Animal Spirits Podcast - The Nastiest, Hardest Problem in Finance (EP.114)

Episode Date: November 27, 2019

On this week's show we discuss scale in the asset management business, Robloncho and Cybertruck reviews, the biggest worries in the real estate market, the student loan-like problem for young people and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by our friends at Y Charts. We are going to use some data from YCharts today to break down the Charles Schwab TD Ameritrade merger, which is so exciting. Wait, what merger? Acquisition? It's a joke. All right. Anyway, we've got a bunch of good data to go over. And if you go to YCharts.com, give them a call, send them an email, tell them Animal Spirits sent you.

Get 20% off your very first subscription. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Rit 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.

Welcome to Animal Spirits with Michael and Ben. Do you think anyone outside of the finance industry realizes what's going on with Charles Schwab and TD Ameritrade? Or is that just finance nerds alone? Why would anyone care? I don't know. Maybe they have accounts at either place. Anyway, big news in the finance industry. Is it safe to say how much of this merger between Charles Schwab and TD Ameritrade can we pinpoint to Robin Hood?

How much did they speed this up? Maybe this would have happened anyway in the future? They were the tipping point. So this is a $26 billion all-stock deal that they were the tipping point probably. Well, from Malcolm Gladwell, I guess. But didn't you say in the podcast they did about the typical point that Robin Hood was the typical point? Yeah, I think I may have made that.

Thanks for the credit there. No problem. This seems like something that probably was going to happen anyway. I had a radio interview with Marketplace the other day, and they asked about this a little bit. And my main point was the fact that we have a merger like this, all of the gains in the past, I don't know, call it five to seven years, it seems like have gone to a consumer. And because fees have gone to zero. that the consumer has won.

And so my point was maybe this is just the power going back a little bit to the platforms. And they're saying, all right, we've given the consumer what they wanted. Costs have come down. They're basically gone. Now it's time for us to use, if you want us to actually be profitable, we're going to have to scale up a little bit. And it's going to be these big mega firms that are going to take advantage, which is why on the other side of the thing, places like Vanguard and Black Rock can offer such low-cost

funds because they have a scale to just have so many of them. and then just ramp them up in terms of having a ton of people that own them. Thoughts? Yes, I think that makes sense. Let me ask you a thought or a question, I should say. So, according to the data at Y charts, Schwab has around 19,000 employees. TD has around half of that. So call it 20,000 employees combined between the two of them.

In five years, what will that number be? That's a good question. It depends how much synergies there are in this merger to use a private equity term. Here's the thing. My point that I was getting to about the fact that these have all gone to, all the gains have gone to consumers, maybe I was a little wrong there because I pulled up the charts. We were talking about this before we got on for the profit margins for TD and Charles Schwab. They're both basically at all-time highs, going back to like the early 2000s, late 90s, even Schwab. They both have 36% profit margins. And they've been rising for the last two or three years. So maybe these drops and fees haven't hurt these places as much as we think. And they've just been making up for it in other areas. I thought about letting this slide, but I'm not going to do it. Again, I asked you a question. I said it depends on the synergies.

Give me a prediction. Okay, yeah, the head counts are probably going to drop. That seems to happen when there are mergers and acquisitions. The thing is, the big worry for these places when you have two big companies that come together like this is what's going to happen to like the customer service. I think that's got to be the big client worry. Obviously, full disclosure, we use both TD and Charles Schwartz. in our day jobs as custodians. So the big worry I think from a client perspective is if they got

rid of a bunch of people, does that make the client service experience? Does it impact it in some way? That'd be the big worry, I would say, if they get rid of some people, which you imagine that there's going to be some redundancies in companies like this. Yeah, I got nothing. So anyway, I thought that this was the best take of the whole thing. You pushed me on that question and then you had nothing. I was about to offer a hot ticket to say that employee account will double, but that's obviously not realistic. Somebody's tweeted, Schwab dropping commissions to cut profits by 6%, forcing TD's hand to drop theirs, costing them 25%, only to buy them is the deal of the year. I have to say, Schwab executed this to perfection. Is there any way that they didn't do this

exactly as this person laid out? Yeah, because as I was saying, I think that their hand was forced by Robin Hood. So do you really think it was Schwab that forced TD? Or did Robin Hood and all these other platforms for Schwab and that forced TD and then this all happened. And as I said, I think this was going to happen anyway. And I think it just moved up the timeline a little bit. You're playing games. Potato potato. But you're trying to say that Schwab was all seeing in this and when they dropped their commissions, they knew they're going to buy TD. I think that stuff all happened so fast that there's no way that they thought this was going to happen. No way did Schwab cut fees and then bought them four weeks later without having this be preordained. Ooh, I think you're giving them a lot of

credit since there was like seven firms that dropped to free commissions before these ones stepped in and did it. But I'm not giving them credit for that. You really think that? Yeah, I absolutely think that. And let me ask you another question while we're on this topic of marketing and such. Did Elon Musk build the cyber truck to break? That was, I gave the story on Twitter. When we were in high school, we had a friend who walked in and he said, guys, check out this sweet new watch I got. Got a scratch-proof face on it. So he handed to one of my friends and he said, do your best. There's no way you can scratch this thing. My friend took it and he put it under his chair with a screw on it and started pressing as hard as he could on the screw to try to scratch the face. And he pushed so hard that the glass broke. And that's what I immediately thought when Musk let the guy walk out with a rock and throw it at the window and it broke.

