Animal Spirits Podcast - When to Sell a Growth Stock (EP.237)

Episode Date: December 29, 2021

On this week's show we discuss an amazing year in the U.S. stock market, why celebrity SPACs stink, the impact of mortgage rates on housing prices, Web3 communities 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

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maintain positions in the securities discussed in this podcast. Ben, I don't know about you, but I was cooped up at home for the last week. One of my boys' teacher was exposed. I mean, everybody knows somebody if they're not exposed themselves or positive themselves. So we were home last week, and this felt like a nine-day weekend to me. I was thinking, like, when was I last at work? But technically, the market was closed on Friday. Friday was a day off, I guess.

So it was a three-day weekend that felt like a nine-day weekend? You've seen the cartoon before where it's like a young person coming to work after the weekend and they're all sad. And then the other one shows parent with little kids coming to work and they're like joyous and happy. For sure, it was a four or five-day weekend for most people. You had the COVID thing. We've had some things too where we've had classrooms, clothes and teachers and people. I guess the report from someplace was like three billion people could get this. They're modeling it out.

I don't know if that's accurate or whatever. But they're saying, like, if the current trajectory holds and whatever, even if it's not that many, this is not an original thought at all. But this has to prolong the supply chain slash labor market shortage stuff. The supply chain and labor market shortage. Well, think about so like over the weekend. I don't know about labor market, probably supply chain, but people are going back to work. I'm saying it's going to be harder to get people because other people are sick. So it's going to just continue to cause disruption.

So think about the airlines this weekend. They're showing people flying back to and fro from holiday travel plans. And to it for like that. But they were showing that airline crews, pilots and flight attendants couldn't make it to the job because they were exposed or they had COVID. Actually, a friend of mine was supposed to go to the Dominican Republic. Flight was canceled because they couldn't fill the plane with workers. But I saw an interesting chart that the number of TSA like checkpoints was at an all time high despite all of the disruption. People are saying like, I'm going.

You're not stopping you're going. I'm going. There's certainly an element of. that. I just think at certain points of your life, especially if you have kids, you're going to get disrupted regardless. But I feel like these last two waves have cost us our roaring 20s. We had like a roaring 20s for like three months. Didn't it feel like it? Like everyone got their vaccine for the most part? I'm still long, the roaring 20s. Okay. I looked at this like early on in the pandemic. I wrote this, let's see, March 25th. So this is like right in the heart of the pandemic.

Wait, 2020? Yeah, I wrote this like early on. And so like World War I went right. into the Spanish flu of like 1918 to 1919. There was a recession in 1919, then a depression in 21. And then finally, after all that crap that people had to go through, you had the Roaring 20s. So maybe it's going to be here just, it's going to take a little longer to get there. But I feel like we were robbed of the Roaring 20s by Delta and Omicron. I disagree. I think they laid the groundwork. Maybe not the variance, but I think that one of the reasons why we're going to have Roaring 20s is because of the pandemic. That's possible. Well, isn't that what we're talking about here?

This shook things up to such a degree that so many people left their job to start new businesses. Yeah. Okay. So you're saying it's just on the back burner. I hope so. I'm saying no change. I do think that, yeah, there's going to be a really great book written someday about all the businesses that grew out of the ash of this pandemic. I think you're right there.

So strong holiday sales. What happened to the supply chain issues? There's an article in the journal talking about how companies got ahead of this, FedEx, UPS, their delivery rates, or like 95% or something like that, which got me thinking about Castaway. Okay. How so? Well, because remember in Castaway, Tom Hanks with the clock with the stopwatch? Oh, yeah.

So you're saying that that stuff was overblown and that people buying two months early probably actually help things or who knows? Yes. So, all right, use retail sales rose 8.5% year over year, but compared with 2019, because that should be the baseline, up 10.7% retail sales. there's a holiday sales, obviously. We're talking about Christmas. Christmas Hanukkah, whatever else people celebrate. What's sitting on all those container ships then? That's what I was thinking. Well, I guess durable goods. Nobody's giving a washing machine for

Christmas. Ah, that's true. So it's the big stuff, probably. That's sitting on the containers? Yeah, I would think so. So here's the deal. Sales at physical stores rose 8.1% year over year, 2.4% compared to 2019. E-commerce. Remember how much we thought e-commerce had penetrated the universe two years ago, e-commerce sales are up 61% compared with 2019. So, by the way, you mentioned the physical store thing. I think I'm just never going back to a physical store to shop ever again. And I mean, stopping for things at like the liquor store or the grocery store,

but actually shopping in like a mall, I don't think that I'm ever going to do that again in my lifetime. I had to take something back recently. How awful was it to like go to the rack and like do this? You can never find your size. Immediately. up the clothes to your, does this fit? Yes.

Now you can just order anything and if it doesn't fit, you send it back and they send you something right away. I was shopping this weekend on Instagram and I saw something that made no sense. It really sort of blew my mind. It was a new balance, fleece, hoodie, short sleeves. That's for Bill Belichick. And what weather is that appropriate for? So it's like for the dad that wants to look fashionable but also be freezing in the cold weather?

This is where finance, bro. get it all wrong. A vest, although it looks kind of cool, is the most useless article of clothing there is. Makes no sense. So I was thinking about this. The only way to wear that in a way that makes even a little bit of sense is if you have like a thermal underneath it. You're trying to make a fashion statement anywhere or something like that. Or are you wearing it in the hot weather and just sweating your butt off? I don't get it. There's like 48 hours out of the year where you could wear that and it makes sense. All right. Nate Garasi had a good stat. The S&P 500 has hit a record high 68 times this year. Second most ever. Second most ever to 1995. The index is up nearly 28%

year to date. He said, who called this at the beginning of year? Good reminder as 2022 predictions start coming out. Not only that, I look today, if it holds, unless we get like a crash in the last three days of the year, whatever, 5.1% is the biggest drawdown peak to trial for the S&P this year. Out of the last 94 years, that's the ninth lowest drawdown we've ever had. So you not only had a 30% gain almost, you had zero volatility, basically. And I have to point out that we're actually hitting an all-time high today on Monday as we record. So it's now the 69th. Don't say it. Don't say it. I'm just giving the data. It's the 69th all-time high this year. So we're up almost 30% this year. Last year was 18%.

