Animal Spirits Podcast - The Worst Chart in Finance (EP.174)

Episode Date: October 28, 2020

On this week's show we discuss why the price of oil is losing its luster as a macro indicator, who owns the stock market, the rise of new investment classes, Robinhood as the financial hub for millennials, why people aren't happier and 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 our friends at Y Charts. One of the great features of Y charts that I like is the fact that you can just search for anything. I have a hot take. I'm going to roll out on the show today. I pulled it out to Michael this morning. He said, no, save it for the show. This is great. So I did some quick research. And the functionality of the tool is great because you can just kind of search for anything. So I looked at the price of oil and the performance of the energy sector. And then I looked at the performance of solar ETFs. And then I went and moved on to compare the performance of the Canadian stock market versus the S&P 500. So the ability to just jump back and forth and use all these different features at the same time

without really knowing what you're looking for is always been helpful for me. And so we're going to share some of the stuff I found in here and why I think maybe the price of oil is losing its luster as a macro-acromic indicator. And if you want to try Y-charts out, take it for a spin. Y-charts.com. Tell them Animal Spirits sent you and get 20% off your initial subscription. 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 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 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 Annal Spears with Michael and Ben. I've got to take in the oven I've been working on for a few days. Preheating? Yeah, it's been preheating for why I wanted to run it by you. What if the price of oil just doesn't matter anymore? To what? A huge macroeconomic indicator. Let me take off what I got for you here.

Of all the weird things to happen in the market this year, don't you think the price of oil going to negative $37 a barrel was one of the weirdest? In a weird year, that was definitely one of the stranger things to happen. And I know that there was these weird dynamics to the fact that demand fell off a cliff because of the quarantines and pandemic and no one wanted to take delivery of a bear of oil so you had to pay these people to keep it. I understand all the dynamics behind that, but there were really no real-world implications that happened from that.

The price of oil went negative for a day. We had kind of fun making jokes about it on finance Twitter. And there really weren't even any huge hedge funds that blew up from it. There really wasn't any overspill into any other. parts of the economy. Here's what else I got for some evidence here. The energy sector now makes up 1.9% of the Vanguard total stock market index fund. So the total U.S. stock market makes up 1.9%. It's less than 3% worldwide. You alerted me to the fact that solar stocks have been going nuts in one of your videos in the compound with Josh a few weeks ago. So the solar

ETF, TAN, is up 125% year today. I think it was up 150 before. Also the clean energy ETF, which is similar holdings. Tesla is up 400% this year. I mean, you could say, well, if the price of oil rises in the future, gas prices will go up on the consumer. How much of impact does that really have on the stock market if gas prices rise? Is it that much? So my whole thought process here is, am I giving the market too much credit to say that it's effectively saying the price of oil just, eh, whatever, doesn't really matter that much in the grand scheme of things as far as markets are concerned? Well, the stock market, maybe it doesn't matter. I mean, I don't know how you could argue that it does matter, given how small it is. So it could

triple from here and not move the needle. It could go to zero and not move the needle in a vacuum. However, energy is still a huge input into costs of everything. I think that the price of oil might not matter or doesn't matter to the stock market, but it certainly matters to the economy. Okay, counterpoint. Don't you think a lot of the companies that use it are now much smarter than they were in the past and they hedge all this stuff out anyway? They've always hedged it out, been doing that forever. I just think if you'd have told someone in the 70s with how crazy that was and they were talking about the peak oil and all this stuff and there's lines to get gas

that the price of oil would go negative in the 2020s and it really wouldn't matter. I think that if you were talking to people from the 70s, you could have said about 7,000 things that would seem insane right now. That would make sense to them. And I think that, yeah, the price of oil going negative is certainly one of them. I don't think anybody in 2019 would have ever believed that that could happen. I know we have a lot of Canadian listeners that follow the show. I did a quick search of the MSEI Canada ETF. In the last 10 years, it's up 19% total against an S&P that's up 250%. And it looks

like actually financials are a much bigger weighting in that index than energy is now. How big is energy in the Canadian market? Materials are actually a bigger piece than energy, but I think it all flows through the fact that the Canadian economy is so tied up to the energy. It doesn't matter to the S&P 500. It certainly matters to the rest of the world. to Canada. But to my point, if you look at VT, which is this total world stock market index fund for the Vanguard, energy is less than 3% of total weighting. Yeah, I agree with you. I don't think it matters to the stock market, but I think it matters to the economy. But I think it matters to the economy way less than it once did, though. How's that? I'm just saying, is it possible

that the market has totally front run everything and thought, okay, in the decades ahead, it's electric vehicles, and I know I'm not saying oil usage is going to completely go away. is it possible that the market is smart enough to that it's just priced all that in with making energy such a small piece of it? Sure, perhaps. Speaking of clean energy and self-driving cars, somebody sent us a comment last week. We were talking about self-driving cars from the ARC report. Who's going to clean them?

If somebody pews or spills water or coffee on the seats, that was an angle that we hadn't considered. I don't know that's like a complete bare case for self-driving cars in the future, but that's a valid, good point. Okay, well, if we get to the point where we have self-driving cars, don't you think they'll have robots that can clean the cars for us? I don't know. Yeah. No, that's true.

