Animal Spirits Podcast - The Opposite of a Falling Knife (EP.151)

Episode Date: June 17, 2020

On this week's show we discuss who is driving market prices right now, Robinhood's PR dream, the Hertz bankruptcy story, Dave Portnoy's day-trading escapades, why active managers should be salivating right now, how private equity could turn out like index funds, why bad news resonates more than good news, is the banking industry heading for a collapse and more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, 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 Battenick and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain position, and the securities discussed in this podcast.

Welcome to Animal Spurts with Michael and Ben. All the talk last week has been about day traders, Robin Hood, Dave Portnoy. Question, is it possible that for the first time in a long time, there are actually suckers at the table, meaning active managers now have easier competition and could theoretically pick some of these guppies off? If active managers don't outperform this year, when are they ever going to do it? Because they wanted volatility, we've gotten that. And they wanted more suckers at the table.

We've obviously gotten that. Hold on. Counterpoint, one of the things that's going to be really hard for active managers this year is the Big Five outperforming by such a wide margin. I think this year is going really tricky, at least in the large cap space. But go ahead. Yeah, that makes sense. I'm saying going forward if this. But like, if you're an active manager and you're complaining about Robin Hood traders, then just hang it up.

because this is what you should want. I mean, don't you agree that it's really overblown the fact that people are saying that retail investors are pushing this market around? You wrote about this. I have mixed thoughts. I have mixed thoughts. What's your theory? Are they pushing the stock market around? Like the S&P 500? I don't buy that first. Right. That's what I'm saying. There's no way. Hertz has a market cap right now of like $400 million. I don't care how many people are trading that. That's just volatility in Whipsong. That doesn't move the market. Correct. I think, but do you agree that they can move individual names? Yes, they can add volatility to it. I think that makes sense. But moving the overall market, this is a drop and a drop and a drop in the bucket.

Well, correct. That's correct. So at the end of 2019, they being robbed, it had 10 million customers. They added another 3 million in the first quarter. So let's say that they added another 3 million in the second quarter. So they've got around 16 million customers. At five grand, that's $80 billion. No, their average account size I've read is $2,000. Oh, okay. So I was making that up. Okay. So at $2,000, it's much smaller. Right. So let's call it $30 billion.

That is nothing. Right. But it's enough to move smaller names. And honestly, if you're a smaller investor, if you want to see some action, like, that's where you go. That's actually smart, don't you think? Yes. Another point, though, is that it's not just Robin Hood.

There are a ton of retail day traders at TD Ameritrade, at Schwab, at Interactive, like it's not just Robin Hood. But I think the bigger picture is the newspapers, the media, whatever, are talking about Robin Hood traders as if it is a sign of the Times. Right, but don't you think they're getting so much free PR from this? They don't even have to advertise Robin Hood. Oh, it's fantastic. If we're talking like brand awareness, this is perfect for them. They're getting so much free advertising. I think that there's room for both sides here. On the one hand, I think that it's certainly fair to say, listen, people are locked in at home. Commissions are free. Dave Portnoy has a huge audience. It's fun.

So I think you could say that on the one hand and say that there's no broader look through into the market. I think that's fair. I also think it's fair to say that how many people are trading stocks because they only see airlines growing up, they only see cruises going up, they think it's easy, they see Portnoy-trashing Buffett. So I think that there's some of both. I think that there's some of both. I don't think it's like 1999 euphoria, but I think there's a little bit of euphoria. Don't you think people are always going to find something to speculate on? Like, how many people have merged over from how many people had to be jumping into Bitcoin when that bubble went up? Like, aren't they just jumping from that to this in the most cases? I don't know.

I think that people are always going to find something to speculate on, and that's never going to change. Yeah, but it's way more people than it had been previously. Yes, and this certainly has amplified it. I agree with that. But the stories are incredible. What's going on with Hart's is amazing. I don't understand how it's legal. They initially said they're going to sell another, this is a bankrupt company. They initially said they filed for bankruptcy. They're going to put out a billion dollars in equity. And I think now it's maybe they got 500 million and a bankruptcy judge actually approved this. What would be illegal about it? It just, it's one of those things that even though they say it's okay, it just seems wrong. I know even if there's demand, this is one of

those things where you need to almost save people from themselves because they even warned this equity will probably be worthless. Here's Matt Levine. Hertz filed for bankruptcy on May 22nd. It has about 142 million shares outstanding. At its $5.53.5 post-bankruptcy high, the total market value of its stock was about $785 million. Hertz is roughly $3 billion in corporate bonds who are trading earlier this week at around 40 cents on the dollar, suggesting that the value of Hertz's stock is at best about negative 1.8 billion dollars. He also said, listen, one of the things you could be warned about is that this company will go out of business and go bankrupt, but that's already happened, which is so wild. This one, okay, yeah, this one is, I don't get it, but yeah.

