Animal Spirits Podcast - The Richest 50 Percent (EP.64)

Episode Date: January 16, 2019

WeWork's rough patch, why Sears was the Amazon of their day, the relationship between mortgage rates and home prices, how the Japanese economy has defied their demographics, asset allocation blind spots, how many millennials plan on dying in debt, why Peter Lynch walked away from his fund at the top of his game, finance Twitter 20 years from now, The Sopranos 20 years ago 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 Y Charts. 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 Holtz 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 Ritthold'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. So this week, there was some news with WeWork. Are they going through like a reorg? What is this? I think this is a forced reorg because they didn't get as much money as they thought. So SoftBank, which we've mentioned before, was going to give them $16 billion to buy the majority of the firm. And now they've decided to instead give them two billion, which seems like a little less. Do you think the full story has not come out yet? I think that's possible.

I think this company went just full bore and tried to just go for it while money was flowing. And they're going to be one of the ones that on the other side is going to have some problems, I think. Well, you're saying their community adjusted EBITDA won't hold up to scrutiny? So the Wall Street Journal said in the first nine months of 2018, they posted revenues of $1.2 billion and a net loss of about $1.2 billion. So that's almost perfect.

if you think about it, but obviously a lot of these companies are going for the spend a lot of money now, get a bunch of people and figure out the scale and the profit stuff later. But I guess it's got to be a red flag if SoftBank won't give you money because they give everyone money. So I don't know what this whole means, but it seems like it's probably not a great thing. So it's going to be we work as is, which is, you know, the office, which is going to be the largest division. We live, which is going to be a provider of co-living spaces, which sounds interesting. And then we live. We live or we live? Oh, that sounds better. And we grow, which includes a school and coding education provider. I guess they're going for it. I don't know. Someone tweeted out last

week that we work has flown out his entire global team to L.A. for three days, rented universal studios and hired the red hot chili peppers. And it said, let's remember this when the down rounds come. Yep, that sounds about right. So to your point about South Bank giving everyone money, I tweeted this won't age well. This is from September 2018. Sone tells Bloomberg Business Week that he plans to raise a new $100 billion fund every two or three years. And I guess if they were planning on doing that, they would almost had to give we work that whole thing of money, right? Because they just, there's no way to put it. In a world where nothing age as well, I don't think I'm going out on the limb to say that this will be one of those things. Okay, so

your boy, Derek Thompson, had a really good piece in the Atlantic about Sears. Did you read this one? Why is he always my boy? He's, you're on record. He's your favorite Atlantic writer. Okay, the only one I know pretty much. But yes. Okay, go ahead. I thought this is a very good line. Sears built a vehicle for surveilling American consumer tastes. But in the past few decades, Walmart and Amazon built better tools for observing and anticipating shopping habits and tastes. That's good. Yeah. I mean, it is, it's almost hard to believe Sears lasted as long as they did. I wrote a piece about this a while ago saying that the way that, the way that, they really initially got people was they had this huge phone book-sized catalog that people

in rural areas could use to buy stuff that they didn't have access to before. And I mean, it's kind of amazing that they stayed around as long as they did. Can I ask you a personal question? Sure. Are you team Sears or team Roebuck? I think everyone's team Sears, aren't they? How long ago to the Roebuck leave? That was a long time ago, right? Yeah, I wonder if there's any robucks around. It's got to be. So did you read my post about how they came to start Sears back in the day? Someone sent him a bunch of jewelry or watches that he didn't need. He didn't order them and he decided to sell them. And that's how Sears was originally started. What book was that from? I think that was from Derek Thompson's book. Caught you. All right. So Sears was

absolutely gargantuan. At one point in the middle of the century, Sears reported the account for one in every $100 spent in the United States. Holy smokes. That's crazy. But what would you say if you had to do the one out of one hundred thing or the $100, how much would you say you spend at Amazon? I don't think I use Amazon as much as you do, but it's, but yeah, it's probably my number one. If we're talking like discretionary spending, I'm probably, probably $10 to $20 out of $100. What are you buying at Amazon? Everything. I have three young kids. Do you know how hard it is to go to the store with three kids? Anything I can buy online, I will because going to the store is hell on earth.

