Animal Spirits Podcast - The Podcast Boot Camp (EP.29)

Episode Date: May 16, 2018

Why market bubbles have nothing to do with ETFs, the multi-millionaire secretary's secret, the massive revenue airline credit cards bring in, the mistakes you want to make as a young investor 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 Rithold's wealth management may maintain positions in the securities

discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Ben, let me ask you a question. Are ETFs going to crash the market? I'm pretty sure they've already created a bubble. So you wrote about this last week, and I read about this before too. Anytime the market goes against what someone thinks it should go, they kind of look for a scapegoat. And ETFs have been the biggest one lately, I think. And so there's this idea that passive investors and ETFs and index funds have created huge imbalances in the markets, which is kind of crazy because this stuff happened well before these things even existed. And so you linked to a piece from Eric Belchunis of Bloomberg. And he wrote Hickshaw's writing for Vanguard. And he looked at stocks, bonds, and gold in the U.S. And ETF ownership

in each of these is just so small. It's not even, it can't even move the needle. So for U.S. equities, ETF ownership of stocks is about 7%. For bonds, it's only 1 to 2%. And for gold, it's actually less than 1%. So anyone thinking that these funds are actually pushing around the market, it just doesn't add up. Yeah, so I guess the fear or maybe the, not the fear, the blame is that there's just indiscriminate buying, there's no price discovery, passive flows are controlling where stocks are going. And if you look at the data, that's just not true. And you had a stat in yours where you said, General Electric, a few years ago, was is the fifth biggest stock in the S&P 500. Of course, GE's had a really tough time. And now they're

the 40th biggest stock because they've lost almost 50% of their value. But that didn't crash the markets. Yeah. So $120 billion over the last three years went into the three biggest S&P 500 ETFs. And so GE, like you said, was the fifth biggest stock at the time. Wouldn't that have been a tail win to GE a little bit? And the answer is no. It's gotten cut in half over that time. And a lot of people are saying, well, these ETFs all hold the big names like Amazon and Apple because their market cap weighted and that's going to crash the markets. But the thing about it is I don't see a bubble in ETFs. I see a bubble bursting in closet indexing. So we've always had this sort of thing where funds have followed the indexes. They've just

done so under an active management umbrella. So I think a lot of what we're seeing is just money coming out of closet index active funds that charge too much in fees into lower fee ETFs and index funds and they're doing the same thing at a lower cost. There's been booms and bust before ETFs. and booms and bust before mutual funds. I don't really think the wrapper in which people hold stocks or bonds is going to be the determinant of where the market goes. So there's another really good chart in here showing the percentage of assets and index funds.

By the way, we're using index funds and ETFs interchangeably in this conversation. We understand that they are not the same thing. There's plenty of ETFs that don't rely on indexes. But what this chart is showing is the growth in index funds, which is now 45% of assets, which is a significant number, obviously. And then it's overlaying the standard deviation of the Russell 3,000 defined by how many stocks have either outperformed or underperformed the index by 10%. And there's no signal here.

It's up, it's down, it's up, it's down. It's hard to look at this chart and say that ETFs or index funds are pushing around price discovery. Yeah, you could certainly say if you wanted to go out on the limit and say the markets are a bubble and the stock market isn't a bubble, sure, you can make that claim. but trying to say that ETS for the cause just doesn't make any sense because, again, these ETS and index funds own the market. They are the market.

