Animal Spirits Podcast - Some Good News (EP.136)

Episode Date: April 8, 2020

On this week's show we discuss some good news out of NYC, can this ever be over until we have a vaccine, why this is more like a war than a financial crisis, who is getting hurt the worst from job losses, the 4 rules of pandemic economics, the massive response from the Fed, and some stuff to worry about when this is all over 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

TechMeme has been Silicon Valley's news source for 15 years. The TechMeme Ride Home Podcast is the only podcast you need to stay on top of tech news as it happens every day. Every day by 5 p.m. Eastern, you get the latest headlines. It's only 15 to 20 minutes long. Search your podcast app and subscribe to the TechMeme Rhymed Home Podcast. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael 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 Rit Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rit Holt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Finally, we're seeing some green shoots on the health front. Cuomo was on TV this morning. It's Monday at 1 o'clock Easter time talking about how the total

new hospital cases is coming down dramatically, which is obviously much welcome news. It's nice to see that this stuff is actually working. I think that would be the point where it would just be so debilitating to everyone's psyche if we were doing all this stuff and the news just eventually wasn't getting better. I'm actually surprised it happening this quick because I thought there was going to be a two-to-three-week lags. This is nice that chart that went around the day. That feels like the first piece of good news I've seen in a while. Well, this morning, Carl Kintanilla tweeted, global deaths 4.7K down two days in a row. New York hospitals down two days in a row. Italy, ICU declined for first time. Spain,

deaths are down three days in a row. And France, ICU slowing, deaths flattening. Which, I mean, thank God, because last week things were seeming incredibly grim with no end in sight. And I think at this point, anybody would take a date. If you told me August 1st, I would take it. It's just the unknown is making this incredibly difficult. I think the hardest part is there really is no, I mean, there's light at the end of the tunnel in terms of getting ahead of this and getting treatments. But from what I understand, without a vaccine, this thing will never be completely gone. So we can get better forms of treatment and we can make it so the hospitals aren't so overrun.

I think that's the worst part to me is just that. this thing could linger with us for a long time in that. So I feel like there's just going to be a lot of fits and starts with people getting back to normal and the economy. And I feel like we can't really, maybe I'm wrong about this, from what I've read, that we can't really declare victory until there is a vaccine, which they keep saying is 12 to 18 months away. So I've been thinking about this and a lot of people have been comparing this to the Great Depression in terms of the economic numbers, but I don't think that is right because this really is a medical crisis and not an economic one. And so we watched the movie 1917 this weekend. Really good

movie. Got me thinking I did a little more research on the war and figuring out like this really is like war where the country completely stops and this is the only thing we focus on. I looked in World War II, there were 16 million people who served in the army. That was 11% of the population of the time for the U.S. And obviously, whole industry stopped, and a lot of them shift to their capacity to do something else. So isn't that the better analogy here that this really is like war? And so you have these periods of uncertainty when you don't know when the war is going to be

over. You have no idea when the end date is. You think there's going to be peace eventually, but you don't know. And doesn't it feel like for us that last victory is going to be when the vaccine is here? And that's when everyone can throw their hands up and go, okay, this is it. Because until then, until there's a vaccine, people can still get sick. Obviously, the people who have been sick hopefully won't be able to get it again. And that's why I feel like the economy can start up a little bit here and there, but people are still going to be tentative.

Don't you feel like we're going to have, even with some good news like this, we're going to have these periods where for a number of months, we're just going to have this thing looming over us. It can't really fully be lifted off of our shoulders until the vaccine is here. Yeah, you make some very good points. And there's going to be people who, let's say that the social distancing does work, that the shutdown, the state, the work from home does work. And it seems to be working. There's going to be people who are like, see, this was such a joke. This was totally overblown. And Adam Butler tweeted this a few weeks ago. And I think it's like one of the most profound things I've seen in a long time. He said, if social distancing is successful, it will be viewed by most people as unnecessary in retrospect. This is the essence of risk management and why so few men are. risk. And honestly, if the government would have gotten completely ahead of this thing and shut the country down right when we figure out what was going on in China, no one would have ever adhered to it because they would have said, no, that's crazy. There's nothing going on here. It's not going to come to our shores. This is nothing worse than the flu. And honestly,

