Animal Spirits Podcast - When Hitler Took Cocaine (EP.44)

Episode Date: August 29, 2018

What 8 different market indicators are telling us, the growth of the intangible economy, chart crime sell signals, the decline in high schoolers playing football, the poor performance of managed futures funds, a bad idea by Chicago, can indexing become too popular and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing, hosted by Michael Batnick and Ben Carlson, two guys who study the markets as a passion and invest for all the right reasons. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities

discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. You did a post last week where you looked at the first modern investing advertisement, which was pretty cool. And this was in 1948. And you found that they were charging 85 basis points per trade, which gets back to your point that you've made time and again, that gross returns may be lower going forward, but net returns may be similar to what we've seen historically. So I actually used to the New York Times archive, which you pointed me out to, to find this. And it was from like 1948. And actually was mentioned on the Outlots podcast. And so it was like the 7,000 word scribe from Merrill Lynch back in the day. And yeah, they kind of went through the whole process

about how they did trades back then. And they made it sound like that was actually on the low end of things, which I'm sure it was because I'm sure the boiler rooms of the 60s, 70s, 80s, and even 90s probably charged way more than that. So yeah, I think it's just, this is why I think it pays to pay attention to the market structure in a lot of ways, more than just like what's going on in each and every environment, trying to compare things across environments because it's just so hard. So there was this Wall Street Journal article last week, and it talked about how they have the eight best predictors of market returns, and they looked at household equity allocations, price to sales ratio, price to book, the Q ratio, all these other things, Buffett Indicator

Cape, and they basically showed each and every one of them shows, things, shows how that the market is overvalued at the moment. But they also provided the other side of things, which was the markets are much different now than they were. So it's kind of, you need some context in there. Would you care to give us some of this context? So they had some stuff from Siegel. And a lot of this is just kind of debating the CAPE ratio again, but just ideas of the changes in accounting rules and regulations. One of the reasons it's so hard to use something like Tobin's Q anymore is because in the past, all these companies were dominated by capital intensive manufacturing assets when today it's more high-tech firms. And so there was this

chart going around from the economist and actually showed the percentage of the market value in S&P 500 assets that are intangible. In 1975, it was less than 20%. In 2015, it was more than 80%. And it went from less than a trillion dollars to almost 20 trillion dollars in assets that are now intangible, which makes it so much harder to use these old valuation techniques to measure the worth of these companies, because the change of the companies is just so much different. So another thing that they spoke about was Buffett's indicator, which I don't think he uses, but GDP is maybe not a great measure because so much of our sales are done outside the United States. Right. Yeah. So 40 or 50% of all SP500 sales are done overseas. So it makes it kind of

harder to. I think the whole point of this is just, and you and I've said this repeatedly, we're not trying to argue that the markets are not overvalued in some way by almost any metric they probably are. But I think the conclusion from that is kind of where investors need to figure out what they want because it's hard to draw a concrete conclusion from the valuation levels. And this is maybe why value investing has gotten so difficult. It's because so much of a company's worth is intangible, things like goodwill and things like that. And there's a chart, I don't know who this is from, but we'll look to it in the show notes. It shows a sector composition of U.S. and Europe employment over time. And one of the things that has gone down significantly

is industrial components. And then, on the other hand, services have gone way up. And that certainly makes valuation comparisons across time different. And it also changes the way that people do business as well. It's because a lot of what you're doing in a services-based industry is like it is intangible. And so you're selling a story or a process and not just this end product, which makes it much harder for the consumer, I think, to know what they're getting. So I think it just, it really, there's a lot of gray area in terms of a lot of different aspects of this. So I don't know what that means, but it means things are never as black and white as they seem just from looking at the numbers.

There was a story from the New York Times, and I suspect that we'll see more of these if crypto assets keep declining about people that just put way too much money into Bitcoin. It's kind of sad. You know these pieces are coming. It's kind of sad in a lot of ways. And they interviewed these people that put a ton of money in. There was a woman they interviewed in Korea who said she put $90,000 into cryptocurrencies last fall and drew on savings and insurance policy and took on a loan.

and now her investment in that is down 90%. And she said, I thought cryptocurrencies would be the one and only breakthrough for ordinary hardworking people like us. And I think this really says a lot about the way that people try to get rich in the markets. They want to figure out if they could find like a secret, which really doesn't exist.