Yeah, because, listen, once a week I have to vacuum my car because there's Cheerios crunched up all over the place and Goldfish, right? So you know the difference between you and me? Once every like three years I vacuum my car. I just let it pile up. I move the car seat once every two years and it's like, oh my God. Yeah, there you go. You don't want to be the company that's servicing out to little kids because your cars are going to be messy all the time. And drunk people. Okay, you had a post this weekend called Who Owns the Stock Market and you shared this graph with me last week.

thought this was really interesting. So it looks at the ownership of U.S. corporate stocks since 1965, and it goes to 2019 and shows how it changes over time. Taxable accounts accounted for roughly 80 percent of stock holdings back in 1965. Now it's eyeballing at 25 percent, maybe. No wonder Warren Buffett crushed it in the 50s. And so now it breaks it out by foreigners, which I guess is sovereign wealth funds and then rich people that that makes up like 40 percent now. It was also direct investment. So one of the examples I gave was, Siemens, if they have a U.S. subsidiary, they count that all zoning. So it's not, yeah. So where did you find this one? I saw somebody tweet about it. I can't remember. But this was from

the Brookings Institute. That's where the work was done. And of course, now there's a big growth in, so defined contribution plans have grown a lot, defined benefit plans have shrunk somewhat. That's just pensions. Then it shows IRAs, then nonprofits and life insurance accounts. But I guess my biggest takeaway from this is does the fact that the changing composition of the ownership of the stock market here, there's far more tax deferred accounts than ever before than there ever were. It used to be way more taxable. Now it's way more tax deferred. Does that make the stock market a little more long term in nature? Is that too much of a stretch? Have you seen 2020? Aren't you the person that's saying that booms and busts are going to happen quicker? I've been listening to your podcast,

and that's what you've been saying. I don't think that's two different things, though. I don't think that really negates the other. Those are complete contradictions. what if people are speculating their taxable accounts that make up a smaller percentage now, but they're leaving a loan there to find contribution plans and IRAs and such? Yeah, I mean, obviously, you're correct. Retirement accounts are becoming a bigger piece of the market. But you could also make the case that because those people are, yeah, thinking long term, they're not really turning over their portfolio, that what's moving the needle is what

it's always been, HFTs and institutional money. I think that, yeah, you're right, but I don't think that's going to necessarily change the way the market acts. It is surprising. I mean, obviously here, there's a lot of legacy stuff here, but it looks like pensions are basically the same size as 401ks, which I think would surprise some people, that there's still that much. I'm surprised that pensions are still that big, aren't you? Or actually, well, pensions could be bigger because this is only showing the stock market. So there was actually a story in The Washington Post, and Edward Wolfe, who was an economist at New York University, he's always got a lot of good stats about ownership of the stock market and wealth inequality. And he looked at it and found. There's like 5,300 pensions sponsored by state and local governments, $2 trillion dollars underwater as of June 30th. That is also at a time when the fund's assets reached an all-time high of $4.7 trillion.

So there's $4.7 trillion in state and local government pension plans, but they're $2 trillion dollars underwater, even though their assets at an all-time high. This is almost a case of them having so much money, but it's almost like no matter what they do with their investments, they're screwed because it's almost like, you know, no matter what you do if you don't save enough, you're out of luck. So this is almost like a personal finance issue for them. They didn't set aside enough money at the start and now they're, even though they have more money they ever had, they're still screwed. I think that's always the issue is that you should never count in your investments to bail you out. Yes. Like their expectations

just got so out of whack. But this is probably one of my bigger long term worries about what are they going to do eventually when this time comes? Are people going to see their benefits cut as they retire? How are you playing this? What's a trade? I don't have any. long-term calls on pensions being screwed. But I'll think about it. So Pachy McCork wrote a post. Software is eating the markets. Welcome to the consumerization of investing. And this is one of the best posts I've read in a while talking about how the markets have changed. And there's a lot in here to unpack. But one of the themes was that retail investors are behaving more like consumers than they are investors. So their motivations are different than institutional investors. It's not just

dollars and cents. There's all sorts of things like into these decision-making process. So here's this quote. He said the rise of consumer investors will alter how markets operate. Your take. Your thoughts. Well, first, I liked how he said that in Silicon Valley, it's almost like a bigger show of pride to say that you invested in like Series A of Uber than own a Ferrari. That's a bigger badge of honor. But I mean, one of the things we've been talking about for a while is the fact that as bond rates continue to fall and maybe stay low for a long time, people are either going to buy choice or by force. go into more creative investments. And that demand, as Josh always says, the supply is going

to catch up with the demand eventually, right? I love this quote. Low interest rates favor more fun assets like art, cards and tech stocks over more boring ones like bonds and value stocks. I think there's just going to be a host of stuff coming in the years ahead that allow people to invest in stuff that they never dreamed of investing before. And actually, I think a lot of this stuff actually favors retail investors over the pros like institutions. Because a lot of this stuff isn't big enough quite yet to scale and reach these big professional investors that can invest hundreds of millions or maybe billions of dollars. So this is actually stuff that is something that the retail investor can put their money in and maybe, I don't know,

who knows what the returns for this stuff are going to be? But if it's something you're more interested in, that's not even the whole point is his point. That returns are obviously a component of people's motivations. But he said, quote, although they're often derided as irrational or gamblers or YOLO traders, retail traders might be behaving perfectly rational when you price in everything else that they're buying and experience a status symbol, a digital good, belonging, entertainment, education, and more, end quote. And I can hear the eyeballs rolling from people who think that they're super smart and this is gambling and this is not what investing is. And okay, yeah, fine. But the world has changed and this is not going away.