the sad thing is it took for it to hit here and to push our hospital capacity for people to act. And it's like a chicken or the egg thing. People had to see this. And now hopefully if it happens again in the future, we'll be more prepared. But I think, that's part of the problem is people had to see this damage for them to act so much and to get the country to have such a concerted effort. And I do hope that things get better. But I think in the meantime, until we hit that victory day, and again, maybe something else happens in the meantime and this thing just, I don't know, Peter's out on its own. It doesn't sound like that's going to happen. I think that's kind of what happened in the 1918 flu. It just kind of went out on its own

because so many people got it. But don't you think by the end of that, if we have these stops and starts and people aren't quite ready to be going back to normal. My concern is there's going to be so many people who are going to have their brains broken and be stuck in this pessimism doom camp that they'll never be able to get out of that. And they'll always think people's behavior is going to be changed forever. This is something that is never going to leave us. And then when that victory happens and we do get the vaccine and people can finally move on, they'll be completely left behind. So we had V-Day using your word analogy. We had V-Day in 1944, 45. 45. And hopefully we'll have one in 2020. That would be terrific. So not terrific. Unfortunately, the economic reality is still

very, very bleak. Danny Blanchflower tweeted, just checked BLSGov, the rise in unemployment rate of 0.9% is the highest for 67 years and the third highest rise ever behind December, 1953, and October 1948. What was in 1953? That's a good question. I thought the 50s were actually relatively mild by historical standards. But I think that's still post-war period of things were still not as rock-sout as they are now for the economy. But I don't know. Well, anyway, so I tweeted last week that we've already had 10 million unemployment claims, and there was about 39 million in all of 07 to 09. And a few people rightfully so were like, well, that's apples to oranges. And it is because this is such, it's only been two weeks. And of course, unemployment claims were going on

for upwards of a few years. But still, the magnitude, the spike, you saw that gift by Len Kiefer, where it shows the unemployment that it just, the spike is just really, really, truly incredible. So some numbers that are coming out, U.S. Daily Output has fallen roughly 29 percent compared with the first week of March. So this is a really good graph from the Wall Street Journal. They said that California is losing $2.8 billion a day or 31.5 percent of its GDP. Wow. And they were one of the ones who got ahead of it, it sounds like. The other crazy thing is, though, because they're helping so many people out, and it sounds like it's taking a little longer than people would like, the income numbers for a lot of people that are losing

their jobs, sounds like the profiles could actually be better. Now, obviously, you don't want ever make light of someone losing their job, but in terms of people losing their job, isn't it almost like the workers are in a better place than a lot of the business owners in this whole thing? I mean, maybe that depends on whether they get these small business loans. The business owners have more to lose. Yeah, and so there's the chart in here that shows job losses by different education. So they show high school and less, associate's degree or some college and bachelor's degree and advanced degree.

And by far, the biggest job loss has gone to those who have a high school degree or less. And this is also going back until the last crash. And so it's never really recovered. And now it's just getting worse from here, unfortunately. But George Perks wrote a piece for Business Insider. and he talks about how much this is helping. And so he gives an example, a single parent with two children that earns federal minimum wage but loses their job as a result of this stands to see their income over the next four months more than double thanks to expanded unemployment benefits and cash stimulus checks. Now, that's a very short-term burst and this person's life could be put on hold and maybe they have a hard time getting back into the workforce. I hope not. But the income numbers to me are going to be interesting to see because we're going to see all this other economic data fall off a cliff. And maybe for some people, the income data is not going to be. be quite as bad. It's not going to match with the other stuff because they're getting this help. Well, New York Times wrote an article about what we already know, which is that staying at home

during coronavirus is a luxury. So it showed the change in movement in metro areas with high income disparity. And basically, the top 10% of all households in terms of income, they flatline. They're not going anywhere. And then you look at the bottom 10%. And they actually had a giant steep decline, but it looks like they're sort of leaving the house more, which is. these people have to work. They don't have any choice. And George, in that article, he said that this bill is helping individuals unlike 08, which is really a bailout for the corporation. So I just want to give some numbers to put some meat in the bones. Large corporations are promised $500 billion of spending in the bill compared with $604 billion for individuals, $340 billion for state and

local governments and 377 billion for small businesses. Households are getting 28% of the total bill when counted as stimulus checks plus unemployment benefits. And adding in safety net and student loan relief spending, it gets to about 32% versus 25% for large businesses and 19% for small businesses. So this is great. Again, we spoke about what George and B Spoke did in their table a few weeks ago, that this is really targeting the lower income people. And I feel like we have to give credit to the federal government because they acted pretty quickly and could have been better yeah, maybe. But the fact that they came together this quick, like what would, and again, this doesn't necessarily change the greater picture, but A, what would the market reaction have been