How about this? You tweeted about financial media taking Portnoy 2 seriously, and I totally get why they're doing it, but this is what he does. He's an agitator. He's an irritator, and he's amazing at it. He's incredibly talented. I think he's a one-of-one. There are no- Here's the thing. Sarcasm does not go over well in financial circles. So people don't get that.

He's not being serious. This is a schick. You know when you see someone give a stand-up comedy routine? And then you hear them interviewed on a podcast or a TV show or something and you realize, oh, that's not really who they are. It's an act. Yeah. And they've honed it and they've crafted it.

That's like him. There's pieces of their personality there, but it's not really them. Is this 60% of the real Dave Portnoy? Is it 160%? Who knows? He put his own money into the stock market. and he's definitely trading it, it looks like. He's showing the receipts and all, but he doesn't care. I'm sure he's happier when it makes money, but he doesn't care about the financial

establishment. That's why someone asked us a few months ago, like, how come there's no barstool of finance? This is why, because if you were in a real finance job, you could never act like that. It had to be someone from actual there and out of the finance world to do this. You know, it's kind of funny that people spend their entire careers trying to make sense of the market, discounting cash flows and looking at fundamentals and trying to figure. and he realized in what, five weeks? Oh, none of this makes any sense. Especially in the short term, if feds are going to do and try to trade, yeah, you just hop on a few trends and fads and mix with people's emotions. But it is funny to me how many people

are taking him seriously. And I know like every single news outlet in financial media had a story about him last week. And I'm sure a lot of them said, hopefully we'll get some of his people to read this and they're drumming up eyeballs too. But there are definitely people taking him as like the shoe shine indicator, which my PSA is no people. He's not being serious. This is, entertainment value. There's no sports going on. They need to do something. And his pivot into this. Granted, it has been great because obviously no one really entertains in the media space in the finance world as it is right now, not like him. Right. This is an amazing quote. Getting back to the Hertz story. It is incredibly creative and they get props for that, but I wouldn't buy those

shares, said Nancy Rapidport, a professor at UNLV's Boyd School of Law, who said she has never seen a bankruptcy funded this way. This quote is incredible. I guess they're trying to catch whatever the opposite of a falling knife is. What would that be called? Can we come up with a term for that right now? I'm not that creative. All right. There's got to be something for,

but obviously we're seeing a lot of this. Look at this chart of Hertz from Robin Track of Hertz versus account holders. There's 160,000 account holders. How many of these people do you think even know what Hertz is? And I guess that's a point. They're having fun. Right. I talked to a family friend a couple weeks ago who said,

hey, I put $10 into Hertz the other day and I bought 50 shares or whatever it is. Yeah, a lot of people just don't care. And this is almost like one of those games in college that you'd play, the stock picking game, and you had two months to play it. So the only way to win those games is not by picking Coca-Cola with a 4% dividend. It's getting the most volatile thing you can find. And that's what these traders are doing these days. And again, because every other piece of the market, what edge do these small traders have in Apple or Microsoft? Nothing.

So why not try to push around these little junky companies and make a quick buck if you can? Jason Zweig had an article in the Wall Street Journal talking about this. And I guess he got to Portnoy. Portnoy said, we are a comedy site with no agenda in an increasingly humorless world. We tend to piss people off. It is what it is. People who know us know our intent is always to make people laugh. That's it. I'm saying that's it's it's what they're trying to do. They're trying to make people laugh. And people are taking this way too seriously. I think it's just people are very stuffy in the finance world. I should say they're taking it too literally because this is a story. Yes, it's definitely a story. It's undoubtedly. It's a massive story. And honestly, though, don't you think the people who say, well, once sports comes back, a lot of people are going to leave? I don't think so. I think it would be way more fun to day trade stocks than trade sports gambling. That market is probably more efficient than this, don't you think? The blinds and stuff that Vegas puts out. Yeah, betting on sports is basically impossible to get lucky. You can get lucky. You can get rich quicker, I think, in the stock market. But so people are like, well, what happens when the airline stopped working or cruises stop working or

the market crashes or whatever, then they're going to move on to VIX products and triple 11 inverse EPS. There's always something to bet on. They're just going to go where the action is. Yes. The same thing happened with the Reddit crowd. It's just moved over to this now. And I guess this is Robin Hood is the new Reddit or whatever. But I wonder how many like crypto junkies are now trading stocks. This is bad news for Bitcoin in a way. Don't you think Bitcoin was seen as like a gambling? It was a form of speculation and gambling. Certainly for some people. I think when you look at all of this. Barclays had a piece saying that actually the most heavily owned names on Robert Hood are doing worse in the market overall. And then B Spoke had an article saying that actually

