Animal Spirits Podcast - The Oracle of Brooklyn (EP.33)

Episode Date: June 13, 2018

We talk about Big Mistakes in the Wall Street Journal, how retirement investors are wising up, the crazy Gen Z retirement plan, why markets haven't changed much since the late-1600s, parenting money tips and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing, hosted by Michael Batnick and Ben Carlson, two guys who study the markets as a passion and invest for all the right reasons. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions in the securities

discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. On this week's show, we're going to be speaking first off the bat to the Oracle of Brooklyn. Our very own Michael Batnik was mentioned in the Wall Street Journal last week. I believe it was on Friday. I actually prefer to be called the bald plunger. Okay. By the way, that term doesn't seem to be used it very much anymore, the plunger. Yeah, it seems like it died with Jesse Livermore. Is that right? I think we should bring it back. Yeah, it's, I think it died a long time ago. So you had a Jason Zwag from the Wall Street Journal wrote a piece.

I think it came out on Friday afternoon. And you sent it to me. And it's pretty crazy because it's a profile of your book, but it also has quotes in there from Zweig went to Warren Buffett and Charlie Munger to get quotes on some of their biggest mistakes. So what was your feeling when you saw this post hit? I had literal tears down my cheek. It wasn't like teary-eyed.

Like I had actual tears running down my face. Really? Was anyone with you? No, but Bianca, my dog was looking at me funny. Okay. It's nice to you could share that moment. This was pretty nuts because I'm sure that something along the lines of this happened, Jason called him and said, Michael Bannock wrote a book, Big Mistakes of Best Investors and the Worst Investments, and he spoke about some of the things that you and Charlie did. So to think that, like, my name went into his ear. It was just like kind of nuts. That is awesome. Yes. Especially since his mentor was Benjamin Graham,

the intelligent investor, and you kind of named your blog after that for the irrelevant investor. Yeah, pretty wild. So in terms of the article itself, I mean, obviously, I thought it was fantastic. My favorite quote in there was from Emily Pronin, a psychologist at Princeton. She said, investors repeat the same errors, partly because people tend to think about their past self like another person. It's easy to look back and say, it was the old me who made that mistake and knew me. It's older and wiser, so I'll never do that again. Which is another reason that we like to say that, And you said this countless times, I think, that look at your past behavior because that's how you should be kind of benchmarking yourself for what's going to happen in the future. I'm not really sure. I was talking to Jason about this. And I'm not really sure why the idea of keeping a journal is unrealistic.

You know, it's like, I don't know. It's a good idea, but I'm not really going to do it. But I actually did it. And at the time, it wasn't because I didn't write because I thought that it would hold myself accountable. It was just something that I did. I guess I saw it as an idea from somebody. I don't really remember why. But that had like a huge. impact because when I reviewed it, it was so eye-opening. This wasn't me taking a look at myself 10 years ago. This was like six months ago, and I could see already how ridiculous some of my thoughts were. I think this is one of the side benefits of starting a blog for me is by putting all that stuff down on paper, you're kind of holding yourself accountable to the stuff you write about. If you're putting stuff out there about how you think about the world and investing, obviously your views can change, but I think it's a way to hold yourself accountable in a lot ways. Right. So speaking of holding yourself accountable, how's, what's going on with your Bitcoin? Are you

hodeling? I'm of the mindset that I probably won't even look at it for 10 years or so. So I'm not, again, it's such a small piece. It doesn't really matter for me. So I'm not, I'm not freaking out. But my favorite quote of the day was from Mark Dow on Twitter. And he said, Silence of the Lambeaus. I thought that was pretty good. That's good. Well, I am still on gold, so I am goodling alongside with you. Okay. It is funny how, obviously, the narrative, always follows price. But I mean, for that two-month period around the holidays, that was all anyone could talk about. And now it just seems like it's just sort of faded away. And I suppose we have a short attention span for these things. But it just feels like that whole wave just

really passed and crested really quickly. Well, when we started the podcast around the time that the mania was really in full swing. And it went from like 3,000 up to 20,000 from September to December, something like that. That was good times. I just wish someone had some data to to show how many people actually put their money in at $17,000, $19,000 for Bitcoin and how that's worked out or what the dollar-weighted returns were for that. I would love to see that, like the Morning Star X-ray on this for what the actual returns versus the dollar-weighted returns, because I'm sure the dollar-weighted returns are just god-awful.

