Animal Spirits Podcast - The Unluckiest Generation (EP.149)

Episode Date: June 3, 2020

On this week's show we discuss the saddest week in a long time, post-traumatic growth, 2020 vs. 1968, why working from home is a privilege, inequality in America, the explosion in the airline ETF, Carl Icahn's big losses in Hertz, teaching your children about investing 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, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's Wealth Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain position. and the securities discussed in this podcast.

Welcome to Animal Spirits with Michael and Ben. There is an account on Twitter hedonometer that measures quantitatively the real-time online measurement of happiness. And not surprisingly, I think this was Friday. This account posted a chart. Yesterday was the saddest day in the history of Twitter. That's probably a good way to describe the last week or so. It was just, it was sad.

And obviously over the weekend, it just got worse. And I don't know any other way to say it. It just kind of makes you feel sad. and I'm sure anger was probably right up there too, but yeah, there's not much that we can really add to this that hasn't already been said, but it's 2020 is just quickly devolving into just an awful, awful year. There's really no positive spin to that. I wonder if this chart was Facebook, what that would look like. Imagine how vile that place was. I think that's probably one of the best decisions I've ever made is just staying away from Facebook and not even getting

into it. I can't even imagine. Ben, you wrote a post over the weekend, Bad is Strong and the Good. You wrote, things are pretty bleak in the world right now. 2020 feels like some combination of 1918, 1929, and 1968 all wrapped into one. I thought that's a pretty good description. So this is based on a book called Bad is Stronger than Good, and it's based on this research from this guy named Roy Baummeister, who wrote this stuff in the 70s. And he looked at all this stuff that disliking Trump's liking, like if you had to put two people in a neighborhood, and figure out whether they're going to become enemies or friends. There's a greater likelihood they're going to become enemies.

And it talks about how negative events are covered more than positive events. Like a bad reputation is way harder to acquire than good reputation. Bad events take longer to wear off than good events. But they talked about how, if you think about something like trauma, there's no opposite of trauma. There's no single good event that can have a lasting impact as much as a bad event can. But they also looked at this idea of 20% of people, will experience post-traumatic stress based on a traumatic event. But that means 80% don't. And so

they looked at it as there's this thing called post-traumatic growth was way more prevalent than post-traumatic stress. And so again, like 80% of people experience that and they become stronger, wise, or tougher, maybe more mature. And maybe the bad stuff prepares them more for the challenges. That was kind of the takeaway. In times like this, this is the first weekend in a while that I just didn't feel like consuming any entertainment. I just decided to read and I was looking at history and a bunch of books cover the period from like the 50s to the 70s and a lot of the space books do this. So Rocket Men by Robert Carson covered this. And in this piece, it was about 68. And it feels like 1968 is almost frequently mentioned as one of the, maybe the worst years in the country's

history. Just you had all these things going on in one. So this is from Rocketman by Robert Carson. He said already 10,000 or more young Americans had been killed in Vietnam in 1968. It wasn't even over. Anti-war demonstrations had erupted all across America. Racial tensions had led to riot. Student protests had turned bloody. In a nine-week span between early April and early June, two of the country's most inspirational figures. Martin Luther King Jr. and Robert Kennedy had been assassinated. Swaths of the population no longer trusted government or authority or institutions. Even music see more political and angry than before. Now all of the year's turmoil seemed to be coming to a head in Chicago as the crew of Apollo 8 prepared to resume training. After a long weekend

at home, 2,000 demonstrators massed in Chicago's Lincoln Park. Many had nowhere else. to sleep, but the city's curfew required them to disperse at 11 p.m. When the hour struck, police outfitted and gas mask and helmets moved in, firing tear gas candidators into the remaining crowd, clubbing and kicking whoever they could reach. I think sometimes reading history for me has been helpful to get an understanding of what was going on, and you feel better because it feels like you've made progress from history. But this is one of those instances where it feels like how are we having the same repeat again 50 years later? It sounds like a similar thing, and it's just That's the part of it. That's just really sad. So you hope that some good comes from this trauma. But at this point, it's hard to put a positive spin on any of this. And it's really just too bad.