2019, we're up 31%. Well, speak for yourself. Speak for yourself. When you say we, you're talking about the S&P 500. Sorry, S&P. I'm not up 30% this year. S&P. Your index funds are. 2018 was a down 4% year, but then 2017 was up 22%. So 2018 is the outlier. If you take that out, this looks like the late 90s almost. So you had 95 through 99 was up 37, up 23, up 33, up 28, up 21. Obviously, the total return there is way more because you have the down year in 2018 and that sort of cancels it out.

But it's not that much different. This is breaking my brain. Think about how bearish people were. Forget about 2017. Like 2013. And so, again, 2017 to today, plus 21 minus 4, plus 31 plus 18 plus 29. L-O-L. Right?

Yes. I know everyone keeps saying I've seen this movie before. It'll end badly. But we're on year 13 of this now. I just got to say shout to the S&P 500 community. It's so welcoming. Such a great community. Yes, they should make it a Dow.

It would do even better. It turns out, Ben, that SPACs stink, especially ones that are backed by celebrities. Bloomberg had an article showing that 21 out of 33 SPACs tied to famous public figures have posted a negative return for 2021, and this quote killed me. Not counting the SPAC tied to former president Donald Trump, which meant it a phenomenal gate of more than 400%. The rest of the group averaged an 11% drop through December 13th with rapper Jay-Z's 84% plunge.

That's the soccer coach, Giff. The worst of the bunch. I'm sorry, but I feel like. A JZ cringe gif? I feel like there is. Oh, yeah. But this looks like it could have been taken right from the script of don't look up. We'll get to that later. But I can't believe that Shaq didn't come through with a better return.

How did Shaq's spec do? I don't know. But it turns out that even despite... Wait, what did Jay Z spec invest in? Did they just not invest in anything? No, down 84%. They had to pull the trigger on something. I didn't read this article.

Do they have anything about, like, how many SPACs have just had the shareholders gotten their money back yet? Or can they not do it yet? Let's see, it was... Isn't that the deal where you can vote to get your money back eventually? That's the pipe money, the insiders. Oh, okay. And yeah, a lot of them are pulling out

for obvious reasons. It was a cannabis company. Okay. And yet, Ben, there's still money waiting to go into these SPACs. There's way too much money sloshing around. The journal had an article. Spax raised about $12 billion in October and November,

doubling their clip in the previous three months. So there was a frenzy. You see the monthly amount raised by SPACs. There was a frenzy in February and March cooled off and now we're going again. We're going. At least people are learning their lesson. So we got that going for us. It's not just SPACs.

It's everything. So the cash committed to venture capital firms and private equity firms is also ballooning. So-called dry powder hit about $440 billion for VCs and roughly $310 billion for growth-focused PE firms. This is back to your Roaring 20s piece that any idea right now is going to have the longest run way in history. Entrepreneurs now are in such a great spot. They can raise money at the drop of a hat right now from anyone. They're beating people off the sticks to raise money and they can stay private for as long as they want and have all the money that they need to try their idea out for as long as they can. The idea that we've given or the example that we're used to prove this

point is Dapper Labs. You might not like Top Shot or NFTs or whatever and say this is so dumb it's going to zero. Yeah, guess what? They raise $600 million or whatever the number is. They're going to be around for a while. Yes. By the way, I don't know why. They sent me an email saying, hey, we sent you $30. Does that count as like an airdrop, like a token kind of? I don't know.

But here's what I'll say. All I know is they sent me $30. So I'm whole on my dapper labs balance. There you go. It's not just celebrity back SPACs that are sticking. Obviously, the entire complex stinks of the nearly 200 companies that have gone public through SPAC deals this year, 75% are below the listing price. Nearly 40 companies have gotten cut in a half.

This is an interesting paradox is not the right word, but an interesting juxtaposition. That's the word I'm looking for. Especially since we just talked about the stock market doing so well this year. And these are getting crushed. What's amazing is that private markets, I don't know if this is always the case, are much more forgiving than public markets. These things have no problem getting liquidity, raising money from private investors. Once these things go public, if they don't deliver, good night. Yeah, short leash, big time.

Isn't that interesting? I don't know if that's always the case, but private markets are the real, like, arena. Isn't this best case scenario, though, if you're just a normal stock market investor? The speculative bullshit just gets taken out. The stock market doesn't care, just does fine. That's perfect for regular 401k average Joe investor. We certainly did not predict this at all. But I feel like we've spoken about this.

What if? What if these names get taken to the woodshed of the market doesn't blink? That's what happened. This is the problem if you're someone who's bearish all the time. Yeah, a lot of people thought that once the bubbles in these names pop, it'll bring the rest of the market down? So wrong. All right. We're sticking with good news here.

This is from Barron's. The U.S. economy is just a machine. So this said when the COVID ravaged economy contracted in 2020, it was just the 19th time since 1920, in which real gross domestic product had declined year over year. And nine out of those times came between the years of 1930 and 1949 as a result of the Great Depression or post-World War II. So basically 10 times, if you take away great. depression in the war. The U.S. economy has contracted year over year. So wait, hold on. Pause. People have a lot of beef with capitalism, and it's certainly far from

perfect. But come on. So listen to this. It's pretty good. GDP was 670 billion in 1920. Now, by 2020, it was 21 trillion. I think it's 23 trillion now. 30 fold increase, meaning U.S. GDP has grown about 10 times as fast as population, which has tripled from 100 million, 106 million people in 1920 to 330 million people a century later. But what about inflation adjusted? Shadow stats adjusted. It's a real GDP. I'm just saying maybe this is like, ring the bell, top is here. Do we just spend way too much time worrying about worst case scenarios? Like, yes, sometimes there's a good reason, but people have worried for the last 10 years about hyperinflation and retiring into a great depression and government debt and rising rates. Even the pandemic was

barely a blip on the markets and the economy came roaring back immediately. Like, we all just spend our time worrying about stuff that could happen 0.1% of the time. In the other 99% of the time, or 99.9% of the time, everything works out fine. Yes, but here's my butt. I think there is good reason for investors to focus on the downside, but do they do it to their detriment? Did we focus too much time on the downside? That's what I mean. Of course we do. But bare markets really, really suck and they are so devastating that I think it does, make sense to at least put yourself in a position always to survive one, because when they come and they stick around, they just destroy portfolios and investor psyche for years.