with young kids. It's impossible. In 2018, the total value of the U.S. housing market increased 1.9 trillion to 33.3 trillion according to new data from Zillow. Do you think that the amount of money in the U.S. housing market affects people's spending on a monthly basis? Not in a monthly basis. Do you think home values rise, people feel better than they spend more money, or is it not that simple? I don't think it's quite that simple unless they're literally pulling money out for like a home equity loan. Well, I guess maybe, maybe, and this might sound very foolish listening back to this because I'm thinking out loud, but houses rise when the economy as well. So they might be spending more money just because the economy is good,

not because their houses are rising in value. So maybe a circular argument there. Maybe a different, maybe a different argument too for people who are retired and planning on using that as they're one of their largest assets. So I guess that could be part of it. Are you suggesting that people, that sellers time the market? No, I'm saying for most people, their house literally is their biggest asset, and then the value becomes more important to them. True. One of the surprising pieces of data from the article was a third of the nation's housing market value can be attributed to California. Oh, wow. That makes sense. Yeah, and we've talked about that a lot, how crazy it is to live there. So I was listening to Barry talk with Len Kiefer the other day on his podcast.

How was it? I did not listen to that yet. He's really good. He's an economist at Freddie Mac. His Twitter feud is very good. Yeah, he's got some great charts and great data viz. That's what they call it, right? DataViz with a Z. That's right. So they were talking about the relative nature of mortgage rates and how mortgage rates

are so much lower now than they were in the past, but young people don't really think about that. is it possible that that this country is almost forced to have lower mortgage rates because home values have come up so much and so there'll be they'll be more tied now to values of houses than ever and so do you think there will be more volatility in home prices because rates are so low now than they were in the past so having rates be high in the past gave a little more of a buffer so when they moved around it didn't matter as much now that they're so low if they move up 100 basis points versus what they did in the past, home prices may be a little

more volatile than they once were and have more of a strong relationship with mortgage rates. Can you make the counter argument that housing prices will be less volatile because the difference between three and a half percent mortgages and four and a half percent is not that big of a deal? You could. If you want to make it, I was making the other argument, but I guess that that interest as a percentage of your total payments are way lower now than they were in the past. True. And maybe my point is home prices are so. high now that we couldn't handle interest rates as high as they were in the 80s. Speak for yourself, buddy.

Okay. I mean, as a group, okay. So there was a piece in the Wall Street Journal last week, which kind of blew my mind. It was called How Aging Japan Defied Demographics and Revived its economy. And Greg Epp wrote this one. And so everyone has heard the phrase like demographics are destiny. And people always point to the U.S. about this thing. I think that's a Howard Dent phrase.

It could be. I'm sure he's written a book titled that in one of his crash books. But it said Japan was long ago consigned to stagnation with its aging population and rock-bottom birth rate. But in recent years, Japan has defied destiny since 2012. Its working age population has shrunk by 4.7 million, yet the number of people working in Japan is surged by 4.4 million, which is critical to their second longest economic expansion since World War II. So I think the demographics thing makes sense to me in terms of productivity and growth and jobs. but this shows that it's not as easy as just looking at the numbers and assuming, you know, what's going to happen? What?

Sorry, sorry, I just Googled Harry Dead Books. Okay. And there's a book called The Demographic Cliff. How to Survive and Prosper during the Great Deflation of 2014 to 2019. I wrote a piece. It was not amazing. He was very specific, literally 2014 to 2019. Wait, did we miss the Great Deflation?

Or we just sidestepped it. You realize that this guy's written, he's sold millions of books, right? Oh, yes. The joke is honest. Constantly wrong, and he sells millions and millions of books. So anyway, I would never have guessed this with Japan. I guess they said it's coming from three different places, the elderly, women, and foreigners. So they're actually having some immigration, which I guess hasn't happened to Japan in a while.