the low price stocks, which are commission free and maybe are more affordable for people, have done better than the market. So who knows where the truth is? And I think one of the reasons why this is such a story is because you can have all the flow data and it's really hard to say X causes why. And so that's why there's just so much room for a story. here. And this is as juicy as it gets. Yes. And people want to latch on. But don't you think that professional investors and strategists and analysts almost always want to put the blame on mom and pop for stuff that goes wrong? And if it doesn't go the way that they think it should, well, mom and pop are doing this. A few years ago, I mean, it wasn't even a few years ago, six months ago. It was everyone

is going to index fund and no one is going to trade anymore. And then what happens to price discovery. And now we see everyone trading and now people complain. These prices don't make sense. So it's like, okay, which one do you want? You want no one to transact? You won't ever to transact. Are you going to pull your this time as different card again? No, this isn't different because speculation is as old as the hills. This is the same. This is how markets have always been. This is the same thing as bucket shops. You just unironically quoted Jesse Livermore. Yeah, sorry. If you go back and read that book, that's what this is. It's the same exact thing.

This is bucket shops. Dave Portnoy created a bunch of bucket shop people that trade on their phone. how's that the phone is the new bucket shop don't try to catch a falling app i don't know i can't do it sorry so not to be outdone kelpers says that to fix their pension shortfall they are going to use leverage and i think most people jumped on this and said how irresponsible it is the chief investment officer there ben mag said that they could take additional leverage via borrowings and financial instruments such as equity futures leverage could be as high as 20% of the value of a fund are nearly $80 billion based on current assets. The aim is to juice up returns to help the scheme, which is the largest pension plan in the U.S., achieve its target goal of 7%.

Did he say that, or is that in the article? Did he say juice returns? This is to them. He basically said in the low yield, low growth environment, there are only a few asset classes with a long-term expected return clearing our 7% hurdle. Leverage will increase the volatility, but also increase our expected returns. I wasn't as down in this as most people. if you put this into some standard portfolio optimizer based on current yields and valuations and if you're taking a longer term perspective, 20% leverage to me does not sound that egregious. And with, I'm sure, borrowing rates so low right now, can you say like this isn't that big of a deal? They're shorting Berkshire to fund their leverage. Is that right?

I mean, basically, what are your options, either lower your expected return and have to put a bunch more money into this at a time when states and cities and municipalities are getting crushed or increase your risk and accept more volatility. So obviously, they're doing what they can with the hand that they've been dealt. I applaud you for your open-mindedness because I feel like the knee-jerk reaction would have been to pile on. That's what everyone was. And I'm saying 20% less.

Kudos to you. They're not doing long-term capital management leverage on here. They're not doing it 140 to 1 or whatever. 20% leverage when rates are so low. I don't know. Aren't we taught in like financial textbooks that like that could actually make sense if you're doing it in a prudent matter? I don't hate it, is what I'm saying. Could it blow up in their face? Sure, especially if they back out of it like they do their tail risk strategies when things

go wrong, then, okay, it was a bad idea. But if they're smart about it and use it intelligently, I don't think it's that big of a deal. I don't know. Or they could just put all their money into Hertz and roll the dice and see what happens. Okay, so last week we talked about private equity going into 401ks. I think I'm coming around on this idea. If, well, well, big if, big if they do it with lower fees. If they can do this, but with taking away the performance fee and just charge, say, like, 1% of assets, if Vanguard or Fidelity or Schwab or someone figures this out, I think you could invest in a subpar, below average private equity fund. It's still come out better than the pros. I think this could be like how the majority of active managers underperform index funds.

I think if one of these places can figure it out to do it at a low enough fee and take away the performance fees and the carried interest, I think that they could do it. So there was this paper that just came out about basically it's called an inconvenient fact private equity returns in the billionaire factory by this guy from the university of oxford and he showed that since 2006 basically public pension funds have received the same exact returns in their private equity as in public markets but in that time private equity funds have collected 230 billion dollars in fees most of it in carried fees from their performance. The number of P.E. multi-billionaires rose from three in 2005 to 22 in 2020.

And he did go through some rebuttals from the private equity industry on this, but the main point was just, if you want to get rich in a private equity fund, you're the GP and the owner of the fund, not the LP and the investor in the fund. That was his main point. And so I think if you can take those fees away and just add a little leverage to some privately held businesses, I think you could come out ahead in the Vanguard private equity approach, if that's what they're going to do. What do you mean take those fees away? Who's going to run the money for no fees? Vanguard. Don't you think Vanguard's going to do this for way lower fees? I'm saying, no. You think Vanguard's going to charge $2.20 for a private equity fund in a target date fund.