So I've been listening to John Meacham has a podcast called Hope Through History, and he goes through, I think it's six parts or so. There's different, each episode is a silo. So one is the FDR and the Great Depression. Two is Churchill in the World War, the polio epidemic, JFK, and the Cuban Missile Crisis, the 1918, the 1918, the pandemic. And so last night I cracked open his book that I read when it was published, probably two years ago, called The Soul of America. And it outlines just perfectly our troubled history and how we got to be. here today. So I was listening to, he was actually on a podcast, Dak Shepard, which you like. What's it called Armchair? Armchair expert, yeah. And so John Meachan was talking about the Martin Luther

King trilogy, these biographies that I've had on my shelf for a long time by this guy, Taylor Branch. And the first one is called Parting the Waters. And I thought to myself, all right, now it's probably a good opportunity to pick up these books and read it. So started last night. These are like monster books. Don't know how far I'm going to get. But it's hard to put a positive spin. I don't know that now is the time. I don't know what to say. is all very tough. But one of the reasons I think for the chart that that Twitter chart is showing just sadness is in the midst of coronavirus, it's like things were bad enough before this. And it's just one thing after another. Well, yeah, unfortunately, like we've talked about speeding up

trends and people have been trying to look for good trends, but it's made the bad trends even worse. And so 40% of the lowest 20% of workers by income have been fired. People have nothing else to do. When people have nothing else to lose, it's almost like surprising something like this didn't happen before. I don't know. The spark was going to happen. And there's so many people out there who just, yeah, this thing has just made it so much worse for them, unfortunately. Right. So there's this chart from The Washington Post showing coronavirus job losses by earnings level. And it is just linear in terms of it being worse at the bottom end. And there was a debate over the week. And I think Powell said that they are not, the Federal Reserve is not driving income inequality. I don't know

what his exact words were. But let me ask you this. Do you think that the Fed can reduce income inequality? In other words, if they could exacerbate it, what could they do to make income inequality or wealth inequality better? I think if we're looking for blame on the government's part, I would put it more on Congress and senators than the president than the Fed at this point. I think the Fed has these specific things that they can do in their toolbox. And I don't know, that's one of them, unless what are they going to do to print money and give it to people in the lower income scale or something. I don't think that's within their mandate. So I don't think that the Fed has as much to do it as some people would like to. I think it's more the government's

fault than anything. Do you think the Fed gets blamed because wealthy people own all of the assets and the people that blame the Fed are the same people that think that the Fed is, for lack of a better word, manipulating the market. But like, if stocks went down, would that make income inequality any better? Or if interest rates were at 4% instead of 0%, which, yes, the Fed controls overnight rates, but they don't control the curve. Let's just say that they could take interest rates up to 3%. Would that somehow reduce income inequality? I don't really understand. I mean, I do understand the argument. I just, I don't think that it's right. Yeah, it's not well thought out. And that's why we almost need more policies to help more people get involved in the fixer finances and get involved

in that. But if stocks fell, that's a temporary fix, not a long-term fix. So there was another one from the Washington Post talking about how the millennials are potentially the unluckiest generation. And obviously, you saw a lot of the people protesting were young people. And they show, so they looked at how much inflation-adjusted gross domestic product per person grew during each generation's first 15 years in the workforce when they started age 18. They averaged it across all birth years and they went back to like the late 1800s of this and millennials are the lowest one ever. So that's 1981 to 1996. Some of these ones overlap like the Civil War and stuff. So it's hard to really compare lucky versus unlucky. We're talking about that. But I think

there's just a lot of people out there who think what good is this system doing for me at the moment? And if I'm not benefiting and other people are, what's the point? Man, this is a rough chart to look at. What holes can we poke in this to put a little bit of a positive spin here? Well, I mean, we're looking at the 1800s, and some of these led up to, you were, or going into World War II, you were 18 and having to go away to the war. So I think millennials might not want to trade places with people who had to get drafted to go to the war or Vietnam or World War II or whatever. So maybe that's positive to spend. But yeah, obviously. There's more to life than economic output, but that is, that drives how people feel.

Are they financially secure? If so, great. If not, things are pretty bleak. Yes. George Perks wrote a really thoughtful piece for Business Insider on the potential pros and cons for working from home. And a point that he made sticking with this inequality theme, which is a theme that we've been talking about a long time now, is this is only available to white collar workers primarily. And it shows the percentage of people that are working at home by education level. and bachelor degree in higher, 46%, less than a high school diploma, 3%.

Same thing with race. Minorities or African Americans and Hispanic or Latino are way lower than whites and Asians. Right. Yeah. Some people just don't have the choice. Yeah, people that are having this argument, this is just a slice of the population that has the luxury of having this debate. That's one of this thing that it shouldn't take something like this to put these things

in perspective, but unfortunately, sometimes it takes bad events. Like, the stuff that we're dealing with is just seems so trivial and minor inconvenience from this pandemic. The pandemic almost seems like an afterthought at this point. But worrying about these things kind of puts your own problems and inconveniences into perspective and makes you really learn how trivial they are compared to what other people are dealing with. Someone did send us data on, apparently the federal government already does this. They provide a schedule and they show it out by different cities. So you could look at Atlanta versus Austin versus Boston versus Boston versus.

