Animal Spirits Podcast - We Love to Spend Money (EP.215)

Episode Date: July 28, 2021

On this week's show we discuss the insane run in stocks over the last 12 years, what's moving crypto prices lately, when to take profits from a big winner, the shortest recession ever, housing price appreciation slowing down, the Netflix of homebuilding, Robinhood vs. Coinbase and much more.   Learn more about your ad choices. Visit megaphone.fm/adchoices

Ben, when I first started gardening, it's not my third season of gardening. I had... Since you went pro? Yeah. I'm still in the minor leagues. I set up my zucchinis next to my cucumbers. And have you ever grown cucumbers? I've never grown anything.

Well, there you go. So I grew my cucumbers and I was like, I don't know what it was. I grabbed them and I threw it out. I thought it was like a demented zucchini. So obviously I'm not a farmer. Listen, I just, I go, do I grow basil? Yeah, I grow basil. I'm not going to go out and buy a farm, find the tractor, find the farmer, do the irrigation.

But I know a company who can, they go by the name of AcreTrader. We actually had on the CEO Carter Malloy a few months ago, if you want to go ahead and check that out. That was a very interesting episode. So go to Acreterter.com. If you're interested in farmland, check them out. 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 Ritt Holt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. I want to read you the last 12 years' worth of S&P 500 annual returns, calendar year. Cherry picking, are we?

We're starting to show that way? Yes. By the way, I tweeted this out yesterday, and someone goes, oh, so I see you didn't include 2008 in there, which there's a reason for that. All right, go ahead. More on. All right, 2009, 26%, 2010, 15%, 2011, 2%. 2012, 2012, 16%.

2013, 32%, 2014, 14%. 2015, 1%, 2016, 12%, 2017, 22%, 2018, the only down year, down 4%. 2019, up 31%, 20, up 18%, 20%, 2021 so far, up 18%. I need more. Okay, you want more? No, I want bigger returns. Give me more returns. Not good enough.

Okay, listen to the NASDAQ 100, 2009 to 2021. Real quick, 55, 23, 18, 37, 19, 10, 7, 33, down. 10 basis points was the one down year. That hurt. Up 39, up 49, and up 18. So 49, 49, 18. The NASDA is obviously done way better. 39, 49, 18.

But Ben, the denominator's fiat, so. Yeah, divided by the Fed balance sheet and we're way over on that. As millennials, what's your point? Is this the best stock market environment we are ever going to live through? Could be. That's possible, right? Oh. Is this as good as it gets?

Honestly, I would say greater than 50% chance at yes. I think there's like an 80% chance. This is the best stock marker. And when I put this out on Twitter to people and I said, is this the best millennials are ever going to get? A lot of people came back and said, well, great, this is awesome. Millennials didn't have any money so they couldn't take advantage. But I would counter that. That's not true. That's just not true. I don't think so either. And obviously, you had the 2000 to 2008 period where stocks were down four out of nine years. And almost all of those losses on calendar year basis were double digits. You had a 12% loss in 2001, 22% loss in 2000. and a 37% loss in 2008. So obviously this last period made up for that awful nine-year stretch or whatever it was. Well, how much money do millennials have in 2008? Zero dollars. Apparently, that's what people are telling me. But you could make the case if the next 10 years from now is awful or sideways or whatever,

we have a few crashes, that is a better environment for millennials to be saving than the current one where stocks have gone up a lot. Yes. Because millennials are still going to be net savers. So I'm the oldest millennial in the world at 39 and 11 months in two weeks or whatever it is. I'm counting down to 40. I still have time until I need this money. I still have whatever 20 years of save for retirement, 25 years.

At this point, a stock market crash would be a good thing for us. Even if markets go sideways and do nothing for 10 years, for me as a net saver, that's a positive. So that's almost a better scenario for millennials than stocks just going up every year. If we do get another big stock market decline, you can already see the headlines now about millennials getting screwed. There was, I was going to talk about this late in the show, but let's just fast forward. There was an article in the Times a few weeks ago. The headline was a struggle for the millennials with the subtext.

If you're in this generation, you face two financial crises before age 40. I guess they count the last one, this most recent one. And you probably have the depleted or zero retirement fund and higher debt to show for it. Really? I know. These are two quotes from the articles. This kind of pisses me off because this is just squirted. reming for a headline, clickbait.

I mean, but there's nothing in here. According to a survey released by in December, 15% of millennials said they had taken an early withdrawal from a 401k compared with 10% of Gen X and 4% of baby boomers. All right. I mean, is that that big of a catastrophe? I mean, certainly for the 15% it is, but to represent an entire group of people in distress or direct, it's just that's not fair. And then another one, they find a person to zero in on.

And they said that she's skeptical that any social safety net will be. intact at all by the time she reaches a retirement age. Here's a quote. With the way social security is going, she said, and especially this pandemic, I don't think it's going to be there in 30 to 40 years. A lot of the retirement has to come from my own legwork. Otherwise, I'll be working until I'm dead. I mean, come on. It's just nonsense. It's just, yeah, some people have it rough, but some people always have it rough. Millennials don't have it worse in any other generation. And in fact, you can make the case that thinks are pretty okay for us. When you're talking about generational thing, it just sounds ridiculous because you're talking

in such generalities. Especially someone who is 25 right now versus someone who's 40 are in completely different stages of life. And certain people, you could argue that the tails now, you could always find much worse on like the left tail of people doing really bad because they made decisions they thought they were supposed to make and they took out all this student loan debt. And it did work out for them. And now, I'm bored of this topic.