But who knows that Vanguard has the expertise to do something like this? They're outsourcing it right now. I'm saying if someone in the 401 case space figures it out and says, we don't need to do this for $2 and $20, why are we charging that much? Let's charge $1 in 10. 1 in 10, 1 in 5, 1 in 0. And I think then that's possible. The individual investor beats the professional again if they're not paying $2.20. Maybe that's impossible. And so then they come back and say, we can't do this. What's the point? It's too operationally much of a headache. Let's get out of it. But I'm saying if you get rid of the fees and stop making these private equity people multi-billionaires, I think that could, the individual could be the biggest beneficiary there. So there was an article in the Walshut Journal,

doom scrolling, why we can't just look away. On June 2nd, Twitter ranking, number seven in Apple's app store above Facebook, Instagram, and Snapchat. That's pretty surprising given how small Twitter's audience is relative to those. Now compare their market caps. Right, exactly. Here's a good quote. Our brains evolved to constantly seek threats. Historically, that might mean poisonous berries or vicious rifle tribe. That's why we seem predisposed to pay more attention to negative than positive. We're scanning for danger. That's from Mary McNaughton, Castle, a professor at University of Texas at San Antonio. There's another quote. There's a sense that we have to be watching all the time in order to protect our families from the same professor. Okay. So I wrote about something like this that the bear case is always easier. And this is exactly why we are always scanning for danger. I thought this is a really good way to put it. It always sounds more intelligent too. You feel smarter being in the bear camp than you do in the bull camp. What's your bull case? Let's hear it. Case for the market? Yeah. Stocks go up most of the time. I was

I mean, so you wrote a piece last week talking about all the reasons to sell. And I think you said, like, what would be the bull case here? The bull case is people are stopping or just completely over the whole pandemic thing and just moving out of their lives and they're going to spend money and we get bailed out with a vaccine. Honestly, I think that's probably for humanity, almost it's a good thing, short term, a bad thing, long term. Because if people just disregarded this thing after like a couple months and it turns out

that a ton of people die and we probably could have more to prevent it. But we get bailed out with a vaccine and an early vaccine and people go, see, knew this is going to happen. Everything's fine. Oh, I hear you. Well, it's risk management things where it's like, we didn't need to manage this risk anyway. We were going to get bailed out anyway. Adam Butler tweeted this. We spoke about this months ago. This was such a great tweet. If the lockdown is effective and it appears that it was, then with the benefit of hindsight, people will say, see, we didn't need to be so aggressive. and that's the essence of risk management and why so few managed risk.

I think that was sort of the quote. I took Kobe strawberry picking this weekend, which a lot of fun. Not usually a fruit picking person. Like, for instance, I think apple picking is kind of boring. But with strawberries, you really had to get down and dirty. You ever do that before? No, not strawberries.

It was fun. Anyhow, it was a farm out east. A lot of people there, everybody was wearing a face mask. It was required. It was just weird to see this is life now. Not that this is permanent, but just the fact that I was in a group of,

I don't know, 2,000 people were there maybe, and every single person was wearing a face mask. Or you go into a restaurant for takeout and all the tables and chairs are against the wall and it's just a big open space. Have you seen some of those? Yeah, it's still so weird. Restaurants here are reopening with, in some cases, tables and chairs, either right outside or in the parking lot. That makes sense, actually. Do you even care to go to a restaurant at this point? I have no desire. Honestly, yeah, it doesn't bother me that much. No desire to do that. Yeah, I agree. So getting to your doom scrolling stuff, this is maybe the most financial clickbait headline of the year from the Atlantic. The looming bank collapse. The U.S. financial system could be on the cusp of a calamity. This time we might not be able to save it. I don't know. 75 people sent us this one. Everyone wanted us to talk about this this week. There was a lot of emails and DM action and stuff on this one. People really wanted to hear our thoughts. I thought this one was a case of fearmongery. after reading it.

Especially because this person, he's like, listen, I was there when these things were first packaged and built. So I have expertise. I think that is sort of adding fuel to the fire. There was a rebuttal that was pretty good. One of the things is I was reading this. And I know, relatively speaking, nothing about the CLL market. Yeah.