Like people want to have a shortcut, and they assumed crypto or what any other fad is going to do it for them. And it's just, I feel like that's why this stuff is just never, going to go away. There's always going to be a new fad that roped people in. Yeah. Like, what lessons do people take away from this? Because I feel like you can't explain to somebody why you shouldn't go all in on something that's up 13,000 percent. My other favorite one with this was on Reddit, a user in the United Arab Emirates posted a picture of the $100,000 loan he took out in December

to buy cryptocurrencies and that he will now be paying it back out of his salary for the next three years. Talk about the kiss of death posting your loan for cryptocurrencies. I mean, that was, when did it top out, January? I guess December was probably the height of the insanity. Pretty wild. I mean, you can always find these stories, but there's no get rich quick scheme that people are going to find that that's going to help them in these things.

So Robin Hood is showing a lesson of how competition works. The trading app is now worth $5.6 billion, at least that's what it's currently valued at. And it really went from zero to that in, I don't know, how long it's been around three, four years maybe. And JPMorgan is getting involved. So anyone who downloads J.P. Morgan's mobile banking app or uses its website can get at least 100 free trades in the first year. And 47 million people already use a company's banking app. So they have quite an opportunity here. What do you think about what's going on in this space? Here's a theory. Now, Robin Hood obviously is already way more highly valued than like the robo advisors.

But remember when the robo advisors first came on, betterment and wealth front, and everyone thought they're going to take all the assets in the industry. But then the rate. regular asset management firms just created their own robot advisors. And now Vanguard and Schwab and all these places are multiple times the size of those ones. Isn't it possible that this happens to Robin Hood as well? Absolutely. The other places just say, well, we have, instead of buying you, we're going to, we already have the customers and the infrastructure. We're just going to do the same thing you do in a different way. Yeah, absolutely. I don't think that means Romanohood goes away, but doesn't it possibly mean that they're not going to be as big as maybe their ambitions are?

Yeah, I think that's certainly fair. But, I mean, the JP Morgan thing is just kind of more along the lines of what Fidelity was doing as well. They're just trying to give their clients or their prospects something and show, hey, we're doing something for you. And then I'm sure they're just going to charge them in other ways. But it seems like free trading is now the, or no fees. Everyone is just focusing on that fee thing. And then obviously they're going to get charged in other ways or upsold. But I mean, it makes sense, especially when you're that big and you have that much scale, why wouldn't you do this?

Well, it's also certainly not going to benefit. the person using the product because, as everybody knows, this will give the temptation to trade more because there's no friction and your results will probably be worse off for it. Right. Yeah. Which is the other from what we started talking about today with a gross versus net returns, that's the big thing. It's it's so much easier to trade these days and there are fewer frictions, but in a lot of ways that that can actually be a hindrance. So we spoke about this a few weeks ago. You had mentioned this. I think I figured where this article was, but there was an article the Walser Journal founded about the trend following fund not working as well as it once did and there were two takeaways in here for me

one of them was it's there was a quote it's like a lot of other industries as it's been successful more people have gotten involved now you can buy a book on amazon on how to code trend following okay there's definitely merit in that and i think i repeated i'm repeating myself now but jim simons was talking about this at mit a few years ago that they used to do trend following early in the 80s and then it just got you know it just stopped working for or whatever that means stopped working just got more difficult. But another piece of it that sort of, I'm sure, irked a lot of people in the industry is they compared these funds. And these funds are managed futures, is what we're talking about. Right. So they used HFR and they said that from 2011 through January, an investor would

have lost 3.4% on average. And over the same period, the S&P 500 is up 124%. Now, trend following, if you're doing trend following on the S&P 500, then sure, it makes sense to compare it to They have to be 500. But these CTs are investing in every product on the planet that can be traded from soybeans to currencies to bonds and whatever. So I think that that's not really a fair comparison. What do you think? Counterpoint, I think a lot of people overpromised in this space. And I do agree that it's, that's not an apples to apples comparison. But a lot of people said, managed futures in this type of trend following strategy can deliver equity like returns and also provide something of like a black swan protection when things go down because they can short markets

and they go long markets. And I think one of the reasons this strategy is done so poorly. And again, so since 2011, it's actually lost money on average, which is pretty tough to stomach when almost every asset in the world, real estate, stocks, bonds, cash is higher than it was. So I think, and I mentioned to this before, I think maybe these strategies are almost over diversified now because they invest in trends in currencies and interest rates and stocks and bonds and commodities and they go long and short. And I almost think when there is more money in the space and you have that, I think it can almost be too much diversification in trend and the fact that, of course, there are still trends in the markets.