So I think people say that the U.S. is kind of screwed when the baby boomers retire. Like, do you hear this argument a lot? I get this question all the time. The stock market is screwed because. they're going to sell all their stocks. That's what everyone says. My answer to that one. Who are they going to be buyers for every seller?

Right. And millennials will hit their peak earning years and it'll be saving. And also, stocks are concentrated in the hands of so few people and like the really vast majority of stocks. I think a lot of these boomers aren't going to have to sell stocks. That's a good point. You know, I don't see that argument. I wrote about this a while ago.

I can post it in the show notes, but I don't see that happening. Well, then the other counterpoint is that with. people living so much longer, they're going to need more exposure to stocks because bonds aren't going to cut it. Yes, totally agree. All right. What do we got next? Let's go to a in mid-show listener question. So this was a cool idea. It says, I'm building a portfolio from a two-year-old with a goal of providing a head start on long-term savings. My wife and I will gift him $10,000 a year. What do you think about the following asset allocation? And they list out some different funds and asset allocation percentages. We get these questions quite a bit from people

about asking us to look at their allocations. And most of the time we say we can't really offer specific advice on these. And it's not because we don't want to or we can't. It's just, well, we can't really, I guess, for compliance reasons. But one of the reasons that we don't really offer specific allocation advice is because A, it doesn't really matter because any advice we give you isn't going to really be that helpful if you can't stick with whatever allocation we would say is the right one. And B, it's really hard to know what the right allocation is for a specific person.

So we wanted to look at some of the differences just going back for the last 5, 10, 15 years and then the most recent drawdown to see what things look like in terms of different allocations just between stocks and bonds, because I think that's the biggest thing that most people have to go by. So we used our friends at Y charts, and they have this cool new tool that is model portfolios, and you can look at different percentages of funds and such. And so I just created a handful of different portfolios using the three-fund vanguard portfolio, which is total U.S. stocks, total international stocks, and total bonds, and I did it by 10 percentage points. So I went from 4060 to 90-10. And so 40-60, 50, 50, 50, 60, 40, 70, 30, 80, 20, and

look at the differences between returns and drawdowns for this recent period. Yes, you did. To me, what really stands out are the 10-year return differences aren't that great, at least like, you know, from 90-10 down to 70-30. Right. So the point, and you know I've talked about this offline before, that the difference between 10 or even 20 points in your equity versus bond allocation isn't going to have that much of a difference on your overall standing. So if you really want to make a huge allocation change, don't change 5% of your portfolio. You'd have to change a big chunk of it. The counterpoint would be if you, like, I think one of the worst things that people can do in terms of mistakes is overestimating their true risk tolerance. Yes. So if you can't stick

with an 80-20 portfolio, a 60-40 portfolio, at least historically, has gotten you a lot of the way there. Yeah. And if you can't stick with an 80-20, you probably can't stick with a 70-30 either. So that changes. So I looked at the drawdown from the height in, I think it was late September to the bottom now is Christmas Eve. And it basically saves you two percentage points every 10% you take off.

So 90-10 portfolio was like a 16.4% drawdown. an 80-20 was 14.4, going all the way down of 40-60 was 6.5. So to your point, if you can't stick with an 80-20, you probably can't stick with the 70-30. I think there's a lot of validity there because the max drawdown for an 80-20 portfolio was 14.4%. For a 70-30, it was 12.5%. So if you're going to freak to do something dumb at 14.4, you're probably going to do the same thing at 12.5. And so anyone asking us for this long-term allocation advice, the idea is it really depends on what can you stick with. So we could quibble between different funds and different, well, should I have 8% in small cap value or 9%. At the end of the day, it doesn't really matter.