I don't really know what to think about him anymore. If you're an ultimate contrarian, you say, actually, it doesn't look that bad. If you're a person who's not an idiot, you say this thing is the ugliest thing I've ever seen in my life, right? Oh, it's terrible looking. This is Elon Musk. He tweeted 146K cybertruck order so far, and then he followed it up with no advertising and no paid endorsement. Maybe he's a genius. Well, he obviously is a genius in some ways, but maybe the one thing he's done that no one ever has done is, you know how they have the concept cars at the auto shows? And then the real cars never looked like the concept cars. He's decided like I'm just going to put out the concept car. It's heinous. It sort of looks like the car, the tumbler in the dark night. Yes, it does a little. But don't you. think that people in Silicon Valley are going to drive it as like a badge of honor just to say, I got one of these things? This thing is uglier than the Roblocho. So someone sent us this in our email. The Roblocho, great name, by the way, is from Dollar Shave Club, which maybe this is part of Musk's genius too is the advertising thing, where people are just going for the most outrageous

thing they can possible to get like any press as good press kind of thing. So Dollar Shave Club, which... Explain what this is. Well, Dollar Shave Club is a company that, that tried to undercut Gillette, and I guess I've never done it. I don't know what the actual deal is. Is it a dollar per razor? It's not that much to get recurring or subscription to razors. And for some reason, they decided to put out a poncho that's part robe, part blanket, and part poncho, hence rablancho.

And in the ad, they show this guy laying on this poncho eating like a full turkey for a picnic. He looks like the most interesting man in the world kind of thing. and I think it is kind of funny that they say that this thing is a robe and a poncho. So I tweeted out, there's no way this can be real. I'm calling a short-term reblancho top, and I put some pictures of it in. In Dollar Shave Club, DM'd me on Twitter and said, oh, it's real. Send us your address and email, and we'll send you one. Did you get one?

They haven't sent it to me yet. I did send them to it, and I said I wear it on this show for the video if they actually send it to me. Have not seen it yet, but maybe that's just part of the marketing thing. and they put this thing out just to drop, get people to go to Dollar Shave Club and check this thing out and then buy their other products. I don't know. Is that just how people advertise these days a lot of ways? I don't know. It's like outrage marketing. Like it's so crazy. It just might work type of thing. I don't know. But I saw another thing that was pretty wild. I'm pretty sure this was a joke. A vertical bathtub. You sent this to me as this tops of Reblancho. There's no way this is real. It's a huge tub that stands up with a door. This is on Reddit. So let's just. The vertical bathtub makes more sense to the Robloin show. Well, maybe Elon Musk's car can be put on its back and that can act as a vertical bathtub

kind of. It looks like that, right? That's so ugly. Okay. Barron's last week had a piece with William Sharp, who, of the Sharp ratio, and is that what he's best known for? No, he's written a bunch of stuff. He said he's trying to solve the nastiest, hardest problem in finance. So he's a Stanford business grad.

and his whole thing is that he thinks the hardest problem to solve in finance is getting people income that can come on a periodic regular basis during retirement so they don't have to create a portfolio of themselves. So basically some sort of annuitizing retirement savings. He thinks this is the biggest problem in finance to solve right now. Wait, on the individual, on the household level or in the aggregate? In the aggregate for regular people. He said, so you've got two big sources of uncertainty. You can diminish one and not the other. You can invest your money in almost anything except an annuity with cost of living adjustments, then you're certainly going to be subjects to investment uncertainty or mortality uncertainty. He's basically saying it's hard to

figure out when you're going to go. So if you can somehow annuitize some of your income stream in retirement, you never have to worry about longevity risk. And so he says he makes the prediction, almost certainly robo advisors will start building products for that person in terms of annuities. and for the middle class, he thinks that's going to be one of the biggest huge steps forward in terms of retirement assets. Do you think that's the case that someone tries to crack this nut and solve this? I don't think it's solvable. He said it's similar to using Bucket.

So he said a retire you might have a box for 2020, a box for 2021, a box for 2022, mixed of annuities and tips, and then maybe a piece of a market-based portfolio with stocks and bonds. and so each year has its own sort of time horizon of its own, and you manage assets that way. This seems very complex to me. Do you really see Robo Advisers getting into something like this of an insurance-based product? Well, who's going to be the underwriter? Are they going to partner with insurance companies?