So really, it's more of a market call than an ETF call. And I think a lot of this is really just people who've had a bad time in the markets and investing looking for a scapegoat and looking for someone to blame for poor performance. And so there was another chart going around, and I wrote about this last week. Golden Sacks has a really cool chart showing how much of the equity market household zone from from 1945 to today. And the craziest part to me is that in the 1940s and 50s, 90 to 95% of all individual securities were held by individuals. So households, corporate management, that sort of thing. That's now down to 36%. ETFs make up just 6%. Pensions and retirement funds

make up 12% mutual funds are about 24%. And so things have actually gotten much more diversified in terms of who is trading these stocks and it's become a lot more institutionalized. So in the 1950s, when A.W. Jones started his hedge fund, it was really like shooting fish in a barrel. He was just like taking candy from a baby. Yes, this is a good thing, the fact that more people are realizing I'm, I shouldn't be picking individual stocks on my own. I should be allowing a profession to do it or something with a little more structure in it instead of trying to pick them on my own. Yeah. And I think like households leaving the market in favor of index funds is not making things easier. It's making things harder because there are less suckers playing at the table. Yeah, this is a perfect chart for the idea that it's becoming harder to be the market over time because there are fewer suckers at the table. And so there was a really good story this weekend.

Last weekend, The New York Times, the title of the story, was a 96-year-old secretary quietly amassed his fortune that donates $8.2 million. So this secretary, Sylvia Bloom, worked for 67 years at a law firm. She worked until she was 96 years old, and I think passed away not too long after she stopped working, and she left the majority of her money to charity once she died. Wait, did she put $10,000 into Disney? Yes. That was it.

She invested in the original Bitcoin. So the interesting part about it to me, and a lot of people didn't know she had the money, and so she did it kind of quietly and was unassuming, and apparently she got a lot of stock tips from some of the lawyers at her firm. But the fact that she was able to stay in the market for that long, I think is the most interesting part. And John Reckinfieler at Morningstar wrote a piece, and he wanted to try to quantify how did she do this?

Was it because she was a great stock? And obviously they don't know because they don't have the account statements. But he actually looked back. If she would have just started saving in 1948 when she started working, the biggest boost to her returns came simply from being in the markets. So he looked at how much would she have had to save in 1948 to actually get to the point of having that $9 million in change in 2016? And what he found was in 1948, she would have to start saving $652 on an annual basis

and increase that by inflation and just earn the returns in the revenue. market to reach her $9 million, which, of course, is easy looking back now. So the most important thing she did was just stay in the market and not sell out of her investments over a very long time horizon. That's like one of the biggest secrets to Buffett's success is not just that he was a talented stock picker, it's that he never, ever, ever sold. Yeah, exactly. It's that really long time.

So this woman was invested for 67 years, so it's just the fact that she never peeled any the money off. And apparently she lived very frugly and didn't have, you know, a huge lifestyle inflation, I guess. But the fact that she just left that money alone and let compound interest do it. And that's the thing. It just, towards the end, that snowball just gets enormous. And so this is, I mean, obviously trying to put that into a formula and try to take away from what she did, maybe is the wrong point of the story here. I think that there's three sources of edge that investors can have. One is you can have more information or get information quicker than other people. And I think that's pretty much gone at this point. The other is you could have an analytical edge that

you are dissecting the data, have better insights, are seeing things more clearly than the rest of the market. Also really, really difficult. And then the third one, which I think is probably the most realistic for most investors, is to have a longer time horizon to truly, truly think about investing in a multi-decade experience. And that is something that is not easier than the first two, but it's more realistic to achieve. To echo your point, so Charlie Ellis had this old scriber, he wrote in one of his books, and he said there's three ways to get rich in the markets. He said, option one is physically exhausting.

You work harder than everyone else. Option two is mentally exhausting. You're smarter than everyone else. And option three is emotionally exhausting. So you have to have just a patient, long-term mindset. And that's obviously, it seems to me like what she did here. She chose the emotionally exhausting route, which for a lot of people is just really difficult to do. But unfortunately, the first two are probably even harder.

It would be really interesting to see what she was actually investing. I know that's totally besides a point for that, but just be kind of neat. Yeah, hopefully it wasn't GE the last couple of years. So there was a study in the Wall Street Journal covered last week, and it was looking at private investments and how they're reported to their investors. And this is something that I've touched on recently. So I wanted to talk about this. So it says a study of 135 U.S.-based unicorns, which would be private investments that are valued at a billion dollars or more by two professors from the University of British Columbia and Stanford University last year found the reported valuations were on average 48% above their estimated fair value.

