Animal Spirits Podcast - The Podcast Power Law (EP.84)

Episode Date: May 29, 2019

On this week's show we discuss the unraveling of Tesla, what it takes to be in the top 1% of podcasts, where do people listen to podcasts, what Michael learned from creating a financial plan, why the fixed costs matter more than the variable costs in your budget, why workers are fleeing big cities, should parents charge rent when their adult kids move back home, the problem with checking your portfolio performance, some thoughts on annuities, would the market be lower without buybacks, raising cash for a down payment and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits is brought to you by Whitecharts. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Battenick 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. of Ritthold's wealth management may maintain positions in the securities discussed in this podcast.

Charlie Grant in the Wall Street Journal had a really good article over the weekend about Tesla and what's going on. He's covered them for a while. A few amazing things jump out of this article. They burned through more than $900 million of cash in the first quarter. And it only has a year's worth of cash left. If it's current burn rate doesn't change. Even though they had a financing deal in May, which brought in $2.4 billion. So it's not just the stock price that's in trouble. It's potentially the business is in trouble, which is probably why the stock prices is in trouble in the first place. But what's really interesting about this story, and I know we've sort of beaten this to death, so forgive us, but is how polarizing this is and how many

people have been betting on it for so long. So this is not a new thing. In 2012, 60% of available shares were sold short. And they obviously got crushed because I think it was in 2013 that Tesla had an enormous store. That's amazing that it was that high. Yeah, crazy. So it appears as if the shorts are pressing their bets because the short interest has gone up while the shares have gone down. Right. So it's the most momentum bet where people are selling so other people hop on, which works in the other direction as well, I guess. So I looked at the numbers and we got these charts from white charts and one of them showed you showed the short interests changing over time and it is all over the place, but it's still relatively high, I'm guessing, in a, in a,

comparison to other stocks. But over the last five years, the S&P is up like 63% and Tesla is down 10% in that time, which sounds horrible. But honestly, that entire underperformance has come in 2019. What happens over the last six years? It's all happened to this year alone, which shows how highly volatile it is as a company. This is the kind of thing that can happen with individual stocks. So Charlie said, since going public in 2010, Tesla has raised fresh funds through stock or convertible bond offerings every year, except 2018, for a total of more than $12 billion. Because the price has generally gone up, investors who put in cash before this year had been happy.

So obviously, things have changed dramatically. I think the stock is down 50% year-to-date. So let me ask you a question. Aside from the shorts, who wins if Tesla goes bankrupt? Paper traders on Twitter? I don't know. It's, I guess you could say some of the other car companies that are already out there. So I was thinking like, is Tesla's potential demise society's loss? Because Musk has been a visionary and a champion of all these things. But if this is really a viable product and a viable business model, then somebody else will pick it up. I guess the hope is that his work has pushed the other car companies even further into electric cars. And it seems like that stuff has sort of shifted in a lot of ways. So hopefully that that's kind of what happens. But.

I, yeah, I wouldn't be surprised either way, but do you really think Tesla is going out of business in the next year or two? Is that really going to happen? You think he's going to allow that? I mean, according to Charlie, like we said, they have one year worth of cash left. I'm going to say that there's going to be a, I'm not bad in this. I have no money in this. So it doesn't, you know, take it with a giant grain of salt. But I would say that there's a short squeeze coming. If funding was secured at 420, shouldn't it be really secured at like 190 or whatever is that now? But don't you think, do you think, do you think? Do you think? that if it does go out of business, is it currently in the death spiral or will it be one more sort of 40% pop? Oh, right. Oh, like this, yeah, I don't. I don't. I know. It's ridiculous. So like a multi-billion dollar company. Maybe I'm, maybe I'm naive. On paper. All right. So I wanted to say something before I forgot. Based on your recommendation on a lot of others, I watched Chernobyl over the weekend. Did you catch up all the way? So the first episode was incredible. The show's

amazing. Absolutely, absolutely incredible. And the ending of the second episode was also phenomenal. So how many episodes are out currently? The fourth one was just on last night. So I've watched three and I'm, I should be catching up on the fourth tonight. Last week, you asked me, is this the 1987 equivalent of a disaster like this? But if you watch it, it's more like the Great Depression, isn't it? Because it just keeps getting worse and worse. It is so phenomenally well done. Like, it's just, It's so good. One part that really stood out was when she opened the window and started measuring the, what is it in the air? The radiation.