if they weren't able to get a deal done? We'd be down 50% right now. And in terms of like, more importantly, real life, if people didn't know that this money was coming to them, there would be huge anxiety even more so than there already is. Even if you're struggling. until that money gets there, just knowing it's coming has to be a huge psychological relief. And I think we're also getting to the point where maybe, hopefully it'll change a little bit after today after seeing some good news that no matter what they do in terms of the government or the response or how we're handling this, people are picking and choosing the wrong side of things. And well, if they would have just done this, it would have been better. And if they

would have done this, it would be better. But I agree, like, credit where credit is due sometime. Both sides of the aisle came together to put this together. And they've never done anything like this before. They pretty much did it on the fly. It would have nice to get it out fast. but I think a lot of people are getting into the point of, and a lot of smart people, too, that I see that are talking about what's going to happen from all this and how it's just going to change everything forever. And I think there's just so much pessimism now that people can't see the good in some of this stuff. And it's going to be really hard to turn that mindset off for people. Somebody tweeted to me. I shared the chart of GDP lost by state and somebody

tweeted also that we could save a few grannies. What a psychopath. To have that mentality, is obviously just very warped. And so again, in the New York Times, they showed that, yeah, people are listening. So the average distance traveled previous to this was five miles a day, and now it's down to less than one mile. So people are listening. They're staying home. And at least in New York, it seems like it's working. Do you find yourself, like if you're going out in about in your neighborhood judging the actions of others that are around you or at the store or whatever in terms of I'm being way more cautious than they are? Do you find yourself judging other people in this time?

Yeah, yeah. This is the most irrational thing that I do. If I'm walking and somebody crosses the street, 500 yards ahead of me, I take it personally. Right, yes. Even though I would have done the same thing. Hey, I was about to cross and I take it as a spite. But yeah, sure, isn't judging what we do best? Yes.

It's like, I must be taking this way more seriously than they are. I don't know. It's just these weird things that get in your head when you're going through something like this. It would be nice if we could, doesn't feel like this country is going to have to be mandated to wear masks to go out. I've been talking about this a little bit, but it seems like a lot of the countries in Asia, that's just more socially acceptable. I feel like people still give you a weird glance if you're wearing a mask, and maybe it's just because I live in a smaller area than you. Maybe in New York it's not the case, but it seems like there's a stigma there that people just

need to get over and everyone needs to make masks. So my mom still uses a sewing machine, old school, and she sewed our whole family masks, and she did little cupcake and ice cream ones for the kids. I haven't been out to the stores or anything, but just in the neighborhood and so I haven't seen people wear masks. Don't you feel like we just have to get to that point where until we get the vaccine, that's going to have to be standard to, or at least if you're traveling or going to the airport or the subway? I haven't been wearing a mask on walks, but if I go to a store, I certainly will. Yeah, I'm not saying, yeah, walk, but I think if you go where those other people, I think wearing a mask will have to eventually be part of what we do, right? Even if it's just a little

bit, makes things a little bit safer for everyone? Well, not necessarily that a mask will keep out all germs, but if nothing else, if it prevents you from touching your face, and that's a huge, huge win. Were we talking about this on the podcast or off? I can't remember. We were joking about, they're going to be like designer face masks. Yes, the hot fall fashions, right? Okay, so I want to talk a little about the small business loan and some details.

So the FT had a good piece about this. Here's some details. The full amount of the loan will be forgiven if it is used for payroll, mortgage interest, rent or utilities, and any amount that is not forgiven. So they're treating it as if it's going to be a grant. But if it's not, it will accrue interest at 0.5%. And this is the PPP. And I think that the earmarked $350 billion or something like that for this.

So banks will receive processing fees. And the fees will vary with loan size, so 5% for loans under $350,000, 3% for loans under $2 million. So banks are being compensated for this. And the basic details are that businesses will be eligible to borrow the equivalent of 2.5 times their average monthly payroll with a cap at $10 million. dollars. And according to the SBA, there are 30 million businesses with fewer than 500 employees in the U.S. that employ 60 million people, almost half of the private workforce.