So, for example, Ben, in 2009, and again, this is like, I don't know if 2009 is worst case, it could be the worst recession that we see in our lifetimes. I'm not saying it's going to be, but it could be, right? That was a pretty bad one, like financial system on the brink. Like, that was pretty bad. It was a good chance. So 2009 took the stock market back to where it was. was in 1996.

Price basis? Yeah. Okay. But still. So bare markets, like, wipe out years and potentially decades of bull market returns. That's why I think investors tend to pay a lot of attention to them. So I guess you could say worry about the risk and the return to take care of itself. So I remember coming out of the...

Not if you worry too much about the risk. As long as your brain doesn't get broken. So, like, coming out of the crisis the last time, people were worried, like, I'm going to retire and there's going to be a double-day recession and I'm screwed. for some reason this piece has always stuck out to me. Michael Kitzis wrote this in 2019. He wrote about the extraordinary upside of sequence of return risk. So people worry about sequence of return risk on the downside. Like if you retire and you retire into a bare market and you're selling, you're screwed. So the idea is, of course, don't have all your money in stocks, and especially when you retire. So you have to have some other sort of dry powder when bonds or cash or something else

to take the money out of so you're not selling when stocks are down. But he said, after a 4% withdrawal right, and he's looking at a 60, 40 portfolio, the odds of nearly depleting a portfolio or equal to the odds of growing it by more than 800 percent historically. And he said that, like, looking at the 4% rule, got you to your initial balance to make it through 30 years of retirement on every occasion. Like, that was like your worst case. So he said that on average, a 4% withdrawal rate, on average, results in retirees finishing with a triple the amount of the original principle on top of sustaining a withdrawal rate of 4% adjusted annually for inflation. Obviously, people say, well, it's different this time because rates are lower. The thing is, we talk about this

with our clients that, like, you have to, at times, prepare for, like, what if things are better than I expected? And what am I actually going to do now? That sounds like, oh, great problem to have. The world's tiniest violin. This person with money made even more money than they thought they would. But, like, that's hard for some people to deal with. Because think about if you're a boomer and you've retired in the last 10 years. Stocks go up every year. Your house is up phenomenally if you own your house. You have all this money sitting there. You're probably in a better position than you ever thought possible 10 years ago financially. So now what? What do you do? And that's like, again, an easier problem to have in the alternative. But for some people, it's still not easy to deal with.

Like, what do I do when things go better than I thought they would? It's hard to keep these two ideas in your brain that you need to put your portfolio in a position to survive the upside. But also, what if your portfolio is literally cut in half in the next two years? That risk is always on the table. And you have to like not overreact to that risk, which is ever present. And it's The risk part of your portfolio, for sure. This is why so much money is going into bonds, because people know this now. They know they need to have another piece of their portfolio, regardless of inflation and what happens to rates, that that piece is going to be there for me to take if stocks get crushed. People ask, like, well, what upside do bonds have with a negative real

yield? All right, fine. You want your entire portfolio in stocks that can fall 10% in a day? Exactly. This is why people own bonds. And board apes. Once I start paying dividends. All right. U.S. savings rate. This is a is a wacky chart, fell to the lowest level since December 2017. So obviously we saw the spike due to fiscal policy and all that sort of stuff, people staying home. And now it's down to 6.9%. I'm sticking with my theory that this is good for the labor market shortage. Well, yes. All the excess savings people had is being spent. So now I'm saying like this chart is probably evidence of people returning back to work. And this is probably also good for supply

chains because there's not going to be as much demand anymore. A lot of the demand came because people were so flush with cash. I think working down some of these savings, this chart looks like the unemployment rate almost. It spiked and then came way back down immediately. What was that double dip spike? Oh, was that the second round of stimulus? The second. Yes, you can see where the stimulus hit, for sure. Okay, I'd like to make an analogy. This is like a blog post on a podcast. I was doing some reading. I think this was actually a Barry Riddholtz recommendation. He gives us recommendations in a while on Slack. And he said, read the end of average. And so there was this study of fighter pilots. And they wanted to determine how fighter planes had changed from like starting

out in the teens and 20s to the 1950s of World War II saying like the guys sitting in the cockpit don't fit anymore. They need to totally redo it. They wanted someone to study it. So they studied like 4,000 pilots. Wait, why don't they fit? There was like people size inflation? Yeah. They thought like the way that they were making them and people were getting bigger and they said, we need to make this more comfortable for people. And so they took all 4,000 of these pilots in the Navy, and this guy studied them. And he took the average arm length and leg length and all that, like, figure out, okay, this is our average pilot out of these 4,000 people. And this is how we're going to make the cockpit. And when they took the average of those 4,000 people, then then they actually compared it to the actual dimensions

of these Navy fighter pilots. Not a single one of them was within an average range of all 10 dimensions that they were studying. So they took an average, they found it, and they realized there wasn't one person who actually was that average. My analogy here, this is the inflation rate. We have this inflation rate at 6.1% of the last 12 months. I was thinking about stuff we've spent money on. So we got a new car lease that was up higher. Daycare was up 10% this year or something that's ridiculous. But something like gas doesn't factor in as much as it used to because my office is like five minutes away. I remember when my wife and I did a long-distance relationship right out of college. She went back to school. I took a job on the other side of the state. The only price I

ever paid attention to was gas. And I remember in 2008, it spiked. And that was like my whole budget back then is gas. Now I don't care about it anymore. Gas was over $4, right? Yeah, I went really high right at the time when I'm driving like every single weekend back and forth or one of us says. My point is that like this is how inflation works because no one is that average inflation rate. It's way lower for some people, way higher for other people. A few people are actually at that average. That's what I'm getting at here. Good point. This was interesting to me.