It's so funny to think about it. This was 1986, so it's not like it was 1950s. But I guess it might as well have been in terms of communication because imagine if that happened today. Well, it did happen. Fukushima Daiichi was front page news. I can't believe that you just pulled that word off. All right. Well, I looked it up last night.

because my wife said, well, this can never happen again, right? And I was like, what do you mean? This just happened to Japan, like in 2010 or don't you remember that? You know, it's funny? I was trying to like, I was like, I knew I remember the word, but I had to look it up. But so she took the sample of the air, put it in the machine, whatever, and it was, I think she was like 400 miles away. Yes, it was in, it was in like Stockholm or something that people found it.

That's insane. And people did tell me, too, that there is a podcast that accompanies the show that you can watch that you can listen to on HBO. I kind of want to listen to that. So here's a mini spoiler alert. So press fast forward 30 seconds right now and it'll be done. Can there be a spoiler alert for something that happened in 1986? I guess if you don't know the story. No, so, okay, so in the show, in the first scene in the first episode, the guy hangs himself. Right. Do you think he hangs himself because he knows what his future awaits with like ears growing out of his face and stuff? Oh, I don't know. That wasn't meant to be a joke.

Yeah, or he thought the KGB was going to kill him, I guess. It's possible. So you sent me a story yesterday from A16Z, which is the venture capital firm funded by Mark Andreessen, Ben Horowitz. And it's called Investing in the podcast ecosystem in 2019 by Legion. And this was really well done. It was a whole huge research piece on the podcast industry, which it doesn't seem like there's ever been a lot of numbers released about podcasting. Because I think Apple, who has most of the data, kind of holds things close to their best. So, yes, this was very well done. And we'll get into our numbers in just a minute. But, Ben, if that's right, do you mind if we discuss our numbers? I didn't even run this by you. I don't care. No, please, please don't share. I'd rather make that private. It's just between the two of us.

What may surprise people living in heavy commuter markets is that listening primarily happens at home, which represents almost half of all podcast consumption. So half of all podcast consumption lives at home, I was listened to at home. That surprised the heck out of me. Yes, that surprised me too. I wonder what percentage, I would love to see what percentage is done. on AirPods because that has supercharged my podcast listening since I got those. I think I told this story a few weeks ago. I would say that I probably, I would say less than 5% of my podcasting is listened to at home, maybe 5 to 10% at times. Yeah, mine's pretty, mine's pretty low too. So the last time that I would, that I did it, Rob was young at me and I couldn't hear it because I had my AirPods in. Kobe locked himself at his bedroom. Nice. No idea. Isn't that, but what's the the most awkward thing in the world is when you have

your AirPods in and someone tries to talk to you like a stranger or someone at the store and you have to fumble with your phone or get the AirPods out. It's just a really awkward scenario. That happened to me at the grocery store yesterday. This nice old lady asked me to grab her some yogurt and I had to take out my headphones. Yeah, it's kind of weird. So they show that it's a venture capital piece so they have to use the word power law in it. So it says power law consumption or podcast consumption follows a power law with a long tail of hobbyist creators. And they say the top 1% gets about 35,000 downloads per episode. And then the top 10% is like 3,300. But the median is 124 downloads per episode. So there are just a ton of podcasts out

there, obviously. What's the total number in here? 700,000. 700,000. It's amazing. Somebody had a good insight. 124 sounds terrible and maybe compared to 35,000 it is. But if you're talking to 124 people, that's still like a room full of people. Yeah, that's true. Like, people get nervous to get up and talk in front of 100 people. Like, if you're talking in front of, like, a lot of people get really nervous to be in front of a crowd and talking about a hundred people. But if you can do that on a podcast, it's much easier, obviously. So you don't get the cleanest data because, like, overcast, for instance, you get an automatic

download. So you don't know how many people are actually listening. But Animal Spirits has between 20 and 25,000 downloads per week, and it's growing. So hopefully the number keeps it growing. we get to the top 1%, but to your point, in terms of like envisioning how many people that is, Madison Square Garden holds around 19,000 people, I think. So we're in the top 2% because 2% is 20,000. So that's their new t-shirt.