The world will never know. So back to your new best friend Warren Buffett. Him and Jamie Diamond, the CEO of J.P. Morgan last week published an op-ed in the Wall Street Journal about how short-termism is harming the economy. And they just, their basic premise was they think that CEOs pay too much attention to meeting short-term earning goals, and it's just really bad for the economy and it's bad for companies. Honestly, obviously you have to give these two kind of a pass, but it was kind of, I don't know, it just seemed kind of short on details. I guess it's probably true that companies are more short-term these days, but I didn't think that

there was really a lot of meat to the bones of this argument. Yeah, I agree. I mean, I think, I think it's they have the right idea but never going to happen yes exactly and even if you did if they were able to say they could ban quarterly earnings estimates and in those sorts of goals that doesn't mean that companies are all of a sudden going to start thinking and acting more long term i think that's just that's just way too wishful thinking for me i just i i just i don't know this seemed like a little bit of virtue signaling to me from these guys which i don't think that anything is really going to happen from any of this yeah likewise so going from from sort of that short thinking. I think investors in a lot of ways get a bad rap for short-term thinking, especially from

the media, maybe from people like us, but I think if you look at the actions of investors, I think they're actually getting smarter. So there was some data this week from Vanguard, and they talked about their 401k participants, which they have an enormous 401k business. And they reported that over half of their 401k participants are now invested in a single target date fund compared to just 13% 10 years ago, which is kind of mind-boggling, if you think about it. I am a huge advocate for the idea behind target date funds. Now, I think one of the things that is important about this is that not all target date funds are created equal. There can be a fairly big difference between the stock and bond mix, the glide path, the actual investments,

international domestic, emerging markets, whatever. So they do look quite different. But the idea of it, I think from a behavioral aspect is really great because I think just seeing the number, 2004, 2050, it puts some meat on the bone and I think it will allow people to stay with it when the next hiccup comes along. I think the really encouraging thing about this is the fact how behavioral driven this is. So they showed that around half of the people who own target date funds in their 401k program arrived at that by choice. In the other half were by default. So I think the fact that they're putting these nudges in place in the default option for I think almost all 401ks that have that is the target date fund. So people who don't opt out

and who just go into the program and don't make any changes, they're automatically put into that. And I think that's a great thing for people because they're ultra diversified right off the bat into a low-cost fund that they don't really have to do much to. And so I think for when you're comparing it to the alternative of sitting in a stable value fund or something, which people may have done in the past, I think this is a huge win for the investor class. Remember the study that that we spoke about a few weeks or months ago where people were given an image of their future self and that helped them focus. I think this does something similar because just by having the number 2055 or 2035 or whenever it is that you're retiring, it allows you to think about

your future self in a way that the S&P 500 or international growth or whatever the fund name might be doesn't. That's a good point. It's funny. They also said that one third of the people who own the Target Date funds own multiple ones, which seems a little counterintuitive. But I think the point is the fact that they're just using these in the first place is a big one. And as you said, I agree, Target Day funds are nowhere near perfect because they don't really take your unique circumstances into mind. But I think for most people, just stocking money away, I think that you can always do much, much worse than this. So I think the alternative of trying to do it on your own or trying to pick your own funds for a lot of people who don't have the time or

skill set or resources to do that. I think this is a big win. put 20% in each of the five-year integers from 2020 to 2060. So I have like a target date fund ladder. That's what I did. There you go. Right. And so there's actually another story on Vanguard this week of their own personal one. So that was Vanguard's 401k program, which is for other companies. Vanguard actually has their own retirement fund, of course. And it was kind of interesting. The headline said that Vanguard employees will no longer be able to own their signature S&P 500 index fund. So even Vanguard, the company is trying to make it easier and they want more of their own employees to be in Target Day mutual funds. So they're actually slimming down the number of options available

because they want more people to invest in Target Day funds, I think, to keep them easier. I don't know if there's some business stuff behind that, but it's kind of interesting that their biggest, most well-known fund, the oldest index fund, their own employees can't invest in it anymore in their retirement fund. Yeah, I think this is sort of a non-story. I mean, right? Yes, exactly. But it was interesting that even they said that they dropped the number of their funds from 28 to 16, and they're trying to make, they're eliminating funds to make the choices easier for their own employees. So even people who work at Vanguard, they're trying to make

their life easier, which I think is probably just a good lesson for people that, that this paradox of choice can really get to you when thinking through this stuff. So even the big fund firms have to have to deal with this stuff. Yeah. All right. So news just broke. gold will be sold in my Roth IRA. Alert, gold will be sold in my Roth IRA. So you're no longer a goldler? Well, by the time this podcast drops, I will no longer be a godler. Shame on me.