I feel like we just, it's enough already. Yeah. Okay. Another crypto weekend out of the insanity, there was a huge gain. a Sunday for apparently no reason. Reading the Yahoo Finance. Let me just push back a little. Are there declines for no reason?

I mean... Oh, yeah, of course. There are. No, but... Do we need a reason for everything? I just love... Well, I mean, if crypto is up 12% in two hours on a Sunday, it's funny to me, like, so you read what happens to the stock market on Yahoo Finance after like a down 60 basis point

day or up 60 basis points, and they give you the reasons. Love it. And it's like, the Fed said this, so stocks fell. But with crypto, it's even funnier because the gains are bigger. But, so they had this profile in the New York Times recently about the guy who founded FTX. So he's been on a few more podcasts and stuff lately. This Sam Bankman-Fried, and the guy's like 25. He looks like your typical schlubby Silicon Valley guy, his hair's all messed up.

He has a hoodie on and mismatching socks or whatever with TiVos, but he's worth like $12 billion or something. And they talked about the leverage being used on FTX and finance and Bitmex in some of these places that aren't even in the U.S. yet in some cases. So they talked about that 125 times leverage that you could use. And I think once this came out, all these places said, okay, if we're ever going to be in the U.S. and get big and be okay with the regulators, we have to limit it. So finance and FTCS decided, all right, we're going to put a ceiling on this leverage. Now you can only use 20 times leverage. I'm out of here. And it was just hilarious. It was just hilarious to me that, okay, 20 times like, all right, we don't want people to totally blow themselves up. So let's just let them lever up 20 to 1 and not

125 times to one. That seems reasonable. I don't know anything about the breakdown of people taking advantage and who's using this much and that much. I can't imagine that many people are using 100 times leverage or even 20 times. You will blow up in 30 seconds. My point is that there obviously is more leverage here so that these huge moves, like we see in Elon Musk tweet and we go, how the hell can that move so much? It moves a lot because people are levered in either direction. So he tweeted out a tweet somewhere about why they did this. And he said the average leverage to use on FTX is two times. So it's not like people are being overly egregious of it. That still seems like a lot. But he says that FTX way less than a 1% of volume comes from margin calls.

But they did say in this New York Times article, on May 18th alone, there was $1.6 billion worth of liquidations. And that's when you're levered up and it goes past you and they don't ask you for a margin call. They just, they sell for you or they buy if you're short. And it says collectively there are $20 billion in forced liquidations in mid-May. So that's how you get a 50% crash off seemingly no news is that people are way, way over leveraged and they get taken down when it finally falls. Hold on. We should also clarify when we say there is news, there's not news. We don't know the news. I mean, there's stuff happening in crypto world that is moving prices. People rescribing this one to there was a job posting for crypto for a crypto position

at Amazon. Okay, fine. That seems reasonable. But there's never going to be news if we're talking about like a GDP report because crypto doesn't have those sort of things. So you and I don't know what's driving prices, but people that are really in the know might have a better handle on what's going. No, they don't. They do not. We could say we know it's driving stock prices and we still don't. This is just narratives attached after the fact. I don't know that I agree with that. No one really knows, Michael. There's no way. Come on. Well, if Elon... You think there are certain people that are like, oh, yeah, this definitely did it. It was that. Do you think that Elon tweet? I mean, yeah, if Elon Musk tweets and then it moves, yeah, sure you can say that.

Okay, that goes on. Okay, there was no tweets this weekend, though. Well, Elon, you might have missed it, but Elon did like a four-way call with Jack and two other people discussing that one of his material positions is still Bitcoin. And that might have been the spark. Okay. I think you're giving a little too much credence to. Sometimes this stuff just moves. Once it starts moving in one direction, everyone just jumps on. Well, of course. And keeps pushing. There's a huge element of that. It's like a rugby scrum. My only point is there is news in the crypto universe that you and I are not privy to. Will you stipulate that? I don't think so. I think we pay attention to a lot of this stuff still.

You think you know what? Dude, we're new whales. We don't know anything about crypto, like in terms of like the building. Is there like a beige book for crypto that we're not like privy to? Yeah. Come on. It might even be rainbow. Get out of here.

If you have access to Twitter, you have access to all the news that everyone else is paying attention to. And it's going to surface in one way or another. Something really did move it. All right. That's pretty fair. All right. Here's a good question from a listener. Speaking of crypto.