We're the 2%, yeah. So the other one that kind of caught me eye, they show the podcast industry rankings, and they show them by company or website or whatever. NPR is, of course, number one. They get like 20 million people a month almost. And the one that surprised me here was ESPN was 9th, that they get like 4.5 million unique listens a month. But Barstool Sports was ahead of ESPN, which doesn't seem to make any sense to me,

the fact that ESPN has let another sports company jump them, that they just totally over. I mean, I don't know, are there any ESPN podcasts that people listen to? They should just dominate this. When you were talking this morning, you listened to the Ryan Rusillo one. I don't listen to any of them. And I don't know if this was a strategy error or a product error failing to realize how big podcast was. But this reminds me of a book that I'm reading, which I am only, let's see, I'm 103 pages in and I am ready to declare this book one of the, probably the book of the summer,

maybe the book of the year. You looking at this, Ben? Yes. Okay. I think Malcolm Gladwell recommended that the other day. Oh, did? Okay. The book is called Loon Shots, how to nurture the crazy ideas that win wars, cure diseases, and transform industries. The introduction was really good. Who's the author, by the way. This guy, Safi Bacall. He, I think he was, he was CEO of a biotech company, I believe. Okay. And it's incredibly well written. There's some amazing stories. So it's not just like fluffy bullshit about how to do things. There's stories I've never read before. I am pounding the table on this. I cannot recommend it highly enough. And I hope that it doesn't let me down. I hope it doesn't fizzle out. How often does the word power law use there? Got to be a bunch. You know what? Not once. I don't think.

Wow. Okay. It's really, really good. So that's it. Okay. But I would love to see what these numbers look in 10 years because I don't see the podcast thing. Everyone always makes a joke. Oh, everyone's got a podcast now. This is peak podcast.

I think no way. This stuff is still going to just continue to keep growing. In terms of ad revenue, it's still a blip on the radar. And in terms of everyone has a podcast, no, they don't. There's too many podcasts. No, there aren't. And obviously, like, what does it even mean there's too many podcasts? So there are there too many websites?

Like, you don't have to go to all them. You don't have to listen to all of them. The fact that FM radio still exists in its current form with the way that the ad model works for that, it's just kind of mind-boggling. Like, I haven't listened to the radio in years, but I know a lot of people still do. FM radio are the C-shares of digital content. There you go. There's a new podcast that I think is tremendous. I think it's called The Longview.

It's with Christine Benz and Jeffrey Patech from Morningstar. Yeah, I've listened to that one too. They're really good together. They have a ton of experience and obviously know what they're talking about. I listen to, so far, I listen to the one with William Bernstein and the one with Morgan Housel. I'm looking forward to listening to more of that. I think my current best podcast in the game right now, hands down, is Conan O'Brien. You're right.

You are right, sir. It is so good. His one with Howard Stern was great last week. He just had one with Bob Newhart this week where I'm like, really Bob. Bob Newhart was 90 years old and it was roasting Conan. I was like legitimately laughing. It was, wasn't it great? It was so funny.

By the way, I've never heard of Bob Newhart. You never heard of the Newhart show? No. Okay. You're older than I am. My parents used to watch it. Okay. Okay, so when I was in New York last week,

you were telling me that you sat down with financial advisor extraordinaire and our team, Bill Sweet, to actually do your own financial plan. Hold on. Hold on. Let's not gloss over the good stuff. Okay. How was a bagel? Oh, yes.

I tried my first New York bagel. It was good. Long Island bagel. Sorry, Long Island bagel. It's in the state of New York. How's that? And then everyone kept saying that you should try it. Now you have to go to Montreal because Montreal bagels are better than New York bagels,

which that's a competition I didn't know was going to happen. Montreal versus New York. Actually, when we were in Texas, our Uber driver was a Jewish girl from Long Island, and we were, somehow bagels came up. Yes. And she told us about Montreal bagels. That's because, you know, Within five minutes of a conversation with someone from New York City,

bagels come up at all times. Bagels and pizza. It was good. We tried pizza and bagels. I like them. Oh, wait. How is the pizza? The pizza was great, too.

Here's the thing. Bang got a buffalo chicken slice from La Piazza and Merrick. Yes, and someone told me you can't call it a piece. You have to call it a slice. What did I say? What did I call it? You called it a slice, but I called it a piece on accident. And I got it.

I'll let that slide. Come on. Here's a thing. The bagel was great. I wouldn't go out of my way for a bagel. That's the thing. you don't have to go out of your way. They're every five blocks.