It kind of depends on what you can stick with and what your time horizon and risk profile is. And just one more shout out to our friends at Y charts. We did want to make the distinction. So again, if you call them up and sign up for a new account, it's 20% off if you mentioned animal spirits. We do have some enterprising listeners who call them up who already have an account and ask for the deal, which I have to give you guys. credit for doing that. But that wasn't part of the deal. It's just for people who people sign up that are new customers for Y charts. But I will give you some credit. But anyway, this new portfolio model portfolio thing that you and I've been playing around is pretty interesting. All right,

survey time. What do we got, Ben? Okay. So this was on CNBC. They said one in five millennials with debt expects to die without ever paying it off, which is a pretty good contrast to our survey from last week that said pretty much all millennials expect to be millionaires by age 40. So maybe they're going to borrow money to become millionaires? I don't know. That's so crazy. It just might work. Well, okay, the average millennial had about $32,000 in personal debt. I would be, I would, I don't think that somebody knows exactly how much debt they're in. How about that? That's probably pretty fair. I think people know that they owe a lot of money, but I don't think that they have any, like, handle on exactly how much they owe. So in terms of credit cards and, yeah, I guess student loans

would be the one that I hope people have a better grasp on, but you're probably right that people don't pay as much attention to this as they should. So the good news is that four out of five millennials won't die with that. Which is great news for Gen Z. Yeah. Speaking of Gen Z, so I listened, so instead of reading the book, I just listened to a few podcasts on your Jonathan Haight guy that you talked about last week, the coddling of the American mind.

I heard it with Scott Galloway. Okay. And I listened to a couple of them. By the way, that must be, that's got to be one of the best things about podcasts, is that I probably could have read that book, but instead I listened to two podcasts on it, and I probably got 60% away there maybe. Is that about, not quite? That's fair.

So anyway, it was good, but he was making the point that it's not millennials, it's Gen Z that is going to cause the most problems in terms of being coddled, which I thought was an interesting point. One thing that on the Galloway podcast said, it was really interesting. I don't think they got that much into this in the book was how is this going to affect corporate America in, say, 10, 15 years. Right. And it could, yeah, if all these people are constantly fighting and making, making hay over

stuff that they shouldn't be, it was an interesting concept. Where else did you listen to him? He was on Joe Rogan's podcast, actually. And Joe Rogan is also anti-survey. Is he? He said, they're talking about surveys, and he said, he said, surveys are bullshit. So we're in good company. What's this from Peter Lynch?

Okay, so Necker Value on Twitter tweeted this out. It was an old story from Peter Lynch right after he retired from the Jellon Fund, which it's kind of crazy. Peter Lynch is probably one of the most successful neutral fund managers of all time looking at his track record. But he retired in 1991, I believe, which, you know, the bull market had another eight years to go. I can't imagine how much money he left on the table because at that point, money was just flowing in hand over fist into his fund. And obviously he could have had a downpoint or a relatively bad. you know, bad a run or whatever. But when he retired, it's actually kind of crazy. And he was relatively young, I think. But they asked him, why did you retire from this at the top of the top of your game? And he said that he had some daughters. And he said, for every one soccer game I went to, I missed seven. And I didn't get to go into football games. And it sounded like he, he basically just was sick of working 90 hours a week and wanted to live his life. So I thought it was actually pretty admirable. He left a ton of money on the table. He was probably the most successful mutual fund manager on the planet and he decided to walk away. Yes. Well, this gets to

the point that we've spoken about. Unless you are a total maniac and care only about money, and even at that point, once you're set, more money doesn't make you happy. And of course, you have to have money in order to say that. But he said that they offered him a fund. He would have his name on it. And he said, I know what I would do. I would work 90 hours a week. All I would get would be a bunch of money. I have no interest in that. Yeah, this was a pretty cool story. I'd never seen this one before. And he also made the point in this that most of his investors did terribly in his fund because they put a bunch of money in after the fact. And, yeah, it was a really good story.