So I don't know that $350 billion is going to be enough, but it's certainly a good starting point. It would be nice if businesses came back from this because I think that would show that it's working and people are shoring their finances up. But sometimes this stuff all comes down to timing. But can you imagine if this outbreak would have hit in 2008 and the banks were not prepared because they've had to shore up their capital requirements so much because of that crisis. If this would have happened then and the banks didn't have the ability to put this through and I think maybe the 2008 thing helped a lot in other ways because we did that stimulus back then and it took some pushback and that wasn't perfect then either. And it seems like they've learned

some lessons from that. But can you imagine if this would have happened 12 years ago when things were getting bad and the banks couldn't have done this, how much worse? I mean, that during that financial crisis. If this happened, that is probably, that's great depression right there, don't you think? Yeah, that would have been horrific. Did you see Derek Thompson's piece, The Four Rules of Pandemic Economics? Yes, I did. So this was excellent, and to the point of them needing to do more, somebody wrote, or I don't know if it's him were quoting one of the economists he spoke to, if the bill is intended to cover 11 weeks of payroll for all companies with fewer than 500 employees, the right figure should be closer to 600 billion. All right, so

it looks like we're halfway there. And there was a feel good story last week that a landlord in New York City was waiving his rent for the month. And there was a few surveys conducted last month, which estimate that 40% of renters in New York City, if not more, would not make April rent, which was due on Wednesday. This seems like the kind of crisis where, so they said this guy owns 18 apartment buildings and told them not to stress about it, which is great. And I think we're seeing this with a lot of big companies, too. I think there's going to be a lot of goodwill or potentially earned or potentially harmed in this by companies that handle this the right way, to people who can do it and decide to help people out, I think they'll engender themselves

a lot of goodwill from people. And the companies who don't are probably going to feel some scoring coming out of this. Well, this morning, J.P. Morgan, Jamie Domney's an annual letter came out. And he said that a special payment of up to $1,000 has been granted to full and part-time employees whose job requires them to continue working on site on generally whose annual cash compensation is less than $60,000. Are they keeping, I assume, banks have continued to stay open and tellers? I believe all the drive-thrus are open. And three, quarters of the branches are still open. I think that was the number. Okay. That would make sense. Again, that's what I was saying last week, that maybe the government should be doing some sort

of hazard pay. It's good to see the companies pay their employees hazard pay because they obviously deserve it right now. You had a great interview with Bill Bernstein on our YouTube channel, which we'll link to. And he said something that we've said a million times, but just hearing the words come out of his mouth just sounded a lot better. He said a 10% update is just just as bad as a 10% down day. Does that work for a 5.5% upday like today, too? No, this is healthy. This is good.

I've gotten a lot of great feedback. So thanks to everyone who's written in about that one. I honestly wanted to do that interview personally because I was wondering what he's thinking about this. So this is a guy that I read every one of his books. He's probably written 10 or 12 books. A lot of them on investing, some of them on some other stuff dealing with the economy. But I think he's one of the sharpest minds out there.

and he also has some self-awareness to know that he's intelligent so he doesn't become overconfident. And I'm always interested to hear what he has to say. So getting to pick his brain for a half hour was definitely helpful to me. And he didn't seem to have a care in the world about this. He's just one of his parting quotes to me was, the only black swan is the history that you've never read. And people, again, keep pushing this in our faces of, it's different this time. This has never happened before like this. And of course, that's true. But it was It's nice to hear it from him that I think a lot of these people that think now is such a unique time in history, even though in some ways it is.

In other ways, this has happened before where the country has been disrupted and the economy has gone into the tank. And I don't see why this time we won't come out of like we have in the past. Well, I want to talk about some new whales. It's been a while since we mentioned that. Has it not? Yeah. Google search trends.

How to buy stocks and how to short stocks is at the highest levels that look. like ever buy a lot. Is how to short stocks, the one that went through the roof there? Is that how to buy stocks? That's how to buy. Okay. So people are both buying and shorting at the same time. So this is why it's not the algorithms.

It's the new whales who are pushing on the stock market every day. Is that it? So news over the weekend that Buffett sold some of his Delta, a fifth of their stakes. And they went to 11%. Now they own 9%. And Ramp put this on an Instagram story. I can't find it. But he showed a chart of the buying activity in Delta on Robin Hood.

and people were like all in on this. And I think that airlines in particular are something that regular people gravitate towards because they see them down 80%, 70%, and they're like, well, these airlines aren't going away. And did I tell you the family member that wanted by United? No. What's the story? So this is a family member that I don't normally talk to the market about because, again, I generally don't have much to say my whatever.