That's true. It was good, yes. Would I, if, you know, in the moment, if I'm gunned to my head, donut or bagel, donut, 10 times out of 10. Nobody's holding a gun to your head. It could happen. All right. So what happened with your financial plan and what did you learn from the experience by going

through this process with Bill? And what caused you to go through the financial plan? Hold on. That question is way too open-ended. Get specific. Okay. Why did you want to create a financial plan? Like, what was the impetus that made you finally do it?

because Bill's been in the office with you and other financial advisors have been for years. Why did you finally decide to do this? Good question, Ben. I'll tell you why. Hey, that's a very good podcast. That's a great question. Yeah, you're really, you're pulling out the threads. So I think I always knew that I wanted to have one done for me eventually, but I didn't

want to do it until I was in my house because I feel like once I'm in my house, I will have like a predictable spending I will know what all my numbers are and stuff like that so I just felt like now is the right time that's a good idea that makes total sense and what did you what changed your mind like did you have anything in your mind change after going through this process did was there any light bulbs that went off um I mean there's there it's hard to boil this down into like a snippet because some parts of me felt like it was it was a waste only in the sense that Like none of this is going to come true. But then other parts, me were like, but this is just the base.

And it's going to get updated and it's going to change. And that's the whole point is that it's going to change. Yeah, that's one of the things people don't realize. It's not something that you just create once. And then it's like that for 40 years. It obviously changes. Your life changes. Your circumstances change.

Your wants and needs and desires change. And maybe that's the point. Bill was asking me, like, do you want a second house? And I was like, I don't know. Sure. Why not? And he was like, all right, how much does it cost? and I was like, $750,000.

Like, I don't know. Like, I don't actually want to, yeah. Yeah, I don't actually want a second house today, but, but maybe I will. And like, maybe in 10 years, if I'm saving for the house and I could say, you know what, I changed my mind, we don't want a house. And then I can redirect that money to something else. Like, I think for that reason, it's valuable. Yeah, that makes sense.

And now, obviously, like, for people that are closer to retirement, I think it's essential and critical even. Yes. And there's other aspects of that, too. Like if you're, if one spouse in a relationship does all the financial planning and all the personal finances in the house and the other person is kind of in the dark, it's good to have a financial plan in place to make sure that other person is taking care of in the event and something happens. One thing that I liked about it as a result and also as a result of reading Ramit Cady's book, I will teach you to be rich. Robin and I created a spreadsheet where we looked at like our income and our spending. and I was very happy to know that my fixed costs are around 55% of my total income after tax.

What do you consider fixed? Car, home. Is Netflix considered a fixed cost? No, I put that in variable. No, I actually had a column for subscriptions. Oh, okay. Hold on. So let me actually, let me just look at this.

See, I've never actually gone through that and figured out what my percentages are. Well, I'm actually going to write a piece on this, I think. but let me just open this up real quick because that is a good cost that is a good question i'm sorry all right so under fixed costs here's what i got all of my insurance homeowners flood whatever whatever car mortgage and taxes daycare cobi's 529 um my taxable investment account my train my car pet insurance pet food like things that are that I pretty much I could bank on. That makes sense.

And then in terms of... Bagels. Bales. Slices of pizza. Did I put food in there? No, I didn't. Subscriptions, I have Sirius, Verizon, ring, Verizon phone,

newspapers, Netflix, and then variable costs. And variable costs are coffee, food, clothes, stuff like that. That makes sense. Did you use a program like mint to do this or did just do it by hand? I just estimated, like, I put... Yeah.

I put, like, $1,000 a month on clothes, but there's no way, no freaking way that I spend $1,000 a month on clothes. I like the idea of including savings in your fixed cost because that's the way I look at it, too, is like, it's a bill, more or less. Right. And I probably, I probably would not, that would have gotten a different line item before, for like knowing that, I guess, or reading that from someone. I don't know if it was Dan Egan or Rameet or somebody. Right. But anyway, that was a very valuable exercise because Rob and I had never done that where it's like, Oh, okay. This is our income and here's our spending. And thank God, there's some left over.

Yeah. Okay. That's a good exercise. So one of the places where I have been spending money lately, and you said when we were talking to our meat, that I buy a lot of sneakers. And I did go on somewhat of a binge with sneakers. And the reason why I did was because they were ads on Instagram. So I've probably spent, I don't know, $6, 700 on sneakers in the last five months. But like, that's it. I don't like buy a lot clothing. I'm not going to, like, continue to, like, collect sneakers. I just had, I just went from, like, zero pairs to, like, five or six or whatever it is. Well, the point is you hope that you get to the point where you can spend on stuff you like, like in that category, and then you cut back

everywhere else. And that was kind of a meet's point to us when we talked with them last week on our video is you cut mercilessly in other areas that you just don't care about. Yeah, and I think that that's, that makes a lot of sense. It's really hard to cut, though. Like, I was thinking about, like, a subscription that I pay $15 a month for. But, like, what is that a year? And that's why the fixed cost thing is so important. And you talked about something like daycare, that's at least something you can plan for. I mean, it's possible your kid could go right from daycare to private school. But if you can do the daycare thing, when you know that's a fixed cost every month or year or whatever, how often you pay it, when that comes off the books, that's like a huge windfall to you.

