Animal Spirits Podcast - The Bear Market (EP.61)

Episode Date: December 26, 2018

the downturn in stocks, is a recession imminent, how often stocks go into a bear market but not a recession, why the Fed is in a no-win position, 2018's worst buzzword, how tax implications can impact your trading decisions, how different generations consume their news, how much CEOs matter to their stock price, the downfall of GE, a recession-proof business model 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

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 studied the markets as a passion, and invest for all the right reasons. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. clients of Ritald's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spurts with Michael and Ben. Well, we're not officially in bear market territory, but sure feels that way, and we're not too far. Are you calling it? Am I calling what?

If you were on the board of the bear market board and it's not take away the 20% thing and you had to make a vote, bare market or no? Oh, bear market. Yeah, I think we're almost there. Honestly, I just want to get to the 20% market. I just want to get all this stuff out of the world. way. So we can stop hearing about things that happen, happened in so many years. These are the numbers. We're recording this on Friday afternoon. We normally record on

Monday morning, but the holidays on Monday, et cetera. So the Russell 2000, peak to trough, down 25%. Russell microcap down 28%. NASDAQ 100 down 21%. S&P 500 down 17%. So S&P 500 is still holding on. No, it's kind of wild. So obviously we know that losses and gains are not symmetrical. So, let's say that the year ended today right here. Got it? I'm with you. Okay. If the year ended today, the S&P 500 could gain 20% next year and still not make new highs.

Oh, wow. How would that be? Imagine we have a 20% to 2019 and we still don't make new highs. That would be interesting. That's pretty good. It's been relentless. Maybe this is a recency bias in my part, but doesn't it kind of feel like these corrections are getting faster the last few years? They just seem to happen.

And, I mean, it's just a huge whoosh every time. Obviously, the old saying is you take the stairs up and the elevator down. But these, I mean, it wasn't that long ago we had the new highs. What was it? Two months maybe? Three months of the most, I guess. It's pretty crazy. And, I mean, this week alone, this week has been relentless.

If you're someone who pays attention to this stuff on a daily basis, it's just, I mean. When you say this was really fast, is that a thinly veiled jab at risk parity? Why would that be? I don't know. Who are you blaming? What do you mean? I'm not blaming anyway. I think that technology is speeding up market cycles in some ways.

So I think maybe the flow of information. I don't think you can prove that. I think declines are always fast. And if you think back to the panic of 1783. Okay. So I'm not ready to wave the white flag in terms of recession yet. I think we could get the reflexivity thing where this leads to a recession. And as I said, a couple shows ago, I kind of also would like to see just a minor recession

and a minor bear market, which according to you, is already happening in the bear market. But just because we are in a bear market doesn't mean that it has to be a recession. So I looked at this a few months ago, maybe a month ago. And I found that since 1927, 28-ish, there's been 47-digit sell-offs, and 31 of them and the S&P have occurred outside of a recession. So two-thirds of the time you see a double-digit decline in. it happens outside of a recession. And if the ones that did happen outside of a recession,

the losses were 18% over 154 days on average. So that's almost your, I guess, your best case scenario now that we've already seen the worst of it. If this is one of those average things, obviously that doesn't always happen. But we had a few people ask us, does this automatically mean the economy's going into recession? I think it's too early to say that quite yet.

But it's possible Jerome Powell is forcing us that way. Here's a prediction that I feel fairly strongly about. Okay. Over the next few days, weeks, and months, we are going to see some absolutely psychotically vicious rallies. Yeah, that's true. The volatility works in both directions. We haven't seen any yet, really, any minor. I don't know how many times this week have you said to me, these rallies aren't holding.

It's pitiful. Well, here's the thing. When you have such oversold conditions and we have some stats later in the show that we're going to bring up and you can't even get a bounce, that is not good. Like, I'm not saying that we're going to crash or that stocks are going to fall 60%. I don't know. But when stocks have gotten absolutely annihilated, oversold gets way more oversold until people are just like literally get me out at any cost. And we're not there yet.

