Animal Spirits Podcast - The Great Unwind (EP.135)

Episode Date: April 3, 2020

We discuss the enormous effort from the science community to find a vaccine, using history as a guide even when every bear market is different, a wild month in the stock market, the coming small business apocalypse, how many people will have trouble with mortgage/rent payments, inequality in the downturn 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

Over two years and 20 million downloads, the TechMeme Ride Home is Silicon Valley's Water Cooler podcast. It's a daily show every day by 5 p.m. Eastern, you get the latest headlines, tweets, hot takes, and context. It's only 15 to 20 minutes long, which helps when you're busy in the quarantine. Search your podcast app and subscribe to the TechMeme Ride Home podcast today. 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 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 in the securities discussed in this podcast. You know, they say that a shorter commute is really indicative of a happier overall life. I think there's a minimum commute at which that is the case. It's like a minimum of three miles or a mile because I don't think 10 feet is making anybody happier right now. We're finding that out at the moment, aren't we?

Yeah. Yeah. So I think the fear and anxiety from this stuff, especially since we've been in it for a while now, I guess it's been, what do you think it's been a month at least since things have been heightened? At first it was a daily thing and now I feel like it comes in waves. and I listened to another Peter Atea podcast on The Drive, and this was with Michael Osterholm, who is the guy who was on Joe Rogan's podcast.

And he was the one, I guess that must have been three or four weeks ago that really made the case. And he's an expert in viruses and pandemics. And I got to say, I didn't come away feeling great from this one. I listened on your recommendation. And I'm not finished. But Atiyah said to him, if you're right about the spread of the virus, the implication is that more Americans will die in the next 12 months from this than from all other causes combined. Right, which is basically what happened in the 1918 flu pandemic.

It was, I think it was 50-50. So it was half of all deaths. So that's anything. Accidents, cancer, any type of sickness, you know, anything that happens. And I think it was half then. And they're saying it could be more now because I think probably because people are safer in a lot of ways. And World War I was going on at that point, too, which is also kind of crazy how high there. that was. So that's the bad news. He was saying basically if it's 100,000 deaths, which their

range now is what 100,000 to 250,000, he was saying 100,000 would be best case. And what is it now? I don't know, 5,000. So 20 times worse from here is best case. So obviously, we've said this for a while. It's going to get worse before it gets better. Bill Gates had a piece in the Washington Post as an op-ed. And he talked about we could need to shut down at least 10 weeks or more for that it starts to go down across America. And he said, trying to look past this thing, he said, if everything goes right, we could have a vaccine in less than 18 months, which would be about as fast as a vaccine has ever been developed, which is crazy. Now, trying to look on the bright side of this, there was a piece in New York Times. They talked about how this whole thing

has brought together scientists like no other event in history. Here's one of their main takeaways. So they'd say, why political leaders have locked their borders, scientists have been shattering theirs, creating a global collaboration unlike any in history. Never before researchers say have so many experts in so many countries focused simultaneously in a single topic and it was such urgency. Nearly all other research has ground to a halt. So they made the point that if you're not studying this right now, you're directed to stay at home anyway. So if you're a scientist, you might as well study this. And they're talking about how scientists from China and France and Germany and the U.S. and all these people are really. working together to solve this. And this has never happened before. So that's the optimistic side

of thing that these scientists everywhere, some of our brightest minds in the world are trying to fix this and they're working together and they don't really care about who gets credit. Maybe they might care if they want their name on this vaccine. But they are all working together to fix this. I guess that's the bright spot in all this. Doesn't last week's unemployment claims seem like a year ago? Yes. Everything is. Last week, it was $3.3 million. Now it just came out of was 6.6 million and bespoke tweeted that, what do they say? About 6% of all employed people in the population claimed unemployment last week. Did I get that right? Yeah, that sounds right. They said in the past two weeks, six and a half percent of employed persons in the United States

have filed an unemployment insurance claim. And so we were trying to help a family member go online and do it. And of course, the site is crashing. It's timing you out. It is a very frustrating process. So the whole process happens online. Yeah, and the system is obviously overwhelmed. So 10 million people in the last two weeks, which is tragic. Trying to beat glasses half full guy today. So here's a story from the AP yesterday. It says, the title of it is, some employers to laid off staffers, let's stay in touch. And they talked about how several large retailer chains are furlowing workers, a form of temporary job cut that often maintains health insurance rather than landing them off. And small businesses too are keeping in touch with workers. And this CEO of a consultancy that works