We'll put a link to it. Okay. Fake news. This is good because for years and years, the baby boomer generation has told the younger generations that video games and movies and the Internet are completely warping their brain. But apparently this story from the verge says that the people whose brains are getting warped is actually the baby boomers. so they said people a new study finds that people over the age of 65 share the most fake news

and it wasn't even close so you mean the forward forward forward forward forward of a Muslim is not real news yes uh yeah so it said they they they regardless of education sex race income or how many links they shared the only the only prediction the only thing that could predict who would share the most fake news online would be their age and it was even by party of Dealation didn't matter. So 11% of users older than 65 would share a hoax while just 3% of users 18 to 29. And Facebook users age 65 and older shared more than twice as many fake news articles than the next oldest age group, 45 to 65 and 7 times as many as the youngest group from 18 to 29. Somebody in my family, this got me so angry, voted me a video of Michael Bennett on the Seahawks in the locker room pointing an American flag. Oh, and it was a fake video.

And it was so, it was a picture. And it was so obviously fake. And I wanted to be like, what is wrong with you? Yes. Yes, I've gotten a lot of, we shouldn't laugh because somebody that's going to be us, we're going to be sending like fake holograms to people or something. Oh, that's a good segue. So I was speaking of, this is going to be us.

I was thinking the other day, what is finance Twitter going to be like in 2040? Like, are we going to be saying things like, oh, that guy's been embarrassed since 2011? Because it really hasn't. When would you say it started? 2010, 2011-ish, maybe. In earnest? Yes. Probably 2013, if we really want to be.

Yeah, I mean, 2010, I think is a fair starting point. Yeah. No, that's true. But, I mean, are we going to, is everybody going to be so sick of each other in like 10 years? Is it going to take that one? Well, I'll have you blocked and you'll have me blocked. All right. So speaking of finance Twitter, somebody sent, sent us a good question.

When does a paper gain switch to investors, quote, real money, even before they sell? Anchoring is a big issue for all investors. One does an investment become savings? I think this is a really good and important question. And I think that it probably changes for everybody. In other words, for some people, it's a time amount. It's like, all right, I've been with the stock for a year. I'm married to it.

For other people, it's like a percent gain or for other people, it's a dollar gain. So I don't think there's one answer. But there's definitely a point in every. free investment where it becomes real and they start anchoring. Well, I like the idea of anchoring to your highest price failure because the way you think about stocks, you almost have to think like this savings for my highest level can be vaporized in a week, a day, whatever, you know? Like it can be gone like that.

So that's why I think it's so hard for people to, that's why we always look at peaks and valleys. So how many times do we use stats that are from the very bottom or the very top? Right? It's almost always that because those are the values that people sort of hold on to. Yeah, that's real. Like people say like, oh, I used, this used to be worth 20,000 and now I'm down to 11. Right. So you almost have to go into it with like, it's almost like a reality and expectations thing. Like, how much could this thing go down tomorrow? And so it obviously doesn't become savings, I think until you sell it, right? I mean, yes, literally. But I think, I think his point was like, you know what he was asking. I don't really know the answer. I do know what he's asking, but I'm just saying, like, your stocks can be vaporized at any time.

So, like, until you do something with them, it is just an investment, and it's not savings. So are you saying to not count your chickens before they hatch? I think that's the saying. Do you count your chips at the table? Is this the Kenny Rogers question? All right, so Tom Sarah Fagas from Bloomberg tweeted. He schooled us on how to say his name. There are 47 stocks in the quality ETF that are also...

low-val stocks. And 30 of those are momentum names. 22 are in all three ETFs being the quality, the low-val, and the momentum. Do you think that there is a problem here? Is this contradictory? Like, what are your thoughts on this? Could something be low-val and momentum? Sure. And it kind of gets back to our idea about like multifactor ETFs. I don't know why there couldn't be some names. And it's kind of interesting because at a certain point, low-val stocks in a bare market become momentum stocks because those are the ones going up, right? So I think it kind of is like environment dependent. So I'm sure that it would be interesting to see how often these things flip depending on the market environment. Yeah, I think that's a good point because a lot of this

depends on time frame and how often these funds are reconstituted. Right. So in a down market, you're going to have these defensive names. They're going to be momentum, which you wouldn't assume would be momentum. In an up market, you're going to have the more typical technology and high flying stocks. So I guess depends on the market. I guess you would think that low volent momentum diametrically opposed, but that's not necessarily the case. Yes, right. It's real depends on what kind of environment we're in. Well, that doesn't mean that something's going up 4% a day.