I'm a millennial first time home buyer with one kid, second on the way. currently live in a two-bedroom apartment. We'd like to upsize with a growing family. In normal times, this would not be an issue as I have a pretty good income. The issue is I live in a super high cost of living market in Canada, which, by the way, we've gotten some emailers from Canada being like the whole hold my beer thing. Like you guys really think you have a bubble in the U.S. Look at Canadian real estate prices. He's saying that a three-bedroom fixer upper is probably in the range of $1.8 million post-pandemic. Said it's barely within reach of my current income and requires a big down payment and closing costs, probably something like a

half million dollars. Where is this, Vancouver? Do we know? I'm guessing it's got to be Vancouver, Toronto. Did some crypto mining back in the day and currently have around $400,000 worth. One thought is whether to sell it and use the money towards a down payment. Two things that hold me back are, one, I think with my current income I will eventually be able to save up enough for a down payment. Two, loss aversion. I used a double digit number of Bitcoin back in the day to buy computer parts and would like to avoid repeating the same mistake. So this is like the crypto pizza guy kind of. What would you guys do? Sell crypto and put a roof over my family's head. Hold crypto forever and avoid buying into a housing bubble, wait it out and maybe try to rent something bigger in the

meantime. Dude, I'm not giving advice on this question. No way. That stakes you too big. We're going to be responsible for this guy's life? No, okay. So here, I wrote a framework for this a few months back when I said, like, let's say a big winner in Nvidia or in Ethereum or whatever before it tanked. Like, what do you do with that? I put together five questions. Before you get to your questions, let's also say he had 400K, now he's got probably 450, 475, maybe even more. Well, it depends when we got this email. It could be from 400 to 200 depending on when we got this. It might be an old one. Okay, so first you say, why did I buy it in the first place? You and I have talked about with Bitcoin. I basically bought it with the understanding that I'm

more or less never selling it. I don't care what happens. I'm not going to sell it. This is like a forever holding for me. If I need to get liquidity from somewhere for an investment, it's probably going to come from somewhere else. This is a buying, just leave it alone, out of my mind, it's out there. Okay, number two, do I have better use for this money? Like Jim Kramer said, he sold his Bitcoin a few months back and paid off his mortgage. If this person with two kids and a wife decides to sell their Bitcoin and then they buy a house of it, do you really think they're ever going to regret that purchase?

That's important. If Bitcoin is at $200,000 or whatever, and they say, oh, this I would. Yeah, they will. Potentially. All right. Three. It'll take some of the edge off, but they'll regret it. Keep going.

Okay. One more. Are there better investment opportunities elsewhere? You could say that buying into Canadian real estate right now is not a better investment opportunity. Dogecoin. You probably could have said the same thing about Canadian real estate four or five years ago. All right. Four, what does my investment plan say?

I don't think this one really, this is more finances versus portfolio. I think there's a difference there. And then five, what would bring me more regret? Buying a house and selling out of crypto or holding crypto and not buying a house. Let's say you have to, it takes you two years to save for down payment. What would you regret more? Missing that time in a house and potentially housing prices? continue to go up or selling your Bitcoin and Bitcoin prices go up more. I think that's a tough

question to answer, obviously. That's always the best framework is regret and minimization. Because what if you wait two years, and this is possible, what if you wait two years, you build a bigger nest egg and then crypto crashes? And you're like, I just wasted two years of my life. Yeah. And at that point, let's say housing prices in Canada are up another 15 percent and you go, now it's got to be bigger. There's no easy answers, but I think that you provided a nice framework. Good job, Ben. That's the idea. When you're in our position, you cannot give specific advice to everyone without knowing everything about them, but you can provide a good decision-making framework. I think that's the

point. Can we just stick with this crypto thing for a second? So Mike Policar tweeted this. It was an article. It says, this article says someone spent 160,000 hours researching all things Bitcoin. How is this possible? So this made me laugh. A 160,000 hours is if my arithmetic, if my phone is working properly, that's 18 years. Crypton hasn't been around for 18 years. So, although maybe... Cryptography? No, I know.

It's got to be time dilation in the metaverse. So I'm reading the, what's the space book that we were both on? Project Hill Mary. Are you done with it yet? Well, he talks about relativity. So maybe he's in another dimension. It's got to be. And kind of like an interstellar where every seven minutes is seven years or whatever.

Fair enough. Although this guy, he jokes on us. He put 30 grand into his Bitcoin IRA and now it's worth like, a couple hundred grants, so there you go. All right. All that studying paid off. Anyway, where are you in the book? I'm about halfway through. Okay. Spoiler alert. He just made contact with the aliens. No spoilers. Sorry. You can't say spoiler alert and then half a second later. Come on, man. Etiquette. I don't think I gave away too much there. I have one take I want to present to you.

There's some people saying it's not going to be Bitcoin because it never works out. That way you had Netscape and you had MySpace and it's never the first thing that comes on the scene. feel like people are a little bit too certain in that assessment. What if Bitcoin has such a first mover advantage that Bitcoin is it? What if this is it? And I'm not saying that that's going to happen. I'm just saying I don't think you could be too dismissive of that as a possibility that we just know something's going to come along better because that's what history has shown. I don't know that to be true. I do think it's hard when you try. And I think the other thing people used to say about Bitcoin is Bitcoin now is where the internet was in 1995.