with these franchise companies said, anyone who's trying to lay off workers is already thinking about how they can bring them back. Now, maybe this is wishful thinking, but it sounds like a lot of these places realize, hopefully this is somewhat temporary. And maybe that wishful thinking is the idea that we're going to have this V-shaped recovery and we're going to turn everything back on and life is going to go back to normal. I'm slowly starting to think that's not the case. It's probably going to be more of a slow grind back and it's going to be a weird thing. But they're saying a lot of these companies, I don't think companies were saying that in 2008 and 2009 when we had 10 or 11% unemployment, that they're going to be ready to hire workers

back. At that point, they were worried about figuring out how companies can make it without having to, with less or fewer workers. So that's a glass is to have full take on this, that a lot of companies realize this could be just temporary and we want to stay in touch and bring you back when we can. Yeah, I mean, I hope that's the case. So the market's reaction, last week it was the biggest number ever and the market was up six and a half percent on the day. and there was a lot of confusion. Why was that the case? And hard to know exactly why maybe there was responding more to the fiscal stimulus than it was the employment claims.

Who knows? But anyway, right now with these numbers, which are even obviously much, much worse than last week, the market has rolled over. So the closes a long way away. Who the heck knows what the ultimate market reaction is going to be? But we did just wrap up the most volatile month ever. So bespoke again, did the S&P 500. average daily percent change by month from 1928 to today. And it was March 2020 was the most

volatile month on record, which is just amazing. That's wild. So I looked at the quarterly performance. It was one of the worst quarterly performances ever. I guess there's only been 10 other times where we've had a quarter that's down 20 percent or worse. And most of them, it's 1932, 1931, 1928, 74, 87, and then one time it happened in 1962. And I guess maybe investors are getting used to this because I looked at this data. I said, okay, after a really bad quarter like this, what has happened in the past to stocks? And I actually looked at this at the end of 2018 because we were down 17% in December of 2018. So this has happened before.

Now, every time I have a historical number like this, people tell me, Ben, it doesn't make sense to use history as a guide here because this is something different. This is a global pandemic. This is completely different. This has never happened before. The economy completely shut off. What are your thoughts on using history as a guide when we're facing something different like this? I think that every single history reading that you gave in that list was different from the previous one.

So I understand why people are saying it's different this time. I would only make the case that every single time is different. And you're not saying that the future has to look like the past. I think the best way to look at this historical data is to look at the range of outcomes. I think the range is more important than the average. Right. So my whole point is, yes, every time is different and these situations are never the same, but people are still people.

And that's the biggest thing. And financial markets have always come back from this. And so I want to do a little spoiler here. I talked to William Bernstein yesterday, who is one of my all-time favorite investment. thinkers and authors. He's written a ton of books on investing and also a bunch of books aren't investing. He was a neurologist before he became an investment thinker. I think he's one of the smartest, brightest minds in all finance. And I've learned a ton from him in that video hopefully will coming out soon. He shared with me something that I'd never heard before. And I asked

him, listen, we don't know if this is going to get better. But what makes you think that it can and what is it about the human spirit that makes you feel better? And we've used examples in the past, like the Great Depression that we've made it through that. How the hell will we make it through that. If we can do that, we can do anything. He shared this stat that I never heard before, and I had to look up the graph. So after World War II, Germany was just decimated, not only by the war and the country just being in shambles, but economically, they took the brunt of everything. Every other country, you know, they just made it impossible for Germany to do anything. And the country was basically starting from scratch in terms of the economy. And they had a three or four

year period where economic growth stalled. But by the end of the 40s, Germany came back on their long-term trajectory in terms of GDP per capita. And if you look on a graph, they have this huge dip in the 40s. And then by the 50s, everything comes back and it's normal again. I'd never heard of that example before of a country that's literally starting over. Their economy was not only in shambles, but their whole country had been defeated and they had to rebuild from scratch. And that's the stuff that I take away from this is that every one of these periods, people were down and out and they always came back. So if you're going to bet against the human spirit, that's fine. I would take the other side of that trade 10 times out of 10. Can we be scared in the short term and optimistic

in the long run? I think that's fair. I think that's where I am. Oh, yeah. I'm certainly scared. And again, the news flow coming in the coming weeks and months, I think it's just going to be awful. I continue to look at the medical stuff and you hear these accounts from doctors and nurses and people on the front lines of this and it's just as bad as predicted or maybe worse from a lot of people. So it's going to continue to get worse. For some people, that's hard to do to have these counterbalancing feelings. I think that's normal and that's part of being a human. So anecdotally, I would say, if I had to guess, that more people think the lows will be retested than people that think that the bottom is in. And I sort of wrote about this. Amazing my own bias.