Detroit or Denver or wherever, and the federal government apparently has these steps and these grades. So they're like 15 pay grades and 10 steps based on the inflation rate. And you can actually compare federal government salaries across different areas. So they basically have it mapped out and set in stone depending on what pay grade and what level of management or whatever or within the organization you are. It is different by standard of living. So it's interesting that the federal government has actually already done that. Just to add to the weirdness of 2020 in terms of the economy in the market and everything else, personal savings has a percentage of disposable personal income spiked recently. So personal income grew 10.5% in ample, which was the highest

monthly total in the history of the United States. And that led to a massive increase in the personal savings rate was about 33%. So Derek Thompson tweeted, if you look at the economic date in April 2020, consumer spending fell by the most on record, initial jobless claims increased by the most on record, incomes increased by the most on record, and personal savings increased by the most on record, which all, obviously, a lot of it comes to this increase in unemployment benefits help the income and people getting fired. They dropped off at the lower end. It's really, I feel like you have to be a huge economic walk to understand all the moving pieces here, but it just really shows how wild this economic period is and how much it just really doesn't

make sense. If you just looked at a single data point, you just picked out one, you would say, like, this doesn't make any sense, but then you put them all together, it makes a little more sense, but it still is pretty wild. This next chart from JPMorgan does a really good job, just clearly telling the story of the pandemic. It's showing, this is from Chase, consumer cards spending by card presence and showing card present. In other words, you are swiping or card not present.

And card present, meaning that you're, again, swiping is down 33% card not present is actually up 1.4%. So there's your e-commerce. bump, right? And a lot of the food places that we've been delivering from and getting from for pickup, we do it on an app and just don't have to pull it out. Doesn't it make sense in the future to just not have to use a credit card and have a physical copy of it? Just have it stored somewhere on your phone, your thumbprint or whatever it is? Well, we do. I was thinking about this. This is definitely one of the things that we take for granted. So Starbucks has a fantastic app where

you can pick up the order. And when your money runs out, you hit reload. It does like your facial recognition and it reloads. And then within the span of 10 seconds, it scans your face, it takes money from your bank, puts it onto your app, orders your coffee. It's incredible that that all happens so quickly and we don't even stop for a second to think about that. But I think that's one of the places that people are going back to in droves. Every time we go by a Starbucks, the drive-in is just packed with people.

Do you have that same? That's one of those places. My Starbucks is not a drive-in, but it's one of the ones. person at a time and it moves pretty quickly. There was a chart from Alpine macro. Also, surprisingly, zero billionaires created by people who gave up on their daily Starbucks habit over the pandemic. No, we just haven't heard about them yet. Okay. They're coming. All right. U.S. cash as a percentage of equity market capitalization. It looks like this is institutional and retail money funds. I'm not exactly, exactly sure where this comes from, but this spiked this

or I guess not totally surprisingly. Could this be possible 16% cash? So it looks like it went from 10 to 16. So the scale on this chart doesn't go to zero. So that makes it look a lot bigger than it actually is. So we're talking about a 6% increase basically in cash, which is still a big number. Well, really like a 60% increase. Okay. I mean 6% on top of 10. But all these people they went to cash and missed the rallies. That would happen. Wall of worry. Doesn't it seem weird when the flows don't match up with the performance, though? Like the Jets ETF? Yes.

That is definitely one of the weirder charts this year. ETFs are so hard to gather assets. You need to be really lucky, for instance, that ETF hack that I think came out shortly before the Sony hack, and that thing took in a billion dollars. You need to either get really lucky with a story or be on the right side of performance. This one is weird. So it's called the U.S. Global Jets ETF, and this is just all the airlines, I think Southwest is the biggest holding.

It had $33 million at the beginning of March. Now it's up to $930 billion in climbing every day. The chart of this is just insane. And so here's the thing. The ETF is down 50% year to date. And even since the bottom, it's only up 26%. So it's lagged the market. It's not like these airlines have just gone bonkers since they bottomed.

They really haven't gone up that much. You think a lot of the companies that got beaten down the most really went up. Again, is this just another gambling thing? Why are so many people betting on the airline? Full disclosure. Is this like the negative oil thing? I'm gambling. So it's Monday morning. I sold my slack and I bought Jets. Did you really? I thought you were joking. No, I really did. I'm keeping a tight leash. I have a stop in at today's lows. If it goes below, today's lows, I'm out. Listen, what a new whale move.