So that's why those fixed costs are so important in controlling those. If your fixed costs are 80%, it doesn't matter what your variable costs are. And you can't cut it off because your fixed costs are way too big a percentage of the buy. Exactly. So anyway, in terms of the ad stuff, so we spoke about this on a video with Josh. The Instagram ads, I think are terrific. And maybe it's because Facebook knows everything about me, even though I'm not really on Facebook, maybe because the people I follow in whatever, whatever.

The Twitter ads, however, seem to be invasive is too strong a word, but they don't seem to be doing so well. I don't ever really notice them. Sometimes I laugh when I see a promoted tweet from someone. I'm like, why is this person promoting a tweet? But I don't notice them as much, but the Instagram ones do sort of pull me in somehow, even though I'm not even on Instagram is nearly as much as Twitter. So I don't know how they haven't figured it out yet to maybe it's just because it's harder to read people on Twitter because people on Twitter are so much crazier than people on Instagram. Could be.

Is that a fair assessment? Instagram is just such a nicer place. It really is. By the way, we post on Instagram. What's our handle, Ben? Animal spirits pod, correct? Okay. That's correct.

Yeah, it's just, it's a nicer place on there. People are nicer. The comments are nicer. It's great. It's like going, what do I, I described it the other day when I was with you as the movie of the beach with Leonardo DiCaprio. Was that what we were talking about? It's like this, we discovered this space. Yeah, we discovered like this safe space that's like hidden and it's from Twitter.

Outer of nicest to least nice. Instagram, inbox, Twitter. Our inboxes full people with backhanded compliments. I love you guys, but you're idiots. And by the way, you know it's so funny. We haven't even spoken about like in person. Where does that rank? Does anybody even interact anymore in person?

Yeah, not much. Okay. I prefer it that way. by the way, for the record. All right. So the New York Times had a story this week and they showed how people in big cities are, a lot of workers are moving away, pretty much because they can't afford to live there anymore.

And so they showed Santa Clara County, California, and they showed the earnings from 1960 to 2017. And then they compared that to, so they compared a worker like a janitor to a lawyer. And the lawyer's earnings are way up. The janitor's earnings are down on a real basis. And so a lot of these companies are having problems keeping people. So they said King County, Washington, which is where Amazon is, had 5,000 people leave last year. In Silicon Valley, they lost almost 25,000 people to domestic migration, they call it. Same thing happened to, like, New York, Los Angeles, Miami.

They all lost people in 2018. So I thought about this when we were in Austin a few weeks ago. And we saw all these cranes everywhere. And there was all this building going on and things were going great. Are big cities like this in more trouble when the next downturn hits than other places? Is that possible? Obviously, this is kind of rhetorical question, I guess, but a lot of these places have just seen so many people come in and has seen so much money and the expenses have gone up and housing is more expensive. Are they going to get hit even harder?

Is it kind of like where we have this thing where the wealthier places are going to feel more pain to the next recession? Isn't that usually what doesn't happen? Don't wealthier people usually write out the recession better? I'm saying maybe this is maybe this time since the wealthy have seen all the gains in the last 10 years in terms of financial assets. Yeah, financial assets, housing prices have gone up. Those gains have mostly gone to the wealthy. And now we're finally seeing some things like wage growth and stuff pick up. But is it possible that these bigger cities are actually going to be a lot of people assume, well, everyone's moving to the cities.

so the cities will be fine. Is it possible the next recession is actually more painful for them? I don't know. Throw it out there. I wonder if the pain will be felt more regionally than it will in cities. I think that you might be able to lump regions together more than you can cities. That's true. That could be the case. I just think it, it seems like the next downturn kind of almost should hurt the wealthy more because they've had a better ride up lately. Isn't this rhetorical because we're going to break Australia's record of 25 years without a recession? Yes. I think that would break people's brains, too, on Twitter, especially if that happened. Okay. So speaking of people moving back, there was a story in the Wall Street Journal about people who, parents who charge their kids rent when they move back home with them. If their adult kids move home with them. And they showed that the percentage of 25 to 35 year olds living with parents is up from like 7.5% in the 60s to 15% now.

