Animal Spirits Podcast - Why The Bull Market Could Last a Lot Longer (EP.238)

Episode Date: January 5, 2022

On today's show we discuss the year that was in the stock market for 2021, why people hate the Fed so much, Michael's predictions for the year, why the bull market could continue to run, stock market FUD, Disney's new movie formula 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

Today's Animal Spirits is brought to you by our friends at Y charts. I'm a very simple guy, Michael. I like simple things when it comes to paying attention to the markets. One of my favorite things to check on Y charts is the simple S&P 500 total return. So they include the dividends. Now, it says total return on there. So when people on Twitter ask, does this include dividends? They should know, total return. I looked at this the other day and I was running a bunch of different numbers. We're going to get into it on today's show a little bit. For 2021, 28.7 percent annual return. pretty nice for 2021 now show 2020 so i was looking back and i for some reason was reading the warren buffett by america i am from 2008 is that like a new annual tradition every new year

you read that just to get your juices going it's fend off some of the bearish thoughts so the stock market fell 30% more from those levels in mid-october but this is the s&p it's up 600% since then so i'm like geez if it's up 600% since then what is it up from the bottom so i looked the smp is now up 812% from the bottom, 18.8% annualized, the bottom in March 2009, of course. I want to talk about on today's show using some of this data, like where this bull market sits now in the pantheon of U.S. stock bull markets. So we're going to get on today's show. Remember, if you want to check out this stuff, go to whycharts.com, telling Animal Spirits sent you and get 20% off that for a subscription. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Battenick and

Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritthold's wealth management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits of Michael and Ben. Michael was out the post this weekend, 10 predictions for 2022. I have to take you to cleaners right away.

You should have called this surprises. Have you learned nothing? You don't call it predictions. You call it surprises. That way, if it comes true, you say it really was a prediction. And if it doesn't come true, you say, well, I didn't really mean it. It was just a surprise. In my defense, it's the first time I've ever done anything like this. So you're right. Next year, it'll be 20, 23 surprises. 23 surprises for 2023. Okay, some pretty good hot takes in here. You said that like large value is going to outperform large growth by 20%. That would be a crazy kind of year. And that to me would show that the S&P is probably down for the year because so much of large growth is in those big names. And you actually said, but maybe not. What if like industrials, financials,

materials, lead, and tech just sort of flatlines? Financials is still a bigger piece of the index than most people realize, right? You know how much financials worked last year? A lot, right? 32%. Okay. The other one you predicted was that the stock market will fall this year and have its worst year since 2008. But you said the worst year could be like, what, a five or six percent pullback? Yeah. So what I said was 2022 will be the worst year since 2008. Whoopty do it. The worst year since 2008 was negative 6 percent. So not exactly a Mark Fobber like call. But I think, what did I say? The SP is going to fall 15 percent this year. Okay. That'd be a decent one, which wouldn't be out of their own possibilities. So I actually looked and you look at those charts that

show what happens to the S&P when it's up in a given year, what happens the next year. So, actually, looked, the average return following a 20% game, which we just had in the S&P, going back to 1928 is 9.7%. That's average, which is basically the long-term average. It's positive 70% of the time after a 20% gain. After a 30% gain, which we were close to, the average return, 9.9%. Basically, what happens in one year tells you almost nothing about what's going to happen the next year. But then I looked, okay, let's put these into content. because we've had 31% in 2019, 18 in 2020, and then 29 in 2021. If we fell 15% in 2022, the four-year annualized return would still be tremendous.

Yes, but I looked. So how often have we ever seen more than three years in a row of double-digit returns? Oh, a lot. Well, that's pretty rare. Oh, really? Double-digit. So, 1942 to 1945. I'm looking at four years in a row.

Four years in a row. Yeah, so more than three. So 1942 to 1945, you had this huge, it was up a lot. That was still some of the war stuff, but also bouncing back from the Great Depression, 1949 to 195 to 1952. So you had two of these like really close together. And then 1995 to 1999 is the all-time run. It's only three times in history that you've seen three years in a row of double-digit returns and then the next year happened again. Well, if 2022 is up 15 percent or something like that, it would be a historic four-year run. Pretty much. You're saying that it could fall or not do

as well is actually not a bad call historically. It has happened, but it's pretty rare. So I looked at the new highs for the index. So it was up, I think a bunch of people said this was 70 new all-time highs in 2021. I mean, this is fun with numbers. Second most ever? Yes, 1995 had 77. That honestly blows my freaking mind. Did it feel like a banner year for stocks?

I think it was just a really easy year, I guess, slowly but surely chipping away. Because there was only a 5% downturn was the biggest peak to trough drawdown. The thing is, I looked this up in 1995, the worst peak to trough drawdown in the year. year the S&P was up 37%. That's the year with the most record highs was like two and a half percent. That was the worst drawdown. That happens in a day most times. Any nitpicks on my predictions? I don't think. Well, okay, I've won. You said the Fed will lower rates. That was spicy. If that happens, I will quit my role as the emeritus Fed chairman. What do you call it? I'm going to quit that because so you said they'll raise rates, the market will fall apart,

then the lower rates. I just think if you're going to start raising rates now and you can't do it now, And if they had to lower rates just because the stock market fell 10 or 15 percent, at that point, you're blatantly making it obvious that. That's all that we care about. Oh, it's not obvious yet. I'll do you one better. If they lower rates, I'm changing my last name to shift. I just can't really see that happening. It's possibly. But again, if they do that, then rates for sure are never going higher. Because if they can't do it now, when will they? I think there's still people that believe in the Fed. I mean, obviously there's a lot of people. I don't think the Fed's a bunch of idiots. I don't think they're like always behind the curve and

ruining the country and all that sort of shit. But if they do lower rates, like they will lose credibility with pretty much everybody except for maybe. There are certain a lot of brains that been broken from the Fed. I posted my chart that I talked about in the lead in for white charts about how we've had almost 19% annual return since the bottom in 2009. And I mean, I should know this, but every time you do this, I get 20 to 25 people on Twitter saying, have you compared it with the Fed's balance sheet or how about M2 money supply? What did people complain about in the bull market of the 50s and 60s or the 80s and 90s? Like, what did they blame it on? Because it feels like people just want to blame it. It's almost like these people hate making money.