That's a good question, or if they just try to do it all on their own. I do like the idea of trying to figure out a way to make this easier for retirees. unfortunately, I don't think there is an easy way to do this. Because guess what? When you buy an annuity, the insurance company takes that money and invest the money just like you. So they're dealing with the same uncertainties you are. But maybe it makes sense to offload the uncertainty and to pay a few for that. Yeah. And to someone else. Everyone's dealing with the same situation is my point. Is someone ever going to be able to come up with an easy solution that is cost effective and maybe tax efficient that makes sense for people that can make it easier for them to live out in retirement?

I don't know that's ever going to happen. So he's been talking about this. He said the same thing on Barry's podcast. Do you think one day he's going to be like, ah, I got it? Or what's the goal here? He said he ran a computer program that created 100,000 retirement income scenarios based on different combinations of lifespans and investment returns. That's the work he's trying to figure out.

And I don't know that there is a solution to this. That's what I'm saying. You're always going to have to deal with a sense of uncertainty, unfortunately, and that whether you annuitize or not, there's always going to be some rent. that can be thrown into the plan that you're not going to be able to plan for, whether it's market returns or something in your life. So let me ask you this. Robin, my wife, works for the New York City Department of Education, and her paid maternity leave has ended. She got six weeks, and I think that's fairly standard. So think about how young and how tiny a six-week-old baby is. And the fact that

the mother is expected to go back to work after six weeks. Seems insane. Doesn't it not? Isn't three months more like standard in most places? Six weeks does seem pretty short. Well, I don't know. Maybe that's not the standard, but that's where her policy is. That's what I'm saying. That almost seems short to me. Six weeks seems very short. Yeah, I always thought three months with the standard if you get it. Her job is secured. She'll be back next year, but there's no pay in the meantime, basically. So we have friends who are going back to work after the six week period. And it's just sad to like be. dropping your six-week-old child off at daycare is pretty tough.

Yeah, so I was going to talk about this later on the show. Might as well bring it up now. Someone put out this paper, and I guess it's from 2007, so it's probably been higher than it is now, but it's called changes in parental spending on children, 1972 to 2007. And they broke down how much you spend on accessories, education, daycare, babysitting. Basically everything else is flat. And daycare is up like 2,000 percent since 1970s. And part of it is probably because most people just didn't use daycare back then.

Because oftentimes there was a single family household. I'm sorry, single income household. Daycare is like the next student loan crisis. Don't you think for young people going through, I don't see people say maybe housing, but I don't think housing is that big of a deal. And I think daycare for people is the one, we always talk about the previous generations didn't have to deal with student loan debt. They were paying like $500 a semester or something for college. The previous generation didn't have to deal with daycare expenses that were this high either. Well, I agree with you because there's not a housing. crisis in the sense that if you can't afford to buy a home, there's an alternative. You rent.

What's the alternative to daycare? I guess the mother's staying home, potentially. Yeah, huge tradeoffs. But then you basically, you make her career progress very difficult. And we spoke about this a few weeks ago on the show that there was an idea to have mandatory paternity leave to level the playing field so that women don't get unfairly disadvantaged. But yes, you're right. Daycare is an enormous expense. Yes. Unless you have a family member willing to step up and take that one for you, which a lot of people just don't have that option, it's tough. You either spend a lot of money or you lose money in terms of income. There are no, I just don't understand why it would be obviously hard to put this through. Why daycare is not, because it's regulated by the state. There are huge regulations on daycare systems and why it's not part of the public school system almost. They have a public school system that we pay taxes into. Why isn't daycare part of that system? system. That's my pie in the sky. Well, why is that pie in the sky? Why can't we make something like that happen?

I hope we do someday. It's really hard for people. We have three kids in day. Well, we just had our first one come off on kindergarten this year, but it's not easy. So, okay, for the housing stuff, here's one for you. And I got a few part series here. So Americans are moving at the lowest rate since the government started keeping track back in the 70s. 9.8% of Americans moved in the year ending March. And it's the first time ever, according to the Census Bureau, okay, this is not the 70s. This is 1947. that has fallen below 10%. And they're basically saying the big reason for this is young people.

Only 29% of 20 to 24-year-olds move between 2005 and 2006. That dropped to 20% in the most recent period. And most of the moves occur within the same county. So people moving from house to house, which is about 60% of sales. I actually think that's a good thing that people are staying in their house. We talked about this recently. People are staying in their houses longer. Yeah, talk about like leakage.

movie is expensive. So they were trying to say this is maybe not a good thing because young people aren't moving. Why is that bad? So here's the other side of this. So Wall Street Journal used the OK Boomer in an article title, which if it wasn't dead before, this horse has just gone, the OK Boomer thing. So it's called OK Boomer, who's going to buy your house? And they're making the prediction that roughly 21 million homes over the next two decades

by baby boomers are going to have to be sold. So on the one hand, you have the New York Times article that's worried that no one's moving. And on the other hand, you have the Wall Street Journal article worried that in the future, who the hell is going to buy these houses from baby boomers? The Fed. Yeah. So they're saying one out of eight owner-occupied homes in the U.S. or nine million residences are set to hit the market by 2027.