Like that was the thing people said in 2017. That's too convenient, that argument. Guess what? Back in the late 90s, people weren't saying that stuff because just no one knew. I think that's, yeah, I agree. That historical analogies thing, that's really, really tough to put in here. What did you do to celebrate? Celebrate what? The end of the recession. Oh, I think that's probably the point where you and I stopped doing two podcasts a week with each other. Correct? So. That was a lot. Credit to us. That first three months or so with a pandemic, that period felt like the first three months of having a kid. You have like adrenaline pumping. You're not sleeping. very well. It's all kind of a blur looking back on it. Doesn't it feel like that whole period was just sort of a blur, right? It really was. It really, really was. I was thinking about the day. Like, what are you doing last May? But I mean, it was scary. It was exciting. That was just a bizarre time. I think when we look back on it, right now, it just seems like because we're just

kind of getting through this stuff. I think people are going to look back on that, and it's going to be just a weird time in everyone's life to think back on. Yeah. All right. So the National Bureau of Economic Research says the U.S. recession lasted two months. ending in April 2002, proving once and for all, the Fed and the government never run out of ammunition. Yet. It's impossible. Can I just say one thing? Stop the depression in its tracks.

I forgot about this. You were right about Coinbase, at least so far. Coinbase is shooting up today along with the price of Bitcoin. So maybe you were right. Oh, the correlation of Bitcoin? Yeah, maybe I was on the other side of that. I was wrong in the short term, but I think in the long term, I'll be proven right. I think that they will go their separate ways eventually.

All right. I don't think so. I think anything crypto right now is just it's moving stages together. Right now. I'm fast forwarding. I'm zooming out. Okay. We'll see. All right. This one from Bloomberg, through a combination of savings, borrowing and... I cut you off. Do we have anything to add on the recession being ended in two months? No, I just think if you would have said, told someone before it happened, global pandemic, basically people are going to stop buying stuff, stop going to work, stop doing all this stuff. We're going to shut down manufacturing plants. The government is going to try to plug the leaks. They would have given you the meme of the guy slapping the thing on the water tube,

you know, the infomercial guy, and then the hole going through his hand with the water. People would have said, you're nuts. No, the government, people are saying it at the time. The Fed can't stop a pandemic, and certainly they didn't, but they can show up an economy. And I just think something we learned about Americans is just we love to spend money. So if we stop spending money on experiences, we're going to buy a shitload of shoes or trampolines or pool or beer, whatever it is. We love to spend money. We do.

And I don't know that you can just beat that out of us. Here's how parents are spending money in one way. This is from Bloomberg. Parents are now footing about 54% of the bill for tuition and room board and other expenses for college, according to a survey out of Salem, May this week, up two percentage points from the year before. Family paid an average of just a little over $26,000 in 2021 school year, according to the survey, how America pays for college.

Basically saying parents are paying most of the bill for college these days, not the kids. So a lot of parents are probably tapping into retirement savings or their own savings and putting their financial needs on hold to take care of their children's college expenses. Wait, is the equivalent of putting on your oxygen mask, you should be taking care of yourself first? Yes. That's the general personal finance rule of thumb. Let your kids take out loans, figure out your own retirement first. Because guess what? If you don't have your retirement figured out and you're paying for your kids expenses now, they're going to have to take care of you someday anyway, probably. So it's probably better off to pick. Yeah, it could be. Have you thought about what you want to do for your kids education in terms of like, do you want to pay for half of it? Because I haven't, honestly, I'm contributing to their 529s, but I haven't really thought about how much I want to pay. for. That's about the extent of mine. Like my dad left me on purpose with enough loans where I would have to pay them off. I think I owed $25 grand afterwards after college. I think he did that purposely. And I think he did similar amounts for my brother and sister, even though I went to different

schools. And I think he wanted us to have some skin in the game and pay it off on our own a little bit. I think that's where I'm at. But the funny thing is, we never really talked about it. But I mean, I guess you could say, I like the idea of like, hey, we'll pay for a state school. Or if you go a community college for two years, you can get the difference. We'll pay you 10 grand a year or something. If you go to a private school, we're going to pay up to this. I think it makes sense to have that talk with your kids at least to know what they're getting themselves into. Well, I haven't even had that talk with myself yet. I wonder like... Honestly, I'm like you. I'm saving in a 529 for each my kids and I started when they were born. But that's okay. Our kids are so young that

like maybe in 10 years I'll have a better sense of like how I feel. Maybe if they're good, if they're good kids, I'll pay for the college. I still think that was one of the worst takes of the entire pandemic was this is the end of college as we know it. I think if anything, it's going the other way where kids are now going to realize how important going to a college campus is and that the whole learning remotely is not conducive to a good college experience. If I could bottle up that first three or four weeks of college as a freshman going away and have that feeling to sell to someone, that's like one of the greatest experiences that I've ever had my life. First time going away from home, oh my gosh. I would like a mulligan on that one.

Okay. You're a college. All right. I think I've heard the story. All right. Moving on. Bill McBride wrote several metrics indicate that demand is softening. I mean, the market is still broadly strong, obviously.

But he showed a chart of Realtors Buyer Traffic Index. He compared April to June. Obviously, the market is still super firm, but it might be softening a little bit. I'm seeing it. I think we spoke about this with Ben Miller on Funrise from our conversation on Monday. Anecdotally, I'm seeing it. And I know my town is not the entire. or United States, of course, but I'm seeing like a lot of price cuts because people went overboard.