But when you try to hit that many trends, I think that's what's made this strategy unsuccessful without understanding, you know, all the individual components. All right. let me propose a county to your counter. The reason why I think this could be included in a portfolio is because it is truly non-correlated with traditional asset classes. Whatever stocks and bonds are doing, this is going to perform, however it performs. So it really is a diversifier. Now, of course, the flip side of that is you have to eat seven years of negative returns to earn the non-correlated returns when stocks are to bear market. I guess the tricky thing is

that you don't, what people really want is they want negative correlation to stocks when stocks go down. And what if these managed future strategies provide non-correlation, but not negative correlation in the next bear market? So in other words, let's say that stocks go down 30%, and these strategies only deliver, you know, plus 2%. Right. I think in that case, people will still latch on to them. Unfortunately, I'm sure eventually some money will come out of these if the performance continues to be so poor, but then when we do get another bear market, and I think it has to be a prolonged bear market for these things to actually work, because if it's just a short, quick V, like we saw at the beginning of this year,

these things are not going to be able to turn that quickly. So it almost has to be that prolonged bear market that can actually hop on those other trends and take advantage of when stocks are going down. But I think this is just a strategy that invites performance chasing like no other. And I think- Totally agree with that. Because it was one of the only strategies that was actually up in 2008. Money poured in, and it's done poorly ever since.

And obviously people say, well, why wouldn't they just overweight stocks? But that's the point. It's a diversified strategy. So it's going to be, there's going to be regret in these things in a lot of ways. But I think a lot of people probably didn't have the right expectations going into managed futures. And I think a lot of people don't really understand exactly how they work, which is part of the problem. Yeah, good. Good point.

All right. So this was interesting. Last week, Target reported earnings, and their CEO said it's the best consumer environment he's ever seen. So they had the strongest same store sales growth in 13 years, which is wild, because all that we've heard over the past two, three years is that Amazon is destroying everything that it touches. But when you look at some of the charts, you have Target at an all-time high. Costco had an all-time high. And by the way, Costco got annihilated when Amazon announced that they were purchasing Whole Foods. T.J. Max is an all-time high.

Ross stores, Lulu, Nike. Best Buy in an all-time high. So this is, so what do you think, what do you make of this? It is interesting. It's, it's kind of like one of those people are always looking for contrarian indicators like, oh, this is something you say at the top. But I think, I think honestly, Best Buy is the one that probably surprises most people, the fact that Amazon never put them out of out of business. But I think this is another one for people, like people can't figure out why the news has an impact of the stock market more. And most of it is dealing with politics. But I, but I think this is one of the reasons why, because things are actually going okay in the economy still,

and people are spending money. And I'm just using, like, anic data here for my economic stuff, but in Grand Rapids where I live, there's cranes everywhere. There's so much building going on. And I feel like I see that every time I travel anywhere, too, it seems like people are still spending money. And I think as long as that's the case, things are going to continue to go okay for the markets. Maybe I'm wrong. These two things that are related, surprised the hell out of me. So Target has been focused, this is from an article from CNBC, Target has been focused on reinvesting in its business ever since it laid out a strategy at the start of last year to pour $7 billion into their e-commerce. And they said that digital sales skyrocketed in more

than 40% during the second quarter. Now it's obviously coming off a small base, but maybe, I don't know, I use Amazon for pretty much everything. It would never dawn on me to go to Target.com to buy something online. I don't know. A couple weeks ago, you said you bought some T-shirts on Target. But that was physical. That was brick and mortar. Okay. Yeah. No, I agree. I go to Amazon for everything, too, but obviously Target has their fans. But I think that's, like, if you look at the retail ETF, which Amazon makes up probably a huge percentage of, I'd imagine. Well, hold on. So you're talking about X, Y, the consumer discretionary ETF? Well, no, the actual

retail, it's like RTH. No, XRT. Is that what you're thinking of? Maybe that's it. Because that one's like an equal weight. So Amazon's not a big piece of that. Okay. RTH is the market vector's retail ETF. Okay. I mean, it's at an all time high and it's just up enormous. And so it can't just be Amazon, it's being held up by other things as well. Is that priced in dollars? Yes. It's in fiat currency. So Walmart is doing an audiobook subscription, which is only $10 a month compared to