And I wrote about this in a piece a couple weeks ago called Schrodinger's portfolio. And my basic idea here was just because you own a bunch of private holdings does not mean that there's little volatility in the space. And a lot of it comes from the fact that you just don't really know how much these are worth on occasion because you don't really see it. And so that volatility not being there is kind of a mirage to a lot of people. And it's interesting to the fact that they say a lot of these unicorns aren't being marked to fair value. So a lot of investors probably assume they're doing much better than they are. Well, Dan Rasmussen spoke about this in a post a few weeks ago. He was saying that granted, not seeing the fluctuations in daily performance every day might help investors behavior,

but that currently investors are paying a large premium for that. added benefit with valuations of private companies where they are today. True. I guess I can see the appeal there. Yeah, that if it helps you be more of a long-term owner, and obviously, if you're invested in private, in a private equity fund or a venture capital fund, you're locked up in a long-term structure, so you have to be. But I think people are diluting themselves if they think that because they can't see the actual value on their statement, that it means that it's any less volatile. True. I don't think anybody actually believes that. If they do, then they're probably not access to private equity in the first place.

Well, I think the boards that are reporting sharp ratios based on these numbers want to believe it. But I think the other part about this is the fact that when you're investing in these kind of funds, there's no one on the other end marking to market for you. These firms that own these investments are making up the valuations as they go. I'm sure they say they have models and stuff. So you really don't know. And almost by the time when you know something has gone wrong, it's almost too late. And I guess there's nothing you do anyway, but it's on such a huge reporting lag. that a lot of people in these funds will never know things are going bad until long after

it's already happened. Yeah, you know there's studies that show that investors that pay a load of three to five percent can actually have higher returns because they feel like they've already spent some money up front, so they're less likely to bail in a drawdown. It makes sense. Yeah, it's something to sort of keep you in. And I guess that's part of the downside of being able to trade ETFs and that sort of thing for free these days.

basically any time you want. So there's no barrier there. So switching gears, Ron Lieber from the New York Times wrote a article a few weeks ago, why airline credit cards have an enduring appeal. You have, you actually have this card. Do you not? He wrote about the Delta Sky Miles cards. And I have the gold one, I believe. I think there's a couple different ones. They'll have different colors. You think gold would be the best one, wouldn't you? But it's like the third one down. There's like platinum. Bitcoin reserve. I got the Ethereum one. So it's pretty interesting. So he goes through some of the data here on the relationships. So he said Delta generated $3 billion from this relationship with American Express in 2017.

And according to American Express, 21% of outstanding credit card loans belong to people with a Delta credit card as of the end of 2017, which is crazy. And I guess I can see it. So this one, here's what I get out of this one. You get a certain amount of points every time you spend and you get free baggage check with Delta. So you don't have to pay to check a bag. I think you get two bags per flight. And so there's also some points you get with when you book travel with them. And so I guess for people who travel a lot, this is probably not a bad idea. What sort of credit cards do you look at for when you do these things? So I use, I only use one credit card. I use the Sapphire Reserve. I use a $400 annual fee for mine. Is there a fee for yours? Yeah, I use the Sapphire Reserve as well. We're such millennials. Wait, why are we such millennials? That card was marketed specifically. for millennials trying to get them to spend on experiences and well i think you've spoken about this before like you sort of wonder how do they pay for the points because i've accumulated like enough to go on vacation at this point so you hoard them i hoard them well okay i mean the answer is that 21% of outstanding credit card loans belong to people with the delta card so people get very

enamored with the benefits with the points they spend money and then they can't pay back and then the interest payments are benefiting people that are accumulating points. They're basically subsidized. Yeah, the people who can't pay their credit cards back are subsidizing the people like us who just spend it down every month. See, I'm not like you, though. I'm not patient enough. I take the cash back every single month from my card. Oh, really? I don't have enough patience to wait for it. I just take the cash back. And so I spend everything on my credit card and it helps with your credit score. It gives you points. So I think it's a great idea if you can actually pay it off every month and you're smart about it. So I put