I was using a monthly moving average and oops, I forgot to look. So you should have technically sold this at the beginning of the month because you're looking on a monthly basis. Yeah. Well, at the end of the last month, yeah. Okay, so explain to people who haven't been following. the trade here, the tactical trade you put on in gold and what it entails. Okay, so I used just a simple 12-month moving average.

And when did I buy this? I think like September of last year. I think I bought, let's see, I think I bought at the end of August of last year. So it appears that I will sell this at a break-even. Oh, well. So you're cutting your losers short. Yeah. People have to stay tuned for the follow-up blog post on this, the idea that I gave you,

now you have to have to run with that. We'll leave that as a little bit of a mystery, but I think you have to. What do I do with my Roth IRA now? You have any ideas? Any tips? I thought you're going to do a target date laddering fund. 20% Tesla, 20% Nvidia, 20% Twitter. Yes. That's a good. So is this kind of your play money in terms of your retirement? What is your, what is your help for this money? So there's like, I think there's less than $20,000 in my Roth IRA. Okay. And you're using this as a play money on the side. Okay, we'll, we'll take suggestions from the readers about what Michael should do, or from the listeners, what Michael should do with this Roth Island right now. Please, that be your best stock tips. I'm looking for a market cap of under $300 million.

Average daily volume has to be above 50 to 100 shares. I'm looking for some deep value with momentum and great profitability and a high ROIC. Thank you. All right. Where were we? That was breaking news. That was actually, that was breaking. That shows how on top of that trade you are if you're 11 days late to sell it. What has it done in the month of June so far? It's rebounded. Okay. So maybe this was a good thing.

Sometimes you have to know when to break your own rules. That's fair. And breaking one of your own rules was kind of buying gold in the first place. And talking about it publicly. Yes. You did it almost as an intellectual exercise as much as an investing exercise, right? It was terrible. All right.

So Michael can take off his tinfoil hat now that he's going to be selling gold. So there was a story in Bloomberg about the coming generation. and what they expect for retirement. And this is where the millennials are old news at this point. Moving on to Gen Z. And they say that the majority of people in Gen Z, especially from the affluent side of things, expects the majority of their retirement savings to come from inheritance.

So I think it was over 60% of affluent Gen Z. And remember, this is a survey. So take that with a grain of salt, as we like to say. Over 60% of the people in Gen Z, and this is aged 18 to 22, so they probably haven't thought much about this yet, want to rely exclusively on inheritance for retirement. Ooh, this is, this is morbid.

It's a little nauseating. That is a little, yeah, that is a little morbid, isn't it? Imagine, listen, if you are born into a wealthy family, that's not your fault, right? Like, obviously. And we all want to be provided for and to provide for our kids. But this is just, imagine being 19 years old and thinking about your retirement in terms of your inheritance. That, yeah, that's just kind of giving up before you even get started, right?

Yeah. Yeah. What do you think? I mean, especially with people living longer these days. I think that that mindset, it really depends on how much wealth is there, I suppose. That mindset is going to have to change because the people are going to be spending down their portfolios for much longer periods of time. What if your parents aren't as wealthy as you think? And then they live to like 97 or 103. Are you like mad that they're like draining your inheritance? I mean, it's just a it's just a lousy, lousy place to be mindset wise. Yes, it's kind of a tough, yeah, that's definitely not going to fall on the financial plan. And so speaking of the more wealthy class, the New York Times had a story last week about the cost of college. And they kind of did some myth-busting here for the sticker price you pay for college. And so a lot of people see how much tuition is and assume that college is just ridiculously expensive. And it is in many ways.

But they actually break it down by poor families, lower middle class, middle class, upper-middle-class, and affluent. And then very affluent. and they show how much each of them pays for a typical college, and they actually have a little calculator on there that you can show. And actually show the majority of people never pay sticker price for the price of college unless you're in the top 10% of income or wealth, actually. Yeah. So where does the gap come from?