But there is, but the fact that we can't even sustain a balance, that is not encouraging at all. And to your other point, we tend to see the biggest bounces during these type of drawdowns. So when stocks are in a downturn, that's when we're going to see these. days, you could see a three or four percent up day. That wouldn't surprise me at all over the next couple months. Yeah, totally. I tried to find this, but I had a tweet a few years ago about some of the bare market rallies in the Great Depression. And they are so. Oh, great depression talk already, huh? They are so, so furious. And so it makes it like, it makes shorting stocks on the way down

very difficult. The question I have is, in 18 months or 24 months, are we going to look back? is this going to be the peak or is this going to be 2011, 2010, 2015, 16, obviously too early to say. But no one ever knows. But doesn't every time this happens, you feel like, all right, this is it. We're really doing this time. We're getting 30%. I'm going back and forth in my head because we don't really see, like economic conditions look okay, but that's right now. And that doesn't mean that they're going to look okay in six months. And that doesn't mean that stocks give a shit about economic conditions. Like, when there's forced liquidation, it doesn't matter what the P.E. is.

Like, that totally irrelevant. That doesn't matter at all. No. And obviously, the market hasn't cared about valuations a whole time up. Why would they care about them on the way down? Very good point. So I would be careful about being too aggressive on the long side if you're like trading or whatever.

I can't have getting trading advice. I'm pretty much kidding. But, you know, it's crazy. So. But hold on. However, however, the other side of the coin is that if you have been waiting, for a decline to put money to work, or if you are really a long-term investor, how could you not buy a little bit right now?

Right. With the understanding that, with the understanding that, listen, I don't know, stocks could go 30% lower. I have no idea. But when stocks, when the S&P 500 is 17% off its highs, if you have, you know, legitimately 10, 20 year horizon with this money, you absolutely do not need. How could you not buy a little bit? Yes.

If you're saving on a regular basis, this is a good thing. It doesn't feel like it, but it is. Yeah, my friend texted me the other day, make the selling stop. And I was like, dude, we're literally contributing to our 401K every two weeks. You should, you should pray that this goes lower and lower and lower. Exactly. Yes. Honestly, the perfect scenario for us, we're in our 30s still is the market. You're pushing 40.

Don't remind me. I know. I'm trying to latch on. But you look like 12 years older than me. Thank you. Wait, without my shirt off, without my shirt on, I look like 30 years older than you. I mean, honestly, the perfect scenario for us would be the market goes nowhere until we're 50, but maybe that is not a great state of the world.

Let me ask you this. Do we make new highs in 2019? Maybe not after hearing your stat about a 20% rally. I mean, wouldn't it be great, though, if stocks continue to go down, we get a bare market and we get like a 10% year next year? Yeah, that'd be fine. I would sign up for that today. I would love to see that.

Bear market, a little wash out here, give people a taste of what could happen, and then everyone's kind of on their toes, and then, I don't know, who knows? So the other big news this week was the Fed raised rates for the ninth time since 2015, and I would not want this job. This is almost like being the chair of the Federal Reserve to me is almost like being president. Like, why would anyone want that job anymore? There are so many armchair chair chair.

Well, they can't win because in the past, everyone said the Fed didn't do enough to stamp out speculation in the tech bubble and in before the real estate bubble. And now let's say the Fed is trying to get ahead of something here and they stamp it out and we go into a recession. Everyone's going to blame the Fed and go, why did you do this? Why did you put us into recession when things were just fine? And so I think that there's no way the Fed can win with everyone. And obviously there's a certain cohort out there who blames the Fed for all their ills and the fact that they've been in cash since 2010. but what does drug say drug is not a fan of the federal reserve i don't think no drunk does not

like the fed which i understand truck made all of his money basically betting against the fed so well this so i wrote a i wrote a piece this week about the history of rate hikes and you and i were kind of looking into this and i i was kind of thinking as i was writing this in the 70s and 80s they didn't tell anyone they didn't make it public when they did when they did their decisions people just had to look at the markets the next day or week to figure out where the movements were in the interest rates to figure out what the Fed did. So they never even talked about it. It wasn't until the mid-90s that they started making this stuff available.