This thing is guilty until proven innocent. Okay. So I'm not giving it much room to run at all. There was $900 million poured into this thing. And it didn't really, I mean, obviously, that's maybe a drop in the bucket. It didn't. It's not like that helped airline performance unless people sold out of the individual stocks and into the ETF to be more diverse or something. But, I mean, again, is this another Robin Hood thing where this is just a bunch of degenerate gamblers that are pouring in? It's just wild to me that this is just such odd behavior during a bear market that you get something like this. Well, because this is so weird because people, the airlines are such a part of our life. Like nobody thinks people that are buying this can't picture United

American jet blue not being here or going bankrupt. Obviously, they could. Do you think that the airlines wish that people would buy their debt like this? If there was like an airline's debt ETF or something, wouldn't that help them more than this equity one? Like, you wonder if they, man, I wish we could get some people to give us the money for debt purposes. But after the 2008 crisis, people weren't pouring into the financials, XLF like this, were they? Or the three times levered financial. I mean, I hear you, that's not an apples to apples because financials were the epicenter of the crisis, whereas the airlines are an externality, kind of. Yeah, I mean, it sounds like the airlines are now going to be starting to layoff people.

How long would you ride this thing for? Let's see. Okay, so Jets, I'm going to be a seller between 18 and 20, but more likely I will get stopped out. Okay. What's the price now? 1576. Okay. You've got some, like, technical analysis, Fibonacci trends on this thing?

No fibs. Straight levels, bro. Okay. So they talked about how a lot of the PPP loans and stuff from the government is getting to the point where you're hitting the deadline where they can now let go of people. And I think a lot of some places are. So one of the things that seems weird, so this is from a Bloomberg article. They talked about how do some people get to keep their jobs during something like this and some people get let go? So the question is, why don't some of these companies just slash

across the board and keep everyone, but just have everyone take a pick? And I've heard of a few local companies do that. When this thing hit, within like 10 days, they said, all upper level management, we're taking a 40% haircut. And everyone's going to stay, but we're all taking a hit. So this Truman Booley, who's from an economics professor at Yale, wrote a book on this. And it's like, why don't wages fall during recession, which is why this income thing going up. And this was published in 99, but he's asked this to a manufacturing executive. Why do you lay off so many people rather than reducing pay? And his answer was, the guy says, I should have made this entitled to my book.

He says, to get the misery out the door. And so he said, it's sort of obvious, and I keep hearing the same thing all over the place. You have to keep the core people working full time and keep their pay to keep them loyal to the company and everyone else you sacrifice, which. Okay, that's cold. Sounds awful. It makes a lot of business sense. Yes, unfortunately. But instead of like we're all in this together, which you'd think in a time like this,

unfortunately, I think a lot of companies probably do look at it that way and say, we're going to demoralize everyone if we give them a pay cut. But if we just demoralize a few people and cut them, they're not going to be around anymore. It's kind of a crazy way to look at the world. But it honestly, unfortunately, makes sense. Okay. The legendary investors are taking L's left. and right during this crisis. So Carl Icon was a big investor in Hertz. And this is according to

CMBC. So Hertz, the car rental agency filed for Chapter 11 last week. Carl Icon held 40% of outstanding shares, according to FACSet. It was worth $342 million at the end of the first quarter, $700 million at beginning of 2019. But when he bought it in 2014, we're talking about $1.5 billion. And it says he might invest more when it comes out of bankruptcy. Who knows? knows, this is another reason why you just don't follow billionaire's investment advice, because Carl Icon can take a $1.5 billion hit and just brush it off like nothing. Most of us won't even earn $1.5 billion in our lifetime. I know. If we're lucky, Jeff Bezos will give us that much if he decides to one day,

but that's a huge, huge loss for a guy who has such an unbelievable track record. That's a lot of money. Do you think he, like, lost sleepover this one? probably a little but honestly at the end of the day i'm worth 21.5 billion instead of 23 billion does that really i don't know i'm not a carl icon biographer but everything that i read about that guy he's an enormous competitor i highly doubt that that was his mentality okay but if he goes after this thing in bankruptcy is he throwing good money after bad i don't know and doing it again also so there was an article uh mark a watch warren buffett's recent track record is really really

Bad. Based on Berkshire's SEC filings, three of the biggest recent investments, Kraft Heinz, Occidental, and the airline stocks have lost at least $7 billion out of an investment of roughly $10 billion in each. How about this? Would he even better just going the private equity route and just taking over companies and buying it on a private market in the last 10 or 12 years and then people don't really know what they're worth anymore? Wouldn't that have made his life easier? Isn't that what he tries to do? I mean, he does that anyway. It's, I don't know. There's just a lot of ELs going around for a lot of the legendary investors aren't coming out very great from this crisis so far. I took two more ELs this weekend on the movie front.