Anyway, he's told me that he was buying United Airlines at the open on Monday. this was probably three weeks ago and I said okay you know I don't like to get specific advice but I'm just going to tell you three things one don't do it two if you do it and you get lucky and you get a 20% pop please sell it immediately and three don't do it right obviously I haven't spoke to it since I don't know if he bought it or not or whatever I think he did sure the thing is down 50% since he did it but that is a type of attitude where it's like you see something like an airline and they're like, well, Delta's not going anywhere. It's United Airlines. Where are they going? Don't you think if you're picking through this group of bottom feeders that have gotten crushed,

don't you feel more confident about the airlines than the cruise ships, though? Oh, yeah. Oh, yeah. However, that doesn't mean, like, I'm more confident in the future businesses of the airlines than the cruises, of course, but cruises could be a better trade because they went down so much harder. So a cruise could pop 70% and still go out of business. I sent this to you beforehand. And obviously the numbers don't matter anymore because it's trailing earnings. But Carnival and Rollo Caribbean are trading at like two times earnings over the past 12 months, which doesn't even matter because they have no earnings going forward. Yeah, they're trading at 400 times forward earnings.

Right. Delta is 65% off of its highs, whereas like come to Carnival is like 86%. But this is a tough beat for Buffet. He owned as of their shareholder letter 11% of the company. Yeah, it's rough. That's tough. Carnival's up 23% today. And I'm looking at the chart, it looks like it's like if you just didn't have the access and you just said, what do you think the stock is up today? I would say 2%. Right. It looks like it's up 2%. It's up 23%. I'm sure a lot of people want some action in these stocks. I would have a hard time ever. You're right. These would be the things that you'd have to figure out a day trade. You'd have to have some rules in place immediately to get in or out. And I would not be smart enough to figure that out. Yeah. So Brian Chappata tweeted initial job disclaims yesterday were staggering. Today's pay.

Roll's report was worse and expected. And yet, Treasury yields barely moved. It suggests the Fed's relentless bond buying may be serving as yield curve control during this crisis. So that reminded me of a conversation between Gavin Baker and Patrick O'Shaughnessy, which I thought was excellent. And one of the things that really stood out to me was this idea of the irresistible force or unstoppable force, meaning the immovable object. And that was on the one hand, you have the reality, the economic reality is that small businesses are getting absolutely demolished all across the country. And you have the Fed doing a massive injection like we've never, ever seen before. So I just thought that this is a really, really interesting concept and circles that

are sort of hard to square. It's kind of bizarre that the Fed has done so much yet it's so far down the list of things people are even thinking or talking about. Obviously, there's the Fed haters who think that the Fed still is the biggest thing to worry about. But they've done so much and even so much more than they did in 08 that they just have such a big control over the credit market and they're making sure that the financial system continues to function in to our point from a few weeks ago about shutting down the markets. I think that is probably one of the smarter things that they never even really considered or maybe they did in terms of shutting the markets down. I think that has actually helped restore confidence for a lot of people that the Fed has stepped in and done all this.

and people don't pay nearly as much attention to the credit markets as the equity markets, but for a moment in time there for, I don't know how long it was, a week-long period or whatever, things were looking pretty bleak anywhere besides treasuries. And the Fed has stepped in and shored that up. And this is like the ultimate test for the don't fight the Fed people, right? Where I guess we get to see how much control they really have just to keep things together. And even if it is just keeping the financial system plumbing just continue to work. Well, one area of the market, speaking of small businesses that's getting particularly hammered are small stocks for obvious reasons. I think JP Morgan had a stat small businesses on average have less than 15 days of cash.

So they are very susceptible to what's going on. And if you think about giant companies, and this is a huge outlier, so I understand I'm cherry picking here. But think about Apple, which had total operating expenses in 2019 of $34 billion. Their cash and cash equivalents are $200 billion. So theoretically, all is equal, and it ever is, they can continue to operate for nearly six years, whereas the rest of, and again, they're an exception even in the mega cap space. But most small companies just don't have this luxury. So here's a quick one over the last five years, total return basis through today.

The S&P is up 40 percent, and that's after the fall, of course, using the Vanguard small cap ETF is flat. So the S&P is up by 40 percent over the small caps over the past five years. whereas they've gone nowhere. Is this a case where they've just gotten crushed so bad when they come out of it and the recovery hits, small caps are, would that be the hope that they lead the charge when things do recover? You would think that they let us into this and they're going to lead us out? We'll see. Jason Zweig had a really smart article in the Wall Street Journal that I hadn't really considered.