And it wasn't until 2000 where they actually decided to hold a press conference either way, whether they made a decision or not. So the communication from the Fed is actually relatively new. So I think that's part of the reason that people just hang on their every word and every single meeting is the most important one ever. But I'm of the camp of we're still not at 3% short-term rates yet, X Robin Hood. but it's kind of crazy to me that people are so worried that rates are at two and a half percent that the economy can't sustain that. I just don't feel like that is a good thing. And maybe

it's more psychological than anything, but anyway, let me take off my economist hat and move on. Either way. Wait, hold on. Can I ask you one more question? You can ask me as many questions as you want. Thanks, Ben. Just getting back to the economy, if you had all the economic numbers for next year, would you feel comfortable in making a stock market prediction? No, no way. All right. I'll take the other side of that. You would.

So I give you the unemployment rate, GDP, the ISM in New Zealand. Corporate profits, earnings growth. Corporate profits is not economic data. Is it? Why not? That's like more stock market data. Anyway, you think that you could trade well if you knew the economic data ahead of time. No, not ordinarily no.

But given an 18% drawdown, if I knew that next year the economy would be healthy, I would be buying stock's hand over fist. That's fair. I'll give you that. All right. Thank you. The other thing, one of the other things that we talked about this week, this is going to maybe sound sadistic to people, but.

Sadistic. What are you about to say? Aren't these environments just kind of fun in some ways? Yes. Definitely a lot more entertaining. Yeah. I feel like things just ramp up. People are a little more on edge.

I honestly still haven't gotten anything from normal people outside of the finance world. But that's a thing. Right now, we're still. enjoying ourselves, we still think this is fun. If you're down 35%, it's not fun anymore. No, that's true. You know what I mean? Like, any, like, this is, so I was just reading about this in a book.

Maybe I'll write it. I'll steal this from a book. A book called The Coddling of the American Mind. And the authors speak about the difference between pain and trauma. And trauma is what leaves psychological scars. And this is just, I think this is pain barely. But like, this is not serious yet. I think a lot of it, that's why even the downshifts in like cryptocurrency, they happen so

quick and they almost a lot of times in the past they have enough time to last. I think that's the part of the reason in stocks that even anytime they've fallen and even in 2011 it fell 19 point whatever percent, it snapped back pretty quick. So I think the trauma comes from these times when it lasts 18 months, 24, 36 months. Right. So let's just take it easy with like the, I mean, this is just starting. If you, no, this is nothing in the grand scheme of things. Yeah. If this feels extraordinarily really painful to you, you either have never read a book on the stock market, or you're just, I don't even know what you thought stocks do, but this is exactly what they do. And not to minimize this, but this is really nothing. And you made a point in your post, unfortunately, this is the time

where people come up and start asking questions. Like, this is not the time to ask for financial advice. The time to ask for financial advice is before something like this happens. Like, if you didn't have a plan going into this, et cetera, et cetera, Mike Tyson, quote, you know, it's, it's, you have to skate to where the portfolio is going. Yes. Okay. Moving on. And if the market rallies 30% on, by the way, could we ever have a reverse 1987 day? What would cause that? Nothing. Impossible. Impossible. Okay. Although that, so you do get buying panics after deep, deep, deep sellers because everybody thinks back in the pool. Right. But you don't have, but you don't buy panics in a healthy market. Yeah, totally agree. The big up days. Yeah, that's, yep, totally agree. Okay, moving along. So the Atlantic had a piece this week that a lot of people were commenting on called Rising Instagram Stars are posting fake sponsored content. And the little subheading is it's street cred. The more sponsors you have, the more credibility you have. So these Instagram people just, I don't know, I don't know if it's fascinating or disgusting or what, maybe somewhere in the middle.

Is this the 4.30 a.m. wake up crowd? No, I think, well, could be. This is more the, our life is amazing on Instagram crowd. Hashtag, beautiful, hashtag blessed. Here's a great quote. A decade ago, shilling products to your fans may have been seen as selling out. Now it's a sign of success. By the hardest deal to land is your first, say several influencers.