Okay. What do you got? Lovebirds. I've never heard of any of these movies that you watch. Lovebirds is with Kamal Najani and Issa Rae. And premise, good, trailer, good, execution, not good. Netflix still hasn't executed a movie fully yet. I thought this is paramount, actually.

I believe this is their first movie that got released on Netflix. It was supposed to be a theater movie. Oh, okay. And then they just sold it to Netflix. This movie could have been very good. It really wasn't. I bailed after 30 minutes. And I was like, oh, man, I wanted to like this.

I also watched, so 824, I went back for more. There's a movie called The Lighthouse with, it's black and white. It's with Robert Pattinson and Willem Defoe. And I probably gave that maybe 45 minutes. And I was thinking to myself, okay, this movie's not. not for me. It is weird and artsy and it felt like a play almost. You know what I mean? And like, I was thinking like, okay, I bet the critics love this. And the critics did love it. I listened to, I went on the big picture, Sean Fantasy spoke to the guy who made the movie. He was also the guy

that did The Witch, by the way. That should have been my first, my first red flag. And Sean Fantasy did love it. And I don't know why I wanted to listen to that podcast. It was just interesting to listen to the making and stuff, but way too weird for me. I am not, I discovered. I'm not an indie film guy, I guess. Time for you to stop calling it films and just stick to movies. It's too intellectual. Ignore the films, stick to movies. Yeah, I need to stick to like John Wick. I think so. Yeah, there's nothing else to do though or watch, unfortunately. I did finally give your movie upgrade a chance. Oh, I've been talking about it for two years. Not that it's like the best movie ever, but it's a good movie that nobody talks about. It's surprising because the technology is good.

and the script is good. Why wasn't Tom Hardy or someone starring in that? It should have been Tom Hardy. That guy is a poor man's Tom Hardy. I always get them confused. Yes. Okay. I've got some more rex later. Okay, here's one from the Wall Street Journal. I just read this morning. It's titled bankrupt in just two weeks. Individual investors get burned by the collapse of complex securities. So this says this guy named William Mark decided to get back into investing after the 2008 crisis. He decided to look pack stock and bonds because he needed to play catch up with his retirement portfolio. So he bought into this triple levered ETN and from UBS. Which one?

Put in $800,000. It earned him 18% a year on average with dividends. So, and then the crisis hit and he lost every single penny. So he said, I'm... Which one? So it was basically based on the mortgage market. It was something to do with all those over leveraged mortgage reeds that just got slaughtered. Do you know what the ticker is?

I don't know. It's probably in the story. It just said it was based on the mortgage market. I'll find they keep to all. He said, I'm 67 years old and I basically went bankrupt in just two weeks. They showed another one. This guy named Mr. Zhu, bought one from UBS, and he paid $13 for it. It slumped to 25 cents a share recently. They decided to close it down, notifying investors would pay out 20 cents a share. He lost 700 grand. Again, he was close to retirement. He said, we were just

looking for basic income. And again, these are leveraged products. The way these ETNs work is if they fall below a certain threshold, the banks who start them can just decide to shut them down and pay them out. And a lot of times they get paid out even less than the assets are worth. These things are just hard to understand, not for retail investors who don't have someone with them to make a good decision because the people selling them at the brokerages are probably getting paid a decent commission on these. This is just a tough, tough look. And I get it. This person said they needed to catch up with their portfolio, so they're probably willing to take some risks so they probably they shouldn't have, but not a good look when you're

selling these to people and they just lose everything so quickly. Yeah, this is tough. It looks like it's E-Tracks monthly pay two-time leverage mortgage-mortgage mortgage ETN, which went from, yeah, 15 to zero. Those mortgage rates, they're levered as it is. So you're adding leverage to leverage, and those things just got crushed during the beginning of this thing. It's one of these invest in what you don't understand, but I'm sure they told people, listen, you're getting a 12% yield in this or whatever it is, and it probably looked good to people. And the people selling it probably didn't understand it. The people buying it didn't understand it. Not good. Okay. Drew Dixon from Albert Bridge Capital had a good piece. Just showing the dichotomy in the

market right now. People talk about the stock market. It really is. People were talking about how the biggest companies were propping things up for years. And a lot of ways, the biggest companies were definitely outperforming. But it's just gotten way worse now. Now, Drew looked at this and he said that the 10 largest companies started the year with a combined market cap of $6.6 trillion. Today, they're at $7.3 trillion. So again, that's a $700 billion increase. Average market cap is up from $664 billion to $7.32 billion. So the smallest 50 companies in the S&P are down 21% this year. The largest 50 are up 4.7%. And the largest 50 traded an 80% PE premium to the smallest. So there's just been this huge divergence between a handful of companies and everything else. And again, this is one of those bubble things that happened basically in the late 1990s during one of the biggest bubbles in history. Now it's happening during a pandemic depression crisis. It is pretty wild that we're seeing this.