It's not just inflation is like a global phenomenon. And we're seeing there was a few things I caught my eye this week. Somebody tweeted Spain's producer price inflation rose to an all-time high. 33% year-over-year. Holy shit. Okay. And there was an article in Times that inflation is soaring in Europe. So you know who's been really right about this from the start is a guy who always gets beat on for just saying the

I think over and over again. Jeremy Siegel has been calling for higher inflation pretty much since they started the pandemic and we spent all the money. Love that guy. He's like the stocks for the long run guy that everyone always says, oh, he's just a permable. He kind of called this. He said, we're going to get... First of all, not true. Not true. He wrote a well-documented article literally in 1999 towards the top that tech stocks are super expensive. But I remember he said, we're going to get higher inflation and it's going to be like 15 to 20 percent in aggregate over two to three years. Now, that still may not come true, but he's been kind of on the forefront of this. He was Right. There was a quote in this article that stood out to me that we all know it to be true.

People are being more careful about their consumption. Nobody is really expecting prices to go back down, end quote, because they don't go back down. Used car prices will come back down. But by and large... This is the psychology behind inflation. How does it impact consumer, how they think about stuff? It changes the way you think about the future. Yeah, I guess it's a difference between will prices fall versus will prices continue to rise in the future? Because if you think prices are going to continue to rise and you buy more now. By today.

Buy now, pay later. Wisdom tree had this chart. Speaking of Siegel, we've been talking about people say what's the best way to hedge inflation. Well, it's not a one for one hedger against inflation, but of the long term stocks. Since 1957, dividends have grown by an average of 5.7% per year, more than 2% above the average rate of inflation. This chart is pretty much up only. There's a few periods where it plateaus. It dipped in 2009 because all the financial stocks cut their dividends.

But dividends grow. People always ask us, what's the best way to produce income in a portfolio? Own stocks. Because the income grows over time. Even if the yield seems poultry and it's like, well, it's 1.8% or whatever. The stock market up 500% over the past since 2008, 2009. The dividend yield has stayed relatively constant that time because the dividends themselves keep going up. Yeah, stocks have the most impressive dividend stream.

All right, here's another inflation piece. People have too much damn stuff. Speak for yourself. This is in the Wall Street Journal that self-storage is so hot right now in the pandemic. And people are paying more than ever to stash their stuff. There's this chart that shows storage space and net operating income has just exploded in all these public storage, extra storage space. And I guess you could make the argument, well, some of this is people who live in big cities and they don't have as much room. But people just have too much stuff.

Was that an intentional Zoolander joke? What did I say? So hot right now. Yeah, I was. But like, if you get to the point where you're not living in a studio apartment and you need to have a storage facility and there's not a really good reason for like you're moving or something, isn't that a cue to you that you have too much stuff? Well, a lot of people live in apartments for ants. I guess so. But, yes, this is my solution to inflation.

Everybody in New York City and a studio apartment has a storage space. You have to. Okay. And I guess if you are like running. a crime syndicate on the side, you have to have one too. Every single show about crime, they have a storage space, right? With something in it. Best storage space of all time? Breaking Bad. Easily. Yes. All right. I want to spend a second on some Web3 stuff. By the way, a lot of beef between Web 2 and Web 3. Did not see that plot coming to fruition in 2021.

On Twitter, I think it's kind of fun to watch, to be honest. So Legion and Katie Parrot wrote a post called the Web 3 Renaissance, a golden age for content. And I understand why people's knee-jerk reaction that don't spend as much time on this as we do is like, this is all bullshit. I'm totally sympathetic to it. But I think this will maybe help shine a light on why we see the potential here. So they wrote, and I'm going to read this for a second, in 100 True Friends, I described that creators could tap into fan self-interest to monetize at higher price points. By delivering substantial value and results, creators could more effectively monetize and make a living from fewer fans.

This represents a move away from the traditional donation model in which users pay to benefit the creator to a value model in which users are willing to pay more for something that benefits themselves. Web3 takes this idea to the next level because all tokens are investments that not only fund the creator, but also could benefit the holder if the value appreciates. Jesse Walden defines patronage plus as patronage with the possibility of profit, a phenomenon that was introduced through tokenized ownership.

that investment element was an impossibility in Web 2 without an on-chain record of ownership like an NFT or a social token, end quote. I think the point of this like really truly cannot be understated or overstated. I'm sorry. The one thing that like your initial traditional finance brain says is, well, why do you need the token if someone can just start a substack and do this on their own? But I've seen so many substack people that have nine months later said I thought I was going to have X number of subscribers and I'd make X amount of money. money, and it did work, so now I'm going back to traditional media. And the token thing, the one thing, this is why I'm surprised that Charlie Munger has never said, you know what, these crypto guys have it figured out because the one thing that crypto has figured out better than almost anyone in the past 10 years is incentives drive everything. This is what Munger

has built his belief system on, is incentives drive everything. That's why they have these yields and defy and why this money pours in because it's all incentivized. People wouldn't do the Bitcoin mining thing if they weren't incentivized by earning Bitcoin. So that's the one thing cryptos figured out is that you have to incentivize people to do something. And prior to this, there was no internet money. And here's a great example. So there was an irdrop on Christmas Eve. You might have seen this from this company called Open Dow that did an irdrop to people that have done transactions that have bought NFTs on OpenC. And so based on the number of ETH that you spent, they had a formula smart contract that dropped SOS, which is a token,

onto its users. And I was speaking to my friend Eric Golden about this. Where the hell does this this money come from? It's like money that just literally gets created out of thin air. So why doesn't everybody just sell it immediately and just dump the value to zero? Why doesn't everyone just redeem and just dump it to zero? Well, that does happen in a lot of situations. But in cases like this, there is a secondary market to basically make the market for this thing. So some of the automated market makers, uniswap, whatever, they start doing these pairs, SOS, ETH, there's buyers and sellers. And now I was checking there was $170 million worth of tokens, SOS tokens traded. And the last 24 hours.