creeping in, but that's just what I think I'm seeing. So I saw a good data point from sentiment trader to rebut the fact that we need to retest the lows. So he shared that 89% of S&P 500 stocks have now triggered a MACD buy signal. And that sounds jargony, but it's really two moving averages crossing over each other. So it's not this complex equation or anything like that, which was the highest in history. And readings like that, at least going back to 1990, they all occurred at major market bottoms or right there. So that was fairly encouraging on the short-term side. Okay. Yeah, you're going to have to give me a Michael explains technical analysis to ban on the MACD thing, but I'll take it, I guess. Just trust me. I'm not trying to spoil the

whole thing. The other thing I talked with Bernstein about, a lot of people have been coming to me saying valuations are worthless right now because earnings are going to zero or potentially negative. And that could happen. For a couple quarters, earnings are just going to be awful. Anytime you see some numbers from places. Someone shared with us that the ticket box office sales for the month of March were like $5,000 or something. I don't know who is still going to movies. Maybe you snuck off one of these nights. But the drop that, I mean, again, business is just screeching to a halt. And so people are saying, why won't the stock market basically go to zero because earnings are going to zero? And the way to think about this is the first thing you learn in any finance class

is any asset that throws off cash flows off cash flows, is present value is simply just future cash flows discounted back at some reasonable rate of interest. Now, obviously, the finance world doesn't work exactly like that, but that's the idea. And so it's not just one or even two years worth of earnings that matter. It's the earnings going out well into the future. And that's what the stock market cares about. And of course, the stock market can't predict that stuff. But even if you put earnings to zero for a couple years, and I wrote a piece about this where I look at this, that doesn't necessarily mean the stock market drops 90% just because earnings do it in one or two years. And I think people confuse this stuff where they see stuff happening in

the short term that falls off a cliff. And they think that must mean the stock market has to fall 90% like it did in the Great Depression. And that's not the case. We would have to have earnings go to zero for like 10 years for that to be the case. All right. Let's move on. So there are some people who are of the opinion that a company should have been prepared for this, that they should held more cash and no business can prepare for a 90% shutdown. So Mike Bird in the Wall Street Journal said, as the economic impact of the crisis of the coronavirus lockdowns tears to do a business globally, the idea that companies should have held more cash to prepare for rainy days gaining currency. For a single business holding a buffer against unexpected slowdowns and other

events outside its control might make sense. At the scale of a whole economy, it creates more problems than it solves. Right. This would have mean we would never would have expanded in the first place, if every company is holding back. And this is one of those things that in the past, people would argue, well, if every individual decides to go the fire route and saves 70% of their income or 80% of their income, then that's going to crash the economy. That idea is just why this type of thing would never happen because the behavior wouldn't allow it and we would never grow in the first place. And if that happened, they would be holding so much cash that they wouldn't grow and then they would be forced to use that cash and would be gone anyway. It would be like a

self-fulfilling prophecy where it wouldn't help them anyway because the whole economy would grind to a halt. Yeah, I think that investors would punish companies that were hoarding cash, like in a good market. Yeah, exactly. Those companies wouldn't survive and anyone who's not investing in their business would be ruined. And it's funny to people that people say, well, they should be holding onto their cash. People have been arguing for years now that companies need to spend more and spend more in research and development. Now they're moving the goalpost a little bit and say, no, no, no, companies actually need to hold cash and hoard it. You don't want to invest in a company that's acting like a doomsday prepper. Exactly. I guess Apple is the only one that people are okay

with that with where they have $200 billion in cash or whatever it is. Well, they're an obvious outlier because they literally are getting cash faster than they can reinvest it. So there's this chart that's been going around from JP Morgan that talks about how half of all small businesses hold a cash buffer of less than one month. So it's like 27 days is the median amount for small businesses. 25% have 62 days in cash. 25% have less than 13 days in cash. I think that's just the nature of these businesses. We've talked a lot about restaurants and bars and those things, having a very thin margin for error, especially when you hold inventory, if you're like a retail chain or if you're at a restaurant and you're buying food and you hold inventory in those terms

until you sell it, you can't really afford to have a huge buffer. It'll just, it'll never happen. Just like there's no way people, individuals, most individuals could save 12 months worth of emergency expenses. They would never have money to spend on necessities in most cases or save for their kids' college fund or save for retirement. If all of your money is going to a backup plan, the rest of your life for most people is just probably not going to move forward, which I saw this take on Twitter the other day and I thought it made sense. Someone said, trying to wrap their head around what this is going to look like. And they said, this is probably going to be a recession for people who are relatively well

off and a depression for people in the lower end of the income scale. And I think that it kind of makes sense, don't you think? Yeah. So I want to talk about that later in the show. But last week, we were talking about the great rebalance it might be coming. And Luke Kawa tweeted this, a quote from Brian Reynolds, a large California pension has postponed their scheduled quarterly rebalancing. As the California pensions are the thought leaders in the pension community,

we think it is likely that others will follow along in postponing or reducing anticipated rebalancing. We talked about that. Yeah, it works better on a spreadsheet than real life because sometimes people get scared. And don't you think investors can get way too cute with this stuff where they're going to like, well, we'll just wait it out and we'll time it at the bottom. Instead of following a plan that they set in place in advance, maybe they'll be right. but I think trying to overthink these things is just, it's not helpful in most cases.