I wonder if back in the day, people crazy as it sounds, didn't blame anyone for a bull market. They just enjoyed the bull market. It's like, okay, great. I don't care why it happened. It happened. It's here. And guess what? The Fed is not all of a sudden going to go, you know what? We're done. We're out of here. See you guys later. You're on your own. That's not going to happen. Yeah, get a clue. They're part of the market, whether you like it or not. That's what I mean, get a clue, not to be so rude, but they're not going anywhere. The Fed will not resign.

And let's get into this. Speaking of the Fed. So we got a few emails. There was an article in, where was this? I don't remember. It doesn't matter. Talking about, let me just read the email. I am 67 and I've been retired for five years living off my investment portfolio.

I've been a long-term buy and hold investor for almost 40 years, and I'm currently about 60-40. I consider myself a fairly sophisticated investor. After reading the article above, I am seriously considering reducing risk in my portfolio. Oh, he said, do you think there's any chance on the limit on eye bonds will be significantly increased? Well, if the Fed or, I don't know, this is not the Fed's decision. Who makes that decision in the Treasury? Yeah, I guess if the Treasury is listening to this podcast, they would know it's a good idea. We have many listeners in the Treasury, so I like to believe.

Please raise that cap. So I read this article and it's not all bad, but some of it I definitely took on with, for example, between 2008 and 2014, the Federal Reserve, printed more than $3.5 trillion in new bills. To put that in perspective, it's roughly triple the amount of money that the Fed created it in its first 95 years of existence. Three centuries worth of growth in the money supply was crammed into a few short years. I would say to this person, read Colin Roche, if you want to know the truth about what actually happened. There was not $3.5 trillion worth of currency that was printed. My way of looking at this is that most people who say the word money printing or the term

money printing, have no idea what it actually means. People assume that the Fed is literally handing money to people and it's going into the stock market. That's not what's happening at all. That's not how this works. I'll admit, I still don't quite know exactly what quantitative using is. I mean, I've read Colin for years and I know reserves, deposits, creation overnight, blah, blah, blah. But it's not like literally new currency flooding the system. And that's why we didn't get inflation the last time around. But the government sending checks to people is literally creating new money. That's money printing. So anyway, so I read the whole article. And the author is basically taking somebody who was inside the Federal Reserve and resigned in 2011.

He was one of the dissenters who really disagreed with quantitative easing, did not want to do it. Let me just say that without QE, we should have done more. I think that's the lesson from this time is we should have done way more. We didn't do enough. Maybe we did enough on the monetary side. We should have had a different fiscal response. Anyway, be that as it may. So this whole article was about how there was somebody inside the Fed who's been warning for years that

were to get inflation because he saw the 1970s. and now we're getting in and see he told you if the Fed just listened. But all that bullshit, the author of this article, his name is Christopher Leonard, actually wrote a book that I very much enjoyed called The Meat Racket, was an inside look at. I think it was Purdue, the chicken company, the poultry company. But anyway, he's writing a book. And the book is called The Lords of Easy Money, how the Federal Reserve broke the American economy. And I wish I knew that before I wasted my time reading this article.

So the point is literally these same arguments. about money printing and the dollar going to hell and you shouldn't buy stocks, it's poison. It is absolute mental poison. And I'm not saying that stocks can't fall and inflation can't get worse. Of course it can. But yeah, so what? There's always a risk. And if you invest as if you're trying to ignore or sidestep every risk, you will never

survive a bull market. And guess what? People talk about survival a lot, like you have to survive a bear. market, you have to survive a bull market. What if those goes on for another five years? The Fed hate stuff. A lot of people say, like, the creation of the Fed was the end of, like, the American economy. I looked at this for one of my books. Basically, before the Fed was enacted in 1913, and for the first 20 or 30 or even 50 years of their existence, they didn't really do much. Like, they made the Great Depression worse. But we had a depression or a recession,

basically every two years on average. All the time, when we were on the gold standard, it would just, we would have these crushing recessions and depressions all the time. It was such a more of a boom bust. And if anything, they've helped take some volatility out of this. Obviously, we're much more mature economy now. But it's really, really tough if you're investing based on this stuff, especially anything that says doomsday in the headline, I think it can pretty safely ignore what they say. So let's stick with this bank. I read an article that pissed me off over the weekend. It's stock market fud. For people that don't know what fud is, I think it's a crypto term. It means fear, uncertainty and doubt, people that are spreading fear uncertainty

and doubt, I guess. So this is the lead in the New York Times article. For two years, the stock market has been largely able to ignore the lived reality of Americans during the pandemic, the mounting coronavirus cases, the loss of lives and livelihoods, the lockdowns, because of underlying policies that kept it buoyant. Investors can now say goodbye to all that. So this entire article was nothing but basically striking fear into the hearts of its readers that 2021 was as good as it's going to get. And the only reason why we were up was because of monetary policies. And as the Fed normalizes, they're acting like the Fed is jacking rates up to 13%. As the Fed normalizes, it's all going to come crashing out without any mention

of the fact that the stock market is driven by something called earnings. And earnings are at an all-time high. No mention of that. Nowhere in the article is as if it's all just manipulated by the Fed. And here's some more. So there was. This guy, Aaron Brown, who's very well known in quantitative circles. I think he's a professor now. He worked at AQR for many years. He's talking about like the nightmare scenario, is that the Fed tightens and it doesn't help. Talk about soft landing.

I don't know what and things could get ugly fast. Here's a quote. And then he said, the Fed may have to take very aggressive actions like a rate hike to 15% or wage and price controls like we tried in the 70s. And the thing about this article that really pisses me off is I actually don't disagree with a lot of it. But it's so sensational. They use the word panic in here.