Did you move back in with your parents after college? For like two months, I think. Well, I was looking three months while I was looking for a job. And then I moved my own place. but I can't, I just can't imagine baby boomers have had such great advantages in terms of barely any student loans, low cost of college, low cost of housing. Falling interest rates? Yes, throw your kids a bone here. There was actually one really good idea. This one person they interviewed, she said she didn't charge her kids any rent, but she wishes

she would have charged them and then give it back to them the day they left as like a forced savings. I really like, kind of like that idea, actually. But I, that seems cruel to me. If you're actually charging your kids' rent and keeping the money. If you don't, I don't get it. If you could afford to not, yeah, that seems kind of weird. So there's an article in the Washington Journal a few weeks back.

Here's the punchline. Almost 30% of loans that mortgage giants Fannie Mae and Freddie Mac package into bonds last year went to home buyers whose total debt payments amounted to more than 43% of their income. So this kind of gets back to the fixed cost thing where this number is rising and people are basically taking on more debt to finance their homes. Is that the deal? Yeah, that's not a good thing. Okay. I'm no mortgage economist, but. Well, we tried to be. So last week, we had to talk your book and it actually just was released on Monday with Unison, which is a company that helps people with down payments. And we've already been getting a ton of feedback on this one. This one,

this one seemed to touch a nerve with people, which we kind of figured it would because it deals with your home. And the whole idea behind that, which we, why we found it's such an interesting idea is because it kind of takes some of that leverage off your shoulders when you're buying a home. And we've gotten a little bit of pushback from people, which is kind of interesting. And the biggest pushback seems to come from people who live their lives in the spreadsheets, which if you already live your life in the spreadsheet and every financial decision is well thought out, you're probably not the people that this is marketed for. Yeah, one person said that it was another transfer from the wealthy to the rich.

I'm not saying that unison is like Mother Teresa. They're running a business, obviously. But I think the whole idea is that these are people that would never be able to be in her home in the first place. Right. It's sort of an all or nothing decision. Like if you can't ever get into a house like that anyway, you're comparing it to price appreciation and gains that are non-existent because it wouldn't have happened. And so I think it's hard for people to sometimes realize that there are, if those people who have their finances in order. Sometimes they have their nose thumbed up at people who don't and they

don't understand what it's like to be in that situation to not have your finances all in order and need some help actually. And the people who do need help, I think a lot of them will probably be happy to give up some of their equity in their home to actually get into a house that they want to be in. I think so. Dan Egan over at Betterment wrote a piece about how checking your portfolio too much is not a good thing from a behavioral standpoint. And he quantified what happens in terms of the more frequent you log in, the more likely you are to change your allocation, to turn off auto deposits and have to quit investing entirely. And I am proud to report that I don't know when this happened, but when we first started the podcast, I was checking my portfolio every day.

Do you remember that? Yes, you used to say that you'd check the value every single day. Did you give up a little bit? I think maybe one of the reasons why I did that was because I knew I was going to be buying a house and maybe I was going to need some of that money for like furniture and stuff like that, even though I wasn't using all of that for the house. But anyhow, I have since stopped doing that. I still do it from time to time, but not nearly as much as I used to. I'd say maybe every six months for me or so where I kind of check everything. So what's the old quote, asset allocation is like a wet bar of soap, the more frequently

you touch it, the more quickly it disappears. Yeah, something like that. That was certainly the case for me and I think for a lot of people. Okay, we've got some good listener questions this week. My dad asked me about annuities the other day. My first reaction was they are trash. But if it gets 6.5 or 7% for 20 years or until he croaks and it's from a reputable company is really that bad. That's a weird thing to write. Yeah. No. Just curious if you guys have any more thoughts on annuities. But here's the thing. I looked up the numbers. And I mean, annuities more or less track, annuity rates more or less track the 10 year plus some sort of premium. So I don't think it's possible to get six and a half or seven percent. I anymore. It's probably closer to 4%, which still, for some people, might not be that bad. And there was actually a piece in Barrens this weekend about our colleagues, Tony and Dina Isola, and they kind of, they have been railing against the annuity usage and four or three plans for teachers. And even Tony said, listen, annuities are okay if they're used