But on the other hand, they are thought leaders. So can you really argue with them? So Brent, Be Sure, at Permanent Equity, wrote a pretty bleak piece on the state of the economy. And Brent, I would classify as an optimist. He is of the mind that we're going to get past this ultimately, but I just want to read some of the things that he wrote in this piece. He wrote, my guess would be that, 5% of existing companies will remain untouched by the paradigm shift. 5% will feel a tailwind and 90% will experience at least a medium-term impairment,

with 30% no longer having a viable business model due to shifting demand, stop start problems, and a loss of operating leverage resulting in a high fixed cost burden. This isn't creative destruction, it's just destruction. And then he goes on to say, speaking frankly, we should expect and plan for a tremendous amount of pain personally and professionally. I believe 20% unemployment is inevitable and can rise as high as 30%. GDP seems set to drop 30 to 50% and I can't see a recovery being V-shaped. In the near term, the average business will experience a catastrophic decline and around

a quarter of your neighbors will be unemployed. These are obviously unprecedented times with unpredictable consequences. Now, I would just say that Brent is on the front line of working with small business owners. So he has a pretty good look at what's going on. I hope that he's, you know, for everyone's sake that he's maybe too close and over-extrapulating. but when he writes stuff like this, I take that seriously. His numbers sound not good, but reasonable. I hate to say, probably, I guess we'll have to see what happens with some of these small

business loans and people getting unemployment and how much that helps. But I'm interested to see what the outcomes of all these small business loans are going to be. If there's enough in the coffers to really help a lot of businesses that would have been in that 30% that no longer have a viable business model, I'll be interested to see that. How long do you think it takes some of these big, huge companies to start just picking out up competitors and buying them or if they go into bankruptcy coming in. Is that a hope too that we get some help from the bigger companies that actually have some dry powder? I'm not optimistic about that at all. I think that companies are going to be so, so, so careful about doing anything

right now. So Brent is technically in the private equity business. I think he's a little different than most in that he works with small businesses and he's not really, I think he has a small group of outside investors, but not a ton. There has been some groundswell this week talking about how private equity firms are now looking for a bailout because I guess for some reason they don't have access to the loans marked for small businesses. For some reason, I don't know what the thing is that's holding them back. For some reason, private equity owned firms can't access that money. And now they're going to the administration and saying, we need some of this. What are your thoughts on this? Well, I just want to say one last thing on the Brent thing.

So Brent is still investing in companies and businesses. And he says, while we're short term pessimistic, we're long-term optimistic, despite obvious challenges and plenty of room for improvement. The United States is a magnet for talent, a beacon of freedom, and an engine for innovation. So, again, balancing the short-term scary with the long-term optimism, I think makes a lot of sense here. Okay. So in Congress or I guess in our laws, there's something called the affiliation rule, which means that small businesses can be barred from accessing the rescue funds if they are backed by a private equity firm whose portfolio companies collectively have a workforce that exceeds the 500 person limit. So it sounds like they're almost holding Congress

hostage a little bit because they're saying that if they don't get access to these funds, they will be forced not only to do mass layoffs, but also they're responsible. Their investors are not just rich people. It's pension funds, which are controlled by teachers and firefighters and policemen. So it seems like they're sort of saying, okay, you don't have to give this money, but the blood is on your hands. And a lot of people would say, we've been talking about this for a couple years now. There's like this $1.5 trillion cash on the sidelines dry powder in private equity that has yet to be called in. And people would say, well, that's almost as big as a stimulus. Why can't they just call money from their investors? That is never going to happen

because all the LPs in those funds would revolt and say there's no way we're going to call on this capital and sell other funds right now and give up our liquidity so you can invest in these potentially dying businesses. And this is one of the reasons I've talked about this before, why it's so hard for private equity companies to take advantage in a downturn. Obviously, again, this downturn is its own beast. And obviously, a lot of these companies are over leveraged and that's making things a lot worse for them. So you could say, well, that's their fault for taking on too much debt. But again, no business model is predicated on the economy shutting off. So I don't see how they can even go to their investors and take money these days

because those investors would say, uh, we're not, we're not giving you this money right now. We need this for our own investments or our own liquidity needs. All right. So average price per gallon for U.S. diesel fuel dips to $2.58, which is the lowest since August 2016. Rend, Sons macro research had this amazing chart showing a sudden stop. Finish motor gasoline demand has fallen off the proverbial cliff for the week ending March 27th. The level has declined to its lowest since 1991. Like almost everything else right now, what is bad for the economy is good for slowing the spread of COVID-19. So I was thinking about this.