And what if this stuff, the status symbol, entertainment, having more fun, what if that stuff keeps you engaged and invested longer too? Even if the returns are subpar. I know a lot of people have pushing back against ESG investing in recent years. I think one of the things they miss on that is who cares if you get any alpha there or whatever? If those decisions allow you to stay in your portfolio longer and allow you to behave versus the alternative, then it's a win-win in that way if it improves behavior. Maybe some of this stuff will make behavior worse, obviously. It depends on the platform and how much you're able to trade and stuff. But I think it's going to maybe bring out a whole host of new investors that might not have looked at this stuff before.

So there are companies that allow you to invest in real estate, institutional like real estate. Fundrise, for example. We had them on the show a few months back. Equity's in lets you invest in pre-IPO markets. We also did one with them. Masterworks for art. There are so many of these companies. Yeah, sneakers and you can invest in a share of a car, classic cars. By the way, I think when I first heard of Valley Road, I'm pretty sure that I laughed and said, this is ridiculous. Why would anybody? But that was probably five years ago. I mean, I think I saw this at one of the stock twits events that I had probably laughed. But I think that this thing is here. It's not going away. I am super bullish on these companies' ability to attract eyeballs and raise assets. Who knows who the winners are going to be. And again, I think that the

returns are just one component of these things. And if the Fed does keep interest rates low till 2023, like they say, who knows if that'll happen. Maybe it does. I am a perfect example of this. So I, like a lot of other listeners, have kept money in a high-yield savings account. I'm saying high-yield. That sounds ridiculous. Marcus or whatever, which is giving you 60 basis points, I don't want that much cash there. No. This has made me think my emergency reserves.

I have definitely less today than I have in the past because rates are effectively forcing me to look elsewhere. I basically have a ceiling on it or a floor, I guess. When I go over that floor, I sweep it out and invest it in something else. Like you said, what's the point if you're earning absolutely nothing on it on that money? And yeah, I think this stuff is just going to. If they do keep rates low for a while, people are going to want to continue to move out of that stuff and into something more exciting. So there was a story about Robin Hood and Bloomberg is a cover story.

And they said, whatever, three million new signups in the first year, in the first half of the year this year, half of their customers were first time investors, they said. That's great. That's a big number. They said 80% of AUM for Robin Hood is millennial users. And I think, I'm sure it sounds like they're biding their time and they actually said they've paused their efforts to expand into Europe and Asia after they had that slowdown member in March and April when their service went down for a day. So I think they want to get that stuff right before they really expand. But if they're able to somehow do some more stuff besides just stock trading, if they're able to get into people somehow help, I know they have like a debit card they've rolled out now and they have a savings account too. Again, you can't call it a high yield, but they have a savings account there.

If they're able to offer other services, checking accounts, whatever, if they want to get into that somehow. Life insurance. Yeah, and be that for millennials, I think they have a real shot at getting there. Do you think that a lot of these newer companies that we're mentioning for alternative asset classes in Robin Hood, are these all going to be winner-take-all markets? Is there going to be room for competition? So who are we talking about this morning?

Equity Zen's competition is a company called Forge. Is that right? Yeah, I can't imagine there won't be competition from this. I'm surprised we haven't seen Robin Hood on steroids. What do you mean? Let's say for the zero commission brokerage firms, Robin Hood is the index fund. I'm surprised there isn't a triple levered version of Robin Hood yet that is just playing the gamification to the next level and just being blatant about it.

I'm surprised that someone hasn't rolled out a competitor yet to them. Maybe it's harder than it sounds, I guess. I'm surprised we haven't or won't seen something like that where that just takes it to the next level. Match.com was one of the first online dating sites. When do we get the Tinder to Robin Hood's match? Didn't they merge? Yeah, maybe you're right. But Tinder just broke it down to the most basic.

You see a picture and you swipe. Next gamification of that for investing, I don't know. Robin Hood, in Packy McCormick's piece, he was talking about their competition as a company called Public. Whereas Robin Hood is encouraging trading and treating it more like a casino. Public is going with the other way. So instead of showing like a ticker symbol for your holdings, they're shown with the logo of the company. They're actually trying to promote more long term. I'm saying I'm surprised they don't see something the other way.

but who knows. What do you mean? Saying that just wants people to just go crazy and trade their faces off. You don't think that's what Robin Hood is? Well, yeah. It's not just Robin Hood. Obviously, we use the Robin Hood effect, and maybe they are certainly the straw that broke the camel's back in terms of nudging Schwab and TD to go to zero on their trades.