Like the endowments are subsidizing this? Yes. A lot of it is subsidized. And I think they said if you're, especially at like the higher tier colleges, the lower, you pay maybe like five grand for a $60,000 college if you make, less than $50,000 or $75,000 a year or something as a family. The problem is, which they kind of note here, is that it's still skewed to a lot of those affluent families are the ones that are being accepted, and maybe a lot of the people on the

poor end aren't applying in the first place, which is kind of sad. But actually, if you don't make a lot, your family doesn't make a lot of money, college can be very affordable for you if you try. So I wonder how many, quote, unquote, poor families make up the percentage of Ivy League schools. It's got to be less than, I mean, way less than 5%, right? I'm guessing. Is it 1%. I don't know. Maybe we should do a survey on this.

Yeah. One of the things that they brought up in the article that was interesting was they say the real problem is elsewhere among for-profit colleges and public colleges with lower list prices but much lower graduation rates. They often produce students with debt and no degree, which is a miserable combination. Yeah, the for-profit ones are, those are kind of, in a lot of ways, they're kind of shady and they, yeah, those are the worst ones for student debt. But I think the point here, the main point here is just that you're not going to be paying the sticker price of college if you're looking at some of these private universities. But I think what this says for affluent people, too, is maybe they're the ones who shouldn't be looking at the private

universities. They should be looking to pay in-state schools and actually allow their taxes to go a little further, but I guess that's easier said than done. So sticking with some surveys, so bank rate had a survey last week. And again, we want to say we're an anti-survey podcast, but we have to keep reporting these because they're there. So they say more than six and ten Americans don't know how much they'll need to save retirement according to a new study from bank rate. They looked at respondents who have an estimated net worth of $650,000. They say that there's also 19 million Americans say they never planned to retire. And so they're obviously not getting an inheritance. And the majority of those were millennials and baby boomers. This actually isn't that surprising to me from, because I think

that a lot of people just have no idea how much they spend or what their lifestyle is going to be like. So I think having a number in mind for a lot of people just isn't realistic. Yeah. And there hasn't even, I mean, has there even been a full cycle of retirees? I feel like the boomers, like the first generation that's even going to experience retirement in mass. That's a good point. I think a lot of people forget the fact that retirement is still a general new concept. In the past, most people's retirement plan was to kill over and die. I'm bearish on retirement. Meaning it's never going to happen for people? Just, I'm just not optimistic. In general. Which I think in a lot of ways, you have to give people

some slack because, like you said, this is such a new thing. There haven't been a lot of generations that have gone through it that could pass on, you know, some tips. And, in, I ideas and advice for the next generation because their parents never experienced it. So I guess in some ways, maybe we can cut the boomers a little bit of slack, even though a lot of them are ill-prepared for retirement. So last night I sent you this link, this was, I wasn't sure how to react to this. There was a survey done by TD Ameritrade. It's called the LGBTQ and straight millennials, attitudes toward money, marriage, retirement, and life in general. What did you think, this struck me is very bizarre. Why would you, what does sexual preference have anything to do

with somebody's attitudes towards money, marriage, retirement, and life in general. I guess maybe they're putting these out more in terms of their advisors if they have some niche advisors that focus on those areas. But I think, yeah, maybe that's drilling down a little too specifically because there's obviously personality differences and it's hard to bucket people in those terms and say that everyone in certain groups acts a similar way. Like, for instance, over half of straight millennials while under half of LGBTQ millennials are homeowners. And they kept, they did this for, I mean, this, it's a long one. I just thought this was very, I don't even know what the word is. It was, it was odd. I guess maybe they're trying to

show how hip they are to get the younger, younger crowd. Yeah, I don't know. Let's move off this before we. Okay. Stay woke. Yeah, exactly. There was a cool graph being shared on Twitter last week by Jerry Newman, who is a venture capitalist. And he showed the top 25 biggest names in the stock market from every year since 1942, and he broke him down every 15 years. So 1942, 1957, 72, 87, 2002, 2002, and 2017. And it showed the biggest 25 stocks by market cap for each of those time periods. And it's really cool interactive chart. We'll post it in the show notes. But the most interesting thing to me here is the fact that he kind of highlights which ones are new each time. And in 1940, from 1942, or sorry, this starts in 1927, so

