? I said, Can I guess what you said? Yes, because you obviously didn't read it. Sorry. You're 32 years old. Who cares about the yield curve? Yes.

Honestly, even if you were 62 years old, who cares about the yield curve? My point was, if you ask a retiree, what's something they regret, you'd get to about item number 13 million before they said investing money in my 30s because of the yield curve. That'd be true. Right? But the other thing is, when you're. young, I feel like you don't really plan ahead for other financial planning. Like, retiring early sounds awesome when you're young for a lot of people. But there's other things that can come up too where maybe you could pre-fund some potential things that will happen.

Weddings are not cheap just because you're single now. It doesn't mean you'll be single forever. Travel, maybe you want to start another business. So there's other goals that you could potentially fund as well. But yes, I think whenever you're setting your asset allocation for something like this, whether it's a lump sum or your dollar cost averaging in, the yield curve is probably not something you should be worried about, especially when you're young. But if you are actually worried and it'll make you feel better to split it out over two years or three years or four years, I think you could probably afford to do that too. Yeah, which I also said.

On January 1st, just put in $250,000 every January 1st. That's what dollar cost averaging is is like a strategy for grant minimization. All right, any recommendations this week? I caught up on the loudest voice, the Roger L's show on Showtime. Are you watching? I haven't started it yet. It's Russell Crow. Okay.

He's probably going to win an Emmy. Okay. And when I say probably, I mean, I have no idea, but he's doing good. Okay. That's it. Well, I also was, I'm watching a pretty bad show on Netflix called Typewriter. It's an Indian show about ghosts. Okay.

see we had a discussion an internal discussion at the company the other day I don't know why I'm watching it you were trying to make the point that you have good recommendations and that's not true someone else asked does Michael have good movie recommendations I said you have a barbell portfolio that's true on on the one end you watch really terrible stuff sometimes but you know it's terrible yes and then the other end you watch good stuff so yes I feel like when we do our recommendations you need to tell people like all right Here's Michael's big dog pile of shit. And here's the other one. But I feel like I'm pretty clear about that.

Like with Carl, I said, listen, if you like stupid monster movies, and by all means, if you don't want and skip it. If you like wasting your time and money on a movie that's going to be terrible, watch this. Exactly. So anyway, I don't know why I'm watching Typewriter, but I'm definitely too far to turn around. Okay, so you don't have a stop loss on this.

No risk management whatsoever. Okay, I rewatched a river runs through it. last week. Why? I wrote about it too. It's a great movie. I never saw it. Oh, you never saw?

Oh, man. Put it on your list. You know what else? I never saw since we're doing this? Rain Man. Okay, another classic. Put those on your list. Both of them.

River runs through it. It's just, it's one of those movies from the, like, I think it's one of the best movies from the 90s that never gets in the conversation for the best movies of the 90s because there's so many good movies. I really like it. And a bunch of people told me that the book is actually even better. I didn't even realize it was based on a book. we've been watching it's kind of slow in the summer for shows succession comes on i think in a couple weeks

august 11th yeah i that's a good one uh so we've been watching killing eve we're about halfway through the first season and it was actually written by the star of fleabag and she she wrote the show so it's on bbc sandra o is in it and then there is a european assassin who is basically like uh female jason born but if jason born was a psychopath and so she plays like a bad assassin and it's not like a great show but it's it's like a pretty good entertaining middle of summer nothing else to watch it's we're into it uh and watched bohemian rap city last night the queen bio which was good that was really good that was one of the better movies i've seen in a while i think it was very good and he was yeah the performance is great i

actually enjoyed that more than i thought i would so that was pretty good and should we get into our sci-fi hot takes we got dragged again on twitter last week because we have bad sci-fi takes Well, you have terrible sci-fi takes Well, you said you don't like Hitchhiker's Guide to the Galaxy And apparently that I didn't realize That was such a big book for so many people I did Okay, I guess I didn't, I never knew

Have you read it? No, I haven't and I didn't see the movie So I have nothing to base it on I will finish it. I've got a third of it left, but I'm genuinely I shouldn't even say anything on this But I said, is this where I come? Is this the thread where I say that Star Wars is overrated?

I don't know why I'm saying this Because I'm going to get a lot of hate mail on this And I think I already have, but so when I grew up, I was kind of a Star Wars fan. We had a lot of the toys that we play with, but I hadn't seen the movie since probably the 80s. So when the new ones came out, are you a big Star Wars fan? I mean, I like it. I'm not huge. I see them in the theaters.

There's huge Star Wars. So when the new ones started coming out, like I watched all the prequels when they came out, and they were like, eh, you know, the prequels were okay. But then when the new ones came out for the sequels, I was like, you know what, I should probably, watch all the originals again because it's been like 20 years since I've done it and so I watched all three of them like back to back to back over a couple month period and uh I don't know personal preference didn't age well like you want to know why here's it's not the technology and stuff because is it the acting the acting was terror like Harrison Ford was the only like legitimate actor in the movie that wasn't awful that was that was my problem with I was like oh my gosh

the acting in this. But I guess the reason people like it is because it had first mover advantage. It has pop culture relevance that is stayed for like, yeah, nostalgia. But that was the thing that really surprised me was the acting was really bad, very suspect. And I guess in an action movie,

sometimes you can kind of, but it would be like Star Wars coming out today and Vin Diesel being in it. Like that's your headline actor. And that's the kind of thing that I guess they can make money, but the acting was. I mean, it's not like Mark, Did Mark Hamill have a career outside of Luke Skywalker?

That's true. And maybe, yeah, maybe that's why. But, okay, that was the only thing. I was surprised at how poorly the acting had aged. Well, is there like a sci-fi movie that you do love? I like sci-fi. Yeah. Any Tom Cruise sci-fi movie I'm in.

And you were a big fan of The Martian. I did like The Martian, yes. That was good. And that was kind of a realistic one. All right, that's enough of this. I'll think of some sci-fi. All right. Send us an email, Animal Spiritspot, at g-gmail.com.

Brit a review for us on iTunes. and we'll talk to you next week.