Right. I mean something is going up consistently. And so you could have now, it could be whatever the typical health care, healthcare, utilities, consumer staples, those could be all the momentum names right now because other stuff is getting hit. Not to actually, but I'm going to. It doesn't even just mean that something's gone up consistently over a long period of time. it could just be something that's gone up over a long period of time. So it could be a 20% gain

in a week and then nothing. And then there are other funds that screen out for that. So Wes and Jack had a piece about like quality momentum, right, where it is sort of stocks that are consistently grinding higher versus a stock that gaps up 20% and then go sideways for the next three weeks. Like that's not a quality of momentum name, even though some filters might pick that up. So I guess the point is factor investing is kind of counterintuitive at times, depending on, And maybe for a lot of people, it, like, don't look at the underlying holdings, right? If you're using a quantitative process, like, trying to understand. I mean, also, you have to know what you own because.

Yeah. Factor is like such a catch-all. It can meet so many different things. So you must have seen this tweet floating around. I don't know who retweeted it, but it's from September 2011, from Blockbuster. Tweet while you're leaving Netflix, the top three most creative tweets using goodbye Netflix, hashtag goodbye Netflix, well, we want a one-year subscription to Blockbuster. So I used to use the Blockbuster DVD.

They tried for a while to send you DVDs to your house like Netflix did. Like they were trying to compete with them. I should have bought Netflix that day because right when I signed up for that program, because it was awful. You get your DVDs like a month later. It never worked. Isn't there still one blockbuster in the country or something in Alaska? Is that the deal?

All right. This is a fantastic tweet. I think it's legitimate. Resident at my senior living facility brought up till right today. I am not making this up. I mean, it's on the internet, so it has to be true, right? So, so seniors are trading weed stocks. Is that what's going on here?

I don't know. Maybe he's running to Hedges Glycoma. All right, we have two more tweets. Sorry, this is a very, actually we have a few more. There's a very tweet-heavy show, but these are very good. This is from the science of hitting. Shall we SEP 500 annual earnings estimates? And you see a pattern here?

Because I see a pattern here. Yeah, this is a great. I've seen this chart before. They start high and they end low. And it sounds like 2019 ones are rolling over already. Yes. Do you perform technical analysis on these sometimes? I stay away. I don't do that.

So we've spoken a lot about what happens to active versus indexes in the next bear market. And Eric Balchunis has been on the forefront of this. And he tweeted active mutual funds on an estimated $513 billion in outflows last year, the most ever with over half of it coming out in November and December alone. So we did have a huge active outflow in December that we talked about. Yeah, this is a good one. Remember last week, I think that you said that a lot of these producers know exactly what they're doing when they put out ridiculous tweets.

Yes. So there are two this week. One of them is from Yahoo Lifestyle. And the tweet is, influencer says she was on a tapas and cocaine diet to stay thin. Here's why that's not healthy. So this got 900 retweets, almost 4,000 likes, and I'm sure a bazillion responses.

Didn't really need that last. That's like a saved-you-click, don't need to click, right? And then finally, from CNBC, This is fantastic. Here's how much money it takes to be among the richest 50% of people in the world. Oh, boy. Honestly, I think that they've just figured out how to trigger people online. Yeah.