By 2037, that's 21 million. So these two articles basically solved their own problem because in the future, baby boomers are going to have to sell and young people are going to have to move into these houses and the circle of life is complete. right nobody loses i think so but i think this also gets to the so they're worried that okay these boomers are not going to be able to sell their homes because young people aren't don't have enough money i think that's kind of a situation that'll take care of itself as people as people age and move up through the ranks but this just gets back to my point of baby boomers tapping into their

homes as their biggest retirement asset and so let's say they're not able to sell somehow don't you see maybe the annuity for baby boomers this is going back to the william sharp thing is their reverse mortgage and they're going to have to do something where they just tap into their home and that's going to be their source of income for so many of these people because that's where all their money is. I think that makes a lot of sense. And from what I understand, the reverse mortgage industry has gotten a lot less slimy over the years. Okay. So Tommy Lee Jones has cleaned up his act in that space. I just got an email. The Charles Schwab Corporation to acquire 2D Ameritrade. It's official. They just sent that on an email. Okay. You're in? I mean, wasn't it in CNBC this

morning. So keeping with the real estate theme, Zillow CEO was on CNBC last week, and he talked about how he basically wants to take over. Rich Barton is his name. We've talked about before how Zillow is getting into house flipping. He's saying, we want to change the whole way that you sell your home and make it more of like a trade and experience. So he's saying that they're making investments in mortgages, title, escrow, all this stuff. So he said, we know who you are. We know who you are. and where you live. We already have a mortgage ready to go. We have an offer ready for your house when you're ready to transact and you with one click can decide to move. So he basically wants to make the real estate industry much easier to transact in. I think it's a lot more labor intensive

than people think. Yes. They're saying they want to handle all these pain points and hopefully make it a little cheaper and easier and make it easier for people to transact. That's kind of like a double-edged sword, a good thing, bad thing. You almost don't want to make it easy to transact because there's a lot of costs and frictions involved, I think. Well, the cost in every way, but I'm certainly rooting for them. Yes, it is a very arcane, old-school, inefficient process in a lot of ways. So if they can do that, I'm all for it. My dad was over this weekend, and he said, did you see that Dalio is betting against the market?

Ah, he picked up on that piece, huh? Yeah. So I think that words matter a lot, and journalism is responsible for a a lot of narratives in the country, obviously. And I thought that this article was pretty lousy. The one in the Wall Street Journal. It basically said Dallio has Bridgewater, Dallio's firm has a billion dollars in bets against the market through buying puts, which works out to, what, less than 1% of their total. And they're making a big bet against the stock market. Dallio had to come out and say, no, actually, that's not true. We didn't

this is just part of our, we're a hedge fund, we're hedging. But it's worse than that because apparently he spoke to the reporter before she wrote the story and it was like, listen, please do not misrepresent the facts. Oh, so he had already talked to her before and then they still went ahead with it and said the wrong thing. My favorite tweet from last week was, so Ray Dalio put out a piece basically saying that this is not true. And on his LinkedIn blog, he wrote, I believe that we are now living in a world in which

sensationalistic headlines are what many writers want above all else. So Wysethel took a screenshot of that, and then a screenshot of a post that he wrote a week previously, The World Has Gone Mad and the System is Broken. Ray Dahlia was the pot calling the kettle black. Now, I still don't like what the Wall Street Journal did, but... Yes, he put out a sensationalist piece on the LinkedIn. The headline was, The World has gone mad and the system is broken. And then he said, I'm sick of reporters using sensationalist headlines.

So the guy's been kind of bearish. So them describing him as bearish was kind of using his tone, even though he set the record straight. But this was my sort of captain obvious news of the week. A hedge fund buys puts because they're a hedge fund. It wasn't that big of a deal. So, of course, people freaked out. They do the same thing with George Soros. This was kind of a non-story.

Somebody just emailed us. Hello, I'm a huge fan of your podcast. Where can I access the show notes? I can't seem to find them. Is it possible to be a huge fan and not know where the notes are? Ben and I each have a blog. Jeez, take it easy, man. Go easy on the listeners.

Every week, well, we get these emails all the time. So maybe it's a failure to communicate. Every week we put the show notes in our blog. Yeah. I'm going to take the other side of this one because Michael's just been harping on the listeners lately. We have some great listeners who write in some great, fantastic emails and reviews. Michael's just picking all the bad stuff.

He's just being too negative, I think. That's me taking the other side of this. The negative, sure, but that email just came as I'm sitting here talking to you. All right. Skip over this money market stuff. It's boring. Somebody sent us a chart called it a crime. I actually like this chart.