1942 is the first new list. And there was nine new names in 1942. If we fast forward to today, the last year is 2017, there's 21 new names. And in 2002, there's 20 new names. So as we've gone along in time, the rate of change in these top names has expanded a ton to where the top 25 names every 15 years are much different now than they were in the past. So what are the takeaways here? I think the biggest takeaway for me was the fact that innovation is speeding up the cycles on these things and it's much harder for a company to stay on the top from compared to in the past. So I think it's easy to think that the top firms these days are so entrenched like Amazon, Facebook, Apple, but the odds of them staying at the top for the next 15 years, I think

it's much harder to do than it was in the past. So I think when we look at that list again in 15 years. There's going to be a lot of new names on there than they're out today. Okay. I think that there's, so what do you think? Do you think that Google, Apple, Amazon, Facebook will all be in the top 10 years from now? If I had to pick, I would say Facebook would be the most vulnerable in my opinion. You know, I was talking to somebody about this the other day and I said that, well, the difference between these companies and maybe companies in the past is that can you picture your life without Google or without your iPhone?

And then I said like AT&T and GM were 15% of the market in 1965. Did you have the same relationship with those two companies? And the person said, well, yeah. I mean, I don't think that in point in time, I don't think you could have pictured your life without that phone or without that automobile. And I thought that was a fair point.

And maybe I am going into the It Feels Different this time, which is, Probably not, but maybe it is? I think it's just, it's harder to predict, especially since some of the big names are tech these days. Obviously, these tech names are way more consumer-oriented than they were in the past. But I think, just looking at these numbers,

it's crazy the fact that there's 20 new names in 2002 from 1987, and there's 21 new names from 2017 to 2002. Now, again, maybe that's a more mature field now in technology, and tech is, what, 25% of the S&P now. So it's just got a bigger base. but I do think that predicting who the big winners are going to be and how long they're going to stick around for is getting much harder these days than it was in the past

when we had these big huge conglomerates or consumers companies that could just stay where they were. I don't know if I'd buy that, maybe marginally. I feel like it's, it was never easy. Okay, in 15 years we'll see who the winner of this argument is. Hold on, hold on, one more thing. I feel like maybe Apple as maybe a hardware company is not fair, but does, and I'm,

I'm literally making this up, but I think it sounds right. Does like 60% of the revenue come from the iPhone? Uh, that sounds right. Fact check me. Wait, then you're looking up. Hmm. I got, I got, yeah, that sounds right. All. Let's roll with it. Okay, what are the other investing implications here, though? So my thought, we talked about this earlier. My, my thought was this is one of the reasons that I think indexing is so hard to beat and maybe it's gotten harder to beat over time because the big, especially in a market cap weighted index, which all the Quants will immediately tell you it is the worst way to invest, even though, you know, say it, say it. Say it, pardon. People, well, people still, it's so funny to me that

Quants always show how market cap weighted indexing is so terrible. And then if it's so terrible, why is it so hard for people to beat? And I think the reason is because it's just a process, disciplined, low turnover way to invest. Anyway, moving back to it, I think it's hard to pick the winners, and especially when in a market cap weighted stock market, when you don't know who those winners are going to be. I think that's why it's so hard to beat indexing because it automatically gives you those winners. Well, the converse is also true that it overweights what will be the biggest loser. True. Yes. So damn it if you do, damn it if you don't. Like how many billions of dollars has General Electric wiped out from the S&P 500? True. And to your point, you're kind of arguing against

yourself here. You had a post where you said GE went from being in the top five or top 10 to being in the top of what, 40 or 50, and it didn't really crash the market. So obviously- Yet, yet, yet. Yes, true. But there was a counterweight to that. So I think that's, obviously, when everything falls, it'll be just that much more painful. But I think it just shows how hard it is to predict these sort of trends. And I think my take is I'm never good at predicting these technological trends, but I think

it's hard to believe that these top names are going to be there again in the future. Well, there was an article today in the Washington Journal. and they said that new entrance to the S&P 500 outperformed the index by a median of 17% in the year leading up to their inclusion in the index, according to a Ned Davis research analysis going back to 1973. Yet one year after their inclusion, stocks tended to underperform lagging behind the S&P 500 by a median of 4.1%. And it's not just the year before and the year after, but it's also like when the announcement is made. So Bob Arnaut had an article, or was quoted in an article recently in Barron. friends talking about how there is inefficiencies in the index because just based on the fact that like Twitter was announced that it was being added to the SP 500 and it's up what

8, 12% since that announcement before it gets added, whatever it is. So there's definitely some validity there. I guess the pushback that I would have is Twitter is a 25, 30 billion, whatever the number is market cap. I mean, it's a tiny, tiny piece. And looking back to when Facebook was added to the S&P 500. I remember a lot of people saying that it's sort of nuts that, so this was back in 2000, December 2013. This was sort of a sign of the top because a $120 billion company was then being added to the S&P 500, as if like index investors were robbed of the first 120 billion.