It's literally just nothing but bad news after bad news after bad news and warnings. And how is an average person supposed to read this and not go, holy shit, I have to protect my portfolio. I have to get out of the market. And then secondly, you know the Gelman amnesia effect? Yes. Where you'll read an article where you have particular expertise and you'll rip it to shreds like we're doing right now, then turn the page and just blank slate. believe whatever the author is writing. And I hate doing this to discredit the media. I don't like doing it. But this really sucks. It sucks at the New York Times. And it's not just

the New York Times, of course. It's basically every financial publication does shit like this to their readers. It sells, I guess. When's the last time you ever heard any good news about, like, the COVID situation? I know it seems to just be getting worse and worse. It feels like it, but there's no one out there really who's saying, like, let's look for some positives in this situation because the negativity, that stuff, it just sells better. And I think people have learned to that? It's hard being optimistic. I've done this post a million times, like, gradual improvements go and notice. Give me a list of reasons to be bullish right now. I don't have one. I can give you a million reasons to be bearish, so I get it. Let me balance you out here on the positive side.

So I'm looking at this. I was looking at that chart saying that we're up 800% from the bottom, and it's 19% analyze returns. It's thinking like, that's way too much. There's no way that can keep going. So I wanted to look, and I wanted to compare, like, what are the best bull markets in U.S. history? And so I looked back, and I'm totally cherry-picking here because besides like the semantics involved in like, let's define a bull market as a 20% gain or it resets after this or wait only new highs, there really is no definition of a bull market. So because this is our show, I made this up. So I'm basically saying a bull market at any time, it ends with like a 40, 50% crash. If you don't have that, the bull market continues. Sorry to bust balls, but did the bull market

ended 2020? Nope, because that's our 1987. Because the bull market did not end in 1980. So this is Ben's definition of a bull market. But can I just say one thing about this before we get into it? I'm doing the same post, I guess. And from 1987 to 1991, the market was flat. We got all the gains back, but it took like almost four years. True. But I think everyone agrees the 80s and 90s were a bull market. True. Because you're going to have periods in between there where you're- I know it's semantic. Sorry. All right, go on. So I broke this up and granted, I'm cherry-picking here. But I looked at these timeframes that we've basically had three bull markets going back to the late 1920s. This is Ben's definition of a bull market. So from like 1929 to 1941, the total return

that's obviously including the Great Depression and then you had another crash. Wait a minute. You're starting the bull market in 1929? No, no, no. I'm showing this is the bear market that precedes the bull. So the total return from 1929 to 1941 is negative 35%. So stocks lost a third of their value over 13 years. I'm sorry. I don't know why I just said that. You said 1929. I heard 1931. Okay. Sorry. So then 1942 is when like I already mentioned you had those four years in a row. That's when I'm starting to the ball market. From 1942 to 1968, the U.S. stock market was up. 3,800 percent, like 15 percent a year. For a really long time, what do you think the worst year, calendar year was in that period? So we're talking almost 30 years. 66? As far as a loss

goes. What was the worst down year in the stock market? 13%. Like 10% basically, 10 or 12%. The thing is, thinking in cycles like that is like kind of fun but useless. It's like... I'm putting the super cycle. So then we have 1969 to 1978. You have a total return of 30%, which was way worse after you take inflation to account with it. Wait, say that one more time. Total return from 69 to 78. Then 79 to 99, you're up another 3,000 percent. Here's where the cherry picking gets really bad.

But I thought the bull market started in 82. 79 was up like 20 percent. 80 was up and then I think 81 was down a little. From the year 2000 to March 2009, granted, peak to bottom. The stock market over those 10 years or so. Negative 6? It was like negative 50. Oh, I'm sorry, annualized.

You're right. It was like negative 6 or, and then March 2009 to now was like plus 800. I'm saying, what's the point? If we get another super cycle like we had in the past 20 or 30 years, Tom Lee's quadrupling of the S&P from here is not out of the question. Okay, so let's talk about that. I don't think it's out of the question either. What's the multiple on the S&P 500 right now?

Is it 25? I honestly don't know. Sure. I don't really pay attention, honestly. What if that goes up by 30%? Oh, and earnings arise. And earnings continue to grow. Obviously, historical analogies you can basically throw most of them out the window.

But I'm just saying, like, these really long super cycles, even though they have 20 or 30 percent downturns in the midst of them can last way longer than anyone could, obviously small sample size, yada, yada, all that stuff. Yes. I don't think anybody's prepared for a super cycle bull market. No. For this to last for another 10 years. No way.

Now, you could say everybody's positioned for it. Yeah. Because household net worth and equities is an all-time high. But mentally, nobody's predicting, and I'm definitely not, obviously, nobody's predicting that this lasts another 10 years. Anyway, the point is you have to survive a bull market. have we learned nothing? And I'm not saying to disregard the risk,

but don't you think that the market prices and the risk's better than you can? So, all right, I was doing my post 10 lessons or something like that. I can't remember which post it was. And I was looking at Cape Ratio stuff. And I came across this. I just blogging lists always come down to 10.

10 is like the perfect number for a blog list. Because you're never going to do eight. Okay. I think I've done nine a few times. Contrarian. Yeah. So research affiliates tried dunking on me In 2018, I think this was from 2018.

They wrote a really long article called. Oh, this was a dunk. You sent this to me. I thought this was like giving you a pat on the back. Oh, no. They were dunking on me. Oh, I forgot about this. Okay.

This is 2018, January 2018 by Rob Arnott himself and two other colleagues. Why Cape Fear, why Cape Naysayers are wrong. And they quoted something that I wrote in 2017, which I think holds up pretty nicely. I wrote, comparing the CAPE ratio from 1960 to today is like comparing Oscar Robertson to Russell Westbrook. Same game, but things have changed. Now, pretty good, actually. Thank you.

It's about four years later. Dunk back on you, sir. That was a follow-up dunk, yes. What do you say? Just defending my honor. Okay, because you slacked this this weekend and I wasn't really paying attention that much when I saw it. I said, oh, that's nice they quoted you.