But this chart from the post shows retail equity trading volume. And TD, Robin Hood, leapfrogged e-trade and Schwab, which is hard to believe. But TD is still way, way, way bigger in terms of the. amount of trading on the platform. It's increased everywhere. Interactive brokers, Charles Schwab, e-trade, all of them. It's everywhere. All right, I want to talk quickly about a piece from Morning Star about momentum. One of the takeaways for me, not that this was necessary, the whole point of the piece, was we compare, at least I do, compare a momentum fund's performance to the S&P 500. That's the benchmark. But actually, oftentimes, certainly in the last one year, three years,

momentum stocks has held growth stocks. Those have been the momentum needs as growth stock. So when you compare Momentum's performance to a growth index, it's actually not done that well. Am I moving the goalposts? Am I being unfair? No, they looked at the I shares momentum factory ETF. It's MTF. And I looked at the top holdings. And the top holding is Tesla, Apple, Amazon, Microsoft, Nvidia, Adobe, Netflix, Google. So how does that compare to the cues? By the way, I'm a believer in Momentum as a valuable strategy. I think that I am perhaps being a little bit unfair. thought this was interesting because over the past few years, I've been comparing momentum to

a broader-based index and saying, like, holy cow, momentum has absolutely annihilated the S&P or whatever, the Russell 1,000. And then when you compare it to the growth, actually, that tells a little bit of a different story. Now, counterpoint to myself is that momentum doesn't have to hold growth stocks. There could obviously be a period where consumer staples have momentum, where you name it, you pick. But in the past few years, it seems that momentum has been primarily high flyers, and it hasn't kept pace with the index. Anyway, I think I'm picking nits here. If you're talking about factors like this, the opportunity cost, though, for a lot of people, is the core holding of the S&P 500 or total stock market. And then what am I doing off of that?

That's true. Yeah. You could look at it either way. When you look at the different factors, I mean, momentum and quality have been the only ones that have been worth a damn over the past few years. Yeah, that have actually done something, worked? Yeah, I agree. All right. This is interesting. Sticking with factors. This is from looks like Bank of America, Merrill Lynch. Amid depressed earnings this year and a nascent economic recovery expected into next year, analysts now assign higher growth rates for value stocks over the next two years than for growth stocks. This is unusual. Absent a brief period in 2017, this has not happened since the financial crisis. Who cares what they say? This is interesting. The expected earnings growth

for value stocks is now higher than that for growth stocks. Yes. That's what this is saying. Okay. That's surprising. This pairs nicely with an economic tweet. Again, from back, American Merrill Lynch, showing that so far this quarter, companies that beat on both top and bottom line have underperformed the S&P 500 by five basis points the day after, which is the worst in history, and misses outperformed by 60 basis points, the highest in history. So I saw this chart, and I basically thought that this was a continuation of the theme that we've seen, which is the high flyers, money losing stocks have done better. But that's not what this is showing, because this is only showing companies that have

missed or beat. This is not showing making money or losing money. So this is again an expectations thing, right? That's exactly right. So then Jake tweeted, looks like it's been the value sectors that I've been missing. Thus, I assume outperforming. So many people have tried to say that it's now values time. I actually did a post last week that looks hilariously wrong on Monday morning with value stocks, cyclicals, industrials getting creamed. Is this the turn? When the tech bubble happened in the late 90s, the thing that all the value investors are hanging their hat on is that when that reversed in 2000, growth stocks out crushed, value did well. It probably is mostly value stocks these days that they're in this bucket. But I think the reversal this time, I'm just waiting. I could

be wrong, obviously. Great caveat there, Ben. Well, of course. COVID, work from home world versus post-COVID, things are a different world. I think that's going to be the line of demarcation there. That's sort of the same thing, but maybe a little bit more specific. You think that's all value stocks. I don't know, I guess. I mean, I'm thinking more of like travel leisure, consumer spending, cyclical, stuff like that. Maybe that's value. Maybe it's not. But I think that's going to be the line in the sand where people realize, okay, this is over and people's habits are going to change. I think it's going to be like flipping a switch. I mean, I kind of did that in my post. The basket that I compared was Amazon DocuSign, Shopify, Peloton, Teladoc and Zoom. Those are the stay-at-home

stocks. And on the other side were Marriott, Macy's, MGM, Royal Caribbean, Delta, and Simon property, which is value growth, to your point, more specifically, stay at home, open up. And P.S. If it were not for the pandemic, I never in a million years would have bought a Peloton. Now I have it. You're still riding, bro? Of course. I love it, actually. I use it. There you go. More than I ever thought I would. Just even getting in like a 10 or 15 minute short workout after the kids are in bed or something. Can I just give a plug? I know everyone's so tired of people with six packs giving exercise advice. Like, those people could take a hike. You have the Instagram model people, yes. But take it for me. I am a fat skinny guy. I have not exercised in 10 years. I do not have a six pack. Believe me. Bad, you're smirking. I am the lightest I've been in probably 10 years. And it took a while. It was not easy, but I finally made exercise part of my routine. I have known you for seven years now, maybe. How do I like?

I don't think you had ever exercised before this year. A fact. Of me knowing you. That's a fact. It makes your life easier. It's a good thing. So again, take it from somebody that does not have a six-pack that was never an exercise junkie.

You're speaking for all the dad-bods out there in the world. Somebody on YouTube was questioning why I would use a firm to buy a Palaton. I did this installation payment plan. A firm is like a huge company. They're probably going to IPO sooner than later. We were reading about this. A third of a firm users are able to use installment plans with no interest. So my credit score isn't quite as pristine as yours, but I guess it's good enough,

that I'm able to buy the Palaton and pay whatever, $60 a month instead of $2,500 or however much it costs. Why would I not take that free money? It's a free loan. I did the same thing. I still don't understand why they offer that. Why do they make that offer? Because for the time of value of money thing, if someone is going to offer me zero percent

financing, I will take it any day of the week. because if there's any inflation, you're paying less over time. There it is. Oh, you used a firm because you're an inflation hawk. If inflation is 0.1% a year, I win on this transaction. I don't know how the deal specifically works with Peloton, but I understand that most merchants pay them on the other side as well. I bought a Dyson vacuum. Did I need to do it on that?