So Facebook were going to be the bagholders. Exactly, exactly. Facebook was announced on December 12th. and then in the week leading up to the inclusion, it gained 11%. So it added $14 billion in market cap between the time that it was announced and the time that it was added, right? So like reasonable people could have said and probably did say, look, index investors being robbed of an additional $14 billion.

However, since being added in December 2013, Facebook has added $420 billion in market cap to the S&P 500. Yeah, I think that's good, right? That is good. And I know I'm obviously cherry picking a specific name, but I think that the biggest winners, maybe you're going to buy high and sell them low if, you know, at one point, if they do shrink, but you're also getting the benefit of them going from a small to a medium-sized company to a giant company. Like, you are riding that wave. And you have to remember that the turnover in the S&P is a fairly small year-to-year, what is it, three to four percent maybe on average. So I think that

by no stretch of the imagination, our index funds perfect. And I think you have to remember that. Obviously, they can be front run and things like this can happen. And there are firms that work to get around these issues. And it's never going to be perfect. But I think the best thing about index funds is simply that they have a discipline process, a low turnover, they're tax efficient. And so there's nothing that says any other quant funds or active funds out there

can't do those same things. It's just a lot of them choose not to. And I think that's one of the reasons that indexing is so hard to beat because they have these built-in, you know, disciplined systems in place, whether they're chasing performance with their inclusion of new stocks or not. Yeah. Okay. So we had a handful of listener questions this week. We're going to get to. I thought this is a good one.

And it says, I'm curious to hear tips and advice on parenting, which is kind of tough because we're still early in our parenting. Yeah, I was supposed to say, I'm still a new whale. I mean, Kobe is 15 months old. Yeah, you have new whale all over your Facebook. bro. So he asked, this reader asked specifically, are there any books or podcasts? We'd recommend Animal Spirits and big mistakes. You got to get those. That's true. Any unique purchases of $500 or less that you couldn't live without and anything's you wish you knew before. Did you use the docketot? What's that? It's like a little foam cushion that you just stick the baby in and they

go to sleep. It's like a portable pillow, basically. Okay, yes. We did use the pillows, especially with the twins so it kind of forms to them yes we use those quite a bit because we had to feed the twins and it was hard to hold them both so we use those i think i thought my best purchase that it probably makes sense to be up for was a good stroller oh yes definitely you definitely i think it makes sense to buy a good one there and and not go cheap because especially when it comes to like folding them up and getting in out of a car you want to have the good one where you can just sort of push the button and it unfolds or folds i liked the round Libra book, The Opposite of Spoiled. I think that's for when the kids are a little older. I will say

my wife was amazing in terms of getting our kids to sleep, all three of our kids to sleep through the night. We use the, it's called The Secrets of the Baby Whisperer, this book that was recommended to some friends. And I know there's other sleep books out there, but I think the biggest thing is like if you're going to try to get your kids asleep is to, it's kind of like everything else is to get them into a routine in a process. And I'm sure there's a lot of other good ones out there, but that's the one we used. How many times a day do the twins meditate? I got to ask them what their morning routine is. It's a little chaotic.

The other thing we found now that our daughter Libby's a little older, we got a zoo membership last summer. That was really good. It's pretty inexpensive and something to do on the weekends, especially when they get a little older. Having those outings and reasons to get out of the house is kind of helpful. So I don't think that we have any great advice on parenting yet because our kids aren't old enough yet,

but I think that's about all I got. Same. Okay, here's another one. I wanted to get your thoughts on the concept of Stocksville-Longone and why investing world all generally agrees that over a long time period, stocks will be up big. Why do stocks generally go up over time and why can we expect them to continue to increase in value over time? This is a really good question. I do not agree that everybody thinks that stocks will be up big over the long run. And I guess the long run means different things to different people.