Companies want to see a promotional abilities and past campaign work. So many have adopted a new strategy. Fake it till you make it. Is there a more annoying term in 2018 than influencer? No. Oh, gross. No thank you. Yeah, this is pretty funny. They also talk about how people will go to hotels and tell them, hey, I'm a travel blogger on Instagram. I'm an influencer. Give me a free hotel room. And a lot of the places are finally saying, no, we don't care. We're all influenced out. Yeah, I don't. I don't need it. There should be an update to the book, How to Win Friends and Influence Influencers. The question is, uh, I got nothing.

Come on. Deliver. Just do it. Just say it. I was going to make fun of us, but it's not worth it. All right. All right. Okay.

So, Dan Egan, I told you I would watch it. You did watch it. All 47 minutes. Okay. You watched his presentation. I did. And there was, I took a few notes that I wanted to share that they were really worthwhile. He was talking about how people trade a lot in taxable accounts and very little in retirement

accounts despite the fact that tax incentives are reversed because people view their taxable accounts as gambling money. I can see that in retirement. Yeah, that's actually, it doesn't make sense from a financial perspective because you have the tax break in those accounts. But maybe it does make sense from a psychological perspective that you know that money in retirement just needs to be left alone in a lot of ways. So why overtrate it? So maybe that's a good thing. So, yeah, I agree. That's a good point. Dan spoke about, I think he spoke about building an immunity to drawdowns. And there's just sort of a light bulb moment for me. How much have I written over the past years, prepare for a bare market. This is what a bare market looks like. This is

the nightmare scenario. I feel like I've written so many posts about like preparing for a bear market. And maybe maybe that was for myself. What do you think about that? Is that meta? How many historical books have we read in the last three or four years on the great, I probably read 10 books on the Great Depression easily. And I mean, maybe in some ways, it's about understanding that just how bad things were back then. And it's, it kind of puts things in perspective a little bit. Like, oh, this is nothing.

This is, this is a flesh wound. So was the Great Depression the friends be, I can't even spit it out. But this is the, this, what makes me mad about today is that people every year since, oh, 2016 is the worst year ever, 2017 is. than 2016. Oh, 2018. This is so 2018. Like, read a history book. Look back at the, like my grandparents, World War I, Great Depression, World War II. Like, that was bad. What we have now, it's like, oh, someone said something mean to me

on social media. I mean, right, whatever. One last thing that Dan showed that was very cool was tax preview reduced market timing. So if you showed somebody that what they were about to do in their account was going to cost them more than $50 in taxes, they were more than 90% less likely to trade. And this is something betterment does for their clients, correct? Yes, which is fantastic. It's basically, from what I understand, like the opposite of Robin Hood. Like, Robin Hood wants you to trade for obvious reasons.

True. Yeah, that's great. Okay, survey time. This was pretty good. And this was done by Pew Research Center, which do they do, what percentage of surveys does Pew do? Got to be like 60 percent, right? Whatever I hear Pew, I always say Pew, Pugh.

Can we do a survey on how many surveys Pugh does? Anyway, this one is pretty cool. There's a chart. We'll put in the show notes. But they looked at the percentage of Americans who get their news from a certain source. So the percentage of Americans 65 went over who get their news from TV is 81%. For people who are 18 to 29, it's only 16%. And the percentage of Americans 65 and older who get their news from a print newspaper,

it's 39%. if people at 18 and 29, it's 2%. That's crazy how far off that is. And I guess maybe when we're that age, we'll be the ones getting it from the internet and the young people who are getting it from a hologram or virtual reality or something, I don't know, but... The blockchain.