Like, they were like, oh, houses are selling for this. We're going to continue to raise prices. And now it's going the other way where I'm seeing house cuts all over my neighborhood. What are you saying? I have to quibble, though, with your assessment of this. Please. You asked Tim, do you think housing prices have peaked? Well. This is like a way of looking at disinflation.

So you go from inflation of 5% to 3%. Inflation is falling, but it's still going up. So that's like housing prices. So prices are still going to go up, but the rate of change is going to slow. Those people who are putting on ridiculous prices of their houses, even the prices they're lowering them to are still higher than they were worth before, probably, 18 months ago or whatever. If I had to guess, you're right. I don't think prices are going to, like, crash by any means. I think it will be a temporary pullback.

So here's what I see, Ben. Follow my finger. A little dip. And then a long-term trend will still be higher. Okay. I don't think we ever get a little dip. I think it just slowly rolls over. I'm calling for a short pullback.

You think prices are going to go down. I do. See, I don't think prices go down for a long, long time. I think the rate of change, it goes from a gain of 15% year-over-year to a gain of three or four or five percent or whatever. And it flattens out? I don't think we're going to see a decline for a long time. Just that's my thought.

Actually, you know what? You may be right. Because you're right. I don't think that prices are going to... Actually, I don't even know what I think. No. After arguing with myself for the last 10 seconds, I do think they are going to pull back a little bit.

All right. You're calling for a correction in the housing market. Calling for us. Honestly. I'm not shorting houses. We're in uncharted territory here, but it's very rare for a correction in the housing market. I will say that. It's also rare for them to go as high as they've gone in such a short period of time.

Yeah, honestly, I think the data's on my side, not yours. When you say it's rare for houses to pull back, yeah, it's more rare for them to go up 30% in a year. All right. Anyhow, we've been speaking a lot about like all cash offers, and we had an email come in. I work at a bank that is predominantly wealthier clients from mass affluent on up. And what we have seen over the last year is a lot of more. mortgages for younger buyers with wealthy parents. The strategy results from the knowledge that in an Uber competitive bidding, they are more likely to get the house with an all-cash offer.

The parents buy the house for cash and quick claim the deed to the kids. The kids then come to the bank to refinance and pay back the parents. These will show up as cash purchases, but in the end really aren't. There's some amount of that messing up with the numbers. So this was interesting. I don't know how meaningful this is, but it's certainly happening. I mean, I'll take this guy's word for it. This is the reason wealth inequality continues to get worse because we have parents paying for college for their kids, which obviously not everyone could do. It compounds. And then you have parents who have the ability to do this for their children and help them get a house

when people without the means to do that cannot do that same situation. Yeah, this is why it gets worse. And you see the spread widened. Meanwhile, my bank asked me, they said they're having trouble verifying my wife's income. I'm like, I gave you four paychecks and what do you need? So I just wrote back L-O-L-L-L. That's where I'm at. I don't know. Why can't it be like doctor's records, where if you do this once for a mortgage and they ask you all these questions, why can't they transfer those records to the, if it's the same bank, or the next bank? I said the pay stubs in February, in April and now in July. It's a joke. You mentioned our talk with Ben Miller at Fundrise, which we've done a couple times.

And I asked him, a lot of people say, well, the reason that institutional buyers are so bad for the market is because they don't have any price discipline. They just pay whatever they want, and they can outbid anyone. And I can ask him about the price discipline. And he gave an interesting answer. He said, when we buy existing homes, we're not competing against other single-family homebuyers. We're competing against the bond market. And that's why I think people for years have said, just wait until rates rise, and that's going to screw up everything. The housing market is screwed. Stocks are screwed. Bonds are screwed. Once rates rise, that's one possibility. The other possibility is rates stay low or not go up for very long. Doesn't that put a floor

under housing prices for a long, long time where if these places are getting five, six, seven percent cap rates on rentals, then they're just going to continue to buy it. Like, these places aren't all of a sudden going to stop buying houses. No. I just think it's just going to keep happening. So the Wall Street Journal wrote another piece on this. And they're talking about the evidence of crowding out. They said institutional buyers bought just one out of 500 homes sold in a 12 months after COVID began. So obviously not a huge part of it. One out of 500. One out of 500. So yeah, pretty small amount, obviously. The sub-market for rented single-family homes alone is worth $3.1 trillion, according to this Amher's

capital, 40% larger than the value of all U.S. offices and more than triple the value of all the country's hotels. This is just a completely untapped market. And they're saying their annual returns, they're looking at like six or seven percent, especially with like an inflation kicker where you can raise rents over time. Right. So it makes sense. They're competing with bond yields. Yes, which remain low. And even if they tick up a little bit, this seems like a place where the future is just going to be one of more professional investors in this space, not less. All right, survey time. This is from, I don't know, survey center in American life.