I didn't realize that they were quoting you as a dunk. Not only was it a dunk quote, Ben, of me, it was not like in the text. Like, they gave me like a header. Yes. You were the Cape skeptic. Okay. Yeah. So anyway, all right, let's talk about hedge funds.

There was a tweet this week showing various hedge funds and their performance. And the S&P was up 28% and a lot of hedge funds were up much, much, much less than 28%. I'm here to defend hedge funds. Well, you know what the great thing is, though? Anytime somebody like this gets posted, I know exactly what's going to happen. Yeah, of course. come. People are going to be dunking and say, see, you should have all their money in the S&P 500, not 2 and 20. Then the people who come back, they're always the people who have capital their name on Twitter. It's some pseudanos person, blank capital. They say, oh, so we're comparing hedge funds of the S&P 500 now. And then you have the people fighting the comments. And that's pretty much the gist of it. All right, well, here's where I am. Listen, folks, obviously hedge funds in general, which is such a stupid thing to classify hedge funds as one sort of thing, right? Because there's literally. really 10,000 of them. But let's just find. Let's be unfair and group them together. It's been

tough keeping up in a bull market. Obviously, they hedge. They're not fully long, but here's the thing. Let's say that their net exposure on making this up. Does 60% work? Sure. Okay. So then 60% of the S&P was 17%. The problem is so many funds did so bad. If the S&P's up 30, how do you lose 22%? So Melvin. How do you lose? Melvin. Melvin down 42% is great because GameStop really won against them. GameStop to wreck them. So anyway, if you're in a hedge fund and you made, I don't know, 14% last year, are you really pissed?

So I feel like the financial blogging community had a good four or five years there have debates about hedge funds. Why hedge fund performance is so bad? Why are there so many of them still? If fees are so high and performance is so bad. And this is one of the great things about crypto because I feel like crypto is totally pushed hedge funds out of the limelight. Like, I feel like there's not much hedge fund discourse anymore.

It's kind of one of those topics that like index funds, it's like, okay, we've already had this discussion enough. We've already suss this out. Let's move on. I'm with you. What else is there to say? But anyway, yeah, listen. By the way, was 2021, was it like the seventh best year of all time, ninth best year?

No. By the way, I looked at this. There have been, since 1928, 17 times the S&P's been up 30%. How many? 17 times. So this is like not even top 20 in terms of best years ever. But I said it's one of the best years ever in a blog post based purely on volatility. and drawdowns, because there was just nothing to speak of.

All right. Speaking of things that are kind of boring that we don't really speak much about, I want to talk about ESG for a second. Here's a deal. There was a very good article in Bloomberg. Remember Larry Fink put out a letter two years ago saying that, like, lecturing CEOs, that there's, he said, quote, we believe that sustainability should be our new standard for investing.

Do you remember that? Yes. Big ESG pushed by BlackRock. So this is interesting. They have a big giant ETF. The ticker is ESGU. it went from $1.6 billion at the start of 2020 to $16.4 billion. And what happened was on January 15th, 2020, the day after Fink's letter, Black Rock

altered its most popular suite of model portfolios by adding ESGU into its fund. So everyone gets like a 3% allocation to this fund now or something. So here's the deal. This is a good quote. One rough analogy for what this has meant in financial services. Imagine if the world's largest grocery company declared it would lead an effort to shift the planet to more sustainable agriculture. And then the next day, it quietly slipped some organic carrots into every fruit and vegetable box that offered customers across the U.S. Suddenly, organic produce sales would show a huge spike, making it appear as if there was a massive demand shift underway for sustainable produce.

Here's a few comments that I have on this. I tweeted over the weekend, this is insane. the S&P 500 ETF for I-Share is IVV, charges only three basis points, which is a beautiful thing, a huge win for investors. That's $100 million in fees on $335 billion in assets. Is that incredible? Yeah, it really is. Three basis points yielding $100 million in fees. All right, so ESGU.

I'm sure someone's done this comparison before, but doesn't ARC probably make more money than Vanguard, even though Vanguard is 20 times bigger than them or whatever? There's got to be some close comparison. Yeah, I know what you made. where some active fund with not a lot of assets is making wear more money than a place like Vanguard with $8 trillion in assets because they don't charge a lot. ESGU charges 15 basis points as opposed to three. And it's hard to get up in arms about a fund that charges 15 basis points. That's not exactly criminal.

But I understand why people are pissed off because they're active all holier than now, making this big ESG push, charging five times the fees. And here's the rub, Ben. Look at these two charts and tell me if you see any difference in the holdings. The first one is Apple, Microsoft, Amazon. on Tesla, Google, Nvidia, Facebook, JPMorgan Home Depot. That's the S&P 500. Just straight up. And then here's ESGU. Apple, Microsoft, Amazon, Google, Tesla, Google, Facebook, Nvidia, Berkshire, United Health. It's the exact same thing for all intents and purposes. So if anything, it's any of the

companies that it's underweighting are really too small and don't matter anyway. It just so happened that they did outperform over the last three years. So the fees are moot point. It is funny, like where we've come to, arguing that this is surreptitiously being done. ESG really angers a lot of financial professionals because they feel like, well, what are you really doing anyway? It's hard to make the definitions work. The way I look at it, like if a person who is investing thinks that investing based on their values will help them stick with their plan better, I don't know why people are so open arms about it. So it's hard to get outraged on the surface. But I think what people are pissed off about is like, I guess they're just done with BlackRock. And certainly Larry Fink wagging his finger and then doing this, it just feels a little yucky, even though it's not that big of a deal. basis points versus three basis points. That's the kind of argument you have in a bull market. How's that? Exactly. But I did think this was an interesting story worth talking about because we don't really talk about this much. So apparently, Jim Bianco put this on my radar. Lumber is roaring back.