Yeah. We've written about this. We've read a lot about this. This was a really good article looked at from every angle. Small, large, value, growth, quality, momentum, whatever. This is really good. All right. This is a good chart from bespoke investment group. It looks like this was published in the New York Times showing since inception of SPY, the S&P 500 ETF from State Street. That goes back to 1993. It shows the gain outside regular hours. Again, that means from close to open. If you had just done that, you would be up 600%. If you bought open to close, again, assuming perfect execution. No. transactions, no taxes, you would basically be flat. And I saw, I forget who, it doesn't matter.

I saw a lot of people like this market is a joke, rig, conspiracy, whatever. This kind of makes sense when you think about the fact that every major economic announcement from anything that moves to market, earnings releases, anything, everything happens before or after the markets are open. Right. Companies report their quarterly earnings after the close. There's no conspiracy. here? Economic data is reported before the open. Typically before the open. Yeah, I saw this two people saying that the markets are broken. What's the difference? So guess what? Don't sell every single day and try to buy back in the morning. That'd be a dumb strategy, right? Like, if that's the way that you're investing, I'm going to go every night, I'm going to go home with a clean book and I'm going to

open back up in the morning and buy. Guess what? You're going to get a bad outcome probably. How about this? What if you just buy the clothes, sell the open every day? Why even bother day trading. You should be overnight trading. All right. Pajama Futures. Is that what we're doing? The Pajama Futures ETF. Okay. So this is a pretty quick round trip for GMO. How much money do you think they've lost for the last five years or so? You think they've weeded people out? I would love to see their AEO at this point. I would guess that the Exodus is flatlined. And I will say, kudos to them. We spoke about this probably, I guess, two years ago at this point. I don't even remember. But their portfolio matches their writings. In other words, they're not saying one thing and doing something else.

They are doing exactly what they say. And their allocation and their flagship fund was really aggressively tilted away from, way away from market cap waiting. It's interesting because in mid-March, they were saying like, okay, things look pretty attractive now. Stocks have gotten crushed. It's time to buy. And now this is in the telegraph. Actually, weren't people, maybe even we were mocking that? Probably. Good for them. Now they're saying, okay, this surge is out of control. It's time to short. So it's just wild that in the span of two months we can go from, while there's a lot of value out there, it's time to buy to, okay, things are getting out of control. It's time to short. And someone asked me this. I'm going to have to look at the numbers. They were saying they

couldn't really find a year within the same year where you've had a 30% drop and a 30% rise in the same year. I'm sure it happened in the 30s, at least once or twice. I guess, In 1987, I think stocks were up 40 or 50% before they fell 30%. But it is pretty wild that we've seen within the span of five months. Imagine the market the year ended today. And you see in the history books, stocks are down 4%. Right. And go, ah, that year must have been just not a whole lot.

Same thing with 1968 that we spoke about earlier. What was the market up that year? 10 or 11% I think. Yeah, one of the most tumultuous periods in our country's history. Go figure. Stocks were up. Yeah, that's why I get why people are angry, but the stock market is not the place to put it at because it's not going to be like the barometer of that stuff.

It's not going to follow it, unfortunately. So we've been worried about what's going to happen with school in the fall. And obviously all of that's still up in the air. Before then, daycare is going to happen. And so in The York Times, they had a piece, should the child care industry get a bailout? And they're talking about the fact that because the child care industry, it's not part of the public education system. So it operates almost entirely on tuition payments. And a lot of these places are barely profitable, apparently. A lot of them had to close. And so New York Times says

half the child care supply in the United States is potentially at risk of closing permanently, according to analysis by the Center for American Progress. They looked at 6,000 providers, and 17% said they could not survive any closure without government support. 30% said they could not survive more than two weeks. And 16% said they could not survive more than a month. So obviously, a lot of these places closed when we have the state home orders. When people try to come back, they're saying one of the problems is a lot of people probably just won't send their kids back, especially if schools don't open or something. For a lot of people, I mean, for you, didn't you have to get on a waiting list? We had to two when we sent up for ours.