It's interesting because, I guess, in a lot of ways, getting back to the influencer thing, the people who make up their advertisers, it kind of, it's kind of a way for advertising firms to measure differently using different audiences in different forms. and it's it's kind of great i mean i i don't get any news from the tv anymore barely i guess robin watches eyewitness news every morning it goes on at six o'clock that's like the local

new york one and i sat there's like why are we watching this shit it's so first of all it's the weather and traffic every seven minutes that that's all it is weather traffic and by the way i got shot last night yeah exactly and then it's just like random horrific stories like uh there was another survey this week, a survey that, so Charlie Belella pulled his followers, if you have to choose between Amazon Prime and alcohol, and I don't think I cut it in pace at this way, so I can't really see it, but it looks like the overwhelming majority said they would prefer to give up Amazon Prime. So the majority were working. What are you laughing at? You're terrible cut and paste type. You can't read it at all.

This is a terrible cut of paste job. He took, he took our, well, we talked about two episodes ago and he figured out that the majority of people would pick alcohol over prime by a factor of about two to one, which I guess that sounds about right. I don't know. Okay. So someone sent us a Reddit thread, which, have you actually been on Reddit before that wasn't sent to you by someone? No. I don't, I get there and I'm, I'm really confused. And this was a post titled, It Has Been a Pleasure to Yolo with you, gentlemen, adult edition. This was, I don't know, you never know if these things are right or wrong, but this was someone showing us their Interactive Brokers account screen, and it shows that the change from one year ago is down $850,000 down to $9,200 in a year.

It doesn't show, that's impressive, by the way. It doesn't show all their positions. It just shows that they had a lot in Roku, which got wrecked, obviously. I give them credit for putting it on here. That's well done. I mean, obviously they didn't follow Michael Badnick trading, book of cutting your losers short. That's right. So Dan Rasmussen wrote a post on is CEO performance persistent?

And he says, we looked first at performance persistence within companies, whether CEOs early track record predicts their later performance. We then looked at CEOs who ran multiple companies to see if their performance at the first company predicted the outcomes of the second. So as I'm reading this, I'm thinking like this is a really dumb study

because I think CEOs get way too much credit and way too much blame, sort of like the president or coaches. And shouldn't you, if you're just looking at stock price, shouldn't you like compare it to maybe their industry peers or what if CEOs were leading their companies and during tough times for the overall stock market? Yeah, it's like performance attribution is tough on these sort of thing. Yeah, so as I'm reading this, I'm like, what the heck? And then, so anyway, the point is I think that Dan, Dan is basically making this point. He said, boards are far more likely to fire CEOs when the industry is having trouble broadly, attributing to a person what was in fact an exogenous economic shock. The media is filled with depictions of visionary CEOs who have records of generating extraordinary returns. And in order an amount of journalistic effort is directed at dissecting their lives, what was his childhood like?

What was his morning routine, et cetera? But beneath the mountain of CEO profiles are base rates that are virtually indistinguishable from randomness. So he was getting at exactly what I thought reading this, that these are just, this is just not really the right way to measure things. I agree. It's hard. And honestly, I think you could almost blame some of the MBA programs that spits out these CEOs more than the CEOs themselves. You know one of the factions of people that got, didn't get enough blame for the financial crisis? Places like Harvard. Well, Harvard, Yale, these places that put out all the people that were running these financial institutions. Like, I think they were the ones who taught them all to act the same.

same way. And they all sort of did the same things. How's that for a hot take? Was that on the New York Times style list of things that could crash the economy in 2019? Just saying. Just saying. So sticking with the CEOs, there was a really, really good story in the journal last week. I've been waiting for this one. Oh, yeah? Like, no, I'm just saying, like, GE's downfall has been happening for a long time. And I was waiting for the huge profile. And the Wall Street Journal was the one who did it. So they spoke about how many people owned GE. It was just so ubiquitous.

If you had a 401k, you own the stock. And this is just wild. 43% of its shares at one point were held by individual investors. Wow. And obviously, I'm sure they had some sort of discount program or you wonder how many, we read that one case study a few months ago. You wonder how many people's retirements have just been slaughtered the last few years. And obviously, one of the things people are holding out for is the dividend.

and you kind of talked about how that dividend was like the last bastion for a lot of people, but that doesn't really save the day when the stock's getting crushed. And now they have like an outsider CEO. So that's how the story ended, right? Yeah, it's kind of crazy how GE and Sears both in the same year, companies that have been around for over 100 years, both kind of almost, I mean, GE's not gone yet, but in terms of their power structure for where they were, It's quite a fall from grace.