So that was the point. He was comparing CDOs to CLOs. And CLOs are these collateralized loan obligations. And he's saying there's too many of them the bank balance sheets. And if you compare it to CDOs. Wait, just explain briefly, briefly what they are. Well, it sounds like they're basically, some of this gets back to private equity stuff, how a lot of the banks have had to take on a lot of this debt. And so he gives the size. He said the bank for international settlements says that the total size of the CDO market in 2007, which is what everything blew up was $640 billion. He's saying now the estimated size of the CLO market in 2018 was $750 billion. So it's even bigger than what it was when that stuff blew up. But there's like context involved here. And it's basically the same thing. where you have this triple A on the top, and then as further down you go, the worse it gets.

And he's saying that this situation of the pandemic is going to make a lot of those loans go bad. And then it's going to all roll up. These are loans to heavily indebted corporations. Yes. And when those go bad, then it's going to all roll down to the banks and the banks are screwed. When he's talking about the size of them, like I forget, I think JPMorgan had $30 billion, something like that, whatever it was. And he's comparing it to, I forget what he compared it to, the cash on hand maybe or the capital. But what about if you compare it to the assets of these banks, it's tiny.

Right. So, yes, exactly. And so this Nathan Tankus guy wrote a rebuttal where he totally point for point went and kind of did a way that you can read it if you're really that interest. But he said the key takeaway here is that financial instruments, which blew up the world financial system in 2008 are not present in the quantities, combinations and locations that they were that they would need to be to threaten a crisis today. To the extent that we were facing a financial crisis today is because of the conventional credit risk due to a pandemic-induced depression. This guy is saying the depression is going to cause all these things to go bad. But Nathan is saying, no, This is just your run-of-the-mill. This is what happens. Selling fear is certainly as old as the hills because people always want to protect themselves, protect their families. So I don't feel qualified to comment on like the CLO market, but this was an article that appeared in our inbox multiple times. Yes.

And honestly, I think if they would have chosen a different headline, it wouldn't have garnered nearly as much outrage and scare tactics. I think the headline said it all. Because if you actually read the piece, it requires a little more nuance, obviously, and understanding. He ends up with saying the purpose of laying out this worst-case scenario isn't to say that it will necessarily come to pass. The purpose is to show that it could. That alone should scare us all and inform the way we think about the next year and beyond. Here's what people say when they write the, I hope I'm wrong. I hope I'm wrong, but I don't think I am.

That's what you say when you lay out the huge barricade. I hope I'm wrong. Listen, I hope I'm wrong. I hope everything goes fine. But just saying, that's what you say. And honestly, this is the type of environment where if you ever were going to get a bank bailout from the Fed, let's say his worst case scenario happened. Buy banks. I'm saying this is when we're in the midst of a crisis, the Fed will literally do anything they can. Well, that's what I'm saying.

Think ahead. The worst will come to pass or buy calls on banks. Okay. Buy XLFs. Is that going in your trading account for the week? But I'm saying this crisis obviously has been horrible for so many people in businesses, but there are other places that have probably gotten bailed out that during a regular run the middle financial crisis wouldn't have gotten that. And the bank certainly, Powell is not

going to let the banking system collapse, as this headline would say. I would take the other side of that every day of the week. So are you still using Instacart or one of the food deliveries? Are you starting to go to the grocery store more again? We are getting P-Pod. Okay. I don't know why, but that's what we use. We use Instacart. I swear, everything they have is way more expensive. They do markups or something, but it's probably been worth it for this. Instacart is the one where you have like a personal shopper and they'll go to whatever store. Right. Yeah, I think we were using that for Fairway.

And it was, I think we spoke about this few weeks. It was like 30 to 40 bucks additional every time. It's a lot. We've been using it for Costco. So they just got a $14 billion valuation because they raised a bunch more money, obviously because things have been going so well. Don't you think for a company like that now is the time to strike while they're on how to just go public?

You don't think some of these companies have learned from Airbnb? that if you don't just do it when you can, you could miss that opportunity, that window. Like, why wouldn't they just go public instead of taking private money right now? I don't know what they're thinking here, so I can't really comment. Airbnb, there's been talks that they might come public again, that's back on the table. Yeah, that changed pretty quick. It turns out that I'm not going to Norfolk, Virginia anymore. I know I said last week there's Norfolk.

It's Norfolk. The family that I was going with, it didn't work out, so I had to back out. But the cancellation policy is fairly egregious. And I think that it's set by the host because I went to see, and it's not the same for every house. But my particular cancellation policy was you lose 50% and you have to pay the service fee. Now, mind you, I canceled it five days after I booked. You had to pay the full amount up front? Yes.

And then you only get 50% back. Correct. And you have to pay the service fee. How was that possible? I canceled five days after I booked it, and my trip wasn't for like another four or five weeks out. So nobody was harmed in the canceling of this reservation. Can you fight it? I am trying to fight it.