Oh, well, at least gas is basically free, but nobody's going anywhere. So I think there was Trump or somebody was saying that this is like a giant tax cut, but nobody's driving. It's like that Alanis Morris set song. It's the free ride that you already paid. Don't you think people are in a lot of ways if you have a job where you're continuing to earn a similar income? And for a lot of people, that's probably not the case. I've heard anecdotally from some people at large publicly traded firms that are in like the manufacturing space that they are taking a huge cut to everyone. I've heard some people say 20% of all salaries for white color workers just gone.

I've heard numbers as high as 40% where they come in and said everyone's, salary is being cut today by 40%. So obviously, there's people in a lot of pain even in the white collar profession. But for people that are continuing to earn the same income for whatever reason, they're able to work at home, don't you think this is the point where they're able to save a lot of money? Literally, the only thing you're spending money on is groceries probably. I mean, that's the only thing we're buying at the moment is groceries and maybe some stuff on Amazon to keep the kids entertained for a while. Other than that, my discretionary spending has dropped to zero, I guess. I mean, I've been buying more booze, maybe and snacks and such. But

other than that, obviously, if the economy is coming to a halt because business is coming to a halt, that means spending is coming to a halt. For a lot of people, that means that they're just not spending as much money as they were. Well, discretionary spending, but don't you think for most people, I don't know what the number is? 70% of what they spend is are fixed costs. Yeah, and necessities. And hopefully people, for a lot of those fixed costs, if, If I was in real pain right now, I would be calling my credit card company, I would be calling my cable company, an internet provider, all those people. I would be negotiating with everyone and anyone I could because I think a lot of those places

will negotiate with you because the difference between paying a lesser amount and paying zero is a big deal of these companies. So I think they'll do whatever they can to keep people paying even though it might not be the full amount. Yeah. So Eric Bautunis just tweeted, unreal. Mutual funds have seen $356 billion in outflows. March. It's hard to describe how wild that it is. So I'll just let the chart to the talk.

And we'll include this in the show notes. This is, wow, that is quite a chart indeed. So there was an article in the Washington Journal, America's Make a Break Week. An estimated $20 billion in monthly retail real estate loans are due as early as this week. Cheesecake Factory already said that they can't pay their rent. Nike has offered to pay 50% rent on its store. So Dick Thaler had an op-ed in the New York Times. I'm sorry. also on the Washington Journal. And he wrote, in typical times when a business tenant isn't making these payments, the landlord either negotiates with the tenant to work out alternatives or begins eviction proceedings. Both these paths require time, effort, and legal expenses. We don't have the capacity required for millions of tenants to renegotiate their contract simultaneously or for the

court system to process millions of evictions. Right. What are some of these companies going to do? What's their recourse at this time if they have tons and tons of tenants that all of a sudden at once they were not paying you? They can't go after all of them. They proposed to suspend rent from April through June and then have the landlord and a tenant agree on what percentage of that rent will be deferred until later in the lease. And he proposes something like regular rent payments will resume on July 1st, for example, and the deferred rent payments. So April through June can be spread out equally over the first six months of 2021. I guess a lot of it depends on who actually owns these things outright. Like if the people

that are leasing them out, if they own them or if they've borrowed, doesn't it all eventually trickle up to the banks, that the banks are the end, that they're the ones who are setting the terms here effectively because they're the ones who probably set these loans out and maybe it's off the bank's books and investors own them now. But eventually, this reaches so many different levels that it's not like it just stops at one place, I guess, unless someone outright owns the building, right? Yeah, the landlord has to negotiate with the bank before they can negotiate with their tenant. Right. Yeah. So I think there has to be negotiation at almost every level and hopefully a lot of these levels are taking into account. We're going to negotiate with you. Then you're

going to negotiate with someone else. And then they're going to negotiate with someone else. Hopefully it goes up the ladder where everyone decides to take a little break. I've seen a lot of stuff going on Twitter saying people who own houses or apartment complexes are saying, listen, we know it's tough for everyone. You don't have to pay rent right now. And seeing those types of things, it's a nice touch for a lot of people. I don't know how prevalent that is, but that's always nice. So bespoke ran the numbers on what people are going to be making because of this fiscal stimulus. And I thought this was actually a pretty good sign. We've been talking a lot in recent years about how the economy is set up.