What the hell is happening? Did you know this is going on? Sorry, I kind of turned my brain off for like the last two weeks, basically. You're going to have to bring me back to speed here. So lumber prices are skyrocketing again. Why is this happening? I don't know. The Fed. No, seriously, I don't know the dynamics of the lumber market. I can't speak to that. But I thought we were done with this. But it's like the meme stocks. It's coming back for a second life. Don't like it. I'm guessing housing demand is to remain strong. Has to be part of it. And then you're probably getting all these. Yeah, I don't know. I got nothing. They did have the flexport guy. Noah Smith had this really long interview with the flexport guy. This Ryan Peterson

guy we've talked about in the past. So he was talking about how globalization was this amazing thing. And he said, ocean freight costs alone at like 5 to 10% for the cost of everything we buy. And 90% of the stuff we buy is shipped on a container ship. So especially if you're buying stuff online. And he said that the globalized supply chain and shipping containers brought down the cost of shipping goods and manufacturing by close to 90% over the last 50 years. So it's been a very good thing. But he's saying once you lose that, and he basically said the whole thing is just there was so much more demand and especially online demand for everything that the global supply chain was just not set up for this. Clearly not, but I want to tell you something that surprised me. I ordered a couple of standing desks

for the office, and shipping says two to five days. How about that? It's not bad, right? And the thing is, if I'm looking for something on Amazon and there's 12 different choices, guess which one I'm going to pick? The one that has the shortest shipping date. It's not priced anymore. It's shipping. I really thought that this was going to be backlog, but maybe things are getting better. He talked in this interview. Again, it's a really long interview, but I think it's worth reading. It helps you understand this whole dynamic better, but he was saying, listen, trying to blame the president and the way out for this stuff. Like, there's not one person who controls this, but he did say, here's what I would do if I was put in charge of this. And if I'm running the White House, I'm hiring this guy to be the supply chain czar for the next 12 months in showing people like, hey, we're going to take some of these regulations off.

He's saying, like, you can bring the National Garden to bring more of these trucks in, which I think I mentioned that in our podcast with Derek Thompson, not even knowing if that was a possibility. It just kind of sounded good in my mind. But apparently the National Guard might have this stockpile of trucks that they can actually use to help. Well, what are we waiting for? So I'm saying Biden administration should hire this guy, supply chain czar, and he can show how he's helping move stuff faster. And this guy's saying, like, these shipping costs are directly having a problem with

inflation. Like, you could use this as something as like a victory to show people that you're trying to help with the inflation stuff going on that people are still angry about. I just clicked on this article before that we were talking about, that doomsday Fed guy warning. The title of the article is, oh, this is from Politica, the Fed's doomsday profit has a dire warning about where we're headed. I mean, could you think of anything more click-baity? That's the world we live in.

Clicks. It's all about clicks. Profit with a pH. That always works really well when you're investing based on someone who says that. Doomsday profit. How many people read this article and said, that's it. Tomorrow I'm selling my stocks. I'm out.

I'm out. And especially like, so the person emailed us so said, in their 60s, getting close to their 70s, about to retire. What do you do? But those are the people that are scared because they say, listen, I'm not working anymore. I have no more income. So they want to protect it. So that's why those people are almost more apt to listen to something like that.

Honestly, I think it's never been harder for the individual investor to ignore this bullshit. How do you do it? The problem is there's so much of it that if you just want to focus on the doomsday profit people, you can if you want to and just add all those negative stories up together and be like. I think I'm pretty cognizant of the downside of the risk. in the market. I write a lot about it, but this doesn't help anyone. No, not at all. All right, let's move on. Some personal finance stuff. I thought this was interesting. There was an article in the journal talking about like some money tasks to take off your to-do list. And I wanted

to get your take on this. By the way, have you seen the, on the, your wife's to watch is like the Good Morning America. They have the today show like 2022 financial habits to make for a great new year. And it's like, create a budget. Track your spend. It's always just like, who is this helpful to? Come on. This doesn't work for anyone. This guy, Kenny Sineau, a financial planner in Denver, said, tracking every last dollar of your monthly spending can feel like empowering at first, but it's hard to sustain.

He advises clients to focus on using a simpler approach, such as designating 50% of your paycheck to essentials, such as rent, 20% for savings, and 30% for everything else. I think this is very sound advice. I tracked my spending. There was this app that I used. I can't remember what it was called. It's exhausting.

I stopped after, like, I don't know, 30 days. this advice is totally context dependent on where you are on the income scale and the wealth scare in your life. Someone just starting out trying to get a handle on their finances, tracking their spending is actually a good thing, I think. Yes, yes. Because I know people who had to go through like the envelope method. That's like the Dave Ramsey thing. And it's like, this is for rent, this is for food, this is for clothes. And just starting out, some people need that. And then when you graduate and you either make a little more money, you have that stuff under control and have a better idea of it, then you eventually have to get to this place. Because if you're

to track your spending your whole life and clip coupons, and that's a tough way to live. It'll just consume you. You don't need to spend so much time on that stuff. But here's another way to fight inflation. Austin Goolsby had this piece on The New York Times. And he was talking about the difference between buying stuff online and buying stuff in the store and actually saying that they track like online prices. And they found that online prices are actually much lower than anything you buy like in a physical store. His whole thing is we need to start breaking out inflation by income classes because he said the more someone shops online rather than the stores, the less inflation that person has faced. His point was saying it's typically wealthier people

that shop online more. And he thinks wealthy people are actually having a lower inflation rate right now because of that. That's an interesting point. Why do you think stuff online is cheaper than stuff in the store? It's easier to check prices with stuff online. It's easy to be more efficient. If you're in a physical store, you have just more overhead costs and it has to be a higher price almost. I guess having physical location is more expensive than all the logistics and the shipping and all that sort of stuff. I guess that's scale it is. I think that's the point. His overall point about breaking down inflation by income bracket in order to better diagnose policies and response, I think is sound. It makes a lot of sense. That's a good way to anger people, especially who live

in the coasts. It's impossible to have a conversation about income or housing without someone getting angry because they live in a very expensive place. They would say, listen, that income does not get me very far in San Francisco or whatever. the case. But also, what do you do with that information? True. True. Yeah. I guess it's just good for econ wonks and useless to everyone else, I guess. Yeah. I mean, what's the policy response? I mean, anyway, I don't know. It was a good point. I guess you're right. It's interesting to people who like that kind of data like us and then maybe useless to everyone else. All right, there was news over the weekend or last week or wherever. Apple is paying an unusual $180,000