Audible, which is 15. So right now, Kindle is controlling more than 80% of all U.S. sales. I thought that was kind of an interesting thing. Have you ever listened to an audiobook before? Not since I was a child. And it was on tape. Audible had this thing where you could get one free book and try it out for a month for free. and I tried it. I just, I can't do it. It's not the same to me. And it's not like listening to a podcast

either, I feel like. I just, I don't know. I think, I'm sure a lot of people like this and it's an easy way to like do it in your car, on your commute or whatever. But I don't know. If anyone has any recommendations, shoot them to us for good audiobooks, but it didn't do it for me. Wait, why would you want recommendations for audiobooks if you don't like them? I'm saying if there's one that is really good. I tried a, I tried a fiction book. And it was people doing different voices for each character. And it was kind of like, you know, when you're parents used to read a book to you in bed and they'd do the voices. Like, I don't know, it seemed kind of cheesy to me. So maybe if there's, maybe there are other ones that are better

that are better suited for, for that, but it, I didn't do it for me. And I don't understand. Why can I not just buy one audiobook? Why do I have to do a subscription? Because everything is a subscription service these days. You cannot buy a single audiobook? I don't think so. I think you have to have a subscription to audible. I could be wrong on this. But I don't think you can just buy a single one. I think you have to have a subscription. Amazon owns Audible. Yes. as far as I know. All right. Well, I don't know how to pivot from this, but I'm just going to do it anyway.

There was a chart that Market Watch found from Gray Cardiff at Sound Advice, a sell signal that's happened only five times before, and it's showing a ratio of stock prices to the price of a median new house. And let's just say it's flashing. Hey, it goes back to 1895. It's got to be true. By the way, before we get into this one, can we just talk about the fact that Bank of America stole your pie chart?

Oh, yeah. Like blatantly stole it. It's not even like they kind of a little bit stole it. They blatantly stole the exact same pie chart that you created. Yeah, it happens. All right. No, this one, yeah. I mean, there's red on here and there's green on here.

And it's, this is, I don't know, this is just terrible. Right? I'm sorry. Wait, and what is this even showing? Like, the S&P, like is it the Dow divided by? It must be. I don't know. but it's only happened five times in history. The funny thing is, people say it's only happened five times in history. Like, that means you should do something. But that's a pretty damn small sample size in my book, right? Like, you'd think people would pump the brakes and say, oh, it's only happened five times in history. Maybe I should see if this actually makes sense. I don't know. That's just me. Yeah, this is not great. There was a good tweet going around that you highlighted me to from sentiment trader. And it said, people are constantly arguing. And this has been a big topic of debate for the last couple of weeks.

is this the longest bull market in history? And I keep circling back to like the Samuel L. Jackson and Pulp Fiction, like say longest bull market again, I dare you. Like that seems like, I feel like that's like Barry's Twitter, Twitter feed these days. But people are trying to define the bear market. Did it start in 2009 when the market's bottom? Did it start in 2013 when we broke through new highs again? Some people say it started in actually started in 2016 because we had a bear market in 2015.

And whatever, in my mind, it doesn't matter. like how you define these things is just, I think that's just kind of nonsense. But this sentiment trader said, okay, let's assume 2016 was the start of the bull market. If it was, it was the fourth most expensive start to a bull market since 1900 based on the Cape ratio. So take that for what it's worth, I suppose. What is your, what is your take on the bull market debate here? Ah, it's enough. Let's move on. Okay. Good deal. All right. So in the past week, there's been a of, and I feel like this is sort of constant, not so good things happening in the financial services industry, and I understand that it's a small percentage of people giving financial