So supply was already relatively thin. So it's kind of like the real estate market. Now, some of these places go out of business, obviously the demand is curve is probably shifted to because people are slowly going away. But that's going to be tough for people. I don't know that these places can just come back because there's all sorts of, of certificates, like, these places need to be government-approved and inspected and all the sort of stuff. You can't just open up a child care place. So ours stayed open because essential employees still had to drop their kids off somewhere. And so some of them closed. Ours stayed open. But yeah, you're right. It's kind of crazy because

they have to adhere to all these regulations, but yet they don't get the same sort of funding that the school system does. We've talked about this before. I would love it if child care or daycare was part of the public school system. That would be, that would make life so much easier for people. People got really mad at us for this one. Yes, which is crazy because guess what? You guys don't get enough? Yeah, by the time your kids are in kindergarten or preschool, they're in public schools. So this is a couple of years before, I guess.

But this is going to make things tough on people. And especially we're worried about the fall if schools don't come back or if schools are on an every other day thing. I think they've talked about ours. Maybe you do like two days on for half the kids and then one day off to clean, then two days on. So your kids would go either Monday, Tuesday, or Thursday, Friday. That's for parents who are working still. That's tough. Then what do you do the other two or three days?

and if daycare is not there, that's going to be tough for people. And I know with ours, they've tried to implement some things where they drop the kids off outside and then the kids are temp checked every day, four times a day or something. So it sounds like a relatively safe environment. I guess the biggest worry is that if these places are germ factories and they're bringing it home and spreading it. But obviously, those are like the decisions we're all going to have to make at some point because no one's going to stay home for two years or whatever until we get a vaccine. Somebody tweeted, new USA Today survey finds that even if schools reopened this fall,

60% of parents would likely continue homeschooling, okay, 30% of parents would very likely continue homeschooling, a big change is happening in education. Yeah. There's no way that survey is legit or going to happen. I'm happy that you've been taking some heat in the inboxes. I don't have you seen. A thousand is a perfectly large enough sample size. The data says. Who? Did a survey say this? Did a survey write us to say that? Don't double down. Just back down. back down. We've read all the books. Oh, so you're giving up on the anti-survey stance now? I'm anti-survey. It's not the number of people pulled. That is the issue. Okay, what's the issue? I mean, do we really need to relitigate this? We're anti-servate.

Well, apparently, you're giving me the heat on this one. I'm taking the heat on this? Yeah, you're taking the heat. It's not the number. That is the problem. I'm sorry, but if there's 330 million Americans, you can't ask a thousand of them something and say 50% of Americans believe. Yes, you can. I'm sorry. Yes, you can. There's no way. There's no way you can get a representative sample out of a thousand. people out of 330 million. You really believe that? Agreed to disagree. All right.

You've turned into a perma bear, and now you're pro-survey. Don't even know you anymore. All right. How about this? So we're looking for places to go. We're looking for houses to rent for the summer to get away because I don't want to stay in the house all summer. We've got no beach.

You can't go outside if it's 90 degrees, so we can't stay inside all summer. Kids summer's canceled. Anyhow, somebody sent me a town to check out. town that I've never heard of, very obscure. It sounds like the plot to one of your crappy horror movies. Come to this town. Population 220. Where is this?

It doesn't matter. Okay. My wife, it's a small town in Maine. Okay. My wife on Instagram saw an ad for this town or something. So I didn't know, maybe this is naive, that Facebook is reading your text messages. Is that possible? I thought that wasn't happening.

Are you basing this off of your one anecdote? How is this an anecdote? I texted her this town and then it's coming up on her Instagram ads. I don't know. This wasn't like a pair of shorts. This was a very specific location. I've decided to basically give up on Instagram the last six weeks or so. I don't know if I'm going to go back and I never was into Facebook.

So if you guys are being patrolled by Mark Zuckerberg and he's implementing chips into your head, I'm free on that one. So good luck with that. You're not going to the town with 200 people in Maine. Let's move out to listen to questions. I thought this is really good. My daughter wants to learn about investing. Options are in outschool.com class or DIY. I'm not the best, but I've learned a lot listening to you guys and lots of reading.

If you had three lessons or main ideas to get across to an interest of 12-year-old, what would they be? I think the idea that you can put your money into something. I remember learning this as a child. When I was like 12 years old, I put birthday money into a CD. Just the idea of thinking that you could put $1,000 into a CD and I think I got 5% and then in a year or two years or whatever it was, you'd get more than that and you didn't do anything. I think just that idea was mind-blowing to me. I think helping someone understand that, like earning interest on interest, compound interest is not the mind-blowing thing some people may get out to be. But just the idea that you can have your money work for you is I think something probably a lot of kids would be blown away at.

I remember my father talking about compound interest, but it didn't take because I didn't see it. I think that if you can give experiences instead of teaching for a child, that could stick. I need to think about this, though, three main ideas. Maybe this is better for a blog post because it's hard to come up with us on the fly. You once wrote about... Idea number two, stock buybacks are the devil. Number three. We'll get back to this, maybe in a blog post.