No, but they offered to me, I'm like, okay, I pay $20 a month instead of paying $800 up front or whatever it is. I bought a Subway sandwich the other day. It was $6. Can I afford it? Yeah, but. I guess it's one of those things like the people don't pay off their credit cards and just earn the rewards. They're being subsidized by the people who don't. I guess I don't know. Same as it ever was. All right. My friend John Borman passed away last week from Glioblastoma,

way too young. I think he was in his young 50s. And a lot of listeners know John from Twitter and have met him and just such a special sweetheart of a person. I went back and I read truly one of my favorite blog posts of all time that he wrote. Yeah, I remember when he wrote this and thinking, this is amazing. Yes, yes, this is not hindsight. I definitely tweeted this at the time. Holy cow, this is amazing. And it's funny because I was writing a little tribute to him, and I wrote this and I deleted it,

only because it just didn't fit. So I published it, and then I read this post, and this is the part that I deleted. Because I couldn't remember. I've been saying this for years. I've been saying this to people for years, specifically younger people. people that are asking me about trading and stuff. And I was sort of paraphrasing this. But John said, if you want to own the strongest stocks, buy the strongest stocks, buy something that's already doing what you wanted to going up. End quote. That sounds so simple. So John was a trend follower,

meaning he bought stocks that were going up. Period. End of story. Did not care what S&P 500 was doing. He bought stocks that were going up. And it was also extremely transparent in the way he did it. Remember, like every week, he would share his performance, he would share the stocks he's buying, the stocks he's selling. Yeah, he was a gem. And he was basically like, I'm just buying stocks that go up. I don't care about anything else. Yeah. I just thought that this was such fantastic trading advice to young people. It sounds so simple. If you want to buy a stock because you want it to go up, well, buy a stock that's already going up. Now, of course, the rub is in real life, that's not easy to do. I don't know that my personality is suited for that. I think you have to have

the right type of personality to take that type of strategy. I don't know that I could do that on a consistent basis? Well, I tried. You have to know yourself to know that you're the kind of person who can do that on a rules-based fashion or whatever. I tried, and it's incredibly difficult. So a lot of people talk about the entry. Like, when do I buy a stock? Nobody talks about when do you sell a stock. So John had this amazing blurb in this long post where he said, watch any trading software ad, and you'll likely hear lots about getting entry signals. The perception is it's more important than the others, but it's not. I think exits are more important. A good exit signal doesn't just get you out when needed.

A really good exit signal keeps you in, staying just below the action and not triggering until the trend is over. Look back at the entry of a successful position you've held for many months. How important was it to enter at that precise time that day? It's likely what followed was more important, what allowed you to tolerate the volatility and ride it higher to where it is now, making it the big winner it is. That's all exits and position size, not entry. So I think that point is so well taken.

We just got to listen to a question this morning asking about, listen, I've got 30% of cash, and I understand the math, and this time is different, and blah, blah, blah. And I basically said to him, if you give it enough time, now this is for an index, this is not stock specific, but if you give the S&P 500 enough time and you really hold on, does the entry really, really matter? Your post about Bob the World's World's Market Timer, for example. Right. If you're holding long enough, patients can kind of conquer all.

One of the unique things about John, I think he was not only a nice guy in real life, but he was super nice on social media, and that's kind of a hard thing because a lot of times you'll find the person that they're in real life is not who are there in social media or vice versa. I mean, we're guilty of this, too, of being snarky and sub-tweeting people and probably saying some stuff every once in a while we shouldn't. He would never pick fights. Yeah, he never did. I mean, he was like that kind of on and awe. And some people, it's hard to separate those two personalities. And he was the same in both. He was never out to get people. He was always like,

this is my thing. If you don't like it, fine. But this is the way I do it. And how you do it is the way you do it. And that's fine. Yeah, rest in peace, John. Real estate continues to be absolutely on fire. So we got existing home sales last week. The median price is up 15%, which is a nominal and real all-time high. Existing home sales were up 9.4% month over month. Existing home sales rose 9.4% month month and 21% year over year. And now here's the interesting piece of data within the data. There were only 1.47 million homes for sale at the end of September, which is down 19% from a year ago. So at the current sales pace, there was just a 2.7 month supply of homes on the market, which is the lowest level on record going back to 1982. I think real estate is one of the places

where the animal spirits, for lack of a better word, take hold more than anywhere else. Anecdotally, I hear people say all the time, why wouldn't I just put my home for sale if I can sell it for more money. Never thinking about the other side of that transaction of guess what you're buying higher to, but I've heard so many people say that in the last few months saying this market is so hot. Why would I not? I can sell it in two days. And I'm seeing that all over. You see a house quote for sale and then the sale pending sign is up three days later. I think it's one of those things where it just builds on itself. And it is funny though, because unless you're downsizing and you're performing like the geo arbitrage and moving somewhere

else or renting, whatever, the difference that you make between what you spend and what you sell for it's going to basically even out. Is it not? Someone I know put their house up for a ridiculous price because houses are flying in my neighborhood like everywhere else. And I said, where are you going? It was like, I'll figure it out. If I get this price, I'll figure it out. I'll go somewhere else. Yeah. This is the way it works, though. Start hearing stories about the stuff and then they want to get into the action too. That's how it tends to work in the housing market. I have a quick story. So I'm a little bit disappointed in this. So my plumber, tons of alpha, the guy that was buying all those high-flyer stocks.