So the winner take all and the rich only get richer and inequality and all this stuff. It sounds like this stimulus rescue package actually really is taking care of the people in the low income scale. For adults earning roughly 20,000 per year or less, the bill more than replaces the income loss from the pandemic. So if you're making 15 grand a year, you will have income 162% higher if you file for unemployment insurance because they're offering $600 more a month. In any household with an average adult income below $55,000 a year will receive income higher than the otherwise would have. So this really was a nice bailout for people on the low end of the income scale who are being hurt the most. They have this chart that shows how much you're paying, how much your income is versus how much you'll be getting. Again, there are going to be people making more than that who are hurt just as bad.

their businesses are down as well, but I do like to see that for once the government stuck their neck out a little bit and helped out people on the lower end of the scale who have been basically left behind for a number of years now. Yep. So two more things on the rent side, there's a idea being floated where tenants in New York City would be allowed to use their existing security deposit to pay April rent, which I think makes a lot of sense. Then it says under the proposal, tenants would use a security deposit as rent for the month with renters who opt into the program, given 30 days to pay the money back. Obviously, that's not going to happen. Oh, yeah, that's pretty quick. Alternatively, they can obtain a low-cost insurance option. I don't know

exactly what that means. But there's another city doing something. Oakland City Council unanimously passed an emergency ordinance Friday banning landlords from evicting residential and commercial tenants during the coronavirus pandemic at least until May 31st. But again, that's fantastic. But then what happens? So I guess the landlords can't evicts. the tenants. What about the relationship between the banks and the landlords? I think the hope for a lot of people is just that this is over relatively quickly and I think it's not going to be so this is going to continue to be a problem. I mean, we're not just going to have tens of thousands or hundreds of thousands of people kicked out on the street. I don't see that happening. I guess California

did a 90-day pause on all mortgage payments. And I think what they're doing is, and they worked with the banks on this, I don't know how it's only California that can do this and not everyone. It would be nice if it was nationwide. But I think what they're going to do is tack those payments on to the end of the loan. So if you have a 30-year or 15-year loan, you're just stopping three payments now. I think the interest still accrues and you pay them at the end. I would love to see a lot of big banks come out and say, we're doing that with everyone who has a mortgage with us. I think that would be wonderful. And if you can make the payments and you want to still and you're worried about paying your mortgage off earlier, that's fine. Go ahead. Everyone else who doesn't, who can't or doesn't

want to save that money and do something good with it. A survey was conducted 7,500 U.S. adults, March 31st. Looking at your current financial situation, are you able to pay your rent or mortgage for April? 63% said yes. 11% said no. 7% said don't know. 19% do not pay for housing. So these numbers, I mean, that's actually fairly encouraging.

Only 11% said no. But 11% is a giant number. Well, I can't believe that you're believing the results of a survey right now. Fine. But let's just give it a margin of error. That's... Yeah, that's between the 11 and the 7 that I cannot pay or I don't know. That's almost 20% that one in five. That's scary. That's pretty scary. And again, something that it's a big enough number where it's going to have to be reckoned with from a lot of different angles. And I don't know what that means. Well, a bit of good news. A federal student loans are suspended

without interest through September 30th. And Bill Sweet tells us basically 90% of all loans fall into this category. So that helps. All right. Last week, we spoke about how this is becoming political very fast. And somebody made a- By the way, that was actually this week. Oh, yeah, that's right. Somebody made a good point- It was three days ago, so that's basically four weeks. Somebody made a good point in emailed that. One of the reasons why it might be political is because it's very geographic at this point, right? So it's yet to hit the middle of the country, by and large, the way that it's hit the coast, which tend to be more. on one side versus the other. And Chris Arnade or Arnadi, I'm not to show you pronounce his last

name, did a thread how the recession, to your point, I'm sorry, this is like a recession for people that are well off and potentially depression for people that aren't. And Seth Stephen Davidowitz, who wrote the book that we like, Everybody Lies, has this really interesting and horrific chart showing that this is quickly becoming a poor person's disease. And he plotted the percent of households making less than $100,000 per year versus a percent of COVID tests that are positive. And you can imagine what this shows that people, people that have the means are able to stay home and ride it out. But the reason why people are leaving the house is because they have to. They have to get food. They have to get money and food to put on the table. So. And a lot of these

people are working. Don't you think this is the biggest reason why anyone who ever complains about having a $15 minimum wage can just F right off in the future? Like, These people, they're showing how important they are to our economy. The people that deliver our groceries. Like, we haven't had to leave the house for two weeks now because people deliver groceries and people to deliver food. And those people putting themselves on the front line of that are exposing themselves and they're still working.

And some of these places are giving them a little bump in pay. A lot of cases, it's probably not enough. Their hazard pay should be even greater. And I think it would be great to see in another round of stimulus that we give these people who are still working, give them that same unemployment bonus. The people who are earning not a very fair wage, give them a bump in their pay from the government because they're the ones who are keeping this thing rolling for us. Yeah.