You once wrote about what if you retired at a market peak, seeing lots of questions for people in the 68 to 72 year old range about starting retirement right now, what are they reading people text messages? Anyway, thoughts. This is from an advisor. So life would be a lot easier for retirees if the 10-year treasury yielded 5 or 6%. I can't believe. So going into the 1987 crash, the 10-year yielded like 10%. Can you imagine looking at it heading into the 1987 crash? Can you imagine like wanting to, if you're retired back then, wanting to even bother with

stocks if you could get 10% in a risk-free government bond? No. So now you're getting nothing. You're getting 60 basis points or whatever to 70 basis points. I mean, the biggest thing is, unfortunately, you have to learn to accept some volatility if you're retired. Because you could still have 10, 20, 30 years ahead of you, depending on you retire. Maybe you're a little older. You could have 40. If you want to grow your money over the rate of inflation, you have to be willing to accept volatility. And what is a smart way to do? Obviously, a three times levered ETN is probably not a smart way to take volatility. that's just the thing. It's too bad. It would be nice if the markets weren't this way. But that's the thing you have to learn to accept is that you're going to even if you want to get yield from somewhere. And you're saying, I'm going to go to high yield bonds or mortgage rates or whatever it is. You're accepting way more volatility there than you are in the Barclays aggregate or treasuries or whatever it is. So you just have to be willing to take some risk, unfortunately.

Last one. I'm listening to your podcast because I'm a new dad and trying to get my financial house in order for my kids. I was hoping you can give me some book recommendations to become a better investor. And ones I've read so far. are. Intelligent investor, common stocks and uncommon profits went up on Wall Street. You can be a stock market genius. Poor Charlie's Almanac, the Ford Pils of investing, aggressive, conservative investor. And then this person goes out to say, one's on my list to read are, okay, here's what I would say. Just don't take this a wrong way, but stop. You have already covered 99% of what you're going to learn. At this point, it is, unless you just love books, I'm not telling you what to do, obviously, if you want to keep reading by all means. But at this point, Now it's the time to take all those lessons and start implementing.

Start coming up with a plan because there's nothing that you're going to learn in any book outside of the ones that you've already read that's going to take you to the next level. Or read something that's more specialized. Read more about retirement saving or personal finance or whatever. You're right. At a certain point, you just have to do it with your money if you're going to one or two more books that isn't going to make you the next Warren Buffett. All right.

Recommendations. What do you got? Okay, so we finished devs, which I don't know if it was on FX or just on Hulu, but we watched it on Hulu. It was an eight-part mini-series, and Ron Swanson from Parks and Rec was the Steve Jobs Silicon Valley Messiah character,

and it was a really good show. And they really nailed the ending. And they got the Silicon Valley culture really right. But this is a futuristic one from the guy who did Ex Machina, and I thought it was amazing. I really enjoyed it. I thought Upgrade was like Ex Machina.

Yeah, a little bit. So, I mean, that guy does his futuristic stuff it takes on the future. It's about stuff in Silicon Valley, but it's set today, and it's stuff that could happen in the future potentially. I really liked it. We tried Space Force, Steve Carell's new show on Netflix. We gave it two episodes, and it was kind of one of those, take it or leave it. I laughed a couple times, but it's not on your half to watch it list, I would say. That's all I got. I don't think I watched anything else this weekend. I did a lot of reading. Again, I re-learned about myself that if the critics like it, but the audience hates it, I'm with the audience

10 times out of 10. I'm not a film critic. Yes. If it's wonderful and beautiful and well done, that's not for me. Yeah, I'm the same way. I never trusted the film critics. A few weeks here, I listened to such a great podcast. The rewatchables did Armageddon. Did you listen to that? Yeah, I did. I didn't realize because I was 13 at the time. I thought that was a serious-ish movie, I guess. I didn't realize that what a joke it was, but I definitely cried. That's not a salesman. That's your father. Definitely got me.

Then you heard that song every five minutes on the radio the whole summer. Totally ruined it. But a perfect July 4th movie, Blockbuster, right? Yeah, perfect. So because I've been riding my physical bicycle, I've got him back into the podcast game, big time. So I already mentioned that John Meacham podcast was excellent. I listened to a series called Gangster Capitalism on the NRA. This podcast was not at all a gun debate issue.

it was just basically how a nonprofit organization is funding the lifestyle of Wain-Lapierre and its associates. And it is just nuts. So that was a good one. Highly recommend. Okay. All right. Shoot us an email Animal Spearspod at gmail.com and we'll talk to you next week.