everything on my card. I never have cash. But yeah, it's interesting. So, I mean, they still have 15 to 20% on all these credit cards and the people who aren't paying it each month are being charged so much that these credit cards are able to give stuff away. I mean, every, I used to do credit card roulette a few years ago, probably, I don't know, five or 10 years ago at this point where I'd say every six months I'd get a new one because they'd have a $500 signing up bonus or 100,000 miles or something. I would play that, which is I just don't have the time for that anymore, but it's amazing how many offers that they have on these things. It's kind of wild that Delta sales in 2017 was just over 40 billion and three billion of it came from their relationship

with American Express. That is crazy. Yeah. So their net income was three and a half billion and they made three billion off of this relationship. That's pretty crazy. Yeah. So really good tweet storm this week from Jim O'Shaughnessy and that inspired Jason Zweik to piggyback and do an equally good tweet storm. What were some of your favorites in here? First of all, people love to complain about social media, but it's stuff like this that comes along that really like makes it all worth it I think all the trolls and all the annoying things and then Jim O'Shaughnessy who has been in the game for I think he said he's been an investor for over 30 years professionally he wrote I don't know it was probably 30 or 40 tweet storm and so my some of my favorites dealt with the human nature

side of thing so he said there have been a massive amounts of data that have documented that while the world is very chaotic the way humans respond to things is very predictable I don't know if some incredible jump in evolution intervention will, based on new discoveries will change human nature, but would gladly make a long-term bet that such a thing will not happen. The idea here is that human nature is kind of a constant no matter what changes in the markets, and I think that that's certainly a bet I'd make as well. Well, it goes back to what we were speaking about earlier about the wrapper in which stocks are held is irrelevant. People are going to behave the way they're going to behave. Exactly. Booms and busts are going to happen, whether it's from index funds and

ETFs or whatever it is. Although, what about when stocks start to trade on the blockchain? tokenize the world so the other the other good one is from jason zwag at the wall street journal he was kind of inspired by jim and it's interesting because i really like look up and respect these guys to the fact that they're they're they're willing and able to share this stuff is great so swag talked about uncertainty and he did a quote he said investors quote unquote hate uncertainty and he says that's nonsense that's like saying you hate gravity or morality or evolution and i just love this because it's people always say like oh uncertainty's at an all-time high right now but it's the world is always uncertain because no one ever knows what's going to happen next

But I love Jason and I love Jim, so I hate to throw him out of the cocktail. But in Jason's edition of the Intelligent Investor, he takes a little jab at Jim Ashonnessy. Oh, yes. You showed me this before. Yeah. I was rereaded that recently. I was like, ooh. Okay.

So what were some of your favorites from these tweets terms? So I also loved the investors hate uncertainty. And in here, in one of these tweets, Jason linked to a post that he wrote in September of 2008 called The Depression of 2008, Don't count on it. And two things that I pulled out of that article that were pretty interesting. Every day my mailbox fills up with messages from agonized investors who can find nowhere to hide. The most common refrain, I've lost money on everything. If you feel this way too, you are certainly not imagining. According to the researchers at Morning Star Inc., 91% of all mutual funds in existence have lost money so far this year.