It's pretty much gone, but not forgotten. Yes. So you're not nibbling here? I am not nibbling. Okay. No call options on GE. Eric Boutchunis had a really good tweet. Fantastic updated look at annual flows by FunType with the return of the S-P-500 above.

He took this chart from at J-S-E-Y-F-F. I don't know what this is. What are you laughing at? At least once a week, you try to read someone's name off a tweet and you totally butcher it. I was going to say at J-safe. I could tell when you hesitated, you're going to butcher it. That's why I listed out the... Anyway, so the takeaway, not surprisingly,

this is just a really good visual of money coming out of actively managed funds and index funds and ETFs. All right, I want to talk about indexing an ETF real quick. This is a DIY-bound stuff. You just want to flesh it out a little bit. This is a, oh, okay, go. Just people have been talking about the fact that, well, once the market turns lower, all these passive index people are going to rush for the exits.

But there's so much money in international emerging market indexes as well. And those have not been doing as well as the S&P. Emerging markets have been getting slaughtered every other year, it seems like. And there's still money flowing into those. So passive investors haven't given up on those completely. Obviously, the flows probably haven't been quite as good. In speaking to flows, we talked about this last week, I'm sure that you can give us an update from a few different tweets on the next show.

what it sounds like last week's record outflows is going to be topped again this week. Yeah, I think there's some stuff in here. Oh, actually, you know what? I do have something in here. But wait, hold on. Didn't we say the other week that European stocks have been seeing outflows for nine straight months? That's possible. No, it's, I did say that.

Okay. Take it back. All right. Eric Balchunis also tweeted this. Buried in the Lipper Report is a shocker. $81 billion into money market funds in one week. He said that's a got to be a record. B, is coupled with $56 billion in equity mutual fund outflows.

Just wow. And this came from Capital Observer. So is this finally people seeing some yield or is this people getting scared of? It's almost like a... Both. I hate to use the perfect storm term here, but maybe it is. Like, you can finally earn two and a half, three percent in something relatively safe. Maybe people are saying, all right, it's finally time.

Let's do this. I was thinking about this, because we spoke about this. Do stocks fall because people are selling or people sell them because stocks fall? Yeah, it's a chicken and the egg sort of thing. No, it's not. Stocks fall because big money is selling and then stocks fall further because other people are selling. Boom, nailed it.

That's it. That's it. Never talk about this again. Case closed. All right. Put that one to bed. All right. Really good tweet from Sentiment Trader.

Out of 7,300 trading days since 1990, today's percentage of new lows among financial stocks is larger than all but four of them. Wow. Okay. So financials are getting particularly wrecked. Canary in the coal mine? Well, it's a little late for that, isn't it? Yeah.

Sorry. Another good chart that I have never seen done. We do charts with these all the time. It never occurred to me to do this one by Michael McDonough. Did I say that right then? Sounds good to me. S&P 500, year on closing price, versus it's 52 week high. So this is almost like a candlestick chart.

Did I get that right? No, you did it. But it shows the range, obviously. Two more tweets coming. Another one from Sampiment Trader. These are the returns in the SEP 500, three months after the NASDAQ Kambosso tumbled into a bare market. Assume we want to use a 20% drop from a peak, which is as good a definition as any.

And what this shows is the median return three months later was 6% and it's positive 90% of the time. Yeah, so it looks like nine out of 10 years. It was up. And the one time it was down, it was down less than 1%. By the way, speaking of silly stats like this, Now that this was particularly silly, the next one is silly. Remember all this stuff about midterm election years being super bullish? Like 100% success record. This is why there's no such thing as a seasonality mutual fund, right? Well said. It's so dumb. Can you imagine that though,

the seasonality mutual fund? That'd be great. It sells in me every year. Yeah. So odd stats tweeted at 2462, SEP 500 will be down 16.28% from the all time high in the history of the index, which began in 1923, it has never been 16.28% below the most recent all-time high and not then become a bare market. And then he retweeted himself and said, welcome to Fucktown. I'm Mayor Odd Stats. And there it is. Okay. Good one. So when markets fall, they fall more. No, no, no. Hold on. Don't be so dismissive. Okay. Never have stocks fallen 16.28% and not completed the 20% down. Okay. That was good. He took it out two decimal points. Yes. You like this one more than me.