The number of close friendships that Americans have has declined over the past several decades. So the number of people in, let's see, 1990 versus 2021, percentage of people who had the following number of close friends, 10 or more, 33% said in 1990 they did, just 13% have 10 or more friends in 2021. And it kind of declines from there. This might be just a weirdly worded survey question and people are trying to figure out the definitions of this. You know, it's interesting. Most of these numbers match up. The only one that's like a really stark contrast is 10 or more. Like if you look at 8% in 1990 answer that they have four friends, it's 11% today. So the numbers

don't diverge that much. But this one is the 10 or more. A third of all people in 1990 had 10 and more friends. It would be interesting to see if they put this as acquaintances. Because the only think people have more acquaintances now because of the internet that aren't really their friends, but they don't hang out all the time, but they probably feel like they know them. This is a crap survey. They should have tracked people from 1990, the same people to today and asked them the same question every year. Okay, but I see this as progress. Why? Because the older I get, I don't need as many friends. I'm actively trying not to make new friends now. Isn't that a thing you do as you age? I feel like the hurdle is way higher to become a friend the older

you get. Just because you don't have as much time to, like, back in college, you had all the time in the world to do nothing. Now you have more work responsibilities, you have family stuff. So let's say you see an old college friend or high school friend at like your kids soccer game or something. Every time you go, oh, hey man, we should get a beer together sometime. Does that beer ever get drank? Of course not. Both sides and no, that's never going to happen. But you say it because it sounds good. Whereas in college, it would be like, let's go get a beer now. And you go, Okay, let's get a beer, right? I think that's showing progress in the world.

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and get up to $2,400. dollars in value in your first 13 months. Terms and conditions apply. Visit bemo.com slash V-I. Porter to learn more. So, Ben, you were right on Coinbase with the crypto stuff, but you were also wrong on the Coinbase. I should say you were wrong on Robin Hood. No, no, no.

I see where you're going with this. It's not true. Not yet. You cannot claim this yet. That's true. Now, you're right. I knew you're going to, because I sell this in the dock. It says, in the dock, Ben is wrong on Robin Hood.

I was going to write below this. No, he's not. All right. Hit me with your argument, then I'm going to counterfactual with you. No, you know what? No, you're right. Why don't we just wait? No, no, no. Hold on. Let's talk to it. Hold on. No, no, no, no, no. Whoa, whoa. Hold on. You're coming on the compound in friends this week. We'll do it then. No, I'm just going to lay on my case. We have the IPO on Thursday. Fine. What's your case? I timestamp this. So they said Robin Hood is coming out with the valuation of $35 to $40 billion. Coinbase right now is worth $50. And you said, okay, Ben said Robin Hood's going to be worth more than Coinbase. He's wrong.

all right on paper you're not taking into account the fact that robin hood could pop 20% on the first day you're right 30% then they're worth more than coinbase I agree let's wait till Thursday you might be right I might be wrong right let's wait till the receipts so you put this in here from roiders they interviewed Vlad Robin hood's CEO's apparently going to be a billionaire now well because of the news is they're they want to include IRAs and Roth IRAs well I don't know why do they not maybe someone can explain this to me why do they not have those now why do so many of the fintech platforms not have the ability to do an IRA? Just more regulation? I think it's a regulatory thing. You'd think at their size they'd be able to do that now. It would make sense. But he says

we see evidence that the majority of our customers are primarily buy and hold. Do you think he says that with a straight face? Like put him on a lie detector. He actually believes, like, it's not a lie if you believe it. And I'm Warren Buffett. I mean, this is. What's buying and hold for Gen Z? 12 minutes? Well, I think they buy it and then they hold it until they sell it. That's got to be what he's saying. Listen, I mean, technically, you're buying and you're holding before you sell. That's what you do. You buy and you hold it and then you sell it. You didn't say we're buying and holding forever. But I mean, this is complete nonsense. I mean, duh. All right, HBO Max, it's going. It's blowing up. 67 global million subscribers.

Actually, I think they added now Apple's Orange is Netflix is way, way, way bigger. They added more subscribers in their last quarter of the report than Netflix did. Again, I know it's kind of a bullshit comparison. I'm just saying. They are the most high quality streaming service there is, bar none. It's fantastic. In terms of movies, TV shows, everything that's on it. it's the most high quality. I don't know if Netflix is in trouble.

That's probably overstated. Actually, let me walk that back. But they said in their report that they're getting into video games. I don't really know to what extent. But their number one show right now is Virgin River, which my wife is watching and she enjoys it, but she's like, this is not a good show. It's their number one show right now.

It's like a show from the WB. Yeah, exactly. Besides Queen's Gambit, in the last 18 months, what's the best thing out of Netflix besides Queen's Gambit? I don't even want to say Tiger King because that's a pandemic show. Like nobody would have watched that it. There hasn't been much. I'm sure there's something, but off the top of my head, I couldn't tell you what it was.

But are people ever going to really cancel Netflix? Probably not. They had 400,000 cancellations in the last quarter, or 700. But no, I'm not canceling. What's the denominator there? It's huge. It's like 200 million. All right.

So we spoke about Dave Ramsey last week. We were sort of like perplexed as to why he would say don't buy ETFs. Ben, you actually wrote a post about him. He has the third biggest radio audience. he has 13 million listeners a week. It's like blew my mind. He's a massive audience. So I just want to share, I just want to read some of the comments that we got about it because we've got quite a bit of feedback about this.