Did he start a newsletter yet? So the other day, I heard some bubbling in my sink. I'm like, oh, great, what is that? And then I realized that the bathroom downstairs was clogged. I just couldn't unclog it. I didn't know what was happening. There was nothing down there. So my plumber came.

Now, granted, it was after hours. It was 7 o'clock on Sunday night. And there was like a drain coming out of my house, a white pipe. And there was toilet paper around it. So something, something, it got backed up. whatever. He took like a chisel. He dug under, there was some sort of valve. He took a chisel. He hammered it. He emptied it out. Took out the toilet paper, put it back on and left. And it was probably, I don't know, it probably took him 40 minutes or so. He charged me a lot of money.

I was just happy to have him here. I was like, oh, thank God. What would have happened if we didn't get you? But I think plumbers make a pretty good living. I said to him, you will never be disrupted. You can't replace this with technology. I learned two important lessons. One, I never knew how to flush a toilet, apparently. Did you know that I flushed it and I like going, that was it? You actually have to flush it and hold it for like two or three seconds to let the drain the water come down. I did not know that.

Check it out. True story. But my children flush the toilet 18 times a day, so maybe they're making up for it. He gave me a number. And so my neighbor texted me the next day. He's like, dude, that was pretty egregious. I'm like, oh, no, really? I thought it was a lot, but I wasn't really.

positive. He's like, that was kind of criminal. How much you charged you? Yeah. Did he give you any free stock picks to make up for it? He did not. But here's another thing. So then the next morning, I had a sprinkler guy come over who also does plumber work. And I asked him, he's like, yeah, that's high. He probably charged me 100, 150 bucks more than he should have. So I was kind of bummed out because I like this guy. You know, I thought that he was my plumber and I was good and I didn't have to find a plumber and I could trust him. And I didn't think to Google how much should this job cost. And you know why? I don't even know what the job is. I wouldn't even have known what to Google. It's like getting a health care bill. You don't know. Right. Right. And no idea. So it's like when you go

to the mechanic. I don't know. So I was thinking there should be like a, am I getting ripped off.com or something like that for services that you have no idea what the actual services are, whether it's a mechanic or a plumber. So I googled that and there's some home advisor sort of does this. Is that what Angie's list is? Oh, is that it? You go to a pre-approved list of you're kind of like the guys on knocked up who created Mr.Skin.com without realings and already existed. I'm an easy. mark. But anyway, my point is, this is all well and good, but I literally would not have even known what to Google. Oh, yeah. My toilets clogged. So what? Then what? Yeah. We had a little pipe in our washer that burst a few months ago. And they gave me the bill for whatever, 400 bucks. And I was like,

oh, that's not that bad. And I was like, oh, that's a lot. And I'm like, oh, okay, it's a lot. I have no idea. I don't know these things. My bill was 450, which I don't know. It seemed pretty expensive. But what was the alternative that everything gets backed up into my house? Yeah. you're paying for getting something done and getting out of there. So, I don't know. Anyhow, you shared with me a post from the Atlantic. Here it is. One of the great paradoxes in American life is that while on average,

existence has gotten more comfortable over time, happiness has fallen. And I did some digging. So they're talking about, there was a quote in here. I can't remember where it was showing how happiness has fallen. I went to the data source, Ben. The general social survey, scroll down. You see this happiness over time? Does this look alarming to you? Okay. It's basically, there was a spike up in the 80s and then it's basically been flat since it came down from that.

So this data talks about people say they're very happy, pretty happy, not too happy. And if you just had no information and you saw this chart, you would say, all right, so happiness over time is pretty much unchanged, correct? Yes. The graph looks fairly similar. The story in the Atlantic was going through all these different reasons why things have gotten better, but it hasn't made people any happier. And maybe people have gotten a little less happy. But to your point, it's basically the same. So that is my point.

I don't necessarily think, or I don't really believe that we're any less happy than we used to be. I just think that you would think, well, life has gotten so much better. Why aren't we happier? I think that is absolutely true. He goes through this thing and says, new homes in 2016 were 1,000 square feet larger than 1973.

Living space per person has on average doubled. So you're saying like all these new amenities we have, we have smartphones, we have the internet, we have all this stuff that makes life more comfortable, but happiness hasn't budged at all. And that's relatively surprising. Those are all material possessions. Right. That wears off very, very quickly. So I definitely think that there is something to the fact that the internet and social

media is making us less happy, sort of on the margin. It's definitely a problem in society. But I think that people are sort of as happy, as unhappy as they've always been. But why aren't we happier is the real question. By the way, I've always been of the mindset that I buy into the experiences are way more valuable than buying stuff. But over the quarantine period and when there was nothing to do, I don't know, buying stuff actually kind of helped. Not going to lie. Really? Tell me what you bought that helped.