bonus to retain engineering talent. So they're trying to stop the crypto outflow? Not just crypto, but a lot of people that are leaving to start new companies. And yeah, crypto is obviously in there. Somebody also tweeted over the weekend. I just quit the Apple design team. I know they're not engineers, but same thing. I just quit the Apple design team to work on crypto full time. If you missed it on Saturday, we had a really long conversation with Howard Linson, where we just kind of let him go on his career and investing in startups and all this stuff. And he made a great point that there's now probably more ideas than there are people to execute on those ideas. Because like if you're a startup trying to find good engineers, if you're not one of those people

who left Apple as an engineer to do it yourself is going to be really hard because it's easier to just say I'm going to invest in startups and it is to say I'm actually going to get my hands dirty and build a startup myself. I thought that was a really great point. For people that didn't listen, can you explain the point that Howard made about why VCs were so focused on wealth front and betterment and missed the opportunity with Robin Hood? So we asked him like Howard invested in Robin Hood in like the idea phase in 2013. 2013. And it's kind of funny. He was just an investor. I don't think he was really doing much advising. He said if he did any advising, he gave him bad advice about not doing free question trading. But he, as being a person who's

out there in the limelight a little bit, he's synonymous with Robin Hood, even though he just made an investment in them because he saw this retail trading thing coming. He's like the confluence of social media and people wanting to do stuff on their own and young people. He's like, there's going to be this huge retail trading room. And he was totally right. I wrote a post saying and then like 2017, he told us this at the bar. And where? Remember at the conference at the Dana Point conference. He was telling us about this. Oh, we went to that together? Oh, data point. Oh, oh. I was thinking Coronado. I missed October 1st. So he was telling us about that over a beer, like how this is going to happen. And we're at an evidence-based investing conference talking about index funds, being like,

yeah, right, okay. Sure. And he was totally right. But his whole thing was all the VCs tried to remake Vanguard with Wealthfront and Betterment. Obviously, Wealthfront and Betterment have become relatively large firms, but not nearly as large, I think, as people thought at the time. And his point was like, Vanguard's okay. Like, we'll have a much better than have much better technology and onboarding than them, but... But Vanguard was mostly good enough. Yeah, Vanguard was mostly good enough. And he said, that's what people miss and how so many people miss, like, the Robin Hood thing.

And he was at the forefront of it because people were trying to recreate something else. That was a fun conversation. Why just survive back to school when you can thrive by creating a space that does it all for you, no matter the size. Whether you're taking over your parents' basement or moving to campus, IKEA has hundreds of design ideas and affordable options to complement any budget. After all, you're in your small space era. It's time to own it. Shop now at IKEA.ca. Bullshit survey of the week from Nickel Digital. 85% institutional investors, wealth managers, have dedicated crypto teams. We don't even need to suss this out. It's so obviously nonsensical. But what made me laugh was I clicked on the article

because I wanted to like read it. And Ben, look at this. I put in the dock. So I'm reading it and it says, new study. I'm like, new study. Where's the A? Look where the A is. It's off the page. And then there's an actual ad. It looks like a fake meme or something. It's two guys and a lady sitting at what looks like a dinner table with like a bowl of guacamole. And it just says invest in crypto like a pro. What the hell is this? Where did you find this website? Literally, what is this? I feel like this is the kind of website you click on and then all of a sudden your credit card information is just gone. Somebody tweeted.

I can't remember, but just nonsense on stilts. I do wonder if the institutional crowd, if they're mostly just trying to be in hedge funds of this or how they're looking at it, because I'm sure there's a lot of like endowments and foundations and pensions. Do you think it's everything in between? It's still going to take years and, yeah. I mean, there's always like the forward thinking ones, but most of these places take so long to get something like this ever instituted in their portfolio that it's going to be a long time

for a lot of the other also rands, basically. Well, Ben, I've got you covered. I have data. Or this article, Nickel Digital, yeah, Nickel Digital Asset Management has data. They said, quote, when it comes to investing in crypto and digital assets, only 20% of professional investors say they prefer beta strategies with 34% opting for Alpha Focus. Ben, let me ask you a question. What about the other 46%? Do they want neither Alpha nor Beta? What comes after Alpha and Beta in the Greek Alpha, but they want some Delta? Omicron? Yeah, I don't know. Speaking of Omicron, man, this sucks. Logan, my two-year-old, woke up whatever day. What day is today? Monday, maybe Thursday, glassy eyes, fever, tested him, immediate results of positivity. Isn't it crazy how quick that line comes up if you have it?

It was like, before we even dunked it in. That's what mine was. You just knew it. So I don't know how this whole freaking thing is very strange. The at-home test showed that he was positive. We did PCR for him. So I took an at-home test immediately, negative, my wife's negative. We got a PCR test for Kobe and Logan and me and my wife.

And the three of us were negative. He was positive. Was it like a drive-thru one he had to go to? No, somebody actually came to our house. Oh, that's nice. My neighbor was paying somebody to come to house, so we hopped on that. But anyway, so the first day, he's fine now. The first day, he was like, done, toast, just couldn't lift his head, was basically

on the pillow the entire day. Yeah, it's just an insane inconvenience. Thank God, nobody got really sick. but now we're home. We were home with the boys the week before the break, and now we're home again. And I think that parents at some point are going to revolt. Now, obviously, if you have a sick child, keep them home, whether it's a cold. But also crazy that no one else in your house has gotten sick. It's very bizarre. I was getting FOMO. I feel like I'm getting left out. I almost want COVID. You should get an antibody test to see if you've already had it. But if you do the

antigen test, so Josh was telling me this, that he already had it. But how do they differentiate between the vaccine and actual COVID? Can they do that? I think they can. I think they can. that's a good question because they did a test. My wife wanted to get my son tested because he had positive tests. We didn't do the PCR. She's like, I wonder if he didn't have it because he had zero symptoms at all. And she got a test that his antibodies like through the roof. So going forward, my daycare is quarantined twice because the teachers had it. I feel like they can't do that anymore. You can't just keep shutting school down. And we're fine. But some people aren't fine. Some people don't have the luxury of having two parents that can work from home.