This is from the Lutehold group showing companies weight in the S&P 500, and very few companies got to above 4% on the market previously, Exxon, Cisco, GE, and Microsoft. And if you squint, you'll notice that they all crashed, implying that Apple, the current portfolio that's 4% of the market, might do the same. Is that when they're implying? with my takeaway. I don't know if they're implying that. Right. So since 1990, there've only been four stocks that have gotten to 4% of the S&P 500. And when they did that, they all pretty much underperform big time going forward. So the question is, now that Apple is at that level,

is it going to do the same thing? Is it too big to succeed, basically? It's possible. Possible. You heard it here first, guys. Folks, it's possible. This seems like the kind of world where the markets are set up for bigger companies to succeed and keep that success, even if... Just say it. It's different this time. No, no, I'd be more surprised if we saw just a huge crash and reversion to the mean. Maybe they just stay at this level for a while. Even if they underperform the market overall. So if I'm an analyst here, I'm not a strong buy. I'm not a strong sell. I'm a neutral. How's that sound? I'm basically giving a no call here. But yeah, it's an interesting chart. We found a good survey this week. Jonathan Clements tweeted, among U.S. adults who lent money to friends and family, 46% said they lost money or the loan damage to their relationship with the borrower, according to a bank rate survey. I would say that this is probably even underreported, like, understated. Business Insider had a piece this week talking about someone who said the downsides of becoming a millionaire. And they sold their tech company for like $15 million. And boohoo, the world smiles violin for someone who made a bunch of money. But they said,

they were kind of giving some tips about loaning money to family. And they said that was one of the things that became really hard when they made a bunch of money is people wanted loans all the time. And his advice was don't ever loan money to a family member. Just give it to them as a gift. Because that kind of thing, obviously not everyone has that ability or those financial means, but that's tough. I'm sure we've all, or many people have been in the situation where you loan somebody money or you know somebody that has borrowed money and then you see them at a lot of money. a bar or spending on ways that you consider frivolous, and it just destroys the friendship. Do I think there's a million more ways to borrow take out a personal loan these days?

I feel like once or twice a week I get something in the mail asking me to borrow $30,000 or something from someplace I've never heard of. But those do you have to pay back? Yes, that's true. It's not as good of a write-off there. Okay, Hollywood Reporter had a piece on Spotify talking about how they want to become the world's number one audio platform. Do you use Spotify, by the way?

I don't. Okay, I have the free one, but I mean, I use Apple Music and Amazon music because of all my Apple products and the Alexa we have. So for whatever reason, Spotify just never made it into my routine. Do you think the music platform matters? They're talking about how they want to be the podcast platform to go in concert with audiobooks and the music that they already do. So podcasting brought in $650 million last year.

They're saying they want to ramp that up to be a much larger number. do you think it matters having sort of the platform for where podcasts are? Do you think that will ever matter unless all huge podcasters go to the same platform? Isn't it kind of a non-event? Do people really care where they get their podcasts from? Well, people all of a sudden change their listening device because it's on a much better platform. Like, I just use the simple iPhone app for podcasts. I would say potentially. I don't know. What if it's a way better app? I use overcast. Okay, and I've tried some of those out and I just could never get around to them, but they're just saying that that's what they want to do is they want to become this big audio

platform and they think podcasting is where it's going to be because people spend so much time. It's interesting, though, so here's the one thing he talked about. And their CEO, I think, is just, I really like him and the way that he approaches this stuff. He seems very humble, which seems to be not the case for a lot of tech CEOs and he seems to have some self-awareness. So he said the audio industry is less than one-tenth the size of the whole video industry in terms of advertising and how much they make on TV and stuff. The question one needs to ask oneself, are your eyes worth 10 times as much as your ears? And he's saying, no, he thinks the audio industry is going to be much, much more highly valued in the future. And with the

advent of AirPods and podcasts, I almost have to assume he's kind of right there. That's very insightful. I totally am with him. And I think maybe what they're trying to do is if you're already listening to music there, why would they not capitalize on the growth of podcasts? Speaking of AirPods. I bought and returned to AirPods pros. And let me tell you a few reasons why. Really? Yes. First and foremost, they were a little too big for my ear and they have three different rubber pieces. I went with the smallest size and it still hurt my ear a little bit. That was one of the reasons. So the tradeoff for noise canceling is that they're a little uncomfortable. Just for me. Everyone has different ear sizes. But the noise canceling was a little bit too

good. And I don't necessarily need noise completely canceled while walking in New York City. I just think that's kind of dangerous. I think these would be good for an airplane. But here was another thing that I noticed. You put them in your ear and you like feel the sound waves. It's just bizarre. I can't really explain it. But when you breathe with them in, if you're not playing music, like in other words, you put them in and it takes a second for you to hit play on your phone and you breathe and it sounds like you're listening through a stethoscope that really, really sharp sort of noise. That was another reason. A fourth reason or a third reason was they were $280 and I don't know, I just didn't really like spending that much money on them. How much are the regular ones? 150 maybe? Yeah. And then finally,

I have Bose headphones for over the ear and those are great in the winter. So I don't even know what I was doing buying them in the first place. But I returned them. I thought that the audio quality was incredible, but for all those reasons that I mentioned, I sent them back. So in your trading days, based on AirPods, pros and the fact that Apple is now 4% of the S&P 500, you'd be shorting hell out of Apple right now, right? Don't put trades in my portfolio, sir. Let me ask you question. I think I know the answer. You don't wear cologne, do you? No, not a cologne guy. Probably haven't worn cologne since college. Least surprising thing ever. Don't drink coffee. Don't wear cologne. Don't go on the internet. Of course. You think not wearing Cologne is anti-establishment?