correctly. But I think for a lot of people, it's almost like an all or nothing decision where an insurance salesperson wants you to be in all annuities or maybe the investor wants to be in all annuities. And it doesn't have to be that way. You can use these things. in concert with one another and with an investment portfolio. It doesn't have to be all on nothing. Yeah, I totally agree. They're not black and white and they can fit into a financial plan. But it pays to really understand what you're getting yourself into. I think that's a problem. A lot of people just don't. They don't know. Okay, I'm 22 years old and I've been very fortunate to be able to max out of Roth IRA for the past three years. I usually put in the max in January and then dollar cost average a few hundred dollars into a couple of index funds once a month. I believe this is the best strategy, but sometimes find myself trying to time in the market. Do you think it'd be best to put it all and work on January 1st? and not worry about it or just dollar cost to average some of it the rest of the year. All right.

The good news is that you're like 95% of the way there in terms of you're just saving. So that's the most important thing. Would it be best to put it all in on January? Of course it would. Does it really, really matter in terms of this is going to matter to you in 40 years? Probably not. And if you like doing it this way, again, I think the fact that you're saving it all is a good thing. And probably what's going to happen eventually is if you keep doing this, you're going to settle on the fact that you're not improving it.

you're not helping yourself. You're not improving your returns. And if you have to mess around for a while until you realize that, that putting it all in on January 1st is the right way to do it, then that's the right way to do it because nobody can tell you to not time the market. Right? Like, that's, that's really hard. You just got to get there for yourself. And honestly, some people need that release valve just to feel like they're in control of something with their portfolio. Like, I'm a big advocate of making things rules-based and getting the person as far out of the process as possible when in making investment decisions. But some people need to have some sense of control. And so if this keeps you out of other areas of your portfolio, if you're just

doing it with a few hundred dollars here and there and you're trying to buy when stocks are down five or ten percent, even though it may be suboptimal because it's hard to time those things, then go for it. But if you're making mistakes with that money constantly, then yeah, just put it in. If you already have the money on January 1st, do it and make it easier. But I think a lot of people that can actually help to do something even if it's suboptimal. I don't want to be a slippery slope truther, but if you are... Timing the market is a gateway drug? It really is.

If you are likely to, like, try and buy the tip and stuff, then maybe, just maybe you might be inclined to sell. And that would be bad. That's true. Yeah. If you're timing both sides of it, that makes it. That's true. Okay.

Would the market be lower without stock buybacks? Jason Zweig had a really interesting article. in the Wall Street Journal of the weekend, and he said, one component of return swamped all others in predicting returns, whether the total supply of shares was contracting or expanding. That alone says, Mr. I'm not going to try and pronounce his last name. I think it's an economist, explains more than 80% of the extent to which returns have diverged across stock markets over the past 20 years. And he was talking about China versus the U.S.

So I think that buybacks do... Is there a correlation causation mismatch here, though? Maybe, but probably not because in terms of what he was talking about with the Chinese market, I think that's pretty cut and dried. But I think that buybacks certainly do affect stocks. I think just it's not as clean as pre-bull make it out to be. I just, I look at buybacks as almost the exact same thing as dividends, but they're just more infrequent. And so I don't see how I think there's a lot of other reasons that the Chinese market has underperformed the U.S. market, and it just so happens that the U.S. market is the biggest

proponent of buybacks. Here's straight nonsense, though. If you see something that says the stock market would be 35% lower without buybacks, throw that right in the garbage. Do not pass go. Correct. Just stop. Okay.

I'm starting to look into moving to the burbs and have been doing some planning to raise cash for a down payment. I have a good chunk in Marcus already, but want to start selling some positions in my taxable fidelity brokerage account. Should I sell those positions that have appreciated the most and locking the gains or sell those that have struggled or are negative in lacking a tax loss. This is, this is, I don't want to answer this question. Here, I went to our tech expert Bill Sweet who have already mentioned and because I like to

run these tax things by him. And he said, listen, this is a great situation to be in. Like, if you, if you have gains in your account, like, you've already, you've won. Like, people hate paying taxes, like almost more than they like having gains in their account. So there's no right or wrong answer in terms of, like, I wouldn't make, the decision based purely on taxes, like make it on what you want to do with your portfolio or when you need the money or whatever. But if you have the gains, like, that's a good thing. That means your investment accounts are working in the right way. So I wouldn't really worry too much about the decision. And I would think more in terms of the investing portfolio side of things than