And my wife can't really work. She's a guidance counselor. But it sounds like a lot of schools came back from the winter break and stayed closed or went online or you're right. The parents, if you're a single person or you have no kid, like you're in a totally different experience with this disease than you are if you have kids, especially kids who haven't been vaccinated yet, which obviously it seems like Vax around Vax, the kids under five, they don't seem to do too bad.

But you're just right. The disruption of uncertainty is just, it's awful to deal with. And who's getting who's not as weird? I was two weeks ago. I was with people in a bar. Everybody got it. Seemly, everybody got it. I didn't get it.

And then this weekend, the people I was with got it. Logan got it. And anyway, it is trying. All right. Listen to questions. All right. Hey, guys, I've got $400,000 in cash credit to you that I've earmarked for a home remodel in the next 12 months.

Damn, $400,000 for a remodel. Is you going to add like the Playboy Hot Tub Grotto? What are we doing here? man. Or is that just what it costs for a new kitchen these days? Yeah, exactly. That's the inflation. I put $50,000 in BlockFi stable coin to earn 9% after hearing the latest podcast you did with their CEO.

Seems too good to be true. I tested it out, took money out to make sure I really could get it out. Why wouldn't I put another $200,000 in there instead of sitting in a Marcus? What is the real risk of that stable coin in BlockFi? So Zach was talking about this because we said, like, what's the risk? And he said, well, I mean, if it's like saving money for a house, that's probably a risk you don't want to take. By the way, we get some form of this question. question once a week. The best way to think about this, I think, is somebody basically said,

like, think of BlockFi or any of these earned products as like a single B bond. You're getting a spread over the risk-free rate and you're taking on credit risk. It's almost like high yield. So would you put $200,000 into a single bond issuing corporation? Maybe, maybe not. I think the thing with this is it's really hard to quantify the risk because, in my opinion, and I've got plenty money in an earned product. I think the risk is I don't care if it goes from eight down to six. The risk is that it gets hacked or that it's gone. That's my biggest worry is like the unquantifiable one of the risk is these things are still relatively new and you just don't know. So I think Zach said like, hey, listen, if you're saving for a boat, yeah, put money in some

of this. If you're saving for like emergencies, maybe you have that somewhere else. That's a good way to put it. Listen, this should not be an emergency fund. Okay. Emergency funds are not risky, by definition. They should have zero risk. The only risk that you should take with your emergency fund is inflation. Okay, I'm guaranteed to lose 2% nominal or real. I'm sorry, over the next 12 months. That's how we're thinking about this. You can go back and listen to that episode with Zach if you want. Let's do one more, Ben. We've opened up a helock with plans to redo our kitchen. These plans are postponed since our first child has decided to be born during construction. We got an introductory IPR of 2.5% for the first 12 months and then

is variable with a 3.59% floor. We have a car loan with four years left. We have a mortgage, but don't want to make extra payments on that, let inflation eat at it, no other debts. Is there anything we can do with this introductory rate? It feels like a missed opportunity. I don't necessarily understand the question, do you? So I think it's saying you can lock in that lower rate now on what you borrow that it'll be raised. I mean, these rates now are so low that you get like this diminishing returns. The difference between a three and a half and a two and a half percent interest rate is not all that. I think if you do the calculation on interest on that, I don't think it's that

big of a deal. Depending on the size of the loan. But even if I've done the calculations, like going from three and a quarter to 275 for a mortgage, like yeah, over the life of the mortgage, it makes a difference. Your break even on that is much, much lower than it was going from six to three or four or five to three. What do you think this person is actually asking? They're saying, like, is there something we can do with that money now that would make sense because it's a lower hurdle rate? Oh, between now and 12 months, I understand. Between now and what it resets? I don't know. Again, the difference in interest over the life of this loan, you have to determine, is it worth it for like rushing out and doing

something with the money, I guess? Is it really worth it to try to figure something out on the fly just because you want to lock in this great rate? Rates are still low and they're going to be low for a while, I think. All right, recommendations. I want to start, Ben, I've gotten some really good feedback. I want to reiterate, double down, triple down on our thing by this guy who was the underboss to John Gotti. This is your podcast? It is so good. It's called The Hour Thing.

Tells a story about how they whacked Paul Castellano in front of Sparks. The stories are incredible, and this guy is an incredible storyteller. So I will double done on that recommendation. Wait, did this guy ever go to jail if he's talking about whacking people? Oh, yeah. Oh, yeah, yeah. Oh, yeah. Matthew Ball tweeted a chart of Marvel's share of domestic box office over time.

And it's pretty disturbing. I mean, I love Marvel, but from 2010 to 2015, it was pretty steady at 5 or so percent. Then went to 10, to 12, to 15, up to 20 percent. In 2021, it was over 20 percent. Not necessarily a world I want to live in. No, but I think this is just what's going to happen with theaters, though. And they're going to make bigger screens and louder. And that kind of seems like at least for a while.

I think you're right. As I mentioned, I've been basically, not basically, I've been quarantined for the last like two weeks. So I've been spending a lot of time in front of the TV. And a couple of weeks ago, I declared Ridley Scott to be my favorite director ever. And I had to write a few wrongs. There was a few of his movies that I hadn't seen. So I did that this week. Let's start with Body of Lies.

You ever see this one? A long time ago. Leo movie, right? Leo and Russell Crow. It's a spy thriller, 2008. It was a good movie. I enjoyed it. I always get this one confused with the Robert Redford Brad Pitt one.

Spy game. They feel similar. I think Spy Game was better. Who directed the Spy Game? Let's see. Spy Game was that? Oh, Spy Game was Tony Scott. Okay.