That's like the most surprising thing to me is that 9% of funds actually made money then. They must have been money market funds or something. But it is great to like have someone like Zawak who's written for so long and go back and see this stuff because honestly a lot of the people that we follow weren't even writing back then. Yeah. Right? I mean, especially, we weren't, people in the blogging world. So it's interesting to go back and have that catalog and look at these things. And then in that same article, Jason was talking about how investors hate uncertainty. He said, well, that's just tough. Uncertainty is all investors ever have gotten or ever will get from the moment barley and sesame first began trading in ancient Mesopotamia to the last trade that

will ever take place on planet Earth. Oh, that's good. And the last. trade that will ever take place and planet Earth will be you shorting Tesla probably. So there was an article in the Wall Street Journal by a guy named James McIntosh that was pretty interesting this week. And I thought it kind of tied in with a lot of the buyback stuff we've been writing and talking about lately. And by the way, every time you bring up buybacks, you get hate mail from people. Is it the same way with you? Even when we explain it, I feel like I still get hate mail from people telling me I'm an idiot. It's always Cisco and Microsoft. Well, and just the idea is that companies should not be buying back stock, they should be giving more money to their employees.

Yeah, this is a great example of you cannot change people's mind with information or data that proves them wrong. Yeah, and I agree with a lot of the sentiment that maybe it would be nice if companies are more charitable, but that's just not how the world works, unfortunately. I wish it was. But the other side of the thing is that people think that now is the most short term we've ever been and companies are just reporting or just going for their quarterly reported earnings, and McIntosh took a look at research and development. And he looked back to the 1960s, and this is a cool chart that will include in the show notes, and he looked at R&D as a percentage of GDP over the years. And it looks like the stock market more or less.

Is that a double top, I see on this chart? There's a little bit of, I do see some head and shoulders. Maybe we can, next week, we can do Michael explains technical analysis on economic charts to Ben. But this shows business R&D in the U.S. as a percent of GDP, and it looks like a stock market chart, which goes from the bottom left to the top right, and it's more than doubled since 1960, and it's now at an all-time high. So people who say that companies are just focused on the short term and propping up their stock price, that they've spent more on R&D now than they ever have before. It's at an all-time high, but it's probably a bubble orchestrated by ETS and the Fed.

Is this higher or lower than you would have thought? If you had to guess, what percent of GDP, do companies spend on R&D? What would you have said? Yeah, that's, I mean, it is a small amount. It's gone from like 0.8% to 1.6%. So it is still a tiny percent. But that's, I honestly, yeah, I guess those numbers do look kind of tiny, but GDP is a massive figure. So I guess it would have, I would have to see it more in dollar terms than in percentage terms to make a, what did you think? Low. I don't know. I guess just seeing this Y axis looks a little bit low than I would have thought probably. Are you trying to say this is a chart crime? No, no.

Just the fact that it's doubled, I think, is encouraging because you hear a lot of this short-termism and people never think for the long-term anymore, but things have been getting better. So what do you think about Whitney Tilson's boot camp for hedge funds? So this was in Barron's last week, I believe. And I think we talked about this before, that he had a tough time as a hedge fund manager and now I was trying to teach. It's the kind of thing, I feel like if you wanted to be a stand-up comedian, you wouldn't go to a class to learn how to be a stand-up comedian, right? I think it's something that either you're born with or you're not. And I don't think someone's going to learn how to run a hedge fund by going to a class. I think one of the reasons why people were mocking this over the weekend is like, and I sort of get the sentiment, it's like if you can't do teach.

And Whitney Tilson admittedly did not do very well in his last years, which is why he shut down the fund. I mean, I give him credit for being so transparent. He said it's embarrassing to teach this. it's embarrassing to admit this. But I guess the idea that somebody would pay $6,500 for this is like sort of mind-boggling. Right. Yes.

I think maybe people who would benefit would be like first-year analysts who want to get into the hedge fund field and get to know it better and probably don't really understand what it all takes. Maybe they could get something from this. How are they paying $6,500 for this? Well, they probably went to Ivy League schools and they'll borrow money from their parents if they're going to go into hedge funds. But yeah, that's a good point.