We'll see what happens. Speaking of that, I saw that I got charged for Stubhub. So the next tickets that I sold for the games that hadn't been played, I think there was three or four games that I sold. Stubhubbub charged me for it. So I then was like, oh, this is a good reminder to reach out to my Knicks rep. So I emailed him. And shockingly, I am getting a refund from Madison Square Garden for those unplayed games, which I hope so. Well, I thought that it would be no option that I would have to roll it over to next year.

So I'm getting a refund, which is fantastic because the demand for next tickets were so low that I was selling it for like 40 cents on the dollar. But you're not required if they have a season next year with fans, which, Who knows what that'll be the case. You're not required to buy these tickets again, right? It's just a one-year thing. I'm definitely not renewing, given the bath that I took this year. Right. And how hard is it going to be to unload tickets next year if they do have a season and, I don't know, half-filled arena, however it plays out?

But I think the number I heard somewhere was they make 40% of their money in the NBA on ticket sales and concessions and stuff at the arena. So obviously, that's a big piece going away for them. And I'm sure that's probably similar across all sports. Yeah, but no one's losing, no one's going to shed a tear for those people who own billion-dollar franchises. But the owners aren't going to get killed. I mean, they will on the dollar amount, but it trickles down to all the vendors and the whole ecosystem gets hurt.

Right. You and I went to that Milwaukee Bucks game last year and all around the stadium, all the restaurants and bars were full. And yeah, that stuff, that goes away. That's tough. All right. So here's, I think when the COVID stuff first erupted, people said, oh, you're going to be home for a few months.

and we're going to have this new baby boom. And the Burking Institute is taking the other side of that. So they have a piece that speculates that we could see decline in births from this period and the order of 300 to 500,000 births in the next year based on... How many births are there normally? Well, that's a good question. I don't know. But this is a big number.

So I'm going to say... Ben, your denominated blindness is showing. Hang on. 130 million a year? What? I'm going to say no. Check again. In the world. 130 million babies are born in the world each year. Really? 250 babies born every minute.

Okay. I thought you're talking about the U.S., so that's why I was so. But still, that sounds incredibly high. 130 million? Yes. Buy gold? Okay. Four million babies born in the U.S. every year, it says. Okay. This is from Google. So anyway, 500,000 out of 4 million is a pretty decent chunk.

and they're basing this on data from the Great Recession and the Spanish flu, which I guess is a good combo of what this crisis has been. It honestly makes sense that during poor economic times, people have fewer kids and don't have kids because obviously kids are not very good for the pocketbook. But do you think that there's something going on with, let's say you have a kid or you have two and you were going to go for number two or number three? Do you think there are parents pulling back because they just spent two months taking care of their kids? kids every day. Is that possible? I don't know how to answer that question. Is it possible? Yeah, of course it's possible. Why are you laughing? I'm just saying that could be, how many parents have

you heard complain over the last two or three months? More than have not? I don't talk to a lot of people. Okay. All right. Okay. You're no help here. All right. But yes, this is one of the ones that the initial thought was, all right, baby boom, people are going to be home. It's going to happen. And now, I don't know. There's going to be a lot of that, I think, with these trends. I think we're going to have stops and starts where it looks like this is going to happen, but then we veer over here and then we veer back here and with this whole thing. I think it's just, it's still truly to tell. All I know is that at this pace, I don't make a bad joke. I stopped myself. Go ahead. Nope. Continue. Give me your dad joke. Nope. All right. So we talked a few weeks ago about the Joe

Rogan deal with Spotify. What did you get $100 million? This guy, Andrew Wilkinson, who writes a lot about the podcasting industry, says Joe Rogan got ripped off. I never realized this. So he says Joe Rogan average listenership is 11 million people per podcast. That's 10 times as big as Howard Stern's audience. So I am a lifelong Stern fan. I don't know where this million listener came from. So Sirius has about 34 million subscribers. I don't know how they got there. However you measure it, Joe Rogan's audience is certainly bigger than Howard's at this point. And it's kind of interesting. Howard Stern has been talking to the past about how podcasting was not a real business. And for a lot of podcast. It's not a real business. Obviously for Joe Rogan, it's an enormous business. But the point in this

article was that Joe Rogan left a lot of money on the table, which sounds insane. I mean, nobody's crying for his $100 million contract. But this is a pretty compelling argument. Just that he said, well, he lost control of his audience and that Spotify get some of his recurring revenue. I don't know. Isn't this taking some risk off the table? Isn't that the way to look at this, though, instead of how much you could have made? Okay. We get a Joe Rogan multiple. on our podcast. Would you rather take the money up front or would you rather have it made down the line? What do you think? But it sounds like he didn't get a big multiple. I guess that's the thing. What sort of revenue did he do last year? He's just going to get an advertising deal through Spotify,

it sounds like to me. They were paying him for the exclusivity and he's still going to make money on advertising just on their platform alone. I don't think it's as bad as this makes it out to be. I guess the bigger question is, what does the future of podcasts look like? Five years from now, are we exclusively on Spotify with everyone else? Is that where we're heading? Is it going to be streaming on TV where there's going to be Spotify and Netflix and Prime and HBO or whatever it is? I don't think the market for podcast is that big.