So income inequality, wealth inequality, which has been a hot topic for the last few years. This is it, again, in another form. All right. So there was an article in the New York Times. Startups are pummeled in the Great Unwinding. In just a few weeks, more than 50 startups have cut or furloughed worth the 6,000 employees in March job listings at the 30 most valuable startups in the United States dropped 19%. Airbnb stopped hiring and has suspended an $800 million marketing campaign. Burr, the electric scooter company that we spoke about earlier in the year,

or last year, laid off 30% of its staff last week, and ZipRecruiter, which you hear on every other podcast, cut around 40% of its staff. Well, ZipRecruiter could probably save itself by stopping podcast ads, right, if they had to? You wonder how much that advertising stuff is going to be going away too for a lot of these places that I wonder how much of the advertising boom in recent years has been done by venture capital money in a lot of these places where they've said we've got venture capital money we've got to get the word out because we have to get to scale and get all these people in and now that probably goes away for a lot of people yeah I mean this has shaken up the startup world so now Zoom is worth 50% more than the entire airline industry which is hard to wrap

your head around. At some point, when this is all over, isn't Zoom going to be a massive short? Don't you think eventually people kind of like, you know what, I'm not going to do Zoom happy hours of my friends anymore now that the quarantine's over? Don't you think when this is over? I'm time stamping it. Zoom is a short. How's that? I mean, yes, at some point, I think there will be a 40% decline in short order. Or maybe not. We'll say. Don't you think we're overdoing it on the Zoom calls that this is like the whole thing that every blog post could be a tweet and every book could be a blog post. Aren't we at the point where people are just doing this because they're bored and every Zoom call could probably just be a conference call? Every Zoom meeting could be a Slack.

Yes, right. Yeah, exactly. Like, hey, look, we saw all 40 of you. Like, is that really helpful to anyone? Can we just put it out there on the record? You're not recommending anybody short Zoom? No, I'm not recommending anybody short Zoom. I'm just saying eventually, I think that the stuff that's really, really popular right now and people are latching on to, that's probably not going to be the case coming out of this. Maybe I'm wrong. There was a chart showing the Uber Daily Download rank on iPhones, and for the first few months of the year, it's been top 50, and that has just absolutely crashed. This is an amazing chart. Do you think that someone like Uber is going to be okay from this, though, and the fact that

they have the Uber eats where they deliver food to people? Is that keeping them afloat in some ways? I really don't know. Okay. Have you guys been doing takeout at all? Not too much. I think I did it on my birthday and I feel like I don't know what's safe anymore. Is it safe to get takeout? We were Googling it last night and listening to some NPR stuff about what you need to do if you get takeout. And they said it's hard to be transmitted through food. But I feel like there's so many little gray areas like that that you just don't know. Like when you get your box from Amazon, do you leave it on your front porch for a whole day and then wipe it down with the Lysol wipes? We put gloves on and then we put the box directly into the recycling bin.

That's what we've been doing too. But it's a lot. At some point, you're going to touch something that's something that somebody else touched to is wrapping it up. I'm surprised I haven't been out much. We've gone on a few hikes here and there and seen people on the neighborhood. When is it going to happen when everyone's wearing masks? Doesn't that just seem like a natural outcome? Like if people are out about this summer, it's everyone's going to be wearing masks. And what's the hot fashion accessory going to be with your mask? That's what I'd like to know. But don't you think that's what they do in all the Asian countries? They wear masks. And I feel like there's almost a social stigma to it where people have to get over it. And it's just going to have

to be everyone is wearing masks every single time they go out. Maybe. So you said that your podcast listening as a bare market, mine's down a little bit. And I think I miss commuting, which, I mean, I had a great commute. 40 minutes into the city, 10 minute walk to the office. You do you think you would ever say that before? I had a great commute. Like people always complain about their commute.

Now you're going, oh man, I had a great commute. So that was like two and a half hours a day. Great downtime to listen to this stuff. And obviously that's gone way down. But it makes sense because sports podcasts are obviously one of the hot ones and that's got to be way, way down. I did see a study saying that business podcasts are up, and we're obviously, we're doing two a week, and our listens and audience have increased.

But I can see, I mean, 75% of the podcast I typically listen to, I have no reason to listen to now, and it'll take a while for me to get back on them. I just, I don't care at the moment, unfortunately. And it's one of those other things like, for some reason, I just don't miss sports. I mean, I'm sure when it comes back, I'll be happy, but it's one of those things that there's just so much else on my mind that I don't really care. And let me throw this out there. When does NFL training camp start? August? No way that happens. I think the NFL season, there's no way they play a full season.