And yeah, I don't see. I guess I don't know how successful he'll be, but it's, maybe he should just start a podcast instead. I don't know. So last week we talked about Argentina and the fact that their central bank increased their short-term interest rates to 40%. So someone sent me this. I guess I wasn't aware of it. In June of 2017, Argentina actually did a bond offering for 100-year bonds. And people actually, it was actually oversubscribed.

and people gave them money and I didn't realize this before Argentina has actually defaulted on its debt eight times in the past 200 years the last one being in 2001 yeah it's sort of like it's sort of nuts imagine they're like guys trust us this time

we're seriously going to pay you back I promise for a hundred years and people gave them money and in the first few months which was the end of last year these bonds actually traded at a premium to par and actually they haven't sold off

as much as you'd think from what's going on there I guess they're down, they're down to like 85 cents on the dollar last time I checked. Give me we work bonds all day. Okay, over Argentina, 100 years. What do you think the duration is on an Argentina 100 year bond? 90. Yeah, it's got to be pretty high.

Yeah, I don't know. It's just. I just, I think of the, the South Park meme, and it's gone. Yeah. I just, it boggles mine sometimes. But this is the human nature thing we were talking about earlier with Jim O'Shaughnessy. It's just, it's pretty crazy. Well, I guess like the high yield, people, there will always be buyers for high yield shit.

Yeah, that's true. Speaking of, Animal Spirits is doing an offering. Yeah. Yeah. We're going to partner with Blue Apron and Meyundies. So we had some listener questions coming this week. They're pretty good. So this one reader says, I think I've made every important mistake you can make while trying to figure out this whole thing.

What would you say is the most useful mistake you can make first to try to help you learn a lesson? Would it be market timing, opportunity costs, overconfidence, inability to admit what you don't know. What say you? What would be the best mistake a young investor could make? All of these things. And I definitely made all of them. You know, I was just reminded of this because I'm putting something together and I was looking at Apple's performance from 2013 to 2014, Apple lost 40% or something like that.

You probably shorted it, though, right? No, but I did sell it. I did sell it. And I remember, like, vividly, like, it was Samsung's going to eat their launch or whatever the stories were. I sort of forget exactly. But I was like, there's no way. I just, I don't believe it. Apple can't innovate. Yeah. And then the stock just kept going down and I sold it. It's definitely, it's definitely like more than doubled since the time I sold it. Yeah. That was actually one of the few individual stocks I've owned for a while. But I think whatever it is, I think the worst thing it can happen to a young investor is actually seeing a bunch of big gains in their

account. That happened to me early also, obviously. Yeah, I guess that's the overconfidence thing. But you're right. I mean, I think everyone just has to go out there and like pay their tuition. I don't think there is one thing that can happen to you right or wrong. But it's just, I mean, the biggest thing I would say for young people is just to figure out something that works with your personality, whatever strategy that is, and stick with it. Because that that's the hardest part of just figuring out something that works for you. I don't think that everybody needs to end up in index funds, like at all, that's where I arrived. But nobody starts out with an index fund, right? Like, everybody tries their hand at beating the market. And it's hard. There's no,

nobody can tell you not to try it or you're not going to be able to do it. Like, you just have to figure out on your own what works, what you're comfortable with and, uh, and go from there. So the more mistakes you can make in an early age, obviously the better in life and in investing. Hashtack study. Yes, the index, the index fund life cycle goes something like this. Index funds are stupid. I don't want to be average. Wait a minute. Wait a minute. I'm going to be Buffett or Paul Tudor Jones. Then, oh, wait, index funds are pretty good. That's way above average. I think I'll just invest in these things. Is that how it goes? Yeah. Okay. So there's another question. This one was around blogging. We actually get a lot of questions about blogging from, I think probably

from financial advisors. A lot of people want to break into that space. And so my question is, how much time resources do you invest in marketing related to the blogs? Do you focus at all on search engine optimization, do you monitor analytics? And I wish I had a good answer for this because it would make it seem like we've really got our stuff together on this. But really the only thing that matters is putting good content out there. And I remember looking at this stuff a lot when I first started, that analytics, Google Analytics and all that stuff. And now I honestly, I couldn't tell you the last time I looked, but it really doesn't matter figuring out keywords and all that minutia. It's really just putting out stuff people want to read. Yeah, I definitely check my traffic