advice that conduct this predatory behavior. However, there are a lot. It's not just a few bad actors. Like, there is a ton of shit that goes on. You agree? Or disagree? Yeah, this one, This one from Terrell Siegel Bernard, Terrell-Sigle-Bernard at the New York Times, and she's always really good about this kind of stuff because she tells it from the point of view of the person who's actually being affected. It was about a young woman or about a woman who looked through her parents' investment accounts, I think, and they figured out that they had been charged, was it six figures in commissions or something? Just ridiculous. These people are 80 years old that I believe they had 90% of their portfolio in equities, which is I guess like the least

offensive thing that this person did. It's kind of interesting. So this was that this was through a J.P. Morgan broker. And I don't know. I would think at a place like that, you'd think like the regulations in the like red tape for doing something like this would be so hard to to jump through. But I guess maybe at a place that big, it's easy to fall through the cracks and just not know it. You'd think something like this would be flagged when someone pays this, this amount of obscene commissions on a portfolio. Well, in their investment advisor agreement, it says J.P. Morgan is acting as a broker dealer and custodian and not as an investment advisor or a fiduciary. When acting in a brokerage capacity, J.P. Morgan has a duty to deal fairly with brokerage clients, but may face certain

conflicts of interest. Oh, you think? And as such, J.P. Morgan's interest may be made different from yours. Could you imagine? I mean, we talked about the 85 basis points earlier from a brokerage firm. And this one was, so it was a $1.3 million portfolio. And over the course of 2017, it was charged $128,000 in commissions, which is 10% of the value, which I just can't even imagine. So I guess the question is, does this account get rolled over into the free trade thing from JP Morgan now? But I'm, shh. Hey, all right. All right. So this type of shit still exists, apparently, which is hard to believe. There were two boiler rooms out in Suffolk County, Melville, which is where all this nonsense occurs. And one of the firms is called My Street Research. Why are these places always in

Long Island? I don't know. One of them is called My Street Research. another is called Power Traders Press, and another one is called Elite Stock Research. And more than 100 investors nationwide were ripped off, and many of them, of course, were elderly. And they were doing pump and dump schemes on grilled cheese truck ink, amongst other things. And it's just, it really is just shocking that it's 2018 and this sort of stuff still exists. Is that really a name of a company, grilled cheese truck ink? Yeah. Okay. It's horrible. And then the other one was Wells Fargo where, you know, I feel sad for a lot of the people that work at Wells Fargo that are trying to do the right thing, but they're in a system that makes it so difficult to do the right

thing. So I'm sure that there's plenty of advisors that are just, you know, what do they do? How do they talk to their clients? Like, oh, no, everything's fine. Everything is not fine. Yeah, I had lunch with a guy a couple years ago from Wells and he kind of said the same thing. He's like, I do right by my clients and I put them in low-cost funds and I have financial plans. But there's a stigma involved and I don't know if more of that now, we'll get to the public or if it's just more people in the industry know, but I mean, the obvious thing here is the fact that it's kind of sad that it's so hard for people to understand whether they're getting good advice or not. I think that's part of the problem is that people just don't know. And like a lot of this stuff that we spend our time arguing about, like, what's the best value risk factor or what's the right expense ratio to pay for this ETF? Like, if you get to that point and you're actually arguing about that, that stuff, like you've already won in a lot of ways. So I think for a lot of people, it's hard to to just avoid these huge, huge mistakes like this and trusting people that they really shouldn't trust. And unfortunately, it's human nature and this stuff is just really never going

to go away. So these brokers were incentivized to put their clients into options into separately managed accounts and private placement alternatives. And if they didn't, their bonuses were penalized. So what do you think is going to happen? Not much. They'll pay a fine slap on the wrist and move on and we'll get another story in 12 months, probably. And then if I had to guess. Of course, this is, you know, obviously there are good people here, but these are publicly traded companies and they care more about their shareholders and they do their clients in a lot of cases.