You and I were not financial planner, so this is not really a real house. but he said, let's say you and your spouse are 45 years old and you expect to earn $2,000 a piece a month in Social Security benefits. By the way, you tweet anything about Social Security and you have all the people saying that it's not going to be there, that it's a Ponzi scheme. So he said, that $2,000 a month that you and your spouse will each receive in the future has a present value of $770,000. So your expected Social Security payments are like a giant phantom annuity. Putting the value of those phantom bonds on your mental balance sheet will remind you that your total portfolio. it was bigger than you thought and less exposed to stocks that it seems. Yeah, and it's probably the greatest annuity ever made because it goes up with the rate of

inflation and if you wait to take it, you get a better return on it. This shows why if you are someone who has a pension and you tried to place a present value on that, that is worth way more money than you assume. And because someone else is giving you the monthly allotment, that helps a lot too. So that's another thing where, again, in the Great Depression, Social Security was one of the things that came out of it actually. it didn't exist going into it. I mean, there was literally no social safety net for the Great Depression. It all came afterwards. There was no unemployment insurance. There was no social security. There was no fiscal

stimulus checks being mailed. That's the thing I think people really forget when they try to make that comparison to that these days. And it's just not even close to being the same thing. Speaking of nothing, are you covering your Zoom short, your paper short? Was it down 25% now? I really nailed that one. How much is it up, though, for you to date still? A few hundred percent. timing is everything there. I've seen a lot of tech takes lately saying how on the one hand you have Amazon and Apple and Google and all these in Facebook and all these established companies that there's no one else that can infringe on their turf. But then you have a company like Zoom who all of these companies have had some sort of Microsoft owns Skype and Apple has FaceTime. Google has

the hangouts thing and none of them could do what Zoom did. So doesn't that make you feel a little better about the fact that innovation will still take place and there will be companies that eventually displace certain parts of those businesses going forward. They just can focus all their time and energy on them, whereas these huge companies are focusing on a million different things or their core businesses already. Yeah, I think that makes sense. So Tracy Illowey tweeted, I didn't read this because who has time to read something like this right now, but a new paper compares to the long-term economic effects of historic pandemics with major wars to show that pandemics tend to destroy investment and boost savings such that the real natural rate of interest

is suppressed for 40 years. And J.B. Morgan came out with their guide to the markets. And they showed that real 10-year yields have been negative for a few months now. So that's not a healthy cocktail. Do you think that the yield curve called the recession of the Black Death in 1331? I would, if history is any guide. Okay. So this is something I talked to with Bernstein as well about, what happens if maybe this is something that makes it even worse where the cost of capital doesn't rise for a very long time. And he said this is actually one of the things he's most concerned about. I think this is something people won't worry about until this whole crisis is over in terms

of the financial stuff because there were way more worried about the stock market and other things going on and savings going down. But this continues to be something that I think is going to be a huge issue that everyone has to deal with going forward. Yeah. what you want me to you've been taking the charge here okay go ahead there was a chart going around from bank of america showing u.s. consumer spending and showing as of march 24th it was down 30% year over year and they went into a bunch of different categories this is another one of those economic data points that is just going to continue to just go i mean have you bought anything non-house-related over the past.

Has your Instagram t-shirt shopping falling off a cliff as well? I just bought a blocker charge shirt from Rex Chapman because he's donating proceeds to charity. But I was actually looking at my spending on Tiller and my spending has not gone down. Ours probably hasn't much either

because we're just buying a ton more food than we usually do, right? Right, right. Same here. I think we have two different grocery services. We're using Instacart and shipped because we're finding it's hard to find every time the person goes to shop for us, a lot of the stuff is just not there. It's almost like trying to plan out your Disney vacation in terms of which rides are going to do, but it's groceries

because a lot of the stuff that you want is just not there very often. And what about toys for the kids? My daughter had her birthday. She turned six on Sunday, and we decided, like, if we're not going to throw her a party, we need to really make this great for her. And so we went all out, probably more all out than we would have otherwise and tried to make it almost like Christmas morning for her because she couldn't have a party and birthday parties are like one of the biggest joys in her life. So luckily she was happy and loved it and had a good time. But yes, definitely a lot of entertainment for the kids is we've been spending a lot of nice. Yeah, honestly, maybe my comment from last week about being able to save if your income stays the same is probably

not maybe not going to come to fruition. Not for me. It's not. You were all over at Disney Plus as a lot of people but being that you were a little bit ahead of me in the children department. So I guess before November, Kobe had never seen a Disney movie and now it's like we can't live without it. Do you think Disney Plus ends up being one of the saving graces of that company? Disney has gotten hammered pretty good here because the parks and ESPN is obviously down. If they didn't have Disney Plus rolled out how long ago it was, I mean, it's only what, five or six months ago at this time, isn't that the only thing that's keeping them afloat at this point?