There's a good Seinfeld bit about Cologne. Yeah, what is it? He talked about on one of the comedians and cars getting coffee just about how, why do I want to smell good for myself? Who am I trying to impress myself? given your track record, I'm not surprised that you don't wear cologne. That's all I'm saying. But so there's people who like hate the smell of cologne. And I know all cologne smell different, but they just don't care for it. And I would agree, nobody likes a person that sprays way too much, perfume your cologne. Nobody likes that person. Yeah, you don't want to be the person that leaves the axe body spray sent behind you in the bathroom or whatever. No. I enjoyed the smell of cologne, and yet I never wear it. And I was thinking about getting back in the cologne game. But I'm always a

one spray person. One spray on the wrist, dab, and then dab the neck. I mean, You're a dad now, I think Cologne is past. You can't wear your hat on. Here's the things you can't do as a dad anymore. No hats on backwards. You've lost that privilege. No, Cologne, for sure. You probably got to get rid of your cargo shorts. Or maybe that is a dad thing. No, that is a dad thing. I don't have cargo shorts. There's just certain fashion things that you can't do anymore now that you're a dad. And I think Cologne is probably one of them. Sorry, man. Yeah, I think you're right. It's over. That's okay. It's passed you by. So Michael Antonelli on Twitter had an good idea for Ben and I to do the rewatchable. I guess, exactly the rewatchables, but with finance movies. So we're stealing that idea, much like we stole the rekindled idea from the ringer. We're going to call it a random watch down Wall Street. And the first movie that we're going to do is boiler room. Yeah. So we're going to rewatch these movies. It's probably a little easier than doing the rekindled where we have to read and spend a lot of time. So we're going to intermix the rekindles with the finance classic movies and report back and do a sort of a rewatchables on those. So let me ask you a question.

Is this hindsight bias? So they're doing a sequel to the Joker. It costs $60 million to make, and it crossed $1 billion in revenue. So, of course, they're doing another one. And sources say, this is from the Hollywood reporter, that Todd Phillips will earn close to $100 million when the dust has settled. So in other words, he deferred a lot of his upfront salary in exchange for a bigger slice of the pie.

So I'm thinking, like, why would the studios do that? Wasn't it obvious that this is going to be a big hit? And obviously, it wasn't obvious because if it was obvious, they probably would not have done that. What do you think? I think you just answered your own question. But obviously, when a movie makes this much money and they don't spend that much, you know the sequel's coming. This is just the paycheck movie. Jason Bateman was on a podcast a while ago talking about how they did the horrible bosses sequel.

And they asked him, what did you think about the second time around? He's like, oh, that was a paycheck movie, plain and simple. We all wanted to get paid because the first one did so well. So I think that's kind of the idea here, right? Hollywood knows they're going to follow the same formula with all these. And I still haven't seen it yet. I'll wait until it comes out on streaming or whatever. But after seeing the first one, would you go see another one?

I don't really need to. I'm going to, but I don't have to. And actually, you know what I watched this weekend? You do know because I told you. For the first time. So I'm reading a book by William Goldman, the man who is famous for saying nobody knows nothing. He wrote a Princess Bride and I believe Butch Cassidy and the Sundance Kids. So he wrote a book, and I think it was in like the late 80s, and it got me thinking about all the

movies of that time, a lot of Dustin Hoffman movies and stuff like that that I've never seen before. So I was flipping through Netflix this weekend, and I said, you know what? I'm going to watch Rain Man. I've never seen that movie. Obviously, it was a big part of the culture, and I know what it's about, but I never saw the movie, and I saw the movie, and it held up well, however, it's definitely. a good movie. Dustin Hoffman won best actor. Vintage Tom Cruise. T.C. was amazing in that movie,

right? It was a bit of a time capsule. There was a lot of transitions with 80s music that could be cut out today. But all in all, solid, solid movie. However, best picture? I don't know about that. And then I went to look at movies that it was competing against. It was a blank slate. So the only other movie from that year that was like Oscarworthy was Mississippi Burning, a Gene Hackman movie that I have not seen. But I was surprised to see that Big was not even nominated for Best Picture.

So Tom Hanks was nominated for Best Actor. It did not win. Dustin Hoffman did. Sorry, I'm a huge big fan, but there's no way you could say Big was better than Rain Man in terms of Best Movie category. Oh, yeah?

I just did. I love Big with Tom Hanks. Rain Man was an all-timer and an all-time performance from Dustin Hoffman. Excuse me. It is not an all-timer. Ooh, bad take, man. You know, it's really not an all-timer.