How about that? I mean, that's what. It was a similar feel to them. So Body Flies, like it was enjoyable. I wasn't mad at it, but it could have been way better. Like, it could have been way better. It was DiCaprio and Russell Crow. And I just feel like it's like a slight taint on his resume.

What a rotten tomatoes give us? It just wasn't that great. Something about it was missing. I can't really just say what, 55%, 62% for the audience. Sounds about right. 62% sounds about right. All right. I watched Thelman Louise.

You ever see that one? I've actually never seen that movie. Speaking of Brad Pitt, that was like his introduction to movie audiences. Yeah, I'll tell you why you haven't seen it. Well, you're a bit older than me. I was six when this came out. So I've heard about this movie,

you've seen it on here and there and everywhere, but I never actually saw the movie. And I'm going to say, it was a perfect movie. It wasn't like the best movie ever by any stretch of the imagination. You know who got a cameo who probably started in this movie? Matt Dillon.

There was one throwaway role where Matt Dillon was like playing the guitar on stage. He was on the camera of about 30 seconds. Really? Whatever happened to that guy? I always liked him. That's a great question. But anyway, it was a perfect movie in the sense that good acting, good writing, but there was a beginning, a middle, an end, like all clearly defined. This got 85% on Rotta Tomatoes' Out since and Bright. And I have to imagine at the time when they drove off the cliff, that was a major shock to people watching it. Whoa, whoa, Whoa. Spoiler alert. This movie's from like 1988, isn't it?

1991. How did you know that happened? I've seen it a million times on just clips and stuff of the movie. Somehow that was shielded for me. I thought everyone knew that they drive off the clip at the end. Well, I didn't know that. It's been spoofed a million times and yeah. Okay. Anyway, Thelman Louise, Gina Davis, Susan Sarandon, quality flick. And lastly, the last duel, which I didn't realize, and this is what Ridley Scott freaked out about, rightfully so, because nobody saw this movie. Five million dollars at the box office. The screenplay was written by Ben Affleck and Matt Damon, they're back. This movie was awesome. It was great, right? Holy, shit. What is wrong with us? This was such a good movie. Yes. And wasn't it so creative how they told

the story too? I loved it. I loved every two and a half hours of it. Affleck as like the bad guy with a blonde hair and that was just great. I thought Adam Driver stole it. He was so good. Actually, Damon wasn't all that impressive. Maybe it's because his character was very unlikable. Yeah, his character was gross. But yeah, listen, nobody saw the movies. Great movie. Great movie. Very good. Anyway, Ridley Scott. It was a Ridley Scott weekend. And then lastly, I've never seen Lethal Weapon. Somehow I've seen Lethal Weapon 4 because I saw that in camp at the movie theater, the one with Chris Rock. So I saw a lethal weapon. I rewatched it recently after it was on rewatchables. I watched it. Then I listened to the rewatchables, which was a ton of fun fun. Guess what? Mel Gibson's

the worst. Obviously, giant scumbay. We don't need to get into that. Very fun movie. Yes. And it was very fun movie ahead of its time. And let me ask you this. How come this is never in the Christmas movie category? Because the entire catalog, I don't know if you remember this, The entire catalog is Christmas music, and... Don't they have a Christmas tree scene, too? There was a Christmas dinner. This took place in Los Angeles at Christmas time one year before Die Hard came out. And somehow, Die Hard is a Christmas movie.

And because Mel Gibson rightly got canceled, nobody talks about lethal weapons as a Christmas movie. That's true. You're right. I never thought about that. All right, we didn't watch a ton of movies. My kids watch Enkanto a million times. Did your kids watch it yet on Disney? Not yet.

Okay. So Lynn Manuel Miranda did the music. And so it's got like some Hamilton. beats to it a little bit, and my kids just fell in love with the music, singing all the songs. So we go from watching the movie three times a day to listen to it in the car. Here's my take on Disney movies now. Magic has now replaced the damsel in distress and the villain. There's no more villains in Disney movies. It's a misunderstanding, typically. So Onward had all this magic. Moana had like the guy who could shape shift. I think it started

with Frozen having some magic. This movie is about a family that does magic. There's no more damsel and distress that's going to get saved by the prince anymore. it's all like magic. And then the person who's bad is really a misunderstood person. It's not that they're a villain. So I think Disney's like totally shifted the way that they do these movies, which is fine. The phrase damsel in distress, I cannot have told you what that meant. Really?

Okay. I had no idea. But apparently a damsel in distress is a young woman in danger. That's what the internet says. Yes. I can see why they didn't want to have that be the theme every year going back to like the 40s or whatever how they used to. All right, two shows that I finished recently.

Insecure, which is on an HBO, I think it was her fourth season. and then Love Life, they did the second season. The first season was Anna Kendrick. This is the one that's like a half hour episode. Oh, I like that. So they did a new season with a whole new guy, but Andrew Kendrick has in it a little bit. Was it good? I liked it.

It wasn't a great show, but I enjoyed it's like one of those ones that each episode is like its own little mini rom-com. It was cute. It was cute. But both of these shows in the finale, I'm not going to give it away, did a fast forward. So the last episode is like a fast forward and not too far into the future, but I love that as a device for finishing up what happens. That's great.

let me ask you, did they say what the S&P did next year? I did not. I did not get that. But I look a good fast forward to show like what happens to people and how their life shakes out. Did you watch Yellowstone finale? We started it last night. I'll have to finish it tonight. Just to start to finish a disappointment from me.

I'm mildly upset. So you caught up. All right. Yeah. I told you, I think that guy spread himself too thin with other shows. I'm going to watch 1883, but I'm keeping on a short leash. I'm giving that two episodes. All right.

You heard it here, folks. All right. First episode of the year. How did it feel? Like we never left. Oh, we've got Paul Kim back on Monday. That should be a good one. Paul Kim from Simplify. Actually, I think they were one of like the hottest asset manager or new kids on the block in 2021.

I think they got to a billion dollars already. Always interested to see what he has for new products. Give us an email Animal Spiritspot at GMO.com. We'll see you then. Thank you.