They essentially, they create a token out of thin air, and then it's put on the marketplace and the market decides the price. Yes. It's an IPO for users, basically. And there's incentives between the financiers, which is sort of the beef between Web 2, Web 3, the people that created the Dow. And so we were talking, like people are talking about, well, why doesn't Twitter do this? What does this, where they reward people by listening, by how many minutes that you listen

to a podcast? If I was paid every time my four-year-old listens to Baby Shark, she'd be going to to college already. You know what's hilarious? I have paid for. I saw this out of the corner of my eye yesterday. I have like a baby shark. There was a box. And it said, Unishark do. Literally unyshark do. And I was like, does that say Unishark Dow? No. Anyway, the reason why this can't happen is because there is no internet money for Twitter. If Twitter tried to do an airdrop to all of its Twitter users, how the hell would it happen? All that they have is your email address. There's no Twitter wallets.

There's no way to get money, Twitter tokens, to its users. How would they even do this? So this is why they need crypto, basically. And this is where tokens, crypto comes into place. I do think that, having said that, like, crypto figured out incentives, I do think as these projects are rolled out, it'll be really fascinating to see how those incentives have unintended consequences. Totally.

If something is really hot for, like, three months, and then someone comes along and has better incentives and all the users leave. So, like, it'll really be determined how much of community is there really versus how much people are just trying to get rich. And there's going to be a little bit of both, obviously. 100%. And there's going to be a ton of garbage. And I saw some people dunking on this. I saw this tweet, Blockbuster, Dow. I saw that too. So our mission is to liberate Blockbuster and form a Dow to collectively govern the brand as we turn Blockbuster into the first ever de-film streaming platform and a mainstay of both Web 3. I mean, come on. Do we need this? Why buy

Blockbuster? I mean, come on. Nostalgia sells, I guess, is the hope there. Which is the same reason why they had a Matrix 4. The only reason that movie came out is because of an install. And we'll talk about this. Honestly, I haven't read the thread, but this sounds so dumb it just might work. Why not? Wasn't that investing in 2020? This sounds like a stupid idea. I better put more money in. I bought non-fungible Olive Garden last night. It's the dumbest thing I've seen. It's got to work. What? Exactly. All right. Kathy Wood last week, we spoke about her saying that the arc could generate 40% returns. So Jeffrey Patak did the work, and here was the data.

That's like me in fifth grade saying, I could play in the NBA. I could. This is a study from 1991 to today. There were 10,538 funds that had at least one five-year return from then to now. Of those, 146% earned a 40% annualized return over a five-year period. But since then, there was 1.4 million five-year returns reportedly by all 10,538 funds. So this means that this feat that she's described happened 0.1% of the time. And you could guess when it happened.

Dot com bubble. I think there was a biotech bubble in here. So it could happen. It's thematic funds, which hers is. So it's a thematic fund. So like maybe. I think the problem is I feel like she just did 40% the year for five years. I looked it up, actually.

Even with her recent drawdowns, it's like 25% a year, but still. That's it? That's still high. Yes. My point is, okay, fine. My reaction was she's done better than anyone in recent memory. She's already done phenomenal. Air quotes, only 25%.

How in the world could she do 40% going forward? I'd have to run the numbers. I bet Buffett has like two or three, 40% per year runs in like a 70s and 80s. Probably in the 50s. In the 80s, I bet he did. But still. Yeah, I bet you didn't. 40?

He had a good run in like the, Early to mid-80s, I did a piece on this one, so I'll have to look it up, but he had some pretty phenomenal returns. All right, so Dumeberg put me on to, that's a substack that I've read a bunch. It's basically clever, funny, zero hedge. Planet for the Apes, he alerted me to this. This is an actual lead in the Wall Street Journal. They did a deep expose.

Did I use that word properly? I'm going to go back to this real quick. So through the peak in February 2021, ARC did 37% per year annualized since inception. That's pretty good. And that's got to be about it. as good as it gets, no? Yes, she's saying, effectively, I could almost do this again after the running up they already had.

That's asking a lot. So, all right, here's the lead in the Walsh Journal article. A mob rescued the world's largest movie theater chain from the edge of bankruptcy. It turned out to be only the first act in an improbable story that made this year in American business like none other. More than four million people joined forces to put billions of dollars into AMC entertainment holdings, staking their money on a company so baddered by the company so baddered the pandemic and competition from streaming entertainment that Wall Street investors had bet big

on its imminent collapse. I can't believe it was that many people. So we talked about this earlier. I was saying like every behavioral book you ever read talks about the herd mentality and how it eventually leads people to lose their minds and every investment in mania has this happen. But usually this stuff happens and then it goes away. So this stuff happened. It peaked in like February, January this year was like huge, which feels like a long time. Remember we did that stock market contest in January? That feels like 13 years. ago. It was this year. And we did it at the perfect time when all this stuff was going on. But you thought it would fall and it hasn't. We came up with this term, credit to us, community

mentality now, where these people have stayed into it. What term credit to us? We turned herd mentality into community mentality. It's gone on longer than anyone could have possibly imagined. I mean, these stocks are down 50% from their highs right now, but AMC is still up like 1,200% on the year. It went from a $475 million market cap company at the beginning of the year to like 11 or 12 billion now. And these people are staying in it. Absolutely wild. And there's no disrespect. There's no way that the equity of this company is worth $12 billion. It's just zero in no world. But in this world. And guess what? This is the world that we live in. So here's a quote that I want to read. Sometimes this is just from one of the community members or one of the owners of the stock.