There's going to be multiple outlets. I think Spotify's going to dominate. I tend to think we could see the free and premium versions like Spotify has, where one of them is free with ads and there's a premium one that gives you a little bit extra and no ads. I think that could be the way it plays out for a lot of people. But yeah, it will be interesting to see. I listened to Joe Rogan's podcast with Bill Burr this weekend. And they talked a lot about how they think it makes sense if you have an audience to just keep control of that and not let someone else come in and infringe on that territory.

Bill Burr is a huge audience. Yeah. But Rogan sold to Spotify. Right. I know. That's the thing. He's saying he still has control over it. Oh, got it. Actually, let's discuss real quick. So I thought Bill Burr was really, really good in the King of Staten Island. I watched it, too. I thought he was excellent. I love the new movies coming on demand. Oh, it's great. In the past, I would have said, really 20 bucks to rent a movie, but now I think instead

of going to the movie, I think it's great. So we obviously both rented King of Staten Island. I thought he was excellent in it and better than I would have thought. I've never really seen him act that much before. I thought he was really good. I thought it was the best one. I thought it was a nice story, but I thought it was too long. I laughed a few times, but to me, there was no, I have no memory of it.

There's no scene that stood out. See, I liked it. I thought it was good, not great, like seven out of ten for me. I enjoyed it. I would watch it again. It definitely dragged at points, and there were some scenes that didn't need to be in there. I think Apatow does that with a lot of his movies. I got sold on this because I listened to the Judd Apatow podcast tour last week.

I mostly listened to one three or four podcasts, and he kind of sold me on it. I mean, Pete Davidson is obviously playing a version of himself here. I don't think he's really been acting, but I don't know, don't a lot of comic actors do that. Ben Stiller and Sandler, you could say that they've always just been playing themselves, but. I didn't hate it. I just thought I'm more like a, I don't know, like a six. I'm a sucker for these coming of age stories. I always like those. I thought Steve Buscemi was the sixth man in this movie, quietly waiting in the weeds. And then he had that one scene where they had the bar. And I thought that scene was the best scene in the movie where Steve

Bushamese telling stories about the dad. Maybe I don't like coming of age stories as much as I thought I did because I also watched this weekend, or last week sometime, perks of being a Wallflower? Yeah, I like that one. Not me. No, okay. See, yeah, maybe that's the problem. You have no heart. I do. I have plenty of hearts, sir. Okay. I liked it. And I came into it. I was like indifferent on Pete Davidson because I know a lot of people who love him or hate him. I was just indifferent. So I needed to be wowed. And I thought it was a good story. And I laughed a few times. And it was, I mean, it was more drama than you would expect from Judd Apatatel movie. But I enjoyed it. What did your wife think? She liked it, too. We both liked it. And I watched recently on Hulu, this movie called Big Time Adolescence, which is also Pete Davidson playing the exact same character, basically, just some loser from Staten Island. And that was decent, too. He was like a secondary character in this one.

He played himself again. So I enjoyed it. Makes sense. You're still coming of age. Yes. Yeah. Coming of age 40 soon. Listener questions.

I couldn't take the volatility and pulled back my equity shortly after the bottom. I used to be 60, 40 bonds and stocks. Now I'm more like 15% in stocks, 60 bonds, and the rest in cash. So they basically went from 40% stocks down to 15 and then the rest was in stocks. I think long term I'll be about 30% stock, 65% equities and 5% cash. Money's on the sidelines now. I'm ready to rebalance. Should a rebalance now or wait for the market to fall again?