Right. I mean, these banks are so huge. I mean, it's, I think it's going to take a long, long time before people start walking with their assets and actually make a difference and make a dent in their business. I just think, I think in a lot of ways it's just never, it's not going to matter, unfortunately. Unfortunately. So are you excited for Matt Patricia and the Detroit Lions? I mean, I'm a Lions fan. I never have, my hopes are never too high. Do you ever go? It's been a while. I would rather watch from HDTV for like any sporting event. But yeah, no, I don't, I don't really care that much. I just, I never get too high or too low. So in preseason, there's a lot of questionable calls going on in terms of like protecting the players, which I get. But it's, it's going to make for the first few weeks of the season pretty interesting. So obviously football is a very dangerous sport. And in 2017, this is from a Deadspin article, high school participation fell 2%, which is not a huge number, but it's 1 million less high school athletes playing than the year

before. Let me ask you this. You have a son. How would you feel about him playing high school football? I don't know, because I don't know how I'm going to feel in 15 years. I played high school football. It was sort of a joke. We didn't win any games. But, well, Julius Thomas, the former tight end of the Broncos and Dolphins, is retired. not due to physical injury, but because he wants to study psychology and learn about the effects that CET have on people. And by the way, he wrote this in the Players Tribune, which I think is a pretty great site. I think by the time, I mean, I think that the people are, you talked about people worrying about the hits in the preseason and how it's going to affect the game.

Like, these are probably the same people who have been complaining about the fact that the NFL doesn't care about concussions. So I feel like that you can't really have it both ways in that argument. But I feel like the press is just going to continue to get harder on this stuff. And I feel like the science behind it is going to be easier to, like, detect. And I feel like by the time our kids are that age, I feel like we're going to know a lot more. And it's going to be, I think the decision is going to be made a lot easier. I think it's going to be really hard to. I mean, football is never going away.

Like, can you imagine in like Texas from the south or Florida ever going away? But I think people are definitely going to spend a lot more time thinking about it. Yeah, I think football in 10 years looks like football today. Probably. So Chuck Kloserman actually had. A chapter in this book about, what was it called about? About what if we're wrong? Yeah.

And he talked about how he thinks maybe it's, maybe in some places, it's just people who really love it. Like in the South, it's going to continue to do fine and everywhere else people give it up. Yeah, that makes sense to me. So there's another thing that just popped up that I hadn't heard about until I saw Michael Lombardi, who is a friend of the show, tweet about it, something called the athletic. And what they're doing is they're basically poaching all of the local sports writers that have an embedded audience. And they're delivering this to the reader at, let's see,

$3.50 a month if you sign up for an annual or $10 a month if you just go monthly. What do you think is going on here? I think they're just trying to get ahead of the fact that newspapers are kind of dying in a lot of ways. And so, yeah, they're charging a subscription service. And they're hiring a ton of well-known sports writers. And I think they have a lot of VC money backing them. And so I think they actually said in a couple articles I read, their goal, is to put out, put a lot of newspapers out of business in terms of sports writing. It's already happening.

Well, yeah, right. So I think it, honestly, in a lot of ways, it makes sense. If you have that, if you can have a brand in an audience, why not charge them and go around the advertisers? The New York Post just laid off a ton of their, like, I think almost all of their sports staff. I mean, it's obviously happening all across the country. So I think there's a great idea.

And I wonder, I mean, sports has been, you know, ESPN is, particularly sports center has been on the decline for a long time. And I don't see that changing anytime soon. and companies like Barstool and Deadspin and The Ringer, it's just, it's so much better to get your sports content like digitally, immediately versus reading the paper the next day. Yeah, totally agree. The whole branding thing, it makes a lot of sense, but it'll be interesting to see in like the years ahead how much of what we consume is subscription and how much is advertising base. I think that's what a lot of these places are really dealing with. What's the

right, you know, way to make money? And a lot of them still just don't know. So survey time. What do we got? Okay, according to a TIA survey, 51% of all employers thought their workers would prefer a $2,700 a month stipend rather than a $500,000 lump sum at retirement. And they ran this one before showing 62% of the employees would choose to have an annuity versus a lump sum. Okay, so basically the employers were split down the middle in terms of what people would choose, but the survey actually shows that employees would prefer to have the monthly distribution. Right. How many people do you think would actually pull out the spreadsheet and run the numbers here for what would be a better choice? No, no, no, no. I don't think that. And I also think that, I mean, one of the problems with the service is that people answer how they think they should answer, not what they would actually do in real life. But I do. So I think that more people would take the lump sum, like more than 38% of people would actually take the lump sum. But I agree that I would take the monthly stipend. Is stipend the right word here?