more than you do. But as far as like the optimization and stuff, don't do any of that. I have no idea where my traffic is coming from. I actually just found that what a bounce rate was when my friend was looking at my analytics. So I think it would be a really big mistake to like see what post did well and then to keep doing that because obviously you don't want to like keep saying the same shit over and over and over. So I guess the answer is I really don't spend much time at all, if any, thinking about optimization. And he also asked, do you work with web developers or designers. And we actually do have designers that people that designed our site, the guys from I2, Zach and Adam, who have been really helpful for us. But I mean, I had my blog

for four years before they came in and really made it look spiffy. And I just kind of designed it myself on WordPress before. So I think all that stuff, it's kind of like buying business cards before you even start a business. Like people who want to be entrepreneurs, they want to get the business card perfect first before they even go out and make their first sale. Like that stuff seems like it matters, but it really doesn't. It's more about actually making the sale and having a good business idea. And that's kind of the same thing with blogging. It's content. And if you write stuff that's good enough for people to want to read, they'll come read it. The more you know. So what else? What other questions did we get? So we also had, this was more of a comment than a

question, but a reader sent us a study about the myth of outliving or retirement savings. And there was actually some work done that showed that people maybe worry too much about longevity risk. And I think part of that probably is more the fact of people are just having a hard time going from accumulating savings to taking it out and spending it. And so there was, this was from Michael Kitsies, actually. There was a study called spending in retirement determining the consumption gap by four different professors in the Journal of Financial Planning. And they actually looked at the period from 2000 to 2008, which is one of the worst eight or nine years stretches in the S&P. and they actually found that the majority of retirees had a higher balance at the end of 2008 than they had in 2000 because they stopped spending their money.

And so they got so worried they couldn't really spend their money. So actually the gist of this study is the fact that most retirees aren't going to outlive their money because they're not spending enough of it to begin with because they're so worried about it. Was this a listener question? Yeah, they sent us in and they said, hey, can you debunk this? And I don't know if I can because a lot of what we've seen too is it's really hard for people to turn around. and go from the accumulation phase and save and save to actually spending and enjoying it. So the idea here is that, and Kitsy makes this point, that the majority of retirees are not

going to put a huge dent in their savings over time because they're not spending enough, which seems kind of counterintuitive. Yeah, I remember why this reader sent this to us is because there is a paragraph here that was just absolute bunk. While some people do it out of money, a person with less than $500,000 in savings on average spends just about a quarter of it during the first 20 years of retirement. How is it even possible?

What was this a survey of one? Well, it says one-third actually end up with a larger nest egg than they had when they left their jobs. The study says, yeah, I guess it's probably hard to say. Even people who had only $32,000 shortly after leaving the workforce had about

24,000 left, some two decades after retirement. That makes no sense at all. I guess what happens for most people is they probably just live off Social Security, I would imagine, at that low. But yeah, I can see I guess I can see both sides of this. On the one hand, longevity risk is increasing because people are living longer.

But on the other hand, I do think there's something to be said about the fact that people have a hard time turning things around and going from being a saver to a spender. Yes, that is going to be one of the biggest challenges. Actually, Chris spoke about this recently on a podcast with Tim Maloulli about the psychological challenges of saving and saving and saving and having that drill into your head for 30, 40 years of your working career. then turning around to be like, all right, now I'm going to spend this down. That is a very difficult transition to make, I would imagine. Very true. Okay. Any good recommendations this week? Yes. So I read a Disney biography, not the big giant one. That's like 800 pages. This one was by Bob Thomas. And it's called an American original. And Disney was a fascinating man. He had an incredible life, obviously. A ton of failures along the way to success. Like he was not an