Yeah. And that's all of it. Okay, listener questions. Let's do it. Is the success of trend-fowing strategies doomed in the modern world of lightning, fast corrections, and recoveries? Given they typically reallocate on a monthly basis using something like 200-day moving average, are they simply too slow to be successful? Actually, I would say maybe the opposite, that the ones that are too fast are not working

anymore because people's time frames are getting shorter and shorter that maybe the longer two moving averages actually will do what they're supposed to do. And are they simply too slow to be successful? If you were just using the 200 moving average as an in or out, you pretty much rode like the bull market for what, two years, two plus years? The thing is with any of these tactical strategies, you're never going to time it perfectly. And the other thing is we aren't really living in a world of lightning fast recoveries and corrections. So I did this in my post last night, I looked at recoveries and corrections. And this was from something we talked about. I finally put this down on paper. And I looked at pre and post 9095 with recoveries and

corrections. And there was pretty much no difference. It's all the same. Before computers, after computers, it doesn't really matter. So maybe this person is talking about like CTAs have had a really hard time for the last few years. And that's not primarily because stocks have hurt them. If they're tracking 20 different baskets, whether it's currencies, commodities, maybe that is where the competition is getting super, super stiff. But I don't think that trend following strategies are doing far from it. Yeah. If you're trying to hit those quick recoveries and corrections and time those short-term ones really hit those ones, then yeah, you're probably going to be out of luck because everyone's competing on those. But the longer-term ones, I think that's where patience

actually is rewarded. All right. Most employers offer their company stock as an option in 401K plans. I realize that an employee's interest should be aligned with their companies, but is it wise to allocate a piece of your retirement savings toward a single stock? If so, what's a good allocation percentage? I think we've talked about this before, but I think I've fallen on, I wouldn't feel comfortable going anything over 10, 15, 20 percent at the most. Yeah, I would say 10 is probably a good up a limit. Now, there's caveats. What if it's a company like Home Depot and they're giving you a 30 percent discount? Take the discount, buy the stock, sell and diversify every year after it's been there for a year. Well, I guess it's in a retirement account, so it doesn't matter about

tax implications. I would take the discount and then sell it. Yeah. I mean, I guess the bottom line is it depends, but be careful. Because your entire life isn't that company. So you don't need to be more leveraged than you already are. All right. So Matt asks, everybody always sees the charts with indicators and then how many months after it was triggered, the recession started. The big one being the two tens inversions. With everyone, including retail investors, look at this all-knowing indicator, wouldn't you think that if the inversion happens, a stock market downturn would happen much faster. I think this kind of makes sense that things get moved up a little bit.

It's kind of like the January effect that people used to bet on in stocks. I can see how this would happen where things just get moved up a little bit if people are trying to time these things in terms of. But again, even when you look at the range of outcomes historically, you're looking at an average, you're not looking at what happens every single time. So there's always going to be a little bit of a range. Well, we just had part of the curve invert. And looking outside, I don't see ever.

session, but you never know. But I think that's the kind of deal where you can't say, well, in the past, it's taken an average of 14 months for recession after an inversion. So you've got plenty of time. Like, I don't think that you can bank on that every single time and feel safe. Our recommendations, what do you got this week? Okay, kind of a lull in TV land lately, I think, because of the holidays and such. We haven't had many good TV shows. Did you watch True Detective last night?

Not yet. It's on DVR. So we plied through a bunch of movies. Molly's game I thought was fantastic. Jessica Chastain is in it. It's in a true story about this girl Molly Bloom who started a like one of the biggest poker games in the country like underground. She had all these Hollywood people coming, Toby McGuire and Ben Affleck and Leonardo DiCaprio. And the movie was about the book that she wrote about this. And I actually plowed to the book too because I thought the movie was so good. That is very unorthodox. You saw the movie and then read the book?