I think so, yeah. So it actually works out to a six and a half percent return. If you receive 27. $1,700 a month. So it would be $1,200, $2,700 payments out of $500,000. It's actually not a bad choice, which is another reason I think people spend a lot of time complaining about annuities and a lot of the fees charged and how they're set up and structured. But I think one of the reasons that they continue to sell is because they offer that sort of peace of mind, whether it's the right or whether it's the right decision on a spreadsheet or not. That's why I think stuff like that is also going to be around and not go away. So there was a New York Times article this weekend talking about how new research suggests that more money really does lead to a more satisfying life. And they studied Swedish lottery winners. And there was a quote from the article, surveys of thousands of Swedish lottery winners have provided persuasive evidence of the truth. And as we just said earlier, surveys do not provide pervasive evidence of anything. Yes. The funny thing to me about this is that I feel like it's kind of like health studies.

where one study will show that drinking three cups of coffee a day will extend your life by three months or something, and others show that it'll kill you. And here's the great reason why. Okay, imagine that you won the lottery and you were asked about your quality of life and you said that it wasn't any better. You would like, there would be so much cognitive dissidents going on. Like, who would say that their life is actually worse, even if that were the truth? You would feel like such an idiot.

Right. You look like a jerk if you say that after winning the lottery. Yeah. So I think that this is. is total bunk. Yes, I agree. Speaking of bunk. So Chicago's pension funds are severely underfunded like so many others are, and they're floating

an idea that to close the gap, they take on more debt. And the thing is that they're going to be paying, at least the presentation listed, a 5.25% interest rate for $10 billion worth of bonds. Now, what do you think about the idea of borrowing at 5.25% in order to achieve higher returns, given that Michael Cohen has a GoFundMe page that has generated $160,000 worth of donations already. Given where we are in the cycle, do you think this is a smart move or a not so smart move? If I was a perma bear, I'd probably say you don't give a drunk or another drink to fix the problem, but I'm not going to go there. I think, honestly, that's like basically

setting a hurdle rate for their pension performance. So they're saying... That's way too high. Yes. Right. And of course, they can't borrow at rates lower than that because Their pension deficits are already so huge. So they're basically just tacking on to the problem they already have. I guess maybe it's a way to kick the can down the road, depending on the maturity of these bonds and if they can maybe roll them over again. But we've talked about this in the past. What choice do these places have? They've got to like try something different.

Unless they get to invest in private private equity. Yeah, that's true. That's fair. Yes. Maybe a private Bitcoin fund. All right. So I saw this, somebody tweeted this the other day. So Info Wars host, there's a hurricane which is about to hit Hawaii, and they say that

it's been split in two by energy beam shots from Antarctica, possibly by John Kerry. Here's my question. Who is the serious viewer of Info Wars? Because this is something that I don't know. Like, who watches this and says, you know what? Maybe the lizard people are going to take over. The type of person that thinks that GLD doesn't actually have physical gold. All right.

Okay. By the way, I did watch the video, and it's just, oh, my God, is it stunningly stupid? Okay. All right, so I was poking around the New York Times archive in 1981, and I came across an advertisement that showed, to buy these three shows on videotape cassette would cost you over $150. And it was Airplane and Goldfinger and another movie that I've never heard of. And on an RCA video disc, which cost only $500, it is incredible how much technology has just squashed the price of technology. Yes, everything is on demand. Like our smart TV, we use that now almost more than our cable box, like all the apps on it.

So we have like the HBO app and Stars and Hulu and Prime and all the. It's just so much easier to get that access that stuff these days. It's wonderful. For less than $150 a year at Netflix, you can have access to thousands of different things. And then in 1981, it would cost you $150 for three cassettes. Yeah, that's, that's bananas. And people are still complaining. All right. Let's move on to listener questions. So I wrote a post a couple weeks when I wanted to get your take on this. So it's called the Half-Life of Investing Strategies and how things tend to not work much anymore. And we've talked about this before. So someone emailed in and said, follow through that half-life idea. There are any number of other clever investing. ideas that seemed like a good idea and failed once the secret got out, isn't indexing one of them? Please squash this one for me. Well, where to begin? Indexing, I don't believe, it's not a factor. It's just market beta. So the idea that index funds are going to somehow, what,