Oh, I don't know. Oh, Paliton. About a Peloton. I bought some, shoot, whatever. Like, it actually kind of helped when there was nothing else to do. But weird situation. Listener questions. My wife and I are beginning to look for our first house, but the market is still crazy when it comes to asking prices in most houses. need renovations done that in our price range. If we wanted to buy a house, we'd have to put $75,000,

$100,000 in it for renovations, but you're not of liquidity to pay for the renovations up front. Would it be smart to take out a larger mortgage to help pay for those renovations, considering interest rates are so low? I don't think that's a bad idea. If you're going to immediately put the work in and potentially increase the value of your home and rates are so low and you don't want to tap your retirement accounts or take out credit card debt or whatever to pay for it, I see no problem with that. But how does taking out a larger mortgage help pay for these renovations? Okay, let's say you buy a house for $300,000, you have $100,000 in renovations, so you take out a mortgage for $400. Can you do that?

Yeah, and you use the difference for spending purposes. I did not know that. Yeah, some places will let you do that, especially with rates being so low and you're paying that money off over time instead of up front and messing with your liquidity. I think that's a great idea. I feel like such an idiot. If you have a bank that will allow you to do it, yeah, go for it. I feel like that's like a game changer piece of information for me because when I was looking for houses, I wanted something that was pretty much done because, to my point earlier, about the plumber

ripping me off, if I could have taken money out. And also, I think it's more economical if you can afford to buy a house that's done because once you start paying for stuff out of pocket for renovations, I mean, it becomes cost prohibitive for, I don't know, everyone. I've never done this before. So I don't know if you're taking out a construction loan or how it works. Maybe someone can point us to how that would work. But I have heard of people doing this before and it makes sense. Okay. That's interesting. Good information. the direction that I was going to go was, instead of maybe doing the renovation, get a house that's already done and look into a company.

Pay a little more. Pay more. And if you need help with a down payment, look into a company like Unison or one of their competitors. So those are companies that will help you with the down payment and then participate in the equity later on. On your episode, Hard Being Rich, a listener had sent in a question about his friend that thinks the financial system is going to collapse and to buy crypto and gold to hedge that risk.

you suggested sending the seduction of pessimism to that friend to the listener. I have a similar friend, so I send that to him as well. Everyone has that friend. Of course. And he sent me these two charts. Are these chart crimes? What say you? Reasonable cause for concern?

Not to be a jerk, but we laughed when we got these because one of them is a chart. It's an arithmetic chart that's just a line that's at zero and then all of a sudden go straight up. And that chart is the balance sheet of the Federal Reserve. So, okay, there you go. the other chart, Ben, why don't you describe the other chart? It's the worst chart in all finance. Wow. And I say that with no reservation. So it shows currencies over time and it shows their value in gold. And of course, it's from a gold website. But gold is just a straight line. Yeah, gold is held constant and all these other. See, I've seen these before. Like, they show the

value of a dollar. Crashing. If you showed the value of a dollar from 1913 when the Fed took over to now, it would be worth like three cents. And that is the dumbest thing I've ever heard because why would a piece paper be worth more money over time. So if you invested in one month T bills since 1926, that's effectively a savings account, you would have had 21 times the return in your money versus just bearing in your backyard. So of course, if you just took dollar bills and buried in your backyard, guess what? They're not worth as much anymore. That's what this is saying. What this chart is showing is every currency crashing relative to gold. Yes. I love the Reich Mark 2. Yeah, it's great. This is an absolute crime against chart mandatory.

It is. You're going to solitary confinement for this chart crime. All right. Recommendations. What do you got? Okay. Biggest upset of the year for me. Wow. The best book was My Expectations versus the Matthew McConaughey book. I read this thing over the weekend, the entire book. Hated it? Two sittings. I freaking loved it.

I thought it was going to be terrible. I've seen him promoting it on social media. And someone said, hey, you got to listen to McConaughey on part of my take because he talks about Hugh Grant in there. Because I talked about this last weekend. Yeah, that's amazing. So I listened to the interview. Hey, hang on, hang on. I have to interrupt. You said biggest upset of the year? I've always kind of looked at McConae. Like, I like his movies, but I've always kind of thought he was a that guy. Is this guy really serious? Is he serious with this stuff? He seems like he gives off like fortune cookie advice.

And I totally underestimated him. So he was on part of my take. You know how everyone has that friend that tells amazing stories, but you know half of it is embellished. But you don't really care because it's such a good story. That's him. He's like a total bullshitter. But his stories were amazing and he's an amazing storyteller. So I went into it thinking like, oh, this book. looks awful. It's just him spouting off his wisdom, but it was excellent. I read it in two sittings. Your McConaughey stand. I never thought it would be. I always thought he's like, again, one of those guys. But his stories were amazing, even though like half of them I was like, that probably didn't happen, but it's a great story. But honestly, they could probably make this book into a movie. I probably will. If they could find someone to play him. Who's going to play

Matthew McConaughey? Maybe Matthew McConaughey. But his story is amazing. I was just blown away how much I loved it. It's the best book I've read this year. And if you would have told me that a week ago, I'd have said you're nuts, but I loved it. Channing Tatum should play Matthew McConaughey. Not bad. The big picture by Ben Fritz was from a couple years ago, and Ryan Rosillo and Bill Simmons were talking on a podcast recently. It's about the movie industry and specifically Sony. And I love it because it takes a look at how Sony basically missed the boat in the changing of the guard from regular movies to superhero movies. And I think you can learn way more from those businesses that missed out on something even though they were at the top and then

they fell a little bit because they missed a sea change. So really good movie book about how Marvel came about and how no one wanted them and how it really wasn't a foregone conclusion. That would be the biggest franchise in the world. Movie for the weekend hunt for the wilder people was by the same guy who did Jojo Rabbit, so you probably wouldn't like it again. This is another one that you wouldn't like. Had that same tone where it's like very dry humor, but I liked it. Who would like it? If you like Jojo Rabbit, you'd like this. Okay. So people who have like empathy and emotion in their heart. Sorry. Cold.