Throw that out there right now. I thought like it would be great. The NBA would be the first thing to come back. They'd squeeze it in. They'd have some playoffs. I'm not sure that's maybe. Maybe they'll figure out a good thing. They're talking about playing all the games in Las Vegas and keeping everyone in the same place. I doubting we're going to see Tom Brady play 16 games into Tampa Bay, Buccaneers, Jersey this year. I don't think that by the fall, people are going to be ready to go to these games. And I just doubt that's going to happen. I think it's going to be a shortened season or extended somehow. I don't see how that happens at this point. All right.

Let's move on to some listener questions. Will the mass closings of retail shops be the death nail in brick and mortar shopping? Is it death knell? I think it is death. I'm surprised you actually knew that, Mr. Grant of Sand. Yeah, what does Nell mean? Is the K. Silent? Actually, death nail actually sounds way worse than death now. I look at this the other way. Don't you think this has shown us that brick and mortar businesses are in some ways

really, really important? So CVS and Rite Aid and what do you guys have in New York, Dwayne Reed or whatever, and shopping centers and, I mean, grocery stores, don't you think in some, obviously that's not retail, but some brick and mortar stores are really, really important still. And I think that's shown because a lot of stuff online, you're waiting to get it. Whereas in with a grocery store or a pharmacy, you can just go there and get it on your own. So I think there's some of them that are being shown to be very important that we still really need them. One question that I can't seem to get out of my head is at what point do we need to worry about the country's debt? I have a two-year-old and another kid on the way.

I'm assuming it's not going to be my generation's problem, hopefully, but I can't help but worry about the future for my kids. Is there a tipping point, I guess is the whatever 20 trillion? dollar question at this point. I don't know. It's not something that I think about. It's not something that I worry about too much because this has been a worry for going back to the Civil War that there's too much debt in the system. I would say that it's easy to look at the liabilities. But if you look at the assets, it makes you feel a little bit better. And again, if you normalize where interest rates are, even if we have a $2 trillion federal deficit this year, in terms of what it cost to service that debt, it's really a drop in the bucket. So I think this is going to be something every generation worries about.

I hate to say it's never going to be a problem. There obviously is a point where it would be ridiculous, but I think this current scenario is going to test the upper limits of, wait, maybe we can handle more debt. And until the rest of the world calls us on stops buying our treasuries or stops using the dollar as a global reserve currency, I think we have a blank check, basically, right? No, am I going to regret saying that? No, I don't know. It seems that way. I'm not an economist. I don't know. All right. Recommendations. What do you got? I don't know. I got nothing. We're still plowing through Ozark. I think we're on like a seventh

episode. It's taken us a little bit. But I think Ruth Langmore, I tweeted this last night. I think she's maybe one of the best characters on TV right now. Yeah, she's so good. Unbelievable. And I shouldn't have tweeted it out because I was worried someone's going to spoil the ending like they did for you. But I'm glad that show is with us. Anything from you? I got one thing. All right. It's called The Platform on Netflix. Oh, I watched it last night. I forgot. So I was upset that Ryan Rusillo thought exactly what I did.

So this is going to sound like I'm copying him, but I'm not. He said that it was like, I said this to you. I said it was like Snowpiercer. Yes. I feel like, so I listened to the dubbed over version. Oh, I watched it with subtitles. So I watched it from the dubbed over. I didn't even know I could have a choice.

I think you can change that. But I watched the dubbed over version. I swear they use the same voice for the old guy. as they used for one of the voices in the show dark. Oh, yeah? Oh, could be. What did you think? Sorry, I'm like 20 minutes from the end.

Oh. I stayed up late and watched it, but it's... It's pretty good. Yes, it's bizarre. It's obviously a twisted mind thought this thing up, but it's unique and it's interesting. And I'm at the point right now where the two guys are going down all the way to the bottom to give food to everyone else. It's a weird movie.

The caveat to this recommendation is this is warped. It is out there. Yes, it is very... It is dark. It is creepy. So if that sort of thing interests you, then I would highly recommend it. It's 90 minutes. It's a quick watch.

If you're squeamish at all or that's not your thing, then definitely hard pass. I'm finding, like, one of the ways that I'm trying to keep my sanity is by finishing my night with some fiction. I don't want to read about the world right now. And so, like, the last hour or 45 minutes of my night, I'm either reading a fiction book or I'm watching a movie or TV show. And that was what my choice last night is platform. So I'm trying to do that to just, like, get out of my own head. a while and watch some form of entertainment to take me away from the worries of today. So that's one of the ways I'm trying to keep my sanity.

Okay. Thank you for listening. Again, tech meme ride home. Check it out where all podcasts are available. Animal Spiritspot at gmail.com. Thank you very much for listening. Everybody, please stay safe and we will see you on Wednesday.