Sometimes it's not about what the fundamental is are. It's who the other shareholders are. It was clear there was a group mentality around this effort. That has fun. fundamentally changed the nature of markets. And I think that the old days of short sellers being so vocal about their shorts, you can't do that anymore. These people will steamroll you. It's insane. And I don't hate it. Again, just the fact that it's gone on for as long as it has. We kind of all figured like, okay, that was fun while it happened. You had this craze or be some books written about it. But then it's still kind of going on, even though these stocks have gotten crushed. They haven't gotten crushed nearly as much as they went up. No way. And now some people obviously,

obviously take it way too far. There's people that have like their identities tied up with AMC and they're on YouTube spewing like all sorts of conspiracy theories about the actual number of shares outstanding and all sorts of stuff. It's bizarre. But this idea of community investing has really flipped everything that we thought we knew on its head. And it's not going away. I can't imagine being a hedge fund manager and trying to step in the way of this. Hungry now. Now. What about now? Whenever it hits you, wherever you are, grab an O-Henry bar to satisfy your hunger.

With its delicious combination of big, crunchy, salty peanuts covered in creamy caramel and chewy fudge with a chocolatey coating. Swing by a gas station and get an O'Henry today. Oh, hungry, oh, Henry. We've gotten a lot of questions from people over there, especially this year about, like, when do I know how to get out of a growth stock? Like, gross stock's getting killed, when do I get out? you always talk about just having price discipline. I'm more of a fundamental kind of guy. So I wanted

to use an example. So I'm not like a gross stock investor by any means, but like in my Robin Hood account, I dabble. And so after the CEO of Stitch Fix was on Patrick O'Shaughnessy's podcast in 2020, like I thought the idea sounded amazing. And I bought shares and the stock was up like 100%. And then it got crushed. And they announced that she was stepping down from, she was like the founder and the CEO. She was stepping down from the firm. And I think at that point, I was still up bearish, 15 or 20 percent. And I said, you know what? I could hold on, turn around. But I'm like, no, I sold immediately when she got out because she was the whole reason that I bought in the first place. And it's gotten crushed even worse since I sold. So I definitely was there for

a decent part of the carnage. Luckily, I bought it early enough what didn't matter that much to me. But that's like my thesis had changed. And actually, it worked out because the company has probably fallen 50% or so more since I sold. I also, I did some Peter Lynch channel checks on this, I became a customer. I used it. And so her whole thing to Patrick was like, we get more data points about people's clothing, sizing, and all this stuff. We're going to create an algorithm that just gets you the perfect size clothing. And so I tried this out. And every two or three months, I get a box of stuff from Stitchvix. And I've used it for probably the last year. And they ask you what you want. And what I found was that their algorithm is bull crap. It doesn't

work. Like you pick, I like this, I like this, I don't like this. And you go through and you answer all these questions. What works is actually telling a stylist, this is what I want. want. So like, you still need the human, like an algorithm could not predict what kind of clothes I would like. This is very similar to like eye buying. This is like eye shopping. Yes, it's hard. So that's what I realized like, oh, wait, this doesn't scale at all. You need someone to talk to. And I would say, I want this specifically. And I want to fit like this. And I want this size. I can be a stylist. What do you need? T-shirts? Anything from Instagram? Any graphics? I thought like this could be huge and Amazon will buy them. Then I felt like, oh, wait a minute, this actually doesn't scale at all.

This is like being a financial advisor. Being a personal stylist, you cannot style. You cannot style. someone on their clothes based on an algorithm, you need a person. And it's like human interaction. That was the only way that I could get clothes that I liked. And all they do, it's kind of fun. It's like Christmas where I get to open up new presents every three months. Investing is hard, not just in growth stocks, but particularly in growth stocks that tend to have these wild dramatic swings up and down. You really need to like come up with some sort of plan ahead of time. And just because you have come up with the plan doesn't mean it's like a good plan, but like it's better than nothing. If you're just purely doing this on emotion, you're toast. Exactly. Yes, about

when to get out and am I going to hold this forever? Or is this a trade or whatever? You have to define what you're trying to do before you buy a growth stock. All right. So it turns out that people really don't use their Alexa. And if it wasn't for my kids playing Baby Shark, I don't use my Alexa. Do you? We bring up the average on this for sure. We use it all the time. All right. For what? But my kids will ask Alexa, how do you say yellow in Spanish? Because they learn Spanish and they're a little school. We use it way more than other people, but it's only because we have kids. If we didn't have kids, I would use it marginally. Okay. So according to internal data. There have been years where 15 to 25% of the new Alexa users were no longer active in

the second week of the device. That doesn't surprise me. This blew my mind. Amazon employees more than 10,000 people to work on Alexa. And the documents that they study projected, it's fixed cost to be $4.2 billion in 2021. So don't you think that means it's going to get better? Eventually, they're trying? I would say that makes me think that I am significantly. underutilizing. I think part of it is, so do you get the notifications that say, like, hey, looks like you're all out of toilet paper. You should probably order some.

See, we have those. Okay, I got to turn those off because those annoy me more than anything. But we use it like almost as like a talking Google. My kids will ask questions to it and then they play music. And that's really the only way we use it. I just don't love talking to a machine. I thought that maybe I was in the minority, but it turns out the amount alone. Whenever my wife tries to talk to it to get to do something, it like doesn't listen

to her well. It's like a dog where like I'm the master and it listens to me, but not her. It's very bizarre. All right, it turns out, Ben, last week we spoke about, like, crowdfunding movies. And I threw out the idea of a doubt, it doesn't have to be a doubt. Just the idea of like crowdfunding movies, like how everything is fractionalized. I suspected that I would like to finance a movie. It sounds like fun.