For seven bucks a month, it's probably such a drop in the bucket. I would assume they probably had a huge influx of people that have signed up for the service. I'm just thinking that seems to be the only thing that they have that's working for them right now. Parks are shut and who knows when those will open and that sort of stuff. All right, let's move on to some listener questions. I watched the interview Ben Day with William Bernstein, and one of the things I've heard him and other say is that banks aren't in danger of failing in this crisis, at least yet. My question is, what is the probability that we would have seen mass bank failures in the current down

had the financial crisis not been the source of the last recession? So, Ben, I think you sort of answered this. Yeah, that's what we were talking about earlier in the show, where if this would have happened in 08, that would have made things way, way worse because the banks couldn't have stepped up and made a bunch of small business loans at that point. So that is one thing where we had some fortuitous timing on this, I guess, that the crisis happened so closely to that. But I agree. And that's something else that happened. If you read the diary by Benjamin Roth of the Great Depression, those banks were failing left and right back then, and that made things even worse. Half of all banks failed in the Great Depression.

My wife and I are both working full time with no kids and are contributing at least 10 percent of each. checked our employer 401K. We closed our first home last year and have a goal to save up for another house with room for kids and hold on to this one as a rental. To help save for a down payment, I'm trying to determine if investing cash would be a good move. Investing cash into stocks would be a good move. We don't expect to make this move for at least two or three years. Is that horizon too short? Would it make more sense to allocate the cash? All right. Usually our advice is if you have less than five years, cash is a place to be. And I think I'm still inclined to say that. But given the fact that stocks fell more than 30%, maybe five years ago

or three years ago or two years ago I would have said put all the money in cash because it's not worth it. But I don't know, maybe you could take half and put that into stocks. Is that too risky? I would run some numbers on the loss. I mean, two or three years, I think it's still kind of tricky. But yeah, I mean, if you put like, I don't know, 20% in there, if you look at like an 80-20 portfolio or something like that where you have a barbel, I suppose you could. But I just don't see what the huge gain. If you already have that saving allocated and you know that's what your down payment is going to be, why ever risk it? I don't see what the point of ever. If you already have it, the downside is way worse than the upside as far as I'm concerned. By the way, this is what Ben says

in a bare market and a bull market. Okay. I recall reading somewhere the possibility of people being allowed to pull from the 401k accounts without accruing a penalty. That actually is part of the new fiscal stimulus plan. If that were the case, where are your thoughts on pulling from the 401k in order to take care of credit card debts? existing school loans, is this a terrible idea or one possibly worth exploring? And this is someone who's in their early 30s, steady contributions, 6% of their salary. Well, wait, there's no 10% early withdrawal penalty, but you still have to pay it back. Right. Yeah. You could take from a Roth, your contributions, but taking from a 401K, I think I would probably be more, if you're really

worried about your personal finances, this seems like the time where instead of pulling from your 401k, I don't know, you pull back your saving percentage and put that towards it. And then once you have those debts paid off, then you supercharge that and roll it back into 401K, right, as opposed to taking it out. Yeah. Christine Benz is a really good post on if you need cash where to take it from. So we'll link to that in the show notes. And check with your accountants or advisor because we're definitely not accountants here. What are your thoughts on dividend ETFs that track the Dow Dividend 100 index? I don't even know that was a thing. When, if ever,

It doesn't make sense to have these in a portfolio. Dividend holdings? I don't know. I guess if you want income. So is this like the dogs of the Dow canister? I've never heard of this one either. I guess it makes sense if you want to just live off of that dividend income and don't care about total returns.

Dividend paying stocks could outperform. They could underperform. You always have to think. Well, there's all sorts of different opinions here. Some people say that dividends are tax inefficient. Some people like getting dividends because it's psychic income. where not second can come, it just isn't come, even if it's taxable. Other people say that dividends strategies are like value in drag. It's just a suboptimal value strategy. So I don't know

there's a right or wrong answer here. I think just personal preference. I was wondering how you guys think this virus has impacted some people's perception around if there is an index fund and or ETF bubble or not. So this person is asking what we think other people think. Yeah. Well, or just has the virus changed perception of this whole index ETF bubble thing? I'm guessing a lot of it will depend on how the flow stuff shakes out. Early on, we talked about last week how Vanguard people haven't been selling. It sounds like Eric Beltuna's tweeted today about how a lot of the inflows are going to places like Vanguard and Charles Schwab that have more of an index focus. And that's always been my thought that during a bear market that they would actually