trying to figure out what the most optimal tax by sell strategy is. Most times people are most likely to sell their winners and hold on to their losers in hopes that they come back. That usually doesn't work out too well. Right. Okay. One more. I was curious to see how this book, The Intelligent Investor, is being used as we go forward to the current market. It's clearly that value in dividend-paying stocks have struggled compared to growth stocks. Do you think that understanding the psychology of investing is now the takeaway from this great book? Yes. I think it always was, to be honest. I don't think, I think the whole analogy of Mr. market was always the best use case of the intelligent investor, not that you're going

to be able to pick the best stocks that Ben Graham was in terms of creating the best screens or value investing strategies. Here's the, here's, I totally agree. Here's a problem with that, at least for me when I read it, is it is written so clearly and it's so persuasive and it makes so much sense that it almost leads to like a false hope because you can understand it, then you can almost understand a mess of your own psychology. And it really doesn't work that way. And this is like the ultimate case of just being aware of the behavioral biases is not enough. So I read this book. And then I started trading stocks.

And I was like, I thought that I was going to sort of mitigate my psych. I mean, it was all psychology. I would literally stare at the screen and like hope for it to go up. I mean, if you trade a triple leveraged S&P 500 ETF, doesn't that mean you have like three times as many value stocks? So you win. Okay. I think that does it for questions for the week. Keep sending them our way. Our email inbox continues to fill up with good questions of people, so we appreciate it.

And bad questions. Yeah. We have some bad questions, too, but mostly good. And a lot of, like I said, a lot of good backhanded compliments. Yeah, we love them. I love your guys' podcast, but, boy, you're idiots. All right. Recommendations for the week.

I'll go first. I just wanted to point out, you haven't interrupted me once this whole episode. Really? It's kind of like a no-hitter where you don't want to talk about it when it's happening. But, okay, so finished Barry and Veep last week. Veep was the series finale, which I felt like it kind of didn't get, I feel like Game of Thrones kind of overshadowed the fact that it was over. But it probably stayed one or two seasons too long, but I really enjoyed the finale

because they did sort of a skip ahead to show what happens to everyone in the future. and it was a really, really good, that was probably one of the best written comedy shows of this decade by far. I loved Barry. The second season finished really good. So that was again on my recommendation list before. I love the first two seasons of that. I read the book, An Economist Walks Into a Brothel by Alison Trigger. You've mentioned this one before. I really liked it because she used perfect analogies to describe risk. And I feel like risk is one of the more misunderstood concepts in all of finance. And the way that she explains, them using different stories and analogies I felt was really good.

And just wanted to mention she is going to be at our Wellstack conference in September in Scottsdale. And we are also doing a live Animal Spirits there on the last day of the conference. So check that out. Just Google Wealth Stack, find the conference. She's going to speak at it. Michael and I will be doing a live Animal Spirits that is going to be kind of a special episode.

So that's all I got for this week. All right. So in this book, Loon Shots, I just want to read something. real quick. So he talks about, did I mention P-type and S-type loon shots earlier, Ben? No. Okay. So P-types are product loon shots and S-type of strategy. So he says, with P-type loon shots, people say, there's no way that can ever work or there's no way that will ever catch on, and then it does. With S-type loon shots, people say, there's no way that could ever make money, and then it does. Deaths from P-type loon shots tend to be quick and dramatic. A flashy new

technology appears, streaming video, it quickly displaces what came before, rentals. Champions emerge, Netflix, Amazon, and the old guard crumbles, blockbuster. Deaths from S-type balloon shots tend to be more gradual and less obvious, which is kind of like what happened with ESPN and Barstool. It took three decades for Walmart to dominate retail and variety stores to fade away, and no one could quite figure out what Walmart was doing or why it kept winning. Very good. I like it. Here's one more. This, and this, this, what I'm about to read was like sort tangential to the chapter, but this is just an example of what was in the book. For decades, IBM dominated computers like Pan Am dominated international travel.

It's $13 billion in sales in 1981 was more than its next seven competitors combined. IBM jumped on the new PC like Trip jumped on the new jet engines. IBM owned a computer model, so it outsourced two of the PC components, software and microprocessors, to two tiny companies, Microsoft and Intel. Was that a sub-tweet at Buffett for buying? ibn way after the fact i think it was okay all right you talk me into it i'll buy loon shots send us an email animal spirits pod at gmail.com we'll talk to you next week