So I also watched... I mean, by far, over the last 10 years or so, if you put Rain Man in any of the best picture categories of the past 10 years, it would win hands down over any of the movies that have won. I don't know about that. It's a good movie. Very good movie.

No, it's not a good movie. Not even a little good. Have you seen The Rainmaker? Matt Damon won? John Grish of a novel? Yeah, a while ago. Okay. Oh, my God.

It's terrible. Terrible, terrible. I kind of liked it. It was all right. Listen to me. I kind of want you to rewind. watch it because it was so odd. It's 1997, so it's not that old, but it could have been 40 years ago. It was so formulaic with the beginning, middle end, but the beginning was like 50 minutes

too long. So listen to this cast. Mickey Rourke, Matt Damon, Danny DeVito, Danny Glover, John Voight, and Roy Scheider, and Claire Danes. And it kind of sucked. And I'm like, who directed this piece of junk? Francis Ford Coppola. Yeah, on one of the recent podcasts, Edward Norton said he was up for it and was mad that Matt Damon got it. It was like a typical Grisham one. It wasn't very good. All right. Rob, it's like, why are you watching these old movies? Well, because there's nothing new good anymore, right? Well, I was flipping through Netflix and Prime Video. It's the same library. Have you noticed that? Yeah, anytime you want to find a movie that I need to rewatch that, it won't be on any of the streaming services because they all have the

same ones. All right, listener questions before we get into some more of Michael's terrible weed recommendations. I'm a big fan of the Bill O'Neill stuff and recall an episode of Talk Your Book with one of the portfolio managers at IBD. I wanted to know if Michael restarted his trading career using the methods in how to make money in stocks. I did. And I stopped. How long did that last for? I don't know, two months. Did you keep a journal?

No, I didn't. I don't want to do it. It's not what I talk about or write about it. And I don't think that you could dabble in that sort of stuff. I think that if you want to trade stocks, by all means, trade stocks, but you can't sort of do it half ass, at least not the way that I want to do it. So I stopped. Too bad. I really wanted you to get back into your trading career. just for fighter for the podcast. Yeah, I was gung-co, but I just, my heart's not in it. All right. If you were 65 retired and had a 60-40 portfolio, what total rate of return would you be happy with in 2019? Much lower than the one that we got. Yeah. So I just looked it up. And so the Vanguard balance fund, which is basically a 60-40 portfolio as of right now is up 13.5%. That's all

US. Obviously, it doesn't include foreign. Foreign is kept up pretty good. So it probably doesn't go on that much of the foreign. So this was a very good year for the 6040 portfolio. Considering it died like 13 times in the last three years, not bad. So yes, if you did pretty well on your 6040 because interest rates fell, bonds did well, and stocks went up. So if, I mean, I expect bonds to do between 2 and 3%. This is U.S. U.S. bonds, 2 to 3%. U.S. stocks, 5 to 6%. Do the math. That's not especially high. So did you just put out a return forecast there? Did you just slip that one in there? I think I did. That sounded very strategist like. Thank you. Well, listen, with all the macro headwinds. Okay, recommendations. I'm going to go since you already talked about like six movies

today. I've watched El Camino. I feel like you didn't give me enough warning on this one. It was not true. I literally told you what I told you. I mean, the best part of the movie was watching the recap of the last season of Breaking Bad, which I think I might rewatch because it got me excited about that. But it was, this is one where if it was an episode of of Breaking Bad, it would have been a forgettable episode. I just don't understand why they had to make this movie. Well, I do understand. They probably made some good money on it. But there's a reason I guess I haven't heard people talk about this and say like, oh, have you seen El Camino yet? Because it was kind of boring, I guess. I don't think Netflix made any money on El Camino. Well, I'm saying

the people who made it made money. I'm sure Netflix paid them a lot. Okay, we watched Seth Myers this weekend, his stand-up special on Netflix. I really liked it. And I think the further I got away from it, the more I liked it because I found myself, when we ran into family and friends this weekend, quoting lines from the movie from the stand-up. He had a lot of good stuff on marriage and having kids. And he's a very good storyteller. Not only that, but he had some very good stories. So I highly recommend the new Seth Myers.

And the crazy one to me was he did his 10 minutes on politics. And he said, all right, for those of you want to skip ahead on the politics and not pay attention to this stuff, you kind of know what I'm going to say. Look at the button right here and it's like a skip intro button, but it said skip politics. And it skipped ahead 10 minutes into the 10 minutes ahead. They had a little button there if you wanted to skip the political section of his. I'm just kind of wondering if Netflix will do more of that in their shows to give people a little bit more power in what they see and don't see. It was kind of interesting. Like choose your own adventure?