Finally, my dad is like the world's biggest Michigan fan in college football, and he put an emotional hedge against Michigan playing this week. He drove to a sports book in Northern Michigan and put a bet against Michigan. I think he was trying to do like the reverse jinx on them. Who were they playing? Minnesota, whatever. He bet on Minnesota to beat Michigan and Michigan won. So don't you think that's a good use case for sports gambling in the future if you could just do it on your phone like Robin Hood, you're a big Giants fan. You bet against the Giants for every big game. If they win, you lost some money, who cares?

That would be a great strategy. If they lose, okay, you won some money. That takes it off the plate a little bit. How about those lions? Yeah, I mean, whatever. The Falcons are the most cursed franchise in sports, but yeah. Nice little W yesterday. Yeah, we'll probably go seven and nine and lose on Thanksgiving.

Okay, that's all I got. So Verdad had their interned do some quantitative analysis on movies. this is great. He basically found that he looked at IMDB and Metacritic, I believe. So it was a relationship between audiences and how successful movies were. And he said, the films that were a hit with the audience, but despised by critics, had big budgets and produced strong ROIs. Whereas the films that were a hit with critics, but had lower audience ratings were smaller budget films that produced extraordinarily high ROI. So I guess the ones that didn't do so great were the ones that were sort of in the middle. Not big budget, but not

independent either. This is movies versus films. And I would take movies every day. 10 out of 10 times. Here's what he did. He built a list of the 10 films with revenue greater than $20 million where the difference between the audience score and the critic score was the greatest. Look at this list, Ben, figure five. I cannot agree more with this. I don't know about you. I love the butterfly effect. Yeah, I kind of like that one too. I actually kind of liked it. Probably haven't seen it in 10 years. Great movie. Was that Ashton Kutcher or Josh Hartnett? can't remember. That's Ashen Couture. Okay. So, IMDB 77, Metascore 30. Get out of here, critics. Yeah, they have Billy Madison at the top, of course. The Great Outdoors, too. Awesome movie.

Patch Adams. How did critics not like Patch Adams? I mean, that is... Yeah, that's kind of surprising, too. I feel like that's a critic-y movie. So then on the other side, they had the critics' favorite films relative to the broader audience. This really surprised me. Free Willy? Yeah, how did Free Willy get on there? What are you kidding me? What? What critics love? I love Free Willy. Remember when the whale jumped over the boy? So inspiring. I mean, I saw that in the theaters. Anyway, that was a fun piece. I don't remember where I saw this, but first time ever, China's box office overtakes North America. Okay. So in the big picture book that Ben Fritz guy talks about how that's the biggest

development that's happened, that China is taking over the U.S. and how they make movies is just geared towards China now. I saw on HBO Max. I saw this trailer. It looked interesting. You're an HBO Max stand, by the way. You told your HBO Max. Just throwing it out there. It's called Ready or Not. Marga Robbie marries into this insanely wealthy family. And on her wedding night, she has to basically hide.

They play hide and seek. And if they find her, they kill her. It's as silly and ridiculous as I just described it. But they're in on the joke. They know that it is. So it's sort of... So it's like over the top then. It's sort of like get out in that sense, that it's horror slash comedy.

So if you like that genre, this was good enough. Not great, but I enjoyed it. Did you watch The Trial of the Chicago 7? No, not yet. Not my list. So it was pretty good. It was very sorky. Sasha Baron Cohen is sort of like a modern-day Abby Hoffman.

What do you mean? So his character was a social activist. Oh, okay. And so what did he do with Borat this weekend? Did you watch Borat? No, I don't know if I will. You don't like to laugh? I mean, I like it.

I feel like I just know what it's going to be. When he had the LAG show, I watched every one of them. So Borat, the first Borat was obviously better because nobody knew who he he was and he could fool everybody. So this was Borat in character. And the scenes where he jokes with people is still incredible. I mean, there was three or four belly laughs for me. The rest of the movie where it's him interacting with his daughter and the whole Kazaki stuff I didn't care for, but I mean, it's worth watching. What else do you do? The fact that he can like stay in character for so long as these things are going haywire is pretty impressive.

There's three or four scenes where I was crying. So just for that alone, it was worth it. And then I rewatch the social network, which I probably haven't seen in 10 years, also sticking with the Sorkin theme. That movie was, like, pretty flawless. I don't remember how good it was. Yeah, and they kind of nailed the fact that Mark Zuckerberg, not a great guy. I think that's on Netflix right now. I was shocked how good it was. Yeah, it is an excellent movie. All right, on Friday, we're talking again with Bruce Bond, credit where credit is due, Ben. We spoke with Bruce Bond in March 2019 about his innovator ETFs. And were we bullish or were we bullish on that as a business? I think we said if we could

invest in innovative ETFs itself, we would because we thought that idea was so excellent. They have crushed it. As far as I'm aware, the ETFs have raised a decent amount of interest from investors. So on Friday, we're talking to him again about their stacker ETF, which is another spin on what they're doing. And Bruce is a really sharp guy. We're looking forward to that one. All right. Animal Spiritspod at gmail.com. Thank you very much for listening. we will see you next time.