Hey, guys, just wanted to give you more insight on the Dave Ramsey, ETF discussion. Dave Ramsey does not care for index funds or ETFs of any kind. He thinks why settle for average when you could pick active managers who will beat the index and always stick to his, quote, your mutual fund should be returning 12% on average per year. Yikes. So it's not that he doesn't like ETFs, it's just he doesn't like passive investing. Here's another one.

This is a bit more damage. from a YouTube viewer. By the way, we're on YouTube now in case, I'm sure we've mentioned that, but we're on YouTube. Dave Ramsey, in one of his rants, noted that over the years, his partner network has paid him over $300 million. So he's got like advisor affiliates. His empire works by directing masses of followers to his network of affiliated advisors

who sell front-loaded mutual funds. He regularly tries to scare his followers away from low-cost ETF. So he's talking to his book. That's what it is. Here's what Dave Ramsey proves, though. The majority of people in America don't need. investing advice. They need personal finance advice. And that's what he's done. And that's how he's locked people into his system. It's because he helps people get out of debt and spend money more

wisely. That's his whole thing. His snowball. That's good advice. The 12% of year investing stuff, that's a little shaky bet. I just want to give you kudos. You put $10,000 into Derek Thompson in like 2016. You're sitting on a pretty hefty gains there. So Derek was on Bill Simmons. and he's like my favorite journalist in the country in terms of his ability to, I mean, obviously he wasn't covered COVID pre-COVID, but he was doing such other great work and all of a sudden he's not like a COVID expert and because he's gathering sources. But his ability to not only be an excellent writer, he's an incredible talker. He kills him when he goes on with Bill Simmons. He's so gosh darn impressive. So kudos to you.

That was a great buy. All right. I'm going to cash in when he starts a substack because substack has got to be nipping at his heels to come through him. That has to be coming out. I probably would have taken chips off the table like three years ago, but you're a buying hold guy, so. I got a quick car store before we get into listener questions. So last week was driving to the ATM to get some cash for the cleaning lady with my son. And on the way back, we heard this thump, thump, thump, thump, thump, thump, thump, thump, thump, thump, thump, thump. Like, when the heck is that?

We got home and we heard this hissing sound in the garage. And I look, and there was this enormous screw in the front tire of my wife's car. Oh, crap. So, of course, the whole tire deflates the next day because I am useless. My father-in-law takes the wheel off for me because he uses the jack. I would not trust myself to jack up a car because I'm useless. I've jacked up a car, not to brag. You did?

I can't really? I'm pretty useless too, but. Okay, that's impressive. And took it to Bell tire and thought, okay, we're not to spend a couple hundred dollars buying a new tire, whatever happens. Bell tire, fix the tire for free because it was just a screw hole. They patched it up, fill the backup of there and fixed it and said, basically, if you have a tire that can be repaired, we'll fix it. And that's how they get people to come back as customers. It's great. It's great business. Pretty good customer service, right? It's fantastic. I never knew that.

Is Bell regional or I've never heard of them? It's a national chain, I believe. But yeah, that's a pretty good service. That's how they get people to come back and buy tires to them because they give free. It's like, how much does our bill? They said, nothing. Fix it for free. All right. So we had a listener comment. We spoke about opting out of social security. Somebody said, email this and said, a side note on the opting out of social security. We had a client to opt out for a time. He was a pastor. I didn't know that you could opt out. Is that religious privileges? What is that? I don't know either. Okay. And it's now evident, as he thinks about retirement, that it was a terrible idea. I think that if given the option to opt out, the exception would be somewhat of means who can afford to. For most, it would be awful, and our retirement system would be under even more pressure. That last sentence, I thought was interesting. Social Security is like the best annuity that there is.

I don't know why most people would want to opt out. A lot of people say, I could invest it better, but I think it's still pretty decent. All right, you want to do a listener question? Let's just do a quick one. All right, here's an easy one. Someone sent us this chart of the ownership of U.S. corporate stock, and it shows that foreigners have gone from 5% back in 1965 to call it 25% now. And someone says, is this something we should worry about? What if one of these foreign governments changes that direction and says you can't own U.S. stocks, like are some other meaningful event occurs?

Does liquidity leave the U.S. market taking it down a notch? No. I actually look at this as a good thing. So back in the day, taxable U.S. accounts helped 80% of the funds in 1965. Now it's more like 30. We're broadening out the ownership base. That also diversifies the liquidity that any one party can affect it at one time. I think that's a good thing.

And there's more retirement plans and hedge funds and mutual funds and ETFs, nonprofits, all this stuff that are holding stock. It's more diverse. That's a good thing, not a bad thing. All right. Recommendations. And having foreigners buy in, yeah. I've got a lot.

We watched started season two of Ted Lassow. I love it. But it's a great show and I think it was perfect for the pandemic. Even though it's a touch on the cheesy side, like it still works and it's so good. But every time we watch it, my wife and I are like, this shouldn't be that good of a show. Why is it so good? Is it possible Ted Lassau is now overrated? My theory, nothing is properly rated on the Internet?

You could be right, but here's what I'll say. Do people love it too? Even though I love the show. It's like a good show, not a great show. It's not a great show. But what's great about it is it's pure happiness. There's no cynicism. There's no nonsense.