Yeah, I know that they might be tried that with some movies and stuff. Some of these places have. It was kind of interesting how they did that. I wonder if they'll do that with other stuff. Twitter should do that. So I also read It's Gary Shandling's book, which was put together by Judd Apatow, pretty quick one. I really like to read these behind the scenes of it was a really quick read. But after Shandling died unexpectedly a few years ago, they went through his estate and his house

and Aptow found these boxes and boxes of stuff hidden away with his old diaries and journals. And he put it together all these old letters and scripts. And it kind of went through Shandling's career. Kind of made me want to watch the Larry Sanders show, which I never got into because it was before my time. It was crazy how many comics thought Shandling was like just a huge, huge mentor to them. I didn't watch the Larry Sanders show. It was kind of in the late 90s. And I was before I was on HBO household.

So it feels like I may have to watch it because people really bowed down to him. Like, he sounded like he was one of a... But he was also very troubled in terms of getting into his own head, like a lot of comedians are. Like, he couldn't find happiness. So it was kind of an interesting book. Found me, the other one, one of my favorite podcasts of this season, if they have such a thing called The Happiness Lab with Dr. Lori Santos, it just finished. And I think because they're doing them in seasons, it was like 10 episodes.

One of the better behavioral psychology ones about why we're happy, going through things like why a bronze medalist in the Olympics is happier than a silver medalist sometimes. And they also talked about how, do you know how in some sitcoms, especially in the networks, they have canned laughter. I do. Friends said that. She talked about how the canned laughter they use in some shows is from like the 1930s still. So they're using audience clips from the 1930s and they have different laughs that they use.

And it kind of got me thinking, I think live podcasts don't work for listening to them most of the time because you get a lot of, it sounds like you have canned laughter in there because I feel like they're giving them sympathy laughs sometimes. Okay. Interesting. Do you get that at all? That's what it sounds like. Anyway, finally, the crown started up again on Netflix. If you explain the show, it doesn't sound that interesting, but the way that they do it and it's really well acted, and I think they spend a lot of money on it, it's just a really good show. And they actually skipped ahead a few years, so they got new actors to play all the members of the royal family, and it didn't really skip a beat. So I think that's just one of the most well-done shows on television right now.

That's all I got. That was a lot of recommendations for me. A lot of recommendations. Wait, no detective books, not a one? I'm saving my Reacher for when I finish it, but I started the new Reacher this week. Okay. A reader, a listener, actually, Ben, I'm not mean to the listeners because this listener sent us a great email. They have a book club on Instagram, and I thought it was really well done. And so here's a little plug for that. We'll link to one of the show notes, which you could find in our blogs. Ladies and gentlemen, called Smarter Book Club. Tyrone Ross did this awesome thing where he went into a Walmart.

I didn't know that this was a thing. He went into a Walmart and paid off items that people have put on layaway. And I can't imagine a better act of kindness or more selfless activity than doing this, where you can't see the person's face when they do it, but you know that you are changing somebody's lives and making their holiday a lot better. So I am 100% going to do this. I told Robin about this. And she was like, but what if the person really is just overextending themselves and they're on credit and they're just hoping that somebody buys this? And I was like, wow, what a terrible thing to say. It's like, we'll take those odds. If that's the

case, then we'll bail that person out. But more likely, we're going to buy somebody a bicycle or something like that. So if you want to do that, a way to spread some goodness, I'm definitely going to do this. Yeah, I'm going to do this too. I told my wife a few years ago that, especially as my kids get older, during the Christmas season, I want to have them pick a charity to give some money to or some sort of charitable cause or volunteer on the holiday season just to get that in their heads a little bit and show them the art of giving back. And I think this is a perfect way to do that. So I guess what they said is you basically have to go in or call them and talk to a Walmart manager and say, give them your level of money that you would be willing to pay off and ask them and they will let you pay off someone's lay away, which is, I think, a great thing in the holidays to do. Two more quick recommendations. One of the things that I think I take for granted is Tadus Viscontas blog at normal returns. He does this every single day. He's like the Cal Ripkin of blogging with this.

If you are looking to learn about finance or you're interested, but you don't want to do all the curation, Tadus does links every single day. He never misses a day. It's really remarkable. Last thing, I read Bob Iger's book. I forget what it's called. The Ride of a Lifetime, maybe. The CEO of Disney.

it was fantastic. I'm shocked by how good it was. It was 200 pages. It could have been 600. You know what I mean? But he cut out so much fat. The story about how he bought Marvel and how he bought Lucas films. Each of those was like only 10 pages. Did he talk about how Disney Plus was a layup and an easy decision to make? Quite the opposite. You sound so ignorant. What a new well you are. It was not a layup. But Disney stock actually felt 3% the day after it announced it was buying Marvel. That was kind of funny. People didn't think it was going to work. But he received some really good advice. on keeping that book to 200 pages. So if you're at all interested in Disney's story and his story, it was a really good read. All right. Good deal. All right. Anything else, Ben? Nope. Thanks to all our wonderful listeners.

Leave us a review. This is one of my favorite. We have the best listeners. The best listeners. Someone wrote, gave us a five-star review and said people who write bad reviews are new whales. I totally agree. Send us an email, Animal Spearspot at g-emil.com. Thanks to our producer Matthew Passy, and we'll talk to you next week.

Thank you.