If I had to like, and I'm making this up and I could feel differently tomorrow, but if I, like, how confident am I that stocks will be higher 20 years from. now than they are today, probably like 70 to 80% confident that they'll be higher. And I don't know, maybe 40% that they'll be like meaningfully higher. But the reason, in my opinion, why stocks generally go up over time is thinking about this, I'm reminded of what Bezos recently said in one of his letters that his customers are divinely discontent. and I think that one of the best things about humanity is progress and the strive to do better things than the previous generation and never being content. And I think all of that

trickles down into investors' pockets over the very long run. Yes, you can't give a time period and say stocks will for sure outperform because there are long-term periods where they haven't. I think one of the biggest reasons, and I think the best data on this probably comes from the authors of Triumphs of the Optimist, which is that Dimson piece, and he puts out every year for Credit Suisse, and it shows stocks versus bonds going back to the year 1900 for every country in the world and every region in the world. And I think just for about every one of them, over the inflation rate, stocks tend to be bonds. And one of the reasons for that is because when you invest in a stock market or in a company, you're not guaranteed to earn income. You're lower

on the capital structure. So you're taking more risk. So I think part of it is really this risk premium. And to kind of echo some of your thoughts, you know, stocks are really kind of an ownership piece in a firm and you're betting on technological progress and innovations and the promise of the future in a lot of ways. And so I think that that's a big part of it. I agree with you that I think a lot of people these days maybe don't think that stocks will continue to offer such a large premium going forward. I think the last couple of decades has scarred a lot of people. But that would be my, I think if you look at some of the research, it kind of shows that stocks have done that. And I think the risk premium is one of the big reasons why.

Yeah, one, I mean, I am fairly confident that stocks will be meaningfully higher like in 80 years from now, 100 years from now. Right. But I don't really think that like 20 years is very long term. I mean, it certainly feels like an eternity. Don't get me wrong. But I think that like over the next 100 years and 200 years, Dow will be at, you know, a million and beyond.

But in the short term, I mean, who knows? Anything could happen. And you have to remember Japan. You do have to remember Japan. Which is everyone's argument against. It's long-term investing, which I don't think really holds up because I think to be a long-term investor in a single country is not really thinking through how things work, and you have to sort of be diversified. And that's one of the reasons that we do diversify, because we don't know. We don't know if stocks will continue to do this.

We think they will, and there's a good argument to be made for it, but we don't know for sure. Okay, one more question. How do you guys approach integrating factor investing into strategic tactical asset allocation decisions? It seems that people always talk about the overall allocation to stocks, but much less thought is given to actual construction. any thoughts on constructing a portfolio? This is a complicated question that I'm going to probably stay away from. You're punting out? Well, I think the idea here, a lot of people probably overthink these decisions.

There really is no perfect allocation. And I think trying to set the perfect portfolio in terms of how much small value do you need or how many momentum stocks you need or whatever. I think that sort of misses the, I don't know, I don't think that's the correct way to think about it because you'll never get to that optimized portfolio. You can always optimize to the past. Well, if you imagine putting like, okay, I want 20% of my equity portfolio in, in stocks with high profitability, another 20% of momentum, another 20% in value, another 20% in small, another 20% whatever. It's like, well, you just own the market. That's just beta. So I think I think that just people really overdo it. And I do think a lot gets lost in these conversations. I think people are talking past each other.

Yes, at a certain point, you just have to, if you're going to make a bet in one of those directions, then just do it and take the consequences and rebalance. comes into the pain when it's not doing well. And write it down, write down while you're doing that. Yes, exactly. But yeah, I think the construction thing, you're never going to get it perfect. But yeah, if you get too diversified and own too many pieces, you're paying up for an index-like portfolio, which kind of defeats the purpose. And then if you're going to be an index-like portfolio, I just remember Japan. Yes, and Greece. All right, any good recommendations this week? So I did finish that book, the Space Barrens. It was good. I mean, this is all new to me. I didn't really know much about SpaceX and Blue Origin, which is Bezos's company.

I just want to read one passage, which was interesting. While Musk had initially invested 100 million of his own money into SpaceX, the company had also benefited for more than $4 billion in contracts from NASA. By contrast, Bezos was his own NASA, funding Blue Origin almost entirely on his own. He joked that Blue Origin's business model has been, quote, I sell about $1 billion a year of Amazon stock and I use it to invest in Blue Origin. So if you had to predict, is there going to be like a winner in all of this? between SpaceX and Blue Origin, or can they both be winners in the space and help NASA?

What's the, what's the conclusion? They have different goals. Musk is obsessed with Mars and colonizing that. And Bezos said, like, one of the whole purposes of doing things in space is to focus on Earth and how beautiful this planet is. And one of the crazy things is, like, they're talking about using asteroids as, like, resources and mining the minerals there. And Allah was passed saying that any of the.

minerals that are mined and asteroids belongs to the United States, something like that. So it's a good thing that you sold gold this week because they're going to find a bunch of an asteroid anyway. Well, that's what I was thinking. I mean, gold is going to flood the market. So is platinum. And these rocks are just going to be worth a fraction of what they are today. That's my thesis, short gold.