Yeah, because I wanted to fill in some of the details because I was like, this can't be, because it was an Aaron Sorkin movie, and I was like, okay, this guy embellishes quite a bit when he writes stuff, so there's no way that this is true. And most of it was actually true, it was really good. We watched Chappaquittic, which is the one about Ted Kennedy. I like that. Did you watch that? Yeah, it was good. How was it, that still kind of boggles my mind how that happened. Like, it wasn't very, obviously, the Kennedys didn't come out looking great in that one. The fact that he was like the fourth longest sitting U.S. Senator after that happened, just I can't wrap my head around it sometimes. Yeah, I don't think that would be swept under the rug

in 2019, or maybe it would. No, yeah, I just can't believe it. And then my one big hole in my sort of armchair TV expert, greatest shows of all time, I've never watched Sopranos. Did you ever watch it? Okay. We were not an HBO household growing up, and I think I was in college when it was on,

so I just kind of passed me by and never caught up with it. So I was sick this whole weekend and on the couch, and I probably plowed through half a season of Sopranos, the first one. I mean, what everyone says is because it was like a 20th anniversary, just what everyone was talking about it last week. I mean, it's great. But I think it honestly would have been one of those shows that would have been better watching

like every week in real time than watching it as a binge. Because it's not one of the shows that is so binge-worthy where you finish one and you want to right away go watch the next one because there's a cliffhanger or something or there's a lot of action.

It's just more character development and there's some funny stuff and like the mob. I mean, it's, what everyone says is true. It's great. And Gandalfini is amazing. I will never,

I will never watch The Sopranos. No? Why is that? Because I'm just, I'm not going to do it. I'm not going to watch eight seasons of TV. I know. It's probably, it's kind of thing where looking at it now, they probably could have shortened them up a lot and had it been like eight episode seasons. But I'm going to, I'm going to do it.

I got to do it. I regret that I missed it. I'm sure it's a fantastic show. I'm just not going to do it. Okay. What do you got? I went to the theater by myself on Friday. So there was a new theater that was closed and reopened in my neighborhood.

It's like literally a block and a half a week. way and it's one of those theaters where they bring you like booze and food in your seat okay so i went to see vice it was a terrific experience the theater was great good movie i had a lot of fun okay vice was good i heard christian bale's amazing yeah he was very good sam rockwell was great as uh w okay yeah it was a good movie definitely recommend i read two books this week that and they were both very very good one is called the monk of mocha have you ever heard of it no so it's It's by this guy named Dave Eggers, and I learned this out of the fact that he's done a bunch of books about, like, immigration and the American dream and their story in the United States. And there's got to be a lot of this book that was smoothed over and embellished, which I learned about a little bit after, because it's such an amazing story.

It's almost like too clean and too perfect. But it's basically about this many American kid who is down on his lock and his parents came here to give him opportunity. And he was, you know, sort of a goofball growing up, didn't take life to you seriously. and he was a dormant in a building, and he found out that coffee originated not in Ethiopia, but in Yemen. So he takes him back to his roots, and he goes to see his grandparents, and he tries to become a specialty coffee maker with Yemeni coffee. And it was really, really good. It's like one of those books that reads like a novel that you can read in like a day. It's a true story. So I highly recommend that one. And I also read The Billion Dollar Whale, which is very similar to bad blood,

But for some reason, didn't get nearly as much press. And I think Bad Blood was better, because Bad Blood was, like, to me, like, an all-time great book. I'm about a quarter of the way through Billion Dollar Whale. It is a crazy story. It's pretty insane. Like, he was literally, allegedly, just taking money, him and the prime minister of Malaysia are just robbing, like, the country from all of their sovereign wealth fund.

And it's kind of hard to believe. So in this book, there's a ton of stories about how, how, so he funded the Wolf of Wall Street. Right. It's crazy. And he was hanging out. All these celebrities were at his birthday party and stuff. So Jamie Fox was a big character in the book. His name popped up over and over, Paris Hilton, Swiss Beets and Alicia Keys.

It was a pretty wild story. I would say it's probably 70 to 80 pages too long. Yeah. But definitely, it was definitely a fun read. And that is all I got. Thank you to Y charts. Thank you to our listeners. If you liked this episode, please leave us a review on iTunes.

We really appreciate it. And we'll see you next week. You know,