Can't answer that question. Do you think the fact that this person sold out shortly after the bottom makes them more or less impatient to do something with their money. More, more. I feel like the timing of your decisions in your portfolio can have a huge impact on the next decision. Oh, for sure. If you're playing with house money now

or if you sold out, can't you see people missing out on a 45% gain and then last week we have that one 6% down day and be like, oh, I'm in. Give me back in. No, no, no, no. I think it's the opposite. I think that they see a big down day

and then their worst fears are reaffirmed. It's like, oh, see, this is why I did what I did. I think this is so hard. This is why you get an addiction to cash because you always think there's going to be a bigger leg down and you just always wait and wait and they never get in. I just think that's why the regret minimization, dollar cost averaging, however you want to do it, is probably the easiest way on your psyche, just to be like every three months I'm going to put a little back in, or every month or every, whatever it is. I think that's just honestly the easiest way in your emotions, even if it's

not the most well-optimized way. All right, open up my shrub account today. I notice they are now offering fractional shares through a service they call share slices. A few people told us this actually. I knew they had plans to roll this out, but it's still a bit of a surprise to see from what I can tell. There are limitations. You can only pick from the S&P 500. You can only pick 10 at a time. Other brokerage firms are sure to follow. Do you think this is going to significantly change investing for mom and pop investors? Probably not. I think we're heading towards a world where you're going to be able to customize your portfolio more than you ever could in the past. And that could be through ESG. It could be through different stock picking. It could be through

themes. I just think it's going to be easier than ever. And the problem is you're going to be given so much more choice. And we already are given so much more choice. It's like that double edge sort of there's never been a better time to be an individual investor. But the sheer number of choices you have to make is just mind boggling for people. And it probably hurts the brain. And it's almost too much for people. The reason why I'm such a wet blanket on some of these questions. It's like, this is such a big question asking to generalize how this might change the industry or how it might affect how people invest. There's so many different styles of investing. So it's hard to speak broadly about how people are going to react to something because there's

thousands of different types of investors. It's also a lot of the stuff that happens in the world of funds and wealth management and how people invest is driven by what's going on in the market. We've seen this. How many people would have predicted that bankrupt companies would be the hottest fad this year in terms of what people. Rem capital. I mean, there's no way anyone predicted any of the stuff that's happened this year in terms of what is getting people's interests and what's keeping them. Just like a few years ago, no one predicted that Bitcoin was going to just all a sudden take over the entire psyche of the market. So I think that it's all very bizarre. Yeah, I do think that people are going to have the ability to customize their funds or strategies or

portfolios in ways that they never thought they could have in the past. And I don't know that's going to be a good thing for people who are tempted to, like, make changes all the time. All right. Other than King of Staten Island, any of the wrecks. I don't know why I watched this. I guess I was just scrolling on Prime, and it was, I saw it. I had never seen it before. Bull Durham? You've never seen Bull Durham before? No. I guess that was before your time. That's a classic. It was 1988. What year were you born? 81. Okay. This was a TBS special back in the day that was on all the time. I thought it was okay. Kevin Conster was very good. I thought it was just okay. Just okay.

Okay. That's it. That's a classic. I mean... All right. I thought Tim Robbins was great in that. So I'm like 0 for three this week again in movies. All right. You're trying. Taking a lot of L's. I mean, it was fine. Totally fine. Wouldn't recommend it. Totally fine. Getting back in, I must have had 10 books that I picked up before the pandemic hit that I just had started and not gotten back to. So I'm slowly... Sounds like a humble break. I don't know if it's a whole brag. I just, I like to hop around with books. Did you listen to the Michael Lewis podcast where they talk about humble bragging? It's like the biggest turnoff. Yes. People prefer bragging. So what you meant to say, Ben, was I read so much, I'm reading 10 books at a given time. That's what you should have said.

I've recently started waking up at 3am again, just to make sure I'm a CEO someday. Oh, me too. This book Next by Michael Lewis, which is about the technology boom of the 1990s. Did you ever read it? No. It was one of those ones that I did. never read it from him. And I thought, like, what's the point of reading it because things have changed? He wrote it in the early 2000s. What's the point because things have changed so much in technology land? But a lot of the stuff, he actually predicted pretty well. So here's one that didn't age well, though. He said, oddly enough, a Finnish company, Nokia had come to dominate

the mobile phone business to the point where pretty much everyone now agreed that the Finns would be the first to connect mobile phones to the internet in a way that the rest of us would find necessary. Is Nokia still in business? Remember the beeper phones? Those things were huge. Yeah, that was big. but obviously they didn't take the iPhone. He had this whole thing about how all of the trends in the internet are made by kids and teenagers. And so he said, and this is true with like TikTok today, he said a child still has time to save himself to a child being on the wrong end of the trend is not a sign that it's time to dig in

and defend the old position. It's a signal to cut and run. Progress depends on these small acts of treason. And he's saying like old people just will never be on the forefront of these trends because they just can't bring themselves to do it. Sorry, Ben. Your time has passed. Yeah, me for sure.

But, yeah. So actually a lot of the stuff that he talked about in this book was still relevant, and he kind of nailed a lot of stuff about where the tech world was going. So it actually is a pretty interesting read. All right. That does it for us. Animal Spiritspot at Gmail.com. Thank you for listening.

Have a great week, and we will see you next time.