All right. Anywho, so I am selling my apartment. I got two things on the personal front. Okay. You don't look like you're entertained. Hit me with it. Well, you already know. Anyway, I'm selling my apartment, and I got a storage unit,

and I went in there, put my stuff in storage, and I was thinking, is this not the greatest business ever? Yeah, it's because people love, have a lot of crap in this country. And I feel like it's totally recession-proof. Yes. Like, actually, maybe you do stop paying your storage bills in recession. Isn't that where the storage wars shows come from, actually?

Oh, yeah, and they repo them. I had a neighbor a few years ago with a three-stall garage, and every night they had to park one of their two cars outside of the garage in Michigan in the winter, which is not a good thing to do because you have to scrape your car off every morning when it snows. Because they had so much crap in two of their three stalls, they couldn't fit their second car in a three-stall garage like that's how much crap people have i've never heard the word stall before that's because you live in the city you got to learn these things if you're moving to the suburbs you've never heard three-stall garage no i've heard two-car garage okay three-car garage

get with it get with it speaking of cars i got a new car and this struck me as uh something else there's no cd player oh are you disappointed about that or just kind of interesting no i'm not disappointed It was just sort of like, huh, that's what's going on now. Finally happened. Cars are basically, they attach to your iPhone now. That's pretty much how it works. My wife just got a new car. And the whole dashboard, when you plug it in, it's the iPhone.

It's great. And lastly, I'm trying to sell my apartment without a broker. I will let you know how it goes. Okay. You're saving some money. Well, 5%. I mean, how have real estate brokers not been disrupted? I'm sorry for real estate brokers.

But I'm not saying they don't do any work, but they do not do, percent worth of work. No, that kind of shocks me, too, how that still has remained. And Business Week, or someone wrote an article about this couple of years ago that said that at some national realtor conference, they were all surprised. Like, in the 90s, they were preparing like, okay, we're going to get disrupted by the internet, and it hasn't happened. I mean, there's obviously a reason, but shouldn't there be a betterment for selling your

house? I agree. I think there's a place called Redfin, is it? That's maybe a little lower, but it's, yeah, I think people, you know, I think people People just, well, there was a stat I read in the new Seth Godin book that said 80% of people pick the realtor based on who would return their call first. So it's not like people are doing their due diligence either on who they're going with. Okay, let's get to some listener questions. We've got two of them that are similar in terms of the market right now.

So I'm going to read them both. If you're a long-term investor, call it three to five years minimum. Should you continue to invest funds during a bare market or correction? And is it better to reinvest dividends if you plan to hold through a bare market or stockpile the cash. Okay. I don't think three to five years qualifies for long-term investor. Okay. Let's assume it's a little longer. I think... Well, it says three or five years. Okay. If you're a saver and you're investing in stocks, then should you still invest during a downturn? I think this is, this is don't overthink it. This is, yes, when markets are going down,

you're going to be averaging down, unfortunately, but that's the best thing. Like, no one's ever going to pick the bottom. And here's the other part of it. If we know, that a giant percentage of the total returns come from dividends, guess what? If you're sitting in cash, you're not getting the dividends. Right. I think getting tricky with that sort of stuff trying to get cute, I don't think that's ever going to work very well. It's so trying to mess with dividends. And I mean, that's because you'll just overthink it. I don't think it's worth it too. But it's important to know that this does say three to five years min. If you have a three to five year time horizon for your money, I don't think that you should be investing in stocks.

That's pushing it. I do agree. You should have some sort of other liquid savings hopefully to get you through that in case the stocks are getting slaughtered because it can happen. Okay. How about some recommendation? By the way, stocks just took another leg lower. Okay.