overnight sensation. He was not a wealthy man until his 50s. So one one line that I wanted to share that I thought was just encapsulates what type of personality he had. So after Disneyland was open, the first person to visit was the president of Indonesia. I'm sorry, the first foreign famous person. And the quote goes, he was dazzled by the place. And as he and Walt stood on the prow of the Mark Twain, he remarked, Mr. Disney, you must be a very wealthy man. Walt smiled then replied, yes, I guess I am. They tell me I owe about $10 million. Nice. That's pretty good. Yeah, it was really, really, really good. So on Friday night, I went to the movies by myself, which I am known to do from time to time. And I saw a quiet place. Wait, was this a late night

visit or an early night? It was 7.50 p.m. Okay. Just by yourself. By myself. Okay. So I don't think I've ever done that before. Really? Movies by myself? No, I don't think so. I think the last 10 movies I've seen have been by myself. Okay. Anyhood. All right. Well.

I saw a quiet place and it was freaking awesome. I highly recommend it. And that's the one with Jim from the office and Emily Blunt. Yeah, really, really good. That's really good. Okay. And I think it was Jason Blum who did that. The dude that does all the horror movies.

Oh, the Blumhouse ones. That's right. Yeah, I think, I called them Blum. I guess it's Blumhouse. I think that he produced this one. I saw on Netflix, I watched a four-part documentary called Bobby Kennedy for president. and this is for people, historic fans only, because maybe people find it sort of boring. But there was one thing that really stood out that was nuts.

So, RFK was JFK's attorney general. And he told him that his approval rating fell from 76% to 70% in a month over the phone. And JFK said that he hadn't seen it. And yes, when did the ratings come out? And Bobby said two days ago. like how crazy that it's not because information didn't travel as fast as it does today which obviously it doesn't but just the fact that he was unaware like 48 hours later of what his approval rating was wow that is nuts so yeah 1968 the year that rfk was a sasset was just a wild

year for our country definitely recommended if you're a fan of history and then uh what else so bill simmons had a podcast this week where he spoke with the owner of the celtics who told the story of when they traded Pierce and KG to the Nets and how they ended up getting another pick which turned into Jason Tatum this year was just really, really, really cool to hear. Okay, good on. I didn't listen to that one yet. So I got just a couple. I finally read the smartest guys in the room, which is the book by Bethany McLean about the Enron fiasco. And for some reason, I just never read it. It was pretty long and had a lot of detail. But I think the personal profiles of the individuals involved were just really good. The crazy

thing to me was, and this was written in the mid-2000s, not too long after it happened, a lot of these guys just weren't remorseful at all afterwards. They didn't admit that they were wrong and they really didn't think they did anything wrong. And a lot of it was just, I think that it was just kind of a psychopath thing, like where, what do they say, 5% of CEOs are psychopaths. Like, who says that? There's studies out there that I've written about the, that book, the wisdom of the psychopath. I think I read that a few months ago. There's some stat that a high percentage of CEOs are psychopath or sociopath. And so that was a good one.

I wrote about this, but it really reminded me of when genius failed in the long-term capital management. There was just, there was so much overlap there. And finally, finished season two of Atlanta, which I mentioned before the season started, I think, on this podcast.

Okay. What is Atlanta about? I don't watch it. It's about a cousin who has a, who is the manager to a rapper. And he's managing and they're trying to come up in the rap. game. But it's kind of, it's a little different. And I'd say this season was a B versus an A last season because it got a little dark midway through the season, but they kind of turned around

and the last two or three episodes were really good. And this finale was great. But it's probably one of the funniest shows on TV. And so if you want to start, I would start with season one to kind of get an idea of the characters and stuff. But it's just about- Start with season one. That's a bold strategy. Well, some... Yes. Yeah. Sorry, this isn't a trend following. This is a value play against for the beginning. And so anyway, season two, Atlanta, I give it a B, but I liked it. And that's all I guys. All right. Thanks for listening. Please, if you enjoy this, drop us for review at iTunes or somewhere else. And we'll see you next week.