It turns out, holy shit, that's actually happening. So the FT had an article, Francis Ford Coppola's son is launching a platform called decentralized pictures to, quote, democratize the financing process and open the doors to new talents. So the platform will give investors and other potential contributors. The chance to vote on which films should be produced, non-investors can also join in by earning voting rights, for example, by volunteering to be script readers. That reminds me very much of index coop and how some index coop participants get tokens. My first thought of this is, I don't know

if you were ever a Simpsons watcher, but when they let Homer design a car, his stepbrother, wherever it was, ran a car company, and Homer designed, like, the worst car in the world, and it lost them all their money and the company went under. You're going to get some awful movies from this. Oh, for sure, for sure. But, Descent. It's still under development. Plans to be up and running in the first quarter next year, has raised seven million dollars. Its income coming from donations and the sale of its digital tokens, Ben, called film credits. They're not the only one. There's one in Canada called token funder.

There's one called block film. So they have it. Their goal is to democratize the financing process and open the door to new talent. You are a fintech company. And I say in your first press release, you cannot use the word democratize. Shut it down. I'm out. Sorry.

Socialize. I'm just saying it. Let's do one listener question. By the way, we had a new listener mail bag on the last show on Monday, so if you miss that, check it out. Good plug. With Ben Carlson, excuse me, the Fed announcing plans to raise interest rates three times in 2022. Savage. Is now the best time to purchase a home and take advantage of historically low mortgage rates,

or do you expect the higher rates to decrease home buyer demand and increase reasonably price supply? I know the latter is unpredictable, but do interest rates outweigh home prices in today's market? By the way, we're going to do a mortgage bet on Cal She for 2020. 7%. Lock it in. 7% yes. What? No, mortgage rates. What are you talking about?

Saying like, will they get over 4%? No. Well, the 30 year, I don't even, where is it today? Three. Is it another three? I'm going to say, well, the 30 year get over 3.5%. I say no. That's tough.

I think it got close to that mid year. That's not a bad one. Anyway, any response. So the question was, do you expect high rates to decrease home buyer, demand. I don't really think so. I think it's going to affect prices, but it's not going to affect demand because demand is one way. I think rates would have, especially since supply, we know is not getting all that much better. I think rates would have to go noticeably higher to like 5% to really dampened demand. Like, do you think if someone's been waiting for house price for the last

18 months to get in that all of a sudden because rates rise, they're going to say, no, I'm out. I'm going to wait for rates to fall. No, rates are going to impact prices, which might impact supply. But I don't think it's going to impact demand. Yeah, I don't think so either. I think that demand is like a one-way street. Yeah. When I say supply, like if rates go up, prices come down, people might be like, eh, I miss the window. I'm not going to sell. Oh, yes. It would have to be a lot. But the whole waiting to purchase a home thing, I feel like that's like waiting to buy in stocks in 2011 or something where every year you wait, unfortunately, it's going to feel worse and worse. I think that's where we're at. I think you're right. This person said also, I love the show, recommendations. Have you considered doing

a top 10 recommendations from the past year to finish out 2021. No, sorry, we missed that window, but before I forget, I just would like to say thank you to everybody who listened. We've probably done 100 episodes this year. Someone else asked me that too. I thought about it, but honestly, 2020 and 2021 are so together in my brain. I wouldn't even remember what I consumed in from one year to the next. No clue. Oh, that reminds me. So yeah, just a sincere thank you to everybody that listens every week. Like, we appreciate it more than you could imagine. We're doing a special episode, I am very excited. Tomorrow, while it should be coming out on Saturday, we're doing an episode with Howard Linson. We're going to talk to Howard about how the hell he got

here and where is here. He's done pretty well for himself. He's been ahead of like every trend of the past three years. So we're going to talk to Howard about what he's doing next, which I think is pretty exciting. That will be coming out on Saturday. All right, recommendations. This was a nine-day weekend. As I said, I watched a lot of movies. Before I talk about movies, there's a blog post that I have to recommend called more to that the many worlds of enough and it was just basically about like the hedonic treadmill about how we're always moving the goalposts and here's a quote the world of enough you occupy today is completely foreign to the one you occupied a decade ago it was really really really good worth mentioning in this recommendation section so I'm going to link to that in the

I subscribe it is very good okay you read this post it's awesome okay so the matric resurrection I was very very bearish on this because the first major Matrix. Was that 1999? Revolutionary. Holds up. Rewatched recently. Still a very good movie, especially put it into context of when it came out. I actually thought the second one was pretty good. It wasn't bad. It was some amazing action sequences, like amazing. The third one completely dropped the shark, in my opinion. I will never rewatch it. I have no idea what happened. You walk away totally scratching your head. Yeah. So needless to say, was not optimistic going to this one. I don't know how you could have been. And it wasn't good. It was watchable. I didn't

I think it was bad, but it was, you know the Ryan Reynolds Giff where he goes, but why? Yeah, yeah, exactly. It didn't really need to be made. No, no, not at all. But I don't think it was a complete piece of shit. So it's kind of like the horse in the front, the donkey in the back, but the up front wasn't quite that good. The first 20 minutes, I was like, all right, this is somewhat interesting.

If you were a fan of the original Matrix movies, they gave you enough nostalgia breadcrumbs to like, oh, I remember that person or I remember that. They're trying to bring it together. But how about this? I am all out. I'm not watching any more matrix. I don't make any more. is it matrices

All right So I finally saw Christmas vacation Whoa you'd never seen it before Never seen it All right Tread lightly my friend I watch that

Every single year on Christmas Eve That is my all-time favorite Christmas movie And there's not a close second Oh Okay Here's what I'm saying All time

Here's what I'm say It wasn't good But it was good Okay Is that fair Here's what it does great It's an absurd It's an absurd

It doesn't go over the line Because if you get to Vegas vacation That one was so absurd it didn't make sense. This one was just the right amount of absurd, and it gets me. Which parts make you laugh? Oh, man.