grow their presence as opposed to shrinking. This was amazing. This chart. He said, tale of two worlds. This is Balchunas. Our allocators versus traders, ETF flow indices showed the biggest gap on record in Q1. The allocator side, which is Vanguard Shraub, I shares, saw net $41 billion in inflows. I don't know what the trader's one is, but we'll look to this in the show notes. I don't know. We'll see. I guess this is definitely conversations around ETFs and the bond market are going to definitely be reexamined. Okay. Recommendations. So there's been a lot of old MBA that I've been watching, and I think this is where I thought

about this. What happened to Ahmad Rashad? Did you used to watch Inside Stuff with him in Willow Bay? Of course. Where did he go? I'm guessing he just hangs out with Michael Jordan all the time and plays golf with him at this point. I don't know. Rode off into the sunset once Jordan was done, more or less. I don't know. He was such a huge part of the culture of the NBA and just haven't seen him. Okay, Gavin Baker mentioned on Patrick's podcast, a book called It Was a Very Good Year. I think we had spoken about that sometime in the last two years. Excellent book. Highly And then what you'll notice is that, so this book was an examination of the 10 best years on record in the stock market through whatever year was published.

And all of the bad years, like all of the bad days, came after the worst years. So I just thought that was a really, really, really good book. Yeah, that's a good financial history one because he has a lot of the years in the early 1900s that are worth reading. Yeah. So there was a good podcast. My podcast listening has been down. But there was a good one on the big picture, 35 best actors under 35.

And there were some names in there that I didn't really think we're under 35. Which ones are surprising to you? Margar Robbie is like 29. Okay, I didn't know that. I just, I rewatched once upon a time in Hollywood last weekend. Still good? Still long. She was great in it too.

I really didn't like it. I think I need to rewatch because maybe I was off. I rewatched, there will be blood. Somebody recommended that we do that. So I saw it when it first came out. I saw it on bootleg, so I didn't have the best experience of this. And that movie was all Daniel Day Lewis because I think that the movie was very good. but without such strong acting, I think it would have been really pretty weak.

I thought that I'm not a film guy, so I don't notice this sort of stuff, but I did think that like the music was great and the way it was shot was very good. I just remember the story being kind of depressing, wasn't it? Yeah, not a happy movie, but he was just so, so good. We finally finished Ozark, which was great. I thought that I grew the third season was probably just as good or better than the second season. I thought it was awesome.

I think there set up a lot of good storylines for next year. So that show continued to be good, I think. I've been into the Some Good News by John Cresensky. Have you seen this? He's doing like videos. He started a YouTube thing where he said, I'm going to share good news that I see on social media. And obviously there's a lot of bad news and pessimism going around.

And I thought, oh, this is kind of sticky. And I watched it and I loved it. And I think I'm going to keep watching it because it's good to see some optimism of positivity. And he's funny. The way he delivers it, his wife came on for a little bit. And I've watched both of them now. I like both of them. So it's good to see a little bit of jolt of positivity from him.

So I like that too. And high fidelity, I rewatched the movie after watching the show holds up well. I still think you got to watch that one. Are they paying you? I need something to do. I feel like we're going to run out of stuff pretty soon. All the movie channels, I've gone through all the movies at this point. And there's not much left.

And again, we watched 1917, which I thought was excellent and really well done. All right. I'm going to save this for next week, some comments. I'm not re-watching. I'm watching Seinfeld. I've never seen Seinfeld. I don't know how that happened. Where did you start, though?

With the pilot. 1989. Okay, so you're like watching it in order. The pilot is bizarre. It's very eerie because it opens with Jerry on stage, and he says something along the lines of, we're here because you go out. That's what people do. They go out.

Why are you here? You go out. You probably don't remember that. But it was just watching it was very eerie, given the situation. Right. There's another group of people that has been displaced by this. comedians, when are they going to start doing shows again? It would be hard to go to see a comedian without a bunch of people in the crowd. Oh, did you see? There's a Chappelle, Mark Twain,

a World Award thing. I haven't seen that yet. No, I have not. Louis came out with a new special, but I think that's a, that's a stay-al-law. Yeah, okay, we'll be back on Friday morning, right? There's enough to talk about animal spirits staying twice a week, and I think people are going to be mad about the stock market again, no matter what happens, right? People are really mad that stocks are up 5% today. Doesn't it seem like that? Some people? Certain people. I think that's going to happen.

Either way, the stock market is going to make you mad no matter what. Animal Spiritspot at gmail.com. We'll talk to you later this week.