That would be an amazing. I mean, I've read things about that in the past, how they could really solve a lot of energy issues if they actually were able to do that. Obviously, the technology in getting, you know, Bruce Wilson and Ben Affleck there to mine it for us is probably a little difficult. But that's the kind of thing where people don't think about in the future why things could actually be much better than they are right now in terms of, you know, markets and the economy, that sort of thing. So, yes, Malcolm Gladwell's podcast, it was a two-parter about how the brain misremembers things. I thought it was really interesting. And I agree with a lot of it. But I'm not sure that Brian Williams, genuinely thinks he was on the plane that was being shot out with guns and bombs. I was surprised at how much of a benefit of a doubt he gave to Williams on this. He just assumed for sure that it was all his memory and he didn't make any of it up.

I gave him a little bit of sympathy after listening to this. Yeah, a little bit. So one of the things that he spoke about was these flashbulb moments. Like, you know exactly where you were on 9-11, but there's studies done that people just totally misremember. But I don't really equate that to what Brian Williams experienced. And I'm obviously, I'm not an expert in memory. So, but I don't know. I thought that I do like the message that we misremember the way that we felt, where we were and how things went down. I totally am on board with that. But I feel like Brian Williams was totally embellishing. It was interesting how

on September 12th asked people where they were when they heard about 9-11. And then they asked them five years later and they said a completely different story but and but that's like I agree that's not something that you experienced that's something you remembered happening so I think yeah being firsthand and seeing something is a little different but I definitely agree with that your memory can play some tricks on you so I'm not allowed I'm not going to give Brian Williams a pass yet but it's a that was an interesting episode so I read business adventures from John Brooks we talked about this a couple weeks ago you finished it I'm probably two-thirds of the way through.

It's called Business Adventures, 12 classic tales from the world of Wall Street. And Brooks is someone we mentioned before that we've read. And he is just such a good author. And honestly, some of these, this was actually a recommendation by Bill Gates, I think, a while ago was one of his favorite business books. Some of the chapters are a little long and meandering and not worth it, but I think it's worth it just for the, especially if you're interested in the markets, for the very first chapter, which was about the flash crash in 1962.

and the coolest part for me was that he took a look at this book that was published in the year 1688 by Joseph de la Vega about the Amsterdam stock market, which was the first stock market that there was. And his book was called Confusion of Confusions. And so many of the things that he was writing about in the 1600s about the stock market were the same as it is today. So De La Vega was saying the news is often of little value when investing. He says that traders in Amsterdam were often very clever at inventing reasons for a sudden rise or fallen prices. And this was a good one. He said, the bears are completely ruled by fear, trepidation, and nervousness. Rabbits become elephants, brawls in a tavern become rebellions. Faint shadows appear to them as signs of chaos.

So this is talking about when people panic in the markets. And it was amazing to me how similar some of these quotes were to stuff we see today. Like was he talking about small cap stocks X junk? Yes, right. Exactly. So it was a it was a, it was a, it was worth it just for that one alone. And I think a lot of people probably don't realize that there was a huge flash crash in 1962. So that one was worth it for me. My wife and I caught up on Handmaid's Tale the last few weeks, season two on Hulu. I think there's two episodes left. I really like that show. It's very dark. And it's like shows this dystopian future about low fertility rates. Well, you said that's on Amazon? It's on Hulu. Yeah, I think it's really well done. The first season

when I thought was one of the best new shows last year. And also the Bill Simmons-Charles-Lockley podcast was amazing. Yes. That was so, he had such, so many good stories about Michael Jordan and playing with the Knicks. And so I highly recommend that. Oh, one last thing that I wanted to mention, thank you so much to everybody who bought my book and write it and sent me emails.

I really, really, really appreciate it. And if I could ask you one more thing to please, if you did enjoy it, write a review on Amazon, I would, I would really, really appreciate it. Yes, that's, that's good for it. All right. Thanks, everyone for listening. Animal Spiritspod at g-gmail.com, if you have anything for us, you can give us investment recommendations for Michael's Roth IRA

and we'll read some of our favorite ones next week. Thanks for listening.