I mean. Oh, when he was hanging up the lights and he kept, and he was falling off, that made me giggle. He does a ladder thing like this. And he, yeah, we watched it again. I think that they nailed the neighbors, Todd and Margo. Cousin Eddie, of course, he's got the dicky on. Was that Randy Quaid? Yeah.

When at the dinner table, it goes, hey, kids, they spotted Santa. And Randy Quaid goes, you serious, Clark? I think that's one of my favorite all-time movie lines. It's one of those movies where you, it sounds like cliche to say, but you have to watch it multiple times and you pick up something new every single time. Can I tell you something? I'll probably watch it again next year. I enjoyed it.

We watch it every year on Christmas Eve. Okay. I love that movie. I'm not quite sure why I saw this movie. Maybe the algorithm where I saw Inside Man recommended to me children of men. I've heard about this movie before. It's like an apocalyptic one? It's a movie.

Michael Kane, Clive Owen, Julianne Moore. I saw it a long time ago. I don't remember much. Good movie. Okay. Good movie. And seriously, what the hell happened to Clive Owen? I know.

Somebody actually sent us something that he played. Bill Clinton in the Monica Lewinsky movie? He had a show on Cinemax a couple years ago where he was a doctor in the early 1900s. What the heck was it was a really good show and they got canceled. I really liked it. I think it was two seasons. Oh, the Nick.

Yes, the Nick. Oh, the Nick. That was good. I really liked that show. That was good. I saw a movie that you enjoyed and you're not going to believe it. I enjoyed it too. I feel like you would think that Garden State is not a Michael movie.

Yeah, I probably would have said, don't watch it. I enjoyed it. Another favorite of mine. Great soundtrack. I like that movie. Good soundtrack indeed. Okay. Let's talk about Don't Look Up.

I gave you an early strong recommendation. The movie was too long. I know it's getting like some bad reviews I've seen. That is the kind of movie where either you get the humor and you like it or you absolutely hate it. I think there's probably no middle ground. Well, it's satire. I laughed out loud on multiple occasions. I thought that they nailed so many aspects of our society in a satirical way perfectly.

Yeah, but this is for people that are either center or at least to the left. If you're like a hard right person, you're like, this movie's a piece of shit to go for you. When they're chanting, don't look up in the comments right overhead. I mean, that was perfect. Well, what's crazy is, so Adam McKay was on the big picture with Sean Fantasy. Did you listen to that yet? No. He wrote this before the pandemic. Oh, really? And he was saying, like, a lot of the stuff that I thought was, like, absurd was actually, like, real, like mining asteroids, for example. He wrote that as a joke. Leaving, like, the politics aside, that wasn't even the funniest. Besides Jonah Hill as a president's son, I thought Jonah Hill just slayed me. Those first few White House meetings, he had some amazing one-liners when he called her,

the boy with the dragon tattoo. But the tech guy, the tech guy was perfect, I thought. He was like some mishmash of Elon Musk and Steve Jobs. Oh, I thought it was Jordan Peterson, too. Oh, but I thought he was just like a perfect character. Timothy Shalameh as the Gen Z, bro. I thought his entire being was totally useless. Okay.

They could have cut all of her scenes out. But I thought Jonah Hill and the tech guy for me. And just the way that they nailed social media and some of those media shows in general, I thought it was perfect. To me, that was the part that worked. best was with Tyler Perry and Kate Blanchett. Yes. To me, they were the strongest parts of the movie.

Leo wasn't even that great of a character, I guess. I think he was trying to like take a swing, which it was okay for him. I thought Jennifer Lawrence was good. But I laughed multiple times. It should have been like an hour and a half long movie, but it's the kind of movie that you're either going to get it and you like it or you absolutely hate it. I think there's no middle ground. Well, I didn't love it.

I liked it. I laughed a lot. I will say that. Last thing on this, he said on the podcast with Sean Fantasy that, that, that he led with the climate crisis of the biggest story in the history of mankind. So that's the angle that he took.

Yeah. All right. I got one more. Yeah, I kind of watch the same stuff to you this weekend, but you were right about Yellowstone. Which part?

You said that it's just like, I feel like they ran out of plot for this year. Oh, it sucks. I'm so mad. Well, here's the thing. I still enjoy spending time with these people in the scenery. I feel like for the first two seasons,

it was like almost in my mind up with succession. I was like, okay. Me too. It's close. I feel like they just ran out of stories and this guy's now doing like 10 TV shows.

So I think he's spread a little thin, but there's just no plot this season. And it's, I mean, I'm sure there's going to be shoot-ups in the last two episodes that people are going to get killed and they're going to try to make something happen. But there's just nothing going on. What was the show on Paramount with Jeremy Renner? Yeah, that's up next for me, mayor of Kingston. I'm going to watch that. By the way, what do you think the Dutton Ranch strategy is for Web 3?

Do you think Rip's going to do some horse NFTs? Can you imagine trying to explain Web 3 to Rip? he would punch you right in the face but they're doing a prequel to Yellowstone about the Dutton Ranch 1883 1883 that's been on the show they've showed clips of it on the actual Yellowstone show did you stop watching I haven't seen the past two weeks okay that's how out I am I'm gonna catch up they like show the 1883 in this it's like a commercial within the show it's very bizarre that's why I think he ran out of pot lines for Yellowstone and he's putting them in other shows okay all right Ben what do we want to say to the audience just one more thank you yeah it's the last one of the year

Monday, we're going to be back with Fundrise and Ben Miller talking about real estate, maybe answering some questions from that guy about rates rising and why it's probably not going to happen. Yeah, thanks to everyone for listening. We have so much fun doing this and we love, love, love the feedback we get on social media and an email and our audience is the best. Animal Spiritspot at gmail.com. We will see you next week. Thank you. Thank you.