underperform, but how could they end to perform? They're an index. It's like the secret, once the secret of the stock market gets out, that's kind of, I think Thaler wrote a paper on this a long time ago about why do stocks continue to offer a premium over cash or bonds? Because they crash. But shouldn't people figure out that over the very long-term stocks outperforming shouldn't that premium come down. But it doesn't be right because it crashes and people can't handle hanging on. Yeah. Now, this one I am not worried about. Are net returns going to be 3% going forward or 5%? I have no idea. But I don't think that they're going to be lower because people know that stocks are risky. Exactly. Okay. I think we're going to put along here. So why

let me move on to some recommendations? What do you got? You're on vacation last week. You've got to have some good stuff for me. Okay. I read Rowald Dahl. You familiar with him? No. He wrote James of the Giant Peach and Matilda. Yep. Sounds familiar. Okay. And Charlie in the Chocolate Factory. So he wrote an autobiography and he's just a beautiful writer and interesting life story talking about like his experience in World War II in Africa. It was pretty good. And then I also read This was a Jim Chanos recommended this on Barry's podcast, a world lit only by fire, which was about the Renaissance. It was about a very specific time period. I think it was from like 1500 to like 1540, something like that. The scientific revolution, basically. Yeah, just how it was, it was a lot about the church and Martin Luther and Magellan and just how awful, awful, awful life was back then in general. So that was a very good one. And then last night, I went to go see the Meg. I was telling you earlier, I saw the preview for this. It's about a giant shark, right?

The Megaladon. With Jason Statham. Okay. What's it called? It's called the Meg. But a shark is called the Megaladon. Okay. And of course you saw this.

Of course it did. This one had you all. How was it? You loved it, right? It was pretty good. It was exactly what I expected. But they did a good job considering that it was a giant shark terrorizing the ocean. Okay.

I guess Jason Statham in a lot of ways is like Liam Neeson, like you know what you're getting, right? So he's a pretty bad actor. Oh, yes, exactly. Right? I think, and like the female lead was also horrifically bad. Okay, but you go for the shark. But you go for the shark, and the shark was phenomenal.

Okay. Oscar worthy performance. All right, I got a few. I think you may have recommended this to me first when Hitler took cocaine and Landon lost his brain, that book. Okay. There's another book out by the same author, same style that I have to get because that was one of the most enjoyable, entertaining books I've read in a long time. Oh, it's great.

So it was all short stories on things you may not know from history, and each short story was like three, four, five pages. So it's actually a really easy book to get through. I mean, my favorite one was definitely the Japanese soldier from World War II who continued to fight in the jungle of the Philippines until 1974. I remember them talking about it in hardcore history, and I almost didn't believe it. How about the story about the one of the, I don't know if you was from Africa or South America, that was literally in the Bronx Zoo? Right.

it's yeah it's it's uh there's a lot of them in there you kind of scratch your head and i feel like that book more than any other book i've ever read i was on google for like the entire time yeah i stopped a lot too to oh i want to see what else happened here i also read this book called the woman in the window which is a fiction book and it was it was really good it's kind of a genre book of did you ever see the movie the girl on the train uh emily blunt okay that was a book too so this one it's kind of this similar one where you know there's a twist ending and this woman is kind of crazy but maybe not and it's so it's kind of in that same genre they're actually making a movie out of it I guess with Amy Adams already did how did

how did you find this actually my wife someone recommended it to my wife and I just picked up and read it was a pretty quick read and it was a really good twist at the end I didn't see coming and I think it'll actually make a decent movie so that was pretty good and finally we watched Deadpool 2 this weekend in the theaters you're a big no it was it's out on DVD now or movie however you get them and you're I know you're a big comic book person, Avengers and stuff, but in my book, I think Deadpool's better than all of those. Okay. I didn't love it. I loved it. I didn't love the first Deadpool. See, I think Ryan Reynolds is, just because it's so self-aware and it kind of makes fun of all those

other movies, maybe that's why, because I'm not a big fan of those. And I think Ryan Reynolds is just his, like, sarcastic attitude about things always gets me. So I, uh, I, not necessarily when you want to see with your kids by any means, but, uh, I, I, I enjoyed it. Okay. All right. So I think that's all we got. Send us an email, Animal SpiritsPod at gmail.com, and we'll talk to you guys next week.