17.6% drawdown. It's getting closer, Ben. We're getting closer by 18. So if we do the thing that everyone does and stocks are back at what level? from are they back to 2017 levels I see they're back at stocks are back at to August of 2017 it's always kind of funny to do this exercise

because how are you feeling about stocks in August of 2017 we were in a bubble right yeah everything like so it's kind of funny to think like oh I should be buying hand over a fist here or the world is coming to an end it's hard to have that perspective

when you because you anchor to the high prices obviously but so be it Okay. Any recommendations? I'm going to start. Hold on. One last, one last little nugget. So this round trip from August, what do we say? Call it August of 2017. We're back to those levels. We went up 30% to give it all back.

Okay. That sucks. So an 18% decline wipes out a 31% gain. Okay. I'm not going to check your math on that. I'm just going to take it at face value, but if someone wants to, feel free. Hold on a sec. 2940. Are you using your CFA calculator? I'm sorry. Hold on. You're right. It's a 21%

Okay, I was going to say, it doesn't sound like 30%. 2940, 24, 22. All right, 21%. I'm sorry. So stocks were up 21% and now they're down almost 18 and that hope,

we just time traveled. Back to 2017. It's not a bare market. We just time traveled. All right. What do you got? I don't have a ton of recommendations this week. I'm going to give a,

I think maybe next week we'll do our 2018 recommendation year and review. We've had a few people ask for that. In memorial. I tried to look for good movies in 2018. I think 2018 may be the worst year ever for movies. I'm just going to put that out there. Did you see...

Nothing. Well, there was something. If you're not a comic book fan, there's nothing. Did you see Upgrade? No. I told you to see it. Okay. Sorry. So I'm going to give an underrated Christmas movie for my recommendation, and I am a big

fan of Family Man with Nicholas Cage. I never saw it. Nicholas Cage, Talyoni, and Jeremy Pipp. Hibbons in it. You never seen Family Man? I never saw Family Man. Is that a Jack Reacher book? No. This is, put Family Man on your list. I don't know if it's on Netflix or not, but watch it this weekend for me. Tell me what you think. I guarantee you'll get a, you'll get a little something in your eye by the end. I like that one. Let's see, what have I been reading lately?

I just read Seth Godin's new book. Have you read any of his books before? No. I mean, I think they're all probably kind of similar, but he's probably one of my favorite people at taking, the book is called This Is Marketing, and he's probably one of my favorite people at just taking complex topics and putting them into easily digestible stories and anecdotes. And I really like the book. He gets a little, maybe a little influencer speak at times, but it's great to talk about marketing and how the internet has changed things and made it easier to sort of measure things. And this is, this is a good book for anyone in the service industry. So that's all I got.

Looks like the VIX is good at 30 for the first time since February. Awesome. Okay. Let's see. What do I got this week? Oh, I'm reading, I'm reading a few books at once, but one that I will recommend. It's called It Was a Very Good Year, which I've never heard of. I'm surprised. I've never seen this book before because it's really, really good. It is 10 chapters, the 10 best years ever in the stock market in the United States, and basically what was going on and what was driving the market, what was going on politically, what was going on in the country. It's really good. I highly recommended. I only read 1908. 1915 and 1927. So I'm only through chapters in, but it's very good. And then I would recommend Chris Cole of Artemis Capital, who you might remember from the snake eating its tail cartoon. He was on a podcast with Mb Faber talking about all things volatility. And he had an interesting point said that if there was a vix in Germany in the early 1920s,

it would have gone from 19 to 2000. Is that a lot? Yeah. That's a lot. All right. Thank you for listening. Happy holidays. we will see you wait is this our last episode before uh yes this is our last episode before the new year

all right do we have anything to say thanks everyone for listening we will see you in 2019 it was we're going to time travel from 2017 to 2019 how do you figure because that's when they're going to hear us again it's 2018 the next time we're on it's 2019 all right you said 2017 you're literally still saying 2017 on all your uh check no i was i was playing on the other joke i said we time traveled back to 2017 in the stock market. Got it. Goodbye. I'm saying goodbye to you too.