It's just, he's just a good person. And there's none of that. So for that reason, it gets a premium. But it's not like a great show, but it puts a smile on your face. It makes you feel good. Yeah. And the first episode was kind of right back to where it was, and it was good. Okay.

That's pretty much all I got. All right. Somebody wrote, hot take. Independence Day is Top Gun with Aliens. Does Michael like that one? I'll respond since you're thinking, well, do I like that one? Hello? I mean, I'm sure this person listened to last week's episode where I declared aliens by favorite genre.

I love Independence Day. Love it, love it, love it. But I will say, this resonated with me because why is Independence Day? Top Gun, if somebody saw Independence Day today for, for the first time, I don't think they would be like, wow, this is a great movie. It was a blockbuster for its time. I have seen it recently, but I can't watch something that I saw at 11 years old with a fresh pair of eyes.

I can't do it. I'm completely not objective. How about this? Could Will Smith and the alien take Maverick and Goose in volleyball if aliens is his partner? Well, Jeff Goldblum and Will Smith are very tall, so they could probably take them in beach volleyball, actually. That's true. Okay.

Oh, speaking of aliens, I honestly have no one. idea how I missed this. There's a movie called Life. Are you aware of this movie, Ben? Ryan Reynolds one. That's right. Yeah, I watched it. That's pretty good. Actually, Jake Gyllenhaal, Ryan Reynolds? Jake Gyllenhaal? Yeah, it's a pretty good movie. So it's basically alien, the movie Alien, which I love, obviously. It's not as good, but this is a good movie. 2017, how did I miss that? And whatever, halfway through, there is a surprise death. We're like, whoa. Yes, good movie. So I will recommend that if You like science fiction and alien movies.

Michael's a little gun shy on his sci-fi recommendations. If you do not, then don't watch it. Here's another hedge that I'm about to put on. So I spoke last week about Dennis Villanueva, and somebody said, that's hilarious, how Michael pronounced it. I guess he's like a French-Canadian, I think, and that's not how you pronounce his name. But for me, it's Villanueva, like Charlie Villanueva. That's all I know. So last week I watched, oh, Arrival.

He did Sicario. He did Arrival. He did Ami. Prisoners did a million movies. So I watched one of his movies. called Incendies. Incendiz is a foreign film. It's subtitles. Here's my hedge. This movie was so so heavy and emotional and disturbing. This is not a movie. This was a film. And it was an excellent film. And I'm out. Okay. So I'm going to say that like this is probably a recommendation for like four to

five listeners. It was a legitimately a great film. If you like movies that are films, it's not a good movie. It's got good acting and it's emotional. Is that the kind of deal it is? All right. Maybe I shouldn't have done this. Listen, I liked it. You're walking it back already. You just put a really tight trading stop on this one. No, I will stand by. That was a good film. I'm not saying that you should watch it, but all right, let's talk about M. Night Shyamalan. How are people still letting this guy make movies? Fool me once. Shame on you. Fool me 10 times. Shyamalan on him. So I saw old on whatever night it was at the theater you had to go i went i knew it wasn't going to be great but listen i'm not expecting greatness i've seen so the six cents was obviously a phenomenon

did six hundred seventy million dollars at the box office was huge then unbreakable all right this you know decent movie i thought science was pretty good and then i actually kind of like the village even though i'm going to recognize it wasn't a very good movie i didn't mind it that much I like the twist. Me too. Okay. Then it went straight to shit. The village, lady in the water, the happening, the last airbender, which was supposed to be like the worst movie of all time.

After Earth, the visit split, which I actually did like, and glass, which I didn't care for. But here's the thing. So my dad said this to me, and it was like, oh, that's so obvious. There's two reasons why he gets to continue making movies after all of these terrible movies. one, first and foremost, he crushes it at the box office, crushes it. If he wasn't making money, they wouldn't let him make these movies. So, signs, 400 million, the village 250, I'll just read the box office, 73, 163, 319, 251, 98, 280, 250. He's killing it at the box office.

Now, the question is why? These movies suck. And I do think that he's obviously living off his sixth sense movie, like, because I was just so. He's the guy who predicted the 2008 crisis is living off it ever since. But there's more to it than that. Selling newsletters. 100%.

I think it's his name. If his name was John Smith, he would not have, but the M. Knight, it's just so like, I don't know, it's just so like compelling. Can a name be compelling? I guess so. It's so mysterious sounding. Good point.

His name gives him a huge premium that he does not deserve. That's a good assessment. Got one more thing. Actually, let's save it. Okay. The Fight Club stuff? Yeah, that's enough. Okay.

Let's talk about that on Spaces. We missed spaces last week. week because I was on vacation. Didn't happen. I was on the ski slopes doing one of those summer toboggan things. So let's say that one for spaces or next week. I will say. And this was a very good movie, film. All right, you're sticking with it now. You're walking it back again. All right. What's it on? By the other, that's another great thing about streaming. Everything is on Amazon for $3 or $4. Yeah, it's cheap. Fantastic. All right. If you miss our funderized one on Monday, check that out. Next Monday, we're going to be talking about wine as

investment, which is a new thing for us. All right, AnimalSpiritspot at gmail.com.